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Civil Appeal No. 1678 of 1973.
From the Judgment and Order dated 4.7.1973 of the Bombay High Court in Appeal No. 142/72.
F. section Nariman, Y. section Chitale, O. C. Mathur, K.J. John, Sri Narain, Narayan B. Shetya and M. Mudgal for the Appellant.
F. D. Damania, B. R. Agarwala and P. G. Gokhale for Respondents 1 2.
M. K. Ramamurthy and Jatinder Sharma for Respondent 3.
Janardhan Sharma for the Interveners.
The Judgment of the Court was delivered by MISRA, J.
The present appeal by certificate is directed against the judgment dated 4th of July, 1973 of the High Court of Bombay in a Letters Patent Appeal arising out of a petition under Article 226 of the Constitution.
The facts leading up to this appeal lie in a narrow compass.
The appellant the Ahmedabad Manufacturing and Calico Printing Co. Ltd. (hereinafter called the Company) is predominantly a textile manufacturer but has also factories in Bombay manufacturing 215 heavy chemicals and engages about 750 workmen in three such factories.
A dispute arose between the Company and the said workmen in respect of seventeen demands raised by them through their union.
The dispute was referred to the Industrial Tribunal under section 10(2) of the .
Out of the demands of the workmen the Tribunal took up for consideration only four demands, that is, demands Nos. 1, 2, 15 and 16 respectively for basic wages and adjustment, dearness allowance, gratuity and retrospective effect of the demands.
The Tribunal gave its award on 30th of November 1971 and sent a copy thereof to the parties.
The award was published on 20th of January, 1972 in the Maharashtra Government Gazette.
Under the rules it was to be effective after one month of its publication in the Gazette.
The Company, feeling aggrieved by the award, filed with this Court a petition for special leave to appeal under Article 136 of the Constitution (the leave petition, for short).
Pursuant to a notice, the respondent union put in appearance and filed a counter affidavit.
It appears that after some arguments the appellant chose to withdraw the leave petition.
As much turns upon the order of this Court dated 21st of August, 1972 permitting withdrawal, it would be appropriate to quote the same: "Upon hearing counsel the Court allowed the special leave petition to be withdrawn.
" Four days thereafter the Company filed a petition under Article 226 of the Constitution before the High Court challenging the award.
That petition was virtually based on the same facts and grounds as were taken in the leave petition before this Court.
The respondent union appeared and filed a counter affidavit urging that the petition be dismissed in limine.
A rejoinder affidavit was filed on behalf of the Company.
On the date of hearing three preliminary objections were raised on behalf of the union respondent.
In the present appeal we are, however, concerned only with one of them, namely, that the High Court should not exercise discretion in granting relief to the Company under Article 226 of the Constitution, after the withdrawal of the leave position unconditionally.
This objection prevailed with the High Court.
The learned Single Judge determined the circumstances on the basis of the respective affidavits filed by the parties, in which the Company 216 unconditionally withdrew its leave petition and in view of those circumstances he equated the withdrawal of the leave petition with the dismissal of the same.
Relying on Vasant Vithal Palse and Ors.
vs The Indian Hume Pipe Co. Ltd. and Anr.
he held that it was not a fit case for exercise of the Court 's discretionary power to admit the writ petition and accordingly dismissed the same in limine.
The Company filed a Letters Patent Appeal but the Division Bench dismissed the same and confirmed the order of the learned Single Judge.
The preliminary objection which weighed with the High Court was repeated on behalf of the union respondent before the Division Bench in appeal with two contentions: (1) the unconditional withdrawal by the company of its leave petition in the circumstances found by the learned Single Judge is a bar to the competence of the Court to entertain the petition under Article 226 of the Constitution.
In other words, the High Court has no jurisdiction to grant rule nisi under Article 226 in view of the withdrawal of the petition under Article 136 of the Constitution; (2) The learned Single Judge has rightly dismissed the petition in limine under Article 226 of the Constitution in the exercise of his discretion on the ground that the leave petition based on the same contention was unconditionally withdrawn.
Although the Division Bench discussed the first contention but refused to decide it as it was taken for the first time before it in appeal.
The second contention was, however, accepted by the Division Bench.
The High Court did not consider the other cases cited on behalf of the Company as it thought that the point in question was concluded by a Division Bench of that Court in Vasant Vithal Palse 's case (supra).
The Company thereafter moved a petition under Article 133 of the Constitution for a certificate of fitness to appeal to the Supreme Court which was granted by the High Court and this is how the present appeal comes before us.
Two questions arise for consideration in this appeal :(1) Whether unconditional withdrawal of the leave petition would amount to its dismissal ? (2) If so, what would be its impact on the petition under article 226 of the Constitution ? It was contended for the appellant that the order of this Court permitting the appellant to withdraw the leave petition should be read as it is and that so read the order only means that 217 the Company had withdrawn the leave petition.
It was urged that the mere fact that the appellant chose to withdraw the leave petition after some arguments will not alter the nature of the order and that by no stretch of imagination can it be said that the leave petition had been dismissed by this Court.
It may be, it was argued that the Company chose to withdraw the leave petition on the ground that this Court was not favourably inclined to grant it or that the Company chose to avail of a better remedy before the High Court under Article 226 of the Constitution, which had a wider scope.
The High Court perused the affidavits filed by the parties to know the circumstances under which the leave petition was withdrawn, but in our opinion that is not a correct approach.
The order of a Court has to be read as it is.
If this Court intended to dismiss the petition at the threshold, it could have said so explicitly.
In the absence of any indication in the order itself, it will not be proper to enter into the arena of conjecture and to come to a conclusion on the basis of extraneous evidence that this Court intended to reject the leave petition.
If the Order of this Court is read as it is there is not the slightest doubt that this Court had allowed the Company to withdraw the leave petition, and if that be so, it would be idle to argue that the leave petition had been dismissed at the threshold.
Reliance was placed on behalf of the appellant on Workmen of Cochin Port Trust vs Board of Trustees of the Cochin Port Trust & Anr.
In that case a special leave petition had been dismissed in limine with a non speaking order.
This Court dealing with the impact of that order observed as follows: "If by any judgment or order any matter in issue has been directly and explicitly decided the decision operates as res judicata and bars the trial of an identical issue in a subsequent proceeding between the same parties.
The principle of res judicata also comes into play when by the judgment and order a decision of a particular issue is implicit in it, that is, it must be deemed to have been necessarily decided by implication; then also the principle of res judicata on that issue is directly applicable.
" 218 Then the Court proceeded to consider whether the matter in issue has been either explicitly or implicitly decided.
Dealing with that aspect of the matter the Court further observed: "Indisputably nothing was expressly decided.
The effect of a non speaking order of dismissal without anything more indicating the grounds or reasons of its dismissal must by necessary implication, be taken to have decided that it was not a fit case where special leave should be granted.
It may be due to several reasons.
It may be one or more.
It may also be that the merits of the award were taken into consideration and this Court felt that it did not require any interference.
But since the order is not a speaking order, one finds it difficult to accept the argument put forward on behalf of the appellants that it must be deemed to have necessarily decided implicitly all the questions in relation to the merits of the award.
A writ proceeding is a different proceeding.
Whatever can be held to have been decided expressly, implicitly or even constructively while dismissing the special leave petition cannot be re opened.
But the technical rule of res judicata, although a wholesome rule based on public policy, cannot be stretched too far to bar the trial of identical issues in a separate proceeding merely on an uncertain assumption that the issues must have been decided.
It is not safe to extend the principle of res judicata to such an extent so as to found it on mere guesswork.
If the writ petition is dismissed by a speaking order either at the threshold or after contest, say, only on the ground of laches or the availability of an alternative remedy, then another remedy open in law either by way of suit or any other proceeding obviously will not be barred on the principle of res judicata.
Of course, a second writ petition on the same cause of action either filed in the same High Court or in another will not be maintainable because the dismissal of one petition will operate as a bar in the entertainment of another writ petition.
Similarly even if one writ petition is dismissed in limine by a non speaking order 'dismissed ', another writ petition would not be maintainable because even the one word order, as we have indicated above, must necessarily be taken to have decided impliedly that the case is not a fit one for exercise of the writ jurisdiction of the High Court.
Another writ petition from the same order or decision will not lie.
But the position is substantially different when a writ petition is dismissed either at the threshold or 219 after contest without expressing any opinion on the merits of the matter; then no merit can be deemed to have been necessarily and impliedly decided and any other remedy of suit or other proceeding will not be barred on the principle of res judicata.
" If a non speaking order of dismissal cannot operate as res judicata, an order permitting the withdrawal of the leave petition for the same reason cannot so operate.
The case in hand stands on a still better footing than the case of Workmen of Cochin Port Trust (supra).
Next reliance was placed on Punjab Beverages Pvt. Ltd. vs Suresh Chand & Anr.
In that case one of the contentions raised was that no application for approval was made by the appellant to the Industrial Tribunal and that there was thus contravention of section 33 (2) (b) of the .
An application for approval was in fact made under section 33 (2) (b), but that was withdrawn and the argument advanced was that the withdrawal was tantamount to refusal of approval, that the ban imposed by section 33 (2) (b), therefore, continued to operate and that the order of dismissal passed by the appellant was void and inoperative.
The contention was, however, repelled and this Court observed: "Where, however, the application for approval under section 33 (2) (b) is withdrawn by the employer and there is no decision on it on merits, it is difficult to see how it can be said that the approval has been refused by the Tribunal.
The Tribunal having had no occasion to consider the application on merits there can be no question of the Tribunal refusing approval to the employer.
It cannot be said that where the application for approval is withdrawn, there is a decision by the Tribunal to refuse to lift the ban.
The withdrawal of the application for approval stands on the same footing as if no application under section 33 (2) (b) has been made at all." In Hoshnak Singh vs Union of India & Ors. an earlier petition was dismissed by a non speaking one word order 'dismissed '.
A second petition after pursuing the alternative remedy was filed.
A question arose whether the same would be barred by the principles analogous to res judicata.
This Court held that the second petition would not be so barred because the cause of action was entirely 220 different and the dismissal could not stand in the way of the petitioner invoking the jurisdiction of the High Court under Article 226 of the Constitution.
Reliance was next placed on Daryao & Ors.
vs The State of U.P. & Ors.
In that case the previous petition for a writ filed by the petitioner before the High Court was withdrawn.
The High Court, therefore, dismissed the said petition with the express observation that the merits had not been considered by the High Court in dismissing it and that, therefore, no order as to costs was passed.
It was held by this Court that the order dismissing the writ petition as withdrawn could not constitute a bar of res judicata.
Counsel for the respondent union has contended that the order of rejection may be either explicit or implicit and that it can be shown from the circumstances of the present case that the leave petition was withdrawn only after full arguments when the appellant found that this Court was not favourably inclined to grant it.
In these circumstances it is argued that the order of withdrawal would amount to the dismissal of the leave petition and that in this view of the matter the High Court in the sound exercise of its discretion was justified in dismissing the writ petition in limine.
In support of this contention the learned counsel relied upon Shankar Ramchandra Abhyankar vs Krishnaji Dattatreya Bapat.
In that case the respondent first filed a revision under section 115 of the Code of Civil Procedure.
The revision was, however, dismissed.
Thereupon the respondent moved a petition under Articles 226 and 227 of the Constitution challenging the same order of the appellate court.
The High Court held that in spite of the dismissal of the revision petition, it could interfere under Articles 226 and 227 of the Constitution on a proper case being made out.
This Court, however, reversed the order of the High Court holding that even on the assumption that the order of the appellate court had not merged in the order of the Single Judge who had disposed of the revision petition, a writ petition ought not to have been entertained by the High Court when the respondent had already chosen the remedy under section 115 of the Code of Civil Procedure and that if there are two modes of invoking the jurisdiction of the High Court and one of those modes has been chosen and exhausted it would not be proper and sound exercise of discretion to grant relief in the other set of proceedings in respect of 221 the same order of the subordinate court.
The facts of that case are materially different from those of the case in hand and that case is not of much assistance in solving the problem before us.
In Vasant Vithal Palse 's case (supra) the trade union filed an application for special leave to appeal to this Court and the same was rejected.
Thereafter the individual workmen filed a petition under Article 226 of the Constitution challenging the award without disclosing the fact that application for special leave made to the Supreme Court by the trade union had been rejected.
The writ petition was dismissed on the grounds: (1) that the material facts had been concealed, and (2) that the leave petition filed by the trade union had been dismissed by the Supreme Court.
That case is also distinguishable on facts, firstly because there is no concealment of facts in the present case, and, secondly, the Supreme Court in that case had dismissed the application for special leave.
In the case in hand the petition has only been permitted to be withdrawn.
It is on the basis of that decision that the High Court had dismissed the petition in limine.
Next, reliance was placed on A. M. Allison vs B. L. Sen.
This Court dealing with the writ of certiorari observed as follows: "A writ of certiorari cannot be issued as a matter of course.
The High Court is entitled to refuse the writ if it is satisfied that there was no failure of justice.
The Supreme Court declines to interfere, in appeal, with the discretion of the High Court unless it is satisfied that the justice of the case requires such interference.
" There is no quarrel with the proposition that a writ of certiorari is not issued as a matter of course and that the petitioner has to satisfy the Court that his rights have been infringed so that there has been failure of justice.
In the instant case the appellant chose to file a petition for leave to appeal to the Supreme Court but eventually withdrew the petition and thereafter invoked the jurisdiction of the High Court under Article 226 of the Constitution and the High Court in its discretion chose to dismiss the writ petition in limine only on the ground that the petitioner had moved an application for special leave before the Supreme Court and withdrew the same unconditionally.
In view of the law laid down by this Court in a recent decision in the case of Workmen of Cochin Port Trust (supra) the decision in Allison 's case has lost its efficacy.
222 In the Management of Western India Match Co. Ltd., Madras vs The Industrial Tribunal, Madras & Anr., the Supreme Court had declined to exercise its discretion in favour of the petitioner by granting leave under Article 136 of the Constitution against an award of the Industrial Tribunal without giving any reasons.
The Madras High Court held that in the circumstances of the case it would not be a proper exercise of its discretion in admitting the writ petition despite the evidence that the Industrial Tribunal failed to give opportunity to the petitioner to produce evidence and thus violated a principle of natural justice, when the Supreme Court had dismissed the leave petition against the award.
In that case the Supreme Court had dismissed the leave petition.
The facts were thus materially different from the facts of the present appeal.
Besides, this Court has taken a different view in the recent case of Workmen of Cochin Port Trust (supra), After having analysed the various cases cited, we are of the view that permission to withdraw a leave petition cannot be equated with an order of its dismissal.
We also come to the conclusion that in the circumstances of the case the High Court has not exercised a proper and sound discretion in dismissing the writ petition in limine on the sole ground that the application for special leave on the same facts and grounds had been withdrawn unconditionally.
We accordingly allow the appeal and set aside the impugned order and the order of the learned Single Judge dated 9th November, 1972 in writ petition No. 583 of 1972 and send the case back to him for considering the writ petition on merits.
There is, however, no order as to costs.
S.R. Appeal allowed.
| IN-Abs | The Industrial Tribunal, Ahmedabad, on a dispute referred to it under section 10(2) of the took up for consideration four demands for basic wages and adjustment, dearness allowance, gratuity and retrospectivity of the demands of the workmen.
The Tribunal gave its award on 30th of November 1971 which was published on 20th January, 1972 in the Maharashtra Government Gazette.
The appellant company, feeling aggrieved by the award, filed in the Supreme Court a petition for special leave to appeal under Article 136 of the Constitution.
Pursuant to a notice, the respondent workmen put in appearance and filed a counter affidavit.
After some arguments the appellant Company at its request was permitted to withdraw the leave petition as per the order of the Court dated 21st of August, 1972 which reads: "Upon hearing counsel the Court allowed the special leave petition to be withdrawn".
Four days thereafter the company filed a petition under Article 226 of the Constitution before the High Court challenging the award.
The petition was virtually based on the same facts and grounds as were taken in the special leave petition before the Supreme Court.
The learned single Judge who heard the petition determined the circumstances on the basis of the respective affidavits filed by the parties in which the company unconditionally withdrew its special leave petition and in view of those circumstances equated the withdrawal of the leave petition with the dismissal of the same.
Relying on Vasant Vithal Palse and Ors.
vs The Indian Hume Pipe Co. Ltd. and Anr. , a decision of that court, the learned Judge dismissed the writ petition in limine.
A Letters Patent Appeal against the said order of dismissal also met the same fate.
However, a petition under Article 133 of the Constitution for a certificate of fitness to appeal to the Supreme Court was accepted by the said Division Bench and a certificate was granted and hence the appeal.
Allowing the appeal, the Court ^ HELD: 1. Permission to withdraw a special leave petition cannot be equated with an order of dismissal.
If a non speaking order of dismissal cannot operate as res judicata for entertaining a fresh writ petition on the same facts and grounds taken in the special leave petition, an order permitting the withdrawal of the writ petition for the same reason cannot so operate.
[219B,222C D] 214 Workmen of Cochin Port Trust vs Board of Trustees of Cochin Port Trust and Anr., ; , followed.
Punjab Beverages Pvt. Ltd. vs Suresh Chand and Anr.
, ; ; Hoshnak Singh vs Union of India and Ors., ; ; Daryao and Ors.
vs The State of U.P. and Ors., ; , discussed.
Vasant Vithal Palse and Ors, v The Indian Hume Pipe Co. Ltd. and Anr.
, ; Management of Western India Match Co. Ltd., Madras vs The Industrial Tribunul, Madras and Anr.
A.I.R. 1958 Mad. 398, distinguished.
The order of a court has to be read as it is.
If the Supreme Court intended to dismiss the petition at the threshold.
it could have said so explicitly.
In the absence of any indication in the order itself, it will not be proper to enter into the arena of conjecture and to come to a conclusion on the basis of extraneous evidence that the Supreme Court intended to reject the leave petition.
If the Order of the Supreme Court is read as it is there is not the slightest doubt that the Supreme Court had allowed the company to withdraw the leave petition, in the instant case.
The approach of the High Court in having perused the affidavits filed by the parties to know the circumstances under which the leave petition was withdrawn is not correct.
[217 C D]
|
Civil Appeal No. 366 of 1979.
Appeal by Special Leave from the Judgment and Order dated 28 2 1978 of the Madhya Pradesh High Court (Indore Bench) in Civil Revision No. 93 of 1976.
Shanker Ghosh and section K. Gambhir for the Appellant.
R. K. Garg and A. K. Sanghi for Respondent No. 1.
The Judgment of the Court was delivered by UNTWALIA, J.
This appeal by special leave is from the judgment of the Madhya Pradesh High Court reversing the decision of the Second Additional District Judge, Indore in Miscellaneous Judicial Case No. 23 of 1975.
The appellant company had filed that case under Order 9 Rule 13 of the Code of Civil Procedure, hereinafter called the Code, for setting aside an ex parte decree for Rs. 28,479/ passed in favour of the respondent firm on 22 4 1975 against the appellant.
The learned Additional District Judge held that summons in the suit was not duly served on the company and it came to know about the decree on 29 7 1975.
Hence he set aside the ex parte decree.
The respondent firm filed a revision in the High Court under section 115 of the Code.
The High Court allowed the revision, set aside the judgment of the Trial Court and upheld the passing of the ex parte decree.
Hence this appeal.
The respondent filed the suit at Indore on 24 2 1975 against the appellant claiming damages to the tune of Rs. 26,000/ on account of the alleged non delivery of certain goods.
Summons in the suit was sent to the registered office of the company in Calcutta and is said to have been served on one Shri Navlakha on 17 3 1975 asking the company to appear at Indore on 25 3 1975 for settlement of issues.
Since the company did not appear in the Court on that date, eventually, 1030 the ex parte decree was passed on 22 4 1975.
According to the case of the appellant the company came to know about the ex parte decree for the first time when its constituted attorney Shri section K. Jhunjhunwala received a notice from the respondent by registered post demanding the decretal dues.
Thereupon Shri N. section Pareek, the Works Secretary of the company who is in charge of the legal matters was sent to Indore to ascertain as to how the ex parte decree came to be passed.
Pareek learnt that the summons purported to have been served on Navlakha on 17 3 1975.
Navlakha was mere Office Assistant in the Sales Department of the company.
He was neither a Secretary nor a Director nor any other Principal Officer of the company authorised to receive summons in the suit.
He did not bring the fact of the receipt of summons by him to the knowledge of any responsible officer of the company.
The company remained in dark and, as stated above, learnt for the first time on 29 7 1975 about the passing of the ex parte decree.
N. section Pareek was the only witness examined on behalf of the appellant in the Miscellaneous case tried by the learned Additional District Judge.
No witness was examined on behalf of the respondent.
The Trial Court held: "I hold that handing over of summons to Navlakha who was only an Office Assistant working in the company and who was not an officer duly authorised to accept summons on behalf of the company did not amount to valid service of summons on the applicant company.
" It also accepted the appellant 's case about the knowledge of the ex parte decree for the first time on 29 7 1975 and hence the application filed is about a week 's time thereafter was held to be within time.
The High Court in its impugned judgment has held: "It is not in dispute that the person who received the summons in the office of the Company is not a person who is entitled to be served on behalf of the company in accordance with sub clause (a) of Rule 2 of Order 29 of C.P.C." The High Court, however, took the view that since Navlakha was an employee of the company sitting in its registered office in Calcutta the summons will be deemed to have been duly served on the company within the meaning of the first part of clause (b) of Order 29, Rule 2 of the Code.
In the opinion of the High Court since the learned Additional District Judge did not apply his mind to the provision of law contained in clause (b), it committed a material irregularity and illegality in exercise of its jurisdiction in setting aside the ex parte decree.
1031 In our opinion the High Court was clearly wrong in upsetting the judgment of the Trial Court.
There was no error in that judgment much less any error of jurisdiction entitling the High Court to interfere with it.
Order 29 of the Code is headed "Suits by or against Corporations".
There are only three Rules in it.
We are concerned with Rule 2 which reads as follows: "Subject to any statutory provision of process, where the suit is against a corporation, the summons may be served (a) on the secretary, or on any director, or other principal officer of the corporation, or (b) by leaving it or sending it by post addressed to the corporation at the registered office, or if there is no registered office then at the place where the corporation carries on business." Rule 2 is not an exhaustive provision providing for all modes of service on the company in the sense as to what is meant by service of summons on the Secretary, Director or Principal Officer in Jute and Gunny Brokers Ltd. and another vs The Union of India and others it was held that the words "Principal Officer" in clause (a) of Rule 2 would include managing agents and it can, under this rule, be on a juristic person.
Accordingly service on managing agents who are a corporation is valid under clause (a).
The meaning of clause (b) has got to be understood in the background of the provisions of the Code in Order 5 which is meant for issue and service of summons on natural persons.
Sending a summons by post to the registered office of the company, unless the contrary is shown, will be presumed to be service on the company itself.
But the first part of clause (b) has got to be understood with reference to the other provisions of the Code.
In Rule 17 of Order 5 it has been provided: "Where the defendant or his agent or such other person as aforesaid refuses to sign the acknowledgement, or where the serving officer, after using all due and reasonable diligence, cannot find the defendant, and there is no agent empowered to accept service of the summons on his behalf, nor any other person on whom service can be made, the serving officer shall affix a copy of the summons on the outer door or some other conspicuous part of the house in which the defendant ordinarily resides or carries on business or personally works for gain, 1032 and shall then return the original to the Court from which it was issued, with a report endorsed thereon or annexed thereto stating that he has so affixed the copy, the circumstances under which he did so, and the name and address of the person (if any) by whom the house was identified and in whose presence the copy was affixed.
" Sending summons to a corporation by post addressed to it at its registered office may be a good mode of service either by itself, or preferably, by way of an additional mode of service.
But leaving the summons at the registered office of the corporation if it is literally interpreted to say that the summons can be left anywhere uncared for in the registered office of the company, then it will lead to anomalous and absurd results.
It has to be read in the background of the provision contained in Order 5 Rule 17 of the Code.
In other words, if the serving peon or bailiff is not able to serve the summons on the Secretary or any Director or any other Principal Officer of the Corporation because either he refuses to sign the summons or is not to be found by the serving person even after due diligence then he can leave the summons at the registered office of the company and make a report to that effect.
In the instant case nothing of the kind was done.
It was not the case of the respondent in its rejoinder filed in the Miscellaneous case that the service of the summons as effected in accordance with the first part of clause (b) of Rule 2 of Order 29 of the Code.
Annexure A to the counter affidavit filed by the respondent is the petition filed by the appellant under Order 9 Rule 13 of the Code.
In paragraph 9 of the said petition it was stated: "Inspection of record of this Hon 'ble Court relating to the service of the summons reveals that the bailiff of the Small Cause Court at Calcutta seems to have delivered a copy of the summons to a gentleman who is described as an office assistant, on 17 3 1975 at about 12.40 P.M.
No office assistant of the defendant No. 1 Company is empowered or authorised to receive summons.
The original summons which has been returned by the bailiff to this Hon 'ble Court, has been signed by one Shri Nawlakha.
Shri Nawlakha was concerned merely with sales and had nothing to do with legal matters generally or with receiving summons in particular.
Service of the summons on Shri Nawlakha cannot be regarded as due service on the defendant No. 1 for the purpose of Order 9 Rule 13 C.P.C." The rejoinder of the respondent is Annexure B to the counter affidavit.
Para 9 of the rejoinder which is in reply to para 9 of the petition reads as follows: 1033 "In reply to para 9 it is stated that the summons was duly served as stated in this para.
But it is denied that Shri Nawlakha was concerned merely with sales and has nothing to do with legal matters, generally or with receiving summons in particular.
It is denied that service on Shri Nawlakha cannot be regarded as due service on the Company Defendant No. 1 for the purpose of Order 9 Rule 13 C.P.C. Shri Nawlakha was a responsible officer who could have intimated the receipt of the summons to his so called bosses.
Without prejudice it is submitted that the Madhya Pradesh amendment in Order 9 Rule 13 C.P.C. may kindly be perused.
" No where in the rejoinder a stand was taken that the summons was duly served on the company because it was left at the registered office of the company.
Reference to the Madhya Pradesh amendment of Order 9 Rule 13 is immaterial as the Trial Court has pointed out that the company had no knowledge of the ex parte decree, even otherwise, before 29 7 1975.
No contrary finding has been recorded by the High Court.
We, therefore, hold that the judgment by the Trial Court setting aside the decree was correct.
In any event no error of jurisdiction was committed by it.
The High Court went wrong in interfering with it.
We accordingly allow the appeal, set aside the judgment of the High Court and restore that of the Trial Court.
The suit shall now proceed to disposal in accordance with the law.
We may, however, make it clear that the appellant under the orders of the Court had furnished bank guarantee for the decretal amount.
It has agreed to continue the same till the disposal of the suit.
We shall make no order as to costs.
S.R. Appeal allowed.
| IN-Abs | The respondent filed a suit at Indore on 24 2 1975 against the appellant claiming damages to the tune of Rs. 26,000/ on account of the alleged nondelivery of certain goods.
Summons in the suit was sent to the registered office of the company in Calcutta and was served on Sri Navlakha on 17 3 1975 asking the company to appear at Indore on 25 3 1975.
Since the company did not appear in the Court on that date, eventually, the exparte decree was passed on 22 4 1975.
The appellant company came to know about the ex parte decree for the first time when its constituted attorney Sri Jhunjhunwala received a notice from the respondent by registered post demanding the decretal dues.
Thereupon Sri N. section Pareek, the Works Secretary of the company who is in charge of the legal matters was sent to Indore to ascertain as to how the ex parte decree came to be passed.
Pareek learnt that the summons was purported to have been served on Navalakha on 17 3 75.
Navalakha did not bring the fact of the receipt of summons by him to the knowledge of any responsible officer of the company.
He was neither secretary nor a Director nor any other principal officer of the company authorised to receive summons in the suit.
The company remained in dark and learnt for the first time on 29 7 75 about the passing of the ex parte decree.
The Trial Court allowed the application but the High Court in revision under section 115 of C.P.C. restored the ex parte order.
Hence the appeal by special leave.
Allowing the appeal, the Court ^ HELD: 1.Rule 2 of Order XXIX of C.P.C. is not an exhaustive provision providing for all modes of service on the Company in the sense as to what is meant by service of summons on the Secretary, Director or Principal Officer.
Service on managing agents who are a corporation is valid under clause (a) of Rule 2 of Order XXIX C.P.C., since a Principal Officer in clause (a) of Rule 2 has been held to include managing agents and it can under this rule, be on a juristic person.
[1031 D E] Jute and Guuny Brokers Ltd. & Anr.
vs Union of India and Ors.
[1961] 3 SCR p. 20; followed.
2.Sending a summon to a corporation by post addressed to it at its registered office may be a good mode of service either by itself, or preferably, by way of an additional mode of service.
But leaving the summons at the registered office of the corporation if it is literally interpreted to say that the summons can be left anywhere uncared for in the registered office of the company.
then it will lead to anomalous and absurd results.
It has to be read in the background of provision contained in Order 5 Rule 17 of the Code.
In other 1029 words, if the serving peon or bailiff is not able to serve the summons on the Secretary or any Director or any other Principal Officer of the Corporation because either he refuses to sign the summons or is not to be found by the serving person even after due diligence then he can leave the summons at the registered office of the company and make a report to that effect.
In the instant case nothing of the kind was done.
It was also not the case of the respondent in its rejoinder filed in the Miscellaneous case that the service of the summons was effected in accordance with the first part of clause (b) of Rule 2 of Order 29 of the Code.
[1032 B D] 3.
Nowhere in the rejoinder a stand was taken by the respondents that the summons was duly served on the company because it was left at the registered office of the company.
The company had no knowledge of the ex parte decree, even otherwise, before 29 7 75.
Hence the application under O.I.X Rule 13 of C.P.C. has been correctly allowed.
[1033 C D]
|
Appeals Nos. 124 to 126 of 1954.
Appeals by special leave from the judgment and order dated the 10th day of March 1952 of the Madras High Court in C.M.P. Nos.
10427, 10425 and 10426 of 1951 arising gut of the order dated the 23rd day of February 1951 of the Income Tax Appellate Tribunal, Madras Bench in Reference Applications Nos. 312, 310 and 311 of 1950 51.
P. R. Das, B. Sen, V. Sethuraman and section Subramaniam for the appellant.
C. K. Daphtary, Solicitor Generalfor India, Porus A. Mehta and R. H. Dhebar for P. G. Gokhale for the respondent.
September 26.
The judgment of the Court was delivered by VENKATARAMA AYYAR J.
These appeals arise out of orders of assessment made on the appellant by the Appellate Tribunal, Madras Bench, for the years of account 1941 42, 1942 43 and 1943 44.
The appellant applied under section 66(1) of the Indian Income tax Act (hereinafter referred to as the Act) to refer to the High Court certain questions which according to it arose out of the orders; but the Tribunal rejected the applications.
The appellant then moved the High Court under section 66(2) of the Act for an order requiring the Tribunal to refer those questions to the court, but the learned Judges held that the questions on which reference was sought by the appellant were pure questions of fact, and dismissed the applications.
The matter now comes before us by way of special appeal.
695 The facts material for the purpose of these appeals may shortly be stated.
The assessee is a public company registered under the Indian Companies Act, and its Managing Agents are the firm of Messrs K. R. Thyagaraja Chettiar and Co., whose partners are Mr. Thyagaraja Chettiar and his two sons.
The company is resident and ordinarily resident in British India, its head office being at Madurai in the Madras State.
It carries on business in the manufacture and sale of yarn, and for the purpose of that business it purchases cotton and occasionally sells it.
Its profits arise for the most part from the sale of yarn and to some extent from the re sale of cotton.
According to the account books of the company, its profits from business for the account year 1941 42 were Rs. 9,25,364, for 1942 43 Rs. 24,09,832 and for 1943 44 Rs. 29,13,88 1.
In its returns, the appellant showed these amounts as its income chargeable to tax for the respective years.
The Department did not accept the correctness of the figures as shown in the accounts.
It contended that the Company had earned more profits than were disclosed in its accounts, and that it had contrived to suppress them by resort to certain devices.
According to the Department, the scheme evolved by the appellant for this purpose was this: Suppose the Company sold 25 bales of yarn to X for.
Rs. 50,000 at the then market rate and received the full amount of the price.
The books of the Company would show neither the sale to X nor its receipt of Rs. 50,000.
Instead, there will be an entry in its books showing the sale of these very bales to A for Rs. 20,000 which will be about the cost price and in the books of A these goods will be shown as sold by it to X for Rs. 50,000.
If the sale by the Company to A and the connected sale by A to X were genuine, the Company would have made no profit on the sale, whereas A would have made a profit of Rs. 30,000 on it.
But in fact,both these sales were sham transactions; the only sale that took place was that by the Company to X and the price actually received by it was not Rs. 20,000 but Rs. 50,000.
As a result of these paper transactions and manipulations, the 696 profit of Rs. 30,000 made by the Company was suppressed.
This process was reversed when the Company purchased cotton.
The appellant purchased, let us say, 100 bales of cotton from X for a price of Rs. 5,000, and paid that amount to X. Neither this purchase from X nor the payment of Rs. 5,000 to him would appear in the books of the Company.
Instead, the books of A will show these goods as purchased by it from X for Rs. 5,000, and the books of the appellant will show a purchase from A of those very goods for Rs. 8,000.
Both these sales were fictitious, the only real transaction was the sale by X to the Company and the price actually paid therefor by the Company was only Rs. 5,000.
By the device of sale by X to A and by A to the Company, the cost price had been inflated by Rs. 3,000, and the real profit had been concealed to that extent.
The accounts of the Company, therefore, did not reflect the true position as to the profits actually made by the appellant.
The names of the intermediaries who according to the Department played the role of A in the above illustration and they will hereafter be referred to simply as intermediaries are given below with the amount of profits made on the sale of yarn in their names and concealed, or the extent of the cost price inflated on the purchase of cotton from them, as found by the Tribunal: 1941 42 1.
Meenakshi & Co. Sale of yarnRs.
35,830 2.
Sivagami & Co. do.
Rs. 35,443 3.
Mangayarkarasi & Co. do.
Rs. 34,579 4.
Alagu & Co. Purchase of cotton Rs. 34,003 1942 43 1.
Meenakshi & Co. Sale of yarnRs.
53,635 2.
Sivagami and Co. do.
Rs. 58,103 3.
Rukmani & Co. Ltd. & Sale of yarn Rs. 3,97,467 4.
Sivagami & Co. Ltd. 5.
Rukmani & Co., Ltd. Purchase of cotton Rs. 33,533 697 1943 44 1.
Pudukottah&Co.,Ltd.
Sale of yarn Rs. 18,99,488 Do.
Purchase of cotton Rs. 12,703 2.
Rukmani & Co., Ltd. do.
Rs. 22,504 3.
Rajendra Ltd. Sale of yarn Rs. 1,06,436 The contention of the Department was that the amounts shown as profits made by the intermediaries and mentioned above represented in fact the profits actually earned by the appellant, and that they should be added to the figures shown in its accounts as its profits.
The appellant contested this position, and maintained that the state of affairs disclosed by its accounts was true, that its sales in favour of the intermediaries were genuine, and that, in fact, little or no profits were made by it in those transactions, that it purchased cotton only from the intermediaries and, did pay them the amounts as shown in the accounts.
These contention were closely examined by the Income tax Officer in the first instance, then again by the Appellate Assistant Commissioner on appeal, and finally by the Appellate Tribunal, and on an elaborate consideration of the materials placed before them, they held that the following facts were established: 1.
The sale of yarn by the appellant to the intermediaries mentioned above was for a price very much below the market rate, often for the cost price and some times for even less.
No acceptable explanation had been given for this unusual feature.
The yarn was in that period a scarce commodity, and it was a seller 's market.
The amounts lost by the Company on these transactions during the three years, if they were genuine, would far exceed Rs. 25 lakhs.
The sales therefore were not bonafide.
The firms of Meenakshi and Co., Sivagami and Co. Mangayarkarasi and Co., and Alagu and Co., who were the intermediaries for the year 1941 42 were all newly started for the first time in 1941.
The partners of the firm were men of no means, and were all relations of Mr. Thyagaraja Chettiar, the chief 698 partner of the Managing Agents firm and a dominant figure in charge of the Company 's affairs.
None of them had done any business in yarn before.
The personnel of these firms was drawn in different combinations from a group of half a dozen persons who were all the creatures of Mr. Thyagaraja Chettiar.
During the year 1942 43, two of the ' firms, Mangayarkarasi and Co., and Alagu and Co., were closed, and their place was taken by two private limited companies called Rukmani and Co., Ltd. and Sivagami and Co., Ltd. The shareholders of these companies were again drawn from the small group of persons who were partners of the firms, and they were all Mr. Thyagaraja Chettiar 's men.
These companies declared no dividends, even though they made con siderable profits and the shareholders received no dividends nor even statements of accounts.
In truth, they had no beneficial interest in the concerns.
The business of the intermediaries, both firms and the companies, consisted solely in the purchase of yarn from the appellant and not from any other person, and the entirety of the yarn purchased was sold by them en bloc to constituents of the appellant.
Thus, the business of the intermediaries was, in fact, only a part of the business carried on by the appellant.
The sales by the appellant in favour of these intermediaries were of large quantities of yarn and sometimes on a scale far higher than other genuine commercial transactions, as for example, the sale of 1850 bales on 17 4 1942 to Rukmani and Co. No securities were taken from the intermediaries for this transaction.
Having regard to the magnitude of the business, the capital of the intermediaries even on paper was negligible.
The intermediaries bad most of them no offices of their own.
Even when they had offices, these were arranged by the officers of the appellant.
The concerns had no godowns, and their staff was meagre and recruited from the employees and servants of the appellant.
Apart from signing the contracts, the intermediaries did nothing.
699 7.
The profits earned by the firms were shown in their books as cash in their possession, but on a surprise raid the authorities were unable to discover any cash with them.
The amount shown as profits in their accounts was, in fact, in the possession of the appellant Company.
The intermediaries had, in fact, never to pay to the appellant for any of the purchases made by them, the course of the business being that they sold the goods purchased from the appellant to its old customers, who paid therefor.
The intermediaries did not issue any delivery orders on the appellant in favour of the customers to whom they ostensibly sold the goods, but the goods were despatched directly by the appellant to the customers and delivered to them.
The customers to whom the goods were delivered by the appellant as aforesaid paid the full price for which they purchased them from the intermediary firms not to those firms with whom alone they had privity of contract but to the appellant direct, and these payments appear as receipts in the books of the appellant.
After the Limited Companies were started in 1942 43 and 1943 44, the course of business adopted by the appellant showed a further mystification.
There was firstly a sale of certain quantity of yarn by the appellant to company A, which sold it in turn to company B which in turn sold it to C, which ultimately sold it to the usual customers of the appellant.
In spite of the number of links between the appellant and the customers, the goods were directly despatched by the former to the latter, who paid by cheques the full amount due by them to their seller C, who straightaway endorsed them, in favour of the appellant.
The intermediaries A and B did no act, and took no part in the ultimate payment of the price by the purchasers.
Some of the intermediaries, firms and companies had been ' formed in Pudukottah State.
At that time, that Sta was foreign territory, and the profit 700 earned there would become taxable only if it was remitted to British India.
Pudukottah is neither a cotton producing area, nor was a market for cotton there.
The object with which the intermediaries had been set up in Pudukottah was obviously to screen portions of the profit earned by the appellant.
On these facts, the Tribunal came to the conclusion that the contentions of the Department had been fully established, namely , that the intermediaries were dummies brought into existence by the appellant for concealing its profits, that the sales standing in their names were sham and fictitious, and that the, profits ostensibly earned by them on those transactions were, in fact, earned by the appellant, and should be added ,to the amounts shown as profits in its accounts.
The point for decision is whether there arises out of the order of the Tribunal any question which can be the subject of reference under section 66(1) of the Act.
Under that section, it is only a question of law that can be referred for decision of the court, 'and it is impossible to argue that the conclusion of the Tribunal is anything but one of fact.
It has been held on the corresponding provisions in the English Income tax statutes that a finding on a question of fact is open to attack as erroneous in law only if it is not supported by any evidence, or if it is unreasonable and perverse, but that where there is evidence to consider, I the decision of the Tribunal is final even though the court might not, on the materials, have come to the same conclusion if it had the power to substitute its own judgment.
In Great Western Railway Co. vs Bater(1), Lord Atkinson observed: "Their (Commissioners ') determination of questions of pure fact are not to be disturbed, any more than are the findings of a jury, unless it should appear that there was no evidence before them upon which they, as reasonable men, could come to the conclusion to which they have come: and this even though the Court of Review would on the evidence have come to a conclusion entirely different from theirs".
(1) , 244.
S.C.R. SUPREME COURT REPORTS 701 There is no need to further elaborate this position, because the law as laid down in these observations is well settled and has been adopted in the construction of section 66 of the Act.
Now, the determination of the Tribunal in the present proceedings being, one of fact, it is open to review by the court only on the ground that it is not supported by any evidence or that it is perverse.
The appellant understood this position quite correctly, and in its application under section 66(1) it stated the only question which it wanted the Tribunal to refer to the court with reference to the present controversy in the following terms: "Whether on the facts and in the circumstances of the case there is any legal evidence to support the finding that the four firms, Meenakshi and Co., Sivagami and Co., Mangayarkarasi and Co., and Alagu and Co., were benamidars for the appellant and that the profits made by these firms were profits made by the appellant".
This was for the accounting year 1941 42.
The question was similarly worded for the subsequent years also except that the names of the intermediaries were different for the different years.
The question as framed assumes, it will be noted, that the Tribunal had held that the intermediaries were benamidars for the appellant, and on this assumption were grounded several contentions which were pressed on behalf of the appellant.
Whether this assumption and the contentions based thereon are well founded is a different matter, and will be considered in due course.
But apart from that, it will be seen that the only ground of attack which was directed against the finding of the Tribunal was that there was no legal evidence.
This is of course a contention open to the appellant; but has that been substantiated? Mr. P. R. Das, learned counsel for the appellant, did, at the start, put his contention as high as that.
But it became abundantly clear when his argument began to unfold itself that it amounted to no more than this that the conclusion drawn by the Tribunal from the facts found by it was unsound and erroneous.
He did not, it must be stated, dispute the facts them 702 selves, but he took them one after another, and contended that they were susceptible of inferences other than those drawn by the Tribunal.
He next offered explanations for them which would 'Make them consistent with the contention of the appellant.
And he finally wound up by saying that the conclusion reached by the Tribunal was not justified.
This clearly is an erroneous approach to the whole question.
When a conclusion has been reached on an appreciation of a number of facts established by the evidence, whether that is sound or not must be determined not by considering the weight to be attached to each single fact in isolation, but by assessing the cumulative effect of all the facts in their setting in the picture as a whole.
In Edwards (Inspector of Taxes) vs Bairstow(1).
Lord Radcliffe stated: I think that it is rather misleading to speak of there being no evidence to support a conclusion when in cases such as these many of the facts are likely to be neutral in themselves, and only to take their colour from the combination of circumstances in which they are found to occur".
This furnishes the corrective to the course adopted by counsel for the appellant in his argument.
And a more serious objection to it, and one of substance is that it relates merely to matters of appreciation of evidence, and does not support the position that there is no legal evidence in support of the finding of the Tribunal.
For example, one of the facts on which the Tribunal relied for its conclusion was that the partners of the intermediary firms were new to yarn business and came on the scene for the first time in 1941.
The appellant contends that no significance could be attached to this, as the partners belonged to the Nattukkottai Chetti caste, which was a trading community.
But surely this does not render the evi dence irrelevant or inadmissible.
It only affects the weight to be attached to it. ' Then again, the Tribunal has made a point of it that the goods were sold by the appellant to the intermediaries for a price far below the market price, sometimes even below the (1) 703 cost price.
The answer of the appellant to this was that they were forward contracts and that the price of yarn on the dates of those contracts was low.
But the Tribunal declined to accept this explanation for the reason and that, a good one that there were no contract registers from which the dates on which the contracts were entered into could be verified, and that the contract notes themselves were not serially numbered.
If this is not a matter of pure appre ciation of evidence, it is difficult to see what else is.
The Tribunal also referred to the fact that the only business which the intermediaries did was to purchase yarn from the appellant and sell it to its own constituents.
The answer of the appellant to this was that there was no need for the intermediaries to purchase from other manufacturers when all their needs were met by the appellant and that there was nothing unusual in their selling all their yarn to its customers.
it is unnecessary to say anything about the worth of this contention, for that is a matter exclusively for the Tribunal to assess.
What has now to be considered is whether this circumstance on which the Tribunal relied is or is not cogent evidence in support of its conclusion.
It will be preposterous to contend that it is not.
No useful purpose will be served by examining the contentions of the appellant with reference to the other facts on which the Tribunal relied for its conclusion.
They are of the same pattern as the above, and bear, at their best, on the weight to be attached to the facts and not to their relevancy or admissibility, and there is no question of want of legal evidence in support of the conclusion of the Tribunal.
Reference should also be made in this connection to another contention which wag pressed by Mr. P. R. Das at a later stage of the argument.
He contended that the facts found showed that the intermediaries were benamidars not for the appellant but for Mr. Thyagarajan Chettiar of the Managing Agents firm.
The significance of this contention lies in this that it grants and Mr. P. R. Das was quite frank about it that the facts found did point to the fact that the 704 intermediaries were dummies, leaving outstanding for decision only the question whether on the evidence they were benamidars for the appellant or for Mr. Thyagarajan Chettiar.
That is a question which will be separately considered.
But it is manifest that this argument is destructive of the contention of the appellant that there is no legal evidence to support the conclusion of the Tribunal that the intermediaries were mere dummies.
The result then is that the finding of the Tribunal viewed as one of fact, which in truth it is supported by evidence, and is not unreasonable and is not open to attack on any of the grounds on which such a finding could be assailed in a reference under section 66(1).
It was next contended for the appellant that inference from facts was a question of law, and that as the conclusion of the Tribunal that the intermediaries were dummies and that the sales standing in their names were sham and fictitious was itself an inference from several basic facts found by it was a question of law and that the appellant had the right under section 66(1) to have the decision of the court on its correctness, and support for this position was sought from certain observations in Edwards (Inspector of Taxes) vs Bairstow(1), Bomford vs Osborne(2), Thomas Fattorini (Lancashire), Ltd. vs Commissioners of Inland Revenue(3), Cameron vs Prendergast(" and The Gramophone and Typewriter Company, Ltd. vs Stanley(5).
At the first blush, it does sound somewhat of a contradiction to speak of a finding of fact as one of law even when that finding is an inference from other facts, the accepted notion being that questions of law and of fact form antithesis to each other with spheres distinct and separate.
When the Legislature in terms restricts the power of the court to review decisions of Tribunals to questions of law, it obviously intends to shut out questions of fact from its jurisdiction.
If the contention of the appellant is (1) (2) 1942 I.T.R. Supplt, 27.
(3) (4) 8 I.T.R. Supplt.
(5) ; correct.
, then a finding of fact must, when it is an inference from other facts, be open to consideration not only on the ground that it is not supported by evidence or perverse but also on the ground that it is not a proper conclusion to come to on the facts.
In other words, the jurisdiction in such cases is in the nature of a regular appeal on the correctness of the finding.
And as a contested assessment and it is only such that will home up before the Tribunal under section 33 of the Act, must involve disputed questions of fast, the determination of which must ultimately depend on findings on various preliminary or evidentiary facts, it must result that practically all orders of assessment of the Tribunal could be brought up for review before courts.
That will, in effect, be to wipe out the distinction between questions of law and questions of fact and to defeat the policy underlying sections 66(1) and 66(2).
One should hesitate to accept a contention which leads to consequences so startling, unless there are compelling reasons therefor.
Far from that being the case, both principle and authority are clearly adverse to it.
Considering the question on principle, when there is a, question of fact to be determined it would usually be necessary first to decide disputed facts of a subsidiary or evidentiary character, and the ultimate conclusion will depend on an appreciation of these facts.
Can it be said Chat a conclusion of fact, pure and simple, ceases to be that when it is in turn a deduction from other facts? What can be the principle on which a question of fact becomes transformed into a question of law when it involves an inference from basic facts? To take an illustration, let us suppose that in a suit on a promissory note the defence taken is one of denial of execution.
The court finds that the disputed signature is unlike the admitted signatures of the defendant.
It also finds that the attesting witnesses who speak to execution were not, in fact, present at the time of the alleged execution.
On a consideration of these facts, the court comes to the conclusion that the promissory note is not genuine, 706 Here, there are certain facts which are ascertained, and on these facts, a certain conclusion is reached which is also one of fact.
Can it be contended that the finding that the promissory note is not genuine is one of law, as it is an inference from the primary facts found? Clearly not.
But it is argued against this conclusion that it conflicts with the view expressed in several English decisions, some of them of the highest authority, that it is a question of law what inference is to be drawn from facts.
The fallacy underlying this contention is that it fails to take into account the distinction which exists between a pure question of fact and a mixed question of law and fact, and that the observations relied on have reference to the latter and not to the former, which is what we are concerned with in this case.
In between the domains occupied respectively by questions of fact and of law, there is a large area in which both these questions run into each other, forming so to say, enclaves within each other.
The questions that arise for determination in that area are known as mixed questions of law and fact.
These questions involve first the ascertainment of facts on the evidence adduced and then a determination of the rights of the parties on an application of the appropriate principles of law to the facts ascertained.
To take an example, the question is whether the defendant has acquired title to the suit property by adverse possession.
It is found on the facts that the land is a vacant site that the defendant is the owner of the adjacent.
residential house and that he has been drying grains and cloth and throwing rubbish on the plot.
The further question that has to be determined is whether the above facts are sufficient to constitute adverse possession in law.
Is the user continuous or fugitive? Is it as of right or permissive in character? Thus, for deciding whether the defendant has acquired title by adverse possession the court has firstly to find on an appreciation of the evidence what the facts are.
So far, it is a question of fact.
It has then to apply the principles of law regarding acquisition of title by adverse possession, and decide whether on the facts 707 established by the evidence, the requirements of law are satisfied.
That is a question of law.
The ultimate finding on the issue must, therefore, be an inference to be drawn from the facts found, on the application of the proper principles of law, and it will be correct to say in such cases that an inference from facts is a question of law.
In this respect, mixed questions of law and fact differ from pure questions of fact in which the final determination equally with the finding or ascertainment of basic facts does not involve the application of any principle of law.
The proposition that an inference from facts is one of law will be correct in its application to mixed questions of law and fact but not to pure questions of fact.
The following observations of Lord Atkinson ' in Herbert vs Samuel Fox and Co., Ltd.(1) clearly bring out the principle above stated: ".
Your Lordships were pressed with the usual argument, that as the County Court judge though a judge of law and facts, is the sole judge of fact, his findings cannot be disturbed if there was any evidence before him upon which he, as a reasonable man, could find as he has found.
That argument is quite sound if it be applied to pure findings of fact.
It is utterly unsound if it be applied either to findings on, pure questions of law or on mixed questions of law and fact .
It is wholly illegitimate, in my view, in cases such as the present, by finding in the words of the statute to endeavor to secure for 'a finding on a pure question of law, or on a mixed question of law and fact, that unassailability which properly belongs only to a finding on a question of pure fact".
These observations were made in a case under the Workmen 's Compensation Act, 1904.
But the same principles have been applied to revenue cases, and it has consistently been held that inferences from facts may themselves be inferences of fact and not of law, and that such inferences are not open to review by the court.
In the Queen vs Special Commissioners of Income tax(2) Esher M. R. observed: (1) , 413.
(2) , 290 291.
92 708 ". . it seems to me that is a question of fact.
It is a question of the true inference which they (Commissioners) had to draw as a matter of evidence upon the facts which they had in evidence before them.
But to draw an inference of fact from evidence before you is not a question of law at all.
The inference is a question of fact just as much as the direct evidence of fact, and it would be an appeal against facts, which we are not entitled to entertain and consequently there can be no Mandamus".
A clearer and more, emphatic refutation of the appellant 's contention cannot be found.
The law is thus summed up in Simon 's Income Tax, 1952 Edition, Volume I, page 281: "There can be no doubt that it is for the Commissioners, and for the Commissioners alone, to discover and state the basic or 'primary ' facts of the case .
From the primary facts the Commissioners will almost always need to draw some inference or inferences by the exercise of reasoning, and it is this process of inference which may, according to its nature, be a finding of law or of fact, or mixed finding of law and fact".
The result of the authorities then is that inference from facts would be a question of fact or of law according as the point for determination is one of pure fact or mixed question of law and fact.
Is there anything in the authorities cited by the appellant which militates against this conclusion? In Edwards (Inspector of Taxes) vs Bairstow(1), the point for determination was whether the transaction entered into by the assessee was an adventure in the nature of trade.
The finding of the Commissioner was that it was not.
But that was reversed by the House of Lords who held that on the facts found it was an adventure in the nature of trade.
The very expression "in the nature of trade" requires that the adventure should possess certain elements which in law would invest it with the characteristics of a trade.
The question is, therefore, one of a mixed law and fact.
That is precisely how the matter is dealt with by (1) 709 Lord Radcliffe.
He observes at page 589: "My Lords, I think that it is a question of law what meaning is to be given to the words of the Income Tax Act 'trade, manufacture, adventure or concern in the nature of trade ' and for that matter what constitutes 'profits or gains ' arising from it.
Here we have a statutory phrase involving a charge of tax and it is for the courts to interpret its meaning having regard to the context in which it occurs and to the principles which they bring to bear upon the meaning of 'income ' ".
Lord Somervell agreed with the opinion expressed by Lord Radcliffe.
The Lord Chancellor, dealing with this aspect of the case, referred to the decisions in Cooper vs Stubbs(1) and Jones vs Leeming(2), where it had been held that whether trading activities amounted to carrying on business was a pure question of fact, and observed at page 587: "Yet it must be clear that to say that such an inference is one of fact postulates that the character of that act which is inferred is a matter of fact.
To say that a transaction is or is not an adventure in the nature of trade is to say that it has or has not the characteristics which distinguish such an adventure.
But it; is a question of law, not of fact, what are those characteristics, or in other words, what the statutory language means ".
In the view of Viscount Simonds, therefore, the question was one of mixed law and fact.
But be was also prepared to decide the case on the footing that it was a question of fact and observed at pp.
585 586: "This appeal must be allowed and the assessments must be confirmed, For it is universally conceded that though it is a pure finding of fact, it may be set aside on grounds which have been stated in various ways but are, I think, fairly summarised by saying that the court should take that course if it appears that the Commissioners have acted without any evidence or upon a view of the facts which could not reasonably be entertained".
That is to say, even if the question was one of pure (1) (2) 710 fact, the finding of the Commissioners was liable to be set aside on the ground that there was no evidence in support of it or that on the evidence it was perverse.
What is of significance in this is that the Lord Chancellor dealing with the question whether the adventure was in the nature of trade as one of fact does not hold that the ultimate finding was one of law by reason of its being one of inference from facts but treats it only as a finding of fact and open to attack as such.
This decision, therefore, is no authority for the position that where a findig is given on a question of fact based upon an inference from facts, that is always a question of law, and the following observation of Lord Radcliffe at page 592 is directly against it: "I do not think that inferences from other facts are incapable of being themselves findings of fact although there is value in the distinction between primary facts and inferences drawn from them".
In Bomford vs Osborne(1), the Commissioners had held that 230 acres out of a plot of 550 acres belonging to the assessee should be separately assessed as "gardens for the sale of produce", while the remaining lands should be taxed on the basis of their annual value.
The assessee disputed the correctness of this finding, and contended that the 230 acres in question were not gardens as contemplated by Rule 8 of Schedule B of the Income tax Act, 1918.
The House of Lords agreed with this contention, and discharged the assessment.
One of the points raised on behalf of the Crown was that the finding of the Commissioner was one of fact and was therefor& final.
This contention was repelled on the ground that whether the lands were gardens within rule 8 was not a pure question of fact.
The following observations in the speech of Lord Wright at page 38 may be quoted: "It has been strenuously contended as a main argument on behalf of the Crown that the questions here to be discussed are questions of 'fact and degree '.
But, in my opinion, the true effect of the facts found cannot be ascertained until the true construction of r. 8 has been examined and its true application to (1) [1942] I.T.R. Supplt.
711 the facts ascertained.
There are, in addition to incidental questions, two main questions of law, namely, what is the meaning of "gardens for the sale of produce" and how is that meaning to be applied to acreage which is worked as a single mixed farm in one unit".
Thus, the basis of the judgment was that the question decided by the Commissioners was one of mixed law and fact, and that their determination was open to review by the courts.
There is nothing in this decision again which supports the contention of the appellant that findings on questions of fact based on inference from other facts should be regarded as questions of law.
On the other hand, the following observations of Viscount Simon at page 22 are really against this contention: "No doubt, there are many cases in which Commissioners, having bad proved or admitted before them a series of facts, may deduce therefrom further conclusions which are themselves conclusions of pure fact, but in such cases the determination in point of law is that the facts proved or admitted provide evidence to support the Commissioner 's conclusions".
These observations clearly establish that inferences from facts found need not necessarily be inferences of law but may be conclusions of fact, and such conclusions of fact could be attacked on grounds on which findings of fact could be attacked, namely, there is no evidence to support them as for example, if the conclusion does not follow even if all the facts found are accepted.
That does not certainly support the contention of the appellant.
In Thomas Fattorini (Lancashire), Ltd. vs Inland Revenue Commissioners(1), the point for decision was whether the appellant company bad failed to declare within a reasonable time dividend out of the profits earned by it, in which case under section 21 of the Finance Act, 1922 the income is deemed to be income of the members and chargeable to super tax.
The finding of the Board of Referees was that distribution of profits had not been made within a reasonable time, (1) ; 712 but their decision was reversed by the House of Lord& on the ground that there was no evidence in support of it.
Thus, there is nothing in the decision itself which has any bearing on the present controversy.
The appellant, however, relies on the following observations in the speech of Lord Porter at page 667: "I. think that the final conclusion is not a fact but an inference from facts previously set out, and that, therefore, that conclusion is not binding upon the tribunal to which the case is referred unless it appears from the previous findings that there are facts which support it.
In the present case I cannot find such support.
" In the context, what these remarks mean is that when the final conclusion is one of fact and is itself an inference from other facts, it is open to attack on the ground that the basic facts themselves do not constitute evidence in support of the final conclusion a position which does not arise here.
Then there is the observation of Lord Maugham in Cameron vs Prenderga8t(1) that "inferences from facts stated by the Commissioners are matters of law and can be questioned on appeal".
Does this remark mean that inferences from facts found are questions of law in all cases, whether these inferences are inferences of facts or of law? There.
being nothing in the observation to throw any light on this question, we must examine the facts of the case to ascertain its true import.
There, the assessee who had been a Director in a building company for 44 years wanted to resign his office, but be was persuaded to continue as an advisory Director on a reduced remuneration and a payment of C45,000, and this arrangement was embodied in a deed.
The question was whether these amounts were taxable as profits arising from an office.
The Commissioners had held that the consideration for the payments was the promise of the assessee not to resign his office, and that therefore they were not profits arising from any office.
The House of lords held, affirming the judgment of the majority of the Court of Appeal that the amounts were paid to (1) 8 I.T.R. Supplt.
75, 81.
713 the assessee in consideration of his continuing as a Director, and were therefore taxable.
Thus, the only point for determination in the case was as to the character of the payments made to the appellant, and that depended on the true interpretation to be put on the agreement, and that really was a question of law.
There was no question of the Commissioners recording findings on primary facts and then of drawing further inferences therefrom.
The dictum relied on by the appellant therefore could have no reference to the question now under consideration.
It is possible that having regard to the observations follow 'ing the one quoted above that "the same remark is true as to the construction of documents", what was meant to be conveyed was that the legal effect of facts stated in the deed of agreement was a question of law.
In the context, it is impossible to construe the observation as an authority in support of the present contention of the appellant, and it should be mentioned that there is nothing about this in take judgments of the other members of the court.
One other argument advanced on behalf of the appellant must now be considered.
This is based on the following observations of Cozens Hardy M.R. in The Gramophone and Typewriter Ltd. vs Stanley(1): "It is undoubtedly true that if the Commissioners find a fact, it is not open to this court to question that finding unless there is no evidence to support it.
If, however, the Commissioners state the evidence which was before them, and add that upon such evidence they hold that certain results follow, I think it is open, and was intended by the Commissioners that it should be open, to the court to say whether the evidence justified what the Commissioners held.
I am satisfied that the case stated by the Commissioners falls under the latter head".
these observations, the argument of the appellant was that whenever the Tribunal found certain basic facts and stated its conclusions thereon,, its determination was open to review by court, and that it was immaterial whether these conclusions were of fact or (1) 714 of law.
The answer to this contention is furnished by the decision in The American Thread Company vs Joyce(1), wherein the true scope of these observations has been fully considered and authoritatively settled.
There, Hamilton J. pointed out that what the observations meant was Chat if the Commissioners merely stated certain findings of fact and while expressing what according to them was their effect, did not intend that the expression should be taken as their finding thereon, then it must be taken that they had referred to the decision of the court the question as to what inference should be drawn from the basic findings, but that if they had not merely stated the basic findings but had also stated their conclusions thereon intending that they should be their determinations on the question, then those determinations, if conclusions of fact, would be binding on the court and that the assessee would then have been stated out of court.
Dealing with the statement of the Commissioners which was under reference before him, the learned Judge observed at page 22: "It appears to me, therefore, that it is quite clear that the Commissioners have done this: they have stated their determination, with which the appellants are dissatisfied; they have stated the facts as found upon which they so determined.
The facts as found they have stated in the first part of paragraph 17, and then they have stated in the previous paragraphs the materials on which they so found, and in so doing they have invited, and only invited, the de termination in point of law of the question whether there was evidence upon which they could reasonably arrive at the conclusion at which they did arrive".
The decision in.
The Gramophone and Typewriter Company Ltd. vs Stanley(2) is thus really not a pronouncement on what is a question of law but on what construction was to be put on the statement of the Commissioners which was before the court.
It should be added that the situation envisaged by Cozens Hardy M. R. in The Gramophone and Typewriter Company (1) (2) 715 Ltd. vs Stanley(1) cannot arise under section 66 of the Act, as the Tribunal is itself charged with the duty to decide whether a question of law arises out of its order, and it cannot therefore merely pass it on for the determination of the court.
The decision in The American Thread Company vs Joyce (2) was taken on appeal and confirmed by the Court of Appeal, of which it may be noted two of the members, Fletcher Moulton L.J. and Buckley L.J. were.
parties to the decision in The Gramophone and Typewriter Company Ltd. vs Stanley(1), and they expressed themselves in agreement with the view taken by Hamilton J.
There was a further appeal to the House of Lords, which in confirming the decision of the courts below expressly approved of the observations of Hamilton J.
The Earl of Halsbury observed: "It is enough to say that they (the Commissioners) have found it and that there was evidence upon which they might find it, and if they did find it and if there was evidence upon which they might find it, there is no question of appeal here at all .
I should have been contented absolutely to say that I entirely agree with every word of Mr. Justice Hamilton 's iudgment".
(The American Thread Company vs Joyce).
This decision is particularly important as the finding in that case was itself, as appears from the judgment of Hamilton J., an inference from facts found and, nevertheless, it was decided that it was a question of fact on which the finding of the Commissioners was final.
I must now refer to another catena of cases relied on by the appellant in support of its contention that inferences from facts are questions of law.
They are decisions of the Privy Council as to when a court of second appeal having authority to review decisions of the lower appellate court on a question of law could interfere with its findings of fact.
In Ramgopal vs Shamskhaton(4), one Daud Rao was sought to be made liable on a mortgage to which he was not a (1) ; (3) , 165.
93 (2) (4) [1891] 921 19 I. A. 228, 716 party on the ground that be had knowledge of it and had accepted it.
In holding that the acts found did not establish any ground of liability, Sir Richard Couch observed: "A finding that the bond shewed that the mortgage deed was accepted by the defendant, as binding obligation upon him, would be an inference of law, an inference which, in their Lordships ' opinion is not a just one from the facts which the Commissioner held to be proved.
The knowledge of the mortgage and saying that the money due upon it was repayable, do not amount to an agreement by him to be bound byit.
As the mortgage did not purport to be made in any way on behalf of Daud Rao it was not a case for ratification.
A new agreement was necessary to bind him".
Then, after referring to the observations of Lord Watson in Ramratan Sukal vs Mussumat Nandu(1) that "it has now been conclusively settled that the third Court, which was in this case the court of the Judicial Commissioner, cannot entertain an appeal upon any question as to the soundness of findings of ' fact by the second court; if there is evidence to be considered, the decision of the second Court, however unsatisfactory it might be if examined, must stand final", Sir Richard Couch continued: ". . the present case does not come within that rule.
The facts found need not be questioned.
It is the soundness of the conclusion from them that is in question, and this is a matter of law".
It is this last observation that is relied upon for the appellant.
But when read along with the other passages quoted above, it clearly recognises the distinction between findings of pure questions of fact and of mixed question of law and fact.
In, Nafar Chandra Pal vs Shukur(2), Lord Buckmaster observed: "Questions of law and of fact are sometimes difficult to disentangle.
The proper legal effect of a proved fact is essentially a question of law, so also is the question of admissibility of evidence and the (1) [1891 92] 19 I.A. 1.
(2) [1917 18] 45 I.A. 183, 187.
717 question of whether any evidence has been offered by one side or the other; but the question whether the fact has been proved, when evidence for and against has been properly admitted, is necessarily a pure question of fact".
The expression "the proper legal effect of a proved fact" is itself indicative that inferences from facts are not all of them questions of law open to consideration in second appeal but only those which involve the application of some legal principle.
The actual decision in that case was that the question as to the character of land was one of fact not open to consideration in second appeal.
In Dhanna Mal vs Motisagar(1), the point for determination was whether the facts proved were sufficient to establish a right of permanent occupancy.
Discussing how far a finding on that question by the lower appellate court could be disturbed in second appeal, Lord Blanesburgh observed at page 185: "It is clear, however, that the proper effect of a proved fact is a question of law, and the question whether a tenancy is permanent or precarious seems to them, in a case like the present, to be a legal inference from facts and not itself a question of fact.
The High Court has described the question here as a mixed question of law and fact a phrase not unhappy if it carries with it the warning that, in so far as it depends upon fact, the finding of the court of first appeal must be accepted".
These observations again emphasise the distinction between inferences which are themselves questions of fact and inferences on mixed questions of law and fact.
This question was the subject of further consideration by the Privy Council in Wali Mohammad vs Mohammad Baksh(2), Secretary of State for India in Council vs Rameswaram Devasthanam(3) and Lakshmidhar Misra vs Rangalal(1).
In, Wali Mohammad vs Mohammad Baksh(2), Sir Benod Mitter (1) [1927] L.R. 54 I.A. 178.
(2) [1929] L.R. 57 I.A 86:59M.L.J. 53.
(3) [1984] L.R. 61 I.A. 163: (4) [1949] L.R. 76 I.A. 271: 718 exhaustively reviewed the authorities on the questions and stated the law in the following terms: "No doubt questions of law and fact are often difficult to disentangle, but the following propositions are clearly established: (1) There is no jurisdiction to entertain a second appeal on the ground of erroneous finding of facts, however gross the error may seem to be.
(See Musumat Durga Choudrain vs Jawahir Singh Choudhri(1)).
(2) The proper legal effect of a proved fact is essentially a question of law, but the question whether a fact has been proved when evidence for and against has been properly admitted is necessarily a pure question of fact.
(Nafar vs Shukur(2)).
(3) Where the question to be decided is one of fact, it does not involve an issue of.
law merely because documents which were not instruments of title or otherwise the direct foundation of rights but were really historical matters, have to be construed for the purpose of deciding the question.
(See Midnapur Zamindary Co. vs Uma Charan Mandal(3)).
(4) A second appeal would not lie because some portion of the evidence might be contained in a document or documents and the first appellate court had made a mistake as to its meaning.
(See Nowbutt Singh vs Chutter Dharee Singh(4)).
Great reliance was placed by the appellants counsel on Dhanna Mal vs Moti Sagar(5) but there, the tenancy was admitted and the question was whether it was permanent or not, and the solution of it depended upon what was the legal inference to be drawn from proved facts, or in other words, the question was what was the legal effect.
of proved facts".
In Secretary of State for India in Council vs Rameswaram Devasthanam(6) where a finding of fact reached by the lower appellate court on a consideration of the documentary evidence was reversed in second appeal, Sir John Wallis in holding that the High Court had, in interfering with the finding of (1) [1889 90] 17 I.A. 122.
(2) [1917 18) 45 I.A. 183.
(3) P.C.; (4) 19 W.R. 222.
(5) [1927] L.R. 54 I.A. 178.
(6) [1934] L.R. 61 I.A. 163.
719 fact, acted in excess of its powers under section 100 observed "The question is mainly one of fact, and it is well settled that under section 100 of the Code of Civil Procedure the High Court has no jurisdiction to reverse the findings of fact arrived at by the lower appellate court however erroneous, unless they are vitiated by some error of law.
Subsequently to the date of the judgments under appeal the Board has had occasion to emphasis the fact that this rule is, equally applicable to cases such as this in which the findings of the lower appellate court are based on inferences drawn from the documents exhibited in evidence".
If an inference from documents exhibited in evidence is a question of fact, an inference from facts found on the evidence must equally be so.
There is one more decision of the Privy Council bearing on this question.
In Lakshmidhar Misra vs Rangalal(1), the question was whether the finding of the Subordinate Judge in appeal that there had been a dedication of certain lands as cremation ground could be reversed in second appeal.
In ' holding that the finding was open to review by the High Court, Lord Radcliffe observed: "Issue No. 5, (whether the land was a cremation ground) is essentially a mixed question of law and fact.
There are findings of fact by the Subordinate Judge which must indeed be accepted as binding in any consideration of this matter on further appeal: but his actual conclusion that there had been a dedication or lost grant is more properly regarded as a proposition of law derived from those facts than as a finding of fact itself".
These observations lend no support to the broad contention of the appellant that inferences from facts are of necessity and always questions of law.
We have discussed the authorities at great length, as some of the observations contained therein appear, at first sight, to render plausible the contention of the appellant, and it seems desirable that the true (1) [1949] L.R. 76 I.A. 271, 720 meaning of those observations Should be clarified, lest error and misconception should embarrass and fog the administration of law.
The position that emerges on the authorities may thus be summed up: (1)When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the court under section 66(1).
(2)When the point for determination is a mixed question of law and fact; while the finding of the Tribunal on the facts found is final its decision as to the legal effect of those finding is a question of law which can be reviewed by the court.
(3) A finding on a question of fact is open to attack, under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse.
(4) When the finding is one of fact, the fact that it is itself in inference from other basic facts will not alter its character as one of fact.
Applying these principles, admittedly there is no question here of construction of any statutory provision or document of title.
The issues which arise for determination whether the sales entered in the books of the appellant in the names of the intermediaries were genuine and if not, to whom the goods were sold and for what price are all questions of fact.
Their determination does not involve the application of legal principles to facts established in the evidence.
The findings of the Tribunal are amply supported by evidence and are eminently reasonable.
It should, therefore, follow that there is no question which could be referred to the court under section 66(1).
it was argued for the appellant that what the Tribunal had found was that the intermediaries, firms and companies were benamidars for the appellant, that a question of benami was one of mixed law and fact, and that accordingly a finding thereon was open to review under section 66(1).
Whether that is a correct reading of what the Tribunal bad found will presently be considered.
Assuming that such is the finding, what is the ground for holding that a finding of benami is one of mixed law and fact? The only basis 721 for such a contention is that the finding that a transaction is benami is a matter of inference from various primary basic facts such as who paid the consideration, who is in enjoyment of the properties and the like.
But that is not sufficient to make the question one of mixed law and fact unless, as already stated, there are legal principles to be applied to the basic findings before the ultimate conclusion is drawn.
But no such principles arise for application to the determination of the question of.
benami, which is purely one of fact, and none has been suggested by the ap pellant.
In Gangadara Ayyar vs Subramania Sastrigal(1), the Federal Court had to consider whether concurrent findings of benami by the courts below could be reviewed by it, and it was held that it could not be clone as the practice of the court was not to interfere with concurrent findings of fact unless there were exceptional grounds therefor and that there were none such in that case.
It should be noted that the finding of benami in that case was a matter of inference from primary facts found which are set out at page 573.
But it was nevertheless held to be a question of fact.
In Misrilal vs Surji(2), it was held by the Privy Council that a finding of benami was one of fact not open to attack in second appeal.
This contention of the appellant must accordingly be rejected.
It was next contended that the finding of the Tribunal that the intermediaries, firms and companies were benamidars.
for the appellant was bad for the following reasons: (1)It had been reached without due consideration of several matters relevant for such a determination.
(2)The finding of benami in so far as it related to the companies was bad for not considering the tests laid down in Smith, Stone and Knight vs Birmingham Corporation(3) as material for a decision on the point.
(1) [1949] 1 M.L.J. 568: A.I.R. 1949 F.C. 88 (2) A.I.R. 1950 P.C. 28: (3) 722 (3) On the facts found,, the proper conclusion to come to was that the intermediaries were benamidars not for the appellant but for Mr. Thyagarajan Chettiar of the Managing Agents firm.
These contentions will now be considered.
As regards the first contention, the argument on behalf of the appellant was this: An important test for determining whether a transaction is benami is to discover the source of consideration for the transfer.
When the question is whether firms and companies are benamidars for another person, what has to be found is whether it was the latter who found the capital of those concerns.
The firms and companies had according to their books their own capital, and there is no finding that the appellant subscribed it.
Another important test of benami is to find who has been in enjoyment of the benefits of the transaction.
It has not been shown that the profits of the intermediaries had been utilised by the appellant.
Therefore, the finding that the intermediaries were benamidars of the appellant could not stand.
Now, the assumption underlying this argument is that the Tribunal had found in its order that the intermediaries were benamidars for the appellant, but there is no basis for this in the order.
In this connection, it is necessary to note that the word 'benami ' is used to denote two classes of transactions which differ from each other in their legal character and incidents.
In one sense, it signifies a transaction which is real, as for example when A sells properties to B but the sale deed mentions X as the purchaser.
Here the sale itself is genuine, but the real purchaser is B, X being his benamidar.
This is the class of transactions which is usually termed as benami.
But the word 'benami ' is also occasionally used, perhaps not quite accurately, to refer to a sham transaction, as for example, when A purports to sell his property to B without intending that his title should cease or pass to B.
The fundamental difference between these, two classes of transactions is that whereas in the former there is an operative transfer resulting in the vesting of title in the transferee, in the latter there is none 723 such, the transferor continuing to retain the title notwithstanding the execution of the transfer deed.
It is only in the former class of cases that it would be necessary, when a dispute arises as to whether the person named in the deed is the real transferee or B, to enquire into the question as to who paid the consideration for the transfer, X or B. But in the latter class of cases, when the question is whether the transfer is genuine or sham, the point for decision would be, not who paid the consideration but whether any consideration was paid.
Therefore, there will be force in the contention of the appellant that a finding as to who furnished the capital for the intermediaries was requisite before they could be held to be benamidars, if the Tribunal had held them to be benamidars in the former sense but not in the latter.
We must.
, therefore, examine what it is that the Tribunal has actually found.
Now, the Tribunal has not held that any of the transactions with which the assessment proceedings are concerned are benami.
Indeed, the word 'benami ' does not find a place anywhere in its order.
It is only in the question which the appellant framed for reference to the court in its application under section 661) that it has chosen for the first time to introduce the word 'benamidar '.
That apart, looking at the substance of the finding, the point that arose for determination before the taxing authorities was what profit the appellant had made on certain sales standing in its books in the names of the intermediaries.
If the sales were true, the amounts shown in the books as price received therefor would be the basis for working out the profits, and that was the stand of the appellant; but the authorities held that those sales were sham and the entries relating to the payment of price therefor fictitious.
Then, they found that the concerned goods were sold by the appellant directly to its own constituents, that the price paid by them was actually received by it, and that should be the basis for calculating its profits.
Thus, the point which was actually in issue in the proceedings was a question of benami in the second sense and not in the first, and to decide that, the Tribunal bad only to 724 find whether any price was paid by the intermediaries for the sales and not who paid the price for them.
It is scarcely necessary to add that no question arises as to whether the intermediaries are benamidars for the ultimate purchasers, because the claim of the former is that they had sold the goods to the latter under fresh contracts at different prices.
Nor could there be a question of benami in the first sense, as that could arise only between a party to a deed and another who is economic not a party to it but claims to be beneficially entitled to the properties conveyed by the deed.
Therefore, on the findings of the Tribunal, the question whether the intermediaries were benamidars for the appellant could not arise, and the further question as to who found the capital for the intermediaries is altogether irrelevant.
Likewise, on the finding that the yarn was really sold by the appellant not to the intermediaries but to its own constituents and that they paid the price therefor to the appellant, the question who had the benefit of the transaction could not arise either.
(2)It is next contended that some of the intermediaries were private limited companies registered in accordance with the provisions of the Companies Act and were in law distinct legal entities as held in Solomon vs Solomon & Company(1), and that they could not be held to be benamidars for the appellant without deciding the matters mentioned by Atkinson J. in Smith, Stone and Knight vs Birmingham Corporation (2) .
The learned Judge observed at page 121: "It seems therefore to be a question of fact in each case, and those cases indicate that the question is whether the subsidiary was carrying on the business as the company 's business or as its own.
I have looked at a number of cases they are all revenue cases to see what the courts regarded as of importance for determining that question.
There is San Paulo Brazilian Rly.
Carter(3), Apthorpe vs Peter Schoenhofen Brewery Co. Ltd. (4), Frank Jones Brew (1) ; (2) (3) [1896] A.G. 31: (4) 725 ing Co. vs Apthorpe(1), St. Louis Breweries vs Apthorpe(2), and I find six points which were deemed relevant for the determination of the question: who was really carrying on the business? In all the cases, the question was whether the company, an English company here, could be taxed in respect of all the profits made by some other company, a subsidiary company, being carried on elsewhere.
The first point was: Were the profits treated as the profits of the Company? wben I say 'the company ' I mean the parent company secondly, were the persons conducting the business appointed by the parent company? Thirdly, was the company the head and the brain of the trading venture? Fourthly, did the company govern the adventure, decide what should be done and what capital should be embarked on the venture? Fifthly, did the company make the profits by its skill and direction? Sixthly, was the company in effectual and constant control?" The contention of the appellant is that before the intermediaries could be held to be benamidars for the appellant, findings ought to have been recorded on the six points mentioned in the judgment of Atkinson, J.
This contention proceeds on a misapprehension as to the true scope of the above observations and of the decisions referred to therein.
In those cases, the question was whether the profits earned by a subsidiary company X could be held to be profits earned by the parent company A and taxed in the hands of company A.
It was held that the fact that X was a legal entity did not stand in the way of its profits being treated as profits of A, if, as observed by Lord Sterndale in Inland Revenue Commissioners vs Samson(3), X was doing the business of A and not its own, and various tests were laid down for ascertaining whether it was A who was running the business of X.
But here, no such question arises.
The true scope of the assessment proceedings is to discover what profits were really made on certain sales effected by the appellant, and the intermediaries came into (1) (2) (3) ; 726 the picture only as the persons in whose names the sales were made.
The question whether apart from those sales the intermediaries were genuine commercial bodies having existence independent of the appellant did not arise for determination, as a finding that they were such bodies would have had no effect on the chargeability of the appellant to tax on the profits made by it on the sales in question.
The question of the true status of the intermediaries would have assumed practical importance if they had done business other than the sales in question and had made profits thereon, and those profits were sought to be taxed as profits made by the appellant.
It would then be a legitimate contention for the appellant to advance that could not be done unless the intermediaries were found to have been really benamidars for it.
In that case, it would have been important to consider who found the capital for the concerns and who was running them.
But here, the tax is levied only on the profits ostensibly earned by the intermediaries on the sales which stand in the books of the appellant in their names.
If those sales are sham, then the order of assessment must stand even if the intermediaries were real concerns, which had found their own capital and earned their own profits in other transactions.
If an individual A carrying on his own business lends his name to the business transaction of B. the latter cannot escape the obligation to pay the tax on these transactions on the ground that A had also his own genuine business.
Likewise if companies doing their own business lend their names to business transactions of other persons, those other persons cannot be heard to say that they are not taxable on the profits of these transactions for the reason that the companies were also carrying on their own business.
Therefore, on the finding that the sales were sham, no question arises as to the constitution or status of the intermediaries.
It is true that the Tribunal has directed that all the profits earned by the intermediaries should be added to the profits of the appellant but that is because it has found that the intermediaries 727 did no business of her than the transactions of the appellant.
And this finding clearly reveals how hollow and unsubstantial the contentions of the appellant are as to the sources of capital for the intermediaries and the application of the tests laid down in Smith, Stone and Knight vs Birmingham Corporation(1).
It is a most unreal question to raise of firms and companies whose only business consists of sham transactions as to who found the capital for them or who was running them.
(3) It is next contended that though the facts proved might justify a finding that the intermediaries were benamidars, they did not necessarily lead to the conclusion that they were benamidars for the appellant.
It is argued that on the findings of the Tribunal that it was Mr. Thyagaraja Chettiar, the Managing Agent of the appellant, that had setup the intermediaries, that it was his relations and men who had been put up as partners and shareholders of these concerns, and that it was he that generally had the control of the business, the proper inference to draw was that the intermediaries were benamidars for Mr. Tbyagaraja Chettiar, and that in consequence their profits were liable to be added to his and not to those of the appellant.
This argument again proceeds on the assumption that the profits of the intermediaries have been taxed in the hands of the appellant on the ground that they are its benamidars.
But, as already stated, that is not the true position.
What are sought to be taxed in these proceedings are the profits made on certain sales and not the profits made by the intermediaries as distinct entities chargeable to tax under section 3 of the Act, and the only relevant points for decision are, what profits were made on those sales and by whom.
On the finding that the appellant sold the goods direct to the ultimate purchasers and recovered the price therefor, it is only the appellant that could be taxed for the profits made thereon and not the Managing Agent.
It is of no consequence that in form the order is that the profits of the intermediaries should be added to those of the (1) [1939] 4 A.E.R.116.
728 appellant, because, as pointed out in discussing the previous contention of the appellant of which the present is but a repetition in another form, the intermediaries did no other business than the sales concerned in this assessment, so that the profits of the business mean the same thing as profits made on the concerned sales.
There is another aspect of the matter, which calls for notice.
If the contention of the appellant that the intermediaries were benamidars for Mr. Thyagaraja Chettiar is accepted, it means that he had, by availing himself of his position as Managing Agent, unjustly enriched himself at the expense of the shareholders to the tune of over Rs. 25 lakhs.
Now, Mr. Thyagaraja Chettiar is the dominant member of the firm of Managing Agents.
It is this firm that has been in management of the affairs of the company at all times and has been representing it in the assessment proceedings at all stages, and it is through this firm that the appellant speaks in the present appeals.
The position then is that Mr. Thyagaraja Chettiar as Managing Agent of the appellant charges himself in his individual capacity with conduct which is grossly fraudulent and infamous, so that the company might escape its liability to tax.
This, to our minds, is a most surprising position to take.
But we are not concerned here with the ethics of it and must consider it on its merits so long as the law does not bar it.
But what are its merits The position which the appellant took up with reference to this matter at the several stages of the assessment has been neither uniform nor even consistent.
Thus, before the Appellate Assistant Commissioner its argument was that the Managing Agent had been the protector of the interests of the ' company at all times, that he had "Stood by it in its lean years" and should "not therefore be presumed to have acted against the interests of the company" and that therefore the transactions in the names of the intermediaries should be accepted as genuine.
Before.
the Tribunal, the contention was that even if the intermediaries were bogus concerns "it might be that some other individual got the bene 730 fit and not the company".
Thus, the contention now advanced was not thought of in the earlier stages and was still nebulous and in the making, when the matter was before the Tribunal, and it is only in the, argument that it has assumed a definite and concrete shape.
Dealing with the contention as advanced before it,.
the Tribunal referred to several facts such as that the sales in favour of the intermediaries were for unusually large quantities and for prices far below the market rate and even the cost of production, that the appellant was a public company with a Board of Directors in charge of its business, and that they must have known all about these transactions.
Is it likely that the Directors would have accepted these sales involving such huge loss to the company and carried on regularly from month to month and year to year during the whole of this period as proper and genuine, unless they considered that it was the company and not Mr. Thyagaraia Chettiar who was to have the benefit of them? it was argued by the learned Solicitor General for the respondent that if on the facts two inferences were possible and the Tribunal chose to draw one and not the other, it was not a matter in which the court could interfere, if the inference is one of fact.
That is a proposition of law well settled, and has not been disputed.
Now, on the facts, two inferences are possible.
One is that the object of the Managing Agent was to defraud the shareholders by purchasing goods himself at a low valuation for his own benefit and that the intermediaries were set up by him for that purpose.
The other is that they were set up for the purpose of concealing portions of the profits earned by the company so as to reduce the tax to which it was liable to be assessed.
The former involves cheating the shareholders; the latter, evad ing the tax due to the State.
Is it an unreasonable inference for the Tribunal to draw that the motive by which the Managing Agent was actuated was the latter and not the former? Is it not more legitimate to presume that the Managing Agent wanted to benefit the shareholders by reducing the 730 tax rather than he wanted to defraud them by himself purchasing the goods for a low price in the names of the intermediaries? If the Tribunal came to the former conclusion and it is one which could reasonably be come to on the materials, it is not one which the court can review, being one of fact.
This ground.
of attack also must be rejected.
In the result, all the contentions of the appellant based on the assumption that the intermediaries had been held to be benamidars for the appellant must be overruled on the ground that on the findings of the Tribunal they do not really arise.
Lastly, it was contended that the profits earned by the intermediaries bad not been brought into the books of the company_ as its income, had not been included in its balance sheet and had not been distributed as dividends or added to its reserves, and, not having been treated as its income or profits, could not be taxed.
The decisions in St. Lucia Usines and Estates Co. vs St. Lucia (Colonial Treasurer) (1), Commissioner of Taxes vs Melbourne Trust(2) and Commissioner of Income tax, Bihar and Orissa vs Maha rajadhiraja of Darbhanga(3) were quoted in support of this contention.
This question is, however, no longer res integral and is covered by the decision of this Court in Commissioner of Income tax vs K. B. M. T. T. Thyagaraja Chetty(1).
There, the assessee which was no other than the firm of Messrs K.R.M.T.T. Thyagaraja Chettiar and Co., the Managing Agents of the present appellant, failed to bring into its profit and loss account a certain amount which it had earned as commission, and the point for decision was whether that amount was liable to tax.
The contention of the assessees was that it was not liable as it had not been treated as profits by the assessee and the decisions in St. Lucia Usines and Estates Co. vs St. Lucia (Colonial Treasurer)(1), Commissioner of Taxes vs Melbourne Trust(2) and Commissioner of Income tax, Bihar and Orissa vs Maharajadhiraja of Darbhanga(3) were relied on in support of this position.
But this Court disagreed with this contention, and (1) [1924] A.G. 508.
(2) (3) 60 I.A. 146.
(4) 731 held that the liability to pay tax on the income arose when it had arisen or accrued and that how the assessee dealt with it subsequently did not affect that liability, and distinguished the decisions in St. Lucia Usines and Estates Co. vs St. Lucia (Colonial Treasurer) (1) and Commissioner of Taxes vs Melbourne Trust(2) on the ground that they were pronouncements on the particular statutes there under con sideration and were not authorities on the question of assessment of profits and gains under the Indian Income tax Act.
Applying this decision, the appellant having been found to have sold its goods to the ultimate purchasers and received the prices, there can be no question but that the profits had accrued to it both in the business and in the legal sense and that liability to tax had arisen.
If an individual were to sell goods and receive the price therefor, that would be income accrued or arisen liable to tax in his hands even though he should have failed to enter it in his accounts.
A party cannot avoid tax by adopting the simple expedient of not disclosing its receipt in his books.
That will be a case of income accrued or arisen but concealed and not of income not accrued or arisen.
This is conceded by the appellant.
But it is argued that different considerations arise in the case of companies registered under the Indian Companies Act, because there are provisions in the Act as to how the profits are to be disposed of, such as distribution of dividends or adding to the reserve and until that was done, there was no accrual of income or of profits under the statute.
This is to confuse accrual of income with the disposal of it.
Income which has accrued to an assessee might remain undisposed of by him, but the liability to tax attaches to it under the provisions of the Indian Income tax Act as soon as it accrues.
It is no concern of the revenue how and when profits are disposed of by the assessees, and for this purpose it makes no difference whether the assessee is an individual or a company, both of them being equally liable to tax 'on income and profits when they have arisen or accrued.
The (1) (1924] A.C. 508.
95 (2) 732 provisions of the Companies Act as to the disposal of profits are designed to protect the interests of the shareholders and have no effect on the right which the State has under the provisions of the Act to impose a tax on income when it arises or accrues.
It should also be mentioned that though the decision in Commissioner of Income tax, Madras vs K. R. M. T. T. Thyagaraja Chetty(1) relates to a firm and not a company, the decisions in St. Lucia Usines and Estates Co. vs St. Lucia (Colonial Treasurer) (2) an(? Commissioner of Taxes vs Melbourne Trust(3) which were held to be inapplicable to the imposition of a charge under the Indian Income tax Act related to companies, and the argument and the decision pro ceeded on the footing that principles applicable were the same both to firms and companies.
The decision in Commissioner of Income tax, Madras vs K. R. M. T. T. Thyagaraja Chetty(1) must accordingly be held to conclude this question against the appellant.
It must be said of this contention that it was raised before the Tribunal and negatived.
Being a question of law, the appellant bad a right to have it referred to the court under section 66(1).
But the question as framed by the appellant in its application under section 66(1) did not specifically raise this point; nor does it appear to have been argued in the High Court.
As the matter is now concluded by authority, it will be an idle formality to direct the Tribunal to refer the question for the decision of the court.
The powers of this Court in appeal under article 136 are not intended to be exercised for such a purpose.
That disposes of the main and substantial questions that have been agitated in these proceedings.
There is one other matter in respect of which the appellant sought reference to the court in its application under section 66(1).
The facts relating to this matter are that during the periods of assessment with which the appeals are concerned, the appellant opened branches in the States of Travancore, Cochin, Pudukkottah and Mysore, and sold yarn to its consti (1) [1964] S.C.R. 258: (2) , (3) 733 tuents in those States through these branches.
The point in dispute is whether the profits made by the appellant on those sales are chargeable to tax.
The contention of the appellant before the Tribunal was that the matter was governed by section 14(2) (c), and that the profits could be taxed only if they were remitted to British India.
That was not disputed by the Department, but they contended that as the appellant sold in the States goods manufactured by it in British India, the governing provisions were sections 42(1) and 42(3), and that under these provisions, the appellant was liable to be taxed on such portions of the profits as were apportionable to the manufacture of the goods in British India.
That was accepted by the Tribunal, and the profits were apportioned in the ratio of 85:15.
In its application under section 66(1), the appellant raised the contention that sections 42 (1) and 42 (3) applied 'only to nonresidents, and that it was only section 14(2) (c) that would apply to residents and applied to have that question referred to the decision of the court.
But the Tribunal held that the decision of this Court in Commissioner of Income tax, Bombay vs Ahmedbhai Umarbhai and Co.(1) had settled that sections 42(1) and 42(3) applied both to residents as well as nonresidents and consequently declined to refer the question ' The correctness of this decision does not appear to have been contested before the High Court, the only point dealt with in the judgment of the learned Judges being as to the correctness of the ratio in which the apportionment was made.
Even in this Court, it was only this question that was pressed on the strength of the decision in Commissioner of Income tax and Excess Profits Pax vs section Sen(2), Section 14 was mentioned in the course of the argument, but no contention was advanced that sections 42(1) and 42(3) ap plied only to non residents, and the decision in Com Missione; of Income tax vs Ahmedbhai Umarbhai and Co.(1) was not even so much as referred to in the (1) ; (2) 734 course of the argument, and the appellant did not even ask for this question being referred.
That apart,in view of the decision in Commissioner of Income tax vs Ahmedbhai Umarbhai and Co.(1), no purpose would be served by directing a reference of this question,and the Tribunal was right in observing that "it is not even of academic interest to refer the said question to the High Court".
On the question whether the fixation of ratio was correct, we are of opinion that it is a pure question of fact, and is not open to reference under section 66(1).
In the result, the appeals fail, and are dismissed with costs.
| IN-Abs | A finding of fact, even when it is an inference from other facts found on evidence, is not a question of law within the meaning of section 66(1) of the Indian Income Tax Act that can be referred to the High Court for its decision.
Such an inference can be a question of law only when the point for determination is a mixed question of law and fact.
On the principles established by authorities, only such questions as relate to one or other of the following matters can be questions of law under the section: (1) the construction of a statute or a document of title; (2) the legal effect of the facts found where the point for determination is a mixed question of law and fact; (3) a finding of fact unsupported by evidence or unreasonable and perverse in nature.
Although a finding of fact which is not supported by any evidence or is unreasonable and perverse may be challenged as an error of law, where there is evidence to consider the finding of the Tribunal does not cease to be final simply because the Court may be inclined to take a view different from that of the Tribunal.
Great Western Railway Co. vs Bater, ([1922] , followed.
The soundness of a conclusion based on a number of facts found on evidence must be judged by the cumulative effect of all the facts and it is altogether a wrong approach to consider them individually in an isolated manner in order to explain them and show that inferences other than those drawn by the Tribunal could be drawn from them.
90 392 Edwards (Inspector of Taxes) vs Bairstow, ([1955] 28 I.T.R. 579), referred to.
Misappreciation of evidence does not amount to want of evi dence and unless the evidence can be shown to be irrelevant or inadmissible, the conclusion of the Tribunal cannot be challenged on the ground that it is based on no legal evidence.
The test as to whether a question is one of fact or one of mixed law and fact is this that while in determining a question of fact no application of any principle of law is required in finding either the basic facts or arriving at the ultimate conclusion, in a mixed question of law and fact the ultimate conclusion has to be drawn by applying the relevant principles of law to the basic findings.
Herbert vs Samuel Fox and Co. Ltd., ([1916] 1 A.C. 405) and The Queen vs Special Commissioners of Income tax ([1894] , followed.
The view expressed in a number of English decisions that an inference from facts is a question of law has reference really to questions of mixed law and fact.
Edwards (Inspector of Taxes) vs Bairstow, ([1955] 28 I.T.R. 679), Bam ford v Osborne, ([1942] A.C. 14), Thomas Fattorini (Lancashire) Ltd. vs Commissioners of Inland Bevenue, ([1942] A.C. 643), and Cameron vs Prendergast, ([1940] A.C. 549), referred to and explained.
The Gramaphone and Typewriter Company Ltd. vs Stanley ([1908] 2 K.B. 89), held inapplicable.
The American Thread Company vs Joyce, ([1911] and The American Thread Company vs Joyce, ([1913] , relied on.
Nor do the observations made by the Privy Council in a number of cases lend any support to the broad contention that inferences from facts are always and necessarily questions of law.
Ram Gopal vs Shamskhaton, ([1892] L.R. 19 I.A. 228), Nafar Chandra Pal vs Shukur ([1918] L.R. 45 I.A. 183), Dhanna Mal vs Moti Sagar, ([1927] L.R. 54 I.A. 178), Wali Mohammad vs Mohammad Baksh, (E 1929] L.R. 57 I.A. 86), Secretary of State for India in Council vs Bameswaram Devasthanam, ([1934] L.R. 61 I.A. 163) and Lakshmidhar Misra vs Bangalal, ([1949] L.R. 76 I.A. 271), referred to and explained.
Consequently, in a case where, as in the present, the Appellate Tribunal, on the basis of certain findings of fact, amply supported by the evidence and eminently reasonable, came to the conclusion that certain sales entered in the books of the assessee Company in the names of certain intermediaries, firms and Companies, which were brought into existence by the assessee solely for the purpose of concealing its own profits, and appeared to have done no other business except the sales in question, were fictitious and the profits ostensibly earned by those firms and Companies were, in fact, 693 earned by the assesses which had itself sold the goods to the real purchasers and received the prices, and should be added to the amounts shown as profits in its accounts, no question of law arose for reference under section 66(1) of the Act.
The question of benami is purely a question of fact and not a mixed question of law and fact as it does not involve the application of any legal principle for its determination.
Gangadhara Ayyar vs Subramania Sastrigal, (A.I.R. 1949 F.C. 88) and Misrilal vs Surji, (A.I.R. , referred to.
The word 'benami ' is used to denote two classes of transactions which differ from each other in their legal character and incidents.
In one, the usual class, the sale is genuine and title is transferred but the real transferee is not the ostensible transferee but another and in the other, where the term is inaccurately applied, the sale to the benamidar is fictitious and the title of the transferor is not intended to pass.
The fundamental difference between these two classes is that while in the former title vests in the transferee, in the latter it remains with the transferor, and when a dispute arises the question as to who paid the consideration becomes relevant only with respect to the former class while in the latter the only question is whether any consideration was paid at all.
The point actually in issue in the instant case, therefore, was a benami in the second sense and what the Tribunal had to decide was whether any price had at all been paid by the intermediaries for the goods ostensibly sold to them by the assessee.
It was not necessary for it to decide whether apart from the sales the intermediaries had an independent existence of their own, for such a decision could not in any way affect the liability of the assessee to pay the tax.
Smith, Stone and Knight vs Birmingham corporation, ([1939] 4 All E.R. 116), distinguished and held inapplicable.
Under the Indian Income tax Act liability to pay the tax arises as soon as the income accrues, whether the assessee be an individual or a registered Company, and the manner in which such a Company chooses to deal with the profits cannot in any way affect its liability.
The provisions of the Indian Companies Act, designed to protect the interests of the share holders, cannot in any way affect the right of the state to levy the tax.
Although the point involved was a question of law appropriate for reference under section 66(1), since the assesses had failed to raise it in his application under that section, this Court would not direct a fresh reference in exercise of its powers under article 136 of the Constitution as the point was no longer in doubt in view of the decision of this Court.
Commissioner of Income tax, Madras vs K.B.M.T.T. Thiagaraja Chetty, ([1954] S.C.R. 258), referred to and followed.
The Tribunal was entirely right in refusing to refer the question as to whether sections 42(1) and 42(3) of the Indian Income tax Act 694 applied only to non residents as was urged on behalf of the assessee.
These sections apply both to residents and non residents.
Commissioner of Income tax vs Ahmedbhai Umarbhai and Co., ([1950] S.C.R. 335), referred to and followed.
The question of apportionment of the profits between the place of manufacture and the place of sale and correctness of the ratio fixed by the Tribunal is a pure question of fact and cannot be referred to Court.
under section 66(1) of the Act.
|
N: Criminal Appeal No. 365 of 1974.
Appeal by Special Leave from the Judgment and Order dated 24.1.1974 of the Patna High Court at Patna in Criminal Appeal No. 306/1969.
U. P. Singh for the Appellants.
K. G. Bhagat and U. N. Prasad for the Respondent.
The Judgment of the Court was delivered by FAZAL ALI, J.
This appeal by special leave is directed against the judgment of the Patna High Court dated 24.1.1974 and has been preferred by appellants Dayanand Mandal, Bhubneshwar Mandal, Kuldip Mandal, Bhagwat Mandal, Nemo Mandal, and Udin Yadav.
The occurrence seems to have arisen out of an irrigation dispute.
According to the prosecution case the appellants wanted to irrigate the land and when they were prevented from doing so, Mainu Mandal resisted as a result of which Bhudeo Mandal who is now dead gave a bhala blow to the deceased Mainu Mandal.
So far as the other appellants are concerned, they are supposed to have been armed with lathis but they did not cause any injuries either to the witnesses or to the deceased.
The Sessions Judge had convicted the accused Bhudeo Mandal under section 304 Part I of the Indian Penal Code and sentenced him to undergo imprisonment for life and the other appellants under section 326/149 of the Indian Penal Code and sentenced them to 3 years rigorous imprisonment but affirmed the acquittal of the accused of the individual charges under sections 323 and 325 of the Indian Penal Code by the Sessions Judge.
We have gone through the judgment of the High Court which while convicting the appellant under section 326/149 of the Indian Penal Code has given no finding regarding the common object of the unlawful assembly.
Even on the prosecution case itself the occurrence took place as a result of an irrigation dispute and the appellants were merely acting under a bona fide claim or belief that they had the right to irrigate the land.
There is no overt act attributed to any of the appellants on the deceased and the mere fact that the appellants were armed with lathis by itself would not prove that they shared the common 293 object with which Bhudeo Mandal was inspired.
Before the High Court could have upheld the conviction of the appellants under section 326/149 of the Indian Penal Code, it should have recorded a clear finding as to what was the object of the unlawful assembly and if so whether the object was to commit murder, grievous hurt or simple hurt.
In these circumstances we find ourselves in complete agreement with the argument of Mr. U.P. Singh, learned counsel for the appellants that there is no material to support the conviction of the appellants under section 326/149 of the Indian Penal Code.
Mr. Bhagat appearing for the State fairly conceded that in the circumstances of this case it would not be possible for him to support the conviction mainly on the ground that since the main accused was convicted under section 304, Part I the other appellants should also have been convicted under section 304/149 and not under section 326 of the Indian Penal Code.
We should like to point out that whenever the High Court convicts any person or persons of an offence with the aid of section 149 a clear finding regarding the common object of the assembly must be given and the evidence discussed must show not only the nature of the common object but also that the object was unlawful.
Before recording a conviction under section 149 of the Indian Penal Code, the essential ingredient of section 141 of the Indian Penal Code must be established.
Section 149 creates a specific offence and deals with the punishment of that offence.
There is an assembly of five or more persons having a common object and the doing of acts by members is in prosecution of that object.
The emphasis is on common object.
In the instant case there is neither any evidence nor any finding that any of the ingredients of section 149 have been established by the prosecution.
In the result the appeal is allowed and the conviction and sentence of the appellants are set aside and the appellants are acquitted of the charge framed against them.
The appellants are hereby discharged from their bail bonds and need not surrender.
N.K.A. Appeal allowed.
| IN-Abs | When the appellants wanted to irrigate the land they were prevented from doing so by the deceased as a result of which the 1st appellant who is now dead gave a bhala blow to the deceased.
The other appellants were supposed to have been armed with lathis but they did not cause any injuries either to the witnesses or to the deceased.
The Sessions Judge convicted the 1st appellant under section 304 Part I of the Indian Penal Code and sentenced him to undergo imprisonment for life and the other appellants under section 326/149 of the Indian Penal Code and sentenced them to undergo 3 years ' rigorous imprisonment but affirmed the acquittal of the individual charges under sections 323 and 325 I.P.C. The High Court while convicting the appellant under sections 325/149 of the I.P.C. has given no finding regarding the common object of the unlawful assembly.
Accepting the appeal, the Court ^ HELD: In the instant case, there is neither any evidence nor any finding that any of the ingredients of section 149 have been established by the prosecution.
Even on the prosecution case itself the occurrence took place as a result of an irrigation dispute and the appellants were merely acting under a bona fide claim or belief that they had the right to irrigate the land.
There is no overt act attributed to any of the appellants in regard to the deceased and the mere fact that the appellants were armed with lathis by itself would not prove that they shared the common object with which the deceased was inspired.
[292 G H] 2.
Before the High Court upheld the conviction of the appellants under sections 326/149 I.P.C. it should have recorded a clear finding as to what was the object of the unlawful assembly and if so whether the object was to commit murder, grievous hurt or simple hurt.
[293 A] 3.
Whenever the High Court convicts any person or persons of an offence with the aid of section 149 a clear finding regarding the common object of the assembly must be given and the evidence discussed must 292 show not only the nature of the common object but also that the object was unlawful.
Before recording a conviction under section 149 of the I.P.C. the essential ingredients of section 141 of the I.P.C. must be established.
[293 D]
|
N: Criminal Appeal No. 313 of 1974.
Appeal by Special Leave from the Judgment and Order dated 23 7 1973 of the Bombay High Court in Crl.
Appeal No. 759/73.
Harjinder Singh for the Appellant.
O.P. Rana and R.N. Podar for the Respondent.
289 The Order of the Court was delivered by FAZAL ALI, J.
In this appeal by special leave the appellant has been convicted under section 302 Indian Penal Code and sentenced to imprisonment for life.
After having gone through the judgment of the Sessions Judge and the grounds taken by the appellant in his appeal by special leave we are satisfied that this case does raise some arguable points which merit serious consideration by the High Court.
We would like to point out that although under section 421 of the Code of Criminal Procedure, 1898 which is section 384 of the Code of Criminal Procedure, 1973 the High Court has the undoubted power to summarily dismiss a first appeal against conviction of an accused yet in very serious cases like those under section 302 Indian Penal Code, or other cases where death or life imprisonment can be awarded, the High Court should consider the appeal on merits instead of dismissing it summarily, unless the evidence is so clear and cogent, reliable and creditworthy that on the face of it no case for the barest consideration is made out.
This Court in Govinda Kadtuji Kadam and Ors.
vs State of Maharastra while laying down the guidelines for dismissing an appeal summarily observed as follows: "The summary decision is accordingly a judicial decision which vitally affects the convicted appellant and in a fit case it is also open to challenge on appeal in this Court.
An order summarily dismissing an appeal by the word 'rejected ', as is the case before us, though not violative of any statutory provision removes nearly every opportunity for detection of errors in the order.
Such an order does not speak and is inscrutable giving no indication of the reasoning underlying it.
It may at times embarrass this Court when the order appealed against prima facie gives rise to arguable points which this Court is required to consider without having the benefit of the views of the High Court on those points.
In our opinion, therefore, when an appeal in the High Court raises a serious and substantial point which is prima facie arguable it is improper for that Court to dismiss it summarily without giving some indication of its view on the points raised.
" To the same effect is the later decision of this Court in Sita Ram and Ors.
vs State of U.P. where this Court reiterated as follows: 290 "The order summarily dismissing an appeal by the High Court by the word 'rejected ' is not violative of any statutory provision.
While holding that a summary rejection of the appeal by the High Court is not violative of any statutory provision, this Court pointed out that it is desirable that reasons are recorded by the High Court when prima facie arguable issues have been raised as that would enable the Supreme Court to appreciate the reasons for rejection of the appeal by the High Court.
" We, therefore, hold that even if the High Court chooses to dismiss the appeal summarily some brief reasons should be given so as to enable this Court to judge whether or not the case requires any further examination.
If no reasons are given then the task of this Court becomes onerous inasmuch as we have to perform the function of the High Court itself by reappraising the entire evidence resulting in serious harassment and expense to the accused.
In these circumstances, we set aside the order of the High Court dismissing the appeal and direct the High Court to re admit the appeal and hear it according to law within three months from today, as far as practicable.
As the case is a very old one the High Court should give top priority to the case.
The entire record and the paper books which have been prepared in this Court should be sent to the High Court which has only to hear the counsel for the parties and decide the case.
V.D.K. Appeal allowed.
| IN-Abs | Although under section 421 of the Code of Criminal Procedure, 1898 (which is section 384 of the Code of Criminal Procedure, 1973) the High Court has the undoubted power to summarily dismiss a first appeal against conviction of an accused yet in very serious cases like those under section 302 Indian Penal Code, or other cases where death or life imprisonment can be awarded, the High Court should consider the appeal on merits instead of dismissing it summarily, unless the evidence is so clear and cogent, reliable and creditworthy that on the face of it no case for the barest consideration is made out.
Even if the High Court chooses to dismiss the appeal summarily some brief reasons should be given so as to enable the Supreme Court to judge whether or not the case requires any further examination.
If no reasons are given then the task of the Supreme Court becomes onerous in as much as the Judges have to perform the function of the High Court itself by reappraising the entire evidence resulting in serious harassment and expense to the accused.
[289 C, 290 C] Govinda Kadtuji Kadam and Ors.
vs State of Maharashtra, ; and Sita Ram & Ors.
vs State of U.P. ; , followed.
|
Civil Appeal No. 775 of 1981.
Appeal by Special Leave from the Judgment and Order dated 21.12.78 of the High Court of Allahabad in C.M.W.P. No. 12602/77.
section N. Kacker and Prem Malhotra for the Appellant.
O. P. Rana and section Dikshit for the Respondent.
The Judgment of the Court was delivered by FAZAL ALI, J.
This appeal by special leave is directed against a judgment dated December 21, 1978 of the Allahabad High Court allowing the writ petition filed by the State of U.P. before the Court.
The case arose out of an order passed by the Prescribed Authority under the U.P. Imposition of Ceiling on Land Holdings Act, 1960 (hereinafter referred to as the 'Act '), as amended uptodate, by which the said Authority rejected the claim of the petitioners on the basis of a gift which had been executed by her grandfather by a registered document dated January 28, 1972.
The Act was passed as far back as 1960 but by virtue of an amendment, being U.P. Act No. 18 of 1973, section 5 was introduced which placed a ceiling on any tenure holder to hold land in excess of the ceiling area fixed under the Act.
Section 5 contained various sub sections but in the instant case we are concerned only with sub section (6) as also clause (b) of the proviso to the said sub section.
By another amendment, being U.P. Act No. 2 of 1975, which was given retrospective operation with effect from 8.6.1973 Explanation I, alongwith its sub clauses, was added to sub section (6) of section 5.
The decision in the present case turns upon the interpretation of sub section (6) of section 5 and the proviso therein in order to determine the validity of the deed of gift said to have been executed by Chunni Lal Bhatiya, the grandfather of the petitioner Sonia and respondent No. 4 before the District Judge.
To begin with, we might like to state here that the facts of the case undoubtedly reveal that if the provisions of the said sub section (6) were to apply it would work serious hardship to the petitioner but as we are concerned with interpretation of an important statute the mere fact that a correct interpretation may lead to hardship would not be a valid consideration for distorting the language of the statutory provisions.
243 Before we proceed to examine the relevant provisions, it may be necessary to give a resume of the facts of the case.
Chunni Lal Bhatiya had two sons, Sudesh and Mahesh and a daughter Smt.
Sarla, On 14.9.1969 Chunni Lal executed a registered deed of gift in respect of 110 bighas in favour of his son, Sudesh.
A month later, another deed of gift was executed in favour of his son, Sudhir.
So far as these two gifts are concerned, as they were made before the amendment of the Ceiling Act, their validity was beyond question and they are not the subject matter of any dispute in the present case.
On January 28, 1972 Chunni Lal executed a gift in respect of 80 bighas in favour of his grand daughter, Sonia (daughter of Mahesh.) It appears that a serious misfortune had befallen Chunni Lal in that he lost his two sons, Sudesh and Mahesh, who were serving in the Air Force and died in two different air crashes.
As Chunni Lal wanted to make sufficient provision for his grandsons and grand daughter, he executed the three gifts.
The gift executed in favour of Sonia is the subject matter of the dispute in the instant case.
The Prescribed Authority held that as the gift was made after the due date, i.e. 24.1.1971, as prescribed by sub section (6) of section 5, the transfer would have to be ignored.
Against the decision of the Prescribed Authority, the appellant filed an appeal before the District Judge being the Appellate Authority, and assailed the finding of the Prescribed Authority.
The District Judge, after hearing the parties, came to a clear finding that the gift was a bona fide one having regard to the circumstances in which the transfer was made and merely because it was executed after the due date (24.1.1971) it could not be held to be invalid.
Thereafter, the State of U.P. filed a writ petition in the High Court which was allowed following a Division Bench decision of its Court in Fateh Mohammad vs District Judge which had held that a deed of gift not being a transfer for consideration had to be ignored under the provisions of the Act.
Hence, this appeal before us.
The finding of the District Judge that the gift was a bona fide one has not been challenged by Mr. Rana, appearing for the respondent, who however argued that the said gift itself was not covered by the Explanations laid down in the proviso to the said sub section (6) of section 5 of the Act.
Thus the only question for determination in the instant case is the legal effect of the prohibition contained in sub section (6) and clause (b) of its proviso.
In order to 244 understand the scope and ambit of sub section (6) and its proviso, it may be necessary to extract the relevant portions of sub section (6) and Explanations concerned: "6.
In determining the ceiling area applicable to a tenure holder, any transfer of land made after the twenty fourth day of January, 1971, which but for the transfer would have been declared surplus land under this Act, shall be ignored and not taken into account: Provided that nothing in this sub section shall apply to: . . "(b) a transfer approved to the satisfaction of the prescribed authority to be in good faith and for adequate consideration and under an irrevocable instrument not being a benami transaction or for immediate or deferred benefit of the tenure holder or other members of his family.
Explanation I For the purposes of this sub section, the expression transfer of land made after the twenty fourth day of January, 1971, includes: (a) a declaration of a person as a co tenure made after the twenty fourth day of January, 1971 in a suit or proceeding irrespective of whether such suit or proceeding was pending on or was instituted after the twenty fourth day of January, 1971; (b) any admission, acknowledgement, relinquishment or declaration in favour of a person to the like effect, made in any other deed or instrument or in any other manner." "Explanation II The burden of proving that a case falls within clause (b) of the proviso shall rest with the party claiming its benefit.
" The substantive provision which is contained in sub section (6) clearly provides that any transfer after the 24th of January 1971 would have to be ignored and not taken into account in determining the surplus area.
Clause (b) of the proviso to sub section (6) (hereinafter referred to as 'clause (b) of the proviso ') however, carves out an exception to the general rule contained in sub section (6) and 245 Explanation II places the burden of proving the fact, that the case falls within the protection of clause (b) of the proviso, on the party relying on the transfer and claiming its benefit.
A careful analysis of clause (b) of the proviso would reveal that it requires the following conditions to be fulfilled before a transfer can seek its protection: (1) that the transfer must be in good faith, (2) that it must be proved to be in good faith to the satisfaction of the Prescribed Authority, (3) that it should be for adequate consideration and under an irrevocable instrument, and (4) that it should not be in the nature of a benami transaction for immediate or deferred benefit of the tenure holder or other members of his family.
It is manifest that if these conditions are satisfied and proved to the satisfaction of the Prescribed Authority then the burden which lies on the claimant under Explanation II would have been discharged and the transfer would not be ignored but would fall under the protective umbrella contained in clause (b) of the proviso.
It may be noticed that the legislature in its wisdom has neither defined the word 'transfer ' in any of the definitions of the Act nor has clarified it.
The primary object of the Act is to prevent the tenure holders from evading the Law of Ceiling by making fictitious transfers even by registered documents either before or after the due date so as to evade the provisions of the Act and thus frustrate the very object and the social purpose for which the Act had been passed.
In these circumstances, therefore, the word 'transfer ' has obviously been used by the legislature in the general sense of the term as defined in the Transfer of Property Act, which is the statute that governs all transfers of movable or immovable properties.
In other words, the word 'transfer ' being a term of well known legal significance having well ascertained incidents, the legislature did not think it necessary to define the term 'transfer ' separately.
Similarly, the word 'consideration ' also being a term commonly used to denote contracts, sales and transactions, has been used in the same sense, that is to say, as defined by section 2(d) of the Contract Act.
It is well settled that whenever the legislature uses certain terms or expressions of well known legal significance or connotation the courts must interpret them as used or understood in the popular 246 sense.
In the case of C.I.T. Andhra Pradesh vs M/s. Taj Mahal Hotel, Secundrabad this Court while laying down guidelines for holding how a particular expression has been defined, observed as follows: "Now it is well settled that where the definition of a word has not been given, it must be construed in its popular sense if it is a word of every day use.
Popular sense means "that sense which people conversant with the subject matter with which the statute is dealing, would attribute to it".
Lord Atkinson in Keats vs Lewis observed as follows: "In the construction of a statute it is, of course, at all times and under all circumstances permissible to have regard to the state of things existing at the time the statute was passed, and to the evils, which as appears from its provisions, it was designed to remedy.
If the words are capable of one meaning alone then it must be adopted, but if they are susceptible of wider import, we have to pay regard to what the statute or the particular piece of legislation had in view.
" These observations are fully applicable to the present Act which has for its object remedying the evil of evading the ceiling law by the large landholders by executing sale deeds or other instruments so as to escape the consequences of the law.
In Union of India vs Sankal Chand Himatlal Sheth & Anr.
Chandrachud, J., as he then was, observed as follows: "The normal rule of interpretation is that the words used by the legislature are generally a safe guide to its intention.
Lord Reid in Westminster Bank Ltd. vs Zang observed that "no principle of interpretation of statutes is more firmly settled than the rule that the Court must deduce the intention of Parliament from the words used in the Act.
" Applying such a rule, this Court observed in section Narayanaswami vs G. Panneerselvam (AIR 247 at 2290) that "where the statute 's meaning is clear and explicit, words cannot be interpolated." . . "But, if the provision is clear and explicit, it cannot be reduced to a nullity by reading into it a meaning which it does not carry." Against this background we have now to consider the real intention of the words "transfer for adequate consideration" as used in clause (b) of the proviso.
The High Court has held that although the deed of gift is a transfer but as it is a transfer without any consideration, therefore such a transfer does not fulfil one of the essential ingredients mentioned in clause (b) of the proviso, namely, that it should be for consideration.
The High Court has further held that its view is reinforced by the word 'adequate ' which qualifies the word 'consideration ' which completely rules out a transfer in the nature of a gift.
The High Court was of the view that a transfer of property by way of a gift being a purely gratuitous transfer made out of love and affection or for the spiritual benefit of the donor, falls completely beyond the ambit of clause (b) of the proviso and, therefore, has to be ignored under the provisions of the said sub section (6) of section 5 of the Act.
Mr. Kacker, appearing for the appellant, assailed the view taken by the High Court on the ground that the High Court has given a very restricted meaning to the term 'transfer for adequate consideration ' by limiting the import of the word 'consideration '.
He argued in the first place that a gift cannot be said to be a transfer without consideration because even love and affection, spiritual benefit or other factors of similar nature may provide sufficient consideration for the gift.
Secondly, it was argued that even if a gift was a transfer without consideration and was intended to be excluded by clause (b) of the proviso, then there should have been an express indication of the same in the provisions of clause (b) of the proviso by expressly excluding gifts.
Another facet of this argument advanced before us by Mr. Kacker was that as gift has not been expressly excluded by clause (b) of the proviso, we should be persuaded to hold that the conditions regarding adequate consideration would not apply to a gift as a gift, was a transfer without consideration and if other conditions were satisfied a gift would also fall within the purview of clause (b) of the proviso.
We have given our anxious consideration to the arguments put forward 248 by Mr. Kacker and although the arguments are extremely attractive yet we find ourselves unable to agree with the same.
To begin with, it may be necessary to dwell on the concept of gift as contemplated by the Transfer of Property Act and as defined in various legal dictionaries and books.
To start with, Black 's Law Dictionary (Fourth Edition) defines gift thus: "A voluntary transfer of personal property without consideration.
A parting by owner with property without pecuniary consideration.
A voluntary conveyance of land, or transfer of goods, from one person to another made gratuitously, and not upon any consideration of blood or money.
" A similar definition has been given in Webster 's Third New International Dictionary (Unabridged) where the author defines gift thus: "Something that is voluntarily transferred by one person to another without compensation; a voluntary transfer of real or personal property without any consideration or without a valuable consideration distinguished from sale.
" (Emphasis ours) Volume 18 of Words & Phrases (Permanent Edition) defines gift thus: "A 'gift ' is a voluntary transfer of property without compensation or any consideration.
A 'gift ' means a voluntary transfer of property from one person to another without consideration or compensation." (Emphasis ours) In Halsbury 's Laws of England (Third Edition Volume 18) while detailing the nature and kinds of gift, the following statement is made: "A gift inter vivos (a) may be defined shortly as the transfer of any property from one person to another gratuitously.
Gifts then, or grants, which are the eighth method of transferring personal property, are thus to be distinguished from each other, that gifts are always gratuitous, grants are upon some consideration or equivalent." 249 Thus, according to Lord Halsbury 's statement the essential distinction between a gift and a grant is that whereas a gift is absolutely gratuitous, grant is based on some consideration or equivalent.
Similarly in Volume 38 of Corpus Juris Secundum, it has been clearly stated that a gift is a transfer without consideration and in this connection while defining the nature and character of a gift the author states as follows: "A gift is commonly defined as a voluntary transfer of property by one to another, without any consideration or compensation therefor.
Any piece of property which is voluntarily transferred by one person to another without compensation or consideration.
A gift is a gratuity, and an act of generosity, and not only does not require a consideration but there can be none; if there is a consideration for the transaction it is not a gift.
" It is, therefore, clear from the statement made in this book that the concept of gift is diametrically opposed to the presence of any consideration or compensation.
A gift has aptly been described as a gratuity and an act of generosity and stress has been laid on the fact that if there is any consideration then the transaction ceases to be a gift.
Before closing this aspect of the matter we might also refer to the definition of consideration given in various books.
Black 's Law Dictionary defines 'consideration ' thus: "Consideration" is not to be confounded with motive.
Consideration means something which is of value in the eye of the law, moving from the plaintiff, either of benefit to the plaintiff or of detriment to the defendant".
" This is the view expressed in 2 Q.B. 851.
Similarly, at p.61 in the same volume, the words 'adequate consideration ' have been defined thus: "One which is equal, or reasonably proportioned, to the value of that for which it is given.
Fair and reasonable under circumstances." (Emphasis ours) Webster 's Third New International Dictionary (Unabridged) defines, consideration ' thus: "Something that is legally regarded as the equivalent or return given or suffered by one for the act or promise of another." 250 And the word 'adequate ' has been defined in the same volume at page 25 thus: "Legally sufficient: such as is lawfully and reasonably sufficient" Similarly, in words and Phrases (Permanent Edition volume 2) the word 'adequate ' has been defined at p.545 thus: 'Adequate ' means fully equal to requirements or occasions, commensurate, but in its primary and more popular significance nothing can be said to be 'adequate ' which is not equal to what is required, suitable to the case or occasion, fully sufficient, proportionate, and satisfactory." And when used to qualify consideration, it has been defined thus: in the same volume at p.545: "Fair consideration in money or money 's worth" is consideration which under all circumstances is honest, reasonable, and free from suspicion, whether or not strictly 'adequate ' or 'full '." (Emphasis supplied) 'Adequate Consideration ' has been further defined as follows in the same volume at p.553: "Adequate consideration" generally is one which is a fair equivalent in value for benefit obtained. . . 'Adequate consideration ' required in action for specific performance merely means that contract price must be substantially just and fair valuation under all circumstances." (Emphasis supplied) In Volume 17 of Corpus Juris Secundum (p.420 421 and 425) the import of 'consideration ' has been described thus: "Various definitions of consideration are to be found in the textbooks and judicial opinions.
A sufficient one, as 251 stated in Corpus Juris and which has been quoted and cited with approval is, "a benefit to the party promising, or a loss or detriment to the party to whom the promise is made. . .
At common law every contract not under seal requires a consideration to support it, that is, as shown in the definition above, some benefit to the promisor, or some detriment to the promisee. . . .
There is a sufficient consideration for a promise if there is any benefit to the promisor or any detriment to the promisee. .
It may be laid down as a general rule, in accordance with the definition given above, that there is a sufficient consideration for a promise if there is any benefit to the promisor or any loss or detriment to the promisee.
" The gist of the term 'consideration ' and its legal significance has been clearly summed up in section 2(d) of the Contract Act which defines 'consideration ' thus: "When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstrains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.
" From a conspectus, therefore, of the definitions contained in the dictionaries and the books regarding a gift or an adequate consideration, the inescapable conclusion that follows is that 'consideration ' means a reasonable equivalent or other valuable benefit passed on by the promisor to the promisee or by the transferor to the transferee.
Similarly, when the word 'consideration ' is qualified by the word 'adequate ', it makes consideration stronger so as to make it sufficient and valuable having regard to the facts, circumstances and necessities of the case.
It has also been seen from the discussions of the various authorities mentioned above that a gift is undoubtedly a transfer which does not contain any element of consideration in any shape or form.
In fact, where there is any equivalent or benefit measured in terms of money in respect of a gift the transaction ceases to be a gift and assumes a different colour.
It has been rightly pointed out in one of the books referred to above that we should not try to confuse the motive or the purpose of making a gift with the consideration which is the subject matter of the gift.
Love, affection, spiritual benefit and many other 252 factors may enter in the intention of the donor to make a gift but these filial considerations cannot be called or held to be legal considerations as understood by law.
It is manifest, therefore, that the passing of monetary consideration is completely foreign to the concept of a gift having regard to the nature, character and the circumstances under which such a transfer takes place.
Furthermore, when the legislature has used the word 'transfer ' it at once invokes the provisions of the Transfer of Property Act.
Under section 122 of the Transfer of Property Act, gift is defined thus: " 'Gift ' is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.
Such acceptance must be made during the lifetime of the donor and while he is still capable of giving.
If the donee dies before acceptance, the gift is void.
" Thus, section 122 of the Transfer of Property Act clearly postulates that a gift must have two essential characteristics (1) that it must be made voluntarily, and (2) that it should be without consideration.
This is apart from the other ingredients like acceptance, etc.
Against the background of these facts and the undisputed position of law, the words, 'transfer for adequate consideration ' used in clause (b) of the proviso clearly and expressly exclude a transaction which is in the nature of a gift and which is without consideration.
Love and affection, etc., may be motive for making a gift but is not a consideration in the legal sense of the term.
As regards the argument of Mr. Kacker that if the legislature intended to exclude gifts, clause (b) of the proviso should have expressly said so; the answer is very simple.
Every legislature has its own technical or legal device to express its intendment.
Some legislatures may have chosen to expressly exclude gift as Mr. Kacker says but that is not the only method of conveying the legislative intent.
There may be other methods or devices by which the legislative intent can be expressed, namely, by using such expressions which would expressly or by necessary intendment exclude a particular transaction.
This method seems to have been adopted by the legislature in enacting clause (b) of the proviso.
In fact, the legislature has made its intention clear that gift is excluded by qualifying the word 'consideration ' by the adjective 'adequate '.
Assuming that love and affec 253 tion, spiritual benefit or similar other factors may amount to a consideration for the gift, the word 'adequate ' is wholly inapplicable to and inconsistent with the concept of a gift because it is impossible to measure love and affection, the sentiments or feelings of the donor by any standard yardstick or barometer.
The words 'adequate consideration ' clearly postulate that consideration must be capable of being measured in terms of money value having regard to the market price of the property, the value that it may fetch if sold, the value of similar lands situated in the vicinity, so on and so forth.
In the instant case, therefore, in our opinion, the legislature by using the word 'adequate ' to qualify the word 'consideration ' has completely ruled out and excluded gift from the ambit of clause (b) of the proviso.
In these circumstances, therefore, the argument of Mr. Kacker that by not expressly excluding gift, clause (b) of the proviso includes gift cannot be accepted particularly in the face of the clear and unambiguous language used by clause (b) of the proviso in describing the nature of the transaction as one for adequate consideration.
We now deal with the second limb of the argument of Mr. Kacker that as in the case of a gift there is no question of a consideration, we should hold that the 3rd part of clause (b) of the proviso which contains the words 'for adequate consideration ' is inapplicable and ignore the same.
This argument is diametrically opposed to the well known rule of interpretation that courts in interpreting statutes must not interpolate or legislate.
It is well settled that a legislature does not waste words without any intention, and every word that is used by the legislature must be given its due import and significance.
In the instant case, the words 'adequate consideration ' have undoubtedly a well recognised concept and, as indicated above, the intention was to exclude any transaction which is not for adequate consideration.
Not to speak of a gift but even if a sale is found to be bona fide but the consideration is inadequate, for instance, where the property has been sold for a nominal price or below the market value, the transaction would fall beyond the protection given by clause (b) of the proviso.
Our attention has been drawn by Mr. Kacker to a single Bench decision by Banerji, J, in Fateh Singh vs State of Uttar Pradesh & Ors where the learned Judge had taken the view that the definition of a transfer given in clause (b) of the proviso included a gift because a gift also could not be said to be a transfer without consideration even though 254 consideration may not be weighed in terms of money.
The learned Judge in taking this view had obviously fallen into error of confusing what was the motive or the reason for the gift as being a legal consideration of it.
It has already been pointed out that in considering the nature of a gift one should not confuse the motive, which may be love and affection, or spiritual benefit, with valuable consideration which has to be either in the shape of a money compensation or equivalent of the same.
It is true that in every gift the donor has a particular motive and objective or a reason to part with his property in favour of the donee, the reason being, in some cases, love and affection where the gift is in favour of a relation or friend, or spiritual benefit in other cases but this will be the immediate motive for making the gift and cannot be regarded as a consideration for the gift because the very concept of gift is based on a purely gratuitous consideration.
The Division Bench of the Allahabad High Court in the case referred to above has rightly overruled the view of Banerji, J,, on this count.
In fact the matter has been considered by other High Courts who have consistently taken the view that a gift is a transfer without consideration, love and affection being only the motive for making the transfer.
In Debi Saran Koiri & Anr.
vs Nandalal Chaubey and Ors.
while elucidating the nature and character of a gift Sahay, J. made the following observations: "Now, section 122, T.P. Act defines "gift" as a transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee." "To my mind consideration in section 122, T.P. Act, means valuable consideration and not consideration in the shape of conferring spiritual benefit to the donor.
If valuable consideration be not the consideration referred to in section 122, I fail to understand how any gift can be made without consideration at all.
There must be some sort of consideration in every gift, for instance, a consideration of an expectation of spiritual or moral benefit or consideration of love and affection.
Such considerations are not considerations contemplated in section 122.
The consideration there contemplated must be valuable consideration, that is consideration either of money of money 's worth".
(Emphasis supplied) 255 In Kulasekaraperumal vs Pathakutty Thalevanar & Ors.
Jagadisan, J. made the classic observations which may be extracted thus: "A gift is essentially a gratuitous transfer.
Complete absence of consideration marks the transfer as a gift and differentiates it from a grant.
" The learned Judge has rightly pointed out that complete absence of consideration is the main hallmark which distinguishes a gift from a grant or for that matter other transactions which may be for valuable or adequate consideration.
We find ourselves in complete agreement with the observations made by Jagdisan, J. in Kulasekaraperumal 's case (supra) and Sahay, J. in Debi Saran 's case (supra) which correctly represent the character and nature of the gift as contemplated by law.
Banerji, J. in Fateh Singh 's case (supra) seems to have relied heavily on Explanation I of sub section (6) of section (5) of the Act which refers to a declaration of a tenure holder made in a suit or any admission, acknowledgement, relinquishment, etc., made in any other deed or instrument in order to reinforce his conclusion that clause (b) of the proviso did not exclude a gift.
With due respect, here the learned Judge completely failed to appreciate the scope of clause (b) of the proviso and Explanation I.
It is well settled that an Explanation merely widens the scope of the main section and is not meant to carve out a particular exception to the contents of the main section.
Thus, even if the words 'relinquishment, admission or declaration ' are used in Explanation I. the use of such words do not absolve the party concerned from proving the essential ingredients laid down in clause (b) of the proviso, namely, that the transfer should be executed in good faith and should be for adequate consideration.
Whatever be the nature of the declaration, acknowledgement, relinquishment, adequacy of consideration has to be proved in any case.
Thus, in our view, the Division Bench was fully justified in overruling the view of Banerji, J. in regard to the interpretation of the Explanation also.
Finally, we would like to mention that the matter is no longer res integra but is fully covered in principle by a decision of this Court in Tulsidas Kilachand vs The Commissioner of Income tax, Bombay City 1, where Hidayatullah J, speaking for the Court observed as follows: "It remains to consider whether there was a adequate consideration for the transfer.
Reliance has been placed 256 only upon love and affection.
The words "adequate consideration" denote consideration other than mere love and affection which, in the case of a wife, may be presumed.
When the law insists that there should be "adequate consideration" and not "good consideration", it excludes mere love and affection.
They may be good consideration to support a contract, but adequate consideration to avoid tax is quite a different thing.
To insist on the other meaning is really to say that consideration must only be looked for, when love and affection cease to exist." (Emphasis supplied) It would thus, appear that this Court clearly held that the words 'adequate consideration ' completely exclude the concept of love and affection and this decision appears to be on all fours with the facts of the present case.
Realising this predicament Mr. Kacker submitted that the words 'adequate consideration ' used in the Income Tax Act denote a different texture.
Mr. Kacker argued that it is not permissible to interpret or use an expression in one Act as having the same meaning in another Act which is of a different kind.
Of course, there can be no dispute with this proposition but then the Act as also the Income Tax Act have both used the words 'adequate consideration ' which, as we have already held, are terms of well known legal significance having a well recognised popular sense and hence they would convey the same meaning and import whenever used in other statutes unless a contrary intention appears from the language employed by the legislature in the statute.
Moreover, the object of the Income Tax Act as also the present Act seems to be more or less identical.
Whereas the object of the Income Tax Act in enacting section 16(3)(b) which is extracted below, is to circumvent and prevent a growing tendency on the part of the assessees to avoid or reduce tax liability by means of settlements: "16(3). (a) (b) so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both.
" 257 In the instant case also the avowed object of sub section (6) of section 5 of the Act is to prevent the large landholders from evading the ceiling law by executing transfers, instruments or gifts so as to reduce their surplus area.
Where the two statutes have a common and identical object then the legal terms used in one statute must be given the same meaning in the other.
It cannot be said that the words 'adequate consideration ' appearing in sub section (6) of section 5 of the Act do not take their colour from the context but are in conformity with the main object of the Act, to prevent evasion of the ceiling law by large tenure holders in anticipation of the passing of the Ceiling Law.
For these reasons, therefore, the argument of Mr. Kacker on this score must be rejected.
We, therefore, hold that in view of the interpretation placed by this Court on the words 'adequate consideration ' which fully applies to the present case and to the same language employed in sub section (6) of section 5 of the Act, a gift is not only impliedly but expressly excluded by the Act.
In the Division Bench decision of the Allahabad High Court referred to above, after a consideration of a large number of authorities the following observations were made: "The Legislature while enacting the U.P. Imposition of Ceiling on Land Holdings Act, was alive to the provisions of the Transfer of Property Act dealing with the transfer of immovable property.
the terms 'transfer ', sale, 'mortgage ' and 'lease ' have not been defined in the Act.
Therefore, these terms must have been used only in the sense in which they have been used in Transfer of Property Act.
If the Legislature intended to use those terms in a different sense and with a different connotation, it would have defined those terms in the Act.
But that has not been done.
The legislature, however, thought that there may be genuine and bona fide transfers for consideration.
To protect such tenure holders and other transfers, proviso (b) to sub section (6) of section 5 of the Act was enacted.
It saved transfers for adequate consideration.
Gift is a gratuitous transfer and there is no consideration which obviously means valuable consideration.
If transfer for love and affection is taken to be a transfer for consideration then the purpose of the Act would be 258 completely defeated as the tenure holders would transfer their land by gift after 24th January 1971.
" We fully endorse the observations made by the Division Bench which lay down the correct law on the subject and we overrule the decision of Banerji, J. in Fateh Singh 's case (supra).
Lastly, it was urged by Mr. Kacker that this is an extremely hard case where the grand father of the donee wanted to make a beneficial provision for his grand daughter after having lost his two sons in the prime of their life due to air crash accidents while serving in the Air Force.
It is true that the District Judge has come to a clear finding that the gift in question is bona fide and has been executed in good faith but as the gift does not fulfil the other ingredients of the section, namely, that it is not for adequate consideration, we are afraid, however laudable the object of the donor may have been, the gift has to fail because the genuine attempt of the donor to benefit his granddaughter seems to have been thwarted by the intervention of sub section (6) of section 5 of the Act.
This is undoubtedly a serious hardship but it cannot be helped.
We must remember that the Act is a valuable piece of social legislation with the avowed object of ensuring equitable distribution of the land by taking away land from large tenure holders and distributing the same among landless tenants or using the same for public utility schemes which is in the larger interest of the community at large.
The Act seems to implement one of the most important constitutional directives contained in Part IV of the Constitution of India.
If in this process a few individuals suffer severe hardship that cannot be helped, for individual interests must yield to the larger interests of the community or the country as indeed every noble cause claims its martyr.
As this was the only point raised before us, we find no merit in the same.
For the reasons given above, we hold that the High Court was right in allowing the writ petition in respect of the gift in question.
The appeal fails and is accordingly dismissed but without any order as to costs.
P.B.R. Appeal dismissed.
| IN-Abs | Sub section 6 of section 5 of the U.P. Imposition of Ceiling on Land Holdings Act, 1960 as it stood at the relevant time provided that in determining the ceiling area any transfer of land made after January, 24, 1971 should be ignored and not taken into account.
Clause (b) of the proviso to sub section 6 which carves out an exception states that the sub section shall not apply to a transfer proved to the satisfaction of the Prescribed Authority to be in good faith and for adequate consideration under an irrevocable instrument.
Explanation II to this proviso places the burden of proof that a case fell within clause (b) of the proviso is on the party claiming its benefit.
On January 28, 1972 the donor gifted away certain lands in favour of his grand daughter, the appellant, daughter of a pre deceased son.
The gift having been made after the prescribed date, the Prescribed Authority ignored the gift for purposes of section 5 (6) of the Act.
On appeal, the District Judge gave a finding in favour of the appellant holding that the gift was bona fide having regard to the circumstances in which it was made and that it could not be held invalid merely because it was executed after the due date of January 24, 1971.
Purporting to follow one of its earlier decisions, the High Court held that a gift not being a transfer for consideration, had to be ignored under the provisions of the Act and that a gift being a gratuitous transfer made out of love and affection fell outside the purview of clause (b) of the proviso.
On behalf of the appellant it was contended that a gift could not be said to be a transfer without consideration because even love and affection may 240 provide sufficient consideration and hence the condition regarding adequate consideration would not apply to a gift.
Dismissing the appeal ^ HELD: It is a well settled rule of construction of statutes that where the definition of a word has not been given in an enactment it must be construed in its popular sense if it is a word of every day use, that is, the sense in which people conversant with the subject matter with which it deals would attribute to it.
Similarly if the language used is clear and explicit, the provision cannot be reduced to a nullity by reading into it a meaning which it does not carry.
[246B] In the instant case therefore, the word "transfer" being a term of well known legal significance with well ascertained incidents the legislature did not consider it necessary to define it separately.
It is used in the sense in which it is used in the Transfer of Property Act.
[245 G] C.I.T., Andhra Pradesh vs M/s. Taj Mahal Hotel, Secunderabad and Union of India vs Sankal Chand Himatlal Sheth and Anr. ; applied.
Keats vs Lewis referred to.
A conspectus of the meaning of the term "gift" is that it is a transfer which does not contain an element of consideration in any shape or form.
Where in respect of a gift there is a benefit measurable in terms of money the transaction ceases to be a gift and assumes a different colour.
Yet another salient feature of a gift is that love, affection and many other factors may constitute the motive for the gift and may enter into the intention of the donor making a gift, but none of these can be held to be legal consideration, as understood by law.
[251 G H; 252F] "Consideration" means a reasonable equivalent or other valuable benefit passed on by the promisor to the promisee or by the transferor to the transferee.
When the term consideration is qualified by the word "adequate" it makes it sufficient and valuable having regard to the facts, circumstances and necessities of the case.
[251 F] The word "transfer for adequate consideration" used in clause (b) of the proviso excludes a transaction, which is in the nature of a gift and which is without consideration.
[252 E] The argument that if the legislature intended to exclude gifts clause (b) of the proviso would have expressly said so and by not excluding it must be deemed to have included a gift is without force particularly in the face of the clear and unambiguous language of the proviso.
Every legislature has its own technical device to express its intendment.
Express exclusion is not the only method of conveying the legislative intent there may be other methods or devices by which a legislature expresses its intent; namely, by using expressions, which would exclude a particular transaction by necessary intendment.
This is what is done in enacting clause (b) of the proviso.
[252 G H] 241 The legislature has made its intention clear that a gift is excluded by qualifying the word "consideration" with the adjective "adequate".
[252 H] By using the word "adequate" to qualify the word "consideration" the legislature has ruled out gifts from the ambit of clause (b) of the proviso.
[253 C] The words "adequate consideration" clearly postulate that consideration must be capable of being measured in terms of money, having regard to the market price of the property, the value that it may fetch if sold, the value of similar lands situate in the vicinity and so on.
[253 B] The argument that since in the case of a gift there is no question of consideration, the words for "adequate consideration" in the 3rd part of clause (b) of the proviso are inapplicable and should, therefore, be ignored is opposed to the well known rule of interpretation that Courts, while interpreting statutes, must not legislate.
A legislature does not use words without any intention and every word used by the legislature must be given its due import.
The intention of the legislature in using the words "adequate consideration" is to exclude any transaction which is not for adequate consideration.
Even if a sale is bona fide if to but consideration is inadequate, the transaction would fall beyond the protection of clause (b) of the proviso.
[253 E F] Debi Saran Koiri and Anr.
vs Nandlal Chaubey and Ors.
A.I.R. 1929 Patna 591 and Kulasekaraperumal vs Pathakutty Thalevanar and Ors.
A.I.R. 1961 Madras 405 approved, The words "adequate consideration" carry a well known legal significance and, therefore, convey the same meaning and import in whichever statute they are used unless a contrary intention appears from the language employed by the legislature in a particular Act.
[256 E F] Tulsidas Kilachand vs The Commissioner of Income tax Bombay City I, ; , referred to Fateh Mohammed vs District Judge [Civil Writ Petition No. 915 of 1975, decided on 10 7 78] overruled.
An explanation merely widens the scope of the main section and is not meant to carve out a particular exception to the main section.
The words admission, acknowledgment, relinquishment or declaration used in Explanation I, do not absolve the party concerned from proving that the transfer should be executed in good faith and for adequate consideration.
[256 E F] However laudable the object of the donor in gifting the property to his grand daughter (particularly in the circumstances of this case) may be and whatever hardship might ensue to the donee by applying the provision, the gift fails if it does not fulfil the other essential requirements of the section.
The act was enacted to implement one of the Directives contained in Part IV of the Constitution and if in this process a few individuals suffer that cannot be helped, for, individual interests must yield to the larger interests of the community.
[258 D F] 242
|
Civil Appeal No. 151 of 1981.
Appeal by Special Leave from the Judgment and Order dated 16.8.1969 of the Addl.
Judge (Revisions) Sales Tax, Saharanpur in Revision Appln.
No. 1688/78.
J. Ramamurthi and Miss R. Vaigai for the Appellant.
section C. Manchanda.
B. P. Maheshwari and Suresh Sethi for the Respondent.
The Judgment of the Court was delivered by TULZAPURKAR, J.
This appeal by special leave raises the question whether hypodermic clinical syringes could be regarded as "glass ware" under Entry No. 39 of the First Schedule to U.P. Sales Tax Act, 1948 ? The facts giving rise to the question lie in a narrow compass.
The appellant firm (hereinafter called the assessee) manufactures and sells hypodermic clinical syringes.
For the assessment year 1973 74 the assessee filed a return disclosing net U.P. sales of such syringes at Rs. 95,065.
The disclosed turnover was accepted by the 296 Sales Tax Officer, Sector III Muzaffarnagar, but as regards the rate of tax the assessee contended that the clinical syringes in respect of their turnover of Rs.91,513 up to November 30, 1973 should be regarded as an unclassified item and taxed at the rate of 3 1/2% or at 4% as "hospital equipment and apparatus" under Entry 44 of the First Schedule to the Act and on the turnover of Rs. 3,552/ for the period from December 1, 1973 to March 31, 1974 at the rate of 7% as an unclassified item.
The Sales Tax Officer, however, treated the syringes as "glass ware" and taxed the entire turnover of Rs.95,065/ at the rate of 10% under Entry No. 39 of the First Schedule.
The said assessment was upheld in appeal by the Assistant Commissioner (Judicial), Sales Tax, Muzaffarnagar and also in revision by the Additional Judge (Revision), Sales Tax, Saharanpur on August 16, 1979.
It is this view taken by the assessing authorities as well as by the Additional Judge in revision that is being challenged by the assessee before us in this appeal.
It may be stated that up to November 30, 1973 there were two competing entries in the First Schedule to the U.P. Sales Tax Act so far as the item in question is concerned, namely, Entry 39 which ran: "Glass wares other than hurricane lantern chimneys, optical lenses and bottles" and Entry 44 which ran: "Hospital equipment and apparatus" and for an item falling under the former the rate of tax was 10% while under the latter the rate of tax was 4% and for an unclassified item the rate was 3 1/2%.
From December 1, 1973 onwards Entry 44 was deleted and, therefore, if the clinical syringes did not fall within Entry 39 it became an unclassified item under section 3A (2A) of the Act and the rate of tax was 7%.
In view of this position that obtained for the relevant periods during the assessment year 1973 74 the assessee had claimed before the assessing authorities that its turnover in respect of syringes for the period up to November 30, 1973 was liable to tax at 3 1/2% as an unclassified item or in the alternative at 4% as "hospital equipment" under Entry 44 and its turnover for the period from December 1, 1973 to March 31, 1974 was liable to be taxed at 7% as an unclassified item.
But, negativing its contentions the entire turnover was held to be taxable at the rate of 10% on the basis that clinical syringes fell within the expression "glass ware" occurring in Entry 39.
Counsel for the assessee contended before us that in the absence of any definition of "glass ware" in the Act that expression must be understood in the ordinary commercial parlance and not in any scientific and technical sense and if such test were applied to the instant case then clinical syringes manufactured and sold by the 297 assessee could never be regarded as "glass ware".
Counsel pointed out that the Revising Authority negatived the contention of the assessee in view of a decision of the Allahabad High Court in the case of Commissioner of Sales Tax vs section section R. Syringes and Thermometers but urged that the contrary view taken by the Orissa High Court in the case of State of Orissa vs Janta Medical Stores that thermometers, lactometers, syringes, eye glasses, etc.
do not come within the meaning of the expression "glass ware" in Entry No. 38 in the Schedule to the relevant Notification issued under the first proviso to section 5(1) of the Orissa Sales Tax Act, 1947 was correct.
In our view counsel 's contention has considerable force and deserves acceptance.
It is well settled that in interpreting items in statutes like the Excise Tax Acts or Sales Tax Acts, whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them.
If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted.
In Ramavatar Budhiaprasad, etc.
vs Assistant Sales Tax Officer, Akola the question was whether 'betel leaves ' fell within item 'vegetable ' so as to earn exemption from sales tax and this Court held that word 'vegetable ' had not been defined in the Act, and that the same must be construed not in any technical sense nor from the botanical point of view but as understood in common parlance and so construed it denoted those classes of vegetable matter which are grown in kitchen garden and are used for the table and did not comprise betel leaves within it and, therefore, betel leaves were not exempt from taxation: In Commissioner of Sales Tax, Madhya Pradesh vs Jaswant Singh Charan Singh the question was whether the item 'coal ' under Entry 1 of Part III of Second Schedule to Madhya Pradesh General Sales Tax Act, 1958 included charcoal or not and this Court observed thus: "Now, there can be no dispute that while coal is technically understood as a mineral product, charcoal is manu 298 factured by human agency from products like wood and other things.
But it is now well settled that while interpreting items in statutes like the Sales Tax Acts, resort should be had not to the scientific or the technical meaning of such terms but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, to their commercial sense.
" Viewing the question from the above angle this Court further observed that both a merchant dealing in coal and a consumer wanting to purchase it would regard coal not in its geological sense but in the sense as ordinarily understood and would include 'charcoal ' in the term "coal", and held that 'charcoal ' fell within the concerned Entry No. 1 of Part III of Schedule II of the Act.
Having regard to the aforesaid well settled test the question is whether clinical syringes could be regarded as "glass ware" falling within Entry 39 of the First Schedule to the Act ? It is true that the dictionary meaning of the expression "glass ware" is "articles made of glass" (See: Websters New World Dictionary).
However, in commercial sense glass ware would never comprise articles like clinical syringes, thermometers, lactometers and the like which have specialised significance and utility.
In popular or commercial parlance a general merchant dealing in "glass ware" does not ordinarily deal in articles like clinical syringes, thermometers, lactometers, etc.
which articles though made of glass, are normally available in medical stores or with the manufacturers thereof like the assessee.
It is equally unlikely that consumer would ask for such articles from a glass ware shop.
In popular sense when one talks of glass ware such specialised articles like clinical syringes, thermometers, lactometers and the like do not come up to one 's mind.
Applying the aforesaid test, therefore, we are clearly of the view that the clinical syringes which the assessee manufactures and sells cannot be considered as "glass ware" falling within Entry 39 of the First Schedule of the Act.
In our opinion, the view taken by the Orissa High Court in State of Orissa vs Janta Medical Stores (supra) is correct and the view of the Allahabad High Court in Commissioner of Sales Tax vs M/s S.S.R. Syringes and Thermometers (supra) is unsustainable.
In this view of the matter it is clear that the assessee 's turnover up to November 30, 1973 will fall under Entry 44 dealing with 299 "hospital equipment" and the same would be taxable at the rate of 4% and its turnover from December 1, 1973 to March 31, 1974 will be taxable at the rate 7% as an unclassified item and the assessment will have to be made accordingly.
In the result the appeal is allowed but there will be no order as to costs.
section R. Appeal allowed.
| IN-Abs | Upto November 30, 1973, there were two competing entries in the First Schedule to the U. P. Sales Tax Act, 1948, so far as the item "hypodermic clinical syringes" is concerned, namely, Entry 39 which ran: "Glass wares other than hurricane lantern chimneys, optical lenses and bottles" and Entry 44 which ran: "Hospital equipment and apparatus" and for an item falling under the former the rate of tax was 10% while under the latter the rate of tax was 4% and for an unclassified item the rate was 3 1/2% From December 1, 1973 onwards Entry 44 was deleted and, therefore, if the clinical syringes did not fall within entry 39 it became an unclassified item under section 3A(2A) of the U.P. Sales Tax Act, 1948 and the rate of tax was 7%.
In view of this position that obtained for the relevant periods during the assessment year 1973 74 the appellant assessee had claimed before the assessing authorities that its turnover in respect of syringes for the period up to November 30, 1973 was liable to tax at 3 1/2%, as an unclassified item or in the alternative at 4% as "hospital equipment" under Entry 44 and its turnover for the period from December 1, 1973 to March 31, 1974 was liable to be taxed at 7% as an unclassified item.
But, negativing its contentions the entire turnover was held to be taxable at the rate of 10% on the basis that clinical syringes fell within the expression "glass ware" occurring in Entry 39 and hence the appeal by special leave on the question whether hypodermic clinical syringes could be regarded as glass ware.
Allowing the appeal, the Court ^ HELD: 1.
The assessee 's turnover up to November 30, 1973 will fall under Entry 44 dealing with "hospital equipment" and the same would be taxable at the rate of 4% and its turnover from December 1, 1974 will be taxable at the rate of 7% as an unclassified item.
[298 H] 2: 1.
It is well settled that in interpreting items in statutes like the Excise Tax Acts or Sales Tax Acts, whose primary object is to raise revenue and for which purpose they classify diverse products, articles and substances resort should be had not to the scientific and technical meaning of the terms or expressions used but to their popular meaning, that is to say, the meaning attached to them by those dealing in them.
If any term or expression has been defined in the enactment then it must be understood in the sense in which it is defined 295 but in the absence of any definition being given in the enactment the meaning of the term in common parlance or commercial parlance has to be adopted.
[297 C D] Ramavatar Budhiaprasad etc.
vs Assistant Sales Tax Officer, Akola, and Commissioner of Sales Tax, Madhya Pradesh vs Jaswant Singh Charan Singh, ; , followed.
2 : 2.
The clinical syringes which the assessee manufactures and sells cannot be considered as "glass ware" falling within Entry 39 of the First Schedule of the Act.
(a) In commercial sense, glass ware would never comprise articles like clinical syringes, thermometers, lactometers, and the like which have specialised significance and utility: (b) in popular or commercial parlance a general merchant dealing in "glass ware" does not ordinarily deal in articles like clinical syringes, thermometers etc.
which articles though made of glass, are normally available in medical stores or with the manufacturers thereof like the assessee; (c) it is equally unlikely that consumer would ask for such articles from a glass ware shop.
Further in popular sense when one talks of glass ware such specialised articles like clinical syringes do not come up to one 's mind.
[298 E F] State of Orissa vs Janta Medical Stores, 37 STC 33, approved.
Commissioner of Sales Tax vs S.S.R. Syringes and Thermometers, 1973 Law Diary 178, overruled.
|
N: Criminal Appeal No. 281 of 1978.
Appeal by Special Leave from the Judgment and Order dated 4.11.77 of the Allahabad High Court at Allahabad in Criminal Appeal No. 1495 of 1977.
L. N. Gupta for the Appellants.
H. R. Bhardwaj and R. K. Bhatt for the Respondent.
O. P. Rana for the Complainant.
The Judgment of the Court was delivered by CHANDRACHUD, C. J.
This is yet another case in which a young housewife has been done to death by a trusted servant of the family.
Her three year old son was murdered along with her and her five year old son was seriously injured.
The incident occurred on May 6, 1971 at about 2.00 p.m. in House No. F 4/3, Kanoria Colony Quarters, Renukoot, where one Mohan Lal Khetan used to live with his wife Geeta and two sons Anil and Sunil aged three and five years respectively.
Mohan Lal left for Allahabad for some work on the morning of the 6th.
His wife and children took their food at about 1.00 p.m. and while they were resting, with a cooler on, they were assaulted as a result of which Geeta and Anil died and Sunil received serious injuries.
The only other person who was then present in the house was the appellant, who was working as a household servant for a few years before the incident.
His presence in the house at the material time is beyond the pale of controversy and indeed his very defence is that some intruders entered the house and caused injuries to Geeta, her two sons and to he himself.
The appellant received quite some injuries in the incident which led to the death of Geeta and Anil.
Sunil, the five year old son of Geeta, was examined by the prosecution as the sole eye witness in the case and his evidence has been accepted by the Sessions Court and the High Court.
Shri L. N. Gupta, who has argued the case on behalf of the appellant with admirable precision and brevity, contends that no reliance should be placed on Sunil 's evidence because he is a young child of immature understanding, that no oath was administered to him by reason of his lack of understanding of the sanctity of oath, that he did not implicate the appellant for two days or so at least and that his 262 statement was recorded by the police about 20 days after the incident.
Counsel further argues that in the very nature of things, it would be impossible for a young lad of 13 like the appellant to overpower, gag, assault and slay a well built woman of 30 that Geeta was.
The motive of the offence, according the Courts below, was to outrage the modesty of Geeta.
It is urged that a boy of 13 could not possibly have entertained any such lewd thoughts.
According to medical evidence, the injuries on the person of Geeta and the appellant were partly caused by a blunt weapon and partly by a sharp edged weapon.
That means that two different kinds of weapons were used against both of them and, what is more important, the same two weapons.
According to counsel, that is more consistent with a stranger or strangers attacking Geeta and the appellant than with the appellant attacking Geeta.
The appellant could not have attacked Geeta with two different weapons and even if Geeta were to retaliate, she could not have caused injuries to the appellant with the same two weapons.
The final submission is that the prosecution case is rendered suspicious because the evidence of discovery of the iron rod, the knife, two gold bangles and the cash at the instance of the appellant has been disbelieved by the Sessions Court and the High Court.
We have given our anxious consideration to these weighty considerations but on a close scrutiny of the evidence and the circumstances of the case we find ourselves unable to differ from the Courts below in regard to the assessment of the evidence in the case.
Counsel is not right in saying that the appellant was only thirteen years of age in May 1971.
It appears that the appellant gave his age as 13 during the committal proceedings but the age so given cannot be accepted as correct merely because, as counsel contends, the prosecution did not dispute the correctness of the assertion made by the appellant.
There was no assertion in regard to the appellant 's age and indeed it was not put in issue at any stage of the proceedings.
The point regarding the appellant 's age is being raised for the first time in this Court in the form and context in which it is raised by Shri Gupta.
The reference to the "tender age" of the appellant was made in the Sessions Court on the question of sentence and not that of guilt, nor indeed in the context that the nature of the offence is such that the appellant could not have committed it, being just a boy of 13 or so.
It is not a matter of uncommon experience that the age of an accused is mentioned in the committal proceedings without proper inquiry or scrutiny since, in most cases, nothing turns on it.
In fact if the appellant 263 was only 13 years of age at the time of the offence, the Sessions Court would not have failed to notice that fact and it would be amazing that the appellant 's advocates in the Courts below should not advert to it, though the minutest contentions were raised in arguments and subtle suggestions were made to prosecution witnesses in their cross examination.
During the trial, the appellant was suspected to be of a deranged mind and was for that reason sent to the mental hospital at Varanasi.
Exhibit K 20, which is the abstract of medical history maintained in that hospital, shows that at the time of the appellant 's admission to the hospital on July 19, 1973 he was 23 years of age.
The occurrence having taken place in May 1971, the appellant would be about 21 years of age at the relevant time.
That is what the High Court has found while dealing with the question of sentence when it was urged before it that the death sentence should not be confirmed since the appellant was just 14 or 15 years of age on the date of offence.
We concur in view of the High Court on the question of the appellant 's age and agree with it that the age given by the appellant in the committal Court and the Sessions Court was a random statement not based on any reliable data.
We cannot accept that an able bodied boy of eighteen or nineteen could not have committed an assault of the present nature for the motive alleged.
But we might mention that we are not in entire agreement with the Sessions Court and the High Court that the motive of the offender was necessarily to outrage the modesty of Geeta.
It is not possible to record a positive finding that the motive necessarily was to commit theft or robbery, but the nature of injuries on the person of Geeta does not fully bear out the inference that the motive of the outrage was concerned with sex.
There was no injury at all on Geeta 's private parts or anywhere nearabout, not even a scratch or an abrasion.
Most of the injuries were caused to her on the face and head.
It seems to us more probable that Geeta woke up while the almirah was being ransacked and she paid the price of her courage.
She resisted the robbery and was therefore done to death.
Shri Gupta made a very plausible case against the acceptance of the evidence of Sunil, the child witness.
We must confess that if the case were to rest solely on Sunil 's uncorroborated testimony, we might have found it difficult to sustain the appellant 's conviction.
But there are unimpeachable and the most eloquent matters on the 264 record which lend an unfailing assurance that Sunil is a witness of truth, not a witness of imagination as most children of that age generally are.
As we have stated earlier, the presence of the appellant is undisputed and is indeed indisputable.
The appellant himself received quite a large number of injuries during the incident, which proves his presence in the house at the relevant time beyond the shadow of a doubt.
If the appellant was present in the house at the time when Geeta was assaulted, it becomes necessary to examine his conduct without shifting the burden of proof on to him.
If the mistress of the house was killed by robbers, we should have thought that the appellant would raise a hue and cry at least after the robbers had made good their escape.
He did nothing of the kind and a little while later, he quitely walked to a neighbour and trotted out the story that a few "Badmashes" intruded into the house and killed Geeta and her son.
Not only does the conduct of the appellant corroborate the evidence of Sunil, but the very pattern of the crime corroborates that it is the appellant who committed it.
Anil was sleeping alongside his mother and he seems to have received an injury while the mother was assaulted.
But Sunil was assaulted obviously in order that he should not be left alive to identify the culprit.
The culprit whom Sunil could easily identify was the appellant who was a household servant engaged mainly to look after the two boys.
Total strangers, whom even the appellant could not identify except as "Badmashes", would have no reason whatever to assault Sunil.
The most important of the circumstances which corroborates the evidence of Sunil is the nature of injuries which were found on the person of the appellant.
Those injuries are typically of the kind which a woman in distress would cause while defending herself.
There is a trail of scratches and abrasions on the front portion of the appellant 's body and it is not without significance, as contended by Shri Bhardwaj who appears on behalf of the State of U.P., that the injuries on Geeta are also all on the front portion of her body.
A 'Badmash ' would not deal with the appellant with his nails, if indeed he wanted to put the appellant out of harm 's way.
There is one more argument which requires to be dealt with, namely, that two different weapons and the same two weapons were used against both Geeta and the appellant.
We are not quite sure whether Geeta had received an incised injury because, the injuries which were found on her forehead can give the appearance 265 of incised injuries, if caused by an iron rod.
The skin just above a hard surface can break by a severe blow and give the appearance of an incised injury.
But even assuming that the same two weapons were used on Geeta as also the appellant, it does not militate against the commission of the crime by the appellant himself.
It is clear from the evidence of Dr. Guha and Dr. Sharma that all the injuries on the person of both Geeta and the appellant were on the front portions of their respective bodies.
It is also clear that the injury which resulted in the death of Geeta as also her son Anil was caused by the iron rod.
We are inclined to the view that the weapons with which Geeta was defending herself at different stages of her life saving fight with the appellant were snatched by the appellant and he hit her with those weapons.
That is how similar injuries were found on the person of both.
We, therefore, agree with the Sessions Court and the High Court that it is the appellant who committed the murder of Geeta and her son Anil and caused injuries to Sunil.
Crimes like the one before us cannot be looked upon with equanimity because they tend to destroy one 's faith in all that is good in life.
A starving youth was given shelter by a kindly couple.
The reward of that kindness is the murder of the woman and her child.
We cannot condemn adequately the utterly disgraceful and dastardly conduct of the appellant.
But all the same, the question as to whether the death sentence is called for has to be examined in each case with dispassionate care.
The appellant was just about 21 years of age on the date of the offence and, very probably, a sudden impulse of sex or theft made him momentarily insensible.
The evidence of Sunil shows that immediately after the crime, the appellant was found sitting in the chowk of the house crying bitterly.
Having achieved his purpose he did not even try to run away, which he could easily have done since, his injuries were not of such a nature as to incapacitate him from fleeing from an inevitable arrest.
It would also appear that though he was not insane at the time of the offence in he sense that he did not know the nature and consequences of what he was doing, still he was somewhat unhinged.
He was suspected to be insane during the trial and was kept in a mental hospital from July 19, 1973 to February 2, 1975.
He was eventually declared fit to stand his trial but the evidence of Dr. R. N. Srivastava (P.W. 13), who was in charge of the hospital and the notes (Exhibit Ka 20) of the hospital show that the appellant had 266 shown aggressive symptoms and once, he had attacked another patient.
Coupled with these considerations is the fact that the basic evidence in the case is of a child of five who answered many vital questions with a nod of the head, one way or the other.
A witness who, by reason of his immature understanding, was not administered oath and who was privileged, by reason of his years, not to make his answers in an intelligible and coherent manner is unsafe to be trusted wholesale.
We cannot also overlook, what Shri L. N. Gupta highlighted, that Sunil 's statement was recorded about 20 days later.
There is valid reason for the delay, namely, his state of mind (he was a witness to the murder of his mother and an infant brother) and the state of his body (he was gagged as a result of which his clavicle was fractured).
Children, in the first place, mix up what they see with what they like to imagine to have seen and besides, a little tutoring is inevitable in their case in order to lend coherence and consistency to their disjointed thoughts which tend to stray.
The extreme sentence cannot seek its main support from evidence of this kind which, even if true, is not safe enough to act upon for putting out a life.
The learned Sessions Judge did not ask the appellant what he had to say on the question of sentence, holding that section 235 (2) of the Code of Criminal Procedure, 1973 did not, by reason of its section 484 (2) (a), apply to trials which were pending on the date when the new Code came into force.
We wish that the Sessions Court had questioned the appellant on the sentence, whether the letter of section 235(2) governed the matter or not.
That would have furnished to the Court useful data on the question of sentence which it proposed to pass.
In any case, the trial would not have been invalidated if the Court were to apply the provisions of that section which were introduced into the Code ex debito justiciae.
The learned Judge had before him a safe expedient, the benefit of which he needlessly denied to himself on technical considerations.
Finally, the appellant has been in jail for ten long years.
He has probably earned by now the right to be released, after taking into account the remissions admissible to him, were he sentenced to life imprisonment.
We suppose, though we are not confident, that some celebrity or the other must have visited the jail and large, wholesale remissions from sentence must have been doled out to the prisoners in order to commemorate the great and unusual event.
267 In the result, we confirm the order of conviction but set aside the sentence of death imposed upon the appellant and sentence him to imprisonment for life for the offence under section 302 of the Penal Code.
The sentence under section 307 will stand but the two sentences will run concurrently.
S.R. Appeal partly allowed.
| IN-Abs | The appellant, a starving youth was given shelter by a kindly couple by engaging him as a domestic servant.
The reward of that kindness was the murder of the lady of the house and her three year old son and causing serious injury to her five year old son.
The appellant was, therefore, charged and convicted under sections 302 and 307 of the Penal Code and sentenced under section 307 to imprisonment and to death under section 302.
The High Court confirmed the death sentence and hence the appeal after obtaining special leave of the Court.
Maintaining the conviction under sections 302 and 307 I.P.C. and the sentence under the latter section, but modifying the death sentence under section 302 to one of life imprisonment, the Court ^ HELD: 1.
Altering the sentence of the appellant to imprisonment for life for the offence under section 302 of the Penal Code, while maintaining the sentence under section 307 Penal Code the two sentences to run concurrently will meet the ends of justice, in the instant case, under the following circumstances: [267A B] (a) He was just about 21 years of age on the date of the offence and, very probably, a sudden impulse of sex or theft made him momentarily insensible.
(b) The evidence of Sunil shows that immediately after the crime, he was found sitting in the chowk of the house crying bitterly.(c) Having achieved his purpose, he did not even try to run away, which he could easily have done since his injuries were not of such a nature as to incapacitate him from fleeing from an inevitable arrest.
(d) Though he was not insane at the time of the offence in the sense that he did not know the nature and consequences of what he was doing, still he was somewhat unhinged.
He was kept in a mental hospital from July 19, 1973 to February 2, 1975 where he had shown aggressive symptoms and once even attacked another patient.
(e) The basic evidence in this case is of a child of five who answered many vital questions with a nod of the head, one way 260 or the other.
The extreme sentence cannot seek its main support from evidence of this kind which, even if true, is not safe enough to act upon for putting out a life.
(f) Non availability of the useful data on the question of sentence which the trial court proposed to pass due to the trial Judge 's failure to ask the appellant what he had to say on the question of sentence and (g) the appellant has been in jail for ten long years and probably would have earned by now the right to be released, after taking into account the remissions admissible to him, were he sentenced to life imprisonment.
[265 E H, 266A, C D, G] 2.
The Trial Judge had a safe expedient in section 235(2) of the Code of Criminal Procedure, 1973, which he needlessly denied to himself on technical consideration that by reason of section 484(2) (a) of the Code section 235 (2) did not apply to trials which were pending on the date when the new Code came into force.
The Trial Judge ought to have questioned the appellant on the sentence, whether the letter of section 235(2) governed the matter or not.
That would have furnished to the court useful data on the question of sentence which it proposed to pass.
In any case, the trial would not have been invalidated if the court were to apply the provisions of section 235 which were introduced into the Code, ex debito justiciae.
[266 D F] 3.
A witness who, by reason of his immature understanding was not administered oath and who was privileged, by reason of his years, not to make his answers in an intelligible and coherent manner is unsafe to be trusted whole sale.
Children, in the first place, mix up what they see with what they like to imagine to have seen and besides, a little tutoring is inevitable in their case in order to lend coherence and consistency to their disputed thoughts which tend to stray.
[266 A B, C] But, in the instant case, there are unimpeachable and the most eloquent matters on the record which lend an unfailing assurance that Sunil is a witness of truth, not a witness of imagination as most children of that age are.
[263H,264A] 4.
An assessment of the following corroborative evidence, in the instant case, clearly indicate that it was the appellant who committed the murder of Geeta and her son Anil and caused injuries to Sunil: (a) the presence of the appellant proved by quite a large number of injuries during the incident; (b) his conduct in not raising hue and cry at least after the robbers had made good their escape, if any at the time of the killing of the mistress of the house, but little while later, he quietly walked to a neighbour and trotted out the story that a few Badmashes intruded into the house and killed Geeta and her son; (c) the pattern of the crime, that is, Anil was sleeping alongside his mother receiving an injury and getting killed while the mother was assaulted and Sunil being assaulted in order that he should not be left alive to identify the culprit, whom Sunil could easily identify as he was a household servant engaged mainly to look after the two boys: (d) the nature of injuries which were found on the person of the appellant are typically of the kind which a woman in distress would cause while defending herself, and cannot be by a Badmash but would otherwise deal with him if indeed the Badmash wanted to put the appellant out of harm 's way; (e) the weapons with which Geeta was defending herself at different stages of her life saving fight with the appellant were snatched by the appellant and he hit her with those weapons, that is how similar injuries were found on the person of the deceased and the appellant by the same two weapons.
[264 A H, 265 B C] 261
|
Civil Appeal Nos.
1801 1805 of 1975.
From the Judgments and Orders dated the 27th January and 3rd February 1975 of the Karnataka High Court at Bangalore in STRPs.
14, 15 19, 26 & 32 of 1974.
N. Nettar for the Appellant.
J. Ramamurthy and Miss R. Vaigai for the Respondent.
Ex parte Respondents in CAs 1801 1803 & 1805/75.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
The question which arises for consideration in these appeals by certificate is whether the respondents (here 282 inafter referred to as 'the assessees ') are liable to pay purchase tax under section 6(i) of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as 'the Act ') on the turnover consisting of the price paid by them for purchasing paddy for the purpose of converting it into rice for sale, in their respective rice mills.
The assessees are owners of rice mills in the State of Karnataka and are registered dealers under the Act.
In the course of their business, they purchase paddy and after milling paddy sell the resultant rice.
During the assessment years, the assessees purchased paddy from agriculturists who were not liable to pay sales tax.
The assessing authority under the Act levied on the assessee in each of these cases purchase tax on the purchase turnover of paddy under section 6(i) of the Act.
The appeals filed by the assessees against the said assessments were dismissed by the appellate authority.
The Karnataka Sales Tax Appellate Tribunal allowed the appeals filed by the assessees against the orders of the appellate authority except the one filed by the assessee who is the respondent in Civil Appeal No. 1805 of 1975 holding that the conversion of paddy into rice did not involve any manufacturing process and that the purchase turnovers of paddy in those cases were not liable to tax under section 6(i) of the Act.
In the case of the assessee who is the respondent in Civil Appeal No. 1805 of 1975, the Tribunal held that the turnover was liable to be taxed as he had manufactured boiled rice out of the paddy purchased by him.
Aggrieved by the decisions of the Tribunal, the State Government filed revision petitions before the High Court under section 23(1) of the Act in the first four cases and the assessee filed a revision petition in the last case.
The High Court after holding that the turnovers in question were not liable to tax under section 6(i) of the Act dismissed the petitions filed by the State Government and allowed the petition of the assessee who is the respondent in Civil Appeal No. 1805 of 1975.
Thereafter the High Court granted by a common order a certificate of fitness in all these cases to prefer appeals before this Court to the State Government.
On the basis of said certificate, these appeals have been filed by the State Government against the orders of the High Court.
Since these appeals involve a common question of law, they are disposed of by this common judgment.
The relevant part of section 6 of the Act reads: "6.
Levy of purchase tax under certain circumstances.
Subject to the provisions of sub section (5) of 283 section 5, every dealer who in the course of his business purchases any taxable goods in circumstances in which no tax under section 5 is leviable on the sale price of such goods and, (i) either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the state, or (ii). . . . shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on the sale price of such goods under section 5." The contention of the State Government before the High Court was and before us is that the sale price of paddy which is a taxable commodity having not been subjected to tax under section 5 the assessees are liable to tax under section 6(i) of the Act as they had consumed it in the manufacture of rice which was a different commodity for sale.
The assessees ' contention which was accepted by the High Court is that paddy and rice being the same it cannot be said that they had manufactured 'other goods ' out of paddy and hence section 6(i) is not attracted.
Paddy and rice have been held to be different commodities by this Court in Ganesh Trading Co., Karnal vs State of Haryana & Anr.
in which it is observed thus: "Now, the question for our decision is whether it could be said that when paddy was dehusked and rice was produced its identity remained.
It was true that rice was produced out of paddy but it is not true to say that paddy continued to be paddy even after dehusking.
It had changed its identity.
Rice is not known as paddy.
It is a misnomer to call rice as paddy.
They are two different things in ordinary parlance.
Hence quite clearly when paddy is dehusked and rice produced, there has been a change in the identity of the goods".
284 The above view has been followed by this Court in Babu Ram Jagdish Kumar and Co. vs The State of Punjab & Ors.
It is unfortunate that the High Court as well as the Tribunal have tried to distinguish the decision of this Court in Ganesh Trading Co. 's case (supra) on insubstantial grounds, a detailed reference to which is unnecessary We reiterate the view expressed in the above two cases and hold that paddy and rice are two distinct commodities and that the milling of paddy involves a manufacturing process.
There is no merit in the submission made on behalf of the assessees that they had not consumed paddy when they produced rice from it by merely carrying out the process of dehusking at their mills.
Consumption in the true economic sense does not mean only use of goods in the production of consumers ' goods or final utilisation of consumers ' goods by consumers involving activities like eating of food, drinking of beverages, wearing of clothes or using of an automobile by its owner for domestic purposes.
A manufacturer also consumes commodities which are ordinarily called raw materials when he produces semi finished goods which have to undergo further processes of production before they can be transformed into consumers ' goods.
At every such intermediate stage of production, some utility or value is added to goods which are used as raw materials and at every such stage the raw materials are consumed.
Take the case of bread.
It passes through the first stage of production when wheat is grown by the farmer, the second stage of production when wheat is converted into flour by the miller and the third stage of production when flour is utilised by the baker to manufacture bread out of it.
The miller and the baker have consumed wheat and flour respectively in the course of their business.
We have to understand the word 'consumes ' in section 6(i) of the Act in this economic sense.
It may be interesting to note that this is the basis of the levy of 'Value Added Tax ', popularly called as VAT, which is levied as an alternative to tax on turnover in some Western countries.
The difference between 'Value Added Tax ', and tax on the turnover of sales or purchases is explained by Professor Paul A. Samuelson in his book entitled 'Economics ' (Tenth Edition, 1976) at page 168 thus: "A turnover tax simply taxes every transaction made: wheat, flour, dough, bread, VAT is different because it does not include in the tax on the miller 's flour that part of its 285 value which came from the wheat he bought from the farmer.
Instead, it taxes him only on the wage and salary, cost of milling, and on the interest, rent, royalty, and profit cost of this milling stage of production.
(That is, the raw material costs used from earlier stages are subtracted from the miller 's selling price in calculating his "value added" and the VAT tax on value added. . )" At every stage of production, it is obvious there is consumption of goods even though at the end of it there may not be final consumption of goods but only production of goods with higher utility which may be used in further productive processes.
While construing the word 'consumption ' which was found in the Explanation to Article 286(1)(a) as it stood prior to its deletion by the Constitution (Sixth Amendment) Act, 1956, this Court in M/s. Anwarkhan Mahboob Co. vs The State of Bombay & Ors.
observed thus: "The Act of consumption with which people are most familiar occurs when they eat, or drink or smoke.
Thus, we speak of people consuming bread, or fish or meat or vegetables, when they eat these articles of food; we speak of people consuming tea or coffee or water, when they drink these articles; we speak of people consuming cigars or cigarettes or bidis, when they smoke these.
The production of wealth, as economists put it, consists in the creation of "utilities".
Consumption consists in the act of taking such advantage of the commodities and services produced as constitutes the "utilization" thereof.
For each commodity, there is ordinarily what is generally considered to be the final act of consumption.
For some commodities, there may be even more than one kind of final consumption.
Thus grapes may be "finally consumed" by eating them as fruits; they may also be consumed by drinking the wine prepared from "grapes".
Again, the final act of consumption may in some cases be spread over a considerable period of time.
Books, articles of furniture, paintings may be mentioned as examples.
It may even happen in such cases, that after one consumer has performed part of the final act of consumption, another portion of the final act 286 of consumption may be performed by his heir or successor in interest, a transferee, or even one who has obtained possession by wrongful means.
But the fact that there is for each commodity what may be considered ordinarily to be the final act of consumption, should not make us forget that in reaching the stage at which this final act of consumption takes place the commodity may pass through different stages of production and for such different stages, there would exist one or more intermediate acts of consumption.
" Applying the above test, it has to be held that the assessees had consumed the paddy purchased by them when they converted it into rice which is commercially a different commodity.
Since it is not disputed that the sales of paddy, which is a taxable commodity, in favour of the assessees had not suffered tax under section 5 in view of the circumstances in which they had taken place and it is held that the assessees had consumed paddy in the manufacture of rice which was a different commercial commodity for sale, the case of the assessees squarely falls under section 6(i) of the Act.
The charge under section 6(i) should, therefore, be given due effect.
This view is in accord with the opinion of this Court in State of Tamil Nadu vs M. K. Kandaswami etc.
and in Ganesh Prasad Dixit vs Commissioner of Sales tax, where provisions corresponding to section 6(i) of the Act arose for consideration.
It is next contended that since the assessees would be exposed to double taxation both as buyers of paddy and as sellers of rice we should hold that the levy in question is impermissible because paddy and rice are liable to be taxed at a single point.
No provision is shown to us which bars such taxation when the commodities are different.
In fact, in this case there is no double taxation on the same commodity.
A similar contention was rejected by this Court in the case of Babu Ram Jagdish Kumar (supra) thus: "We may at this stage refer to one other subsidiary argument urged on behalf of the appellants.
It is argued that because paddy and rice are not different kinds of goods 287 but one and the same, the inclusion of both paddy and rice in Schedule C to the Act would amount to imposition of double taxation under the Act.
There is no merit in this contention also because the assumption that paddy and rice are one and the same is erroneous.
In Ganesh Trading Co., Karnal vs State of Haryana (1973) 32 S.T.C. 623 (S.C.), arising under the Act, this Court has held that although rice is produced out of paddy, it is not true to say that paddy continued to be paddy even after dehusking; that rice and paddy are two different things in ordinary parlance and, therefore, when paddy is dehusked and rice produced, there is a change in the identity of the goods.
" In the result these appeals are allowed, the judgments of the High Court against which these appeals are filed are set aside and the turnover in question in each case is held to be taxable under section 6(i) of the Act.
There shall, however, be no order as to costs.
| IN-Abs | The assessees (respondents) are the owners of rice mills and are registered dealers under the Karnataka Sales Tax Act, 1957.
In the course of their business, they purchase paddy and after milling paddy, sell the resultant rice.
During the assessment years, the assessees purchased paddy from agriculturists who were not liable to pay sales tax.
The assessing authority under the Act levied on the assessee in each of these cases purchase tax on the purchase turnover of paddy under section 6(i) of the Act.
The appeals filed by the assessees were dismissed by the Appellate Authority except the one, holding that the conversion of paddy into rice did not involve any manufacturing process and that the purchase turnovers of paddy in those cases were not liable to tax under section 6(i) of the Act.
In the case of the other assessee, the Tribunal held that the turn over was liable to be taxed as he had manufactured milled rice out of the paddy purchased by him.
The appellant filed revision petitions in the High Court and the assessee filed revision petition in the last case.
The High Court after holding that the turn overs in question were not liable to tax under section 6(i) of the Act dismissed the petitions filed by the appellant and allowed the petition of the last assessee.
The High Court granted a certificate of fitness to this Court.
The appellant argued that the sale price of paddy which is a taxable commodity having not been subjected to tax under section 5, the assessees were liable to tax under section 6(i) of the Act as they had consumed it in the manufacture of rice which was a different commodity for sale.
The respondent argued that they had not consumed paddy when they produced rice from it by merely carrying out the process of dehusking at their mills.
Allowing the appeals, ^ HELD: 1.
(i) Paddy and rice are two distinct commodities.
The milling of paddy involves a manufacturing process.
[284 B] (ii) The levy in question is not impermissible even though paddy and rice are liable to be taxed at a single point, as in fact there is no double taxation on the same commodity.
[286 F G] 281 Ganesh Trading Co. Karnal vs State of Haryana and Anr.
32 S.T.C. 623, Babu Ram Jagdish Kumar and Co. vs The State of Punjab and Anr.
44 S.T.C. 159 affirmed.
Consumption in the true economic sense does not mean only use of goods in the production of consumer goods or final utilisation of consumer goods by consumers involving activities like eating of food, drinking of beverages, wearing of clothes or using of an automobile by its owner for domestic purposes.
A manufacturer also consumes commodities which are ordinarily called raw materials when he produces semi finished goods which have to undergo further processes of production before they can be transformed into consumer goods.
At every such intermediate stage of production, some utility or value is added to goods which are used as raw materials and at every such stage the raw materials are consumed.
[284 D E] 3.
At every stage of production there is consumption of goods even though at the end of it there may not be final consumption of goods but only production of goods with higher utility which may be used in further productive processes.
[285 B B] M/s.
Anwar Khan Mahboob Co. vs The State of Bombay and Ors.
at pp.
715 716; Economics (Tenth Edition 1976) at page 168 by Professor Paul A. Samuelson, referred to.
In the instant case, the assessees had consumed that paddy purchased by them when they converted it into rice which is commercially a different commodity for sale.
The case of assessees therefore, squarely falls under section 6(i) the Act.
[286 C] State of Tamil Nadu vs M. K. N. Kandaswami etc.
; , Ganesh Prasad Dixit vs Commissioner of Sales Tax ; , referred to.
|
: Criminal Appeal No. 60 of 1981.
Appeal by Special Leave from the Judgment and Order dated 8 4 1980 of the Punjab and Haryana High Court in Criminal Revision No. 342 of 1980.
M. section Dhillon for the Appellant.
T. section Arora for the Respondent.
The Judgment of the Court was delivered by FAZAL ALI, J.
This appeal by special leave is directed against the Judgment of the Punjab and Haryana High Court dated 8th April, 1980 by which the respondent Sarwan Singh was acquitted of the charge under section 406 of the Indian Penal Code.
It appears that the respondent accused was charged under section 406 of the Penal Code for misappropriating the amounts deposited with him as a cashier of the Tanda Badha Co operative Society, District Patiala.
The challan was presented against the accused on the 13th October, 1976.
The trial court after recording the evidence acquitted the respondent of the charge under section 408 but convicted the respondent of the charge under section 406 and sentenced him to rigorous imprisonment for one year and to pay a fine of Rs. 1,000/ .
The respondent then filed the appeal to the High Court which allowed the appeal and acquitted the respondent mainly on the ground that the prosecution launched against the respondent was clearly barred by limitation under sections 468 and 469 of the Code of Criminal Procedure.
The High Court was of the view that the charge sheet clearly shows that the embezzlement is said to have been committed on 22nd August, 1972 and the audit report, through which the offence was detected is dated 5th January, 1973.
Taking any of these dates, the prosecution was barred by limitation under section 468 (2) (c) of the Code.
In our opinion, the High Court has taken the correct view of the law.
Section 468(2) (c) may be extracted thus: Sec.
468 (2) (c): "three years, if the offence is punishable with imprisonment for a term exceeding one year but not exceeding three years.
" 351 Section 469 (1) (a) and (6) may be extracted thus: "(a) on the date of the offence; or (b) where the commission of the offence was not known to the person aggrieved by the offence or to any police officer, the first day on which such offence comes to the knowledge of such person or to any police officer, whichever is earlier;" In the instant case as the charge sheet clearly mentions that the offence was committed on the 22nd August, 1972, the bar of limitation contained in section 468 (2) (c) clearly applies and the prosecution therefore, is clearly barred by limitation.
Even assuming that so far as, the offender is concerned, the commission of the offence came to knowledge of the officer concerned, it would be so according to charge sheet on January 5, 1973, the date when the audit report was made.
Even if this extreme position be accepted, the prosecution would still be barred by limitation under section 469(b) of the Code of Criminal Procedure, 1973.
Counsel for the State of Punjab was unable to assail the point of law derived by the High Court regarding the interpretation of section 468.
The object of the Criminal Procedure Code in putting a bar of limitation on prosecutions was clearly to prevent the parties from filing cases after a long time, as a result of which material evidence may disappear and also to prevent abuse of the process of the court by filing vexatious and belated prosecutions long after the date of the offence.
The object which the statutes seek to subserve is clearly in consonance with the concept of fairness of trial as enshrined in article 21 of the Constitution of India.
It is, therefore, of the utmost importance that any prosecution, whether by the State or a private complainant must abide by the letter of law or take the risk of the prosecution failing on the ground of limitation.
The prosecution against the respondent being barred by limitation the conviction as also the sentence of the respondent as also the entire proceedings culminating in the conviction of the respondent herein become non est.
For these reasons given above, we hold that the point of law regarding the applicability of Section 468 of the Code of Criminal Procedure has been correctly decided by the Punjab and Haryana High Court.
This Court has also taken the same view in a number of decisions.
The result is that the appeal fails and is dismissed.
The respondent will now be discharged from his bail bonds.
S.R. Appeal dismissed.
| IN-Abs | Based on the audit report dated January 5, 1973 revealing an embezzlement having been committed by the Respondent on 22.8.1972, a challan was presented against him on the 13th October, 1976 under Sec.
406 Penal Code for misappropriating the amounts deposited with him as a Cashier of the Tanda Badha Co operative Society, district Patiala.
The Trial Court convicted the respondent under section 406 Penal Code and sentenced him to rigorous imprisonment for one year and to pay a fine of Rupees one thousand.
The respondents ' appeal to the High Court was allowed accepting the plea of bar of limitation under section 468 of the Criminal Procedure Code.
Hence the State appeal after obtaining special leave of the Court.
Dismissing the appeal, the Court, ^ HELD: (1) Taking any of these dates, namely, 22nd August 1972, (Commission of embezzlement), and 5th January 1973 (date of detection of embezzlement) the prosecution was barred by limitation under sections 468(2) (a) and 469(b) of the Code of Criminal Procedure.
Therefore, the conviction and the sentence of the respondent as also the entire proceedings culminating in his conviction became non est.
G] (ii) The object of the Criminal Procedure Code in putting a bar of limitation on prosecution was clearly to prevent the parties from filing cases after a long time, as a result of which material evidence may disappear and also to prevent abuse of the process of the court by filing vexatious and belated prosecutions long after the date of the offence.
The object which the statute seeks to subserve is clearly in consonance with the concept of fairness of trial as enshrined in article 21 of the Constitution of India.
It is, therefore, of the utmost importance that any prosecution, whether by the State or a private party must abide by the letter of law or take the risk of the prosecution failing on the ground of limitation.
[351 E F] 350
|
ivil Appeal Nos.
490 and 2228 (N) of 1970.
Appeals by certificate from the Judgment and order dated 9 10 1969 & 14 1 1970 of the Punjab and Haryana High Court in Letters Patent Appeal Nos.
553 of 1968 & 570 of 1969 respectively.
332 Hardev Singh and R.S. Sodhi for the Appellants (In both the Appeals.) K C. Bhagat and R.N. Podar for the Respondent (in both the Appeals) The Judgment of the Court was delivered by FAZAL ALI, J.
These two appeals by certificate are directed against judgments dated 9.10.69 and 14.1.1970 of the Punjab and Haryana High Court in Letters Patent Appeals Nos.
553 of 1968 and 570 of 1969 by which the contentions raised by the appellants in the two appeals were rejected.
After the matter came up in this Court the two appeals were consolidated as they arose out of almost the same subject matter and involved identical points.
The facts which have given rise to these appeals lie within a very narrow compass and may be briefly summarised thus.
The appellants were refugees from Pakistan and Sant Singh Nalwa was allotted 63 standard acres and 8/1/4 units in village Marghain and another area of 19 standard acres and 5 units in Garden Colony in Jundla which were entered as sailab land in the revenue records.
The other appellant, Kartar Kaur, was allotted 96 acres, 3 bighas and 13 biswas in the same district.
These lands were given to the appellants as they were displaced persons.
After the appellants had become owners of the lands, the State of Punjab passed the Punjab Security of Land Tenures Act, 1953, (hereinafter referred to as the 'Act ') which later applied to Haryana also, under which every land owner whether a displaced person allottee or otherwise could not retain any area of land which fell beyond the extend prescribed by sub section (3) of section 2 of the Act.
After the coming into force of the Act the revenue authorities proceeded to determine the permissible area of the land of both the appellants so that the area which was found to be in excess may be taken over by the State after paying the compensation as provided in the Act and the Rules made thereunder, viz., The Punjab Security of Land Tenures Rules, 1953 (hereinafter called the 'Rules ').
In order to determine the permissible area the Act contains certain provisions by which the entire area held by a land owner has to be converted into standard acres on the basis of a formula contained in sub section (5) of section 2 of the Act which defines 'standard acre ' thus: " 'Standard acre ' means a measure of area convertible into ordinary acres of any class of land according to the 333 prescribed scale with reference to the quantity of yield and quality of soil.
" Similarly, the relevant portion of sub section 5 a which defines 'Surplus Area ' may be extracted thus: " 'Surplus Area ' means the area other than the reserved area, and, where no area has been reserved, the area in excess of the permissible area selected (under section 5 B or the area which is deemed to be surplus area under sub section (1) of section 5C) (and includes the area in excess of the permissible area selected under section 19 B) but it will not include a tenant 's permissible area;. " So far as the appellant, Sant Singh Nalwa, was concerned, the revenue authorities held that he was entitled to retain 50 (fifty) standard acres being the permissible area and the balance of 13 standard acres and odd units was declared as surplus.
Similarly, in the case of the other appellants, Kartar Kaur, she was allowed to retain 50 standard acres and about 15 standard acres of land was taken over being surplus.
In the instant appeals, there is no dispute that the formula by which the extent of the land in possession of the appellants had been converted into standard acres was not in accordance with the provisions of the Act.
The only point that was canvassed before the revenue authorities as also in the High Court centered round the question of the nature of the land and the valuation thereof for the purpose of assessing compensation.
The appellants case was that as the lands which had been declared surplus or for that matter the entire lands/allotted to them as displaced persons fell in a portion of District Karnal which was sailab and Adna sailab and therefore according to the classification made under the Rules they did not carry any valuation.
Sant Singh Nalwa challenged before the Collector the validity of declaration of the surplus area and contested the valuation put by the Collector.
The Collector dismissed the application by his order dated 13.3.1963 and held that 13 standard acres and 6 units of the land had to be declared surplus.
Against this order, Sant Singh filed an appeal before the Additional Commissioner, Ambala Division where the only point raised by him was that the area was not correctly evaluated.
His main grievance was that the area in question was equated with Barani land and valuated at the rate of unirrigated area as given in the valuation statement of the Karnal District under Annexure 'A ' of the Rules.
The main contention of 334 the appellants before the Commissioner as also before us was that as the surplus area does not fall under any of the categories mentioned in Annexure 'A ' it carried no valuation at all.
The Commissioner, however, dismissed the appeal holding that the collector was right in treating the surplus area as an unirrigated area and valuing the same at 9 annas per standard acre.
Thereafter, the appellant filed a writ petition before the High Court which was allowed by the Single Judge by his order dated July 23, 1963.
The Single Judge set aside the orders of revenue courts and accepted the contention of the appellant.
Against this order, the Financial Commissioner filed an appeal under Letters Patent before a Division Bench of the High Court which by its judgment dated 9.10.69 allowed the appeal and dismissed the writ petition filed by the appellant before the High Court.
Similarly, Kartar Kaur, the other appellant also filed an appeal before the Additional Commissioner, Ambala Division regarding the surplus land and having failed there, filed a writ petition in the High Court on 10.2.1965 which was ultimately dismissed on 10.10.69 and the appeal under Letters Patent against the said order of the Single Judge was also dismissed on 14.1.70.
Thus, the position is that both the appellants failed to get any redress from the High Court which ultimately confirmed the orders of the Revenue courts.
The learned counsel for the appellants raised two contentions before us.
In the first place, it was argued that the Revenue courts as also the High Court were in error in holding that the surplus area was rightly evaluated in as much as the classification made under the Rules was ultra vires as being in direct disobedience to the mandate contained in sub section (5) of section 2 of the Act.
In other words, it was argued that whereas sub section (5) directed the Government to frame Rules after considering the quantity of the yield and quality of soil, in the Rules framed by the Government under its rule making power given to it by the Statute the main guidelines laid down by sub section (5) were not followed and the classification made by the Rules under Annexure 'A ' was arbitrary without determining the quantity of the yield and the quality of the soil.
We might mention here that this contention appears to have found favour with the Single Judge in the writ petition filed by the appellant, Sant Singh Nalwa but the judgment of the Single Judge ' 335 as already indicated, was reversed by the Division Bench in the Letters Patent appeal.
Secondly, it was contended that even if the classification made in Annexure 'A ' was valid, the Revenue courts as also the High Court committed an error of Law in misconstruing the classification and in arbitrarily placing the surplus area in the category of unirrigated land.
Coming now to the first point raised by the appellants regarding the constitutionality of the Rules framed under the Act, after hearing the counsel for the parties we find no merit in this contention.
Sub section (5) of section 2 of the Act merely requires that the Rule should classify the land according to the quantity of the yield and quality of the soil.
The Rules have classified the land by preparing a schedule consisting of various Annexures which divide the lands according to the quantity of yield and quality of the soil into various categories.
A perusal of the Annexures to the Rules clearly shows that the valuation statement and the class of land has been described not only as being applicable to one place or the other but in view of the entire topography of every district or tehsil, it is manifest that in a peculiar State like Punjab and Haryana diverse factors, namely, the situation or position of the land, its nearness to the river, the irrigation facilities, the ravages of flood, the fertility of the land and its produce and various other similar circumstances have to be taken into consideration in determining the nature and character of the land.
As far back as 1952, a Land Resettlement Manual was prepared by Tarlok Singh, which was relied upon by the judgment of the Single Judge and at p. 287 the land has been classified in following categories: "Chahi and Abi Chahi Nehri Unirrigated Nehri Non Perennial or other Nehri or Nehri Inundation" This classification varies from District to District and Tarlok Singh has also given the approximate value of the land.
After going through the Land Resettlement Manual we find that the classification has been made in a very scientific manner after taking into consideration the relevant factors.
Even Sir James M. Douie in his Punjab Settlement Manual (4th Edition), which is undoubtedly a work of 336 unimpeachable authenticity, as pointed out by the Single Judge, had made a classification which is almost similar to the one made by Tarlok Singh.
It is, however, obvious that the Punjab Settlement Manual by Sir Douie was made long ago and since then there have been great changes resulting from various steps taken by the Government for improving the nature and character of the land and the irrigation facilities.
It is, therefore, not possible for us to rely on the Manual prepared by Sir Douie as the Single Judge had done because that would not be an objective assessment.
Even so, the classification made by Sir James Douie has been adhered to broadly and basically by Tarlok Singh in his Manual which forms the pivotal foundation for the schedule containing Annexure 'A ' framed under the Rules.
The classification of land like barani, sailab, abi, nehri, chahi, etc., are clearly mentioned in para 259 of Sir James 's Punjab Settlement Manual which Sarkaria, J., as he than was, rightly classed as the Bible of Land Revenue Settlement.
The point, however, that has to be considered in this case is whether the rule making authority has in any way departed from the mandate given or the guidelines contained in the Act.
There does not appear to be any material to show that the Rule Making Authority has in any way either departed from the principles mentioned in sub section (5) of section 2 of the Act or violated the guidelines contained therein.
The appellants were not able to show that the classification made under the Rules has not been made according to the quantity of the yield or the quality of the soil.
Neither any affidavit nor any document has been produced before the courts below to prove this fact.
In this state of the evidence the Single Judge was not justified in striking down the Rules as being ultra vires.
Moreover, it is obvious that the Rules were made under section 27 of the Act which authorises the Government to make rules for carrying out the purposes of the Act.
If the dominant object of the Act was to take over the surplus area according to the formula contained in various provisions of the Act particularly sub sections (3) and (5) of s.2, there is no material on the record to show that the Rules do not fulfil or carry out the object contained in the Act.
Moreover, in Jagir Singh and Ors.
vs The State of Punjab and Ors.
a Division Bench of the Punjab High Court while considering a similar contention rejected the argument that the Annexure framed under the Rules was bad as it did not consider the nature 337 and quality of the Soil.
In this connection, the Division Bench observed thus: "It is thus clear that the formation of an assessment circle necessarily takes into consideration the various factors mentioned by the learned author and those include the nature of soil and its quality apart from various other factors affecting the yield.
The circumstance therefore, that in the Annexure the State of Punjab has been split up into assessment circles, as determined at the time of the Settlement, is highly significant, and leaves no doubt that Settlement, is highly significant and leaves no doubt that the nature and the quality of the soil inherent in the formation of an assessment circle have been taken into consideration for valuing the land for purposes of its conversion into standard acres.
At the same time, the existing sources of irrigation have all been taken into consideration.
It is, in the circumstances, impossible to agree that the Annexure in any manner violates the direction contained in the Punjab Security of Land Tenures Act.
We are, in the circumstances, unable to agree that the disputed rule and Annexure 'A ' attached to the Rules are ultra vires the Punjab Security of Land Tenures Act.
" We find ourselves in complete agreement with the observations made by the High Court and endorse the same.
With due respect, the view taken by Sarkaria J., as he then was (the single Judge in the instant case) is not at all in consonance with the scheme and spirit of the Rules framed under the Act and is based on a wrong interpretation of the nature extent and ambit of the classification made in annexure 'A '.
We therefore fully agree with the Division Bench judgment of the High Court that the classification is in accordance with the provisions of sub section (5) of section 2 of the Act and is therefore, constitutionally valid.
The first contention put forward by the counsel for the appellants is therefore overruled.
Coming now to the second contention that even if the classification is correct, the revenue authorities were wrong in treating the surplus land in dispute as unirrigated area.
We find no substance in this argument.
The relevant Annexure which gives the surplus land in District Karnal is to be found at page 308 of the compilation of Punjab & Haryana Local Acts (vol VII) where while lands 338 classified as Chahi, Abi, Nehri, Unirrigated and Nehri/Non perennial are mentioned, there is no mention of sailab or adna sailab lands.
Whereas at page 306 in the same volume there is no sailab land except in tehsil Sonepat.
Thus, it appears that so far as Karnal District is concerned there was no sailab land at the time when the Rules were framed and the classification was made.
Even if the land in question could be treated as sailab and equated with the land in Sonepat then the valuation would have been at 12 annas as shown at p. 306 of the aforesaid compilation, in which case this would be more detrimental to the interests of the appellants.
The Collector and the Commissioner have therefore rightly treated the land as unirrigated which is almost the lowest category and whose valuation is given as 9 annas per acre.
We, therefore, find no error in the classification made by the revenue authorities.
We are unable to agree with the counsel for the appellants that as the land in question did not fall in any of the heads of classification made in District Karnal they will carry no value at all because this is directly opposed to the various schemes of the classification made under the Rules.
A subsidiary contention in this very argument was that the land should have been valued in accordance with Rule 2, provisos (a) to (c), which may be extracted thus: "2.
Conversion of ordinary acres into standard acres.
The Equivalent, in standard acres, of one ordinary acre of any class of land in any assessment circle, shall be determined by dividing by 16, the valuation shown in Annexure 'A ' to these rules for such class of land in the said assessment circle; Provided that the valuation shall be (a) in the case of Banjar Qadim land, one half of the value of the class previously described in the records and in the absence of any specific class being stated, one half of the value of the lowest barani land.
(b) in the case of Banjar Jadid land, seven eighth of the value of the relevant class of land as previously entered in the records, or in the absence of specified class in the records of the lowest barani land; and (c) in the case of cultivated thur land subject to waterlogging, one eighth of the value of the class of land shown in the records or in the absence of any class, of the lowest barani land.
" 339 The three categories given in clauses (a), (b) and (c) as extracted above do not at all cover the land of the appellants which is sailab or adna sailab and therefore they cannot be given the benefit of any of these three sub clauses of the proviso.
For these reasons, the second contention is overruled.
The result is that we find no merit in the appeals which are accordingly dismissed but in the circumstances without any order as to costs.
N.V.K. Appeals dismissed.
| IN-Abs | The appellants who were displaced persons were allotted land which was entered as sailab land in the revenue records and they became the owners of these lands.
After the coming into force of the Punjab Security of Land Tenures Act, 1953, the Revenue Authorities proceeded to determine the permissible area of the land of the appellants under section 2(3).
They allowed 50 standard acres of land to each of the appellants and declared the balance as surplus land.
The appellants claimed that the lands allotted to them as displaced persons fell in a portion of District Karnal which was sailab and adna sailab and according to the classification made under the Punjab Security of Land Tenures Rules, 1953 they did not carry any valuation.
The Collector dismissed their application.
The Commissioner dismissed their appeals holding that the Collector was right in treating the surplus area as an unirrigated areas and valuing the same at nine annas per standard acre.
A single Judge accepting the contention of the appellant in his writ petition set aside the orders of the Revenue Court.
The Financial Commissioner filed an appeal which was allowed by the Division Bench and the writ petition was dismissed.
In the appeals to this Court it was contended on behalf of the appellants that (1) whereas sub section (5) of section 2 of the Act directed the Government to frame Rules after considering the quantity of the yield and quality of soil, in the Rules framed by the Government the main guide lines laid down by sub section(5) were not followed, and the classification made by the Rules under Annexure 'A ' was arbitrary without determining the quantity of the yield and quality of the soil, and (2) that even if the classification made in Annexure 'A ' was valid, the Revenue Courts as also the High Courts committed an error of law in misconstruing the classification and in arbitrarily placing the surplus area in the category of unirrigated land.
331 Dismissing the appeals, ^ HELD: 1(i) The view of the single Judge is not in consonance with the scheme and spirit of the Rules framed under the Act and is based on a wrong interpretation of the nature, extent and ambit of the classification made in Annexure 'A '.
The classification is in accordance with provisions of sub section (5) of section 2 of the Act and is, therefore, constitutionally valid.
[337 E F, G] (ii) The Land Resettlement Manual prepared in 1952 by Tarlok Singh shows that the classification has been made in a very scientific manner after taking into consideration all the relevant factors.
The Punjab Settlement Manual (4th Edition) prepared by Sir James M. Douie though possessing unimpeachable authenticity was made long ago and since then there have been great changes resulting from various steps taken by the Government for improving the nature and character of the land and the irrigation facilities.
Even so, the classification made by Sir James Douie has been adhered to broadly and basically by Tarlok Singh in his Manual which forms the pivotal foundation for the schedule containing Annexure 'A ' framed under the Rules.
[335H 336 C] (iii) The classifications of land like barani, sailab, abi, nehri, chahi etc.
are clearly mentioned in the Punjab Settlement Manual.
The Rule Making Authority has not in any way either departed from the principles mentioned in sub section(5) of section 2 of the Act or violated the guidelines contained therein, nor could it be said that the classification made under the Rules has not been made according to the quantity of yield or the quality of the soil.
[336 C, D E] (iv) If the dominant object of the act was to take over the surplus area according to the formula contained in various provisions of the Act particularly sub sections (3) and (5) of section 2, there is no material on the record to show that the Rules do not fulfil or carry out the object contained in the Act.
[336 G] Jagir Singh and Ors.
vs The State of Punjab and Ors., 44 (1965) Lahore Law Times 143, approved.
2.(i) There was no error in the classification made by the revenue authorities.
So far as Karnal District was concerned, there was no sailab land at the time when the Rules were framed and the classification was made.
Even if the land in question could be treated as sailab and equated with the land in Sonepat then the valuation would have been at 12 annas which could be more deterimental to the interest of the appellants.
The Collector and the Commissioner have rightly treated the land as unirrigated which is the lowest category and whose valuation is given as nine annas per acre.
[338C, B] (ii) The three categories given in clauses (a), (b) and (c) of Rule 2 do not cover the land of the appellants which is sailab or adna sailab and therefore, they cannot be given the benefit of any of these three sub clauses of the proviso.
[339 A]
|
Civil Appeal No. 1958 of 1980.
Appeal by Special Leave from the Judgment and Order dated 20th July 1979 of the Punjab and Haryana High Court in Civil Writ Petition No. 2135/79.
P. P. Rao and C. M. Nayar for the Appellants.
O. P. Sharma and M M. Dhillon for Respondents Nos.
1 5. section M. Ashri & G. K. Bansal for the other appearing Respondents.
The Judgment of the Court was delivered by SEN, J.
This appeal by special leave from a judgment of the Punjab & Haryana High Court, raises a question of some complexity.
The question is when there is a notification issued under sub section
(3) of section 5 of the Punjab Municipal Act, 1911, for inclusion of certain local areas within the limits of a municipality, whether it is permissible for the State Government to hold elections in the municipality without delimitation of wards and preparation of fresh electoral rolls.
It arises under the following circumstances.
In exercise of their powers under sub section
(3) of section 5 of the Punjab Municipal Act, 1911 (hereinafter referred to as 'the Act '), the State Government of Punjab by notification dated August 2, 1976, directed inclusion of certain local areas.
The local areas so included are: (1) Moranwali Panchayat Area, (2) Grain Market Area, (3) Guja Peer Basti, (4) Jakhal Road, (5) ITI Area, (6) BDO Block, (7) Tehsil Court Area and (8) Thei Area.
The Gram Panchayat, Moranwali challenged the validity of the said notification by a writ petition filed before the High Court.
A learned Single 343 Judge granted an ad interim stay staying the operation of the impugned notification.
The writ petition was dismissed by the learned Single Judge on October 23, 1978.
Thereupon, the Gram Panchayat preferred a Letters Patent Appeal and prayed for grant of stay of operation of the impugned notification.
On December 19, 1978, a Division Bench passed the following order: Admitted.
Stay dispossession ad interim.
Notice regarding stay.
It is common ground that eventually the stay was confirmed by the Division Bench and remained operative till April 1, 1980 when the Letters Patent Appeal was dismissed.
In the meanwhile, the State Government decided to hold the elections of councillors of the Sunam Municipality on the basis of the old municipal limits, i.e. from the existing 15 wards, along with those of the 42 other municipalities, since proviso to sub section
(3) of section 13 of the Act, inserted by Punjab Act 18 of 1978 as amended by Punjab Act 2 of 1979 made it obligatory for the State Government to hold such elections before June 30, 1979.
Accordingly, the Deputy Commissioner issued a notification on April 6, 1979 under r. 3 of the Election Rules, 1952, specifying that the elections in the municipality shall be held on June 10, 1979.
On June 23, 1979, i.e. after the whole process of election was over, the appellants, who seek to represent about 1000 voters from the local areas newly added to the municipal limits, filed a writ petition in the High Court challenging the election as null and void on the ground that there was no delimitation of wards and no fresh electoral rolls were prepared.
The High Court, by its order dated July 20, 1979, declined to set aside the elections held, but directed that the local areas be given representation under sub section
(5) of section 5 of the Act.
In support of the appeal, there is a two fold contention advanced.
In the first place, the submission is that when a local area is included within a municipality, elections cannot be held without delimitation of wards and preparation of fresh electoral rolls; and secondly, the submission is that, in any event, with the vacation of stay, the election was invalidated.
The first of these submissions is unexceptionable, but it does not arise, and the second appears to us to be wholly devoid of substance.
Sub section
(5) of section 5 of the Punjab Municipal Act, 1911, which is relevant for our purposes, reads as follows: 344 (5) When any local area included in a municipality under sub section (3) is a Sabha area, or a part thereof under the Punjab Gram Panchayat Act, 1952, representation to the inhabitants of the local area so included on the committee of the municipality, in which local area is included, shall be given in the prescribed manner.
The Act does not prescribe the manner of giving representation to the inhabitants when any local area included in a municipality under sub section
(3) of section 5 is a Sabha area, unlike that in the case of a municipality or a notified area for which an express provision is made in sub section (6) thereof.
The matter, therefore, falls to be governed by the Election Rules, 1952 and the Delimitation of Wards of Municipalities Rules, 1972, framed by the State Government in exercise of their powers under section 240 (1) (b) and (c) and section 258 of the Act.
Whenever there is a change in the limits of a municipality, the State Government cannot proceed to hold election of councillors without delimitation of the municipality into wards.
The delimitation of wards, a delicate and important task.
is entrusted to a Delimitation Board constituted under r. 3 of the Delimitation of Wards of Municipalities Rules, 1972 and under r. 4 thereof it is the duty of the Delimitation Board to effect a re division of a municipality.
That rule reads thus: 4.
Functions of the Board it shall be the duty of the Board: (i) to divide the Municipality into such number of wards as may be necessary, having regard to the number of elected members prescribed by the State Government, for the Committee, and the number of seats reserved for members of the Scheduled Castes; and (ii) to re adjust the wards as and when the limits of the Municipality are altered or there is increase in population of the Municipality or there is abnormal variation in population or voting figures of some of the wards of the Municipality, which requires, such re adjustment.
In the delimitation of wards, the Board must observe the principles laid down in r. 6, namely, (1) all wards shall, as far as practicable, be geographically compact areas, and in delimiting them due regard shall be had to physical features, existing boundaries of administra 345 tive units, if any, facilities of communication and public convenience; (2) wards in which seats are reserved for the Scheduled Castes shall be located, as far as practicable, in those areas where the proportion of their population to the total population of the municipality is the largest; and (3) each municipality shall be divided into wards in such manner that the population of each ward, as far as practicable, is the same throughout the municipality, with a variation upto 10 per cent above or below the average population figures.
While making a re division, it may not be possible to achieve mathematical perfection, but there must definitely be a substantial compliance with the requirement that every person should have an equal vote.
The whole purpose of delimitation of municipalities into wards is to ensure that every citizen should get a fair representation in the municipalities.
When a municipality is re constituted by the inclusion of any local area within the limits of a municipality under sub section
(3) of section 5 or by the exclusion of any local area from the limits of a municipality under section 7, i.e. when there is an alteration of the limits of the municipality, there must of necessity be a division of the re constituted municipality into new wards without which the elections cannot be held.
There can be no disenfranchisement of a part of the electorate of a municipality.
The question was dealt with at some length by the Gujarat High Court in Bhaichandbhai Maganlal Shah vs The State of Gujarat & Ors.
and it was observed: It must follow logically and inevitably from this proposition that the constitution of wards dividing the whole of the municipal district is a sine qua non of a valid election.
If no wards at all are constituted in the municipal district, the machinery of election cannot go through and equally the machinery of election cannot go through if wards are constituted in respect of a part of the municipal district and the other part is not divided into any ward or wards.
In such a case there would be lists of voters for the wards which are constituted out of a part of the municipal district but there would be no lists of voters so far as the other part of the municipal district is concerned and no one from that part would be qualified to vote or to stand as a candidate for the election and no Councillors being elected by 346 that part, there would be no representation of that part on the municipality.
Where such a situation arises, it is difficult to see how the Municipality can be said to be a Municipality for the whole of the municipal district within the meaning of section 9.
We approve of the view taken by the Gujarat High Court.
There can be no dispute with the principle that the State Government without re constituting a municipality into new wards, cannot proceed to hold an election of councillors, when there is an extension of the municipal limits, but the difficulty is about the applicability of that principle to the facts of the present case.
There is no denying the fact that the effect of the stay order passed by the learned Single Judge staying the operation of the notification issued under sub section
(3) of section 5 was to put the said notification in abeyance, with the result that the local areas to which it related were not brought within the municipal limits.
It is also an undisputed fact that the stay order passed by the learned Single Judge was in force from August 2, 1978 to October 23, 1978.
It is, however, urged that with the dismissal of the writ petition by the learned Single Judge on October 23, 1978, the impugned notification was brought into effect and, therefore, the State Government could not proceed with the election without delimitation of wards and preparation of fresh electoral rolls.
We are afraid, the contention cannot be accepted.
The case presents a rather disturbing feature.
There were drastic changes brought about in section 13 of the Act dealing with the term of councillors leading to the supersession of all municipalities in the State and casting an obligation on the State Government to hold fresh elections of councillors, before June 30, 1979.
In these circumstances, the Division Bench should have acted with greater circumspection.
On the contrary, the Division Bench, on December 19, 1978 passed a stay order staying the dispossession of the Gram Panchayat although the Gram Panchayat had applied for staying the operation of the impugned notification.
It is somewhat unfortunate that the stay order passed by the Division Bench was couched in rather ambiguous terms, but it had virtually the same effect as the one passed by the learned Single Judge.
It is difficult to comprehend the distinction between "stay of dispossession of the Gram Panchayat" and "stay of operation of the impugned notification".
Apparently, the Division Bench, without applying its mind, passed an order staying dispossession of the Gram Panchayat, failing 347 to realise that the effect of stay would dislocate the whole electoral process.
When a local area sought to be brought within the limits of the municipality by the issue of a notification under sub section
(3) of section 5, was kept out of such limits by reason of the stay order passed by the Division Bench, there would obviously be no delimitation of the municipality into new wards.
There was some doubt created about the purport and effect of the stay order passed by the Division Bench.
This brought about an inevitable chain of events.
After the Division Bench passed the order on December 19, 1978, the State Minister for Transport who represented the Sabha Areas in the State Legislative Assembly wrote to the Minister for Local Self Government to postpone the elections scheduled to be held for the municipality.
When the exact nature of the stay order was brought to the notice of the Minister, he agreed with the view of the Local Self Government Department that the elections to the municipality could not be held without a delimitation of the municipal area.
Eventually, the State Government had no other alternative but to hold the election of the councillors on the basis of the existing limits of the municipality, i.e. from the existing 15 wards, due to the amendment of Proviso to sub s.(3) of s.13 of the Act by Punjab Act 2 of 1979 which made it obligatory for the State Government to hold the election before June 30, 1979.
There can be no doubt that the State Government acted with the best of intentions in deciding to hold the elections.
The election so held on June 10, 1979 was a valid election and the councillors elected are entitled to run their full term of five years as provided by sub s.(2) of section 13.
The contention that with the vacation of the stay by the dismissal of the Letters Patent Appeal on April 1, 1980, the whole election would be invalidated, must, therefore, fail.
We are distressed to find that due to the stay order passed by the Division Bench a large number of inhabitants of the local areas brought within the municipal limits under sub s.(3) of s.5 of the Act, who were otherwise eligible to be enrolled as voters, have thereby been deprived not only of their valuable right to vote at the election but also of the right to contest as a candidate for election as a councillor from any of the wards of the municipality or to the office of the President or the Vice President.
But there is little that can be done in the matter at this stage.
Driven to this situation brought about by the stay orders of the High Court, there is no other alternative but to direct that 348 the local areas included in the municipality under sub section
(3) of section 5 should be formed into a ward or wards and representation given to them under sub section
(5) of section 5 of the Act.
The term of the councillors so elected from such local areas shall be co terminus with the term of the councillors already elected from the existing 15 wards.
We are assured by learned counsel for the State that the State Government shall take immediate steps to comply with this direction.
This shall be a purely interim arrangement necessitated by the somewhat unfortunate stay orders passed by the High Court.
The interim arrangement cannot obviously extend beyond the term of the present council.
We hope and trust that the State Government shall, in the meanwhile, take steps to constitute a Delimitation Board under r. 3 of the Delimitation of Wards of Municipalities Rules, 1972.
After the delimitation of the municipality into new wards, the State Government shall proceed to re fix the number of councillors of the re constituted municipality under section 11, prescribe the number of elected councillors afresh as required under cl.
(a) of sub section
(1) of section 12 of the Act and issue necessary directions for the preparation of fresh electoral rolls as required under rr. 8 and 8A of the Election Rules.
In the result, the appeal fails and is dismissed.
There shall be no order as to costs.
S.R. Appeal dismissed.
| IN-Abs | In exercise of their powers under sub section (3) of section 5 of the Punjab Municipal Act, 1911, the State Government by its Notification dated August 2, 1976 directed inclusion, in Sunam Municipality, of eight local areas including Moranwali Gram Panchayat, which challenged the validity of the said notification by a writ petition filed before the High Court and obtained stay of operation.
Under the Election Rules of 1952 and the Delimitation of Wards of Municipalities Rules, 1972, whenever there is a change in the limits of the municipality the State Government cannot proceed to hold election of councillors without delimitation of the municipality into wards.
However, since proviso to subsection 3 of section 13 of the Act, inserted by Punjab Act 18 of 1978 as amended by Punjab Act 2 of 1979 made it obligatory for the state Government to hold the election before June 30, 1979, along with those of the 42 other municipalities the election of the councillors of the Sunam Municipality was also held on June 10, 1979 on the basis of the old municipal limits, that is, from the existing 15 wards.
On June 23, 1979 the appellants who seek to represent about 1,000 voters from the local areas newly added to the municipal limits, filed a writ petition in the High Court challenging the election as null and void on the ground that there was no delimitation of wards and no fresh electoral rolls were prepared.
The High Court by its order dated July 10, 1979 declined to set aside the elections held, but directed that the local areas be given representation under sub section(5) 341 of section 5 of the Act.
Hence the appeal after obtaining special leave of the Court.
Dismissing the appeal, the Court ^ HELD: 1.
The State Government without reconstituting a municipality into new wards cannot proceed to hold an election of councillors, when there is an extension of the municipal limits.
[346 C] 2.
The whole purpose of delimitation of municipality into wards is to ensure that every citizen should get a fair representation in them municipalities.
When a municipality in reconstituted by the inclusion of any local area within the limits of a municipality under sub section (3) of section 5 or by the exclusion of any local area from the limits of a municipality under section 7, that is, when there is an alteration of the limits of the municipality, there must of necessity be a division of the reconstituted municipality into new wards without which the elections cannot be held.
There can be no disenfranchisement of part of the electorate of a municipality.
[345 C D] 3.
But, in the instant case, the said principle could not be applied due to the stay order passed by single Judge of the Punjab High Court which was in force from August 2, 1978 to October 23, 1978 and thereafter till April 1, 1980 consequent to the order of stay of dispossession by the Division Bench, dated December 19, 1978 in the Letters Patent Appeal preferred by the Gram Panchayat, Moranwali.
When a local area sought to be brought within the limits of the municipality by the issue of a notification under sub section (3) of section 5 was kept out of such limits by reason of the stay order passed by the Division Bench there could, obviously, be no delimitation of the municipality into new wards.
[346 C, D; 347 B, A] 4.
To contend that with the dismissal of the writ petition on October 23, 1978, the impugned notification was brought into effect and therefore, the State Government could not proceed with election without delimitation of wards and preparation of fresh electoral rolls is incorrect.
It is equally incorrect to say that with the vacation of the stay by the dismissal of the Letters Patent Appeal on April 1, 1980 the whole election would be invalidated.
The Election held on June 10, 1979 were valid and the councillors elected are entitled to run their full term of five years as provided in section 13.
The State Government acted with the best of intentions in deciding to hold the elections.
The State Government had no other alternative but to hold the election of the councillors on the basis of the existing limits of the municipality, that is, from the existing 15 wards due to the amendment of proviso to subsection (3) of section 13 of the Act by Punjab Act 2 of 1979 which made it obligatory for the State Government to hold the elections before June 30 1979.
[347 E,D] Bhaichandbhai Maganlal Shah vs The State of Gujarat and Ors., , approved. 6.
In view of the fact that a large number of inhabitants of the local areas brought within the municipal limits under sub section (3) of section 5 of the Act, 342 who were otherwise eligible to be enrolled as voters but for the stay by the High Court, have thereby been deprived not only of their valuable right to vote at the election but also the right to contest as a candidate for election as a councillor from any of the wards of the municipality or to the office of the President or the Vice President, the Court directed; (1) that the local areas included in the municipality should be formed into a ward or wards and representation given to them under sub section (5) of section 5 of the Act; (ii) that the term of the councillors so elected from such local areas shall be co terminus with the term of the councillors already elected from the existing 15 wards and (iii) that this shall be a purely interim arrangement necessitated by the somewhat unfortunate stay order passed by the High Court and that obviously it cannot extend beyond the term of the present council.
[347 G, 348 B]
|
N: Criminal Appeal No. 220 of 1974.
Appeal by Special Leave from the Judgment and Order dated 9th January, 1974 of the Allahabad High Court in Criminal Appeal No. 356/77 connected with Criminal Appeal No. 723 of 1970.
R. K. Garg, section section Bhatnagar, V. J. Francis and Sunil Kumar Jain for the Appellants.
R. K. Bhat for the Respondent.
The Judgment of the Court was delivered by BAHARUL ISLAM, J.
This appeal by special leave has been directed against the judgment and order passed by the Allahabad High Court dismissing two appeals filed by the appellants before it.
The appellants were convicted under Sections 302, 307 and 323 all read with Section 149 of the Penal Code.
They were sentenced to imprisonment for life, each, under Section 302/149, rigorous imprisonment for 7 years, each, under Section 307/149 and rigorous imprisonment for six months, each, under Section 323/149 of the Penal Code.
Appellants Harish Chandra and Nathu were further convicted under Section 148 of the Penal Code and sentenced to rigorous imprisonment for two years, each.
The sentences were directed to run concurrently.
The facts material for the purpose of disposal of this appeal may be stated thus.
The prosecution alleges that there was 354 long standing enmity between the parties of the deceased and the appellants.
Some time prior to the incident a flour mill was installed and a house constructed by P.W. 1, Pahelwan, in his plot of land.
In front of the flour mill and the residence of Pahelwan there was some vacant land in his possession.
The appellants had started throwing rubbish on the land.
Pahelwan and his son, Ram Swarup (deceased) objected to this.
The appellants were annoyed at the objection of Pahelwan and his son Ram Swarup.
On 31st December, 1968 at about noon appellants Harish Chandra and Ram Sewak had some alteration with Pahelwan and Ram Swarup in connection with throwing of rubbish on the aforesaid land and as a consequence the relation between the parties worsened.
In the evening at about 8 O 'clock on the 1st of January, 1969, appellant, Ram Sewak, armed with a lathi went to the front of the flour mill of Pahelwan and started to hurl abuses on Pahelwan and his son Ram Swarup.
Appellant, Ram Sewak, challenged Pahelwan and his companions to see them that day.
At that time, it has been alleged, an electric light was burning in the front of the room of the flour mill as usual.
At the call of the appellant, Ram Sewak, the other appellants came variously armed with lathis and spears and started giving blows to Pahelwan and his son, Ram Swarup, both of whom, according to the prosecution, were unarmed.
Pahelwan, somehow, managed to snatch the spear from the hand of the appellant, Ishwari, and started giving blows to the assailants in order to defend himself.
At that time, it has been further stated, appellants Harish Chandra and Nathu fired their gun and pistol respectively.
As a result, Ram Swarup was hit and he fell down in front of the flour mill.
The shot of Nathu hit P.W. 1 Pahelwan, Lal Ram and Shri Kishan, all of whom received injuries.
Lekh Raj, P.W., then attacked the appellants with his lathi, as a result of which some injuries were caused to the appellants including Harish Chandra.
Thereafter the appellants escaped.
Ram Swarup succumbed to bullet injuries while he was being removed to the police station.
A first information report was lodged by P.W. 1, and eventually the appellants were committed to the court of Sessions that convicted and sentenced as stated above.
Their appeal was also dismissed by the High Court as earlier stated.
Learned counsel for the appellants submitted that large number of injuries had also been received by the appellants and that there was no finding by the courts below as to how the assault 355 initially started and which party was the aggressor, prosecution has not explained as to how the appellants received the injuries.
As such, he submitted, the conviction for the offences with the aid of Section 149, Penal Code, was bad in law.
In support of his contention he relied on a decision of this Court reported in AIR 1976 section C. 2263.
This Court in A.I.R. 1976 S.C. 2263 has held: (1) That the prosecution has suppressed the genesis and the origin of the occurrence and has thus not presented the true version; (2) that the witnesses who have denied the presence of the injuries on the person of the accused are lying on most material point and therefore their evidence is unreliable; (3) that in case there is a defence version which explains the injuries on the person of the accused it is rendered probable so as to throw doubt on the prosecution case.
The omission on the part of the prosecution to explain the injuries on the person of the accused assumes much greater importance where the evidence consists of interested or inimical witnesses or where the defence gives a version which competes in probability with that of the prosecution one.
" The submission of the learned counsel is that the injuries found in the persons of the appellants have not been explained by the prosecution.
The injuries are serious.
The appellants had the right of private defence, and therefore, they have committed no offence.
The submission of the learned counsel is not warranted by the findings of the High Court.
The High Court agreeing with the trial Court has found that the prosecution case as alleged has been established by the evidence of the prosecution witnesses.
The High Court as well as the trial Court has rejected the defence version of the case, in view of their inconsistent pleas before the Committing Court and the trial Court.
Before the Committing Magistrate pleas of appellants, Harish Chandra and Soney Lal, were alibi.
The defence of appellants, Ram Sewak and Nathu, was that the occurr 356 ence had not taken place on the land of P.W. 1, Pahelwan, as alleged by the prosecution, but it had taken place at a different place.
According to them there was a quarrel in respect of some property between Ram Swarup, (deceased) and Zorawar, brother in law of Ram Swarup, in which appellant Nathu intervened whereupon Pahelwan (P.W. 1), Lala Ram, Shri Kishan, Triloki, Ram Swarup Prasad, Munna Jamadar, Lekthraj and others attacked the appellants and in that incident injuries were received by P.W. 1 and the deceased.
The defence of appellant, Ishwari, before the Committing Magistrate was that Pahelwan (P.W.1), Lekh Raj and others attacked him, as a result of which he became unconscious.
The defence of the appellants before the Sessions Judge was one of the right of private defence.
The defence of appellant Harish Chander before the Sessions Judge was an alibi.
The defence of the other appellants was that Ishwari had been returning from Ghurwal Chak.
At that time he was attacked by the prosecution witnesses and the deceased.
The incident took place on a land between residence and flour mill of P.W.1 and in that assault the appellants had to defend themselves.
On a consideration of the evidence on record the learned High Court agreeing with the Sessions Judge has accepted the version of the prosecution and rejected that of the defence.
In coming to that conclusion the High Court has also taken notice of the fact that P.W.1.
had a licensed gun.
Had he and Ram Swarup and other P.W 's been the aggressors, he (P.W.1) would not have come without the gun.
In view of the "inconsistent pleas" and "in view of the fact that no infirmity worth the name has been shown in the statement of eye witnesses of the occurrence", the High Court accepted the prosecution case as true and held "that the defence case is false".
The High Court has also held that "appellants were the aggressors".
It is therefore, not correct to suggest as contended by the learned counsel for the appellants that there were no findings on record to show as to how the quarrel started and that the appellants were the aggressors.
From the findings of learned courts below the facts that emerge are (1) that it was the appellants who were the aggressors; (2) that the occurrence took place on the land in front of the house of P.W. 1, Pahelwan, who was in possession thereof; (3) that P.W.1 and the deceased had the right of the private defence of property and person and they did exercise that right.
Aggres 357 sors, even if they receive injuries from the victims of their aggression cannot have the right of private defence.
The findings are that P.W.1 and the deceased were unarmed.
P.W.1 snatched a weapon from one of the assailants and caused injuries on them.
On the top of it two of the appellants brought fire arms and fired at the deceased and the P. W. 1, as a result of which the deceased expired.
The submissions of learned counsel for the appellants do not stand scrutiny.
This appeal has no merit and is dismissed.
| IN-Abs | The prosecution alleged that there was a long standing enmity between the parties of the deceased and the appellants.
There was a vacant plot of land in front of the flour mill and residence of PW. 1.
The appellants started throwing rubbish on this piece of land.
PW.1 and his son, the deceased, objected to this.
On the fateful day at about noon there was an altercation in connection with the throwing of rubbish, and at about 8 p.m. one of the appellants armed with a lathi went to the flour mill and challenged PW. 1 and his companions.
At the call of this appellant, the other appellants who were armed with gun, pistol, lathi and spear arrived at the spot.
PW. 1 managed to snatch the spear from the hands of one of the appellants and started giving blows to the assailants in order to defend himself.
At that time two of the appellants fired their gun and pistol as a result of which the son of PW. 1 received injuries, to which he succumbed while being removed to the Police Station.
The defence of the appellants was one of alibi and that the offence had not taken place on the land of PW. 1.
The appellants were tried before the Sessions Judge who convicted and sentenced them under Sections 302 307 and 323 read with Section 149 of the Penal Code.
The High Court dismissed the appeal.
It agreed with the trial Court and found that the prosecution case was established by the evidence of the prosecution witnesses and that the defence version of the case had to be rejected on account of the inconsistent pleas made by the appellants before the committing court and the Sessions Court.
In the appeal in this Court, it was contended that there was no finding by the trial and appellate courts as to how the assault initially started and which party was the aggressor, that the prosecution had not explained as to how the 353 appellants received the injuries, and that the appellants had the right of private defence and, therefore, they had committed no offence.
Dismissing the appeal, ^ HELD: 1.
The High Court rightly accepted the prosecution case as true and held that the defence case was false.
[356 F] 2.
The findings of the two courts below indicate that it was the appellants who were the aggressors and that the occurrence took place on the land lying in front of the house of PW. 1 who was in possession thereof and that the deceased and PW. 1 had the right of private defence of property and person and that they exercised that right.
The appellants who were the aggressors, even if they received injuries from the victims of their aggression, cannot have any right of private defence.
The findings are that the deceased and PW. 1 were unarmed and that P.W. 1 snatched the weapon from one of the assailants and caused injuries to them.
If the deceased and the other prosecution witnesses had been the aggressors, PW. 1 would not have come without his licensed gun.
[356 H 357A, 356E]
|
100 and 101 of 1956.
Petitions under Article 32 of the Constitution for writs in the nature of Habeas Corpus.
N. C. Chatterjee, Sadhan Chandra Gupta and Janardhan Sharma, for the petitioners.
C. K. Daphtary, Solicitor General for India, Porus A. Mehta and R. H. Dhebar, for the respondents.
September 17.
The Judgment of the Court was delivered by VENKATARAMA AYYAR J.
These are petitions under article 32 of the Constitution for the issue of a writ in the nature of habeas corpus.
On 26th January 1956 the District Magistrate, Than;, passed orders under section 3(2) of the IV of 1950 (hereinafter referred to as the Act) for the detention of the petitioners, and in execution of the orders, they were arrested on 27th January 1956.
The next day, the District Magistrate sent his report to the State Government which on 3rd February 1956 approved of the same.
Meantime, on 30th January 1956 the District Magistrate formulated the grounds on which the orders of detention were made, and the same were communicated to the petitioners on 31st January 1956.
A copy of these grounds was sent to the State Government on 6th February 1956.
The petitioners challenge the validity of the detention on two grounds.
They contend firstly that the grounds for the order of detention which were furnished to them under section 7 of the Act are vague, 646 and secondly that the requirements of section 3 (3) of the Act had not been complied with, in that those grounds had been sent to the State Government by the District Magistrate, not along with, his report on 28th January 1956, but on 6th February 1956, after the State Government had approved of the order.
There is no substance whatsoever in the first contention.
The communication sent to the petitioners runs as follows: "During the monsoon season in the year 1955, you held secret meeting of Adivasis in Umbergaon, Dhanu, Palghar and Jawhar Talukas of Thana Distric 't at which you incited and instigated them to have recourse to intimidation, violence and arson in order to prevent the labourers from outside villages hired by landlords from working for landlords.
As a direct result of your incitement and instigation, there were several cases of intimidation, violence and arson in which the Adivasis from these Talukas indulged.
Some of these cases are described below. . " Then follows a detailed statement of the cases.
It is argued for the petitioners that no particulars were given as to when and where the secret meetings were held in which they are alleged to have participated, and that the bald statement that they took place during the monsoon season was too wide and vague to be capable of being refuted.
But then, the particulars Which follow give the dates on which the several incidents took place, and it is obvious that the meetings must have been held near about those dates.
The communication further states that it is not in the public interests to disclose further facts.
Reading the communication as a whole, we are of opinion that it is sufficiently definite to apprise the petitioners of what they were charged with and to enable them to give their explanation therefor.
That was the view taken by Chagla, C. J. in the applications for habeas corpus, which the petitioners moved in the High Court of Bombay under article 226 of the Constitution, and we are in agreement with it.
The complaint that the grounds are vague must therefore fail.
As regards the second contention, it will be usefu 647 to set out the relevant sections of the Act bearing on the question: Section 3(1) "The Central Government or the State Government may (a)if satisfied with respect to any person that with a view to preventing him from acting in any manner prejudicial to (i)the defence of India, the relations of India with foreign powers, or the security of India, or (ii)the security of the State or the maintenance of public order, or (iii)the maintenance of supplies and services essential to the community; or (b)if satisfied with respect to any person who is a foreigner within the meaning of the (XXXI of 1946), that with a view to regulating his continued presence in India or with a view to making arrangements for his expulsion from India, it is necessary so to do, make an order directing that such person be detained.
(2) Any of the following officers, namely, (a) District Magistrates, (b) Additional District Magistrates specially empowered in this behalf by the State Government, (c) the Commissioner of Police for Bombay, Calcutta, Madras or Hyderabad, (d) Collector in the State of Hyderabad may if satisfied as provided in sub clauses (ii) and (iii) of clause (a) of sub section (1) exercise powers conferred by the said sub section.
(3) When any order is made under this section by an officer mentioned in sub section (2) he shall forthwith report the fact to the State Government to which he is subordinate together with the grounds on which the order has been made and such other particulars as in his opinion have a bearing on the matter, and no such order made after the commencement of the Preventive Detention (Second Amendment) Act, 1952, shall remain in force for more than twelve days after the making thereof unless in the meantime it has been approved by the State Government.
648 (4) Where any order is made or approved by the State Government under this section, the State Government shall, as soon as may be, report the fact to the Central Government together with the grounds on which the order has been made and such other particulars as in the opinion of the State Government have bearing on the necessity for the order".
Section 7 (1) "Where a person is detained in pursuance of a detention order, the authority making the order shall, as soon as may be, but not later than five days from the date of detention communicate to him the grounds on which the order has been made, and shall afford him the earliest opportunity of making a representation against the order to the appropriate Government.
(2) Nothing in sub section (1) shall require the authority to disclose facts which it considers to be against the public interest to disclose".
On these sections, the argument of Mr. Chatterjee for the petitioners is that section 3 (3) requires that when an order of detention is made by one of the authorities mentioned in section 3(2) in this case it was so made that authority should forthwith report the fact to the State Government together with the grounds on which the order was made; that this provision is clearly intended to safeguard the rights of the detenu, as it is on a consideration of these grounds that the Government has to decide whether it will approve of the order or not;, that when therefore the grounds had not been made available to the State Government before they had approved of the order, as happened in the present case, there was a clear violation of the procedure prescribed by the statute, and that the detention became illegal.
Now, it is clear from the affidavit filed on behalf of the respondent that when the District Magistrate sent a report under section 3(3) on 28th January 1956, he did send a report not merely of the fact of the making of the order of detention, but also of the materials on which he had made the order.
The contention of the petitioner is that the grounds which 649 were formulated on 30th January 1956 and communicated to them on 31st January 1956 should also have been sent along with the report.
The question is whether what the District Magistrate did was sufficient compliance with the requirements of section 3 (3), and that will depend upon the interpretation to be put upon the words "grounds on which the order has been made" occurring in that section.
Construing these words in their natural and ordinary sense they would include any information or material on which the order was based.
The Oxford Concise Dictionary gives the following meanings to the word "ground": 'Base, foundation, motive, valid reason '.
On this definition, the materials on which the District Magistrate considered that an order of detention should be made could properly be described as grounds therefor.
But it is contended by Mr. Chatterjee that the expression "grounds on which the order has been made" occurring in section 3(3) is, word for word, the same as in section 7, that the same expression occurring in the same statute must receive the same construction, that what section 3 requires is that on the making of an order for detention, the authority is to formulate the grounds for that order, and send the same to the State Government under section 3(3) and to the detenu under section 7, and that therefore it was not sufficient merely to send to the State Government a report of the materials on which the order was made.
Reliance was placed on the following passage in Maxwell 's Inter predation of Statutes, 10th Edition, page 522: "it is, at all events, reasonable to presume that the same meaning is implied by the use of the same expression in every part of an Act".
The rule of construction contended for by the petitioners is well settled, but that is only one element in deciding what the true import of the enactment.
is) to ascertain which it is necessary to have regard to the purpose behind the particular provision and its setting in the scheme of the statute.
"The presumption", says Craies, "that the same words are used in the same meaning is however very slight, and 650 it is proper 'if sufficient reason can be assigned, to construe a word in one part of an Act in a different sense from that which it bears in another part of an Act" '.
(Statute Law, 5th Edition, page 159).
And Maxwell, on whose statement of the law the petitioners rely, observes further on: "But the presumption is not of much weight.
The same word.
may be used in different senses in the same statute, and even in the same section".
(Interpretation of Statutes, page 322).
Examining the two provisions in their context, it will be seen that section 3(1) confers on the Central Government and the State Government the power to pass an order of detention, when the grounds mentioned in that sub clause exist.
When an order is made under this provision, the right of the detenu under section 7 is to be informed of the grounds of detention, as soon as may be, and that is to enable him to make a representation against that order, which is a fundamental right guaranteed under article 22(5).
Coming next to section 3(2), it provides for the power which is conferred on the State Government under section 3(1) being exercised by certain authorities with reference to the matters specified therein.
This being a delegation of the power conferred on the State Government under section 3(1), with a view to ensure that the delegate acts within his authority and fairly and properly and that the State exercises due and effective control and supervision over him, section 3(3) enacts a special procedure to be observed when action is taken under section 3(2).
The authority making the order under section 3(2) is accordingly required to report the fact of the order forthwith to the State along with the grounds therefor, and if the State does not approve of the order within twelve days, it is automatically to lapse.
These provisions are intended to regulate the course of business between the State Government and, the authorities subordinate to it exercising its power under statutory delegation and their scope is altogether different from that of section 7 which deals with the right of the detenue as against the State 651 Government and ' its subordinate authorities.
Section 3(3) requires the authority to communicate the, grounds of its order to the State Government, so that the latter might satisfy itself whether detention should be approved.
Section 7 requires the statement of grounds to be sent to the detenu, so that he might, make a representation against the order.
The purpose of 'the two sections is so different that it cannot, be presumed that the expression "the grounds on which the order has been made" is used in section ' 3(3) in the same sense 'Which it bears in section 7.
That the legislature could not have contemplated that the grounds mentioned in section 3(3) should be, identical with those referred to in section 7 could also be seen from the fact that whereas under section 7(2) it is open to the authority not to disclose to the detenu facts if it considers that it would be against public interests so to do, it is these facts that will figure prominently in a report by the subordinate authority to the State Government under section 3(3),and form the basis for approval.
If the grounds which are furnished under section 3(3) could contain matters which need not be communicated to the detenu under section 7, the expression "grounds on which the order has been made" cannot bear the same meaning in both the sections.
There is also another reason in support of this conclusion.
When the authority mentioned in section 3(2) decides, on a consideration of the materials placed before it, to act under that section and orders detention, it is required by section 3(3) to, report that fact with the grounds therefore to the State Government forthwith.
But under section 7, the duty of the authority is to communicate the grounds to the detenu, as soon as may be.
Now, it has been held that as the object of this provision is to give the detenu an opportunity to make a representation against the order, the grounds must be sufficiently definite and detailed to enable him to do so.
It is obvious that the communication that has to be served on the detenu under section 7 of the Act is a formal document setting out the grounds for the order and the 652 Particulars in support thereof, subject, of course, to section 7(2); whereas the report to the State under section 3(3) is a less formal document in the nature of a confidential inter departmental communication, which is to contain the particulars on which the order was made.
It could not have been intended that the contents of the two communications which are so Dissimilar in their scope and intendment should be identical.
Mr. N. C. Chatterjee also cited certain observations of Kania C.J. in State of Bombay vs Atma Ram Sridhar Vaidya(1) as supporting his contention that the grounds which are furnished to the detenu must have been before the State Government before it approves of the order.
Said the learned Chief Justice: "It is obvious that the grounds for making the order as mentioned above, are the grounds on which the detaining authority was satisfied that it was necessary to make the order.
These grounds therefore must be in existence when the order is made".
But the grounds referred to in the above passages are the reasons for making the order, not the formal expressions in which they are.
embodied, and that will be clear from the following observation further on: "By their very nature the grounds are conclusions of facts and not a complete detailed recital of all the facts".
Our conclusion is that the failure on the part of the District Magistrate of Thana to send along with his report under section 3(3), the very grounds which he subsequently communicated to the detenu under section 7 is not a breach of the requirements of that sub section, and that it was sufficiently complied with when he reported the materials on which he made the order.
The second contention of the petitioners also fails, and these applications must therefore be dismissed.
(1) ; , 178.
| IN-Abs | Sub section (3) of section 3 of the , provides that when an order of detention is made under subsection (2) by an officer mentioned therein, he shall forthwith report the fact to the State Government together with the grounds on which the order has been made . and no such order. shall remain in force for more then twelve days after the making thereof unless in the meantime it has been approved by the State Government.
Under section 7(1) "when a person is detained in pursuance of a detention order, the authority making the order shall . communicate to him the grounds on which the order has been made, and shall afford him the earliest opportunity of making a representation against the order to the appropriate Government".
The petitioners were arrested on 27th January 1956 in pursu anoe of the orders of detention passed under section 3(2) of the , by the District Magistrate who sent his report the next day to the State Government which approved of the same on 3rd February 1956.
Meantime, the grounds on which the orders of detention were made were formulated by the District Magistrate who furnished the same to the petitioners on 31st January 1966 under section 7 of the Act.
A copy of these grounds was sent to the State Government on 6th February 1956.
The petitioners challenged the validity of the detention and contended, inter alia, that as the expression "grounds on which the order has been made" occurring in section 3(3) is word for word, the same as in section 7 of the Act, it must have the same meaning and as the copy of the grounds referred to in section 7 had not been sent along with the report under section 3(3) to the State Government before it had approved of the orders of detention there was a violation of the procedure prescribed by the statute and consequently the detention became illegal.
It was found that the report sent by the District Magistrate set out not merely the fact of the making of the order of detention but also the materials on which he had made the order.
Held, that the failure on the part of the District Magistrate to 645 send along with his report under section 3(3) the very grounds which he subsequently furnished the detenu under section 7, is not a breach of the requirements of that sub section and that it was sufficiently complied with when he reported the materials on which he made the order.
The scope and intendment of the expression " the grounds on which the order has been made" in sections 3(3) and 7 of the Act are quite different and it is not essential that the grounds which are furnished to the detenu must have been before the State Government before it approves of the order.
|
N: Criminal Appeal No. 183 of 1981.
Appeal by special leave from the Judgment and Order dated 30.1.1981 of the High Court of Allahabad in Civil Misc.
Habeas Corpus Writ No. 6343/80.
R.K. Garg, Naresh K. Sharma and Mukul Mudgal for the Appellant.
R.K. Bhatt for Respondent No. 1 Hardayal Hardy and Miss A. Subhashini for the Respondents.
The Judgment of the Court was delivered by KOSHAL, J.
This is an appeal by one Harish Pahwa against the judgment dated 30th January, 1981 of the High Court of Allahabad dismissing a petition presented by the appellant to it under Article 226 of the Constitution of India with a prayer that a writ of habeas corpus be issued against the State of Uttar Pradesh and Union of India in as much as the detention of the appellant by them was not in accordance with law.
The only point that has been raised before us by Mr. Garg appearing on behalf of the appellant is that the representation made by him against his detention to the State Government was not decided within a reasonable time and that the delay is fatal to the detention.
This point was no doubt not taken before the High Court, but in view of its importance and the fact that all the material necessary for its determination is available on the record, we have allowed it to be raised before us and have overruled a preliminary objection taken by the State to the effect that it should not be entertained.
In order to decide the point we may refer to certain admitted facts.
The order of detention is dated 16th May, 1980 and the representation made by the appellant against it from Varanasi Jail bears date the 3rd of June, 1980.
The State Government received 278 the representation on the 4th June, 1980 but for two days no action was taken in connection with it.
On the 6th of June, 1980 comments were called for from the Customs authorities with regard to the allegations made in the representation and such comments were received by the State Government on the 13th June, 1980.
On the 17th of June, 1980, the State Government referred the representation to its Law Department for its opinion which was furnished on the 19th of June, 1980 The rejection of the representation was ordered on the 24th of June, 1980 and it was communicated to the jail authorities two days later.
The case of the State is that the representation was with the Customs authorities who were formulating their comments from 7th June, 1980 to the 12th of June, 1980 and that the representation was under the consideration of the Government for four days from 13th June, 1980 to 16th June, 1980, of its Law Department from 17th June, 1980 to 19th June, 1980 and then again under its own consideration for six days from 19th June, 1980 to 24th June, 1980.
In our opinion, the manner in which the representation made by the appellant has been dealt with reveals a sorry state of affairs in the matter of consideration of representations made by persons detained without trial.
There is no explanation at all as to why no action was taken in reference to the representation on 4th, 5th and 25th of June, 1980.
It is also not clear what consideration was given by the Government to the representation from 13th June, 1980 to 16th June, 1980 when we find that it culminated only in a reference to the Law Department, nor it is apparent why the Law Department had to be consulted at all.
Again, we fail to understand why the representation had to travel from table to table for six days before reaching the Chief Minister who was the only authority to decide the representation.
We may make it clear, as we have done on numerous earlier occasions, that this Court does not look with equanimity upon such delays when the liberty of a person is concerned.
Calling comments from other departments, seeking the opinion of Secretary after Secretary and allowing the representation to lie without being attended to is not the type of action which the State is expected to take in a matter of such vital import.
We would emphasise that it is the duty of the State to proceed to determine representations of the character above mentioned with the utmost expedition, which means that the matter must be taken up for consideration as soon as such a representation is received and dealt with continuously (unless it is absolutely necessary to wait for 279 some assistance in connection with it) until a final decision is taken and communicated to the detenu.
This not having been done in the present case we have no option but to declare the detention unconstitutional.
We order accordingly, allow the appeal and direct that the appellant be set at liberty forthwith.
N.V.K. Appeal allowed.
| IN-Abs | The appellant who was detained by an order dated 16th May, 1980, made a representation dated 3rd June, 1980 from jail, which was received by the State Government on 4th June, 1980.
Comments were called for from the Customs Authorities on the 6th of June, 1980 and were received on 13th June, 1980.
On the 17th June, 1980, the State Government referred the representation to its Law Department for opinion which was furnished on the 19th June, 1980.
The representation was rejected by an order dated 24th June, 1980, which was communicated to the jail authorities two days later.
The appellant 's writ petition having been dismissed by the High Court, he came in appeal to this Court raising a new plea that the representation made by him against the detention to the State Government was not decided within a reasonable time and that the delay was fatal to the detention.
Allowing the appeal, ^ HELD: 1.
In matters of this kind where all the material necessary for the determination of a new point is available on the record, and having regard to the importance of the matter, this Court can entertain the point even if it had not been raised before the High Court.
[277 F G] 2.
The order of detention declared unconstitutional and appellant directed to be set at liberty.
[279 F] 3.
On numerous earlier occasions this Court has made it clear that it does not look with equanimity upon delays in considering the representations of detenus.
Where the liberty of a person is involved it is the duty of the State to determine his representations with the utmost expedition and deal with it continuously until a final decision is taken and communicated to the detenu.
[278 G H] In the instant case no explanation had been given by the Government, as to why no action was taken on the representation of the detenu on 4th, 5th and 277 25th of June 1980 and what consideration was given from 13th June, 1980 to 16th June, 1980 and why the file had to travel from table to table before reaching the Chief Minister, who was the only authority to decide the representation.
[278 E F]
|
ivil Appeal Nos.
768 769 of 1978.
Appeals by Special Leave from the Judgment and order dated 28.1.1977 of the Punjab and Haryana High Court in Income Tax Reference No. 29 of 1975.
B.B. Ahuja and Miss A. Subhashini for the Appellant.
G.C. Sharma, E.D. Helms, R.S. Sharma and K.B. Rohtagi for the Respondent.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
The Commissioner of Wealth Tax, Amritsar has filed the above appeals by special leave against the judgment of the High Court of Punjab and Haryana in a reference made under section 27(1) of the (hereinafter 422 referred to as 'the Act ') answering in favour of the assessee the following two questions: "1.
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the offence relating to the omission to file the Wealth tax returns was a continuing offence ? 2.
Whether, on the facts and in the circumstances of the case, the Tribunal was right in law upholding the penalties of Rs. 5382/ and Rs. 7759/ levied by the department on the assessee under section 18(1)(a) of the , for the assessment years 1964 65 and 1965 66 respectively ?" The assessee, the respondent in these appeals filed his wealth tax returns for the assessment years 1964 65 and 1965 66 on March 18, 1971 while he was required by section 14(1) of the Act to file the return for the assessment year 1964 65 on or before June 30, 1964 and the return for the assessment year 1965 66 on or before June 30, 1965.
The Wealth tax Officer completed the assessments for the aforementioned years on March 22, 1971 determining the total wealth at Rs. 1,45,800/ for the assessment year 1964 65 as against the declared wealth of Rs. 1,38,550/ and at Rs. 1,65,200/ for the assessment year 1965 66 as against the declared wealth of Rs. 1,59,127/ and also commenced proceedings for the levying penalty under section 18(1)(a) of the Act for late submission of returns.
Ultimately the penalties were levied as follows: "Assessment year 1964 65: (i) For the period from 1.7.64 to 31.3.69: Penalty at 2% p.m. subject to maximum of 50% of the wealth tax payable under section 18(1)(a) before its amendments on 1.4.69 by the Finance Act, 1969: Rs. 115/ (ii) For the period from 1.4.69 to 18.3.71: Penalty at 1/2% of the net wealth for each month of the default under section 18(1)(a) as amended by the Finance Act, 1969: Rs. 5,267/ Rs. 5,382/ 423 Assessment year 1965 66: (i) For the period from 1.7.65 to 30.3.69: Penalty at 2% p.m. subject to maximum of 50% of the wealth tax payable under section 18(1)(a) before its amendment on 1.4.69 by the Finance Act, 1969: Rs.163/ (ii) For the period from 1.4.69 to 18.3.71: Penalty at 1/2% of the net wealth for each month of default under section 8(1)(a) as amended on 1.4.69 by the Finance Act, 1969: Rs. 7,596/ Rs. 7,759/ The above orders levying penalties were upheld in appeal by the Appellate Assistant Commissioner and the Income tax Appellate Tribunal, Amritsar Bench, Amritsar.
At the instance of the assessee a consolidated reference was made by the Income tax Appellate 'Tribunal to the High Court referring the above two questions for its opinion.
The High Court answered the said questions in favour of the assessee after rejecting the contention of the department that the default or failure to file the return in time was a continuing default and that the penalty had to be computed for the period prior to April 1, 1965 in accordance with section 18 as it stood prior to its amendment by the Wealth tax (Amendment) Act, 1964, for the period between April 1, 1965 to March 3], 1969 in accordance with section 18 of the Act as amended by the Wealth tax (Amendment) Act, 1964 and for the period between April 1, ]969 to March 18, 1971 (on which date the returns were filed) in accordance with sec.
18 of the Act as amended by the Finance Act, 1966.
Aggrieved by the decision of the High Court, the Department has filed these appeals under Article 136 of the Constitution .
Before dealing with the contentions of the parties, it is appropriate to set out the provisions of the Act which have a bearing on the question involved in the present appeals as they stood during the relevant periods: Prior to April 1, 1965, sub sections (1) and (3) of section 14 of the Act stood as follows: 424 "14.
Return of wealth (1) Every person whose net wealth on the valuation date was of such amount as to render him liable to wealth tax under this Act shall, before the thirtieth day of June of the corresponding assessment year, furnish to the Wealth tax officer a return in the prescribed form and verified in the prescribed manner setting forth his net wealth as on the valuation date; (2). . . (3) The Wealth tax officer may, if he is satisfied that it is necessary so to do, extend the date for the delivery of return under this section.
" After April 1, 1965: "14. (1) Every person, if his net wealth or the net wealth of any other person in respect of which he is assessable under this Act on the valuation date was of such an amount as to render him liable to wealth tax under this Act, shall, before the thirtieth day of June of the corresponding assessment year, furnish to the Wealth tax officer a return in the prescribed form and verified in the prescribed manner setting forth the net wealth as on the valuation date.
(2). . . (3) The Wealth tax officer may, if he is satisfied that it is necessary so to do, extend the date for the delivery of the return under this section.
" Section 15 of the Act which has not undergone any change since the commencement of the Act reads: "15.
Return after due date and amendment of return If any person has not furnished a return within the time allowed under section 14 or having furnished a return under that section discovers any omission or a wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made.
" The relevant parts of section 18 of the Act as they stood during the three periods referred to above read as follows: 425 Prior to April 1, 1965 "18.
(1) If the Wealth tax officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person (a) has without reasonable cause failed to furnish the return of his net wealth which he is required to furnish under sub section (1) or sub section (2) of section 14 or section 17 or has without reasonable cause failed to furnish it within the time allowed and in the manner required; or (b) . (c) . . he or it may, by order in writing, direct that such person shall pay by way of penalty (i) in the case referred to in clause (a), in addition to the amount of wealth tax payable by him, a sum not exceeding one and a half times the amount of such tax, and . " Between April 1, 1965 and March 31, 1969 "18.
(1) If the Wealth tax officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person (a) has without reasonable cause failed to furnish the return of his net wealth which he is required to furnish under sub section (a) of section 14 or by notice given under sub section (2) of section 14 or section 17 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub section (1) of section 14 or by such notice, as the case may be; or (b) . . (c) . . 426 he or it may, by order in writing, direct that such person shall pay by way of penalty (i) in the cases referred to in clause (a), in addition to the amount of wealth tax, if any, payable by him, a sum equal to two per cent of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent of the tax; After April 1, 1969 and as on March 18, 1971 on which date the returns were filed "18.
(1) If the Wealth tax officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person (a) has without reasonable cause failed to furnish the return which he is required to furnish under sub section (1) of section 14 or by notice given under sub section (2) of section 14 or section 17, or has without reason able cause failed to furnish within the time allowed and in the manner required by sub section (1) of section 14 or by such notice, as the case may be; or (b) . . (c) . . he or it may, by order in writing, direct that such person shall pay by way of penalty (i) in the cases referred to in clause (a), in addition to the amount of wealth tax, if any, payable by him, a sum, for every month during which the default continued, equal to one half per cent of (A) the net wealth assessed under section 16, as reduced by the amount of net wealth on which in accordance with the rates of wealth tax specified in Paragraph A of Part I of the Schedule or Part II of the Schedule, the wealth tax chargeable is nil; or (B) the net wealth assessed under section 17, where assessment has been made under that section, as reduced by 427 (1) the net wealth, if any, assessed previously under section 16 or section 17 or (2) the amount of net wealth on which in accordance with the rates of wealth tax specified in Paragraph A of Part I of the Schedule or Part II of the Schedule, the wealth tax chargeable is nil, whichever is greater, but not exceeding, in the aggregate, an amount equal to the net wealth assessed under section 16, or, as the case may be, the net wealth assessed under section 17, as reduced in either case in the manner aforesaid;. . " Now let us analyse the above provisions of law.
Section 14 of the Act which has not undergone any material change from the commencement of the Act in so far as the question involved in these appeals is concerned requires a person the value of whose wealth is such as would attract the liability to pay tax to file a return of his wealth as on the valuation date in the prescribed manner before the Wealth tax Officer on or before the thirtieth of June of the assessment year or on or before any date upto which the Wealth tax officer has extended the time to file the return.
Section 15 of the Act, however, enables such a person to file a return at any time before the assessment is made.
The distinction between section 14 and section 15 of the Act lies in the fact that whereas under section 14 a duty is imposed on the assessee to file a return within the prescribed date, section 15 enables him to file a return before the assessment is made even though the last date prescribed by section 14(1) is over.
Section 18 of the Act deals with three types of penalties for certain specified acts or omissions on the part of the assessee referred to in clauses (a), (b) and (c) of sub section (1) thereof.
We are concerned in this case with the question of levy of penalty in respect of omissions referred to in clause (a) of section 18(1) of the Act.
There are four kinds of omissions referred to in that clause (i) failure to furnish the return which the assessee is required to furnish under sub section (i) of section 14; (ii) failure to furnish the return as required by a notice issued under section 14(2) or section 17, (iii) failure to furnish the return as required by section 14(1) within the time allowed and in the prescribed manner and (iv) failure to furnish the return as required by a notice issued under section 14(2) or section 17 within the time allowed and in the prescribed manner.
Each one of these omissions expose the assessee to the levy of penalty unless reasonable cause is shown for not performing 428 the duty.
In clause (i) of section 18(1) of the Act, the penalty leviable for any of the omissions referred to in section 18(1)(a) is set out but the measure of penalty imposable has varied from time to time.
Prior to April 1, 1965 the penalty imposable was a sum not exceeding one and a half times the amount of wealth tax payable by the assessee during the assessment year in question.
Within the outer limit referred to above, The officer concerned or the Tribunal as the case may be could impose any amount as penalty having regard to all the relevant circumstances of the case including perhaps the time that had elapsed from the last day allowed to file the return.
Between April 1, 1965 and March 31, 1969 the measure of penalty was regulated by section 18 of the Act as amended in 1964.
During that period the penalty imposable was a sum equivalent to two per cent of the tax for every month during which the default continued but not exceeding in the aggregate fifty per cent of the tax.
The penalty leviable during this period was less onerous than it was before April 1, 1965.
Then came the amendment made by the Finance Act of 1969.
After April 1, 1969 by reason of the amendment introduced by the Finance Act of 1969 the penalty imposable was altered to a sum for every month during which the default continued equal to one half per cent of the net wealth calculated in accordance with the amended provisions in section 18.
The penalty leviable during this period was more drastic than what it was before.
One significant difference between the law as it existed prior to April 1, 1965 and the law as it existed during the subsequent two periods is that whereas during the period prior to April I, 1965 there was no specific reference in clause (i) of section 18 (a) to the time lag between the last date on which the return had to be filed and the date on which it was actually filed, the said factor was expressly required to be taken into consideration after April 1, 1965 while determining the penalty payable by the assessee.
Another significant factor which requires to be borne in mind is that neither the Wealth tax (Amendment) Act, 1964 nor the Finance Act, 1969 by which section 18 of the Act was amended expressly stated that the amended provisions of section 18 would be applicable to an assessee who had failed to file the return in respect of any preceding assessment year and the said default had continued after the amendment came into force except using the phrase "for every month during which the default continued", in that part of section 18 which prescribed the measure of penalty.
The contention of the Department is that whatever may have been the position of law before April 1, 1965, on and after that date 429 the default committed by an assessee in not filing a return as required by section 14(1) of the Act amounted to a continuing wrong which attracted the penalty as provided by the law in force at the time when such default continued.
In other words it is contended that in this case since the assessee who had to file a return after April 1, 1965 for assessment year 1965 66 had not f led the same till March 13, 1971 penalty had to be computed for the period upto April 1, 1969 under the provisions of section 18 of the Act as it stood during that period and for the subsequent period additional penalty should be levied in accordance with section 18 as amended by the Finance Act, 1969.
Relying upon the decision of the Kerala High Court in Commissioner of Wealth tax, Kerala vs Smt.
V. Pathummabi it is argued that amendments made in 1964 and 1969 brought about a qualitative change in the nature of the default contemplated under section 18 and that what could have been a completed default before April 1, 1965 became a continuing default.
Even assuming that this argument is correct it has to be held that the decision of the High Court in so far as the default committed by the assessee in not filing the return in respect of the assessment year 1964 65 is concerned is not erroneous.
What remains to be considered is whether the decision in respect of the default committed by the assessee in not filing the return due on June 31), 1955 for the assessment year 1965 66 is liable to be interfered with.
To repeat, the relevant part of section 18 of the Act can be divided into two parts the first part contained in clause (a) of section 18(1) setting out the gist of the default and the second part prescribing the measure of penalty.
The former part has more or less remained the same from the commencement of the Act and it is only the latter part which has undergone changes.
The question is whether by reason of the changes in the latter pari, there has been a change in the nature of the wrong referred to in section 18 (1) (a) of the Act.
A liability in law ordinarily arises out of an act of commission or an act of omission.
When a person does an act which law prohibits him from doing it and attaches a penalty for doing it, he is stated to have committed an act of commission which amounts to a wrong in the eye of law.
Similarly when a person omits to do an act which is required by law to be performed by him and attaches a penalty for such omission, he is said to have 430 committed an act of omission which is also a wrong in the eye of law.
Ordinarily a wrongful act or failure to perform an act required by law to be done becomes a completed act of commission or omission, as the case may be, as soon as the wrongful act is committed in the former case and when the time prescribed by law to perform an act expires in the latter case and the liability arising therefrom gets fastened as soon as the act of commission or of omission is completed.
The extent of that liability is ordinarily measured according to the law in force at the time of such completion.
In the case of acts amounting to crimes the punishment to be imposed cannot be enhanced at all under our Constitution by any subsequent legislation by reason of Article 20 (I) of the Constitution which declares that no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.
In other cases, however, even though the liability may be enhanced it can only be done by a subsequent law (of course subject to the Constitution) which either by express words or by necessary implication provides for such enhancement.
In the instant case the contention is that the wrong or the default in question has been altered into a continuing wrong or default giving rise to a liability de die in diem, that is, from day to day.
The distinctive nature of a continuing wrong is that the law that is violated makes the wrong doer continuously liable for penalty.
A wrong or default which is complete but whose effect may continue to be felt even after its completion is, however, not a continuing wrong or default.
It is reasonable to take the view that the court should not be eager to hold that an act or omission is a continuing wrong or default unless there are words in the statute concerned which make out that such was the intention of the legislature.
In the instant case whenever the question of levying penalty arises what has to be first considered is whether the assessee has failed without reasonable cause to file the return as required by law and if it is held that he has failed to do so then penalty has to be levied in accordance with the measure provided in the Act.
When the default is the filing of a delayed return the penalty may be correlated to the time lag between the last day for filing it without penalty and the day on which it is filed and the quantum of tax or wealth involved in the case for purposes of determining the quantum of penalty but the default however is only one which takes place on the expiry of the last day for filing the return without penalty and not a continuing one.
The default in question does not, however, give rise to a fresh cause of action every day.
Explaining the expression 431 'a continuing cause of action ' Lord Lindley in Hole vs Chard Union observed: "What is a continuing cause of action ? Speaking accurately, there is no such thing; but what is called a continuing cause of action is a cause of action which arises from the repetition of acts or omissions of the same kind as that for which the action was brought." In the same decision, Lord Justice A. L. Smith who concurred with the above view said: "If once a cause of action arises, and the acts com plained of are continuously repeated, the cause of action continues and goes on de die in diem.
It seems to me that there was a connection in the present case between the series of acts before and after the action was brought; they were repeated in succession, and became a continuing cause of action.
They were an assertion of the same claim namely, a claim to continue to pour sewage into the stream and a continuance of the same alleged right.
In my opinion, there was here a continuing cause of action within the meaning of the rule.
" The distinction between a continuing offence and an offence which is not a continuing one is well brought out in the decision of the High Court of Bombay in State vs A. H. Bhiwandiwalla.
In that case, the accused respondent had been charged with two offences namely, (a) failure to apply for registration of his factory and to give notice of occupation and (b) running the factory without a licence issued under the .
The accused had a plea of limitation against the prosecution.
In that context the High Court observed: "In civil law, we often refer to a continuing or recurring cause of action.
Similarly, even in criminal law the expression "continuing offence" is frequently used.
As observed by Beaumount C. J. in 'Emperor vs Chhotalal Amarchand ', AIR 1937 Bom 1 (FB) the expression "continuing offence" is not a very happy expression.
It assumes, says the learned Chief Justice 432 ". that you can have a continuing offence in the sense in which you can have a continuing tort, or a continuing breach of contract, and I doubt, myself whether the assumption is well founded, having regard to the provisions of the Criminal Procedure Code as to the framing of charges and as to the charges which can be tried at one and the same trial.
It is quite clear that you could not charge a man with committing an offence 'de die in diem ' over a substantial period.
" Even so, this expression has acquired a well recognised meaning in criminal law.
If an act committed by an accused person constitutes an offence and if that act continues from day to day, then from day to day a fresh offence is committed by the accused so long as the act continues.
Normally and in the ordinary course an offence is committed only once.
But we may have offences which can be committed from day to day and it is offences falling in this latter category that are described as continuing offences.
" Accordingly the High Court of Bombay held in Bhiwandiwalla 's case (supra) that the failure to apply for registration of the factory under the and to give notice of occupation thereof was not a continuing offence but the running of the factory without a licence issued thereunder was a continuing offence.
Section 39 of the Indian Mines Act, 1923 which came up for consideration before the Patna High Court in The State vs Kunja Behari Chandra & Ors.
on which reliance was placed by the Revenue is a case of continuing offence.
Section 39 provided: "39.
Whoever contravenes any provision of this Act or of any regulation, rule or bye law or of any order made thereunder for the contravention of which no penalty is hereinafter provided shall be punishable with fine which may extend to one thousand rupees, and in the case of a continuing contravention, with a further fine which may extend to one hundred rupees for every day on which the offender is proved to have persisted in the contravention after the date of the first conviction.
" 433 In this case the language of the section itself made it obvious that its violation resulted in a continuing offence.
The true principle appears to be that where the wrong complained of is the omission to perform a positive duty requiring a person to do a certain act the test to determine whether such a wrong is a continuing one is whether the duty in question is one which requires him to continue to do that act.
Breach of a covenant to keep the premises in good repair, breach of a continuing guarantee, obstruction to a right of the way, obstruction to the right of a person to the unobstructed flow of water, refusal by a man to maintain his wife and children whom he ii bound to maintain under law and the carrying on of mining operations or the running of a factory without complying with the measures intended for the safety and well being of workmen may be illustrations of continuing breaches or wrongs giving rise to civil or criminal liability.
as the case my be, de die in diem.
In Balkrishna Savalram Pujari & Ors.
vs Shree Dayaneshwar Maharaj Sansthan & Ors.
Gajendragadkar, J. (as he then was) observed: "It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury.
If the wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue.
If, however, a wrongful act is of such a character that the injury caused by it itself continue, then the act constitutes a continuing wrong.
In this connection it is necessary to draw a distinction between the injury caused by the wrongful act and what may be described at the effect of the said injury.
" Section 18 of the Act with which we are concerned in this case, however, does not require the assessee to file a return during every month after the last day to file it is over.
Non performance of any of the acts mentioned in section 18(1)(a) of Act gives rise to a single default and to a single penalty, the measure of which, 434 however, is geared up to the time lag between the last date on which the return has to be fled and the date on which it is filed.
The default, if any committed is committed on the last date allowed to file the return.
The default cannot be one committed every month thereafter.
The words for every month during which the default continued ' indicate only the multiplier to be adopted in determining the quantum of penalty and do not have the effect of making the default in question a continuing one.
Nor do they make the amended provisions modifying the penalty applicable to earlier defaults in the absence of necessary provisions in the amending Acts.
The principle underlying section 6 of the General Clauses Act is clearly applicable to these cases.
It may be stated here that the majority of the High Courts in India have also taken the same view.
In the result we hold that where the default complained of is one falling under section(l)(a) of the Act, the penalty has to be computed in accordance with the law in force on the last day on which the return in question had to be filed.
Neither the amendment made in 1964 nor the amendment made in 1969 has retrospective effect.
The appeals therefore fail and are dismissed with costs.
Hearing fee one set.
S.R. Appeals dismissed.
| IN-Abs | The assessee respondent filed his Wealth Tax returns for the assessment years 1964 65 and 1965 66 on March 18, 1971, while he was required by section D 14(1) of the Act to file the return for the assessment year 1964 65 on or before June 30, 1964 and the return for the assessment year 1965 66 on or before June 30, 1965.
The Wealth Tax officer completed the assessment for the said years on March 22, 1971 and also commenced proceedings for levying penalty under section 18(1) (a) of the Act for the late submission of returns.
The Wealth Tax officer levied the penalties for different periods at different rates, as provided by the 1964 and 1969 Amendments.
treating the failure to file the return in time as a "continuing offence".
The orders levying penalties were upheld in appeal by the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar.
A consolidated reference made by the Tribunal at the instance of the assessee was answered by the High Court of Punjab in favour of the assessee after rejecting the contention of the department that the default or failure to file the return in time was a continuing default and that the penalty had to be computed for the period prior to April 1, 1965 in accordance with section 18 as it stood prior to its amendment by the Wealth tax (Amendment) Act, 1964, for the period between April 1, 1965 to March 31, 1969 in accordance with section 18 of the Act as amended by the Wealth tax (Amendment) Act, 1964 and for the period between April 1, 1969 to March 18, 1971 (on which date the returns were filed) in accordance with section 18 of the Act as amended by the Finance Act, 1969.
Aggrieved by the decision of the High Court, the Department has filed these appeals under Article 136 of the Constitution.
G Dismissing the appeals, the Court ^ HELD 1:1.
Where the default complained of is one falling under section 18(1) (a) of the Wealth Tax Act, the penalty has to be computed m accordance with the law in force on the last day on which the return in question had to be filed.
Neither the amendment made in 1964 nor the amendment made in 1969 has retrospective effect.
[434 C D] 420 1:2.
Section 18 of the Wealth Tax Act does not require the assessee to file a return during every month after the last day to file it is over.
Non performance of any of the acts mentioned in section 18(1) (a) of the Act gives rise to a single default and to a single penalty, the measure of which, however, is geared up to the time lag between the last date on which the return has to be filed and the date on which it is filed.
The default, if any committed is committed on the last date allowed to file the return.
The default cannot be one committed every month thereafter.
[433 G H, 434 A] 1:3.
The words "for every month during which the default continued" indicate only the multiplier to be adopted in determining the quantum of penalty and do not have the effect of making the default in question a continuing one.
Nor do they make the amended provisions modifying the penalty applicable to earlier defaults in the absence of necessary provisions in the amending Acts.
The principle underlying section 6 of the General Clauses Act is clearly applicable to these cases.
[434 B C] 2:1.
A liability in law ordinarily arises out of an act of commission or an act of omission.
When a person does an act which law prohibits him from doing it and attaches a penalty for doing it, he is stated to have committed an act of commission which amounts to a wrong in the eye of law.
Similarly when a person omits to do an act which is required by law to be performed by him and attaches a penalty for such omission, he is said to have committed an act of omission which is also a wrong in the eye of law.
Ordinarily a wrongful act or failure to perform an act required by law to be done becomes a completed act of commission or of omission, as the case may be, as soon as the wrongful act is committed in the former case and when the time prescribed by law to perform an act expires in the latter case and the liability arising therefore gets fastened as soon as the act of commission or of omission is completed.
The extent of that liability is ordinarily measured according to the law in force at the time of such completion.
In the case of acts amounting to crimes the punishment to be imposed cannot be enhanced at all under our Constitution by any subsequent legislation by reason of Article 20(I) of the Constitution which declares that no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.
In other cases, however, even though the liability may be enhanced it can only be a subsequent law (of course subject to the Constitution which either by express words or by necessary implication provides for such enhancement.
[429 G H, 430 A D] 2:2.
The distinctive nature of a continuing wrong is that the law that is violated makes the wrongdoer continuously liable for penalty.
A wrong or default which is complete but whose effect may continue to be felt even after its completion is, however, not a continuing wrong or default.
[430 D E] 2:3.
The court should not be eager to hold that an act or omission is a continuing wrong or default unless there are words in the statute concerned which make out that such was the intention of the legislature.
In the instant case when ever the question of levying penalty arises what has to be first considered is whether the assessee has failed without reasonable cause to file the return as re 421 quired by law and if it is held that he has failed to do so then penalty has to be levied in accordance with the measure provided in the Act.
When the default is the filing of a delayed return the penalty may be correlated to the time lag between the last day for filing it without penalty and the day on which it is filed and the quantum of tax or wealth involved in the case for purposes of determining the quantum of penalty but the default however is only one which takes place on the expiry of the last day for filing the return without penalty and not a continuing one.
The default in question does not, however, give rise to a fresh cause of action every day.
[430 E H] 2:4.
Where the wrong complained of is the omission to perform a positive duty requiring a person to do a certain act the test to determine whether such a wrong is a continuing one is whether the duty in question is one which requires him to continue to do that act.
Breach or a covenant to keep the premises in good repair, breach of a continuing guarantee obstruction to a right of way, obstruction to the right of a person to the unobstructed flow of water, refusal by a man to maintain his wife and children whom he is bound to maintain under law and the carrying on of mining operations or the running of a factory without complying with the measures intended for the safety and well being of workmen may be illustrations of continuing breaches or wrongs giving rise to civil or criminal liability, as the case may be, de die in diem.
[433 A D] Hole vs Chard Union, , quoted with approval.
State vs A. Bhiwandiwalla, A. I. R. ; The State vs Kunja Behari Chandra and Ors.
A.I.R. 1954 Patna 371, approved, Balkrishna Savalram Pujari and Ors.
vs Shree Dayaneshwar Maharaj Sansthan and Ors., [1959] Supp. 2 S.C.R. 476, referred to.
|
Civil Appeal Nos.
1217 1222 of 1973.
Appeals by certificate from the Judgment and order dated 21.12 1972 of the Gujarat High Court in Wealth Tax Reference No. 2 of 1969.
V. section Desai, Shardul section Shroff and H. section Parihar for the Appellant.
section T. Desai, P. A. Francis and Miss A. Subhashini for the Respondent.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
On the basis of a certificate granted under section 29(1) of the (hereinafter referred to as the Act ) the appellant has filed these appeals against the judgment and order dated December 21 1972 of the High Court of Gujarat in Wealth tax Reference No 2 of 1969.
The questions referred to the High Court under section 27 of the Act by the In come tax Appellate Tribunal Ahmedabad Bench read thus: "(1) Whether on the facts and in the circumstances of the case the liability in respect of income tax payable on the concealed income disclosed by the assessee pursuant to section 68 of the Finance Act 1965 is deductible under section 2(m) of the in computing the net wealth of the assessee for the 405 assessment years 1959 60 1960 61 1961 62 1962 63 A 1963 64 and 1964 65.
(2) Whether the Tribunal was right in holding that the liability to pay tax on the amount disclosed under section 68 of the Finance Act 1965 arose not under that Finance Act but under section 3 of the Indian Income tax Act 1922.
Having regard to the assessment years in question the second question should be read as including within its scope also the question whether the Tribunal was right in holding that the liability to pay tax on the amount disclosed under section 68 of the Finance Act, 1965 arose not under that Finance Act but under section 4 of the Income tax Act 1961.
The assessee who is the appellant in these appeals had been assessed on the basis of his returns of net wealth and the statements filed therewith in the status of an individual to wealth tax under section 16(3) of the Act during the assessment years 1957 58 t 1964 65 on various dates between January 15 1960 and July 14 1964.
Subsequently the assessee made a disclosure under section 68 of the Finance Act 1965 (hereinafter referred to as the Finance Act) of Rs.7,00,000 which had been shown as having been covered by some hundi transactions with a concern known as M/s Abdul Razack & Co. in his books of account at the Bombay branch of his business.
Alongwith the declaration the assessee filed a statement that this concealed income had been earned by him during the assessment years 1957 58 to 1964 65.
He however did not allocate the total sum disclosed amongst different assessment years but showed it in a lump sum.
The amount of income tax was computed at 60% of the total concealed income and it was paid as contemplated under section 68 of the Finance Act.
The Wealth tax officer thereafter reopened the assessments or the assessee to wealth tax for assessment years 1957 58 to 1964 65 on the ground that he had reason to believe that certain wealth of the assessee had escaped assessment during the said years and that his belief was founded on the disclosure made by the assessee under section 68 of the Finance Act.
We are concerned in these appeals only with the assessment years 1959 60 to 1964 65.
On scrutiny it was found on the basis of peak cash credits in each assessment year that the amounts covered by hundies were as under: 406 Assessment years Peak cash credits 1959 60 RS.
4,57,465/ 1960 61 RS.
5,59,8231 1961 62 RS.
6,38,325/ 1962 63 RS.
6,82,974/ 1963 64 RS.
7,01,578/ 1964 65 RS.
7,01,578/ As can be seen from the above statement the assessee had substantial sums with him in the years in question which had not been disclosed earlier.
Since these amounts constituted the wealth which was liable to tax on the respective valuation dates the assessee filed returns of wealth for the above mentioned years in compliance with the notices issued to him and in the course of the assessment proceedings he claimed the deduction for income tax payable by him in respect of the sums which had been progressively earned by him from year to year and which were liable to income tax under the relevant income tax law in force during the years relying upon the decision of this Court in Kesoram Industries and Cotton Mills Ltd vs Commissioner of Wealth tax (Central), Calcutta.
The Wealth tax officer however held that since in his balance selects the assessee had not shown the liability to pay income tax the deduction of the amounts claimed could not be allowed in any of the assessment years and accordingly the orders of reassessment were passed by him after disallowing the claim made by the assessee.
He however included the sums mentioned in the above statement in the net wealth of the respective assessment years and determined the wealth tax payable by the assessee.
The appeals filed by the assessee against the orders of the Wealth tax officer before the Appellate Assistant Commissioner were dismissed.
On further appeal to the Income tax Appellate Tribunal the Tribunal held that the deduction claimed in respect of each assessment year was in truth and substance a liability under the Indian Income tax Act 1922 or the Income tax Act 1961 as the case may be and not a new liability created by the Finance Act and therefore it constituted a debt owed by the assessee on the respective valuation dates within the meaning of section 2(m) of the Act and that the deduction claimed should be allowed while computing the net wealth 407 of the assessee.
Accordingly the Tribunal allowed the appeals of the assessee.
Thereafter at the instance of the Commissioner of Wealth tax the Tribunal referred under section 27 of the Act the two questions mentioned above to the High Court.
After hearing the parties the High Court answered both the questions in the negative and in favour of the Revenue by its judgment dated December 21 1972.
On a certificate granted by the High Court under section 29(1) of the Act the assessee has come up in appeal to this Court.
The relevant part of section 2(m) of the Act reads: "2.
(m) net wealth means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets wherever located belonging to the assessee on the valuation date including assets required to be included in his net wealth as on that date under this Act is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than In the case of Kesoram Industries and Cotton Mills Ltd. (supra.) this Court has held that income tax other than that falling under clause (iii) of section 2(m) of the Act payable on the valuation date is a debt owed by the assessee and hence is deductible from the total wealth of the assessee while determining the net wealth for the purpose of levying wealth tax.
The principal question which arises for consideration in these appeals relates to the true character of the tax paid by the assessee in the proceedings under section 68 of the Finance Act and the applicability of the ratio of the decision of this Court in the case of Kesoram Industries and Cotton Mills Ltd. (supra).
Since it is contended by the assessee that the tax so paid was the tax which he was liable to pay under the relevant income tax law in force during the assessment years in question and it is urged by the Department that the said payment was in discharge of a liability created for the first time by the Finance Act it is necessary to examine the provisions of section 68 of the Finance Act in some detail in so far as they relate to the question involved in this case.
The relevant part of section 68 of the Finance Act which came into force on March 1 1965 reads: 408 "68.
Voluntary disclosure of income (1) Where any person makes a declaration in accordance with sub section (2) in respect of the amount representing income (a) which he has failed to disclose in a return of income for any assessment year filed by him before the first day of March 1965 under the Indian Income tax Act 1922 (Xl of 1922) or the Income tax Act 1961 (XLIII of 1961) or (b) which has escaped assessment for any assessment year for which an assessment has been made before the 1st day of March 1965 under either of the said Acts or (c) for the assessment of which no proceeding under either of the said Acts has been taken before the 1st day of March 1965, he shall notwithstanding anything contained in the said Acts be charged income tax at the rate specified in sub section (3) in respect of the amount so declared if he (i) pays the amount of income tax as computed at the said rate or (ii) furnishes adequate security for the payment there of in accordance with sub section (4) and under takes to pay such income tax within a period not exceeding six months from the date of the declaration as may be specified by him therein or (iii)On or before the 31st day of May 1965 pays such amount as is not less than one half of the amount of income tax as computed at the said rate or furnishes adequate security for the payment there of in accordance with sub section (4) and in either case assigns any shares in or debentures of a joint stock company or mortgages any immovable property in favour of the President of India by way o f security for the payment of the balance and undertakes to Fay such balance within the period referred to in clause (ii).
409 (2) The declaration shall be made to the Commissioner and shall specify the period required to be specified under clause (ii) of sub section (1) contain the name address and signature of the person making the declaration and also full information in respect of the following matters namely: B (a) Whether he was assessed to income tax or not and if assessed the name of the Income tax Circle in which he was assessed.
(b) The amount of income declared giving where available details of the financial year or years in which the income was earned and the amount pertaining to each such year.
(c) Whether the amount declared is represented by cash (including bank deposits) bullion investments in shares debts due from other persons commodities or any other assets and the name in which it is held and location thereof: Provided that the declaration shall be of no effect unless it is made after the 28th day of February 1965 and before the Ist day of June 1965.
F (3) The rate of income tax chargeable in respect of the amount referred to in sub section (1) shall be sixty per cent of such amount: Provided that if before the Ist day of April 1965 the tax on the amount declared is paid by the declarant at the rate of fifty seven per cent of such amount he shall not be liable to pay any further tax on such amount.
(4) A person shall not be considered to have furnished adequate security for the payment of the tax for the purposes of sub section (I) unless the payment is guaranteed by a scheduled bank or the person makes an assignment in favour of the President of India of any security of the Central or State Government.
Explanation For the purposes of this sub section where an assignment of Government securities is made in 410 favour of the President the amount covered by such assignment shall be the market value of the securities on the date of the assignment.
(5) Any amount of income tax paid in pursuance of a declaration made under this section shall not be refundable in any circumstances and no person who has made the declaration shall be entitled i n respect of any amount so declared or any amount of tax so paid to reopen any assessment or reassessment made under the Indian Income tax Act 1922 (XI of 1922) or the Income tax Act 1961 (XLIII of 1961) or the Excess Profits Tax Act 1943 (XV of 1940) or the Business Profits Tax Act 1947 (XXI of 1963) or the Companies (Profits) Surtax Act 194 (VII of 1964) or claim any set off or relief in any appeal reference revision or other proceeding in relation to any such assessment or reassessment.
(6) (a) Any amount declared by any person under this section in respect of which the tax referred to in subsection (3) is paid shall not be included in his total income for any assessment under any of the Acts mentioned hl sub section (5) if he credits in the books of account if any maintained by him for any source of income or in any other record the amount declared as reduced by the tax paid thereon under this section.
Section 68(1) of the Finance Act provides that where any person makes a declaration in accordance with section 68(2) in respect of any amount represent n g income which he has failed to disclose in his return or which has escaped assessment for any assessment year for which an assessment has been made before March 1, 1965 under either of the two Acts namely the Indian Income tax Act 1922 and the Income tax Act 19 1 or for the assessment of which no proceeding is taken before March 1, 1965 he shall notwithstanding anything contained in the said Acts be charged income tax at the rate specified in sub section (3) thereof in respect of the amount so declared.
If he pays the amount of income tax as computed at the said rate or furnishes adequate security for the payment thereof in accordance with sub section (4) thereof and undertakes to pay such income tax within the period specified in the section he would be absolved from the liability under the relevant law of in 411 come tax.
The declaration should however be filed with the particulars mentioned in section 68(2).
Section 68(3) provides that the rate of income tax chargeable in respect of the amount referred to in the declaration shall be sixty percent of such amount provided that if the tax is paid within April 1, 1965 the tax payable would be fifty seven percent.
Sub section (5) of section 68 of the Finance Act provides that any amount of income tax paid in pursuance of a declaration made under that section shall not be refundable in any circumstances nor a declarant is entitled in respect of any amount declared or tax paid thereon to reopen any assessment or reassessment made under the Indian Income tax Act 1922 or Income tax Act 1961 or any other Act mentioned therein.
He cannot also claim any set off or relief in any appeal reference revision or other proceeding in relation to any such assessment or reassessment.
Clause (a) of sub section (6) of section 68 grants immunity from proceedings under the Acts mentioned in section 68(5) to the assessee by providing that any amount declared by any person under section 68 in respect of which the tax referred to hl sub section (3) thereof is paid shall not be included in his total income for any assessment under any of the assessments made under any of the Acts mentioned in section 68(5) if he credits in the books of account if any maintained by him for any source of income or hl any other record the amount declared as reduced by the tax paid thereon under section 68.
On an examination of the several provisions contained in section 68 of the Finance Act it becomes clear that they had been enacted as a part of the measures adopted with a view to unearthing unaccounted money in possession of the members of the public on which income tax had not been paid and also to create an incentive to such persons to make disclosure of their unaccounted incomes and to pay tax thereon at the specified rate without the liability to pay any interest thereon or penalties for non compliance with the law of income tax.
The declaration to be riled by a person under section 68 is about an amount representing his income earned in an earlier accounting period which has not been subjected to tax in the ordinary course although income tax was payable hl respect of it.
If the declarant pays tax at the rate specified in sub section (3) of section 68 he would be absolved from any further liability to tax on such income.
The declaration has to be made before the Commissioner of Income tax and it should contain full information namely whether he was assessed to income tax or not and if assessed the name of the Income tax circle in which he was assessed the 412 amount of income declared giving w ere available details of the financial year or years in which the income was earned and the amount pertaining to each such year and whether the amount declared is represented by cash (including bank deposits) bullion investment in shares debts due from other persons commodities or any other assets and the name in which it is held and the location thereof.
Section 68 also states at more than one place that what is payable pursuant to a declaration is income tax.
Section 68 (1) contains words such as he shall notwithstanding anything contained in the said Acts be charged income tax at the rate specified in sub section (3) .
if he pays the amount of income tax at the said rate and undertakes to pay such income tax .
Section 68(3) contains the words: the rate of income tax chargeable.
Section 68(5) refers to: (a) any amount of income tax paid and section 68(7) contains the words: paid the income tax under this section .
These words show that Parliament was of the view that what was payable under section 68 was income tax.
The points of difference between any Finance Act that may be passed annually fixing the rates of income tax and section 68 of the Finance Act however relate to (i) the time within which and the manner in which information in regard to the income is to be furnished (ii) the method of computation of taxable income and E(iii) the rate of tax payable on such income.
The declaration which is equivalent to a return to be filed under the Indian Income tax Act 1922 or Income tax Act 1961 need not contain all the particulars that have to be furnished in such return.
The declaration can be filed during the period mentioned in proviso to section 68(2).
There is no provision to claim various deductions exemptions set off etc.
in respect of the income disclosed in the declaration as in the case of income shown in an ordinary return.
Since the rate of tax is a uniform one and does not vary with the quantum of the income disclosed there is no need to trace it to any specific assessment year.
Further the declaration is a voluntary one and it is not pursuant to any notice issued by the Department.
The question is whether these distinguishing features make the amount disclosed in a declaration anything different from the income of an assessee and the tax paid under section 68 anything different from a tax on income.
In other words does section 68 impose a new charge on the income of the declarant for the first time wholly independent of the levy under section 3 of the Indian Income tax Act 192 ' or section 4 of the Income tax Act 1961 ? The High 413 Court has given the following reasons for holding that the tax paid under section 68 is not tax on income payable under the Indian Income tax Act 1922 and Income tax Act 1961: (i) the charge under the Income tax Act is on the total income of the previous year and not on any particular item of income but that is not so under section 68,(ii) payment of tax under section 68 has no reference to any assessment year and unless it is correlated to an assessment year it can not be ordinary income tax and (iii) the disclosed income is chargeable to tax without allowing usual deductions and without providing for any procedure for qualification.
The High Court proceeded to hold that section 68 enacted a new charge of tax on an ad hoc basis on disclosed income irrespective of the assessment year in which it was earned.
The disclosure of concealed income coupled with the payment of tax as contemplated in clause (i) of sub section (1) according to the High Court not only created a charge of tax but also satisfied it.
In its view the disclosure of concealed income coupled with furnishing of security and undertaking as contemplated in clause (ii) created a new charge of tax and when the undertaking was carried out by payment of tax the liability arising from the charge of tax was satisfied.
one basic fallacy underlying the conclusion of the High Court that a new charge is being levied under section 68 appears to be the assumption that the amount in question in respect of which tax is payable under that provision was not liable to income tax earlier.
lt should be borne in mind that the declaration contemplated under section 68 is a declaration in respect of income of earlier years which had been concealed and on which tax was payable during the relevant assessment years in the ordinary course.
Section 3 of the Indian Income tax Act 1922 and section 4 of Income tax Act 1961 which are couched more or less in the same language state that where any Central Act enacts that inc me tax shall be charged for any year at any rate or rates income tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of the relevant Act in respect of the total income of the previous year or previous years as the case may be of every person.
Now it is well settled by a series of judicial decisions that the liability to income tax arises by virtue of the charging section in the relevant Income tax Act and it arises not later than the close of the previous year even though the rate of tax for the year of assessment may be fixed after the close of the previous year and the assessment has necessarily to be made after the previous year.
414 The quality of chargeability of any income to tax is not dependent upon the passing of the Finance Act though its quantification may be governed by the provisions of the Finance Act in respect of any assessment year vide Wallace Brothers and Co. Ltd. vs Commissioner of Income tax.
Messers Chatturam Horilram Ltd. vs Commissioner of Income tax and Ors.
and Kalwa Devadattam & Ors.
vs The Union of India & Ors.
In the case of Kesoram Industries and Cotton Mills Ltd. (supra) Subba Rao J. (as he then was) summarised the legal position thus : To summarize: A debt is a present obligation to pay an ascertainable sum of money, whether the amount is payable in prasenti or in futuro: debitum in prsesenti, solvendum in futuro.
But a Sum payable upon a contingency does not become a debt until the said contingency has happened.
A liability to pay income tax is a present liability though it becomes payable after it is quantified in accordance with ascertainable data.
There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability.
The rate is always easily ascertainable.
If tile Finance Act is passe l it is the rate fixed by that Act; if the Finance Act has not yet been passed it is the rate proposed in Finance Bill pending before Parliament or the rate in force in the preceding year whichever is more favourable to the assessee.
All the ingredients of a debt are present.
It is a present liability of an ascertain able amount.
It is thus clear that it the assessee had brought to the notice of the Department in the usual course the existence of incomes which were later on declared under section 68 they would have been taxed during the relevant assessment year.
Hence merely because they are disclosed in a declaration filed under section 68, they cannot cease to be income not already charged for income tax.
It is true that the Finance Act in question merely levied a fixed rate of tax in respect of all the income disclosed without allowing deductions exemptions and set off under the relevant income tax law yet its function was no more than that of a Finance Act passed annually even though it made certain alterations with regard to filing of declaration and computation of taxable income 415 It was however urged on behalf of the Department that the nature of the declaration which was dependent upon the volition of the declarant and the fact that the liability to tax the amount mentioned therein was contingent upon the willingness of the declarant to disclose the amount ought to make a difference.
We do not think so because any such voluntary disclosure by an assessee even in the absence of section 68 would have exposed him to an assessment or reassessment as the case may be being made in respect of the sum disclosed as part of the income of the relevant assessment year and of course with the additional liability to payment of interest and levy of penalty and perhaps with the right to claim deductions if any admissible in the circumstances of the case and the benefit of other procedural rights.
The voluntary character of the declaration cannot therefore alter the character of the tax.
There is also no substance in the contention that in the absence of the allocation of the amount disclosed amongst different assessment years the tax payable under section 68 cannot be termed as a tax on income because such allocation would not achieve any additional purpose in the scheme of section 68 Irrespective of the other income which may have been determined in an ordinary proceeding under the relevant law of income tax a fixed rate of tax is payable under section 68(3) and hence the amount disclosed being treated as the income of any particular year would not make any difference regarding the quantum of tax.
Nor is there any other purpose to be served by such allocation.
Section 68 is in the nature of a package deal but the net result achieved is that the declarant is treated as having discharged all his liability in respect of the said income under the income tax law.
There is one other circumstance which may be noticed here.
The tax levied under section 68 can be only a tax on income.
If we hold it otherwise it may become a tax on wealth itself.
The basis of the liability in this case is the admission made by the declarant that the amount declared was his income earned in previous years but concealed from the knowledge of the Department.
In these circumstances it cannot be said that the amount declared under section 68 is not income which was not taxable under the Indian Income tax Act 1922 or the Income tax Act 1961 as the case may be.
The finding of the High Court that section 68 created a fresh charge is incompatible with the foundation of the very reassessment proceedings under section 17 of the Act.
The basis of these proceedings is the information which the Wealth tax officer acquired 416 from the declaration filed by the assessee in this case that the assessee was in possession of unaccounted funds represented by the non genuine hundis which had progressively reached the level of Rs. 7,01,578 during the assessment year 1964 65 from the level of Rs. 4,57;465 in 1959 60 by gradual accumulation of income.
But for this assumption in the absence of any other material reassessment under the Act would have been possible only in the last year in which the disclosure was made.
That however is not the case here.
The High Court in support of its view has relied on the decision of the Kerala High Court though not the reason given in support of that decision in C. K. Babu Naidu vs Wealth tax Officer.
That decision has since been reversed in appeal by a Division Bench of that Court in C. K. Babu Naidu vs Wealth tax Officer, 'A ' Ward, Calicut & anr in which the Kerala High Court has held that the liability for tax arising under section 68 of the Finance Act was nothing other than the liability under the Income tax Act 1961 itself and accordingly has allowed the deduction of tax paid under section 68 as a debt owed on the valuation date.
In Commissioner of Wealth Tax, Haryana, H.P. & Delhi III vs Girdhari Lal, Commissioner of Wealth tax vs B. K Sharma, Commissioner of Wealth tax, West Bengal III, Calcutta vs Bansidhar Poddar, D. C. Shah vs commissioner of Wealth tax Mysore and Shri Bhagwandas Jain vs Addl.
Commissioner of Wealth tax, M. P., the High Courts of Delhi Allahabad Calcutta Karnataka and Madhya Pradesh have accepted the view that the tax paid under section 68 of the Finance Act should be treated as a debt owed for purposes of determining net wealth as denied in section 2(m) of the Act.
The High Court of Bombay has also recalled the same conclusion in Bhagwandas Binani vs Commissioner of Wealth tax, Bombay City III but in doing so it observed that it appears to us that although it is not possible to say that the amount of income tax paid under section 68 of the Finance Act 1965 is income tax under the charging sec 417 tion 3 or section 4 of the I.T. Acts it must be regarded as income tax paid in lieu of such income tax and would be entitled to the same considerations as lavished by the Supreme Court on the ordinary charge of income tax.
The High Court of Bombay appears to take the view as the High Court of Gujarat has done in the decision under appeal that a new liability is created by section 68 but it however would not have any adverse effect on the right of the assessee to claim the deduction.
While we approve of the conclusion reached by the High Court of Bombay we feel that the said decision to the extent it attempts to follow the reason given by the Gujarat High Court to hold that the liability under section 68 is a fresh liability is not correct.
The true position is that the amount declared has the liability to pay income tax imbedded in it on the valuation date but only the ascertainment of that liability is postponed to a future date.
In the instant case its determination is allowed to he done in accordance with the provisions of section 68.
Even though it may appear to be itself a complete code it is only a scheme which provides a method for the liquidation of an already existing income tax liability which was present on the relevant valuation date.
The view does not in any way To counter to any observations made by this Court in Commissioner of Income Tax, Bombay City I vs Khatau Makanji Spinning and Weaving Co. Ltd. In that case this Court was concerned with the validity of a charge levied by the Finance Act 1951 in respect of dividends distributed in excess of the specified limit under clause (ii) of the proviso to Paragraph of Part I of the First Schedule to that Act as applied to the assessment year 1953 54 by the Finance Act 1953.
This Court held that income tax was a tax on income of the previous year and it would not cover some thing which was not the income of the previous year or made fictionally so and according to the scheme of that provision it was impossible to say that the additional income tax was properly laid upon the total income because what was actually taxed was never a part of the total income of the previous year.
This decision is clearly distinguishable from the present case where what is taxed is the income which was ordinarily liable to tax but which had not been included in the return of the assessee or which had escaped assessment or which was still to be assessed to income tax under the relevant Income tax Act.
It was in fact a part of the total income though not assessed till the declaration was made.
Merely because it is stated that the rate of tax charged on the 418 amount declared is sixty per cent or fifty seven per cent as the case may be it does not cease to be a part of the total income.
This is not a case where what was not in fact income had been converted into income by section 68.
For the same reason the Department cannot derive any support from the observations made by this Court in Madurai District Central Co operative Bank Ltd. vs Third Income tax officer, Madurai.(l) We are therefore of the view that the assessee was entitled to claim deduction of income tax payable on the amounts added to his total wealth under section 2(m) of the Act in the course of the reassessment proceedings.
In the result these appeals are allowed the judgment of the High Court is set aside and the questions referred to it are answered in the affirmative and in favour of the assessee.
The Department will pay the costs of the appellant assessee Hearing fee one set.
P.B.R. Appeals allowed.
| IN-Abs | As part of a measure to mop up unaccounted money on which no income tax had been paid, an incentive scheme was prepared by the Government under which a person disclosing such income was required to pay a specified rate of tax without attracting the penal provisions of the Income Tax Act.
Section 68 of the Finance Act, 1965 provided that a person making voluntary disclosure of his income in accordance with the provisions of the section would be charged income tax at a specified rate notwithstanding anything contained in the Income Tax Act.
The assessee had a large sum of such unaccounted money in his possession.
Without allocating the total sum amongst the different assessment years, he declared that he had a sum of Rs. 7 lakhs in his possession which was earned by him during the assessment years 1957 58 to 1964 65.
Income Tax in respect of this income computed in accordance with section 68 of the Finance Act was paid by him.
In the wealth tax returns filed by him in response to the notice issued by the Wealth Tax officer for re assessment consequent on the disclosure of his wealth the assessee claimed deductions of income tax paid under section 68 of the Finance Act.
But the Wealth Tax officer disallowed the claim holding that since the assessee had not shown the liability to pay income tax in his balance sheets for the respective years the deductions claimed by him could not be allowed in any of the assessment years.
The Appellate Assistant Commissioner dismissed the assessee 's appeal.
The Tribunal, on the other hand, held that the liability constituted a "debt owed" because in truth and substance, it was a liability under the Income Tax Act, 1922 or 1961 and not a new liability created by the Finance Act, 1965.
On reference the High Court held in favour of the Revenue on the ground that section 68 of the Finance Act enacted a new charge of tax on an ad hoc 403 basis on disclosed income and, therefore, it was not a "debt owed" which could be allowed as a deduction under the Wealth Tax Act.
On behalf of the Revenue it was contended that since the tax paid by the assessee under the voluntary disclosure scheme was in discharge of a liability created for the first time by the Finance Act, 1965 it was not an allowable deduction under the Wealth Tax Act.
Allowing the appeal, ^ HELD: The assessee was entitled to claim deduction of income tax paid on the amounts added to his total wealth under section 2 (m) of the Wealth Tax Act in the course of the assessment proceedings.
[418 B] C 1.
Merely because the amounts were disclosed in a declaration under section 68 of the Finance Act, they did not cease to be incomes not already charged to income tax.
Although the Finance Act merely levied a fixed rate of tax in respect of all the income disclosed without allowing deductions, exemptions and such other allowances which are allowable under the Income Tax Acts, its function was no more than that of an annual Finance Act despite the fact that it made certain alterations in regard to the filing of declaration and computation of taxable income.
[414 G H] 2.
The nature of the declaration which was dependent on the volition of the declaring and the fact that the liability to tax the amount was contingent upon the willingness of the declaring to disclose the amount would not make a difference because such voluntary disclosure, even in the absence of section 68, would have exposed the assesseee to assessment or reassessment.
The voluntary character of the declaration cannot alter the character of the tax.
[415 A B] 3.
The true position is that the amount declared has the liability to pay income tax embedded in it on the valuation date but only the ascertainment of that liability is postponed to a future date.
[417 C] In the instant case its determination was allowed to be done in accordance with the provisions of section 68.
Even though this section was a complete code in itself it was only a scheme which provided a method for the liquidation of an already existing income tax liability which was present on the relevant valuation date.
[417 D] 4.
Nor did the absence of allocation of the amount disclosed amongst different assessment years detract the tax from being called a tax on income because such allocation would not achieve any additional purpose in the scheme of section 68 This section is in the nature of a package deal.
The net result achieved was that the declarant was treated as having discharged all his liability in respect of such income under the income tax law.
[415E] 404 5.
The finding of the High Court that section 68 created a fresh charge is incompatible with the foundation of the very reassessment proceedings under section 17 of the Wealth Tax Act.
[415 H] 6.
Moreover section 68, at more than one place stated that what was pay able was income tax which clearly showed that what was payable under the section was income tax.
[412 B C] C.I.T. vs Khalau Makanji Spinning and Weaving Co. Ltd., Madurai District Central Cooperative Bank Ltd. vs Third I.T.O. , distinguished.
C. K. Bahu Naidu vs Wealth Tax Officer, ; C. Ii T vs GirdhariLal, ; C.W.T. vs B.K Sharma, ; C.W.T. vs Bansidhar Poddar.
; D.C. Shah vs C.W.T., ; Bhagwandas Jain vs Addl.
C.W.T. and Bhagwanidas Binani vs C.W.T., , approved.
|
Civil Appeal No. 1038 of 1973.
Appeal by certificate from the Judgment and Order dated the 19th February 1973 of the Calcutta High Court in Appeal from Original Order No. 200 of 1971.
section Chowdhuri, P.P. Ginwala, T.A. Ramachandran and D.N. Gupta for the Appellants.
V.S. Desai, Champt Rai and Miss A. Subhashini for Respondents No. 1 & 2.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
This appeal by certificate under Article 133 of the Constitution arises out of a writ petition filed by the appellants under Article 226 of the Constitution of India before the High Court of Calcutta.
The appellants are partners of a firm of Solicitors known as M/s. Orr Dignam & Co. having its office at Calcutta.
The appellants acted as the Solicitors of a German Corporation known as Ferbwerke Hoechst Aktiengesellschaft Vormals Mester Lucius & Bruning (a Corporation organised under the law of Federal Republic of Germany) (hereinafter referred to as 'the German Corporation ' ) in two suits filed on the Original Side of the Calcutta High Court one Suit No. 511 of 1962 filed by the Bengal Chemical and Pharmaceutical Works Ltd. against German Corporation and another Suit No. 1124 of 1962 filed by the German Corporation against the Bengal Chemical and Pharmaceutical Works Ltd. on the alleged infringement of a patent.
The appellants were instructed by a firm of Solicitors in London namely M/s. Ashurst, Morris, Crisp & Co. (hereinafter referred to as 'the London Solicitors ') who were also acting for the German Corporation by a cable dated May 31, 1965 to retain in the said suits Mr. Blanco White Q.C., a resident of the United Kingdom, who was a barrister having considerable practice in the branch of patent law.
On his arrival in India, the appellants accordingly retained Mr. Blanco White as the counsel to argue the case of their clients the German Corporation even though they did not deliver any briefs to him and also did not 390 pay or undertake any obligation to pay any fees for his services.
The briefs had been earlier delivered by the London Solicitors.
It is stated that they did not know as to how much amount was payable to him by the London Solicitors by way of fees.
The hearing of one of the said two suits lasted for thirteen days commencing from January 27, 1970 and was concluded on February 16, 1970.
Mr Blanco White left India on February 17, 1970 after the hearing was over without making any arrangement regarding the payment of income tax on the fees earned by him by arguing the case of the German Corporation.
Thereafter on February 19, 1970, the appellants received a notice from the Income tax Officer, 'A ' Ward, Foreiga Section asking them to furnish information about the fees earned in India by Mr. Blanco White as counsel engaged by them to argue the case of their clients i.e. the German Corporation and also drawing their attention to the liability arising under section 195 (2) of the Income tax Act, 1961 (hereinafter referred to as 'the Act ') which required them to deduct the tax payable under the Act at source on payments made to a non resident.
The appellants sent a reply to that letter on February 24, 1970 stating that Mr. Blanco White had been engaged by the London Solicitors of the German Corporation to appear before the Calcutta High Court on behalf of the German Corporation and that they had neither briefed him nor had they incurred any liability to pay him any fees.
They, therefore, denied their liability under section 195(2) of the Act.
Incidentally it may be stated here that the appellants referred to one other suit i. e. Suit No. 422 of 1963 on the file of the Calcutta High Court filed by the German Corporation against Albert David Ltd. in which also Mr. Blanco White had been engaged for the German Corporation.
Thereupon by a letter dated February 27, 1970 the Income tax Officer informed the appellants that he proposed to proceed against them under section 163 (1) of the Act treating them as the agents of Mr. Blanco White on the ground that the income in question had arisen on account of the business connection that existed between the appellants and Mr. Blanco White.
To this, the appellants sent a long reply dated March 10/11, 1970 denying their liability to be proceeded against under section 163 (1) of the Act.
In the course of the said reply, the appellants contended inter alia that they had not either engaged or briefed Mr. Blanco White in the three suits on the file of the Calcutta High Court; that they had not paid or promised to pay any fees lo him and that, therefore, no income had accrued to Mr. Blanco White on account of any business connection that existed between them and Mr. Blanco White.
The appellants further contended that as Mr. Blanco White was a 391 barrister who was not carrying on any business but had only, rendered professional service in Calcutta, the connection if any, could not be a business connection.
They also questioned the jurisdiction of the Income tax Officer to make any assessment treating them as the representative assessees of Mr. Blanco White.
The Income tax Officer by his letter dated March 25, 1970 rejected the plea of the appellants and called upon them to appear before them on April 18, 1970 to make any other submission that they had to make.
Thereafter the appellants filed a petition under Article 226 of the Constitution before the High Court of Calcutta and obtained a rule nisi on May 25,1970) calling upon the Income tax Officer, the Commissioner of Income tax West Bengal and the Union of India to show cause as to why the proposal to initiate proceedings under the Act as stated above should not be quashed and a writ in the nature of mandamus prohibiting them from proceeding against the appellants under section 163(1) of the Act should not be issued.
The petition was contested by the respondents.
In the Counter Affidavit filed by the Income tax Officer, it was asserted that the Department had received information that Mr. Blanco White had charged Rs. 17,000/ per day by way of fees for appearing in the Calcutta High Court in the suits referred to above; that Mr. Blanco White was not domiciled in India; that inasmuch as his stay in India did not exceed ninety days it was not necessary for him to obtain a Tax Exemption Certificate for leaving India; that the appellants had acted as instructing Solicitors to the German Corporation in the three suits in which Mr. Blanco White had argued as counsel; that he could not have, according to the Calcutta High Court Rules (Original Side) appeared before that court unless he was instructed by an Attorney of that Court was in the instant case happened to be the appellants and that, therefore.
there existed a business connection which brought the appellants within the scope of section 163(1) of the Act.
It was also contended by the respondents that the petition was premature as the matter had still to be decided in accordance with the procedure prescribed by the Act.
The learned Single Judge who heard the petition was of the view that the question whether the case came within the purview of section 163(1) had to be determined after ascertainment of facts by the Income tax Officer and that therefore, the petition was liable to be dismissed on the ground that it was a premature one.
Accordingly he dismissed it without expressing any opinion on the merits of the case.
Aggrieved by the decision of the Single Judge, the appellants preferred an appeal before the Division Bench of the Calcutta High Court.
The Division Bench dismissed the appeal holding, inter 392 alia, that from the facts disclosed before the Court it appeared that from May 31, 1965 upto February 16, 1970 there was business connection (directly of indirectly through correspondence) between the appellants firm and the non resident British counsel, Mr. Blanco White, that it could not be said that there was no element of continuity and that the transaction was a solicitory and isolated one and that taking into account the surrounding circumstances and particularly the relationship between the Solicitors and a counsel, an agency could very well be said to have been established between the appellants ' firm and the non resident British counsel, Mr. Blanco White.
The Division Bench further held that there was business connection between them and that it was not possible to accept the contentions of appellants that no income either accrued or arose to Mr. Blanco White in India.
The appeal was accordingly dismissed.
On a certificate granted by the Division Bench under Article 133 of the Constitution, the appellants have come up in appeal to this Court against the judgment of the Division Bench of the High Court.
It should be stated here that alongwith the petition for a certificate under Article 133 of the Constitution, the appellants filed an application before the High Court for stay of further proceedings before the Department.
On that application, the High Court passed an order on March 12, 1973 stating that the order of stay already granted would continue subject to the following modification. "(1) The respondents will be at liberty to decide after giving the petitioners a hearing whether the petitioners firm should be treated as agent of Mr. Blanco White under section 163 of the Income tax Act.
1961: (2) If they so decide the respondents will be at liberty to issue a notice under section 148 of the Act but will not take any further steps thereafter until the disposal of the application; (3) The petitioners will also be at liberty to appeal from any order made under section 163 without prejudice to their contentions in the proposed appeal to the Supreme Court".
We are informed that pursuant to the liberty given by the said order, the Income tax Officer made an order on March 23, 1977 treating the appellants ' firm as the agent of Mr. Blanco White under section 163(1) of the Act and also on the same date issued a notice 393 under section 148 of the Act to the appellants to file a return of the income of Mr. Blanco White.
It is also stated that the appellants preferred an appeal against that order before the Appellate Assistant Commissioner without prejudice to the appellants ' contentions in their appeal to this Court.
Ultimately on November 30, 1973 this Court made an order that the appellants might apply to the Appellate Assistant Commissioner for an order of stay in respect of the question whether they were agents of Mr. Blanco White and that at any rate even if the Income tax Officer were to proceed with the case, he would make the assessment but would not make a final demand till the disposal of the appeal.
It is further stated that pursuant to the notice under section 148 of the Act, the appellants filed a 'nil ' return.
Thereafter we are informed that the Income tax Officer intimated the appellants on September 17, 1977 that he had completed the assessment of Mr. Blanco White for the assessment year 1970 71 treating the appellants ' firm as the agent and that copies of the assessment order, demand notice and challan would be forwarded to them after disposal of this appeal.
It is necessary to refer at this stage to certain relevant facts of the case.
The appellants were acting as the Solicitors of the German Corporation in India in the cases referred to above and the London.
Solicitors were acting as its Solicitors in London.
Suits Nos.
511 and 1124 had been instituted in 1962 and suit No. 422 in 1963.
On May 31, 1965, the London Solicitors sent a cable to the appellants which read as follows: " Dignior Calcutta We act for Farewerke Hoechst this country and understand that you act India stop in connection acting infringement Indian Tolbutamide patent have been instructed to retain Blanco White as counsel to attend hearings Calcutta and Bombay stop Imperative to know dates of respective actions since counsel can only accept subject to other Commitments stop Please cable hearing dates if known or date when Information available stop our Ref Lcc.
Ashursts London Col Blanco White REF: LCC.
" The above cable shows that the London Solicitors had sought information about the suits in Calcutta to enable them to engage Mr. Blanco White to plead on behalf of the German Corporation in the said suits.
On December 23, 1969, the London Solicitors 394 wrote a letter to the appellants in which it was stated that the copies of certain documents sent by the appellants had been handed over to Mr. Blanco White in addition to copies of certain other documents which they themselves had handed over to him.
A part of the aforesaid letter which is relevant for the purpose of the present case, is reproduced below: ".
We are asking Mr. Divecha of Hoechst Pharmaceuticals Limited, Bombay, to arrange for copies of the evidence in the Bombay case to be sent to you.
The formulation of the evidence can then be discussed between you and your Counsel and Mr. Blanco White when he arrives in Calcutta.
The remaining documents which we are sending you are three bound volumes of pleadings which you sent to us in the early stages but which will no doubt be of use to you at the trial, Mr. Blanco White of course has copies of all the pleadings in the three cases.
There are a number of points which Mr. Blanco White has asked us to put to you for consideration and these are as follows: 1.
It is not entirely clear from the pleadings that Indian Patent No. 66049 is a document in the Albert David case.
Will you please consider whether this specification may have to be strictly proved ? 2.
In the infringement action by Hoechst against Bengal Chemicals, the defendants have objected there is no claim against the second and third dependants, that is the inventors named in the Patent.
Mr. Blanco White sees no reason to pursue this point and, subject to your views, would suggest that it is abandoned.
In the threats action by Bengal Chemicals, again subject to your views, Mr. Blanco White would not propose to argue that Hoechst did not in fact threaten proceedings.
Also in the threats action, there is a point which we would mention here on which we are asking Hoechst Pharmaceuticals Limited of Bombay for information.
Bengal Chemicals have said in their affidavits filed in the interlocutory proceedings in April 1962 that they stopped production of Tolbutamide because of the threats made by Hoechst.
395 At the same time it appears that they published advertisements in the Punjab Medical Journal and the Indian Medical Journal of Ist May of that year.
We are asking Hoechst Pharmaceuticals if they can say when these advertisements would have had to have been sent to those Journals for publication on that date.
Mr. Blanco White will be flying in Calcutta on BOAC Flight No. 914 leaving London on Tuesday, 20th January 1970 and arriving at 6.40 a.m. local time on Wednesday, 21st January.
He would like to have preliminary discussion with you and counsel on matters of procedure, etc.
On Thursday morning and possibly Wednesday afternoon.
We believe that the gentlemen from Hoechst, Frankfurt plan to arrive in Calcutta on Thursday, 22nd January, so as to be available for more detailed talks starting on Friday.
We are asking Hoechst, Bombay to arrange for hotel accommodation for Mr. Blanco White.
" Then there is the letter dated January 8, 1970 written by the London Solicitors to the appellants enclosing copies of the briefs which had been delivered by the London Solicitors to Mr. Blanco White.
The said suits came up for hearing on January 27, 1970.
The appellants had engaged Mr. P.P. Ginwala, Mr. A.K. Basu and Mr. Sankar Ghose to appear on behalf of the German Corporation in the said suits.
In paragraph 6 of the writ petition filed before the High Court out of which this appeal arises, the appellants have stated as follows: "On 27th January 1970 the said suits were called on before his Lordship the Hon 'ble Mr. Justice K.L. Roy.
It was decided to take up Suit No. 1124 of 1962 first.
In the said suit Mr. Blanco White, Q.C. appeared with Mr. P.P. Ginwala, Mr. A.K. Basu and Mr. Sankar Ghose.
The said suit No. 1124 of 1962 was heard on 27th, 28th, 29th, 30th January 1970, 2nd, 3rd, 4th, 5th, 6th.
9th, 12th, 13th and 16th February 1970 and judgment was reserved.
The other suits were adjourned until after the judgment.
" In his letter dated March 21, 1973 written to the London Solicitors marked as Annexure 'E ' to the writ petition, Mr. Blanco White while attempting to make out a case supporting the appellants admitted that he was not disputing that when he was actually in 396 Court in Calcutta, he was, formally, there on instructions from the appellants as attorneys.
The relevant part of that letter reads: "Dear Mr. Gane, Farbwerke Hoechst vs Bengal Chemical.
Certainly I can confirm that, when I appeared before the Calcutta High Court in January and February 1970.
I was briefed by your firm and not by Orr.
Dignam & Co. Accordingly, whilst I would not dispute that when I was actually in Court in Calcutta I was, formally, there on instructions from Orr.
Dignam as attorneys of record, all arrangements relating to my fees were made with you (as the English Solicitors of Hoechst in Germany) and Orr.
Dignam were at no time concerned with these arrangements." Mr. Blanco White left India on February 17, 1970 without making any arrangement for the settlement of his liability under the Act.
When the Income tax Officer issued the notice dated February 19, 1970 to the appellants drawing their attention to the provisions contained in section 195(2) of the Act and requesting them to furnish information regarding the income earned by Mr. Blanco White by arguing the case before the Calcutta High Court on behalf of the German Corporation, the appellants replied on February 24, 1970 stating that the London Solicitors had engaged Mr. Blanco White to appear on behalf of the German Corporation before the Calcutta High Court; that the appellants had not briefed him nor did they know on what fees, if any, he had been engaged.
In their letter dated March 10/11, 1970 to the notice dated February 17, 1970 issued by the Income tax Officer to the appellants under section 163(1) of the Act, the appellants again stated that they had not engaged or delivered any brief to Mr. Blanco White and that they had no business connection with him.
It was urged before the High Court by the appellants that there was no sort of connection between the appellants and Mr. Blanco White and even if there was any connection, it was just a casual one and could in no case be termed as business connection: that they had not undertaken to pay any fees to him for appearing in the suits and that, therefore, the appellants were not liable to be assessed.
The Division Bench of the High Court which heard the appeal came to the conclusion that there was business connection between the appellants and Mr. Blanco White; that it could not be said that there was no element of continuity and the transaction was a stray or an isolated one and that the appellants were not entitled to the issue of the writ prayed for on the facts and in the circumstances of the case.
397 For proper appreciation of the contentions advanced by the parties before us, it is necessary to refer to some of the provisions of the Act.
Section 160(1)(i) of the Act provides that in respect of the income of a non resident specified in sub section (1) of section 9 of the Act, the agent of the non resident, including a person who is treated as an agent under section 163 is a representative assessee.
Section 161 (1) of the Act stipulates that every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially, and shall be liable to assessment in his own name in respect of that income; but any such assessment shall be deemed to be made upon him in his representative capacity only, and the tax shall, subject to the other provisions contained in Chapter XV of the Act be levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him.
Section 163 (1)(b) and (c) of the Act provides that for purposes of the Act any person in India who has any business connection with the non resident or from or through whom the non resident is in receipt of any income whether directly or indirectly can be treated as an agent of such nonresident.
Section 5(2) of the Act inter alia provides that subject to the provisions of the Act, the total income of any previous year of a person who is a non resident includes all income from whatever source derived which accrues or arises or is deemed to accrue or arise to him in India during such year.
The relevant part of section 9(1) of the Act reads: "(1) The following incomes shall be deemed to accrue or arise in India (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through of from any asset or source of income in India or through the transfer of a capital asset situate in India; Explanation For the purposes of this clause (a) in case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India 398 From the facts stated above it is seen that from the year 1965 there was correspondence between the appellants and the London Solicitors who in their turn had engaged Mr. Blanco White in connection with the suits in question.
It shows that there was a connection between the appellants and Mr. Blanco White though it was an indirect one.
After his arrival in India, it must be assumed that the appellants had done all that was suggested in the letter of the London Solicitors dated December 23, 1969.
It is admitted that Mr. Blanco White appeared with the Indian counsel engaged by the appellants and argued the case on behalf of the client of the appellants in the suit in which they were acting as solicitors.
Even though the appellants did not hand over ally briefs directly to Mr. Blanco White, it is seen that part of the records handed over to Mr. Blanco White by the London Solicitors consisted of the copies of records sent by the appellants to the London Solicitors.
It is further seen that Mr. Blanco White appeared before the High Court alongwith the Indian counsel engaged by the appellants, though with the leave of the Court granted presumably under section 32 of the .
We are also of the view that there must have been discussion between the appellants and Mr. Blanco White before the case was argued by him.
Moreover, Mr. Blanco White could appear only with the consent of the appellants who were the Solicitors on record.
In the circumstances, it cannot be said that the High Court was wrong in holding that there was connection between the appellants and Mr. Blanco White.
The said connection cannot also be termed as a casual one having regard to the period over which it had existed.
It was real and intimate and Mr. Blanco White earned the fees for arguing the case in India only through the said connection.
The case satisfies the test laid down by this Court in Commissioner of Income tax, Punjab vs R.D. Aggarwal and Co. and Anr.
for holding that there was connection between the appellants and Mr. Blanco White.
The finding of the High Court on the above question also appears to be well founded The only remaining question which needs examination is whether the said connection was a business connection.
The contention of the appellants is that a professional connection cannot amount to a business connection attracting section 9(1) of the Act.
In support of this contention the appellants depend upon the definitions of the expressions 'business ' and 'profession ' found in 399 section 2 (13) and section 2(36) of the Act.
Section 2(13) of the Act reads: "business" includes any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture".
Section 2(36) of the Act provides: ""Profession" includes vocation ".
Section 14 of the Act which enumerates the heads of income which give rise to a liability to tax under the Act treats the income from profits and gains of business and profession as a single head.
Sections 28 to 44B of the Act constitute the fascicule of provisions dealing generally with the computation of income from business and profession although not all those provisions are applicable to income from a profession.
The definition of the expression 'business ' given in the Act is an inclusive one.
The expression 'business connection ' however is not defined in the Act.
It is manifest that the words in section 9(1) and section 163 are comprehensive enough to include all heads of income mentioned in section 14 of the Act.
It is no doubt true that there is specific reference to 'business ' in section 9(1) and there is no reference to 'profession '.
But no tenable reason is discernible from the statute for excluding income arising out of profession from its scope.
In this connection two submissions are made on behalf of the appellants (1) that it was the intention of the Parliament to exclude non residents engaged in learned professions from the operation of section 9(1) and that even if the intention of the Parliament was not to exclude such persons from section 9(1) since there is an omission to refer to them expressly the lacuna should not be made good by giving a wide interpretation to the expression 'business connection '.
We do not find that there is any substance in the first submission.
There could be no good reason for the Parliament for excluding non resident professional men from the purview of section 9(1) of the Act.
There is no material on which we can reach that conclusion.
In so far as the second submission is concerned, we have to examine whether it would really amount to filling up a lacuna in the section if the expression 'business connection ' is interpreted as including within its scope 'Professional Connection ' also.
400 In Commissioner of Income Tax, Bombay vs Currimbhoy Ebrahim & Sons Ltd., Sir George Rankin speaking for the Judicial Committee of the Privy Council while construing the expression 'business connection ' in section 42(1) of the Indian Income Tax Act 1922 observed: "The phrase " business connection " is different from, though doubtless not unrelated to, the word "business" of which there is a definition in the Act ".
The expression 'business ' does not necessarily mean trade or manufacture only.
It is being used as including within its scope professions, vocations and callings from a fairly long time.
The Shorter oxford English Dictionary defines 'business ' as 'stated occupation, profession or trade ' and ' a man of business ' is defined as meaning 'an attorney ' also.
In view of the above dictionary meaning of the word 'business ' it cannot be said that the definition of business given in section 45 of the Partnership Act, 1890 (53 & 54 Vict. c. 39) was an extended definition intended for the purpose of that Act only.
Section 45 of that Act says: "The expression "business includes every trade, occupation, or profession".
Section 2(b) of the also defines " business" thus: " "business" includes every trade, occupation and profession".
The observation of Rowlatt, J. in Christopher Barker & Sons vs Commissioner of Inland Revenue.
"All professions are business, but all businesses are not professions,. " also supports the view that professions are generally regarded as businesses.
The same learned Judge in another case Commissioner of Inland Revenue vs Marine Steam Turbine Company Limited held: The word 'business ' however is also used in another and a very different sense, as meaning an active occupation or profession continuously carried on and it is in this sense the word is used in the Act with which we are here concerned.
" 401 The word business is one of wide import and it means an A activity carried on continuously and systematically by a person by the application of his labour or skill with a view to earning an income.
We are of the view that in the context in which the expression business connection is used in section 9 (1) of the Act there is no warrant for giving a restricted meaning to it excluding professional connections from its scope.
There is very little substance in the submission made on behalf of the appellants that since Mr. Blanco White could not appear as counsel as of right either under the or under the Calcutta High Court original Side Rules he could not be treated as having any business connection with the appellants.
As noticed earlier Mr. Blanco White appeared alongwith the Indian counsel engaged by the appellants and the appellants continued to represent the German Corporation when Mr. Blanco White argued the case before the High Court.
It is difficult to hold that he was a stranger to the appellants.
The appellants may not have engaged him to argue the case but they allowed him at the request of the London Solicitors to argue the case and willingly cooperated with him in doing so.
That it was their case that Mr. Blanco White argued cannot be denied.
The appellants may not have undertaken to pay his fees but he could not have argued and earned the fees without associating himself with the appellants.
The fact that Mr. Blanco White being a barrister could not file a suit to recover the fees would not make any difference in this case as in the letter dated August 19 1980 written by the London Solicitors to the appellants which is produced before us it is stated that the fees of Mr. Blanco White amounted to 2200 with refreshers at the rate of 220 per day.
We need not go into the correctness of these figures but the fact remains that Mr. Blanco White has earned income for the work done in India.
We do not propose to go into question as to what would happen if no fees have been realised by him at all.
In view of the foregoing we are of the view that the judgment of the Division Bench of the High Court which is under appeal does not call for interference.
In the result the appeal is dismissed.
I he parties shall however bear their costs.
V.D. K .
Appeal dismissed.
| IN-Abs | The appellants are partners of a firm of Solicitors at Calcutta and they had been engaged by a German Corporation to act on its behalf in three suits pending before the High Court at Calcutta.
A firm of Solicitors in London, namely M/s. Ashurst, Morris, Crisp & Co., which was also acting on behalf of the German Corporation instructed the appellants to retain Mr. Blanco White Q.C., a resident of the United Kingdom, who was a barrister having considerable practice in the branch of patent law, to argue the case in the aforesaid three suits.
The appellants did not deliver any briefs to him and also did not pay or undertake any obligation to pay any fees for his services The briefs had been earlier delivered by the London Solicitors.
Mr. Blanco White left India on February 17, 1970 after arguing the cases for 13 days commencing from January 27, 1970 to February 16, 1970, without making any arrangement regarding the payment of the Income Tax on the fees earned by him.
The Income Tax Officer informed the appellants that he proposed to proceed against them under section 163(1) of the Act treating them as the agents of Mr. Blanco White on the ground that the income arising out of professional charges had arisen on account of the business connection that existed between the appellants and Mr. Blanco White.
Thereafter the appellants challenged the said order of the Income Tax Officer by filing a petition under Article 226 of the Constitution before the High Court of Calcutta.
The learned Single Judge dismissed the petition on the ground that it was a premature one taking the view that the question whether the case came within the purview of section 163(1) of the Act had to be determined after ascertainment of facts by the Income tax officer.
The appeal preferred by the appellants was dismissed by a Division Bench holding (a) there was business connection (directly or indirectly through correspondence) between the appellants ' firm and their non resident British Counsel Mr. Blanco White and that an agency could very well be said to have been established between them; (b) there was business connection between them and (c) income did either accrue or arise to Mr. Blanco White in India.
However, the Division Bench granted certificate to the appellants under Article 133 of the Constitution and hence the appeal.
388 Dismissing the appeal, the Court ^ HELD: 1.
From the facts and other material on record there was connection between the appellants and Mr. Blanco White.
The said connection cannot also be termed as a casual one having regard to the period over which it had existed.
It was real and intimate and Mr. Blanco White earned the fees for arguing the case in India only through the said connection.
From the year 1965 there was correspondence between the appellants and the London Solicitors who in their turn had engaged Mr. Blanco White in connection with the suits in question Mr. Blanco White appeared before the High Court along with Indian counsel engaged by the appellants, though with the leave of the Court granted presumably under section 37 of the Advocates Act, 1951.
Mr. Blanco White could appear only with the consent of the appellants who were the Solicitors on record.
[398 A F] Commissioner of Income tax, Punjab vs R.D. Aggarwal and Co. and Anr., , applied .
2 It is incorrect to suggest that it was the intention of the Parliament to exclude non residents engaged in learned professions from the operation of section 9(1).
The words in section 9(1) and section 163 are comprehensive enough to include all heads of income mentioned in section 14 of the Act.
[393 D].
The expression "business" does not necessarily mean trade or manufacture only it is being used as including within its scope professions, vocations, and callings from a fairly long time.
From section 2(b) of the , it is clear that the "business is one of wide import and it means an activity carried on continuously and systematically by a person by the application of his labour or skill with a view to earning an income.
In the context in which the expression "business connection" is used in section 9(1) of the Income Tax Act, 1961 there is no warrant for giving a restricted meaning to it excluding "professional connection" from its scope.
[400 B D, 401 A B] Commissioner of income Tax, Bombay vs Currimbhoy Ebrahim and Sons Ltd., ; Christopher Barker and Sons vs Commissioner of Inland Revenue, at page 228 and Commissioner of Inland Revenue vs Marine Steam Turbine Company Limited, , quoted with approval .
In the instant case, (a) it cannot be said that since Mr. Blanco White could not appear as counsel as of right either under the Advocates Act or under the Calcutta High Court Original Side Rules, he could not be treated as having any business connection with the appellants; (b) since Mr. Blanco White appeared along with the Indian counsel engaged by the appellants and the appellants continued to represent the German Corporation when Mr. Blanco White argued the case before the High Court, it cannot be said that Mr. White was a stranger to the appellants; (c) the appellants may not have engaged him to argue the case but, they allowed him at the request of the London Solicitors to argue the case and willingly co operated with him in doing so; (d) the appellants may not have undertaken to pay Mr. White 's fees but he could not have argued and earned the fees without associating himself with the appellants.
The fact that Mr. Blanco White being a barrister could not file a 389 suit to recover the fees would not make any difference; and (e) that it is seen from the correspondence that Mr. Blanco White has earned the fees amounting to Pounds 2200 with refreshers at the rate of Pounds 220 per day, for the work done in India.
Therefore.
the appellants are liable to tax agents of Mr. Blanco White under section 153(1) of the Income Tax Act, 1961.
[401 B E]
|
Civil Appeal No. 758 of 1978.
Appeal by Special Leave from the Judgment and Order Decree dated 5.10.1977 of the Patna High Court (Ranchi Bench) Ranchi in Appeal from Appellate Decree No. 204 of 1976 (R).
R.K. Garg, V.J. Francis, D.K. Garg and S.K. Jain for the Appellant.
Sarjoo Prasad.
S.N. Misra and A.N. Bardiyar for the Respondents.
The Judgment of the Court was delivered by DESAI, J.
A tenant under a decree of eviction questions its correctness in this appeal by special leave.
Respondents 1 and 2 are the brother 's sons of respondent 3 Kishorilal Vishwakarma.
Respondents commenced an action for ejectment of the appellant under section 11 (2)(c) & (d) of the Bihar Buildings (Lease, Rent & Eviction) Control Act.
1947 ( 'Rent Act ' for short) from a shop forming part of holding No. 188 of Ward No. 3 within the area of Giridih municipality in Bihar State.
371 Claim for possession was founded on the ground mentioned in section 11 (1) (c) alleging that the respondents in good faith required possession of the shop for opening an office and a clinic by first respondent Manoharlal Sharma who by then had become a qualified medical practitioner having obtained M.B.B.S. degree.
The additional ground on which the claim rested was the usual one of default in payment of rent for a period of two months and more as envisaged by section 11 (1) (d).
Default complained of was failure to pay rent for the months of September, October and November, 1972.
Appellant contested the suit, inter alia, contending that he did not commit default in payment of rent for the months of September, October and November, 1972, and that the same was paid but no receipt was passed and that as the respondents were avoiding statutory liability of passing the receipt acknowledging payment of rent the appellant was forced to send the rent by Money Order from December 1972 and he sent the same month after month, and, therefore, he could not be dubbed a defaulter within the meaning of section 11(1) (d).
Controverting the ground of personal requirement, the appellant contended that the property belonged to a firm and, therefore, the same cannot be claimed for the use of any one partner for his business other than the business of the firm.
And in any case, the respondents have number of houses in their possession and the requirement alleged on behalf of Manoharlal Sharma was incorrect and unwarranted.
The learned trial judge framed as many as nine issues.
He held against the appellant both on the question of default in payment of rent and the personal requirement and after answering some technical defences raised by the appellant, learned trial judge decreed the suit.
The appellant preferred an appeal to the appellate authority.
When the appeal was pending before the learned Second Additional Subordinate Judge, Giridih, the appellant filed an application supported by an affidavit on September 28, 1976, purporting to be under order 41, rule 27, Code of Civil Procedure contending therein that as originally contended by him the shop belongs to a firm and in Suit No. 4 of 1974 there has been a partition of the properties amongst the members of the firm and the suit shop has been allotted to one Pyarelal, who is neither a plaintiff nor a party to the proceedings and if the shop now belongs to Pyarelal as an exclusive owner, the respondents and especially respondent 1 Manohar Lal Sharma cannot seek to evict the appellant for his personal requirement of the suit shop.
This application was filed 372 with an affidavit drawn at the foot of the application itself.
The learned appellate judge referred to this application in paragraph 12 of his judgment and negatived the contention therein raised observing that allotment of the suit shop to Pyarelal has taken place after the suit was filed and that as earlier the respondents were accepted by the appellant as the landlords of the suit shop, the subsequent partition decree would not help the appellant.
He then made a cryptic observation that 'in any view of the matter the finding of the learned Munsif regarding personal necessity is correct and there is no ground for interference. ' He agreed with the finding of the trial Court that there was default in payment of rent for a period of three months, and, therefore, also the respondents were entitled to a decree for eviction on the ground mentioned in section 11 (1) (d) of the Rent Act.
Accordingly he dismissed the appeal with costs.
A second appeal to the High Court by the tenant met with the same fate.
It is, however, advantageous to notice the approach of the High Court to the two contentions raised on behalf of the appellant.
The contention of the tenant that the ground for personal requirement of respondent 1 Manoharlal Sharma no more survives because he has no subsisting interest in the suit shop in view of the partition decree in Suit No. 4 of 1974 was negatived observing that the appellant had not moved the first appellate court with a proper application under order 41, rule 27 of the Code of Civil Procedure and as there was no such application on the record of the case the contention could not be entertained.
Alternatively, the High Court found it difficult to accept the contention that during the pendency of the appeal if the house in question was allotted to the share of one of the co sharers of the decree (sic) the decree which had been passed in their favour becomes nullity and is liable to be set aside by the appellate court on this ground alone.
Relevant to the second contention the High Court observed that the appellant did not challenge the finding of the two courts below on the question of default in payment of rent.
Accordingly the High Court dismissed the second appeal with costs.
Hence this appeal.
Learned counsel for the appellant canvassed the same two contentions before us which were pressed before the High Court.
It was contended that the High Court was clearly in error in rejecting the contention of the appellant that the ground of personal requirement was no more available to the respondents in view of the partition decree in Suit No. 4 of 1974 because not only the landlord must prove his requirement at the commencement of the action but 373 the landlord for whose requirement the action is commenced must show that his requirement continues throughout the course of proceedings and that he has a subsisting interest in the premises of which possession is sought for his own use.
Reliance was placed in support of this submission on Pasupuleti Venkateswarlu vs The Motor & General Traders.
It was also contended that the High Court was in error in observing that in the absence of a proper application under order 41, rule 27 the court could not entertain the contention thereby sought to be raised.
It was also contended that the High Court was in error in observing that the finding that the appellant was in default in payment of rent for a period of two months was not questioned before it.
Respondents 1 and 2 are the sons of one Sunderlal Sharma.
Respondent 3 is the brother of Sunderlal Sharma.
One Pyarelal is also a brother of Sunderlal Sharma and Respondent 3 and thus an uncle of respondents 1 and 2.
These facts have become very relevant for evaluating and disposing of the contention canvassed before us.
Action for ejectment was filed by respondents 1 and 2 Manoharlal Sharma and Motilal Sharma sons of deceased Sunderlal Sharma, and respondent 3 Kishorilal Vishwakarma, brother of Sunderlal Sharma, inter alia, stating that they are the owners of the suit shop and are thus landlords within the meaning of Rent Act and that they require possession of the suit premises, firstly on the ground that Manoharlal Sharma wants to open his clinic in the suit shop and secondly, that the appellant tenant has committed default in payment of rent for a period of two months and more.
At the first appellate stage appellant filed an application, in the cause title of which it is mentioned that it is an application purporting to be under order 41 rule 27, C.P.C. and at the foot of it there is a sworn affidavit with reference to the contents of the application.
In this application it has been in terms stated that in suit No. 4 of 1974 (Kishorilal Vishwakarma vs Pyarelal Vishwakarma) for partition of the assets of the firm there has been a compromise on August 16, 1974, and that by the partition effected by the decree the suit shop has been allotted to Pyarelal and thereby he became the owner and landlord of the suit shop with reference to the appellant and as he is neither a party to the 374 suit nor has he applied to be joined as a party to the suit, the present respondents have no subsisting interest in the property and, therefore, a decree for eviction on any of the grounds mentioned in the Rent Act could not be passed in their favour.
He requested for setting aside the decree on this ground.
It was further stated in the application that this fact being in the special knowledge of the respondents did not come to the knowledge of the appellant and notwithstanding the exercise of due diligence such evidence was not within his knowledge or could not after the exercise of due diligence be produced by him, and, therefore, he sought to produce this additional evidence at the appellate stage.
A request was made to accept the certified copy of the partition decree evidencing the fact alleged in the application.
The learned appellate judge did not find fault either with the form of the application or compliance with the technical requirement of order 41, rule 27, or in any delay in moving the court for taking on record the additional evidence, The learned judge of the first appellate court disposed of the contention raised in the application on merits as would be evident from paragraph 12 of his judgment.
Not to confound the issue on this point any more, the observation of the learned judge of the first appellate court may be extracted; "After the argument was heard, the deft.
appellant has filed the certified copy of the compromise decree of P.s 4 of 1974 (page 10 begins) Relying on this decree it has been alleged that the house in question has now been allotted to one Pyarelal who is not party to this suit.
So, now, the puffs have no concern with the suit house.
This event had taken place after passing of the decree.
If Pyarelal was co sharer then other co sharer is competent to file a suit on behalf of the other.
From the notice reply ext.
1 it will appear that ownership of the puffs respondent of T.S. 47/73 was accepted.
Once they have accepted that the plaintiffs are the owner now the defendant appellant can not say that the puffs are not the owner of the suit premises.
This partition decree will not help the defendant to say that the puff do not require the house now ? In execution of that partition decree, also the vacant possession will be required.
So, in any view of the matter I find that the findings of the matter I find that the findings of the learned Munsif, regarding the personal necessity is correct and there is ground for interference.
The learned Munsif has rightly appreciated the evidence and has come to the correct findings.
" 375 It would unquestionably appear that the learned judge entertained the application for additional evidence, took it on record and examined it on merits.
In this background, in our opinion, the High Court was clearly in error in ignoring this evidence in second appeal on a technical consideration that a proper application under order 41, r. 27 was not placed before the first appellate court.
Here is what the High Court says: "Whenever any additional evidence is produced before an appellate court a regular application under order 41, rule 27 of the Code of Civil Procedure is filed.
There is no such application in the records of the case.
" Obviously, this is contrary to record.
But the High Court appeared to be in two minds when it proceeded to entertain the contention on merits and negatived it on merits.
Says the High Court further on this point as under: "Apart from that, it is difficult to accept the contention that during the pendency of the appeal if the house in question is allotted to the share of one of the co sharers of the decree, the decree which had been passed in their favour becomes nullity and is liable to be set aside by the appellate court on this ground alone.
This aspect of the matter has (sic) considered on several occasions by this Court where the plaintiff, during the pendency of the suit has assigned his interest.
Even in those cases it has been held that by mere assignment the plaintiff does not lose the right to maintain the suit.
In my view, the position will be all the more difficult for the defendant if any such objection is taken for the first time in the court of appeal.
" What precedents are relied upon by the High Court when it says that the aspect required to be considered by it has been examined on a number of occasions left us guessing because there is no citation in the judgment.
If the precedent relied upon was quoted in the judgment we could have profitably examined the precedent itself.
In the absence of it the contention being a pure question of law will have to be examined on its own merits.
The procedural conundrum may be cleared out at the threshold.
Was there a proper application before the appellate court under 376 order 41, rule 27.
It must be answered in the affirmative.
The application Annexure II page 36 of the record recites in its title as: 'Petition under order 41, rule 27 of the Civil Procedure Code '.
It is founded on an affidavit.
It is a well recognised practice commonly adopted in courts that where an application is required to be supported by an affidavit the application is drawn up and at the foot of it an affidavit is sworn.
Even taking the most technical view of the requirement of order 41, r.27, C.P.C. the petition purporting to be under order 41 rule 27 meets with the requirement of the situation.
The contention of delay in moving the application will be presently examined but the High Court could not have rejected the contention raised by the appellant on the ground that a proper application under order 41, rule 27, is not to be found on record.
To some extent this observation would indicate that the record of the case was not examined with the thoroughness as is expected in disposing of the appeal.
In fact, the first appellate court whose grievance was that the application was filed after the arguments were concluded, has had no objection in treating the application to be one under order 41, rule 27.
It has been so treated and has been disposed of on merits as per the passage from the judgment extracted hereinbefore.
The High Court, therefore, was squarely in error in rejecting the contention on the narrow ground that there was no proper application under order 41, rule 27.
Now, probing the merits of the contention, the first thing that stares in the face is whether where a suit is filed by a person claiming to be landlord on the ground that he in good faith requires the suit premises for his own use and occupation, would he still be entitled to a decree for possession on this ground even if during the course of proceedings his interest in the suit premises has come to an end and on the date of the final decree he had no subsisting interest in the suit premises? In other words, how should the Court approach a proceeding under the Rent Act while taking into consideration the subsequent events which would non suit the plaintiff? The expression 'landlord ' has been defined in section 2 (d) of the Rent Act which reads as under: "landlord" includes the persons who for the time being is receiving, or is entitled to receive, the rent of a building whether on his own account or on behalf of another, or on account or on behalf or for the benefit, or himself and others or as an agent, trustee, executor, administrator, 377 receiver or guardian or who would so receive the rent, or be entitled to receive the rent if the building were let to a tenant.
" The inclusive definition is couched in very wide language.
However this wide amplitude of the expression has been cut down by the explanation appended to sub clause (c) of sub section (1) of section 11 which reads a under: 11.
Eviction of tenants: (a) Notwithstanding anything contained in any contract or law to the contrary but subject to the provisions of the Industrial Dispute Act, 1947 and to those of section 12, where a tenant is in possession of any building, he shall not be liable to eviction there from except in execution of a decree passed by the Court on one or more of the following grounds; . . (c) Where the building is reasonably and in good faith required by the landlord for his own occupation or for the occupation of any person for whose benefit the building is held by the landlord; Provided that where the Court thinks that the reasonable requirement of such occupation may be substantially satisfied by evicting the tenant from a part only of the building and allowing the tenant to continue occupation of the rest and the tenant agrees to such occupation the Court shall pass a decree accordingly, and fix proportionately fair rent for the portion in occupation of the tenant, which portion shall thenceforth constitute the building within the meaning of clause (aa) of section 2, and the rent so fixed shall be deemed to be the fair rent fixed under section 5; Explanation: In this clause the word "landlord" shall not include an agent referred to in clause (d) of section 2." Therefore, while taking advantage of the enabling provision enacted in s.11 (1) (c), the person claiming possession on the ground of 378 his reasonable requirement of the leased building must show that he is a landlord in the sense that he is owner of the building and has a right to occupy the same in his own right.
A mere rent collector, though may be included in the expression landlord in its wide amplitude cannot be treated as a landlord for the purposes of section 11 (1) (c).
This becomes manifestly clear from the explanation appended to the sub section.
By restricting the meaning of expression landlord for the purpose of section 11(1)(c), the legislature manifested its intention namely that landlord alone can seek eviction on the ground of his personal requirement if he is one who has a right against the whole world to occupy the building himself and exclude any one holding a title lesser than his own.
Such landlord who is an owner and who would have a right to occupy the building in his own right, can seek possession for his own use.
The latter part of the section envisages a situation where the landlord is holding the buildings for the benefit of some other person but in that case landlord can seek to evict tenant not for his personal use but for the personal requirement of that person for whose benefit he holds the building.
The second clause contemplates a situation of trustees and cesti que trust but when the case is governed by the first part of sub clause (c) of sub section (1) of s.11, the person claiming possession for personal requirement must be such a landlord who wants possession for his own occupation and this would imply that he must be a person who has a right to remain in occupation against the whole world and not someone who has no subsisting interest in the property and is merely a rent collector such as an agent, executor, administrator or a receiver of the property.
For the purposes of section 11(1)(c) the expression landlord could, therefore, mean a person who is the owner of the building and who has a right to remain in occupation and actual possession of the building to the exclusion of everyone else.
It is such a person who can seek to evict the tenant on the ground that he requires possession in good faith for his own occupation.
A rent collector or an agent is not entitled to occupy the house in his own right.
Even if such a person be a lessor and, therefore, a landlord within the expanded inclusive definition of the expression landlord, nonetheless he cannot seek to evict the tenant on the ground that he wants to personally occupy the house.
He cannot claim such a right against the real owner and as a necessary corollary he cannot seek to evict the tenant on the ground that he wants possession of the premises for his own occupation.
That can be the only reasonable interpretation one can put on the ingredients of sub clause (c) of section 11(1) which reads: "Where building is reasonably and in good faith required by the landlord 379 for his own occupation. ".
Assuming that the expression 'landlord ' has to be understood with the same connotation as is spelt out by the definition clause, even a rent collector or a receiver of the property appointed by the Court in bankruptcy proceedings would be able to evict the tenant alleging that wants the building for his own occupation, a right which he could not have claimed against the real owner.
Therefore, the explanation to clause (d) which cuts down the wide amplitude of the expression 'landlord ' would unmistakably show that for the purposes of clause (c) such landlord who in the sense in which the word 'owner ' is understood can claim as of right to the exclusion of everyone, to occupy the house, would be entitled to evict the tenant for his own occupation.
The next step to be taken is whether where a person claiming to be such a landlord has sought to evict the tenant for his own occupation of the building but lost his interest in entirety in the building during the pendency of the appeal which is a continuation of the suit.
Would he still be entitled to maintain or continue the action after the cessation or extinguishment of his interest in the building? To examine this contention on merits one feature of the proceedings under the Rent Act may be taken into consideration.
To what extent and in what circumstances the court can take notice of events subsequent to the institution of the action is the core problem.
This is no more res integra and need not be examined in depth.
In Pasupuleti Venkataeswarlus ' case this Court examined this question in relation to a proceeding under the Andhra Pradesh Buildings (Lease, Rent & Eviction) Control Act, 1960.
The landlord in that case sought to evict the tenant as he wanted to start his own business in the demised premises.
In other words, action was for eviction for personal requirement.
In the zig zag course of proceedings it transpired that subsequent to the commencement of the action the landlord had come into possession of another shop which would meet with his requirement and on this subsequent event tenant requested the court to non suit the plaintiff.
At that stage the proceedings were pending before the High Court in a revision petition at the instance of the landlord questioning a remand to the trial court by the first appellate court for investigation of certain facts.
In this revision at the instance of the landlord the High Court took notice of the subsequent event that the landlord 's requirement had been fully satisfied as he had come in possession of another shop.
In appeal by the landlord to this Court, a serious exception was taken that the High Court could not have taken into consideration an event subsequent to the commencement of the proceedings and non 380 suit the landlord and that too at a stage when the proceedings were pending in revision at the instance of the landlord.
Negativing this contention and dismissing the appeal this Court, after referring to the decision in Lachmeshwar Prasad Shukul vs Keshwar Lal Chaudhri quoted with approval the following passage from Patterson vs State of Alabama : "We have frequently held that in the exercise of our appellate jurisdiction we have power not only to correct error in the judgment under review but to make such disposition of the case as justice requires.
And in determining what justice does require, the Court is bound to consider any change, either in fact or in law, which has supervened since the judgment was entered.
" In the leading judgment in Lachmeshwar Prasad Shukul 's case Varadachariar, J. observed that an appeal being in the nature of a re hearing the Courts in India have in numerous cases recognised that in moulding the relief to be granted in a case on appeal, the Court of appeal is entitled to take into account even facts which have come into existence after the decree appealed against was made.
Krishna Iyer, J. summed up the position in Pasupuleti Venkateswarlu 's case: "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 Equally clear is the principle that procedure is the handmaid and not the mistress of the judicial process.
If a fact, arising after the lis has come to court and has a fundamental impact on the right to relief or the manner of moulding it is brought diligently to the notice of the tribunal, it cannot blink at it or be blind to events which stultify or render inept the decretal remedy.
Equity justifies binding the rules of procedure, where no specific provision or fairplay is violated, with a view to promote substantial justice subject, of course, to the absence of other disentitling factors or just circumstances.
Nor can we contemplate any limitation on this power to take note of updated facts to confine it to the trial Court.
If the litigation pends, the power exists, absent other special circumstances repelling resort to that course in law or 381 justice.
We affirm the proposition that for making the right or remedy claimed by the party just and meaningful as also legally and factually in accord with the current realities, the court can, and in many cases must, take cautious cognizance of events and developments subsequent to the institution of the proceeding provided the rules of fairness to both sides are scrupulously obeyed." To sum up, there was a proper and regular application to meet with the requirements of order 41 rule 27, CPC for additional evidence inviting the Court 's attention to a subsequent event of vital importance cutting at the root of the plaintiff 's right to continue the action.
Coupled with it, there was evidence in the form of a certified copy of the decree showing that the plaintiffs, even if they had some shade of title to commence action, they having lost all interest in the property and the property having become one of exclusive ownership of a person not a party to the proceedings, were no more entitled to continue the proceedings for their own benefit.
Have the first appellate court and the High Court acted in accordance with law in ignoring this subsequent event of vital importance ? The first appellate court, as pointed out earlier, proceeded to examine the contention on merits and rejected it on the ground that this being an event subsequent to the passing of the decree by the trial court, no notice could be taken of it, a view contrary to the law laid down by this Court.
Same is true of the High Court when it said that even if the landlord who commenced action lost all interest in the property subsequent to the passing of the decree, the decree does not become a nullity and at any rate no note of the subsequent events can be taken in the absence of a proper application under order 41, rule 27, C.P.C.
But the next observation of the High Court that where the plaintiff landlord 's interest in the property is extinguished subsequent to the decree by the trial court, he does not lose his right to maintain and continue the action, is opposed to the very scheme of the Rent Act and the provisions contained in sections 11(1)(c) and 12.
Both the courts were, therefore, clearly in error in ignoring this vital piece of evidence which goes to the root of the matter and would surely non suit the plaintiffs.
Once this subsequent event of landlord 's interest in the property getting extinguished as the property in question is allotted as an exclusive owner to a sharer upon a partition amongst co sharers, is properly evaluated, unless some proper explanation is offered by the landlords who are parties to the proceedings, the plaintiffs are 382 liable to be non suited.
This does not require much of a discussion because plaintiffs sought possession for personal requirement of respondent 1 Manohar Lal Sharma.
Monohar Lal Sharma wanted to start his clinic, as he is a qualified medical practitioner, in the suit premises.
Manohar Lal Sharma is neither an owner nor a co owner nor he has any interest in the suit property since the date of partition effected by compromise between the co sharers in Suit No. 4/75.
If action were to start today a or day after the decree for partition, could Manohar Lal Sharma ever file a suit for evicting the present appellant from the suit shop on the ground that he wanted to start his clinic in the suit shop ? If Manoharlal Sharma can bring such an action he can as well evict any tenant from any premises with which he has no connection.
Even if at the commencement of the action Manoharlal Sharma was a co owner alongwith his brother and uncle and, therefore, he had a semblance of title to commence action for eviction, once the co owner parted company, partitioned property by metes and bounds and the suit property came to be allotted to Pyarelal as an exclusive owner.
Manoharlal Sharma cannot claim eviction of the tenant from such property in which he has no subsisting interest.
And even if this event occurred subsequent to the passing of the decree by the trial court, this subsequent event should have been noticed at the appellate stage because the appeal is nothing else but a continuation of the suit and in a proceeding under the Rent Act the relief has to be moulded according to the situation on the date of the decree; the decree would mean the decree which is final and not correctible by any judicial proceeding.
Manoharlal Sharma, therefore, cannot seek to evict the tenant for his personal requirement.
Therefore, the suit for eviction under s.11(1)(c) would ordinarily fail on this ground.
However, as the fresh evidence is being taken into consideration and as both the appellate courts and the High Court, have erred in approaching the matter by ignoring the subsequent event, it would be presently pointed out that in order to do justice between the parties the matter will have to be remanded to the first appellate court.
Before turning to the next topic, a word about the judicial approach to the question of personal requirement of the landlord under the Rent Act would not be out of place.
The learned judge of the first appellate court while upholding the claim of personal requirement of respondent 1 has observed as under: "It is for the plaintiffs to decide whatever they think fit and proper.
It is not for the defendant to suggest as 383 to what they should do.
The defendant has led evidence to show that the plaintiffs have got some more houses at Girdih.
The defendant appellant has also filed certified copy of judgment of one suit No. 47/73 which is Ext.
only to show that plaintiffs have got a decree for eviction with respect to the other house at Giridih.
I have already pointed out earlier that it is for the plaintiffs to decide which of the houses is suitable for them.
It is not for the defendant to suggest that the house which will fall vacant in the near future is most suitable house for the plaintiffs".
This approach betrays a woeful lack of consciousness relatable to circumstances leading to enactment of Rent Acts in almost all States in the country.
The time honoured notion that the right of re entry is unfettered and that the owner landlord is the sole judge of his requirement has been made to yield to the needs of the society which had to enact the Rent Acts specifically devised to curb and fetter the unrestricted right of re entry and to provide that only on proving some enabling grounds set out in the Rent Act the landlord can re enter.
One such ground is of personal requirement of landlord.
When examining a case of personal requirement, if it is pointed out that there is some vacant premises with the landlord which he can conveniently occupy, the element of need in his requirement would be absent.
To reject this aspect by saying that the landlord has an unfettered right to choose the premises is to negative the very raison de 'etre of the Rent Act.
Undoubtedly, if it is shown by the tenant that the landlord has some other vacant premises in his possession, that by itself may not be sufficient to negative the landlord 's claim but in such a situation the Court would expect the landlord to establish that the premises which is vacant is not suitable for the purpose of his occupation or for the purpose for which he requires the premises in respect of which the action is commenced in the Court.
It would, however, be a bald statement unsupported by the Rent Act to say that the landlord has an unfettered right to choose whatever premises he wants and that too irrespective of the fact that he has some vacant premises in possession which he would not occupy and try to seek to remove the tenant.
This approach would put a premium on the landlord 's greed to throw out tenants paying lower rent in the name of personal occupation and rent out the premises in his possession at the market rate.
To curb this very tendency the Rent Act was enacted and, therefore, it becomes the duty of the Court administering the Rent Act to bear in mind the object and intendment of the legislature in enacting the 384 same.
The Court must understand and appreciate the relationship between legal rules and one of necessities of life shelter and the way in which one part of the society exacts tribute from another for permission to inhabit a portion of the globe.
In 'The Sociology of Law ', edited by Pat Carlen, the author examines the rent and rent legislation in England and Wales and observes as under: "The prevailing paradigms of neo classical economics and empiricist political theory have determined the conceptual insularity of law and legal institutions, with the result that they and other social events appear as random existences independent of their historical formation.
The force of any theory of law must of course lie in its explanatory power, and this in turn depends on the wider image of social relations which produces it".
It was, however, contended on behalf of the respondents that even if in view of the subsequent event the plaintiffs landlords were not entitled to recover possession on the ground set out in s.11(1)(c) yet the respondents would still be entitled to evict the appellant on the ground mentioned in section 11(1) (d) in as much as all the courts have concurrently found that the appellant was in default of payment of rent for a period of three months, i. e. September, October and November, 1972, and that this finding was not even questioned before the High Court as mentioned in paragraph 3 of the judgement of the High Court.
The appellant has set out ground No. V in his petition for special leave in the following terms: "Because the High Court erred in holding that the findings regarding default in payment of rent and of personal necessity were not challenged before the High Court".
Undoubtedly, what the High Court states in its judgment on the question whether a particular finding was challenged or not challenged is entitled to highest respect at our hands and must ordinarily be always accepted.
We have lingering hesitation in the facts of this case for two specific reasons: (i) that there are some recitals in the judgment of the High Court specifically referred to herein before which show that certain aspects have been disposed of cursorily, lacking precision; and (ii) that a tenant who examined as many as eight witnesses including himself to prove that the rent was paid and who specifically pleaded that fact in reply to the notice served by the landlords and who meticulously fought his case by making an application for additional evidence at the appellate 385 stage would not give up the contention and if he had in fact given it up there was no justification for still taking the matter to the highest court.
Even then we would have overlooked the contention to the contrary and accepted what has been stated in the judgment but for the fact that subsequent event stated hereinabove may have a direct impact on the title of the landlords respondents to evict the appellant on the ground of non payment of rent.
If on examining and evaluating the contents of the certified copy of the decree in partition suit No. 4/74 it is established conclusively that the property has been exclusively allotted to Pyarelal who has not applied to be joined as party to these proceedings though he has filed some affidavit in this appeal before this Court and if no reservation is made in the decree for continuation of the proceedings for recovering possession on the ground of non payment of rent in favour of the present respondents nor have the present respondents undertaken any liability to continue the proceedings on behalf of Pyarelal Sharma for the limited purpose of recovery of rent, in our opinion it would be extremely doubtful if the respondents can still maintain the action for recovering rent and for possession on the grounds mentioned in section 11(1)(c) & (d).
That aspect has not at all been examined either by the first appellate Court or by the High Court.
If 'A ', a landlord commences action for eviction against his tenant on the only ground of non payment of rent and during the pendency of the proceedings transfers the property lock stock and barrel to a third person and if the third person is not before the Court, without finally expressing any opinion because the remand is contemplated, it is just unthinkable that such a landlord can continue the suit even after he had no interest in the property.
The aspect may have to be examined in The background of the contract between the landlord who commenced the action and his transferee, or the transferee having reserved some right came to the Court for being impleaded as a party to continue the action and his, right to continue, may be examined.
These aspects arc not examined by any Court though decision on them goes to the root of the matter.
Therefore, a remand is inevitable in the circumstances of this case.
Accordingly, we allow this appeal and set aside the decree of the High Court and the first appellate Court and remand the case to the first appellate Court which, after granting the application under order 41, r. 27 and taking the certified copy of the decree in partition suit No. 4/74 on record and after giving an opportunity to the parties before it to lead any additional evidence pursuant to this additional evidence, would decide the following two questions: 386 (1) Does the partition decree transfer the suit shop to Pyarelal Sharma exclusively ? (2) If yes, can the respondents (plaintiffs) maintain action and are entitled to evict the appellant (defendant) on the ground of personal requirement of Manohar Lal Sharma (respondent 1) and/or on the ground of default as contemplated by section 11(1)(d) of the Rent Act ? On the evidence on these issues the Court may mould the final relief consistent with its findings.
With this direction the appeal is remanded to the first appellate Court.
In the circumstances of the case there will be no order as to costs.
N.V.K. Appeal allowed.
| IN-Abs | Respondents 1 and 2 are the brother 's sons of Respondent No. 3.
These respondents commenced an action for ejectment of the appellant from a shop under section 11(1)(c) & (d) of the Bihar Buildings (Lease, Rent and Eviction) Control Act, 1947, alleging that the respondents in good faith required possession of the shop for opening an office and a clinic by the first respondent who had become a qualified medical practitioner, and that there was default in payment of rent for a period of three months i.e. September, October and November, 1972.
The appellant contested the suit for eviction contending that he did not commit default in payment of rent for the three months and that the same was paid but no receipt was passed and that as the respondents were avoiding the statutory liability of passing the receipt acknowledging payment of rent, the appellant was forced to send the rent by money order from December, 1972 and he sent the same month after month, and therefore, he could not be dubbed a defaulter.
The ground for personal requirement was controverted contending that the property belonged to a firm, and therefore, the same cannot be claimed for the use of any one partner for his business other than the business of the firm.
It was further contended that the respondents also owned a number of houses and their requirement for Respondent No. 1 was incorrect and unwarranted.
The Trial Court held against the appellant both on the question of default in payment of rent and personal requirement and ordered eviction.
The appellant preferred an appeal and when the appeal was pending before the appellate authority, he moved an application under Order 41, Rule 27 of the Code of Civil Procedure contending that there had been a partition of the properties amongst the members of the firm and the suit shop had been allotted 368 to one 'P ' who was neither a plaintiff nor a party to the proceedings and if the shop belonged to him as an exclusive owner, the respondents and especially respondent No. 1 could not seek to evict the appellant for his personal requirement of the suit shop.
The appellate judge holding that the respondents were accepted by the appellant as the landlords of the suit shop, the subsequent partition decree would not help the appellant and agreeing with the finding of the Trial Court that there was default in payment of rent for a period of three months, he dismissed the appeal.
The second appeal to the High Court by the appellant was dismissed, holding that the appellant had not moved the first appellate court with a proper application under order 41, rule 27 of the Code of Civil Procedure and as there was no such application on the record of the case the contention could not be entertained, and that the appellant did not challenge the finding of the courts on the question of default in payment of rent.
In the appeal to this Court, it was contended on behalf of the appellant tenant that: (1) the High Court was in error in rejecting the contention of the appellant that the ground of personal requirement was no more available to the respondents in view of the partition decree because not only the landlord must prove his requirement at the commencement of the action but the landlord for whose requirement the action is commenced must show that his requirement continues throughout the course of proceedings and that he had a subsisting interest in the premises of which possession is sought for his own use, (2) the High Court was in error in observing that in the absence of a proper application under order 41, rule 27 the Court could not entertain the contention thereby sought to be raised, and that the finding that the appellant was in default in payment of rent for a period of two months was not questioned before it.
Allowing the appeal, ^ HELD: 1.
The decree of the High Court and the first appellate court are set aside and the case remanded to the first appellate court, which after granting the application under order 41, rule 27, and taking the certified copy of the decree in the partition suit on record and after giving an opportunity to the parties to lead any additional evidence should decide, whether the partition decree transfers the suit shop to 'P ' exclusively and whether the respondents can maintain the action and are entitled to evict the appellant on the ground of personal requirement of respondent No. 1 and or on the ground of default.
[385 G 386 B] 2.
The expression 'landlord ' which has been defined in section 2(d) of the Rent Act is an inclusive definition couched in very wide language.
This wide amplitude of the expression has however been cut down by the explanation appended to sub clause (c) of sub section (1) of section 11.
The person claiming possession on the ground of his reasonable requirement of the leased building must show that he is a landlord in the sense that he is the owner of the building and has a right to occupy the same in his own right.
A mere rent collector, though may be included in the expression landlord in its wide amplitude cannot be treated as landlord for the purposes of section 11(1)(c).
[376 G 378 B] 369 3.
The legislature by restricting the meaning of the expression 'landlord ' for the purpose of Section 11(1)(c), manifested its intention namely that landlord alone can sue for eviction on the ground of his personal requirement if he is one who has a right against the whole world to occupy the building himself and exclude any one holding a title lesser than his own.
Such landlord who is an owner and who would have a right to occupy the building in his own right, can seek possession for his own use.
A rent collector or an agent is not entitled to occupy the house in his own right.
Even if such a person be a lessor and, therefore, a landlord within the expanded inclusive definition of the expression landlord, nonetheless he cannot seek to evict the tenant on the ground that he wants to personally occupy the house.
He cannot claim such a right against the real owner and as a necessary corollary he cannot seek to evict the tenant on the ground that he wants possession of the premises for his own occupation.
[378 C, G] In the instant case the application for additional evidence was filed after the arguments were concluded.
The Judge had no objection in treating it to be one under Or 41 rule 27, took it on record and examined it on merits.
The High Court was clearly in error in ignoring the evidence in second appeal on a technical consideration that a proper application under order 41, rule 27, was not placed before the first appellate court.
C, 375 A B] In the instant case, there was a proper and regular application to meet with the requirements of order 41, rule 27, CPC for additional evidence inviting the court 's attention to a subsequent event of vital importance cutting at the root of the plaintiff 's right to continue the action.
Coupled with it, there was evidence in the form of a certified copy of the decree in a partition suit showing that the respondents even if they had some shade of title to commence action, they having lost all interest in the property and the property having become one of exclusive ownership of a person not a party to the proceedings were no more entitled to continue the proceedings for their own benefit.
Both the lower appellate court and the High Court were clearly in error in ignoring this vital piece of evidence which goes to the root of the matter and which would non suit the respondents.
[381 C, G] Pasupuleti Venkateswarlu vs The Motor & General Traders, ; and Lachmeshwar Prasad Shukul vs Keshwar Lal Chaudhri, , referred to.
The time honoured notion that the right of re entry is unfettered and that the owner landlord is the sold judge of his requirement has been made to yield to the needs of the society which had to enact the Rent Acts specifically devised to curb and fetter the unrestricted right of re entry and to provide that only on proving some enabling grounds set out in the rent Act the landlord can re enter.
One such ground is of personal requirement of landlord.
When examining a case of personal requirement, if it is pointed out that there is some vacant premises with the landlord which he can conveniently occupy, the element of need in his requirement would be absent.
To reject this aspect by saying that the landlord has an unfettered right to choose the premises is to negative the very raison de 'etre of the Rent Act.
If it is shown by the tenant that the landlord has some other vacant premises in his possession, that by itself may not be sufficient to negative the landlord 's claim but in such a situation the court would expect the landlord to establish that the premises which is vacant is not suitable 370 for the purpose of his occupation or for the purpose for which he requires the premises in respect of which the action is commenced in the Court.
To say that the landlord has an unfettered right to choose whatever premises he wants and that too irrespective of the fact that he has some vacant premises in possession which he would not occupy and try to seek to remove the tenant would be unsupported by the Rent Act.
This approach would put a premium on the landlord 's greed to throw out tenants paying lower rent in the name of personal occupation and rent out the premises in his possession at the market rate.
To curb this very tendency the Rent Act was enacted, and, therefore, it becomes the duty of the Court administering the Rent Act to bear in mind the object and intendment of the legislature in enacting the same.
The Court must understand and appreciate the relationship between legal rules and one of the necessities of life shelter.
[383 C 384 A] In the instant case there are some recitals in the judgment of the High Court which show (i) that certain aspects have been disposed of cursorily, lacking precision, and (ii) that a tenant who examined as many as eight witnesses including himself to prove that the rent was paid and who specifically pleaded that fact in reply to the notice served by the landlords and who meticulously fought his case, by making an application for additional evidence at the appellate stage would not give up the contention and if he had in fact given it up there was no justification for still taking the matter to the highest court.
The subsequent event of partition of the properties have a direct impact on the title of the landlord respondents to evict the appellant on the ground of non payment of rent.
A remand of the case is therefore inevitable.
[384 G 385 B, G]
|
Civil Appeal No. 282 of 1980.
Appeal by special leave from the judgment and order dated the 29th March, 1980 of the Allahabad High Court (Lucknow Bench) know in Writ Petition No. 524 of 1979.
AND CIVIL MISCELLANEOUS PETITION Nos. 4905 and 11949 of 1980.
463 G.N. Dixit, Mrs. Shobha Dikshit and H.R. Bhardwaj for the Appellants.
S.N. Kackar, K.K Mohan, Rajiv Datta and A.S. Pandit for the Respondent.
A.N. Pareek and S.K Jain for the Intervener.
The Judgment of the Court was delivered by MISRA, J.
The present appeal by special leave is directed against the judgment dated 29th March 1979 of the Allahabad High Court allowing a petition under Article 226 of the Constitution.
In the State of Uttar Pradesh, there is a Service commonly known as Naib Tehsildars.
They have always formed the backbone of the revenue administration in that State.
Sixty per cent of the posts of Naib Tehsildars are filled through a competitive examination held by the State Public Service Commission.
The remaining posts are filled by promotion.
There is another Service in that State known as the Service of Tehsildars.
Cent percent of the posts of Tehsildars are filled by promotion from amongst various sources such as Naib Tehsildars, Peshkars of the Kumaon Division, Kanungos, Kanungo Inspectors or Instructors and Sadar Kanungos.
Ram Gopal Shukla, the respondent, started his service as Kanungo in 1949.
In due course, he was promoted as Naib Tehsildar.
In 1962, he was confirmed as such, and in 1963 he was appointed as Tehsildar in an officiating capacity.
It appears that a regular selection for the posts of Tehsildars was held in 1966 in accordance with the Uttar Pradesh Adheenasth Rajaswa Karyakari (Tehsildar) Sewa Niyamavali, 1966 (hereinafter referred to as 'the Tehsildar Rules 1966 ').
Rule 5 of these Rules provides the sources of recruitment to the post of Tehsildar.
Rule 6 thereof lays down conditions for eligibility and provides, "For the purposes of recruitment to the Service a selection strictly on merit shall be made from amongst all the permanent Naib Tehsildars, Tehsildars, Peshkars of the Kumaon Division, Kanungo Inspectors or Instructors and Sadar Kanungos, who have put in not less than seven years ' service in the aggregate as such or in an equivalent or higher 464 post in a substantive or officiating capacity on the first day of January of the year in which the selection is made.
" Rule 7 enjoins upon the Parishad to report by list of March every year to the Government the number of vacancies in the Service expected during the following calendar year, and then provides that the Governor shall fix the number of appointments to be made.
Rule 8 lays down the criterion for selection.
Rule 9 prescribes the procedure for selection.
As this rule is important for the purpose of the present case, it is reproduced in so far as it is relevant, "9.
The procedure for selection shall be as follows: (1) The Parishad shall draw up, in order of merit, a list of most suitable candidates from amongst those who are eligible for promotion to the posts of Tehsildars.
The names in the list shall ordinarily be double the number of substantive vacancies to be filled during the course of the year.
(2) The Parishad shall also draw up, in order of merit, a supplementary list containing names of officials considered suitable for officiating or temporary vacancies expected to occur during the course of the year.
(3) The two lists drawn up under clauses (1) & (2) above together with a gradation list prepared under clause (b) of Rule 10, indicating therein the reasons for passing over the seniors, if any and the character rolls of all the eligible officials shall be forwarded by the Parishad to the Commission . . . " (4) The Parishad shall thereafter, in consultation with the Commission, fix date, on which a Selection Committee consisting of . . shall consider the cases of the eligible candidates whose names are contained in the final lists drawn up by the Commission and interview such of them as are indicated by the Commission under clause (3) above.
(5) The lists of the names selected by the Committee shall be taken with him by the representative of the Commission 465 for placing them before the Commission, and the Commission, shall thereafter send their final recommendations to the Parishad.
(6) The Parishad shall draw from the first list received from the Commission under clause (5) above, as many candidates as there are permanent vacancies and will thereafter re arrange their names in accordance with their seniority in the present service and they will be appointed against the substantive vacancies.
The remaining names of the first list and those of the second list will be regarded as forming the 'Select List ' to be drawn up in order of merit.
The officials will be offered officiating or temporary vacancies in the order in which their names have been arranged in the aforesaid 'Select List ' as and when the vacancies occur during the course of the year.
This 'Select List ' will hold good only for one year or until such time review is made at the following selection.
(Emphasis supplied) (7) In case permanent vacancies do not occur for two consecutive years and it becomes necessary to make a selection for temporary or officiating vacancies only, then also the procedure prescribed above will be followed." In accordance with the aforesaid rules, the Uttar Pradesh Public Service Commission selected 148 persons for substantive appointment as Tehsildars and their names were shown in a list known as List A.
The Commission also selected 300 other persons for temporary and officiating appointment as Tehsildars during the coming years and their names figured in what was called List B.
The respondent was, however, not selected and consequently his name could not be included in either of the aforesaid two lists, presumably because he had an adverse entry forming part of the remarks recorded on his work and conduct and had also been shown down below at serial No. 557 in the seniority list of Naib Tehsildars in the year 1956 Though the adverse entry was expunged in the year 1969 and his seniority was also re fixed at serial No. 216 on 6th of October 1970, as there was no selection after 1966, his name could not be included in either of the two lists.
He has, however, no grievance on that account.
Subsequently, the State Government made the Uttar Pradesh Promotion by Selection in Consultation with Public Service Commission (Procedure) Rules, 1970 (hereinafter referred to as 'the 466 1970 Rules ').
These rules govern various Services, to be more specific 29 U.P. Services including the Service of Tehsildars.
The purpose of these rules obviously was to standardise the procedure for promotion and make it uniform in respect of all such Services.
The procedure laid down in the 1970 Rules for promotion as Tehsildar was not substantially different from that laid down in the Tehsildar Rules 1966.
The respondent, therefore, did not feel aggrieved even by the introduction of the 1970 Rules.
His grievance started only with the introduction of rules 7 A and 7 B to the 1970 Rules by notification No.42/4/1966 Apptt.
3 dated 4th of July 1972.
As the question to be decided in this case is about the vires of rules 7 A and 7 B, it will be appropriate to read them at this stage, "7 A.
Notwithstanding anything contained in these rules, but subject to the proviso to rule 18, the names of candidates on the Select List appointed in temporary or officiating vacancies prior to the date of issue of this notification, shall be rearranged in order of seniority.
" "7 B.
The candidates of the Select List as rearranged in accordance with rule 7 A shall be appointed against substantive vacancies in preference to any candidate selected in accordance with the provisions of these rules.
" The complaint of the respondent was that the aforesaid new rules 7 A and 7 B were discriminatory and violative of Article 14 and 16 of the Constitution, in as much as the candidate in the Select List of 1966 were to be appointed against substantive vacancies in preference to any candidate selected in accordance with the provisions of the 1970 Rules and unless the candidates in the list were exhausted, other eligible candidates were not to be considered for promotion so that their chances of promotion would be deferred to an undated future.
The further grievance of the respondent was to the following effect.
The Select List was to hold good only for one year or until such time a review was in made at the following selection.
Thus, the life of the Select List of 1966 was for one year only on the expiry of which it died its natural death.
In this view of the legal position, the appointment of Tehsildars from the Select List of 1966 after the expiry of a year from the date of its operation was illegal on the face of it.
On the strength of Rule 7 A and rule 7B, no selection was to be held unless 300 persons included in List were absorbed.
The respondent challenged the vires of rules 7 A and 7 B by filing a petition under Article 226 of the Constitution in the High 467 Court of Allahabad.
That petition was allowed in part and rules 7 A and 7 B were declared ultra vires Articles 14 and 16 of the Constitution in the impugned judgment.
Shri Dixit, appearing for the State has contended that a mere chance of promotion is not a condition of service giving rise to a fundamental right.
We are afraid this contention is irrelevant to the decision of this case.
The precise grievance of the respondent has been that he had a fundamental right of being considered for promotion when others similarly situated were so considered and that if he was not considered in a situation like that, he was discriminated against and was denied equality of opportunity.
This grievance, if factually correct, must be held to be well founded.
It was next contended by Shri Dixit that the candidates covered by rule 7 A are a class by themselves, that the classification is a reasonable classification and that as the respondent does not satisfy the requirements of rule 7 A, he cannot claim that any infraction of Article 14 or 16 bas taken place.
According to Shri Dixit, two conditions are necessary to bring a person within the fold of that rule: (1) the candidate 's name must have been included in the Select List; and (2) he must have been appointed in a temporary or officiating vacancy prior to the date of issue of the notification of 4th July 1972.
The respondent did not satisfy these requirements and therefore did not fall within the purview of rule 7 A. Rule 7 B gives preference to the candidates in the Select List as rearranged in accordance with rule 7 A, which, according to Shri Dixit, was based on a reasonable classification and therefore the respondent can have no grievance.
In support of this contention, reliance has been placed on Reserve Bank of India vs C.S. Rajappan Nair and others, State of Jammu & Kashmir vs Triloki Nath Khosa and others, Ramesh Prasad Singh vs State of Bihar and others, and Ganga Ram and others vs Union of India and others.
In C.S. Rajappan Nair (supra), the classification of a group of employees who had officiated in a particular capacity as a different class, treating them differently from others who had not the opportunity to function as such, was held to be an intelligible differentia which can stand the test of equality provided by Article 16 of the 468 Constitution.
In Triloki Nath Khosa (supra), persons appointed directly and by promotion had integrated into a common class of Assistant Engineers.
The question arose whether for the purpose of promotion to the cadre of Executive Engineers, they could be classified on the basis of educational qualification.
It was held by this Court that the rule providing that graduates shall be eligible for such promotion to the exclusion of diploma holders did not violate Articles 14 and 16 of the Constitution.
In Ramesh Prasad Singh (supra), this Court, dealing with principle of equality under Articles 14 and 16, observed, "The doctrine of equality before law and equal protection of laws and equality of opportunity in the matter of employment and promotion enshrined in Articles 14 and 16 of the Constitution which is intended to advance justice by avoiding discrimination is attracted only when equals are treated as unequals or where unequals are treated as equals.
The guarantee of equality does not imply that the same rules should be made applicable in spite of differences in their circumstances and conditions.
Although Articles 14 and 16 of the Constitution forbid hostile discrimination, they do not forbid reasonable classification and equality of opportunity in matters of promotion means equality as between members of the same class of employees and not equality between members of separate independent classes. .
Equality is for equals, that is, who are similarly circumstanced are entitled to an equal treatment but the guarantee enshrined in Articles 14 and 16 of the Constitution cannot be carried beyond the point which is well settled by a catena of decisions of this Court " In Ganga Ram (supra), dealing with Articles 14 and 16 of the Constitution, this Court again held, "Mere production of inequality is not enough to attract the constitutional inhibition because every classification is likely in some degree to produce some inequality.
The classification need not be scientifically perfect or logically complete.
The matter has to be considered in a practical way without whittling down the equality clause.
The classification must however be founded on intelligible differentia 469 which on rational grounds distinguishes persons grouped together from those left out, and it must bear a just and reasonable relation to the object sought to be achieved.
" There is no dispute with the principles of law laid down in the aforesaid cases.
By now, the principles of classification are well settled and need not be repeated.
The question is of application of those principles to the facts of the present ease.
The only basis for grouping the 300 persons in one category is that they were included in the Select List of 1966 and that they were officiating.
The respondent in the instant case could not be selected in the selection of 1966 on account of an adverse entry which, as stated earlier, was subsequently expunged.
His position in the seniority list was also corrected but because no selection took place after 1966 the respondent could not be included in the list for no fault of his.
If there had been a selection and the list had been revised every year as is the requirement of the rules, the respondent, and like him many others, would have been included in the list.
For example, some candidates who had not completed seven years could not be eligible for promotion and could not be included in the Select List of 1966 but after a lapse of time they became eligible and they might have been selected if selection had taken place.
But, the door for promotion had been of reclosed for the respondent and many others like him by rules 7 A and 7 B for no fault of theirs.
In this connection reference may be made to the objection of the Public Service Commission and the letter of the Secretary of the Board of revenue, to show that it would take.
about 24 years to absorb 300 persons included in List B. The Secretary, Board of Revenue, vide his letter No. 14708/T.N.T. 59 A/70 dated 30th of January 1973, to the Secretary, Government Revenue Department (filed as Annexure II to the counter affidavit), recommended that the List may not be enforced.
In so far as it is pertinent for the present purpose, it reads, "On the basis of the selection in the year 1966, the List 'B ' was prepared for 300 names.
During this period all the candidates of list 'B ' are working.
So long as all these candidates are not absorbed in the regular vacancies, the question of second selection does not arise till then.
Only 56 vacancies have occurred after the selection of 1966.
According to this the average vacancies in a year are at 10, with the result, it will take 24 years to exhaust the above list.
Till then no selection is Possible.
" 470 In the circumstances, the Secretary requested the Government to take steps to recommend to the Public Service Commission to make the next selection of Tehsildars without any further delay.
The objections of the Secretary, Board of Revenue, were similar to the objections raised by the Public Service Commission.
These letters and objections point out unmistakably that the selection was unnecessarily postponed only to accommodate the 300 persons included in the Select List of 1966.
There appears to be no rational basis for such a departure from the ordinary operation of the 1970 Rules which envisaged the preparation of a new list every year and for singling out one particular list for according preferential treatment to the persons whose names were contained therein.
The classification in this case therefore cannot be said to be a reasonable classification based on intelligible differentia having a nexus to the object sought to be achieved.
It is, however, contended for the State that the selection could not take place for all these long years because of a stay order passed by the High Court in petitions filed by some candidates challenging the Tehsildar Rules 1966.
This has been refuted by Shri S.N. Kacker and a finding recorded by the High Court makes out that there was no order staying the holding of selection.
All that was stayed was the confirmation of the officers promoted to the posts of Tehsildars.
It is therefore not correct that selection could not take place because of a stay order from the High Court.
As a second limb of this argument, it was contended on behalf of the State that the Government was the sole judge of the administrative necessities and there being no rule to the contrary, the Government could hold selection according to the need and no exception can be taken to the power of the State.
There is no denying the fact that the rules regulating the conditions of service are within the executive power of the State or its legislative power under the proviso to Article 309 but even so, such rules have to be reasonable, fair and not grossly unjust, if they are to survive the test of Articles 14 and 16 of the Constitution.
A rule which contemplates that unless the list of 300 persons is exhausted no other person can be selected, obviously is unjust and it deprives other persons in the same situation of the opportunity of being considered for promotion.
471 It was next contended for the State that the declaration of rules 7 A and 7 B as ultra vires the Constitution would affect not only the incumbents of one Service but of 29 Services and a fairly large number of persons would be affected in that situation, that the respondent did not implead any of those persons likely to be affected in the various Services, that in any case, at least the Naib Tehsildars or other persons who have been promoted as Tehsildars and who are likely to be affected by the declaration of rules 7 A and 7 B as ultra vires should have been impleaded as parties and that in the absence of those parties, the writ petition was not maintainable and should have been dismissed by High Court on that score.
Shri S.N. Kacker appearing for the respondent, on the other hand, has contended that no such plea was taken on behalf of the State before the High Court and that, therefore, it cannot be permitted to take up a new plea for the first time before this Court.
Elaborating the point, Shri Kacker urged that if such a plea had been taken before the High Court, the respondent would have impleaded all those persons as parties and filled up the lacuna, if any, and that if the State is permitted to take up such a plea for the first time before this Court, it would seriously prejudice the case of the respondent.
Alternatively, it was contended that the respondent is aggrieved by the amendment of the 1970 Rules by the 1972 notification which introduced rules 7 A and 7 B, that the respondent has challenged the vires of rules 7 A and 7 B and only the State is a necessary party who has already been impleaded, and that at the most, those persons who are likely to be affected in case the said rules are declared ultra vires, may be proper parties but are not necessary parties.
He sought to take support for his contention from B. Gopalaiah vs Government of Andhra Pradesh, J.S. Sachdev & Ors.
vs Reserve Bank of India & Anr., and General Manager, South Central Railway, Secundrabad & Anr.
vs A .
V. R. Siddhahi and Ors In Gopalaiah 's case dealing with a situation as in the present case, the Andhra Pradesh High Court held, "This is not a case of discrimination of individual against individual.
This is a case where a whole class of citizens have been discriminated against and the court can not refuse to give relief to them on the ground that the 472 class of persons who will be benefited as a result of the discrimination are not before the Court.
The person who complains of discrimination cannot be expected to search the country for all persons who are likely to be benefited by its discriminatory policy.
Of course, if the discrimination is in favour of an individual against an individual different considerations might arise.
But this is not such a case.
In my opinion, where a scheme formulated by the Government is attacked on the ground of its being discriminatory the position is precisely the same as if a statute is attacked as being discriminatory and it can never be an answer to such an attack that persons likely to be benefited by a discriminatory statute should be brought before the Court before the statute is struck down." In J.S. Sachdev 's case (supra), a Division Bench of the Delhi High Court endorsed the view taken in Goplaiah 's case (supra).
In South Central Railway 's case (supra), a similar objection taken before the Supreme Court was repelled on two grounds, firstly, because this point was not canvassed in the lower courts, and secondly, because the employees who were likely to be affected as a result of the re adjustment of the petitioner 's seniority were at the most proper parties and not necessary parties and their non joinder could not be fatal to the writ petition.
In view of the law laid down in South Central Railway 's case (supra), the State cannot be permitted to take up a new plea which was not taken before the High Court.
Shri B.P. Sharma had moved an application (C.M.P. No.49051.80) for permission to intervene in the appeal on the ground that he was vitally interested in the outcome of the instant appeal which would have a great bearing upon the claim petition pending before the Service Tribunal, Lucknow.
This application was ordered to be listed at the time of the hearing of this appeal.
He also moved an application (C.M.P.No. 11949/80 for modification of the stay order dated 23rd of April 1980 in the appeal filed by the State, so as to govern other cases affected by rules 7 A and 7 B of the 1970 Rules, as amended by the 1972 notification.
Later on, he realised that such an application could not be moved on behalf of an intervener, and therefore, instead of pursuing this application, he 473 filed Writ Petition No. 3806 of 1980, which has been dealt with separately.
Both these applications are, therefore, dismissed.
For the reasons given above, we find no error in the impugned judgment.
We accordingly dismiss the appeal.
Parties shall, however, bear their own costs.
S.R. Appeal dismissed.
| IN-Abs | The selection for the posts of Tehsildars in the State of U.P. was to be made by promotion from amongst various sources such as Naib Tehsildars, Peshkars of the Kumaon Division, Kanungos, Kanungo Inspectors or Instructors and Sadar Kanungos as per the procedure laid down in rules known as Uttar Pradesh Adheenasth Rajaswa Karyakari (Tehsildar) Sewa Niyamavali, 1966.
The procedure for selection is regulated by Rule 9 and under sub section (6) of this Rule a select list will be drawn in order of merit separately for substantive vacancies and temporary vacancies and officials will be offered officiating or temporary vacancies in the order in which their names have been arranged in the "select list" as and when the vacancies occur during the course of the year.
This "select list" will hold good only for one year or until such time a review is made at the following selections.
Subsequently, the State Government made the Uttar Pradesh Promotion by Selection in Consultation with Public Service Commission (Procedure) Rules, 1970, which governed various services, to be more specific 29 Uttar Pradesh services including the services of Tehsildars.
The purpose of these rules was to standardise the procedure for promotion and make it uniform in respect of such services.
The procedure laid down in the 1970 Rules for promotion as Tehsildars was not substantially different from that laid down in the Tehsildars Rules, 1966.
By a Notification No. 4214/196.
Appointment, 3 dated 4th July, 1972 two new rules were introduced, namely, Rules 7A and 7B, in the 1970 Rules.
As per these newly added rules candidates in the Select List made under the 1966 Rules were to be appointed against substantive vacancies in preference to any candidates selected in accordance with the provisions of the 1970 Rules and unless the candidates in the list were exhausted, other eligible candidates were not to be considered for promotion so that their chances of promotion would be deferred to an undated future.
461 The respondent who started his service as Kanungo in 1949, was promoted as Naib Tehsildar and in 1962 he was confirmed as such.
In 1963, he was appointed as Tehsildar in an officiating capacity.
In accordance with the ]966 Rules the Uttar Pradesh, Public Service Commission selected 148 persons for substantive appointment as Tehsildars and their names were shown in a list known as List A.
The Commission also selected 300 other persons for temporary or officiating appointment as Tehsildars during the coming years and their names figured in what was called List B.
The respondent was, however, not selected and his name could not be included in either of the aforesaid two lists because he had an adverse entry forming part of the remarks recorded on his work and conduct and had also been shown down below at serial 557 in the seniority list of Naib Tehsildars in the year 1966.
Though the adverse entry was expunged in the year 1969 and his seniority was also re fixed at serial number 216 on 6th October, 1970, since there was no selection after 1966, his name could not be included in either of the two lists even thereafter.
The respondent challenged the vires of Rules 7A and 7B by filing a petition under Article 226 of the Constitution in the High Court of Allahabad.
That petition was allowed in part and Rules 7A and 7B were declared ultra vires Articles 14 and 1 6 of the Constitution, in the impugned judgment.
Hence the appeal by special leave by the State.
Dismissing the appeal, the Court, ^ HELD: 1:1.
Rules 7A and 7B of the Uttar Pradesh Promotion by Selection in Consultation with Public Service Commission (Procedure) Rules, 1970, are ultra vires Articles 14 and 16 of the Constitution.
[466 E, 473 A B] 1:2.
The grievance of the respondent, namely, that he had a fundamental right of being considered for promotion when others similarly situated were so and that if he was not considered in a situation like that, he was discriminated against and was denied equality of opportunity is not only factually correct but well founded.
[467 B C] 2:1.
It is true that the rules regulating the conditions of service are within the executive power of the State or its legislative power under the proviso to Articles 309 of the Constitution, but even so, such rules have to be reasonable, fair and not grossly unjust if they are to survive the test of Articles 14 and 16 of the Constitution.
A rule, which contemplates that unless the list of 300 persons is exhausted no other person can be selected obviously, is unjust and it deprives other persons in the same situation of the opportunity of being considered for promotion.
[470 F H] 2:2.
The classification in this case cannot be said to be a reasonable classification based on the intelligible differentia having a nexus to the object sought to be achieved.
The only basis of grouping the 300 persons in one category is that they were included in the select list of 1966 and that they were officiating.
The respondent, in the instant case, could not be selected in the selection of 1966 on account of an adverse entry which was subsequently expunged.
His position in the seniority list was also corrected but because no selection took place after 1966.
The respondent could not be included in the list for no fault of his.
If there held 462 been a section and the list had been revised every year, as is the requirement of the rules, the respondent, and like him many others, would have been included in the list.
For example, some candidates who had not completed seven years could not be eligible for promotion and could not be included in the Select List of 1966 but after a lapse of time they became eligible and they might have been selected if selection had taken place.
But, the door for promotion had been foreclosed for the respondent and many others like him by Rules 7A and 7B for no fault of theirs.
The objection taken by the Public Service Commission and the letter of the Secretary or the Board of Revenue addressed to the Government indicating that it would take about 24 years to absorb 300 persons included in List B and, therefore, recommending that the list may not be enforced would point out unmistakably that the selection was unnecessarily postponed only to accommodate the 300 persons included in the Select List of 1966.
There is no rational basis for such a departure from the ordinary operation of the 1970 Rules which envisaged the preparation of a new list every year and for singing out one particular list for according preferential treatment to others in the similar situations [469 B F, 470 A C] State of Jammu and Kashmir vs Triloki Nath Khosa and others ; ; Ramesh Prasad Singh vs State of Bihar and others; , and Ganga Ram and others vs Union of India and others, , applied.
Reserve Bank of India vs C.S. Rajappan Nair and others, I.L.R. 1977 Kerala 398, approved.
In a case where the vires of certain rules were challenged as being violative of the Articles 14 and 16 of the Constitution, only State is a necessary party.
The other persons likely to be affected by the declaration of the rules as ultra vires are only proper parties.
[471 E F] 4.
A party cannot be permitted to take up a new plea in the appeal for the first time before this Court which was not taken before the High Court in writ petition.
[472 E F] General Manager, South Central Railway, Secundrabad an Anr.
vs A.V.R. Siddhanti and Ors., ; , followed.
B. Gopalaiah vs Government of Andhra Pradesh, A.I.R. and J.S. Sachdev and Ors.
vs Reserve Bank of India and Anr., I.L.R. (1973) II Delhi 392, approved.
|
Civil Appeal No. 1415 of 1981.
Appeal by special leave from the judgment and order dated the 7th January 1981 of the Allahabad High Court in Civil Misc.
Application No. 113 of 1981 in Second Appeal No. 1484 of 1973.
O.P. Rana, M. Qamaruddin and Mrs. M. Qamaruddin for the Appellants.
510 A.K. Sanghi for Respondent No. 1.
The Judgment of the Court was delivered by DESAI, J.
Special leave granted.
We have heard Mr. O. P. Rana, learned counsel for the appellant, and Mr. A.K. Sanghi, learned counsel for the respondent.
The High Court disposed of the appeal preferred by the present appellant in the absence of the learned counsel for the appellant.
When the appellant became aware of the fact that his appeal had been disposed of in the absence of his advocate, he moved an application in the High Court to recall the order dismissing his appeal and permit him to participate in the hearing of the appeal.
This application was rejected by the High Court on the ground that though the application was prepared and drafted and an affidavit was sworn on 29th October, 1980, the same was not presented to the court till November 12, 1980 and that there is no satisfactory explanation for this slackness on the part of the learned advocate who was requested to file the application.
The disturbing feature of the case is that under our present adversary legal system where the parties generally appear through their advocates, the obligation of the parties is to select his advocate, brief him, pay the fees demanded by him and then trust the learned advocate to do the rest of the things.
The party may be a villager or may belong to a rural area and may have no knowledge of the court 's procedure.
After engaging a lawyer, the party may remain supremely confident that the lawyer will look after his interest.
At the time of the hearing of the appeal, the personal appearance of the party is not only not required but hardly useful.
Therefore, the party having done everything in his power to effectively participate in the proceedings can rest assured that he has neither to go to the High Court to inquire as to what is happening in the High Court with regard to his appeal nor is he to act as a watchdog of the advocate that the latter appears in the matter when it is listed.
It is no part of his job.
Mr. A.K. Sanghi stated that a practice has grown up in the High Court of Allahabad amongst the lawyers that they remain absent when they do not like a particular Bench.
Maybe he is better informed on this matter.
Ignorance in this behalf is our bliss.
Even if we do not put our seal of imprimatur on the alleged practice by dismissing this matter which may discourage such a tendency, would it not bring justice delivery system into disrepute.
What is the fault of the party who having done everything in his 511 power and expected of him would suffer because of the default of his advocate.
If we reject this appeal, as Mr. A.K. Sanghi invited us to do, the only one who would suffer would not be the lawyer who did not appear but the party whose interest he represented.
The problem that agitates us is whether it is proper that the party should suffer for the inaction, deliberate omission, or misdemeanour of his agent.
The answer obviously is in the negative.
Maybe that the learned advocate absented himself deliberately or intentionally.
We have no material for ascertaining that aspect of the matter.
We say nothing more on that aspect of the matter.
However, we cannot be a party to an innocent party suffering injustice merely because his chosen advocate defaulted.
Therefore, we allow this appeal, set aside the order of the High Court both dismissing the appeal and refusing to recall that order.
We direct that the appeal be restored to its original number in the High Court and be disposed of according to law.
If there is a stay of dispossession it will continue till the disposal of the matter by the High Court.
There remains the question as to who shall pay the costs of the respondent here.
As we feel that the party is not responsible because he has done whatever was possible and was in his power to do, the costs amounting to Rs.200/ should be recovered from the advocate who absented himself.
The right to execute that order is reserved with the party represented by Mr. A.K.Sanghi.
Appeal allowed to the extent indicated with costs in the manner indicated.
P.B.R. Appeal allowed.
| IN-Abs | On knowing that the High Court had dismissed his appeal on the ground that his Advocate was not present in the Court when the matter was taken up for hearing the appellant moved an application for the recall of the order dismissing the appeal and for permission to participate in the hearing of the appeal.
The High Court rejected this application stating that no satisfactory explanation had been furnished by the Advocate for his slackness in filing the affidavit for nearly 15 days after it was drafted.
On the question whether the litigant is entitled to have his case reheard by the High Court.
^ HELD: It is not proper that an innocent litigant, after doing everything in his power to effectively participate in his proceedings by entrusting his case to the Advocate, should be made to suffer for the inaction, deliberate omission or misdemeanour of his agent.
For whatever reason the Advocate might have absented himself from the Court, the innocent litigant could not be allowed to suffer injustice for the fault of his Advocate.
[511 B] The respondent 's costs should be recovered from the Advocate who absented himself from Court.
[511 D] [The Court directed the appeal to be restored to its original position in the High Court and heard.]
|
ax Reference Case No. 17 of 1975.
Under section 257 of the Income Tax Act, 1961 made by the Income Tax Appellate Tribunal, Delhi Bench in Reference Application No. 92/DEL/71 72 arising out of I.T.A. No.1339/DEL/68 69.
B.B. Ahuja and Miss A.Subhashini for the Appellant.
A.K Sanghi and Narayan Netter for the Respondent.
The following Judgments were delivered: PATHAK, J.
In view of the majority opinion of this Court in Additional Commissioner of Income tax, Gujarat vs Surat Art Silk Cloth Manufactures, the reference must be answered against the Revenue and in favour of the assessee.
SEN, J.
This direct reference under section 257 of the Income tax Act, 1961 (hereinafter referred to as 'the Act ') made by the Income Tax Appellate Tribunal Delhi Bench 'B ' at the instance of the Commissioner of Income Tax, Delhi II, New Delhi raises the much vexed question as to whether the words "not involving the carrying on of any activity for profit" in the definition of 'charitable purpose ' contained in section 2 (15) of the Act, govern the word 'advancement ' and not the words 'object of general public utility.
493 The facts giving rise to the reference are as follows: The Federation of Indian Chambers of Commerce and Industry, New Delhi hereinafter referred to as 'the assessee ' is an existing company under the .
It was registered under section 26 of that Act and permitted to omit the word 'Limited ' from its name.
It has neither any share capital nor does it distribute any dividends to its members.
The entire income is expended for the fulfilment of its object.
The main object of the assessee is the promotion protection and development of trade, commerce and industry in India.
The main objects for which the Federation has come into existence are set out in cl. 3 of the Memorandum of Association which, insofar as material, reads: 3.(a) To promote Indian business in matters of inland and foreign trade, transport, industry and manufactures, finance and all other economic subjects and to encourage Indian banking, shipping and insurance.
While cl. 3(a) defines the primary purpose of the trust, i.e. to promote trade and industry which undoubtedly being an object of general public utility engaged in carrying on activities without any profit motive, the subsidiary objects set out in sub cls.
(b) to (z2) of cl.3 are merely incidental or ancillary thereof.
During the assessment year 1962 63, the relevant accounting year for which was the year ended December 31, 1961 the assessee submitted a return showing its total income as 'nil ' claiming that all its income was exempt under section 11(1)(a) read with section 2(15) of the Act.
During the assessment year in question, the assessee held the Indian Trade Fair at New Delhi and derived receipts totalling Rs. 75,18,548 from rent for space allotted, temporary stalls and storage.
It also received Rs. 20,750 by sale of season tickets and Rs. 3,94,143 by daily gate tickets.
It realised deposits and advances from the participants for hotel accommodation.
In the relevant accounting year, the Conference of the Afro Asian Organisation for Economic Cooperation, sponsored by the assessee, was held at New Delhi.
For organising the Conference, the assessee received Rs. 3,00,000 from the Government of India as grant in aid and after meeting the expenses, was left with a balance of Rs. 2,17,346.38.
Further, the assessee received Rs. 265.50 as the share of profits on the sale of a book on Company Law, Rs. 5,371.82 as fee for arbitration.
It realised advances from its members for arbitration amounting to Rs. 20,000 from out of which a balance of Rs. 299.18 was left.
The balance sheet for the 494 accounting year shows that the assessee had in excess income of Rs. 2,291.71 over the expenditure under the head 'income '.
The contention of the assessee before the Income Tax officer was that the activities carried on by the Federation were not with the motive of earning profits, but they were carried on with the object of promotion, protection and development of trade, commerce and industry in India and abroad.
Its contention was that the dominant object for which the Federation was constituted was for promotion, protection and development of the country 's trade, commerce and industry and the activities carried on during the assessment year in question, namely, the holding of the Indian Trade Fair and of sponsoring the Conference of the Afro Asian Organisation for Economic Cooperation were incidental or ancillary to the main object, and, therefore, the income derived therefrom was exempt under section 11 (1)(a) of the Act.
Reliance in support of this contention was placed on the decision of this Court in Commissioner of Income Tax vs Andhra Chamber of Commerce.
In the immediately preceding assessment years 1960 61 and 1961 62, the income of the assessee was treated as exempt from tax under section 4(3) (i) of the Income Tax Act, 1922.
The Income Tax officer, however, felt that the decision of this Court in the Andhra Chamber of Commerce 's case (supra) was no longer good law due to the addition of the words "not involving the carrying on of any activity for profit" in the definition of 'charitable purpose ' in section 2(15) of the Act which qualify the fourth head of charity, viz., "any other object of general public utility", and, therefore, must be read subject to the additional statutory requirement that the object of general public utility should not involve the carrying on of any activity for profit.
He accordingly raised a demand of Rs. 49,818 on a total income of Rs. 84,430 on appeal, the Appellate Assistant Commissioner disagreed with the view of the Income Tax Officer and held that the activities carried on by the assessee were not profit oriented and, therefore, its income was exempt.
The Commissioner of Income tax appealed to the Appellate Tribunal without any success.
The Tribunal upheld the view of the Appellate Assistant Commissioner and held that the dominant object with which the Federation was constituted being a charitable purpose, viz., promotion, protection and development of trade, commerce and industry, there being no motive to earn profits, it was not engaged in any activity in the nature of business or trade, and, if any 495 income arose from such activity, it was only incidental or ancillary to the dominant object for the welfare and common good of the country 's trade, commerce and industry.
Thereupon, the Commissioner of Income Tax applied to the Appellate Tribunal to make a reference to the High Court under sub s.(1) of s.256 of the Act, but the Tribunal, in view of the conflict in the decisions of the High Courts on the construction of the expression 'charitable purpose ' as defined in section 2(15) of the Act, has made a reference of the following questions to this Court under section 257 of the Act, for its opinion, namely: 1.
Whether having regard to the definition of charitable purpose as contained in Section 2(15) read with Sections 11(1) and 11(4), charging sections and sections dealing with computation of income, the assessee was liable to be taxed in respect of income relating to assessment year 1962 63 ? 2.
Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income earned by the assessee would not come within the provisions of Section 2(15) read with Section 11 of the Income Tax Act, 1961 and the onus that this profit was not exempt from tax would be on the Revenue ? 3.
Whether on the facts and in the circumstances of the case, the purpose of the Federation of Indian Chambers of Commerce and Industry was advancement of objects of general public utility not involving the carrying on of any activity for profit ? There had been a sharp conflict of opinion between the different High courts as to the construction of the ten crucial words "not involving the carrying on of any activity for profit" qualifying the fourth head of charity "advancement of any other object of general public utility".
This Court resolved the conflict in the Sole Trustee, Loka Shikshan Trust vs C.I.T. and the Indian Chambers of Commerce vs C.I.T. by holding that the words "not involving the carrying on of any activity for profit" govern the word "advancement" and observed that if the advancement or attainment of the object involves an activity for profit, tax exemption would not be available.
496 Unfortunately for the Revenue, the Court has, in a five Judges Bench, by a majority of 4 to 1, in Addl.
Commissioner of Income Tax vs Surat Art Silk Cloth Manufactures ' Association reversed these two decisions in the Loka Shikshan Trust 's case and the Indian Chambers of Commerce 's case (supra).
The Court has approved of the observations of Beg, J. in his separate but concurring judgment in the Loka Shikshan Trust 's case that "if the profits must necessarily feed 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.
" In other words, the majority view in the Surat Art Silk 's case (supra) was that the condition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the real object.
The theory of dominant or primary object of the trust has, therefore, been treated to be the determining factor, even in regard to the fourth head of charity, viz., the advancement of any other object of general public utility, so as to make the carrying on of business activity merely ancillary or incidental to the main object.
One should have thought that the correct way to approach this question of interpretation was to give the words used by Parliament their ordinary meaning in the English language and if, consistently with the ordinary meaning, there was a choice between two alternative interpretations, then to prefer the construction that maintains a reasonable and consistent scheme of taxation without distorting the language.
When the Government did not accept the recommendation of the Direct Taxes Laws Committee in Chapter 2 (Interim Report, December, 1977) for the deletion of the words "not involving the carrying on of any activity for profit" occurring in section 2(15) of the Act, the Court has by a process of judicial construction achieved the same result.
Whatever reservations one may have regarding the correctness of this interpretation of the exclusionary clause in the definition of charitable purpose in section 2(15) of the Act, there can be no doubt that the majority decision in the Surat Art Silk 's case (supra) is binding on us.
With respect, I venture to say that the majority decision has the effect of neutralising the radical changes brought about by Parliament in the system of taxation of income and profits of charities, with particular reference to "objects of general public utility" to prevent tax evasion, by diversion of business profits to 497 charities.
It is the vagueness of the fourth head of charity "any other object of general public utility" that impelled Parliament to insert the restrictive words "not involving the carrying on of any activity for profit".
In my minority opinion in the Surat Art Silk 's case (supra) I had endeavoured to give reasons why the correctness of the majority decision was open to question.
There is no point in traversing the same ground over again.
It was clearly inconsistent with the settled principles to hold that if the dominant or primary object of a trust was 'charity ' under the fourth head 'any other object of general public utility ', it was permissible for such an object of general public utility, to augment its income by engaging in trading or commercial activities.
In retrospect it seems that it would have been better for Parliament to have deleted the fourth head of "any other object of general public utility" from the ambit of the definition of 'charitable purpose ' while enacting section 2(15) of the Act rather than inserted the words "not involving the carrying on of any other activity for profit", thereby creating all this legal conundrum.
In England, the Radcliffe Commission on Taxation of Profits and Income recommended in 1955 that for purposes of taxation, charity should be restricted to relief of poverty, advancement of education and advancement of religion and that the fourth category mentioned in the dictum of Lord Macnaghten, namely, "trusts for other purposes beneficial to the community ' should be cut out entirely.
The majority in the Surat Art Silk 's case (supra) has evolved the doctrine of dominant or primary object and there is little that we can do about it.
Faced with this difficulty, learned counsel for the Revenue advanced no submissions with regard to the questions referred and indeed, in view of the majority decision in the Surat Art Silk 's case (supra) the answers to the questions are self evident.
The doctrine of dominant or primary object must, as laid down in the Surat Art Silk 's case, holds the field till there is a change in the law.
Undoubtedly, the activities of the assessee in regard to holding of the Indian Trade Fair and sponsoring of the Conference of the Afro Asian Organisation in the relevant accounting year were for the advancement of the dominant object and purpose of the trust, viz., 498 promotion, protection and development of trade, commerce and industry in India.
Learned Counsel for revenue with his usual fairness, conceded that the income derived by the assessee from such activities was exempt under s.11(1)(a) read with s.2(15) of the Act.
It was, however, urged that the objects set out in sub cls.
(v), (z1) and (z2) of cl.3 of the Memorandum of Association of the Federation were not incidental or ancillary to the main object of the trust.
The relevant sub clauses are set out below: (v) To establish and support or aid the establishment and support of associations, institutions, funds, trusts and convenience, calculated to benefit employees of the Federation or the dependents or connections of such persons, and grant pension and allowances, and to make payments towards insurance, and to subscribe or guarantee money for charitable or benevolent objects or for any exhibition for any public, general, useful object.
(z1) To establish a Trust or Trusts and/or appoint Trustees thereof from time to time and vest the funds or the surplus income or any property of the Federation in the Trustees who shall hold and deal with the funds, surplus income or property in such manner as the committee may decide.
(z2) To undertake and execute any Trusts the undertaking of which may seem to the Federation desirable either gratuitously or otherwise.
The contention advanced cannot be accepted, for the reason that no such point was ever raised at any stage of the proceedings, much less before the Appellate Tribunal.
Even otherwise, there appears to be no substance in the contention.
There is a distinction between the "purpose" of a trust and the "powers" conferred upon the trustees as incidental to the carrying out of purpose.
For instance cl.3(v) enables the establishment and support of associations, institutions, funds, trusts and convenience calculated to benefit the employees and their dependents, for making provisions for grant of pension and allowances etc.
The framing of such employee benefit schemes is essential and necessary for the proper functioning of the organisation and is incidental to the carrying out of the purpose for 499 which it is constituted.
I refrain from expressing any opinion whether or not the employees constitute a "section of the public".
For, if the primary or dominant purpose of a trust or institution is charitable, any other object which is merely ancillary or incidental to the primary or dominant purpose, would not prevent the trust or institution from being a valid charity.
Likewise, cls.3(z1) and (z2) which permit the establishment of a trust or trusts, appointment of trustees thereof from time to time and the vesting of funds or surplus income or any property of the assessee in the trustees, are nothing but powers conferred on them for the proper financial management of the affairs of the trust which are incidental or ancillary to the main purpose of the trust.
The contention must, therefore, fail.
In the result, the reference under s.257 of the Income Tax Act, 1961 made by the Income Tax Appellate Tribunal, Delhi B, New Delhi, must be answered against the Revenue and in favour of the assessee.
There shall be no order as to costs.
VENKATARAMIAH, J. I have had the advantage of reading the judgment prepared by my learned brother A.P. Sen, J. and I respectfully agree with his reasoning and conclusion.
I share with him my doubts about the correctness of the decision in Additional Commissioner of Income tax, Gujarat vs Surat Art Silk Cloth Manufacturers ' Association.
I would like to say a few words of my own on the subject.
There can be no objection to a person spending his money on charity.
But can he be charitable at the expense of others? This is a question which necessarily arises when we read section 11 of the Income tax Act, 1961.
Section 11 as it stands now grants exemption from payment of tax on any income, which would have otherwise been taxable, provided (1) the property yielding income is held under trust or such other legal obligation which is brought into existence by an act of party and not by an act of law, (2) the purpose of the trust is charitable which may enure to the benefit of the public or a section of the public and (3) the other conditions prescribed by the Act are satisfied.
It means that if there is a diversion of property or income earning apparatus by an act of party into a charitable trust and the prescribed conditions are satisfied, the income derived from it (including the portion which would have gone to the public exchequer but for the trust) may be spent by a person in charge of the 500 affairs of the trust on objects indicated in the trust which is a creature of its author.
In effect what does it mean? It means that the author of the trust is able to divert by his own will to a purpose of his own choice, though charitable, a large part of the income which would have been, but for the trust, at the disposal of the Legislature which alone has the power over the national exchequer.
Whatever may have been the position in those days when the State was just a police State performing minimum functions of Government, today when the State is a welfare State would it be right either morally or constitutionally to allow amounts which should legitimately form part of the revenue of the State to be dealt with by non Governmental agencies administering trusts is a question which requires examination in an appropriate case.
This, however, is a larger question which, if logically pursued, may justify total deletion of the exemption accorded in the case of charitable and religious trustee.
But even as the provisions now stand, I feel that while construing them, this Court has enlarged the meaning of "charitable purpose" in section 2 (15) beyond what it legitimately should mean in the Surat Art Silk Cloth Manufacturers ' Associations ' case (supra).
I would like to adopt the words in the dissenting judgment of my learned brother A.P. Sen J. in the Surat Art Silk Cloth Manufacturers ' Association 's case (supra): "The judicial attitudes cannot be formed in isolation from legislative processes, particularly, in connection with tax avoidance provisions.
" It is true that it is open to the Legislature to give encouragement to objects which it considers to be laudable by means of fiscal exemptions.
At the same time it takes care to enact fresh provisions from time to time to suppress any mischief which may have resulted from the misuse of existing law.
Parliament deliberately stepped in by adding the words "not involving the carrying on of any activity for profit" in the definition of charitable purpose in section 2 (15) of the Act, when the tax exemptions available to charitable and religious trusts came to be misused by some for the unworthy purposes of tax avoidance.
The law had been so re structured to prevent allergy to taxation masquerading as charity.
The law was thus designed by Parliament to prevent this misuse of tax exemption in the name of charity.
The majority decision in the Surat Art Silk Cloth Manufacturers ' Association 's case (supra), if I may say so without meaning 501 any disrespect, has virtually wiped off the restrictive words "not involving the carrying on of any activity for profit" occurring in section 2(15), thereby defeating the very object and purpose of the legislation.
It is not the function of a court of law to give the words a strained and unnatural meaning.
When the Government had not accepted the recommendation of the Direct Taxes Laws Committee in Chapter 2 (Interim Report, December, 1977) for the deletion of the words "not involving the carrying on of any activity for profit", by suitable legislation, it was impermissible for this Court by a process of judicial construction to achieve the same result.
If I may adopt the words of Lord Reid in Greenberg vs IRC quoted in the minority decision in Surat Art Silk Cloth Manufacturers ' Association 's case (supra) displaying the court 's concern about the prevailing attitude of tax statutes: "Parliament is very properly determined to prevent this kind of tax evasion and, if the courts find it impossible to give very wide meanings to general phrases, the only alternative may be for Parliament to do as some other countries have done, and introduce legislation of a more sweeping character. " Modern legislation has changed in pattern towards re casting provisions of taxation with very wide language, while at the same time dealing in much more detail with some areas of law.
Judges, while responding to general trends of law, but also reacting to the form of modern tax legislation, must be prepared to take account of the context and purposes of the change brought about.
It is relevant to refer to one other aspect arising out of an observation made in the course of the majority judgment in the Surat Art Silk Cloth Manufacurers ' Association 's case (supra) suggesting that the area of exemption under Indian law is much wider than what is available under English law.
The relevant part of the majority judgment reads: "The definition of "charitable purpose" in Indian Law thus goes much further than the definition of charity to be derived from the English cases, because it specifically includes medical relief and embraces all objects of general public utility.
In English Law it is not enough that 502 a purpose falls within one of the four divisions of charity set out in Lord Macnaghten 's classification.
It must also be within the spirit and intendment of the Preamble to the Statute of Elizabeth if it is to be regarded as charitable.
There is no such limitation so far as Indian Law is concerned even if a purpose is not within the spirit and intendment of the Preamble to the Statute of Elizabeth, it would be charitable if it falls within the definition of "charitable purpose" given in the Statute.
Every object of general public utility would, therefore, be charitable under the Indian Law, subject only to the condition imposed by the restrictive words "not involving the carrying on of any activity for profit" added in the present Act.
It is on account of this basic difference between the Indian and English Law of charity that Lord Wright uttered a word of caution in All India Spinners ' Association vs Commissioner of Income tax (12 I.T.R. 482) against blind adherence to English decisions on the subject.
The definition of "charitable purpose" in the Indian Statute must be construed according to the language used there and against the background of Indian life.
" If Indian life should be a true guide for the determination of questions arising in court, then we should go back to our ancient treatises to find out the true meaning of charity which may be either dana or utsarga.
In the case of dana the donor gives up his ownership over a thing, makes another the owner of it and cannot thereafter use it nor has he any control over it.
When a man makes an utsarga, he no doubt gives up his ownership but gives up the thing for the benefit of all.
Opinion is, however, divided whether as a member of the public he can also use a thing thus dedicated for the public.
But in any event, he would no longer have any control over the thing dedicated.
How many of the so called charitable trusts satisfy the rigours of the Indian concept of charity? Are there any measures by which misuse of funds belonging to charities can be effectively checked? It is wrong to think that all springs of charity in India will dry up if true effect is given to section 2 (15) of the Act in accordance with the minority judgment in the Surat Art Silk Cloth Manufacturers ' Association 's case (supra).
People who are truly charitable do not think of the tax benefits while making charities.
One must realise 503 that even the poor who do not pay income tax can be charitable and their charities made at great personal inconvenience are commendable indeed.
One need not go in search of charitable persons amongst the tax payers only.
Still the majority view has got to be followed now.
| IN-Abs | The respondent assessee an existing company under the had neither any share capital nor distributed any dividend to its members and its entire income was expended for fulfilment of its objects, which were the promotion, protection and development of trade, commerce and industry in India.
During the assessment year 1962 63, the relevant accounting year for which the year ended December 31, 1961 the assessee submitted a return showing its total income as 'nil ' claiming that all its income was exempt under section 11(1)(a) read with Section 2(15) of the Income Tax Act.
During the assessment year, the assessee held the Indian Trade Fair at New Delhi and derived receipts from rent for space allotted, temporary stalls and storage and realised deposit and advances from the participants for hotel accommodation.
In the relevant accounting year, the Conference of the Afro Asian Organisation for Economic Cooperation, was sponsored by the assessee and for organising the Conference, the assessee received from the Government Rs. 3 lakhs as grant in aid and after meeting the expenses, was left with a balance of Rs. 2 lakhs.
It also received income by sale of books, fee for arbitration etc.
The balance sheet for the accounting year indicated that it had an excess of income over expenditure under the head 'income '.
The contention of the assessee before the Income Tax Officer was that the activities carried on by the Federation were not were not motive of earning profits, but that they were carried on with the object of promotion, protection and development of trade, commerce and industry in India and abroad, and therefore the income derived by the assessee was exempt under section 11(1)(a).
The Income Tax Officer, held that the decision of this Court in the Andhra Chamber of Commerce 's case [1965] I.S.C.R. 565 was no longer good law due to the addition of the words 'not involving the carrying on any activity for profit ' in the definition of 'charitable purpose ' in Section 2(15) of the Act which qualify the fourth head of charity viz. 'any other object of general public utility ' and, therefore, must be read subject to the additional statutory requirement that the 490 object of general public utility should not involve the carrying on of any activity for profit, and accordingly raised a demand.
On appeal by the assessee, the Appellate Assistant Commissioner disagreed with the view of the Income Tax Officer and held that the activities carried on by the assessee were not profit oriented and, therefore, its income was exempt.
The Department appealed to the Appellate Tribunal, and the Appellate Tribunal upheld the view of the Appellate Assistant Commissioner and held that the dominant object with which the Federation was constituted being a charitable purpose viz., promotion, protection and development of trade, commerce and industry, there being no motive to earn profits, it was not engaged in any activity in the nature of business or trade, and, if, any income arose from such activity, it was only incidental or ancillary to the dominant object for the welfare and common good of the country 's trade, commerce and industry.
The Commissioner of Income Tax applied to the Appellate Tribunal to make a reference to the High Court under sub section (1) of section 256 of the Act, but in view of the conflict in the decisions of the High Courts on the construction of the expression 'charitable purpose ' as defined in section 2(15) of the Act the Tribunal made a reference to this Court under Section 257 .
On the question whether the words 'not involving the carrying on of any activity for profit ' in the definition of 'charitable purpose ' contained in section 2(15) of the Act, govern the word 'advancement ' and not the words 'object of general public utility '.
^ HELD: [By the Court] The reference must be answered against the Revenue and in favour of the assessee, in the view of the majority opinion in Addl.
Commissioner of Income Tax vs Surat Art Silk Cloth Manufactures, [1980] I S.C.R. 77.
[492 F] [Per A.P. Sen, J.] 1.
The majority view in the Surat Art Silk case was that the condition that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit making is not the real object.
The theory of dominant or primary object of the trust, has, therefore, been treated to be the determining factor, even in regard to the fourth head of charity, viz. advancement of any other object of general public utility, so as to make the carrying on of business activity merely ancillary or incidental to the main object.
This doctrine of dominant or primary object holds the field till there is a change of law.
[496 C D, 497 F] 2.
The majority decision had the effect of neutralising the radical changes brought about by Parliament in the system of taxation of income and profits of charities, with particular reference to "object of general public utility" to prevent tax evasion, by diversion of business profits to charities.
It is the vagueness of the fourth head of charity "any other object of general public utility" that impelled 491 Parliament to insert the restrictive words "not involving the carrying on of any activity for profit".
[496 G 497 A] 3.
It was clearly inconsistent with the settled principles to hold that if the dominant or primary object of a trust was 'charity ' under the fourth head 'any other object of general public utility ', it was permissible for such an object of general public utility to augment its income by engaging in trading or commercial activities.[497 B] 4.
When the Government did not accept the recommendation of the Direct Taxes Laws Committee in Chapter 2 for the deletion of the words "not involving the carrying on of any activity for profit" occurring in Section 2(15) of the Act, it was impermissible for the Court by a process of judicial construction to achieve the same result.
[496 F] 5.
In the instant case, activities of the assessee in regard to holding of the Indian Trade Fair and sponsoring of the Conference of the Afro Asian organisation in the relevant accounting year were for the advancement of the dominant object and purpose of the trust, viz. promotion, protection and development of trade, commerce and industry in India.
The income derived from such activities was therefore exempt under section 11(1)(a) read with section 2(15) of the Act.
[498 G 499 A] 6.
There is a distinction between the "purpose" of a trust and the "power conferred upon the trustees" as incidental to the carrying out of the purpose.
If the primary or dominant purpose of a trust or institute is charitable, any other object which is merely ancillary or incidental to the primary or dominant purpose, would not prevent the trust or the institution being a valid charity.
[498 G, 499 A] [Per Venkataramiah, J.] 1.
It is open to the Legislature to give encouragement to objects which it considers to be laudable by means of fiscal exemptions.
At the same time, it takes care to enact fresh provisions from time to time to suppress any mischief which may have resulted from the misuse of existing law.
Parliament deliberately stepped in by adding the words "not involving the carrying on of any activity for profit" in the definition of 'charitable purpose ' in section 2(15) of the Act, when the tax exemptions available to charitable and religious trusts came to be misused by some for the unworthy purposes of tax avoidance.
The law had been so restructured to prevent allergy to taxation masquerading as charity.
The law was thus designed by Parliament to prevent this misuse of tax exemption in the name of charity.
[500 F H] 2.
This Court has enlarged the meaning "charitable purpose" in Section 2(15) beyond what it legitimately should mean in the Surat Art Silk Cloth Manufacturers Association 's case.
It has virtually wiped off the restrictive words "not involving the carrying on or any activity for profit" occurring in section 2(15), thereby defeating the very object and purpose of the legislation.
It is not the function of a court of law to give the words a strained and unnatural meaning.
Judicial attitudes cannot be formed in isolation from legislative processes, particularly, in connection with tax avoidance provisions.
[500 D, 501A, 500E] 492 3.
Modern legislation has changed in pattern re casting provisions of taxation with very wide language, while at the same time dealing in much more detail with some areas of law.
Judges while responding to general trends of law, but also reacting to the form of modern tax legislation, must be prepared to take account of the context and purposes of the change brought about.[501 E] Greenberg vs Inland Revenue Commissioners [1972] A.C. 109 (HL) referred to.
When the Government had not accepted the recommendation of the Direct Taxes Laws Committee in Chapter 2 for the deletion of the words "not involving the carrying on of any activity for profit", by suitable legislation, it was impermissible by a process of judicial construction to achieve the same result.
[501 B] 5.
People who are truly charitable do not think of the tax benefits while making charities.
Even the poor who do not pay income tax can be charitable and their charities are made at great personal inconvenience.
Charitable persons are not amongst the tax payers only.
[502 H 503 A]
|
N: Criminal Appeal No. 543 of 1976.
Appeal by special leave from the judgment and order dated the 6th May 1975 of the Rajasthan High Court in D.B. Criminal Jail Appeal Nos.
277, 413 to 416 and 918 of 1971.
Badri Das Sharma for the Appellant.
Dalveer Bhandari for the Respondent.
The Judgment of the Court was delivered by BAHARUL ISLAM, J.
This appeal by special leave on behalf of the State of Rajasthan is directed against the judgment of the Rajasthan High Court acquitting the two respondents, Shrimati Kalki alias Kali and her husband, Amara (alongwith four other co accused).
Respondent Kalki was convicted under Section 302 and Section 148 of the Penal Code and sentenced to imprisonment for life and for rigorous imprisonment for two years, respectively.
The five other accused persons including respondent, Amara, were convicted under Section 302 read with Section 149 and under Section 147 of the Penal Code, and each of them was sentenced to imprisonment for life and to one and a half years rigorous imprisonment respectively.
The material facts of the prosecution case were that there was a land dispute between Nimba (P.W.6) father of the deceased, Poona, on the one hand, and respondent Amara and the members of his family, on the other.
On July 17, 1970 at about sunset the accused persons of whom respondent Kalki was armed with an axe and respondent, Amara with a dharia, came to the house of the deceased.
At that time the deceased was inside his hut with his wife Mooli (P.W.1).
Amara called Poona.
Poona came out followed by his wife Mooli, when he was knocked down by Amara and Rama whereupon Kalki gave him blow with the axe on the neck.
Poona met with instantaneous death.
Mooli (P.W.1) raised an outcry when Geli, mother of the deceased (P.W.2) who had been at some distance from the hut came running to the place of occurrence and saw the assailants leaving the place.
506 3.
Nimba lodged a report at the police station at Nana.
Police registered a case.
In due course the case was sent to, and tried by, the Session Judge who convicted and sentenced the six accused persons including the two respondents as stated above.
This Court granted special leave to appeal only against the two respondents and refused it as against the other four.
The question before us is whether the two respondents or any of them caused the death of Poona.
There is no dispute that Poona met a homicidal death.
The High Court has set aside the Order of conviction and sentence passed by the Session Judge on the grounds (1) that P.W.1 the widow of the deceased "is. a highly interested witness, in as much as, she is the wife of the deceased and there was an enmity between the deceased and the accused on account of the dispute about the agricultural land", and (2) "that there are material discrepancies in her statement".
We have been led through the evidence of P.W. 1, the only eye witness in the case, of P.W.2, Geli, who says that she saw the respondents leaving the place of occurrence with the weapons in their hands, and of P.W.5 the Medical Officer, who held the Post Mortem examination on the deceased.
His evidence fully supports the evidence of P.W.1, who deposed that respondent Kalki gave a blow on the neck of the deceased with an axe.
P.W. 5 found one incised wound measuring 5" X 2" X 4" on the lateral side of the left side of neck.
On a perusal of the evidence of these witnesses, we do not have the least doubt in our mind that it was respondent Kalki who gave an axe blow on the neck of the deceased and that respondent Amara came along with his wife with a dharia with the common intention of causing the death of Poona.
In fact it was he who called out Poona from inside the hut, and felled down and facilitated the murder of Poona by his wife, Kalki.
As mentioned above the High Court has declined to rely on the evidence of P.W.1 on two grounds: (1) she was a "highly interested" witness because she "is the wife of the deceased", and (2) there were discrepancies in her evidence.
With respect, in our opinion, both the grounds are invalid.
For, in the circumstances of the case, she was the only and most natural witness; she was the only person present in the hut with the deceased at the time of the occurrence, and the only person who saw the occurrence.
True, it is she is the wife of the deceased; but she cannot be called an 'interested ' 507 witness.
She is related to the deceased.
'Related ' is not equivalent to 'interested '.
A witness may be called 'interested ' only when he or she derives some benefit from the result of a litigation; in the decree in a civil case, or in seeing an accused person punished.
A witness who is a natural one and is the only possible eye witness in the circumstances of a case cannot be said to be 'interested '.
In the instant case P.W.1 had no interest in protecting the real culprit, and falsely implicating the respondents.
The second ground on which the High Court refused to place reliance on the evidence of P.W. 1 was that there were "material discrepancies".
As indicated above we have perused the evidence of P.W. 1.
We have not found any "material discrepancies" in her evidence.
The discrepancies referred to by the High Court are, in our opinion, minor, insignificant, natural and not 'material '.
The discrepancies are with regard to as to which accused "pressed the deceased and at which part of the body to the ground and sat on which part of the body; with regard to whether the respondent Kalki gave the axe blow to the deceased while the latter was standing or lying on the ground, and whether the blow was given from the side of the head or from the side of the legs.
In the depositions of witnesses there are always some normal discrepancies however honest and truthful they may be.
These discrepancies are due to normal errors of observation, normal errors of memory due to lapse of time, due to mental disposition such as shock and horror at the time of the occurrence, and the like.
Material discrepancies are those which are not normal, and not expected of a normal person.
As indicated above we have not found any material discrepancies in the evidence of the P. W. 1. 7.
Learned counsel for the respondent submitted that the appeal involved only appreciation of evidence and this Court may not interfere with the findings of facts resulting from appreciation of evidence.
It is true that in an appeal under Article 136 of the Constitution this Court normally does not interfere with findings of facts arrived at by the High Court.
But when it appears that the findings of facts arrived at are bordering on perversity and result in miscarriage of justice, this Court will not decline to quash such findings to prevent the miscarriage of justice.
In our opinion the guilt of the two respondents has been established by the prosecution beyond reasonable doubt and their acquittal resulted in grave miscarriage of justice.
508 In the result we set aside the order of acquittal passed by the learned High Court and convict respondent Kalki alias Kali under section 302 of the Penal Code and respondent, Amara, under Section 302/34 of the Penal Code, and sentence each of them to suffer imprisonment for life.
The appeal is allowed.
The respondents are said to be on bail.
They shall surrender forthwith to serve out their sentences.
V.D.K. Appeal allowed.
| IN-Abs | Respondent Kalki alias Kali and her husband Amara (along with four other co accused) were charged, convicted under section 302 I.P.C. and sentenced to life imprisonment.
While Kalki was also convicted and sentenced under section 148 I.P.C. for two years ' rigorous imprisonment, the other five accused were convicted and sentenced under section 147 I.P.C. for rigorous imprisonment for a period of one and a half years.
In appeal the High Court of Rajasthan acquitted all of them on the grounds (i) that P.W. 1, the widow of the deceased "is. . a highly interested witness, inasmuch as, she is the wife of the deceased and there was an enmity between the deceased and the accused on account of the dispute about the agricultural land" and (ii) "that there are material discrepancies in her statement".
This Court granted special leave to appeal only against Kalki and her husband and refused it as against the four.
Dismissing the appeal, the Court ^ HELD: 1.
It is true that in an appeal under Article 136 of the Constitution the Supreme Court normally does not interfere with findings of facts arrived at by the High Court.
But when it appears that the findings of facts arrived at are bordering on perversity and have resulted in miscarriage of justice, the Court will not decline to quash such findings to prevent miscarriage of justice.
[507 F G] 2.
Material discrepancies are those which are not normal, and not expected of a normal person.
In the depositions of witnesses there are always some normal discrepancies however honest and truthful the witnesses may be.
These discrepancies are due to normal errors of observation, normal errors of memory due to lapse of time, due to mental disposition such as shock and horror at the time of the occurrence, and the like.
There are no material discrepancies in the evidence of P.W. 1 so as to reject the evidence in its entirety.
[507 D E] 3.
"Related" is not equivalent to "interested".
A witness may be called "interested" only when he or she derives some benefit from the result of a 505 litigation; in the decree in a civil case, or in seeing an accused person punished.
A witness who is a natural one and is the only possible eye witness in the circumstances of a case cannot be said to be "interested".
In the instant case.
P.W. 1 had no interest in protecting the real culprit, and falsely implicating the respondents.
[507 A B]
|
N: Criminal Appeal No. 234 of 1976.
Appeal by special leave from the judgment and order dated the 5th December, 1975 of the Andhra Pradesh High Court in Criminal Revision Case No. 816 of 1974 (Criminal Revision Petition No. 732 of 1974).
AND Criminal Appeal Nos. 315 and 316 of 1976.
Appeals by special leave from the judgment and order dated the 12th April, 1976 of the Andhra Pradesh High Court in Criminal Appeal Nos.
31 O & 311 of 1975.
P. Govindan Nair and A. Subba Rao for the Appellant in Crl.
A. No. 234/76.
M. N. Phadke, and B. Kanta Rao for the Appellant in Crl.
A. Nos.315 & 316 of 1976.
G. N. Rao for the Respondent in all the appeals.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
What is the effect of the declaration by the Supreme Court that the appointment of an Additional Sessions Judge was invalid on judgments pronounced by the Judge prior to such declaration is the question for consideration in these criminal appeals.
The question may seem to be short and simple but it cannot be answered without enquiry and research.
An answer, on first impression, may be 'a judgment by a judge who is not a judge is no judgment ' ' a simple, sophisticated answer.
But it appears 477 second thoughts are necessary.
What is to happen to titles settled, declarations made, rules issued, injunctions and decrees granted and even executed ? What is to happen to sentences imposed ? Are convicted offenders to be set at liberty and to be tried again '! Are acquitted accused to be arrested and tried again ? Public Policy is clearly involved.
And, in the tangled web of human affairs, law must recognise some consequences as relevant, not on grounds of pure logic but for reasons of practical necessity.
To clear the confusion and settle the chaos, judges have invented the de facto doctrine, which we shall presently examine.
de facto doctrine is thus a doctrine of necessity and public policy.
A. No. 234 of 1976 arises out of a proceeding under S.6A of the Essential Commodities Act, by which the District Revenue officer West Godavari, Andhra Pradesh, ordered the confiscation of Rs. 203.74 kgs.
Of paddy and Rs. 302.25 kgs. of rice.
The appellant, Gokaraju Rangaraju, preferred an appeal under section 6C of the Essential Commodities Act to the Court of Session, West Godavari.
The appeal was heard by Shri G. Anjappa, Additional Sessions Judge and was rejected.
The appellant preferred a Criminal Revision Petition before the High Court of Andhra Pradesh.
Criminal Appeal Nos. 315 and 316 of 1976 arise out of Sessions Case No. 12 of 1975 in the Court of Session, Guntur Division ' The case was heard and the judgment was pronounced by Shri Raman Raj Saxena, II Additional Sessions Judge, Guntur.
The convicted accused preferred appeals to the High Court of Andhra Pradesh.
By the time the Criminal Revision case filed by Gokaraju Rangaraju and the Criminal Appeals filed by the appellants in Crl.
Appeals Nos. 315 and 316 of 1976 came up for hearing before the High Court of Andhra Pradesh, this Court by its judgment dated 2nd September 1975 quashed the appointment of Shri G. Anjappa, Shri Raman Raj Saxena and two others as District Judges Grade II, on the ground that their appointment was in violation of the provisions of article 233 of the Constitution.
Thereupon a point was raised in the Criminal Revision case as well as in the Criminal Appeals that the judgments rendered by Shri Anjappa and Shri Raman Raj Saxena were void and required to be set aside.
The High Court overruled the point raised by the present appellants and held that though the appointment of Shri Anjappa and Shri Raman Raj Saxena as District Judges Gr.
II was invalid, yet they were not mere usurpers but had held office under lawful H authority and therefore, the judgments rendered by them were valid and could not be questioned in collateral proceedings.
The present 478 appeals have been preferred by special leave granted by this Court.
In Criminal Appeals Nos. 315 and 316 of 1976, however, the special leave granted by this Court was limited by the order granting leave to the question whether the judgments rendered by Sessions Judges were void where their appointment as Sessions Judges was subsequently declared illegal.
Shri Govindan Nayar learned counsel for the appellants in Crl.
A. No. 234 of 1976 and Shri Phadke, learned counsel for the appellants in Crl.
Appeals Nos. 315 & 316 of 1976, argued before us that the judgments rendered by Shri Anjappa and Shri Raman Raj Saxena were void as they were never duly appointed as District Judges.
It was urged that there was no need for them to question the appointment of Shri Anjappa or Shri Kaman Raj Saxena as their appointment had already been quashed by the Supreme Court.
It was said that the de facto doctrine was based on public policy and necessity and that in the present case neither public policy or necessity required that the judgments should not be set aside.
No inconvenience would be caused by ordering a rehearing of the appeals or a retrial of the accused.
It was also urged that the attack, if any, on the appointment of Shri Anjappa and Shri Raman Raj was not collateral attack.
It was submitted that a question of jurisdiction could be raised at any stage in a criminal case and a trial by a Sessions Judge who was appointed in violation of article 233 was not a trial by a Sessions Judge duly appointed to exercise jurisdiction in a Court of Session under section 9 of the Code of Criminal Procedure.
It was argued that the de facto doctrine was not an absolute doctrine.
It was subject to certain limitations.
One such limitation was that imposed by article 233 of the Constitution.
A person appointed as a District Judge contrary to the provisions of article 233 was no judge and his judgments were no judgments.
It was submitted that the 20th Amendment of the Constitution would be a surplusage if the de facto doctrine was to be applied to judgments rendered by persons appointed as District Judges contrary to the provisions of article 233 of the Constitution.
It was also suggested that the Fundamental Right of the appellants under article 21 of the Constitution was violated as their liberty was being taken away otherwise than in accordance with the procedure established by law.
We are unable to agree with the submissions of the learned counsel for the appellants.
The doctrine is now well established that "the acts of the officers de facto performed by them within the scope of their assumed official authority, in the interest of the public 479 or third persons and not for their own benefit, are generally as valid and binding, as if they were the acts of officers de jure" (Pulin Behari vs King Emperor).
As one of us had occasion to point out earlier "the doctrine is founded on good sense, sound policy and practical expedience.
It is aimed at the prevention of public and private mischief and the protection of public and private interest.
It avoids endless confusion and needless chaos.
An illegal appointment may be set aside and a proper appointment may be made, but the acts of those who hold office de facto are not so easily undone and may have lasting repercussions and confusing sequels if attempted to be undone.
Hence the de facto doctrine" (vide Immedisetti Ramkriashnaiah Sons vs State of Andhra Pradesh and Anr.
In Pulin Behari vs King Emperor, (Supra) Sir Ashutosh Mukerjee J. noticed that in England the de facto doctrine was recognised from the earliest times.
The first of the reported cases where the doctrine received judicial recognition was the case of Abbe of Fountaine decided in 1431.
Sir Ashutosh Mookerjee noticed that even by 1431 the de facto doctrine appeared to be quite well known and, after 1431, the doctrine was again and again reiterated by English Judges.
In Milward vs Thatcher, Buller J. said: "The question whether the judges below be properly judges or not.
can never be determined, it is sufficient if they be judges de facto.
Suppose a person were even criminally convicted in a Court of Record, and the Recorder of such Court were not duly elected, the conviction would still be good in law, he being the judge de facto".
In Seaddling vs Lorant, the question arose whether a rate for the relief of the poor was rendered invalid by the circumstance that some of the vestry men who made it were vestry men de facto and not de jure.
The Lord Chancellor observed as follows: With regard to the competency of the vestry men, who were vestry men de facto, but not vestry men de jure, to make the rate, your Lordships will see at once the impor 480 tance of that objection, when you consider how many public officers and persons there are who were charged with very important duties, and whose title to the office on the part of the public cannot be ascertained at the time.
You will at once see to what it would lead if the validity of their acts, when in such office, depended upon the propriety of their election.
It might tend, if doubts were cast upon them, to consequences of the most destructive kind.
It would create uncertainty with respect to the obedience to public officers and it might also lead to persons, instead of resorting to ordinary legal remedies to set right anything done by the officers, taking the law into their own hands".
Some interesting observations were made by the Court of Appeal in England in re James (An Insolvent).
Though the learned Judges constituting the Court of Appeal differed on the principal question that arose before them namely whether "the High Court of Rhodesia" was a British Court, there did not appear to be any difference of opinion on the question of the effect of the invalidity of the appointment of a judge on the judgments pronounced by him.
Lord Denning M. R., characteristically, said: "He sits in the seat of a judge.
He wears the robes of a judge.
He holds the office of a judge.
May be he was not validly appointed.
But, still, he holds the office.
It is the office that matters, not the incumbent . . so long as the man holds the office and exercises it duly and in accordance with law, his orders are not a nullity.
If they are erroneous they may be upset on appeal.
But if not erroneous they should be upheld".
Lord Denning then proceeded to refer to the State of Connecticut vs Carroll decided by the Supreme Court of Connecticut, Re Aldridge decided by the Court of Appeal in New Zealand and Norton vs Shelby County decided by the United States Supreme Court.
Observations made in the last case were extracted and they were: "Where an office exists under the law, it matters not how the appointment of the incumbent is made, so far as the validity of his acts are concerned.
It is enough that he is clothed with the insignia of the office, and exercises its powers and functions.
The official acts of such persons are recognised as valid on grounds of public policy, and for the protection of those having official business to transact." 481 Scarman LJ who differed from Lord Denning on the question whether the High Court of Rhodesia was a British Court appeared to approve the view of Lord Denning M. R. in regard to the de facto doctrine.
He said: "He (Lord Denning) invokes the doctrine of recognition of the de facto judge, and the doctrine of implied mandate or necessity.
I agree with much of the thinking that lies behind his judgment.
I do think that in an appropriate case our courts will recognise the validity of judicial acts, even though they be the acts of a judge not lawfully appointed or derive their authority from an unlawful government.
But it is a fallacy to conclude that, because in certain circumstances our Courts would recognise as valid the judicial acts of an unlawful court or a de facto judge, therefore, the Court thus recognised is a British Court".
The de facto doctrine has received judicial recognition in the United States of America also.
In State vs Gardner (Cases on Constitutional Law by Mc.
Gonvey and Howard Third Edition 102) the question arose whether the offer of a bribe to a City Commissioner whose appointment was unconstitutional was an offence.
Broadbury, J. said.
"We think that principle of public policy, declared by the English Courts three centuries ago, which gave validity to the official acts of persons who intruded themselves into an office to which they had not been legally appointed, is as applicable to the conditions now presented as they were to the conditions that then confronted the English Judiciary.
We are not required to find a name by which officers are to be known, who have acted under a statute that has subsequently been declared unconstitutional, though we think such officers might aptly be called de facto officers.
" In Norton vs Shelby Country, Field, J., observed as follows: "The doctrine which gives validity to acts of officers de facto whatever defects there may be in the legality of their appointment or election is founded upon considerations of policy and necessity, for the protection of the pub 482 lic and individuals whose interests may be affected thereby.
Offices are created for the benefit of the public, and private parties are not permitted to inquire into the title of persons clothed with the evidence of such offices and in apparent possession of their powers and functions.
For the good order and peace of society their authority is to be respected and obeyed until in some regular mode prescribed by law their title is investigated and determined.
It is manifest that endless confusion would result, if in every proceeding before such officers their title could be called in question.
" In Cooley 's 'Constitutional Limitations ', Eighth Edition, Volume II p. 1 355, it is said, "An officer de facto is one who by some colour or right is in possession of an office and for the time being performs its duties with public acquiescence, though having no right in fact.
His colour of right may come from an election or appointment made by some officer or body having colourable but no actual right to make it; or made in such disregard of legal requirements as to be ineffectual in law; or made to fill the place of an officer illegally re moved or made in favour of a party not having the legal qualifications; or it may come from public acquiescence in the qualifications; or it may come from public acquiescence in the officer holding without performing the precedent conditions, or holding over under claim of right after his legal right has been terminated; or possibly from public acquiescence alone when accompanied by such circumstances of official reputation as are calculated to induce people, without inquiry, to submit to or invoke official action on the supposition that the person claiming the office is what he assumes to be.
An intruder is one who attempts to perform the duties of an office without authority of law, and without the support of public acquiescence.
No one is under obligation to recognise or respect the acts of an intruder, and for all legal purposes they are absolutely void.
But for the sake of order and regularity, and to prevent confusion in the conduct of public business and in security of private rights, the acts of officers de facto are not suffered to be questioned because of the want of legal authority except by some direct proceeding instituted for 483 the purpose by the State or by some one claiming the office de jure, or except when the person himself attempts to build up some right, or claim some privilege or emolument, by reason of being the officer which he claims to be.
In all other cases the acts of an officer de facto are as valid and effectual, while he is suffered to retain the office, as though he were an officer by right, and the same legal consequences will flow from them for the protection of the public and of third parties.
There is an important principle, which finds concise expression in the legal maxim that the acts of officers de facto cannot be questioned collaterally.
" In Black on judgments it is said: "A person may be entitled to his designation although he is not a true and rightful incumbent of the office, yet he is no mere usurper but holds it under colour of lawful authority.
And there can be no question that judgments rendered and other acts performed by such a person who is ineligible to a judgeship but who has nevertheless been duly appointed, and who exercises the power and duties of the office is a de facto judge, and his acts are valid until he is properly removed.
" The de facto doctrine has been recognised by Indian Courts also.
In Pulin Behari vs King Emperor, Sir Ashutosh Mookerjee, J after tracing the history of the doctrine in England observed as follows: "The substance of the matter is that the de facto doctrine was introduced into the law as a matter of policy and necessity, to protect the interest of the public and the individual where these interests were involved in the official acts of persons exercising the duties of an office without being lawful officers.
The doctrine in fact is necessary to maintain the supremacy of the law and to preserve peace and order in the community at large.
Indeed, if any individual or body of individuals were permitted, at his or their pleasure, to collaterally challenge the authority of and to refuse obedience to the Government of the State and the numerous functionaries through whom it exercised its various 484 powers on the ground of irregular existence or defective title, insubordination and disorder of the worst kind would be encouraged.
For the good order and peace of society, their authority must be upheld until in some regular mode their title is directly investigated and determined.
" In P. section Menon vs State of Kerala and Ors. a Full Bench of the Kerala High Court consisting of P. Govindan Nair, K.K. Mathew and T.S. Krishnamoorthy Iyer, JJ said about the de facto doctrine: "This doctrine was engrafted as a matter of policy and necessity to protect the interest of the public and individual involved in the official acts of persons exercising the duty of an officer without actually being one in strict point of law.
But although these officers are not officers de jure they are by virtue of the particular circumstances, officers, in fact, whose acts, public policy requires should be considered valid".
In the judgment under appeal Kuppuswami and Muktadar, JJ observed: "Logically speaking if a person who has no authority to do so functions as a judge and disposes of a case the judgment rendered by him ought to be considered as void and illegal, but in view of the considerable inconvenience which would be caused to the public in holding as void judgments rendered by judges and other public officers whose title to the office may be found to be defective at a later date.
Courts in a number of countries have, from ancient times evolved a principle of law that under certain conditions, the acts of a judge or officer not legally competent may acquire validity".
A judge, de facto, therefore, is one who is not a mere intruder or usurper but one who holds office, under colour of lawful authority, though his appointment is defective and may later be found to be defective.
Whatever be the defect of his title to the office, judgments pronounced by him and acts done by him when he was clothed with the powers and functions of the office, albeit unlawfully, have the same efficacy as judgments pronounced and acts done by a Judge de 485 jure.
Such is the de facto doctrine, born of necessity and public policy to prevent needless confusion and endless mischief.
There is yet another rule also based on public policy.
The defective appointment of a de facto judge may be questioned directly in a proceeding to which he be a party but it cannot be permitted to be questioned in a litigation between two private litigants, a litigation which is of no concern or consequence to the judge except as a judge.
Two litigants litigating their private titles cannot be permitted to bring in issue and litigate upon the title of a judge to his office.
Otherwise so soon as a judge pronounces a judgment a litigation may be commenced for a declaration that the judgment is void because the judge is no judge.
A judge 's title to his office cannot be brought into jeopardy in that fashion.
Hence the rule against collateral attack on validity of judicial appointments.
To question a judge 's appointment in an appeal against the judgment is, of course, such a collateral attack.
We do not agree with the submission of the learned counsel that the de facto doctrine is subject to the limitation that the defect in the title of the judge to the office should not be one traceable to the violation of a constitutional provision.
The contravention of a constitutional provision may invalidate an appointment but we are not concerned with that.
We are concerned with the effect of the invalidation upon the acts done by the judge whose appointment has been invalidated.
The de facto doctrine saves such Acts.
The de facto doctrine is not a stranger to the Constitution or to the Parliament and the Legislatures of the States.
article 71(2) of the Constitution provides that acts done by the President or Vice President of India in the exercise and performance of the powers and duties of his office shall not be invalidated by reason of the election of a person as President or Vice President being declared void.
So also Sec.
107(2) of the Representation of the People Act 1951 (Act 43 of 1951) provides that acts and proceedings in which a person has participated as a Member of Parliament or a Member of the Legislature of a State shall not be invalidated by reason of the election of such person being declared to be void.
There are innumerable other Parliamentary and State Legislative enactments which are replete with such provisions.
The Twentieth Amendment of the Constitution is an instance where the de facto doctrine was applied by the Constituent body to remove any suspicion or taint of illegality, or invalidity that may be argued to have attached itself to judgment, decrees sentences or orders passed or made by certain District Judges appointed before 1966, otherwise than in accordance with the provision of article 233 and Art 235 of 486 the Constitution.
The Twentieth Amendment was the consequence of the decision of the Supreme Court in Chandra Mohan vs State of Uttar Pradesh and Ors., that appointments of District Judges made otherwise than in accordance with the provisions of articles 233 and 235 were invalid.
As such appointments had been made in many States, in order to preempt mushroom litigation springing up all over the country, it was apparently thought desirable that the precise position should be stated by the Constituent body by amending the Constitution.
Shri Phadke, learned counsel for the appellants, argued that the constituent body could not be imputed with the intention of making superfluous amendments to the Constitution.
Shri Phadke invited us to say that it was a necessary inference from the Twentieth Amendment of the Constitution that, but for the amendment, the judgments, decrees etc.
of the District Judges appointed otherwise than in accordance with the provisions of article 233 would be void.
We do not think that the inference suggested by Shri Phadke is a necessary inference.
It is true that as a general rule the Parliament may be presumed not to make superfluous legislation.
The presumption is not a strong presumption and statutes are full of provisions introduced because abundans cautela non nocet (there is no harm in being cautious).
When judicial pronouncements have already declared the law on the subject, the statutory reiteration of the law with reference to the particular cases does not lead to the necessary inference that the law declared by the judicial pronouncements was not thought to apply to the particular cases but may also lead to the inference that the statute making body was mindful of the real state of the law but was acting under the influence of excessive caution and so to silence the voices of doubting Thomases by declaring the law declared by judicial pronouncements to be applicable also to the particular cases.
In Chandra Mohan ' case (Supra) this Court held that appointments of District Judges made otherwise than in accordance with article 233 of the Constitution were invalid.
Such appointments had been made in Uttar Pradesh and a few other States.
Doubts had been cast upon the validity of the judgments, decrees etc.
pronounced by those District Judges and large litigation had cropped up.
It was to clear those doubts and not to alter the law that the Twentieth Amendment of the Constitution was made.
This is clear from the statement of objects and reasons appended to the Bill which was passed as Constitution (20th Amendment) Act.
The statement said: 487 "Appointments of District Judges in Uttar Pradesh and a few other States have been rendered invalid and illegal by a recent judgment of the Supreme Court on the ground that such appointments were not made in accordance with the provisions of article 233 of the Constitution.
As a result of these judgments, a serious situation has arisen because doubt has been thrown on the validity of the judgments, decrees, orders and sentences passed or made by these District Judges and a number of Writ Petitions and other cases have already been filed challenging their validity.
The functioning of the District Courts in Uttar Pradesh has practically come to a stand still.
It is, therefore, urgently necessary to validate the judgments, decrees, orders and sentences passed or made heretofore by all such District Judges in those States. " In our view, the de facto doctrine furnishes an answer to the submissions of Shri Phadke based on Sec.
9 Criminal Procedure Code and article 21 of the Constitution.
The judges who rejected the appeal in one case and convicted the accused in the other case were not mere usurpers or intruders but were persons who discharged the functions and duties of judges under colour of lawful authority.
We are concerned with the office that the judges purported to hold.
We are not concerned with the particular incumbents of the office.
So long as the office was validly created, it matters not that the incumbent was not validly appointed.
A person appointed as a Sessions Judge, Additional Sessions Judge or Assistant Sessions Judge, would be exercising jurisdiction in the Court of Session, and his judgments and orders would be those of the Court of Session.
They would continue to be valid as the judgments and orders, of the Court of Session, notwithstanding that his appointment to such Court might be declared invalid.
On that account alone, it can never be said that the procedure prescribed by law has not been followed.
It would be a different matter if the constitution of the Court itself is under challenge.
We are not concerned with such situation in the instant cases.
We, therefore, find no force in any of the submissions of the learned counsel.
Shri Govindan Nair attempted to argue that the confiscation was not justified on the merits.
We find no reason to interfere with 488 the concurrent findings of fact arrived at by the lower Courts.
Shri Phadke requested us to widen the scope of the appeals and to permit him to canvas the correctness of the convictions and sentences also.
We declined to do so.
All the appeals are dismissed.
P.B.R Appeals dismissed.
| IN-Abs | The appellants in both the appeals were convicted of certain offences by two District Judges. ' By the time the appeals went up for hearing to the High Court, the appointment of the two District Judges was quashed by this Court as being in violation of Article 233 of the Constitution.
The appellants contended before the High Court that having regard to the fact that the Supreme Court had quashed the appointment of District Judges, the judgments rendered by them in these two cases became void.
The High Court, rejecting the contention, held that since the District Judges held office under lawful authority, the judgments rendered by them during the tenure of their office were valid and that in any event the validity of the judgments could not be questioned in collateral proceedings.
In appeal to this Court it was contended that trial by a Sessions Judge appointed in violation of Article 233 was not a trial by a Sessions Judge duly appointed to exercise jurisdiction in a Court of Sessions under section 9, Cr.
P.C. and that the appellants ' liberty was being taken away otherwise than in accordance with the procedure established by law and that the Constitution (Twentieth Amendment) Act, 1966 would be a surpluses if the de facto doctrine was applied to judgments rendered by persons appointed as District Judges contrary to the provisions of Article 233 of the Constitution Dismissing the appeals, ^ HELD: The two Judges who gave the judgments in the two cases were not usurpers or intruders but were persons who discharged the functions and duties of Judges under colour of lawful authority.
So long as an office is validity created it matters not that the incumbent was not validity appointed.
A person appointed to a post of Sessions Judge would be exercising jurisdiction in the 475 Court of Session and his judgments and orders would be those of that court and would continue to be valid notwithstanding that his appointment to such court might be declared invalid.
On that account alone it cannot be said that the procedure prescribed by law had not been followed.
[487 E F] Milward vs Thatsher ; @ 87, Seaddling vs Lorant ; , re.
James (An Insolvent) , Norton vs Shelby Counrty Law Ed. 178; referred to.
The doctrine of de facto envisages that acts permitted de facto by the officers within the scope of their assumed official authority, in the interest of the public or third persons and not for their own benefit, are generally as valid and binding as if they were the acts of officers de jure [478 H] The de facto doctrine is founded on good sense, sound policy and practical expedience.
It is aimed at the prevention of public and private mischief and protection of public and private interest.
It avoids endless confusion and needless chaos.
An illegal appointment may be set aside and a proper appointment may be made but the acts of those who hold office de facto are not so easily undone.
They may have lasting repercussions and confusing sequels if attempted to be undone.
[479 B] Pulin Behari vs King Emperor [1912] 15 Cal Law Journal 517 @ 574, Immedisetti Ramkrishnaiah Sons vs State of Andhra Pradesh and Anr AIR 1976 A.P 193; referred to.
A defective appointment of a de facto judge cannot be permitted to be questioned in a litigation between two private litigants.
If this were not so, so soon as a Judge pronounces a judgment litigation may be commenced for a declaration that the judgment was void because the judge was no judge.
To question a Judge 's appointment in an appeal against his judgment is such a collateral attack.
[485 B C] The de facto doctrine saves acts done by a Judge whose appointment has later been declared void, from being invalidated.
The doctrine is recognised in Article 71(2) (which declares that acts done by the President in the exercise of his powers shall not be invalidated by reason of the election being declared void) and section 107(2) of the Representation of the People Act, 1951 (which provides that acts of a reason participating as member of Parliament or a State Legislature shall not be declared invalid by reason of his election being declared void).
The doctrine, therefore, is no stranger to the Constitution and the laws.
[485 E F] The Constitution (Twentieth Amendment) Act, 1966 is an instance where the de facto doctrine was applied to remove and taint of illegality being attributed to the judgments or orders passed by District Judges appointed before 1966 otherwise than in accordance with the provisions of Articles 233 and 235 of the Constitution and which appointments were declared invalid by this Court in Chandra Mohan vs State of U.P., [485 H] 476 It is not a necessary inference from the Twentieth Amendment That but for that amendment the judgments, decrees etc.
Of those District Judges would have been void.
As a general rule Parliament may be presumed not to make superfluous legislation.
But This presumption is not a strong presumption in that it is not uncommon to find statutes containing provisions introduced because abundas cautela non nocet (there is no harm in being cautious).
[486 C D] The statutory reiteration of the law, a clear judicial pronouncement on a subject notwithstanding, only leads to the inference that The statute making body, though mindful of the real state of the law, was acting under the influence of excessive caution.
The Constitution (Twentieth Amendment) Act, 1966 is one such instance.
[486 E F]
|
riminal Appeals No. 7 of 1950 and No. 25 of 1951.
Criminal Appeal No. 7 of 1950 was an appeal under article 134 (1) (c) from the Judgment and Order of the High Court of Calcutta dated 23rd May, 1950, in Government Appeal No. 2 of 1950 and Criminal Appeal No. 25 of 1951 was an appeal by special leave from the Judgment and Order of the same Court dated 4th May, 1950, in Criminal Revision No. 132 of 1950.
Ajit Kumar Datta and S.N. Mukherjee for the appellant in both the appeals.
B. Sen for the respondent in both appeals.
G.N. Joshi for the Intervener.
129 1951.
October 4.
The Judgment of the Court was delivered by CHANDRASEKHARA AIYAR J.
These two criminal appeals are from convictions of the appellants by the High Court at Calcutta.
In the first case, leave to appeal to this Court was granted by the High Court under article 134(1)(c) of the Constitu tion of India.
In the second case, special leave to appeal was granted by this Court under article 136(1) of the Con stitution.
The appeals were heard together, but as they are by different parties and the facts are different, it is desirable to have two separate judgments.
Criminal Appeal No. 7 of 1950.
The appellant, Joylal Agarwala, who was a salesman in a retail shop in Pulbazar in the district of Darjeeling in the State of West Bengal, was charged with having sold a piece of textile cloth at a price in excess of the controlled price.
For this contravention of the provisions of clause 24 (1) of the Cotton Textiles Control Order, 1948, he was convicted by the Sub Divisional Magistrate of Darjeeling under section 7 of the Essential Supplies (Temporary Powers) Act (Act XXIV) of 1946 (herein after referred to as the Essential Supplies Act), and sentenced to six months ' rigor ous imprisonment.
On appeal to the Sessions Judge, the appellant was acquitted on two grounds, viz., (1) that no sanction was previously obtained for the prosecution as required by clause 36 of the Cotton Textiles Control Order, and (2) that the Essential Supplies Act was not in force in the district of Darjeeling on the date of the occurrence.
On appeal to the High Court by the State of West Bengal, the point about the absence of sanction under clause 36 of the Control Order was given up by the present appellant as its necessity had been abolished by a later Notification of the Central Government.
On the second point, the learned Judges of the High Court held that the Act was validly extended to the district of Darjeeling and was in force in that area on the date of the occurrence, viz., 14 10 1949.
The acquittal of the appellant 130 was set aside, the order of conviction passed by the Magistrate was restored, and the appellant was sentenced to four months ' rigorous imprisonment.
To understand the main legal argument as to whether the Essential Supplies Act of 1946 was in force at the time of the alleged commission of the offence, it is necessary to set out the relevant provisions of a few Acts and Orders and their dates.
The Essential Supplies Act came into force on 19 11 1946.
Section 92(1) of the Government of India Act, 1935, provided as follows : " . no Act of the Federal Legislature or of the Provincial Legislature, shall apply to an excluded area or a partially excluded area, unless the Governor by public notification so directs, and the Governor in giving such a direction with respect to any Act may direct that the Act shall in its application to the area, . . have effect subject to such exceptions or modifications as he thinks fit.
" In exercise of the powers conferred on him by this section, the Governor of Bengal by a notification published on the 14th December, 1946, directed that the Essential Supplies Act shall apply to the district of Darjeeling, which was an excluded area.
Section 1(3) of the Essential Supplies Act provides that it shall cease to have effect on the expiration of the period mentioned in section 4 of the India (Central Govern ment and Legislature) Act, 1946 (9 & 10 Geo.
6, Ch. 39).
Section 4 of the latter Act provides as follows : "The period mentioned. is the period of one year beginning with the date on which the Proclamation of Emer gency in force at the passing of this Act ceases to operate or, if the Governor General by public notification so di rects, the period of two years beginning with that date: Provided that if and so often as a resolution approving the extension of the said period is passed by both Houses of Parliament, the said period shall be extended for a further period of twelve months from 131 the date on which it would otherwise expire so, however, that it does not in any case continue for more than five years from the date on which the Proclamation of Emergency ceases to operate.
" The Proclamation of Emergency referred to in this sec tion ceased to operate on 31 3 1946.
In the absence of a notification by the Governor General under the second part of the section, the Essential Supplies Act remained opera tive only till 31 3 1947, under the first part.
The Gover nor General, however, issued a notification on 3 3 1947 continuing its force for a period of 2 years from the date of cessation of emergency.
By virtue of this notification, therefore, the Essential Supplies Act would remain in force till 31 3 1948.
On 18 7 1947, the Indian Independence Act was passed, and India became a Dominion on 15 8 1947.
Under section 9 read with section 19(4) of the Indian Independence Act, 1947, the GOvernor General passed an Order on 14 8 1947, which substituted the words "Dominion Legislature" for" both Houses of Parliament" in the proviso to section 4 of the India (Central Government and Legislature) Act, 1946, and also introduced a new section 4A by way of adapta tion, providing that the powers of the Dominion Legislature shall be exercised by the Constituent Assembly.
On 25 2 1948, the Constituent Assembly passed its first resolution extending the operation of the Essential Supplies Act by one year up to 31 3 1949.
On 23 3 1949, a second resolution was passed by the Assembly extending the life of the Act by one more year up to 31 3 1950.
In respect of these Acts and notifications three ques tions were urged on behalf of the appellant: firstly, wheth er the Governor 's notification of the 14th December, 1946, continued the operation of the Essential Supplies Act in the district of Darjeeling beyond the then period of life of the Act, namely, the period of one year from the date of cessa tion of emergency; secondly, whether a fresh notification by the Governor under section 92(1) of the Government of India Act was not necessary.
after the life of the Essential 132 Supplies.
Act was extended by the Governor General 's noti fication of 3 3 1947; and thirdly, whether the resolutions passed by the Constituent Assembly could operate to extend the life of the Essential Supplies Act.
Now, it is clear that under section 1 (3) of the Essen tial Supplies Act, it shall cease to have effect on the expiration of the period mentioned in section 4 of the India (Central Government and Legislature) Act, 1946.
The period mentioned in that section is not necessarily one year from the date of cessation of emergency.
It can be 2 years if the Governor General by notification so directs, and it may go up to a maximum period of 5 years in instalments of 1 year each, under the proviso.
The fixation of the period of operation of the Essential Supplies Act is thus not left to any other enactment.
It is provided by the Act itself.
As stated already, the notification of the 14th December, 1946, issued by the Governor applied the Essential Supplies Act to the Darjeeling district, and its life was extended up to 31 3 1948 by the notification of the Governor General.
It is difficult to see why a fresh notification under section 92 (1) of the Government of India Act is required to continue the life of the Act in the district of Darjeeling.
The Governor 's notification extended the Act to Darjeeling without specifying any particular period for its applicabil ity to that district, and it follows therefore that the Act would remain in force in the district so long as it remained in force in the rest of India.
It is only if its effect had ceased earlier than the coming into force of the Indian Independence Act and there was a reenactment by the legisla ture which was sought to be applied to an excluded area, that a notification by the Governor under section 92 (1) of the Government of India Act might be necessary.
Otherwise, the question of a fresh notification does not arise.
Section 19(4) of the Indian Independence Act, 1947, provides as follows: "In this Act, except so far as the context otherwise requires 133 References to the Government of India Act, 1935, include references to any enactments amending or supplementing that Act, and, in particular, references to the India '(Central Government and Legislature) Act, 1946; . " The adaptations made by the Governor General under sections 9 and 19 of the Indian Independence Act substituted the words "ConstitUent Assembly" for "both Houses of Parlia ment" in section 4 of the India (Central Government and Legislature) Act, and the Constituent Assembly by two reso lutions of different dates has extended the life of the Essential Supplies Act till 31 3 1950.
As soon as the adap tations came into force by order of the Governor General, the Constituent Assembly acquired the powers conferred on both Houses of Parliament under section 4 of the India (Central Government and Legislature) Act.
The validity of the adaptations is beyond question.
The case of Jatindra Nath Gupta vs The Province of Bihar and Others(1) has no application here.
In the case now before us, the Legislature has itself applied its mind and has fixed the duration of the Act, but has left the machin ery to reach the maximum period by instalments to be worked out in a particular manner.
There is here no question of delegation at all, much less delegation of any legislative power.
The appeal therefore fails and is dismissed.
Criminal Appeal No. 25 of 1951.
In this case, the appellant Bichan Chand Molla was charged with loading 28 bags of millmade cloth from a truck into a specially chartered aircraft at the Dum Dum airport, on behalf of his employers, Messrs. Amarchand Pannalal, without a permit, as required under clause 4 (2) of the West Bengal Cotton Cloth and Yarn Movement Control Order, 1947.
He was convicted under section 7 (1) read with section 8 of the Essential Supplies Act and sentenced to 9months ' rigor ous imprisonment and a fine Of Rs. 1,000 by the (1) 18 134 1st Class Magistrate of Barrackpore.
The Sessions Judge of 24 Parganas dismissed the appeal preferred by the accused.
A revision application filed by him in the High Court shared the same fate.
The legal argument urged in this appeal was the same as in the earlier appeal, and has to be repelled as untenable for the reasons already stated.
A special point was sought to be argued that the element of mens rea was want ing.
But the question was considered by the High Court, and it was held that there are two facts from which mens tea could be inferred.
When questioned, the accused stated that he was.loading handloom bales and not millmade cloth.
He had no permit with him and was not able to produce any even from his employers.
These facts under the circumstances warrant the inference of a criminal intent.
This appeal also will therefore stand dismissed.
Agent for the intervener: P.A. Mehta.
| IN-Abs | The Essential Supplies (Temporary Powers) Act (XXIV Of 1946) came into force on 19th November, 1946.
By a notifica tion 128 of 14th December, 1946, under section 92 (1) of the Government of India Act, 1935, the Governor of Bengal directed that the Act shall apply to the District of Darjeeling which was an "excluded area".
Section 1 (3) of the Essential Supplies Act provided that it shall cease to have effect on the expiration of the period mentioned in section 4 of the India (Central Government and Legislature) Act, 1946.
By a noti fication issued by the Governor General under section 4 the operation of the Essential Supplies Act was extended up to 31st March, 1948.
The Constituent Assembly in which the powers of the Houses of Parliament under section 4 of the above said India Act of 1946 became vested after the passing of the Indian Independence Act, 1947, passed resolutions ex tending the operation of the Essential Supplies Act up to 31st March, 1950.
The appellant, who was convicted under section 7 of the Act in respect of an act committed on the 14th October, 1949, within Darjeeling, contended that the Act was not validly extended to the District of Darjeeling and was not therefore in force there on the date of the alleged offence.
Held, that, as the Governor 's notification extend ed the Act to the District of Darjeeling without specifying any particular period for its applicability, the Act would remain in force in this district as long as it remained in force in the rest of India and a fresh notification of the Governor under section 92 (1) of the Government of India Act, 1935, was not necessary.
Under the adaptations made under sections 9 and 19 of the Indian Independence Act the powers conferred on the Houses of Parliament became vested in the Constituent Assembly and the Act was in force in the dis trict of Darjeeling on the date of the alleged contravention of the Act.
Held further, that there was no question of delegation of legislative power in this case as the Legislature had itself applied its mind and fixed the duration of the Act, leaving only the machinery to reach the maximum period to be worked out in a particular manner.
|
Appeals Nos. 325 of 1955 and 174 of 1956.
Appeal by special leave from the decision and order dated the 29th April 1955 of the Labour Appellate Tribunal of India at Calcutta in Appeal No. Calcutta 110 of 1953 arising out of the award dated 24th June, 1953, of the Industrial Tribunal, Calcutta.
M. C. Setalvad, Attorney General for India, B. Sen, section N. Mukherji and B. N. Ghosh for M/s. Burn & Co. N. C. Chatterji, A. K. Dutt and B. P. Maheshwari for the workmen.
783 1956.
October 11.
The Judgment of the Court was delivered by VENKATARAMA AYYAR J.
.Disputes having arisen between Messrs Burn and Company, Calcutta, hereinafter called the Company, and a section of their employees in Howrah Iron Works, hereinafter referred to as the Union, the Government of West Bengal issued a notification on 16 12 1952 referring the same to the First Industrial Tribunal for adjudication.
Though there were as many as 13 items comprised in the reference, we are concerned in these appeals only with four of them, viz., (1) revision of pay of clerical and sub staff, (2) grades of sarkars and checkers, (3) bonus and (4) reinstatement of four employees, section N. Chatterjee, Ashimananda Banerjee, Panchanan Rana and Joydeb Banerjee and/or payment of compensation to them.
By his award dated 24 6 1953, Shri Banerji, the Industrial Tribunal, held (1) that there were no grounds for revising the scale of pay of the clerical and sub staff; (2) that the pay of checkers should be increased and that they should be paid according to the scale as set out in his award; (3) that the profits of the Company did not warrant the grant of any bonus in addition to what had been paid by the Company; and (4) that of the four employees, Shambunath Chatterjee should be re employed as a checker on his old pay, that Ashimananda Banerjee and Panchanan Rana should be "re employed in posts equivalent to their own posts as new incumbents" and that Joydeb Banerjee was not entitled either to reinstatement or compensation.
Against this award, the Union preferred an appeal to the Labour Appellate Tribunal.
By its decision dated 29 4 1955 the Appellate Tribunal substantially modified the award of Shri Banerji in favour of the Union it held (1) that the minimum pay of the clerical and sub staff should be raised, and that corresponding changes should be made in the ceiling level, in the increments and in the scales of pay of other grades of the staff; (2) that the scale of pay of the sarkars and checkers should be increased and incre 784 ments given as laid down in the award; (3) that the employees should be paid a month 's bonus in addition to what had been given to them; and (4) that of the employees, Shambunath Chatterjee, Ashimananda Banerjee and Panchanan Rana should not merely be re employed but reinstated with continuity of service, and that further Shambunath Chatterjee was entitled to compensation at the rate of six months ' basic wages with dearness allowance.
As for Joydeb Banerjee, the Appellate Tribunal held that though his reinstatement was not desirable, he was entitled to one year 's basic wages with dearness allowance as compensation.
Against this decision, the Company has preferred Civil Appeal No. 325 of 1955 by special leave, and the Union has likewise preferred Civil Appeal No. 174 of 1956, the leave being limited in the latter to the four points raised by the Company in its appeal.
(1) The first question relates to the increase in the minimum wages of the clerical and sub staff.
For a correct understanding of the true position, it is necessary to refer to the facts which form the background of the present dispute.
In 1946, the Bengal chamber of Commerce took up the question of fixing, suitably to the changed conditions brought about by World War II, wages and other terms of service of the employees in industrial concerns, and framed a scheme classifying them under different categories, and fixing scales of pay and dearness allowance for the several categories, and that was brought into force in the Company on 1 10 1946.
Under this scheme, the scale of pay for the lower categories of employees, with whom we are concerned in these appeals, was as follows: Class of employees Basic monthly pay range Junior clerks Rs. 60 2 90 Tracers 60 2 80 Clerks 60 4 124 (E. B. at 105) Typists 60 4 90 Steno typists Comptometer 80 4 124 (E. B. at 105) Operators 785 Juniors (Drg.
and Estg.)60 4 88 2 100 Junior Draftsmen 92 4 124 2 134 Junior Estimatorsr Disputes then arose between Engineering Firms in the State of West Bengal and their employees as regards fixation of grades, wages and dearness allowance, and by a notification dated 31 10 1947 the Government referred them to the adjudication of the First Engineering Tribunal.
The appellant Company and its workmen were parties to the proceedings but not the present Union, which was composed of the clerical and sub staff.
On 30 6 1948 the Tribunal passed an award, the terms whereof were, in general, less favourable to the employees than those fixed by the Bengal Chamber of Commerce and adopted by the Company on 1 10 1946.
While the proceedings were, pending before the Engineering Tribunal, disputes arose between various Mercantile Firms in Calcutta and their employees as regards wages, dearness allowance and other terms of service, and by notification dated 17 1 1948 the Government of West Bengal referred them to the adjudication of another Tribunal, called the Mercantile Tribunal.
This Tribunal pronounced its award on 26 8 1949, and the scale of pay provided therein for the lower categories of employees was as follows: Grade D Rs. 70 3 130 Grade C Rs. 70 4 134 The Union was party No. 192 in those proceedings, but for technical reasons, the Tribunal declined to adjudicate on their disputes.
The result was that this award was no more binding on the parties than the one passed by the Engineering Tribunal.
But the scale fixed in the award of the Mercantile Tribunal was decidedly more favourable to the employees than either the scale recommended by the Bengal Chamber of Commerce and adopted by the Company on 1 10 1946 or that fixed in the award of the Engineering Tribunal, and it is therefore not surprising that it should have inspired the Union to present a demand 786 for wages and dearness allowance on the scales provided therein.
The Company having declined to accept it, there arose an industrial dispute, and by a notification dated 18 1 1950, the Government of West Bengal referred the same for adjudication to one Shri Palit, District Judge.
Before him, the Company contended that as the members of the Union were employees in an Engineering concern, the scale of pay applicable to ' them was that laid down in the award of the Engineering Tribunal, and that as the scale actually in force was more favourable to them than that scale, there was no ground for revision.
The Union, on the other hand, contended that not having been a party to the proceedings before the Engineering Tribunal, it was not bound by the award therein, and that as its members were clerical staff and not workers, the scales fixed in the award of the Mercantile Tribunal were more appropriate to them.
By his award dated 12 6 1950 shri Palit held that the nature of the work and the qualifications of the clerical staff were not the same in all business establishments, that the clerks in mercantile concerns were better qualified and had to do more onerous work than the members of the Union, that the latter could not be put in the same position as the former, and that the scale of pay fixed in the scheme of the Bengal Chamber of Commerce which was adopted by the Company was fair and required no revision.
He, however, made some slight changes in the incremental scales and the maximum limits of the grades.
The scheme as settled in his award with reference to the categories involved in this appeal was as follows: Grade Class of employees Pay according to the award of Shri Palit "D" Junior Clerks 60 3 96 Tracers 60 3 90 Clerks 60 4 140 (E.B. at 100) Typists 60 4 100 Stenotypists and Comptometer Operators 80 4 124 (E.B. at 120) 787 "C" Junior (Drawing and Estimating) 60 4 120 Junior Draftsmen _ Junior Estimators 92 4 140.
The Union preferred an appeal against this award, but that was dismissed as barred by limitation.
Under section 19(3) of the Industrial Disputes Act XIV of 1947, an award is to be in operation for a period of one year, and under section 19(6), it is to continue to be binding on the parties even thereafter, until terminated by either party by giving two months ' notice.
Acting on this provision, the Union issued a notice to the Company on 12 7 1951 being exactly one year from the date of publication of Shri Palit 's award dated 12 6 1950, declaring its intention not to be bound by it.
This was followed in November by presentation of demands including ' one for raising the scale of pay to the level adopted in the award of the Mercantile Tribunal, and the result was an industrial dispute, which is the subject matter of the present reference.
Shri Banerji, who heard the ,reference, held that the question as to the scale of pay had been directly adjudicated upon by Shri Palit, that, on principle, the decision of a Tribunal on a matter referred to it should not be disturbed, unless there had been a change of circumstances since the date of the award, and as none such existed,, the wage structure as fixed by him should stand.
The Appellate Tribunal disagreed with this conclusion.
It held that the award of Shri Palit, which Shri Banerji accepted, was bad for the reason that it had failed to examine "the question as to whether the minimum salary fixed by the Managing Agents was adequate to cover the cost of a balanced diet and provide frugal comforts which a workman of the clerical staff must have to maintain the efficiency of his work".
It then referred to the opinion of Dr. Akroyd that an intake of 2,600 calories of food was necessary for efficiency of work, quoted some decisions of the Labour Tribunal in which the minimum pay of the clerical staff had been fixed at Rs. 70 and even more, and decided that the minimum pay should be fixed at Rs. 65 per 788 mensem for the clerical and sub staff of the Company.
Having raised the floor level of the wage structure as aforesaid, it correspondingly raised the ceiling level and the scales of increment, and further with a view to maintain the differential scales as between the different categories, it raised the minimum pay in scales where it stood at Rs. 65 and more, with "consequential change in their incremental scales and the maximum grades".
It is argued for the appellant Company that the Appellate Tribunal was in error in brushing aside the award of Shri Palit and in deciding the matter afresh, as if it arose for the first time for determination, that when once a dispute is referred to a Tribunal and that results in an adjudication, that must be taken as binding on the parties thereto, unless there was a change of circumstances, and as none such had been alleged or proved, the award of shri Palit should, have been accepted, as indeed it was by Shri Banerji, and the decisions in The Army & Navy Stores Ltd., Bombay vs Their Workmen(1) and Ford Motor Co. of India, Ltd. vs Their Workmen(1) were cited in support of this contention.
In the instant case, the Labour Appellate Tribunal dismissed this argument with the observation that was "a rule of prudence and not of law".
If the Tribunal meant by this observation that the statute does not enact that an award 'should not be re opened except on the ground of change of circumstances, that would be quite correct.
But that is not decisive of the question ', because there is no provision in the statute prescribing when and under what circumstances an award could be re opened.
Section 19(4) authorises the Government to move the Tribunal for shortening the period during which the award would operate, if "there has been a material change in the circumstances on which it was based".
But this has reference to the period of one year fixed under section 19(3) and if that indicates anything, it is that would be the proper ground on which the award could be reopened under section 19(6), and that is what the learned Attorney General (1) (2) 789 contends.
But we propose to consider the question on the footing that there is nothing in the statute to indicate the grounds on which an award could be reopened.
What then is the position? Are we to hold that an award given on a matter in controversy between the parties after full hearing ceases to have any force if either of them repudiates it under section 19(6), and that the Tribunal has no option, when the matter is again referred to it for adjudication, but to proceed to try it de novo, traverse the entire ground once again, and come to a fresh decision.
That would be contrary to the well recognised principle that a decision once rendered by a competent authority on a matter in issue between the parties after a full enquiry should not be permitted to be re agitated.
It is on this principle that the rule of res judicata enacted in section II of the Civil Procedure Code is based.
That section is, no doubt, in terms inapplicable to the present matter, but the principle underlying it, expressed in the maxim "interest rei publicae ut sit finis litium", is founded on sound public policy and is of universal application.
(Vide Broom 's Legal Maxims, Tenth Edition, page.
"The rule of res judicata is dictated" observed Sir Lawrence Jenkins, C.J. in Sheoparsan Singh vs Ramnandan Prasad Singh(1)."by a wisdom which is for all time".
And there are good reasons why this principle should be applicable to decisions of Industrial Tribunals also.
Legislation regulating the relation between Capital and Labour has two objects in view.
It seeks to ensure to the workmen who have not the capacity to treat with capital on equal terms, fair returns for their labour.
It also seeks to prevent disputes between employer and employees, so that production might not be adversely affected and the larger interests of the society might not suffer.
Now, if we are to hold that an adjudication loses its force when it is repudiated under section 19(6) and that the whole controversy is at large, then the result would be that far from reconciling themselves to the award and settling down to work it, either party will treat it as a (1) [1916] L.R. 43 I.A. 91; Cal.
103 103 790 mere stage in the prosecution of a prolonged struggle, and far from bringing industrial peace, the awards would turn out to be but truces giving the parties breathing time before resuming hostile action with renewed vigour.
On the other hand, if we are to regard them as intended to have long term operation and at the same time hold that they are liable to be modified by change in the circumstances on which they were based, both the purposes of the legislature would be served.
That is the view taken by the Tribunals themselves in The Army & Navy Stores Ltd., Bombay vs Their Workmen(1) and Ford Motor Co. of India Ltd. vs Their Workmen(2), and we are of opinion that they lay down the correct principle, and that there were no grounds for the Appellate Tribunal for not following them.
We should add that the Appellate Tribunal was also in error in thinking that Shri Palit had failed to advert to the principle on which basic wages should be fixed, and that he had not referred to the doctrine of Dr. Akroyd about the need for a balanced diet of 2,600 calories.
It is true that Shri Palit does not in terms refer to these matters in his award.
But they were all discussed in the awards of both the Engineering Tribunal and the Mercantile Tribunal.
The dispute between the parties was whether the one award or the other should be taken as the basis for fixation of the scale of pay, and Shri Palit decided that it was the Engineering Tribunal 's award and not the other that was more appropriate to the class of employees, of which the Union was composed.
In basing his award on the award of the Engineering Tribunal, Shri Palit must be taken to have considered all the factors relied on by the Tribunal for fixing the scales and the criticism that the award does not refer to them once again is one of form rather than of substance.
We must, therefore, hold that the decision of the Appellate Tribunal cannot be maintained even on its own ground.
The position then is this: The question of scales of pay was decided by Shri Palit in his award dated (1) (2) 791 12 6 1950, and the Union was a party to it.
It is not alleged that there has been any change in circumstances between that date and 16 12 1952 when the present reference was made to Shri Banerji.
On the principles stated above, therefore, the award of Shri Palit should not be disturbed.
This conclusion would have entailed the reversal of the order of the Appellate Tribunal and the restoration of the award of Shri Banerji.
We are of opinion, however, that the scale fixed by the Appellate Tribunal In its order dated 29 4 1955 should not be interfered with, in so far as it fixes the minimum pay of the clerical and sub staff at Rs. 65 per mensem.
It is common ground that dearness allowance is payable under the rules of the Company, only when the cost of living index exceeds point 180.
The basic wages should therefore be fixed with 180 point as cost of living index.
When we turn to the award of the Engineering Tribunal, we find that it fixed the basic wages after taking the cost of living index as 160 points.
Before Shri Palit, the Company contended that the scale fixed in the award of the Engineering Tribunal should form the basis of fixation of the pay scale of the Union, and though the Tribunal held that the award was not as such binding on the Union, it agreed with the Company that it was the scale fixed therein and not that fixed in the award of the Mercantile Tribunal that was more appropriate to the clerical staff of an Engineering concern, and adopted the scale fixed by the Company on 31 10 1946 as being "slightly in advance of the terms contained in the Engineering Tribunal 's award".
It is clear from a reading of the award of Shri Palit that he was not conscious that the basic wages had been fixed by the Engineering Tribunal with point 160 as the cost of living index, and his observation that the scale adopted by the Company was an advance on that fixed by the Engineering Tribunal is consistent only with an assumption by him that the basic wages bad been fixed both by the Company and the Engineering Tribunal with point 180 as the cost of living index.
Now, if we are to accept the scale fixed in the award 792 of Shri Palit as did Shri Banerji, the position would.
be that while for purposes of basic wages the cost of living index point would be 160, for purposes of dearness allowance it would be 180, and that would work great injustice on the workers.
It is the realisation of this fact that must have led Mr. Bose, counsel for the Company ' to raise at a late stage of the hearing of the appeal the contention that the 'cost of living index of the Bengal Chamber of Commerce which was adopted by the Company was different from that of the Government.
But this contention went against the admission made by Mr. Sen on behalf of the Company at an earlier stage, and was rightly rejected by the Appellate Tribunal and that was abandoned before us.
There is thus, on the face of the record, an error of a fundamental character.
It is argued for the appellant that this point is not open to consideration at this stage, as it had not been raised by the Union at any time before, and that, in any event, the matter should be remanded for further enquiry.
But the question is whether in view of what appears on the face of the record this is a fit case for our interference in special appeal.
The minimum pay fixed by the Appellate Tribunal would be quite proper if the cost of living index is taken, for the purpose of fixing the basic wages, at point 180 instead of 160, and there is no reason why we should not accept it.
Nor do we think that a remand is called for in the interests of justice, as, in the face of the undisputed facts, it can only result in the proceedings dragging on and the relationship between the parties deteriorating.
Under the circumstances, we do not propose to disturb the minimum pay of Rs. 65 per mensem fixed by the Appellate Tribunal.
But we see no justification for raising either the ceiling levels or the starting pay of other categories of employees whose initial pay was Rs. 65 per mensem or more.
We accordingly set aside the scale of pay as fixed by the Appellate Tribunal and restore that of Shri Banerji subject to the following modifications: Grade D Junior clerks Rs. 65 3 98 Tracers 65 3 92 793 Grade C Clerks 65 4 141 (E.B. 'at 105) Typists 65 4 101 Junior (Drawing and Estimating) 65 4 121 (2) The second question relates to the grading of sarkars and checkers.
The claim put forward on their behalf is that they should be raised to the category of clerks.
This was rejected by Shri Palit in his award dated 12 6 1950 and again by Shri Banerji in those proceedings.
The Appellate Tribunal before whom this claim was repeated, while observing that the work of sarkars and checkers was "not of the same nature as that of the members of the clerical staff", held, nevertheless, that the scales of pay fixed in the award of the Engineering Tribunal for clerks should be applied to them, and that therefore non matriculate sarkars and checkers should be put on Rs. 55 2 1/2 80 scale and matriculate sarkars and checkers on Rs. 60 2 1/2 90 scale.
We are unable to uphold this order.
When once the Appellate Tribunal reached the conclusion that the sarkars and checkers could not be put in the same category as clerks, the question then is simply whether any grounds had been made out for interfering with the fixation of pay scales by Shri Banerji.
So far as the sarkars are concerned, the scale had been fixed by Shri Palit, and Shri Banerji adopted it.
As no change ' in the circumstances was alleged in support of a revision thereof, there was no ground for interfering with it.
As for checkers, they are hourly rated workers, and Shri Banerji had revised their pay scale.
Apart from stating that "the ends of justice" required it, the Appellate Tribunal gave no reason for modifying his award.
We are of opinion that the order of the Appellate Tribunal should be set aside both in respect of sarkars and checkers and the award of Shri Banerji restored.
(3) On the question of bonus, the facts are that the Company had an elaborate scheme for granting bonus and the employees had been paid in accordance therewith.
But the Union claimed that having regard to the profits made by the Company, the employees 794 should be paid three months ' basic wages as bonus for the years 1950 and 1951.
It is not in dispute that the profits of the Company available for distribution for the year 1950 were Rs. 3.81 lakhs and for the year 1951, even less.
The monthly salary of the clerks, sub staff, sarkars and checkers was Rs. 89,500 and the monthly wages of the workers were Rs. 1,75,000, making a total of Rs. 2,64,500.
This is only for one factory, the Howrah Iron Works.
The Company owns nine other units at different places, and there is no evidence as to the monthly salary payable to the employees and workmen in those units.
Now, the surplus of Rs. 3.81 lakhs in the hands of the Company represents the total profits made by it in all its units, and there cannot be much of a doubt that this amount would be wholly insufficient to pay one month 's basic wages as bonus to the employees of the Company in ,all its, ten units.
Shri Banerji accordingly held to at the profits of the, Company did not justify the grant of any bonus beyond what the Company had granted, and simplifying the complicated scheme of bonus which the Company had evolved, he directed that bonus should be paid, including what had been paid by it, at one month 's basic pay.
The Appellate Tribunal when dealing with this question agreed that "if all categories of workmen be paid bonus, there is no scope for the payment of any additional bonus".
But it held that as the other categories of workmen had not made any claim for bonus and as the amount payable to the members of the Union was only Rs. 89,000, the surplus was sufficient to justify the award to them only of another month 's basic wages as bonus.
Whether we consider the question on principles of law or of equity, this conclusion is clearly unsound.
In law, a claim for bonus will be admissible only if the business had resulted during the year in sufficient profits.
And as the reasons for the grant of bonus is that workers should share in the prosperity to which they have contributed, all of them would have the right to participate in it.
Therefore, profits can be said to be sufficient to declare a bonus only if they 795 are sufficient to make a payment to all of them.
If the profits are not sufficient for that purpose, then the very, condition on which bonus could be declared would be absent, and no question of granting any bonus could arise.
As it is common ground that the profits of the Company are not sufficient to justify the award of bonus if it is to be paid to all the workers of the Company in all its units, it follows that there is in law no ground for the grant of bonus.
Nor can such a claim be sustained in equity.
The entire profits of the Company are the result of the labour of all the workmen and employees in all its units.
To grant a bonus to a section of them on the basis of the total profits of the Company will be to give them a share in profits to which they have not contributed.
We are wholly unable to appreciate the observation of the Appellate Tribunal that to refuse additional bonus to the Union employees would be to penalise them " not for their own fault but for the laches of the coworkers, who abandoned their claim".
The Tribunal forgets that, on its own finding, if all the workmen made a claim, no bonus could have been declared.
It is not a question of their abandoning their claim but of their realising that they have none.
If the order of the Appellate Tribunal is to be given effect to, some of the employees of the Company would get a bonus, while others not, and as observed in Karam Chand Thappar & Bros. ' Workmen vs The Company(1), that must lead to disaffection among the workers and to further industrial disputes.
The order of the Appellate Tribunal awarding an additional one months basic wages as bonus is neither legal nor just and must be set aside and the award of Shri Banerji as regards bonus restored.
(4) It remains to deal with the question of the re instatement and/or compensation of four employees, section N. Chatterjee, Ashimananda Banerjee, Panchanan Rana and Joydeb Banerjee.
It has been already stated that the order of Shri Banerji with reference to them was modified by the Appellate Tribunal by awarding compensation at the rate of six months ' basic wages (1) ,160.
796 to section N. Chatterjee and one year 's basic wages with dearness allowance to Joydeb Banerjee and by providing that section N. Chatterjee, Ashimananda Banerjee and Panchanan Rana should not merely be re employed but reinstated with continuity of service.
It is argued for the appellant that under section 7 of the Industrial Disputes (Appellate Tribunal) Act XLVIII of 1950, the order of the Tribunal refusing reinstatement was not open to appeal, as it is not one of the matters set out in section 7(1)(b), and that, in consequence, the order of the Appellate Tribunal in so far as it modified the order of the Tribunal as regards the four employees aforesaid, was without jurisdiction, and the decision in Ranganathan vs Madras Electric Tramways(1) and Sudershan Steel Rolling Mills vs Their Workmen(2) were relied on in support of this contention.
It must be mentioned that retrenchment is one of the matters enumerated in section 7 (1) (b), in respect of which an appeal would lie.
But if the order is one of dismissal, it cannot be said to be one of retrenchment as that word is ordinarily understood, and will not be appealable under section7(1)(b).
In 1953 the legislature enacted the Industrial Disputes (Amendment) Act XLIII of 1953 wherein "retrenchment" was for the first time defined so as to include, subject to certain exceptions, the termination by the employer of the service of workmen for any reason whatsoever.
(Vide section 2(oo)).
Under this definition, an appeal would be competent under section 7 (1) (b) (vii) in the case of termination of service, subject to the exceptions specified therein.
But this Act came into force on the 24th December 1953, and as there is nothing in it giving retrospective operation to this definition, the rights of the parties to the present appeal would remain unaffected by it.
Act XLIII of 1953 replaced Ordinance No. V of 1953, wherein also retrenchment was defined as including, subject to exceptions all termination of service; but that also came into force only on the 24th October 1953, whereas the present appeal was filed on 19 8 1953.
On that date, the order of the Tribunal refusing (1) A.I.R. 1952 Mad. 669.
(2) 797 reinstatement was not open to appeal, and the order of the Appellate Tribunal modifying it would therefore be without jurisdiction and void.
But it is argued for the respondent that an award of the Tribunal refusing reinstatement would be appealable under section 7 (1) (a ') if it involved a substantial question of law, and that as the contention of the employees was that the orders dismissing them were bad as having been passed in contravention of ,the rules of natural justice, that was a question of law on which an appeal was competent.
It was further contended that when a question arises whether a Tribunal has jurisdiction over the subject matter, it must be competent to decide whether the preliminary conditions exist, on which its jurisdiction depends, and its decision on that question is not liable to be attacked in civil courts, and that accordingly the assumption of jurisdiction by the Appellate Tribunal on the footing that there was a substantial question of law was not liable to be questioned by the civil court, and the decisions in Pankaj Kumar Ganguli vs Bank of India(3) and Upper Ganges Electric Employees Union vs Upper Ganges Valley Electricity Supply Co. Ltd. and another(4) were relied on in support of this contention.
We agree that an order refusing reinstatement would be open to appeal under section 7(1)(a) if it involved a substantial question of law.
Whether a decision of the Appellate Tribunal that an appeal to it from an award was competent under section 7 (1) (a) on the ground that it involved a substantial question of law is final and not open to question in a civil court is a point on which we do not desire to express an opinion, as in the present case, the correctness of that ,decision is challenged not collaterally or in independent proceedings, such as an application under article 226 of the Constitution as in the two cases relied on for the respondent, but by way of appeal under article 136, and it is open to us to consider as a Court of Appeal whether, in fact, the order of the Tribunal was vitiated by an error of law, and whether the (1) 104 (2) A.I.R. 1956 All. 491, 104 798 order of the Appellate Tribunal modifying it is sound.
We must now consider the case of the four employees from this standpoint: (1) section N. Chatterjee had an eye defect, and acting on the advice of its medical officer, the Company discharged him on that ground.
The Tribunal has found him to be fit, and directed his re employment.
He now claims compensation on the ground that he had produced a certificate of fitness from a competent medical officer but that the Company discharged him without making any enquiry thereon.
The Appellate Tribunal found that the company bad acted bonafide, but that as the order of dismissal was made without due enquiry it was bad, and accordingly awarded compensation at the rate of six months ' basic wages.
We are unable to hold that on the facts found the Appellate Tribunal had acted without jurisdiction in interfering with the award or that its order is unjust.
No case has been made out for our interference with it under article 136 (2) Ashimananda Banerjee was arrested by the Government under the West Bengal Security Act and detained in jail from 25 1 1949 to 5 4 1951.
The Company terminated his services on 22 4 1949.
The Tribunal made an order that he should be re employed, and that is not now in question.
But he fur ther claims that he is entitled to be reinstated.
The Appellate Tribunal has accepted that claim on the ground that he had been discharged without the Company framing a charge or holding an enquiry, and that the rules of natural justice had been violated.
We are unable to agree with this decision.
The ground of discharge is the continued absence of the employee, and his inability to do work, and it is difficult to see what purpose would be served by a formal charge being delivered to him and what conceivable answer he could give thereto.
The order of the Appellate Tribunal is manifestly erroneous and must be set aside.
(3) The facts relating to Panchanan Rana are similar to those of Ashimananda Banerjee, and for the reasons already given, the order of the Appellate 799 Tribunal in his favour should be set aside.
(4) The question as regards Joydeb Banerjee is whether he is entitled to compensation on the ground that he had been wrongly discharged.
The facts are that on 16 11 1950 a number of employees participated in an assault on the Works Manager, Mr. Davison, and the Company dismissed fourteen of them on that ground, and Joydeb Banerjee was one of them.
The Appellate Tribunal has held that as no charge was, framed against him or an enquiry held, his dismissal was in contravention of the rules of natural justice.
It has accordingly ordered that he should be given one year 's basic wages with dearness allowance as compensation.
It is true that no charge sheet was formally drawn up against him, but that would not vitiate the order of dismissal if he knew what the charge against him was and had an opportunity of giving his explanation.
It appears from the order of the Tribunal that subsequent to the order of dismissal by the Company, there were conciliation proceedings and an enquiry by the Labour Minister, as a result of which he recommended the reinstatement of seven out of the fourteen who had been dismissed, leaving the order in operation as regards the other seven, of whom Joydeb Banerjee was one.
In the face of these facts, it is idle for him to contend that he had been dismissed without hearing or enquiry.
The order of the Appellate Tribunal awarding compensation to him should be set aside.
In the result, Civil Appeal No. 325 of 1955 is allowed, the order of the Appellate Tribunal set aside and that of Shri Banerji restored, except that (1) the minimum pay of the clerical staff will be Rs. 65 per mensem with modifications as to the ceiling level and increments as set out supra and (2) that section N. Chatterjee will be reinstated with compensation as provided in the order of the Appellate Tribunal.
The Union will pay half the costs of the appellant throughout.
Civil Appeal No. 174 of 1956 is dis missed, but there will be no order as to costs.
| IN-Abs | An award of an Industrial Tribunal is intended to have a long term of operation, and can be reopened under section 19(6) of the Industrial Disputes Act XIV of 1947 only when there has been a material change in the circumstances on which it was based.
To hold otherwise would be to defeat the two basic objects which all industrial legislations have in view, namely, to ensure to the workmen, a fair return for their labour and to prevent disputes between the employers and employees, so that production might not be affected and the interests of the society might not suffer.
That although the rule of res judicata as enacted by section 11 of the Code of Civil Procedure does not in terms apply to such an award, its underlying principle which is founded on sound public policy and is of universal application must apply.
The Army & Navy Stores Ltd., Bombay vs Their Workmen, ([1951] and Ford Motor Co. of India Ltd. vs Their Workmen, ([1951] , approved and applied.
Sheoparson Singh vs Bamnandan Prasad Singh, ([1916] L.R. 43 I.A. 91), referred to.
Consequently, where, as in the instant case, the Union of the employees of a certain section of the appellant Company served a notice on the Company under section 19(6) of the Act terminating a previous award which had applied to its members the scales of pay and dearness allowance fixed by the Bengal Chamber of Commerce with slight modifications, and demanded that the more favourable Scale of pay adopted by the Mercantile Tribunal in its award might be applied to them, and the Tribunal appointed to adjudicate the dispute, held that, there having been no change in the circumstances in which the previous award had been made, the same was binding between the parties and could not be modified, but the Appel 102 782 late Tribunal in appeal held otherwise and brushed aside the previous award, held that the order of the Appellate Tribunal was erroneous in law and as such liable to be set aside.
Hold further, that the reason for the grant of a bonus being that the workers should be allowed to share in the prosperity to which they have contributed, unless the profits for a particular year were adequate for a payment of bonus to all the workers of the Company in all its sections, no claim for it could at all arise either in law or equity.
Karam Chand Thappar & Bros. ' Workmen vs The Company ([1953] L.A.C. 152), referred to.
That an order passed by the Tribunal refusing reinstatement would be appealable under section 7(1)(a) of the Industrial Disputes (Appellate Tribunal) Act of 1960 if it involved a substantial question of law and it was not necessary to decide in the present case whether the decision of the Appellate Tribunal that an appeal lay to it under that section was final and not open to question in a civil court, as the correctness of that decision was challenged not collaterally or in an independent proceeding but in an appeal under article 136 of the Constitution and it was open to the Supreme Court in such an appeal to consider the legality or otherwise of the orders passed either by the Tribunal or by the Appellate Tribunal in appeal.
Pankaj Kumar Ganguli vs The Bank of India, ([1966] 60 C.W.N. 602) and Upper Ganges Valley Electric Employees Union vs Upper Ganges Valley Electricity Supply Co. Ltd. and another, (A.I.R. 1956 All. 491), distinguished.
That the omission to draw up a formal charge sheet against a workman could not vitiate an order of dismissal if he was aware of the charge framed against him and had an opportunity of offering his explanation.
|
Civil Appeal No. 1185 of 1979, Appeal by Special Leave from the Judgment and order dated 15.12.1978 of the Gujarat High Court in Sales Tax Reference No. 24 of 1978.
AND Civil Appeal No. 1187 of 1979.
Appeal by Special Leave from the Judgment and order dated 27.11.1978 of the Gujarat High Court in Sales Tax Reference No. 11 of 1977.
K H. Kaji, T. Sridharan, R.D. Pathak, Miss C. K. Sucharita and Mrs. section Bhandare for the Appellant in both the Appeals.
S.T. Desai and M.N. Shroff for the Respondent in both the Appeals.
437 The Judgment of the Court was delivered by VENKATARAMIAH, J.
Since a common question of law is involved in these two appeals by special leave, they are disposed of by this common judgment.
The appellant in Civil Appeal No. 1185 of 1979 is M/s. Hindustan Brown Boveri Ltd., a company engaged in the business of manufacturing certain goods which are used in electrical undertakings for the purpose of generating and distributing electrical energy.
It is registered as dealer under the provisions of the Gujarat Sales Tax Act, 1969 (Gujarat Act No. I of 1970) (hereinafter referred to as 'the Act ').
For the purpose of manufacturing the goods, the appellant which was also a recognised dealer under the Act purchased raw materials during the period between May 6, 1970 and March 31, 1971 after furnishing a certificate in Form No. 19 as provided under section 13(1)(B) of the Act read with Rule 24(4) of the Gujarat Sales Tax Rules, 1970 (hereinafter referred to as 'the Rules ') framed under the Act stating that the raw materials purchased by it would be used in manufacturing taxable goods which would be sold by it in the State of Gujarat.
Some part of the goods manufactured by the appellant were sold to a certain electrical undertaking in the State of Gujarat against 'C ' forms in order to claim exemption from payment of tax on the said sales under the Act by virtue of a notification issued under section 49(2) of the Act exempting the goods sold to electrical undertakings for being used in generation and distribution of electrical energy.
On coming to know of the said sales, the Sales Tax officer.
, who was the assessing authority under the Act levied purchase tax under section 16 of the Act on the raw materials purchased be the appellant on the ground that the undertaking given in Form No. 19 had been violated.
The appeals filed by the appellant before the Assistant Commissioner of Sales Tax and the Gujarat Sales Tax Tribunal against the said levy were unsuccessful.
Thereafter at the instance of the appellant the Tribunal referred the following question of law to the High Court of Gujarat under section 69 of the Act: "Whether on the facts and in the circumstances of the case, and on a correct interpretation of sub section (33) of section 2 of the Gujarat Sales Tax Act, 1969 the Tribunal was right in deciding that the applicant was liable to pay purchase tax under section 16 of the Gujarat Sales Tax Act, 1969 on the ground that certain electric goods manufactured 438 out of raw materials etc.
purchased against declaration in Form 19 were sold to Gujarat State Electricity Board against declarations in Form prescribed in Entry 5 of the Government Notification issued under section 49 of the Gujarat Sales Tax Act, 1969 ?" The appellant in Civil Appeal No. 1187 of 1979 is M/s. Hindustan Engineering Co. Ltd. which is engaged in manufacturing heavy machinery and gear conveyers.
It is also a recognised dealer under the Act.
Like the appellant in Civil Appeal 1185 of ]979, this appellant also purchased raw materials by furnishing certificates in Form No. 19 and later on sold a part of the goods manufactured by it to a certain electrical undertaking against Form No. 'C ' and claimed exemption under the notification issued under section 49(2) of the Act.
In this case also the Sales Tax officer levied purchase tax under section 16 of the Act for violation of the undertaking given in Form No. 19.
The appeals to the Assistant Commissioner of Sales Tax and the Gujarat Sales Tax Tribunal failed.
Thereafter at the instance of the appellant, the Gujarat Sales Tax Tribunal referred the following question for the opinion of the High Court of Gujarat: Whether on the facts and in the circumstances of the case, the Tribunal is justified in holding that the sales of machineries and conveyers manufactured by the applicant to an electrical undertaking against Form 'C ' under Entry 5 of the Government Notification issued under section 49 of the Gujarat Sales Tax Act, 1969 resulted in the breach of the declarations in Form 19 as the goods so manufactured and sold did not amount to manufacture of taxable goods ?" It is seen from the two questions referred to above that they are substantially the same.
The High Court answered the said questions in favour of the Revenue and against the assessees by two separate orders following its earlier decision in M/s. Nawroji N. Vakil & Co. vs State of Gujarat.
The appellants have filed these appeals against the decision of the High Court by special leave under Article 136 of the Constitution.
We shall now briefly refer to the relevant provisions of the Act.
Section 2(10) of the Act defines a 'dealer ' as any person who 439 buys or sells goods in connection with his business and when he obtains a certificate of registration he becomes a registered dealer.
Section 32 of the Act provides for the recognition of a registered dealer.
It says that where during the previous or current year, the value of all taxable goods manufactured for sale by a dealer registered under section 29 or by a dealer registered under section 30, whose turnover of sales or purchases has subsequently, exceeded the limits specified in sub section (4) of section 3, exceeds Rs. 3,000/ such dealer on application by him may be granted recognition by the Commissioner and on such recognition being granted, he becomes a recognised dealer.
Section S of the Act says that subject to the conditions or exceptions (if any) set out against each of the goods specified in column 3 of the Schedule I to the Act, no tax shall be payable on the sales or purchases of any goods specified in that Schedule.
Section 6 of the Act provides that subject to the provisions of the Act and to any rules made thereunder there shall be paid by every dealer who is liable to pay tax under the Act, the tax or taxes leviable in accordance with the provisions of Chapter II of the Act.
Tn order to ensure that as far as possible the incidence of tax under the Act is not felt at more than one point in the series of transactions of sales and purchases of goods other than declared good in the State of Gujarat, sections 7, 8 and 10 of the Act are enacted as follows: "7.
Levy of sales tax on goods in Schedule II, Part A.
There shall be levied a sales tax on the turnover of sales of goods specified in Part A of Schedule II at the rate set out against each of them in column 3 thereof, but after deducting from such turnover, (i) resale of goods on the purchase of which the dealer is liable to pay purchase tax under sec.
(ii) resales of goods purchased by him from a Registered dealer (iii) sales of goods, of resales of goods to which clauses (i) and (ii) do not apply, to a Recognised dealer or to a Commission agent holding a permit who purchases on behalf of a principal who is a Recognised dealer, upon such dealer or Commission agent, as the case may be, furnishing in the circumstances and subject to the conditions specified in sub clause (B) and item (ii) of sub clause (C) of 440 sub see.
(1) of sec.
13, a certificate as provided therein, and (iv) sales of goods or resales of goods to which clauses (i) and (ii) do not apply, to a Licensed dealer or to a Commission agent holding a permit who purchases on behalf of a principal who is a Licensed dealer, upon such dealer or Commission agent, as the ease may be; furnishing in the circumstances and subject to the conditions specified in item (i) of sub clause (A) and item (i) (a) of sub clause (C) of sub sec.
(I) of sec.
13, a certificate as provided therein.
Levy of general sales tax on goods in Schedule II Part B There shall be levied a general sales tax on the turnover of sales of goods specified in Part of Schedule II at the rate set out against each of them in column 3 thereof, but after deducting from such turnover, (i) resales of goods on the purchase of which the dealer is liable to pay purchase tax under see.
16; (ii) resales of goods purchased from a Registered dealer by a dealer who is not a Licensed dealer at the time of such purchase, and (iii) sales of goods, or resales of goods to which clauses (i) and (ii) do not apply, to a Licensed dealer, Recognised dealer or to a Commission agent holding a permit, who purchases on behalf of a principal who is a Licensed dealer or a Recognised dealer, upon such dealer or Commission agent as the ease may be furnishing, in the circumstances and subject to the conditions specified in see.
13, a certificate as provided therein.
" " 10.
Levy of sales tax and general sales tax on goods specified in Schedule III. (I) There shall be levied a sales tax on the turnover of sales of goods specified in Schedule III at the rate set out against each of such goods in column 3 thereof, but after deducting from such turnover, (i) resales of goods on the purchase of which the dealer is liable to pay purchase tax under see.
16, 441 (ii) resales of goods purchased by him from a Registered dealer, (iii)sales of goods.
Or resales of goods to which clauses (i) and (ii) do not apply, to a Recognised dealer or to a Commission agent holding a permit who purchases on behalf of a principal who is a Recognised dealer, upon such dealer or Commission agent, as the case may be, furnishing in the circumstances and subject to the conditions specified in sub clause (B) and item (ii) of sub clause (C) of sub sec.
(1) of sec 13, a certificate as provided therein, and C (iv) sales of goods or resales of goods to which clauses (i) and (ii) do not apply, to a Licensed dealer or to a Commission agent holdings permit who purchases on behalf of a principal who is a Licensed dealer, upon such dealer or Commission agent as the case may be, furnishing in the circumstances and subject to the conditions specified in item (i) of sub clause (A) and item (i) (a) of sub clause (C) of sub sec.
(1) of sec.
13, a certificate as provided therein.
(2) There shall be levied a general sales tax on the turnover of sales of goods specified in Schedule III at the rate set out against each of such goods in column 4 thereof, but after deducting from such turnover (i) resales of goods purchased from a Registered dealer, by a dealer who is not a Licensed dealer at the time of such purchase; and (ii) sales of goods, or resales of goods which clause (i) does not apply to a Licensed dealer, or Recognised dealer or a Commission agent holding a Permit who purchases on behalf of a principal who is a Licensed dealer or a Recognised dealer upon such dealer or Commission agent, as the case may be, furnishing in the circumstances and subject to the conditions specified in sec.
13 a certificate as provided therein.
" 442 It may be noted that in the above provisions that from the turnover of sales of goods of a dealer which are otherwise taxable, the turnover of goods sold to a Recognised dealer, upon such Recognised dealer furnishing in the circumstances and subject to the conditions specified in sub clause (B) of sub section (1) of section 13 of the Act a certificate as provided therein becomes deductible and no tax is payable on such sales in favour of the Recognised dealer.
The relevant part of section 13 of the Act reads thus: "13.
No deduction from turnover except on a certificate. (1) There shall not be deducted from the turnover of sales, sales of goods to a Licensed dealer, Recognised dealer or to a Commission agent holding a permit purchasing on behalf of his principal, as provided in sections 7, 8 and 10 unless (A). (B) The Recognised dealer certifies in the prescribed form, that the goods other than prohibited goods sold to him are goods purchased by him for use by him as raw or processing materials or as consumable stores in the manufacture of taxable goods for sale by him; or Rule 24(4) of the Rules prescribes that the certificate issued by a Recognised dealer shall be in Form No. 19.
The relevant part of Form No. 19 reads: ". and that the goods purchased by me/the said . . and specified in bill/cash memo/invoice No . dated. . of M/s. . address. . will be used by me/the said. as raw/or processing materials or consumable stores in the manufacture of taxable goods viz. . for sale by me/the said. . and that such sale shall not take place outside the State of Gujarat.
(Emphasis supplied)" The expression 'taxable goods ' is defined by section 3(33) of the Act thus: "2(33).
"taxable goods" means goods other than those on the sale or purchase of which no tax is payable under sec.
5 or sec.
49 or a notification issued thereunder.
" 443 Sub section (1) of section 49 provides that subject to the conditions or exemptions.
if any, specified in relation to them, the classes of sales or purchases referred in clauses (i) to (vii) of section 49(1) shall be exempt from the payment of the whole of tax payable under the provisions of the Act.
Sub section 2 of section 49 of the Act authorises the State Government to exempt any other specified class of sales by a notification published in the Official Gazette.
Section 49(2) reads: "49.
Exemptions (1) (2) Subject to such conditions as it may impose, the State Government may, if it considers it necessary so to do in the public interest, by notification in the Official Gazette, exempt any specified class of sales or purchases from payment of the whole or any tax payable under the provisions of this Act. ' By a notification dated April 29, 1970 issued under section 49(2) of the Act the State Government exempted the entire tax payable on sales of goods (other than prohibited goods) by a registered dealer to an electrical undertaking, certified for the purpose by the Commissioner, if the electrical undertaking furnished to the selling dealer a certificate in Form appended to the notification stating inter alia that the goods purchased were required for the use of the generation or distribution of electrical energy by the undertaking.
In view of the above notification the sales made to the electrical undertaking become exempt from payment of sales tax under the Act on the undertaking furnishing the required certificate and no tax was paid by the appellants in these two appeals on sales of goods effected by them in favour of the electrical undertaking.
It is now necessary to refer to section 16 of the Act, the relevant part of which reads : "16.
Liability to purchase tax for contravention of terms of certificate etc. (1) Where any dealer or Commission agent has purchased any taxable goods under a certificate given by him under section 12 or 13, and (a) contrary to such certificate, the goods are used for another purpose, or are not resold or despatched in the manner and within the period certified, or 444 (b) on the resales in the course of inter State trade or commerce, of the goods so purchased, no tax under the (LXXIV of 1956), is actually payable by him on account of any deduction admissible under any of the Provisions of the said Act.
then such dealer or Commission agent shall be liable to pay tax on the purchase price of the goods purchased under such certificate; and accordingly, he shall include the purchase price thereof in his turnover of purchases in his declaration or return under section 40 which he is to furnish next thereafter.
(2) . . (3) the purchase tax leviable under this section in respect of any goods specified in Schedule II or III shall be the aggregate of all taxes which would have been leviable thereon but for the certificate given under section 12 or 13.
(4) If any question arises whether the purchase price of goods purchased under a certificate given under section 12 or 13 is not liable to be included in the turnover of purchases of a dealer or Commission agent under this section, the burden of so proving shall be upon such dealer, or as the case may be, the Commission agent.
" Section 16 of the Act provides that where a dealer has purchased any taxable goods under a certificate given by him under section 13 and has used the goods for a different purpose contrary to such certificate, then such dealer shall be liable to pay tax on the purchase price of the goods purchased under such certificate and his liability has to be computed in the manner stated in that section.
It is this liability of the appellants that is in dispute in these appeals.
It is not disputed that the appellants are recognised dealers; that they had purchased raw materials which were taxable goods (other than prohibited goods) from registered dealers against certificates issued by them in Form No. 19; that no sales tax had been paid on sales in their favour; that they had manufactured goods by using the said raw materials that they had sold a part of the goods to an electrical undertaking notified under section 49(2) of the Act and that no tax had been paid on sales effected by them in 445 favour of the electrical undertaking.
It is also not disputed that in Form No. 19 the appellants had stated that the raw materials purchased by them would be used to manufacture taxable goods which would be sold inside the State of Gujarat.
The question for consideration is whether the appellants had used the raw materials for another purpose contrary to the terms of Form No. 19.
The contention of the Department is that the appellants had contravened Form No. 19 by manufacturing goods which were not 'taxable goods ' and hence were liable to pay purchase tax on the purchase of raw materials under section 16 of the Act and the contention of the appellants is that the goods manufactured and sold by them to the electrical undertakings were 'taxable goods ' and merely because they were sold to an electrical undertaking under transactions exempted by section 49(2) of the Act, the goods did not cease to be taxable goods.
The solution to the question, therefore, lies on the true meaning of the expression 'taxable goods '.
Relying upon the decision of this Court in the Stale of Tamil Nadu vs M.K. Kandaswami and Ors.
it is urged on behalf of the appellants that the expressions 'taxable persons ', 'taxable goods ' and 'taxable events ' are entirely different concepts in sales tax law; that the goods in question were taxable goods as any sale of those goods not covered by section 49(1) and (2) would make such sale taxable and that section 49(1) and (2) of the Act referred to only events which resulted in the exemption from payment of sales tax.
It is further argued that all goods the sale or purchase of which is liable to tax under the Act are taxable goods and that goods would not be taxable goods only when their sales are exempted generally from payment of tax as provided in section 5 of the Act.
It is, therefore, contended that the goods manufactured by the appellants not having been goods, the sale or purchase of which had been exempted from tax by inclusion in Schedule I to the Act, the appellants could not be treated as having infringed the terms of Form No. 19, notwithstanding the existence of the circumstance that the particular sales made by them to the electrical undertakings were exempt from payment of tax.
The second ground urged on behalf of the appellants is that the condition under Form No. 19 became satisfied immediately on the goods being manufactured by the appellants as at that stage the goods were really taxable and that a subsequent event of sale to the electrical undertaking cannot be considered as having violated the said condition.
The third ground urged by the appel 446 lants is that a transaction of sale involved two facets a sale and a purchase and if a sale is exempted from tax, it cannot be said the purchase is also exempted.
On the above footing it is contended that since under section 49(2) only the tax on sale is exempted and nothing is said about the liability of the purchaser to tax, it cannot be said that the goods which were otherwise taxable had become non taxable on being sold under a transaction which attracted section 49(2) of the Act.
We find no substance in any of the three grounds urged on behalf of the appellants for the reason that the present case is governed by the definition of the expression 'taxable goods ' in section 2(33) of the Act.
It is interesting to note that the Bombay Sales Tax Act, 1959 (Bombay Act No. 1 of 1959) which was in force in the State of Gujarat before the Act came into force and which was repealed by section 88 of the Act contained the definition of the expression 'taxable goods ' in section 2(33) thereof.
The expression 'taxable goods ' was defined in the Bombay Act as 'goods other than those on the sale or purchase of which no tax is payable under section 5 '.
In the Bombay Act there was also a provision corresponding to section 49 of the Act in section 41 thereof which empowered the State Government subject to such conditions as it may impose to exempt by a notification published in the Official Gazette any specified class of sales or purchases from payment of the whole or any part of any tax payable thereunder if the State Government was satisfied that it was necessary so to do in the public interest.
Still the definition of 'taxable goods ' in that Act did not refer to sales exempted under section 41 thereof.
But in the Act which repealed and replaced the Bombay Act the meaning of the expression 'taxable goods ' has been narrowed down as section 2(33) of the Act reads 'taxable goods ' means goods other than those on the sale or purchase of which no tax is payable under section 5 (which corresponds to section 5 of the Bombay Act) and section 49 of the Act (which corresponds to section 41 of the Bombay Act) or a notification issued thereunder.
By this definition, the dichotomy that is stated to exist between 'taxable goods ' and 'taxable events ' has been given a go by.
It may be that section 5 and Schedule I refer to goods only but section 49 deals with only taxable events which result in the exemption from payment of tax on the conditions mentioned therein or in the notification issued thereunder being satisfied even though the goods in question do not come under Schedule I.
Secondly one has to wait till the disposal of the goods by the dealer to find out whether the goods are taxable goods or not in view of the 447 definition of the said expression which takes away goods sold under circumstances attracting section 49 from the scope of the meaning of that expression.
Nor does the third ground survive for the very same reason.
If the sale is exempt from tax under section 49 of the Act, the goods sold would not be taxable goods.
We need not go into the question whether the purchaser in a sale under section 49 of the Act has to pay tax in these cases.
This reason also disposes of an allied argument of the appellants that the possibility of any liability arising under section 50 of the Act on the breach of any condition imposed by section 49 or the notification issued thereunder would absolve the appellants of their liability to pay the tax under section 16 of the Act.
Any such levy made under section 50 has not been shown to have any effect in law on the liability of the appellants under section 16.
The scheme of the Act appears to be that sales tax should be levied on goods which are not included in Schedule I at least once inside the State in the series of sales and purchases even though they may have been converted into manufactured goods and that is why Form No. 19 requires the purchaser to state that the goods will be used by him as raw or processing materials or as consumable stores in the manufacture of taxable goods for sale by him inside the State and section 16 of the Act provides that where any dealer has purchased any taxable goods under a certificate given by him under section 12 or section 13 of the Act and contrary to such certificate the goods are used for another purpose or are not resold or despatched in the manner and within the period certified or on the resales in the course of inter State trade or commerce, of the goods so purchased no tax under the is actually payable by him on account of any deductions admissible under any of the provisions of that Act, then such dealer shall be liable to pay tax on the purchase price of the goods purchased under such certificate.
The deliberate alteration of the definition of 'taxable goods ' in the Act also is attributable to the said intention of the State legislature.
The appellants also cannot derive any assistance from the decision of this Court in Polestar Electronic (Pvt.) Ltd. vs Additional Commissioner, Sales Tax and Anr.
as these cases are governed by 448 the provisions of the Act and as there appears to be no similarity between the facts of these appeals and the facts involved in that case.
For the foregoing reasons, we do not find any merit in these appeals.
The appeals are dismissed with costs.
Hearing fee one set.
| IN-Abs | Exercising power under section 49(2) of the Gujarat Sales Tax Act, 1969, the State Government exempted the entire tax payable on sale of goods (other than prohibited goods) by a registered dealer to an electrical undertaking, certified for the purposes by the Commissioner; if the electrical undertaking, furnished to the selling dealer a certificate in the requisite form that the goods purchased were required for the generation or distribution of electricity by the undertaking.
But according to section 16 or the Act where a dealer has purchased any taxable goods under a certificate given by him under section 13 and has used the goods for a purpose contrary to such certificate, such dealer becomes liable to pay tax on the purchase price of the goods.
The appellants who were recognised dealers purchased raw materials of taxable goods from registered dealers by furnishing a certificate in Form 19 by reason of which no sales tax had been paid by them.
After manufacturing the goods with raw materials,, they sold part of the manufactured goods to an electrical undertaking in the State against 'C ' forms to claim exemption from tax on them by virtue of a notification issued under section 49(2) of the Act.
No tax had been paid on sales effected by them in favour of the electrical undertaking.
On the ground that the undertaking furnished in form 19 had been violated, the Sales Tax officer levied purchase tax under section 16 on the raw materials purchased by the appellants.
The appellants were unsuccessful in their appeals before the Assistant Commissioner as well as before the Sales Tax Tribunal.
The High Court answered the references against the assessees and in favour of the Revenue.
It was contended on behalf of the appellants (1) that the goods manufactured by them not having been goods the sale or purchase of which had been exempted from tax by inclusion in Schedule I they could not be treated as having infringed the terms of Form No. 19 notwithstanding the fact that particular sales made by them to the electrical undertaking were exempted from payment of tax (2) the condition in form 19 became satisfied immediately on the 436 goods being manufactured by the appellants as at that stage the goods were really taxable and that a subsequent event of sale to the electrical undertaking could not be considered as a violation of the said condition and (3) in a transaction of sale if the sale was exempted from tax it could not be said that the purchase was also exempted.
Dismissing the appeal, ^ HELD: (1) The expression "taxable goods '.
defined in section 2(33) of the Act means goods other than those on the sales or purchase of which no tax is payable under section 5 and section 49 or a notification issued thereunder.
By this definition the dichotomy that existed between "taxable goods" and "taxable events" in the now repealed Act (The Bombay Sales Tax Act, 1959 which was in force in the State before the present Act) had been given a go by.
It may be that section 5 and Schedule I refer to goods only but section 49 deals with only taxable events which result in the exemption from payment of tax on the happening of the conditions mentioned therein or in the notification even though the good in question do not come under Schedule 1.
[446 F H] (2) To find out whether the goods are taxable goods or not one has to wait till the disposal of the goods by the dealer in view of the definition of the said expression which takes away goods sold under circumstances attracting section 49 from the scope of the meaning of that expression.
[447 A] (3) If the sale is exempt from tax under section 49 the goods sold would not be taxable good.
[447 B]
|
: Contempt Appeal No. 19 of 1981.
From the judgment and order dated the 17th November, 1980 of the Himachal Pradesh High Court at Simla in Contempt Petition (Crl.) No. 7 of 1980.
V. M. Tarkunde, section section Ray, K.K.Venugopal, Dr. L. M. Singhvi, Kapil Sibbal, C. M. Nayar and L. K. Pandey for the Appellant.
L. N. Sinha, Attorney General for the Respondent (Registrar, High Court) K. Parasaran, Soli.
General and Miss A. Subhashini for the Respondent (State of H. P.) 538 The Judgment of the Court was delivered by CHANDRACHUD,C. J.
This is an appeal under sec.
19(1)b of the , ("the ",) against the judgment of the High Court of Himachal Pradesh dated November 17, 1980 in Contempt Case (Criminal) No. 7 of 1980, whereby the appellant was sentenced to simple imprisonment for six months and a fine of Rs. 200.
The appellant practises as an Advocate at Solan which is a district place in the State of Himachal Pradesh.
It appears that only one court generally sits at Solan which is that of the Senior Sub Judge cum Chief Judicial Magistrate.
The learned Judge, who presides over that Court, also exercises the powers of a Rent Controller and of the Court of Small Causes.
On June 18, 1980, Shri Kuldip Chand Sud, who was the Presiding Officer of the Court, was hearing a petition under the Rent in which the petitioner was represented by the appellant.
When the case was called out for hearing, the learned Judge noticed that the petitioner had not paid the process fee, as a result of which the summons could not be issued to the respondent.
The Judge therefore proceeded to dismiss the petition under Order 9, Rule 2 of the Civil Procedure Code.
Taking umbrage at the dismissal of the petition, the appellant hurled his shoe at the Judge which hit him on the shoulder.
The Judge asked his Orderly to take the appellant in custody but the appellant slipped away.
The Judge evidently wanted to proceed under section 228 of the Penal Code for which purpose he issued a warrant of arrest against the appellant.
The appellant successfully evaded the warrant and managed to prevent proceedings being taken by the Judge for the contempt of his court.
The Judge then made a reference to the High Court of Himachal Pradesh under section 15(2) of the .
The High Court issued notice to the appellant enclosing therewith a copy of the reference made by the Judge.
The appellant did not dispute in the High Court that he hurled a shoe at the Judge.
He explained his conduct by saying that he acted under an irresistible impulse generated by the provocative language used by the Judge.
The appellant 's version is like this: On the previous date of hearing, the Judge had directed the appellant to pay fresh process fee and to supply the address of the respondent to the Rent petition.
The appellant informed the Judge that he was unable to comply 539 with that order since the respondent had been admitted to a hospital and had since left the hospital.
The house in which the respondent lived was locked.
The Judge then declared that he proposed to take action under Order 9 Rule 2 of the Civil Procedure Code.
The appellant asked the Judge to record his statement as to why he was unable to pay the process fee and supply the address of the respondent.
Instead of recording the appellant 's statement, the Judge remarked: "You rascal, I will set you right".
The appellant protested at the abusive language used by the Judge, but the Judge retorted: "I repeat what I said".
The appellant thereafter lost control over himself and under the "extreme heat of moment and passion, his hand fell on his shoe" which he threw towards the dais.
Many persons were present in the court who witnessed the incident.
After hurling the shoe at the dais, the appellant took off his coat and tie and told the court: "An unfortunate incident has happened.
Do you want to take any action against me ? I surrender".
Upon this the Judge remarked: "You scoundrel get out of my court".
The appellant thereafter left the court room.
The High Court had called for the comments of the Judge on the version of the appellant, from which it was satisfied that the appellant was making a false allegation that the Judge had used abusive language against him.
The High Court also held that the appellant had given an untrue version of the very genesis of the incident since the Judge had not given any direction for furnishing the complete address of the respondent before him.
Many technical contentions were raised in the High Court, one of them being that section 10 of the was a bar to the High Court taking cognizance of the matter.
It is unnecessary to go into that question or into various other matters raised in the High Court on behalf of the appellant since, Shri V. M. Tarkunde and Shri section section Ray who appear on behalf of the appellant, stated before us that the appellant did not desire to take a contentious attitude.
It was stated on behalf of the appellant that he was prepared to tender an unconditional written apology to this Court and to produce evidence before us of his having tendered a similar apology to the trial court.
Such apologies have been duly tendered.
Learned counsel appearing on behalf of the appellant appealed to us in all their persuation that in view of the fact that the appellant 540 was genuinely repentant for his conduct, he should be enlarged on a mere admonition.
Counsel plead that the appellant evidently lost his balance and whether or not there was any justification for it, he acted under the impulse of grave passion for which he has been sufficiently punished by the publicity which the incident has received and the notoriety which he has invited for himself.
We had made it clear to the learned counsel at the very time when they conveyed to us the willingness of the appellant to apologise that we offer no promise or inducement that if the appellant apologises we will take a lenient view of the matter.
In our opinion the appellant is guilty of conduct which is highly unbecoming of a practising lawyer.
He hurled his shoe at the Judge in order evidently to overawe him and to bully him into accepting his submission that the case should not be dismissed under Order 9 Rule 2, C.P.C. The appellant did his best or worst to see that the petition was not dismissed for non payment of process fee and finding that the Judge was not willing to accept his argument, he took out his shoe in show of his physical prowess.
We cannot adequately condemn the appellant 's behaviour which strikes us as most reprehensible, remembering that, as a practising lawyer, he is an officer of the court.
Such incidents can easily multiply considering the devaluation of respect for all authority, whether in law, education or politics.
We do not, however, propose to impose a long sentence of imprisonment on the appellant, since he has tendered an unconditional apology to this Court and to learned trial Judge.
The appellant was present in our Court at the time when his appeal was argued and though, on such occasions, histrionics cannot entirely be ruled out, we did form an impression, backed by our small little experience of life and its affairs, that the appellant is deeply regretful and genuinely contrite.
He has suffered enough in mind and reputation and no greater purpose is going to be served by subjecting him to a long bodily suffering.
Accordingly, we reduce the sentence of six months to a period of one month, enhance the fine from Rs. 200 to Rs. 1000 and direct that the fine, if recovered, shall be paid over to a Legal Aid Society, if any, functioning in the State of Himachal Pradesh.
The High Court will decide which society should get the money, if there is more than one such society, of which there is precious little likelihood.
Order accordingly.
We will be failing in our duty if before parting with the case we did not draw attention to what the appellant 's counsel Shri 541 Bhagirath Das said in the High Court during the course of his arguments.
Shri Bhagirath Das told the learned Judges of the High Court: "Better part of discretion is to ignore it instead of fanning it.
It is a tussle between legal profession and judiciary".
(emphasis supplied since it must have been placed).
This part of the argument of the appellant 's counsel in the High Court is as much to be regretted as the conduct of the appellant before the learned trial Judge.
Discretion is undoubtedly the better part of valour but we did not know, until we read the argument advanced by the appellant 's counsel in the High Court, that the better part of discretion is to ignore that a practising advocate had hurled a shoe at a Judge.
We are also unable to understand how the High Court was "fanning" the incident by taking cognizance of it, which it was its clear duty to do.
It makes sorry reading that "a tussle between legal profession and judiciary" should find its culmination in a member of that noble profession throwing a shoe at a Judge.
Those who are informed of the question and think deeply upon it entertain no doubt that the Bar and the Bench are an integral part of the same mechanism which administers justice to the people.
Many members of the Bench are drawn from the Bar and their past association is a source of inspiration and pride to them.
It ought to be a matter of equal pride to the Bar.
It is unquestionably true that courtesy breeds courtesy and just as charity has to begin at home, courtesy must begin with the Judge.
A discourteous Judge is like an ill tuned instrument in the setting of a courtroom.
But members of the Bar will do well to remember that such flagrant violations of professional ethics and cultured conduct will only result in the ultimate destruction of a system without which no democracy can survive.
All this, of course, is said without meaning any disrespect to Shri Bhagirath Das.
Not he, but what he said, is the cause of this comment.
N.V.K. Appeal partly allowed.
| IN-Abs | The appellant a practising Advocate appeared for the petitioner in a petition under the Rent Act.
When the case was called out for hearing, the Judge noticed that the petitioner had not paid the process fee, as a result of which the summons could not be issued to the respondent.
The Judge, proceeded to dismiss the petition under Order IX Rule 2 of the Civil Procedure Code.
Taking umbrage at the dismissal of the petition the appellant hurled his shoe at the Judge which hit him on the shoulder.
The Judge intending to proceed under Section 228 of the Penal Code issued a warrant of arrest against the appellant.
The appellant evaded the warrant and successfully managed to prevent proceedings being taken by the Judge for the contempt of his Court.
The Judge thereupon made a reference to the High Court under Section 15(2) of the .
Before the High Court the appellant did not dispute that he hurled a shoe at the Judge.
He explained his conduct by saying that he acted under an irresistible impulse generated by the provocative language used by the Judge.
The High Court being satisfied, that the appellant was making a false allegation that the Judge had used abusive language against him and that he had given an untrue version of the very genesis of the incident, held the appellant guilty of contempt of Court and sentenced him to simple imprisonment for six months and a fine of Rs. 200/ .
In the appeal to this Court it was pleaded that the appellant evidently lost his balance and whether or not there was any justification for it, he acted under the impulse of grave passion for which he had been sufficiently punished by the publicity which the incident had received and the notoriety which he had invited for himself and as the appellant was genuinely repentant for his conduct he should be enlarged on a mere admonition.
Allowing the appeal in part, ^ HELD: 1.
(i) The sentence of simple imprisonment for six months is reduced to a period of one month and the fine for Rs. 200/ is enhanced to Rs. 1000/ .
537 The fine if recovered shall be paid over to the Legal Aid Society functioning in the State.
[540 G] (ii) The appellant is guilty of conduct which is highly unbecoming of a practising lawyer.
He hurled his shoe at the Judge in order to overawe him and to bully him into accepting his submission that the case should not be dismissed under Order IX Rule 2 C.P.C.
The appellant did his best or worst to see that the petition was not dismissed for non payment of process fee and finding that the Judge was not willing to accept his argument, he took out his shoe in show of his physical prowess.
[540 C] (iii) The appellant 's behaviour is condemned.
It is most reprehensible remembering that, as a practising lawyer he is an officer of the Court.
[540 D] (iv) A long sentence of imprisonment is not imposed on the appellant since he has tendered an unconditional apology to this Court and to the trial Judge.
The appellant is deeply regretful and genuinely contrite.
He has suffered enough in mind and reputation and no greater purpose is going to be served by subjecting him to a long bodily suffering.
[540 E, F] 2.
(i) The argument of the appellant 's counsel in the High Court that: "better part of discretion is to ignore it instead of fanning it.
It is a tussle between legal profession and judiciary", is as much to be regretted as the conduct of the appellant before the trial Judge.
[541A B] (ii) The Bar and the Bench are an integral part of the mechanism which administers justice to the people.
A discourteous Judge is like an ill tuned instrument in the setting of a Court room.
But Members of the Bar will do well to remember that flagrant violations of professional ethics and cultured conduct will only result in the ultimate destruction of a system without which no democracy can survive.
[541 E, F]
|
Civil Appeal Nos.
1256 1258 of 1981.
451 Appeals by Special Leave from the Judgment and Order dated 9.9.1980 of the Calcutta High Court in Appeal Nos. 94, 122 & 95 of 1980 respectively.
S.N. Kacker and H.R. Puri for the Appellant.
Shankar Ghosh, B.P. Maheshwari and Miss Asha Jain for Respondent No. 1.
Dalip Sinha, G.S. Chatterjee and P.K. Chatterjee for Respondent No. 2.
The Judgment of the Court was delivered by DESAI, J.
M/s Jethabhai Khatu & Co., a partnership firm, is the appellant in all the three appeals.
The respondents in all the three appeals are: (1) Luxmi Narayan Cotton Mills Ltd., an incorporated Company ( 'company ' for short), (2) State of West Bengal, (3) S.K. Dutta, who was for some time a receiver appointed by the High Court; (4) Grindlays Bank, ( 'Bank ' for short), having a fixed deposit account in the name of Receiver.
S.K. Dutta on behalf of Luxmi Narayan Cotton Mills Ltd., (5) A.K. Dutta, and (6) R.C. Deb, who claim to have been appointed as joint receivers after removal of Sh.
S.K. Dutta.
Appellant filed suit No. 1194/66 against the company on the original side of the Calcutta High Court to recover a certain amount due under two separate heads.
By the time the suit came up for hearing the board of Directors of the 1st respondent company was superseded and one Gurudas Sharma was appointed as an Administrator.
The Administrator on behalf of the 1st respondent company entered into a compromise with the appellant in respect of the claim in suit of the appellant and after obtaining leave of the Court to settle the matter, invited a consent decree by which the company was held liable and directed to pay Rs. 2,85,000 with interest thereon at 6% per annum from January 6, 1970, the date of the decree, till realisation.
The Ist respondent company was given an option to pay the decretal amount by monthly instalments of Rs. 5,000, the first instalment becoming due and payable on March 15, 1970, and each subsequent instalment to be paid by 15th day of the next succeeding month.
The default clause in the consent decree provided that if the company committed default in payment of any two instalments within the time stipulated in the decree, the whole of the decretal amount and the interest on the balance of the decretal 452 amount will become due and payable at once.
It appears that the Ist respondent company received Rs. 15,00,000 from the Custodian of Enemy Property in respect of its cotton Mills situated in Narayanganj, Bangladesh.
The 3rd respondent S.K. Dutta appears to have been appointed a receiver in respect of this compensation amount and he appears to have deposited Rs. 8,40,000 out of the compensation amount in fixed deposit account evidenced by receipt No.1002 2539 with the Bank at its Netaji Subhash Road Branch, Calcutta.
The appellant, by an order dated April 5, 1978, of the Calcutta High Court, obtained leave to execute the decree by attachment of funds lying in the hands of the 3rd respondent receiver S.K. Dutta (Annexure 'D ').
By the date of the order Rs. 4,20,702.94 p. had become due and payable under the decree.
Pursuant to this order an interim attachment was levied under order 21 Rule 52 C.P.C.
On the amount covered by the aforementioned fixed deposit receipt, and accordingly the Master of the Court, Shri S.K. Ghosh informed the 3rd respondent receiver by the writ of the Court dated April 12, 1978, that the receiver shall hold the money under the fixed deposit account subject to such order as may be made respecting the same in the suit in which he had been appointed a receiver and subject to further orders of the Court (Annexure 'E ').
The Master confirmed the interim attachment by his order dated April 24, 1978 (Annexure 'F ').
On May 4, 1978 upon a petition by the appellant the Court directed the receiver 3rd respondent to pay the sum of Rs. 4,20,702.94 to the appellant decree holder out of the amount in the fixed deposit account of the judgment debtor with the Bank in fixed deposit receipt No. 1002 2539 standing in the name of the receiver which was attached in terms of order dated April 12, 1978, as confirmed by the order dated April 24, 1978.
Presumably neither the 3rd respondent receiver nor the Bank effectively implemented the order dated May 4, 1978, whereupon the appellant moved the Court during the vacation on May 24, 1979, for an appropriate direction and a learned single Judge of the Calcutta High Court working as vacation judge gave the directions prayed for.
As this order has some legal consequences in this matter, it would be advantageous to extract it.
It reads as under: "There will be an order in terms of prayers (a) & (b) of the petition.
Prayer (a): That the receiver Sudhir Kumar Dutta be forthwith directed to instruct and intimate to the Grindlays Bank Ltd., Netaji Subhash Road Branch, Calcutta, to pay 453 a sum of Rs. 4,29,702.94 p. to the petitioner decree holder in terms of the payment order dated 4th May, 1978 out of the amount of the Fixed Deposit of the judgment debtor with Grindlays Bank Ltd., in Fixed Deposit Receipt No. 1002 2539 which has been Lying attached in terms of the order dated 12th April, 1978 and is confirmed by the order dated 24th April, 1978 and the said Grindlays Bank Ltd., Netaji Subhash Road, Branch, Calcutta, be directed to pay the said sum of Rs. 4,20,702.94 p. to the petitioner decree holder; Prayer (b): That Grindlays Bank Ltd., Netaji Subhash Road Branch, Calcutta, be directed to pay the said sum of Rs. 4,20,702.94 p. to the petitioner decree holder in terms of the payment order dated 4th May, 1978, out of the said fixed deposit receipt No. 1002 2539.
" Effectively this order of the Court directed the receiver to pay the amount therein mentioned to the decree holder and the Bank, the keeper of the fixed deposit account of the receiver was also put under an obligation not to raise any objection on receiver withdrawing the money and paying the same to the decree holder.
In fact upon its true construction, the Bank was also under an obligation to take effective steps to pay the amount mentioned in the order to the decree holder.
It appears that these directions were not obeyed.
Consequently, the appellant moved the Court for holding the 3rd respondent receiver S.K. Dutta and the 4th respondent Bank in contempt and for passing appropriate order for punishing them for contempt unless they purged themselves of the contempt.
On June 7, 1979, when the petition for taking action against the alleged contemners came up before the Court, respondents 5 and 6 appear to have been appointed as joint receivers.
The Bank appeared through its counsel Mr. Majumdar and the joint receivers appeared forth themselves as well as for their respective clients, namely, 1st respondent company and the 2nd respondent State of West Bengal.
Mr. Majumder, learned advocate for the Bank undertook to the Court to comply with the order dated May 24, 1979, to pay the amount therein mentioned to M/s Maharia & Co. Advocate on record for the appellant.
The court directed that on such payment being made the Bank shall be absolved from all the liability in respect of the said amount.
The Court specifically noted that in view of the undertaking given by the learned advocate on behalf of the 454 Manager of the Bank, the Court was not inclined to pass any order in respect of the contempt application and the application for taking action in contempt was accordingly disposed of.
At this stage.
Mr. A.K. Dutta appearing for the Ist respondent company prayed for stay of a portion of the order of the Court which prayer was specifically refused observing that as no fresh orders have been passed on that day affecting the interests of the said Company, no question of granting stay of a portion of the order arises.
The Court specifically directed that all the parties and particularly the Manager of the Bank should act on the signed copy of the minutes.
It appears that the solemn undertaking given by the Bank was not acted upon.
Probably soon thereafter some interim orders were obtained as would transpire from the order of Mrs. Padma Khastgir, J. dated March 7, 1980.
When the matter came up on March 7, 1980, the court observed that there will by no order on the applications before it save and except that the receiver will hold the balance sum of Rs. 4,19,697.06p till further order of the Court.
The Court also declined to grant prayer for discharge of the receiver S.K. Dutta, the 3rd respondent, because notice of the application was not served upon him.
This observation would, however, establish that till March 7, 1980, the 3rd respondent was not discharged as a receiver though from the recitals in the order dated June 7, 1979, it appears that by that date A.K. Dutta and R.C. Deb were functioning as joint receivers.
In this order it was distinctly made clear that except what is stated the specifically in the order all interim orders were vacated.
However, the Court at the instance of joint receivers stayed the portion of the order dated March 7, 1980, for a period of a fortnight.
To clarify the position it may be mentioned that when the Court directed that balance of Rs. 4,19,697.06 will be held by the receiver it would imply that would be the balance after payment of the amount directed to be paid to the appellant.
Specifically this order has the effect of confirming the earlier order dated May 24, 1970, to pay the decretal amount to the appellant.
If appears that thereafter three appeals came to be filed before the Division Bench of the Calcutta High Court.
Appeal No. 95/80 and Appeal No. 94/80 were preferred by the Ist respondent company.
Appeal No. 122/80 was preferred by the 2nd respondent State of West Bengal.
These three appeals were preferred against the order dated March 7, 1980, made by Mrs. Padma Khastgir, J.
In the two appeals preferred by the Ist respondent company a Division Bench of the Calcutta High Court by its order dated 455 March 27, 1980, granted ad interim stay as under: "The Joint Receivers, R.C. Deb and A.K. Dutta are directed not to part with any money lying deposited under the fixed deposit receipt No. 1002/2529 in the Grindlays Bank.
There will be an order directing the Grindlays Bank Ltd., of 29, Netaji Subhash Road not to disburse any amount in respect of fixed deposit No. 1002 2539 standing in the name of S.K. Dutta, the fixed deposit receipt whereof is Lying deposited with the present joint receivers R.C. Deb and A.K.Dutta .
Order of injunction restraining Jethabhai Khatau and Co. from obtaining any payment out of the moneys lying in the Grindlays Bank and held by the joint receivers or receiver.
" This interim order was confirmed by the Division Bench by its order dated September, 9, 1980.
Hence these three appeals by special leave.
Frankly, this Court ordinarily does not interfere with interim orders unless and until manifest injustice convulsively shakes it.
Even then, with our usual response of reluctance to undertake to examine interim orders, only a notice to show cause why special leave should not be granted and the interim stay application not be considered, was issued to the respondents.
After notices were served and counter affidavits and rejoinder affidavits were filed, this matter came before us about four weeks back, our hands off attitude to interim orders manifested itself when we adjourned the matter for four weeks indicating to the parties, especially the respondents who are appellants before the High Court, to take executive steps to get their appeals placed on the cause list for hearing and to move for expeditious disposal of the same.
We also declined to grant any interim relief.
We so adjourned the matter in the fond hope that we may hang on to our tenuous view that ordinarily we would not undertake to deal with interim orders.
Our hope has proved a mirage.
When this matter was listed before us on April 3, 1981, Mr. Kackkar, learned counsel for the Appellant stated that almost within the dying embers of the time granted by this Court an attempt was 456 made by the respondents to get their matter listed in the High Court and the only order that the court has made is that the appeals be added to the cause list of the Division Bench and it would be anybody 's guess when this last added matter would reach hearing.
Having no alternative left open to us, we have heard the matter.
As the appeals are pending before the Division Bench of the Calcutta High Court and are to be heard on merits, we would make every manageable human effort to avoid any expression of opinion which may even remotely interfere with judicious adjudication of the issues before the Division Bench.
However, we make it clear that even if there is any express or implied opinion discernible in this order, the same has to be wholly ignored by the High Court while disposing of the appeals on merits.
With this extra caution we proceed to dispose of these appeals.
As every stage of the proceeding has been neatly delineated by us with the orders of the Court referred to in details, the permissible inferences may alone be set out.
What is the injudicious situation which may bring disrepute to judicial process, stares in the face.
The consent decree under which appellant was entitled to recover Rs. 2,85,000 with interest, at the rate of 6% per annum from the date of the decree till realisation was made by the Court on January 6, 1970.
The decree without being satisfied in its minutest part has collected dust for 11 years.
And at present who is impeding the execution of the decree ? It is the 1st respondent company which has been a party to the consent decree and which decree has become final and unassailable.
There is no proceeding at precent questioning the correctness, validity or legality of the decree or its binding character on the 1st respondent company.
It is again incontrovertible that the judgment debtor Ist respondent company has in its fixed deposit with the 4th respondent Bank a sum of Rs. 8,40,000.
That his amount is of the ownership of the judgment debtor is not in dispute.
3rd respondent S.K. Dutta was once a receiver.
Respondents say that he has been removed and respondents 5 and 6 who are respectively the Advocates of the Ist respondent company and the 2nd respondent State of West Bengal claim to be appointed as joint receivers.
The date of appointment is not made clear but the order dated March 7, 1980 (Annexure 'J ') by Mrs. Padma Khastgir, J. leaves no room for doubt that till that date 3rd respondent S.K. Dutta was not discharged as receiver.
457 The High Court on a petition of the appellant levied attachment under order 21 Rule 52 C.P.C.
On the amount Lying in fixed deposit account with 4th respondent Bank in the name of 3rd respondent S.K.Dutta as receiver of the first respondent company by order dated April 5, 1978.
This attachment order was levied by the Master of the Court and the interim attachment was confirmed.
Admittedly these orders were not challenged.
Sabyasachi Mukerjee, J. by his order dated May 4, 1978, directed 3rd respondent S.K. Dutta to pay the amount of Rs. 4,20,702.94 P. Out of the amount Lying in fixed deposit receipt No. 1002 2539 with the fourth respondent Bank to the appellant in satisfaction of the decree.
This order may appear to have become final as not having been questioned by any one.
Manoj Kumar Mukherjee, J. by his order dated May 24, 1979, directed 3rd respondent S.K.Dutta, receiver of the Ist respondent company to pay Rs. 4,20,702.94 p.
Out of the fixed deposit account held by him as receiver of the Ist respondent company to the appellant and a consequential order was made directing the Bank to pay the amount set out in the order to the appellant.
This order dated May 24, 1979, may appear to have become final as it appears not to have been questioned, challenged or appealed by any one.
Failure to comply with the court 's mandatory direction led the appellant to file a petition for contempt.
The alleged contemners impleaded were Ist respondent company and the 4th respondent Bank.
When this petition for taking action in contempt came up before Manoj Kumar Mukherjee, J. there appeared on the scene one Mr. Majumdar, learned counsel for the 4th respondent Bank as well as the two joint receivers functioning in dual capacity as joint of receivers as well as learned counsel for the respective clients, namely, Ist respondent company and the 2nd respondent State of West Bengal.
At the hearing of this motion for taking action for contempt, Mr. Majumdar learned counsel for the 4th respondent unreservedly agreed to comply with the order of the Court on May 24, 1979, which means that he agreed and undertook to pay the amount of Rs. 4,20,702.94 out of the fixed deposit account in the name of 3rd respondent S.K. Dutta, receiver of the Ist respondent company.
It is because the Bank agreed unreservedly and unconditionally to pay up the amount that the motion for taking action in contempt was discharged by the Court.
No action was sought to be taken against the joint receivers who had interposed themselves in the meantime.
Therefore, the court declined to accede to their request to stay a 458 portion of the order.
The order dated June 7, 1979, is not a fresh order on merits.
It was merely an implementation of the order dated May 24, 1979, which may appear to have become final and binding.
Yet the 1st respondent company and the 2nd respondent State of West Bengal took no further action and surprisingly the Bank also joined hands with them by not paying the amount till March 7, 1980.
Maybe, there may be some interim orders.
We are not made knowledgeable about the nature and character of those interim orders save and except what has been recited in the order dated March 7, 1980, of Mrs. Padma Khastgir, J. However, there seems to be some apparent collusion between the company on one hand and the joint receivers in not complying with the court 's order dated May 24, 1979, even though action for contempt was avoided by giving an unconditional undertaking to carry out that order.
The three appeals were preferred against the order dated March 7, 1980.
That order has nothing to do with order dated May 24, 1979, or the order dated June 7, 1979.
At any rate, the order dated May 24, 1979, may appear to have become final.
Would it be appropriate in such circumstances to grant an interim stay of the portion of an order which may appear to have become final in an appeal against an altogether different order? Mr. Shankar Ghose, learned counsel for the respondent wanted us to take note of various allegations against the 3rd respondent, the receiver, the fact that he was removed, the fact that he was colluding with the appellant and that he was negligent as also that he was discharged at some stage of the proceedings.
At this stage, these contentions in our opinion are not very relevant.
Maybe, there is merit in these contentions.
Maybe, the Division Bench hearing the appeals by the Ist and 2nd respondent will examine these contentions on merits.
The only live issue is whether would it be fair while granting stay of the order dated March 7, 1980 to effectively stay the order dated March 24,1979, which appears not to be under appeal though its validity may be questioned in the course of hearing of the appeal? If that be so, could the Court overlook attempt of the Ist and 2nd respondents to circumvent the order by obtaining an interim stay in such manner that an order not under appeal gets frozen '? It is, therefore, that we propose to interfere with the interim order made by the Division Bench of the Calcutta High Court on September 9, 1980, confirming the ad interim order dated March 7, 1980, to a limited extent so that an impression that the court 's process can be lightly trifled with, may be avoided.
459 Under the circumstances the proper thing to do would be to set aside the interim stay order dated March 27, 1980, as also the order dated September 9, 1980, confirming the interim order but in order to ensure the resultant justice as we are interfering with an interim order, we consider it proper to give certain directions, while restoring status quo ante in the event the appeals filed by respondents 1 and 2 are allowed or any specific positive direction is given by the court in this behalf.
We accordingly allow these appeals and set aside the orders made by the Division Bench on March 27, 1980 and September 9, 1980.
The result would be that the order dated May 4, 1978, by Sabyasachi Mukherjee, J. and order dated May 24, 1978, made by Manoj Kumar Mukherjee, J. as also the undertaking given by the manager of the 4th respondent Bank through his learned counsel Shri Majumdar before Manoj Kumar Mukherjee, J. On June 7, 1979, would be revived and would be effective and will have to be implemented.
In pursuance to the aforementioned two orders, the 4th respondent Bank will have to pay Rs. 4,20,702.94 p. to the decree holder appellant towards the decretal amount.
On receipt of the amount the appellant shall pass a receipt acknowledging receipt of the amount and to the extent of the payment of the amount herein indicated the liability of the 4th respondent Bank to the Ist respondent company or anyone claiming on its behalf or the 3rd respondent receiver shall stand discharged.
Before the amount is paid, the appellant shall give security to the satisfaction of the High Court and also an undertaking on affidavit to the Division Bench of the Calcutta High Court before which the appeals preferred by the Ist and 2nd respondents are pending that in the event the appeals are allowed which makes it consequently necessary for the appellant to repay the amount received from the 4th respondent Bank in payment of the decretal amount, the appellant shall deposit the said amount with the Calcutta High Court within one month from the date of the order of the appellate Bench.
The appeals will stand disposed of as herein indicated with no order as to cost.
N.V.K. Appeals allowed.
| IN-Abs | The appellant filed a suit for recovery of certain amounts due from the first respondent company.
By the time the suit came up for hearing the first respondent company was superseded and an Administrator was appointed.
The suit was compromised and a consent decree was passed, the company being held liable and directed to make payment of Rs. 2.85 lakhs with interest at 6% from the date of the decree.
The first respondent company received a sum of about Rs. 15 lakhs from the Custodian of Enemy Property as compensation in respect of certain Cotton mills owned by it.
The third respondent was appointed a receiver in respect of this amount and he deposited a sum of Rs. 8 lakhs of the compensation amount into a fixed deposit account with a Bank.
The decretal amount having become due and payable the appellant by an order dated April 12, 1978 obtained an interim attachment of the money in the fixed deposit account of the bank, which was confirmed by order dated April 24, 1978 on May 4, 1978 upon a petition by the appellant, the Court directed the receiver, 3rd respondent to pay the decretal amount to the appellant out of the amount in the fixed deposit account of the judgment debtor with the Bank.
As this order was not implemented, the appellant again moved the Court and by its order dated the May 24.
1978 the Court directed the receiver to pay the amount to the decree holder and the Bank, the keeper of the fixed deposit account of the receiver was also put under an obligation not to raise any objection on the receiver withdrawing the money and paying the same to the decree holder.
These directions not being obeyed, the appellant moved the Court for holding the third respondent receiver and the fourth respondent Bank in contempt and for passing appropriate orders for punishing them for contempt.
Respondents 5 and 6 were in the meanwhile appointed as joint receivers.
A solemn undertaking was given by the Bank to the Court that the decretal amount would be paid.
In view of the undertaking the Court did not pass any orders on the contempt application.
On March 7, 1980 the Court declined to grant the prayer for discharge of the receiver 3rd respondent and directed that the balance after payment of the decretal amount in the fixed deposit account will be held by the receiver.
The Court however at the instance of the joint receivers Respondents 5 and 6 stayed the order for a fortnight.
450 Three appeals were filed against the order dated March 7, 1980.
Two appeals were preferred by the Ist respondent company and one appeal was preferred by 2nd respondent, State of West Bengal.
In the appeals preferred by the Ist respondent company the High Court by its order dated March 27, 1980 granted ad interim stay in the matter, by directing that the Bank would not disburse any amount in respect of the fixed deposit account and by issuing an injunction restraining the appellant from obtaining any payment.
Allowing the appeals to this Court, ^ HELD: The order made by the Division Bench on March 27, 1983 and continued on September 9, 1980 are set aside.
The order dated May 4, 1978 and May 24, 1979 as also the undertaking given by the Manager of the 4th respondent Bank through its Counsel on June 7, 1979 would be revived and would be effective and will have to be implemented.
The 4th Respondent Bank will pay the decretal amount to the appellant, the appellant shall pass a receipt acknowledging receipt and the liability of the 4th Respondent company to the 3rd Respondent receiver shall thereupon stand discharged.
Before the amount is paid, the appellant shall give security to the satisfaction of the High Court and also an undertaking on affidavit that in the event of the appeals being allowed, the appellant shall deposit the said amount with the High Court within one month from the date of the order of the appellate Bench.
[459 C F] 2.
This Court ordinarily does not interfere with interim orders unless and until manifest injustice convulsively shakes it.
[455 E] In the instant case the interim order made by the Division Bench on September 9, 1980 confirming the ad interim order dated March 7, 1980 has to be interfered to a limited extent to avoid the impression that the Court 's process can be lightly trifled with.
[458 H] 3.
Failure to comply with the Court 's mandatory directions led the appellant to file a petition for contempt.
The alleged contemners impleaded were Ist respondent company and the 4th respondent Bank.
At the hearing, counsel for the 4th respondent unreservedly agreed to comply with the order of the Court.
It was because the Bank unreservedly and unconditionally agreed and undertook to pay up the amount that the motion for taking action in contempt was discharged by the Court.
[457 E, H] 4.
The order dated June 7,1979 is not a fresh order on merits.
It was merely an implementation of the order dated May 24, 1979 which appears to have become final and binding.
[158 A] 5.
The three appeals were preferred against the order dated March 7, 1980.
That order had nothing to do with the order dated May 24, 1979 or the order dated June 7, 1979.
At any rate, the order dated May 24, 1979 appears to have become final.
[458 D]
|
Civil Appeal No. 364 of 1981.
Appeal by special leave from the Award dated the 31st May, 1980 of the Additional Labour Court, Delhi in Industrial I.D. No. 62 of 1976.
V. M. Tarkunde, Hemant Sharma and P. H. Parekh for the Appellant.
section Markendaya for the Respondent.
The Judgment of the Court was delivered by DESAI, J.
The appellant Mohan Lal was employed with the respondent M/s Bharat Electronics Limited as Salesman at its Delhi 521 Sales Depot on a salary of Rs. 520 per month from 8th December, 1973.
His service was abruptly terminated by letter dated 12th October 1974 with effect from 19th October, 1974.
Consequent upon this termination, an industrial dispute was raised and the Delhi Administration, by its order dated 24th April, 1976 referred the following dispute to the Labour Court, Delhi for adjudication: "Whether the termination of services of Shri Mohan Lal is illegal and/or unjustified and if so, to what relief is he entitled and what directions are necessary in this respect?" As the respondent management at one stage failed to participate in the proceedings, the reference was heard ex parte and the Labour Court made an award on 2nd May, 1977 directing reinstatement of the appellant with continuity of service and full back wages at the rate of Rs. 520 per month from the date of termination till reinstatement.
Subsequently, respondent moved for setting aside the ex parte award and seeking permission to participate in the proceedings, which motion was granted.
The respondent inter alia contended that the appellant was a salesman appointed on probation for six months and subsequently on the expiry of the initial period, the period of probation was extended upto 8th Sept., 1974 and on the expiry of this extended period of probation, his service was terminated by letter dated 12th October, 1974, as he was not found suitable for the post to which he was appointed.
The Labour Court, on evaluation of evidence both oral and documentary, held that the termination of the service was in accordance with the standing orders justifying the removal of the employee on unsuccessful probation during the initial or extended period of probation; and therefore the termination in this case, according to the Labour Court, would not constitute retrenchment within the meaning of section 2(oo) read with section 25F of the Industrial Dispute Act.
Accordingly it was held that the termination was neither illegal nor improper nor unjustified and the claim of the appellant was negatived.
Hence, this appeal by special leave.
The only point for determination is whether even in the circumstances, as pleaded by the respondent termination of service of the appellant would amount to retrenchment within the meaning of the expression as defined in section 2(oo) of the Industrial Dispute Act, 1947 (`Act ' for short)? If the answer is in affirmative, the consequential question will have to be answered whether in view of 522 the admitted position that the mandatory pre condition prescribed by section 25F for a valid retrenchment having not been satisfied, the appellant would be entitled to reinstatement with back wages or as contended by Mr. Markandey in the special facts of this case, the Court should not direct reinstatement but award compensation in lieu of reinstatement.
An apparent contradiction which stares in the eye on the stand taken by the respondent is overlooked by the Labour Court which has resulted in the miscarriage of justice.
In this context the facts as alleged by the respondent may be taken as true.
Says the respondent, that the appellant was appointed by order dated July 21, 1973.
The relevant portion of the order of which notice may be taken is paragraph 2.
It reads as under: "This appointment will be temporary in the first instance but is likely to be made permanent.
" Paragraph 4 refers to the consequences of a temporary appointment, namely, that the service would be terminable without notice and without any compensation in lieu of notice on either side.
Paragraph 6 provides that the employment of the appellant shall be governed by rules, regulations and standing orders of the company then in force and which may be amended, altered or extended from time to time and the acceptance of the offer carries with it the necessary agreement to obey all such rules, regulations and standing orders.
There is not even a whisper of any period of probation prescribed for the appointment nor any suggestion that there are some rules which govern appointment of the appellant which would initially be on probation.
Thus, the appointment was temporary in the first instance and there was an inner indication that it was likely to be made permanent.
Even if this promise of likely to be made permanent is ignored, indubitably the appointment was temporary.
The respondent, however, says that note 3 at the foot of the appointment order intimates to the appellant that in the event of his permanent appointment the temporary service put in by him will be counted as part of probationary period of service as required under the rules.
This consequence would follow in the event of permanent appointment being offered and this is clear from the language employed in note 3.
In this case no permanent appointment having been offered, the consequence set out in note 3 could not have emerged.
Assuming, however, that this note incorporates all the necessary rules and regulations in the contract of employment, it was incumbent upon 523 the respondent to show that even when appointment is not shown to be on probation in the order of appointment, in view of the rules governing the contract of employment there shall always be a period of probation for every appointee.
Witness Bawdekar who appeared on behalf of the respondent stated in his evidence that the appellant was appointed as a probationary salesman.
Even according to him prescribed period of probation was six months.
He then stated that by the letter dated July 10, 1974, respondent informed the appellant that his service should have been terminated on the expiry of initial period of probation, i.e. on June 8, 1974.
However, as a special case the probation period was extended upto September 8, 1974.
No rule was pointed out to us enabling the respondent to extend the initial period of probation.
Assuming even then that such was the power of the respondent, on September 9, 1974, the period of probation having not been further extended nor termination of service having been ordered during or at the end of the probationary period on the ground of unsuitability, the consequence in law is that either he would be a temporary employee or a permanent employee as per the rules governing the contract of employment between the appellant and the respondent.
Admittedly his service was terminated by letter dated October 12, 1974, with effect from October 19, 1974.
It is not the case of the respondent that there was any further extension of the probationary period.
Thus, if the initial appointment which was described as temporary is treated on probation, even according to the respondent the period of probation was six months, it expired on June 8, 1974.
Even if by the letter dated July 10, 1974, the period of probation was said to have been extended, on its own terms it expired on September 8, 1974.
The service of the appellant was terminated with effect from October 19, 1974.
What was the nature and character of service of the appellant from September 8, 1974 when the extended period of probation expired and termination of his service on October 19, 1974? He was unquestionably not on probation.
He was either temporary or permanent but not a probationer.
How is it open then to the Labour Court to record a finding that the service of the appellant was terminated during the period of probation on account of his unsatisfactory work which did not improve in spite of repeated warnings? The Labour Court concluded that notwithstanding the fact that the appellant was not shown to have been placed on probation in the initial appointment letter but in view of the subsequent orders there was a period of probation prescribed for the appellant and that his service was terminated during the extended period of 524 probation.
This is gross error apparent on the face of the record which, if not interfered with, would result in miscarriage of justice.
If on October 19,1974, the appellant was not on probation and assuming maximum in favour of the respondent that he was a temporary employee, could termination of his service.
even according to the respondent, not as and by way of punishment but a discharge of a temporary servant, constitute retrenchment within the meaning of section 2(oo), is the core question.
Section 2(oo) reads as under: "2(oo) "retrenchment" means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include (a) voluntary retirement of the workman; or (b) retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or (c) termination of the service of a workman on the ground of continued ill health.
" Niceties and semantics apart, termination by the employer of the service of a workman for any reason whatsoever would constitute retrenchment except in cases excepted in the section itself.
The excepted or excluded cases are where termination is by way of punishment inflicted by way of disciplinary action, voluntary retirement of the workman, retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf, and termination of the service of a workman on the ground of continued ill health.
It is not the case of the respondent that termination in the instant case was a punishment inflicted by way of disciplinary action.
If such a position were adopted, the termination would be ab initio void for violation of principle of natural justice or for not following the procedure prescribed for imposing punishment.
It is not even suggested that this was a case of voluntary retirement or retirement on reaching the age of superannuation or absence on account of continued ill health.
The case does not fall under any of the excepted categories.
There is thus termination of 525 service for a reason other than the excepted category.
It would indisputably be retrenchment within the meaning of the word as defined in the Act.
It is not necessary to dilate on the point nor to refer to the earlier decisions of this Court in view of the later two pronouncements of this Court to both of which one of us was a party.
A passing reference to the earliest judgment which was the sheet anchor till the later pronouncements may not be out of place.
In Hariprasad Shivshankar Shukla vs A.D. Divikar, after referring to Pipraich Sugar Mills Ltd. vs Pipraich Sugar Mills Mazdoor Union, a Constitution Bench of this Court quoted with approval the following passage from the aforementioned case: "But retrenchment connotes in its ordinary acceptation that the business itself is being continued but that a portion of the staff or the labour force is discharged as surplusage and the termination of services of all the workmen as a result of the closure of the business cannot therefore be properly described as retrenchment.
" This observation was made in the context of the closure of an undertaking and being conscious of this position, the question of the correct interpretation of the definition of the expression `retrenchment ' in section 2(oo) of the Act was left open.
Reverting to that question, the view was reaffirmed but let it be remembered that the two appeals which were heard together in Shukla 's case were cases of closure, one Barsi Light Railway Company Ltd., and another Shri Dinesh Mills Ltd. Baroda With specific reference to those cases, in State Bank of India vs N. Sundara Money, Krishna Iyer J. speaking for a three judges bench, interpreted the expression `termination. for any reason whatsoever ' as under: "A break down of section 2(oo) unmistakably expands the semantics of retrenchment.
`Termination. for any reason whatsoever ' are the key words.
Whatever the reason, every termination spells retrenchment.
So, the sole question is has the employee 's service been terminated ? Verbal apparel apart, the substance is decisive.
A termination takes place where a term expires either by the active step of the master of the running out of the stipulated term.
To pro 526 tect the weak against the strong this policy of comprehensive definition has been effectuated.
Termination embraces not merely the act of termination by the employer, but the fact of termination howsoever produced.
May be, the present may be a hard case, but we can visualise abuses by employers, by suitable verbal devices, circumventing the armour of section 25F and section 2(oo).
Without speculating on possibilities, we may agree that `retrenchment ' is no longer terra incognita but area covered by an expansive definition.
It means `to end, conclude, cease '.
In the present case the employment ceased, concluded, ended on the expiration of nine days automatically may be, but cessation all the same.
That to write into the order of appointment the date of termination confers no moksha from section 25F(b) is inferable from the proviso to section 25F(1).
True, the section speaks of retrenchment by the employer and it is urged that some act of volition by the employer to bring about the termination is essential to attract section 25F and automatic extinguishment of service by effluxion of time cannot be sufficient.
" It would be advantageous to refer to the facts of that case to appreciate the interpretation placed by this Court on the relevant section.
State Bank of India appointed the respondent by an order of appointment which incorporated the two relevant terms relied upon by the Bank at the hearing of the case.
They were: (i) the appointment is purely a temporary one for a period of 9 days but may be terminated earlier, without assigning any reason therefor at the Bank 's discretion; (ii) the employment, unless terminated earlier, will automatically cease at the expiry of the period i.e. 18.11.1972.
It is in the context of these facts that the Court held that where the termination was to be automatically effective by a certain date as set out in the order of appointment it would nonetheless be a retrenchment within the meaning section 2(oo) and in the absence of strict compliance with the requirements of section 25F, termination was held to be invalid.
Continuing this line of approach, in Hindustan Steel Ltd. vs The Presiding Officer, Labour Court, Orissa and Ors., a bench of three judges examined the specific contention that the decision in Sundara Money 's case runs counter to the construction placed on that section by a Constitution Bench and, therefore, the decision is 527 per incuriam.
This Court analysed in detail Shukla 's case and Sundara Money 's case and ultimately held that the Court did not find anything in Shukla 's case which is inconsistent with what has been held in Sundara Money 's case.
In reaching this conclusion it was observed that in Shukla 's case the question arose in the context of closure of the whole of the undertaking while in Hindustan Steel 's case and Sundara Money 's case the question was not examined in the context of closure of whole undertaking but individual termination of service of some employees and it was held to constitute retrenchment within the meaning of the expression.
This question again cropped up in Santosh Gupta vs State Bank of Patiala.
Rejecting the contention for reconsideration of Sundara Money 's case on the ground that it conflicted with a Constitution Bench decision in Shukla 's case and adopting the ratio in Hindustan Steel 's case that there was nothing in the two aforementioned decisions which is inconsistent with each other and taking note of the decision in Delhi Cloth and General Mills Ltd. vs Shambu Nath Mukerjee wherein this Court had held that striking off the name of a workman from the rolls by the management was termination of service which was retrenchment within the meaning of section 2(oo), the Court held that discharge of the workman on the ground that she had not passed the test which would enable her to obtain confirmation was retrenchment within the meaning of section 2(oo) and, therefore, the requirements of section 25F had to be complied with.
It was pointed out that since the decision in Shukla 's case, the Parliament stepped in and introduced section 25FF and section 25FFF by providing that compensation shall be payable to workman in case of transfer or closure of the undertaking, as if the workmen had been retrenched.
The effect of the amendment was noticed as that every case of termination of service by act of employer even if such termination was as a consequence of transfer or closure of the undertaking was to be treated as `retrenchment ' for the purposes of notice, compensation, etc.
The Court concluded as under: "Whatever doubts might have existed before Parliament enacted sections 25FF and 25FFF about the width of section 25F there cannot be any doubt that the expression `termination of service for any reason whatsoever ' now covers every kind of termination of service except those not 528 expressly provided for by other provisions of the Act such as sections 25FF and 25FFF." Reverting to the facts of this case, termination of service of the appellant does not fall within any of the excepted, or to be precise, excluded categories.
Undoubtedly therefore the termination would constitute retrenchment and by a catena of decisions it is well settled that where pre requisite for valid retrenchment as laid down in section 25F has not been complied with, retrenchment bringing about termination of service is ab initio void.
In State of Bombay and Ors.
vs The Hospital Mazdoor Sabha and Ors.
, this Court held that failure to comply with the requirement of section 25F which prescribes a condition precedent for a valid retrenchment renders the order of retrenchment invalid and inoperative.
In other words, it does not bring about a cessation of service of the workman and the workman continues to be in service.
This was not even seriously controverted before us.
It was, however, urged that section 25F is not attracted in this case for an entirely different reason.
Mr. Markendaya contended that before section 25F is invoked, the condition of eligibility for a workman to complain of invalid retrenchment must be satisfied.
According to him unless the workman has put in continuous service for not less than one year his case would not be governed by section 25F.
That is substantially correct because the relevant provision of section 25F provides as under: "25F. "No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until: (a) the workman has been given one month 's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice; Provided that no such notice shall be necessary if the retrenchment is under an agreement which specifies a date for the termination of service; 529 (b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent of fifteen days ' average pay (for every completed year of continuous service) or any part thereof in excess of six months; and (c) notice in the prescribed manner is served on the appropriate Government (or such authority as may be specified by the appropriate government by notification in the Official Gazette).
" Before a workman can complain of retrenchment being not in consonance with section 25F, he has to show that he has been in continuous service for not less than one year under that employer who has retrenched him from service.
Section 25B is the dictionary clause for the expression `continuous '.
It reads as under; "25B (1) a workman shall be paid to be in continuous service for a period if he is, for that period in uninterrupted service, including service which may be interrupted on account of sickness or authorised leave or an accident or a strike which is not illegal, or a lockout or a cessation of work which is not due to any fault on the part of the workman; (2) where a workman is not in continuous service within the meaning of clause (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer (a) for a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than (i) one hundred and ninety days in the case of a workman employed below ground in a mine; and (ii) two hundred and forty days, in any other case; 530 (b) for a period of six months, if the workman, during a period of six calendar months preceding the date with reference to which calculation is to be made has actually worked under the employer for not less than (i) ninety five days, in the case of a workman employed below ground in a mine; and (ii) one hundred and twenty days, in any other case.
Explanation For the purposes of clause (2), the number of days on which a workman has actually worked under an employer shall include the days on which (i) he has been laid off under an agreement or as permitted by standing orders made under the , or under this Act or under any other law applicable to the industrial establishment; (ii) he has been on leave with full wages, earned in the previous years; (iii)he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and (iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.
Mr. Markendaya contended that clauses (I) and (2) of section 25B provide for two different contingencies and that none of the clauses is satisfied by the appellant.
He contended that sub section (I) provides for uninterrupted service and sub section (2) comprehends a case where the workman is not in continuous service.
The language employed in sub sections (1) and (2) does not admit of this dichotomy.
Sub sections (1) and (2) introduce a deeming fiction as to in what circumstances a workman could be said to be in continuous service for the purposes of Chapter VA.
Sub section (1) provides a deeming fiction in that where a workman is in service 531 for a certain period he shall be deemed to be in continuous service for that period even if service is interrupted on account of sickness or authorised leave or an accident or a strike which is not illegal or a lockout or a cessation of work which is not due to any fault on the part of the workman.
Situations such as sickness, authorised leave, an accident, a strike not illegal, a lockout or a cessation of work would ipso facto interrupt a service.
These interruptions have to be ignored to treat the workman in uninterrupted service and such service interrupted on account of the aforementioned causes which would be deemed to be uninterrupted would be continuous service for the period for which the workman has been in service.
In industrial employment or for that matter in any service, sickness, authorised leave, an accident, a strike which is not illegal, a lockout and a cessation of work not due to any fault on the part of the workman, are known hazards and there are bound to be interruptions on that account.
Sub section (I) mandates that interruptions therein indicated are to be ignored meaning thereby that on account of such cessation an interrupted service shall be deemed to be uninterrupted and such uninterrupted service shall for the purposes of Chapter VA be deemed to be continuous service.
That is only one part of the fiction.
Sub section (2) incorporates another deeming fiction for an entirely different situation.
It comprehends a situation where a workman is not in continuous service within the meaning of sub section (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer for a period of one year or six months, as the case may be, if the workman during the period of 12 calendar months just preceding the date with reference to which calculation is to be made, has actually worked under that employer for not less than 240 days.
Sub section (2) specifically comprehends a situation where a workman is not in continuous service as per the deeming fiction indicating in sub section (1) for a period of one year or six months.
In such a case he is deemed to be in continuous service for a period of one year if he satisfies the conditions in clause (a) of sub section (2).
The conditions are that commencing the date with reference to which calculation is to be made, in case of retrenchment the date of retrenchment, if in a period of 12 calendar months just preceding such date the workman has rendered service for a period of 240 days, he shall be deemed to be in continuous service for a period of one year for the purposes of Chapter VA.
It is not necessary for the purposes of sub section (2) (a) that the workman should be in service 532 for a period of one year.
If he is in service for a period of one year and that if that service is continuous service within the meaning of sub section (1) his case would be governed by sub section (1) and his case need not be covered by sub section (2).
Sub section (2) envisages a situation not governed by sub section (1).
And sub section (2) provides for a fiction to treat a workman in continuous service for a period of one year despite the fact that he has not rendered uninterrupted service for a period of one year but he has rendered service for a period of 240 days during the period of 12 calendar months counting backwards and just preceding the relevant date being the date of retrenchment.
In other words, in order to invoke the fiction enacted in sub section 2(a) it is necessary to determine first the relevant date, i.e., the date of termination of service which is complained of as retrenchment.
After that date is ascertained, move backward to a period of 12 months just preceding the date of retrenchment and then ascertain whether within the period of 12 months, the workman has rendered service for a period of 240 days.
If these three facts are affirmatively answered in favour of the workman pursuant to the deeming fiction enacted in sub section 2(a) it will have to be assumed that the workman is in continuous service for a period of one year and he will satisfy the eligibility qualification enacted in section 25F.
On a pure grammatical construction the contention that even for invoking sub section (2) of section 25B the workman must be shown to be in continuous service for a period of one year would render sub section (2) otiose and socially beneficial legislation would receive a set back by this impermissible assumption.
The contention must first be negatived on a pure grammatical construction of sub section (2).
And in any event, even if there be any such thing in favour of the construction, it must be negatived on the ground that it would render sub section (2) otiose.
The language of sub section (2) is so clear and unambiguous that no precedent is necessary to justify the interpretation we have placed on it.
But as Mr. Markandaya referred to some authorities, we will briefly notice them.
In Sur Enamel and Stamping Works (P) Ltd. vs Their Workmen, referring to section 25B as it then stood read with section 2(eee) which defined continuous service, this Court held as under: "The position therefore is that during a period of employment for less than 11 calendar months these two 533 persons worked for more than 240 days.
In our opinion that would not satisfy the requirement of section 25B. Before a workman can be considered to have completed one year of continuous service in an industry it must be shown first that he was employed for a period of not less than 12 calendar months and, next that during those 12 calendar months had worked for not less than 240 days.
Where, as in the present case, the workmen have not at all been employed for a period of 12 calendar months it becomes unnecessary to examine whether the actual days of work numbered 240 days or more.
For, in any case, the requirements of section 25B would not be satisfied by the mere fact of the number of working days being not less than 240 days.
" If section 25B had not been amended, the interpretation which it received in the aforementioned case would be binding on us.
However, section 25B and section 2(eee) have been the subject matter of amendment by the Industrial Disputes (Amendment) Act, 1964.
Section 2(eee) was deleted and section 25B was amended.
Prior to its amendment by the 1964 amendment Act, section 25B read as under: "For the purposes of sections 25C and 25F a workman who during the period of 12 calendar months has actually worked in an industry for not less than 240 days, shall be deemed to have completed one year of continuous service in the industry.
" We have already extracted section 25B since its amendment and the change in language is the legislative exposition of which note must be taken.
In fact, we need not further dilate upon this aspect because in Surendra Kumar Verma and Ors.
vs Central Government Industrial cum Labour Court, New Delhi and Anr., Chinnappa Reddy.
J., after noticing the amendment and referring to the decision in Sur Enamel and Stamping Works (P) Ltd case, held as under: "These changes brought about by Act 36 of 1964 appear to be clearly designed to provide that a workman who has actually worked under the employer for not less 534 than 240 days during a period of twelve months shall be deemed to have been in continuous service for a period of one year whether or not he has in fact been in such continuous service for a period of one year.
It is enough that he has worked for 240 days in a period of 12 months, it is not necessary that he should have been in the service of the employer for one whole year.
" In a concurring judgment Pathak J. agreed with this interpretation of section 25B(2).
Therefore, both on principle and on precedent it must be held that section 25B(2) comprehends a situation where a workman is not in employment for a period of 12 calendar months, but has rendered service for a period of 240 days within the period of 12 calendar months commencing and counting backwards from the relevant date, i.e. the date of retrenchment.
If he has, he would be deemed to be in continuous service for a period of one year for the purpose of section 25B and Chapter VA.
Reverting to the facts of this case, admittedly the appellant was employed and was on duty from December 8, 1973 to October 19, 1974 when his service was terminated.
The relevant date will be the date of termination of service, i.e. October 19, 1974 Commencing from that date and counting backwards, admittedly he had rendered service for a period of 240 days within a period of 12 months and, indisputably, therefore, his case falls within section 25B(2) (a) and he shall be deemed to be in continuous service for a period of one year for the purpose of Chapter VA.
Appellant has thus satisfied both the eligibility qualifications prescribed in section 25F for claiming retrenchment compensation.
He has satisfactorily established that his case is not covered by any of the excepted or excluded categories and he has rendered continuous service for one year.
Therefore, termination of his service would constitute retrenchment.
As pre condition for a valid retrenchment has not been satisfied the termination of service is ab initio void, invalid and inoperative.
He must, therefore, be deemed to be in continuous service.
The last submission was that looking to the record of the appellant this Court should not grant reinstatement but award compensation.
If the termination of service is ab initio void and inoperative, there is no question of granting reinstatement because there is no cessation of service and a mere declaration follows that 535 he continues to be in service with all consequential benefits.
Undoubtedly, in some decisions of this Court such as Ruby General Insurance Co. Ltd vs Chopra (P.P.), and Hindustan Steel Ltd. Rourkela vs A. K. Roy and Others it was held that the Court before granting reinstatement must weigh all the facts and exercise discretion properly whether to grant reinstatement or to award compensation.
But there is a catena of decisions which rule that where the termination is illegal especially where there is an ineffective order of retrenchment, there is neither termination nor cessation of service and a declaration follows that the workman concerned continues to be in service with all consequential benefits.
No case is made out for departure from this normally accepted approach of the Courts in the field of social justice and we do not propose to depart in the case.
Accordingly, this appeal is allowed and the Award of the Labour Court dated May 31, 1980, is set aside.
We hold that the termination of service of the appellant was ab initio void and inoperative and a declaration is made that he continues to be in service with all consequential benefits, namely, back wages in full and other benefits, if any.
However, as the Award is to be made by the Labour Court, we remit the case to the Labour Court to make an appropriate Award in the light of the findings of this Court.
The respondent shall pay the costs of the appellant in this Court quantified at Rs. 2000 within four weeks from the date of this judgment and the costs in the Labour Court have to be quantified by the Labour Court.
S.R. Appeal allowed.
| IN-Abs | The appellant was employed with the respondent as Salesman at its Delhi Sales Depot on a salary of Rs. 520/ per month from 8th December, 1973.
His service was abruptly terminated by letter dated 12th October, 1974 with effect from 19th October, 1974.
Consequent upon his termination, an industrial dispute was raised and referred to the Labour Court, Delhi, on 24th April, 1976.
The Labour Court, on evaluation of evidence both oral and documentary, held that the termination of the service was in accordance with the standing orders justifying the removal of the employee on unsuccessful probation during the initial or extended period of probation and, therefore, the termination would not constitute retrenchment within the meaning of section 2(oo) read with section 25F of the Industrial Dispute Act.
The Labour Court accordingly held that the termination was neither illegal nor improper nor unjustified and the claim of the appellant was negatived.
Hence the appeal by special leave.
Allowing the appeal, the Court ^ HELD: 1.
The termination of service of the appellant was ab initio void and inoperative.
His case not being covered by any of the excepted or excluded categories referred to under section 2(oo) and he has rendered continuous service for one year, the termination of his service would constitute retrenchment.
The pre condition for a valid retrenchment has not been satisfied in this case and therefore he will be entitled to all benefits including back wages etc.
(534F G, 535 C D) 2.
Where the termination is illegal especially where there is an ineffective order of retrenchment, there is neither termination nor cessation of service and a declaration follows that the workmen concerned continues to be in service with all consequential benefits.
It is no doubt true that the Supreme Court had held that before granting reinstatement the court must weigh all the facts and exercise discretion properly whether to grant reinstatement or to award compensation.
519 Here, no case has been made out for departure from the normally accepted approach of the courts in the field of social justice.
(535A C) Ruby General Insurance Co. Ltd. vs Chopra (P.P.), (1970) 2 Labour Law Journal, 63 and Hindustan Steel Ltd., Rourkela vs A.K. Roy and Others, ; , referred to.
Niceties and semantics apart, termination by the employer of the service of a workman for any reason whatsoever in section 2(oo) of the Industrial Dispute Act, would constitute retrenchment except in cases excepted in the section itself.
The excepted or excluded cases are where termination is by way of punishment inflicted by way of disciplinary action, voluntary retirement of the workman, retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf, and termination of the service of a workman on the ground of continued illhealth.
(524 E F) 3:2.
It was not open to the Labour Court to record a finding that the service of the appellant was terminated during the period of probation on account of his unsatisfactory work which did not improve in spite of repeated warnings when there was not even a whisper of any period of probation in the appointment order or in the rules.
The termination of service being, for a reason other than the excepted category, it would indisputably be retrenchment within the meaning of section 2(oo) of the Industrial Dispute Act.(523 G H, 524A, 525Z) Pipraich Sugar Mills Ltd. vs Pipraich Sugar Mills Mazdoor Union, ; Hariprasad Shivshankar Shukla v, A. D. Divikar, [1957] S.C.R. 121; State of Bombay and Ors.
vs The Hospital Mazdoor Sabha and Ors. ; at 872; State Bank of India vs N. Sundara Money, ; ; Hindustan Steel Ltd. vs The Presiding Officer, Labour Court, Orissa and Ors., ; ; Santosh Gupta vs State Bank of Patiala, and Delhi Cloth and General Mills Ltd. vs Shambhu Nath Mukerjee, ; , explained and followed.
Before a workman can complain of retrenchment being not in consonance with section 25F of the Industrial Dispute Act, he has to show that he has been in continuous service for not less than one year under that employer who has retrenched him from service.
(529 C) 5:1.
The language employed in sub sections (1) and (2) of section 25B does not admit of any dichotomy, namely, (a) sub section (1) providing for uninterrupted service and (b) sub section (2) comprehending a case where the workman is in continuous service.
Sub sections (1) and (2) introduce a deeming fiction as to in what circumstances a workman could be said to be in continuous service for the purposes of Chapter V A. (530 G H) 5:2.
Sub section (1) provides deeming fiction in that where a workman is in service for a certain period for that period even if service is interrupted on account of sickness or authorised leave or an accident or a strike which is not illegal or a lockout or a cessation of work which is not due to any fault on the 520 part of the workman.
Sub section (1) mandates that interruptions therein indicated are to be ignored meaning thereby that on account of such cessation an interrupted service shall be deemed to be uninterrupted and such uninterrupted service shall for the purposes of Chapter V A be deemed to be continuous service.
(530H, 531A, C D) 5:3.
Sub section (2) incorporates another deeming fiction for an entirely different situation.
It is not necessary for the purposes of sub section (2) (a) that the workman should be in service for a period of one year.
If he is in service for a period of one year and that if that service is continuous service within the meaning of sub section (1) his case would be governed by sub section (1) and his case need not be covered by sub section (2).
Sub section (2) envisages a situation not governed by sub section (1).
And sub section (2) provides for a fiction to treat a workman in continuous service for a period of one year despite the fact that he has not rendered uninterrupted service for a period of one year but he has rendered service for a period of 240 days during the period of 12 calendar months counting backwards and just proceeding the relevant date being date of retrenchment.
(531D E. 532A B) Both on principle and on precedent section 25B(2) comprehends the situation where workman is not in employment for a period of 12 calendar months but has rendered service for a period of 240 days within the period of 12 calendar months commencing and counting backwards from the relevant date that is the date of retrenchment, if he has, he would be deemed to be in continuous service for a period of one year for the purpose of section 25B and Chapter V A.
In the instant case, the appellant 's case indisputably falls within section 25 B(2) (a) and he shall be deemed to be in continuous service for a period of one year for the purpose of Chapter V A. (534B D) Sur Enamel and Stamping Works (P) Ltd. vs Their Workmen, ; explained and distinguished.
Surendra Kumar and Ors.
vs Central Government Industrial cum Labour Court, New Delhi and Another, ; followed.
|
N: Criminal Appeal Nos.
543 545 of 1979.
Appeals by special leave from the judgment and order dated the 15th April, 1978 of the Madhya Pradesh High Court in Criminal Revision No. 701/77, 105/78 & 103/78 respectively.
H.K. Puri for the Appellant.
R.K. Garg, Sunil Kumar Jain and V.J. Era for Respondents Nos. 1, 2, 5 & 6.
S.K. Gambhir and Vijay Mansaria for the State.
The following Judgments were delivered CHINNAPPA REDDY, J. I agree with my brother A.P. Sen that the order passed by the High Court should be set aside and that the Magistrate should be directed to record the plea of the accused under Sec.
251 Criminal Procedure Code and thereafter, to proceed with the trial according to law.
The facts leading to these appeals have been stated in the judgments of both my brethren A.P. Sen and Baharul Islam and it is unnecessary for me to state them over again.
The prayer in the application before the High Court was merely to quash the order dated November 30, 1977 of the learned Chief Judicial Magistrate, Bhopal and not to quash the complaint itself as the High Court has done.
But, that was only a technical defect and we do not take serious notice of it in an appeal under article 136 of the Constitution where we are very naturally concerned with substantial justice and not with shadow puppetry.
The position now is this: The news item in the Blitz under the caption 'MISA Rape in Bhopal Jail ' undoubtedly contained serious imputations against the character and conduct of the complainant.
In order to attract the 9th Exception to Sec.
499 of the Indian Penal Code, the imputations must be shown to have been made (1) in good 631 faith, and (2) for the protection of the person making it or of any other person or for the public good. 'Good Faith ' is defined, in a negative fashion, by Sec.
52 Indian Penal Code as follows: "Nothing is said to be done or believed in 'Good faith ' which is done or believed without due care and attention".
The insistence is upon the exercise of due care and attention.
Recklessness and negligence are ruled out by the very nature of the definition.
The standard of care and attention must depend on the circumstances of the individual case, the nature of the imputation, the need and the opportunity for verification, the situation and context in which the imputation was made, the position of the person making the imputation, and a variety of other factors.
Good faith, therefore is a matter for evidence.
It is a question of fact to be decided on the particular facts and circumstances of each case.
So too the question whether an imputation was made for the public good.
In fact the 1st Exception of Sec.
499 Indian Penal Code expressly states "Whether or not it is for the public good is a question of fact". 'Public Good ' like 'Good faith ' is a matter for evidence and not conjecture.
In Harbhajan Singh vs State of Punjab, this Court observed (at p. 244): "Thus, it would be clear that in deciding whether an accused person acted in good faith under the Ninth Exception, it is not possible to lay down any rigid rule or test.
It would be a question to be considered on the facts and circumstances of each case. what is the nature of the imputation made, under what circumstances did it come to be made; what is the status of the person who makes the imputation; was there any malice in his mind when he made the said imputation; did he make any enquiry before he made it; are there reasons to accept his story that he acted with due care and attention and was satisfied that the imputation was true? These and other considerations would be relevant in deciding the plea of good faith made by an accused person who claims the benefit of the Ninth Exception".
Again in Chaman Lal vs The State of Punjab this Court said (at p. 916): 632 "In order to establish good faith and bona fide it has to be seen first the circumstance under which the letter was written or words were uttered; secondly, whether there was any malice; thirdly, whether the appellant made any enquiry before he made the allegations; fourthly, whether there are reasons to accept the version that he acted with care and caution and finally whether there is preponderance of probability that the appellant acted in good faith".
Later the Court said (at p. 918): "Good faith requires care and caution and prudence in the background of context and circumstances.
The position of the person making the imputation will regulate the standard of the person making the imputation will regulate the standard of care and caution".
Several questions arise for consideration if the Ninth Exception is to be applied to the facts of the present case.
Was the Article published after exercising due care and attention? Did the author of the article satisfy himself that there were reasonable grounds to believe that the imputations made by him were true? Did he act with reasonable care and a sense of responsibility and propriety? Was the article based entirely on the report of the Deputy Secretary or was there any other material before the author? What steps did the author take to satisfy himself about the authenticity of the report and its contents? Were the imputations made rashly without any attempt at verification? Was the imputation the result of any personal ill will or malice which the author bore towards the complainant? Was it the result of any ill will or malice which the author bore towards the political group to which the complainant belonged? Was the article merely intended to malign and scandalise the complainant or the party to which he belonged? Was the article intended to expose the rottenness of a jail administration which permitted free sexual approaches between male and female detenus? Was the article intended to expose the despicable character of persons who were passing off as saintly leaders? Was the article merely intended to provide salacious reading material for readers who had a peculiar taste for scandals? These and several other questions may arise for consideration, depending on the stand taken by the accused at the trial and how the complainant proposes to demolish the defence.
Surely the stage for deciding these questions has not arrived yet.
Answers to these questions at this stage, even before the plea of the 633 accused is recorded can only be a priori conclusions. 'Good faith ' 'public good ' are, as we said, questions of fact and matters for evidence.
So, the trial must go on.
SEN, J.
This appeal, by special leave, is directed against an order of the Madhya Pradesh High Court dated April 15, 1978 quashing the prosecution of the respondent, R.K. Karanjiya, Chief Editor, Blitz, for an offence under section 500 of the Indian Penal Code for publication of a news item in that paper which was per se defamatory, on the ground that he was protected under Ninth Exception to section 499 of the Code.
During the period of Emergency the appellant, who is a senior lawyer practising at Bhopal, was placed under detention under s.3 (1) (a) (ii) of the and was lodged in the Central Jail, Bhopal.
There were several other detenus belonging to the opposition parties lodged along with him in the same jail, including three lady detenus, viz., Smt.
Uma Shukla, Smt.
Ramkali Misra, Advocate and Smt.
Savitha Bajpai, later State Minister, Public Works Department.
The husband of Smt.
Uma Shukla, a practising advocate at Bhopal, was not detained.
Shukla was released on parole for a week between June 10 and 18, 1976.
On her return to the jail it was found that she had conceived.
She was examined on July 30, 1976, by a lady doctor, Dr. (Mrs) N.C. Srivstava, Woman Asst.
Surgeon and the pregnancy was reported to be six weeks old.
Shukla was again released on parole in the month of August 1976 and on August 24, 1976, she got the pregnancy terminated by Dr. (Mrs) Upadhayay at the Zanana Hamidia Hospital, Bhopal with the written consent of her husband under s.3 of the Medical (Termination of Pregnancy) Act, 1976.
While the order of detention of the appellant was still in operation, there was an ex parte confidential enquiry held by Shri S.R. Sharma, I.A.S. Deputy Secretary (Home) Government of Madhya Pradesh, into the circumstances leading to the pregnancy of Smt.
Shukla.
The Enquiry Officer by his report dated November 3, 1976, apparently held that the pregnancy was due to illicit relations between the appellant and Smt.
Shukla, during their detention in the Central Jail.
On December 25, 1976, the Blitz, in its three editions in English, Hindi and Urdu simultaneously flashed a summary of the report and the story as given out was that (i) there was a mixing of male and female detenus in the Central Jail, Bhopal, (ii) the appellant had the opportunity and access to mix with Smt.
Shukla freely, and (iii) Smt.
Shukla became pregnant through the 634 appellant.
The news item was per se defamatory.
It is somewhat surprising that the Enquiry Report, which was a document of highly confidential nature, should have found its way to the Press.
With the revocation of Emergency, the appellant along with the other political detenus was released from detention.
On his release, the appellant lodged a criminal complaint for defamation against the respondent, R.K. Karanjia.
The respondent, on appearing before the Magistrate, moved an application under section 91 of the Code of the Criminal Procedure, 1973, praying that the report of the Enquiry Officer be sent for as it was likely to be lost or destroyed.
On August 23, 1976 the learned Magistrate allowed the application and directed that the report with the concerned file be produced.
The State Government, however, did not comply with the direction and by an application dated December 31, 1977, claimed privilege in respect of the Enquiry Report which still awaited consideration.
On October 29, 1977 when the case was fixed for recording the plea of the accused under section 251 of the Code, the respondent moved an application stating that the plea should be recorded only after the Enquiry Report was produced.
The learned Magistrate by his order dated November 30, 1977, rejected the said application of the respondent as to the summoning of the records and directed the accused persons to appear in person or through counsel for explaining to them the substance of the accusation and also for recording their pleas.
Thereafter, the respondent filed a revision before the High Court under section 397 of the Code for setting aside the order of the learned Magistrate and alternatively under section 482 of the Code, if it were held to be an interlocutory order.
The revision was heard by a learned Single Judge and it appears that the Government Advocate made available a copy of the Enquiry Report for the perusal of the learned Judge.
The learned Judge by his order dated April 15, 1978, quashed the proceedings on the ground that the respondent 's case "clearly falls within the ambit of exception 9 of section 499 of the Indian Penal Code".
In reaching that conclusion, he observed that "it would be abuse of the process of the court if the trial is allowed to proceed which ultimately would turn out to be a vexatious proceeding".
The reasoning advanced by him was as follows: The real question to ask is, did the applicants publish the report for public good, in public interest and in good faith? My answer is in the affirmative.
It was a publication 635 of a report for the welfare of the society.
A public institution like prison had to be maintained in rigid discipline; the rules did not permit mixing of male prisoners with female prisoners and yet the report said the prison authorities connived at such a thing, a matter which was bound to arouse resentment and condemnation.
The balance of public benefit lay in its publicity rather than in hushing up the whole episode.
Further, there was good faith in the publication.
The source on which the publishers acted was the proper source on which they were entitled to act and they did so with care and circumspection.
The report further shows that the publication had been honestly made in the belief of its truth and also upon reasonable ground for such a belief, after the exercise of such means to verify its truth as would be taken by a man of ordinary prudence under like circumstances.
(emphasis added) It is somewhat strange that the learned Judge should have made public the contents of a document in respect of which the State Government claimed privilege.
The order recorded by the High Court quashing the prosecution under section 482 of the Code is wholly perverse and has resulted in manifest miscarriage of justice.
The High Court has pre judged the whole issue without a trial of the accused persons.
The matter was at the stage of recording the plea of the accused persons under section 251 of the Code.
The requirements of section 251 are still to be complied with.
The learned Magistrate had to ascertain whether the respondent pleads guilty to the charge or demands to be tried.
The circumstances brought out clearly show that the respondent was prima facie guilty of defamation punishable under section 500 of the Code unless he pleads one of the exceptions to section 499 of the Code.
The offending article which is per se defamatory, is as follows: MISA RAPE IN BHOPAL JAIL (By Blitz Correspondent).
Blitz: A shocking sex scandal involving a top RSS leader of M.P. was discussed at a secret meeting of Jan Sangh MLAs and MPs here recently.
The alleged escapades of 55 years old Sewakram Sobhani, a close confidant of RSS Chief Bhausaheb Devras, with the young wife of another RSS man in the Bhopal Central Jail, where both were detained under MISA, have rocked RSS Jan Sangh circles of the State.
636 According to a report submitted to the State Government by a Deputy Secretary in the Home Deptt.
who inquired into the grisly affair, Sobhani was reportedly responsible for making Mrs. Uma Shukla, 22 year old wife of a lawyer Yogesh Shukla, pregnant.
Abortion? When this was discovered she was quietly released on parole and, at her own request, taken for abortion to the Sultania Zanana Hospital.
After discharge she refused to rejoin her husband but stayed during the remaining period of her parole in the hide out of the 'total revolutionaries ' in the Professor 's Colony.
She returned to jail later and was transferred to the Hoshangabad Jail, while Sobhani was sent to the Raipur Central Jail.
The Official report throws light on how Sobhani allegedly enticed Mrs. Shukla with the help of a high official of the Bhopal Central Jail despite a ban on contacts between male and female detenus.
The jail official, himself a close sympathiser of the RSS allowed Sobhani to meet her frequently in his office and their love sessions were in his anteroom.
Yogesh Shukla has made a representation to the State Government alleging that Sobhani had committed adultery with his wife and demanded action against the jail authorities for permitting a "rape" of his wife.
It is for the respondent to plead that he was protected under Ninth Exception to section 499 of the Code.
The burden, such as it is, to prove that his case would come within that exception is on him.
The ingredients of the Ninth Exception are that (1) the imputation must be made in good faith, and (2) the imputation must be for the protection of the interests of the person making it or any other person or for the public good.
We are completely at a loss to understand the reasons which impelled the High Court to quash the proceedings.
The respondent, in his revision directed against the order of the learned Magistrate dated November 30, 1977, asserted in paragraph 5 that the case pre eminently a fit case for quashing the impugned order either in the revisional jurisdiction of the High Court or in the exercise of its inherent powers under section 482 of the Code to prevent the abuse of 637 the process of law and to secure the ends of justice.
The prayer made in the revision was in these terms: The applicants pray that the impugned order be quashed and the learned Magistrate be directed to persue the report which he has sent for under section 91, Criminal Pro.
Code and pass suitable orders according to law.
All that the respondent wanted is that learned Magistrate should not proceed to record the plea of the accused persons under section 251 of the Code without perusing the Enquiry Report under section 91 of the Code.
There was no application made before the High Court under section 482 of the Code for quashing the prosecution itself.
The averment contained in paragraph 4 that the Blitz only published a concise summary from the findings reached by the Deputy Secretary (Home) who was the Enquiry Officer appointed by the Government and, therefore, it was the duty of the learned Magistrate, to go through the report for himself and hold that no accusation had been made and the question of explaining it to the accused did not arise and the proceedings were liable to be dropped because no ingredients constituting an offence under section 500 of the Code had been made out, must be read in conjunction with paragraph 5 and in support of the limited prayer made in revision.
This cannot be construed as invoking the High Court 's powers under section 482 of the Code for quashing the whole proceedings.
We have considerable doubt about the propriety of the High Court making use of the Enquiry Report which has no evidentiary value and in respect of which the Government claimed privilege.
The application made by the Government claiming privilege still awaited consideration.
While the Government claimed privilege at one stage, it appears to have waived the claim and produced the Enquiry Report and made the contents public.
There was no factual basis for the observations made by the High Court underlined by me, except the Enquiry Report.
The contents of the Enquiry Report cannot be made use of unless the facts are proved by evidence aliunde.
There is also nothing on record to show that the accused persons made any enquiry of their own into the truth or other wise of the allegations or exercised due care and caution for bringing the case under the Ninth Exception.
The Enquiry Report cannot by itself fill in the lacunae.
A bare perusal of the offending article in Blitz shows that it is per se defamatory.
There can be no doubt that the imputation 638 made would lower the appellant in the estimation of others.
It suggested that he was a man devoid of character and gave vent to his unbridled passion.
It is equally defamatory of Smt.
Shukla in that she was alleged to be a lady of easy virtue.
We need not dilate on the matter any further.
It is for the accused to plead Ninth Exception in defence and discharge the burden to prove good faith which implies the exercise of due care and caution and to show that the attack on the character of the appellant was for the public good.
In Sukro Mahto vs Basdeo Kumar Mahto & Anr this Court observed: The ingredients of the Ninth Exception are first that the imputation must be made in good faith; secondly, the imputation must be for protection of the interest of the person making it or of any other person or for the public good.
Good faith is a question of fact.
So is protection of the interest of the person making it.
Public good is also a question of fact.
After referring to the two earlier decisions in Harbhajan Singh vs State of Punjab and Chaman Lal vs State of Punjab the Court held that there must be evidence showing that the accused acted with due care and caution. "He has to establish as a fact that he made enquiry before he made the imputation and he has to give reasons and facts to indicate that he acted with due care and attention and was satisfied that the imputation was correct.
The proof of the truth of the statement is not an element of the Ninth Exception as of the First Exception to section 499.
In the Ninth Exception the person making the imputation has to substantiate that his enquiry was attended with due care and attention and he was thus satisfied that the imputation was true.
" The High Court appears to be labouring under an impression that journalists enjoyed some kind of special privilege, and have greater freedom than others to make any imputations or allegations, sufficient to ruin the reputation of a citizen.
We hasten to add that journalists are in no better position than any other person.
Even the truth of an allegation does not permit a justification under First Exception unless it is proved to be in the public good.
The question 639 whether or not it was for public good is a question of fact like any other relevant fact in issue.
If they make assertions of facts as opposed to comments on them, they must either justify these assertions or, in the limited cases specified in the Ninth Exception, show that the attack on the character of another was for the public good, or that it was made in good faith: per Vivian Bose, J. in Dr. N.B. Khare vs M.R. Masani and Ors.
As the matter is of great public importance, it would, perhaps, be better to quote the well known passage of Lord Shaw in Arnold vs King Emperor (2) The freedom of the journalist is an ordinary part of the freedom of the subject, and to whatever lengths the subject in general may go, so also may the journalist, but, apart from statute law, his privilege is no other and no higher.
The responsibilities which attach to this power in the dissemination of printed matter may, and in the case of a conscientious journalist do, make him more careful: but the range of his assertions, his criticisms, or his comments, is as wide as, and no wider than, that of any other subject.
No privilege attaches to his position.
For these reasons, we must set aside the order passed by the High Court and direct the Magistrate to record the plea of the accused persons under section 251 of the Criminal Procedure Code, 1973 and thereafter, to proceed with the trial according to law.
BAHARUL ISLAM, J. Had there been no subsequent development after the impugned judgment of the High Court, I could have persuaded myself to agree to the order proposed by my Brother Sen, J., but after the Inquiry Report has been released by the Government and placed before us I regret my inability to agree to the order of sending back the case to the Magistrate as proposed by my Brother, and proceed to give my own judgment.
The facts material for the purpose of disposal of these appeals may be stated thus: During the period of Emergency between June 1975 and March 1976 the appellant, Shri Sewakram Sobhani, an advocate, was one of the detenus under the Main 640 tenance of Internal Security Act, 1976 (hereinafter 'MISA ') and lodged in the Bhopal Central Jail.
There were also three women detenus including Smt.
Uma Shukla and Smt.
Ramkali Mishra, Advocate.
The husband of Smt.
Uma Shukla was a practising advocate at Bhopal.
He was not a detenu.
Uma Shukla became pregnant while in detention in the aforesaid Central Jail and abortion was carried out in the month of August, 1976 in the Zanana Hamidi Hospital to relieve her of the pregnancy.
This circumstance created an uproar and an inquiry into the affairs had to be held by Shri S.R. Sharma, Dy.
Secretary (Home), Government of Madhya Pradesh, (hereinafter 'Sharma ') who submitted his report dated 7.10.1976 to the Government.
Respondent No. 1 is the Chief Editor of the Blitz and respondent No. 5 was, at the relevant time, Bhopal Correspondent of the Blitz.
Respondents 2, 3 and 4 are persons connected with the Blitz Weekly publication.
The Blitz weekly is published in three languages, viz., English, Hindi and Urdu.
The Blitz weekly dated 25.12.76 published a news item purported to be a summary of the report submitted by Sharma in its Urdu and Hindi editions.
The appellant took exception to the publication and filed a criminal case for defamation against the respondents under Sections 500 and 501 of the Penal Code.
The Magistrate issued processes to the respondents.
The respondents appeared before the Magistrate and made an application on 23.8.77 under Section 91 of the Code of Criminal Procedure, 1973 (hereafter 'the Code ') requesting the court, before arriving at a conclusion whether it should proceed further with the case or not, to call for (a) the original Enquiry Report submitted by Sharma on 7.10.76; (b) the statement of witnesses recorded by Sharma, (c) the original complaint; and (d) documents of the jail Department including letters from the Government to the Department (Vide para 4 of Annexure D to the Special Leave Petition).
The Magistrate called for the original Inquiry Report dated 7.10.76 submitted by Sharma to the Government, and then posted the case for production of the said records by the Government and recording the plea of the respondents.
The Government failed to produce the inquiry report before the Magistrate whereupon the Magistrate issued a notice to the Government to show cause as to why contempt proceedings should not be initiated against them.
The Magistrate, however, did not wait for the receipt of the report and wanted to record the plea of respondents.
641 The respondents then filed an application before the High Court of Madhya Pradesh under Section 397/401 read with Section 482 of the Code.
It was alleged by the respondents that the Deputy Home Secretary in his report came to the following conclusions : (1) There was free mixing of male and female prisoners in the Bhopal Central Jail ; (2) Shri Sewakram Sobhani had opportunity and also availed of the opportunity and mixed very freely with Smt.
Uma Shukla; and (3) Smt.
Uma Shukla became pregnant through Shri Sewak Ram Sobhani.
It may be mentioned that the Government later on produced the inquiry report before the High Court but claimed privilege.
The learned High Court presumably perused the report before passing the impugned order.
It may also be mentioned that although the Government claimed privilege in respect of the report at that time, it appears, they subsequently, after the impugned order of the High Court, waived the claim of privilege, and released the inquiry report; for, in fact, a copy of the report has been annexed and is available in the paper book of these appeals before us as Annexure `A '. 5.
The submission of the appellants is that the impugned order of the High Court is beyond its revisional jurisdiction.
The submission is that the respondents prayed for quashing the order of the Magistrate proceeding to record their plea before the inquiry report was produced by the Government, but the High Court has wrongly quashed the complaint itself.
On the other hand the reply of the respondent is that although there was no specific prayer in the petition, the petition was also made for quashing the criminal case under Section 500/501 of the Penal Code pending before the Magistrate.
The respondents ' submission is that they are not guilty for the impugned publication in view of Exception 9 to Section 499 of the Penal Code.
A perusal of the respondents ' petition before the High Court and its impugned judgment justifies the factual submission of the respondents, namely, that their application before the High 642 Court (Copy Annexure C) was under Section 482 as well as Sections 397 and 401 of the Code, and that the respondents claimed and canvassed the protection under the Ninth Exception of Section 499 of the Penal Code.
For, para 6 of the Judgment of the High Court reads : "The applicants feeling aggrieved have come to this Court for quashing the complaint, since they contend that the publication would squarely fall within exception 9 of Section 499 of the Indian Penal Code.
The applicants further contend that the report of the Deputy Secretary (Home) is the document on the basis of which the reporting was done and unless that is got produced and inspected, the defence of exception 9 cannot be made out. (Emphasis added) 7.
The omission in the prayer portion of a petition of a part of the claim, particularly in a criminal case, is not fatal.
The High Court in its revisional jurisdiction can always grant suitable relief justified by law as well as facts and circumstances of a particular case.
That a part, Article 136 of the Constitution of India gives wide powers to the Supreme Court to grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any court or tribunal in the territory of India.
The power is discretionary and therefore to be sparingly exercised.
This power is to be exercised to meet ends of justice, to enhance justice and remove miscarriage of justice in a particular case.
It does not exercise such powers for academic reasons but for practical purposes.
The High Court in the impugned order has held that "it would be abuse of the process of the court if the trial is allowed to proceed or alternatively to turn out to be vexatious proceeding" and therefore quashed the complaint.
Such an order would be warranted under Section 482 of the Code of Criminal Procedure if the merit of the case before the High Court justified it.
We have therefore to examine whether the respondents ' case falls within the ambit of the Ninth Exception to Section 499 of the Penal Code as held by the High Court.
643 9.
The appellant has not submitted before us that the summary of the report published in the Blitz is not a correct summary of the Inquiry Report.
The copy of the Report, Annexure A, shows that a complaint was received from one Shri Krishsan Gopal Maheshari, advocate, alleging certain objectionable activities and misconduct on the part of the appellant and Shrimati Uma Shukla.
Annexure A also shows that the Inquiry Officer Sharma, examined several witnesses including Shri Yogesh Shukla, husband of Smt.
Uma Shukla.
Para 4 of the report reads : "The following points are in dispute : (a) whether as alleged by the complainant there was free mixing of female members with male members detained under MISA; (b) in case (a) is in the affirmative, whether Shri Sewakram Sobhani had an opportunity to mix freely with Smt.
Uma Shukla; (c) in case (a) and (b) are in the affirmative when, how and through whom Smt.
Uma Shukla a MISA detenu conceived".
His findings are "(a) There was a free mixing of male and female prisoners in the Bhopal Central Jail; (b) Shri Sewakram Sobhani had opportunity and also availed of opportunity and mixed very freely with Smt.
Uma Shukla; (c) Smt.
Uma Shukla became pregnant through Shri Sewakram Sobhani".
It, therefore, appears that the impugned publication is a correct summary of the report and no submission has been made to the contrary by the appellant before us.
The only question is whether the publication falls within the Ninth Exception to Section 499 of the Penal Code, as claimed by the respondents.
644 Before we do that, we must not be oblivious of the fact that the Inquiry Report in question was a privileged document; it is now an unprivileged open document as indicated above.
The High Court proceeded on the footing that if the document is not produced to be utilized by the accused, the benefit would go to him.
Section 499 defines `defamation '.
It is as follows: "section 499.
Whoever, by words either spoken or intended to be read, or by signs or by visible representations makes or publishes any imputation concerning any person intending to harm, or knowing or having reason to believe that such imputation will harm the reputation of such person, is said, except in the cases hereinafter defame that person".
The Ninth Exception reads: "It is not defamation to make an imputation on the character of another provided that the imputation be made in good faith for the protection of the interests of the person making it, or of any other person, or for the public good".
The Ninth Exception requires, inter alia, that the imputation made must be in good faith for the public good.
`Good faith ' has been defined in Section 52 of the Penal Code as: "52.
Nothing is said to be done or believed in "good faith" which is done or believed without due care and attention", The definition is expressed in negative terms.
Normally proof of an exception lies on the person who claims it; but the definition of the expression "good faith" indicates that lack of good faith has been made a part of the offence which the prosecution has to establish beyond reasonable doubt.
On the other hand the mere proof by the accused of the report to be an authentic document is enough; it will create a doubt in the mind of the Court as to the lack of "good faith" on the part of the accused.
The inquiry was made and the report prepared by a highly responsible officer and submitted to the Government.
It was in pursuance of a complaint made by one of the citizens pointing 645 out laxity in observance of jail rules and highly objectionable practices of some of the prisoners and seeking improvement in jail administration.
The object was to see improved conditions, and maintenance of certain standard of moral conduct by prisoners, in jail.
If the complaint and the consequent inquiry report be for public good, and the respondents had reasons to believe its contents to be true, they will be protected under the Ninth Exception.
Even if the burden of proof of `good faith ' be on the accused `good faith ' need not be proved beyond reasonable doubt.
Once this is done, whether the publication was for public good would be a matter of inference.
The Dy.
Secretary (Home) examined Shri Bhandari, Editor of Prach who was a MISA detenu as witness No. 1, complainant Maheshwari as witness No. 2, Smt.
Ramkali Mishra, an advocate, and a member of Jana Sangha, another MISA detenu, as witness No. 4, Dr. Hamid Quireshi, another MISA detenu as witness No. 6, Shri Ramesh Chand Shrivastava an `independent ' witness as witness No. 7, and Shri Yogesh Shukla, husband of Smt.
Uma Shukla as witness No. 3.
Most of the said witnesses, it appears, were the party colleagues of the appellant and his co MISA detenus.
I must not be understood to suggest the contents of the inquiry report are true; it is an exparte inquiry report; it might be the result of political rivalry, as alleged by the appellant, but it appears that political rivalry, if any, was between the members of the appellant 's party and not between the party in power and party in opposition.
The comment of Mr. Sharma on the evidence of witness No. 3 is as follows: "Shri Yogesh Shukla witness No. 3 has categorically stated that he had no connection with his wife and that she became pregnant through Shri Sobhani, Advocate and got the child aborted.
It is worth consideration as to why the husband will come up with such an open allegation against his own wife, unless there be no very strong reasons for such a conviction.
Normally, no husband, even though his wife may have conceived through somebody else will like to see his name being scandalised.
Shri Yogesh Shukla witness No. 3 is an advocate, quite an educated person and we can safely presume that he knows the consequences of his statement and also their legal and moral implications on his profession.
Such an open scandalous statement against 646 his own wife could not but be a result of very strong abhoration or an outcome of utter desperation.
It could also be an expression of a naked truth.
" The entire report is exhaustive, reasoned and based on evidence.
A perusal of the report will normally lead one to believe the imputations.
If that be so, it cannot be said that the respondents published the report or its summary without due care and attention.
This establishes `good faith ' as required by the Ninth Exception to Section 499 of the Penal Code.
From what has been stated above, the publication obviously appears to be for public good.
The appellant submitted that he wanted an opportunity to clear himself of the imputations made against him by adducing evidence before the Magistrate to establish the falsity of the imputations made in the publication.
We are not concerned with the truth or falsity of the imputations published.
Even if the findings in the report be proved to be false, the respondents will be protected.
Sending back the case to the Magistrate to record the respondents ' plea after the perusal of the Inquiry Report will, in my opinion, be an exercise in futility and abuse of the process of the criminal court.
The appellant may seek his remedy, if any, in the Civil Court.
The learned High Court, therefore, in my opinion committed no error in quashing the complaint.
The appeal is dismissed.
ORDER In view of majority judgments, the appeals are allowed.
P.B.R. Appeals allowed.
| IN-Abs | A news item published in the Blitz weekly of which the respondent was the Editor, stated that the appellant enticed a female detenu who alongwith him, was detained in the Central Jail under the Maintenance of Internal Security Act and that she had conceived through him and that on getting released on parole she had the pregnancy terminated.
It was further stated that a confidential enquiry conducted by a senior officer of the Home Department revealed that it was the appellant who was responsible for the detenu 's pregnancy.
On release from jail the appellant lodged a criminal complaint against the respondent.
Before the Magistrate the respondent prayed that the report of the Enquiry Officer be sent for.
But the report could not be obtained because the State Government claimed privilege in respect of that report.
When the Magistrate proceeded to record the plea of the accused under section 251 of the Code of Criminal Procedure, the respondent requested that his plea be recorded only after the enquiry report was produced; but the Magistrate rejected the request.
The respondent thereupon filed a revision before the High Court for setting aside the order of the Magistrate.
Waiving privilege the State Government produced a copy of the enquiry report before the High Court.
A single Judge of the High Court quashed the proceedings on the view that the respondent 's case clearly fell within the ambit of the ninth exception to section 499, I.P.C. because, according to him, the publication had been made honestly in the belief of its truth and also upon reasonable ground for such belief, after the exercise of such means to verify its truth as would be taken by a man of ordinary prudence under like circumstances.
On the question whether the High Court was right in quashing the order of the Magistrate, remanding the case to the Magistrate.
628 (Per majority: Chinnappa Reddy and A.P. Sen JJ Baharul Islam J dissenting) ^ HELD: The order passed by the High Court should be set aside.
The Magistrate should record the plea of the accused under section 251 Cr.
P.C. and thereafter proceed with the trial according to law.
(Per Chinnappa Reddy, J.) To attract the ninth exception to section 499, I.P.C. the imputations must be shown to have been made (1) in good faith and (2) for the protection of the person making it or of any other person or for the public good.
The insistence of the section is upon the exercise of due care and attention.
The standard of care and attention must depend on the circumstances of an individual case, the nature of imputation, the need and the opportunity for verification and so on.
In every case it is a question of fact to be decided on its particular facts and circumstances.
[631 A B] Harbhajan Singh vs State of Punjab, @ 244, Chaman Lal vs The State of Punjab ; @ 916 and 918.
Several questions may arise for consideration depending on the stand taken by the accused at the trial and how the complainant proposed to demolish the defence.
In the instant case the stage for deciding these questions had not arrived yet.
Answers to such questions, even before the plea of the accused was recorded, could only be a priori conclusions.
[632 H] The respondent 's prayer before the High Court was to quash the Magistrate 's order and not to quash the complaint itself as the High Court has done.
But that was only a technical defect which need not be taken seriously in an appeal under Article 136 of the Constitution where the Court is concerned with substantial justice and not with shadow puppetry.
[630 G] (Per A.P. Sen J.) The order of the High Court quashing the prosecution under section 482 of the Code of Criminal Procedure is wholly perverse and had resulted in manifest miscarriage of justice.
The High Court has pre judged the whole issue without a trial of the accused persons.
The matter was at the state of recording the pleas of the accused under section 251 Cr.
P.C. The circumstances brought out clearly showed that the respondent was prima facie guilty of defamation punishable under section 500 of the Indian Penal Code unless covered by one of the exceptions of section 499 Indian Penal Code.
[635 E F] The burden to prove that his case would come within the ninth exception to section 499, namely, that the imputation was in good faith and was for the protection of the interests of the person making it or of any other person or for the public good was on the respondent.
All that the respondent prayed for was that the Magistrate should not proceed to record his plea under section 251 Cr.
P.C. without perusing the enquiry report.
There was no application for quashing the prosecution itself.
C] 629 The enquiry report in respect of which the Government claimed privilege had by itself no evidentiary value.
The contents of that report could not be made use of unless the facts were proved by evidence aliunde.
The report being per se defamatory, it was for the accused to plead the ninth exception in defence and discharge the burden of proving good faith which implies the exercise of due care and caution and to show that the attack on the character of the appellant was for the public good.
[637 E; G; H] Sukro Mahto vs Basdeo Kumar Mahto and Anr.
[1971] Supp.
SCR 329 at 332, Harbhajan Singh vs State of Punjab ; , Chaman Lal vs State of Punjab ; , referred to.
The High Court appears to be labouring under an impression that journalists enjoyed some kind of special privilege.
Journalists are in no better position than any other person.
Even the truth of an allegation does not permit a justification under the first exception unless it is proved to be in the public good.
The question whether or not it was for public good is a question of fact like any other relevant fact in issue.
If they make assertions of facts as opposed to comments on them, they must either justify these assertions or in the limited cases specified in the ninth exception, show that the attack on the character of another was for the public good or that it was made in good faith.
[638 G H] Dr. N.B. Khare vs M.R. Masani and Ors., ILR 1943 Nag.
347, Arnold vs King Emperor at 169, referred to.
(Per Baharul Islam J.) The Court did not commit any error in quashing the appellant 's complaint.
[646 E] The High Court 's judgment justifies the factual submission of the respondents that their application was under section 482 as well as under sections 397 and 401 of Cr.
P.C. and that they claimed and canvassed the protection under the ninth exception to section 499, I.P.C. The omission in the prayer portion of a petition, particularly in a criminal case, is not fatal.
The High Court, in its revisional jurisdiction, can always grant suitable relief justified by law as well as facts and circumstances of a particular case.
[641 H; 642 D] The definition of "good faith" which is couched in negative terms indicates that lack of good faith has been made a part of the offence which the prosecution has to establish beyond reasonable doubt.
On the other hand, proof by the accused of the report to be an authentic document is enough.
It would create a doubt in the mind of the Court as to the lack of "good faith" on the part of the accused.
[644 F G] If on a complaint made by a citizen alleging laxity in the observance of jail rules, if the report submitted by a high Government official on the basis of an enquiry conducted by him was for public good and if the respondents had reasons to believe its contents to the true, they will be protected under the ninth exception even if the burden of proof of good faith is on the accused.
Good faith need not be proved beyond reasonable doubt.
[645 B] The report of the enquiry officer was exhaustive, reasoned and was based on evidence.
The report leads one to believe the imputations.
If that be so, it 630 cannot be said that the respondents published the report or its summary without due care and attention.
This establishes good faith under the ninth exception to section 499.
Therefore, the publication obviously was for public good.
[646 B C] In the instant case even if the findings of the report be proved to be false, the respondents would be protected.
Sending back the case to the Magistrate would be an exercise in futility and abuse of the process of the criminal court as the High Court has pointed out.
[646 D E]
|
ivil Appeal Nos. 2115 to 2117 of 1980.
Appeals by special leave from the judgment and order dated the 8 the August, 1978 of the Bombay High Court in Income Tax Reference No. 142 of 1969.
section C. Manchanda and A. Subhashini for the Appellant.
V. N. Ganpule and Mrs. Veena Devi Khanna for the Respondent.
V. N. Ganpule for Intervener No. 1.
section C. Patel for Intervener No. 2.
The Judgment of the Court was delivered by TULZAPURKAR, J.
These appeals by special leave raise the question: "whether on the facts and in the circumstances of the case the assessee Council could be taken to be a body intended to advance any object of general public utility falling within section 2(15) for purposes of section 11 of the Income Tax Act, 1961 ?" The facts giving rise to the aforesaid question may briefly be stated.
The respondent assessee Bar Council of Maharashtra is a body corporate established under the (Act 25 of 1961) which came into force on December 28, 1961.
During the accounting periods relevant to the assessment years 1962 63, 1963 64 and 1964 65 the assessee derived income from 544 securities (interest) and other income by way of enrollment fees particulars whereof, are as follows: Assessment year Interest on securities Other Income 1962 63 Rs. 3,779 Rs 28,035 1963 64 Rs. 8,629 Rs 3,04,103 1964 65 Rs. 9,356 Rs 96,322 The Income Tax Officer subjected to tax the income from both the sources for all the three years.
In appeals preferred to the Appellate Assistant Commissioner it was contended by the assessee that its other income by enrollment fees was exempt under section 10 (23A) and interest on securities was exempt from tax under section 11 of the Income Tax Act, 1961.
The Appellate Assistant Commissioner negatived the exemption claimed under section 10(23A) in the absence of the Central Government 's notification according approval to the association and with regard to the claim for exemption in respect of the interest on securities he held that it was not established that the securities were held on trust for any charitable purpose.
He took the view that the main object of the assessee Council was to benefit the legal profession (its Members) and, therefore, the object was not one of general public utility.
Accordingly he confirmed the assessment orders for the three years.
The matter was carried in further appeal to the Income Tax Appellate Tribunal and since by that time the Central Government had accorded approval to the assessee for the purpose of section 10 (23A) by a notification dated August 5, 1966 with effect from December 28, 1961, the Tribunal held that the assessee Council was entitled to exemption under section 10(23A) in respect of its income by way of enrollment fees.
In regard to the income by way of interest on the securities the Tribunal observed that the character of the body holding the securities was not by itself decisive, that safeguarding the rights, privileges and interest of advocates on its roll could not be said to be an object of general public utility, that the real question to be considered under section 11 was whether the securities were held for any charitable purpose or not and the tribunal found that there was no evidence or material on record touching this aspect.
It, therefore, remanded the case back to the Appellate Assistant Commissioner and directed him to dispose of the case by examining the question as to the purpose for which the securities were held by 545 the assessee Council.
It observed that if the said securities were held for educational purpose or for any other charitable purpose then the exemption under section 11 would be admissible to the extent available under the law.
At the instance of the assessee Council the question set out at the commencement of this judgment was referred to the High Court for its decision under section 256(1) of the Act.
The High Court took the view that having regard to the obligatory functions enjoined upon a State Bar Council under s.6 of the the assessee Council could be regarded as a body constituted for general public utility and that the entire income of the body would be exempt from tax under s.11 of the Income Tax Act, 1961.
In its view the advancement of any object beneficial to the public or a section of the public as distinct from an individual or a group of individuals would be a charitable purpose as defined in s.2 (15) of the Income Tax Act and in this view of the matter the High Court answered the question in the affirmative and against the Revenue.
It is this view of the High Court that is being challenged by the Revenue before us in these appeals.
In support of the appeals counsel for the Revenue sought to raise two contentions.
First, he urged that the relief claimed under s.11 was ruled out by reason of relief having been obtained by the assessee Council in respect of its income from enrollment fees under s.10 (23A) of the Act.
According to him s.10 (23A), while exempting from tax any income of an association or institution established in India having as its object the control, supervision, regulation and encouragement of the profession of law, medicine, accountancy and any other profession as the Central Government may specify, has expressly excluded from exemption such association 's or institution 's income chargeable under the head "interest on securities" or "Income from house properties" or "any income received in rendering any specific service", etc., and, therefore, what has been expressly excluded from exemption under this provision could not be or was not intended to be exempt under s.11 of the Act.
In other words, the assessee Council 's claim for exemption in respect of interest on securities under s.11 was ruled out by reason of s.10(23A) of the Act.
Secondly, counsel contended that on merits the High Court 's view that the assessee Council was a body constituted for advancement of an object of general public utility was erroneous inasmuch as it was a body established principally for the purpose of safeguarding the rights, privileges and interest of the advocates on its roll and since such objective merely served to benefit the members 546 of the profession it was no charitable purpose as defined by s.2 (15) for purposes of s.11 of the Act.
In support of this contention counsel placed reliance on some English decisions.
At the out set it may be stated that we were not inclined to permit counsel for the Revenue to urge his first contention as in our view the Revenue must be deemed to have given up the same.
We may point out that precisely this very contention was raised by the Revenue before the Tribunal and was negatived by it.
The Tribunal on a detailed analysis of the concerned provisions took the view that the two provisions were not mutually exclusive but operated under different circumstances, that s.11 was relatively wider in its scope and ambit, that while s.10 (23A) granted absolute exemption in respect of particular types of income s.11 imposed certain conditions for the exemption but such exemption was available for all sources and there was nothing inherently improbable or inconceivable about the two provisions operating simultaneously and as such the claim for exemption under s.11 was available to the assessee Council provided it satisfied all the requirements of that provision.
We may point out that there are other allied provisions like for instance sub section
(23C) in s.10 which clearly indicate that the Legislature did not intend to rule out s.11 when exemption was claimable under such specific provisions of s.10.
It was after negativing the contention in this manner that the Tribunal went on to consider the claim for exemption made by the assessee Council under s.11 but on merits found that there was no material or evidence on record to show whether or not the securities were held by the assessee Council for any of charitable purposes and, therefore, it remanded the case.
The remand order was never challenged by the Revenue by seeking a reference on the ground that a remand was unnecessary because s.11 was ruled out by reason of exemption having been obtained by the assessee Council under s.10 (23A) of the Act nor was any such contention raised when reference was sought by the assessee Council nor when the matter was being argued in the High Court.
In these circumstances it is clear to us that the Revenue acquiesced in the view taken by the Tribunal that the claim for exemption under s.11 of the Act could not be said to be ruled out by reason of the provisions of s.10 (23A).
We, therefore, proceed to deal with the second contention which was principally argued before us in these appeals.
Under s.11 of the Income Tax Act, 1961, subject to the conditions therein specified, income derived from property held 547 under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India is exempt from the tax liability under the Act and s.2 (15) gives an inclusive definition of the expression "charitable purpose" thus: "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 any activity for profit.
It may be noticed that whereas any object of general public utility was included in the definition of "Charitable purpose" in the 1922 Act, the present definition has inserted the restrictive words "not involving the carrying on of any activity for profit" which qualify or govern the last head of charitable purpose.
In Commissioner of Income Tax, Madras vs Andhra Chamber of Commerce a case decided by this Court under the 1922 Act where the restrictive words were absent this Court laid down that if the primary or dominant purpose of a trust or institution was charitable, any other object which by itself might not be charitable but which was merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity.
After the addition of the restrictive words in the definition in the 1961 Act, this Court in Additional Commissioner of Income Tax, Gujarat vs Surat Art Silk Cloth Manufacturers Association affirmed that the aforesaid test of primary of dominant purpose of a trust or institution still holds good, that the restrictive words qualify "object" and not the advancement or accomplishment thereof and that the true meaning of the restrictive words was that when the purpose of a trust or institution was the advancement of an object of general public utility at was that object of general public utility and not its accomplishment or carrying out which must not involve the carrying on of any activity for profit.
And applying these tests trading bodies like Andhra chamber of Commerce and Surat Art Silk Cloth Manufacturers Association have been held to be institutions constituted with a view to advance an object of general public utility because their primary or dominant purpose was to promote and protect industry, trade and commerce either generally or in certain commodities, even though some benefit through some of their activities did accrue to their members which 548 was regarded as incidental and this Court held that the income derived from diverse sources by these institutions (rental income from property in the case of Andhra Chamber of Commerce and income from annual subscriptions collected from its members and commission of a certain percentage of the value of licences for import of foreign yarn and quotas for purchase of indigenous yarn obtained by the assessee from its members in the case of Surat Art Silk Cloth Manufacturers Association was exempt from tax liability under s.11 of the Act.
Reliance on English decisions would not be of much avail because the definition of charitable purposes as given in our Act since it embraces 'any other object of general public utility ' goes further than the definition of charity to be derived from the English cases.
Under English law of charity a trust is charitable only if it is within the spirit and intendment of the Preamble to the Statute of Elizabeth (43 Eliz.
ch. 4) and all objects of general public utility are not necessarily charitable, some may or some may not be, depending upon whether they fall within the spirit and intendment of the Statute of Elizabeth.
Under our definition every object of general public utility would be charitable subject only to the condition imposed by the restrictive words inserted in the 1961 Act.
It is because of this basic difference between Indian Law and English Law of charity that Lord Wright in All India Spinners ' Assn.
vs CIT uttered a warning against blind adherence to English decisions on the subject thus: "The Indian Act gives a clear and succinct definition which must be construed according to its actual language and meaning.
English decisions have no binding authority on its construction and though they may sometimes afford help or guidance, cannot relieve the Indian Courts from their responsibility of applying the language of the Act to the particular circumstances that emerge under conditions of Indian life.
" Having regard to the aforesaid manner in which the definition of "charitable purpose" given in s.2 (15) has been interpreted by this Court the question that arises for consideration in these appeals is whether the securities, interest from which is sought to be exempted from tax liability, were held by the assessee Council on trust wholly for a charitable purpose, namely, for the advancement of an object of general public utility? Admittedly the assessee Council is not indulging in any activity for profit and hence the aspect of considering the applicability of the restrictive words does not arise and the answer to the question must depend upon the 549 nature or character of the functions and activities which the assessee Council can undertake under the for it is clear that it cannot go beyond what is prescribed by that Act.
The Preamble of the shows that it was enacted with a view to amend and consolidate the law relating to legal practitioners and to provide for the constitution of Bar Councils and an All India Bar.
Under s.3 of the Act Bar Councils are constituted for various States and the assessee Council happens to be a State Bar Council for Maharashtra.
Section 4 provides that every Bar Council shall be a body corporate having perpetual succession and a common seal, with power to acquire and hold property both movable and immovable and to contract, and may by the name by which it is known sue or be sued.
Section 6 is the material provision which sets out both obligatory as well as optional functions of every State Bar Council and so far as is material runs thus: "6.(1)The functions of a State Bar Council shall be (a) to admit persons as advocates on its roll; (b) to prepare and maintain such roll; (c) to entertain and determine cases of misconduct against advocates on its roll; (d) to safeguard the rights, privileges and interests of advocates on its roll; (e) to promote and support law reform; (ee) to conduct seminars and organise talks on legal topics by eminent jurists and publish journals and papers of legal interest; (eee) to organise legal aid to the poor in the prescribed manner; (f) to manage and invest the funds of the Bar Council; (g) to provide for the election of its members; (h) to perform all other functions conferred on it by or under this Act; 550 (i) to do all other things necessary for discharging the aforesaid functions.
(2) A State Bar Council may constitute one or more funds in the prescribed manner for the purpose of (a) giving financial assistance to organise welfare schemes for the indigent, disabled or other advocates; (b) giving legal aid or advice in accordance with the rules made in this behalf.
" Sections 9, 9A and 10 of the Act provide for the constitution of various committees for the purposes mentioned therein.
Section 15 confers power on the Bar Council to make rules to carry out the purposes of this Chapter.
The rest of the provisions of the Act are not material for the purpose of the issue under consideration.
Counsel for the Revenue contended that the primary object or purpose with which the Bar Council of a State is constituted is to benefit the members of the legal profession inasmuch as under s.6 (1) (d) it is an obligatory function of the State Bar Council to safeguard the rights privileges and interests of the advocates of its roll and that other functions like promotion of law reform, conducting law seminars etc.
are incidental objects and the benefit to the public is remote or indirect or incidental and, therefore, the assessee Council could not be regarded as a body intended to advance the object of general public utility.
It is impossible to accept this contention.
It is clear that sub section
(1) lays down the obligatory functions while sub section
(2) indicates what are the optional or discretionary functions that could be undertaken by the State Bar Council and from amongst the obligatory functions it will be wrong to pick out one and say it is the primary or dominant object or purpose.
All the clauses of sub section
(1) will have to be considered in light of the main objective sought to be achieved as indicated in the Preamble.
The functions mentioned in cls.
(a) and (b) of sub section
(1), namely, to admit persons as advocates on its roll and to prepare and maintain such roll, are clearly regulatory in character intended to ensure that persons with requisite qualifications who are fit and otherwise proper to be advocates are available for being engaged by the litigating public; the function prescribed in cl.
(c) has been enjoined upon avowedly with the objective of protecting the litigating public from unscrupulous professionals by taking them to task for any misconduct on 551 their part; it is also one of the obligatory functions of a State Bar Council to promote and support measures for law reform as also to conduct law seminars and organise talks on legal topics by eminent jurists, obviously with a view to educate the general public, the function prescribed by cl.
(eee) is obviously charitable in nature, the same being to organise legal aid to the poor.
Amongst these various obligatory functions one under cl.
(d) is to safeguard the rights, privileges and interests of the advocates on its roll and it is difficult to regard it as a primary or dominant function or purpose for which the body is constituted, Even this function apart from securing speedy discharge of obligations by the litigants to the lawyers ensures maintenance of high professional standards and independence of the Bar which are necessary in the performance of their duties to the society.
In other words, the dominant purpose of a State Bar Council as reflected by the various obligatory functions is to ensure quality service of competent lawyers to the litigating public, to spread legal literacy, promote law reforms and provide legal assistance to the poor while the benefit accruing to the lawyer members is incidental.
It is true that sub section
(2) provides that a State Bar Council may constitute one or more funds for the purpose of giving financial assistance to organise welfare schemes for the indigent, disabled or other advocates; but it is an optional or discretionary function to be undertaken by the Council.
Apart from that, admittedly the assessee Council has not so far constituted any such fund for the purpose specified in the instant case.
As and when such a fund is constituted a question may arise for consideration and the Court may have to decide whether the function so undertaken by a State Bar Council has become the dominant purpose for which that Council is operating.
Having regard to the Preamble of the Act and the nature of the various obligatory functions including the one under cl.
(d) enjoined upon every State Bar Council Under s.6 (1) of the Act, it is clear that the primary or dominant purpose of an institution like the assessee Council is the advancement of the object of general public utility within the meaning of s.2 (15) of the Act, and as such the income from securities held by the assessee Council would be exempt from any tax liability under s.11 of the Act.
Having come to the aforesaid conclusion on applying the language of our Act to the nature of functions undertaken by a State Bar Council under the it is truly unnecessary to deal with the English decisions cited during the course of 552 arguments.
However, we might indicate that in two cases (Royal College of Surgeons case and the General Medical Council 's) case on an analysis of the functions undertaken by the two concerned institutions under the Statutes and Charters governing them the Court came to the conclusion that the institutions were not constituted for charitable purpose but they were more of professional institutions, the approach being to find out whether the objects satisfied the limited concept of charity within the spirit and intendment of the Statute of Elizabeth.
In the other two cases (The Yorkshire Agricultural Society 's case and The Institute of Civil Engineers ' case the Court took the view that both the institutions were constituted for charitable purposes entitled the exemptions under s.37 (1) (b) of the Income Tax Act, 1918, and the benefits accruing to the members were regarded as incidental.
In the result we are of the opinion that the High Court was right in answering the question in the affirmative and in favour of the assessee.
The appeals are accordingly dismissed with no order as to costs.
S.R. Appeals dismissed.
| IN-Abs | The income derived by the Bar Council of Maharashtra from securities (interest) and other income by way of enrollment fees during the accounting periods relevant to the assessment years 1962 63,1963 64,1964 65 was subjected to tax by the Income Tax Officer.
Since the Central Government had accorded approval to the assessee for the purpose of section 10(23A) during the pendency of the appeal before the Tribunal by a notification dated August 5, 1966 with effect from December 28,1961, the Tribunal held that the assessee Council was entitled to exemption under section 10(23A) in respect of its income by way of enrollment fees.
The Tribunal remanded the case back to the Appellate Assistant Commissioner and directed him to dispose of the case by examining the question as to the purpose for which the securities were held by the assessee Council.
It observed that if the said securities were held for educational purpose or for any other charitable purpose then the exemption under section 11 would be admissible to the extent available under the law.
The High Court, on a reference made at the instance of the assessee Council, answered the question: "Whether on the facts and in the circumstances of the case, the assessee Council could be taken to be a body intended to advance any object of general public utility falling within section 2(15) for purposes of section 11 of the Act ?" in favour of the assessee and hence the appeals by Revenue after obtaining special leave from the Court.
Dismissing the appeals, the Court ^ HELD: 1.
Having regard to the Preamble of the and the nature of the various obligatory functions including the one under clause (d) enjoined upon every State Bar Council under section 6(1) of the , it is clear that the primary or dominant purpose of an institution like the assessee Council is the advancement of the object of general public utility within the meaning of section 2(15) of the Income Tax Act, 1961 and as such the income from securities held by the assessee Council would be exempt from any tax liability under section 11 of the Income Tax Act, 1961.
[551 E G] 543 2.
If the primary or dominant purpose of a trust or institution was charitable any other object which by itself might not be charitable but which was merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity.
The restrictive words "not involving the carrying on any activity for profit" in section 2(15) of the Income Tax Act, 1961, qualify "object" and not the advancement or accomplishment thereof.
In other words, the true meaning of the restrictive words is that when the purpose of a trust or institution was the advancement of an object of general public utility it was that object of general public utility and not its accomplishment or carrying out which must not involve the carrying on of any activity for profit.
Here, admittedly, the State Bar Councils are not indulging in any activity for profit and hence the question of applying the restrictive words in s.2(15) does not arise.
[547 C F, 548 G H] Commissioner of Income Tax, Madras vs Andhra Chamber of Commerce, ; Additional Commissioner of Income Tax, Gujarat vs Surat Art Silk Cloth Manufacturers Association, , reiterated.
|
Civil Appeal No. 1843 of 1974.
Appeal by special leave from the judgment and order dated the 6th September, 1972 of the Allahabad High Court in Civil Misc.
Writ No. 27 of 1972.
S.C. Manchanda, Champat Rai and Miss A. Subhashini for the Appellants.
Pramod Swarup for the Respondent.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
The question which arises for consideration in this appeal by special leave is whether under section 52 of the (hereinafter referred to as the Act) the Central Government is bound to accept in satisfaction of the whole or any part of the duty payable under the Act at such price as may be agreed upon between the Central Government and the person accountable for estate duty any property passing on the death of the deceased when an application is made for that purpose by such person.
On the death of Lala Beni Madho Agarwal which took place on September 29, 1964 his son Prayag Dass Agarwal, the respondent 579 herein filed a statement of account under the Act of the estate passing on the death of the deceased.
The estate duty payable in respect of the estate in question was determined at Rs. 3,37,543.40 by the Assistant Controller of Estate Duty, Allahabad by his order dated November 30, 1970.
When the appeal filed against the said order was still pending, the respondent made an application under section 52(1) of the Act on February 15, 1971 to the Central Board of Direct Taxes offering one of the items of property passing on the death of the deceased, namely premises No. 1, Phaphamau Road, Allahabad, whose principal value had been determined by the Assistant Controller at Rs. 2,53,655 in part payment of the balance of estate duty which was still payable by him under the order of assessment.
The said application elicited a cryptic reply dated September 16, 1971 from the Under Secretary of the Central Board of Direct Taxes, the relevant part of which read as follows: "I am directed to refer to your petition dated 16.2.1971 on the subject mentioned above and to say that your offer is not acceptable.
" The Assistant Controller, however, wrote to the respondent on October 21,1971 stating that the respondent could pay the arrears of estate duty payable by him in monthly instalments of Rs. 10,000 each beginning from October 29, 1971 subject to payment of interest @ 9% per annum on the arrears outstanding.
Thereupon the respondent filed a writ petition before the High Court of Allahabad under Article 226 of the Constitution against the Assistant Controller, the Central Board of Direct Taxes and the Union of India requesting the High Court to issue a writ in the nature of mandamus to the Union of India to consider the application made by him under section 52(1) on its merits, to negotiate and settle the price of the property offered by him in settlement of part of duty payable by him and to give credit to the extent of the price so determined under the Act.
The respondent contended inter alia that section 52 of the Act conferred a right on an accountable person, if he chose to do so, to offer an item of property passing on the death of the deceased in respect of whose estate, duty was payable under the Act in discharge of the whole or part of such duty and that it imposed a reciprocal obligation on the Central Government to accept such property and adjust its price as may be agreed upon between the Central Government and the accountable person towards the duty payable.
He further contended that the Central Government had no right to refuse to accept the offer so made by the accountable person and that he 580 having made the offer to pay the duty by transfer of the property in question he could not be compelled to pay the duty to the extent of its price.
He, therefore prayed for the issue of appropriate direction to the Central Government to comply with section 52 of the Act accordingly.
On behalf of the Union Government it was inter alia urged that it was not bound to accept an offer made under section 52(1) of any property and it was within the discretion of the Union Government to reject the offer.
The High Court held that if the accountable person exercised the option to pay the estate duty by transferring property, the Central Government could not refuse to accept the offer and insist upon payment by another mode when there was agreement about the price between it and the accountable person.
It, however, held that it was not necessary to decide the question whether it was open to the Central Government to refuse the offer of property on a ground other than the price as the impugned order had not disclosed any reason at all for rejecting the offer.
Accordingly the High Court directed the Union Government and the Central Board of Direct Taxes to dispose of the application of the petitioner afresh in accordance with law.
This appeal is filed against the said decision of the High Court under Article 136 of the Constitution.
Section 5(1) of the Act provides that in the case of every person dying after the commencement of the Act there shall, save as expressly provided in the Act, be levied and paid upon the principal value ascertained as per the relevant provisions of the Act of all property, settled or not settled, including agricultural land situate in the territories which immediately before November 1, 1956 were comprised in the States in the First Schedule to the Act which passes on the death of such person, a duty called 'estate duty ' at the rates fixed in accordance with section 35 of the Act.
The rates of estate duty are set out in the Second Schedule to the Act.
The principal value of the property liable for estate duty has to be ascertained in accordance with the provisions in Part V of the Act.
The estate duty levied under the Act can be collected as per provisions in Part VII of the Act.
Section 51 of the Act states that estate duty may be collected by such means and in such manner as the Central Board of Direct Taxes may prescribe.
Rule 18 of the Estate Duty Rules (hereinafter referred to as 'the Rules ') made by the Central Board of Direct Taxes in exercise of the powers conferred by sub section (1) of 581 section 85 of the Act deals with payment of estate duty.
That Rule provides inter alia that payment of any duty may be made by delivery of a cheque on a scheduled bank or by a bank draft issued by a scheduled bank or by depositing the amount of duty in the Government Treasury or by adjustment of any refund of income tax, excess profits tax, business profits tax or excess profits tax deposit.
Section 52 of the Act as it was originally enacted provided that the Board might prescribe that Government securities could be accepted in payment of estate duty on such items as it thought fit.
When it was suggested that a provision corresponding to section 56(1) of the Finance as it stood at the time when the Act was enacted could be introduced into the Act, it was not accepted by the Indian Finance Minister.
Section 49 of the British Finance Act 1946 (9 & 10 Geo 6 C. 64) provided that the Commissioners of Inland Revenue could accept any property under section 56 of the Finance in satisfaction or part satisfaction of any estate duty and amended the latter Act accordingly.
Section 56(1) of British Finance which was again amended by the British Finance Act of 1949 read thus: "56(1) The Commissioners may, if they think fit, on the application of any person liable to pay estate duty or settlement estate duty accept in satisfaction of the whole or any part of such duty any such real (including leasehold) property as may be agreed upon between the Commissioners and that person." The legal position in the United Kingdom as it existed in 1965 in so far as transfer of real and leasehold property in payment of estate duty is concerned is summarized in Dymond 's Death Duties (14th Edition) at pages 720 721 thus: "D Transfer of Property in Payment of Duty : (1) Real and leasehold property: By section 56(1) of the Finance , as extended and amended by section 49 of the Finance Act, 1946 (which applies to deaths at any time) and the Finance Act, 1946 (which applies to deaths at any time) and the Finance Act, 1949, Sched.
XI, Pt.
IV the Commissioner 's may, if they think fit, on the application of any person liable to pay any Death Duties, accept in satisfaction of the 582 whole or part of such duty any such real (including leasehold) property as may be agreed upon between the Commissioners and the accountable person.
The Commissioners have the right to accept foreign real or leasehold property, but they are scarcely likely to do so.
The property accepted need not itself be liable to duty.
It may be accepted in satisfaction of duty on any property, real or personal.
No Stamp Duty is to be payable on the transfer of such property (Finance , section 56(2) .
The disposition of any property accepted by the Commissioners is provided for by sections 50 and 51 of the Finance Act, 1946, under which the Treasury may direct that the land be transferred direct to a body of persons (e.g. the National Trust) or to trustees for such a body, etc,.
instead of to the Commissioners, and the duty receivable by the latter may be paid out of the National Land Fund established by section 48 of the Act.
It is within the discretion of the Commissioners whether they will accept property under this provision, but the Chancellor of the Exchequer in his Budget statement for 1946 said that he expected the power (which hitherto had not in practice been used) to operate on a substantial scale in the future: it is understood that seventy properties had been taken over up to the 31st March, 1963.
He referred also to the National Trust and the Youth Hostels Association as examples of the bodies not established for profit, and having for their object "the provision, improvement or preservation of amenities enjoyed, or to be enjoyed, by the public or the acquisition of land to be used by the public" to which the land may be transferred.
Particulars of properties accepted are given in the Commissioner 's Annual Reports.
There is no provision for the transfer of land by a person other than the accountable person, and the acquisition price cannot exceed the amount of the duty.
The Commissioners ' powers extend to the acquisition of foreign immovable property, but are scarcely likely to be exercised in respect of it.
" The position in the United Kingdom appears to be more or less the same even after the former estate duty was replaced by the new tax known as capital transfer tax by the British Finance Act 583 1975 (vide section 22 of the Finance Act 1975).
The relevant part of paragraph 17 of Schedule 4 to that Act reads thus: "17 (1) The Board may, if they think fit on the application of any person liable to pay tax, accept in satisfaction of the whole or any part of it any property to which this paragraph applies.
(2) This paragraph applies to any such land as may be agreed upon between the Board and the person liable to pay tax.
(3) This paragraph also applies to any objects which are or have been kept in any building (a) If the Board have determined to accept or have accepted that building in satisfaction or part satisfaction of tax or estate duty, or . . " (See Halsbury 's Statutes of England (Third Edition) Vol. 45 at page 1870).
Section 52 of the Act was substituted by a new section 52 by the Direct Taxes (Amendment) Act, 1964.
The new section reads thus: "52.
Payment of duty by transfer of property (1) The Central Government may, on an application of the person accountable for estate duty, accept in satisfaction of the whole or any part of such duty any property passing on the death of the deceased at such price as may be agreed upon between the Central Government and that person, and thereupon such person shall deliver possession of the property to such authority as may be specified by that Government in this behalf.
(2) Notwithstanding anything contained in any other law for the time being in force, on the date the possession of the property is delivered to the authority under sub section (1) (i) the property shall vest in the Central Government; and (ii) the Central Government shall, where necessary, intimate the registering authority concerned accordingly; and the authority shall administer the property in such manner as the Central Government may direct.
584 (3) Where the price referred to in sub section (1) exceeds the aggregate of the amounts due under this Act in respect of the estate of the deceased, the excess shall be applied in the following order to the payment of any tax, penalty, interest or other amount (i) which the legal representative of the deceased is liable to pay in respect of the income, expenditure or wealth of, or gift made by, the deceased under any of the Acts referred to in clause (c) of section 2 of the ; (ii) which the executor is liable to pay under any of the Acts aforesaid in respect of the estate of the deceased for the period of the administration of the estate; (iii)which the person beneficially entitled to the property in question is liable to pay under any of those Acts; and the balance, if any, shall be paid to the accountable person.
" In the Notes on clauses annexed to the Bill which ultimately became the Direct Tax (Amendment) Act 1964, it was stated: "Sub clause (b) seeks to substitute the provisions of section 52 of the by a new provision, enabling the Central Government to accept at an agreed price, the assets comprised in an estate passing on the death of the deceased towards payment of the estate duty, if the accountable person so offers.
Provision is also made that any balance of the price left after satisfying the amounts due under the will be adjusted against amounts due under the other Direct Taxes Act from the deceased, his estate and the accountable person beneficially entitled to the asset in question in that order.
" Let us now analyse section 52 of the Act.
A proceeding under section 52 does not commence until an application is made by the person accountable for estate duty.
It is entirely at his option whether a property passing on the death of the deceased should be transferred so that its price can be adjusted towards payment of the estate duty.
The Central Government cannot compel him to do so.
When the accountable person voluntarily applies to the Central 585 Government, the section says that the Central Government 'may ' accept the property offered in satisfaction of the estate duty at such price as may be agreed upon between it and the accountable person.
Section 52 of the Act does not say that the Central Government shall do so but it may do so.
The question in this case is whether the Central Government is bound to do so.
We shall revert to this question later on.
Then the price of the property has to be agreed upon between the Central Government and the accountable person.
The price so agreed upon should naturally relate to the date on which agreement takes place and it cannot certainly be the principal value of the property determined in the estate duty proceedings.
This provision may perhaps indirectly act as a deterrent against excessive valuation of the property in the estate duty proceedings because when the question of determination of its price under section 52 of the Act arises there ought not to be a wide disparity between the principal value determined in the estate duty proceedings and what is offered by the Central Government as the price under section 52.
When once the price is agreed upon, then the accountable person is bound to deliver possession of the property to such authority as may be specified by the Central Government.
On such delivery the property vests in the Central Government without any further formality.
Sub section (3) of section 52 of the Act provides that where the price agreed upon exceeds the amount due as estate duty, the excess amount shall be applied to the payment of any tax penalty, interest or other amount payable in the order mentioned in clauses (i) to (iii) thereof.
If after adjusting all such dues, any balance still remains, such balance shall be paid to the accountable person.
The Act is a fiscal statute principally intended to levy and collect estate duty which when collected has to be disbursed in accordance with Part XII of the Constitution.
It is not a law providing for acquisition of a property forming part of the estate of the deceased.
Part VII of the Act in which sections 51 and 52 occur only provides the machinery for collection of the duty.
Whereas section 51 of the Act authorises the Board to prescribe the means and manner in which the estate duty may be collected, section 52 gives the option to the accountable person to offer a property passing on the death of the deceased so that its price may be adjusted towards the payment of the estate duty.
Rule 18 of the Rules made by the Board pursuant to section 51 enables the accountable person to discharge his liability in one or more ways mentioned therein and there the Central Government is left with no choice 586 about them.
Payment of duty in any of the said ways discharges the liability of the accountable person under the Act.
Section 52 of the Act however, appears to be an alternative mode by which such liability can be discharged but it has some distinguishing features.
Indisputably the price of the property offered thereunder has to be agreed upon between the Central Government and the accountable person which introduces an element of consensus into the proceeding.
But the point on which the parties are at issue in this case is whether the Central Government is bound to accept a property offered by the accountable person under section 52 and initiate proceedings to settle its price by negotiation.
The language of the statute prima facie does not compel the Central Government to do so.
The section is in the nature of an enabling provision which authorises the Central Government to accept a property in lieu of estate duty payable subject to the conditions mentioned in it.
It is true that even enabling words in a statute which confer a discretionary power may have to be interpreted as compulsory where they amount to words clearly intended to effectuate a legal right.
But ordinarily such words are permissive only.
In the instant case the very fact there is a need for an agreement upon the price of the property between the Central Government and the accountable person makes the power of the Central Government under section 52(1) of the Act discretionary and permissive.
Any other meaning may lead to impractical and incongruous result.
The Central Government cannot be compelled to accept the properties in discharge of the estate duty when no agreement is possible on its price, and when law does not provide for a machinery to determine the price when there is no agreement.
The history of the corresponding legislation in the United Kingdom and the language of section 52 read with the 'Notes on clauses ' attached to the relevant Bill extracted above suggest that the Central Government has the option either to accept or reject the offer made by an accountable person under section 52.
This has to be so having regard to the administrative difficulties involved in the matter.
As mentioned earlier, the Act is a fiscal statute intended to collect duty and not to acquire property.
If section 52 of the Act is held to be mandatory then the Central Government will be obliged to acquire properties in several parts of India where it may not find any use for them and spend money on their management and upkeep and arrange for their disposal.
The cost of administration involved in the Act in that case possibly may be much more than the duty realisable under the Act.
Further if such is the construction to be placed then what happens if the price of the property offered is more than the duty payable ? Then in every such case, the Government would be compelled to acquire property by paying 587 to the accountable person the amount which is in excess of the duty and other sums payable under section 52(2)(i) to (iii) even when it does not need such property.
Surely such could not have been the intention of the Parliament.
We are of the view that on a plain construction of section 52 of the Act, the Central Government may at its discretion either accept the property offered under section 52 or may not if the circumstances so warrant.
The accountable person cannot claim that the Central Government is bound to accept to such property.
The power of the Central Government under section 52 is purely administrative and discretionary.
The High Court was in error in holding that if an assessee wanted to pay the estate duty by transferring property, the Government could not refuse to accept the offer and insist upon payment by another mode, provided there was agreement on the price of the property between the Government and the assessee.
When once it is held that the power of the Government under section 52 of the Act is administrative and discretionary, it follows that the said power should be exercised subject to the same limitation which govern all such administrative and discretionary powers.
The Central Government or the authority which is competent to take a decision should exercise its discretion bona fide and in good faith by addressing itself to the matter before it and should not allow itself to be influenced by extraneous and irrelevant considerations.
The question should not be disposed of in an arbitrary or capricious way.
In this case, the Court can only ask the authority concerned to exercise the discretion vested in it but it cannot be asked to exercise it in a particular way.
On this question we approve the decision of the Andhra Pradesh High Court in Chella Rama Bhupal Reddy vs Central Board of Direct Taxes & Anr.
The true legal position may be summarised thus.
What section 52(1) does is to set forth one more mode in which estate duty may be recovered.
It is a provision made specially for the recovery of estate duty.
It enables the Government to recover the duty in accordance with that mode.
The other statutory modes prescribed under section 51 and specified in the Rules are those where recourse by the accountable person obliges the Revenue to accept the payment made in any of those modes and to treat it, by compulsion of statute, as satisfaction of the dues.
The peculiarity of the mode provided under section 52(1) is that while recourse to it by the accountable person does not automatically imply satisfaction of the 588 dues, there is the duty cast on the Revenue to consider the application by the accountable person offering an item of property as a mode for satisfying the dues.
The Government must consider the application on its merits and in the exercise of sound administrative judgment.
Ordinarily in every contract for the purchase of property there are two stages.
(1) In the first stage, there is complete freedom to the parties to decide whether one should enter into negotiations with the other at all and in that regard the law takes no account of reason of any party for not choosing to entertain the proposal for sale made by the other however arbitrary, illogical or irrelevant the reason may be.
(2) The second stage follows the entertaining of the proposal and the actual negotiations between the parties which may or may not fructify in a contract.
Section 52(1) now under consideration concerned with the first stage, and differs in this from the complete freedom to entertain the proposal in that the proposal made under section 52(1) by the accountable person must be considered by the Central Government and any decision taken by it on that question must proceed on considerations which are relevant and bona fide.
The price of the property is, however, left to be determined by agreement in the event of the Government deciding to accept the offer made by the accountable person.
This forms part of the second stage.
In the instant case, the High Court was, however, right in holding that it had not been shown that the competent authority had properly exercised its discretion.
In the counter affidavit filed by the Assistant Controller of Estate Duty, some reasons were given in support of the decision of the Board.
That counter affidavit is of no use for the deponent could not speak on behalf of the Central Government or the Board.
In the counter affidavit of Balbir Singh, Secretary, Central Board of Direct Taxes and Deputy Secretary to the Government of India, two principal grounds were mentioned for rejecting the offer one, that the Central Government was not bound to accept the offer and two, that it had been shown that "the cash in hand, cash in bank, book debts, business profits, rent and share of the deceased in the firm of Ramnarain Lal Beni Madho amounted to Rs. 4,57,462 which amount was more than sufficient to pay the entire estate duty demand".
On the other hand the respondent contended in his reply affidavit that he had no liquid cash to pay the estate duty as it had been invested in business.
But there appears to have been no further probe into the question.
It is also obvious that the Board proceeded on the assumption that its discretion was unfettered even by considerations relevant to administrative 589 law.
In these circumstances, we feel that there was no proper exercise of the discretion by the Board.
We, therefore, affirm the direction issued by the High Court but subject to the observations made above and direct the Board to dispose of the application afresh in accordance with law.
The appeal is accordingly disposed of.
No costs.
| IN-Abs | On the death of his father which took place on September 29, 1964 the respondent filed a statement of account under the of the estate passing on the death of the deceased.
The estate duty payable in respect of the estate in question was determined at Rs. 3,37,543.40 by the Assistant Controller of Estate Duty, Allahabad, by his order dated November 30, 1970.
When the appeal filed against the said order was still pending, the respondent made an application under section 52(1) of the Act on February 16, 1971 to the Central Board of Direct Taxes offering one of the items of property passing on the death of the deceased, namely, premises No. 1, Phaphamau Road, Allahabad, whose principal value had been determined at Rs. 2,53,625 in part payment of the balance of estate duty which was still payable by him under the order of assessment.
The said offer was not accepted by the Central Board of Direct Taxes but the appellant herein wrote to the respondent stating that the respondent could pay the arrears of estate duty payable by him in monthly instalments of Rs. 10,000 each beginning from October 29, 1971 subject to payment of interest @ 9% per annum on the arrears outstanding.
Thereupon the respondent filed a writ petition before the High Court of Allahabad requesting the High Court to issue a writ in the nature of mandamus to the Union of India to consider the application made by him under section 52(1) on its merits, to negotiate and settle the price of the property offered by him in settlement of part of duty payable by him and to give credit to the extent of the price so determined under the Act.
The High Court held that if the accountable person exercised the option to pay the estate duty by transferring property, the Central Government could not refuse to accept the offer and insist upon payment by another mode when there was agreement about the price between it and the accountable person.
The High Court, however, held that it was not necessary to decide the question whether it was open to the Central Government to refuse the offer of property on a ground other than the price as the impugned order had not disclosed any reason at all for rejecting the offer.
Accordingly, the High Court directed the respondents before it to dispose of the application afresh in accordance with law.
Hence the appeal after obtaining special leave of the Court.
Affirming the High Court directions, the Court 577 ^ HELD :1:1.
What section 52(1) of the does is to set forth one more mode in which estate duty may be recovered.
It is a provision made specially for the recovery of estate duty.
It enables the Government to recover the duty in accordance with that mode.
The other statutory modes prescribed under section 51 and specified in the Rules are those where recourse by the accountable obliges the Revenue to accept the payment made in any of those modes and to treat it, by compulsion of statute, as satisfaction of the dues.
The peculiarity of the mode provided under section 52(1) is that while recourse to it by the accountable person does not automatically imply satisfaction of the dues, there is the duty cast on the Revenue to consider the application by the accountable person offering an item of property as a mode for satisfying the dues.
The Government must consider the application on its merits and in the exercise of sound administrative judgment.
[587 F H, 588 A] 1:2.
Ordinarily in every contract for the purchase of property there are two stages.
(i) In the first stage, there is complete freedom to the parties to decide whether one should enter into negotiations with the other at all and in that regard the law takes no account of the reason of any party for not choosing to entertain the proposal for sale made by the other however arbitrary, illogical or irrelevant the reason may be.
(ii) The second stage follows the entertaining of the proposal and the actual negotiations between the parties which may or may not fructify in a contract.
Section 52(1) is concerned with the first stage, and differs in this from the complete freedom to entertain the proposal in that the proposal made under section 52(1) by the accountable person must be considered by the Central Government and any decision taken by it on that question must proceed on considerations which are relevant and bonafide.
The price of the property is, however, left to be determined by agreement in the event of the Government deciding to accept the offer made by the accountable person.
This forms part of the second stage.
[588 A D] 1:3.
The is a fiscal statute principally intended to levy and collect estate duty which when collected has to be disbursed in accordance with of the Constitution.
It is not a law providing for acquisition of a property forming part of the estate of the deceased.
Section 52 is in the nature of an enabling provision which authorises the Central Government to accept a property in lieu of estate duty payable subject to the conditions mentioned in it.
It is true that even enabling words in a statute which confer a discretionary power may have to be interpreted as compulsory where they amount to words clearly intended to effectuate a legal right.
But ordinarily such words are permissive only.
C D] In the instant case, the very fact that there is a need for an agreement upon the price of the property between the Central Government and the accountable person makes the power of the Central Government under section 52(1) of the Act discretionary and permissive.
Any other meaning may lead to impractical and incongruous result.
[586 D E] 1:4.
On a plain construction of section 52 of the Act the Central Government may at its discretion either accept the property offered under section 52 or may not if the circumstances so warrant.
The accountable person cannot claim 578 that the Central Government is bound to accept such property.
The power of the Central Government under section 52 is purely administrative and discretionary.
Therefore, the said power should be exercised subject to the same limitations which govern all such administrative and discretionary powers.
The Central Government or the authority which is competent to take a decision should exercise its discretion bonafide and in good faith by addressing itself to the matter before it and should not allow itself to be influenced by extraneous and irrelevant considerations.
The question should not be disposed of in an arbitrary or capricious way.
In this case, the Court can only ask the authority concerned to exercise the discretion vested in it but it cannot be asked to exercise it in a particular way.
[587 A B, D F] Chella Rama Bhupal Reddy vs Central Board of Direct Taxes and Anr., Andhra Pradesh, approved.
In the instant case, the High Court was right in holding that it had not been shown that the competent authority had properly exercised its discretion.
The Board proceeded on the assumption that its discretion was unfettered even by considerations relevant to administrative law and did not probe into the question of the availability of liquid cash in the hands of the respondent to pay tee estate duty and the averment of the respondent that the entire liquid cash had been invested in business.
[588 E, H, 589 A]
|
Civil Appeal No. 1146 of 1973.
From the judgment and order dated the 1st, June 1972 of the Calcutta High Court in Appeal No. 150 of 1971 arising out of Matter No. 262 of 1968.
Debi Pal, A.K. Verma and K.J. John for the Appellant.
V.S. Desai, Champat Rai and Miss A. Subhashini for the Respondents.
The Judgment of the Court was delivered by BHAGWATI, J.
This appeal by certificate is directed against an order passed by a Division Bench of the High Court of Calcutta allowing an appeal against a decision of a Single Judge which quashed and set aside a notice dated 28th March 1968 issued by the Income Tax Officer under section 148 of the Indian Income Tax Act, 1961 seeking to reopen the assessment of the assessee for the assessment year 1959 60.
The facts giving rise to the appeal are a little important and they may be briefly stated as follows.
567 Prior to March 1947, one Deo Datt Sharma carried on business in Delhi in the name of Sharma Trading Company.
The business was quite a prosperous one and the record shows that Deo Datt Sharma was making an average profit of about Rs. 36,000 per year.
In March 1947, the assessee was incorporated as a private limited company with Ganga Saran Sharma as its managing director and it took over the business of Sharma Trading Company as a going concern in consideration of allotment of 1703 shares in the share capital of the assessee to Deo Datt Shrama.
The share capital of the assessee consisted of 8500 shares out of which 1703 shares were allotted to Deo Datt Sharma, 5 shares were held by Ganga Saran Sharma and 3500 shares, by a company called Narendra Trading Company controlled by Ganga Saran Sharma and his wife.
It may be pointed out at this stage that Deo Datt Sharma was the brother in law of Ganga Saran Sharma.
When business of Deo Datt Sharma was taken over by the assessee, Deo Datt Sharma was appointed Director of the assessee along with two other persons.
Deo Datt Sharma was placed in charge of management of the business of Delhi Branch of the assessee and he was paid a salary of Rs. 1000 per month, commission at the rate of 1 per cent on the sales of the Delhi Branch and bonus equivalent to three months ' salary.
Ganga Saran Sharma and the other two directors were also paid salary, commission and bonus but it is not necessary to set out the quantum of the emoluments paid to them, because in this appeal we are concerned only with the emoluments paid to Deo Datt Sharma and not with the emoluments paid to other directors.
The Income Tax Officer while assessing the assessee to tax for the assessment year 1949 50 disallowed the claim of the assessee for deduction in respect of payments made to the managing director and other directors on account of commission and bonus.
On appeal by the assessee the Appellate Assistant Commissioner disagreed with the view taken by the Income Tax Officer and allowed the entire amount paid to the managing director and other directors by way of commission and bonus.
So far as Deo Datt Sharma is concerned, the Appellate Assistant Commissioner observed that having regard to the fact that this very business was carried on by Deo Datt Sharma prior to its taking over by the assessee and it was a prosperous business earning on an average about Rs. 36,000 per year and after taking over of the business by the assessee, Deo Datt Sharma continued to be in sole management of the 568 business of the Delhi Branch, the aggregate amount paid to him could not at all be regarded as excessive and was allowable as a permissible deduction.
Thus the entire amount paid by the assessee to the managing director and other directors was allowed by the Appellate Assistant Commissioner as a deduction in computing the taxable income of the assessee.
The assessee had thereafter no difficulty in claiming deduction of the amount paid to the managing director and other directors on account of salary, commission and bonus, but again in the assessment year 1956 57, the Income Tax Officer disallowed a substantial portion of the remuneration paid to the managing director and the assessment made by the Income Tax Officer was confirmed in appeal by the Appellate Assistant Commissioner and in further appeal by the Income Tax Tribunal.
This led to the making of a reference and the High Court answered the question referred to it in favour of the assessee and held that the disallowance of a portion of the remuneration paid to the managing director was not justified.
While making the assessment for the assessment year 1957 58, the Income Tax Officer once again disallowed a part of the remuneration paid to the managing director as also the amounts of interest paid to the directors on the balances lying to the credit of their respective accounts with the assessee on account of undrawn remuneration.
The Appellate Assistant Commissioner in appeal held that the interest paid to the directors on the balances lying to the credit of their respective accounts was an allowable expenditure but he sustained the disallowance of a portion of the remuneration paid to the managing director.
The assessee thereupon preferred a further appeal to the Tribunal and after considering all the facts and circumstances of the case, the Tribunal came to the conclusion that the remuneration paid to the managing director as also to the other directors was not at all excessive and no portion of it could justifiably be disallowed.
The result was that not only was the remuneration paid to the managing director and the other directors allowed in full as a permissible deduction but also the amount of interest paid on the credit balances in their respective accounts was allowed to be deducted as a permissible expenditure.
Obviously, and this could not be disputed on behalf of the Revenue, the accounts of the managing director and other directors including Deo Datt Sharma showing the amount of remuneration credited and the withdrawals debited in each year were produced before the Income Tax Officer and he was aware that only a very small amount was withdrawn by Deo Datt Sharma out of the remuneration credited in his account.
The 569 record also shows that on a query made by the Income Tax Officer the assessee furnished inter alia the assessment file number of Deo Datt Sharma who was being assessed in Delhi.
The assessment for the assessment year 1958 59 also followed the same course upto the stage of appeal before the Income Tax Tribunal and ultimately the amount of interest paid to the directors on the credit balances in their respective accounts was allowed as a permissible deduction to the assessee.
The assessment of the assessee for the subsequent year 1959 60 was thereafter completed on the basis of the decision of the Income Tax Tribunal for the two earlier assessment years and the amounts paid to the managing director and other directors including Deo Datt Sharma by way of salary, commission and bonus were allowed in full as permissible deductions and so was the interest paid on the credit balances in their respective accounts.
On 28th March, 1968 the Income Tax Officer issued a notice under section 148 of the Income Tax Act, 1961 seeking to reopen the assessment of the assessee for the assessment year 1959 60 on the ground that the income of the assessee had escaped assessment at the time of the original assessment.
Since a period of four years had already elapsed from the close of the assessment year 1959 60 and no notice could be issued under section 147 (b), it was obvious that the notice issued by the Income Tax Officer was based on section 147 (a), and it could be justified only if it could be shown that the Income Tax Officer had reason to believe that, by reason of omission or failure on the part of assessee to disclose any material facts, the income of the assessee had escaped assessment.
The Income Tax Officer however did not indicate in the notice as to what were the reasons which had led him to believe that the income of the assessee had escaped assessment by reason of omission or failure to disclose material facts nor did he give any reasons though requested by the assessee to do so.
The assessee thereupon preferred a writ petition in the High Court of Calcutta challenging the validity of the notice on the ground that there was no omission or failure on the part of the assessee to disclose any material facts at the time of the original assessment and that in any event, there was no reason to believe that any part of the income of the assessee had escaped assessment by reason of such omission or failure.
The writ petition was admitted and rule was issued by a single Judge of the Calcutta High Court.
The Income Tax Officer, possibly on service of the rule, addressed a letter dated 19th June 1968 to the assessee stating that 570 the notice was issued by him because he had reason to believe that the payment of remuneration to Deo Datt Sharma was bogus and false.
The Income Tax Officer also stated in the affidavit filed by him in reply to the writ petition that after the assessment of the assessee was completed for the assessment years upto 1963 64, the Income Tax Officer came to learn that Deo Datt Sharma was the brother in law of Ganga Saran Sharma, managing director and that Deo Datt Sharma had disposed of the income received by him by way of remuneration from the assessee, in the following manner: 1.
On 31st July 1957 he made a gift to Shri Narendra Sharma son of Shri Ganga Saran Sharma, Managing Director of the Company.
Rs. 12,550.00 2.
On 25th August 1958 he made a loan to Ganga Saran Sharma.
Rs. 2,25,000.00 Total 2,37,550.00 and thereafter, out of the amount lying to his credit in the account with the assessee, he had made the following gifts: On 5th December 1960 gift to Brahma Devi wife of Ganga Saran Sharma Rs.1,01,101.00 On 21st December 1960 gift to Indu Sharma daughter in law of Ganga Saran Sharma Rs. 15,101.00 On 26th December 1961 gift to Hemlata Sharma daughter in law of Ganga Saran Sharma.
Rs. 50,101.00 The Income Tax Officer stated that out of the total amount of remuneration of Rs. 3,51,000 received by Deo Datt Sharma during the period upto 31st March 1962, he had paid tax in the sum of about Rs. 65,000/ and spent a total sum of Rs. 2,37,550 on account of gifts and loan as aforesaid and the withdrawals made by him for his own purposes thus did not amount to more than Rs. 4000 per year.
These facts, according to the Income Tax Officer, showed 571 that the remuneration paid to Deo Datt Sharma was not genuine and was sham and bogus and the amount of such remuneration alleged to have been paid to Deo Datt Sharma was wrongly allowed as a permissible deduction and hence the assessment of the assessee was liable to be reopened by issue of a notice under section 147 (a).
The learned single Judge of the Calcutta High Court who heard the writ petition took the view that there was no omission or failure on the part of the assessee to disclose any material facts relating to his assessment and that in any event, there was no reason to believe that any part of the income of the assessee had escaped assessment at the time of the original assessment by reason of wrong allowance of the remuneration paid to Deo Datt Sharma as a permissible deduction.
The writ petition was accordingly allowed by him and the notice issued by the Income Tax officer was quashed and set aside.
The Income Tax Officer thereupon preferred an appeal before a Division Bench of the Calcutta High Court and the learned Judges constituting the Division Bench allowed the appeal, holding that the Income Tax Officer had reason to believe that the amount of remuneration paid to Deo Datt Sharma had been wrongly allowed as a permissible deduction by reason of omission or failure on the part of the assessee to disclose the material facts set out above and the notice issued by the Income Tax Officer was justified.
The assessee thereupon preferred the present appeal in this Court after obtaining a certificate of fitness from the High Court of Calcutta.
It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income Tax Officer can assume jurisdiction to issue notice under section 147 (a).
First, he must have reason to believe that the income of the assessee has escaped assessment and secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment.
If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction.
The important words under section 147 (a) are "has reason to believe" and these words are stronger than the words "is satisfied".
The belief entertained by the Income Tax Officer must not be arbitrary or irrational.
It must be reasonable or in other words it must be based on reasons which are relevant and material.
The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which 572 have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147 (a).
It there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to he struck down as invalid.
Now here on the facts as admitted or found it is clear that Deo Datt Sharma was carrying on the same business prior to the incorporation of the assessee as a private limited company and this business was yielding him an average profit of about Rs. 36000 per year.
When the assessee, on incorporation, took over the business as a going concern from Deo Datt Sharma it appointed Deo Datt Sharma as a director and placed him in sole charge of the management of the Delhi Branch of the business.
In fact, it could not be disputed on behalf of the Revenue that Deo Datt Sharma was looking after the business of the Delhi Branch of the assessee in the same manner in which he was doing when he was sole proprietor of the business and for this work done by him, Deo Datt Sharma was paid salary at the rate of Rs. 1000 per month, commission at the rate of one per cent on the sales of the Delhi Branch and bonus equivalent of three months ' salary.
The amount of remuneration paid to Deo Datt Sharma was thus not without consideration; in fact, it was paid for valuable services rendered by Deo Datt Sharma in solely managing the business of the Delhi Branch of the assessee.
Now once it is conceded that Deo Datt Sharma was in sole charge and management of the business of the Delhi Branch of the assessee and was rendering full time service to the assessee in that capacity, it is difficult to see how any one could reasonably come to the belief that the payment of remuneration made to him was sham and bogus.
Surely, the Income Tax officer could not expect Deo Datt Sharma to devote his full time and energy to the business of the Delhi Branch of the assessee without any remuneration whatsoever.
The actual remuneration paid to Deo Datt Sharma was in fact found to be genuine and reasonable by the Appellate Assistant Commissioner 573 while disposing of the appeal of the assessee for the assessment year 1949 50 as also by the Income Tax Tribunal while disposing of the appeal for the assessment year 1957 58.
It is true that Deo Datt Sharma was the brother in law of Ganga Saran Sharma, the managing director of the assessee, but this circumstance cannot by any stretch of imagination lead to an inference that the payment of remuneration to Deo Datt Sharma who was solely managing and looking after the business of the Delhi Branch of the assessee was sham and bogus.
Even a close relative who is in management and charge of a business on a full time basis is entitled to be paid remuneration and, in fact, it would be wholly unreasonable to expect him to work free of charge.
The Revenue, however, relied strongly on the fact that out of the total amount of remuneration of Rs. 3,51,000 received by Deo Datt Sharma and credited to his account with the assessee, he had not withdrawn more than Rs. 4,000 per year for himself and an aggregate sum of Rs. 2,37,550 was expended by him in giving a loan to Ganga Saran Sharma and making gifts to the son, wife and daughters in law of Ganga Saran Sharma on diverse dates between 31st July, 1957 and 26th December 1961.
We fail to see how this fact can lend itself to the inference that the payment of remuneration to Deo Datt Sharma was bogus and not genuine.
It is an admitted fact that Deo Datt Sharma was the brother in law of Ganga Saran Sharma and there is nothing unusual in Deo Datt Sharma giving a loan to Ganga Saran Sharma or making gift to the son, wife and daughters in law of Ganga Saran Sharma who were his close relatives.
It is indeed difficult to appreciate how any inference can reasonably be drawn that the payment of remuneration to Deo Datt Sharma was sham and bogus merely from the manner in which he expended the amount of remuneration received by him, particularly when the persons to whom he gave a loan and made gifts were his close relatives.
It is possible that Deo Datt Sharma had other financial resources apart from the remuneration derived by him from the assessee and he therefore decided to give a loan and make gifts to his close relatives out of the remuneration received by him for valuable services rendered to the assessee.
In fact, if he had no other financial resources, it is extremely difficult one might say, almost impossible to believe that he worked for the assessee and managed and looked after the business of the Delhi Branch on a full time basis without any remuneration or in any event on a 574 paltry remuneration of Rs. 4,000 per year when the managing director and other directors who were working like him were getting much more from the assessee and as the proprietor of the business prior to its taking over by the assessee, he was earning an average profit of about Rs. 36,000/ per year.
We are clearly of the view that on these facts the Income Tax Officer could have no reason to believe that the payment of remuneration to Deo Datt Sharma was sham and bogus and that the amount of remuneration paid to him was wrongly allowed as a permissible deduction.
We may point out that, in fact, the statement of account of Deo Datt Sharma with the assessee for the relevant accounting year as also the previous years were with the Income Tax Officer at the time of the original assessment and these statements of account clearly showed that out of the amount of remuneration credited to his account, he had made a gift of Rs. 12,550 to the son of Ganga Saran Sharma on 31st July 1957 and given a loan of Rs. 2,25,000 to Ganga Saran Sharma on 25th August, 1958 and the Income Tax Officer was fully aware that Ganga Saran Sharma was the managing director of the assessee.
It is possible and we may assume it in favour of the Revenue, that the subsequent gifts made by Deo Datt Sharma to the wife and daughters in law of Ganga Saran Sharma were not disclosed to the Income Tax Officer at the time of the original assessment, but these gifts being subsequent to the relevant accounting year, the assessee was not bound to disclose the same to the Income Tax Officer.
Moreover, it is difficult to appreciate how the assessee could be said to be under an obligation to disclose to the Income Tax Officer in the course of its assessment as to how a director who was in sole charge of the management of the business of the assessee and who was being paid remuneration for the services rendered by him to assessee, had utilised the amount of remuneration received by him.
We do not think it possible to sustain the conclusion that the assessee omitted or failed to disclose fully and truly any material facts relating to his assessment.
We must in the circumstances hold that neither of the two conditions necessary for attracting the applicability of section 147(a) was satisfied in the present case and the notice issued by the Income Tax Officer must be held to be without jurisdiction.
We accordingly allow the appeal, set aside the judgment of the Division Bench and restore that of the learned single Judge quashing 575 and setting aside the notice dated 28th March 1968 issued by the Income Tax Officer against the assessee.
The Revenue will pay the costs of the assessee throughout.
| IN-Abs | The assessee was incorporated as a Private Limited Company in March, 1947 with G as its Managing Director and it took over the business of the trading company carried on by 'D ' in Delhi.
D was the brother in law of G and was placed in charge of the management of the business of the Delhi Branch of the assessee and he was paid a salary of Rs. 1000 per month, commission at the rate of 1 per cent on the sales of the Delhi Branch and bonus equivalent to three months salary.
The assessments of the assessee for the years 1949 50 to 1959 60 were finalised on the basis of the decisions of the Income Tax Tribunal and the amounts paid to the Managing Director and the other Directors including D by way of salary, commission and bonus were allowed in full as permissible deductions and so was the interest paid on the credit balances in their respective accounts.
On the 28th March, 1968, the Income Tax Officer issued a notice under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment of the assessee for the assessment year 1959 60 on the ground that the income of the assessee had escaped assessment at the time of the original assessment.
The Income Tax Officer, however, did not state the reasons which had led to the belief that the income of the assessee had escaped assessment by reason of omission or failure to disclose material facts nor did he give any reasons though requested by the assessee.
The assessee 's writ petition challenging the validity of the notice was allowed by a Single Judge and the notice issued by the Income Tax Officer was quashed.
It was held that there was no omission or failure on the part of the 565 assessee to disclose material facts relating to his assessment and that there was no reason to believe that any part of the income of the assessee had escaped assessment at the time of the original assessment by reason of wrong allowance of the remuneration paid to D as a permissible deduction.
The Division Bench allowed the appeal, holding that the Income Tax Officer had reason to believe that the remuneration paid to D had been wrongly allowed as a permissible deduction by reason of omission or failure on the part of the assessee to disclose the material facts and the notice issued by the Income Tax Officer was justified.
Allowing the appeal to this Court, ^ HELD: 1.
(i) Neither of the two conditions necessary for attracting the applicability of Section 147(a), was satisfied.
The notice issued by the Income Tax Officer is therefore without jurisdiction.
[574 G] (ii) It is not possible to sustain the conclusion that the assessee omitted or failed to disclose fully and truly any material facts relating to his assessment.
[574 F] 2.
(i) Before the Income Tax Officer can assume jurisdiction to issue notice under Section 147(a), two distinct conditions must be satisfied.
First, he must have reason to believe that the income of the assessee has escaped assessment and secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment.
If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction.
[571 F] (ii) The important words under Section 147(a) are "has reason to believe" and these words are stronger than the words "is satisfied.".
The belief entertained by the Income Tax Officer must not be arbitrary or irrational.
It must be reasonable or in other words it must be based on reasons which are relevant and material.
The Court, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer, in coming to the belief, but the Court can examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a).
If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.
[571 G 572 C] 3.
Even a close relative who is in management and charge of a business on a full time basis is entitled to be paid remuneration and, in fact, it would be wholly unreasonable to expect him to work free of charge.
[573 C] 566 In the instant case D was the brother in law of G the Managing Director of the assessee but this circumstance cannot lead to an inference that the payment of remuneration to D who was solely managing and looking after the business of the Delhi Bench of the assessee was sham and bogus.
There is nothing unusual in D giving a loan to his brother in law, the Managing Director or making gifts to the son, wife and daughter in law of the Managing Director who were his close relatives.
Any inference that the payment of remuneration to D was sham and bogus cannot be drawn merely from the manner in which he expended the amount of remuneration received by him, particularly when the persons to whom he gave a loan and made gifts were his close relatives.
[573 E 574 B] 4.
The statements of account of D with the assessee for the relevant accounting year as also the previous years were with the Income Tax Officer at the time of the original assessment and these statements of account clearly showed that out of the amount of remuneration credited to his account, he had made gifts to the sons of G on 31st July, 1957 and given a loan to G on the 25th August, 1958 and the Income Tax Officer was fully aware that G was the Managing Director of the assessee.
The assessee could not therefore be said to be under an obligation to disclose to the Income Tax Officer in the course of its assessment as to how the director who was in sole charge of the management of the business of the assessee, and who was being paid remuneration for the services rendered by him to the assessee, had utilised the amount of remuneration received by him.
[574 C F]
|
Civil Appeal No. 218 of 1970.
Appeal by special leave from the judgment and order dated the 10th September, 1968 of the Assam and Nagaland High Court in Civil Rule No. 56 of 1967.
S.K Nandy for the Appellant.
S.N. Chowdhary for the Respondent.
The Judgment of the Court was delivered by DESAI, J.
This appeal by special leave arises out of a writ petition filed by the respondent Bishwanath Tea Co. Ltd., in the Assam and Nagaland High Court questioning the action of the appellant, the Divisional Forest Officer, Darrang Division, of recovering Rs. 7069.37 p. as royalty for cutting and felling trees from Tezalpatty grant No. 1 held under lease dated September 27, 1932, and for a mandamus directing the appellant to issue permits without insisting upon payment of royalty for the trees cut and felled from the area under lease.
Respondent Bishwanath Tea Co. Ltd. ( 'Company ' for short) took on lease land admeasuring 1107.26 acres from the Government.
The lease was executed between the Company and the Secretary of the State for India.
The lease in the first instance was for a period of 15 years commencing from April 1, 1932.
The lease was to be exploited for cultivation and raising tea garden.
The lease was subject to conditions set out therein and generally to Assam Land and Revenue Regulation and the rules made thereunder.
On February 15, 1966, manager of the Company approached the appellant seeking permission to cut 7000 cubic feet of timber from Grant N.C. Tezalpatty No. 1 of Nagshankar Mouza, for utilising the same for building of staff and labourer 's houses.
By the reply dated April 4, 1966, the appellant noted that the timber was to be 665 cut for constructing houses in Partabghur and Dekorai Tea Estates and that it was necessary to ascertain whether any of the aforementioned two Tea estates was situated within the grant evidenced by lease of N.C. Tezalpatty No. 1.
It was made clear that if it was not so, full royalty will be payable by the company for cutting, felling and removing timber.
The manager by his letter dated April 23, 1966, informed the appellant that as the lessee is Bishwanath Tea Co. Ltd, it can cut and fell timber from any of its leased area to be utilised for its purposes in any other division.
Therefore, the manager suggested that the permit must be issued without insisting on payment of royalty.
The appellant by his letter dated May 12, 1966, informed the manager that as the timber was required for use in Partabghur and Dekorai tea estates which were not within N.C. Tezalpatty Grant No. 1 of Nagshankar Mouza from which timber was to be felled and cut, full royalty will be payable on timber so cut and removed because it was to be utilised for the purpose unconnected with the grant.
For this assertion the appellant relied upon a portion of clause (2) of Part IV of the lease deed dated September 27, 1932.
Correspondence further ensued between the parties and ultimately the respondent company paid an amount of Rs. 7069.37 p. as and by way of royalty under protest and then filed a petition under Article 226 of the Constitution in the High Court alleging that upon a true construction of the relevant clause of the grant as also proviso to Rule 37 of the Settlement Rules as the timber was required for the purpose connected with the exploitation of the grant, the company as lessee was entitled to cut and remove timber without payment of royalty and, therefore, the recovery of royalty being unsupported by law, the appellant was liable to refund the same.
The company also prayed for a mandamus directing the present appellant who was respondent in the High Court for issuing permits without insisting on payment of royalty whenever timber was to be cut from the leased area for the purposes connected with the exploitation of the grant.
The appellant filed his return to the rule issued by the High Court.
A preliminary objection was raised that the right claimed by the respondent flowed from the contract of lease and such contractual rights and obligations can only be enforced in civil court.
It was contended that apart from the fact that interpretation of the contract of lease is generally not undertaken by the High Court in exercise of its extraordinary jurisdiction under Article 226, it was further contended that even if interpretation of the relevant clause of the lease as alleged on behalf the respondent finds favour with 666 the court, yet facts will have to be investigated before any refund could be ordered or a blanket injunction could be granted for all times to come against the appellant from performing his duty, namely, of granting permit and recovering royalty.
The High Court overruled the preliminary objection observing that the court was not called upon to decide any complicated question of fact and the question for decision before the Court was whether the company was entitled to enforcement of its legal right under the proviso to rule 37 of Settlement Rules.
The Court further observed that even though part of the proviso to rule 37 of the Settlement Rules was incorporated in the lease itself, nonetheless what the Court had to consider was the interpretation of a statutory rule and that is the function of the Court under Article 226.
On merits the High Court held that as the grant N.C. Tezalpatty No. I was in favour of M/s.
Bishwanath Tea Co. Ltd., the company was entitled to cut and fell timber from N.C. Tezalpatty grant area for its use in other tea gardens, namely, Partabghur and Dekorai and even if the latter two gardens were outside N.C. Tezalpatty Grant No. 1, yet they being under the ownership and management of the company, felling of trees from the area of one grant for utilisation at other places would fall within the second part of the proviso to rule 37 in that the felling and removal of timber was for use not unconnected with the exploitation of the grant and, therefore, the company was entitled to fell and remove timber in the aforesaid situation without payment of royalty.
In accordance with this finding the High Court made the rule absolute, directed refund of the amount paid under protest and issued a mandamus directing the appellant to issue permits to the respondent company without payment of royalty for removal of timber from Tezalpatty Grant No. 1 for use in tea garden of Dekorai division for exploitation of tea plantation.
Hence this appeal by special leave.
Unquestionably, the rights and obligations between the parties to this appeal are governed by the terms of the lease dated September 27, 1932.
Specifically the respondent who was a petitioner in the High Court claimed the right to relief under Clause 2 of Part IV of the indenture of lease which reads as under: "2.
The lessee shall pay to the lessor as provided by rules for the time being in force under the Assam Land and Revenue Regulation for all timber (if any) on the 667 demised lands cut down, removed or utilised by the lessee during the period of the lease.
Timber valuation at reduced rates estimated at Rs. 12472.7 (Rupees Twelve thousand four hundred and seventy two and annas seven only) was credited into the treasury by Challan Nos.
43 dated the 24.2.32 The lessee shall be liable to pay timber valuation at full rates on all timber sold or removed for sale and on all timber removed for use unconnected with exploitation of the grant during the period of his lease or renewed lease." According to the respondent, it would be entitled to remove timber cut and felled from the leased area without liability to pay royalty for its own use irrespective of the fact whether such timber was to be used outside the leased area, because such use would be in connection with the exploitation of the grant and there is such a reservation in the grant evidenced by the lease.
True it is that if the timber is felled and removed for purpose connected with the exploitation of the grant, there would be no liability to pay the royalty.
Such a positive right is claimed from a negative covenant in the lease.
Clause 2 provides that the lessee had paid timber valuation at the reduced rate at Rs. 12472.7 on 24 2 32 The lessee according to the respondent would be liable to pay timber valuation at full rates on all timber sold or removed for sale on all timber removed for use unconnected with exploitation of the grant during the period of the lease or renewed lease.
The implication of the negative covenant would be that if timber is removed from the leased area connected with the exploitation of grant, there would be no liability to pay royalty on such timber.
The respondent claimed to remove timber without the liability to pay royalty in exercise of the right reserved under Cl. 2 thus interpreted.
In para 5 of the Writ Petition filed by the respondent in the High Court, a reference has been made to the aforementioned term in the lease deed.
It was further stated that the respondent paid the royalty under protest which it was not liable to pay as the timber was urgently required for the purpose of the business of the Company in connection with the grant.
These averments in the petition would show that the respondent claimed the right to remove timber without the obligation to pay royalty as flowing from the grant evidenced by the lease.
Anticipating a possible contention about the jurisdiction of the High Court to entertain 668 a writ petition for enforcement of contractual obligation, the respondent contended that the levy of royalty had no authority of law and that this was an unreasonable restriction on the fundamental right of the respondent to carry on its trade.
This camouflage of contending that the levy of royalty was not supported by law and that this was an unreasonable restriction on the fundamental right to carry on trade successfully persuaded the High Court to entertain the petition.
Shorn of all embellishment the relief claimed by the respondent was referable to nothing else but the term of the lease viz. Cl.
2 Part IV.
Maybe, that this term is a mere reproduction of proviso to Rule 37 of Assam and and Revenue and Local Rates Regulations, but that by itself is not sufficient to contend that what the respondent was doing was enforcing a statutory provision.
Proviso to Rule 37 is an enabling provision.
The relevant portion of the proviso reads as under: "Provided that if any person taking up land for special cultivation is unwilling to pay the full royalty valuation of the timber as estimated, he shall have the option of paying a reduced valuation representing only the profit which is likely to derive from the use of the timber for the purposes connected with the exploitation of the grant.
If he exercises such option, he shall be liable to pay royalty at full rates on all timber sold, bartered, mortgaged, given or otherwise, transferred or removed for transfer and on all timber removed for use unconnected with the exploitation of the grant during the period of his lease or renewed lease.
" A bare perusal of clause 2 of Part IV of the indenture of lease extracted hereinbefore and the proviso to Rule 37 would at a glance show that the proviso enables a grantee to take benefit of it by fulfilling certain conditions namely by paying a reduced valuation representing only the profit which it is likely to derive from the use of timber for purposes connected with the exploitation of the grant.
It is thus an enabling provision and the grantor of the lease may permit this option to be enjoyed by the grantee.
But whether that has been done or not is always a question of fact.
If the precondition is satisfied, the benefit can be taken.
That again is a matter to be worked out by the parties to the indenture of lease.
In fact, clause 2 of the indenture of lease would show that the respon 669 dent grantee paid Rs. 124727/ being timber valuation at reduced rates.
The respondent having made the payment, whereupon the grantor of the lease agreed that the grantee will have to pay timber valuation at full rates on all timber sold or removed for sale and on all timber removed for use unconnected with exploitation of the grant during the period of his lease or renewed lease but the grantee will not have to pay royalty for timber felled and removed for purpose connected with the grant.
It thus can be demonstrably established that the respondent was trying to enforce through the writ petition the right to remove timber without the liability to pay royalty not under the proviso to Rule 37 which was merely an enabling provision, but the specific term of lease agreed to between the parties.
Proviso to Rule 37 may not be incorporated in an indenture of lease.
If incorporated after fulfilling pre condition it becomes a term of lease.
The High Court, in our opinion, therefore, was in error in posing a question to itself as to whether the applicant (respondent herein) was entitled to the enforcement of legal right under the proviso to Rule 37 of the Settlement Rules.
The camouflage successfully worked, but once this cloak is removed, it unmistakably, transpires that the respondent was trying to claim benefit of clause 2 of the lease having fulfilled its pre condition and obtaining the inclusion of its latter part in the contract of lease.
The question, therefore, really is whether such contractual obligation can be enforced by the writ jurisdiction? How dangerous it is, can be demonstrably established in this case.
But we would first address ourselves to the question of law.
article 226 confers extraordinary jurisdiction on the High Court to issue high prerogative writs for enforcement of the fundamental rights or for any other purpose.
Undoubtedly, the respondent contended that its fundamental right under article 19(1) (g) to carry on trade has been violated.
The High Court overlooked the well settled legal position that a juristic person such as a Corporation is not entitled to any of the freedoms guaranteed by article 19.
The respondent was the sole petitioner in the High Court.
It is a company incorporated under the Companies Act.
The fundamental right claimed under article 19 (1) (g) is to practise any profession or carry on any occupation, trade or business.
The respondent (company) contended that it had a right to carry on its trade or business of cultivating and raising a tea garden and as part of it to cut timber and remove the same from the leased area without the payment of royalty and that insistence upon payment of royalty unsupported by law is an unreasonable restriction denying the fundamental right guaranteed to the respondent.
article 670 19 (1) (g) guarantees the fundamental freedom to a citizen.
The respondent not being a citizen was not entitled to complain of breach or violation of fundamental right under article 19 (1) (g).
[See State Trading Corporation of India Ltd. vs The Commercial Tax Officer, Vishakhapatnam and Tata Engineering and Locomotive Co. vs State of Bihar .] However, the shareholders of a company can complain of infringement of their fundamental rights [See Bennett Coleman & Co. and others vs Union of India and others].
Such is not the case pleaded.
Therefore the writ petition on the allegation of infringement of fundamental right under article 19 (1) (g) at the instance of respondent company alone was not maintainable.
It is undoubtedly true that High Court can entertain in its extraordinary jurisdiction a petition to issue any of the prerogative writs for any other purpose.
But such writ can be issued where there is executive action unsupported by law or even in respect of a Corporation where there is a denial of equality before law or equal protection of law.
The Corporation can also file a writ petition for enforcement of a right under a statute.
As pointed out earlier, the respondent (Company) was merely trying to enforce a contractual obligation.
To clear the ground let it be stated that obligation to pay royalty for timber cut and felled and removed is prescribed by the relevant regulations.
The validity of regulations is not challenged.
Therefore, the demand for royalty is unsupported by law.
What the respondent claims is an exception that in view of a certain term in the indenture of lease, to wit, Clause 2, the appellant is not entitled to demand and collect royalty from the respondent.
This is nothing but enforcement of a term of a contract of lease.
Hence, the question whether such contractual obligation can be enforced by the High Court in its writ jurisdiction.
Ordinarily, where a breach of contract is complained of, a party complaining of such breach may sue for specific performance of the contract, if contract is capable of being specifically performed, or the party may sue for damages.
Such a suit would ordinarily be cognizable by the Civil Court.
The High Court in its extraordinary jurisdiction would not entertain a petition either for specific performance of contract or for recovering damages.
A right to relief flowing from a contract has to be claimed in a civil court where a suit for specific performance of contract or for damages could be 671 filed.
This is so well settled that no authority is needed.
However, we may refer to a recent decision bearing on the subject.
In Har Shankar and Ors.
vs The Deputy Excise and Taxation Commissioner and Ors., the petitioners offered their bids in the auctions held for granting licences for the sale of liquor.
Subsequently, the petitioners moved to invalidate the auctions challenging the power of the Financial Commissioner to grant liquor licence.
Rejecting this contention, Chandrachud J., as he than was speaking for the Constitution Bench at page 263 observed as under: "Those who contract with open eyes must accept the burdens of the contract along with its benefits.
The powers of the Financial Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim.
Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract.
By such a test no contract could ever have a binding force.
" Again at page 265 there is a pertinent observation which may be extracted.
Analysing the situation here, a concluded contract must be held to have come into existence between the parties.
The appellants have displayed ingenuity in their search for invalidating circumstances but a writ petition is not an appropriate remedy for impeaching contractual obligations.
" This apart, it also appears that in a later decision, the Assam High Court itself took an exactly opposite view in almost identical circumstances.
In Woodcrafts Assam vs Chief Conservator of Forests, Assam, a writ petition was filed challenging the revision of rates of royalty for two different periods.
Rejecting this petition as not maintainable, a Division Bench of the High Court held that the complaint of the petitioner is that there is violation of his rights under the contract and that such violation of contractual obligation cannot be remedied by a writ petition.
That exactly is the position in the case before us.
Therefore, the High Court was in error in entertaining the writ petition and it should have been dismissed at the threshold.
672 In substance, this was a suit for refund of a royalty alleged to be unauthorisedly recovered and that could hardly be entertained in exercise of the writ jurisdiction of the High Court.
As the High Court has also disposed of the case on merits after overruling the preliminary objection, it is but meet that we may examine the case on merits and that itself would demonstrably show the dangerous course adopted by the High Court in examining rights and obligations claimed under the contract without proper or adequate material or evidence to reach a conclusion, more so when the petition raised disputed questions of facts which needed investigation.
Respondent No. 1 had entered into a lease dated September 27, 1932 with the Secretary of State for India.
Part II of the lease describes the land leased to the respondent.
The description is as under; N. C. Tengalbasti Village in Sootea Mauza in the Tezpur Sadar Sub Division of Darrang District.
Block No. 1 Field No. 2 1804 B. 4 K 12L, Block No.2 Field No. 3 1544 B. 2 K 13L. Total 1107.26 Acres on 3349 B. 2K 5L This land was taken on lease for cultivation and raising tea garden.
Under the relevant Clause 2 above, the lessee was to pay timber valuation on full rate for all timber sold or removed for sale and on all timber removed for use unconnected with exploitation of the grant during the period of lease or renewed lease.
From this negative covenant in the indenture of lease, the respondent says that where timber is cut and felled and removed for a purpose or use connected with the exploitation of grant during the period of lease or renewed lease, royalty shall not be payable.
Assuming the respondent is right in its construction of Clause 2 of the indenture of lease, in order to obtain relief, namely, to cut and remove timber from the leased area for purpose connected with the exploitation of the grant, it must show that the timber is being felled and cut from an area covered by the lease in which Clause 2 finds its place and that such timber is being removed for a purpose connected with the exploitation of the grant.
To be more specific, following facts will have to proved for obtaining relief: (i) The area covered by the grant.
673 (ii) Felling of the trees from the area covered by the grant.
(iii)Use to which the felled timber was to be put to.
(iv) Such use will have to be one connected with the exploitation of the grant.
(v) What is meant by the exploitation of the grant ? Could these facts be assumed without evidence ? Was the High Court justified in observing that it was called upon to decide complicated questions of facts ? Some averments in the petition were disputed.
The appellant contended that Clause 2 of the indenture of lease only means that if there is some use of timber which is being felled and removed from the area covered by the grant for the purpose connected with the exploitation of that very grant, then and only then the relief can be claimed under Clause 2.
The High Court found as a fact that the timber was sought to be removed for the purpose of constructing quarters for the workmen employed in Partabghur Garden situated in Dekorai Division.
Admittedly, this Partabghur Garden is not situated in Tezalpatty Village.
At any rate, Partabghur Garden where the houses for the workmen were to be constructed was situated outside the area covered by the grant, as also outside the Revenue Division in which the leased area is located.
The High Court got over this difficulty by observing that the grant being in favour of an incorporated company, it can cut and remove timber from leased area for use at any place which is owned, managed or controlled by the company and it is immaterial whether one is directly connected with the other or not.
If the timber is being felled from the area of one grant to be used at some other place where the Company is carrying on its operation, the benefit of the removal of timber without payment of royalty would be available to the Company anywhere in the world.
To stretch this logic a little further, it would mean that if the respondent (Company) is to set up a tea garden outside India, it can as well cut and remove timber from N.C. Tezalpatty, Grant No. 1 in Assam to the place outside India without the obligation to pay royalty.
The fallacy underlying the approach of the High Court becomes self evident.
It is immaterial that the grantee was the Company.
The specific provision is that the grant is for a purpose of cultivation and raising tea garden and that from the area covered by the grant, if timber is felled for purpose connected with the grant itself, namely, cultivation and raising tea garden in that area then alone benefit of removal of timber without payment of royalty can be 674 availed of.
It is admitted that Partabghur Tea Garden is outside the area covered by the grant, in fact in an altogether different division.
In such a situation upon a true construction of Clause 2, Part IV of indenture of lease, the respondent Company was not entitled to remove timber without payment of royalty.
Therefore, even on merits, the High Court was in error in granting relief.
Accordingly, this appeal is allowed and the judgment of the High Court is quashed and set aside and the writ petition filed by the respondent in the High Court is dismissed with costs throughout.
S.R. Appeal allowed.
| IN-Abs | Respondent Tea Company took on lease land N.C. Tezalpatty No. 1 from the then Government.
The lease was to be exploited for cultivation and raising tea garden, and was subject to conditions set out therein and generally to Assam Land and Revenue Regulation and the rules made thereunder.
The respondent company sought permission from the appellant to cut 7,000 cubic feet of timber from Grant N.C. Tezalpatty No. 1 for utilising the same for building of staff and labourers ' house as per clause 2 of Part IV of the lease dated 27 9 1932 and Rule 37 of the Assam Land and Revenue Regulations.
Since the timber was required by the company for use in Partabghur and Dekorai tea estates which were outside Tezalpatty No. 1.
the appellant demanded full royalty on timber cut, felled and removed.
The company paid an amount of Rs. 7069.37 Paise under protest and later filed a petition under Article 226 of the Constitution in the Assam High Court, praying for refund of the amount and for a mandamus directing the appellant for issuing permits without insisting on payment of royalty whenever timber was to be cut from the leased area for the purposes connected with the exploitation of the grant.
The preliminary objection raised by the appellant that since the right claimed by the respondent flowed from the contract of lease such contractual right can only be enforced in civil court and therefore cannot be gone into under Article 226 was rejected by the Assam High Court.
On merits, the High Court further held that as the grant of N.C. Tezalpatty No. 1 was in favour of the respondent, the company was entitled to cut, fell and remove timber from that grant area for its use covered either by the same area or in other tea gardens which are outside the grant.
The High Court made the rule nisi absolute and hence the appeal by special leave.
Allowing the appeal, the Court ^ HELD: 1.
The Writ Petition on the allegation of infringement of fundamental right under Article 19(1)(g) of the Constitution, at the instance of respondent company alone was not maintainable for the reasons that: (a) a juristic person such as a corporation is not entitled to any of the freedoms guaranteed by Article 19 and here the respondent is a company incorporated under the Companies Act; (b) Article 19(1)(g) guaranteed the fundamental freedom to a 663 citizen and the respondent being a company is not a citizen and (c) the shareholders of a company alone can complain of infringement of their fundamental rights.
[669 E H, 670 A C] Tata Engineering and Locomotive Co. vs State of Bihar, ; , State Trading Corporation of India Ltd. vs The Commercial Tax Officer, Vishakhapatnam, [1964] 4 S.C.R. 99 and Benuott Coleman and Co. and other vs Union of India and others; , , followed.
2:1.It is undoubtedly true that the High Court can entertain in its extraordinary jurisdiction a petition to issue any of the prerogative writs for any other purpose.
But such writ can be issued where there is executive action unsupported by law or even in respect of a Corporation where there is a denial of equality before law or equal protection of law.
The Corporation can also file a writ petition for enforcement of a right under a statute.
Here, the relief claimed by the respondent was referable to nothing else but the terms of lease, namely, clause 2 Part IV.
The fact that this term is a mere reproduction of proviso to Rule 37 of Assam Land and Revenue Local Rate Regulation but that by itself is not sufficient to contend that what the respondent was doing was enforcing a statutory provision.
The validity of regulations is not challenged.
Therefore, the demand for royalty is supported by law.
[670 C F] 2:2.
Ordinarily, where a breach of contract is complained of, a party complaining of such breach may sue for specific performance of the contract, if the contract is capable of being specifically performed, or the party may sue for damages.
Such a suit would ordinarily be cognizable by the Civil Court.
The High Court in its extraordinary jurisdiction would not ordinarily entertain a petition either for specific performance or for recovering damages.
A right to relief flowing from a contract has to be claimed in a civil court where a suit for specific performance of contract or for damages could be filed.
Here, this was a suit for refund of a royalty alleged to be unauthorisedly recovered and that could hardly be entertained in exercise of the writ jurisdiction of the High Court.
[670 F G, 671 A G, 672 A] Har Shankar and Ors.
vs The Deputy Excise and Taxation Commissioner and ors.
; , , applied.
Woodcrafts Assam vs Chief Conservator of Forests, Assam, AIR 1971 Assam p. 92, approved.
Upon a true construction of clause 2 Part IV of indenture of lease, the respondent company was not entitled to remove timber without payment of royalty.
The specific provision is that the grant is for a purpose of cultivation and raising tea garden and that from the area covered by the grant, if timber is felled for purpose connected with the grant itself, namely, cultivation and raising tea garden in that area, then alone the benefit of removal of timber without payment of royalty can be availed of.
[673 G H., 674 A] 3:2.
In order to obtain relief, namely to cut and remove timber from lease area for purpose connected with exploitation, of the grant the company must show that the timber is being felled and cut from an area covered by the lease in 664 which clause 2 finds its place and that such timber is being removed for a purpose connected with the exploitation of grant.
To be more specific, following facts will have to be proved for obtaining relief: (i) the area covered by the grant; (ii) felling of the trees from the area covered by the grant; (iii) use to which the felled timber was to be put to; (iv) such use will have to be one connected with the exploitation of the grant and (v) meaning of the exploitation of the grant, when controverted these aspects will have to be proved by relevance.
And that was the situation when return was filed by the present appellant in the High Court.
[672 G H, 673 A D]
|
N: Criminal Appeal No. 277 of 1976.
Appeal by special leave from the judgment and order dated the 9th April, 1975 of the Bombay High Court (Nagpur Bench), Nagpur in Criminal Appeal No. 134 of 1971.
M.C. Bhandare and R.N. Poddar for the Appellant.
P. Govindan Nair, K. Ramavtar and K.R. Choudhury for the Respondent.
The Judgment of the Court was delivered by SEN, J.
The State Government of Maharashtra has preferred this appeal, by special leave, against the judgment of the 678 Bombay High Court, reversing the judgment and sentence of the Special Judge, Chandrapur and acquitting the respondent of an offence under section 5(2) read with section 5(1)(e) of the Prevention of Corruption Act, 1947 (hereinafter called 'the Act ').
The respondent, Wasudeo Ramchandra Kaidalwar, was a Range Forest Officer, drawing a salary of Rs. 515 per month.
On September 21, 1969, PW 71, Patwardhan, Inspector, Anti Corruption Bureau under authorisation from the Director, Anti Corruption Bureau, Bombay, carried out search and seizure at the residential house of the respondent.
The Inspector made a recovery of Rs. 26,870 in cash from an almirah, savings bank accounts in the names of the respondent, his wife and children totalling to Rs. 12,588.35, national savings certificates worth Rs. 510, postal savings certificates worth Rs. 184.25 in the name of his daughter, Nandini, savings bank deposits with the State Bank of India and the postal savings certificates in the name of his brother in law, Narayan, amounting to Rs. 2,279.05, gold and silver ornaments, household effects etc.
of the value of Rs. 8,602.50, two sale deeds in respect of two plots bearing Khasra Nos.
28/1K and 28/1Dh in Chandrapur purchased (1) in the name of his wife, Smt.
Sushila for Rs. 5,250 and (2) in the joint names of his wife, Smt.
Sushila and his brother in law, Narayan for an amount of Rs. 21,210, papers relating to the building of a house at village Gondpipri built in the year 1965 at a cost of Rs. 10,000.
The petitioner was accordingly put on trial for having committed an offence punishable under section 5(2) read with section 5(1)(e) of the Act, being found in possession of assets disproportionate to his income.
The respondent abjured his guilt and denied the commission of the offence.
He pleaded that he was leading frugal life and all the property found during the search of his residential house belonged to his father in law, Hanumanthu, pairokar of Raja Dharmarao, Zamindar of Aheri Estate.
He alleged that two of the sisters of his father in law were the kept mistresses of Raja Dharmarao and enjoyed special favours from the late Zamindar who bestowed on them large amounts of cash, ornaments etc.
They used to visit the house of his father in law, Hanumanthu, once or twice a month, and used to keep all their cash, gold and silver ornaments.
Hanumanthu owned a grocery shop.
He and his father had a liquor shop besides forest contracts.
Hanumanthu used to deal in money lending business.
The respondent alleged that his father in law deposited an amount of Rs. 30,000 in April 1957, Rs. 10,000/ in August 1957 and Rs. 35,000 in cash and Rs. 1,000 in coins and also 23 tolas of gold in September, 1957 with his wife, Smt.
Sushila.
679 He pleaded that his father in law died on March 10, 1958 at his house leaving behind his son, Narayan and two daughters, Smt.
Shakuntala, who on her marriage with the respondent was re named as Smt.
Sushila, and Smt.
Sushila, his sister in law, minor at that time.
He instructed him to divide the property into three equal shares among his three children.
The respondent maintained that he was holding the property merely as a custodian and was not the owner thereof.
The Special Judge, Chandrapur, by his judgment dated 7.6.1971, convicted the respondent for having committed an offence punishable under s.5(2) read with s.(5)(1)(e) of the Act inasmuch as he was found in possession of property worth Rs. 79,574.70 as against his only known source of income, namely, his total salary in government service amounting to Rs. 44,000.
He held that the respondent had failed to account for cash of Rs. 26,870, sale deeds of the two plots purchased for Rs. 5,250 and Rs. 21,210 in the name of his wife Smt.
Sushila and the other jointly in the name of his wife and brother in law, Narayan and for the house built at village Gondpipri at a cost of Rs. 10,000 He held that the acquisition of these immovable properties was not reasonably attributable to the property left by his father in law, Hanumanthu.
He also rejected the respondent 's plea that he was leading a frugal life and, therefore, was able to make a saving of Rs. 15,000 out of his salary income.
He accordingly sentenced him to undergo rigorous imprisonment for two years and to pay a fine of Rs. 26,870.
He further directed that the two plots at Chandrapur and the house at village Gondpipri be sold and the sale proceeds be forfeited.
On appeal, a learned Single Judge of the High Court set aside the judgment and sentence passed by the learned Special Judge and acquitted the respondent.
The order of acquittal was based principally on two grounds: (1) The prosecution having failed to discharge the burden of disproving all possible sources of income i.e. failed to account for the properties left by the respondent 's father in law, Haumanthu, he could not be convicted under section 5(2) read with section 5 (1)(e) of the Act, and (2) it was not possible to exclude the probability that the property found in the respondent 's house could be the property left by his father in law, Hanumanthu.
In coming to the conclusion that it did, the High Court was of the view that the changes brought about by the Anti Corruption Laws (Amendment) Act, 1964 had the effect of limiting the presumption of guilt arising under s.4(1) of the Act to offences of criminal misconduct 680 specified in ss.5(1)(a) and (b) and not to that in s.5(1)(e).
It therefore held that mere possession of disproportionate assets by a public servant to his known sources of income for which he has failed to account would not be sufficient to bring home the guilt under s.5(1) (e), unless the prosecution further excludes all possible sources of income.
The construction placed by the High Court on the provisions contained in s.5(1)(e) of the Act is obviously wrong.
It completely overlooks the fact that the burden is cast on the accused by the use of the words "for which the public servant cannot satisfactorily account".
It is also wrong in distorting the meaning of the expression "known sources of income" occurring in section 5(1)(e), which has a definite legal connotation and which, in the context, must mean "sources known to the prosecution".
It is distressing to find that the High Court has involved itself into a process of evolution of a new theory of law, instead of confining itself to a re appraisal of the evidence on record which it was entitled to do sitting as a court of appeal against the judgment of conviction.
The order of acquittal recorded by the High Court could still be maintained on a proper evaluation of the facts, as, on the proved circumstances, there was a preponderance of probability that the property found in the respondent 's house could be the property left by his father in law, Hanumanthu.
The legislature deleted s.5(3) of Act which embodied a rule of evidence by s.6 of the Anti Corruption Laws (Amendment) Act, 1964 and instead, inserted s.5(1)(e) making, possession of disproportionate assets by a public servant, a substantive offence.
Section 5(1)(e) of the Act reads: 5.(1) A public servant is said to commit the offence of criminal misconduct (e) if he or any person on his behalf is in possession or has, at any time during the period of his office, been in possession, for which the public servant cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income.
Old s.5(3) of the Act was in these terms: 5.(3) In any trial of an offence punishable under subsection(2) the fact that the accused person or any other person on his behalf is in possession, for which the accused 681 person cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income may be proved, and on such proof the Court shall presume, unless the contrary is proved, that the accused person if guilty of criminal misconduct in the discharge of his official duty and his conviction therefor shall not be invalid by reason only that it is based solely on such presumption.
Three questions arise for our consideration in this appeal, namely: (1) Whether a public servant charged with having disproportionate assets in his possession, for which he cannot satisfactorily account, cannot be convicted of an offence under section 5(2) read with s.5(1)(e) of the Act unless the prosecution disproves all possible sources of his income (2) If the prosecution establishes that a public servant is in possession of pecuniary resources or property disproportionate to his known sources of income, whether the burden to disprove the charge shifts to the accused to satisfactorily account for the source of acquisition of such resources or property.
and if so, the nature and extent of such burden on the accused.
(3) Whether, on the facts and circumstances of the present case, having regard to the fact that the respondent 's father in law, Hanumanthu was pairokar of Raja Dharmarao, Zamindar of Aheri Estate and left substantial properties, it was not improbable that the properties found in possession of the respondent belonged to his father in law.
It is clear both on authority and principle that s.5(3) which now stands deleted did not create an offence separate from the one created by s.5(1), but intended only to lay down a rule of evidence to raise a presumption of guilt in certain circumstances.
Section 5(1) defines different species of criminal misconduct which can be committed by a public servant and section 5(2) provides that any public servant who commits criminal misconduct shall be punishable with imprisonment for a term which shall not be less than one year, but which may extend to seven years and also shall be liable to fine.
Under the old s.5(3), a presumption of criminal misconduct could be drawn if such a public servant or any person on his behalf was found to be in possession of pecuniary resources or property disproportionate to his known sources of income for which the public servant could not satisfactorily account.
Once the prosecution proved that the accused person was possessed of disproportionate assets, the burden was shifted to the accused to prove the source of acquisition of such assets.
682 The provisions of s.5(3) have been subject of judicial interpretation.
First the expression "known sources of income" in the context of s.5(3) meant "sources known to the prosecution".
The other principle is equally well settled.
The onus placed on the accused under s.5(3) was however, not to prove his innocence beyond reasonable doubt, but only to establish a preponderance of probability.
These are well settled principles: C.S.D. Swamy vs The State Sajjan Singh vs State of Punjab and V.D. Jhagan vs State of U.P.
The legislature thought it fit to dispense with the rule of evidence under section 5(3) and make the possession of disproportionate assets by a public servant as one of the species of the offence of criminal misconduct by inserting section 5(1)(e) due to widespread corruption in public services.
The terms and expressions appearing in section 5(1)(e) of the Act are the same as those used in the old Section 5(3).
Although the two provisions operate in two different fields, the meaning to be assigned to them must be the same.
The expression "known sources of income" means "sources known to the prosecution".
So also the same meaning must be given to the words "for which the public servant is unable to satisfactorily account" occurring in section 5(1)(e).
No doubt, section 4(1) provides for presumption of guilt in cases falling under sections 5(1)(a) and (b), but there was, in our opinion, no need to mention section 5(1)(a) therein.
For, the reason is obvious.
The provision contained in s.5(1)(e) of the Act is a self contained provision.
The first part of the Section casts a burden on the prosecution and the second on the accused.
When section 5(1)(e) uses the words "for which the public servant is unable to satisfactorily account", it is implied that the burden is on such public servant to account for the sources for the acquisition of disproportionate assets.
The High Court, therefore, was in error in holding that a public servant charged for having disproportionate assets in his possession for which he cannot satisfactorily account, cannot be convicted of an offence under section 5(2) read with s.5(1)(e) of the Act unless the prosecution disproves all possible sources of income.
That takes us to the difficult question as to the nature and extent of the burden of proof under section 5 (1) (e) of the Act.
The expression 'burden of proof ' has two distinct meanings (1) the legal burden.
i.e. the burden of establishing the guilt, and (2) the 683 evidential burden, i.e. the burden of leading evidence.
In a criminal trial, the burden of proving everything essential to establish the charge against the accused lies upon the prosecution, and that burden never shifts.
Notwithstanding the general rule that the burden of proof lies exclusively upon the prosecution, in the case of certain offences, the burden of proving a particular fact in issue may be laid by law upon the accused.
The burden resting on the accused in such cases is, however, not so onerous as that which lies on the prosecution and is discharged by proof of a balance of probabilities.
The ingredients of the offence of criminal misconduct under section 5(2) read with s.5(1)(e) are the possession of pecuniary resources or property disproportionate to the known sources of income for which the public servant cannot satisfactorily account.
To substantiate the charge, the prosecution must prove the following facts before it can bring a case under section 5(1)(e), namely, (1) it must establish that the accused is a public servant, (2) the nature and extent of the pecuniary resources or property which were found in his possession, (3) it must be proved as to what were his known sources of income i.e. known to the prosecution, and (4) it must prove quite objectively, that such resources or property found in possession of the accused were disproportionate to his known sources of income.
Once these four ingredients are established, the offence of criminal misconduct under section 5(1)(e) is complete, unless the accused is able to account for such resources or property.
The burden then shifts to the accused to satisfactorily account for his possession of disproportionate assets.
The extent and nature of burden of proof resting upon the public servant to be found in possession of disproportionate assets under section 5(1)(e) cannot be higher than the test laid by the Court in Jahgan 's case (supra), i.e. to establish his case by a preponderance of probability.
That test was laid down by the court following the dictum of Viscount Sankey, L.C. in Woolmington vs Director of Public Prosecutions.
The High Court has placed an impossible burden on the prosecution to disprove all possible sources of income which were within the special knowledge of the accused.
As laid down in Swamy 's case (supra), the prosecution cannot, in the very nature of things, be expected to know the affairs of a public servant found in possession of resources or property disproportionate to his known sources of income i.e. his salary.
Those will be matters specially within the knowledge of the public servant within the meaning of s.106 of the Evidence Act, 1872.
Section 106 reads: 684 section 106.
when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him.
In this connection, the phrase the burden of proof is clearly used in the secondary sense namely.
the duty of introducing evidence.
The nature and extent of the burden cast on the accused is well settled.
The accused is not bound to prove his innocence beyond all reasonable doubt.
All that he need do is to bring out a preponderance of probability.
Such being the law, the question whether or not the respondent had established a preponderance of probability is a matter relating to appreciation of evidence.
On a consideration of the evidence adduced by the respondent, the High Court has taken the view that it is not possible to exclude the possibility that the property found in possession of the respondent belonged to his father in law, Hanumanthu.
We have been taken through the evidence and we cannot say that the finding reached by the High Court is either manifestly wrong or perverse.
Maybe, this Court, on a reappraisal of the evidence, could have come to a contrary conclusion.
That, however, is hardly a ground for interference with an order of acquittal.
There are no compelling reasons to interfere with the order of acquittal, particularly when there is overwhelming evidence led by the respondent showing that his father in law, Hanumanthu, was a man of affluent circumstances.
There is no denying fact that Hanumantha was the pairokar of Raja Dharmarao Zamindar of Aheri Estate and by his close association with the Zamindar, had amassed considerable wealth.
More so, because two of his sisters were the kept mistresses of the Zamindar and amply provided for.
It appears that after the death of Raja Dharmarao, Hanumanthu took up his residence with his elder daughter, Smt.
Sushila, who was married to the respondent.
To substantiate his plea in defence, the respondent examined as many as 12 witnesses including himself as AW 12, his sister in law, Smt.
Sushila (AW 11), Dr. Chandrasekhar Merekar (AW 6), Shri V.N. Swamy, Advocate, Chandrapur (AW 8).
We cannot brush aside the unimpeachable testimony of Shri V.N. Swamy, AW 8, who was a leading advocate of Chandrapur and Member of Lok Sabha, and Dr. Chandrasekhar Merekar, AW 6, Medical Practitioner of Chandrapur, who attended on Hanumanthu at the time of his death.
Both these witnesses have unequivocally stated that when Hanumanthu died at the respondents leaving his two minor children, Smt.
Sushila and Narayan to the care of the respondent and his wife, Smt.
Sushila, he told them that he 685 was leaving properties worth Rs. 70 to 80 thousand comprising cash ornaments, jewellery etc., and expressed a desire that the same be divided equally among, his three children, the two daughters and son.
Shri Swamy testified to the fact that he was handling all the litigation of Raja Dharamrao, Zamindar of Aheri Estate who had an yearly income of Rs. 6 to 8 lakhs because the Zamindar had rich forests.
He tells us that he knew Hanumanthu well because he was the pairokar of Raja Dharmarao, that Hanumanthu enjoyed great confidence of the Zamindar and had free access to him because his two sisters were the kept mistresses of the Zamindar.
His evidence shows that the ladies were well provided for and whenever they visited Hanumanthu they used to hand over their cash, ornaments and jewellery to him for safe custody.
His evidence also shows that Hanumanthu was a man of affluence and that he and his father had a liquor shop besides forest contracts.
Hanumanthu also used to deal in money lending business.
The respondent has also placed on record documents showing that Hanumanthu was a man of substantial means.
To add to the difficulty of the prosecution, Smt.
Sushila, AW 11, sister in law of the respondent has come and deposed that all the property belonged to her father.
All this evidence is sufficient to create a doubt as to whether the respondent was in possession of disproportionate assets.
There is certainly a preponderance of probability that the property found in the possession of the respondent did not belong to him but belonged to his father in law, Hanumanthu.
The result, therefore, is that the appeal must fail and is accordingly dismissed.
P.B.R. Appeal dismissed.
| IN-Abs | The respondent was a Range Forest Officer on a monthly salary of Rs. 515.
In a search conducted by an officer of the Anti Corruption Bureau, Rs. 26 thousand odd in cash, savings bank accounts in the names of himself, his wife and children, national savings certificates, postal saving certificates, gold and silver ornaments, sale deeds of certain properties in the name of his wife, sister in law and brother in law aggregating in all to over Rs. 79 thousand were discovered from his house.
On the allegation that he was found in possession of assets disproportionate to his known sources of income he was charged with offence punishable under section 5(2) read with section 5(1)(e) of the Prevention of Corruption Act, 1947.
The respondent pleaded that he led a frugal life and that secondly much of the property found in his house belonged to his father in law.
He added that his father in law was a pairokar of a Zamindar in the area, that two sisters of his father in law were the kept mistresses of the Zamindar, and the Zamindar gave large amounts of cash and presents most of which were passed on to his father in law.
At the time of his death, his father in law entrusted his minor daughter and son to his care and instructed that his property should be divided among his three children equally and that therefore he was holding the property merely as a custodian.
Rejecting the plea of the respondent a Special Judge convicted and sentenced him under section 5(2) read with section 5(1)(e) of the Act.
On appeal a single Judge of the High Court acquitted him holding that the prosecution had failed to discharge the burden of disproving all possible sources of the respondent 's income, that it was not possible to exclude the probability that the property found in his possession could be the property left by his father in law, and that mere possession of assets disproportionate to his known sources of income would not be sufficient to bring home the guilt under section 5(1)(e) unless the prosecution further excluded all possible sources of income.
The High Court was also of the view that the changes brought about by the Anti 676 Corruption Laws (Amendment) Act, 1964 had the effect of limiting the presumption of guilt arising under section 4(1) of the Act to an offence of criminal misconduct specified in section 5(1)(a) and (b) and not to that in section 5(1)(e).
^ HELD: The construction placed by the High Court on section 5(1)(e) was wrong in that it overlooked the fact that, by the use of the words "for which the public servant cannot satisfactorily acquit", a burden is cast on the accused.
[680 B] Section 5(3) which now stood deleted, did not create an offence separate from the one created by section 5(1) but only raised a presumption of criminal misconduct if he or any person on his behalf was in possession of pecuniary resources or property disproportionate to his known sources of income which he could not satisfactorily account.
Once the prosecution proves this fact the burden shifts on to the accused to prove the source of acquisition of such assets.
[681 F G] The expression "known sources of income" in the context of the section means "sources known to the prosecution".
Secondly, the onus placed on the accused under the section was not to prove his innocence beyond reasonable doubt but only to establish a preponderance of probability.
To eradicate the widespread corruption in public services the legislature dispensed with the rule of evidence under section 5(3) and made possession by a public servant of assets disproportionate to his income as one of the species of offences of criminal misconduct by inserting clause (e) in section 5(1).
[682 A C] The meaning to be assigned to the expression "known sources of income" occurring in section 5(1)(e) must be the same as was given to that expression in section 5(3) before its repeal, that is, "sources known to the prosecution".
So also the same meaning must be given to the words "for which a public servant is unable to satisfactorily account" occurring in section 5(1)(e).
When clause (e) uses the words "if the public servant is unable to satisfactorily account" it is implied that the burden is on such public servant to account for the sources for the acquisition of assets disproportionate to his income.
The High Court was, therefore, in error in holding that a public servant charged for having in his possession assets disproportionate to his income for which he cannot satisfactorily account could not be convicted of an offence under section 5(2) read with section 5(1)(e) unless the prosecution disproves all possible sources of income.
[682 D F] Sajjan Singh vs State of Punjab ; and V.D. Jhagan vs State of U.P. ; , referred to.
The expression "burden of proof" has two distinct meanings: (1) the legal burden, that is, the burden of establishing the guilt and (2) the evidential burden, that is, the burden of leading evidence.
Notwithstanding the general rule that the burden of proof lies exclusively upon the prosecution, in the case of certain offences, the burden of proving a particular fact in issue may be laid by law upon the accused.
This burden is not so onerous as that which lies on the prosecution and is discharged by proof of a balance of probabilities.
To substantiate the charge of criminal misconduct under section 5(2) read with section 5(1)(e) the prosecution must prove (1) that the accused was a public servant; (2) the nature and extent of the pecuniary resources or property in his possession, (3) his known sources of income, i.e. known to the prosecution; (4) that such 677 sources or property were disproportionate to his known sources of income.
Once these are established, the offence of criminal misconduct under section 5(1)(e) would be complete.
The burden then shifts to the accused to substantially account for possession by him of assets disproportionate to his income.
The extent and nature of burden of proof resting upon the public servant cannot be higher than establishing his case by a preponderance of probability.
[683 A E] In the instant case the High Court has placed an impossible burden on the prosecution to disprove all possible sources of income which were within the special knowledge of the accused.
The prosecution cannot in the nature of things be expected to know the affairs of a public servant found in possession of resources or property disproportionate to his known sources of income that is his salary, because these are matters specially within his knowledge, within the meaning of section 106 of the Evidence Act.
The phrase "burden of proof" in section 106 of Evidence Act is clearly used in the secondary sense, namely the duty of introducing evidence.
The nature and extent of the burden cast on the accused is well settled.
The accused is not bound to prove his innocence beyond all reasonable doubt.
All that he need do is to bring out a preponderance of probability.
[684 B] On the proved circumstances there was a preponderance of probability that the property found in the respondent 's house could be the property left by his father in law.
There is overwhelming evidence on record that the respondent 's father in law was a man of affluent circumstances, being a paiorkar of a Zamindar and that he had amassed considerable wealth, more so because his two sisters were the kept mistresses of the Zamindar.
On the death of the Zamindar his father in law stayed with the respondent.
Also, the respondent 's father had a liquor shop besides forest contracts.
The evidence led in the case was sufficient to create a doubt whether the respondent was in possession of assets disproportionate to his known sources of income.
On the other hand there is preponderance of probability that the property in his possession belonged not to him, but to his father in law.
[684 D H]
|
Appeal No. 247 of 1953.
Appeal by special leave from the judgment and decree dated August 22, 1952 of the Bombay High Court in Appeal No. 66 of 1952 arising out of the decree dated March 7, 1952 of Bombay High Court in its Ordinary Original Civil Jurisdiction in Suit No. 1177 of 1951.
M. C. Setalvad, Attorney General for India, Purshottam Tricumdas, T. Godiwala, J. B. Dadachanji, Rameshwar Nath and section N. Andley, for the appellant.
C. K. Daphtary, Solicitor General of India and Sardar Bahadur, for the respondent.
October 19.
The Judgment of the Court was delivered by SINHA J.
This is an appeal by special leave against the judgment and decree of the High Court of Judicature at Bombay dated August 22,1952, reversing those of a single Judge of that Court on the Original Side, dated March 7,1952, by which he had granted a decree for dissolution of marriage between the appellant and the respondent.
840 The facts and circumstances of this case may be stated as follows: The appellant, who was the plaintiff, and the respondent were married at Patan on April 20, 1942, according to Hindu rites of the Jain Community.
The families of both the parties belong to Patan, which is a town in Gujarat, about a night 's rail journey from Bombay.
They lived in Bombay in a two room flat which was in occupation of the appellant 's family consisting of his parents and his two sisters, who occupied the larger room called the hall, and the plaintiff and the defendant who occupied the smaller room called the kitchen.
The appellant 's mother who is a patient of asthma lived mostly at Patan.
There is an issue of the marriage, a son named Kirit, born on September 10, 1945.
The defendant 's parents lived mostly at Jaigaon in the East Khandesh district in Bombay.
The parties appear to have lived happily in Bombay until a third party named Mahendra, a friend of the family came upon the scene and began to live with the family in their Bombay flat some time in 1946, after his discharge from the army.
On January 8, 1947, the appellant left for England on business.
It was the plaintiff 's case that during his absence from Bombay the defendant became intimate with the said Mahendra and when she went to Patan after the plaintiff 's departure for England she carried on "amorous correspondence" with Mahendra who continued to stay with the plaintiff 's family in Bombay.
One of the letters written by the defendant to Mahendra while staying at the plaintiff 's flat in Bombay, is exhibit E as officially translated in English, the original being in Gujerati except a few words written in faulty English.
This letter is dated April,1947, written from the plaintiff 's house at Patan, where the defendant bad been staying with her mother in law.
This letter had been annexed to the plaint with the official translation.
It was denied by the defendant in her written statement.
But at the trial her counsel admitted it to have been written by her to Mahendra.
As this letter started all the trouble between the parties to this litigation, it will have to be set out in extenso hereinafter.
Continuing 841 the plaintiff 's narrative of the events as alleged in the plaint and in his evidence, the plaintiff returned to Bombay from abroadon May 2O, 1947.
To receive him back from his foreign journey the whole family ' including the defendant was there in Bombay.
According to the plaintiff, he found that on the first night after his return his bed had been made in the hall occupied by his father and that night he slept away from his wife.
As this incident is said to have some significance in the narrative of events leading up to the separation between the husband and the wife and about the reason for which the parties differ, it will have to be examined in detail later.
Next morning, that is to say, on May 21, 1947, the plaintiff 's father handed over the letter aforesaid to the plaintiff, who recognised it as being in the familiar handwriting of his wife.
He decided to tackle his wife with reference to the letter.
He handed it to a photographer to have photo copies made of the same.
That very day in the evening he asked his wife as to why she had addressed the letter to Mahendra.
She at first denied having written any letter and asked to see the letter upon which the plaintiff informed her that it was with the photographer with a view to photo copies being made.
After receiving the letter and the photo copies from the photographer on May 23, the plaintiff showed the defendant the photo copy of the letter in controversy between them at that stage and then the defendant is alleged to have admitted having written the letter to Mahendra and to have further told the plaintiff that Mahendra was a better man than him and that Mahendra loved her and she loved him.
The next important event in the narrative is what happened on May 24, 1947.
On the morning of that day, while the plaintiff was getting ready to go to his business office his wife is alleged to have told him that she had packed her luggage and was ready to go to Jalgaon on the ostensible ground that there was a marriage in her father 's family.
The plaintiff told her that if she had made up her mind to go, he would send the car to take her to the station and offered to pay her Rs. 100 for her expenses.
But she 884 refused the offer.
She left Bombay apparently in the plaintiff 's absence for Jalgaon by the afternoon train.
when the plaintiff came back home from his office, he "discovered that she had taken away everything with her and had left nothing behind".
It may be added here that the plaintiff 's mother had left for Patan with his son some days previously.
Plaintiff 's case further is that the defendant never came back to Bombay to live with him, nor did she write any letters from Jalgaon, where she stayed most of the time.
It appears further that the plaintiff took a very hasty, 'if not also a foolish, step of having a letter addressed to the defendant by his solicitor on July 15, 1947, charging her with intimacy between herself and Mahendra and asking her to send back the little boy.
,The parties violently differ on the intent and effect of this letter which will have to be set out in extenso at the appropriate place.
No answer to this letter was received by the plaintiff.
In November, 1947, the plaintiff 's mother came from Patan to Bombay and informed the plaintiff that the defendant might be expected in Bombay a few days later.
Thereupon the plaintiff sent a telegram to his father in law at Patan.
The telegram is worded as follows: "Must not send Prabha.
Letter posted.
Wishing happy new year".
The telegram stated that a letter bad been posted.
The defendant denied that any such letter bad been received by her or by her father.
Hence the original, if any, is not on the record.
But the plaintiff produced what he alleged to be a carbon copy of that letter which purports to have been written on November 13, 1947, the date on which the telegram was despatched.
An English translation of that letter is exhibit C and is to the following effect: Bombay 13 11 47 To Rajmanya Rajeshri Seth Popatlal & others.
There is no letter from you recently.
You must have received the telegram sent by me today.
Further, this is to inform you that I have received information from my Mami (mother) that 843 Prabha is going to come to Bombay in 3 or 4 days.
I am surprised to hear this news; Ever since she has gone to Jalgaon, there has been not a single letter from her to this day.
Not only that, but, although you know everything, neither you nor any one on your behalf has come to see me in this connection.
What has made Prabha thus inclined to come all of a sudden! After her behaviour while going to Jalgaon for: the marriage, (and after), her letter to Mahendra and her words. 'He is better than you Has feeling for ' me and I love him ' and all this, I was afraid that she would not set up a house with me.
Hence when my mother gave me the news of her return, I was surprised.
I have not the slightest objection to the return of Prabha, but if she gives such shameless replies to me and shows such improper behaviour, I shall not be able to tolerate the same.
If she now really realises her mistake and if she is really repenting and wants sincerely to come, please make her write a reply to this letter.
On getting a letter from her, I shall personally come to Patan to fetch her.
Kirit is young.
For his sake also, it is necessary to persuade Prabha.
Further, I have to state that I have so far kept peace.
I have made efforts to call back Prabha.
Please understand this to her my final effort.
If even now Prabha does not give up her obstinacy, I am not responsible and (then) do not blame me.
Well, that is all for the present.
Kirit must be bale and hearty.
My new year 's greetings to you all.
Please do assign to me such work as I can manage.
Written by Bipinchandra" The plaintiff stated that be received no answer either to the telegram or to the letter.
Two days later, on, November 15, the plaintiff 's father addressed a letter to the defendant 's father, which is exhibit D.
This letter makes reference.
to the defendant 's mother having, talked to the plaintiffs mother about sending the defendant I to Bombay and to the fact that the plaintiff bad sent a telegram on November 13, and ends with the expression of opinion by the plaintiff 's father 844 that it was "absolutely necessary" that the plaintiff 's consent should be obtained before sending the defendant to Bombay.
This letter also remained unanswered.
According to the plaintiff, nothing happened until May, 1948, when he went to Patan and there met the defendant and told her "that if she repented for her relations with Mahendra in the interests of the child as well as our own interests she could come back and live with me".
To that the defendant is said to have replied that in November, 1947, as a result of pressure from her father and the community, she had been thinking of coming to live with the plaintiff) but that she had then decided not to do so.
The defendant has given quite a different version of this interview.
The second interview between the plaintiff and the defendant again took place at Patan some time later in 1948 when the plaintiff went there to see her on coming to know that she had been suffering from typhoid,.
At that time also she evinced no desire to come back to the plaintiff.
The third and the last interview between the plaintiff and the defendant took place at Jalgaon in April May, 1949.
At that interview also the defendant turned down the plaintiff 's request that at least in the interests of the child she should come back to him.
According to the plaintiff, since May 24, 1947, when the defendant left his home in Bombay of her own accord, she bad not come back to her marital home.
The suit was commenced by the plaintiff by filing the plaint dated July 4, 1951, substantially on the ground that the defendant bad been in desertion ever since May 24, 1947, without reasonable cause and without his consent and against his will for a period of over four years.
He therefore prayed for a decree for a dissolution of his marriage with the defendant and for the custody of the minor child.
The suit was contested by the defendant by a written statement filed on February 4, 1952, substantially on the ground that it was the plaintiff who by his treatment of her after his return from England had made her life unbearable and compelled her to leave her marital home against her wishes on or about May 845 24, 1.947.
She denied any intimacy between herself and Mahendra or that she was confronted by the plaintiff with a photostat copy of the letter.
, exhibit E, or that she had confessed any such intimacy to the plaintiff.
She admitted having received the Attorney 's letter, exhibit A, and also that she did not reply to that letter.
She adduced her father 's advice as the reason for not sending any answer to that letter.
She added that her paternal uncle Bhogilal (since deceased) and his son Babubhai saw the plaintiff in Bombay at the instance of the defendant and her father and that the plaintiff turned down their request for taking her back.
She also made reference to the negotiations between the defendant 's mother and the plaintiff 's mother to take the defendant back to Bombay and that the defendant could not go to Bombay as a result of the telegram of November 13, 1947, and the plaintiff 's father 's letter of November 15, 1947, aforesaid.
She also stated that the defendant and her son, Kirit, both lived with,the plaintiff 's family at Patan for over four months and off and on on several occasions.
The defendant 's definite case is that she had always been ready and willing to go back to the plaintiff and that it was the plaintiff who all along had been wailfully refusing to keep her and to cohabit with her.
On those allegations she resisted the plaintiff 's claim for a decree for a dissolution of the marriage.
On those pleadings a single issue was joined between the parties, namely, "Whether the defendant deserted the plaintiff for a continuous period of over four years prior to the filing of the suit".
At the trial held by Tendolkar, J. of the Bombay High Court on the Original Side, the plaintiff examined only himself in support of his case.
The defendant examined herself, her father, Popatlal, and her cousin, Bhogilal, in support of her case that she had been all along ready and willing to go back to her marital home and that in spite of repeated efforts on her part through her relations the plaintiff had been persistently refusing to take her back.
110 846 The learned trial Judge answered the only issue in the case in the affirmative and granted a decree for divorce in favour of the plaintiff, but made DO order as to the costs of the suit.
He held that the letter, exhibit E "reads like a love letter written by a girl to her paramour.
The reference to both of them having been anxious about something and there being now no need to be anxious any more can only be to a possible fear that she might miss her monthly periods and her having got her monthly period thereafter, because, if it were not so and the reference was to anything innocent, there was nothing that she should have repented later on in her mind as she says she did, nor should there have been occasion for saying 'after all love is such an affair '.
" With reference to that letter he further held that it was capable of the interpretation that she had misbehaved with Mahendra and that she was conscious of her guilt.
With reference to the incident of May 24, the learned Judge observed that having regard to the demeanour of the plaintiff and of the defendant in the witness box, he was inclined to prefer the husband 's testimony to that of the wife in all matters in which there was a conflict.
He held therefore that there was desertion with the necessary animus deserendi and that the defendant had failed to prove that she entertained a bonafide intention to come back to the marital home, that is to say, there was no animus revertendi.
With reference to the contention that the solicitor 's letter of July 15,1947, had terminated the desertion, if any, he held that it was not well founded inasmuch as the defendant had at no time a genuine desire to return to her husband.
He made no reference to the prayer in the plaint that the custody of the child should be given to the father, perhaps because that prayer was not pressed.
The defendant preferred an appeal under the Letters Patent which was heard by a. Division Bench consisting of Chagla C.J. and Bhagwati J.
The Appellate Bench, allowed the appeal, set aside the decision of the trial Judge and dismissed the suit with costs.
It held that the defendant was not guilty of 847 desertion, that the letter of July 15, 1947, clearly established that it was the 'plaintiff who had deserted the defendant.
Alternatively, the Appellate Court held that even assuming that the defendant was in desertion as a result of what had happened on May 24, and subsequently, the letter aforesaid bad the effect of putting an end to that desertion.
In its judgment the letter, exhibit E, did not justify the plaintiff having any reasonable suspicions about his wife 's guilt and that the oral evidence of the defendant and her relations proved the wife 's anxiety to return back to her husband and of the obduracy of the husband in refusing to take the wife back.
The plaintiff made an application to the High Court for leave to appeal to this Court.
The leave asked for was refused by another Division Bench consisting of the Chief Justice and Dixit J.
Thereafter the plaintiff moved this Court and obtained special leave to appeal from the judgment of the Appellate Bench of the High Court.
In this appeal the learned Attorney General appearing on behalf of the appellant and the learned Solicitor General appearing on behalf of the respondent have placed all relevant considerations of fact and law before us, and we are beholden to them for the great assistance they rendered to us in deciding this difficult case.
The difficulty is enhanced by the fact that the two courts below have taken diametrically opposite views of the facts of the case which depend mostly upon oral testimony of the plaintiff husband and the defendant wife and not corroborated in many respects on either side.
It is a case of the husband 's testimony alone on his side and the wife 's testimony aided by that of her father and her cousin.
As already indicated, the learned trial Judge was strongly in favour of preferring the husband 's testimony to that of the wife whenever there was any conflict.
But he made no reference to the testimony of the defendant 's father and cousin which, if believed, would give an entirely different colour to the case.
Before we deal with the points in controversy, it is convenient here to make certain general of observations 848 on the history of the law on the subject and the well established general principles on which such cases are determined.
The suit giving rise to this appeal is based on section 3(1) (d) of the Bombay Hindu Divorce Act ', XXII of 1947, (which hereinafter will be referred to as "The Act") which came into force on May 12, 1947, the date the Governor 's assent was published in the Bombay Government Gazette.
This Act, so far as the Bombay Province, as it then was, was concerned, was the first step in revolutionizing the law of matrimonial relationship, and, as the Preamble shows, was meant "to provide for a right of divorce among all communities of Hindus in certain circumstances".
Before the enactment, dissolution of a Hindu marriage particularly amongst what were called the regenerate classes was unknown to general Hindu law and was wholly inconsistent with the basic conception of a Hindu marriage as a sacrament, that is to say, a holy alliance for the performance of religious duties.
According to the Shastras, marriage amongst the Hindus was the last of the ten sacraments enjoined by the Hindu religion for purification.
Hence according to strict Hindu law as given by the Samhitas and as developed by the commentators, a Hindu marriage could not be dissolved on any ground whatsoever, even on account of degradation in the hierarchy of castes or apostacy.
But custom ', particularly amongst the tribal and what used to be called the lower castes recognised divorce on rather easy terms.
Such customs of divorce on easy terms have been in some instances held by the courts to be against public policy.
The Act in section 3 sets out the grounds of divorce.
It is noticeable that the Act does not recognise adultery simpliciter as one of the grounds of divorce, though cl.
(f) renders the fact that a husband "has any other woman as a concubine" and that a wife "is a concubine of any other man or leads the life of a prostitute" a ground of divorce.
In the present case we are immediately concerned with the provisions of section 3(1)(d), which are in these terms: 3.
(1) A husband or wife may sue for divorce on 849 any of the following grounds, namely: . . . . . . . . (d) that the defendant has deserted the plaintiff for a continuous period of four years".
"Desertion" has been defined in section 2(b) in these terms: 'Desert ' means to desert without reasonable cause and without the consent or against the will of the spouse".
It will be seen that the definition is tautological and not very helpful and leads us to the Common Law of England where in spite of repeated legislation on the subject of matrimonial law, no attempt has been made to define "desertion".
Hence a large body of case law has developed round the legal significance of "desertion".
"Marriage" under the Act means "a marriage between Hindus whether contracted before or after the coming into operation of this Act".
"Husband" means a Hindu husband and "wife" means a Hindu wife.
In England until 1858 the only remedy for desertion was a suit for restitution of conjugal rights.
But by the Matrimonial Causes Act of 1857, desertion without cause for two years and upwards was made a ground for a suit for judicial separation.
It was not till 1937 that by the Matrimonial Causes Act, 1937, desertion without cause for a period of three years immediately preceding the institution of proceedings was made a ground for divorce.
The law has now been consolidated in the Matrimonial Causes Act, 1950 (14 Geo.
VI, c. 25 ).
It would thus appear that desertion as affording a cause of action for a suit for dissolution of marriage is a recent growth even in England.
What is desertion? "Rayden on Divorce" which is a standard Work on the subject at p. 128 (6th Edn.) has summarised the case law on the subject in these terms: "Desertion is the separation of one spouse from the other, with an intention on the part of the deserting spouse of bringing cohabitation permanently to on end without reasonable cause and without the 850 consent of the other spouse; but the physical act of departure by one spouse does not necessarily make that spouse the deserting party".
The legal position has been admirably summarised in paras.
453 and 454 at pp.
241 to 243 of Halsbury 's Laws of England (3rd Edn.) Vol. 12, in the following words: "In its essence desertion means the intentional permanent forsaking and abandonment of one spouse by the other without that other 's consent, and without reasonable cause.
It is a total repudiation of the obligations of marriage.
In view of the large variety of circumstances and of modes of life involved, the Court has discouraged attempts at defining desertion, there being no general principle applicable to all cases.
Desertion is not the withdrawal from a place but from a state of things, for what the law seeks to enforce is the recognition and discharge of the common obligations of the married state; the state of things may usually be termed, for short, 'the home '.
There can be desertion without previous cohabitation by the parties, or without the marriage having been consummated.
The person who actually withdraws from cohabitation is not necessarily the deserting party.
, The fact that a husband makes an allowance to a wife whom he has abandoned is no answer to a charge of desertion.
The offence of desertion is a course of conduct which exists independently of its duration, but as a ground for divorce it must exist for a period of at least three years immediately preceding the presentation of the petition or, where the offence appears as a cross charge, of the answer.
Desertion as a ground of divorce differs from the statutory grounds of adultery and cruelty in that the offence founding the cause of action of desertion is not complete, but is inchoate, until the suit is constituted.
Desertion is a continuing offence".
Thus the quality of permanence is one of the essential elements which differentiates desertion from 851 wilful separation.
If a spouse abandon the other spouse in a state of temporary passion, for example, anger or disgust, without intending permanently to cease cohabitation, it will not amount to desertion. ' For the offence of desertion, so far as the deserting spouse is concerned, two essential conditions must be there., namely, (1) the factum of separation, and (2) the intention to bring cohabitation permanently to an end (animus deserendi ).
Similarly two elements are essential so far as the deserted spouse is con cerned: (1) the absence of consent, and (2) absence of conduct giving reasonable cause to the spouse leaving the matrimonial home to form the necessary intention aforesaid.
The petitioner for divorce bears the burden of proving those elements in the two spouses respectively.
Here a difference between the English law and the law as enacted by the Bombay Legislature may be pointed out.
Whereas under the English law those essential conditions must continue throughout the course of the three years immediately preceding the institution of the suit for divorce; under the Act, the period is four years without specifying that it should immediately precede the commencement of proceedings for divorce.
Whether the omission of the last clause has any practical result need not detain us, as it does not call for decision in the present case.
Desertion is a matter of inference to be drawn from the facts and circumstances of each case.
The inference may be drawn from certain facts which may not in another case be capable of leading to the same inference; that is to say, the facts have to be viewed as to the purpose which is revealed by those acts or by conduct and expression of intention, both anterior and subsequent to the actual acts of separation.
If, in fact, there has been a separation, the essential question always is whether that act could be attributable to an animus deserendi.
The offence of desertion commences when the fact of separation and the animus deserendi co exist.
But it is not necessary that they should commence at the same time.
The de facto separation may have commenced without the necessary animus or it may be that the separation 852 and the animus deserendi coincide in point of time; for example, when the separating spouse abandons the marital home with the intention, express or implied, of bringing cohabitation permanently to a close.
The law in England has prescribed a three year period and the Bombay Act prescribes a period of four years as a continuous period during which the two elements must subsist.
Hence, if a deserting spouse takes advantage of the locus poenitentiae thus provided by law and decides to come back to the deserted spouse by a bonafide offer of resuming the matrimonial some with all the implications of marital life, before the statutory period is out or even after the lapse of that period, unless proceedings for divorce have been commenced,, desertion comes to an end and if the deserted spouse unreasonably refuses the offer, the latter may be in desertion and not the former.
Hence it is necessary that during all the period that there has been a desertion the deserted spouse must affirm the marriage and be ready and willing to resume married life on such conditions as may be reasonable.
It is also well settled that in proceedings for divorce ' the plaintiff must prove the offence of desertion, like any other matrimonial offence, beyond all reasonable doubt.
Hence, though corroboration is not required as an absolute rule of law, the courts insist upon corroborative evidence, unless its absence is accounted for to the satisfaction of the court.
In this connection the following observations of Lord Goddard, C.J. in the case of Lawson vs Lawson(1) may be referred to: "These cases are not cases in which corroboration is required as a matter of law.
It is required as a matter of precaution. . .
With these preliminary observations we now proceed to examine the evidence led on behalf of the parties to find out whether desertion has been proved in this case and, if so, whether there was a bona fide offer by the wife to return to her matrimonial home with a view to discharging marital duties and, if so, whether (1) , 342. 853 there was an unreasonable refusal on the part of the husband to take her back.
In this connection the plaintiff in the witness box deposed to the incident of the night of May 20, 1947.
He stated that at night he found that his bed had been made in the hall in which his father used to sleep, and on being questioned by him, the defendant told him that it was so done with a view to giving him the opportunity after a long absence in England to talk to his father.
The plaintiff expressed his wish to the defendant that they should sleep in the same room as they used to before his departure for England, to which the wife replied that as the bed had already been made, "it would look indecent if they were removed".
The plaintiff therefore slept in the hall that night.
This incident was relied upon by the plaintiff with a view to showing that the wife had already made up her mind to stop cohabitation.
This incident has not been admitted by the defendant in her cross examination.
On the other hand she would make it out that it was at the instance of the plaintiff that the bed had been made in the hall occu pied by his father and that it was the plaintiff and not she who was responsible for their sleeping apart that night.
As the learned trial Judge has preferred the plaintiff 's testimony to that of the defendant on all matters on which there was simply oath against oath, we would not go behind that finding.
This incident by itself is capable of an innocent explanation and therefore has to be viewed along with the other incidents deposed to by the plaintiff in order to prove his case of desertion by the defendant.
There was no reason why the husband should have thought of sleeping apart from the wife because there was no suggestion in the record that the husband was aware till then of the alleged relationship between the defendant and Mahendra.
But the wife may have been apprehensive that the plaintiff had known of her relations with Mahendra.
That apprehension may have induced her to keep out of the plaintiff 's way.
The most important event which led to the ulti 854 mate rupture between the parties took place on May 21, 1947, when in the morning the plaintiff 's father placed Mahendra 's letter aforesaid in the plaintiff 's hands.
The letter which has rightly been pointed out in the courts below as the root case of the trouble is in its relevant parts in these terms: "Mahendrababu, Your letter has been received.
I have read the same and have noted the contents.
In the same way, I hope, you will take the trouble of writing me a letter now and then.
I am writing, this letter with fear in my mind, because if this reaches anybody 's hands, that cannot be said to be decent.
What the mind feels has got to be constrained in the mind only.
On the pretext of lulling (my) son to sleep, I have been sitting here in this attic, writing this letter to you.
All others are chitchatting below.
I am thinking now and then that I shall write this and shall write that.
Just now my brain cannot go in any way.
I do not feel like writing on the main point.
The matters on which we were to remain anxious and you particularly were anxious, well we need not now be.
I very much repented later on in my mind.
But after all love is such an affair.
(Love begets love).
. . . . . . . "While yet busy doing services to my mother in law, the clock strikes twelve.
At this time, I think of you and you only, and your portrait shoots up before my eyes.
I am reminded of you every time.
You write of coming, but just now there is nothing like a necessity, why unnecessarily waste money? And again nobody gets salvation at my bands and really nobody will.
You know the natures of all.
Many a time I get tired and keep on being uneasy in my mind, and in the end I weep and pray God and say, 0 Lord, kindly take me away soon: I am not obsessed by any kind of anxiety and so relieve me from this mundane existence.
I do not know how many times I must be thinking of you every day. . . " This letter is not signed by the defendant and in place of the signature the word "namaste" finds 855 place.
The contents of the letter were put to the defendant in cross examination.
At that time it was no more a contested document, the defendant 's counsel having admitted it during the cross examination" of the plaintiff.
She stated that she had feelings for Mahendra as a brother and not as a lover ' When the mysterious parts of the letter beginning with the words "The matters on which" and ending with the words "such an affair" were put to her, she could not give any explanation as to what she meant.
She denied the suggestion made on behalf of the plaintiff in these words: "It is not true that the reference here is to our having had sexual intercourse and being afraid that I might remain pregnant".
The sentence "I very much repented later on in my mind" was also put to her specifically and her answer was "I do not know what I repented for.
I wrote some thing foolishly".
Pressed further about the meaning of the next sentence after that, her answer was "I cannot now understand how I came to write such a letter.
I admit that this reads like a letter written by a girl to her lover.
Besides the fact that my brain was not working properly I bad no explanation to give as to how I wrote such a letter".
She also admitted that she took good care to see that the.
other members of the family, meaning the mother in law and the sisters in law, did not see her writing that letter and that she wanted that the letter should remain a secret to them.
Being further pressed to explain the sentence "We need not be anxious now", her answer was " I did not intend to convey that I had got my monthly period about which we were anxious.
I cannot say what the normal natural meaning of this letter would be".
She bad admitted having received at least one letter from Mahendra.
Though it would appear from the trend of her cross examination that she received more letters than one, she stated that she did not preserve any of his letters.
She has further admitted in cross examination "I have not signed this letter.
It must have remained to be signed by mistake.
I admit that under the 856 letter where the signature should be I have put the word 'Namaste ' only.
It is not true that I did not sign this letter because I was afraid, that if it got into the hands of any one, it might compromise me and Mahendra.
Mahendra would have known from my handwriting that this was my letter.
I had previously written one letter to him.
That letter also I had not signed.
I had only said 'Namaste" '.
The tenor of the letter and the defendant 's explanation or want of explanation in the witness box of those portions of the letter which very much need explanation would leave no manner of doubt in any person who read that letter that there was something between her and Mahendra which she was interested to keep a secret from everybody.
Even when given the opportunity to explain, if she could, those portions of the letter, she was not able to put any innocent meaning to her words except saying in a bland way that it was a letter from a sister to a brother.
The trial court rightly discredited her testimony relating to her answers with respect to the contents of the letter.
The letter shows a correspondence between her and Mahendra which was clearly unworthy of a faithful wife and her pose of innocence by characterising it as between a sister and a brother is manifestly disingenuous.
Her explanation, if any, is wholly unacceptable.
The plaintiff naturally got suspicious of his wife and naturally taxed her with reference to the contents of the letter.
That she had a guilty mind in respect of the letter is shown by the fact that she at first denied having written any such letter to Mahendra, a denial in which she persisted even in her answer to the plaint.
The plaintiff 's evidence that he showed her a photostatic copy of that letter on May 23, 1947, and that she then admitted having written that letter and that she bad tender feelings for Mahendra can easily be believed.
The learned trial Judge was therefore justified in coming to the conclusion that the letter betrayed on the part of the writer "a consciousness of guilt".
But it is questionable how far the learned Judge was justified in observing further that ' the contents of the 857 letter "are only capable of the interpretation that she had misbehaved with Mahendra during the absence of the plaintiff".
If he meant by the word "misbehaved" that the defendant had sexual intercourse with Mahendra, he may be said to have jumped to the conclusion which did not necessarily follow as the only conclusion from them.
The very fact that a married girl was writing amorous letters to a man other than her husband was reprehensible and easily capable of furnishing good grounds to the husband for suspecting the wife 's fidelity.
So far there can be no difficulty in assuming that the husband was fully justified in losing temper with his wife and in insisting upon her repentance and assurance of good conduct in future.
But we are not prepared to say that the contents of the letter are capable of only that interpretation and no other.
On the other hand, the learned Judges of the Appeal Court were inclined to view this letter as an evidence merely of what is sometimes characterised as "platonic love" between two persons who by reasons of bond of matrimony are compelled to restrain themselves and not to go further than merely showing love and devotion for each other.
We are not prepared to take such a lenient, almost indulgent, view of the wife 's conduct as betrayed in the letter in question.
We cannot but sympathise with the husband in taking a very serious view of the lapse on the wife 's part.
The learned Judges of the Appeal Court have castigated the counsel for the plaintiff for putting those questions to the defendant in cross examination.
They observe in their judgment (speaking through the Chief Justice) that there was no justification for the counsel for the plaintiff to put to the defendant those questions in cross examination suggesting that she had intercourse with Mahendra as a result of which they were apprehending future trouble in the shape of pregnancy and illegitimate child birth.
It is true that it was not in terms the plaintiff 's case that there had been an adulterous intercourse between the defendant and Mahendra.
That need not have been so, because the Act does not recognise adultery as one of the grounds 858 for divorce.
But we do not agree with the appellate Court that those questions to the defendant in cross examination were not justified.
The plaintiff proposed to prove that the discovery of the incriminating letter containing those mysterious sentences was the occasion for the defendant to make up her mind to desert,the plaintiff.
We do not therefore agree with the observations of the appellate Court in all that they have said in respect of the letter in question.
There can be no doubt that the letter in question made the plaintiff strongly suspicious of his wife 's conduct (to put it rather mildly), and naturally he taxed his wife to know from her as to what she bad to say about her relations with Mahendra.
She is said to have confessed to him that Mahendra was a better man than the plaintiff and that he loved her and she loved him.
When matters had come to such a head, the natural reaction of the parties would be that the husband would get not only depressed, as the plaintiff admitted in the witness box, but would in the first blush think of getting rid of such an unloving, if not a faithless, wife.
The natural reaction of the defendant would be not to face the husband in that frame of mind.
She would naturally wish to be out of the sight of her husband at least for some time, to gain time for trying, if she was so minded, to reestablish herself in her husband 's estimation and affection, if not love.
The event of the afternoon of May 24, 1947, must therefore be viewed in that light.
There was going to be performed the marriage of the defendant 's cousin at her father 's place of business in Jalgaon, though it was about five to six weeks from then.
The plaintiff would make it out in his evidence that she left rather in a recalcitrant mood in the afternoon during his absence in office with all her belongings and that she had refused his offer of being sent in his car to station and Rs. 100 for ' expenses.
This conduct on the part of the wife can easily be explained as that of a person who had found that her love letter had been discovered by the husband.
She would naturally try to flee away from the husband for the time being at least because she had not the 859 moral courage to face him.
The question is whether her leaving her marital home on the afternoon of May 24, 1947, is only consistent with her having deserted, her husband, in the sense that she had deliberately ' decided permanently to forsake all relationship with her husband with the intention of not returning to consortium, without the consent of the husband and against his wishes.
That is the plaintiff 's case.
May that conduct be not consistent with the defendant 's case that she had not any such intention, i.e., being in desertion? The following observations of Pollock, M. R. in Thomas vs Thomas(1) may usefully be quoted in this connection: "Desertion is not a single act complete in itself and revocable by a single act of repentance.
The act of departure from the other spouse draws its significance from the purpose with which it is done, as revealed by conduct or other expressions of intention: see Charter vs Charter(2).
A mere temporary parting is equivocal, unless and until its purpose and object is made plain.
I agree with the observations of Day J. in Wilkinson vs Wilkinson(3) that desertion is not a specific act, but a course of conduct.
As Corell Barnes J. said in Sickert vs Sickert(4): 'The party who intends bringing the cohabitation to an end, and whose conduct in reality causes its termination, commits the act of desertion '.
That conduct is not necessarily wiped out by a letter of invitation to the wife to return".
The defendant 's further case that she bad been turned out of the house by the husband under duress cannot be accepted because it is not corroborated either by circumstances or by direct testimony.
Neither her father nor her cousin say a word about her speaking to them on her arrival at Jalgaon that she had been turned out of her husband 's home.
If her case that she bad been forcibly turned out of her marital home by the husband had been made out, certainly the husband would have been guilty of "constructive desertion", because the test is riot who (1) (3) (2) (4) , 282, 860 left the matrimonial home first.
(See Lang vs Lang(1)).
If one spouse by his words and conduct compel the other spouse to leave the marital home.
the former would be guilty of desertion, though it is the latter who has physically separated from the other and has been made to leave the marital home.
It should be noted that the wife did not cross petition for divorce or for any other relief.
Hence it is no more necessary for us to go into that question.
It is enough to point out that we are not prepared to rely upon the uncorroborated testimony 'of the defendant Chat she had been compelled to leave her marital home by the threats of the plaintiff.
The happenings of May 24, 1947, as pointed out above, are consistent with the plaintiff 's case of desertion by the wife.
But they are also consistent not with the defendant 's case as actually Pleaded in her written statement, but with the fact; and circumstances disclosed in the evidence, namely, that the defendant having been discovered in her clandestine amorous correspondence with her supposed paramour Mahendra, she could not face her husband or her husband 's people living in the same flat in Bombay and therefore shamefacedly withdrew herself and went to her parent 's place of business in Jalgaon on the pretext of the marriage of her cousin which was yet far off.
That she was not expected at Jalgaon on that day in connection with the marriage is proved by her own admission in the witness box that "when I went to Jalgaon everyone was surprised".
As pointed out above, the burden is on the plaintiff to prove desertion without cause for the statutory period of four years, that is.
to say, that the deserting spouse must be in desertion throughout the whole period.
In this connection the following observations of Lord Macmillan in his speech in the House of Lords in the case of Pratt vs Pratt(2 ) are apposite: "In my opinion what is required of a petitioner for divorce on the ground of desertion is proof that throughout the whole course of the three years the respondent has without cause been in desertion.
The (1) 417.
(2) , 420. 861, deserting spouse must be shown to have persisted in the intention to desert throughout the whole period.
In fulfilling its duty of determining whether on the evidence a case of desertion without cause has been proved the court ought not, in my opinion, to leave out of account the attitude of mind of the petitioner.
If on the facts it appears that a petitioning husband has made it plain to his deserting wife that he will not receive her back, or if he has repelled all the advances which she may have made towards a resumption of married life, he cannot complain that she has persisted without cause in her desertion".
It is true that the defendant did not plead that she had left her husband 's home in Bombay in the circumstances indicated above.
She, on the other hand, pleaded constructive desertion by the husband.
That case, as already observed, she has failed to substantiate by reliable evidence.
But the fact that the defendant has so failed does not necessarily lead to the conclusion that the plaintiff has succeeded in proving his case.
The plaintiff must satisfy the court that the defendant had been in desertion for the continuous period of four years as required by the Act.
If we come to the conclusion that the happenings of May 24, 1947, are consistent with both the conflicting theories, it is plain that the plaintiff has not succeeded in bringing the offence of desertion home to the defendant beyond all reasonable doubt.
We must therefore examine what other evidence there is in support of the plaintiff 's case and in corroboration of his evidence in court.
The next event of importance in this narrative is the plaintiff 's solicitor 's letter of July 15, 1947, addressed to the defendant, care of her father at Jalgaon.
The defendant 's cousin 's marriage was performed towards the end of June and she could have come back to her husband 's place, soon thereafter ' Her evidence is that after the marriage had been performed she was making preparations to go back to Bombay but her father detained her and asked her to await a letter from the plaintiff.
The defendant instead of getting an invitation from the plaintiff to 862 come back to the marital home received the solicitor 's letter aforesaid, which, to say the least, was not calculated to bring the parties nearer.
The letter is in these terms: "Madam, Under instructions from our client Bipin Chandra J. Shah we have to address you as under: That you were married to our client in or about April 1942 at Patan.
Since the marriage you and our client lived together mostly in Bombay and son by name Kirit was born on or about the 10th day of September 1944.
Our client.
states that he left for Europe in January last and returned by the end of May last.
After our client 's return, our client learnt that during our client 's absence from India you developed intimacy with one Mahendra and you failed to give any satisfactory reply when questioned about the same and left for your parents under the pretext of attending to the marriage ceremony of your cousin.
You have also taken the minor with you and since then you are residing with your father to evade any satisfactory explanation.
Our client states that under the events that have happened, our client has become entitled to obtain a divorce and our client does not desire to keep you any longer under his care and protection.
Our client desires the minor to be kept by him and we are instructed to request you to send back the minor to our client or if necessary our client will send his agent to bring the minor to him.
Our client further states that in any event it will be in the interest of the minor that he should stay with our client.
Our client has made this inquiry about the minor to avoid any unpleasantness when our client 's agent comes to receive the minor".
The letter is remarkable in some respects,apart from antedating the birth of the son Kirit by a year.
The letter does not in terms allege that the defendant was in desertion, apart from mentioning the fact that she had left against the plaintiff 's wishes or that she had done so with the intention of permanently abandon 863 ing her marital duties.
On the other hand, it alleges that "You are residing with your father to avoid any satisfactory explanation".
The most important part of the letter is to the effect that the plaintiff had "become entitled to obtain a divorce" and that he "does not desire to keep you any longer under his care and protection".
Thus if the solicitor 's letter is any indication of the working of the mind of the plaintiff, it makes it clear that at that time the plaintiff did not believe that the defendant had been in desertion and that the plaintiff had positively come to the determination that he was no longer prepared to affirm the marriage relationship.
As already indicated, one of the essential conditions for success in a suit for divorce grounded upon desertion is that the deserted spouse should have been willing to fulfill his or her part of the marital duties.
The statement of the law in para 457 at p. 244 of Halsbury 's Laws of England (3rd Edn.
Vol 12) may be usefully quoted: "The burden is on the petitioner to show that desertion without cause subsisted, throughout the statutory period.
The deserting spouse must be shown to have persisted in the intention to desert throughout the whole of the three year period.
It has been said that a petitioner should be able honestly to say that he or she was all along willing to fulfill the duties of the marriage, and that the desertion was against his or her will, and continued throughout the statutory period without his or her consent; but in practice it is accepted that once desertion has been started by the fault of the deserting spouse, it is no longer necessary for the deserted spouse to show that during the three years preceding the petition be or she actually wanted the other spouse to come back, for the intention to desert is presumed to continue.
That presumption may, however, be rebutted".
Applying those observations to the facts of the present case, can the plaintiff honestly say that be was all along willing to fulfill the duties of the marriage and that the defendant 's desertion, if any, continued throughout the statutory period without his consent.
The letter, exhibit A) is an emphatic No.
In the first 864 place, even the plaintiff in that letter did not allege any desertion and, secondly, he was not prepared to receive her back to the matrimonial home.
Realising his difficulty when cross examined as to the contents of that letter, he wished the court to believe that at the time the letter was written in his presence he was "in a confused state of mind" and did not remember exactly whether he noticed the sentence that he did not desire to keep his wife any longer.
Pressed fur ther in cross examination, he was very emphatic in his answer and stated: "It is not true that by the date of this letter I had made up my mind not to take her back.
It was my hope that the letter might induce her parents to find out what had happened, and they would persuade her to come back.
I am still in the confused state of mind that despite my repeated attempts my wife puts me off".
In our opinion, the contents of the letter could not thus be explained away by the plaintiff in the witness box.
On the other hand, it shows that about seven weeks after the wife 's departure for her father 's place the plaintiff had at least for the time being convinced himself that the defendant was no more a suitable person to live with.
That, as found by us, be was justified in this attitude by the reprehensible conduct of his wife during his absence is beside the point.
This letter has an importance of its own only in so far as it does not corroborate the plaintiff 's version that the defendant was in desertion and that the plaintiff was all along anxious to induce her to come back to him.
This letter is more consistent with the supposition that the husband was very angry with her on account of her conduct as betrayed by the letter, exhibit E and that the wife left her husband 's place in shame not having the courage to face him after that discovery.
But that will not render her in the eye of the law a deserter, as observed by Pollock, M. R. in Bowron vs Bowron(1) partly quoting from Lord Gorell as follows: "In most cases of desertion the guilty party (1) , 192. 865 actually leaves the other, but it is not always or necessarily the guilty party who leaves the matrimonial home.
In my opinion, the party who intends bringing the cohabitation to an end, and whose conduct in reality causes its termination, commits the act of desertion: See also Graves vs Graves(1); Pulford vs Pulford(2); Jackson vs Jackson(2); where Sir Henry Duke P. explains the same doctrine.
You must look at the conduct of the spouses and ascertain their real intention".
It is true that once it is found that one of the spouses has been in desertion, the presumption is that the desertion has continued and that it is not necessary for the deserted spouse actually to take steps to bring the deserting spouse back to the matrimonial home.
So far we do not.find any convincing evidence in proof of the alleged desertion by the wife and naturally therefore the presumption of continued desertion cannot arise.
But it is not necessary that at the time the wife left her husband 's home, she should have at the same time the animus deserendi.
Let us therefore examine the question whether the defendant in this case, even if she had no such intention at the time she left Bombay, subsequently decided to put an end to the matrimonial tie.
This is in consonance with the latest pronouncement of the Judicial Committee of the Privy Council in the case of Lang vs Lang(1) in an appeal from the decision of the High Court of Australia, to the following effect: "Both in England and in Australia, to establish desertion two things must be proved: first, certain outward and visible conduct the 'factum ' of desertion; secondly, the 'animus deserendi ' the intention underlying this conduct to bring the matrimonial union to an end.
In ordinary desertion the factum is simple: it is the act of the absconding party in leaving the matrimonial home.
The contest in such a case will be almost entirely as to the 'animus '.
Was the intention (1) 3 Sw. & Tr.
(3) (2) (4) [1955] A.G. 402, 417.
866 of the party leaving the home to break it up for good, or something short of, or different from that?" In this connection the episode of November, 1947, when the plaintiff 's mother came from Patan to Bombay is relevant.
It appears to be common ground now that the defendant had agreed to come back to Bombay along with the plaintiff 's mother or after a few days.
But on this information being given to the plaintiff he countermanded any such steps on the wife 's part by sending the telegram, exhibit B,aforesaid and the plaintiff 's father 's letter dated November 15, 1947.
'We are keeping out of consideration for the present the letter, exhibit C, dated November 13, 1947, which is not admitted to have been received either by the defendant or her father.
The telegram is in peremptory terms: "Must not send Prabha".
The letter of November 15, 1947, by the plaintiff 's father to the defendant 's father is equally peremptory.
It says "It is absolutely necessary that you should obtain the consent of Chi.
Bipinchandra before sending Chi.
Prabhavati".
The telegram and the letter which is a supplement to the telegram, as found by the courts below, completely negative the plaintiff 's statement in court that he was all along ready and willing to receive the defendant back to his home.
The letter of November 13, 1947, exhibit C, which the plaintiff claims to have written to his father in law in explanation of the telegram and is a prelude to it is altogether out of tune with the tenor of the letter and the telegram referred to above.
The receipt of this letter has been denied by the defendant and her father.
In court this letter has been described as a fake in the sense that it was an afterthought and was written with a. view to the legal position and particularly with a view to getting rid of the effect of the solicitor 's letter of July 15, which the plaintiff found it hard to explain away in the witness box.
Neither the trial court, which was entirely in favour of the plaintiff and which had accepted the letter as genuine, nor the appellate Court, which was entirely in favour of the defendant has placed implicit faith in the bona fides of this letter.
The lower appellate Court 867 is rather ironical about it, observing "This letter as it were stands in isolated glory.
There is no other letter.
There is no other conduct of the plaintiff which is consistent with this letter".
Without going into the controversy as to the genuineness or bona fldes of this letter, it can be said that the plaintiff 's attitude, as disclosed therein, was that he was prepared to take her back into the matrimonial home provided she wrote a letter to him expressing real repentance and confession of mistake.
This attitude of the plaintiff cannot be said to be unreasonable in the circumstances of the case.
He was more sinned against than sinning at the beginning of the controversy between the husband and the wife.
This brings us to a consideration of the three attempts alleged by the plaintiff to have been made by him to induce his wife to return to the matrimonial home when he made two journeys to Patan in 1948 and the third journey in April May, 1949, to Jalgaon.
These three visits are not denied by the defendant.
The only difference between the parties is as to the purpose of the visit and the substance of the talk between them.
That the plaintiff 's attachment for the defendant had not completely dried up is proved by the fact that when he came to know that she had been suffering from typhoid he went to Patan to see her.
On this occasion which was the second visit the plaintiff does not say that he proposed to her to come back and that she refused to do so.
He only says that she did not express any desire to come back.
That may be explained as being due to diffidence on her part.
But in respect of the first and the third visits the plaintiff states that on both those occasions he wanted her to come back but she refused.
On the other hand, the defendant 's version is that the purpose of his visit was only to take away the child and not to take her back to his home.
It is also the plaintiff 's complaint that the defendant never wrote any letter to him offering to come back.
The wife 's answer is that she did write a few letters before the solicitor 's letter was received by the father and that thereafter under her father 's advice she did not write 868 any more to the plaintiff.
In this connection it becomes necessary to examine the evidence of her cousin Babulal and her father Popatlal.
Her cousin, Babulal, who was a member of her father 's joint family, deposes that on receipt of the letter, exhibit A, a fortnight later he and his father, since deceased, came to Bombay and saw the plaintiff.
They expostulated with him and pleaded the defendant 's cause and asked the plaintiff to forgive and forget and to take her back.
The plaintiff 's answer was that he did not wish to keep his wife.
The defendant 's father 's evidence is to the effect that after receipt of the letter, exhibit A, he came to Bombay and saw the plaintiff 's father at his residence and protested to him that "a false notice had been given to us".
The plaintiff 's father is said to have replied that they "would settle the matters amicably" He also deposes as to his brother and his brother 's son having gone to the plaintiff.
He further states that he with his wife and the defendant went to Patan and saw the plaintiff 's mother and in consultation with her made arrangements to send her back to 'Bombay.
But before that could be done the telegram, exhibit B, and the letter, exhibit D, were received and consequently he gave up the idea of sending the defendant to Bombay without straightening matters.
Both these witnesses on behalf of the defendant further deposed to the defendant having done several times and stayed with the plaintiff 's family, particularly his mother at Patan along with the boy.
The evidence of these two witnesses on behalf of the defendant is ample corroboration of the defendant 's ,case and the evidence in court that she has all along been ready and willing to go back to the matrimonial home.
The learned trial Judge has not noticed this evidence and we have not the advantage of his comment on this corroborative evidence.
This body of evidence is in consonance with the natural course of events.
The plaintiff himself stated in the witness box that he had sent the solicitor 's ' letter by way of a shock treatment to the defendant 's family so that they might persuade his wife to come back to his matrimonial home.
The subsequent 869 telegram and letters (assuming that both the letters of the 13th and 15th November had been posted in the usual course and received by the addressees) would give a shock to the family.
Naturally thereafter the members of the family would be up and doing to see that a reconciliation is brought about between the husband and the wife.
Hence the visits of the defendant 's uncle and the father would be a natural conduct after they had been apprised of the rupture between them.
We therefore do not see any sufficient reasons for brushing aside all that oral evidence which has been believed by the Lower Appellate Court and had not in terms been disbelieved by the trial court.
This part of the case on behalf of the defendant and her evidence is corroborated by the evidence of the defendant 's relatives aforesaid.
It cannot be seriously argued that evidence should be disbelieved, because the witnesses happened to be the defendant 's relatives.
They were naturally the parties most interested in bringing about a reconciliation They were anxious not only for the welfare of the defendant but were also interested in the good name of the family and the community as is only natural in families like these which have not been so urbanised as to completely ignore the feelings of the community.
They would therefore be the persons most anxious in the interests of all the parties concerned to make efforts to bring the husband and the wife together and to put an end to a controversy which they con sidered to be derogatory to the good name and, prestige of the families concerned.
The plaintiff 's evidence, on the other hand, on this part of the case is uncorroborated.
Indeed his evidence stands uncorroborated in many parts of his case and the letters already discussed run counter to the tenor of his evidence in court.
We therefore feel inclined to accept the defendant 's case that after her leaving her husband 's home and after the performance of her cousin 's marriage she was ready and willing to go back to her husband.
It, follows from what we have said so far that the wife was not in desertion though she left her husband 's home without any fault on the part of the 870 plaintiff which could justify her action in leaving him, and that after the lapse of a few months ' stay at her father 's place she was willing to go back to her matrimonial home.
This conclusion is further supported by the fact that between 1948 and 1951 the defendant stayed with her mother in law at Patan whenever she was there, sometimes for months, at other times for weeks.
This conduct is wholly inconsistent with the plaintiff 's case that the defendant was in desertion during the four years that she was out of her matrimonial home.
It is more consistent with the defen dant 's attempts to.
get herself re established in her husband 's home after the rupture in May 1947 as aforesaid.
It is also in evidence that at the suggestion of her mother in law the defendant sent her three year old son to Bombay so that be might induce his ' ,father to send for the mother, The boy stayed in Bombay for about twenty days and then was brought.
back to Patan by his father as he (the boy) was unwilling to stay there without the mother.
, This was in August_September 1948 when the defendant deposes to having questioned her husband why she bad not been called back and the husband 's answer was evasive.
Whether or not this statement of the defendant is true, there can be no doubt that the defendant would not have allowed her little boy of about three years of age to be sent alone to Bombay except in the hope that he might be instrumental in bringing about a reconciliation between the father and the mother.
The defendant has deposed to the several efforts made by her mother in law and her father in law to intercede on her behalf with the plaintiff but without any result.
There is no explanation why the plaintiff could not examine his father and mother in corroboration of his case of continuous desertion for the statutory period by the defendant.
Their evidence would have been as valuable, if not more, as that of the defendant 's father and cousin as discussed above.
Thus it is not a case where evidence was not available in corroboration of the plaintiff 's case.
As the plaintiff 's evidence on many important aspects of the case 871 has remained uncorroborated by evidence which could be available to him, we must hold that the evidence given by the plaintiff falls short of proving his case of desertion by his wife.
Though we do not find that the essential ingredients of desertion have been proved by the plaintiff, there cannot be the least doubt that it was the defendant who had by her objectionable conduct brought about a rupture in the matrimonial home and caused the plaintiff to become so cold to her after she left him.
In view of our finding that the plaintiff has failed to prove his case of desertion by the defendant, it is not necessary to go into the question of animus revertendi on which considerable argument with reference to case law was addressed to us on both sides.
For the aforesaid reasons we agree with the Appellate Bench of the High Court in the conclusion at which they had arrived, though not exactly for the same reasons.
The appeal is accordingly dismissed.
But as the trouble started on account of the defendant 's con duct, though she is successful in this Court, we direct that each party must bear its own costs throughout.
Appeal dismissed.
| IN-Abs | The parties were married in 1942 and there was a child of the marriage.
In 1947 the appellant left for England on business and on his return to India discovered that this wife (respondent) bad been having amorous correspondence with one M, and taxed her with having developed intimacy with him.
She was unable to give any answer and went to her father 's place on May 24, 1947, on the pretext of the marriage of her cousin which was to take place in June.
On July 15, 1947, the appellant sent a notice to the respondent through his solicitor in which after mentioning the fact that she had, left against his wishes stated that he did not desire to keep her any ' longer under his care and protection, and desired her to send the minor son to him.
On July 4, 1951, the appellant instituted the suit for divorce under section 3(1)(d) of the Bombay Hindu Divorce Act, 1947, on the ground that the respondent had been in desertion ever since May 24, 1947, without reasonable cause and without his consent and against his will for a period of over four years.
The respondent 's case that it was the appellant who by his treatment of her after his return from England had made her life unbearable and compelled her to leave her marital home against her wishes, 'was not proved but there was evidence that after the solicitor 's notice dated July 15, 1947, was received by the respondent, attempts were made by her father and his relations to bring about reconciliation between the parties but they failed owing to the attitude of the appellant.
The question was whether the respondent had been in desertion, entitling the appellant to have a decree for divorce.
Held that, on the facts, though the initial fault lay with the respondent, her leaving her marital home was not actuated by any animus to desert her husband but as the result of her sense of guilt, and as subsequently she was willing to come back but could not do, so owing to the attitude of the appellant, there was no proof that she deserted him, much less that she bad harbored that animus for the statutory period, and the appellant 's case must fail.
The essential conditions for the offence of desertion, so far as the deserting spouse is concerned, are (i) the factum of separation and (ii) the intention to bring cohabitation permanently to an end 839 (animus deserendi); and as regards the deserted spouse the elements are (i) the absence of consent and (ii) absence of conduct giving reasonable cause to the spouse leaving the matrimonial home to form the necessary intention aforesaid.
Desertion is a matter of inference to be drawn from the facts and circumstances of each case and those facts have to be viewed as to the purpose which is revealed by those facts or by conduct and expression of intention, both anterior and subsequent to the actual act of separation.
In a suit for divorce on the ground of desertion the burden is on the plaintiff to prove that the deserting spouse has been in desertion throughout the statutory period of four years.
Thomas vs Thomas ([1924] P. 194), Bowron vs Bowron ([1925] P. 187), Pratt vs Pratt ([1939] A.C. 417) and Lang vs Lang ([1965] A.C. 402), referred to.
Quaere, whether the statutory period of four years specified in section 3(1)(d) should immediately precede the institution of the suit for divorce.
|
N: Criminal Appeal No. 403 of 1981.
841 From the judgment and order dated the 10th October, 1980 of Punjab & Haryana High Court in Crl.
A. No. 954 of 1979.
Sushil Kumar for the Appellant.
K.C. Bhagat and R.N. Poddar for the Respondents.
The Judgment of the Court was delivered by SEN, J.
The short point involved in this appeal is whether the appellant is guilty of culpable homicide amounting to murder punishable under section 302, Indian Penal Code, or only of culpable homicide not amounting to murder punishable under section 304, Part II, Indian Penal Code (hereinafter called 'the Code ').
It is not disputed that the appellant, Jagrup Singh, struck a blow with the blunt side of a gandhala on the head of the deceased, Chanan Singh, who was his uncle, resulting in his death.
It appears that after the death of Joginder Singh, the deceased Chanan Singh was looking after the family of his brother, Joginder Singh consisting of his widow Mst.
Dalip Kaur and her children.
He had settled the betrothal and marriage of Mst.
Dalip Kaur 's daughter, Tej Kaur.
The prosecution case is that the appellant Jagrup Singh and his brothers, Billaur Singh, Jarmail Singh and Waryam Singh, co accused, although they were collaterals of Joginder Singh, were not invited by Mst.
Dalip Kaur to the marriage of her daughter Tej Kaur, at the instance of the deceased Chanan Singh.
On account of this, there was ill feeling between the parties.
On the fateful evening, i.e. On 20.3.1978, at 5.15 p.m. the marriage of Tej Kaur was performed.
It is alleged that shortly thereafter, the appellant Jagrup Singh armed with a gandhala, his brothers Billaur Singh armed with a gandasa and Jarmail Singh and Waryam Singh armed with lathis emerged suddenly and made a joint assault on the deceased Chanan Singh and the three eyewitnesses, Gurdev Singh, PW 10, Sukhdev Singh, PW 11 and Makhan Singh, PW 12.
The deceased along with the three eye witnesses was rushed to the Rural Dispensary, Rori where they were examined at 6 p.m by Dr. Bishnoi, PW 3, who found that the deceased had a lacerated wound 9cm x 1/2cm bone deep on the right parietal region, 9 cm away from the tip of right pinna; margins of wound were red, irregular and were bleeding on touch; direction of wound was anterior posterior.
The deceased was in a serious condition and, therefore, he was referred by Dr Bishnoi to the Civil Hospital, Sirsa, where he died on the morning of 21.3.1978 at 2.10 a.m. 842 Dr. Karan Singh, Senior Medical officer, Civil Hospital, Sirsa, PW 1, performed an atopsy on the dead body of the deceased.
He found the following external injuries: A stitched contused wound 9 1/2 cm long situated on right side of the head, 9 cm above the top of pinna and 9 cm above the eye brow.
Skull deep, direction anterio posterior.
On dissection, he found the following internal injury: A fracture line running starting from the lower and the anterior part of parietal bone injuring the middle meningeal artery near its entrance into the skull and traversing medially across the base of right middle fossa, crossing the mid line and extending slightly to the left of mid line.
There was a dark red haemotoma (extra dural) 3" 2x3" overlying the parietal and temporal lobes of brain on right side and the area was compressed.
In his opinion, the death of the deceased was due to cerebral compression as a result of the head injury which was sufficient in the ordinary course of nature to cause death.
He High Court of Punjab and Haryana, agreeing with the Additional Sessions Judge, Sirsa, held that the appellant struck a blow on the head of the deceased with the blunt side of the gandhala with the intent of causing such bodily injury which was sufficient in the ordinary course of nature to cause death and that being so, the appellant was guilty of culpable homicide amounting to murder punishable under section 302 of the Code.
In assailing the conviction, learned counsel for the appellant contends that the appellant having struck a solitary blow on the head of the deceased with the blunt side of the gandhala, can be attributed with the knowledge that it would cause an injury which was likely to cause death and not with any intention to cause the death of the deceased.
The offence committed by the appellant, therefore amounted to culpable homicide not amounting to murder, punishable under section 304, Part Ir of the Code.
He further contends, in the alternative, that there could be no doubt that the appellant acted in the heat of the moment when he bit the deceased and is, therefore, entitled to the benefit of Exception of section 300 of the Code.
On the other hand.
Learned counsel for the State contends that the matter 843 squarely falls within Clause Thirdly of section 300 of the Code.
He A submits that merely because the appellant rendered a solitary blow with the blunt side of the gandhala on the head would not necessarily imply that the offence amounted to culpable homicide not amounting to murder punishable under section 304, Part II of the Code.
There is no justification for the assertion that the giving of a solitary blow on a vital part of the body resulting the death must always necessarily reduce the offence to culpable homicide not amounting to murder punishable under section 304, Part II of the Code.
If a man deliberately strikes another on the head with a heavy log of wood or an iron 'rod or even a lathi so as to cause a fracture of the skull, he must, in the absence of any circumstances negativing a the presumption, be deemed to have intended to cause the death of the victim or such bodily injury as is sufficient to cause death.
The whole thing depends upon the intention to cause death, and the case may be covered by either Clause Firstly or Clause Thirdly.
The nature of intention must be gathered from the kind of weapon used, the part of the body hit, the amount of force employed and the circumstances attendant upon the death.
The ingredients of Clause Thirdly of section 300 of the Code were brought out by Vivian Bose, J. in Virsa Singh vs State of Punjab in his terse language: "To put it shortly, the prosecution must prove the following facts before it can bring a case under section 300 "3rdly".
First, it must establish, quite objectively, that a bodily injury is present; Secondly, the nature of the injury must be proved.
These are purely objective investigations.
Thirdly, it must be proved that there was an intention to inflict that particular bodily injury, that is to say, that it was not accidental or unintentional, or that some other kind of injury was intended.
Once these three elements are proved to be present, the enquiry proceeds further and, 844 Fourthly, it must be proved that the injury of the type just described made Up of the three elements set out above is sufficient to cause death in the ordinary course of nature.
This part of the enquiry is purely objective and inferential and has nothing to do with the intention of the offender".
The learned Judge explained the third ingredient in the following words: The question is not whether the prisoner intended to inflict a serious injury or a trivial one but whether he intended to inflict the injury that is proved to be present.
If he can show that he did not, or if the totality of the circumstances justify such an inference, then, of course, the intent that the section requires is not proved.
But if there is nothing beyond the injury and the fact that the appellant inflicted it, the only possible inference is that he intended to inflict it.
Whether he knew of its seriousness, or intended serious consequences, is neither here nor there.
The question, so far as the intention is concerned, is not whether he intended to kill, or to inflict an injury of a particular degree of seriousness, but whether he intended to inflict the in jury in question; and once the existence of the injury is proved the intention to cause it will be presumed unless the evidence or the circumstances warrant an opposite conclusion.
These observations of Vivian Bose, J. have become locus classicus.
The test laid down in Virsa Singh 's case (supra) for the applicability of Clause Thirdly is now ingrained in our legal system and has become part of the rule of law.
Under Clause Thirdly of section 300 of the Code, culpable homicide is murder if both the following conditions are satisfied: (a) that the act which causes death is done with the intention of causing a bodily injury; and (b) that the injury intended to be inflicted is sufficient in the ordinary course of nature to cause death.
It must be proved that there was an intention to inflict that particular bodily injury which, in the ordinary course of nature, was sufficient to cause death, viz. that the injury found to be present was the injury that was intended to be inflicted.
The decision in Virsa Singh 's case (supra) has throughout been followed as laying down the guiding principles.
The decisions 845 are too numerous and we may notice only two of them: Gudur Dusadh vs State of Bihar and Chahat Khan vs State of Haryana.
In Gudur Dusadh 's case, the day before the occurrence, the accused had killed a goat and on the advice of the deceased, the complainant lodged a report.
On the next morning, while the deceased was returning from his fields along with his son, they were assaulted by the accused persons who had been hiding on the route.
Thereafter, the accused set fire to the hut of the deceased.
On these facts it was held that the act of the accused who had waylaid the deceased was a pre meditated act, and, therefore, the accused had the necessary intention to commit murder.
In Chahat Khan 's case also, the deceased was waylaid by the accused who were armed with lathis.
That case is destructive of the theory that a solitary blow on the head reduces the offence to culpable homicide not amounting to murder punishable under section 304, Part II.
From the evidence it emerged that the accused had both gun and a lathi, and he made full use of the lathi by using both the hands and struck a blow on the head of the deceased with sufficient force.
The solitary blow with the lethi was sufficient in the ordinary course of nature to cause his death, and there was no occasion for using the gun which was hanging on his shoulders.
Both these cases fell within Clause Thirdly as there was clear intention to cause such bodily injury which in the ordinary course of nature was sufficient to cause death.
Looking at the totality of the evidence, it would not be possible to come to the conclusion that when the appellant struck the deceased with the blunt side of the gandhala, he intended to cause such bodily injury as was sufficient in the ordinary course of nature to cause death.
A gandhala is a common agricultural implement consisting of a flat, rectangular iron strip, three sides of which are blunt, embedded in a wooden handle.
The length of the iron strip is in continuation of the wooden handle and the end portion is sharp, which is used to dig holes in the earth to set up fencing on embankments in the field.
If a man is hit with the blunt side on the head with sufficient force, it is bound to cause, as here, death.
There can be no doubt that it was used with certain amount of force because there was cerebral compression.
But that by itself is not sufficient to raise an inference that the appellant intended to cause such bodily injury as was sufficient to cause death.
He could only be attributed with the knowledge that it was likely to cause an injury which was 846 likely to cause the death.
The matter, therefore, does not fall within Clause Thirdly of section 300 of the Code.
In Chamru Budhwa vs State of Madhya Pradesh in somewhat similar circumstances, where there was exchange of abuses between the two parties both of whom were armed with lathis, they came to blows and in the course of the fight that ensued, the accused struck a lathi blow on the head of the deceased which caused a fracture of the skull resulting in the death.
In view of the fact the accused had given only one blow in the heat of the moment, it was held that all that can be said was that he had given the blow with the knowledge that it was likely to cause death and, therefore, the offence fell under section 304, Part II of the Code.
In Willie (Williams) Slaney vs State of Madhya Pradesh there was, as here, a sudden quarrel leading to an exchange of abuses and in the heat of the moment a solitary blow with a hockey stick had been given on the head.
The court held that the offence amounted to culpable homicide not amounting to murder punishable under section 304, Part II.
At this stage, we think, it desirable to refer to two other decisions in Harjinder Singh (alias Jinda) vs Delhi Admn.
and Lakshman Kalu Nikalje vs State of Maharashtra, where the court, relying upon the principles enunciated by Vivian Bose, J. in Virsa Singh 's case (supra), excluded the application of Clause Thirdly, because the third ingredient laid down, viz. the intention to cause the particular injury which was likely to cause death, was not present.
In Harjinder Singh 's case (supra) there was a sudden commotion when the accused took out a knife and stabbed the deceased who intervened in a fight.
At this stage, the deceased was in a crouching position presumably to intervene and separate the two persons fighting.
It could not, therefore, be said with any definiteness that the accused aimed a blow at a particular part of the thigh that it would cut the femoral artery which would result in the death of the deceased.
It was, therefore, not possible to apply Clause Thirdly of section 300 of the Code.
In Laxman Kalu Nikalje 's case (supra) there was a sudden quarrel and the accused lost his temper and whipped out a knife and gave one blow.
Although it was given on the chest, 847 it was not on a vital part of the chest and but for the fact that the knife cut the auxiliary artery, death might not have ensued.
In the present case, there is no doubt that there was a sudden quarrel and the appellant assaulted the deceased with the blunt side of the gandhala on the head in the heat of the moment.
What actually was the immediate cause for the assault by the appellant on the deceased at the marriage ceremony of Tej Kaur, is not clear.
The genesis of the quarrel resulting in the head injury to the deceased is not known.
The prosecution came with a positive case that the appellant, together with his three brothers, who had not been invited to the marriage of Tej Kaur by Mst.
Dalip Kaur at the instigation of deceased Chanan Singh, came armed with different weapons to teach the deceased a lesson.
But the prosecution has failed to examine Mst.
Dalip Kaur and the defence version is that the appellant and his brothers had been invited to the marriage of Tej Kaur by Mst.
Dalip Kaur.
In view of these infirmities in the prosecution case, the High Court was constrained to observe: In the absence of any specific and positive evidence whether oral or documentary, it is not possible to arrive at any positive conclusion that this circumstance furnished any motive for the accused to attack Chanan Singh (deceased) and three other prosecution witnesses.
After a careful perusal of the entire prosecution evidence, it appears more probable that the accused had also joined in the marriage as the collaterals, but something happened on the spur of the moment which resulted in the infliction of injury by Jagrup Singh on the person of Chanan Singh which resulted into his death.
In the first information report, it had not been disclosed, as was subsequently made out at the trial, that the accused had come from the house of Jarmail Singh, accused, armed with weapons.
(emphasis supplied) In our judgment, the High Court having held that it was more probable that the appellant Jagrup Singh had also attended the marriage as the collateral, but something happened on the spur of the moment which resulted in the infliction of the injury by Jagrup Singh on the person of the deceased Chanan Singh which resulted in his death, manifestly erred in applying Clause Thirdly of section 300 848 of the Code.
On the finding that the appellant when he struck the deceased with the blunt side of the gandhala in the heat of the moment, without pre meditation and in a sudden fight, the case was covered by Exception 4 to section 300.
It is not suggested that the appellant had taken undue advantage of the situation or had acted in a cruel or unusual manner.
Thus, all the requirements of Exception 4 are clearly met.
That being so, the conviction of the appellant Jagrup Singh, under section 302 of the Code cannot be sustained.
The result, therefore, is that the conviction of the appellant under section 302 is altered to one under section 304, Part II of the Indian Penal Code.
For the altered conviction, the appellant is sentenced to suffer rigorous imprisonment for a period of seven years.
P.B.R Appeal allowed.
| IN-Abs | The appellant and the deceased were collaterals.
On the death of his brother, the deceased was looking after the affairs of his brother 's wife and children.
Some while before on the day of occurrence, the deceased attended the marriage of his brother 's daughter.
The prosecution case against the appellant was that he nursed a grievance against the deceased that it was he who induced his sister in law not to invite him, (the appellant) and his brothers to the marriage and incensed by such insult he wanted to teach the deceased a lesson.
After the marriage, armed with a gandhala (a common agricultural implement with a flat, rectangular iron strip with three sides blunt, embedded in a wooden handle which is used for digging holes) the appellant and his brothers emerged suddenly and in a joint assault the appellant struck a blow on the head of the deceased with the blunt side of the gandhala.
The Sessions Judge held that the appellant struck the blow on the head with intent to cause such bodily injury as was sufficient in the ordinary course of nature to cause death and that, therefore, he was guilty of culpable homicide amounting to murder punishable under section 302 I.P.C. Affirming the conviction and sentence the High Court was of the view that there was no specific and positive evidence as to the motive for the murder but that it was more probable that the accused had joined the marriage and that "something happened on the spur of the movement", which resulted in the infliction of the injury leading to the death of the deceased.
In appeal it was contended that the offence amounted to culpable homicide not amounting to murder punishable under section 304 part II I.P.C. because all that could be attributed to the appellant was knowledge that a blow struck on the head with the blunt side of the gandhala would cause an injury, which was likely to cause death but that in any event when he struck the blow he could not be attributed with intention to cause death.
Allowing the appeal, ^ HELD: The appellant having been found to have struck the deceased with the blunt side of the gandhala in the heat of the moment without premeditation 840 and in a sudden fight all the requirements of Exception 4 to section 300 are met.
Having held that it was more probable that the appellant had also attended the marriage but that something had happened on the spur of the moment resulting in the infliction of the injury and eventual death of the deceased the High Court erred in applying clause.
Thirdly of section 300.
Giving a solitary blow on a vital part of the body resulting in death cannot always necessarily reduce the offence to culpable homicide not amounting to murder punishable under section 304 part II of the Code.
If a man deliberately struck another on the head with a heavy log or an iron rod or a lathi so as to cause a fracture of the skull, in the absence of any circumstances negativing the presumption, he must be deemed to have intended to cause death or such bodily injury as is sufficient to cause death.
The intention must be gathered from the kind of weapon used, the part of the body hit, the amount of force employed and the circumstances attendant upon death.
[843 B C] Under clause Thirdly of section 300 culpable homicide is murder if the act which causes death is done with intention of causing a bodily injury and that injury is sufficient in the ordinary course of nature to cause death i.e. the injury found was one that was intended to be inflicted.
[844 F G] Virsa Singh vs State of Punjab ; at 1503 applied.
Gudur Dusadh vs State of Bihar , Chahat Khan vs State of Haryana, A.I.R. 1972 S.C. 2574, Chamru Budhwa vs State of Madhya Pradesh, A.I.R. 1954 section C. 652, Willie (Williams) Slaney vs State Of Madhya Pradesh ; , Harjinder Singh (alias Jinda) vs Delhi Admn. ; & Lakshman Kalu Nikalje vs State of Maharashtra ; referred to.
In the instant case the genesis of the quarrel was not known.
The prosecution alleged that the appellant and his brothers had a grouse against the deceased and that they went to the marriage armed with weapons to teach the deceased a lesson.
The defence version, on the other hand, was that they were invited to the marriage.
In a controversy of such a nature the prosecution should have examined the sister in law of the deceased who was a material witness to ascertain the truth, failure to do which made the prosecution case infirm.
[847 B C] Secondly when the appellant struck a blow with blunt side of the gandhala it could not be said that he intended to cause such bodily injury as was sufficient in the ordinary course of nature to cause death.
If a man is hit with the blunt side on the head with sufficient force it is bound to cause death.
The fact that the gandhala was used with sufficient force was not by itself sufficient to raise an inference that the appellant intended to cause such bodily injury as was sufficient to cause death.
He could only be attributed with the knowledge that it was likely to cause an injury which was likely to cause death.
Therefore, the case does not fall within clause Thirdly of section 300 I.P.C [845 E H]
|
N: Criminal Appeal No. 520, of 1976.
Appeal by Special Leave from the judgment and order dated the 17th September, 1975 of the Delhi High Court in Criminal Misc.
(M) 212 of 1974 D. Mukherjee, and O.P. Sharma for the Appellant.
P.R. Mridul, B.P. Mridul, B.P. Maheshwari and Suresh Sethi for the Respondents.
The Judgment of the Court was delivered by SEN, J.
This appeal by special leave from a judgment of the Delhi High Court upholding an order of the Metropolitan Magistrate, Delhi, raises a question of some public importance.
The question is as to whether the appellant, who is a member of the Indian Administrative Service, and whose services were placed at the disposal of the Cooperative Store Ltd., a society registered under the Bombay Cooperative Societies Act, 1925 (hereinafter called the Society), was a public servant within the meaning of cl.
Twelfth of section 21 of the Indian Penal Code, 1860, for purposes of section 197 of the Code of Criminal Procedure, 1973.
The question arises in this way.
The appellant is a member of the Indian Administrative Service.
By notification No. 27 942 Estt. 1, dated 23rd April, 1972, issued by the Government of India in the Ministry of Agriculture (Department Agriculture), the services of the appellant, who was a Joint Commissioner (State Liaison) in that Ministry, were placed at the disposal of the Department for his appointment as the General Manager, Super Bazaar, Connaught Place, New Delhi with effect from April 7, 1972, on which date he took over charge as General Manager.
At the request of the Managing Committee of the Society, the Government of India extended the period of his deputation for a further period of one year with effect from April 7, 1973.
On completion 867 of his period of deputation, the appellant reverted as Joint Secretary in the Ministry of Agriculture.
On October 10, 1973, the Food Inspector purchased a sealed bottle of honey from the Super Bazaar at the INA Market.
The Public Analyst 's report showed the honey to be adulterated.
On April 5, 1974, the Municipal Corporation, Delhi, filed a complaint against the appellant and other officials of the Super Bazaar as also against the manufacturer of honey for having committed an offence punishable under section 7 read with section 16 of .
On being summoned by the Metropolitan Magistrate, Delhi, to appear before him as an accused, the appellant raised a preliminary objection that the taking of cognizance of the alleged offence by the Magistrate was barred under section 197 of the Code of Criminal Procedure, 1973, for want of sanction of the Central Government, since the act complained of was nothing but an act done by him in the discharge of his duties as a public servant.
The Metropolitan Magistrate, Delhi, by his order dated October 9, 1974, rejected the objection, holding that the appellant, at the time of commission of the alleged offence, was not a public servant within the meaning of cl.
Twelfth of section 21 of the Indian Penal Code and, therefore, he was competent to take cognizance of the alleged offence.
In coming to that conclusion, the learned Magistrate held that the services of the appellant having been placed at the disposal of the Society, he was in foreign service under FR 9 (7) and, therefore, could not be regarded as a public servant within the meaning of cl.
Twelfth of section 21 of the Indian Penal Code for two reasons, namely: (a) as the General Manager, he was not an officer in the service or pay of the Government, and (b) while functioning as General Manager, he was not employed in connection with the affairs of the Union.
On appeal, the High Court confirmed the view of the learned Magistrate.
The short question that falls for our determination in this appeal is whether a member of the Indian Administrative service, whose services are placed at the disposal of an organisation which is neither a local authority, nor a corporation established by or under a Central, Provincial or State Act, nor a Government Company, by the Central Government or the Government of a State, can be treated to be a 'public servant ' within the meaning of cl.
Twelfth of section 21 of the Indian Penal Code for purposes of section 197 of 868 the Code of Criminal Procedure, 1973.
The answer to the question turns on the construction of cl.
Twelfth of section 21 of the Indian Penal Code, 1860 and section 197 of the Code of Criminal Procedure, 1973, which, so far as they are relevant, are as follows: 21.
The words 'public servant ' denote a person falling under any of the descriptions hereinafter following, namely: Twelfth: Every person (a) in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government; (b) in the service or pay of a local authority, a corporation established by or under a Central, Provincial or State Act or a Government company as defined in section 617 of the .
section 197 Prosecution of Judges and public servants.
(1) When any person who is or was a Judge or Magistrate or a public servant not removable from his office save by or with the sanction of the Government is accused of any offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duty, no Court shall take cognizance of such offence except with the previous sanction: (a) in the case of a person who is employed or, as the case may be, was at the time of commission of the alleged offence employed, in connection with the affairs of the Union, of the Central Government; In support of the appeal, learned counsel for the appellant has urged two grounds.
The first is that the chain of Departmental Stores known as Super Bazaar at Connaught Place, New Delhi, together with 12 other super bazaars in the metropolitan city of Delhi, including the one at the INA market, is nothing but a com 869 mercial activity of the Central Government and, therefore, the appellant was, at the time of the, commission of the alleged offence, employed in connection with the affairs of the Union.
That being so, the prosecution could not be launched without sanction from the Central Government under section 197 of the Code of Criminal Procedure, 1973.
The second is that the Cooperative Store Limited which runs the super bazaars, having been registered under section 10 of the Bombay Cooperative Societies Act, 1925, was a body corporate by virtue of section 23 of that Act and, therefore, the appellant was a public servant within the meaning of cl.
Twelfth of section 21 of the Indian Penal Code.
It is said that although the appellant may not be covered by sub cl.
(a), he falls within the ambit of sub cl.
(b) of cl.
Twelfth.
We find it difficult to accept these submissions.
Clause Twelfth of section 21 of the Indian Penal Code protects two classes of public servants, viz., (a) every person in the service or pay of the Government or remunerated by fees or commission for the performance of any public duty by the Government, and (b) every person in the service or pay of a local authority, a corporation established by or under a Central, Provincial or State Act or a Government company as defined in section 617 of the .
The appellant does not answer any of these descriptions.
During his period of deputation, he was not an officer in the service or pay of the Government, nor was he in the service of a local authority, a corporation established by or under an Act or a Government company.
It is, however, urged that the expression 'corporation ' appearing in sub cl.
(b) of cl.
Twelfth of section 21 of the Indian Penal Code is wide enough to include not only a corporation established by or under a Central, Provincial or State Act, but also a body corporate.
The submission proceeds on the basis of section 23 of the Bombay Cooperative Societies Act, 1925, which reads: 23.
The registration of a society shall render it a body corporate by the name under which it is registered, with perpetual succession and a common seal, and with power to hold property, to enter into contracts, to institute and defend suits and other legal proceedings and to do all things necessary for the purposes of its constitution.
Clause Twelfth does not use the words "body corporate", and the question is whether the expression "corporation" contained therein, taken in collocation of the words "established by or under a Central, Provincial or State Act" would bring within its sweep a cooperative 870 society.
Indubitably, the Cooperative Store Limited is not a corporation established by a Central or State Act.
The crux of the matter is whether the word 'under ' occurring in cl.
Twelfth of section 21 of the Indian Penal Code makes a difference.
Does the mere act of incorporation of a body or society under a Central or a State Act make it a corporation within the meaning of cl.
Twelfth of section 21? In our opinion, the expression 'corporation ' must, in the context, mean a corporation created by the Legislature and not a body or society brought into existence by an act of a group of individuals.
A cooperative society is, therefore, not a corporation established by or under an Act of the Central or State Legislature.
A corporation is an artificial being created by law having a legal entity entirely separate and distinct from the individuals who compose it with the capacity of continuous existence and succession, notwithstanding changes in its membership.
In addition, it possesses the capacity as such legal entity of taking, holding and conveying property, entering into contracts, suing and being sued, and exercising such other powers and privileges as may be conferred on it by the law of its creation just as a natural person may.
The following definition of corporation was given by Chief Justice Marshall in the celebrated Dartmouth College case : A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law.
Being the mere creature of law, it possesses only these properties which the charter of its creation, confers upon it, either expressly or as incidental to its very existence.
These are such as are supposed best calculated to effect the object for which it was created.
Among the most important are immortality, and, if the expression may be allowed, individuality; proper ties, by which a perpetual succession of many persons are considered as the same, and may act as a single individual.
They enable a corporation to manage its own affairs, and to hold property, without the perplexing intricacies, the hazardous and endless necessity, of perpetual conveyances for the purpose of transmitting it from hand to hand.
It 871 is chiefly for the purpose of clothing bodies of men, in A succession, with these qualities and capacities, that corporations were invented, and are in use.
By these means, a perpetual succession of individuals are capable of acting for the promotion of the particular object, like one immortal being.
The term 'corporation ' is, therefore, wide enough to include private corporations.
But, in the context of cl.
Twelfth of section 21 of the Indian Penal Code, the expression 'corporation ' must be given a narrow legal connotation.
Corporation, in its widest sense, may mean any association of individuals entitled to act as an individual.
But that certainly is not the sense in which it is used here.
Corporation established by or under an Act of Legislature can only mean a body corporate which owes its existence, and not merely its corporate status, to the Act.
For example, a Municipality, a Zilla Parishad or a Gram Panchayat owes its existence and status to an Act of Legislature.
on the other hand, an association of persons constituting themselves into a Company under the or a Society under the Societies Registration Act owes its existence not to the Act of Legislature but to acts of parties though, it may owe its status as a body corporate to an Act of Legislature.
There is a distinction between a corporation established by or under an Act and a body incorporated under an Act.
The distinction was brought out by this Court in Sukhdev Singh & ors.
vs Bhagatram Sardar Singh Raghuvanshi & ors.
It was observed: A company incorporated under the is not created by the but comes into existence in accordance with the provisions of the Act.
There is thus a well marked distinction between a body created by a statute and a body which, after coming into existence, is governed in accordance with the provisions of a statute.
In Sabhajit Tewary vs Union of India and ors the question arose whether the Council of Scientific and Industrial Research which was a society registered under the Societies Registration Act, was a statutory body.
It was 872 urged that because the Council of Scientific and Industrial Research had government nominees as the President of the body and derived guidance and financial aid from the Government, it was a statutory body.
Repelling the contention, the Court observed: The Society does not have a statutory character like the Oil and Natural Gas Commission, or the Life Insurance Corporation or Industrial Finance Corporation.
It is a society incorporated in accordance with the provisions of the Societies Registration Act.
The fact that the Prime Minister is the President or that the Government appoints nominees to the Governing Body or that the Government may terminate the membership will not establish anything more than the fact that the Government takes special care that the promotion, guidance and co operation of scientific and industrial research, the institution and financing of specific researches, establishment or development and assistance to special institutions or departments of the existing institutions for scientific study of problems affecting particular industry in a trade, the utilisation of the result of the researches conducted under the auspices of the Council towards the development of industries in the country are carried out in a responsible manner.
Whatever has been said with regard to the Council of Scientific and Industrial Research, which was a society registered under the Societies Registration Act, equally applies to the Cooperative Store Limited, which is a society registered under the Bombay Cooperative Societies Act, 1925.
It is not a statutory body because it is not created by a statute.
It is a body created by an act of a group of individuals in accordance with the provisions of a statute.
The Super Bazaar at Connaught Place together with its 12 branches in Delhi, is not an instrumentality of the State.
In a welfare State like ours, there is greater participation by Government in various commercial activities.
Some times the Government directly engages itself in such commercial activities by acquiring a monopoly in trade in the public interest.
Or it may, by an Act of Legislature, establish statutory corporations like the State Trading Corporation, Life Insurance Corporation of India, the Industrial Finance Corporation, the Oil and Natural Gas Commission etc.
, or it may set up Government companies under section 617 of the , like the Hindustan Steel Limited etc.
By no stretch of imagination, could it be said that the appellant was employed in connection with the 873 affairs of the Union within the meaning of section 197 of the Code of Criminal Procedure, 1973.
The Super Bazaars are not owned by the Central Government.
They are owned and managed by the Cooperative Store Limited.
Pursuant to an agreement executed between the Cooperative Store Limited and the Union of India, the Central Government has advanced a loan of Rs. 40,00,000/ to the Society for establishment and management of the Super Bazaars, and the Central Government also holds more than 97% shares in the total share holding of the Society.
Clause 6 of the Agreement provides: That the incumbents of supervisory and other key posts including those of General Manager, Deputy General Manager, Finance Manager, Asst.
General Manager, Purchase Manager, Sales Manager and Accounts Manager, by whatever other designation they may be known shall not be appointed or removed from their posts by the Debtor except with the prior approval of the Creditor in writing.
The Super Bazaar at Connaught Place and at various other places are run by the Cooperative Store Limited under the control of the Ministry of Agriculture (Department of Cooperation).
The incumbents of supervisory and other key posts including that of the General Manager cannot be appointed or removed without the prior approval of the Central Government.
The whole purpose of cl. 6 of the Agreement in the matter of appointment of General Manager and other incumbents holding key posts is to safeguard interests of the Central Government.
Legally speaking, the Super Bazaars are owned and managed by the Society and not by the Central Government and, therefore, the appellant was not employed in connection with the affairs of the Union within the meaning of section 197 of the Code of Criminal Procedure, 1973.
Explanation to r. 2 (a) of the All India Services (Conduct) Rules, 1968 and r. 2 (c) of the All India Services (Discipline and Appeal) Rules, 1969, on which reliance was placed, can be of no avail.
Explanation to r. 2 (a) enlarges the meaning of the expression "serving in connection with the affairs of the Union or in connection with the affairs of the State".
It provides that a member of the Service whose services are placed at the disposal of a company, corporation or other organisation or a local authority by the Central Government or the Government of a State.
shall.
for the 874 purpose of those rules, be deemed to be a member of the Service serving in connection with the affairs of the Union or in connection with the affairs of the State, as the case may be, notwithstanding that his salary is drawn from the sources other than the Consolidated Fund of India or the Consolidated Fund of that State.
The legal fiction contained in Explanation to r. 2 (a), is for a limited purpose.
This is evident by the use of the words "for purposes of these rules".
Rule 2 (c) of the All India Services (Discipline and Appeal) Rules, 1969 defines Government to mean (i) in the case of a member of the Service serving in connection with the affairs of a State, or who is deputed for service in any company, association or body of individuals whether incorporated or not, which is wholly or substantially owned or controlled by the Government of a State, or in a local authority set up by an Act of Legislature of a State, the Government of that State; and (ii) in any other case, the Central Government.
That again is for purposes of these rules.
These provisions cannot be pressed into service for improving upon the language of cl.
Twelfth of section 21 of the Indian Penal Code, 1860.
Before parting with the case, we would like to advert to one aspect.
It is common ground that the honey in question was sold in a sealed container bearing the manufacture 's warranty as to quality as required under r. 12 A of the Prevention of Adulteration Rules, 1955.
That being so, the learned Magistrate shall first determine whether or not the appellant was protected under section 19 (2) of the .
Subject to this observation, the appeal fails and is dismissed.
There shall be no order as to costs.
P.B.R. Appeal dismissed.
| IN-Abs | The services of the appellant, a Member of Indian Administrative Service, were placed at the disposal of the Co operative Store Ltd. for being appointed as the General Manager of the Super Bazaars run by the Co operative Store.
On a complaint being filed against the appellant for commission of alleged offence punishable under section 7 read with section 16 of the before the Metropolitan Magistrate Delhi the appellant contended that he was a public servant within the meaning of clause Twelfth of section 21 of the Penal Code, that the act complained of was done by him in the discharge of his duties as a public servant and that since, as required by section 197, Cr.
P.C., previous sanction of the Central Government had not been obtained the court was not competent to take cognizance of the offence.
The Magistrate rejected all these contentions.
He held that the appellant could not be regarded as a public servant within the meaning of clause Twelfth of section 21 and that at the relevant time he was neither in the service or pay of the Government nor was he employed "in connection with the affairs of the Union".
The High Court, on appeal, upheld tho view of the Magistrate.
Before this Court it was contended that the term "corporation" used in clause Twelfth of section 21 is wide enough to include not merely a statutory corporation but also a body corporate such as the Cooperative Stores 865 established under the State Act like the Bombay Cooperative Societies Act, 1925 and that as General Manager he was employed in connection with the affairs of the Union by reason of the fact that the Central Government had advanced a huge loan to the Society for carrying on commercial activities.
Dismissing the appeal, ^ HELD: The appellant does not answer any of the essential requirements of clause Twelfth of section 21 I.P.C. He was neither an officer in the service or pay of the Government nor of a local authority, a corporation established by or under an Act or a Government company.
[869 D] Mere incorporation of a society under a Central or State Act does not make a body a corporation within the meaning of clause Twelfth of section 21.
The expression "corporation" must, in the context, mean a corporation created by the legislature and not a body or society brought into existence by an act of a group of individuals.
A cooperative society is, therefore, not a corporation established by or under an Act of the Central or State legislature.
[870 B] Corporation in its widest sense may mean any association of individuals entitled to act as an individual.
But that is not the sense in which it is used in clause Twelfth of section 21.
There is a well marked distinction between a body created by a statute and a body which, after coming into existence, is governed in accordance with the provisions of a statute.
A corporation established by or under an Act of legislature can only mean a body corporate which owes its existence, and not merely its corporate status to the Act.
An association of persons constituting themselves into a company under the Companies Act or a society under Societies.
Registration Act owes its existence not to the Act of legislature but to acts of parties though it may owe its status as a body corporate to an Act of the legislature.
[871 C G] In the instant case the Cooperative Society was a society registered under the Bombay Cooperative Societies Act.
It is not a body created by a statute but a body created by an act of a group of individuals in accordance with the provisions of the statute.
[872 F] Nor did the fact that the Central Government had advanced a huge loan to the Society and held major shares in the total shareholding of the Society make the Super Bazaars run by the Society an instrumentality of the State and the appellant "employed in connection with the affairs of the Union" within the meaning of section 197, Cr.
P.C. [872 H 873 B] The clause in the agreement advancing the loan to the Society which provided that the General Manager and other important incumbents of key posts shall not be appointed or removed from their posts by the Society except with the prior approval of the Government in writing was merely incorporated to safeguard the interests of the Central Government.
Legally the Super Bazaars were owned and managed by the Society and not by the Central Government [873 E F] Explanation to rule 2 (a) of the All India Services (Conduct) Rules, 1968 which provides that a member of the services whose services were Placed at the 866 disposal of any organisation by the Central Government shall, for the purposes of these rules, be deemed to be a member of the service serving in connection with the affairs of the Union notwithstanding that his salary is drawn from sources other than the Consolidated Fund of India serves a limited purpose, that is, "for the purposes of these Rules".
Similarly rule 2(c) of the All India Services (Discipline and Appeal) Rules, 1969 is for the purposes of these Rules.
These two Rules could not be pressed into service for improving the language of clause Twelfth of section 21 of the Penal Code.
[873 G, 874 D]
|
Civil Appeal No. 1108 of 1976.
Appeal by special leave from the judgment and order dated the 17th April 1976 of the Madhya Pradesh High Court in Second Appeal No. 113 of 1969.
S.K. Mehta, P.N. Puri and E.M.S. Anam for the Appellants.
P.P. Juneja for the Respondent.
The following Judgments were delivered DESAI, J. A tenant under a decree of eviction is the appellant in this appeal by special leave.
609 Respondent landlord filed a suit for recovery of possession of premises being a small shop admeasuring 7 'X 22 ' forming part of a big non residential building situated in Sadar Bazar, Bilaspur town in Madhya Pradesh on two grounds, to wit: (i) that he (landlord) intended to open a medicine shop and he had no other reasonably suitable accommodation for the same in the town; and (ii) that he (landlord) required the suit building for the purpose of reconstruction and repairs which could not be carried out unless it was vacated by the defendant.
The tenant resisted the suit pointing out that the landlord on his own admission as set out in plaint para 4 was in possession of a major portion of a non residential building of which he acquired possession from the firm of Goraldas Parmanand which accommodation was sufficient for starting the business of Chemists and Druggists shop.
It was also contended that the building was not in a dilapidated condition and did not need reconstruction and repairs.
The trial court recorded a finding that the building was in a dilapidated condition and reconstruction of it was essential and the landlord had sufficient funds to undertake reconstruction.
On the question of personal requirement of plaintiff to start a medicine shop, the trial court recorded a finding that in the front portion of building landlord would start his business as Chemists and Druggists and the rear of the building would be utilized by him for his residence.
It was further held that as the landlord 's requirement was a composite one in that he wanted to reconstruct the building and then use the whole of it for himself, therefore, the tenant was not entitled to be inducted in the reconstructed building which he would have been entitled to claim under section 18 of the Madhya Pradesh Accommodation Control Act, 1961 ( 'Act ' for short).
An appeal by the tenant to the District Court elicited in para 20 a finding that though the landlord was studying he might choose his career for business after he completed his education and he had got Rs. 8,000 in a fixed deposit account in a bank and even though he obtained a decree against the firm of M/s. Goral Parmanand he had not got actual possession as the litigation was still pending and, therefore, the plaintiff 's requirement of the whole building was established.
The finding that the house was in dilapidated condition and required reconstruction was affirmed.
When the matter reached the High Court in second appeal by the tenant an application under Order VI, rule 17, Code of Civil 610 Procedure, was made praying for an amendment to the written statement alleging that the firm Goraldas Parmanand has vacated the whole of the remaining portion of the building excluding the premises in possession of the tenant measuring 7 ' X 22 ' and that the plaintiff has obtained actual possession of the same and if this aspect was taken into consideration the plaintiff landlord would not be entitled to a decree for eviction under section 12(1)(f) of the Act.
The High Court rejected the application observing that the adjoining portion occupied by firm Goraldas Parmanand was vacated by the firm as far back as in the year 1972 and therefore the application for amendment filed 3 1/2 years after the filing of the appeal must be rejected on the ground of delay and laches.
Further, despite the judgment of this Court in Pasupuleti Venkateswarlu vs The Motor and General Traders, the High Court felt considerable hesitation in taking note of this event subsequent to the passing of the decree for eviction by the trial court because of its earlier decision in Taramal vs Laxaman Sewak and Ors in which it was held that the definition of 'tenant ' in the Act would not enable a tenant, though in possession but against whom a decree or order for eviction has been made, to invite the Court to take notice of events subsequent to the passing of the decree for eviction by the trial court.
The decision of this Court was distinguished on the ground that the definition of the expression 'tenant ' in Andhra Pradesh Building (Lease Rent and Eviction) Control Act, 1960, was somewhat different and was wide enough to include such persons.
The High Court accordingly rejected the application and dismissed the second appeal confirming the decree for eviction.
Section 12(1)(f) under which eviction of the tenant is sought by the landlord reads as under: "that the accommodation let for non residential purposes is required bona fide by the landlord for the purpose of continuing or starting his business or that of any of his major sons or unmarried daughters if he is the owner thereof or for any person for whose benefit the accommodation is held and that the landlord or such person has no other reasonably suitable non residential accommodation of his own in his occupation in the city or town concerned.
" In order to be able to seek eviction of a tenant under section 12(1)(f) the landlord has not only to establish that he bona fide requires the 611 accommodation let to the tenant for non residential purposes for the purpose of continuing or starting his business but he must further show that the landlord has no other reasonably suitable nonresidential accommodation of his own in his occupation in the city or the town concerned.
The landlord in this case seeks eviction of the tenant from a building let for non residential purpose.
He can obtain possession either for continuing or starting his business.
He was a student at the relevant time.
He appeared to have completed his education thereafter.
It is stated in the plaint unambiguously that he wanted to start business by opening a medicine shop.
In other words, he wanted to start a Chemist and Druggist shop.
He must, therefore, show that he has not got in his possession a reasonably suitable non residential accommodation of his own in his occupation in the town of Bilaspur.
The suit building, as earlier observed, is in the city of Bilaspur and situated in Sadar Bazar, obviously a business locality.
Respondent landlord claims to be the owner of the whole building.
The suit premises in possession of the tenant in which he is carrying on a small kirana shop admittedly admeasures 7 frontage on the main road and 22 in depth.
In other words it is 7 'X 22 '.
The whole building of which demised premises form a small part appears to be having a frontage of 28.
3 passage has to be excluded.
The premises in possession of the tenant has a frontage of 7.
The length of the building or what is styled as depth was given out to us as 90 by learned counsel for respondent landlord.
18 ' frontage with 90 ' depth was thus in possession of firm Goraldas Parmanand.
Respondent landlord had also initiated proceedings for obtaining possession of the premises occupied by firm Goraldas Parmanand on the same ground, namely, that he wanted to start his business of Chemists and Druggists in the building.
The question is whether the premises occupied by firm Goraldas Parmanand has been vacated by the firm.
If the answer is in affirmative, the respondent landlord has thus obtained vacant possession of the whole of the premises occupied by firm Goraldas Parmanand.
Looking to the map annexed to the plaint and the evidence led in the case and the dimensions of the premises stated at the hearing of this appeal the area vacated by the previous tenant would be 18 'X90 ' plus portion at the back of the premises occupied by the present appellant which would be 7 'X 68 ' and it 612 has come in possession of the respondent.
The last question would be if landlord obtained vacant possession subsequent to the decree passed against the present appellant tenant by the Trial Court, whether the subsequent event could be noticed by the court for moulding the decree against the present appellant tenant.
Section 12 starts with a non obstante clause thereby curtailing the right of the landlord to seek eviction of the tenant which he might have under any other law and the right of eviction is made subject to the overriding provision of section 12.
It is thus an enabling section.
In order to avail of the benefit conferred by section 12 to seek eviction of the tenant the landlord must satisfy the essential ingredients of the section.
The landlord in this case seeks eviction of the tenant under section 12(1)(f).
He must, therefore, establish (i) that he requires bona fide possession of a building let for non residential purpose for continuing or starting his business; and (ii) that he has no other reasonably suitable non residential accommodation of his own in his occupation in the city or town concerned.
The burden to establish both the requirements of section 12(1)(f) is squarely on the landlord.
And before an allegation of fact to obtain the relief required is permitted to be proved, the law of pleadings require that such facts have to be alleged and must be put in issue.
Ordinarily, therefore, when a landlord seeks eviction under section 12(1)(f) the court after satisfying itself that there are proper pleadings must frame two issues namely (i) whether the plaintiff landlord proves that he bona fide requires possession of a building let to the tenant for non residential purpose for continuing or starting his business, and (ii) whether he proves that he has no other reasonably suitable non residential accommodation of his own in the city or town concerned.
Without elaborating we must notice a well established proposition that any amount of proof offered without pleadings is generally of no relevance.
Turning to the pleadings in this case the plaintiff in para 6 of the plaint has stated as under: "The plaintiff intends to start his own business in the said building after the said reconstruction.
He intends to open a medicine shop therein.
The plaintiff bona fide requires the suit house for the above purpose.
He has no other suitable accommodation for the same in the town.
" The cryptic averment is that the plaintiff has not got any other reasonably suitable accommodation in the same town.
However, 613 in para 4 of the plaint it is stated 'that the major portion of the building is in occupation of the firm Goraldas Parmanand and the plaintiff has already obtained a decree for its eviction therefrom '.
The defendant in his written statement has in term stated that the defendant is in possession of a small portion of the building, the remaining portion of which was in possession of firm M/s. Goraldas Parmanand.
In para 6 of the written statement it is further stated that on his own admission, the plaintiff has got a suitable alternative accommodation being the premises for which a decree of eviction is obtained for doing business and which is more than sufficient for his requirement.
The learned Trial Judge framed Issue No. 2(a) on the question whether the plaintiff landlord had no other reasonably suitable accommodation of his own in his occupation in the city.
While recording finding on this issue the cryptic observation in para 19 of the judgment is that the plaintiff is a student and he has no other accommodation for starting his own business.
There is not the slightest reference to the decree admittedly obtained by the plaintiff against firm M/s. Goraldas Parmanand which firm was carrying on business in a portion of the building which the plaintiff himself has described as the major portion of the building, the suit premises being a small portion of the whole building.
In the first appeal this contention is disposed of by observing that the alternative accommodation which the defendant has pleaded in his written statement is under litigation and therefore it cannot be treated as available to the plaintiff. ' In the second appeal in the High Court the defendant appellant moved an application under Order VI Rule 17 for amendment of the written statement for elaborating what was already stated that not only the decree obtained by the plaintiff against the adjoining tenant of the same building namely firm of M/s. Goraldas Parmanand has become final but the plaintiff in execution of the decree way back in 1972 obtained actual possession of the whole of area occupied by that firm and that forms major portion of the whole building.
This application, though, in our opinion, to be wholly superfluous in view of the pleadings hereinbefore set out and in view of the fact that the burden of proof of establishing that the landlord was not in possession of a reasonably suitable accommodation in the same town was on the plaintiff was rejected on untenable ground that the defendant appellant was guilty of delay and laches.
This application for amendent deserves to be granted, and we grant the same.
What is its impact ? Even while rejecting the application the High Court in terms observed in para 4 of its judgment as under: 614 'Adjoining portion was vacated by firm Goraldas Parmanand as far back as in the year 1972 '.
The High Court thus had before it a fact beyond dispute and beyond controversy that the major portion of the building was vacated by the adjoining tenant way back in 1972.
This was an uncontroverted fact.
Therefore remand on this point is an exercise in futility because the fact alleged in the application for amendment is admitted.
After rejecting the application on wholly untenable ground the High Court in 1976 affirmed the finding wholly contrary to record as available at that stage that the plaintiff landlord had no other reasonably suitable non residential accommodation of his own in his occupation in the city even though on landlord 's own admission he had acquired vacant possession of a major portion of the building let for non residential purpose as far back as 1972.
In the course of hearing we were repeatedly told that the finding of facts are sacrosanct.
The finding of fact ignoring incontrovertible admitted position which would non suit the plaintiff if upheld would be travesty of justice.
The burden being on the plaintiff to show that he had no other reasonably suitable accommodation for carrying on the business which he wanted to start in the suit premises, it was for the plaintiff to show that he had not acquired possession from firm Goraldas Parmanand.
Alternatively the plaintiff should have shown that the said adjacent accommodation was not reasonably suitable for the business he wanted to start.
He has done neither.
On the contrary plaintiff has admittedly adopted a position in the plaint that he not only wanted suit premises but also the adjoining premises of which he had obtained possession for starting his business.
In such a situation if the High Court had kept in view that the plaintiff had already with him viz. possession of a building having 18 frontage on the main road and 90 depth plus portion at the back of the suit premises in his possession it would have to come to an affirmative conclusion that the plaintiff had sufficient accommodation for starting his business as a Chemists and Druggists.
It was no where pointed out by the plaintiff that the shop of Chemists and Druggists or a medicine shop would require frontage of more than 18 '.
18 ' frontage on a main road in a city like Bilaspur is sufficiently attractive and accommodating.
The depth of the shop as given out to us being 90 '; therefore landlord has now in his possession shop admeasuring 18 ' x 90 ' plus the area of 7 ' x 90 ' at the back of the suit premises being part of the same building.
Would this not provide more than ample accommodation to the plaintiff to start his business as a Chemists and Druggists ? Not one 615 word has been said that the accommodation which is already in possession of the plaintiff is neither suitable nor reasonably suitable nor sufficient for starting his business.
In fact the very stand of plaintiff landlord as accepted by the High Court that some portion at the back would be utilised by landlord for residence would affirmatively establish that landlord has more than enough vacant accommodation in possession for starting his business.
The difficulty which the High Court experienced was whether a tenant under a decree of eviction could invite the Court to take into consideration the events subsequent to passing of the decree which if noticed would non suit the landlord.
The definition of expression 'tenant ' in the Act excludes from its operation a person in possession against whom any order or decree for eviction has been made.
The High Court referred to its earlier judgment in Taramal 's case wherein it was held that the protection to a statutory tenant lapsed with the passing of a decree and such a person had no right to bring on record new circumstances which were not in existence at the date of the passing of the decree.
This approach wholly overlooks the scheme of the Rent Restriction Act.
The M.P. Act enables a landlord to seek eviction of a tenant and obtain possession under various circumstances set out in section 12.
If a landlord bona fide requires possession of a premises let for residential purpose for his own use, he can sue and obtain possession.
He is equally entitled to obtain possession of the premises let for non residential purposes if he wants to continue or start his business.
If he commences the proceedings for eviction on the ground of personal requirement he must be able to allege and show the requirement on the date of initiation of action in the Court which would be his cause of action.
But that is not sufficient.
This requirement must continue throughout the progress of the litigation and must exist on the date of the decree and when we say decree we mean the decree of the final court.
Any other view would defeat the beneficial provisions of a welfare legislation like the Rent Registration Act.
If the landlord is able to show his requirement when the action is commenced and the requirement continued till the date of the decree of the Trial Court and thereafter during the pendency of the appeal by the tenant if the landlord comes in possession of the premises sufficient to satisfy his requirement, on the view taken by the High Court, the tenant should be able to show that the subsequent events disentitled the plaintiff, on the only ground that here is tenant against whom a decree or order for 616 eviction has been passed and no additional evidence was admissible to take note of subsequent events.
When a statutory right of appeal is conferred against the decree or the order and once in exercise of the right an appeal is preferred the decree or order ceases to be final.
What the definition of 'tenant ' excludes from its operation is the person against whom the decree or order for eviction is made and the decree or order has become final in the sense that it is not open to further adjudication by a court or heirarachy of courts.
An appeal is a continuation of suit.
Therefore a tenant against whom a decree for eviction is passed by Trial Court does not lose protection if he files the appeal because if appeal is allowed the umbrella of statutory protection shields him.
Therefore it is indisputable that the decree or order for eviction referred to in the definition of tenant must mean final decree or final order of eviction.
Once an appeal against decree or order of eviction is preferred the appeal being a continuation of suit, landlord 's need must be shown to continue to exist at appellate stage.
If the tenant is in a position to show that the need or requirement no more exists because of subsequent events, it would be open to him to point out such events and the Court including the appellate court has to examine, evaluate and adjudicate the same.
Otherwise the landlord would derive an unfair advantage.
An illustration would clarify what we want to convey.
A landlord was in a position to show he needed possession of demised premises on the date of the suit as well as on the date of the decree of the trial court.
When the matter was pending in appeal at the instance of the tenant, the landlord built a house or bungalow which would fully satisfy his requirement.
If this subsequent event is taken into consideration, the landlord would have to be non suited.
Can the court shut its eyes and evict the tenant ? Such is neither the spirit nor intendment of Rent Restriction Act which was enacted to fetter the unfettered right of re entry.
Therefore when an action is brought by the landlord under Rent Restriction Act for eviction on the ground of personal requirement, his need must not only be shown to exist at the date of the suit, but must exist on the date of the appellate decree, or the date when a higher court deals with the matter.
During the progress and passage of proceeding from court to court if subsequent events occur which if noticed would non suit the plaintiff, the court has to examine and evaluate the same and mould the decree accordingly.
This position is no more in controversy in view of a decision of this Court in Pasupuleti Venkateswarlu (supra) where Justice Krishna Iyer speaking for the Court observed as under: "We affirm the proposition that for making the right or remedy claimed by the party just and meaningfully as 617 also legally and factually in accord with the current realities, the court can, and in many cases must, take cautions cognisance of events and development subsequent to the institution of the proceeding provided the rules of fairness to both sides are scrupulously observed.
" In order to fully evaluate the law laid down in the aforementioned extracted passage it is worthwhile to give the background of facts in which it was made.
The appellant landlord in that case was the owner of a large building which was leased out in separate portions to several tenants.
One of such tenants was the respondent.
The landlord wanted to start a business in automobile spares and claimed eviction of the respondent under the Rent Restriction Act being Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960.
The petition was resisted and the Rent Controller dismissed the petition.
The appeal of the landlord failed.
But in revision the High Court chose to remand the case to the appellate authority and the appellate authority in turn remitted the case to the Trial Court for fresh disposal in accordance with certain directions.
The landlord preferred a revision petition against the order of remand by the first appellate court.
The High Court dismissed the action of the landlord taking cognisance of a subsequent event namely that the landlord acquired possession of a reasonable suitable non residential building in the same town.
In appeal to this Court it was seriously contended that it was improper for the High Court to take into consideration the subsequent events and this contention was negatived inter alia on the ground in the passage extracted above.
Therefore, it is now incontrovertible that where possession is sought for personal requirement it would be correct to say that the requirement pleaded by the landlord must not only exist on the date of the action but must subsist till the final decree or an order for eviction is made.
If in the meantime events have cropped up which would show that the landlord 's requirement is wholly satisfied then in that case his action must fail and in such a situation it is incorrect to say that as decree or order for eviction is passed against the tenant he cannot invite the court to take into consideration subsequent events.
He can be precluded from so contending when the decree or order for eviction has become final.
In view of the decision in Pasupuleti 's case (supra) the decision of the Madhya Pradesh High Court in Taramal 's case must be taken to have been overruled and it could not be distinguished only on the ground that the definition of 'tenant ' in the Madhya Pradesh Act is different from the one in Andhra Pradesh 618 Act.
Therefore, the High Court was in error in declining to take this subsequent event which was admittedly put forth in the plaint itself into consideration.
The landlord wants to start his business as Chemists and Druggists.
On his own admission he has in his possession a shop admeasuring 18 ' X 90 ' plus 7 ' X 68 ' forming part of the same building the remaining small portion of 7 ' X 22 is occupied by the tenant.
The landlord has not stated that so much space with 18 ' frontage is not reasonably suitable for starting his business as Chemist and Druggist.
In that view of the matter the plaintiff 's suit for eviction on the ground mentioned in section 12(1)(f) must fail and this is being done by not disturbing any finding of fact but relying upon the admission of the plaintiff himself.
There is an error apparent on the face of the record inasmuch as when the High Court was faced with a dilemma whether the landlord required the whole of the building including demised premises now in possession of the appellant tenant for starting his business of Chemists and Druggists and when the High Court had before it an indisputable fact that the respondent landlord has obtained vacant possession of a major portion of the building which was in possession of firm M/s. Goraldas Parmanand, was it necessary for him to have any additional accommodation ? The High Court got over this dilemma by observing and by affirming the finding of the subordinate courts that the remaining portion of the premises would be used by the landlord for his residence and even though the portion utilised for the purpose of running the business would be smaller compared to the one to be utilized for the residence it would still not be violative of sub section (7) of sec.
12 because such a composite user would not radically change the purpose for which the accommodation was let.
This finding is contrary to record and pleadings.
Minutely scanning the plaint presented by the landlord there is not the slightest suggestion that he needs any accommodation for his residence.
He has not even stated whether at present he is residing in some place of his own though he claimed to be residing in the same town.
He does not say whether he is under any obligation to surrender that premises.
Section 12(1)(e) specifically provides for a landlord obtaining possession of a building let for residential purposes if he bona fide requires the same for his own use and occupation.
But there is an additional condition he must fulfil namely he must further show that he has no other reasonably suitable residential accommodation of his own in his 619 occupation in the city or town concerned.
Utter silence of the landlord on this point would be a compelling circumstance for the court not to go in search for some imaginary requirement of the landlord of accommodation for his residence.
In the context of these facts the Trial Court and the first Appellate Court committed a manifest error apparent on the record by upholding the plaintiff 's case by awarding possession also on the ground neither pleaded nor suggested.
The landlord must have been quite aware that he cannot obtain possession of any accommodation for his residence.
There fore, the finding of the High Court and courts subordinate to it that the respondent landlord requires possession of the whole of the building including the one occupied by the tenant for starting his business as Chemists and Druggists as also for his residence is vitiated beyond repair.
Once impermissible approach to the facts of the case on hand is avoided although facts found by the Courts are accepted as sacrosanct yet in view of the incontrovertible position that emerges from the evidence itself that the landlord has acquired major portion of the building in which he can start his business as Chemists and Druggists he is not entitled to an inch of an extra space under section 12(1)(f) of the Act.
Respondent landlord also sought possession on the ground set out in section 12(1)(h) which reads as under: "that the accommodation is required bona fide by the landlord for the purpose of building or rebuilding or making thereto any substantial additions or alternations and that such building or re building or alterations cannot be carried out without the accommodation being vacated." In order to obtain possession under section 12(1)(h) the landlord again has to establish his bona fide requirement of the accommodation in possession of the tenant for the purpose of building or rebuilding or making thereto any substantial additions or alterations and must further show that such building or re building or alterations cannot be carried out without the accommodation being vacated.
The case of the landlord on this point is that he wants possession of the whole of the building including the suit premises and he has Rs. 8,000 in a fixed deposit account and that as the building is in a dilapidated condition, he would reconstruct the same and use it for himself both for residence and starting his business.
If landlord acquires possession under section 12(1)(h), section 620 18 imposes corresponding obligation which reads as under: "18.
Recovery of possession for repairs and rebuilding and re entry. (1) In making any order on the grounds specified in clause (g) or clause (h) of sub section (1) of Sec. 12, the Court shall ascertain from the tenant whether he elects to be placed in occupation of the accommodation or part thereof from which he is to be evicted and, if the tenant so elects, shall record the fact of the before election in the order and specify therein the date on or which he shall deliver possession so as to enable the landlord to commence the work of repairs or building or re building, as the case may be." The courts declined to grant any relief to the tenant under section 18 on the ground that as the landlord 's requirement is a composite one, the tenant is not entitled to be re inducted in the building that may be reconstructed by the landlord after obtaining possession of the same.
Now once it is held that the landlord is not entitled to possession for his residence and he has more than enough accommodation in his possession for carrying on his business, the composite requirement disappears.
Landlord 's case will, therefore, have to be exclusively examined in the context of section 12(1)(h).
Two contentions were urged on behalf of the appellant to negative the case of the landlord in this behalf; one that the building is not in a dilapidated condition and secondly it can be repaired without vacating the premises.
As all the courts have concurrently found that the building is in a dilapidated condition, this finding is entitled to respect and it is not proper for us to interfere with the same.
The question would however be whether the landlord wants to reconstruct the demised portion of the premises even though he is not entitled to acquire possession of the same for his use and that he would be under an obligation to re induct the tenant after its construction.
The further question is whether the landlord is interested in reconstructing the whole building.
It was alternatively contended that no attempt is made to find out whether the landlord would be in a position to reconstruct that part of the building which has come in his possession once he is not in a position to acquire possession of the demised premises for his own use.
This situation calls for a fresh examination of the case of the landlord under section 12(1)(h).
If landlord is to be awarded possession under section 12(1)(h) on the footing that, that is the only ground on which he can seek possession, it will have to be found out after giving oppor 621 tunity to the landlord to prove whether he is interested in re building that portion of the building which is occupied by the appellant and further the court should give necessary direction under section 18.
In that event the court will have also to ascertain whether the portion which is now in possession of the landlord and which he may be interested in reconstructing can be reconstructed without the tenant vacating the demised premises.
As the whole foundation of the landlord 's case of composite requirement disappears the matter has to be examined afresh on the footing that the landlord has come to the court for possession under section 12(1)(h) only and if he succeeds in his prayer for possession on the ground mentioned in section 12(1)(h) it would be necessary for the court to give appropriate direction under section 18 of the Act.
As the matter has not been examined from this angle by any Court it has become inevitable, even though the litigation is pending for a long time, to remit the case for examination of this aspect.
The question is whether the remand should be to the first appellate court or to the trial court.
As the first appellate court is the fact finding court, in our opinion it would be appropriate for us to remit the case, after setting aside the decree of the first appellate court as well as the High Court, to the first appellate court to ascertain : (i) Whether the landlord is interested in reconstructing that portion of the building which is in possession of the tenant as demised premises; (ii) Whether the landlord would be in a position to reconstruct the building in his possession without the tenant being required to vacate the demised premises; and (iii)if the first two queries are answered in favour of the landlord, what should be the appropriate directions to be given in favour of the tenant as enjoined by section 18 ? Accordingly, this appeal is allowed and the decree of eviction made by the trial court and confirmed by the 1st appellate court and also by the High Court is set aside.
The prayer of the landlord for possession under section 12(1)(f) is negatived as he is not entitled to recover possession on the ground mentioned in section 12(1)(f).
The matter is remanded to the 1st Appellate Court for the limited purposes set out in the just preceding paragraph.
In the circumstances of the case there will be no order as to costs.
622 PATHAK J. This is tenant 's appeal by special leave against the judgment of the High Court of Madhya Pradesh arising out of a suit for ejectment.
The suit was filed by the respondent, Raghunath Prasad.
He claimed to be the owner of a building in Sadar Bazar, Bilaspur.
One portion of the building was occupied by a firm Goraldas Permanand.
According to the plaint, the entire building was in a dilapidated condition and the plaintiff intended to reconstruct the front portion of the building and to effect major repairs in the rear portion.
In order to do so it was said to be necessary that the defendants should vacate the accommodation.
In regard to the other portion, the plaintiff stated that he had obtained a decree for ejectment against Goraldas Parmanand.
The plaintiff also alleged that he intended to start the business of a medicine shop and for that purpose he required the accommodation occupied by the defendants as it faced the main road in Sadar Bazar, and that he had no other suitable accommodation in the town for such business.
The suit was resisted by the defendants, and a number of pleas were taken.
In particular it was denied that the accommodation occupied by them was dilapidated and that it was bona fide required by the plaintiff.
It was claimed that in view of the decree for ejectment against Goraldas Parmanand the plaintiff had suitable alternative accommodation for his proposed business.
The trial court found that the entire building, including the accommodation occupied by the defendants, needed reconstruction and repairs, and that for the purpose of his projected business the plaintiff had bona fide need of the accommodation held by the defendants.
It was observed that the accommodation occupied by Goraldas Parmanand was still under litigation as an appeal was pending in the case.
Holding that the grounds under section 12(1) (f) and 12(1)(h) of the Madhya Pradesh Accommodation Control Act were made out, the suit was decreed for ejectment.
The defendants preferred an appeal, and the first appellate court while dismissing the appeal maintained the findings of the trial court and upheld the order of ejectment.
A second appeal by the defendants was dismissed by the High Court on 17th April, 1976.
During the pendency of the appeal the defendants moved an application under Order VI, Rule 17 of the Code of Civil Procedure for leave to amend their written statement 623 by adding the plea that the plaintiff had secured vacant possession of the adjoining portion of the building from Goraldas Parmanand in the year 1972, and that the case should be remanded for deciding whether the accommodation acquired was reasonably suitable for starting a medicine shop, the purpose for which the plaintiff said he required the accommodation held by the defendants.
The High Court rejected the application observing that it had been moved three and a half years after the event had taken place, that it was not made bona fide but was intended merely to gain time and would result in grave injustice to the plaintiff.
The High Court also observed that even if the amendment was allowed it would not affect the decision of the case, because as the plaintiff 's need extended to entire building his securing vacant possession of one part would not conclude the matter.
It was pointed out that the plaintiff intended to reconstruct the entire portion of the building including the accommodation occupied by the defendants, as well as effect major repairs to the rear portion of the building.
In place of the shop of the defendants with a frontage of 7 and a depth of 22 and the adjoining shop with a frontage of 10 and a depth of 90, the plaintiff intended to demolish the front portion of both the shops and to reconstruct the building with a new shop having a wide frontage of 22 ' and a depth of 7 ', and to reside in the rear portion of the building.
The High Court added that residence in the rear portion of the accommodation would not alter the nature of the accommodation as the residence would be incidental to the main purpose of carrying on the medicine business in the front portion of the building.
The defendants having obtained special leave from this Court this appeal is now before us.
As analysis of the plaint shows that the ejectment of the appellants was sought on two grounds.
The respondent intended to reconstruct the front portion of the dilapidated building and to repair the rear portion and according to him this required the appellants to vacate the accommodation occupied by them.
That clearly is the ground envisaged by section 12(1)(h), Madhya Pradesh Accommodation Control Act.
That ground stood on its own.
The respondent also intended to open a medicine shop in the front portion of the building, and he pleaded that he had no other accommodation for the purpose.
That brings into play section 12(1)(f) of the Act.
The plea shows that as the dilapidated building required reconstruction and repairs, the respondent indended to avail of the opportunity to so effect the structural alterations as to accommodate a medicine 624 shop which he planned to start as a business in the premises.
This latter ground arose as a sequel to the first.
If the first ground was made out, the appellants would have to vacate the portion held by them, and if that had been the only ground the court would automatically be called upon to consider section 18 of the Act, which entitles the tenant at his option to be reinstated in a portion of the reconstructed building.
There was the further ground that the respondent proposed to start his own business in the front portion of the building, and the finding of the High Court that the respondent wanted the rear portion of the building for his personal residence.
The subordinate courts were influenced by the consideration that although the respondent had obtained a decree for ejectment against Goraldas Parmanand, the case continued to be the subject of litigation and therefore it could not be said that the respondent was in possession of alternative accommodation.
However, while the second appeal was pending in the High Court the appellants applied for amendment of their written statement to include the plea that the respondent had meanwhile obtained possession from Goraldas Parmanand.
The High Court declined to permit the amendment.
In doing so, it seems to me that the High Court erred.
It was an essential part of the appellants ' defence from the outset that the portion let out to Goraldas Permanand constituted suitable alternative accommodation, and therefore they should not be ejected.
It is immaterial that the amendment was sought more than three years after possession of the portion had passed to the respondent.
The High Court was bound to take the fact into consideration because, as is well settled now, in a proceeding for the ejectment of a tenant on the ground of personal requirement under a statute controlling the eviction of tenants, unless the statute prescribes to the contrary the requirement must continue to exist on the date when the proceeding is finally disposed of either in appeal or revision, by the relevant authority.
That position, to my mind, is indisputable.
The High Court should have allowed the amendment.
The High Court, alternatively observed that the respondent wanted to accommodate his shop in the front portion of the building and therefore, of necessity, he would require the portion occupied by the appellants.
That conclusion is based on the findings rendered by the courts below, which findings the High Court respected as findings of fact.
But the High Court failed to note that both the courts below had proceeded on the assumption that the adjoining portion occupied by Goraldas Parmanand was not immediately available on account of litigation.
It is for that reason that permitting the amendment sought by the 625 appellants became relevant and, indeed, imperative.
If the respondent has obtained possession of that portion, and that does not seem to be disputed, it becomes a serious question for decision whether the respondent needs the front portion of the building for his medicine shop and, if so, according to dimensions proposed by him.
In the consideration of that question the element of the respondent 's need for the rear portion of the building for his personal residence must be ignored.
That need was never pleaded in the plaint and, as will be seen from section 12(1)(e) of the Act, several considerations need to be satisfied before the need can be held proved.
This aspect of the matter was apparently not brought to the notice of the High Court and therefore it fell into the error of taking this element into account.
My brother Desai has in his judgment held that the respondent can accommodate his medicine shop in the portion vacated by Goraldas Parmanand and he has indicated the dimensions of the shop which appear reasonable to him.
With great respect I am unable to concur with what he has said.
Whether or not the shop should be located in the front portion of the building and what should be its dimensions will turn on the evidence adduced by the parties in that behalf.
The original record of the suit is not before us, and without knowledge of the state of the evidence I would refrain from a finding on the point.
Indeed, it seems to me in the circumstances of this case to be pre eminently a task to be entrusted to a subordinate court.
The position which then emerges is this.
The respondent has made out his case under section 12(1)(h) of the Act that he requires the building, including the portion occupied by the appellants, for reconstruction of the front portion and repairs to the rear portion, and that necessitates that the appellants vacate their accommodation.
This matter is concluded by the concurrent findings of fact rendered by the trial court and the first appellate court.
It is also concluded by concurrent findings of fact that the respondent needs a portion of the building for starting the business of a medicine shop.
What should be the location of the shop and what its dimensions is a matter which remains for decision.
And there is the further question of considering the availability of section 18 of the Act to the appellants.
Both these questions, I think, should be left to the first appellate court.
Accordingly, I allow the appeal, set aside the judgment and decree of the High Court and of the first appellate court and remand 626 the case to the latter court for permitting the appellants to amend their written statement and allowing the parties to lead such evidence as is consequentially called for, and thereafter to decide the case afresh in the light of the observations made above.
I would leave the parties to bear their costs.
S.R. Appeal allowed.
| IN-Abs | The respondent landlord filed two eviction suits for recovery of possession of a non residential building which were in occupation of a firm Goraldas Parmanand and the appellant tenant.
The portion occupied by the appellant including the frontage was 7x22.
In the view of the fact that the landlord obtained eviction order against the firm Goraldas Parmanand on the ground that the building was required for the purpose of reconstruction and repairs and also for bona fide requirement, in the later eviction suit filed against the appellant, in para 4 of the plaint the landlord stated that he was in possession of a major portion of the non residential building which he obtained from the firm M/s. Goraldas Parmanand.
The appellant contested the eviction suit filed against him on the ground, (a) that the premises was not in dilapidated condition and did not, therefore, need reconstruction and repairs and (b) that the landlord in view of his own admission in the plaint at para 4 has a reasonable suitable non residential accommodation of his own and therefore cannot claim his eviction under section (12)(1)(f) of the Madhya Pradesh Accommodation Control Act, 1961.
The trial court rejected the tenant 's pleas and passed an eviction order.
In appeal the first appellate court, while confirming the finding of the trial court that the building was in a dilapidated condition and required re construction and repairs, held that even though the landlord obtained a decree against the firm Goraldas Parmanand, he had not got actual possession, as the litigation was still pending and, therefore, the plaintiff 's requirements of the whole building was established.
In the second appeal before the High Court, an application under Order VI, Rule 17, Code of Civil Procedure, was made praying for an amendment to the written statement alleging that the firm Goraldas Parmanand has vacated the entire portion of the premises in his possession and the plaintiff landlord has obtained actual possession of a major portion of the building and if this aspect was taken into consideration the plaintiff landlord would not be entitled to a decree for eviction under section 12(1)(f) of the Act.
The High Court rejected 606 the application observing that the adjoining portion occupied by firm Goraldas Parmanand was vacated by the firm as for back as in the year 1972 and, therefore, the application for amendment filed 3 1/2 years after the filing of the second appeal must be rejected.
Further it was of the view that the definition of "tenant" in the Madhya Pradesh Act would not enable a tenant, though in possession but against whom a decree or order for eviction has been made, to invite the court to take notice of events subsequent to the passing of the decree for eviction by the trial court.
The High Court, accordingly confirmed the decree for eviction hence, the appeal by the tenant after obtaining special leave of the Court.
Allowing the appeal and remanding the matter to the first appellate court with directions, the Court ^ HELD: 1.
Before an allegation of fact to obtain the relief required is permitted to be proved, the law of pleadings require that such facts have to be alleged and must be put in issue.
Any amount of proof offered without pleadings is generally of no relevance.
In order to be able to seek eviction of a tenant under section 12(1)(f) of the Madhya Pradesh Accommodation Control Act, 1961, the landlord has to allege and establish (i) that he bonafide requires the accommodation let to the tenant for non residential purposes for the purpose of continuing or starting his business and (ii) that he has no other reasonably suitable non residential accommodation of his own in his occupation in the city or the town concerned.
The burden to establish both the requirements of section 12(1)(f) is squarely on the landlord.
[610 H, 611 A, 612 D and F] 2.
The application under Order VI Rule 17, Civil Procedure Code, in view of the averments in the written statement is wholly superfluous.
However, in view of the pleadings in the instant case, it must be granted because "the burden of proof of establishing that the landlord was not in possession of a reasonably suitable accommodation in the same town was on the plaintiff" it was wrongly rejected by the High Court on untenable ground that the defendant appellant was guilty of delay and laches ignoring incontrovertible admitted position which would non suit the respondent plaintiff.
[613 E G] 3:1.
The definition of expression "tenant" in the Madhya Pradesh Accommodation Control Act, 1961 excludes from its operation a person in possession against whom any order or decree for eviction has been made.
The decree means the decree of the final court.
This is so because once an appeal against decree or order of eviction is preferred, the appeal is a continuation of suit.
[615 C, 616 B] 3:2.
When an action is brought by the landlord under Rent Restriction Act for eviction on the ground of personal requirement, his need must not only be shown to exist at the date of the suit, but must exist on the date of appellate decree, or the date when a higher court deals with the matter.
During the progress and passage of proceeding from court to court if subsequent events occur which if noticed would non suit the plaintiff.
the court has to examine and evaluate the same and mould the decree accordingly.
The tenant is entitled to show that the need or requirement no more exists by pointing out such subsequent events, to the court including the appellate court.
Otherwise the landlord would 607 derive an unfair advantage, and it would be against the spirit or intendment of Rent Restriction Act which was enacted to fetter the unfettered right of re entry.
In such a situation it would be incorrect to say that as decree or order for eviction is passed against the tenant he cannot invite the court to take into consideration subsequent events.
But the tenant can be precluded from so contending when decree or order for eviction has become final.
[616 C G] Pasupuleti Venkateswarlu vs The Motor and General Traders, ; , followed.
Taramal vs Laxman Sewak and Ors., 1971 Madhya Pradesh Law Journal p. 888, overruled.
In the instant case; (i) relying on the admission of the plaintiff himself that he has in his possession a shop admeasuring 18/x68 plus 7/x68 forming part of the same building and his failure to state that the space with 18 frontage is neither suitable not reasonably suitable nor sufficient for starting his business as Chemist and Druggist, the plaintiff 's suit for eviction on the ground mentioned in section 12(1)(f) of the Madhya Pradesh Act must fail; (ii) the finding of the courts below that the respondent requires possession of the whole of the building including the one occupied by the tenant for starting his business as Chemist and Druggist as also for his residence is vitiated beyond repair.
The observation of the High Court that the remaining portion of the premises would be used by the landlord for his residence and even though the portion utilised for the purpose of running the business would be smaller compared to the one to be utilised for the residence it would still not be violative of sub section (7) of section 12 because such a composite user would not radically change the purpose for which the accommodation was let, is contrary to records and pleadings.
[618 B C, D F, 619 B C] 4:1.
In order to obtain possession under section 12(1)(h) of the Madhya Pradesh Act the landlord has to establish his bonafide requirement of the accommodation in possession of the tenant for the purpose of building or rebuilding or making thereto any substantial additions or alterations and must further show that such building or re building or alterations cannot be carried out without the accommodation being vacated.
If the landlord succeeds in his prayer for possession on the ground mentioned in section 12(1)(h), it would be necessary for the court to give appropriate directions under section 18 of the Act.
[619 F G, Here, as the matter has not been examined from this angle by any court, even though the litigation is pending for a long time, the case requires to be remanded to the first appellate court to ascertain: (i) whether the landlord is interested in re constructing that portion of the building which is in possession of the tenant as demised premises; (ii) whether the landlord would be in a position to reconstruct the building in his possession without the tenant being required to vacate the demised premises and (iii) if the first two queries are answered in favour of the landlord, what should be the appropriate directions to be given in favour of the tenant as enjoined by section 18 of the Act.
[621 C F] 608 Per Pathak, J. (Concurring) 1.
In a proceeding for the ejectment of a tenant on the ground of personal requirement under a statute controlling the eviction of tenants, unless the statute prescribes the contrary the requirement must continue to exist on the date when the proceeding is finally disposed of, either in appeal or revision, by the relevant authority.
Here, the High Court should have allowed the application for amendment of the written statement under Order VI Rule 17, Civil Procedure Code.
[624 E F] 2.
Before the need for personal residence can be held proved, several considerations need to be proved under section 12(1)(e) of the Act.
The omission to draw the attention of the High Court to the fact that the need for personal residence was never pleaded in the plaint led the High Court to fall into error in taking this element into account.
[625 B C] Per Contra: 3:1.
In the instant case, it is clear from the concurrent findings of the courts below that (a) the respondent has made out his case under section 12 (1)(h) of the Act that he requires the building including the portion occupied by the appellants for the re construction of the front portion and repairs to the rear portion and that necessitates that the appellants vacate their accommodation and (b) the respondent needs a portion of the building for starting the business of a medicine shop.
[625 E G] 3:2.
Whether or not the shop should be located in the front portion of the building and what should be the dimensions of the proposed Chemist and Druggist shop will turn on the evidence adduced by the parties in that behalf, Giving a finding on this point, in the circumstances of this case, is pre eminently a task to be entrusted to a subordinate court.
The questions for consideration by the appellate court are: (i) what should be the location of the shop and what should be the dimensions in the matter and (ii) availability of the benefit under section 18 of the Act to the appellants.
[625 D E]
|
Civil Appeal No. 318 of 1978.
41 From the judgment and order dated 8th November 1978 of the High Court of Delhi at New Delhi in C.W. No. 786 of 1978.
Appellant in person P.A. Francis, Miss A. Subhashini and R.N.Poddar, for Respondent No. 1.
R.N. Sharma, R. N. Poddar and N.N. Sharma, for Respondent Nos. 2 and 3.
The Judgment of the Court was delivered by PATHAK, J.
This appeal by special leave is directed against the judgment of the High Court of Delhi dismissing in limine the appellant 's writ petition against an order of the Indian Institute of Technology, Delhi terminating his services.
The writ petition by the appellant was brought on the following allegations.
The appellant, with a Master 's degree in Aeronautical Engineering, was commissioned in the Indian Air Force on March 1, 1958 and in due course was promoted to the rank of Squadron Leader.
During the years 1972 to 1975 he was an Assistant Director in the Rockets and Missiles Department of the Defence Research and Development Organization, New Delhi.
In January 1975, the appellant was tried by a General Court Martial on four charges and was convicted on two: (1) under section 45, for behaving in a manner unbecoming of the position and character expected of him as an officer in meeting secretly on several occasion a foreign national, contrary to the existing order on the subject and (2) under section 65, for improperly accepting a gift from a foreign national.
He was found not guilty on the remaining two charges.
On March 4, 1975, the General Court Martial directed that he be cashiered and suffer rigorous imprisonment for six months.
The findings and sentence of the General Court Martial were confirmed by the Chief of the Air Staff on April 8, 1975 and he directed that the sentence of rigorous imprisonment be carried out by confinement in civil prison.
Subsequently, by an order dated May 24, 1975, the Central Government remitted the unexpired portion of the punishment of rigorous imprisonment.
The appellant was anxious to join the Indian Institute of Technology, Delhi and obtained a certificate to enable him to do so.
The Air Headquarters, New Delhi issued the certificate reciting 42 that he was commissioned in the Indian Air Force and was posted to the Defence Research and Development Organization, Ministry of Defence.
It also stated that he was tried by General Court Martial in January, 1975 and in the result he was cashiered from service and also sentenced to rigorous imprisonment for six months.
The fact of remission of the imprisonment was also stated.
On July 15, 1977, the appellant was offered appointment to the post of Senior Research Assistant in the Department of Applied Mechanics of the Indian Institute of Technology for the programme of writing a monograph on 'Large Deformation in Metallic materials ' undertaken by Professor B. Karunesh of the said Department, and it was specifically mentioned that the appointment was purely temporary, subject to verification of the appellant 's character and antecedents from the Government, and could be terminated on 24 hours notice in writing by either side.
The appellant accepted the appointment and joined the Institute the next day.
The appellant alleges that unknown to him the Institute communicated with the Ministry of Defence in regard to his employment, and in reply the Ministry informed the Institute by letter dated November 19, 1977 of the appellant 's conviction and sentence by a General Court Martial and also of the fact of remission of the unexpired period of his imprisonment.
The letter also drew the attention of the Institute to an office memorandum dated May 14, 1965 of the Ministry of Home Affairs that persons who were dismissed from service were disqualified from future employment under the Government and added whether the same disability would apply in the case of the appellant should be decided by the Institute.
Professor Karunesh, under whom the appellant was working, was apparently apprised of the Ministry 's letter but he recommended that the appellant be retained in service.
On January 21, 1978, the Institute issued an order stating that the appellant 's services were no longer required and that they would stand terminated on the expiry of 24 hours.
According to the appellant, the Chairman of the Board of Governors of the Institute noted that as the appellant had been dismissed for spying he should not be retained in service.
The writ petition filed by the appellant was dismissed by the High Court of Delhi by an order dated November 8, 1978.
In this appeal the appellant, who appears in person contends that the Institute had no ground for terminating his services as the effect of the order of remission passed by the Central Government was to acquit him of the charges on which he had been found guilty, 43 that the Institute did not apply its mind to the facts of the case when deciding to terminate his services, that there was no material to support the comment of the Chairman, Board of Governors, and in any event the appellant was entitled to an opportunity to be heard before his services were terminated.
It was also contended that the Director of the Institute had abdicated his powers.
Reference was also made to section 73, in support of the submission that the statute did not bar employment elsewhere.
We are of opinion that we need not be detained by these contentions.
The fundamental relief claimed by the appellant is reinstatement to his post in the Institute.
For the reasons which follow that relief must be denied.
It appears from the record before us that the appellant was appointed in the Institute in connection with the programme of writing a monograph on 'Large Deformation in Metallic materials ' undertaken by Prof. B. Karunesh.
The appointment was temporary only and could be terminated on 24 hours ' notice.
It is averred in the counter affidavit filed by the Institute that the post of Research Assistant, to which the appellant was appointed, was created for one year only.
That was so, although according to the appellant the programme extended to two years.
It has also been affirmed in the counter affidavit that on the death of Professor Karunesh in June, 1978 the project in which he was engaged has been dropped and finally closed, and the period for which the appellant 's post of Senior Research Assistant was created has also expired.
There is no reason why these averments should not be accepted.
In the circumstances, we do not see how the appellant can be granted the relief of reinstatement.
We consider it unnecessary to interfere with the order terminating the appellant 's services in the Institute.
The appeal is dismissed, but we make no order as to costs.
S.R. Appeal dismissed.
| IN-Abs | The appellant, a commissioned officer in the Indian Air Force, on a General Court Martial was cashiered and sentenced to suffer rigorous imprisonment for six years.
Later the Central Government remitted the unexpired portion of the punishment of rigorous imprisonment.
Subsequently, he was appointed by the Indian Institute of Technology for a project work on a purely temporary basis and subject to verification of his character and antecedents from the Government and subject to the further condition that his services could be terminated on 24 hours notice in writing by either side.
On a reference by the I.I.T., the Ministry of Defence by its letter dated November 19, 1977 invited attention to the Ministry of Home Affairs Memorandum dated May 14, 1965 to the effect that persons who were dismissed from service were disqualified from future employment under the Government but left it open to the I.I.T. whether it would follow that principle in the case of the appellant.
The Professor under whom the appellant was working recommended the retention of the appellant in service.
The I.I.T. did not accept the said recommendation and by its order dated January 21,1978 terminated the appellant 's services on the expiry of 24 hours.
A writ petition filed by the appellant challenging the validity of the said order was dismissed in limine by the Delhi High Court and hence the appeal by special leave.
Dismissing the appeal, the Court, ^ HELD: The relief claimed by the appellant for reinstatement to his post in the Institute must be denied for the reasons, namely, (a) the appointment was temporary only and could be terminated on 24 hours notice; (b) the Professor incharge of the project passed away subsequently in June 1978 and, therefore, the project in which he was engaged was finally closed and (c) the period for which the appellant 's post of Senior Research Assistant had been, created had come to an end.
[43 D E]
|
ax Reference Case No. 19 of 1975.
Tax Reference section 256 of the Income Tax Act, 1961 made by the Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur in R.A. No. 221/Jab/73 74 arising out of I.T.A. No. 1560 (Jab)/1972 73 decided on 10 1 1974; Assessment Year 1967 68.
section T. Desai, B.L. Noma and K.J. John for the Petitioner 852 V.s.
Desai, Champat Rai and Miss A. Subhashini for the Respondent.
The Judgment of A.P. Sen and E. section Venkataramiah, JJ. was delivered by Sen, J. R.S. Pathak, J. gave a separate opinion.
PATHAK, J: I agree.
The acceptance of a disclosure statement made by a declarant under s.24 of the Finance (No. cannot confer immunity on another person from tax liability in respect of the same sum of money.
As was held by this Court in Ahmed Ibrahim section Dhoraji vs The Commissioner (of Wealth Tax Gujarat the liability imposed under s.24 of the Finance (No. is identifiable with the income tax liability under the Income tax Act.
The scheme for voluntary disclosure of income and its taxation is only another mode provided by law for imposing income tax and recovering it.
Consequently, the general principles which apply to assessments made under the Income Tax Act would except for the provision to the contrary, be applicable to assessments made under s.24 of the Finance (No. Accordingly, when the assessment to income tax is made under the latter enactment, it will be governed by the general principle that a finding recorded therein governs only the particular person assessed.
The jurisdiction of an Income Tax officer when making an assessment is concerned primarily with the issue whether the receipt under consideration constitutes the income of the assessee before him.
Any finding reached by the Income Tax officer touching a person not the assessee in the process of determining that issue cannot be regarded as an operative finding in favour of or against such person.
The only exception to this rule centres on the limited class, and for the limited purpose, defined by this Court in Income Tax Officer, A Ward Sitapur vs Murlidhar Bhagwan Das.
Viewed in the light of that principle it is apparent that the finality enacted by sub section (8) of section 24 of the Finance (No. attaches to the assessment of the declarant only.
It cannot in law operate in favour of or against any other person.
I am of opinion that the making of an assessment against a declarant on his disclosure statement under s.24 of the Finance (No. cannot deprive an Income Tax officer of jurisdiction to assess the same receipt in the hands of another person if, in 853 a properly constituted assessment proceeding under the Income Tax A Act, the receipt can be regarded as the taxable income of such other person.
I would answer the first question in the affirmative, in favour of the Revenue and against the assessee.
That being so, no answer is necessary to the second question.
The Commissioner of Income Tax is entitled to his costs of the reference.
SEN, J. This is a direct reference under section 257 of the Income Tax Act, 1961 made by the Income Tax Appellate (Tribunal, Jabalpur, for short, The Appellate Tribunal), at the instance of the assessee.
The reference is necessitated due to divergence of opinion, as reflected in the various decisions of different High Courts, with respect to the scope and effect of the Voluntary Disclosure Scheme under section 24 of the Finance (No. (the 'Act ', for short).
The assessee, Messrs. Jamnaprasad Kanhaiyalal, is a partnership firm.
The firm consists of 4 partners, namely, Kanhaiyalal and his 3 major sons, Rajkumar, Swatantrakumar and Santoshkumar with his minor son Satishkumar admitted to the benefits of the partnership.
In the course of assessment proceedings for the assessment year 1967 68, the relevant accounting year of which was the year ending Diwali, 1966, the Income Tax officer (ITO, for short) noticed in the books of account of the asssesee five Cash credits of Rs. 9,250 each in the names of five sons of Kanhaiyalal, as detailed below: Rs. Sailendrakumar 5 yrs.
9,250/ Satishkumar 9 yrs.
9,250/ Sunilkumar 7 yrs.
9,250/ Swatantrakumar 16 yrs.
9,250/ Santoshkumar 18 yrs.
9,250/ 46,250/ The ITo accordingly called upon the assessee to explain the genuineness as well as the source of the cash credits.
On being questioned, Kanhaiyalal the Managing Partner, disavowed ail knowledge as to the capacity of the creditors to advance the amounts in question.
854 On the contrary, he admitted that the creditors had no independent source of income of their own.
In fact, he further stated that he could not explain the source of the cash credits.
It was contended before the ITo that the creditors having made voluntary disclosures under the Voluntary Disclosure Scheme and the disclosures made by them having been accepted by the Commissioner of Income Tax and tax paid thereon, the amount of Rs. 46,250 could not be treated as income of the assessee from undisclosed sources.
The ITo, however, held that the disclosures made under the scheme granted immunity from further taxation only to the declarant, and not to person to whom the income actually belonged.
He further held that the assessee having failed to prove the genuineness and source of the cash credits, the amount of Rs. 46,250 credited in the books of account of the assessee in the names of the creditors, who had no income of their own must be treated as the assessee 's income from undisclosed sources.
According to him, such cash credits were treated in their names after making false declarations under the Scheme, with a view to avoid a higher rate of taxation.
He accordingly made an addition of Rs. 46,250 as assessee 's income from undisclosed sources.
The Appellate Assistant Commissioner disagreed with the ITO, holding that when an amount was disclosed by a person under section 24 of the Act, there was an immunity not only as regards the declarant, but there was also a finality as to the assessment.
In his view, the entire statement of Kanhaiyalal had to be ignored, as it was not clear in what capacity the questions were put to him and the answers elicited because any investigation into the source of the deposits was prohibited and illegal under the Act.
He accordingly held that the acceptance of the voluntary disclosures made by the creditors in question to the Commissioner and the payment of tax thereon precluded the Department from disputing that the income belonged to the said creditors and as the same income cannot be taxed twice, once in the hands of the creditors and again in the hands of the assessee, the order passed by the ITO in that behalf was unsustainable.
The Appellate Assistant Commissioner, therefore, directed the deletion of Rs. 46,250.
The Department went up in appeal before the Appellate Tribunal.
The Appellate Tribunal, however, disagreed with the Appellate Assistant Commissioner and upheld the decision of the ITo.
It was of the opinion that the ITo was justified in treating the cash credits appearing in the books of account of the assessee in the names of 855 the creditors as unexplained cash credits, since it was found that the A income declared by the creditors did not belong to them, and there was nothing to prevent the same being taxed in the hands of the assessee to which it actually belonged.
According to the Tribunal the immunity under section 24 of the Act was conferred on the declarant only, and there was nothing to preclude an investigation into the true nature and source of the credits.
The Appellate Tribunal, after taking into consideration the statement of Kanhaiyalal, and having regard to the age of the creditors and the fact that none of them had any independent source of income at any time, held that the ITo was justified in holding that the asssessee failed to discharge the burden of proof under section 68 of the Income Tax Act, 1961 in regard to the nature and source of the cash credits and, therefore, it had to be treated as the assessee 's income from undisclosed sources.
Thereupon, the assessee applied to the Appellate Tribunal under section 256 of the Income Tax Act, 1961 to refer the question of law arising out of its order, to the Madhya Pradesh High Court for its opinion.
There being a conflict of opinion between the different High Courts as to the true nature of the immunity granted under section 24 of the Act, the Appellate Tribunal has made a reference under section 257 of the Income Tax Act, 1961 to this Court, of the following questions of law, for its opinion, namely: 1.
Whether on the facts and in the circumstances of the case, it was open to the Revenue authorities to investigate into the genuineness of the five credits aggregating to Rs. 46,250 and records a finding in regard thereto, when the Disclosure petitions made by the five creditors under Section 24 of the Finance (No. , had been acted upon by the Revenue authorities ? 2.
If the answer to the first question is in the negative and in favour of the assessee, whether the addition of Rs. 46,250 to the income of the assessee as representing its income from undisclosed sources, for the assessment years 1967 68, is valid and justified in law ? The main question in controversy lies within a narrow compass.
The question, in fact, is whether the provisions of section 24 of the Act can be construed as conferring any benefit, concession or 856 immunity on any person other than the person making the declaration under the provisions of the Act.
It may be mentioned that to avoid any room for doubt, the legislature has introduced section 18 in the Voluntary Disclosures of Income and Wealth Act, 1976 (Act No. 8 of 1976) which specifically provides that save as otherwise provided in the Act, nothing contained in the Act shall be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under the provisions of the Act.
The question for consideration is whether the absence of such a provision as is found in Act No. 8 of 1976 leads to the consequence that acceptance of a declaration under section 24 of the Act confers a benefit which is not provided by the Act on a person other than the declarants and takes away the power of the ITO under section 68 of the Income Tax Act, 1961 to make an investigation as to the nature and source of a cash credit appearing in the books of the assesssee to reject the explanation offered by the assessee as unsatisfactory and to treat it as his income from undisclosed sources.
Section 24 of the Finance (No. provided for the making of voluntary disclosures in respect of amounts representing income chargeable to tax under the Income Tax Act 1922 or the Income tax Act, 1961, for any assessment year commencing on or before April 1, 1964.
On such disclosure being made under sub section
(I) thereof, in the manner provided by sub section
(2) the amount was to be charged to Income tax in accordance with sub section
(3) which provided by a legal fiction that income tax shall be charged on the amounts of voluntarily disclosed income at certain specified rates "as if such amount were the total income of the declarant".
There was a safeguard provided in sub section
(4) that the benefit under the scheme would be available only in respect of the voluntarily disclosed income and not in respect of the amount detected or deemed to have been detected by the ITO before the date of declaration.
When the Commissioner of Income Tax passed an order under sub section
(4) there was an appeal provided to the Central Board of Revenue under sub section
(S) and the Board was empowered under sub section
(6) to pass such orders thereon as it deemed fit.
There was a finality attached to the order of the Board under sub section
(8) In support of the reference, learned counsel for the assessee has, in substance, put forth a three fold contention.
It is submitted, firstly, that the ITO could not have treated the cash credits standing 857 in the names of the sons of Kanhaiyalal, the Managing Partner as .
the assessee 's income from undisclosed sources, having regard to the fact that each one of them had made a declaration under sub section
(I) and paid tax thereon under sub section (3).
The submission is that it is not permissible for the Department to go into the question of the nature and source of the amount so declared in a voluntary disclosure under s.24 of the Act, and to say that it does not represent the income of the declarant.
Secondly, it is urged that sub section
(I) read with sub section
(3) of s.24 of the Act has a overriding effect over s.68 of the Income Tax Act, 1961 and, therefore, the ITO could not make any investigation as to the nature and source of the cash credits, and thirdly, it is submitted that there cannot be double taxation of the same income, once in the hands of the creditors and again in the hands of the assessee.
These submissions proceed on a wrongful assumption that there is a finality attached under sub section
(8) to the legal fiction created by sub section
(3) for which there is no basis whatever.
The contentions cannot, in our opinion, prevail.
For an appreciations of the contentions raised, it is necessary to set out the relevant provisions of s.24 of the Act.
Sub section
(1), insofar as relevant reads .
(1) Subject to the provisions of this section, where any person makes, on or after the 19th day of August, 1965, and before the 1st day of April, 1966, a declaration in accordance with sub section (2) in respect of the amount representing income chargeable to tax under the Indian Income tax Act, 1922 (11 of 1922), or the Income tax Act, 1961 (43 of 1961), for assessment year commencing on or before the 1st day of April, 1964 (a) for which he has failed to furnish a return within the time allowed under section 22 of the Indian Income tax Act, 1922 (11 of 1922), or section 139 of the Income tax Act, 1961 (43 of 1961), or G (b) which he has failed to disclose in a return of in come filed by him on or before the 19th day of August, 1965, under the Indian Income Tax Act, 1922 (11 of 1922) or the Income Tax Act, 1961 (43 of 1961), or 858 (c) which has escaped assessment by reason of the omission or failure on the part of such person to make a return under either of the said Acts to the Income tax officer or to disclose fully and truly 11 material facts necessary for his assessment.
he shall, notwithstanding anything contained in the said Acts, be charged income tax in accordance with sub section (3) in respect of the amount so declared or it more than one declaration has been made by a person the aggregate of the amounts declared therein, as reduced by any amount specified in any order made under sub section (4) or, if such amount is altered by an order of the Board under sub section (6), then such altered amount. . .
Sub section
(3) containing the legal fiction reads as follows: (3) Income tax shall be charged on the amount of the voluntarily disclosed income (a) where the declarant is a person other than a company, at the rates specified in paragraph A, and (b) where the declarant is a company, at the rates specified in Paragraph F, of Part I of First Schedule to the Finance Act (X of 1965) as if such amount were the total income of the declarant Sub section
(8) on which strong reliance is placed, runs thus: (8) An order under sub section (6) shall be final and shall not be called in question before any Court of law or any other authority.
The crux of the matter is whether the provisions of s.24 of the Act can be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under the provisions of the Act.
The question is whether the non obstente clause contained in sub section
(I) of section 24 of the Act precludes the Department from proceeding against the person to whom the income actually belonged.
The contention that there was an immunity not only as regards the declarant, but there was also a finality as to the assessment under s.24 of the Act stems from a misconception of the nature and scope of the Voluntary Disclosure Scheme.
859 Under sub section
(I) of s.24, a person was required to make a voluntary disclosure in respect of the amount representing the income chargeable to tax under the Indian Income Tax Act, 1922 or the Income Tax Act, 1961 for any assessment year commencing on or before April 1, 1964.
Sub section (I) makes it clear that the declarations, which were expected to be made in the manner provided by sub section
(2), were with regard to the income which was chargeable to tax under the Income Tax Acts of 1922 or 1961, but which was not disclosed at the proper time.
Neither under the Act of 1922 nor under the Act of 1961, was a person required to submit a return with regard to the income which was either not earned or deemed to have been earned by him.
It, therefore, follows that the declarations under sub section
(2) of s.24 had to relate to income actually earned by him.
The scheme only permitted the bringing forward of income to tax it did not require investigation of the claim of the declarant.
If a person made a declaration, the Commissioner was under an obligation to assess him to tax.
In respect of the voluntary disclosures made, a declarant acquired an immunity from further investigation as to the nature and source of the income.
He also acquired certain benefits.
One of the distinctive features of the scheme was that tax was chargeable on the whole of the disclosed income taken as a single block at rates prescribed for personal income or for corporate income under the Act, and not at an ad hoc concessional rate.
Further, facilities were allowed to payment of tax in appropriate instalments extending over a period not exceeding four years, subject to a down payment of not less than 10% of the tax due and furnishing a security in respect of the balance.
Income which had already been detected on the material available prior to the date of disclosure, was, however, to be assessed under the regular provisions of the Income Tax Act and not under the scheme.
Any admissions made by a person in the declarations filed by him under the scheme in respect of such income were not to be used in assessing that income under the Income Tax Act.
Under the scheme, the disclosed income was not to be subject to any further proceedings of assessment.
The identity of the declarant was not to be revealed and he was also immune from penalty and prosecution for the past concealment of the disclosed income.
It is, therefore, obvious that the Act granted immunity only to the declarant alone and not to other persons to whom the income really belonged.
The scheme of the Act makes it abundantly clear that it was to protect only those who preferred to disclose the income they 860 themselves had earned in the past and which they had failed to disclose at the appropriate time.
It is undoubtedly true that the Act was brought on the statute book to unearth the unaccounted money.
But there is no warrant for the proposition that by enacting the same, the legislature intended to permit, or connive at, any fraud sought to be committed by making benami declarations.
If the contentions were to be accepted, it would follow that an assessee in the higher income group could, with immunity, find out a few near relatives who would oblige him by filing returns under s.24 of the Act disclosing unaccounted income of the assessee as their own and claiming that the said income was kept by them in deposit with the assessee.
That takes us to the contention based on the legal fiction contained in sub section
(3) of s.24 of the Act and the finality of the assessment, by virtue of sub section
(8) thereof.
The legal fiction contained in sub section
(3) of s.24 of the Act, construed in the light of the other provisions; must mean that the income voluntarily disclosed shall be deemed to be the income of the declarant.
The words "as if such income were the total income of the declarant" can only mean that even though the income did not actually belong to the declarant lt would be treated to be his income for purposes of payment of income tax under the scheme.
If, therefore, a person made a false declaration with regard to income not earned by him, it is difficult to comprehend how the Department could be prevented from proceeding against the person to whom the income actually belonged and during the course of whose assessment the concealed income is detected.
It, therefore, logically follows that on a disclosure being made, the amount was not to be charged to income tax in accordance with sub section
(3) of s.24 of the Act, taking the disclosed income as the taxable income of the declarant.
The immunity under section 24 of the Act was conferred on the declarant only and there was nothing to preclude an investigation into the true nature and source of the credits.
The ITO was, therefore, justified in treating the cash credits in the books of account of the assessee in the names of the creditors as unexplained cash credits.
The finality under sub section
(8) is to the order of the Central Board of Revenue under sub section
Under sub section
(4) the Commissioner of Income Tax was required, within thirty days, if satisfied that the whole or any part of the income declared had been detected or deemed to have been detected by the ITO prior to the 861 date of declaration, to make an order in writing to that effect and forward a copy thereof to the declarant.
Any person who objected to such an order could appeal under sub section (5) to the Central Board of Revenue stating the grounds for such an objection.
The Board was empowered to pass such orders as it thought fit under sub section
This order of the Board under sub section
(6) was final and conclusive by reason of sub section
Thus, the finality under sub section
(8) was to the order of the Board under sub section
(6) of section 24 and not to the assessment of tax made on the declarations furnished by the creditors under the scheme, by virtue of the legal fiction contained in sub section
(3) of section 24 of the Act.
The next question that calls for determination is whether the non obstante clause contained in sub section
(1) of section 24 of the Act precludes the Department from proceeding against the person to whom the income actually belonged.
Under sub section
(1) of section 24 the declaration was required to be made in respect of the amount which represented the income of the declarant.
The declaration could not be made in respect of an amount which was not the income of the declarant.
If, therefore, a person made a false declaration with respect to an amount which was not his income, but was the income of somebody else, then there was nothing to prevent an investigation into the true nature and sources of the said amount.
There was nothing in section 24 of the Act which prevented the ITO, if he was not satisfied with the explanation of an assessee about the genuineness or source of an amount found credited in his books, in spite of its having already been made the subject of a declaration by the creditor and then taxed under the scheme.
We find no warrant for the submission that section 24 had an overriding effect over section 68 of the Income Tax Act, 1961, insofar as the persons other than the declarants were concerned.
In our judgment, the legal fiction created by sub section
(3) of section 24 of the Act by virtue of which the amount declared by the declarant was to be charged to income tax "as if such amount were the total income of the declarant" was limited in its scope, and it cannot be invoked in assessment proceedings relating to any person other than the person making the declaration under the Act so as to rule out the applicability of section 68 of the Income Tax Act, 1961.
The last question that remains is whether the same income cannot be taxed twice, once in the hands of the creditors and again in the hands of the assessee.
In a case of this description, there is 862 no question of double taxation.
The situation is of the assessee 's own making in getting false declarations filed in the names of the creditors with a view to avoid higher slab of taxation.
Once it was found that the income declared by the creditors did not belong to them, there was nothing to prevent the same being taxed in the hands of the assessee to which it actually belonged.
It follows that the decisions of the Gujarat High Court in Manilal Gafoorbhai Shah vs Commissioner of Income Tax, of the Allahabad High Court in Badri Prasad & Sons vs Commissioner of Income Tax, and Pioneer Trading Syndicate vs Commissioner of Income Tax, Lucknow and of the Madhya Pradesh High Court in Addl.
Commissioner of Income Tax vs Samrathmal Santoshchand which lay down the true scope of the Voluntary Disclosure Scheme under section 24 of the Act must be upheld.
The decisions of the Delhi High Court in Rattan Lal & Ors vs Income Tax Officer and Shakuntala Devi & ors.
vs C.I.T. and of the Jammu & Kashmir High Court in Mohd. Ahsan Wani vs C.I.T., taking a view to the contrary, are overruled.
The Income Tax officer was entitled to determine whether the amount disclosed was or was not the income of the declarant, while dealing with the case of another assessee under section 68 of the Income Tax Act, 1961.
The legal fiction created by sub section
(3) of section 24 was restricted to the Voluntary Disclosure Scheme itself.
The protection enjoyed by the declarant under that scheme extended only to the amounts so declared being not liable to be added, in any assessment, of the declarant.
There was no absolute finality attached to the declaration especially when the nature and source of the sum declared was being determined for the purpose of its inclusion in the income of an assessee other than the declarant.
There was, therefore, nothing which prevented the Income Tax officer from investigating into the nature and source of the sums credited in the books of account of an assessee and reject his explanation to the effect that 863 the sums belonged to the persons who had made declarations about them under section 24 of the Act.
Accordingly, the reference must be answered in favour of the Revenue and against the assessee.
Our answer to the first question is that the legal fiction created by sub section
(3) of section 24 of the Finance (No.2) Act, 1965 by virtue of which the amounts disclosed by the declarants had to be charged to income tax "as if such amount were the total income of the declarants" was limited in its scope and could not be invoked in the assessment proceedings relating to the assessee in whose books of account the cash credits appear.
The answer to the first question is sufficient to dispose of the second.
On the construction placed on sub section
(3) of section 24 of the Act, it must also be held that the ITO was justified in treating the cash credits appearing in the books of account of the assessee, amounting to Rs. 46,250 as the assessee 's income from undisclosed sources, since the assessee failed to discharge the burden of proof placed upon him under section 68 of the Income Tax Act, 1961.
The Commissioner of Income Tax shall be entitled to his costs of the reference.
| IN-Abs | During the course of the assessment proceedings of the assessee firm for the assessment year 1967 68, the Income Tax officer noticed cash credits of Rs. 9,250 each in the names of five sons of the Managing Partner, in the books of the assessee.
The Income Tax officer found that these creditors, who were minors, had no independent source of income.
The assessee contended before the ITO that the five creditors had voluntarily disclosed the credits under section 24 of the Finance (No. and that the disclosures were accepted by the Commissioner.
The ITO rejected the contention of the assessee and held that the cash credits in question were unexplained cash credits, that they represented the income of the assessee from undisclosed source, and accordingly made an addition of Rs. 46,250.
The appellate Assistant Commissioner held that the acceptance of the voluntary disclosures under section 24(3) of the Act and the payment of tax thereon precluded the Department from disputing the fact that the income belonged to the creditors, and, as the same income could not be taxed twice once in the hands of the creditors and again in the hands of the assessee, set aside the order of the ITO.
The Tribunal disagreed with the Appellate Assistant Commissioner and upheld the order of the ITO.
Hence the reference at the instance of the assessee under section 257 of the Income Tax Act, 1961 .
Answering the reference against the assessee, the Court ^ HELD: Per Sen, J. 1.
Section 24 of the Finance (No. cannot be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under the provisions of the Act.
The scheme of the Act makes it abundantly clear that it was to protect only those who preferred to disclose the income they themselves had earned in The past and which they had failed to disclose at the proper time.
The scheme only permitted the bringing 850 forward of income to tax; it did not require investigation of the claim of the declarant.
The Act granted immunity only to the declarant and not to other persons to whom the income really belonged.
[859 G H, 860 A] 2.
The legal fiction created by sub section
(3) of section 24 of the Finance (No. by virtue of which the amount declared by the declarant had to be charged to income tax "as if such amount were the total income of the declarant", was limited in scope and it cannot be invoked in assessment proceedings relating to any person other than the person making the declaration, and did not take away the power vested in the ITO under section 68 of the Income Tax Act, 1961 to reject the ' explanation of an assessee for a cash credit on the ground that the explanation was not satisfactory in the case of such other person.
[861 F G] 3.
The finality under sub section
(8) of section 24 of the Act was to the order of the Central Board of Revenue under sub section
(6) thereof and not to the assessment of tax made on the basis of a declaration made by the creditors under the scheme.
There was, therefore, nothing to prevent an investigation into the true nature and source of the cash credits.
[861 B, D] 4.
The acceptance of voluntary disclosures under s 24 of the Act and the payment of tax thereon by the creditors could not, in law, justify the deletion of the amount of Rs. 46,250 as it represented the assessee 's income from undisclosed sources.
In a case of this description, there was no question of double taxation which was a situation of assessee 's own making in getting false declarations made in the names of the creditors with a view to avoid higher slab of taxation.
once it was found that the income declared by the creditors did not belong to them, there was nothing to prevent the same being taxed in the hands of the assessee to which it actually belonged.
[861 H, 862 A B, 863 C] Manilal Gafoorbhai Shah vs Commissioner of Income Tax, Gujarat; Badri Prasad & Sons vs Commissioner of Income Tax, Allahabad; Pioneer Trading Syndicate vs Commissioner of Income Tax, Lucknow, Bench Allahabad) and Additional Commissioner of Income Tax vs Samarathmal Santoshchand, Madhya Pradesh, approved.
Rattan Lal & Ors vs Income Tax officer, Delhi; Shakuntala Devi & Ors vs C.I.T, Delhi and Mohd. Ahsan Wani vs C.I.T., Jammu & Kashmir, overruled.
The declaration made under sub section
(2) of s.24 of the Income Tax Act, 1961 had to relate to income actually earned by the assessee.
It did not require any investigation into the correctness of the declarations or any determination of the amounts belonging to the declarant.
The mere charge to tax on the amounts under the Voluntary Disclosure Scheme could not have the effect of converting the money from the deductions from the books of the assessee into the income of The declarants if it did not belong to it.
It was, therefore, open to the Income Tax officer to investigate into the source of the cash credit amounting to Rs. 46,250 standing in the books of the assessee in the names of the sons of the Managing Partner.
[859 C D, 860 F G] 851 1.
The making of an assessment against a declarant on his disclosure of statement under section 24 of the Finance (No. cannot deprive Income Tax officer of jurisdiction to assess the same receipt in the hands of another person if, in a properly constituted assessment proceeding under the Income Tax Act, the receipt can be regarded as the taxable income of such other person.
[852 G H, 853 A] 2.
The liability imposed under section 24 of the Finance (No. is identifiable with the income tax liability under the Income Tax Act.
The scheme for voluntary disclosure of income and its taxation is only another mode provided by law for imposing income tax and recovering it.
Consequently the general principles which apply to assessments made under the Income Tax Act would, except for provision to the contrary, be applicable to assessments made under section 24 of the Finance (No. Accordingly when the assessment to income tax is made under the latter enactment, it will be governed by the general principle that a finding recorded therein governs only the particular person assessed.
[852 B D] 3.
The finality enacted by sub.s.
(8) of section 24 of the Finance (No. attaches to the assessment of the declarant only.
It cannot in law operate in favour of or against any other person.
The jurisdiction of an Income Tax officer when making an assessment is concerned primarily with the issue whether the receipt under consideration constitutes the income of the assessee before him.
Any finding reached by the Income Tax officer touching a person not the assessee in the process of determining that issue cannot be regarded as an operative finding in favour of or against such person.
The only exception of this rule centers on the limited class, and for the limited purpose, defined by the Supreme Court in Income Tax Officer, A Ward, Sitapur vs Murlidhar Bhagwan Das, at 346.
[852 D F] Ahmed Ibrahim section Dhoraji vs The Commissioner of Wealth Tax Gujarat, [1981] 3 SCR p. 402 and Income Tax Officer, A Ward, Sitapur vs Murlidhar Bhagwan Das, at 346, applied.
|
ition No. 119 of 1979.
(Under Article 32 of the Constitution of India) V.M. Tarkunde, G.L. Sanghi, Mrs. Jayashree Wad, G.D).
Gupta and Miss Anita for the Petitioners.
K. Parasaran, Solicitor General and Miss. A. Subhashini for Respondents 1 2 and 4 7.
Dr. Y.S. Chitale, A.T.M. Sampath and P.N. Ramalingam for the other appearing Respondents.
The Judgment of the Court was delivered by BALAKRISHNA ERADI, J.
In this petition filed under Article 32 of the Constitution, the petitioners 31 in number who are all officers serving in the Aviation Research Centre (for short, the 'ARC ') have challenged the constitutionality of Rules 6 to 8 of the "Aviation Research Centre (Technical) Service Rules, 1976" issued by the President of India under the proviso to Article 309 of the Constitution, as also the legality and validity of the "absorption" of respondents Nos. 8 to 67 in the said Department pursuant to the impugned Rules.
There is a further prayer in the writ petition to declare the Seniority List dated November 6, 1978 (Annexure 'G ') published by the Department as illegal, unconstitutional and void.
Yet another relief claimed by the petitioners is that all the promotions granted to respondents Nos. 8 to 67 in the ARC service from 1968 till 1978 should be declared by this Court as illegal and void, and that a writ of mandamus or any other appropriate writ, order or direction should be issued to respondents Nos. 1 to 7 the Union of India, the Cabinet Secretary, the Director of Department of Personnel, the Director General of Security, the Director of ARC and the Adviser (Technical), A.R.C., respectively to constitute the ARC afresh in accordance with law and to rearrange the seniority in the Service in conformity with law.
The petitioners ' case is that shortly after the formation of the ARC in 1963 the petitioners were directly recruited to the said department on a regular basis during the period between 1963 and 1966 in the category of Assistant Central Intelligence officers Grade II, (which has since been redesignated as Deputy Field officers (Tech.) 881 (for short DFO) under the impugned Rules while respondents Nos. 8 to 67 are officers whose services have been borrowed on deputation to the ARC from some departments of Central Government and from the Police Cadre of State Governments.
The petitioners contend that by virtue of their regular appointments in the ARC, they were, as of right, entitled to be promoted to the higher posts of Assistant Central Intelligence officer, Grade I now called the Field officer (Tech.) Deputy Central Intelligence officer (Tech.)/Assistant Technical officer subject only to the right of the Department to supersede those found unsuitable for such promotions.
However, instead of promoting the petitioners to the vacancies that arose in such higher categories of posts, the Department filled up those vacancies by granting promotions to the deputationists.
thereby illegally denying to the petitioners the opportunities legitimately due to them for promotion in the Department.
It is contended by the petitioners that the deputationists were occupying the posts in the Department only on ad hoc basis and such ad hoc appointees who were having the benefit of lien in their parent departments and were getting promotions in those departments had no claim whatever to seniority or promotions in the borrowing Department, namely, the ARC.
On this basis the petitioners have raised a . challenge in this writ petition against the legality of the various promotions given to respondents Nos. 8 to 67 in the year 1968 and thereafter.
A draft combined seniority list of Assistant Central Intelligence officers Grade II (Tech.) working in the ARC was published in March 1971 (Annexure 'A '), wherein the officers on deputation as well as those who are directly recruited in the ARC had all been included and the seniority of the deputationists had been fixed by taking into account the total length of service put in by them in the rank of ACIO in their parent departments as well as in the ARC.
According to the petitioners, the said list had been prepared in violation of the principle that the same period of service of a Government servant cannot be legally considered twice over for service benefits in two Departments, namely, the parent department and the borrowing department.
G A Writ Petition Civil Writ Petition No. 1020 of 1971 was filed in the Delhi High Court by three of the present petitioners complaining against the promotions given to the deputationists and challenging the validity of the combined seniority list published by the Department in 1971.
During the pendency of that writ petition the impugned seniority list of 1971 was substituted by two separate 882 lists one consisting of the direct recruits and the other consisting of deputationists.
Thereupon.
the writ petition before the Delhi High Court was got amended by the petitioners therein by incorporating objections against the new seniority lists published by the Department.
When the case came up for hearing, counsel appearing on behalf of the Union of India submitted before the High Court that statutory rules governing the service were then under preparation, that the arrangements till then made were all purely on ad hoc basis and the whole question will eventually be finalised after the rules were framed.
In the light of the said submission, the High Court dismissed that writ petition observing that since no rules governing the Service had been framed and the appointments in question had all been made on purely ad hoc basis, the petitioners did not have at that point of time any legitimate grievance and the writ petition was, therefore, premature.
It is submitted by the petitioners that, contrary to the assurance given to the Delhi High Court, the Department did not take early action for framing the rules but instead continued to confer on the deputationists the benefit of further illegal promotions and it was only after all the higher posts were filled by promoting deputationists that the Department ultimately promulgated the impugned statutory Service Rules on April 26, 1976.
Strong reliance has been placed by the petitioners on office Memorandum dated December 22, 1959 issued by the Ministry of Home Affairs (Annexure 'C ') laying down certain general principles for determining seniority of various categories of persons employed in Central Services.
According to the petitioners, in the absence of statutory rules governing the conditions of service of personnel in the ARC, the principles laid down in the aforesaid office Memorandum were applicable to the said Department.
It is urged that under clause (viii) of the said office Memorandum, it was incumbent on the authorities to replace all the deputationists who, according to the petitioners, were holding the posts in the Department only on ad hoc basis, by persons approved for regular appointment by direct recruitment, and until the deputationists were so replaced the deputationists had to be placed in bloc below person directly recruited to the grade.
The petitioners have sought to derive support from Annexure 'D ' which is a letter dated October 15, 1971 addressed by the Department of Personnel, Cabinet Secretariat to the Director General of Security, wherein it is pointed out that persons appointed to a grade on deputation basis are appointed for a specific period, after the expiry of which they are required to revert back to their parent departments and since the said deputationists do not have any locus standi in the borrowing departments, they are not entitled to 883 promotions/confirmations in the borrowing departments.
The letter proceeds to state that the question of fixation of their inter se seniority of such deputationists vis a vis other categories of officers of a particular grade by preparing a combined seniority list does not, therefore, arise.
However, it was also added in the next para.
graph of the letter that though deputationists are not entitled to promotion to a higher grade, yet they can be considered for appointment on deputation to the higher grades, if the Recruitment Rules of the higher grade provide for appointment on deputation basis, and in the absence of the Recruitment Rules, it is for the appointing authority to decide whether a person already serving as a deputationist in the lower grade should be considered for appointment on deputation to the higher posts.
According to the petitioners, on the basis of the principle enunciated in this letter, persons serving on deputation in the ARC should all have been repatriated to their parent departments as soon as direct recruits became available in sufficient number and the action taken by the Department in filling up the vacancies in the higher categories, namely, ACIOs Grade I (Field officers) and Assistant Technical officers by granting promotions to respondents Nos. 8 to 67 was totally illegal.
The petitioners have alleged that some of the deputationists were holding posts in their parent departments which were inferior in rank in comparison with the posts of DFOs.
It is contended by the petitioners that the grant of such promotions to the deputationists amounted to conferment of double benefits on them since they were simultaneously earning promotions in their parent departments.
Some of the petitioners who had joined the ARC in 1963 as DFOs became eligible for promotions in 1968 by completing the five years ' qualifying period, but instead of promoting them to the category of Field officers, the Department filled up the vacancies which became available in 1968 and subsequent years by promoting some of the respondents who were only deputationists.
The petitioners contend that the deputationists were serving in the ARC only on ad hoc basis and hence they were not eligible under the terms of the Memorandum dated December 27, 1959 (Annexure 'C ') for the grant of any promotions in the borrowing department.
It is alleged that while effecting such irregular promotions, the petitioners were not even considered and they were illegally denied the opportunity of competing with the respondents for promotions to the posts of Field officers.
In 1975, a further injustice is said to have been done to the petitioners when twenty of the deputationists functioning as Field officers were promoted as Assistant Technical officers (for short, ATOs).
Writ petitioners Nos. 1 and 4 made representations 884 complaining against those promotions, but those representations were rejected by the Director, ARC by his Memorandum dated September 8, 1975 (Annexure `E ').
On December 1, 1975, seven more deputationists were promoted as ATOs.
The petitioners have raised the plea that the aforesaid promotions of the deputationists were illegal and discriminatory since the Department had fixed an arbitrary date, namely, December 1972 for computing the qualifying period of three years for eligibility to be considered for promotions.
It was only after most of the posts in the higher categories of ATos and FOs had come to be occupied by the deputationists as a consequence of such irregular promotions that the impugned Rules were promulgated by the President of India on April 26,1976.
Through the said Rules, the Department has purported to absorb all the deputationists/respondents Nos. 8 to 67 in the ARC Service as TOs/ATOs/FOs and thereby legalised all the illegal promotions granted to those deputationists.
This, according to the petitioners, has been done with the mala fide intention of giving favoured treatment to a deputationist at the expense of the direct recruits like the petitioners.
The petitioners have put forward the contention that the impugned Rules are arbitrary and discriminatory and are violative of Articles 14 and 16 of the Constitution.
It is their further plea that the wholesale absorption of the deputationists is a colourable and unconstitutional exercise of power and the impugned Rules in so far as they provide for such absorption are in the nature of a fraud on the powers conferred on the President by the proviso to Article 309 of the Constitution.
The petitioners point out that even after the constitution of the Service by the impugned Rules, no seniority list was published for more than two years, but promotions to the posts of FOs were, in the meantime, granted to several of the deputationists.
It is contended by the petitioners that Rule 6 of the impugned Rules confers arbitrary powers on the controlling authority to equate the ad hoc service rendered by the deputationists in the ARC with the 'regular ' service rendered by persons like petitioners who had been directly recruited to the Department on a regular basis and this has resulted in permanently blocking all the future chances of the petitioners in matters of promotion and other service benefits.
According to the petitioners the "initial constitution" of the Service purported to be brought about under the Rules is itself highly arbitrary and it infringes Articles 14 and 16 of the Constitution since it is based on illegal treatment of unequals as equals by equating persons functioning on a mere ad hoc basis with those holding posts in he organisation on a regular basis.
Another ground of attack put forward by 885 the petitioners is that Rule 6(2) confers arbitrary and unfettered powers on the Screening Committee and hence it suffers from the vice of excessive delegation.
It is also urged that the said sub rule is unconstitutional because it enables the controlling authority to retain to itself an arbitrary power to control the decision making of the Screening Committee by means of "general or special instructions ' thereby rendering it impossible for the Screening Committee to function in an independent and objective manner.
According to the petitioners, Rule 6(2) enables the controlling authority to impose its will and whims on the Screening Committee.
The petitioners allege that the controlling authority had imposed its favoured treatment to deputationists and displayed a discriminatory attitude against the regular departmental personnel like the petitioners by treating the ad hoc service of the deputationists in the ARC as regular service and absorbing them in the posts or grades to which they have been granted illegal promotions.
The petitioners have urged that Rule 6(2) in so far as it vaguely uses the words "continuous appointment in the grade" has vested an arbitrary power in the Department to take into consideration the ad hoc service rendered by the deputationists in grades to which they have no right in law and hence the said provision is highly arbitrary and violative of Article 14 of the Constitution.
Alternatively, it is submitted by the petitioners that the aforesaid words "continuous appointment in the grade" should be reasonably construed to mean "continuous appointment on regular basis in the grade" in which event alone the rule can be regarded as free from the vice of arbitrariness.
Rule 6(6) has also been attacked by the petitioners as infringing Articles 14 and 16 of the Constitution on the ground that it enables the Screening Committee to discriminate against the direct recruits by treating them on a par with the deputationists.
It is contended by the petitioners that the said sub rule confers power on the Screening Committee to absorb such of the deputationists in a lower grade who were found to be unsuitable for absorption in a higher grade and thereby completely blocks the chances of persons like the petitioners to get promotions into such lower grades despite their being found suitable for such promotions.
Another point raised by the petitioners is that it was incumbent on the Screening Committee before it took its final decision regarding the absorption of personnel in the various grades to give an opportunity to the petitioners to represent their case, and inasmuch as this procedure was not followed, the decisions taken by the Screening Committee were in clear violation of the principles of natural justice.
The petitioners have also voiced a grievance that 886 even though the Screening Committee had prepared a list of the officers whom it had decided to absorb in the various grades, the Department did not disclose the contents of the said list to personnel working in the ARC but kept the matter secret.
Reiterating their contention that the promotions given to respondents Nos. 8 to 67 during the period from 1968 to 1978 were all illegal on the ground that these promotions had been made without considering the cases of the petitioners, the petitioners have put forward further plea that the publication of the impugned Seniority List was deliberately delayed by the Department till November 6, 1978.
with intent to favour the deputationists, some of whom were promoted as ATOs on November 5, 1978.
On this basis, it is contended that the action taken by the Department in publishing the Seniority List dated November 6, 1978 was mala fide.
Another argument advanced by the petitioners is that Rule 7 in so far as it empowers the Department to reckon the seniority of the deputationists by giving them the benefit of the ad hoc service rendered by them in the ARC as well as the prior service put in by them in their parent departments is arbitrary.
The petitioners con tend that this deviation from the principle uniformly followed for fixing the seniority in all other departments of the Government of India namely those laid down in the Home Ministry 's office Memorandum dated December 22, 1959 was wholly unjustified and as a result thereof the direct recruits in the ARC are subjected to a differential treatment resulting in gross prejudice to them with out there being any rational basis for separate classification.
There is also an allegation that in fixing the seniority of personnel as per the impugned gradation list dated November 6, 1978, even service rendered by the deputationists in non comparable and lower ranks has been wrongly taken into account.
Rule 8(1) has been attacked by the petitioners as empowering the controlling authority to enable the deputationists to consolidate the illegal advantage gained by them at the initial constitution by further promotions/appointments to still higher posts in the ARC.
It is pointed out by the petitioners that while specifying the method of recruitment to the various posts in the Service and fixing a quota as between the vacancies to be filled up by promotions and those to be filled up by direct recruitment/deputation or re employment in Schedule II of the rules the deputationists have been treated on a par with regular departmental personnel, and this involves a clear violation of Articles 14 and 16 of the Constitution.
887 Lastly, it is contended that even if it is to be assumed that the decision taken by respondents I to 7 to retain the deputationists in the Departmental the time of the initial constitution of the ARC was valid, the position of the deputationists would, in law, be only that of persons permanently transferred from the parent departments to the ARC and under Article 26 of the Civil Service Regulations, such persons appointed by transfer shall be ranked below all the direct recruits as well as the promotees already functioning in the Department.
The petitioners contend that since the Seniority List dated November 26, 1978 has been drawn up in contravention of the aforesaid principle laid down in article 26, the said list should be declared to be illegal and void.
Detailed counter affidavits have been filed on behalf of respondent No. 1 and respondents Nos. 13 to 16, 22, 25, 28 and 31.
In the counter affidavit filed on behalf of respondent No. 1, by the Deputy Secretary, Cabinet Secretariat, it is stated that the Aviation Research Centre was initially set up as a Sensitive Security organisation in the year 1963 on a purely temporary basis by way of an extension of the Intelligence Bureau.
In February 1965, the ARC, along with two other schemes, was brought under the control of the Director General of Security.
The Department was continued by the Government on temporary basis from year to year till 1971 when the Government, after reviewing all the relevant factors, took a decision to make the ARC permanent.
The administrative control over the ARC was originally vested in the Ministry of External Affairs and later with the Prime Minister 's Secretariat till 1965 when it was transferred to the Cabinet Secretariat.
There were no Recruitment and Cadre Rules for the ARC during the period when the Department was functioning on a temporary and purely experimental basis and a number of officers, including respondents Nos. 8 to 67, were taken on deputation from other Central and State Government Departments to man the various posts in the organisation.
Some persons, like the petitioners, were also directly recruited as ACIOs II on a purely temporary and ad hoc basis against temporary posts in the ARC.
The contention of the petitioners that they were regularly recruited as DFOs in the ARC is denied by the Government respondents.
It is submitted in the counter affidavit of respondent No. I that the appointments given to the petitioners were merely ' ad hoc in character and this had been clearly specified in the Memos issued to them containing the order of appointment that the appointments were temporary and would not confer on them any right for permanent appointment if and when the posts were made permanent.
It is stated that the Memos issued 888 to all the petitioners were on identical terms and a specimen copy of the Memo issued to the petitioners has been appended to the counter affidavit of respondent No. 1, as Annexure 'R 1 '.
The further submission made in the counter affidavit of the first respondent is that in the ARC there was no regular cadre nor any Recruitment Rules prior to 1976 and as and when posts in the various categories in the grades were sanctioned, they were filled up by getting suitable hands with the requisite qualifications and some experience from other departments on deputation and some vacancies were also filled up by direct recruitment.
Briefly sketching the history of the formation of the ARC, the first respondent has stated that the ARC organisation was set up in the wake of Chinese aggression that took place in the winter of 1962 and its primary role was to collect intelligence by employing the most modern highly sophisticated techniques and to furnish it to other Agencies like the Special Frontier Force and the Special Security Bureau which were in need of such intelligence in order to give better protection to our borders against external aggression.
For manning such an organisation, it was absolutely essential to secure the services of persons possessing the requisite experience, technological skill, special attitude and ability.
Initially, therefore, the various posts in the ARC organisation, which was started on a mere experimental basis, were filled up by taking on deputation officers from the intelligence Bureau and other departments which had the expertise in related fields, such as, the Department of Defence Science, Wireless Planning and Coordination and Directorate General of Civil Aviation.
With the gradual expansion in the activities of the ARC, it was found that the aforesaid Departments could not supply on deputation basis enough hands for meeting the needs of ARC and hence, the direct recruitments from the open market had also to be made.
How ever, all the appointments made by direct recruitment were merely temporary and ad hoc in character.
While the deputationists were persons with rich experience and long years of service, the direct recruits were inexperienced and new to the job.
In the circumstances, the higher posts of FOs, ATOs and Assistant Directors had to be filled up by ad hoc appointments from amongst the deputationists who by virtue of their long experience in the particular type of work were considered suitable for those posts.
As and when direct recruits gained adequate experience, several of them were also given ad hoc appointments to such higher posts.
It is further averred in the counter affidavit that in making such appointments to the higher posts, only considerations of public interest and maintenance of efficiency in the 889 functioning of the Department had weighed with the appointing authority.
The allegation put forward by the petitioners that the direct recruits were discriminated against has been denied by the first respondent as totally unfounded, and it is stated that all such appointments to the various technical posts in the higher categories of FOS, ATOS and Assistant Directors were made by the Department on the recommendations of the duly constituted DPCs/Selection Committees.
Some of the deputationists were also appointed to the higher post when they got promotions to the corresponding ranks in their parent departments.
The Department treated both the direct recruits as well as the deputationists as ad hoc apponintees in the ARC with equal rights, and equal weightage was given to both categories of employees in respect of length of service in a given grade irrespective of whether or not it was rendered wholly in ARC.
As regards the petitioners ' contentions based on the MHA Memorandum dated December 22, 1959, it is pointed out in the counter affidavit that the general principles laid down therein had no application till the matter of filling up of temporary posts in a temporary department.
Stress is laid in the counter affidavit on the fact that simultaneously with the constitution of the ARC as a regular department, the ARC (Technical) Service Rules, 1976 were promulgated by the Government and it has been submitted that the principles laid down in the aforesaid Memorandum did not get attracted to the new service inasmuch as it is clearly specified in the Memo itself that the principles enunciated therein will not be applicable for such Services and posts for which separate principles have been already issued or may be issued thereafter by the Government, The allegation of the petitioners that they had not been considered for promotion at the time when the vacancies in the categories of DFOs were filled up during the year 1968 to 1975 has been denied by the first respondent and it is averred in the counter affidavit that the direct recruits were given promotions in the higher posts when they were found suitable by the DPC for ad hoc promotions to the grades of FOs (Tech.), etc.
Reliance is placed by the first respondent of the observations made by the Delhi High Court in its judgment in Civil Writ Petition No. 1020 of 1971, filed by three of the present petitioners, that no discrimination could be said to have been made against the direct recruits either in drawing up the seniority list of 1971 or in the action taken by the authorities to filling up some of the higher posts by appointing deputationists.
Though a decision was taken by the Government in 1971 to make the ARC a permanent department, and steps to frame rules were also immediately initiated, the draft rules could be finalised after intensive examination by various concerned Ministries only by April 1976 when the Rules were 890 promulgated.
The allegation made by the petitioners that the promulgation of the rules was deliberately delayed in order to confer an undue advantage on the deputationists who were granted promotions to the higher grades in the meantime, has been categorically denied by the first respondent in its counter affidavit.
The delay in promulgation of the rules was due to the fact that because of the special features of the Department and the sensitive nature of the functions to be discharged by it, various circumstances and factors had to be taken into account before the draft rules were finally cleared by the several Ministries concerned.
The first respondent has stated in the counter affidavit that equal treatment had been meted out to the direct recruits and the deputationists in the matter of promotion/appointment from the grade of AClO 1 to that of ATO.
The allegation of the petitioners that the DPC had fixed the crucial date for eligibility for promotion from the category of ACIO I to the grade of ATO in an arbitrary manner so as to exclude the petitioners from consideration, has f) been denied by the first respondent and it is averred that the crucial date was determined by the DPC on each occasion by taking into consideration the number of vacancies likely to be available for promotion/selection and the number of persons who could reasonably be considered for such promotions/selection.
It is pointed out by tile first respondent that when deputationists were selected by the DPC, they were 'appointed ' to the higher posts on deputation and it was not a process of promotion as wrongly contended by the petitioners.
In reply to the challenge made by the petitioners against Rule 6 of the impugned Rules which provides for the initial constitution of the new service to be known as the Aviation Research Centre (Technical) Service it is submitted by the first respondent that there is no principle of law prohibiting the absorption in a newly constituted Department of persons who are functioning on deputation in a temporary organisation which was later constituted into a permanent service.
It is also submitted by the first respondent that the provision in the impugned rules for absorption of the deputationists in the ARC (Technical) Service was Made in public interest since it was found that the continual retention of the deputationists who possessed valuable experience and had long association with the organisation was absolutely necessary for the efficient functioning of the Department.
The first respondent states that the impugned rules extend equal treatment to all categories of employees who were in position on the crucial date, namely, April 25, 1976, in the matter of absorption as 891 well as determination of seniority at the initial constitution, irrespective of whether they were direct recruits or deputationists.
Since the direct recruits were all occupying the posts in the ARC only on a purely cd hoc basis, they had no legal right to be appointed in the new Department and merely by reason of their temporary appointments as ACIO II (Tech.) in the ARC organisation they could not automatically become members of the new ARC (Technical) Service which was constituted for the first time with effect from April 26, 1976.
All persons working in the ARC in various temporary posts as on April 26, 1976, were given the option to express their willingness or otherwise to be absorbed in the new Department.
The petitioners as well as the direct recruits were treated alike in the matter of the assessment of their suitability for absorption by the Screening Committee and on being found suitable, they were absorbed either in the same posts which they were occupying immediately prior to April 26, 1976 or in a lower post, subject to availability of permanent posts.
The Screening Committee prepared the seniority list of the persons found suitable for absorption in accordance with the provisions contained in Rule 6 (2) read with Rule 7 of the impugned Rules.
The counter affidavit of the first respondent goes on to state that the seniority list published on November 6, 1978 had been prepared strictly in accordance with the provisions of the impugned Rules, the names of the officers having been arranged with reference to the dates of their continuous appointment to the concerned grade.
Printing out that the benefit of the ad hoc service rendered in a particular grade has been given not only to the former deputationists but also to the direct recruits in the matter of determining their inter se seniority in the grade of FOs, it is submitted by the first respondent that there is no merit in the petitioner 's contention that the seniority list of November 6, 1978 has been prepared in a discriminatory manner so as to violate Article 16 of the Constitution.
The first respondent has further submitted that the charge of discrimination has been made by the petitioners on the basis of an erroneous assumption that the petitioners were in regular service in the ARC prior to the promulgation of the impugned Rules and that hence they had a superior claim for promotion to a higher post in comparison with the deputationists.
The petitioners had been appointed/promoted to various grades in the ARC only on ad hoc basis prior to April, 26 1979 and the benefit of such ad hoc service rendered by them had been given to the petitioners in the same way and to the same extent as service rendered by the former deputationists on deputation.
The first respondent, therefore, submits that the provisions of Rule 6 892 cannot be said to be 'arbitrary or violative ' of the principle of equality enshrined in Articles 14 and 16 of the Constitution.
Repelling the contention of the petitioners that the principle for fixation of seniority laid down in the impugned Rules is illegal for the reason that it is inconsistent with the guidelines and general principles for determination of seniority in the Central Services enunciated in MHA Memorandum dated December 22, 1959 (Annexure 'C ') the first respondent has submitted in the counter affidavit that there is no substance in this plea since it has been specially stated in the Memorandum (Annexure 'C ') itself that the principles contained therein will not apply to "such services and posts for which separate principles have already been issued or may be hereafter issued by Government".
The allegation made by the petitioners that the framing of the rules and the constitution of.
the ARC (Technical) Service was deliberately delayed with a view to give undue advantage to the deputationists has been denied by the first respondent as baseless and untrue.
Prior to 1971, there were no permanent posts at all in the ARC because the Department was temporary and all the temporary posts were being sanctioned on a year to year basis.
Action to frame the rules was initiated shortly after the decision was taken in 1971 to make the ARC a permanent Department.
The first set of draft rules was prepared and submitted to Government in 1972.
Since it was found to be defective in certain aspects, a revised draft was prepared in 1974.
Since the whole matter had to be subjected to extensive and intensive examination by various Ministries taking into account all relevant factors, the finally approved rules could be promulgated only in April 1976.
The first respondent has submitted that Rule 6 of the impugned Rules provides equal treatment to all the officers in position in the ARC on the crucial date in the matter of absorption and determination of inter se seniority at the time of initial constitution of the service.
The service rendered by the former deputationists in various grades prior to their absorption in the ARC could not be ignored, as their services were required by the Department in public interest.
It is pointed out that if the contention of the petitioners that only persons who are regularly appointed in the ARC could be absorbed in the service is to be accepted, then none of the petitioners could have been permanently appointed in the ARC Technical Service, as the appointments held by the petitioners prior to the constitution of the ARC Service in 1976 were purely temporary and ad hoc in 893 The further plea put forward by the petitioners that Rule 6(2) of the impugned Rules suffers from the vice of excessive delegation of power has been stoutly denied by the first respondent.
The Screening Committee was required to act within the frame work of the scheme of absorption envisaged in the Rules and the Committee had followed proper guidelines which had been approved by the controlling authority, namely, the Secretary, Department of Cabinet Affairs, Cabinet Secretariat.
The provision enabling the controlling authority to issue general instructions was incorporated in the rules for the purpose of ensuring that the rules relating to the initial constitution of the service were applied uniformly and judiciously.
The contention put forward by the petitioners that the said provision renders the functioning of the Screening Committee nugatory, is C refuted by the first respondent as being devoid of any merit.
The allegation made by the petitioners that the deputationists were given illegal promotions from time to time has also been denied in the first respondent 's counter affidavit as totally baseless.
It is admitted that during the period when the ARC was functioning as a temporary Department.
some of the deputationists who were initially appointed as (Tech.) were subsequently appointed to higher posts on deputation basis but the first respondent submits that there could be no valid objection to such appointments, as they had all been made in the public interest and in accordance with the general instructions on the subject.
Referring to the provisions contained in Rule 5(3) of the impugned Rules regarding the exercise of option by officers willing to be absorbed on permanent basis in the ARC, it is submitted in the counter affidavit that the said provision was equally applicable to direct recruits as well as the erstwhile deputationists.
Since the temporary appointments of the direct recruits in the post of ACIO II (Tech.) did not confer on them any right of confirmation and the ARC (Technical) Service was altogether a new service, the first respondent states that the petitioners were rightly asked to exercise their option in terms of Rule 6(3).
Dealing with the attack levelled by the petitioners against the validity of Rule 6(6), it is pointed out in the counter affidavit that the spirit and content of the rule is that persons who were holding higher posts on the crucial date and were considered suitable for permanent appointment in the said posts but could not be appointed substantively to such posts for want of vacancies, may be given permanent posts in the owner grade.
It is pointed out in the counter affidavit that the said rule was applicable to direct recruits as well as to the deputationists and that, as a matter of fact, some of the petitioners got the benefit of this rule inasmuch as they were 894 appointed substantively in the grade of DFO(T) with effect from April 26, 1976, while they are holding posts of Fo(T) on the said date.
The charge of discrimination levelled by the petitioners is, therefore, denied by the first respondent as being devoid of any foundation.
With reference to the grievance put forward by the petitioners that they were denied an opportunity to represent their case before the Screening Committee, it is submitted by the first respondent that under the scheme of the impugned Rules, the Screening Committee was not expected to entertain any representations from any quarter and, in fact, no representations were received.
The Committee had acted strictly in accordance with the provisions contained in the Rules in determining the suitability of the persons concerned for absorption in the new Department and the principles of natural justice have no applicability in such a context.
The allegation of mala fides put forward by the petitioners has been stoutly denied by the first respondent.
After the seniority list was prepared by the Screening Committee in accordance with the provisions contain ed in Rule 6(2) read with Rule 7 of the impugned Rules, certain formalities had to be gone through before orders regarding substantive appointments of the officers to the various grades could be issued.
It was only after the issue of substantive appointment orders to persons who had opted for absorption into the service, that the Department could publish the seniority list.
The formalities aforementioned included obtaining the options from all the employees, getting the approval of the parent departments of the erstwhile deputationists for their permanent absorption in the ARC Service, medical examination of employees, etc.
It was on account of the delay involved for completing the said procedure that the seniority list could be finally published only on November 6, 1978.
The counter affidavit proceeds to state that promotions in the Department were effected in the meantime strictly on the basis of the seniority list of officers recommended for absorption which the Screening Committee had prepared.
It is further pleaded by the first respondent that no illegality whatever was involved in adopting the principle of reckoning the seniority in a particular post on the basis of total length of continuous service put in by the concerned officers in the particular grade in the ARC or in the equivalent grade in the parent department.
The said rule was framed keeping in view the special requirements of the new Department.
If the deputationists had not been given the benefit of the service put in by them in the equivalent grade in their parent departments, they 895 would have all opted for their reversion to their parent departments and that would have resulted incomplete dislocation of the functioning in the ARC.
The first respondent states that lin formulating or applying the seniority rule there has not been any arbitrary discrimination as between direct recruits and deputationists and hence neither the rules nor the seniority list can be said to be violative of Articles 14 and 16 of the Constitution.
B Dealing with the contention put forward by the petitioners on the basis of article 26 of the Civil Service Regulations, it is submitted by the first respondent that the said article, which deals with appointments by transfer "in accordance with a provision in the Recruitment Rules providing for such transfers" had no applicability at all in the matter of taking persons on deputation to the ARC when it was a purely temporary Department which had no Recruitment Rules.
The subsequent absorption of such deputationists and other categories of employees has been done strictly in accordance with the provisions contained in the impugned Rules which are statutory in origin.
In the absence of any Recruitment Rules, there was no legal bar whatever preventing the competent authority from borrowing persons from other departments on deputation basis to man the various posts in the ARC during the period prior to the introduction of the impugned Rules with effect from April 26, 1976.
The former deputationists had occupied a larger percentage of the higher posts during the aforesaid period because they had put in more years of service in different grades and had much greater experience in carrying out the functions which were of a highly specialised nature when compared to the direct recruits whose induction in the ARC started only from 1965.
On the basis of the aforesaid averments contained in his counter affidavit, the first respondent has submitted that the petitioners are not entitled to any relief in this writ petition and that the petition should be dismissed.
In the separate counter affidavit filed on behalf of respondents 13, 16,22 etc., they have put forward more or less the same contentions in defence of the writ petition as have been taken by the first respondent.
From the averments contained in counter affidavit of the first respondent and the documents produced before us, it is seen that . the Aviation Research Centre was a temporary and ad hoc organisation set up late in 1962, on an emergency basis, when the country 896 was threatened with the Chinese aggression for carrying out the work of collecting intelligence by the use of highly sophisticated techniques.
For manning this Task Force, persons with experience in the specialised nature of the work were taken on deputation basis from different sources, such as the intelligence Bureau, the Departments of Defence Science, Wireless Panning and Coordination, the Directorate General of Civil Aviation and the Police of different States and they were grouped together to form the ARC.
Subsequently, to supplement the man power, some persons were also directly recruited to the organisation on a purely ad hoc basis.
The ARC organisation was initially treated as an extension of the intelligence Bureau.
In February 1965, it was brought under the control of the Director General of Security.
The administrative control over the organisation which was originally vested in the Ministry of External Affairs and later with tho Prime Minister 's Secretariat was transferred to the Cabinet Secretariat in 1965.
The sanction for continuance of the temporary organisation was accorded by the Government from year to year till the year 1971 when decision was taken by the Government to make the ARC a permanent Department.
But, the finalisation of the principles to be adopted for constitution of the new permanent Department took considerable time and it was only on April 26, 1976 that the President of India promulgated the Aviation Research Centre (Technical) Service Rules providing for the constitution of a new service to be known as Aviation Research Centre (Technical) Service and laying down the principles regulating the method of recruitment to the various posts in the said Service.
Till 1976, there was no regularly constituted cadre of posts in the temporary ARC organisation and there were also no rules or even executive orders laying down any principles regulating the method of appointment to the various posts in the organisation.
Clause 6 of the impugned Rules deals with the initial constitution of the new ARC permanent Service.
That clause is in the following terms: "6.
Initial Constitution (1) All persons holding, as on the appointed day, any one of the categories of posts specified in rule 4, whether in a permanent or temporary or officiating capacity or on deputation basis, shall be eligible for appointment to the service at the initial constitution thereof.
897 (2) The controlling authority shall constitute a Screening Committee in respect of each grade for adjudging the suitability of persons, who, being eligible to be appoint ed to the service under sub rule (1) were serving in any grade immediately before the initial constitution of the cadre for permanent appointment therein and every committee so constituted shall, subject to such general or special instructions as the controlling authority may give and after following such procedure as the committee may deem fit, prepare lists of persons considered suitable for such appointment in each grade with the names of such persons arranged in the order of seniority based on the date of continuous appointment in the grade in which they are to be absorbed or in an equivalent grade; Provided that if the controlling authority deems it necessary so to do, the same committee may be constituted to function in relation to two or more grades.
D (3) An intimation shall be sent to every person considered suitable for appointment on a permanent basis to a post in any grade giving him an opportunity to express, within thirty days of the receipt of intimation by him his willingness to be so appointed on a permanent basis and the option once exercised shall be final.
(4) Persons who are willing to be appointed on a permanent basis shall be so appointed in the order of seniority against permanent posts available as on the appointed day.
(5) Notwithstanding anything contained in sub rules (2) to (4), every person holding, as on the appointed day, a permanent post in any one of the categories specified in rule 4 in the Aviation Research Centre shall, without prejudice to his being considered for appointment to a permanent post in the higher grade or to his continuance in such higher grade in officiating or temporary capacity, be absorbed in his respective substantive grade against the permanent posts available as on the appointed day.
(6) The Screening Committee may recommend for permanent appointment in a lower grade any person who 898 is serving in a higher grade irrespective of whether he is deputationist or a direct recruit and every appointment made on such recommendation shall be without prejudice to his continuing to serve in the higher grade.
(7) Persons holding posts, as on the appointed day, in any grade of the service who are not found suitable for permanent appointment under sub rules (2) to (6), may be continued in posts in the same grade of the service in a temporary or officiating capacity as the case may be." Rule 7 lays down the principles to be applied for fixation of seniority of those appointed to the various posts in the ARC at the time of its initial constitution.
That rule reads: "7.
Seniority of persons appointed on permanent basis in each grade at the initial constitution of the service shall be in the order in which they are shown in the relevant list prepared in accordance with provisions of rule 6.
" The next rule under challenge by the petitioners is Rule 8 which deals with the topic of filling up of vacancies in various grades remaining unfilled immediately after the initial constitution of the service and all vacancies that may subsequently arise in the Department.
That rule is in the following terms: "8.
Maintenance (1) Subject to the initial Constitution of the various grades in the service, every post remaining unfilled and every vacancy that may arise thereafter shall be filled in accordance with the provisions contained in Schedule II, by appointment on promotion, deputation transfer, re employment after retirement or direct recruitment as the case may be.
(2) For a period not exceeding three years from the date of commencement of these rules, notwithstanding the limits specified in column 7 of Schedule II, the controlling authority may, if it considers it necessary so to do, exceed the percentage specified for filling up of vacancies by deputation and decrease the percentage 899 prescribed for filling up of vacancies by promotion, direct recruitment of re employment after retirement, as it may deem fit.
" The only other rule which requires to be referred to for the purpose of the present case is Rule 12 which states that "in regard to matters not specifically covered by these rules or by orders issued by the Government, members of the service shall be governed by general rules, regulations and orders applicable to persons belonging to the corresponding Central Civil Service".
The petitioners are some amongst the persons recruited directly to the ARC organisation during the period between 1965 and 1971.
The basic premise on which the petitioners have rested their challenge against the validity of the promotions given to respondents Nos. 8 to 67 from the year 1968 onwards as well as of the provisions contained in the impugned Rules is that they (petitioners) had all been regularly appointed to the ARC at the time of their initial appointment itself and that by virtue of such regular appointments, they had acquired vested rights for seniority, promotions etc., in the said organisation.
As already noticed, during the period between 1965 and 1971, the ARC organisation was a purely temporary one, the continuance of which, on an experimental basis, was being sanctioned from year to year.
There was no regular cadre of posts in the organisation nor was there any set of rules regulating the method of appointment to the various posts that had created on a mere temporary and ad hoc basis.
Annexure 'R l ' produced along with the first respondent 's counter affidavit is a copy of the letter issued by the Directorate General of Security to one of the petitioners, communicating the offer of appointment to the temporary post of ACIO II(Tech.).
It was on the basis of the acceptance of that offer by the said petitioner that he was appointed in the Department of ARC.
It is stated in the counter affidavit of the first respondent that the appointments of all the remaining writ petitioners to the cadre of ACIO II (DFO) were made on identical terms and this averment has not been controverted by the petitioners.
It is expressly recited ill exhibit R 1 that what was being offered thereunder was a temporary appointment to a temporary post and that the perm anent appointment of the person concerned to the post, if and when the post was made permanent, would depend upon various factors governing permanent appointment in such posts in force at the time, and that the temporary appointment will not 900 confer on him the title of permanency from the date the post is converted.
It is further stipulated in the letter that the appointment was liable to be terminated at any time by a notice given by either side, namely, the appointee or the appointing authority without assigning any reason.
There is also a further condition that the services of the appointee were liable to be terminated within a period of six months from the date of his appointment without any notice and without any reason being assigned.
Since the petitioners are shown to have been appointed to the cadre of ACIO Il on the aforementioned conditions, it is difficult to see how they can successfully contend that they had been regularly appointed to the ARC with effect from the dates of their initial recruitment.
They were holding merely ad hoc appointments which did not confer on them any entitlement for permanent absorption in the posts if and when the posts were made permanent.
The basic premise on which the petitioners have sought to build up their case of arbitrariness and discriminations, namely, that the petitioners had all been initially recruited directly to the ARC on a regular basis while the deputationists were holding posts only on ad hoc basis, is thus seen to be contrary to facts.
The correct position which obtained as on the date of the promulgation of the impugned Rules was that the petitioners as well as the deputationists were all working in the temporary ARC organisation only on a purely ad hoc basis.
It is against this factual background that we have to examine the contentions put forward by the petitioners in support of the challenge levelled by them against the impugned Rules as well as against the seniority list of 1968 and the various promotions given to respondents Nos. 8 to 67.
At this stage, it will be convenient to first dispose of the contentions urged by the petitioners, against the validity of the promotions given to respondents Nos. 8 to 67 during the period between 1968 and 1975.
In our opinion, the challenge raised by the petitioners against those promotions is liable to be rejected on the preliminary ground that it is most highly belated.
No valid explanation is forthcoming from the petitioners as to why they did not approach this Court within a reasonable time after those promotions were made, in case they really did feel aggrieved by the said action of the Department.
This writ petition has been filed only in the year 1979, and after such a long lapse of time the petitioners cannot be permitted to assail before this Court the promotions that were effected during the years 1968 to 1975.
A party seeking the intervention and aid of this Court under Article 32 of the Constitution for enforcement of his fundamental rights, 901 should exercise due diligence and approach this Court within a reasonable time after the cause of action arises and if there has been undue delay or laches on his part, this Court has the undoubted discretion to deny him relief.
[See Rabindra Nath Bose & Ors vs Union of India & Ors.
In this case before us, many of the impugned promotions had been effected during the year 1968 69 onwards.
Three of the present petitioners had challenged the validity of some of the promotions granted to various deputationists as well as the ranking given to them in a seniority list of ARC personnel published in 1971 by filing Civil Writ Petition No. 1020 of 1971 in the Delhi High Court.
Though the High Court by its judgment dated April 7, 1972 dismissed that writ petition on the ground that it was premature inasmuch as it had been submitted before it by the counsel for the Union of India that all the existing arrangements in the ARC were purely ad hoc and that service rules would be framed shortly, the High Court has recorded clear findings in the judgment that the principle adopted for the preparation of the combined seniority list of 1971 could not be said to have violated Articles 14 to 16 of the Constitution and that it had not been shown by the writ petitioners in that case that the impugned promotions had been effected in violation of any "statutory rules, constitutional or statutory limitations or even administrative instructions" .
If the petitioners were dissatisfied with the aforementioned findings entered by the Delhi High Court, one should have expected then to approach this Court at least soon after that decision was rendered by that High Court in April 1972 we are not suggesting that the findings of the High Court operate as res judicata against the petitioners in these proceedings.
There is no satisfactory explanation forthcoming from the petitioners as to why no action at all was taken by them to challenge the validity of the impugned promotions given to respondents Nos. 8 to 67 from 1968 onwards for a period of nearly seven years subsequent to the aforesaid pronouncement by the Delhi High Court.
Quite apart from what has been stated above on the aspect of 'laches ', on the merits also we do not find any substance in the contentions urged by the petitioners against the legality of the promotions granted to respondents Nos. 8 to 67 during the period between 1968 and 1975.
At that time, as already, noticed, the ARC was a H 902 purely temporary organisation which was being continued on a year to year basis.
There was no regular cadre of posts in the said organisation, nor were there any rules governing the mode of recruitment etc.
All the appointments made in the organisation, whether of direct recruits like the petitioners or of deputationists like respondents Nos. 8 to 67, had been made only on an ad hoc basis.
Since there was no regularly constituted service, the principles contained in the office Memorandum dated December 22, 1959 issued by the Ministry of Home Affairs (Annexure 'C '), on which strong reliance was placed by the petitioners, could have no application at all to the temporary ARC organisation.
It is clear from a reading of the said Memorandum (Annexure 'C ') that its provisions will get attracted only in relation to Government servants appointed to the Central Services.
During the period aforementioned, the ARC was just a Task Force set up on an ad hoc and experimental basis for the purpose of carrying out certain functions of a highly specialised and sensitive nature.
Quite naturally, the personnel required for manning the organisation had to be picked and grouped together in the manner best suited to effectuate the object and purpose underlying the creation of the organisation.
So long as there was no regular cadre and hierarchy of posts and no rules laying down the mode of appointment/promotion to those posts it was perfectly open to the Government to fill up the posts by securing the services of persons who, in its opinion, were, by virtue.
Of their experience and qualifications, best suited for being entrusted with the specialised kinds of functions attached to the various posts.
We have already seen that the petitioners had been appointed as ACIOs II(DFOs) only on a temporary and ad hoc basis.
Such appointments did not confer on them any rights even to the posts of DFos.
It had also been categorically made clear to them in the letters containing the offers of appointment that such appointments will not confer on them any right to the permanently absorbed in the post if and when it was made permanent.
There was also not even any executive order or administrative instruction declaring the post of DFo as the feeder category for appointment to the higher posts.
In such circumstances, it has to be held that the petitioners had no legal right or claim for being appointed by promotion to the higher posts of ACIO I (FO), ATO, etc.
It has been averred in the counter affidavit that as and when vacancies arose in the higher posts of FO.
ATO, etc, in the tem 903 porary ARC organisation in the early years after its formation, deputationists who, by virtue of their greater experience in the particular type of specialised work, were considered suitable for carrying out the duties attached to those posts on deputation basis to the category of FO, ATO, etc.
Subsequently, after the direct recruits had gained sufficient experience, some of them who were found suitable, were also appointed as ACIOs I, ATOs, etc.
No illegality of any kind was involved in the action so taken by the concerned authorities to fill up the vacancies in the higher posts by ad hoc appointments of persons possessing the requisite ability and experience.
We have, therefore, no hesitation to reject the contention put forward by the petitioners that the promotions granted to respondents Nos. 8 to 67 during the period between 1968 and 1975 were illegal and violative of Articles 14 and 16 of the Constitution .
We shall now proceed to deal with the challenge raised by the petitioners against the provisions contained in the impugned rules.
It is under Rule 3 of the Rules that the Aviation Research Centre (Technical) Service was constituted for the first time.
The com position of the service has been described in Rule 4, wherein the designations, classifications and scales of pay of the various posts included in the Service have been set out.
Rule 6 provides for the initial constitution of the Service.
The petitioners have challenged f the validity of sub rule (I) of this Rule which declares that all persons holding, as on the appointed day, any one of the categories of posts specified in Rule 4, whether in a permanent or temporary or officiating capacity or on deputation basis, shall be eligible for appointment to the service at the initial constitution thereof.
When a new service is proposed to be constituted by the Government, it is fully within the competence of the Government to decide as a matter of policy the sources from which the personnel required for manning the Service are to be drawn.
It is in the exercise of the said power vested in the Government, that provision has been made by sub rule (I) that all the persons who, as on the appointed day were already working in the ARC organisation on a temporary and ad hoc basis and had thereby acquired valuable experience in the specialised kinds of work would be eligible for appointment to the new service at the stage of its initial constitution.
The writ petitioners as well as the deputationists, namely, respondents Nos. 8 to 67 were all functioning in the temporary ARC organisation on an ad hoc basis.
Equal opportunity was given to all of them by sub rule (I) of Rule 6 to get permanently appointed in the new ARC 904 (Technical) Service subject to their being found fit by the Screening Committee referred to in the sub rule (2).
We fail to see how the said provision can be said to be violative of Articles 14 and 16 of the Constitution.
The attack levelled by the petitioners against sub rule (1) of Rule 6 is thus manifestly devoid of merit.
The next contention urged by the petitioners is that sub rule (2) of Rule 6 confers arbitrary and uncanalised powers on the Screening Committee and is hence violative of the principles of equality of opportunity enshrined in Article 16 of the Constitution.
Another point urged is that the said sub rule in so far as it provides that the Screening Committee should discharge its functions subject to such general or special instructions as the controlling authority may give, confers an arbitrary and unlimited power on the controlling authority and enables the controlling authority to impose its will and whims on the Screening Committee.
We see no force in either of the aforesaid contentions.
The provision for constitution of a Screening Committee for adjudging the suitability of the persons in the field of eligibility for permanent appointment to the service is absolutely reasonable.
The power conferred on the controlling authority to issue general or special instructions to a Screening Committee is really in the nature of a safeguard for ensuring that the rules relating to the initial constitution of the service were applied fairly and justly.
The 'controlling authority ' is the "Secretary, Department of Cabinet Affairs".
When supervisory powers are entrusted to such a high and responsible official, it is reasonable to assume that they will be exercised fairly and judiciously and not arbitrarily.
We are, therefore, unable to uphold the contention of the petitioners that the provisions of sub rule (2) of Rule 6 suffer from the vice of the arbitrariness or excessive delegation.
The petitioners have also attacked the provisions contained in sub Rule (2) of Rule 6 enjoining the Screening Committee to arrange the names of persons considered suitable for appointment in each grade in the order of seniority based on the date of continuous appointment in the grade in which they were absorbed or in an equivalent grade.
We have already found that the basic assumption on which the petitioners have founded the attack against this provision, namely, that the petitioners were all holding regular appointments as DFOs in the ARC organisation from the dates of their initial recruitment and that the deputationists (respondents Nos. 8 to 67) l were functioning in their respective posts only on an ad hoc basis is incorrect and fallacious.
As on the date of the promulgation of the rules and the initial constitution of the ARC.
(Technical) Service, 905 petitioners as well as respondents Nos. 8 to 67 were all holding the various posts in the ARC organisation only on a temporary and ad hoc basis.
While the petitioners had no substantive lien in respect of or title to any post in any department, the deputationists were having a lien on the posts held by them in their parent departments.
l he petitioners, therefore, formed a different class consisting of persons who were virtually being recruited for the first time into regular Government service, as distinct from the respondents 8 to 67 who had been holding posts in their parent departments for several years on the regular basis who formed a separate class When recruitment to the new Service was being made from two different classes of sources, it was necessary for the Government to evolve a fair and reasonable principle for regulating the inter se seniority of the personnel appointed to a new Department.
What has been done under Rule 6 is to give credit to the full length of continuous service put in by all the appointees in the concerned grade, whether such service was rendered in the temporary ARC organisation or in other departments of the Government.
The criterion applied, namely the quantum of previous experience possessed by the appointees measured in terms of the length of continuous service put in by them in the concerned or equivalent grade is perfectly relevant to the purpose underlying the framing of the rule.
In our opinion, the aforesaid principle laid down hl rule 6(2) for determination of inter se seniority was quite reasonable and fair and it did not involve any arbitrary or unfair discrimination against the petitioners.
The attack levelled by the petitioners against the said provision contained in sub rule (2) will, therefore, stand repelled.
In the light of what we have stated above, the provision contained in rule 7 that the seniority of persons appointed on permanent basis in each grade at the initial constitution of the service shall be in the order in which they are shown in the relevant list prepared by the Screening Committee in accordance with provisions of Rule 6 has also to be upheld as perfectly valid and constitutional.
We see no substance at all in the challenge raised by the petitioners against Rule 8 of the impugned rules and the provisions of Schedule II.
Under the said rule, the appointing authority is empowered to fill up every post remaining unfilled immediately after the initial constitution of the various grades in the service as well as 906 every vacancy that subsequently arises by making appointments on promotion, deputation/transfer, re employment after retirement or direct recruitment, in accordance with the provisions contained in Schedule II.
At the time of constituting a new service and laying down the mode of appointment to the various posts, it was fully within the powers of the President of India to prescribe the methods by which vacancies arising in the different categories of posts in the department should be filled up and this is precisely what has been done as per rule 8 and the provisions of Schedule II.
The petitioners have not been able to make out that the provisions of Rule 8 and Schedule II are tainted by illegality of any kind.
The next point urged by the petitioners is that the Screening Committee had acted in violation of the principles of natural justice in as much as it had not afforded to the petitioners an opportunity to make their representations before the Committee.
The function entrusted to the Committee was to adjudge the suitability of person who were holding posts in the different grades in the temporary ARC organisation for permanent appointment in the newly constituted ARC (Technical) Service on the basis of the records relating to their past performance in ARC organisation, etc.
We do not see how the principles of natural justice can get attracted in such a context.
The law does not cast any obligation on a Committee discharging such a function to invite representations from the persons in the eligible categories and consider those representations while adjudging their suitability for appointment into the new service.
Hence we do not find any substance in the argument advanced on behalf of the petitioners that there was a violation of principles of natural justice by the Screening Committee.
The petitioners have put forward a further plea that the promulgation of the impugned rules was deliberately delayed till April 1976 with a view to confer an unfair advantage on the deputationists, several of whom were granted promotions to higher posts during the v period between 1971 when the decision to make the department permanent was taken and April 26, 1976 when the impugned rules were finally issued.
We find it stated in the counter affidavit filed on behalf of the first respondent that the draft rules were prepared by the Directorate of ARC and submitted to the Government in 1972 itself, but, on a detailed scrutiny being made, it was found that the 907 said draft required substantial modification in several respects.
Revised rules were, therefore, drafted and submitted to the government late in 1974.
The first respondent has submitted that the time taken in finalising the rules was due to the fact that intensive examination of all the relevant aspects had to be done by various concerned Ministries before the draft rules could be finally approved and issued.
We are inclined to accept the explanation offered by the first respondent for the delay in promulgation of the Rules, and we hold that the plea of mala fides put forward by the petitioners is not established.
All the promotions given to the deputationists as well as to the direct recruits during the period between 1968 and 1976 had been effected only on a purely ad hoc basis.
Even though temporary in character, those promotions had been made only on the basis of the recommendations made by the Departmental Promotion Committee which had effected the selections by applying uniform and relevant considerations, such as length of service in the lower grade and over all experience and performance.
It is stated in the counter affidavit that, while making such promotions for appointments to higher posts, no deputationists with lesser years of service vis a vis direct recruits had been given ad hoc appointment to any higher post.
The first respondent has submitted that in making the promotions aforementioned, the authorities concerned were actuated only by considerations of the best interests of the department and the maintenance of a higher standard of efficiency in its function and there was no intention whatever to confer any advantage to the deputationists or to discriminate against the direct recruits.
We do not find any ground for not accepting as correct and true the aforesaid submissions made on behalf of the first respondent.
Accordingly we hold that in granting promotions to the deputationists during the period between 1971 and 1975 respondents 1 to S were not actuated by any intention to confer an unfair advantage on the deputationists.
Another argument advanced on behalf of the petitioners was that at the time of their initial appointment in the ARC, they had been given high expectations regarding their promotional prospects from the post of DFO, and that by bringing in large number of deputationists and fitting them into the higher posts, the Government had illegally gone back on the promise held out to the petitioners.
We see no merit in this contention.
As already noticed, in the letters 908 sent to the petitioners offering appointment to the category of AClO II (DFO), it had been made abundantly clear that their appointments would be purely temporary and ad hoc in nature and would not confer on them any claim for permanent absorption even in the post of DFo.
No subsequent representation is shown to have been made to the petitioners by the Department at any time prior to 1976 holding out any prospects of Department permanent absorption in service or promotions to higher grades.
The petitioners continued to function in the ARC organisation only on ad hoc basis till the rules were promulgated and they were absorbed into the new ARC (Technical) Service at the stage of its initial constitution on the basis of the provisions contained in Rules 3 and 6.
It is significant to note in this context that it was only after the petitioners had seen the impugned rules and had gained full knowledge of the provisions contained therein relating to absorption and seniority in the department, that they opted for absorption in the service in accordance with those rules and it was on the basis of the options so exercised by them that they were appointed in the hew constituted service.
The petitioners have also put forward a case that despite the provision contained in rule 6 (3) there was, as a matter of fact, no adjustment of the suitability of the various officers by the Screening Committee and, instead, there was a wholesale absorption of all the personnel in the posts which they were holding in the ARC organisation as on April 26,1976.
This allegation has been strongly refuted in the counter affidavit filed by the first respondent wherein it has 11 been staled that the Screening Committee has examined individually 9 the cases of all the concerned officers before deciding about their ,, suitability for permanent absorption in the service and prepared ranked lists strictly in accordance with the principle laid down in Rule 6 (2).
The learned Solicitor General, appearing on behalf of the Union of India.
submitted before us that the files containing the minutes of the meetings of the Screening Committee and the ranked select lists prepared by the Committee for the different grades were available with him in Court and he offered to place them before us for our perusal.
In the circumstances, we see no reason not to accept as correct the aforesaid averments contained in the counter affidavit of the first respondent.
It then follows that this contention of the petitioners has also to fail.
Another point urged on behalf of the petitioners was that some of the deputationists were not holding in their parent depart 909 ments posts equivalent in rank to those in which they were appointed on deputation in the ARC organisation and such persons should not have been subsequently absorbed in the new ARC Service In those higher categories.
We are unable to uphold this contention.
At the time when the ARC was a mere temporary organisation without any recruitment rules the posts in that organisation could be filled up by appointing suitable hands possessing the requisite specialised skill and experience drawn from any source in respect of whatever was the position occupied by such appointees in their parent service, if any.
Likewise, at the stage of the initial constitution of the new ARC (Technical) Service the Government had the right and full freedom to decide from what all sources the personnel for the new Department should be drawn and there is no warrant in law for imposing a limitation that in taking persons from other departments the field of choice should be restricted to persons holding any particular ranks in those other departments.
The relevant consideration for appointment of personnel in a department of this nature has necessarily to be the suitability of the person concerned for the specialised type of the work for adjudging which the experience and expertise that he possesses in carrying out such functions would be the most relevant criterion.
Once appointments are made to the various grades in the new service the inter se seniority of the persons appointed in each category or grade is to be fixed under Rule 6 on the basis of the total length of service in the particular or equivalent Grade and this, in our opinion, is a perfectly reasonable principle.
The argument advanced by the petitioners that the seniority of the deputationists who have been absorbed into the ARC (Technical) Service is governed by the provisions of Article 26 (7) (iii) of the Civil Service Regulations is wholly devoid of merit.
Article 26 (7) (iii) applies to cases "where a person is appointed by transfer in accordance with a provision in the recruitment rules providing for such transfer in the event of non availability of candidates by direct recruitment or promotion".
The absorption of the erstwhile deputationists in the ARC (Technical) Service at the time of its initial constitution was not by such transfer and hence the provisions of Article 26 (n (iii) are not attracted.
We do not also see any merit in the argument put forward on behalf of the petitioners that sub rule (6) of Rule 6 of the impugned 910 Rules enables the Screening Committee to absorb in a lower grade such of the deputationists who were found unsuitable to be absorbed in the higher posts which they were holding as on April 26, 1976.
Firstly, this is not a provision applicable only to the erstwhile deputationists.
On the other hand, the sub rule itself makes it very clear that its provisions apply equally to all the persons who are eligible for absorption in the service under sub rule (1) irrespective of whether they are deputationists or direct recruits.
Sub rule (6) comes into operation when a person in the eligible category holding a post in a higher grade on the appointed day, who has been found suitable for permanent appointment in such higher grade cannot, however, be absorbed in the said grade on account of non availability o a vacancy therein.
What the sub rule lays down is that in such eventuality the Screening Committee may recommend such a person for permanent appointment in a lower grade and thereby retain his services in the new Department.
We fail to see how this provision can be said to infringe any of the fundamental rights of the petitioners.
Lastly, it was contended on behalf of the petitioners that in preparing the impugned seniority list dated November 6, 1978, the principles laid down in Rule 6 (3) and Rule 7 have not been correctly observed, and that by reason of the deviation from those principles, the promotional prospects of some of the petitioners have been adversely affected.
No concrete instance of any such deviation from the principles set out in Rule 6 (3) and Rule 7 has been brought to our notice.
All the same, we think it necessary to observe that this Court expects that the provisions of Rule 6 (3) and Rule 7 will be strictly conformed to, both in letter as well as in spirit, by respondents Nos.
I to 7, and that in case it is found on examination that the ranking assigned to any of the petitioners in the impugned seniority list dated November 6, 1978 is not consistent with the principles laid down in the aforementioned rule, necessary action should be immediately taken to rectify the said defect, and if the promotional chances of any of the petitioners have been adversely affected by reason of such defect in the seniority list, such promotions should also be reviewed after following the requisite procedure.
We direct that the petitioners may bring to the notice of the first respondent specific instances, if any, of deviation from the principles enunciated in Rule 6 (3) and Rule 7 resulting in incorrect assignment of seniority and rank to them by submitting representations before the first respondent within a period of six weeks from today.
In 911 case any such representations are received, they will be duly examined by the first respondent and appropriate orders will be passed thereon in the manner indicated above as expeditiously as possible.
Subject to the above observations and directions, we dismiss this writ petition.
The parties will bear their respective costs.
| IN-Abs | The Aviation Research Centre was a temporary and ad hoc organisation set up in 1962 for carrying out the work of collecting intelligence by the use of highly sophisticated techniques.
For manning this Task Force, persons with experience in the specialised nature of the work were taken on deputation basis from different sources, such as the Intelligence Bureau, the Departments of Defence Science, Wireless Planning 'and Coordination, the Directorate General of Civil Aviation and the Police Cadres of different States and they were grouped together to form the ARC.
To supplement the man power some persons were also directly recruited to the organisation on a purely ad hoc basis.
The ARC organisation was initially treated as an extension of the Intelligence Bureau.
In February 1965, it was brought under the control of the Director General of Security.
The administrative control over the organisation which was originally vested in the Ministry of External Affairs and later with the Prime Minister 's Secretariat was transferred to the Cabinet Secretariat in 1965.
The sanction for continuance of the temporary organisation was accorded by the Government from year to year till the year 1971 when a decision was taken by the Government to make the ARC a permanent Department.
The finalisation of the principles to be adopted for constitution of the new permanent Department took considerable time and it was only on April 26, 1976 that the President of India promulgated the Aviation Research Centre (Technical) Service Rules ]976 providing for tho constitution of a new service the Aviation Research Centre (Technical) Service.
876 Rule 6 of the said Rules dealt with the initial constitution of the new ARC permanent Service and provided that all persons holding, as on the appoint ed day, any one of the categories of posts specified in rule 4, whether in a permanent or temporary or officiating capacity or on deputation basis, shall be eligible for appointment to the service at the initial constitution thereof.
Rule 7 laid down the principles to be applied for fixation, of seniority of those appointed to the various posts at the time of its initial constitution, while Rule 8 dealt with the filling up of vacancies in various grades remaining unfilled immediately after the initial constitution of the service and all vacancies that may subsequently arise in the Department.
Rule 12 provided that in regard to matters not specifically covered by the rules or by order issued by the Government, the members of the service shall be governed by general rules, regulations and orders applicable to persons belonging to the corresponding Central Civil Service.
The petitioners, who were persons recruited directly to the ARC organisation during the period between 1965 and 1971 challenged in their writ petition, the validity of the promotion given to respondent nos.
8 to 67 from the year 1968 onwards officers whose services were borrowed on deputation.
They contended that the deputationists were occupying the posts in the Department only on an ad hoc basis and such ad hoc appointees who were having the benefit of lien in their parent departments and were getting promotions in those departments had no claim whatever to seniority or promotions in the borrowing department viz.
A.R.C. They also assailed the Aviation Research Centre (Technical) Service Rules as conferring arbitrary powers on the controlling authority to equate the ad hoc service rendered by the deputationists in the ARC with the regular service rendered by persons like the petitioners who had been directly recruited to the Department on a regular basis which resulted in permanently blocking all the future chances of the petitioners in matters of promotion and other service benefits.
The Rules were highly arbitrary and infringed Articles 14 and 16 of the Constitution since it was based on illegal treatment of unequals as equals by equating persons functioning on a mere ad hoc basis with those holding posts in the organisation on a regular basis.
Rule 6(2) conferred arbitrary and unfettered powers on the Screening Committee and suffered from the vice of excessive delegation.
Rule 7 in so far as it empowered the Department to reckon the seniority of the deputationists by giving them the benefit of the ad hoc service rendered by them in the ARC as well as the prior service put in by them in their parent departments was arbitrary.
Rule 8(1) enabled the deputationists to consolidate the illegal advantage gained by them at the initial constitution by further promotions/appointments to still higher posts in the ARC, and by specifying the method of recruitment to the various posts in the Service and fixing a quota as between the vacancies to be filled up by promotions and those to be filled up by direct recruitment/deputation or re employment in Schedule II of the rules, the deputationists have been treated on a par with regular departmental personnel and this involved a clear violation of Articles 14 and 16 of the Constitution.
It was further contended that the position of the deputationists being that of persons permanently transferred from the parent departments to the ARC, under Article 26 of the Civil Service Regulations, such persons appointed by transfer shall be ranked below all the direct recruits as well as the promotees already functioning in the Department and the seniority list dated November 6, 1978 having been drawn up in contravention of the aforesaid principle laid down in Article 26, the said list should be declared to be illegal and void.
877 The case of the petitioners was resisted by respondent No. 1, who contended that the appointments made by direct recruitment were merely temporary and ad hoc in character.
While the deputationists were persons with rich experience and long years of service, the direct recruits were inexperienced and new to the job.
The delay in promulgation of the rules was due to the fact that because of the special features of the Department and the sensitive nature of the functions to be discharged by it, various circumstances and factors had to be taken into account before the draft rules were finally cleared by the several Ministries concerned.
There is no principle of law prohibiting the absorption in a newly constituted Department of persons who are functioning on deputation in a temporary organisation which was later constituted into a permanent service.
The Service Rules extend equal treatment to all categories of employees who were in position on the crucial date viz., April 26, 1976 in the matter of absorption as well as determination of seniority at the initial constitution, irrespective of whether they were direct recruits or deputationists.
The Screening Committee prepared the seniority List of the persons found suitable for absorption in accordance with the provisions contained in Rule 6(2) read with Rule 7.
The Rules cannot be said to be arbitrary or violative of the principles of equality enshrined in Articles 14 and 16.
Dismissing the writ petition, ^ HELD: l(i) A party seeking the intervention and aid of this Court under Article 32 of the Constitution for enforcement of his fundamental rights, should exercise due diligence and approach this Court within a reasonable time after the cause of action arises and if there has been undue delay or laches on his part, this Court has the undoubted discretion to deny him relief.
[900 H 901 A] (ii) The challenge raised by the petitioners against the validity of the promotions given to respondent nos.
8 to 67 during the period between 1968 and 1975 is liable to be rejected on the preliminary ground that it is most highly belated.
There is no valid explanation from the petitioners as to why they did not approach this Court within a reasonable time after those promotions were made.
This writ petition has been filed only in the year 1979 and after such a long lapse of time the petitioners cannot be permitted to assail before this Court the promotions that were effected during the years 1968 to ]975.
[900 F G] (iii) There is also no satisfactory explanation from the petitioners as to why no action at all was taken to challenge the validity of the promotions given to respondents nos.
8 to 67 for a period of nearly seven years subsequent to the judgment of the High Court in 1972.
[901 F] Rabindra Nath Bose and ors.
vs Union of India and ors ; referred to.
So long as there was no regular cadre and hierarchy of posts and no rules laying down the mode of appointment/promotion to those posts, it was perfectly open to the Government to fill up the posts by securing the services of persons who in its opinion were by virtu.
Of their experience and qualifications, best suited for being on trusted with the specialised kinds of functions attached to the various posts.
[902 E] 878 In the instant case the petitioners had been appointed as ACIOs II only on a temporary and ad hoc basis.
Such appointments did not confer on them any rights even to the posts of DFOs.
It had also been categorically made clear to them in the letters containing the offers of appointment that such appointments will not confer on them any right to be permanently absorbed in the post if and when it was made permanent.
There was also not even any executive order or administrative instruction declaring the post of DFO as the feeder category for appointment to the higher posts.
The petitioners, therefore, had no legal right or claim for being appointed by promotion to the higher posts of ACIO I (FO), ATO, etc.
[902 F G] 3(i) When a new service is proposed to be constituted by the Government, it is fully within the competence of the Government to decide as a matter of policy the sources from which the personnel required for manning the service are to be drawn.
[903 F] (ii) It is in the exercise of the said power, that provision has been made by sub rule (1) of Rule 6, that all the persons who, as on the appointed day, were already working in the ARC organisation on a temporary and ad hoc basis and had thereby acquired valuable experience in the specialised kinds of work would be eligible for appointment to the new service at the stage of its initial constitution.
Equal opportunity was given to all to get permanently appointed in the new ARC (Technical) Service subject to their being found fit by the Screening Committee under sub rule (2) of Rule 6.
The provision cannot be said to be violative of Articles 14 and 16.
[903 G, 904 A] 4(i) The provision for Constitution of a Screening Committee for adjudging the suitability of the persons in the field of eligibility for permanent appointment to the service is absolutely reasonable.
[904 D] (ii) The power conferred on the controlling authority to issue general or special instructions to a Screening Committee is really in the nature of a safeguard for ensuring that the rules relating to the initial constitution of the service were applied fairly and justly.
The controlling authority is the "Secretary Department of Cabinet Affairs".
When supervisory powers are entrusted to such a high and responsible official, it is reasonable to assume that they will be exercised fairly and judiciously and not arbitrarily.
The contention that the provisions of sub rule (2) of Rule 6 suffer from the vice of arbitrariness or excessive delegation therefore, fails.
[904 E] 5(i) When recruitment to the new Service was being made from two different classes of sources, it was necessary for the Government to evolve a fair and reasonable principle for regulating the inter se seniority of the personnel appointed to a new Department.
What has been done under Rule 6 is to give credit to the full length of continuous service put in by all the appointees in the concerned grade, whether such service was rendered in the temporary ARC organisation or in other departments of the Government.
The criterion applied, namely the quantum of previous experience possessed by the appointees measured in terms of the length of continuous service put in by them in the concerned or equivalent grade is perfectly relevant to the purpose underlying the framing of tho rule.
The principle laid down in rule 6(2) for determination of 879 inter se seniority was quite reasonable and fair and did not involve any arbitrary or unfair discrimination against the petitioners.
[905 C E] In the instant case while the petitioners had no substantive lien in respect of or title to any post in any department, the deputationists were having a lien on the posts held by them in their parent departments.
The petitioners, therefore, formed a different class consisting of persons who were virtually being recruited for the first time into regular Government service, as distinct from respondents 8 to 67 who had been holding posts in their parent departments for several years on regular basis who formed a separate class.
[905 B] 6.
The provisions contained in Rule 7 that the seniority of persons appointed on permanent basis in each grade at the initial constitution of the service shall be in the order in which they are shown in the relevant list prepared by the Screening Committee in accordance with the provisions of Rule 6 was upheld as perfectly valid and constitutional.
[905 F G] 7.
At the time of constituting a new service and laying down the mode of appointment to the various posts it is fully within the powers of the President of India to prescribe the methods by which vacancies arising in the different categories of posts in the department should be filled up.
In the instant case this is precisely what has been done by Rule 8 and the provisions of Schedule II.
[906 B] 8.
The draft rules were prepared by the Directorate of ARC and submitted to the Government in 1972 itself but on a detailed scrutiny being made it was found that the said draft required substantial modification in several respects.
Revised rules were, therefore, drafted and submitted to the Government late in 1974.
The time taken in finalising the rules was due to the fact that intensive examination of all the relevant aspects had to be done by the various concerned Ministries before the draft rules could be finally approved and issued.
The plea of malafides put forward by the petitioners is not established.
[906 H 907 B] 9.
Article 26(7)(iii) of the Civil Services Regulations applies to cases "where a person is appointed by transfer in accordance with a provision in the recruitment rules providing for such transfer in the event of non availability of candidates by direct recruitment or promotion".
The absorption of the erstwhile deputationists in the ARC (Technical) Service at the time of its initial constitution was not by such transfer.
The provisions of Article 26(7)(iii) are, therefore not attracted.
[909 F G] 10.
The provisions of Rule 6(3) and Rule 7 will be strictly conformed, to both in letter as well as in spirit, by respondents nos.
1 to 7.
In case it is found on examination that the ranking assigned to any of the petitioners in the impugned seniority list dated November 6, 1978 is not consistent with the principles laid down in the aforementioned rule, necessary action should be immediately taken to rectify the said defect.
If the promotional chances of any of the petitioners have been adversely affected by reason of any defect in the seniority list, such promotions should also be reviewed after following the requisite procedure.
The petitioners may bring to the notice of the first respondent specific instances, if any, of deviation from the principles enunciated in Rule 6(3) and Rule 7 resulting in incorrect assignment of seniority and rank by sub 880 mitting representations.
Such representations, if received, will be duly examined and appropriate orders passed thereon as expeditiously as possible.
[910 F 911 A]
|
ION: Civil Appeal No. 1757 of 1980.
From the judgment and order dated 11th September, 1980 of the Industrial Tribunal at Nagpur in Reference (II) No. 22/78.
Y.S. Chitale, R.K. Thakur, O.C. Mathur and K.J. John for the Appellant H.W. Dhabe and A.G. Ratanaparkhi for Respondent 1.
G.L. Sanghi, V.A. Bobde, A.K. Sanghi and Miss Vasudha Sanghi for Respondent 2.
The Judgment of the Court was delivered by GUPTA J.
During the pendency of a reference before the Industrial Tribunal at Nagpur, a written agreement in settlement of the disputes covered by the reference as also certain other disputes between the management and the workmen was signed; on behalf of the trade unions representing the workmen the agreement was signed by their office bearers.
A few days later the executive committee of one of the Unions rejected the agreement on the ground that the agreement had given rise to discontent among a section of the workers whose problems had not been satisfactorily solved.
A question then arose, whether the agreement was a settlement within the meaning of section 2 (p) of the from which the Union could not resile.
The Tribunal by its award held that the agreement was not a settlement binding on the union: the validity of this award is challenged in this appeal by special leave preferred by the management.
The relevant facts are those.
The appellant, Brooke Bond India Limited, a Company incorporated and registered under the Indian Companies Act, hereinafter referred to as the company, have a factory at Kanhan, District Nagpur, in Maharashtra.
Two trade unions of workmen employed by the company function in the 32 Kanhan factory; one is known as Bharatiya Swatantra Brooke Bond Chaha Karamchari Sangh (Bharatiya Union for short) and the other is called M.P. Rashtriya Brooke Bond Chaha Karamchari Sangh (Rashtriya Union for brevity 's sake).
In this case we are concerned with the Rashtriya Union.
On September 27, 1975 Government of Maharashtra made a reference under section 10 (1) (d) of the for the adjudication of an industrial dispute between the company and the workmen in respect of 4 demands set out in the schedule to the order of reference.
Subsequently on June 11, 1977 a joint charter of demands was submitted by the workmen through the aforesaid two unions; this charter included 26 demands.
At a meeting of the executive committee of the Rashtriya Union held on August 19, 1977 several resolutions were passed of which two only appear to be relevant for the present purpose.
By one of the resolutions a negotiation committee composed of six members including some of office bearers of the union was formed "for a discussion to be held with the management".
The other resolution related to the 26 demands mentioned above and it said that "a proper decision" regarding these demands would be taken after "due consideration of the proposals given by the members and after placing the same before the negotiation committee of both the unions".
Thereafter two more charters of demands, one by each union, were submitted.
At a meeting of the executive committee of the Rashtriya Union held on January 8, 1978 the office bearers of the union put it on record that in respect of the 4 demands pending before the Tribunal the union would accept a satisfactory settlement and that the executive committee had granted permission to the negotiation committee for carrying on discussion with the company and the Bharatiya Union as regards the pending demands.
Subsequently the resignation of some of the office bearers of the union led to the reconstitution of the negotiation committee at a meeting of the executive committee of the union held on February 18, 1978.
On the subject of the proposed settlement it was disclosed at this meeting that the company had agreed to obtain clarification from the head office on several points including the absorption in company 's employment of workers employed in loading and unloading job and confirmation of casual workers.
The general secretary of the Rashtriya Union by a letter dated March 9, 1978 informed the factory manager that the members of the reconstituted negotiation committee "will participate in the negotiations to be commenced from 13th March, 1978 for arriving at an agreement".
On March 16, 1978 a 33 memorandum of settlement was signed.
The following office bearers of the Rashtriya Union signed the memorandum, the working president, two vice presidents, general secretary, joint secretary and the organizing secretary.
They were also members of the negotiation committee along with others.
On the next day, March 17, a joint petition was filed before the Industrial Tribunal signed by the factory manager of the company, the general Secretary of the Bharatiya Union and the General Secretary of the Rashtriya Union praying that an award in terms of the settlement be passed.
About a week later, on March 24, 1978 a meeting of the executive committee of the Rashtriya Union was held in which "it was unanimously resolved to withdraw from the agreement dated March 16, 1978" in view of the "discontent amongst the workers about the agreement".
On April 1, 1978 at an emergent meeting of the executive committee of the Rashtriya Union, after an elaborate discussion on the agreement it was "resolved to reject the agreement as the problems of the workers were not satisfactorily solved".
On April 7, 1978 an application was made to the Tribunal on behalf of the Rashtriya Union praying that the agreement be rejected.
The Tribunal heard the question as to the validity of the settlement so far as the Rashtriya Union was concerned as a preliminary issue.
The Tribunal rejected the contention raised on behalf of the Rashtriya Union that the agreement signed on March 16, 1978 was only a draft agreement and held that it was intended to be a settlement.
The Tribunal however came to the conclusion that it could not be treated as a settlement within the meaning of section 2 (p) of the .
It cannot be disputed that unless the office bearers who signed the agreement were authorised by the executive committee of the Union to enter into a settlement or the constitution of the Union contained a provision that one or more of its members would be competent to settle a dispute with the management, no agreement between any office bearer of the Union and the management can be called a settlement as defined in section 2 (p) There is no provision in the constitution of the Rashtriya Union authorising any office bearers of the Union to enter into a settlement with the management.
We have referred above to the proceedings of the executive committee.
As the Tribunal points out, the resolutions passed by the 34 executive committee do not support the claim that the Negotiation Committee was empowered to enter into a settlement without seeking ratification from the executive committee.
The Tribunal held, in our opinion rightly, that the fact that the agreement was signed by the office bearers of the Union does not clinch the matter because the executive committee at no stage had accepted the agreement.
In fact no meeting of the executive committee was held before the agreement was signed on March 16, 1978 to consider whether the agreement was acceptable.
Section 2 (p) of the defines "settlement"; "Settlement" means a settlement arrived at in the course of conciliation proceeding and includes a written agreement between the employer and workmen arrived at otherwise than in the course of conciliation proceeding where such agreement has been signed by the parties thereto in such manner as may be prescribed and a copy thereof has been sent to an officer authorised in this behalf by the appropriate Government and the conciliation officer;" In the present case the purported settlement was arrived at not in the course of conciliation proceedings.
Section 18 (1) of the Act provides: "Section 18 .
Persons on whom settlements and awards are binding: (1) A settlement arrived at by agreement between the employer and workmen otherwise than in cause of conciliation proceeding shall be binding on the parties to the agreement :" It is also necessary to refer to rule 62 (2) (b) of the Industrial Disputes (Bombay) Rules, 1957.
Rule 62 (2) (b) is as follows: "62.
Memorandum of Settlement: . . . 35 (2) The settlement shall be signed by: (a) . . .
(b) in the case of workmen, either by the President or Secretary (or such other officer of a trade union of the workmen as may be authorised by the Executive Committee of the Union in this behalf ), or by five representatives of the workmen duly authorised in this behalf at a meeting of the workmen held for the purpose.
" Sub rule (4) of rule 62 requires the parties to the settlement to send copies thereof jointly to the prescribed authorities.
That this was done in the present case is not disputed.
It was argued on behalf of the appellant that as the agreement was signed in the manner prescribed by rule 62 (2) (b) and as the requirements of rule 62 (4) have been complied with, the agreement must be accepted as a settlement within the meaning of section 2 (p) of the and as such binding on the Rashtriya Union under section 18 (1) of the Act.
But, as pointed out by the Tribunal rule 62 only prescribes the form of the memorandum of settlement and by whom it should be signed, and the question whether the procedure prescribed by rule 62 has been complied with will arise only if there is in existence a valid settlement between the parties concerned.
In this case it has been found that the office bearers who signed the agreement were not competent to enter into a settlement with the company and as such it cannot be said that an agreement was reached between the employer and the workmen represented by the Rashtriya Union.
What is binding as a settlement under section 18 (1) of the is an agreement between the employer and workmen.
Here the Tribunal found that there was no agreement between management and the Rashtriya Union.
Reliance was placed on behalf of the appellant on the decision of this Court in Workmen of M/s. Delhi Cloth and General Mills vs Management of M/s. Delhi Cloth and General Mills.(1) In that case among other matters rule 58 of the Industrial Disputes (Central) Rules, 1957 made under section 38 of the came up for consideration.
Rule 58 (2) (b) of the Central Rules which is similar to rule 62 (2) (b) of the Bombay Rules reads: 36 "85.
Memorandum of settlement: (1) x x x (2) the settlement shall be signed (a) x x x (b) In the case of workmen, by any officer of a trade union of workmen or by five representatives of workmen duly authorised in this behalf at a meeting of the workmen held for the purpose.
" It was held that the rule must be fully complied with if the settlement is to have a binding effect on all workmen.
Section 18 (3) of the makes a settlement which has become enforceable, binding among others, on all parties to the industrial dispute.
It is not clear why this decision was considered relevant.
Possibly this case was referred to for the observation occurring on page 897 of the report: "We may observe here that we were not impressed by the appellant 's argument that r. 58 rub rule (2) (b) required that the officer of a trade union of workmen must also be duly authorised.
We, however, do not express any considered opinion in view of our conclusion on other points".
Reference to this observation may have been intended as a reply to the construction sought to be put on rule 62 (2) (b) of the Bombay Rules on behalf of the Rashtriya Union that the words "duly authorised" applied not only to the five representatives of workmen" but also to the office bearers mentioned in the rule to enable them to sign the settlement; on such construction it was contended that the office bearers of the Union who signed the agreement were not specifically authorised to do so.
This construction of rule 62 (2) (b) was rightly rejected by the Tribunal.
But neither rule 58 of the Central Rules nor rule 62 of the Bombay Rules contains anything to suggest that any officer of a trade union who is entitled to sign a settlement must be deemed to have had the authority to enter into this settlement.
The procedure prescribed by either rule 58 of the Central Rules or rule 62 of the Bombay Rules presupposes the existence of a valid settlement, and the question in this case is whether there was such a settlement.
Another case relied on by the appellant is The Sirsilk Ltd. and others vs Government of Andhra Pradesh and another.(1) The facts of that case 37 are that after the proceedings before the Tribunal had come to an end and the Tribunal had sent its award to government the parties concerned in the dispute came to a settlement.
Section 17 (1) of the lays down that every award shall within a period of thirty days from the date of its receipt by the appropriate government be published in such manner as the appropriate government thinks fit.
Section 18 (1) makes a settlement arrived at between the employer and workmen otherwise than in the course of conciliation proceedings binding on the parties to the agreement.
Under section 18 (3) an award of a Tribunal on publication shall be binding on all parties to the industrial dispute.
In Sirsilk case difficulty was felt in giving effect to the settlement because the proceedings before the tribunal had ended and the tribunal had sent its award to the government before the settlement was arrived at.
This Court held: "The only way in our view to resolve the possible conflict which would arise between a settlement which is binding under section 18 (1) and an award which may become binding under section 18 (3) on publication is to withhold the publication of the award once the Government has been informed jointly by the parties that a settlement binding under section 18 (1) has been arrived at.
In such a situation we are of opinion that the government ought not to publish the award under section 17 (1) and in cases where government is going to publish it, it can be directed not to publish the award in view of the binding settlement arrived at between the parties under section 18 (1) with respect to the very matters which were the subject matter of adjudication under the award.
" We think this decision was relied on only to emphasize that a settlement reached between the parties concerned in the dispute must prevail if it is reached at any time before the publication of the award.
That is undoubtedly so, but the question before us is different which is, whether in fact a settlement within the meaning of section 2 (p) of the was reached.
Other questions will arise only after it is found that there was such a settlement in existence.
Sirsilk does not therefore afford any assistance to the appellant.
The tribunal in support of the view taken by it relied on a decision of the Delhi High Court.
In 38 Hindustan Housing Factory Ltd. vs Hindustan Housing Factory Employees ' Union and others, the High Court held: ". the contention on behalf of the petitioner company that the fact that the Memorandum of settlement was in the prescribed form and was signed by one or more of the office bearers of the Union is by itself sufficient to make the settlement arrived at between the Management of the petitioner company and the signatories binding on the Union and all its members, is untenable.
The language of section 18 (1) clearly shows that the settlement will be binding only "on the parties to the agreement.
" The definition of "settlement" in section 2 (p) of the Act also states that "settlement" means a settlement arrived at "between the employer and the workmen.
" So, normally in order that a settlement between the employer and the workmen may be binding on them, it has to be arrived at by agreement between the employer and the workmen.
Where the workmen are represented by a recognised Union, the settlement may be arrived at between the employer and the Union.
If there is a recognised Union of the workmen and the Constitution of the Union provides that any of its office bearers can enter into a settlement with the Management on behalf of the Union and its members, a settlement may be arrived at between the employer and such office bearer or bearers.
But, where the Constitution does not so provide specifically, the officer bearer or bearers who wish to enter into a settlement with the employer should have the necessary authorisation by the executive committee of the Union or by the workmen.
A reading of rule 58 clearly shows that it presupposes the existence of a settlement already arrived at between the employer and the workmen, and it only prescribes the from in which the Memorandum of settlement should be, and by whom it should be signed.
It does not deal with the entering into or arriving at a settlement.
Therefore, 39 where a settlement is alleged to have been arrived at between an employer and one or more office bearers of the Union, and the authority of the office bearers who signed the Memorandum of settlement to enter into the settlement is challenged or disputed, the said authority or authorisation of the office bearers who signed the Memorandum of settlement has to be established as a fact, and it is not enough if the employer merely points out and relies upon the fact that the Memorandum of settlement was signed by one or more of the office bearers of the Union.
" In our opinion the above extract from the judgment of the Delhi High Court states correctly the law on the point.
The appeal is accordingly dismissed; in the circumstances of the case we direct the parties to bear their own costs.
N.K.A. Appeal dismissed.
| IN-Abs | Two Trade Unions of Workmen function at appellant 's factory.
The State Government made a reference under the Industrial Dispute Act, 1947 for adjudication of an Industrial Dispute between the appellant and its workmen regarding their demands.
A joint charter of Demands was later submitted by the Unions raising certain other demands.
On behalf of one of the union a negotiation committee was formed composed of some of the office bearers of that union to participate in the negotiations for a settlement.
Ultimately a memorandum of settlement was signed.
The members of the negotiation committee of aforesaid union who happened to be office bearers of that union signed the settlement for their union.
The settlement covered the disputes mentioned in the reference and also certain other disputes between the management and workmen.
A joint petition for passing an award in terms of the settlement was filed before the tribunal.
A few days later the executive committee of the aforesaid Union rejected the agreement on the ground that the agreement had given rise to discontent among a section of the workers whose problems had not been satisfactorily solved.
The question was whether the agreement was a settlement within the meaning of section 2(p) of the from which the Union could not resile.
30 The Tribunal by its award held that the agreement was not a settlement within the meaning of section 2(p) of the Act.
Hence this appeal by special leave.
It was argued on behalf of the appellants that as the agreement was signed in the manner prescribed by rule 62(2)(b) of the Industrial Disputes (Bombay) Rules, 1957 and as the requirements of rule 62(4) have been complied with, the agreement must be accepted as a settlement within the meaning of section 2(p) of the , and as such was binding on the Union under Section 18(1) of the Act.
Dismissing the appeal, ^ HELD: 1.
In this case it has been found that the office bearers who signed the agreement were not competent to enter into a settlement with the company and as such it cannot be said that an agreement was reached between the employer and the workmen represented by the Union.
[35 E F] 2.
What is binding as a settlement under section 18 (1) of the is an agreement between the employer and workmen and the Tribunal found that there was no agreement between the Management and the Union.
[35 E F] Workmen of M/s Delhi Cloth & General Mills vs Management of M/s Delhi Cloth & General Mills ; referred to.
The procedure prescribed by either rule 58 of the Central Rules or Rule 62 of the Bombay Rules pre supposes the existence of a valid settlement.
But neither rule 58 of the Central Rules nor rule 62 of the Bombay Rules contains anything to suggest that any officer of a trade union who is entitled to sign a settlement reached between the parties must be deemed to have had the authority to enter into the settlement.
Rule 62 only prescribes the form of memorandum of settlement and by whom it should be signed and the question whether the procedure has been complied with will arise only if there is in existence a valid settlement.
[36 F H] The Sirsilk Ltd. and others vs Govt.
of Andhra Pradesh 31 Hindustan Housing Factory Ltd. vs Hindustan Housing Factory Employees ' Union & Others approved.
|
Civil Appeals Nos. 2139, 2483 and 2484 of 1978.
Appeals by Special Leave from the judgment and order dated the 6th October, 1978 of the Madras High Court in O.S.A. No. 64 of 1978.
F.S. Nariman, A.K. Sen, Dr. Y.S. Chitaley, S.N. Kackar, T. Dalip Singh, K.J. John, Ravinder Narain, A.G. Menses and R. Narain for the Appellants.
H.M. Seervai, Anil B. Divan, A.R. Wadia, S.N. Talwar, I.N. Shroff and H.S. Parihar for Respondent No. 1.
D.N. Gupta for Respondents Nos.
2 7, 10 12, 15, 16, 18 22, 26 and 28 33.
The Judgment of the Court was delivered by CHANDRACHUD, C. J.
These three appeals by special leave arise out of a judgment of a Division Bench of the High Court of Madras dated October 6, 1978 allowing an appeal against the judgment of a learned Single Judge, dated May 17, 1978 in Company Petition No. 39 of 1977.
The main contending parties in these appeals are: (i) the Needle Industries (India) Limited and (ii) the 715 Needle Industries Newey (Indian Holdings) Limited.
These two companies have often been referred to in the proceedings as the Indian Company and the English Company respectively, but it would be convenient for us to refer to the former as 'NIIL ' and to the latter as the 'Holding Company '.
The Holding Company has been referred to in a part of the proceedings as 'NINIH '.
In Civil Appeal 2139 of 1978, which was argued as the main appeal, NIIL is appellant No. 1 while one T.A. Devagnanam is appellant No. 2.
The latter figures very prominently in these proceedings and is indeed one of the moving spirits of this acrimonious litigation.
He was appointed as a Director of NIIL in 1956 and as its Managing Director in 1961.
He is referred to in the correspondence as 'TAD ' or 'Theo ' but we prefer to call him 'Devagnanam '.
The Holding Company is Respondent 1 to the main appeal, the other respondents being some of the Directors and shareholders of NIIL.
Civil Appeal 2483 of 1978 is filed by some of the shareholders of NIIL while Civil Appeal 2484 of 1978 is filed by some of its directors and officers.
The Holding Company is the contesting respondent to these two appeals.
We will deal with the main appeal and our judgment therein will dispose of all the three appeals.
The NIIL was incorporated as a Private Company under the Indian Companies Act, 1913 on July 20, 1949 with its Registered Office at Madras.
Its factory is situated at Ketty, Nilgiris.
At the time of its incorporation, NIIL was a wholly owned subsidiary of Needle Industries (India) Ltd., Studley, England (hereinafter called 'NI Studley ').
The authorised capital of NIIL was Rs. 50,00,000 divided into 50,000 equity shares of Rs. 100 each.
Its issued and paid up capital prior to 1961 was Rs. 6,75,600 divided into 6,756 equity shares of Rs. 100 each.
The issued and paid up capital was increased to Rs. 11,09,000/ in 1961.
In that year, NI Studley entered into an agreement with NEWEY BROS.
LIMITED, Birmingham, England, (hereinafter called NEWEY), under which NEWEY agreed to participate in the equity capital of NIIL to the extent of Rs. 4,33,400/ , consisting of 4,334 equity shares of Rs. 100/ each.
Thus, in 1961, the position of the share holding in NIIL was that NI Studley held approximately 60.85% of the issued capital and NEWEY held the balance of 39.14%.
In 1963, NIIL increased its share capital by issuing 2,450 additional shares to NI Studley, as a result of which the latter became the holder of about 68% shares in NIIL, the rest of the 716 32% belonging to NEWEY.
Later in the same year, NI Studley and NEWEY combined to form the Holding Company, of which the full official name.
as stated earlier is the Needle Industries Newey (Indian Holding) Ltd. The Holding Company was incorporated in the United Kingdom under the English Companies Act, 1948 with its Registered Office at Birmingham, England.
The entire share capital of NIIL, held by NI Studley and NEWEY, was transferred to the Holding Company in which NI Studley and NEWEY became equal sharers.
As a result of this arrangement, the Holding Company came to acquire 99.95% of the issued and paid up capital of NIIL.
The balance of 0.05%, which consisted of 6 shares being the original nominal shares, was held by Devagnanam.
The NIIL, it shall have been noticed, was incorporated about two years after India attained independence.
As a result of an undertaking given by it to the Government of India at the time of its incorporation and pursuant to the subsequent directives given by the said Government for achieving Indianisation of the share capital of foreign companies, three issues of shares were made by NIIL in the years 1968, 1969 and 1971, all at par.
There was also an issue of Bonus shares in 1971.
As a result of these issues, about 40% of the share Capital of NIIL came to be held by the Indian employees of the Company and their relatives while the balance of about 60% remained in the hands of the Holding Company.
In terms of the number of shares, by 1971 72 the Holding Company owned 18, 990 shares and the Indian shareholders owned 13,010 shares.
Out of the latter block of shares, Devagnanam and his relatives held 9,140 shares while the remaining 3,870 shares were held by other employees and their relatives, amongst whom were N. Manoharan and his group who held 900 shares and D.P. Kingsley and his group who held 530 shares.
The total share capital of NIIL thus came to consist of 32,000 equity shares of Rs. 100 each.
In or about 1972, a company called Coats Paton Limited, Glasgow, U.K. (hereinafter called 'Coats ') became an almost 100% owner of NI Studley.
The position at the beginning of the year 1973 thus was that 60% (to be exact 59.3%) of the share capital of NIIL came to be owned half and half by Coats and NEWEY, the remaining 40% being in the hands of the Indian group.
The bulk of this 40% block of shares was held by Devagnanam 's group, which came to about 28.5% of the total number of shares.
717 Though NIIL was at one time wholly owned by NI Studley and later, by NI Studley and NEWEY, the affairs of NIIL were managed ever since 1956 by an entirely Indian management, with Devagnanam as its Chief Executive and Managing Director with effect from the year 1961.
The Holding Company which was formed in 1963, had only one representative on the Board of Directors of NIIL.
He was N.T. Sanders.
He resided in England and hardly ever attended the Board meetings.
The Holding Company reposed great confidence in the Indian management which was under the direction and control of Devagnanam.
But the acquisition of NI Studley by Coats in 1972 and their consequent entry in NIIL created in its wake a sense of uneasy quiet between the Coats on one hand, which came to own half of the 60% share capital held by the Holding Company, that is to say, 30% of the total share capital of NIIL, and the Devagnanam group on the other hand, which owned 28.5% of that share capital.
By the mere size of their almost equal holding in NIIL, Coats and Devagnanam developed competing interests in the affairs of NIIL.
Coats were in the same line of business as NIIL, namely, manufacture and sale of needles for various uses, fish hooks etc., and they had established trading centres far and wide, all over the world.
It is plain business, involving no moral turpitude as far as business ethics go, that Coats could not have welcomed competition from NIIL with their world interests.
Devagnanam was a man of considerable ability and foresight and in NIIL he saw an opportunity of controlling and dominating as industrial enterprise of enormous potential in a rapidly growing market.
The turnover of NIIL had increased from 2.80 lakhs in 1953 to 149.93 lakhs in 1972 and the profits ran as high as 19.4% of the turnover.
Implicit confidence in the Indian management which was the order of the day almost till 1974 gradually gave way to an atmosphere of suspicion and distrust between Coats and Devagnanam.
NEWEY apparently kept away from the differences which were gradually mounting up between the two but, evidently, they nursed a preference for Devagnanam.
Coats are a giant multinational organization.
NEWEY, comparatively, are small fish though, they too had their own independent business interests to protect and foster.
NEWEY owned a flourishing business in Malaysia, Hong Kong, Taiwan, Japan and Australia and from 1972 onwards they drew Devagnanam increasingly into the orbit of their Far Eastern 718 interests.
In July, 1972 he was offered the office of Managing Director of a group of four companies in Hong Kong and Taiwan on a five year contract, with an annual salary of six thousand pounds.
He had already been appointed to the Board of the NEWEY joint venture company in Osaka and Japan and acted as the liaison Director for that company.
He had also been asked to coordinate sales with NEWEY Brothers, Australia.
Willing to accept these manifold responsibilities, Devagnanam became strenuously involved therein.
He and his wife began to reside in Hong Kong and he cogitated over resigning from his position in NIIL.
Coats, on their part, were clear that Devagnanam should relinquish his responsibilities in NIIL, in view of the time his role in NEWEY 's Far Eastern interests was consuming.
The question of appointing his successor as Managing Director in NIIL then began to be discussed, the Holding Company wanting to have Manoharan as a substitute.
Devagnanam carried the feeling that he was already persona non grata with Coats, because of certain incidents which had taken place some years ago.
The Foreign Exchange Regulation Act, ( 'FERA '), 46 of 1973, which came into force on January 1, 1974 provided to Coats and Devagnanam a legal matrix for fighting out their differences.
The provisions of FERA, which was passed, inter alia, for the conservation of foreign exchange resources of the country and the proper utilisation thereof in the interests of the economic development of the country are stringent beyond words.
Putting it broadly and briefly, section 29 (1) of FERA prohibits non residents, non citizens and non banking companies not incorporated under any Indian Law or in which the non resident interest is more than 40%, from carrying on any activity in India of a trading, commercial or industrial nature except with the general or special permission of the Reserve Bank of India.
By section 29 (2) (a), if such a person or company is engaged in any such activity at the commencement of the Act, he or it has to apply to the Reserve Bank of India, for permission to carry on that activity, within six months of the commencement of the Act or such further period as the Reserve Bank may allow.
Since the Holding Company is a non resident and its interest in NIIL exceeded 40%, NIIL had to apply for the permission of the Reserve Bank for continuing to carry on its business.
Section 29 (4) (a) imposes a similar restriction on such person or company from holding shares in India of any company referred to in clause (b) of section 29 (1), without the permission of the Reserve Bank.
Therefore, the Holding Company also had to apply for the permission of 719 the Reserve Bank for continuing to hold its shares in NIIL.
The time for making application for the requisite permission under section 29 was extended by the Reserve Bank by two months generally, that is to say, until August 31, 1974.
The need to comply with the provisions of section 29 of FERA is the pivot round which the whole case revolves.
NIIL applied to the Reserve Bank for the necessary permission through its Director and Secretary, D.P. Kingsley, on September 3, 1974 By its letter dated May 11, 1976, the Reserve Bank allowed that application on certain conditions.
NIIL 's application was late by three days but the delay was evidently ignored or condoned.
One of the conditions imposed by the Reserve Bank on NIIL was that it must bring down the non resident interest from 60% to 40% within one year of the receipt of its letter.
That letter having been received by NIIL on May 17, 1976, the dead line for reducing the non resident interest to 40% was May 17, 1977.
The Holding Company applied to the Reserve Bank for a 'Holding Licence ' under section 29(4)(a) of FERA, on September 18, 1974.
That application which was late by 18 days is, we are informed, still pending with the Reserve Bank.
Perhaps, it will be disposed of after the non resident interest in NIIL is reduced to 40% in terms of section 29 (1) of FERA.
Devagnanam was residing in Hong Kong to fulfil his commitment to NEWEY 's far eastern business interests.
FERA had its implications for him too, especially since he could be regarded as a nonresident and did consider himself as such.
He obtained a holding licence dated March 4, 1975 from the Reserve Bank in respect of his shares in NIIL.
But, his interest in the affairs of NIIL began to flag for one reason or another and he started looking out for a purchaser who would buy his shares on convenient and attractive terms.
In a note dated April 29, 1975 which he prepared on "further Indianisation Needle Industries (India) Ltd." he pointed out that Indianisation should be considered on the footing that the non resident interest should be reduced to 40% and that, as between the two feasible methods of Indianisation, namely, (1) Going to public and (2) placement of shares, the latter was preferable.
He said: 720 There can be no question of my becoming in any way involved with Ketti and its future as I am committed to NEWEY.
There appears to be no possibility of returning to India in what is left of my working life.
I therefore have little choice but to sell my shares.
( 'Ketty ' in Nilgiris, is the place where NIIL 's factory is situated and is treated as synonymous with NIIL).
Devagnanam referred in his note to an inquiry from a Mr. Khaitan, the head of a powerful group with diverse interests and investment in industry, who was already involved in the manufacture of products allied to NIIL 'section Coats were alarmed that Devagnanam was negotiating the sale of his shares "to a Marwari, one Khaitan of Shalimar, a sewing needle competitor to Ketti".
In a letter dated August 6, 1975 addressed to Doraiswamy, a partner in a Madras firm of solicitors called 'King and Partridge ' who was a Director of NIIL, Sanders, a Director of the Holding Company on NIIL 's Board, expressed his grave concern at the proposed deal thus: No doubt Mr. Khaitan would pay the earth to acquire NIIL and judging by what Theo (Devagnanam) had said about him in the past, he may be prepared to arrange or facilitate payment abroad, a most attractive possibility from Theo 's point of view, since he has said clearly that he intends leaving India for good, finally settling in Australia.
Sanders added that the deal was so dangerous from the point of view of NIIL that the Holding Company "would feel obliged to prevent it by whatever means were open" to it.
By his reply dated August 12, 1975, Doraiswamy said that the news of the proposed sale came as no surprise to him and that he had heard that Silverston, a former Solicitor partner of his, was acting as a "go between" in Devagnanam 's deal with Khaitan.
On September 16, 1975 Devagnanam wrote to M.M.C. NEWEY of NEWEY, Birmingham.
pointing out the advantages that would accrue by the sale of the shares to Khaitan.
Devagnanam reiterated his total identification with NEWEY 's Far Eastern interests and expressed his anxiety to free himself from all commitments to or involvement with NIIL, as early as possible.
On October 22, 1975 an important meeting was held in which Alan Machrael, a Director of the Holding Company, made it clear 721 on behalf of Coats that neither Khaitan nor any other single purchaser would be acceptable to the Holding Company if that meant the acquisition of 30% share holding.
The notes of the meeting record that Devagnanam had confirmed that the offer which he had received from Khaitan was at Rs. 360 per share, out of which a substantial proportion (perhaps 50%) would be payable outside India.
Mackrael stated at the meeting that the price in rupees could be matched but not the method of payment which was illegal and reiterated that the Holding Company would prevent any attempt by Devagnanam to sell his holding to Khaitan.
The notes of the meeting were signed by Mackrael on October 30, 1975.
On that date, Sanders wrote a letter to Manoharan stating that the Holding Company was not prepared that 30% of the share capital should get into the hands of any one person, bearing in mind the problems that had arisen in allowing Devagnanam to acquire a holding of nearly that proportion.
On November 7, 1975 M.M.C. Newey wrote to Devagnanam making it clear beyond the manner of any doubt that Coats, will not accept Khaitan and that according to Bannatyne of Coats, they were put to considerable trouble in finding Indian residents who would match Khaitan 's offer of 3.6 times par.
Newey made it clear that in any event, the sale price would have to be paid in India and that they would not be a party to any illicit currency deal.
Finding that Coats were determined not to allow him to sell his shares to Khaitan, Devagnanam changed his mind and decided against disposing of his holding in NIIL.
On November 13, 1975, he wrote to Newey saying: "I do not think any of us want to see Coats dominate Ketti.
Hence there can be no question of selling any part of my shares to their nominee.
As they in turn will not approve of anyone we choose, there is no way of solving the problem.
The best thing to do, therefore, is for me to revert to the original basis and they should have no cause to complain.
This will of course include effectively managing the Indian company.
Let me however assure you that it will not be at the expense of Newey." And so did Devagnanam remain in NIIL, with the stage set for a battle between him and Coats for acquisition of control over the affairs of NIIL.
Yet another statutory provision which has an important bearing on the issues arising in these appeals is the one contained 722 in section 43 A of the Indian , which was introduced in 1961 by Act 65 of 1960.
NIIL was incorporated as a Private Company in 1949 under the Indian Companies Act, 1913.
It was a Private Company as defined in section 3 (1) (iii) of that Act since, by its Articles of Association, it restricted the right to transfer its shares, limited the number of its members to fifty and prohibited any invitation to the public to subscribe to any of its shares or debentures.
By section 43 A, it became a Public Company, since not less than twenty five per cent of its paid up share capital was held by a body corporate, namely, the Holding Company.
But, under the first proviso to section 43A (1), it had the option to retain its Articles relating to matters specified in section 3 (1) (iii) of the Companies Act.
NIIL did not alter the relevant provisions of its Articles after it became a Public Company within the meaning of section 43A.
One of the points in controversy between the parties is whether, in the absence of any positive step taken by NIIL for exercising the option to retain its Articles relating to matters specified in section 3 (1) (iii) of the Companies Act, it can be held that NIIL had in fact exercised the option, which was available to it under the 1st proviso to section 43A, to include provisions relating to those matters in its Articles.
To resume the thread of events, on receipt of the letter of the Reserve Bank dated May 11, 1976 Kingsley, as NIIL 's Secretary, sent a reply on May 18, 1976 to the Bank confirming the acceptance of the various conditions under which permission was granted to NIIL to continue its business.
On August 11, 1976 the term of Devagnanam 's appointment as the Managing Director of NIIL came to an end but in the meeting dated October 1, 1976 of NIIL 's Board of Directors, that appointment was renewed for a further period of five years.
On being informed of the renewal of Devagnanam 's appointment, NEWEY 's Chairman, C. Raeburn, who used to attend to the affairs of the Holding Company, did not object as such to the Board 's decision ("It may well be that the reappointment in itself is right") but he demurred to the modality by which the decision was taken since, according to him, questions relating to appointments to senior positions in the Company ought to be decided in consultation with the U.K. Shareholders so that they could have an opportunity to express their views.
Sanders, it may be mentioned, had received the notice of the meeting duly.
On October 20 and 21, 1976, a meeting took place at Ketti between the U.K. shareholders and the Indian shareholders of NIIL.
The former were represented by Alan Mackrael, the Managing Director 723 of the Holding Company, and C. Raeburn, the Chairman of NEWEY the latter by Devagnanam and Kingsley.
One Martin Henry, the Managing Director of 'Madura Coats ', an Indian Company in which the Holding Company had substantial interest, also attended that meeting and took part in its deliberations.
Silverston, an Englishman who was practising in India asa Solicitor, attended the meeting as an advisor to the Indian shareholders.
C. Raeburn chaired the meeting.
Para 2 of the note prepared by him of the discussions held at the meeting says that it was agreed that Indianisation should be brought about by May 1977, as requested by the Government, so as to achieve 40% U.K. and 60% Indian shareholding.
But the meeting virtually ended in a stalemate because whereas the Holding Company wanted a substantial part of the share capital held by it in excess of 40% to be transferred to Madura Coats as an Indian shareholder, Devagnanam insisted that the existing Indian share holders of NIIL alone had the right, under its Articles of Association, to take up the shares which the Holding Company was no longer in a position to hold because of the directives issued by the Reserve Bank pursuant to FERA.
Thus, the difference between the two groups who were fast falling out was not, as it could not be, whether the Holding Company had to reduce its share holding in NIIL from 60% to 40%, but as regards the mode by which that reduction was to be brought about.
The bone of contention was as to which Indian Party should take up the excess of 20% the existing Indian shareholders of NIIL or an outside Indian Company, the Madura Coats.
Raeburn played the role of a mediator but did not succeed.
On the conclusion of the Ketty meeting, Silverston wrote a letter to Kingsley conveying his appreciation of the efforts made by Raeburn to bring the parties together and his distress at the attitude of Coats which, according to Silverston, showed that they were trying to circumvent the provisions of FERA.
Raeburn too wrote a letter on October 23, 1976 to Devagnanam saying that Coats were not really interested in any independent Indians taking their excess share holding.
On December 11, 1976 Devagnanam wrote to Raeburn expressing the resentment of himself and his group at the attempts made by Coats to maintain their control over NIIL by indirect means.
On December 14, Devagnanam offered a package deal under which the existing Indian shareholders would augment their holding to 60%, Mackrael and Raeburn would be on the Board of Directors but not Martin Henry, and even B.T. Lee, a Senior Executive of NI Studley, could be appointed as a wholetime Director of NIIL to be in charge of its export programme.
On January 20, 1977 the Reserve Bank sent a reminder to NIIL asking 724 it to submit at an early date the progress report regarding dilution non resident interest.
By its reply dated February 21, 1977 NIIL confirmed its commitment to achieve the desired Indianisation by the stipulated date, viz., May 17, 1977.
On March 9, 1977 Raeburn wrote to Devagnanam, saying that after a discussion with Mackrael and three other high ranking persons of Coats, it was clear that Coats were not agreeable to allowing the present Indian shareholders to acquire 60% of the equity capital of NIIL, since such a course carried in the long run too great a risk to their world trade.
Raeburn made certain fresh proposals by his letter in the hope that they would be acceptable to Coats and invited Devagnanam to come to Birmingham for negotiations.
On March 18, 1977 a notice was issued by NIIL 's Secretary, D.P. Kingsley, intimating that a meeting of the Board of Directors will be held on April 6, 1977.
One of the items on the agenda of the meeting was shown as "Policy Indianisation".
Sanders received the notice of the meeting duly but did not attend the meeting.
Devagnanam went to Birmingham in the last week of March 1977.
Between 29th and 31st March, he held discussions with four out of the six Directors of the Holding Company, namely NEWEY, Jackson, White house and Raeburn.
The other two Directors, Mackrael and Sanders, did not take any part in those discussions.
During his visit to Birmingham, Devagnanam expended considerable time in discussing various matters with NEWEY, pertaining to their Far Eastern business.
On April 4, 1977 NIIL received a reminder letter dated March 30, 1977 from the Reserve Bank which pointed out that the Company had not yet submitted any concrete proposal for reduction of the non resident interest and asked it to submit its proposal in that behalf without any further delay.
The letter warned the Company that if it failed to comply with the directive regarding dilution of foreign equity within the stipulated period, the Bank would be constrained to view the matter seriously.
Raeburn had written a letter to Devagnanam on 4th April on the question of the compromise formula and Devagnanam too had written a letter to Raeburn on the 5th, saying that he would place the formula before his colleagues.
These letters evidently crossed each other.
The 6th April was then just at hand.
725 The meeting of NIIL 's Board of Directors was held on April 6, 1977 as scheduled.
Seven Directors were present at the meeting, with Devagnanam in the chair at the commencement of the proceedings.
C. Doraiswamy, solicitor partner of 'King and Partridge ', was one of the Directors present at the meeting.
He had no interest in the proposal of "Indianisation" which the meeting was to discuss and was, therefore, considered to be an independent Director.
In order to complete the quorum of two independent Directors, the other Directors apart from C. Doraiswamy being interested in the business of the meeting, Silverston, an ex partner of Doraiswamy 's firm of solicitors, was appointed to the Board as an additional Director under article 97 of the Articles of Association.
Silverston chaired the meeting after his appointment as an additional Director.
The meeting resolved that the issued capital of NIIL be increased to Rs. 48,00,000/ by a new issue of 16,000 equity shares of Rs. 100/ each, to be offered as rights shares to the existing shareholders in proportion to the shares held by them.
The offer was to be made by a notice specifying the number of shares which each shareholder was entitled to, and in case the offer was not accepted within 16 days from the date on which it was made, it was to be deemed to have been declined by the concerned shareholder.
The minutes of the meeting recorded that as a matter of abundant caution, the Directors who were holding shares in NIIL did not take part either in the discussions which took place in the meeting or in the voting on the resolution.
After the aforesaid meeting of the Board dated April 6, 1977, Devagnanam wrote a letter bearing the date April 12 to Raeburn, explaining that every alternative proposal was discussed in the meeting and setting out the compelling circumstances arising out of the requirements of FERA which led to the passing of the particular resolution.
It was stated in the letter that a copy of the Reserve Bank 's letter of March 30, 1977 to NIIL was enclosed therewith, but in fact it was not so enclosed.
The letter of offer dated April 14, 1977 was prepared pursuant to the resolution passed in the meeting of 6th April.
The envelope containing Devagnanam 's letter dated April 12 (without the copy of the letter of the Reserve Bank dated March 30, 1977) and the letter of offer dated April 14 were received by Raeburn on May 2, 1977 in an envelope bearing the Indian postal mark of April 27, 1977, The letter of offer which was sent to one of the Indian shareholders, Manoharan, was posted in an envelope which also bore the postal mark of 27th April.
The next meeting of the Board was due to be 726 held on May 2, 1977 and it is on that date that Raeburn received the letter of offer dated April 14, which evidently, was posted at Madras on April 27, 1977.
The Holding Company was thereby denied an opportunity to exercise its option whether or not to accept the offer of rights shares, assuming that any such option was open to it.
Whether such an option was open to it and whether, if it could not or did not want to take the rights shares, it could transfer its rights, under NIIL 's letter offering the rights shares, to a person of its choice depends upon the provisions of FERA, the necessity to Comply with the directives of the Reserve Bank the terms of NIIL 's Articles of Association and the provisions of the Indian Companies Act.
On April 19, 1977 a notice was issued by NIIL 's Secretary intimating that a meeting of the Board of Directors will be held on May 2, 1977.
One of the items of agenda mentioned in the notice was "Policy (a) Indianisation, (b) Allotment of shares".
The notice of the meeting was sent to the Holding Company in an envelope which also bore the Indian postal mark of April 27, 1977.
The notice was received by Sanders in England on May 2, 1977 i.e. on the date when the meeting was due to be held in India.
Even the fastest and the most modern means of transport could not have enabled Sanders to attend the meeting.
In between, on April 26, 1977 Raeburn had written a letter to Devagnanam at Malacca, following a telex message which said: HAD HELPFUL DISCUSSIONS COATS YESTERDAY PLEASE MAKE NO DECISIONS RE INDIANISATION PENDING LETTER" By his letter of 26th April, which is said to have been received by Devagnanam on May 4, 1977, Raeburn stated that Coats were still unwilling to grant majority shareholding control to the existing Indian shareholders, but that they were equally not keen to do any thing which would be regarded as circumventing the proposal for Indianisation or the law bearing on the subject, since that would undermine the position of the Indian shareholders.
A meeting of the Board of Directors was held on May 2, 1977 as scheduled.
The minutes of that meeting show that Kingsley, the Secretary of NIIL, pointed out in the meeting that applications for allotment of the rights shares offered as also the amounts payable 727 along with the acceptance of the offer had been received from all the shareholders except the U.K. shareholders and the Manoharan group.
The offer to Manoharan was sent at Virudh Nagar but Silverston pointed out to the meeting that Manoharan was working in Jaipur and that therefore, he should be given further time to participate in the rights issue.
The Manoharan group was accordingly allowed twenty days ' time from the date of the allotment letter for payment of the allotment amount.
In the meeting of 2nd May, the whole of the new issue consisting of 16,000 rights shares was allotted to the Indian shareholders, including members of the Manoharan group.
Out of these, the Devagnanam group was allotted 11, 734 shares.
A dividend of 30%, subject to tax, amounting to Rs. 9,60,000/ was recommended by the Board, and it was resolved that the Annual General meeting of the Company be held on 4th June, 1977.
Silverstone was appointed as an additional Director of the Company and his election as such at the Annual General meeting was recommended by the Board.
Further, it was resolved that deposits be invited from the public.
On the same day i.e. 2nd May, Devagnanam wrote a letter to Raeburn intimating to him that in a meeting held that morning the formalities relating to allotment of shares were completed, bringing the Company under the control of the Indian shareholders.
Devagnanam reiterated by his letter the hope of a closer association with the NEWEY group.
Raeburn reacted sharply to Devagnanam 's letter of April 12 and to the letter of offer dated April 14.
As stated earlier, he had received both of these on May 2 in an envelope which bears the postal mark of Madras dated April, 27.
Raeburn sent a telex, message to Devagnanam on 2nd May and another to Kingsley on 3rd May.
By the first telex, he complained about the inadequacy of the notice of the meeting and by the second, he conveyed that there was considerable doubt on the question whether the necessary disinterested quorum was available at the meeting of the Directors held on April 6.
On receipt of the telex message, Devagnanam wrote a letter to Raeburn on May 4 explaining the pressure of circumstances which compelled the Board to take the decision which it did in the meeting of May 2, 1977.
Raeburn followed up his telex messages by a letter to Devagnanam on May 3.
While expressing his distress and displeasure at the manner in which the decision regarding the issue of rights shares was taken and the allotment of the shares was made, Raeburn stated in his letter that the rights issue at par, which was considerably less than the fair value 728 of the shares, was most unfair to the shareholders who could not take up the rights issue.
After making the allotment of shares in the meeting of May 2, NIIL sent a letter to the Reserve Bank reporting compliance with the requirements of FERA by the issue of 16,000 rights shares and the allotment thereof the Indian shareholders which resulted in the reduction of the foreign holding to approximately 40% and increased that of the Indian shareholders to almost 60%.
Reference was made in the letter to the fact that the allotment money of Rs. 1,10,700/ had yet to be received, which was obviously in reference to the amount due on the 1,107 rights shares which were allotted to the Manoharan group in the meeting of 2nd May. The Manoharan group did not evidence any interest even later in taking up those shares.
Manoharan, it may be stated, who was a Director and General Manager of NIIL had resigned his post in April 1976, after serving the Company for nearly 17 years.
Between the 2nd and 9th May, there was an exchange of cables between Mackrael and Doraiswamy which led to the latter writing a letter on the 9th to the former.
Doraiswamy stated in that letter that he had thoroughly investigated the position by perusing all available records placed before him by Devagnanam and Kingsley and that he was of the opinion that, in the meeting of the 6th April, there was the required quorum of two disinterested Directors consisting of Silverston and himself and, therefore, there could be no doubt whatsoever about the legality of the resolution passed in that meeting.
He admitted that although the time limit fixed by the Reserve Bank had expired on 17th May, 1977, "it may have been possible for the Company to get further time from the Reserve Bank of India".
As regards the decision to issue the additional shares at par, he explained that if the issue had been made at a premium, it would have necessitated an approach to the Controller of Capital Issues, a process which was time consuming and complicated.
He pointed out that the authorities would not have allowed the Company to issue the rights shares at a premium and that even if they were to allow such a course, the premium permissible would have been only nominal.
He asserted that the delay caused in the offer of new shares being received by the U.K. shareholders was of little consequence because they would not have been able to take up the shares in any event.
He expressed the hope that Mackrael would agree that the decision regarding the issue of rights shares taken at the Board meeting on April 6, 1977 was bona fide and in the best interests 729 of the Company.
He concluded his letter by an assurance that as regards the late despatch of the notice of the Board Meeting of 2nd May, further enquiries were being made.
On May 11, Devagnanam wrote to Raeburn apologising for the manner in which the foreign shareholding had been reduced and for good measure, he projected the various advantages which the NEWEY group would enjoy under the new Indian management and control of NIIL.
As if to illustrate that it is better late than never, he enclosed with his letter a copy of the Reserve Bank 's letter dated 30th March, 1977 which was to have been sent along with the letter dated April 12 but was in fact not so sent.
On May 17, 1977 Mackrael, acting on behalf of the Holding Company, filed a Company Petition in the Madras High Court under sections 397 and 398 of the Indian out of which the present appeals arise.
It is alleged in the petition that the Indian Directors abused their fiduciary position in the Company by deciding in the meeting of April 6 to issue the rights shares at par and by allotting them exclusively to the Indian shares holders in the meeting of 2nd May, 1977.
In so doing, they acted mala fide and in order to gain an illegal advantage for themselves.
The Indian Directors, according to the company petition, either knew or ought to have known that the fair value of the shares of the Company was about Rs. 204 per share.
By deciding to issue the rights shares at par, they conferred a tremendous and illegitimate advantage on the Indian shareholders.
Devagnanam delayed deliberately the intimation of the proceedings of the 6th April to the Holding Company.
By that means and by the late giving of the notice of the meeting of the 2nd May, the Devagnanam group presented a fait accompli to the Holding Company in order to prevent it from exercising its lawful rights.
Thus, according to the petition the conduct of the Indian Directors lacked in probity and fair dealing which the Holding Company was entitled to expect.
By the Petition, the Holding Company asked for the following reliefs: (a) That the Board of Directors of the Company be superseded and one or more Administrators be appointed to administer the affairs of the Company or, in the alternative, the Board of Directors be reconstituted so as to ensure that the Holding Company had adequate representation on it; 730 (b) That the proceeding of the meeting of the Board of Directors held on April 6 and May 2, 1977 be declared illegal, void and inoperative; (c) That Silverston 's appointment as an Additional Director of the Company be declared as void and inoperative and he be restrained from functioning as a Director of the Company; (d) That the purported allotment of 16,000 shares pursuant to the impugned resolution of the Board of May 2, 1977 be declared void; (e) That the Indian group of shareholders to whom the rights shares were allotted be restrained from exercising any voting rights in regard to any part of those shares; (f) That the Company be restrained from giving effect to the allotment of the 16,000 rights shares and from making any payment of dividend on those shares; (g) That the Articles of Association of the Company be amended so as to permit the transfer of the shares to persons other than the existing members of the Company in order to enable the Holding Company to comply with the requirement of disinvestments without prejudice to its interest as a shareholder; and (h) That a special majority for decisions of the Board be prescribed in regard to all important matters and provision be made for the appointment of Directors by proportional representation.
The learned Acting Chief Justice who tried the Company Petition, found several defects and infirmities in the Board 's meeting dated May 2, 1977 and concluded that appropriate relief should be granted to the Holding Company under section 398 of the .
The learned Judge was of the view that the average market value of the rights shares was about Rs. 190 per share on the crucial date and that, since the rights shares were issued at par, the Holding Company was deprived unjustly of a sum of Rs, 8,54,550/ at the rate of Rs. 90/ per share on the 9,495 rights shares to which it was 731 entitled.
Exercising the power under section 398(2) of the , the learned Judge directed NIIL to make good that loss which, according to him, could have been avoided by it "by adopting a fairer process of communication" with the Holding Company and "a consequential dialogue" with them, in the matter of the issue of rights shares at a premium.
The learned Judge directed NIIL to pay to the Holding Company the aforesaid sum of Rs. 8,54,550/ as a "solatium" in order to meet the ends of justice.
Being aggrieved by the aforesaid judgment, the Holding Company filed O.S. Appeal No. 64 of 1978 while NIIL filed cross objections to the decree.
The appeal and cross objections were argued before the Division Bench of the High Court on the basis of affidavits, the correspondence that had passed between the parties and certain additional documents which were filed before the Appellate Court by consent of parties.
Though the Company Petition was filed under section 397 as also under section 398 of the and though the trial court had granted partial relief to the Holding Company under section 398, it was stated in the Appellate Court on its behalf that its entire case was based on section 397 and that it did not want to invoke the provisions of section 398.
A similar statement was made before us also.
On a consideration of the matters and material before it, the Division Bench formulated its view in the form of 18 conclusions on various aspects of the case.
They may be summed up thus: (a) As soon as Devagnanam became involved in the far eastern ventures of NEWEY, he decided to sell his share holding in NIIL to an Indian concern or party from which he expected to receive at least a part of the consideration in a foreign country.
(b) Seeing that Coats were opposed to his receiving any part of the consideration for the sale of his shares in a foreign country, Devagnanam decided not to part with his shares but to obtain the control of the Company.
(c) The directives of the Reserve Bank of India on the question of Indianisation were exploited by Devagnanam for compelling the Holding Company to part with its shares in favour of the Indian shareholders.
732 (d) Coats were willing to carry out the directives of the Reserve Bank but they did not want to transfer their shares to the existing Indian shareholders because thereby, the latter would have acquired a controlling interest in NIIL which Coats wanted to prevent.
Coats were willing to part with their excess shares in favour of other Indian residents.
(e) Though Coats originally contemplated the transfer of 15% of their excess 20% shares to Madura Coats, or the incorporation of a company to take over their excess 20% shares, they were ultimately agreeable that the existing Indian shareholders should get 9% out of that 20% so as to have a 49% holding in the share capital of NIIL and that 11% should go to new, independent, Indian Institutional shareholders.
The object of Coats was that any one group of shareholders should not have a dominating position in the affairs of NIIL.
(f) At the Ketti meeting held on October 20 and 21, 1976, the issue of rights shares was considered as an alternative to disinvestment, but that was subject to two conditions: one, that it should be shown that there was a viable development plan which required additional funds which the existing cash flow of NIIL could not meet, and two, that the value of the U.K. equity interest required to be transferred would be no less favourable than what would be achieved by a direct sale of that interest.
(g) Though by his letters of December 11 and 14, 1976 Devagananam had informed Raeburn of the decision of the Indian shareholders to acquire 60% shares for themselves, he did not ever say one word about the issue of rights shares in any of the numerous communications which he sent to Raeburn.
No reference was made to the issue of rights shares even in the memorandum of discussions which took place during the visit of Devagnanam to U.K. from March 29 31, 1977.
Thus, the issue of rights shares was sprung as a surprise on the U.K. shareholders.
733 (h) The notice dated March 13, 1977 for the meeting of the Board of Directors held on April 6, 1977 referred to the main item on the agenda in ambiguous terms as: "Policy Indianisation".
In the context of the discussions which had taken place until then between the parties, N.T. Sanders who represented the Holding Company on the Board had no means or opportunity of knowing that the particular item on the agenda involved the question of the issue of rights shares.
(i) Since every major decision was taken by the Board of Directors in consultation with the Holding Company and since there was no agenda for the appointment of an additional Director under article 97 of Articles of Association of NIIL, the decision taken by the Board in its meeting of April 6 on the issue of rights shares and the appointment of Silverston as an Additional Director constituted a departure from established practice and showed want of good faith and lack of fair play on the part of the Board of Directors of NIIL.
(j) The letter dated April 12, the letter of offer dated April 14 and the notice for meeting of the Board of Directors to be held on May 2, were all got posted by Devagnanam as late as on April 27, 1977 at Madras, so as to ensure that these important documents should not reach the Holding Company in time to enable it to participate in the all important meeting of the 2nd.
Davagnanam wanted to present a fait accompli to the Holding Company so as to prevent it from taking any preemptive action.
(k) Whenever NIIL wrote to the Reserve Bank alleging that the Holding Company was not willing to carry out the directives of the Bank or to comply with the provisions of FERA, its object was to prejudice the Bank against the Holding Company by drawing a red herring across the track.
(l) The directives of the Reserve Bank of India had the provisions of FERA were not concerned with who should be the Indian shareholders of NIIL.
All that they were concerned with was that 60% of the share 734 holding must be with the Indian residents.
For the purpose of achieving that result, three courses were available to NIIL: (1) Disinvestment by foreign shareholders in favour of Indian shareholders; (2) Issue of rights shares pursuant to section 81 of the , and (3) Action under section 81 (1 A) of the for issuing additional shares to Indian residents other than the existing Indian shareholders by passing an appropriate special resolution, or if no special resolution was passed, then, by a majority of the shareholders approving such a course with the consent of the Central Government.
The first course was ruled out since Coats had taken a definite stand that they will not allow the existing Indian shareholders to obtain the excess shares.
As far as the second alternative was concerned, the Holding Company had the right to renounce shares offered to it in favour of any other person under section 81 (1) (c) of the , which right was denied to it because, the letter of offer dated April 14 did not contain a statement regarding renunciation of the right to take shares and also because that letter was not posted in time.
As regards the third course, if the Holding Company were given adequate notice of the proposal to issue rights shares, it might have taken appropriate action under section 81 (1 A) of the .
(m) The object of the Directors of NIIL in deciding upon the issue of rights shares, and that too in the manner in which they did so, was clearly to obtain control of the Company and to eschew and eliminate the controlling power which the Holding Company had over NIIL.
The conversion of the existing minority of Indian shareholders into a majority, far from being a matter of statutory compulsion, was an act of self aggrandizement on the part of the existing Indian shareholders.
(n) The action taken by the Indian shareholders was against the interest of the Company itself because the rights shares were issued at par which was far below their market price.
(o) The true motivation of the various steps taken by the Devagnanam NEWEY Combination was the furtherance 735 of the interest of NEWEY 's Far Eastern enterprises, coupled with the personal interest of Devagnanam himself.
Devagnanam was receiving Rs. 96,000/ per annum in addition to substantial fringe benefits as the Managing Director of NIIL.
He was also getting a large salary from NEWEY which was $10,000 in 1075 $11,000 in 1976 and $12,000 for the Year ending July 31, 1977.
(p) The fact that NIIL informed the Holding Company on May 21, 1977 which was after the Company Petition was filed, that the Holding Company could not exercise and will not be allowed to exercise any rights in respect of the whole of 18,990 shares held by it since its application under section 29 (4) of FERA was not granted by the Reserve Bank shows that the object of the Board of Directors in taking the impugned decision was to exclude the Holding Company from all control over NIIL.
That is why NIIL advised the Reserve Bank of India by its letter dated May 24, 1977 that no application for holding any shares by a non resident should be allowed by the Bank without the knowledge and consent of NIIL.
That also is the reason why NIIL conveyed to the Reserve Bank by its letter of September 20, 1977 that until such time as the Company Petition was finally disposed of, no licence should be issued to non resident shareholders and no remittance of dividend out of India should be permitted with out the non resident share holders reducing their holding in NIIL to less than 40%.
The two other conclusions are comprehended within the 16 set out above.
On the basis of the aforesaid formulations, the Division Bench concluded that the affairs of NIIL were being conducted in a manner oppressive, that is to say, burdensome, harsh and wrongful to the Holding Company.
After referring to certain passages from Palmer 's Company Law and Gore Browne on Companies, and the decisions of the House of Lords, this Privy Council, and our own Courts including the Supreme Court, the Division Bench held that since the action of the Board of Directors of NIIL was not in the interest of the Company but was taken merely for the purpose of 736 welding the Company into NEWEY 's Far Eastern complex, it was just and equitable to wind up the Company.
NIIL had filed cross objections in the High Court appeal contending that, in any event, the learned Acting Chief Justice was in error in directing it to pay the sum of Rs. 8, 54,550/ to the Holding Company.
While dealing with the cross objections, the Division Bench held that the injury suffered by the Holding Company on account of the oppression practised by the Board of Directors of NIIL could not be remedied by the award of compensation and, therefore, the action of the Board of Directors in issuing the rights shares had to be quashed.
Having found that the Holding Company was entitled to relief under section 397 of the and the award of solatium made by the trial Court was not the appropriate relief to grant, the Division Bench allowed the appeal filed by the Holding Company, dismissed the cross objections in substance and adjourned the appeal for a fortnight for hearing further arguments on the nature of the relief to be granted in the case.
Eventually, by its order dated October 26, 1978 the Division Bench granted the following reliefs: (a) Devagnanam was removed forthwith both as the Managing Director and Director of NIIL and was asked to vacate the bungalow occupied by him, by November 1, 1978.
He was paid one Year 's remuneration as compensation for the termination of his appointment as the Managing Director.
(b) The Board of Directors was superseded and an interim Board consisting of nine directors proposed by the Holding Company was constituted, with Shri M.M. Sabharwal as an independent Chairman.
(c) Harry Bridges, an executive of COATS, was appointed as the Managing Director for a period of four months.
(d) The rights issue made on 6th April, 1977 and the allotment of shares made on 2nd May, 1977 at the Board meetings were set aside and the Interim Board was directed to make a fresh issue of shares at a premium to the existing shareholders, including the Holding Company which was to have a right of renunciation.
The new Board was directed to apply to the Controller 737 of Capital Issues for determining the amount of premium.
(e) The Articles of Association were to be altered by appropriate additions and deletions in order to provide for election of Directors by proportional representation; and (f) Devagnanam was asked to pay to the Holding Company the costs of appeal and cross objections quantified at Rs. 25,000/ .
He was also asked personally to reimburse the expenses incurred by NIIL in the appeal and cross objections.
These appeals were heard in the first instance by Justice Untwalia and Justice Pathak.
In view of the importance of the questions arising therein, on some of which our learned Brothers, it seems, were unable to agree, they desired that the appeals be heard by a larger Bench.
That is how the appeals are now before us.
The petition of the Holding Company out of which these appeals arise sought relief under sections 397 and 398 of the .
The case under section 398 not having been pressed except before the learned trial Judge, we are only concerned with the question whether the Holding Company is entitled to relief under section 397 which reads thus: "397(1) Any members of a company who complain that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members (including any one or more of themselves) may apply to the Court for an order under this section: provided such members have a right so to apply in virtue of section 399.
(2) If, on any application under sub section (1) the Court is of the opinion: (a) that the company 's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members; and (b) that to wind up the company would unfairly prejudice such member or members, but that other 738 wise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up; the Court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit.
" Section 398 provides for relief in cases of mismanagement.
Section 399(1) restricts the right to apply under sections 397 and 398 to persons mentioned in clauses (a) and (b) of sub section (1) It is necessary to refer briefly to the relevant part of the pleadings before examining the charge of oppression made by the Holding Company against a group of the minority shareholders of NIIL After tracing the history of formation and composition of NIIL, the company petition states that the management of NIIL was in the hands of the Board of Directors in which the Indian group had a large majority.
The Holding Company had implicit trust in them and was content to leave the management in their hands.
After referring to the impact of section 43A of the , the company petition says that in the wake of FERA, discussions and negotiations were held between the representatives of the Holding Company and the Management of NIIL amongst themselves as well as with the Reserve Bank of India, in order to enable NIIL to obtain the requisite permission for carrying on its business.
Paragraph 13 of the company petition states that the Reserve Bank of India by its letter dated May 11, 1976 granted to NIIL the necessary permission subject to the condition, inter alia, that it reduced non resident shareholding to 40 per cent on or before May 17, 1977.
The case of the Holding Company in regard to its own attitude is stated succinctly in paragraph 14 of the company petition which may with advantage be reproduced: "Discussions were thereafter held on a number of occasions between the petitioner and the management of the Company to effectuate the aforesaid condition imposed by the Reserve Bank of India which the petitioner was at all times ready and willing to comply with.
The petitioner did not, however, desire to dilute its holding of shares in the company by a further issue of capital and preferred to effectuate the said intention by disinvesting or selling 20% of its holding in the company.
The Reserve Bank of India was agreeable to such dilution taking place by the petitioner selling a part of its holding to an Indian resident or Indian residents.
The Reserve Bank had indicated that 739 they would be willing for such dilution taking place by a further issue of shares provided that additional capital was required for purposes of expansion.
The petitioner was not willing to sell a part of its holding to the Indian group as such a sale would result in the Indian group acquiring an absolute majority interest.
Further more under the Articles of Association of the Company the consent of the existing shareholders would be required (apart from the approval of the Reserve Bank) before the petitioner sold any of its shares to an Indian party, other than to a member." According to the Holding Company, the various steps which culminated in the allotment of rights shares to the existing Indian shareholders were vitiated by mala fide, their dominant object being to convert an existing minority into a majority.
The decision taken in the meeting of the Board on April 6, 1977 was taken deliberately in haste and hurry in order to pre empt any action by the Holding Company to restrain the Board from taking the desired decision.
The Reserve Bank, according to the company petition, would not have been so unreasonable as not to extend the time for complying with its directive, especially since the Holding Company had agreed in principle to dilute its holding and the only difference between the parties was as regards the method by which such dilution was to be effected.
In Paragraph 27 of the company petition it is stated that the Devagnanam group decided to issue the rights shares with a view to securing an illegal and unjust advantage for itself, for improving its own position in the Company and in order to deprive the Holding Company of its lawful rights as majority shareholders.
In this behalf, reliance is placed on the following facts and circumstances, inter alia: (a) The Holding Company was never informed of any specific proposal to make the rights issue.
(b) The notice of the Board meeting of April 6, 1977 did not refer to the said proposal.
(c) The notice offering rights shares to the Holding Company was not prepared till April 14 and was not posted till April 27, 1977.
By the time the notice was received by the Holding Company, the Board of NIIL had met to allot the rights shares.
740 (d) The time given in the notice was much less than was customary.
(e) The notice did not contain a statement relating to the right of the shareholders to renounce the rights shares.
(f) The notice of the Board meeting of May 2, although dated 19th April 1977, was posted to Sanders on 27.4.1977, thereby ensuring that it would reach him only after the date of the meeting.
(g) By issuing shares at par, though their value was much higher than Rs. 100/ per share, existing Indian share holders were enabled to acquire the shares at a gross undervalue and the Company was put to a heavy loss.
(i) The Reserve Bank of India had indicated that dilution of the foreign holding by a rights issue could be considered if the Company required further capital for expansion.
At the discussions and negotiations held between the Holding Company and the Indian group it was inter alia agreed that the rights issue would be made only if there was a viable development plan requiring further funds.
The rights issue was made even though no such need for expansion or development existed or was referred to.
(j) Though the Reserve Bank had inter alia stipulated that the said dilution should be effectuated on or before 17th May, 1977, the time schedule is never strictly insisted upon.
There have been numerous instances when the Reserve Bank has granted reasonable extension of time to comply with such conditions.
The Board of NIIL never requested the Reserve Bank to grant further time.
C. Doraiswamy, the 8th respondent stated in his letter dated 9.5.1977 to Mackrael, a Director of the Holding Company, that it would have been possible for the Company to get further time from the Reserve Bank of India.
The Holding Company contends further that M.J. Silverston was not a disinterested person, that his vote on the resolution for the 741 issue of rights shares had therefore to be ignored in which case there was no quorum of two disinterested directors and that his appointment as an Additional Director was not valid since the notice for the meeting of the Board of Directors to be held on 6.4.1977 did not contain in the agenda any subject regarding appointment of an additional Director under Article 97 of the Company 's Articles of Association.
In answer to these contentions, Devagnanam filed an elaborate counter affidavit on his behalf as well as on behalf of NIIL.
In that counter affidavit, every one of the material contentions put forward by the Holding Company has been denied or disputed.
Devagnanam contends that it was the Holding Company which wanted to retain its control over NIIL contrary to the directive of the Reserve Bank of India, the national policy of the Central Government and the provisions of FERA.
According to Devagnanam, every action taken in the Board meetings of 6.4.1977 and 2.5.77 was in accordance with law, that Sanders never used to attend the meetings of the Board, being a non resident he was not entitled to have notice of the Board meetings, that there was no violation of section 81 of the at all, that section 81 (c) of the did not apply to the present case and that, in view of the attitude adopted by Coats, NIIL, in order to comply with the restrictions imposed by the Reserve Bank and to carry out its directive, had no option but to decide upon the issue of rights shares to bring about the reduction in the non resident shareholding.
Devagnanam repudiates emphatically the charge of mala fides or of conduct in breach of the fiduciary duty of NIIL 's Board of Directors.
Having regard to these pleadings, the main question for consideration is whether the decisions taken in the meetings of the Board of Directors of NIIL on April 6 and May 2, 1977 constitute acts of oppression within the meaning of section 397 of .
The High Court has answered this question in the affirmative and has issued consequential directions in regard to the management of NIIL 's affairs.
The findings recorded by the High Court in appeal have been challenged before us with vehemence and ability in an equal measure, matched equally in both respects on either side.
Learned counsel who led the arguments on the rival sides, Shri F.S. Nariman for the appellants and Shri H.M. Seervai for the respondents, have drawn our attention in copious details to 742 the correspondence that transpired between the parties, the correspondence with the Reserve Bank of India, the discussions at Ketty and Birmingham which preceded the impugned decisions, the conduct of Devagnanam as a man and a Managing Director, the attitude of Coats stated to arise out of their world wide business interests and the predicament of NEWEY which was willing to strike but was afraid to wound its partner Coats.
We have also been taken through several decisions and texts bearing particularly on: (a) The meaning of 'oppression ' of the members of a Company within the terms of section 397 and the circumstances in which a Company can be wound up under the just and equitable clause under section 433 (f) of the ; (b) The approach which the court should adopt in cases wherein mala fides and abuse of power on the part of Directors are alleged but no oral evidence is led; (c) The fiduciary powers of Directors in issuing shares; (d) The impact of the provisions of the Foreign Exchange Regulation Act, 1973 with particular reference to section 2 (p), (q) and (u) and section 29; (e) The question as to whether it is necessary to issue a prospectus under section 81 (1) (c) of the ; (f) The constraints on public and private companies under the , and their duties and obligations, with particular reference to sections 2 (35), 2(37), 3 (1) (iii) and (iv) and sections 43A and 81 of the ; (g) The relationship of partnership between the Indian shareholders, Coats and NEWEY who owned respectively 40%, 30%, and 30% of the shareholding in NIIL; (h) The question whether Silverston was an 'interested ' Director within the meaning of section 300 of the ; and (i) Whether Silverston 's appointment as an Additional Director in the meeting of the Board held on April 6, 1977 was, in the circumstances, valid.
743 Coming to the law as to the concept of 'oppression ' section 397 of our follows closely the language of section 210 of the English of 1948.
Since the decisions on section 210 have been followed by our Court, the English decisions may be considered first.
The leading case on 'oppression ' under section 210 is the decision of the House of Lords in Scottish Co op.
Wholesale Society Ltd. vs Meyer.
(1) Taking the dictionary meaning of the word 'oppression ', Viscount Simonds said at page 342 that the appellant society could justly be described as having behaved towards the minority shareholders in an 'oppressive ' manner, that is to say, in a manner "burdensome, harsh and wrongful".
The learned Law Lord adopted, as difficult of being bettered, the words of Lord President Cooper at the first hearing of the case to the effect that section 210 "warrants the court in looking at the business realities of the situation and does not confine them to a narrow legalistic view".
Dealing with the true character of the company, Lord Keith said at page 361 that the company was in substance, though not in law, a partnership, consisting of the society, Dr. Meyer and Mr. Lucas and whatever may be the other different legal consequences following on one or other of these forms of combination, one result followed from the method adopted, "which is common to partnership, that there should be the utmost good faith between the constituent members".
Finally, it was held that the court ought not to allow technical pleas to defeat the beneficent provisions of section 210 (page 344 per Lord Keith; pages 368 369 per Lord Denning).
In Meyer (supra) above referred to, the House of Lords was dealing with a case in which the appellant company was accused of having committed acts of oppression against its subsidiary.
In that context it was held that the parent company must, if it is engaged in the same class of business, accept as a result of having formed such a subsidiary an obligation so to conduct, what are in a sense its own affairs, as to deal fairly with its subsidiary.
In Re Associated Tool Industries Ltd. (2) of which judgment a photographic copy was supplied to us, Joske J. held that the rule in Meyer (supra) involved the consequence that the subsidiary companies must also exercise good faith to the holding company and not merely that the latter should so act to the former.
744 In an application under section 210 of the English , as under section 397 of our , before granting relief the court has to satisfy that to wind up the company will unfairly prejudice the members complaining of oppression, but that otherwise the facts will justify the making of a winding up order on the ground that it is just and equitable that the company should be wound up.
The rule as regards the duty of utmost good faith, on which stress was laid by Lord Keith in Meyer, (supra) received further and closer consideration in Ebrahim vs Westbourne Galleries Ltd.,(1) wherein Lord Wilberforce considered the scope, nature and extent of the 'just and equitable ' principle as a ground for winding up a company.
The business of the respondent company was a very profitable one and profits used to be distributed among the directors in the shape of fees, no dividends being declared.
On being removed as a director by the votes of two other directors, the appellant petitioned for an order under section 210.
Allowing an appeal from the judgment of the Court of Appeal, it was held by the House of Lords that the words 'just and equitable ' which occur in section 222 (f) of the English Act, corresponding to our section 433 (f), were not to be construed ejusdem generis with clauses (a) to (e) of section 222 corresponding to our clauses (a) to (e) of section 433.
Lord Wilberforce observed that the 'words ' just and equitable ' 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; and 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 obligations inter se which are not necessarily submerged in the company structure: "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, to insist on legal rights, or to exercise them in a particular way".
(p 379) 745 Observing that the description of companies as "quasi partnerships" or "in substance partnerships" is confusing, though convenient, Lord Wilberforce said: "company, however small, however domestic, is a company not a partnership or even a quasi partnership and it is through the just and equitable clause that obligations, common to partnership relations, may come in".
(p 380) Finally, it was held that it was wrong to confine the application of the just and equitable clause to proved cases of mala fides, because to do so would be to negative the generality of the words.
As observed by the learned Law Lord in the same judgment, though in another context: "Illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances." (pp 374 375) In his judgment in Re Westbourne Galleries (supra) Lord Wilberforce has referred at two places to the decision in Blissett vs Daniel, (1) which is recognised as the leading authority in the Law of Partnership on the duty of utmost good faith which partners owe to one another.
Lindley on Partnership (14th Edition, pages 194 95) cites Blissett vs Daniel (1) as an authority for the proposition that: "The utmost good faith is due from every member of a partnership towards every other member; and if any dispute arise between partners touching any transaction by which one seeks to benefit himself at the expense of the firm, he will be required to show, not only that he has the law on his side, but that his conduct will bear to be tried by the highest standard of honour".
The fact that the company is prosperous and makes substantial profits is no obstacle to its being wound up if it is just and equitable to do so.
This position was accepted in the decision of the Court of Appeal in Re Yenidge Tobacco Co. (2) and of the Privy Council in Loch vs John Blackwood (3).
746 The question sometimes arises as to whether an action in contravention of law is per se oppressive.
It is said, as was done by one of us, N.H. Bhagwati J. in a decision of the Gujarat High Court in S.M. Ganpatram vs Sayaji Jubilee Cotton & Jute Mills Co., (1) that "a resolution passed by the directors may be perfectly legal and yet oppressive, and conversely a resolution which is in contravention of the law may be in the interests of the shareholders and the company".
On this question, Lord President Cooper observed in Elder vs Elder (2): "The decisions indicate that conduct which is technically legal and correct may nevertheless be such as to justify the application of the 'just and equitable ' jurisdiction, and, conversely, that conduct involving illegality and contravention of the Act may not suffice to warrant the remedy of winding up, especially where alternative remedies are available.
Where the 'just and equitable ' jurisdiction has been applied in cases of this type, the circumstances have always, I think, been such as to warrant the inference that there has been, at least, an unfair abuse of powers and an impairment of confidence in the probity with which the company 's affairs are being conducted, as distinguished from mere resentment on the part of a minority at being outvoted on some issue of domestic policy".
Neither the judgment of Bhagwati J. nor the observations in Elder are capable of the construction that every illegality is per se oppressive or that the illegality of an action does not bear upon its oppressiveness.
In Elder a complaint was made that Elder had not received the notice of the Board meeting.
It was held that since it was not shown that any prejudice was occasioned thereby or that Elder could have bought the shares had he been present, no complaint of oppression could be entertained merely on the ground that the failure to give notice of the Board meeting was an act of illegality.
The true position is that an isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention or that such violation was burdensome, harsh and wrongful.
But a series of illegal acts following upon one another can, in the context, lead justifiably to the conclusion that they are a part of the same transaction, of which 747 the object is to cause or commit the oppression of persons against whom those acts are directed.
This may usefully be illustrated by reference to a familiar jurisdiction in which a litigant asks for the transfer of his case from one Judge to another.
An isolated order passed by a Judge which is contrary to law will not normally support the inference that he is biassed; but a series of wrong or illegal orders to the prejudice of a party are generally accepted as supporting the inference of a reasonable apprehension that the Judge is biassed and that the party complaining of the orders will not get justice at his hands.
In England, after the decision of the House of Lords in Meyer, (supra) a restricted interpretation has been given to section 210 by the Court of Appeal in re Jermyn St. Turkish Baths,(1) which has adversely criticised by writers on Company Law (see Palmer 's Company Law, 22nd ed., page 613, paras 57 06, 57 07; Gore Brown on Companies, 43rd ed., para 28 12).
In India, this restrictive development has no place, for, in S.P. Jain vs Kalinga Tubes, (2) Wanchoo J. accepted the broad and liberal interpretation given to the Court 's powers in Meyer.
In Kalinga Tubes, Wanchoo J. referred to certain decisions under section 210 of the English including Meyer (supra) and observed: "These observations from the four cases referred to above apply to section 397 also which is almost in the same words as section 210 of the English Act, and the question in each is whether the conduct of the affairs of the company, by the majority shareholders was oppressive to the minority shareholders and that depends upon the facts proved in a particular case.
As has already been indicated, it is not enough to show that there is just and equitable cause for winding up the company, though that must be shown as preliminary to the application of section 397.
It must further be shown that the conduct of the majority shareholders was oppressive to the minority as members and this requires that events have to be considered not in isolation but as a part of a consecutive story.
There must be continuous acts on the part of the majority shareholders, 748 continuing upto the date of petition, showing that the affairs of the company were being conducted in a manner oppressive to some part of the members.
The conduct must be burdensome, harsh and wrongful and mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppression of a minority by a majority in the management of the company 's affairs, and such oppression must involve at least an element of lack of probity of fair dealing to a member in the matter of his proprietary rights as a shareholder.
It is in the light of these principles that we have to consider the facts. .with reference to section 397".
(page 737) At pages 734 735 of the judgment in Kalinga Tubes, Wanchoo J. has reproduced from the judgment in Meyer, the five points which were stressed in Elder.
The fifth point reads thus: "The power conferred on the Court to grant a remedy in an appropriate case appears to envisage a reasonably wide discretion vested in the Court in relation to the order sought by a complainer as the appropriate equitable alternative to a winding up order".
It is clear from these various decisions that on a true construction of section 397, an unwise, inefficient or careless conduct of a Director in the performance of his duties cannot give rise to a claim for relief under that section.
The person complaining of oppression must show that he has been constrained to submit to a conduct which lacks in probity, conduct which is unfair to him and which causes prejudice to him in the exercise of his legal and proprietary rights as shareholder.
It may be mentioned that the Jenkins Committee on Company Law Reform had suggested the substitution of the word 'Oppression ' in section 210 of the English Act by the words 'unfairly prejudicial ' in order to make it clear that it is not necessary to show that the act complained of is illegal or that it constitutes an invasion of legal rights (see Gower 's Company Law, 4th edn., page 668).
But that recommendation was not accepted and the English Law remains the same as in Meyer and in Re H.R. 749 Harmer Ltd., (1) as modified in Re Jermyn St. Turkish Baths.
(supra) We have not adopted that modification in India.
Having seen the legal position which obtains in cases where a member or members of a company complain under section 397 of the that the affairs of the company are being conducted in a manner oppressive to him or them, we can proceed to consider the catena of facts and circumstances on which reliance is placed by the Holding Company in support of its case that the conduct of the Board of Directors of NIIL constitutes an act of oppression against it.
There is, however, one matter which has to be dealt with before adverting to facts, namely, the provisions of FERA their impact on the working of NIIL and on the right of the Holding Company to continue to hold its shares in NIIL.
This we consider necessary to discuss before an appraisal of the factual situation since, without a proper understanding of the working of FERA, it would be impossible to appreciate the turn of intertwined events.
It is in the setting of FERA that the significance of the various happenings can properly be seen.
The Foreign Exchange Regulation Act, 46 of 1973, is "An Act to consolidate and amend the law regulating certain payments, dealings in foreign exchange and securities, transactions indirectly affecting foreign exchange and the import and export of currency and bullion, for the conservation of the foreign exchange resources of the country and the proper utilisation thereof in the interests of the economic development of the country".
It repealed the earlier Act, namely, The Foreign Exchange Regulation Act, 1947, and came into force on January 1, 1974.
"Person resident in India" is defined in clause (p) of section 2 to mean: (i) a citizen of India, who has, at any time after the 25th day of March 1947, been staying in India, but does not include a citizen of India who has gone out of, or stays outside, India, in either case (a) for or on taking up employment outside India, or (b) for carrying on outside India a business or vocation outside India, or 750 (c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period; (ii) a citizen of India, who having ceased by virtue of paragraph (a) or paragraph (b) or paragraph (c) of sub clause (i) to be resident in India, returns to or stays in India, in either case (a) for or on taking up employment in India, or (b) for carrying on in India a business or vocation in India, or (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period.
"Person resident outside India" according to clause (q) means "a person who is not resident in India".
Under clause (u) "security" means "shares, stocks, bonds," etc.
Section 19 (1) provides: "Notwithstanding anything contained in section 81 of the , no person shall, except with the general or special permission of the Reserve Bank. . (a) take or send any security to any place outside India; (b) transfer any security, or create or transfer any interest in a security, to or in favour of a person resident outside India; (d) issue, whether in India or elsewhere, any security which is registered or to be registered in India, to a person resident outside India;" Section 29 which is directly relevant for our purpose reads thus: 751 "29.
(1) Without prejudice to the provisions of section 28 and section 47 and notwithstanding anything contained in any other provision of this Act or the provisions of the , a person resident outside India (whether a citizen of India or not) or a person who is not a citizen of India but is resident in India, or a company (other than a banking company) which is not incorporated under any law in force in India or in which the non resident interest is more than forty per cent, or any branch of such company, shall not, except with the general or special permission of the Reserve Bank, (a) carry on in India, or establish in India a branch, office or other or other place of business for carrying on any activity of a trading, commercial or industrial nature, other than an activity for the carrying on of which permission of the Reserve Bank has been obtained under section 28; or (2) (a) where any person or company (including its branch) referred to in sub section (1) carries on any activity referred to in clause(a) of that sub section at the commencement of this Act or has established a branch, office or other place of business for the carrying on of such activity at such commencement, then, such person or company (including its branch) may make an application to the Reserve Bank within a period of six months from such commencement or such further period as the Reserve Bank may allow in this behalf for permission to continue to carry on such activity or to continue the establishment of the branch, office or other place of business for the carrying on of such activity, as the case may be.
(b) Every application made under clause (a) shall be in such form and contain such particulars as may be specified by the Reserve Bank.
(c) Where any application has been made under clause (a), the Reserve Bank may, after making such inquiry as it may deem fit, either allow the application subject to such conditions, if any, as 752 the Reserve Bank may think fit to impose or reject the application: . . (4) (a) Where at the commencement of this Act any person or company (including its branch) referred to in sub section (1) holds any shares in India of any company referred to in clause (b) of that sub section, then, such person or company (including its branch) shall not be entitled to continue to hold such shares unless before the expiry of a period of six months from such commencement or such further period as the Reserve Bank may allow in this behalf such person or company (including its branch) has made an application to the Reserve Bank in such form and containing such particulars as may be specified by the Reserve Bank for permission to continue to hold such shares.
(b) Where an application has been made under clause (a) the Reserve Bank may, after making such inquiry as it may deem fit, either allow the application subject to such conditions, if any, as the Reserve Bank may think fit to impose or reject the application :" It is clear from these provisions that NIIL, being a Company in which the non resident interest of the Holding Company was more than 40%, could not carry on its business in India except with the permission of Reserve Bank of India.
An application for permission to continue to carry on such business had to be filed within a period of six months from the commencement of the Act or such further period as the Reserve Bank may allow.
The time for filing the application was extended in all cases by two months and, therefore, it could be filed by August 31, 1974, NIIL filed its application three days late on September 3, 1974, and the application was granted by the Reserve Bank on certain conditions, by its letter dated May 10, 1976.
Under the terms and conditions imposed by the Reserve Bank, the non resident interest of the Holding Company, which came to about 60%, had to be brought down to 40% within one year of the receipt of the letter dated May 10, 1976, that is to say before May 17, 1977.
753 By reason of section 29 (4) of FERA, the Holding Company too had to apply for permission to hold its shares in NIIL.
It applied to the Reserve Bank for a Holding licence on September 18, 1974.
The application which was filed late by 18 days is still pending with the Reserve Bank and is likely to be disposed of after the non resident interest of the Holding Company in NIIL is reduced to 40%.
There is a sharp controversy between the parties on the question as to whether May 17, 1977 was a rigid dead line by which the reduction of the non resident interest had to be achieved or whether NIIL could have applied to the Reserve Bank before that date for extension of time to comply with the Bank 's directive, in which case, it is urged, no penal consequences would have flown.
We will deal later with this aspect of the matter, including the question of business prudence involved in applying to the Reserve Bank for such an extension of time.
Shri Nariman raised at the outset an objection to a finding of mala fides or abuse of the fiduciary position of Directors being recorded on the basis merely of affidavits and the correspondence, against the NIIL 'S Board of Directors or against Devagnanam and his group.
He contends.
Under the Company Court Rules framed by this Court, petitions, including petitions under section 397, are to be heard in the open court (Rules 11 (12) and Rule 12 (1), and the practice and procedure of the Court and of the Civil Procedure Code are applicable to such petitions (Rule 6).
Under Order XIX Rule 2 of the Code, it is open to a party to request the Court that the deponent of an affidavit should be asked to submit to cross examination.
No such request was made in the Trial Court for the cross examination of Devagnanam who, amongst all those who filed their affidavits, was the only person having personal knowledge of everything that happened at every stage.
Why he did or did not do certain things and what was his attitude of mind on crucial issues ought to have been elicited in cross examination.
It is not permissible to rely argumentively on inferences said to arise from statements made in the correspondence, unless such inferences arise irresistibly from admitted or virtually admitted facts.
The verification clause of Mackrael 's affidavit shows that he had no personal knowledge on most of the material points.
Raeburn who, according to Mackrael, was the Chief negotiator on behalf of the Holding Company in the Birmingham meeting did not file any affidavit at all.
Whitehouse, the Secretary 754 of the Holding Company and N.T. Sanders who was the sole representative of the Holding Company on NIIL 's Board of Directors, did file affidavits but they are restricted to the question of the late receipt of the letter of offer of shares and the notice for the Board meeting of May 2, 1977.
Their affidavits being studiously silent on all other important points and the affidavit filed on behalf of the Holding Company being utterly inadequate to support the charge of mala fides or abuse of the Directors ' fiduciary powers, it was absolutely essential for the Holding Company to adduce oral evidence in support of its case or at least to ask that Devagnanam should submit himself for cross examination.
This, according to Shri Nariman, is a fundamental infirmity from which the case of the Holding Company suffers and therefore, this Court ought not to record a finding of mala fides or of abuse of powers, especially when such findings are likely to involve grave consequences, moral and material, to Devagnanam and jeopardise the very functioning of NIIL itself.
In support of his submission, Shri Nariman has relied upon many a case to show that issues of mala fides and abuse of fiduciary powers are almost always decided not on the basis of affidavits but on oral evidence.
Some of the cases relied upon in this connection are: Re. Smith & Fawcett Ltd.,(1) Nanalal Zaver vs Bombay Life Assurance,(2) Plexcy vs Mills,(3) Hogg vs Cramphorn(4) Mills vs Mills,(5) Harlowe 's Nominees(6) and Howard Smith vs Amphol.(7) We appreciate that it is generally unsatisfactory to record a finding involving grave consequences to a person on the basis of affidavits and documents without asking that person to submit to cross examination.
It is true that men may lie but documents will not and often, documents speak louder than words.
But a total reliance on the written word, when probity and fairness of conduct are in issue, involves the risk that the person accused of wrongful conduct is denied an opportunity to controvert the inferences said to arise from the documents.
But then, Shri Nariman 's objection seems to us a belated attempt to avoid an inquiry into the 755 conduct and motives of Devagnanam.
The Company Petition was argued both in the Trial Court and in the Appellate Court on the basis of affidavits filed by the parties, the correspondence and the documents.
The learned Appellate Judges of the High Court have observed in their judgment that it was admitted, that before the learned trial Judge, both sides had agreed to proceed with the matter on the basis of affidavits and correspondence only and neither party asked for a trial in the sense of examination of witnesses.
In these circumstances, the High Court was right in holding that, having taken up the particular attitude, it was not open to Devagnanam and his group to contend that the allegation of mala fides could not be examined, on the basis of affidavits and the correspondence only.
There is ample material on the record of this case in the form of affidavits, correspondence and other documents, on the basis of which proper and necessary inferences can safely and legitimately be drawn.
Besides, the cases on which counsel relies do not all support his submission that from mere affidavits or correspondence, mala fides or breach of fiduciary power ought not to be inferred.
In Re Smith & Fawcett Ltd., (supra) Lord Greene, after stating that he strongly disliked being asked on affidavit evidence alone to draw up inferences as to the bona fides or mala fides of the actors, added that this did not mean that it is illegitimate in a proper case to draw inferences as to bona fides or mala fides in cases, where there is on the face of the affidavits, sufficient justification for doing so.
In Nanalal Zaver, (supra) the judgment of Kania C.J. contains a statement at page 394 that 'Considerable evidence was led in the trial Court on the question of hona fides ' but it is not clear what kind of evidence was so led and besides, the fact that oral evidence was led in some cases does not mean that it must be led in all cases or that without it, the matter in issue cannot be found upon.
We may mention that in Punt vs Symons,(1) Fraser vs Whalley(2) and Hogg vs Cramphorn, (supra) the breach of fiduciary duty was inferred from affidavit evidence.
We have therefore no hesitation in rejecting the submission that we ought not to record a finding of mala fides or abuse of fiduciary power on the basis of the affidavits, correspondence and the 756 other documents which are on the record of the case.
May it be said that these are on the record by consent of parties.
Not merely that, but more documents were placed on the record, mostly by consent of parties, as the case progressed from stage to stage.
A very important document, namely, Devagnanam 's telex to Raeburn dated May 25, 1977 was put on the record for the first time before us since Shri Nariman himself desired it to be produced, waiving the protection of the caveat "without prejudice".
That shows that the parties adopted willingly a mode of trial which they found to be most convenient and satisfactory.
That takes us to the question as to whether on the basis of the material which is on the record of the case, it can be said that the decision taken by NIIL 's Board of Directors in their meetings of April 6 and May 2, 1977 constitute acts of oppression as against the Holding Company.
The case of the Holding Company as put forward by Shri Seervai is like this: (i) Devagnanam kept Raeburn and Coats under the impression that negotiations were still going on and were not to be treated as concluded while, in reality, he had made up his mind to treat the matter as at an end.
(ii) He kept the Holding Company in total ignorance of the steps which he was taking in behalf of the issuance and allotment of the rights shares.
The copy of the letter of the Reserve Bank dated March 30, 1977 which is said to have spurred the decision taken in the meetings of April 6 was not sent to the Holding Company though Devagnanam had stated in his letters dated April 12 to Raeburn that the said copy was being enclosed along with that letter.
Deliberately and designedly, the letter of offer dated April 14, 1977 meant for the Holding Company in England was not posted until April 27.
Similarly, the notice calling a meeting of the Board on May 2 was not posted till April 27.
The notice to Manoharan too was posted as late as on April 27, since he was believed to be siding with Coats.
The letter of offer and the notice of meeting of May 2 which were posted at Madras on April 27 were received by the Holding Company on May 2, after the Board 's meeting for allotment of rights shares was held.
757 (iii) The Reserve Bank of India was not informed of the proposal to issue right shares to the existing shareholders although it was the most obvious thing to do, in response to its letter dated March 30, 1977, calling upon NIIL to submit its proposal for reducing its non resident interest without delay.
(iv) No application was made to the Controller of Capital Issues for fixing the premium on rights shares, not withstanding that the Reserve Bank had informed NIIL, that if necessary, an application to that effect may be made to the Controller of Capital Issues.
(v) The whole idea was to cut off all sources of information from Raeburn and Coats and to confront them with the fait accompli of the allotment of rights shares to the Indian shareholders, including the shares formally offered to the Holding Company which were not allotted to it on the ground of its non compliance with the letter of offer.
(vi) The agenda of the meetings of April 6 and May 2, 1977 was purposely expressed in vague terms: 'Policy Indianisation ', in order that the Holding Company should not know that the reduction of the non resident interest was proposed to be effected by the issue of rights shares.
By suppressing from the knowledge of the Holding Company what was its right to know, and what was the duty of the Board 's Secretary to convey to it, Devagnanam succeeded in achieving his purpose on the sly and pre empted any action by the Holding Company to restrain the holding of the meeting, the issue of rights shares and the allotment thereof exclusively to the existing shareholders (barring Manoharan).
(vii) Silverston was appointed as an additional Director in the meeting of April 6 to make up the quorum of two "disinterested" directors even though he was in the true sense not a disinterested person in the decision taken in that meeting.
The appointment of additional directors was not even an item on the agenda of the meeting.
758 (viii) Devagnanam was emboldened to take this course because he believed that no matter how wrongful his conduct, he could count upon the support of NEWEY to see that he was not brought to book in a court of justice for his wrongful conduct.
He even attempted to thwart the Company Petition and render it infructuous by persuading NEWEY to withdraw the power of attorney executed by them, authorizing the filing of the petition.
(ix) In these machinations, Devagnanam was actuated by the sole desire to acquire the control of NIIL for his personal benefit, by ousting the Holding Company from its control over the affairs of NIIL.
(x) In fact, the rights shares were issued at par, though their market value was far greater, as a measure of personal aggrandisement in the supposition and forethought that such shares will inevitable go to Devagnanam and his group.
This was blatantly in breach of the fiduciary obligation of the Directors.
(xi) By these means and methods, which totally lacked in probity, Devagnanam succeeded in converting the existing majority into a minority and the minority into a majority, a conduct which is burdensome, harsh and unlawful, qua the existing majority.
According to Shri Seervai, the question before the Court is not whether the issue of rights shares to the existing Indian shareholders only, amounted to oppression but whether, the offer of rights shares to all existing shareholders of NIIL but the issue of rights shares to existing Indian shareholders only, constituted oppression of the Holding Company on the facts and circumstances disclosed in the case.
This argument raises questions regarding the interpretation of sections 43A and 81 of the .
These contentions of the Holding Company have been controverted by Shri Nariman, according to whom, the appellate Court has taken a one sided view of the matter which is against the weight of evidence on the record.
Counsel contends that Devagnanam had done all that lay in his power to persuade the Holding Company to disinvest so as to reduce its holding in NIIL to 40%, that the Direc 759 tors of NIIL were left with no option save to decide upon the issue of rights shares, since disinvestment was a matter of the Holding Company 's volition, that the wording of the agenda of the meetings of April 6 and May 2 conveyed all that there was to say on the subject since, in the background of the negotiations which had taken place between the parties, it was clear that what was meant by 'Policy Indianization ' and 'Allotment of Shares ' was the allotment of rights shares in order to effectuate the policy of the Reserve Bank that the Indianization of the Company should be achieved by the reduction of the non resident holding to 40% that Coats refused persistently, both actively and passively, either to disinvest or to consider the only other alternative of the issue of rights shares, and that the impugned decisions were taken by the Board of Directors objectively in the larger interests of the Company.
According to Shri Nariman, Coats left no doubt by their attitude that their real interest lay in their worldwide business and they wanted to bring the working of NIIL to a grinding halt with a view to eliminating an established competitor from their business.
It is denied by counsel that important facts or circumstances were deliberately suppressed from the Holding Company or that the letter of offer and the notice of the Board 's meeting of May 2 were deliberately posted late on April 27.
It is contended that neither by the issue of rights shares nor by the failure to give the right of renunciation to the Holding Company was any injury caused to its proprietary rights as a shareholder in NIIL.
As a result of the operation of FERA, the directives issued by the Reserve Bank thereunder and because of the fact that NIIL had retained its old Articles after becoming a public company under section 43A of the , the Holding Company could neither have participated in the issue of rights shares nor could it have renounced the rights shares offered to it in favour of an outsider, not even in favour of a resident Indian Company like Madura Coats.
It is denied that Silverston was not a disinterested Director or that his appointment as an additional Director was otherwise invalid.
Counsel sums up his argument by saying that the Board of Directors of NIIL had in no manner abused its fiduciary position and that far from their conduct being burdensome, harsh and wrongful, it was the attitude of Coats which was unfair, unjust and obstructive.
Coats having come into an equitable jurisdiction with unclean hands, contends Shri Nariman, no relief should be granted to them assuming for the sake of argument that Devagnanam from the position of Managing Director, are characterised by counsel as wholly uncalled for, transcending the exigencies of the situation.
760 It seems to us unquestionable that Devagnanam played a key role in the negotiations with the Holding Company and ultimately master minded the issue of rights shares.
He occupied a pivotal position in NIIL, having been its Director for over twenty years and a Managing Director over fifteen years, in which capacity he held an undisputed sway over the affairs of NIIL.
The Holding Company had nominated only one Director on the Board of NIIL, namely, N.T. Sanders, who resided in England and hardly ever attended the Board 's meetings.
Devagnanam was thus a little monarch of all that he surveyed in Ketty.
He had a large personal stake in NIIL 's future since he and his group held nearly 30% shares in it, the other Indian shareholders owning a mere 10%.
In the 60% share capital owned by the Holding Company, Coats and NEWEY were equal sharers with the result that Coats, NEWEY and Devagnanam each held an approximately 30% share capital in NIIL.
This equal holding created tensions and rivalries between Coats and Devagnanam, NEWEY preferring to side with the latter in a silent, unspoken manner.
Eventually.
after the filing of the Company Petition, Coats bought over NEWEY 's interest in NIIL sometime in July 1977.
The picture which Devagnanam has drawn of himself as a person deeply committed to Ketty, and as having built up the business with scrupulous regard to the observance of Foreign Exchange Regulations and Indian Laws in contradistinction to Coats who, he alleged, wanted to contravene the Foreign Exchange Regulations of our country is not borne out by the correspondence.
In fact, the letter which he wrote to Shread of Newey Goodman Ltd. on August 11, 1973 (which was filed by consent in the Appeal Court) shows that he wanted to dispose of his shares at a large premium by officially receiving the par value in Rupees in India and obtaining the balance in foreign currency outside India.
Nevertheless, he stated on oath in para 13 of his rejoinder affidavit that "it is not true that in selling my shares, I wanted a part of the consideration in foreign exchange".
The said letter discloses that over and above proposing to make a large profit in contravention of the Foreign Exchange Regulations and the tax laws of India by receiving money outside India, Devagnanam proposed to take away from Ketty its "select key personnel and technicians" to Malacca and to manufacture competitively, products which were then manufactured by Needle Industries, U.K. The foot note to the letter to Shread asked him to keep these matters secret from Coats till the shares had been sold, and till the deed had been done.
761 There is another aspect of Devagnanam 's conduct to which reference must be made.
The statement made by him in para 15 of his reply affidavit denying that he was a non resident is not entirely true because at least between August 26, 1974 and June 9, 1976 he was a non resident within the meaning of section 2 (p) (i) (a) of FERA.
By his letter dated August 26, 1974 to the Reserve Bank, he asked, though out of abundant caution, for permission under section 29 (4) of FERA to hold his shares in NIIL.
He referred in that letter to his contract with Newey and Taylor under which he was to be a full time Managing Director of that Company for five years from August 1, 1974 to July 31, 1979 and asked the Reserve Bank to determine his status.
On September 3, 1975 he wrote to the Reserve Bank contending that he was a 'resident ', referring this time not to his contract with Newey Taylor but to the agreement between NILL and Newey Goodman Ltd., a Company about to be formed, under which he was to be on deputation with it as an employee of NIIL.
Devagnanam 's letter dated August 11, 1973 to Shread of Newey Goodman, the gloss which he put on his status as a resident in his letters to the Reserve Bank dated August 26, 1974 and September 3, 1975 and the clever manner in which he had his status determined as a resident, cast a cloud on his conduct and credibility.
And though, as contended by Shri Seervai, we do not propose to apply to Devagnanam 's affidavit evidence the rule of 'corroboration in material particulars ' which is generally applied in criminal law to accomplice evidence, we shall have to submit Devagnanam 's conduct to the closet scrutiny and statements made by him, from time to time, to the most careful examination.
We shall have to look to something beyond his own assertion in order to accept his claim or contention.
Shri Nariman attacked the conduct of Coats almost as plausibly as Shri Seervai attacked that of Devagnanam, though in terms of a saying in a local language we may say that 'a brick is softer than a stone ', Coats being the brick.
Coats, as will presently appear, are not to be outdone by Devagnanam in the matter of lack of business ethics.
But that is no wonder because when the dominant motivation is to acquire control of a company, the sparring groups of shareholders try to grab the maximum benefit for themselves.
If one decides to stay on in a company, one must capture its control.
If one decides to quit, one must obtain the best price for one 's 762 holding, under and over the table, partly in rupees and partly in foreign exchange.
Then, the tax laws and the foreign exchange regulations look on helplessly, because law cannot operate in a vacuum and it is notorious that in such cases evidence is not easy to obtain.
Alan Mackrael says in paragraph 20 of his reply affidavit in the Company Petition that it was made clear to Devagnanam that neither Coats nor the Needle Industries (U.K.) would ever be a party to any transaction which was illegal under the Indian law.
In a letter dated May 24, 1976 to Devagnanam, A.D. Jackson of NEWEY has this to say: "In broad terms the proposition is that Alan Mackrael, Martin Henry and myself should meet with you in Malacca during September to discuss arrangements whereby an Indian gentleman known to Coats would purchase both your shares and our own share of the NINTH holding in the manner which I outlined to you on the telephone.
In order to provide a base for the calculations, Kingsley is to be asked to obtain the government approved price but, of course, the basis of our discussions has been that the actual payment will be higher than this".
In the same letter Jackson, after warning that Coats/Needle Industries (U.K.) are "certainly not going to relinquish control of Ketty without a major struggle", proceeds to describe the helpless condition of NEWEY by saying that in the financial position in which they found themselves, they were "in no state to do battle with this particular giant".
Leaving aside the determination of Coats to engage in a major struggle with NIIL 's Board of Directors, Jackson 's letter leaves no doubt that Coats were willing to be a party to the arrangement whereby the shares of Devagnanam and NEWEY would be sold to an 'Indian gentleman ', under which the actual payment would be higher than the government approved price ascertained by Kingsley, the Secretary of NIIL.
This is doubtful ethics which justifies Shri Nariman 's argument that he who comes into equity must come with clean hands; if he does not, he cannot ask for relief on the ground that the other man 's hands are unclean.
The "Notes on further Indianization" made by Devagnanam on April 29, 1975, at a time when the relations between the parties were not under a strain, show that N.T. Sanders who was nominated by the Holding Company as a Director of NIIL was "aware of an inquiry from a Mr. Khaitan".
This shows that Devagnanam was not trying 763 to dispose of his shares secretly to Khaitan and Coats were aware of that move.
In para 20 of his reply affidavit, Alan Mackrael says that none of the proposals put forward by the Holding Company for achieving Indianization to comply with the requirements of FERA would have given the control of NIIL to the Holding Company.
This is falsified by Raeburn 's letter dated October 25, 1976 to Devagnanam, in which he says that the idea of an outside independent party holding 15% of the share capital of NIIL was raised, but this did not appear to be acceptable to Coats since "they want to achieve not only that the present Indian shareholders hold a minority but that they (Coats) hold and influence a substantial block, thereby hoping to influence NEWEY to their views".
Thus, there is a wide difference between what Coats practised earlier and pleaded later.
Towards the end of paragraph 21, Mackrael asserts that the shareholders of the Holding Company, namely, Coats and NEWEY, were unanimous in the filing of the Company Petition and the prosecution of the proceedings following upon it, which is said to be clear from the fact that two powers of attorney were attested by the Directors of the Holding Company, both of whom were Directors of NEWEY also.
The fact that Coats and NEWEY were not of one mind is writ large on the face of these proceedings and, in fact, the charge against NEWEY is that because of their Far Eastern interests in which Devananam was a great asset to them, they were supporting Devagnanam.
We may in this connection draw attention to a letter dated June 8, 1977 by Raeburn to Mackrael, saying that the insistence of Coats ( 'Glasgow ') to hold on to the 60% shareholding in NIIL or at least to ensure that 60% did not get into the hands of the Indian shareholders will involve a long and costly legal battle.
Raeburn proceeds to say: "We, as Neweys, have neither the will nor the means to participate in that battle, nor do we think it right to do so bearing in mind the legal position regarding Indianisation, the provision in the Articles and the fact that substantially the modern business of N.I.I.L. has been built up by the efforts of the present Indian shareholders".
In paragraph 5 of the aforesaid letter, Raeburn clarifies the attitude of NEWEY by saying that if Coats were unable to agree to the arrangement suggested by NEWEY, then, NEWEY will be compelled to notify to those concerned in India that they can no longer be parties to the power of attorney granted by the Holding Company 764 to Mackrael or to any other proceedings in the Indian Courts.
In spite of this letter of Raeburn (dated June 8, 1977), Mackrael had the temerity in his reply affidavit dated July 8, 1977, to say that Coats and NEWEY were unanimous in the prosecution of the proceedings consequent upon the filing of the Company Petition.
There was no agreement between Coats and NEWEY either in regard to Indianisation of NIIL or in regard to the legal proceedings instituted to challenge the issue of rights shares.
There are many other contradictions on material points between the actual state of affairs and what Coats represented them to be, but we consider it unnecessary to cover the whole of that field.
We will refer to one of these only, in order to show how difficult it is to choose between Coats and Devagnanam.
In paragraph 19 of the Company Petition, which is sworn by Mackrael, it is stated that Devagnanam was in U.K. sometime towards the end of March 1977 and that he held several discussions with the representatives of the Holding Company.
In paragraph 40 of his reply affidavit, Mackrael says that as to the contents of paragraph 19 of the Company Petition, he himself was not present at such meeting, since it was a meeting between Devagnanam and the officials of NEWEY for the purpose of discussing matters concerning NEWEY 's Far Eastern interests.
The verification clause of Mackrael 's affidavit in support of the Company Petition shows that the contents of paragraph 19 are based on information which he believed to be true.
A clearer contradiction between the parent petition and the reply affidavit is difficult to imagine.
It would appear that it was not until quite late that Coats realised that they had to plead all ignorance of the discussions which were held in U.K. towards the end of March 1977 between Devagnanam and the representatives of the Holding Company.
We will now shift our attention to another scene in order to show how unethical the Coats are.
Coats ' subsidiary called the Central Agency Ltd., who were sole selling agents of NIIL 's products in various markets in the world, ceased to be so after NIIL put an end to the agreement with them.
The Central Agency never applied during the time that they were sole selling agents of NIIL 's products for registration of the Indian Company 's Trade Marks as a protective measure.
The learned Trial Judge, Ramaprasada Rao, Acting C.J., delivered the judgment in the Company 's Petition on May 17, 1978.
Immediately thereafter, Application No. 34991 of 1978 was filed by the Japanese Trade Marks Agents of Needle Industries, 765 U.K., for registration of the Trade Marks 'Pony ' and 'Rathna ', which were the registered Indian Trade Marks of NIIL.
That application was made under the authority of a Power of Attorney signed by Alan Marckrael.
In June 1978, Application No. 102987 was filed in Thailand on behalf of the Needle Industries U.K. as owners of the Trade Mark 'Pony ' which is clear from the Trade Mark Attorney 's letter dated January 22, 1979.
In October 1978, Coats Patons, Hong Kong, got the Indian Company 's Trade Mark 'Pony ' registered.
In November 1978, the Trade Mark Agents and Solicitors of NIIL in Hong Kong had to give a notice to Coats Patons, Hong Kong, that the latter had registered the 'Pony ' Trade Mark in Hong Kong with the full knowledge that NIIL was the legal owner of that Trade Mark and threatening legal action.
As a result of that notice, the Indian Company 's Trade Mark 'Pony ' which was registered by Coats Patons in Hong Kong as their own Trade Mark, was assigned to the Indian Company on December 21, 1978 for a nominal sum of 10 dollars.
Items 7 and 8 of the minutes dated March 28, 1979 of the meeting of the interim Board of Directors of NIIL refer to the registration in Hong Kong by Coats Patons of the Indian Trade Mark of NIIL and subsequent assignment thereof to NIIL when legal action was threatened.
Harry Bridges, who was appointed as a temporary Managing Director by the High Court, has stated in his counter affidavit dated March 27, 1980 that the application for registration of the 'Pony ' Trade Mark was made in Hong Kong and other places in order to protect that Trade Mark from its improper use by other traders.
This is a lame explanation of an act of near piracy.
Were this explanation true, the application for registration of the Trade Mark would have mentioned that it was being filed on behalf of NIIL, and that 'Pony ' was in fact the Trade Mark of NIIL.
It is quite amazing that any one should claim that the registration of the Trade Mark was being sought as a protective measure when a battle royal was raging between the Holding Company and NIIL and after the Trial Court had delivered its judgment.
We may mention that by a letter dated June 15, 1977 Mackrael had informed Devagnanam that he was removed from the Board of Directors of the Holding Company and M.D.P. Whiteford was appointed in the vacancy.
The fact that Needle Industries, U.K., had surreptitiously made an application for the registration of NIIL s Trade Mark 'Pony ' came to light fortuitously in January 1979 when NIIL applied for the registration of the 'Pony ' Trade Mark in Thailand and Japan.
NIIL 's Trade Mark Agents there found, on inspection of the registers, that certain 766 applications made by Needle Industries, U.K., claiming the same mark as their own pending consideration.
The decision, in appeal, of the High Court appointing Harry Bridges as a Managing Director for 4 months was pronounced on October 26, 1978.
As a Managing Director appointed by the Court, Bridges called a Board meeting of their members of the Board appointed by the Appellate Court, for November 2, 1978.
Bridges took away many files, documents and statements from the NIIL 's factory at Ketty on October 28, 1978, his explanation being that he wanted to carry these documents to Madras where the Board meeting was to be held.
A little before Bridges left Ketty for Madras, he was informed that this Court had passed an interim order on November 1, 1978.
Consequently, the meeting of the 2nd November did not take place.
Bridges says that when it became clear that he was no longer required to act as a Managing Director of NIIL, he took the earliest opportunity of returning the documents which he had taken from the office of the factory at Ketty.
It is understandable that Bridges wanted to take with him certain documents to help him perform his functions as a Managing Director in the meeting of November 2, 1978.
But it is surprising that, in addition to the documents which Bridges returned on November 8, he had taken with him several other documents which he returned when pressed to do so.
He took away with him (1) Design drawing (2) Statistical Returns (3) the Master Budget summary, 1978 (4) Cash forecast for 1978 79 (5) Detailed Project Report with cash flow forecast (6) Details of Project Investment (7) Note on activity upto October 1978 and one or two other documents.
These were eventually returned by the Holding Company 's Advocate, Shri Raghavan.
When NIIL wrote on November 21, 1978 to Shri Raghavan asking him to call upon Bridges to confirm that he had not retained copies of any of the documents which he had removed from Ketty, Bridges replied by his letter dated November 29, 1978 that he had taken copies of such documents which he considered relevant and that he proposed to retain such copies since "as director of the Company, I am entitled to peruse and take copies of whatever records I choose".
This is a wee bit high and mighty.
The Design drawing is not the drawing of a bungalow (with a swimming pool) which was being built for Devagnanam but it is a 'Ring spring fastener tool design '.
The other documents which Bridges had taken away and of which he got copies made in assertion of his Directorial right, contain important matters like details 767 of production, sales and exports of NIIL 's products, orders outstanding and sales, the proposed additional turnover and the working capital requirements, etc.
The fact of Harry Bridges 's taking away these documents and making copies thereof for his own use leaves not the slightest doubt that the motivation of Coats at all times was to advance their own world interests at the expense of NIIL.
In the background of such conduct, it becomes difficult to appreciate the Holding Company 's contention, so strongly pressed upon us, that Coats, NEWEY and Devagnanam being in the position of partners, the greatest good faith and probity were expected to be displayed by them.
The contention, as a bald proposition of law is sound.
The snag is: who should harp upon it ? Not Devagnanam, we agree.
But, not Coats either, we think.
We have said, while discussing the conduct of Devagnanam, that it would be difficult to accept his word unless there is support forthcoming to it from other circumstances on the record.
We feel the same about Coats.
It would be equally unsafe to accept their word unless it finds support from the other facts and circumstances on the record of the case.
It is true that in saying this, we have partly taken into account facts which came into existence after the Company Petition was filed.
But those facts do not reflect a new trend or a new thinking on the part of Coats, generated by success in the litigation.
Finding that they had succeeded in the High Court, Coats took courage to pursue relentlessly their old attitude with the added vigour which success brings.
On the question of oppression, there is a large mass of correspondence and other documentary evidence on the record before us.
We shall have to concentrate on the essentials by separating the chaff from the grain.
In the earlier part of this judgment we have already referred to the course of events generally, which culminated in the meetings of NIIL 's Board of Directors, held on April 6 and May 2, 1977.
We propose now to refer to these events selectively.
FERA having come into force on January 1, 1974, D.P. Kingsley, the Secretary Director of NIIL, applied on September 3, 1974 to the Reserve Bank for the necessary permission under section 29 (2) of that Act.
The Reserve Bank intimated to NIIL by its letter dated November 5, 1975 that permission would be accorded to NIIL under section 29 (2) (a) read with section 29 (2) (c) of FERA to carry on its activities in India subject to the conditions enumerated 768 in paragraph 2 of the letter.
One of the conditions mentioned in the aforesaid paragraph was that the non resident interest in the equity capital must be reduced to a level not exceeding 40%, within a period of one year from the date of receipt of the letter.
The Reserve Bank asked NIIL to submit a scheme within a period of three months, showing how it proposed to achieve the required reduction in the non resident interest: "(a) whether by disinvestment by non resident shareholders, or (b) whether by issue of additional equity capital to Indian residents to the extent necessary to finance any scheme of expansion diversification, or (c) by both".
Kingsley wrote a letter to Mackrael on November 19, 1975, enclosing therewith a copy of the letter of the Reserve Bank dated November 5.
On February 4, 1976 Kingsley wrote to the Reserve Bank that NIIL was prepared to agree to reduce the non resident interest in the equity capital to a level not exceeding 40% and that the Company was proposing to bring this about by disinvestment though, depending upon future developments, the Company reserved its right to reduce the non resident interest by issue of additional equity capital to Indian shareholders.
Kingsley requested the Bank to extend the stipulated time one year in case NIIL was not able to comply with the Bank 's directive by reason of circumstances beyond its control.
A copy of this letter dated February 4, 1976 was sent by Kingsley to Whitehouse, the Secretary of the Holding Company.
It is significant that there was no response as such to this communication, from the Holding Company.
On May 11, 1976 the Reserve Bank of India sent a letter to NIIL granting permission to it under FERA to carry on its business on certain conditions, one of them being that the non resident interest in the equity capital had to be reduced to a level not exceeding 40% within a period of one year from the date of receipt of the letter.
The Reserve Bank stated in the aforesaid letter that until such time as the non resident interest was not reduced to 40%, the manufacturing activity of the Company shall not exceed such capacity as was validly approved or recognised by the appropriate authority on December 31, 1973 and that the Company shall not expand its manufacturing activities beyond the level so approved or recognised.
It is clear from this letter that all developmental activities of NIIL stood frozen as of the date December 31, 1973, until the non resident interest was reduced to 40%.
The Reserve Bank stated further in the letter that NIIL should submit quarterly reports to it indicating the progress made in implementing the reduction of the non resident interest and that the transfer of shares from non residents to Indian residents would be required to be confirmed by the Reserve Bank under section 19 (5) of FERA.
769 The letter of the Reserve Bank was received by NIIL on May 17, 1976, which meant that the reduction of the non resident interest had to be achieved by May 17, 1977.
It shall have been seen that by the time the permission was granted by the Reserve Bank to NIIL in May 1976, FERA had been in force for a period of about 2 1/2 years.
A period of one year and eight months had gone by since the filing by NIIL of the application for dilution of the non resident interest.
Over and above that, the Reserve Bank had granted a long period of one year for bringing about the dilution of the non resident interest.
It is true that public authorities are not generally averse, in the proper exercise of their discretion, to extending the time limit fixed by them, as and when necessary.
But an elementary sense of business prudence would dictate that the time schedule fixed by the Reserve Bank had to be complied with.
The firm tone of the Reserve Bank 's letter conveyed that it would not be easy to obtain an extension of time for complying with its directive, while the stringent conditions imposed by it, particularly in regard to future developmental activities, dictated an early compliance with the directive.
Kingsley sent a letter to the Reserve Bank on May 18, 1976, confirming the acceptance of the various conditions under which permission was granted to NIIL to carry on its business.
Kingsley pointed out a difficulty in implenting one of the conditions regarding the sale of petroleum products, but the Reserve Bank by its letter dated May 29, 1976 informed him that after a careful consideration of the request, the Bank regretted its inability to enhance the ceiling on the turnover from the Company 's trading activity, as stipulated in the letter dated May 11, 1976.
In the meeting of the Board held on October 1, 1976, Devagnanam 's appointment as Managing Director was renewed for a further period of five years.
Raeburn, Chairman of NEWEY who was looking after the affairs of the Holding Company, wrote to Devagnanam on October 4, 1976, complaining that it was necessary that the Holding Company should be kept informed in ample time of the Board 's meetings on important organisational matters.
Raeburn and Mackrael came to India to discuss the question of dilution of the non resident holding in NIIL.
A meeting was held at Ketty on October 20 and 21, 1976 in which the U.K. shareholders were represented by Mackrael and Raeburn and the Indian shareholders by Devagnanam and Kingsley.
Silverston took part 770 in the meeting as an adviser to the Indian shareholders.
Martin Henry, the Managing Director of Madura Coats which is an Indian company in which the Needle Industries (U.K.) and Cotas have substantial interest, attended the meeting and took part in the discussions.
A note of the discussions which took place at Ketty on October 20 and 21 was prepared by Raeburn and forwarded along with a letter dated November 10, 1976 to Devagnanam, with copies to Mackrael, Newey, Jackson and Whitehouse.
Paragraph 2 of this note, which is important, says: "It was agreed that Indianization should be brought about by May, 1977, as requested by Government, so as to achieve a 40% U.K. and 60% Indian shareholding".
The main features of the discussions which took place in the Ketty meeting are these: (1) Mackrael and Martin Henry suggested acceptability of Madura Cotas as holding part of the 60% of the equity to be held by Indian shareholders.
The latter "saw no reason to give up the right which the Indianization legislation, combined with the Company 's Articles, conferred upon them and, therefore they insisted on taking up the whole of their entitlement to 60% of the equity".
Silverston who was an Englishman by nationality and a Solicitor by profession in India and was acting as an Adviser to the Indian shareholders in the Ketty meeting plainly and rightly pointed out that Government 's approval of a holding by Madura Coats of 15% of NIIL shares would be unlikely, because by that method Coats would indirectly and effectively with NEWEY hold over 40%, approximately 46%, share in NIIL.
It is apparent that this would have been a clear violation of FERA.
(2) To allay the concern of U.K. shareholders when they became in minority by the Indian shareholders coming to hold 60%, some safeguards were suggested which, amongst others, were, (i) the Articles of the Company could be altered only by a special resolution which requires a 75% majority of the members voting in person or by proxy.
Thus, either group of the shareholders could prevent the sale of shares to any one not 771 approved, (ii) the Board could be reconstructed as mentioned in para 4.3 of the note to give U.K. shareholders sufficient safeguards and hand in the management of the Indian Company.
(3) The preferred method of transferring 20% of the equity to Indian shareholders was thought to be by sale by U.K. members of the appropriate number of shares at the price to be determined by the Government and the advice to be taken from Price Waterhouse in this regard.
As an alternative it was suggested that a rights issue, with the Indian shareholders taking up the U.K. Members ' rights would also be considered, provided it was demonstrated by Ketty that there was a viable development plan requiring funds that the expected NIIL cash flow could not meet.
The value of the U.K. equity interest thus transferred was not to be less favourable than by a direct sale of shares.
(4) Approval was given in principle to the renewal of contract of Devagnanam as Managing Director of NIIL.
Devagnanam agreed to devote adequate time to the affairs of Ketty and was authorised to continue to supervise the NEWEY affairs in Hong Kong and Malacca.
At the resumed discussion on October 21, 1976, both sides stuck to their stand.
Devagnanam was insistent that he will "not accept on behalf of the Indian shareholders anything less than the full entitlement of 60% of the shares", while Mackrael, equally insistent, "could not accept on behalf of NI/Coats that the full 60% be held by the present Indian shareholders, even with the safeguards and assurances discussed previously".
The Ketty meeting thus ended in a stalemate, both sides insisting on what, what they considered to be their right and entitlement.
Raeburn attempted to play the role of a mediator but failed.
In this situation, the parties decided to give further consideration to the matter and to adhere to the following time table: "Mid December TAD (Devagnanam) to submit to the U.K. shareholders 772 both the decisions reached by the Indian shareholders as regards the 60% and the case, if any, for a Rights Issue.
Mid January U.K. shareholders to decide on their reaction to the Indian shareholders ' decision".
Silverston conveyed to Kingsley his regret that the Ketty meeting could product no outcome because of the attitude of Coats who wanted to put pressure on the Directors of NIIL by giving 15% of the shareholding to Madura Coats and thereby avoiding the provisions of FERA.
This reaction of Silverston finds support in the reaction of Raeburn himself, which he described in his letter dated October 23, 1976 to Devagnanam.
Raeburn says in that letter that he had learnt from Martin Henry that Coats were keen to introduce Prym technology in India in their Madura Coats factory.
It may be mentioned that the Prym technology when introduced in Madura Coats would have created a direct competition between it and NIIL.
It would also appear from Devagnanam 's letter of October 21, 1976 to Jackson that Coats were intending to start an Engineering Division at Bangalore for the manufacture of Dynecast and Prym products with an investment of the tune of Rs. 3,00,00,000 (Rupees three crores).
Compared with that, the interest of Coats in NIIL was just about Rs. 10 lakhs, even if the shares of NIIL were to be valued at Rs. 190/ per share.
Devagnanam wrote a letter dated December 11, 1976 to Raeburn, informing him that they had just closed the Board 's meeting in which the principal subject of discussion was "Indianization".
Devagnanam expressed resentment of himself and his colleagues that after they had faithfully served the Holding Company for almost the whole of their working lives, the Holding Company should be unwilling to accept them as partners, especially when they were legally entitled to be so considered.
Devagnanam made it clear in this letter that any attempt by Coats to retain an indirect control in the management of NIIL will not be acceptable to the Indian shareholders.
Then comes the important letter of December 14, 1976, which was written by Devagnanam to Raeburn.
Devagnanam informed Raeburn by that letter that he had further discussions with his colleagues and was able to persuade them to agree to a kind of Package deal.
The terms of the deal so suggested were: "(1) 773 Indianization should take place with the existing Indian shareholders acquiring 60% of the stock; (2) Mackrael and Raeburn should be taken on NIIL 's Board as Directors, but in no event Martin Henry who was connected with Madura Coats which had a powerful plan of development of Prym technology; (3) the Indian shareholders were prepared to take B.T. Lee, a senior executive of Needle Industries/Coats, Studley, as a permanent whole time Director of NIIL to be put specifically in charge of exports".
Some other suggestions were made by Devagnanam to show the bona fides of the Indian shareholders and to alleviate the apprehensions in the minds of the U.K. shareholders.
Devagnanam asked Raeburn to convey his reactions in the matter.
This letter has been gravely commented upon by the Holding Company on the ground that it did not contemplate the issue of rights shares.
We are unable to see the validity of this criticism.
There is not the slightest doubt that the Indian shareholders were insisting all along that they should become the owners of 60% of the equity capital of NIIL.
A simple method of bringing this about was the transfer by the Holding Company of 20% of its shareholding to the existing Indian shareholders.
It was only when this plain method of bringing about reduction in the equity holding failed and the deadline fixed by the Reserve Bank was drawing nearer, that the Board of NIIL decided upon the issue of rights shares, which was the only other alternative that could be conceived of for reducing the non resident interest.
The issuance of rights shares, after all, was not like a bolt from the blue.
In any event, it was mentioned in the Ketty meeting.
On December 20, 1976 Silverston wrote a letter to Raeburn saying that he would be proceeding to U.K. early in January in connection with his personal matters and that he would then visit Raeburn also.
Silverston stated candidly in the letter that the situation which was developing between the U.K. and the Indian shareholders, if allowed to continue, could do much damage to the British interests and "as one who is still concerned with the interests of British industry, I feel I cannot sit by and allow matters to deteriorate to their detriment, without making some attempt towards bringing the issues between the parties to a fair conclusion.
" Raeburn wrote to Kingsley on January 14,1977 stating that he had a discussion with Silverston a couple of days back, during which Silverston had stated clearly the legal position and given his advice upon it.
In the last paragraph of this letter, Raeburn said: 774 "We have now put our views quite clearly to Mr. Makrael and we are awaiting the reaction of Needle Industries and Coats.
Therefore, I am hoping but I cannot be sure of this, to be able to let you know fairly soon what the formal decision of the U.K. shareholders is.
It needs to be emphasised, especially since its importance was not fully appreciated by the Appellate Bench of the High Court, that the Indian point of view was communicated with the greatest clarity to Raeburn in Devagnanam 's letter dated December 14, 1976, which was within the time schedule which was agreed to be adhered to in the Ketty meeting.
The views of the U.K. shareholders were most certainly not communicated to the Indian shareholders by the middle of January 1977 as was clearly agreed upon in the Ketty meeting.
In fact, they were never communicated.
On January 20, 1977, the Reserve Bank sent a reminder to NIIL.
After referring to the letter of May 11, 1976, the Reserve Bank asked NIIL to submit at an early date the progress report regarding dilution of the non resident interest.
In reply, a letter dated February 21, 1977 was sent by NIIL to the Bank, stating: "We confirm that we are following up the matter regarding dilution of non resident interest and we confirm our commitment to achieve the desired Indianization by the stipulated date, i.e. 17th May, 1977.
" It is very important to note that a copy of this letter was forwarded both to Whitehouse and Sanders.
They must at least be assumed to know that not only was Indianization to be achieved by May 17, 1977, but that NIIL had committed itself to do so by that date.
It is contended by Shri Seervai that the negotiations with Coats had in fact not come to an end and that Coats were never told that the compromise talks will be regarded as having failed.
It is urged that Coats were all along labouring under the impression, and rightly, that the compromise proposals which were discussed with Raeburn in the meeting of March 29 31, 1977 in U.K. would be placed by Devagnanam before the Indian shareholders, and the 775 U.K. shareholders apprised whether or not the proposals were acceptable.
Shri Seervai relies strongly on a letter dated March 9, 1977 written by Raeburn to Devagnanam.
After saying that on the Friday preceding the 9th March, he had discussions with Mackrael and three high ranking personnel of Coats, Raeburn says in that letter that Coats had refused to agree that the Indian shareholders should acquire a 60% shareholding in NIIL that this had created a new situation and that he was appending to the letter an outline of what he believed, but could not be sure, would be agreeable to Coats/Needle Industries.
Raeburn stated further in that letter: "I know that all this will be difficult for you and your fellow Indian shareholders, but I urge you to support this view and get their acceptance, and to come here to be able to negotiate.
If these or similar principles can be agreed during your visit, I have no doubt that the detailed method can be quickly arranged.
" Raeburn stated that the proposal annexed to the letter had not been agreed with Coats but he, on his own part, believed that Coats could be persuaded to agree to it.
Stated briefly, the proposal annexed by Raeburn to his letter aforesaid involved (i) the existing Indian shareholders holding 49% of the shares, (ii) new Indian independent institutional shareholders holding 11% of the shares, and (iii) the existing U.K. shareholders, either directly or indirectly, holding 40% of the shares.
The proposed Board of Directors was to consist of representatives of the shareholders appointed by them thus: "Existing Indian shareholders 3, New independent Indian shareholders 1, existing U.K. shareholders 2, and an independent Indian Chairman acceptable to all parties.
" It is contended by Shri Seervai that these proposals are crucial for more than one reason since, in the first place, the proposal to increase the holding of the existing Indian shareholders to 49% and the offer of 11% to new Indian independent institutional shareholders was inconsistent with the charge that Coats wanted to retain control over NIIL, directly or indirectly.
The second reason why it is said that the proposal is crucial is that Raeburn 's letter of 776 March 9 must have been received by Devagnanam before March 14 since it was replied to on the 14th.
Therefore, contends Shri Seervai, the negotiations between the parties were still not at an end.
Counsel says that it was open to Devagnanam to refuse to negotiate on the terms suggested and insist that the Indian shareholders must have 60% of the shares.
Instead of conveying his reactions to the proposal Devagnanam, it is contended, went to the United Kingdom to discuss the question.
The minutes of discussions which took place in U.K., Mackrael and Sanders not taking any part therein, show that NEWEY continued to plead that the Indian shareholders and Coats should consider the compromise formula and that Devagnanam undertook to put to the Indian shareholders further proposals for compromise and to consider what other proposals or safeguards they might suggest.
Reliance is also placed by counsel on a letter which Devagnanam wrote to Raeburn on April 5, in support of the submission that the negotiations were still not at an end.
The last but one paragraph of that letter reads thus: "As undertaken, I shall place the compromise formula, very kindly suggested by you, before my colleagues later today.
We shall discuss it fully at the Board Meeting tomorrow and I shall communicate the outcome to you shortly thereafter.
" We are unable to agree that the proposal annexed to Raeburn 's letter of March 9 1977 was either a proposal by or on behalf of Coats or one made with their knowledge and approval.
Were it so, it is difficult to understand how Raeburn could write to Mackrael on June 8, 1977 that Coats were still insistent on the entire 20% of the excess equity holding not going to the existing Indian shareholders.
There is also no explanation as to why, if the proposal annexed to Raeburn 's letter of March 9 was a proposal by or on behalf of Coats, Raeburn said at the U.K. meeting of March 29 31, 1977 that it was better to 'let Coats declare their hand '.
It is indeed impossible to understand why Coats, on their own part, did not at time communicate any compromise proposal of theirs to the Indian shareholders directly.
They now seem to take shelter behind the proposal made by Raeburn in his letter of March 9 adopting it as their own.
Even in the letter which Crawford Bayley & Co., wrote on June 21, 1977 on behalf of Sanders to the Reserve Bank of India, no reference was at all made to any proposal by or on behalf of Coats to the Indian shareholders.
The vague statement 777 made in that letter is that 'certain proposals ' were being considered and would be submitted 'shortly ' before the authorities.
No such proposals were ever made by the Solicitor or their client to anyone.
These letters and events leave no doubt in our mind that the negotiations between the parties were at an end that there were no concrete proposals by or on behalf of Coats which remained outstanding to be discussed by the Indian shareholders.
To repeat, Devagnanam declared his hand in his letter of December 14,1976 by reiterating, beyond the manner of doubt, that nothing less than 60% share in the equity capital of NIIL would be acceptable to the Indian shareholders.
Coats never replied to that letter nor indeed did they convey their reaction to it in any other form or manner at any time.
In fact, it would be more true to say that Coats themselves treated the matter as at an end since, they were wholly opposed to the stand of the Indian shareholders that they must have 60% share in the equity capital of NIIL.
What happened in the meeting of April 6, 1977 has to be approached in the light of the finding that the negotiations between the parties had fallen through, that Coats had refused to declare their hand and that all that could be inferred from their attitude with a fair amount of certainty was that they were unwilling to disinvest.
On March 18, 1977 NIIL 's Secretary gave a notice of the Board meeting for April 6, 1977.
The notice was admittedly received by Sanders in U.K., well in time but did not attend the meeting.
The explanation for his failure to attend the meeting is said to be that the item on the agenda of the meeting, 'Policy Indianisation ' was vague and did not convey that any matter of importance was going to be discussed in the meeting, like for example, the issue of rights shares.
We find it quite difficult to accept this explanation.
Just as a notice to quit in landlord tenant matters cannot be allowed to split on a straw, notices of Board meetings of companies have to be construed reasonably, by considering what they mean to those to whom they are given.
To a stranger, 'Policy Indianisation ' may not convey much but to Sanders and the U.K. shareholders it would speak volumes.
By the time that Sanders received the notice, the warring camps were clearly drawn on two sides of the battle line, the Indian group insisting that they will have nothing less than a 60% share in the equity capital of NIIL and the U.K. shareholders insisting with equal determination that they will not allow the existing Indian 778 shareholders to have anything more than 49%.
In pursuance of a resolution passed by the Board, a letter had already been written to the Reserve Bank confirming the commitment of NIIL to achieve the required Indianisation by May 17, 1977.
A copy of NIIL 's letter to the Reserve Bank was sent to Sanders and Whitehouse.
In view of the fact that to the common knowledge of the two sides there were only two methods by which the desired Indianisation could be achieved, namely, either disinvestment by the Holding Company in favour of the existing Indian shareholders or a rights issue, the particular item on the agenda should have left no doubt in the mind of the U.K. shareholders as to what the Board was likely to discuss and decide in the meeting of the 6th.
Disinvestment stood ruled out of consideration, a fact which was within the special knowledge of the Holding Company, since whether to disinvest or not was a matter of their volition.
After the despatch of the notice dated March 18,1977 two important events happend.
Firstly, Devagnanam went to Birmingham, where discus ions were held from March 29 31, 1977 in which Indianisation of NIIL was discussed, as shown by the minutes of that discussion.
NEWEY were willing to accept Indianisation, by the existing Indian shareholders acquiring a 60% interest in the share capital of NIIL while "COATS were adamantly opposed" to that view.
It is surprising that during the time that Devagnanam was in Birmingham, Sanders did not meet him to seek an explanation of what the particular item on the agenda of the meeting of April 6 meant Sanders had received the notice of March 18 before the Birmingham discussions took place, and significantly he has made no affidavit at all on the question as to why he did not meet Devagnanam in Birmingham, or why he did not attend the meeting of April 6 or what the particular item on the agenda meant to him.
The second important event which happened after the notice of March 18 was issued was that on April 4, 1977 NIIL received a letter dated March 30, 1977 from the Reserve Bank.
The letter which was in the nature of a stern reminder left no option to NIIL 's Board except to honour the commitment which it had made to the Reserve Bank.
By the letter the Reserve Bank warned NIIL: "Please note that if you fail to comply with our directive regarding dilution of foreign equity within the stipulated period, we shall be constrained to view the matter seriously." 779 We do not see any substance in the contention of the Holding Company that despite the commitment which NIIL had made to the Reserve Bank, the long time which had elapsed in the meanwhile and the virtual freezing of its developmental activities as of December 31, 1973, NIIL should have asked for an extension of time from the Reserve Bank.
In the first place, it could not be assumed or predicated that the Bank would grant extension, and secondly, it was not in the interest of NIIL to ask for such an extension.
The Board meeting was held as scheduled on April 6, 1977.
The minutes of the meeting show that two directors, Sanders and M.S.P. Rajes, asked for leave of absence which was granted to them.
Sanders, as representing the U.K. shareholders on NIIL 's Board, did not make a request for the adjournment of the meeting on the ground that negotiations for a compromise had not yet come to an end or that the Indian shareholders had not yet conveyed their response to the "Coats ' compromise formula".
Nor did he communicate to the Board his views on 'Policy Indianisation ', whatever it may have meant to him.
Seven Directors were present in the meeting, with Devagnanam in the chair at the commencement of the meeting.
C. Doraiswamy, a Solicitor by profession and admittedly an independent Director, was amongst the seven.
In order to complete the quorum of two "independent" directors, other directors being interested in the issue of rights shares, Silverston was appointed to the Board as an Additional Director under article 97 of NIIL 's Articles of Association.
Silverston then chaired the meeting, which resolved that the issued capital of the Company be increased to Rs. 48,00,000/ by the issue of 16,000 equity shares of Rs. 100/ each to be offered as rights shares to the existing shareholders in proportion to the shares held by them.
The offer was decided to be made by a notice specifying the number of shares which each shareholders was entitled to, and in case the offer was not accepted within 16 days from the date of the offer, it was to be deemed to have been declined by the shareholder concerned.
The aforesaid resolution of the Board raises three important questions, inter alia, which have been passed upon us by Shri Seervai on behalf of the Holding Company: (1) Whether the Directors of NIIL, in issuing the rights shares, abused the fiduciary power which they possessed as directors to issue shares; (2) Whether Silverston was a 'disinterested Director '; and (3) Whether Silverston 's appointment was otherwise invalid, since there was no item on the agenda 780 of the meeting for the appointment of an Additional Director.
If Silverston 's appointment as an Additional Director is bad either because he was not a disinterested director or because there was no item on the agenda under which his appointment could be made, the resolution for the issue of rights shares which was passed in the Board 's meeting of April 6 must fall because then, the necessary quorum of two disinterested directors would be lacking.
On the first of these three questions, it is contended by Shri Seervai that notwithstanding that the issues of shares is intra vires the Directors, the Directors ' power is a fiduciary power, and although an exercise of such power may be formally valid, it may be attacked on the ground that it was not exercised for the purpose for which it was granted.
It is urged that the issue of shares by Directors which is directed to affect the right of the majority of the shareholders or to defeat that majority and convert it into a minority is unconstitutional, void and in breach of the fiduciary duty of Directors, though in certain situations it may be ratified by the Company in the General Meeting.
Any reference by the Company to a general meeting in the present case, it is said, would have been futile since, without the impugned issue of rights shares, the majority was against the issue.
It was finally argued that good faith and honest belief that in fact the course proposed by the Directors was for the benefit of the shareholders or was bona fide believed to be for their benefit is irrelevant because, it is for the majority of the shareholders to decide as to what is for their benefit, so long as the majority does not act oppressively or illegally.
Counsel relies in support of these and allied contentions on the decision of the Privy Council in Howard Smith Ltd. and of the English Courts in Fraser, Punt, Piercy and Hogg.
(supra) In Punt vs Symons, (supra) which applied the principle of Fraser vs Whallcy, (supra) it was held that: Where shares had been issued by the Directors.
not for the general benefit of the company, but for the purpose of controlling the holders of the greater number of shares by obtaining a majority of voting power, they ought to be restrained from holding the meeting at which the votes of the new shareholders were to have been used.
But Byrne J. stated: 781 There may be occasions when Directors may fairly and properly issue shares in the case of a Company constituted like the present for other reasons.
For instance it would not be at all an unreasonable thing to create a sufficient number of shareholders to enable statutory powers to be exercised.
In the instant case, the issue of rights shares was made by the Directors for the purpose of complying with the requirements of FERA and the directives issued by the Reserve Bank under that Act.
The Reserve Bank had fixed a deadline and NIIL.
had committed itself to complying with the Bank 's directive before that deadline.
Peterson J. applied the principle enunciated in Fraser and in Punt in the case of Piercy vs section Mills & (Company Ltd. (supra) The learned Judge observed at page 84: "The basis of both cases is, as I understand, that Directors are not entitled to use their powers of issuing shares merely for the purpose of maintaining their control or the control of themselves and their friends over the affairs of the company, or merely for the purpose of defeating the wishes of the existing majority of shareholders.
" The fact that by the issue of shares the Directors succeed, also or incidentally, in maintaining their control over the Company or in newly acquiring it, does not amount to an abuse of their fiduciary power.
What is considered objectionable is the use of such powers merely for an extraneous purpose like maintenance or acquisition of control over the affairs of the Company.
In Hogg vs Cramphorn Ltd., (supra) it was held that if the power to issue shares was exercised from an improper motive, the issue was liable to be set aside and it was immaterial that the issue was made in a bona fide belief that it was in the interest of the Company.
Buckley J. reiterated the principle in Punt and in Piercy, (Supra) and observed: "Unless a majority in a company is acting oppressively towards the minority, this Court should not and will not itself interfere with the exercise by the majority of its constitutional rights or embark upon an inquiry into the respective merits of the views held or policies 782 favoured by the majority and the minority.
Nor will this Court permit directors to exercise powers, which have been delegated to them by the company in circumstances which put the directors in a fiduciary position when exercising those powers, in such a way as to interfere with the exercise by the majority of its constitutional rights; and in a case of this kind also, in my judgment, the court should not investigate the rival merits of the views or policies of the parties." (p. 268) Applying this principle, it seems to us difficult to hold that by the issue of rights shares the Directors of NIIL interfered in any manner with the legal rights of the majority.
The majority had to disinvest or else to submit to the issue of rights shares in order to comply with the statutory requirement of FERA and the Reserve Bank 's directives.
Having chosen not to disinvest, an option which was open to them, they did not any longer possess the legal right to insist that the Directors shall not issue the rights shares.
What the Directors did was clearly in the larger interests of the Company and in obedience to their duty to comply with the law of the land.
The fact that while discharging that duty they incidentally trenched upon the interests of the majority cannot invalidate their action.
The conversion of the existing majority into a majority was a consequence of what the Directors were obliged lawfully to do.
Such conversion was not the motive force of their action.
Before we advert to the decision of the Privy Chuncil in Howard Smith Ltd. vs Ampol Petroleum Ltd., (supra) we would like to refer to the decision of the High Court of Australia in Harlowe 's Nominees Pty. Ltd vs Woodside (Lakes Entrance) oil Company No Liability and another, (supra) and to the Canadian decision of Berger J. of the Supreme Court of British Columbia, in the case of Teck Corporation Ltd. vs Miller et al(1), both of which were considered by Lord Wilberfore in Howard Smith.
On a consideration of the English decisions, including those in Punt and Plercy, Barwick C.J. said in Harlowe 's Nominees (supra): "The principle is that although primarily the power is given to enable capital to be raised when required for the purposes of the company, there may be occasions when the directors may fairly and properly issue shares for other reasons, so long as those reasons relate to a 783 purpose of benefiting the company as a whole, as distinguished from a purpose, for example, of maintaining control of the company in the hands of the directors themselves or their friends.
An inquiry as to whether additional capital was presently required is often most relevant to the ultimate question upon which the validity or the invalidity of the issue depends; but that ultimate question must always be whether in truth the issue was made honestly in the interests of the company." (p. 493) We agree with the principle so stated by the Australian High Court and, in our opinion, it applies with great force to the situation in the present case.
In Teck Corporation, (supra) the Court examined several decisions of the English Courts and of other Courts, including the one in Hogg.
(supra) The last headnote of the report at page 289 reads thus: "Where directors of a company seek, by entering into an agreement to issue new shares, to prevent a majority shareholder from exercising control of the company, they will not be held to have failed in their fiduciary duty to the company if they act in good faith in what they believe.
on reasonable grounds, to be the interests of the company.
If the directors ' primary purpose is to act in the interests of the company, they are acting in good faith even though they also benefit as a result".
In Howard Smith, no new principle was evolved by Lord Wilberforce who, distinguishing the decisions in Teck Corporation and Harlowe 's Nominees, (supra) said: "By contrast to the cases of Harlowe and Teck, the present case, on the evidence, does not, on the findings of the trial judge, involve any consideration of management, within the proper sphere of the directors.
The purpose found by the judge is simply and solely to dilute the majority voting power held by Ampol and Bulkships so as to enable a then minority of shareholders to sell their shares more advantageously.
So far as authority goes, an issue of shares purely for the purpose of creating voting power has repeatedly been condemned".
(page 837) 784 The dictum of Byrne J. in Punt (supra) that "there may be reasons other than to raise capital for which shares may be issued" was approved at page 836 and it was observed at page 837 "Just as it is established that directors, within their management powers, may take decisions against the wishes of the majority of shareholders, and indeed that the majority of shareholders cannot control them in the exercise of these powers while they remain in office (Automatic Self Cleansing Filter Syndicate Co. Ltd. vs Cuninghams, , so it must be unconstitutional for directors to use their fiduciary powers over the shares in the company purely for the purpose of destroying an existing majority, or creating a new majority which did not previously exist.
To do so is to interfere with that element of the company 's constitution which is separate from and set against their powers.
If there is added, moreover, to this immediate purpose, an ulterior purpose to enable an offer for shares to proceed which the existing majority was in a position to block, the departure from the legitimate use of the fiduciary power becomes not less, but all the greater.
The right to dispose of shares at a given price is essentially an individual right to be exercised on individual decision and on which a majority, in the absence of oppression or similar impropriety, is entitled to prevail".
In our judgment, the decision of the Privy Council in Howard Smith, (supra) instead of helping the Holding Company goes a long way in favour of the appellants.
The Directors in the instant case did not exercise their fiduciary powers over the shares merely or solely for the purpose of destroying an existing majority or for creating a new majority which did not previously exist.
The expressions 'merely ', 'purely ', 'simply ' and 'solely ' virtually lie strewn all over page 837 of the report in Howard Smith.
The Directors here exercised their power for the purpose of preventing the affairs of the Company from being brought to a grinding halt, a consummation devoutly wished for by Coats in the interest of their extensive world wide business.
In Nanalala Zaver and another vs Bombay Life Assurnnce Co. Ltd., (supra) Das J., in his separate but concurring judgment deduced the following principle on the basis of the English decisions: 785 "It is well established that directors of a company are in a fiduciary position vis a vis the company and must exercise their power for the benefit of the company.
If the power to issue further shares is exercised by the directors not for the benefit of the company but simply and solely for their personal aggrandisement and to the detriment of the company, the Court will interfere and prevent the directors from doing so.
The very basis of the Court 's interference in such a case is the existence of the relationship of a trustee and of cestui que trust as between the directors and the company".
(pp. 419 420) It is true that Das J. held that Singhanias were complete strangers to the company and consequently the Directors owed no duty, much less a fiduciary duty, to them.
But we are unable to agree with the contention that the observations extracted above from the judgment of Das J. are obiter.
The learned Judge has set forth the plaintiffs ' contentions under three sub heads at page 415.
At the bottom of page 419 he finished discussion of the 2nd sub head and said: "This leads me to a consideration of the third sub head on the assumption that. . the additional motive was a bad motive".
The question was thus argued before the Court and was squarely dealt with.
Before we leave this topic, we would like to mention that the mere circumstance that the Directors derive benefit as shareholders by reason of the exercise of their fiduciary power to issue shares, will not vitiate the exercise of that power.
As observed by Gower in Principles of Modern Company Law, 4th edn.
, p. 578: "As it was happily put in an Australian case they are 'not required by the law to live in an unreal region of detached altruism and to act in a vague mood of ideal abstraction from obvious facts which must be present to the mind of any honest and intelligent man when he exercises his power as a director".
The Australian case referred to above by the learned author is Mills vs Mills, (supra) which was specifically approved by Lord Wilberforce in Howard Smith.
In Manala Zaver (supra) too, Das J. stated at page 425 that the true principle was laid down by the Judicial Committee of the Privy Council in Hirsche vs Sims(1), thus: 786 "If the true effect of the whole evidence is, that the defendants truly and reasonably believed at the time that what they did was for the interest of the company they are not chargeable with dolus malus or breach of trust merely because in promoting the interest of the company they were also promoting their own, or because the afterwards sold shares at prices which gave them large profits".
Whether one looks at the matter from the point of view expressed by this Court in Nanala Zaver or from the point of view expressed by the Privy Council in Howard Smith, (supra) the test is the same, namely, whether the issue of shares is simply or solely for the benefit of the Directors.
If the shares are issued in the larger interest of the Company, the decision to issue shares cannot be struck down on the ground that it has incidentally benefited the Directors in their capacity as shareholders.
We must, therefore, reject Shri Seervai 's argument that in the instant case, the Board of Directors abused its fiduciary power in deciding upon the issue of rights shares.
The second of the three questions arising out of the proceedings of the Board 's meeting dated April 6, 1977 concerns the validity of the appointment of Silverston as an Additional Director.
Under section 287(2) of the the quorum for the said meeting of Directors was two.
There can be no doubt that a quorum of two Directors means a quorum of two directors who are competent to transact and vote on the business before the Board.
(see Greymouth vs Greymouth and Palmer 's Company Precedents.(1) 17th Edn.: p. 579, f.n.3).
The contention of the Holding Company is that Silverston was a Director "directly or indirectly concerned or interested" in the arrangement or contract arising from the resolutions to offer and allot rights shares and consequently, the resolutions were invalid: firstly on the ground that they were passed by a vote of an interested director without which there would be no quorum and secondly because, Silverston 's appointment as an Additional Director was for the purpose of enabling the said resolution to be passed for the benefit of interested directors.
Relying upon a decision of the Bombay High Court in Firestone Tyre & Rubber Co. vs Synthetics & Chemicals Ltd.,(2) Shri Seervai contends that section 300 of the embodies the general rule of equity that no person who has to discharge duties on behalf of a corporate body shall be 787 allowed to enter into engagements in which he has a personal interest conflicting, or which may possibly conflict, with the interests of those whom he is bound to protect.
The reason why it is said that Silverston was interested in or concerned with the allotment of the rights shares to the existing shareholders is, firstly because at the Ketty meeting held in October 1976 he had acted as an 'Advisor to the Indian shareholders ' and secondly, because on October 25, 1976 he had written a letter to Kingsley purporting to convey his advice to the Board of Directors.
That letter contains allegations against the Needle Industries, U.K. and of Coats.
In other words, it is contended, Silverston was hostile to Needle Industries, U.K., and to Coats, and no person in his position could possibly bring to bear an unbiased or disinterested judgment on the question which arose between the Holding Company and the Indian shareholders as regards the issue of rights shares.
It is also said that certain other aspects of Silverston 's conduct, including his attitude in the meeting of the 6th April, show that he was an interested director.
We are unable to accept the contention that Silverston is an 'interested ' director within the meaning of section 300 of the .
In the first place, it is wrong to attribute any bias to Silverston for having acted as an adviser to the Indian shareholders in the Ketty meeting.
Silverston is by profession a solicitor and we suppose that legal advisers do not necessarily have a biassed attitude to questions on which their advice is sought or tendered.
The fact that Silverston was received cordially in U.K. both by Raeburn and Mackrael when he went there in January 1977 shows that even after he had acted as an adviser to the Indian shareholders it was not thought that he was in any sense biassed in their favour.
Silverston 's alleged personal hostility to Coats cannot, within the meaning of section 300(1) of the , make him a person "directly or indirectly, concerned or interested in the contract or arrangement" in the discussion of which he had to participate or upon which he had to vote.
Section 300(1) disqualifies a Director from taking part in the discussion of or voting on any contract or arrangement entered into or on behalf of the company, if he is in any way concerned or interested in that contract or arrangement.
Under section 299(1) of the , "Every director of a Company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the Board 788 of Directors.
" The concern or interest of the Director which has to be disclosed at the Board meeting must be in relation to the contract or arrangement entered into or to be entered into by or on behalf of the company.
The interest or concern spoken of by sections 299(1) and 300(1) cannot be a merely sentimental interest or ideological concern.
Therefore, a relationship of friendliness with the Directors who are interested in the contract or arrangement or even the mere fact of a lawyer client relationship with such directors will not disqualify a person from acting as a Director on the ground of his being, under section 300(1), an "interested" Director.
Thus, howsoever one may stretch the language of section 300(1) in the interest of purity of company administration, it is next to impossible to bring Silverston 's appointment within the framework of that provision.
In the Firestone (supra) the Solicitor Director was held to be concerned or interested in the agreement for the appointment of Kilachands as selling agents, as he had a substantial shareholding in a private limited company of Kilachands.
Besides, he was also a shareholder director in various other concerns of Kilachands.
We must, accordingly, reject the argument that Silverston was an interested director, therefore his appointment as a Additional Director was invalid and that consequently, the resolution for the issue of rights shares was passed without the necessary quorum of two disinterested directors.
We have already held that the resolution was not passed for the benefit of the Directors.
There is therefore no question of Silverston 's appointment having been made for the purpose of enabling such a resolution to be passed.
The third contention, arising out of the proceedings of the meeting of 6th April, to the effect that Silverston 's appointment as an Additional Director is invalid since there was no item on the agenda of the meeting for the appointment of an Additional Director is equally without substance.
Section 260 of the preserves the power of the Board of Directors to appoint additional Directors if such a power is conferred on the Board by the Articles of Association of the Company.
We are not concerned with the other conditions laid down in the section, to which the appointment is subject.
It is sufficient to state that Article 97 of NIIL 's Articles of Association confers the requisite power on the Board to appoint additional Directors.
We do not see how the appointment of an additional Director could have been foreseen before the 6th April, on which date the meeting of the Board was due to be held.
The occasion to 789 appoint Silverston as an Additional Director arose when the Board met on 6th April, with Devagnanam in chair.
Sanders was absent and no communication was received from or on behalf of the Holding Company that they had decided finally not to disinvest.
They always had the right to such a locus penitentia.
Were they to intimate that they were ready to disinvest, there would have been no occasion to appoint an additional Director.
That occasion arose only when the picture emerged clearly that the Board would have to consider the only other alternative for reduction of the non resident holding, namely, the issue of rights shares.
It is for this reason that the subject of appointment of an additional Director could not have, in the then state of facts, formed a part of the Agenda.
Silverston 's appointment is, therefore, not open to challenge on the ground of want of agenda on that subject.
It is necessary to clear a misunderstanding in regard to the Directors to issue shares.
It is not the law that the power to shares can be used only if there is need to raise additional capital.
It is true that the power to issue shares is given primarily to enable capital to be raised when it is required for the purposes of the company but that power is not conditioned by such need.
That power can be used for other reasons as, for example, to create a sufficient number of share holders to enable the company to exercise statutory powers (Punt vs Symons and Co.), (Supra) or to enable it to comply with legal requirements as in the instant case.
In Hogg vs Cramphorn (supra).
Buckley J. (p 267) agreed with the law of Byrne J. in Punt And so did Lord Wilberforce (pp 835 836) in Howard Smith (supra) where he said: "It is, in their Lordships ' opinion, too narrow an approach to say that the only valid purpose for which shares may be issued is to raise capital for the company.
The discretion is not in terms limited in this way: the law should not impose such a limitation on Directors ' powers.
To define in advance exact limits beyond which directors must not pass is, in their Lordships ' view, impossible.
This clearly cannot be done by enumeration, since the variety of different types of Company in different situations cannot be anticipated".
The Australian decision in Harlowe Nominees (supra) took the same view of the directors ' power to issue shares.
It was said therein: "The principle is that although primarily the power is given to enable capital to be raised when required for the 790 purposes of the company, there may be occasions when the directors may fairly and properly issue shares for other reasons, so long as those reasons relate to a purpose of benefiting the company as a whole, as distinguished from a purpose, for example, of maintaining control of the company in the hand of the directors themselves or their friends".
We have already expressed our view that the rights share were issued in the instant case in order to comply with the legal requirements, which, apart from being obligatory as the only viable course open to the Directors, was for the benefit of the company since, otherwise, its developmental activities would have stood frozen as of December 31, 1973.
The shares were not issued as a part of takeover war between the rival groups of shareholders.
The decision to issue rights shares was assailed on the ground also that the company did not, as required by the Reserve Bank 's letter dated May 11, 1975 submit any scheme indicating whether the reduction in the non resident interest was proposed to be brought about by issue of additional equity capital to Indian residents to the extent necessary to finance any scheme of expansion or diversification.
It is true that by the aforesaid letter, the Reserve Bank had asked NIIL to report to it as to how the Company proposed to reduce the non resident interest: whether by disinvestment by non resident shareholders, or by issue of additional equity capital to Indian residents to the extent necessary to finance any scheme of expansion/diversification, or by both.
We are, however, unable to read the Bank 's letter as requiring or asking the Company not to issue the additional capital unless it was necessary to do so for financing a scheme of expansion or diversification.
The Reserve Bank could not have intended to impose any such condition by way of a general direction in face of the legal position, which we have set out above, that the power of the Directors to issue shares is not conditioned by the need for additional capital.
We are not suggesting that the Reserve Bank, in the exercise of its statutory functions, cannot ever impose such conditions as it deems appropriate, subject to which alone a new issue may be made.
But neither the wording of the Bank 's letter nor the true legal position justifies the stand of the Holding Company.
The minutes of the Ketty meeting of October 20 21, 1976 saying that it was agreed that the rights issue, with the Indian share holders taking up the U.K. members ' rights, would be considered provided it was demonstrated by NIIL that "there is a viable development plan requiring funds that the expected NIIL cash flow 791 cannot meet", cannot also justify the argument that the power of the company to issue rights shares was, by agreement, conditioned by the need to raise additional capital for a development plan.
In fact, the occasion for consideration by the Holding Company of NIIL 's proposal to issue rights shares did not arise, since the Holding Company virtually boycotted the meeting of April 6.
Assuming for the sake of argument that there was any such understanding between the parties, the minutes of the meeting of April 6 show that the Company needed additional capital for its expansion.
The minutes say: "As per the final budget for the year 1977, the working capital requirements amounted to nearly Rs. 100 lakhs and even after tapping the facilities that we will be entitled to obtain from the Banking sector, we will be left with a gap of about Rs. 25 lakhs which can be met by only increasing equity capital and attracting deposits from public".
There is no reason to believe that this statement does not accord with the economic realities of the situation as assessed by the Directors of the Company.
Finally, it is also not true to say, as a statement of law, that Directors have no power to issue shares at par, if their market price is above par.
These are primarily matters of policy for the Directors to decide in the exercise of their discretion and no hard and fast rule can be laid down to fetter that discretion.
As observed by Lord Davey in Hilder and others vs Dexter(1).
"I am not aware of any law which obliges a company to issue its shares above par because they are saleable at a premium in the market.
It depends on the circumstances of each case whether it will be prudent or even possible to do so, and it is a question for the directors to decide".
What is necessary to bear in mind is that such discretionary powers in company administration are in the nature of fiduciary powers and must, for that reason, be exercised in good faith.
Mala fides vitiate the exercise of such discretion.
We may mention that in the past, whenever the need for additional capital was felt, or for other reasons, NIIL issued shares to its members at par.
792 We are therefore of the opinion that Devagnanam and his group acted in the best interests of NIIL in the matter of the issue of rights shares and indeed, the Board of Directors followed in the meeting of the 6th April a course which they had no option but to adopt and in doing which, they were solely actuated by the consideration as to what was in the interest of the company.
The shareholder Directors who were interested in the issue of rights shares neither participated in the discussion of that question nor voted upon it.
The two Directors who, forming the requisite quorum, resolved upon the issue of rights shares were Silverston who, in our opinion, was a disinterested Director and Doraiswamy, who unquestionably was a disinterested Director.
The latter has been referred to in the company petition, Mackrael 's reply affidavit and in the Holding Company 's Memorandum of Appeal in the High Court as "uninterested", "disinterested" and "independent".
At a crucial time when Devagnanam was proposing to dispose of his shares to Khaitan, Sanders asked for Doraiswamy 's advice by his letter dated August 6, 1975 in which he expressed "complete confidence" in Doraisway in the knowledge that the Holding Company could count on his guidance.
Disinvestment by the Holding Company, as one of the two courses which could be adopted for reducing the non resident interest in NIIL to 40% stood ruled out, on account of the rigid attitude of Coats who, during the period between the Ketty meeting of October 20 21, 1976 and the Birmingham discussions of March 29 31, 1977 clung to their self interest, regardless of the pressure of FERA, the directive of the Reserve Bank of India and their transparent impact on the future of NIIL.
Devagnanam and the disinterested Directors, having acted out of legal compulsion precipitated by the obstructive attitude of Coats and their action being in the larger interests of the company, it is impossible to hold that the resolution passed in the meeting of April 6 for the issue of rights shares at par to the existing shareholders of NIIL constituted an act of oppression against the Holding Company.
That cannot, however, mark the end of the case because 2nd May has still to come and Shri Seervai 's argument is that the true question before the Court is whether the offer of rights shares to all existing shareholders of NIIL but the issue of rights shares to existing Indian shareholders only, constitutes oppression of the Holding Company.
That takes us to the significant, and if we may so call them, sordid, happenings between April 6 and May 2, 1977.
Devagnanam wrote a letter to Raeburn on April 12, 1977 stating that a copy of 793 the Reserve Bank 's letter dated March 30, 1977 was enclosed therewith.
It was in fact not enclosed.
Pursuant to the decision taken in the Board 's meeting of April 6, a letter of offer dated April 14 was prepared by NIIL.
Devagnanam 's letter to Raeburn dated April 12, (without a copy of the Reserve Bank 's letter dated March 30) and the letter of offer dated April 14 were received by Raeburn on May 2, 1977 in an envelope bearing the postal mark of Madras dated April 27, 1977.
The letter of offer which was posted to the Holding Company also bore the postal mark of Madras dated April 27, 1977 and that to was received in Birmingham on May 2, 1977.
The letter of offer which was posted to one of the Indian shareholders, Manoharan, who was siding with Coats, was also posted in an envelope which bore the postal mark of Madras dated April 27, 1977.
On April 19, 1977, a notice of the Board 's meeting for May 2, 1977 was prepared.
One of the items on the Agenda of the meeting was stated in the notice as "Policy (a) Indianisation (b) Allotment of shares".
The notice dated April 19 of the Board 's meeting for May 2 was posted to Sanders in an envelope which bore the postal mark of Madras dated April 27, 1977 and was received by him in Birmingham on May 2, 1977, after the Board 's meeting fixed for that date had already taken place.
It puts a severe strain on one 's credulity to believe that the letters of offer dated April 14 to the Holding Company, to Raeburn and to Manoharan were posted on the 14thitse If but that somehow they rotted in the post office until the 27th, on which date they took off simultaneously for their respective destinations.
The affidavit of Selvaraj, NIIL 's senior clerk in the despatch Department and the relevant entry in the outward register are quite difficult to accept on this point since they do not accord with the ordinary course of human affairs.
Not only the three letters of offer above said, but even the notice dated April 19, of the Board meeting for May 2, was received by Sanders at Birmingham in an envelope bearing the Madras postal mark of April 27.
Selvaraj 's affidavit, apparently supported by an entry in the outward register, that the envelope addressed to Sanders containing the notice of 19th April was posted on the 22nd is also difficult to accept.
It takes all kinds to make the world and we do not know whether the NIIL 's staff was advised astrologically that 27th April was an auspicious date for posting letters.
But if only they had sought a little legal advice which, at least from Doraiswamy and Silverston, was readily available to them, they would have seen the folly of indulging in such behaviour.
Add to that the circumstance that Devagnanam 's letter to Raeburn dated April 12 was put in the same envelope in which the letter of 794 offer dated April 14 was enclosed and the envelope containing these two important documents bore the postal mark of Madras dated 27th April.
These coincidences are too tell tale to admit of any doubt that someone or the other, not necessarily Devagnanam, unduly solicitous of the interest of NIIL and of the Indian shareholders manipulated to delay the posting of the letters of offer and the notice of the Board meeting for 2nd May, until the 27th April.
What is naively sought to be explained as a mere coincidence reminds one of the 'Brides in the Bath Tub ' case: The death of the first bride in the bath tub may pass off as an accident and of the second as suicider but when, in identical circumstances, the third bride dies of asphyxia in the bath tub, the conclusion becomes compelling, even applying the rule of circumstantial evidence, that she died a homicidal death.
The purpose behind the planned delay in posting the letters of offer to Raeburn and to the Holding Company, and in posting the notice of the Board 's meeting for May 2 to Sanders, was palpably to ensure that no legal proceeding was taken to injunct the holding of the meeting.
The object of withholding these important documents, until it was quite late to act upon them, was to present to the Holding Company a fait accompli in the shape of the Board 's decision for allotment of rights shares to the existing Indian shareholders.
We are, however, unable to share the view expressed in the '12th Conclusion ' in the appellate judgment of the High Court that Devagnanam and "his colleagues in the Board of Directors" arranged to ensure the late posting of the letters of offer and the notice of the meeting.
We do not accept Shri Nariman 's argument that Devagnanam must be exonerated from all responsibility in this behalf because he was away in Malacca from April 13 to 26.
In the first place, to be in a place on two dates is not necessarily to be there all along between those dates and therefore we cannot infer that Devagnanam was in Malacca from 13th to 26th since he was there on the 13th and the 26th.
Besides, it was easy for a man of Devagnanam 's importance and ability to pull the strings from a distance and his physical presence was not necessary to achieve the desired result.
That is how puppets are moved.
But there is no evidence, at least not enough, to justify the categorical finding recorded by the appellate Bench of the High Court.
The fact that Devagnanam stood to gain by the machination is a relevant factor to be taken into account but even that is not the whole truth: NIIL, not Devangnanam was the real beneficiary, a thesis 795 which we have expounded over the last many pages.
And the involvement of the other Directors by calling them Devagnanam 's colleagues is less than just to them.
There is not a shred of evidence to justify the grave charge that they were willing tools in Devagnanam 's hands and lent their help to concoct evidence.
We clear their conduct, expressly and categorically.
In so far as Devagnanam himself is concerned, there is room enough to suspect that he was the part author of the late postings of important documents, especially since he was the prime actor in the play of NIIL 's Indiansation.
But even in regard to him, it is difficult to carry the case beyond the realm of suspicion and 'room enough ' is not the same thing as 'reason enough '.
Section 15 of the Evidence Act which carries the famous illustration of a person obtaining insurance money on his houses which caught fire successively, the question being whether the fire was accidental or intentional or whether the act was done with a particular knowledge or intention, will not help to fasten the blame on Devagnanam because, it is not shown that he was instrumental or concerned in any of the late postings complained of.
Were his complicity shown in any of these, it would have been easy to implicate him in all of them.
On the contrary, there is an admitted act, described as a lapse, on Devagnanam 's part which shows that he failed to do what was to his advantage to do.
It may be recalled that in his letter dated April 12 to Raeburn, Devagnanam stated that he was enclosing therewith a copy of the Reserve Bank 's letter dated March 30, 1977 but that was not enclosed.
Nothing was to be gained by suppressing the Reserve Bank 's letter from Raeburn who was always sympathetic to the Indian shareholders.
If anything, there was something to gain by apprising Raeburn of the urgency of the matter in view of the Reserve Bank 's letter.
The strongest point in favour of the Indian shareholders was the last para of the Reserve Bank 's letter which they would have liked the U.K. shareholders to know.
Raeburn 's response of 2nd May to Devagnanam 's letter of 12 April and the letter of offer was without the knowledge of Reserve Bank 's letter of March 30.
When the Bank 's letter was sent to Racburn along with Devagnanam 's letter of May 11, Raeburn categorially supported the stand of the Indian shareholders, as is clear from paragraph 4 of the letter dated June 8, 1977 by Raeburn to Mackrael, a copy of which was sent by Raeburn to Devagnanam along with his letter dated June 17, 1977.
796 The inferences arising from the late posting of the letter of offer to the Holding Company as also of the notice of meeting for May 2 to Sanders and the impact of inferences on the conduct and intentions of Devagnanam are one thing: we have already dealt with that aspect of the matter.
Their impact on the legality of the offer and the validity of the meeting of May 2 is quite another matter, which we propose now to examine.
In doing this, we will keep out of consideration all questions relating to the personal involvement of Devagnanam and his group in the delay caused in sending the letters of offer and the notice of meeting for May 2.
First, as to the letter of offer: The letter of offer dated April 14, 1977 sent to the Holding Company at Birmingham, like all other letters of offer, mentions, inter alia that it was resolved in the meeting of April 6 to increase the issued capital of the company from 32,000 shares of Rs. 100 each to 48,000 shares of Rs. 100 each by issuing Rights Shares to the existing shareholders on the five conditions mentioned in the letter.
The second condition reads thus: "If the offer is not accepted within 16 days from the date of offer, it shall be deemed to have been declined by the shareholder".
The Holding Company was informed by the last paragraph of the letter of offer that in respect of its holding of 18,990 shares, it was entitled to 9495 rights shares and that its acceptance of the offer together with the application money (at Rs. 50/ per share) should be forwarded so as to reach the registered office of NIIL on or before April 30, 1977.
A postal communication by air between U.K. and Madras, which is the normal mode of communication, generally takes five days to reach its destination.
If the letter of offer were to be posted on the 14th itself in Mardas, it would have reached the Holding Company in Birimingham, say, on the 19th.
Even assuming that the 16 days ' period allowed for communicating the acceptance of offer is to be counted from the 14th and not from the 19th, it would expire on 30th April, To that has to be added the period of five days which the Holding Company 's letter would take to reach Madras.
That means that the Holding Company would be within its rights if its acceptance reached NIIL on or before May 5, 1977.
The Board of Directors had, however, met in Madras three days before that and had allotted the entire issue of the rights shares to the Indian shareholders, on the ground that Holding Company had not applied for the allotment of the shares due to it.
In these circumstances, it is quite clear that the rights shares offered to the Holding Company could not have been allotted to anyone in the meeting of May 2, for the supposed failure of the Holding Company to communicate its acceptance before April 30.
The meeting of May 2, of which the 797 main purpose was to consider 'Allotment ' of the rights shares must, therefore, be held to be abortive which could produce no tangible result.
The matter would be worse if April 27, and much worse if May 2, were to be taken as the starting point for counting the period of 16 days.
Except for circumstances, hereinafter appearing the allotment to Indian shareholders of the rights shares which were offered to the Holding Company would have been difficult to accept and act upon.
The objection arising out of the late posting of the notice dated April 19 for the meeting of 2nd May goes to the very root of the matter.
That notice is alleged to have been posted to N.T. Sanders, Studley, Warwickshire, U.K. on April 22.
But we have already held that in view of the fact that the envelope in which the notice was sent bears the postal mark of Madras dated April 27, 1977, this latter date must be taken to be the date on which the notice was posted.
The notice was received by Sanders on May 2, on which date the Board 's meeting for allotment of rights shares was due to be held and was, in fact, held.
The utter inadequacy of the notice to Sanders in terms of time stares in the face and needs no further argument to justify the finding that the holding of the meeting was illegal, at least in so far as the Holding Company is concerned.
It is self evident that Sanders could not possibly have attended the meeting.
There is, therefore, no alternative save to hold that the decision taken in the meeting of May 2 cannot, in the normal circumstances, affect the legal rights of the Holding Company or create any legal obligations against it.
The next question, and a very important one at that on which there is a sharp controversy between the parties, is as to what is the consequence of the finding which we have recorded that the objection arising out of the late position of the notice of the meeting for 2nd May goes to the root of the matter.
The answer to this question depends upon whether the Holding Company could have accepted the offer of the rights shares and if, either for reasons of volition or of legal compulsion, it could not have accepted the offer, whether it could have at least renounced its right under the offer to a resident Indian, other than the existing Indian shareholders.
The decision of this question depends upon the true construction of the provisions of FERA and of sections 43A and 81 of the .
We have already reproduced the relevant provisions of FERA, namely, section 2(p), (q) and (u); section 19(1)(a), (b) and (d); 798 section 29(1)(a); section 29(2)(a), (b) and (c); and section 29(4)(a) and (b).
Section 29(1) provides that: . notwithstanding anything contained in the provisions of the a company which is not incorporated under any law in force in India or in which the non resident interest is more than forty per cent shall not, except with the general or special permission of the Reserve Bank carry on in India any trading, commercial or industrial activity other than the one for which permission of the Reserve Bank has been obtained under section 28.
The other provisions are of ancillary and consequential nature, following upon the main provision summarised above.
NIIL had applied for the necessary permission, since the non resident interest therein was more than 40% the Holding Company owing nearly 60% of its share capital.
That permission was accorded by the Reserve Bank on certain conditions which, inter alia, stipulated that the reduction in the non resident holding must be brought down to 40% within one year of the receipt of its letter, that is, before May 17, 1977 and that until then, the manufacturing and business activities of the Company shall not be extended beyond the approved level as of December 31, 1973.
It is contended by Shri Seervai that non compliance with the condition regarding the dilution of non resident interest within the stipulated period could not have resulted in the RBI directing NIIL to close down its business or not to carry on its business.
It is also argued that noncompliance with the conditions imposed for permission to carry on its business would not have exposed the Indian directors to any penalties or liabilities and that, in the absence of a power to revoke the permission already granted (as in other sections like sections 6 and 32), the RBI had no power to revoke the permission granted to NIIL even if the conditions subject to which the permission was granted were breached.
According to counsel, closing down a business which the RBI had allowed to be continued by granting permission would have such grave consequences public and private that the power to direct the business to be discontinued was advisably not conferred, even if the conditions are breached.
Section 29(4)(c), it is urged, which enables the RBI to direct non residents to sell their shares or cause them to be sold where an application under section 29(4)(a), for permission to continue to 799 hold shares, was rejected is the only power given to the Reserve Bank where a condition imposed under section 29(2) is breached.
We are unable to accept these contentions.
The Reserve Bank granted permission to NIIL to carry on its business, "subject to the conditions" mentioned in the letter of May 11, 1976.
It may be that each of those conditions is not of the same rigour or importance as e.g. the condition regarding the progress made in implementing the other conditions, which could reasonably be relaxed by condonation of the late filing of any particular quarterly report.
But the dilution of the non resident interest in the equity capital of the Company to a level not exceeding 40% "within 'a period of 1(one) year from the date of the receipt of" the letter was of the very essence of the matter.
A permission granted subject to the condition that such dilution shall be effected would cease automatically on the non compliance with the condition at the end of the stipulated period or the extended period, as the case may be.
The argument of the Holding Company would make the granting of a conditional permission an empty ritual since, whether or not the company performs the conditions, it would be free to carry on its business, the only sanction available to the Bank being, as argued, that it can compel or cause the sale of the excess non resident interest in the equity holding of the Company, under section 29(4)(c) of FERA.
This particular provision, in our opinion, is not a sanction for the enforcement of conditions imposed on a Company under clause (c) of section 29(2).
Section 29(4)(c) provides for a situation in which an application for holding shares in a Company is not made or is rejected.
The sanction for enforcement of a conditional permission to carry on business, where conditions are breached, is the cessation, ipso facto, of the permission itself on the non performance of the conditions at the time appointed or agreed.
This involves no element of surprise or of unjustness because permission is granted, as was done here, only after the applicant agrees to perform the conditions within the stipulated period.
When NIIL wrote to the Bank on February 4, 1976 binding itself to the performance of certain conditions, it could not be heard to say that the permission will remain in force despite its non performance of the conditions.
Having regard to the provisions of section 29 read with sections 49, 56(1) and (3) and section 68 of FERA, the continuance of business after May 17, 1977 by NIIL would have been illegal, unless the condition of dilution of non resident equity was duly complied with.
It is needless, once again, to dwell upon the impracticability of NIIL applying for extension of the period of one year allowed to it by the 800 Bank.
Coats could be optimistic about such an extension being granted especially, since thereby they could postpone the evil day.
For NIIL, the wise thing to do, and the only course open to it, was to comply with the obligation imposed upon it by law, without delay or demur.
It seems to us quite clear, that by reason of the provisions of section 29(1) and (2) of FERA and the conditional permission granted by the RBI by its letter dated May 11, 1976, the offer of rights shares made by NIIL to the Holding Company could not possibly have been accepted by it.
The object of section 29, inter alia, is to ensure that a company (other than a banking company) in which the non resident interest is more than 40% must reduce its to a level not exceeding 40%.
The RBI allowed NIIL to carry on its business subject to the express condition that it shall reduce its non resident holding to a level not exceeding 40%.
The offer of rights shares was made to the existing shareholders, including the Holding Company, in proportion to the shares held by them.
Since the issued capital of the Company which consisted of 32,000 shares was increased by the issue of 16,000 rights shares, the Holding Company which held 18,990 shares was offered 9495 shares.
The acceptance of the offer of rights shares by the Holding Company would have resulted in a violation of the provisions of FERA and the directive of the Reserve Bank.
Were the Holding Company to accept the offer of rights shares, it would have continued to hold 60% share capital in NIIL and the Indian shareholders would have continued to hold their 40% share capital in the Company.
It would indeed be ironical that the measure which was taken by NIIL 's Board of Directors for the purpose of reducing the non resident holding to a level not exceeding 40% should itself become an instrument of perpetuating the ownership by the Holding Company of 60% of the equity capital of NIIL.
We are not suggesting that the offer of rights shares need not have been made to the Holding Company at all.
But the question is whether the offer when made could have been accepted by it.
Since the answer to this question has to be in the negative, no grievance can be made by the Holding Company that, since it did not receive the offer in time, it was deprived of an opportunity to accept it.
We see no substance in Shri Nariman 's contention that the letter of offer could not have been sent to the Holding Company without first obtaining the RBI s approval under section 19 of FERA.
Counsel contends that under section 19(1)(b), notwithstanding anything contained in section 81 of the , no person can, except with 801 the general or special permission of the Reserve Bank, create `any interest in a security ' in favour of a person resident outside India.
The word "security" is defined by section 2(u) to shares, stocks, bonds, etc.
We are unable to appreciate how an offer of shares by itself creates any interest in the shares in favour of the person to whom the offer is made.
An offer of shares undoubtedly creates "fresh rights" as said by this Court in Mathalone vs Bombay Life Assurance Co.(1) but, the right which it creates is either to accept the offer or to renounce it, it does not create any interest in the shares in respect of which the offer is made.
But though it could not have been possible for the Holding Company to accept the offer of rights shares made to it, the question still remains whether it had the right to renounce the offer in favour of any resident Indian person or company of its choice, be it an existing shareholder like Manoharan or an outsider like Madura Coats.
The answer to this question depends on the effect of section 43A and 81 of the .
We will first notice the relevant parts of sections 3, 43A and 81 of the .
Section 3(1)(iii) defines a "private company" thus : "private company" means a company which, by its articles : (a) restricts the right to transfer its shares, if any; (b) limits the number of its members to fifty and (c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company.
Clause (iv) of section 3(1) define a "public company" to mean a company which is not a private company.
Section 43A of the , which was inserted by Act 65 of 1960, reads thus : 43A. (1) Save as otherwise provided in this section, where not less than twenty five per cent of the paid up share capital of a private company having a share capital, is held by one or more bodies corporate, the private, company shall. 802 become by virtue of this section a public company : Provided that even after the private company has so become a public company, its articles of association may include provisions relating to the matter specified in clause (iii) of sub section (1) of section 3 and the number of its members may be, or may at any time be reduced, below seven : (2) Within three months from the date on which a private company becomes a public company by virtue of this section, the company shall inform the Registrar that it has become a public company as aforesaid, and thereupon the Registrar shall delete the word "Private" before the word "Limited" in the name of the company upon the register and shall also make the necessary alterations in the certificate of incorporation issued to the company and in its memorandum of association. . (4) A private company which has become a public company by virtue of this section shall continue to be a public company until it has, with the approval of the Central Government and in accordance with the provisions of this Act, again become a private company.
Section 81 of the reads thus : 81.
(1) Where . . it is proposed to increase the subscribed capital of the company by allotment of further shares, then, (a) such further shares, shall be offered to the persons who at the date of the offer, are holders of the equity shares of the company in proportion, as nearly as circumstances admit, to the capital paid up on those shares at that date ; 803 (b) the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined ; (c) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person, and the notice referred to in clause (b) shall contain a statement of this right ; (d) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is given that he declines to accept the shares offered, the Board of directors may dispose of them in such manner as they think most beneficial to the company. . (1A) Notwithstanding anything contained in sub section (1) the further shares aforesaid may be offered to any persons (whether or not those persons include the persons referred to in clause (a) of sub section (1) ) in any manner whatsoever (a) if a special resolution to that effect is passed by the company in general meeting, or (b) where no such special resolution is passed if the votes cast. . in favour of the proposal . . exceed the votes, if any, cast against the proposal . . and the Central Government is satisfied, on an application made by the Board of directors in this behalf that the proposal is most beneficial to the company. . (3) Nothing in this section shall apply (a) to a private company. . 804 While interpreting these and allied provisions of the , it would be necessary to have regard to the relevant Articles of Association of NIIL, especially since Section 81(1)(c) of that Act, which is extracted above, is subject to the qualification : "Unless the articles of the Company otherwise provide".
The relevant Articles are Articles 11, 32, 38 and 50 and they read thus : Article 11: In order that the Company may be a private Company within the meaning of the Indian Companies Act, 1913, the following provisions shall have effect, namely : (i) No invitation shall be issued to the public to subscribe for any shares, debentures, or debenture stock of the Company.
(ii) The number of the members of the Company (Exclusive of persons in the employment of the Company) shall be limited to fifty, provided that for the purposes of this Article where two or more persons hold one or more shares in the Company jointly, they shall be treated as a single member.
(iii) The right to transfer shares of the Company is restricted in manner hereinafter provided.
(iv) If there shall be any inconsistency between the provisions of this Article and the provisions of any other Article the provisions of this Article shall prevail.
Article 32 : A share may subject to article 38 be transferred by a member or other person entitled to transfer to any member selected by the transferor; but, save as aforesaid, no share shall be transferred to a person who is not a member so long as any member is willing to purchase the same at the fair value.
Such value to be ascertained in manner hereinafter mentioned.
Article 38 : The Directors may refuse to register any transfer of a share (a) where the Company has a lien on the share, or (b) in case of shares not fully paid up, where it is not proved to their satisfaction 805 that the proposed transferee is a responsible person, or (c) where the Directors are of opinion that the proposed transferee (not being already a member) is not a desirable person to admit to membership, or (d) where the result of such registration would be to make the number of members exceed the above mentioned limit.
But clauses (b) and (c) of this Article shall not apply where the proposed transferee is already a member.
Article 50 : When the Directors decide to increase the capital of the Company by the issue of new shares such shares shall be offered to the shareholders in proportion to the existing shares to which they are entitled.
The offer shall be made by notice specifying the number of shares offered and limiting a time within which the offer, if not accepted, will be deemed to be declined and after the expiration of such time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, the Directors may dispose of the same in such manner as they think most beneficial to the Company.
The Directors may likewise so dispose of any new shares which (by reason of the ratio which the new shares bear to the shares held by persons entitled to an offer of new shares) cannot, in the opinion of the Directors, be conveniently offered under this Article.
It is contended by Shri Nariman that by reason of the articles of the Company and on a true interpretation of section 81, the right of renunciation of the shares offered by NIIL was not available to the Holding Company since NIIL was not a full fledged public company in the sense of being incorporated as a public company but had become a public company under section 43A(1) and had, under the first proviso to that section, retained its articles relating to matters specified in section 3(1) (iii).
According to Shri Nariman, section 81(1A) can have no application to a `section 43A (1) proviso company ' (for short, the `proviso company ') because it contemplates issue of shares to the public and to persons other than members of the company, which cannot be done in the case of a company which falls under the proviso to section 43A(1).
806 Section 81(1A), it is urged, is complementary to section 81 and since the latter cannot apply to the `proviso company ', the former too cannot apply to it.
In any event, according to counsel, section 81 (1) (c) cannot apply in the instant case since the articles of NIIL provide, by necessary implication at any rate, that the members of company shall have no right to renounce the shares in favour of "any" other person, because such a right would include the right to renounce in favour of persons who are not members of the company, and NIIL had retained its articles under which, shares could not be transferred or renounced in favour of outsiders.
Shri Seervai has refuted these contentions, his main argument being that the definitions of `public company ' and `private company ' are mutually exclusive and, between them, are exhaustive of all categories of companies.
There is, according to the learned counsel no third category of companies recognised by the Companies Act, like the `proviso company '.
Shri Seervai further contends : (a) The right of renunciation is not a `transfer ' and therefore the directors ' power to refuse to register the shares under the articles does not extend to renunciation ; (b) Before considering Section 43A, which was inserted for the first time in the Act of 1956 by the amending Act of 1960, it should be noted that Section 81 as enacted in the Act of 1956 contained three sub sections (1), 2 and 3, and sub section 3 provided that "nothing in this section shall apply to a private company".
The opening words of Section 81, as they now stand, were substituted by the Amending Act of 1960, and sub section (1A) was inserted by the said Amending Act, and sub section (3) was substituted by the Amending Act of 1963.
But subsection 3 (a) reproduced sub section (3) of the Act of 1956, namely, "nothing in this section shall apply to a private company".
It is clear therefore that the rights conferred by Section 81 (1) and (2) do not apply to a private company, and this provision in the Act of 1956 was not connected with the insertion Section 43A for the first time in 1960.
(c) The provisos to Section 43A (1), (1A) and (1B) are very important in connection with Section 81 of the 807 Act of 1956.
Just as the crucial words in Section 27(3) are "shall contain", the crucial words in the provisos are "may include" (or may retain).
The words "shall contain" are mandatory and go to the constitution of a private company.
The words "may include" are permissive and they do not go to the constitution of a company which has become a public company by virtue of Section 43A because whether the articles include (or retain) those requirements or do not include those requirements, the constitution of the company as a public company remains unaffected; (d) No statutory consequence follows, as to the company being a public company, on the retention of the three requirements or one or more of them, or in not complying with those requirements.
But in the case of a private company which does not comply with the requirements of Section 3 (1)(iii) serious consequences follow under Section 43, and in the case of a private company altering its articles so as not to include all the matters referred to in Section 3 (1) (iii) serious consequences follow under Section 43, and in the case of a private company altering its articles so as not to include all the matters referred to in Section 3 (1) (iii) serious consequences follow under Section 44.
In short, the inclusion, or retention, of all the matters referred to in Section 3(1) (iii) has a radically different part of function in a private company which becomes a public company by virtue of Section 43A from that which it has in a private company.
More particularly the non compliance with the three requirements of Section 3 (1)(iii) included, or retained, in the articles of a private company which has become a public company by virtue of Section 43A, involves no statutory consequences or disabilities, since such a company is a public company and Section 43 is not attracted.
(e) It is wrong to contend that the whole of Section 81(1) does not apply to a `proviso company ' because it is a private company entitled to the protection of subsection 3 (a).
Section 81(3) (a) applies to a private 808 company; a `proviso company ' is one which has become, and continues to remain, a public company; (f) Section 81 (1) (c) applies to all companies other than private companies.
The articles of a public company may include all of the matters referred to in Section 3 (1) (iii), or may include one or two of the matters referred to therein without ceasing to be a public company.
A public company which has become such by virtue of Section 43A can delete all the matters referred to in Section 3 (1) (iii) or may delete one or two of them or may include (or retains) all the three matters referred to in Section 3 (1) (iii).
The retention of the three matters mentioned in Section 3(1) (iii) does not in any way affect the constitution of the company because it has become and continues to be a public company ; (g) Section 81 when enacted in 1956 consisted of 3 subsections.
The need to exempt private companies arose from Section 81(c), for the right to renounce in favour of any person might, (not must), conflict with the limitation on the number of members to 50 and since that was one of the matters which went to the constitution of a company as a private company, private companies were expressly exempted.
No such exemption was necessary in the case of a `proviso company ' which retains in its articles all the three matters referred to in Section 3(1) (iii), because an increase in the number of its members above 50 will not affect the constitution of the company which remains that of a public company; (h) Section 81 as enacted in 1956 did not contain subsection (1A) which was inserted for the first time by the Amending Act of 1960, which Amending Act also inserted Section 43A.
After the insertion of subsection (1A) the effect of the exemption of private companies from the operation of section 81 became even more necessary for the provisions of sub section (1A) (a) and (b) override the whole of Section 81 (1) and shares need not be offered to existing shareholders.
Section 81 (1A) also overrides Article 50 of NIIL; 809 (i) The Articles of NIIL provide for the transfer of shares, and Article 38 sets out the circumstances under which the directors may refuse to transfer the shares.
However, since renunciation of shares is not a transfer, the restriction in Article 11(iii) is not violated by an existing member of NIIL renouncing his share in favour of any other person; (j) The opening words of Sections 81 (1) (c) are "unless the articles of the company otherwise provide".
Section 81 (1) (c) contains no reference to "expressly provide" or "expressly or by necessary implication provide".
According to the plain meaning of the words "other wise provide", there must be a provision in the Articles which says that the offer of shares to existing members does not entitle them to renounce the shares in favour of any person.
Article 11 of NIIL merely states the matters necessary to constitute a company a private company.
Such companies are exempt from Section 81 and so, the questions of its `otherwise providing ' does not arise.
Article 50 refers to the rights shares but it makes no other provision with regard to the right of renunciation than is made in Section 81(1)(c).
Unless such other provision is made, the opening words of Section 81(1)(c) are not attracted.
Secondly, Section 81(1)(c) provides that unless the articles otherwise provide "the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any person".
The right conferred by the deeming clause can be taken away only by making a provision in the Articles to prevent the deeming provision from taking effect.
The deeming provision cannot be avoided by implications; and (k) The Holding Company could have renounced the rights shares offered to it at least in favour of the Manoharan group and the fact that after the shares were allotted, the Manoharans stated that they were not interested in subscribing to the shares offered does not affect the question of the legal right.
Besides, it was one thing to refuse to subscribe to the shares offered; it was another thing to accept the renunciation of merely 6,190 shares 810 which would have given the Manoharans a substantial stake in the affairs of the company.
Shri Seervai relies upon many a text and authority in support of the proposition that the classification of companies into private and public is mutually exclusive and collectively exhaustive.
He relies upon a decision in Park vs Royalty Syndicates(1) in which Hamilton J. (later Lord Summer) observed that a public company is simply one which is not a private company and that there is no "intermediate state or terbium quid".
In support of the proposition that the right to renunciation of shares is not a transfer, counsel relies upon a decision in Re Pool Shipping Co. Ltd.(2).
Reliance is also placed in this behalf on the statement of law in Halsbury (Vol. 7, 4th edition, p. 218), Palmer 's Company Law Vol. 1, 22nd edition p. 393), Palmer 's Company Precedents (Part 1, 17th edition, p. 688), Gore Brown on Companies (43rd edition, para 16.3) and Buckley on Companies Act (13th edition, p. 815).
While indicating his own reasons as to why the legislature enacted identical provisos to sub sections (1),(1A) and (1B) of section 43A, counsel mentioned that no light is thrown for enacting these provisos, either by the Shastri Committee Report which led to the Companies (Amendment) Act, 1960 or by the Notes on clauses, or by the Report of the Joint Select Committee.
In regard to the opening words of section 81 (1)(c); "Unless the articles of the company otherwise provide", counsel cited the Collins English Dictionary, the Random House Dictionary and the Oxford English Dictionary.
An interesting instance of the use of the word "provide ' is to be found in the Random House Dictionary, 1967, p. 1157, to this effect : "The Mayor 's wife of the city provided in her will that she would be buried without any pomp or noise".
It shall have been noticed that the entire superstructure of Shri Seervai 's argument rests on the foundation that the definitions of `public company ' and `private company ' are mutually exclusive and collectively exhaustive of all categories of companies, that is to say, that there is no third kind of company recognised by the .
The argument merits close examinations since it finds support, to an appreciable extent, from the very text of the .
The definition of `private company ' and the manner in which a `public company ' is defined ("public company means a company which is not a private company") bear out the argument that these 811 two categories of companies are mutually exclusive.
If it is this it cannot be that and if it is that it cannot be this.
But, it is not true to say that between them, they exhaust the universe of companies.
A private company which has become a public company by reason of section 43A, may include, that is to say, may continue to retain in its articles, matters which are specified in section 3 (1)(ii), and the number of its members may at any time be reduced below 7.
This provision itself highlights the basic distinction between, on one hand, a company which is incorporated as a public company or a private company which is converted into a public company under section 44, and on the other hand, a private company which has become a public company by reason of the operation of section 43A.
In the first place, a section 43A company may include in its articles, as part of its structure, provisions relating to restrictions on transfer of shares, limiting the number of its members to 50, and prohibiting an invitation to the public to subscribe for shares, which are typical characteristics of a private company.
A public company cannot possibly do so because, by the very definition, it is that which is not a private company, that is to say, which is not a company which by its articles contains the restrictions mentioned in section 3 (1)(iii).
Therefore, the expression `public company ' in section 3(1) (iv) cannot be equated with a `private company which has become a public company by virtue of section 43A '.
Secondly, the number of members of a public company cannot fall below 7 without attracting the serious consequences provided for by section 45 (personal liability of members for the company 's debts) and section 433(d) (winding up in case the number of its members falls below 7).
A section 43A company can still maintain its separate corporate identity qua debts even if the number of its members is reduced below seven and is not liable to be wound up for that reason.
Thirdly, a section 43A, company can never be incorporated and registered as such under the .
It is registered as a private company and becomes, by operation of law, a public company.
Fourthly, the three contingencies in which a private company becomes a public company by virtue of section 43A (mentioned in sub sections (1), (1A) and (1B) read with the provisions of subsection (4) of the section) show that it becomes and continues to be a public company so long as the conditions in sub sections (1), (1A) or (1B) are applicable.
The provisos to each of these sub sections 812 clarify the legislative intent that companies may retain their registered corporate shell of a private company but will be subjected to the discipline of public companies.
When the necessary conditions do not obtain, the legislative device in section 43A is to permit them to go back into their corporate shell and function once again as private companies, with all the privileges and exemptions applicable to private companies.
The proviso to each of the subsections of section 43A clearly indicates that although the private company has become a public company by virtue of that section, it is permitted to retain the structural characteristics of its origin, its birth marks, so to say.
Any provision of the which would endanger the corporate shell of a `proviso company ' cannot be applied to it because, that would constitute an infraction of one or more of the characteristics of the `proviso company ' which are statutorily allowed to be preserved and retained under each of the three provisos to the three sub sections of section 43A.
A right of renunciation in favour of any other person, as a statutory term of an offer of rights shares, would be repugnant to the integrity of the Company and the continued retention by it of the basic characteristics under section 3(1)(iii).
Fifthly, section 43A, when introduced by Act 65 of 1960, did not adopt the language either of section 43 or of section 44.
Under section 43 where default is made in complying with the provisions of section 3(1)(iii), a private company "shall cease to be entitled to the privileges and exemptions conferred on private companies by or under this Act, and this Act shall apply to the company as if it were not a private company".
Under section 44 of the Act, where a private company alters its Articles in such a manner that they no longer include the provisions which under, section 3(1)(iii) are required to be included in the Articles in order to constitute it a private company, the company "shall as on the date of the alteration cease to be a private company".
Neither of the expressions, namely, "This Act shall apply to the company as if it were not a private company" (section 43) or that the company "shall . cease to be a private company (section 44) is used in section 43A.
If a section 43A company were to be equated in all respects with a public company, that is a company which does not have the characteristics of private company, Parliament would have used language similar to the one in section 43 or section 44, between which two sections, section 43A was inserted.
If the intention was that the rest of the Act was to apply to a section 43A company "as if it were not a private company" nothing would have been easier 813 than to adopt that language in section 43A, and if the intention was that a section 43A company would for all purposes "cease to be a private company", nothing would have been easier than to adopt that language in section 43A.
Sixthly, the fact that a private company which becomes a public company by virtue of section 43A does not cease to be for all purposes a "private company" becomes clear when one compares and contrasts the provisions of section 43A with section 44 : when the Articles of a private company no longer include matters under section 3(1)(iii), such a company shall as on the date of the alteration cease to be a private company (section 44(1)(a)).
It has then to file with the Registrar a prospectus or a statement in lieu of prospectus under section 44(2).
A private company which becomes a public company by virtue of section 43A is not required to file a prospectus or a statement in lieu of a prospectus.
These considerations show that, after the Amending Act 65 of 1960, three distinct types of companies occupy a distinct place in the scheme of our : (1) private companies (2) public companies and (3) private companies which have become public companies by virtue of section 43A, but which continue to include or retain the three characteristics of a private company.
Sections 174 and 252 of the which deal respectively with quorum for meetings and minimum number of directors, recognise expressly, by their parenthetical clauses, the separate existence of public companies which have become such by virtue of section 43A.
We may also mention that while making an amendment in sub clause (ix) of Rule 2 of the Companies (Acceptance of Deposits) Rules, 1975, the Amendment Rules, 1978 added the expression : "Any amount received. . by a private company which has become a public company under section 43A of the Act and continues to include in its Articles of Association provisions relating to the matters specified in clause (iii) of sub section (1) of section 3 of the Act", in order to bring deposits received by such companies within the Rules.
The various points discussed above will facilitate a clearer perception of the position that under the , there are three kinds of companies whose rights and obligations fall for consideration, namely, private companies, public companies and companies which have become public companies under section 43(1) but which retain, under the first proviso to that section, the three characteristics of private companies mentioned in section 3(1)(iii) 814 of the Act, private companies enjoy certain exemptions and privileges which are peculiar to their constitution and nature.
Public companies are subjected severely to the discipline of the Act.
Companies of the third kind like NIIL, which become public companies but which continue to include in their articles the three matters mentioned in clauses (a) to (c) of section 3(1)(iii) are also, broadly and generally, subjected to the rigorous discipline of the Act.
They cannot claim the privileges and exemptions to which private companies which are outside section 43A are entitled.
And yet, there are certain provisions of the Act which would apply to public companies but not to section 43A companies.
Is section 81 of the one such provision ? and if so, does the whole of it not apply to a section 43A company or only some particular part of it ? These are the questions which we have now to consider.
On these two questions, both the learned counsel have taken up extreme positions which, if accepted, may create confusion and avoidable inconvenience in the administration of section 43A companies like NIIL.
Shri Nariman contends that a section 43A company becomes a public company qua the outside world, as e.g. in matters of remuneration of directors, disclosure, commencement of business, information to be supplied but it remains a private company qua its own shareholders.
Therefore, says counsel, no provision of the can apply to such companies, which is inconsistent with or destructive of the retention of the three essential features of private companies as mentioned in section 3(1)(iii).
Section 81, it is said, is one such provision and in so far as private companies go, it can apply only to (a) such companies which become public companies under section 43A but which do not retain the three essential features and to (b) private companies which are duly converted into public companies.
It is urged that even assuming that the expression "private company" occurring in the various provisions of the (including section 81(3)(a)) does not include a section 43A proviso Company, that does mean that section 81 would be applicable to a 43A Proviso Company, because : (a) The proviso to section 43A(1) and section 81 are both substantive provisions and neither is subordinate to the other ; in fact section 43A was introduced later in 1960; and (b) An offer of rights shares to a member in a section 43A proviso company cannot include a right to renounce the shares in favour of any other person, because such a right would be inconsistent with the article of the company limiting the number of its members to 50 and with the article prohibiting invitation to the public to subscribe for shares in the company.
The fact that the statute overrides the 815 articles is not a sufficient ground for rendering the provisions of section 81 applicable to a section 43A(1) proviso company since the right to continue to include provisions in its articles specified in section 3(1)(iii) is itself a statutory right.
Counsel says that in these circumstances and this is without taking the assistance of the words "unless the articles of the company otherwise provide" in section 81(1)(c) the provision regarding the right of renunciation cannot apply to section 43A proviso company.
The answer of Shri Seervai to this contention flows from what truly is the sheet anchor of his argument, namely, that the definitions of `public company ' and `private company ' are mutually exclusive and between them, they are exhaustive of all categoric of companies.
Counsel contends that section 81(1A) overrides section 81(1); that by reason of sub section (3) of section 81, section 81 is not applicable to a "private company" but NIIL is not a "private company ' since it became a public company by virtue of section 43A; and that, therefore, the offer of rights shares made by NIIL can be renounced by the offerees in favour of any other person.
Neither of the two extreme positions for which the counsel contend commends itself to us.
The acceptance of Shri Nariman 's argument involves tinkering with clause (a) of section 81(3), which shall have to be read as saying that "Nothing in section 81 shall apply to a `private company ' and to a company which becomes a public company by virtue of section 43A and whose Articles of Association include provisions relating to the matters specified in clause (iii) of sub section (1) of section 3".
Section 81(1) does not contain a non obstante clause.
But, if Shri Nariman is right, there would be no alternative save to exclude the applicability of all of its provisions to a company like NIIL, by reading into it an overriding provision which alone can achieve such result.
On the other hand, to accept wholesale the argument of Shri Seervai would render the first proviso to section 43A(1) nugatory.
The right to retain in the Articles the provision regarding the restriction on the right to transfer shares, the limitation on the number of members to fifty and the prohibition of any invitation to the public to subscribe for the shares or debentures of the Company will then be washed off.
The truth seems to us to lie in between the extreme stands of the learned counsel for the two sides.
There is no difficulty in giving full effect to clauses (a) and (b) of section 81 (1) in the case of a company like NIIL, even after it 816 becomes a public company under section 43A.
Clause (a) requires that further shares must be offered to the holders of equity shares of the Company in proporation, as nearly as circumstances admit, to the capital paid up on those shares, while clause (b) requires that the offer of further shares must be made by a notice specifying the number of shares offered and limiting the time, not being less than fifteen days from the date of the offer, within which the offer, if not accepted, will be deemed to have been declined.
The real difficulty arises when one reaches clause (c) according to which, the offer shall be deemed to include the right of renunciation of shares or any of them in favour of any other person.
We will keep aside for the time being the opening words of clause (c) : "unless the articles of the company otherwise provide".
Clause (c) further requires that the notice referred to in clause (b) must contain a statement as to the right of renunciation provided for by clause (c).
Having given to the matter our most anxious consideration, we are of the opinion that clause (c) of section 81(1) cannot apply to the earth while private companies which have become public companies under section 43A and which include, that is to say which retain or continue to include, in their articles of association the matters specified in section 3(1)(iii) of the Act, as specified in the first proviso to section 43A.
If clause (c) were to apply to the section 43A proviso companies, it would be open to the offerees to renounce the shares offered to them in favour of any other person or persons.
That may result directly in the infringement of the article relating to the matter specified in section 3(1)(iii) (b) because, under clause (c) of section 81(1), the offeree is entitled to spilt the offer and renounce the shares in favour of as many persons as he chooses, depending partly on the number of shares offered by the company to him.
The right to renounce the shares in favour of any other person is also bound to result in the infringement of the article relating to the matter specified in section 3(1)(iii)(c), because an offer which gives to the offeree the right to renounce the shares in favour of a non member is, in truth and substance, an invitation to the public to subscribe for the shares in the company.
As stated in Palmer 's Company Law (22nd Ed., Vol.
I, para 21 18) : "Where the Company issues renounceable letters of allotment the circle of original allottees can easily be broken by renunciation of those rights and complete strangers may become the allottees; here the offer will normally be held to be made to the public.
" There is statement to the same effect in Gower 's Company Law 4th Ed., page 351) : 817 "It is therefore clear that an invitation by or on behalf of a private company to a few of the promoter 's friends and relations will not be deemed to be an offer to the public.
Nor, generally, will an offer which can only be accepted by the shareholder of a particular company.
On the other hand it is equally clear that an offer of securities in a public company even to a handful people may be an offer to the public if it is calculated (which presumably means "Likely" rather than "intended") to lead to the securities being subscribed (i.e. applied for on original allotment) or purchased (i.e. bought after original allotment) by persons other than those receiving the initial offer.
In particular, if securities to be issued under renounceable allotment letter or letter of right the invitation to take them up must be deemed to be made to the public, since these securities are obviously liable to be subscribed or purchased by others.
" The learned author says at page 430 that in the case of a private placing an issue by a private company allotment letters will probably be dispensed with, "in any case they cannot be freely renounceable".
In foot note (22) the author points out that the real danger is that if renounceable allotment letters are issued, the company may be regarded as having made an offer to the public.
We cannot construe the provision contained in clause (c) in a manner which will lead to the negation of the option exercised by the company to retain in its articles the matters referred to in section 3 (1)(iii).
Both these are statutory provisions and they are contained in the same statute.
We must harmonise them, unless the words of the statute are so plain and unambiguous and the policy of the statute so clear that to harmonise will be doing violence to those words and to that policy.
Words of the statute, we have dealt with.
Its policy, if anything, points in the direction that the integrity and structure of the section 43A provisio companies should, as far as possible, not be broken up.
The exemption in favour of private companies would appear to have been inserted in section 81(3)(a) because of the right of renunciation conferred by section 81(1)(c).
Section 105C of the Companies Act 1973 which contained substantially all the provisions that are to be found in section 81(1)(a), (b) and (d) applied to all companies.
The right of renunciation in favour of any other person was conferred for the first time by the Act of 1956.
That led to the insertion of the exception in favour of private companies since, a right of renunciation in favour of other persons is wholly inconsistent 818 with the structure of a private company, which has to contain the three characteristics mentioned in section 3(1)(iii).
When section 43A was introduced by Act 65 of 1960, the legislature apparently overlooked the need to exempt companies falling under it, read with its first proviso, from the operation of clause (c) of section 81(1).
That the legislature has overlooked such a need in regard to other matters, in respect of which there can be no controversy, is clear from the provisions of sections 45, and 433 (d) of the Companies Act.
Under section 45, if at any time the number of members of a company is reduced, in the case of a public Company below seven, or in the case of a Private Company below two, every member of the company becomes severally liable, under the stated circumstances, for the payment of the whole debt of the company and can be severally sued therefor.
No exception has yet been provided for in section 45 in favour of the section 43A proviso companies, with the result that a private company having, say, three members which becomes a public company under section 43A and continues to function with the same number of members, will attract the rigour of section 45.
Similarly, under section 433(d), such a company would automatically incur the liability of being wound up for the same reason.
If and when these provisions fall for consideration, due regard may have to be given to the principle of harmonious construction, in order to exclude section 43A proviso companies from the application of those provisions.
We hope that before such and occasion arises, the Legislature will make appropriate amendments in the relevant provisions of the Companies Act.
Such amendments have been made in sections 174(1), clause (iii) of the second proviso to sub section (1) of section 220, and section 252(1) in order to accord separate treatment to private companies which become public companies by virtue of section 43A, as distinguished from public companies of the general kind.
In coming to the conclusion that clause (c) of section 81(1) cannot apply to section 43A proviso companies, we have not taken into consideration the impact of the opening words of clause (c) : "Unless the articles of the company otherwise provide".
The effect of these words is to subordinate the provisions of clause (c) to the provisions of the articles of association of the company.
In other words, the provisions that the offer of further shares shall be deemed to include the right of renunciation in favour of any other person will not apply if the articles of the company "otherwise provide".
Similarly the requirement that the notice of offer must contain a statement of the right of renunciation will not apply if the articles of 819 the company otherwise provide.
The question which we have to consider under this head is whether the articles of association of NIIL provide otherwise than what is provided by clause (c) of section 81(1).
We have already extracted the relevant articles, namely, articles 11, 32, 38 and 50.
To recapitulate, article 11, which has an important bearing on the subject now under discussion, provides that in order that the company may be a private company, (i) no invitation shall be issued to the public to subscribe for any shares, debentures, etc; (ii) the number of members of the company shall be limited to 50; and (iii) the right to transfer shares of the company will be restricted in the manner provided in the articles.
By article 32, a share may be transferred, subject to article 38, by a member to any member selected by the transferor but no share shall otherwise be transferred to a person who is not a member so long as any member is willing to purchase the same at a fair value.
Article 38 confers upon the directors the power to refuse to register the transfer of a share for four reasons, the last of which is that the transfer will make the number of members exceed the limit of 50.
Article 50, which also, is important, provides that the offer of new shares shall be made by a notice specifying the number of shares offered and limiting the time within which the offer, if not accepted, will be deemed to have been declined.
If the offer is declined or is not accepted, before the expiration of the time fixed for its acceptance, the directors have power to dispose of the shares in such manner as they think most beneficial to the company.
It is urged by Shri Seervai that none of the articles of the company provides otherwise than what is provided in clause (c) of section 81(1) and therefore, clause (c) must have its full play in the case of NIIL.
On the other hand, it is contended by Shri Nariman that the opening words, of clause (c) do not require or postulate that the articles of the company must contain an "express" provision, contrary to what is contained in clause (c).
The contention, in other words, is that if the articles of a company contain a provision which, by necessary implication, is otherwise than what is provided in clause (c); that clause can have no application.
In view of our finding that keeping aside the opening words of clause (c), the provisions of that clause cannot apply to section 43A proviso companies, it is academic to consider whether the word "provide" in the opening part of clause (c) postulates an express provision on the subject of renunciation or whether it is sufficient compliance with the opening words, if the articles contain by necessary implication a provision which is otherwise than what is provided in clause 820 (c).
We would, however, like to express our considered conclusion on this point since the point has been argued fully by both the counsel and needs to be examined, as it is likely to arise in other cases.
In the first place, while construing the opening words of section 81(1)(c), it has to be remembered that section 43A companies are entitled under the proviso to that section to include provisions in their Articles relating to matters specified in section 3(1)(iii).
The right of renunciation in favour of any other person is wholly inconsistent with the Articles of a private company.
If a private company becomes a public company by virtue of section 43A and retains or continues to include in its Articles matters referred to in section 3(1)(iii), it is difficult to say that the Articles do not provide something which is otherwise than what is provided in clause (c).
The right of renunciation in favour of any other person is of the essence of clause (c).
On the other hand, the absence of that right is of the essence of the structure of a private company.
It must follow, that in all cases in which erstwhile private companies become public companies by virtue of section 43A and retain their old Articles, there would of necessity be a provision in their Articles which is otherwise than what is contained in clause (c).
Considered from this point of view, argument as to whether the word "provide" in the opening words of clause (c) means "provide expressly" loses its significance.
On the question whether the word "provide" means "provide expressly", we are unable to accept Shri Seervai 's submission that the Articles must contain a provision which is expressly otherwise than what is provided in clause (c).
In the context in which a private company becomes a public company under section 43A and by reason of the option available to it under the proviso, the word "provide" must be understood to mean "provide expressly or by necessary implication".
The necessary implication of a provision has the same effect and relevance in law as an express provision has, unless the relevance of what is necessarily implied is excluded by the use of clear words.
Considering the matter from all reasonable points of view, particularly the genesis of section 43A proviso companies, we are of the opinion that in order to attract the opening words of clause (c) of section 81(1), it is not necessary that the Articles of the Company must contain an express provision otherwise than what is contained in clause (c).
We do not think it necessary to consider the decision of the Privy Council in Shanmugam vs Commissioner for Registration, 821 cited by Shri Nariman, which says that to be an "express provision" with regard to something it is not necessary that the thing should be specially mentioned; it is sufficient that it is directly covered by the language, however broad the language may be which covers it, so long as the applicability arises directly from the language used and not by inference therefrom.
We may only mention that though Articles of NIIL do not contain an express provision that there shall be no right of renunciation, the right is wholly inconsistent with the Articles.
We have already stated above that the right of renunciation is tantamount to an invitation to the public to subscribe for the shares in the company and can violate the provision in regard to the limitation on the number of members.
Article 11, by reason of its clause (iv), prevails over the provisions of all other Articles if there is inconsistency between it and any other Article.
For these reasons we are of the opinion that clause (c) of section 81(1) of the Companies Act, apart from the consideration arising out of the opening words of that clause, can have no application to private companies which have become public companies by virtue of section 43A and which retain in their Articles the three matters referred to in section 3(1)(iii) of the Act.
In so for as the opening words of clause(c) are concerned, we are of the opinion that they do not require an express provision in the Articles of the Company which is otherwise than what is provided for in clause (c).
It is enough, in order to comply with the opening words of clause (c), that the Articles of the Company contain by necessary implication a provision which is otherwise than what is provided in clause (c).
Articles 11 and 50 of NIIL 's Articles of Association negate the right of renunciation.
The question immediately arises, which is of great practical importance in this case, as to whether members of a section 43A proviso company have a limited right of renunciation, under which they can renounce the shares offered to them in favour of any other member or members of the company.
Consistently with the view which we have taken of clause (c) of section 81(1) our answer to this question has to be in the negative.
The right to renounce shares in favour of any other person, which is conferred by clause (c) has no application to a company like NIIL and therefore, its members cannot claim the right to renounce shares offered to them in favour of any other member or members.
The Articles of a company may well provide for a right of transfer of shares by one member to another, but that right is very much different from the right or 822 renunciation, properly so called.
In fact, learned counsel for the Holding Company has cited the decision in Re Pool Shipping Co. Ltd., (supra) in which it was held that the right of renunciation is not the same as the right of transfer of shares.
Coming to sub section (1A) of section 81, it provides, stated briefly, that notwithstanding anything contained in sub section (1), the further shares may be offered to any persons in any manner whatsoever, whether or not those persons include a person referred to in clause (a) of sub section (1).
That can be done under clause (a) of sub section (1A) by passing a special resolution in the General Meeting of the company or under clause (b), where no such special resolution is passed, if the votes cast in favour of the proposal exceed the votes cast against it and the Central Government is satisfied that the proposal is most beneficial to the company.
For reasons similar to those which we have come to the conclusion that clause (c) of section 81 cannot apply to a section 43A proviso company, we must hold that sub section (1A) can also have no application to such companies.
To permit the further shares to be offered to the persons who are not members of the company will be clearly contrary to the Articles of Association of a section 43A proviso company, in regard to the three matters which bear on the structure of such companies.
At the highest, the method provided for in clauses (a) and (b) of sub section (1A) may be resorted to by a section 43A proviso company for the limited purpose of offering the net shares to its members otherwise than in proportion to the capital paid up on the equity shares of the company.
That course may be open for the reason that sub section (1A) permits the further shares to be offered "in any manner whatsoever".
A change in the pro rata method of offer of new shares is not necessarily violative of the basic characteristics of a private company which becomes a public company by virtue of section 43A.
To this limited extent only, but not beyond it, the provisions of sub section (1A) of section 81 can apply to such companies.
The following proposition emerge out of the discussion of the provisions of FERA, sections 43A and 81 of the Companies Act and of the articles of association of NIIL: (1) The Holding Company had to part with 20% out of the 60% equity capital held by it in NIIL; (2) The offer of Rights Shares made to the Holding Company as a result of the decision taken by Board of 823 Directors in their meeting of April 6, 1977 could not have been accepted by the Holding Company; (3) The Holding Company had no right to renounce the Right Shares offered to it in favour of any other person, member or non member; and (4) Since the offer of Rights Shares could not have been either accepted or renounced by the Holding Company, the former for one reason and the latter for another, the shares offered to it could, under article SO of the articles of association, be disposed of by the directors, consistently with the articles of NIIL, particularly article 11, in such manner as they thought most beneficial to the Company.
These proposition afford a complete answer to Shri Seervai 's contention that what truly constitutes oppression of the Holding Company is not the issue of Rights Shares to the existing Indian shareholders only but the offer of Rights Shares to all existing shareholders and the issue thereof to existing Indian shareholders only.
The meeting of 2nd May, 1977 was unquestionably illegal for reasons already stated.
It must follow that the decision taken by the Board of Directors in that meeting could not, in the normal circumstances, create mutual rights and obligations between the parties.
But we will not treat that decision as non est because a point of preponderating Importance is that the issue of Rights Shares to existing Indian shareholders only and the non allotment thereof to the Holding Company did not cause any injury to the proprietary rights of the Holding Company as shareholders, for the simple reason that they could not have possibly accepted the offer of rights shares because of the provisions of FERA and the conditions imposed by the Reserve Bank in its letter dated May 11, 1976, nor indeed could they have renounced the shares offered to them in favour of any other person at all because section 81(1)(c) has no application to companies like NIIL which were once private companies but which become public companies by virtue of section 43A and retain in their articles the three matters referred to in section 3(1)(iii) of the Act.
It was neither fair nor proper on the part of NIIL 's officers not to ensure the timely posting of the notice of the meeting for 2nd May so as to enable Sanders to attend that meeting.
But there the 824 matter rests.
Even if Sanders were to attend the meeting, he could not have asked either that the Holding Company should be allotted the rights shares or alternatively, that it should be allowed to "renounce" the shares in favour of any other person, including the Manoharan group.
The charge of oppression arising out of the central accusation of non allotment of the rights shares to the Holding Company must, therefore, fail.
We must mention that we have rejected the charge of oppression after applying to the conduct of Devagnanam and his group the standard of probity and fairplay which is expected of partners in a business venture.
And this we have done without being influenced by the consideration pressed upon us by Shri Nariman that Coats and NEWEY, who were two of the three main partners, were not of one mind and that NEWEY never complained of oppression.
They may or they may not.
That is beside the point.
Such technicalities cannot be permitted to defeat the exercise of the equitable jurisdiction conferred by section 397 of the Companies Act.
Shri Seervai drew our attention to the decision in Blissett vs Daniel (supra) the facts of which as they appear at pp 1036 37, bear, according to him, great resemblance to the facts before us.
The following observations in that case are of striking relevance; "As has been well observed during the course of the argument, the view taken by this Court with regard to morality of conduct amongst all parties most especially amongst those who are bound by the ties of partnership is one of the highest degree.
The standard by which parties are tried here, either as trustees or as co partners, or in various other relations which may be suggested, is a standard, I am thankful to say so, far higher than the standard of the world; and, tried by the standard, I hold it to be impossible to sanction the removal of this gentleman under these circumstances".
(p 1040) Not only is the law on the side of Devagnanam but his conduct cannot be characterised as lacking in probity, considering the extremely rigid attitude adopted by Coats.
They drove him into a tight corner from which the only escape was to allow the law to have its full play.
Even though the company petition fails and the appeals succeed on the finding that the Holding Company has failed to make out a case of oppression, the court is not powerless to do substantial justice between the parties and place them, as nearly as it may, in the same 825 position in which they would have been, if the meeting of 2nd May were held in accordance with law.
The notice of the meeting was received by Sanders in U.K.
On the 2nd May when everything was over, bar the post meeting recriminations which eventually led to this expensive litigation.
If the notice of the meeting had reached the Holding Company in time, it is reasonable to suppose that they would have attended the meeting, since one of the items on the Agenda was "Policy (a) Indianisation, (b) allotment of shares".
Devagnanam and his group were always ready and willing to buy the excess shares of the Holding Company at a fair price as clear from the correspondence to which our attention has been drawn.
In the affidavit dated May 25, 1977, Devagnanam stated categorically that the Indian shareholders were always ready and willing to purchase one third of the shareholding of the non resident shareholders, at a price to be fixed in accordance with the articles of Association by the Reserve Bank of India.
On May 27, he sent a cable, though 'without prejudice ', offering to pay premium if the Holding Company were to adopt disinvestment as a method of dilution of their interest.
In the Trial Court, counsel for the Indian shareholders to whom the rights shares were allotted offered to pay premium on the 16,000 rights shares.
The cable and the offer were mentioned before us by Shri Nariman and were not disputed by Shri Seervai.
There is no reason why we should not call upon the Indian shareholders to do what they were always willing to do, namely, to pay to the Holding Company a fair premium on the shares which were offered to it, which it could neither take nor renounce and which were taken up by the Indian shareholders in the enforced absence of the Holding Company.
The willingness of the Indian shareholders to pay a premium on the excess holding or the rights shares is a factor which, to some extent, has gone in their favour on the question of oppression.
Having had the benefit of that stance, they must now make it good.
Besides, it is only meet and just that the Indian shareholders, who took the rights shares at par when the value of those shares was much above par, should be asked to pay the difference in order to nullify unjust unjustifiable enrichment at the cost of the Holding Company.
We must make it clear that we are not asking the Indian shareholders to pay the premium as a price of oppression.
We have rejected the plea of oppression and the course which we are now adopting is intended primarily to set right the course of justice, in so far as we may.
The question then is as to what should be taken to be the reasonable value of the shares which were offered to the Holding Company but taken over by the bulk of the Indian shareholders.
In 826 his letter dated December 17, 1975 to M.M.C. Newey, D.P. Kingsley, the Secretary of NIIL, had assessed the value of NIIL 's shares at Rs. 175 per share.
That value was arrived at by averaging the break up value, the yield and the average market price in the case of quoted shares.
Citing a paragraph from a book on the Foreign Exchange Regulation Act, Kingsley says in his letter that the method which was adopted by him far valuing the shares was also followed by the Controller of Capital Issues.
Copies of Kingsley 's letter were sent to Alan Mackrael and Devagnanam.
On June 9, 1976 Price Waterhouse, Peat & Co., Chartered Accountants, Calcutta wrote a letter to Mackrael in response to the latter 's cable, valuing the shares of NIIL at Rs. 204 per share.
That letter shows that while valuing the shares, they had taken into account various factors including "the average of the net asset value and the earnings basis", which, according to them, are considered as relevant factors by the Controller of Capital Issues while valuing the shares of companies.
The Chartered Accountants applied "the CCI formula" and after making necessary adjustments to the fixed assets, the proposed dividend and the gratuity liabilities for 1975, they valued NIIL 's business, on a net asset basis, at Rs. 50 lakhs.
On an earnings basis, the valuation of the Company based on the past three years ' net profits capitalized at 15% was Rs. 80 lakhs.
That gives an average valuation of Rs. 65 lakhs for the business or Rs. 204 per share.
The purported offer to Devagnanam by Khaitan "a sewing needle competitor to Ketti", at 3.6 times par, cannot afford any criterion for valuing NIIL 's shares.
Khaitan, purportedly, had competitive business interests and was therefore prepared to "pay the earth to acquire NIIL".
According to the learned trial Judge, one thing which appeared to be certain was that the market value of the shares of NIIL at or about the time when disputes arose between the parties, and particularly during the period when the controversial meetings of the Board of Directors were held, ranged between Rs. 175 and Rs. 204.
We agree with the learned Judge and hold that it would be just and reasonable to take the average market value of the rights shares on the crucial date at Rs. 190 per share.
The learned trial Judge awarded a sum of Rs. 90 per share on 9495 shares to the Holding Company by way of "solatium", which, with respect, is not an accurate description of the award and is likely to confuse the basis and reasons for directing the payment to be made.
Since the average market price of NIIL 's shares in April May 1977 can be taken to be Rs. 190 per share, the Holding Company, which was offered 9495 rights shares, will be entitled to receive from the Indian shareholders 827 an amount equivalent to that by which they unjustifiably enriched themselves, namely, Rs. 90x9495 which comes to Rs. 8,54,550.
We direct that Devagnanam, his group and the other Indian shareholders who took the rights shares offered to the Holding Company shall pay, pro rata, the sum of Rs. 8,54,550 to the Holding Company.
The amount shall be paid by them to the Holding Company from their own funds and not from the funds or assets of NIIL.
As a further measure of neutralisation of the benefit which the Indian shareholders received in the meeting of 2nd May, 1977, we direct that the 16,000 rights shares which were allotted in that meeting to the Indian shareholders will be treated as not qualifying for the payment of dividend for a period of one year commencing from January 1, 1977, the Company 's year being the Calendar year.
The interim dividend or any further dividend received by the Indian shareholders on the 16,000 rights shares for the year ending December 31, 1977 shall be repaid by them to NIIL, which shall distribute the same as if the issue and allotment of the rights shares was not made until after December 31, 1977.
This direction will not be deemed to affect or ever to have affected the exercise of any other rights by the Indian shareholders in respect of the 16,000 rights shares allotted to them.
We have not considered the possibility of Manoharans taking up the rights shares offered to them because, by a letter dated May 11, 1977 to NIIL 's Secretary, N. Manoharan had declined the offer on the ground that he was "not in a position to take those shares".
Finally, in order to ensure the smooth functioning of NIIL, and with a view to ensuring that our directions are complied with expeditiously, we direct that Shri M.M. Sabharwal who was appointed as a Director and Chairman of the Board of Directors under the orders of this Court dated November 6, 1978 will continue to function as such until December 31, 1982.
The Company will take all effective steps to obtain the sanction or permission of the Reserve Bank of India or the Controller of Capital Issues, as the case may be; if it is necessary to obtain such sanction or permission for giving effect to the directions given by us in this judgment.
In the result, the appeals are allowed with the directions above mentioned and the judgments of the learned single Judge and of the Division Bench of the High Court are set aside.
We make no order as to costs since both the sides are, more or less, equally to 828 blame, one for creating an impasse and the other for its unjust enrichment.
All parties shall bear their own costs throughout.
The interim orders passed by this Court are vacated.
The amount of Rs. 8,54,550 which the Indian shareholders have been directed to pay to the Holding Company shall be paid in two instalments, the first of which shall be paid before August 31, 1981 and the second before November 30, 1981.
The interim Board of Directors shall forthwith hand over charge to the Board which was superseded, but with Shri M.M. Sabharwal as a Director and Chairman of the Board of Directors.
After taking the charge from the interim Board, the Board of Directors will take expeditious steps for convening an Annual General Meeting for the year 1976 77 and the years thereafter for the purpose of passing the accounts, declaring dividends electing all Directors and for dealing with other necessary or incidental matters.
N.V.K. Appeals allowed.
| IN-Abs | M/s. Needle Industries (India) Ltd. (NIIL), the appellant was incorporated under the Indian Companies Act 1913 as a Private Company on 20.7.1949 with its Registered office at Madras and at the time of its incorporation it was a wholly owned subsidiary of Needle Industries (India) Ltd., Studley, England (NI Studley).
In 1961, NI Studley entered into an agreement with Newey Bros. Ltd., Birmingham, England (Newey) to invest in the Indian Company.
In 1963, NI Studley and Newey combined to form the Holding Company in England M/s Needle Industries Newey (India) Holding Ltd., the respondent.
The entire share capital of NIIL held by NI Studley and Newey was transferred to the Holding Company in which NI Studley and Newey became equal shares.
699 As a result of this arrangement, the Holding Company came to acquire 99.95 per cent of the issued and paid up capital of NIIL.
The balance of 0.05 cent, which consisted of six shares being the original nominal shares, was held by Devagnanam the managing director of NIIL.
By virtue of the introduction of section 43A in the Companies Act in 1961, NIIL became a public company, since not less than twenty five per cent of its paid up share capital was held by a body corporate, the Holding Company.
However, under the first proviso to section 43(1) it had the option to retain its articles relating to matters specified in section 3(1)(iii) of the Companies Act.
NIIL did not alter the relevant provisions of its articles after its became a public company within the meaning of section 43A.
By 1971 about 40 per cent of the share capital of NIIL came to be held by the Indian employees of the company and their relatives and the balance of about 60 per cent remained in the hands of the Holding Company NINIH Ltd.
In 1972 Coats Paton Ltd. became an almost 100% owner of NI Studley.
The position at the beginning of the year 1973 was that 60% (to be exact 59.3%) of the share capital of NIIL came to be owned half and half by Coats and NEWEY, the remaining 40% being in the hands of the Indian Group of which 28.5% was held by the Devagnanam 's group.
Though NIIL was at one time wholly owned by NI Studley and later by NI Studley and Newey, the affairs were managed ever since 1956 by an entirely Indian Management with Devagnanam as its Chief Executive and Managing Director with effect from the year 1961.
The Holding Company which was formed in 1963 had only one representative on the Board of Directors of NIIL.
He was N.T. Sanders, who resided in England and hardly ever attended the Board Meetings.
The holding company reposed great confidence in the Indian management which was under the direction and control of Devagnanam In July 1972 Mr. Devagnanam was offered by the office of Managing Director of group of four companies in Hong Kong and Taiwan and his family began to reside in Hong Kong and he cogitated over resigning from his position in NIIL.
Coats, on their part were clear that Devagnanam should relinquish his responsibilities in NIIL.
in view of the time his role in Newey 's Far Eastern interests was consuming.
The Foreign Exchange Regulation Act 1973, came into force on Junuary 1, 1974.
S.29(1) prohibited non residents, non citizens and non banking companies not incorporated under any Indian law or in which the non resident interest was more than 40 per cent, from carrying on any activity in India of a trading, commercial or Industrial nature except with the general or special permission of the Reserve Bank of India.
By section 29(2)(a) if such person was engaged in any such activity at the commencement of the Act, he or it had to apply to the Reserve Bank of India, for permission to carry on that activity, within six months of the commencement of the Act or such further period the Reserve Bank may allow.
section 29 (4) (a) imposed a similar restriction on such person or company from holding shares in India, of any company referred to cause (b) of section 29(1), without the permission of the Reserve Bank.
The 700 time for making the application for the requisite permission under section 29 was extended by the Reserve Bank until August 31, 1974.
Since the Holding Company was a non resident and its interest in NIIL exceeded 40% NIIL had to apply for the permission of the Reserve Bank under section 29 (1) FERA for continuing to carry on its business.
The Holding Company had also to apply for the permission of the Reserve Bank under section 29 (4) (a) FERA for continuing to hold its shares in NIIL.
NIIL applied to the Reserve Bank for the necessary permission on September 3, 1974.
By its letter dated May 11, 1976 the Reserve Bank condoned the delay and allowed the application and imposed conditions on NIIL that it must bring down the non resident interest from 60% to 40% within one year of the receipt of its letter.
The Holding Company applied to the Reserve Bank for a Holding Licence under section 29 (4) (a) of FERA, on September 18, 1974; which application was late by 18 days and was still pending with the Reserve Bank Devagnanam who was residing in Hong Kong obtained a holding licence dated March 5, 1975 from the Reserve Bank in respect of his shares in NIIL.
On receipt of the letter of the Reserve Bank dated March 11,1976 NIIL 's secretary sent a reply on May 18, 1976 to the Bank confirming the acceptance of the various conditions under which permission was granted to NIIL to continue its business.
On August 11, 1976 the term of Devagnanam 's appointment as the Managing Director of NIIL came to an end but in the meeting dated October 1, 1976 of NIIL 's Board of Directors his appointment was renewed for a further period of 5 years.
On October 20th and 21st, 1976 a meeting took place between the U.K. shareholders and the Indian shareholders of NIIL.
But the meeting ended in a stalemate because whereas the Holding Company wanted a substantial part of the share capital held by it in excess of 40 per cent to be transferred to Madura Coats an Indian company in which the Holding Company had substantial interest as an Indian shareholder.
Devagnanam insisted that the existing Indian shareholders of NIIL alone had the right under its Articles of Association to take up the shares which the Holding Company was no longer in a position to hold because of the directives issued by the Reserve Bank pursuant to FERA.
As negotiations were going on between the competing groups regarding the Indianisation of NIIL, on April 4, 1977 NIIL received a reminder letter dated March 30, 1977 from the Reserve Bank which pointed out that the company had not submitted any concrete proposal for reduction of the non resident interest and asked it to submit its proposal in that behalf without any further delay and that failure to comply with the directive regarding dilution of foreign equity within the stipulated period would be viewed seriously.
A meeting of NIIL 's Board of Directors was held on April 6, 1977.
All the directors were present in the meeting with Devagnanam in the chair at the commencement of the proceedings.
Mr. C. Doraiswamy, solicitor partner of 701 King and Partridge was one of the directors present at the meeting.
He had no interest in the proposal of Indianisation which the meeting was to discuss.
In order to complete the quorum of two independent directors, the other directors apart from C. Doraiswamy being interested in the business of the meeting, Silverston an ex partner of Doraiswamy 's firm of solicitors, was appointed to the board as an additional director under article 97 of the Articles of Association.
Silverston chaired the meeting after his appointment as additional director.
The meeting resolved that the issued capital of NIIL be increased by a new issue of 16,000 equity shares of Rs. 100 each to be offered as rights shares to the existing shareholders in proportion to the shares held by them.
The offer was to be made by a notice specifying the number of shares which each shareholder was entitled to and in case the offer was not accepted within 16 days from the date on which it was made it was to be deemed to have been declined by the concerned shareholder.
In pursuance to the aforesaid resolution a letter of offer dated April 14, 1977 was prepared.
The envelope containing Devagnanam 's explanatory letter dated April 12 (without the copy of the letter of the Reserve Bank dated March 30, 1977) and the letter of offer dated April 14 were received by the Holding Company on May 2, 1977 in an envelope bearing the Indian postal mark of April 27, 1977.
The letter of offer which was sent to one of the Indian shareholders, Manoharan was posted in an envelope which also bore the postal mark of 27th April.
The next meeting of the Board was due to be held on May 2, 1977.
The Holding Company was thus denied an opportunity to exercise its option whether or not to accept the offer of right shares, assuming that any such option was open to it.
The meeting of the Board of Directors was held an May 2, 1977 as scheduled and in the meeting the whole of the new issue consisting of 16,000 rights share was allotted to the Indian shareholders including members of the Manoharan group.
Out of these the Devagnanam group was allotted 11,734 shares.
After marking the allotment of shares a letter was sent to the Reserve Bank by NIIL reporting compliance with the requirements of F.E.R.A. by the issue of 16,000 rights shares and the allotment thereof to the Indian shareholders which resulted in the reduction of the foreign holding to approximately 40% and increased that of the Indian shareholders to almost 60%.
The Holding Company filed a company petition in the High Court under section 397 and 398 of the Indian alleging that the Indian Directors abused their fiduciary position in the Company by deciding in the meeting of April 6 to issue the rights shares at par and by allotting them exclusively to the Indian shareholders in the meeting of 2nd May, 1977.
In doing so, they acted mala fide and in order to gain an illegal advantage for themselves.
By deciding to issue the rights shares at par, they conferred a tremendous and illegitimate advantage on the Indian shareholders.
Devagnanam delayed deliberately the intimation of the proceedings of the 6th April to the Holding Company.
By that means and by the late giving of the notice of the 702 meeting of the 2nd May, the Devagnanam group presented a fait uccompli to the Holding Company in order to prevent it from exercising its lawful rights.
The conduct of the Indian directors lacked in probity and fair dealing which the Holding Company was entitled to expect.
The acting Chief Justice who tried the Company Petition, found several defects and infirmities in the Board 's meeting dated May 2, 1977 and being of the view that the average market value of the rights shares was about Rs. 190 per share on the crucial date and that, since the rights shares were issued at par, the Holding Company was deprived unjustly of a sum Rs. 8,54,550 at the rate of Rs. 90 per share on the 9,495 rights shares to which it was entitled.
Exercising the power under section 398 (2) of the , the learned Judge directed NIIL to make good that loss which, could have been avoided by adopting a fairer process of communication with the Holding Company and 'a consequential dialogue ' with them in the matter of the issue of rights shares at a premium.
The Holding Company being aggrieved by the aforesaid judgment filed an appeal and NIIL filed cross objections to the decree.
The appeal and cross objections were argued before the Division Bench of the High Court on the basis of affidavits, the correspondence that had passed between the parties and certain additional documents which were filed before the Appellate Court.
The Division Bench concluded that the affairs of NIIL were being conducted in a manner oppressive, that is to say burdensome, harsh and wrongful to the Holding Company and held that since the action of the Board of Directors of NIIL was taken merely for the purpose of welding the Company into Newey 's Far Eastern complex it was just and equitable to wind up the Company.
With regard to the cross objections, the Division Bench held that the injuries suffered by the Holding Company could not be remedied by the award of compensation and, therefore, the action of the Board of Directors in issuing the rights shares had to be quashed.
It accordingly allowed the appeal filed by the Holding Company and dismissed the cross objections of the appellant and directed that the Board of Directors be suspended and an interim Board consisting of nine directors proposed by the Holding Company be constituted and that the rights issue made on 6th April, 1977 and the allotment of shares made on 2nd May, 1977 at the Board Meeting be set aside and the Interim Board be directed to make a fresh issue of shares at a premium to the existing shareholders including the Holding Company which was to have a right of renunciation.
In the appeals to this Court, on the question whether the decisions taken at the meetings of the Boards of Directors of NIIL on April 6 and May 2, 1977 constitute acts of oppression within the meaning of section 397 of the .
Allowing the appeals ^ HELD: 1.
The charge of oppression rejected after applying to the conduct of Devagnanam and his group the standard of probity and fairplay, which is expected of partners in a business venture.
Not only is the law on his side, but his conduct cannot be characterised as lacking in probity, considering the extremely rigid attitude by Coats.
He was driven into a tight corner from which the only escape was to allow the law to have its full play.
[824 B C; G H] 703 2.
Even though the company petition falls and the appeals succeed on the finding that the Holding Company has failed to make out a case of oppression, the court is not powerless to do substantial justice between the parties and place them, as nearly as it may, in the same position in which they would have been, if the meeting of 2nd May were held in accordance with law.
[824 H 825 A] 3.
The willingness of the Indian shareholders to pay a premium on the excess holding or the rights shares is a factor which, to some extent, has gone in their favour on the question of oppression.
Having had the benefit of that stance, they must now make it good.
Besides, it is only meet and just that the Indian shareholders, who took the rights shares at par when the value of those shares was much above par, should be asked to pay the difference in order to nullify their unjust and unjustifiable enrichment at the cost of the Holding Company.
The Indian shareholders are not asked to pay the premium as a price of oppression.
The plea of oppression having been rejected the course being adopted is intended primarily to set right the course of justice.
[825 F G] 4.
Devagnanam, his group and the other Indian share holders who took the rights shares offered to the Holding Company shall pay, pro rata, the sum of Rs. 8,54,550 to the Holding Company.
The amount shall be paid by them to the holding company from their own funds and not from the funds or assets of NIIL.
[827 A B] 5.
As a further measure of neutralisation of the benefit which the Indian shareholders received in the meeting of 2nd May, 1977, it is directed that the 16,000 rights shares which were allotted in that meeting to the Indian shareholders will be treated as not qualifying for the payment of dividend for a period of one year commencing from January 1, 1977 the Company 's year being the Calendar year.
The interim dividend or any further dividend received by the Indian shareholders on the 16,000 rights shares for the year ending December 31, 1977 shall be repaid by them to NIIL, which shall distribute the same as if the issue and allotment of the rights shares was not made until after December 31, 1977.
This direction will not be deemed to affect or ever to have affected the exercise of any other rights by the Indian shareholders in respect of the 16,000 rights shares allotted to them.
[827 B D] 6.
In order to ensure the smooth functioning of NIIL and with a view to ensuring that the directions are complied with expeditiously, it is directed that Shri M.M. Sabharwal who was appointed as a Director and Chairman of the Board of Directors under the orders of this Court dated November 6, 1978 will continue to function as such until December 31, 1982.
[827 F] 7.
The Company will take all effective steps to obtain the sanction or permission of the Reserve Bank of India or the Controller of Capital Issues, as the case may be, if it is necessary to obtain such sanction or permission for giving effect to the directions.
[827 G] 8.
Devagnanam and his group acted in the best interests of NIIL, in the matter of the issue of rights shares and indeed, the Board of Directors followed in the meeting of the 6th April a course which they had no option but to adopt and in doing which, they were solely actuated by the consideration as to what 704 was in the interest of the company.
The shareholder Directors who were interested in the issue of rights shares neither participated in the discussion of that question nor voted upon it.
The two Directors who, forming the requisite quorum, received upon the issue of rights shares were Silverston who, was a disinterested Director and Doraiswamy who, unquestionably, was so.
[792 A C] 9.
Disinvestment by the Holding Company, as one of the two courses which could be adopted for reducing the non resident interest in NIIL to 40% stood ruled out, on account of the rigid attitude of Coats who, during the period between the Ketty meeting of October 20 21, 1976 and the Birmingham discussions of March 29 31, 1977 clung to their self interest, regardless of the pressure of FERA, the directive of the Reserve Bank of India and their transparent impact on the future of NIIL.
[792 D E] 10.
Devagnanam and the disinterested Directors, having acted out of legal compulsion precipitated by the obstructive attitude of Coats and their action it being in the larger interest of the company, it is impossible to hold that the resolution passed in the meeting of April 6 for the issue of rights shares at par to the existing shareholders of NIIL constituted an act of oppression against the Holding Company.
[792 E F] 11.
It puts a severe strain on ones credulity to believe that the letters of offer dated April 14 to the Holding Company, to Raeburn and to Manoharan were posted on the 14th itself but that somehow they rotted in the post office until the 27th on which date they took off simultaneously for their respective destinations.
[793 E] 12.
The purpose behind the planned delay in posting the letters of offer to Raeburn and to the Holding Company, and in posting the notice of the Board 's meeting for May 2 to Sanders, was palpably to ensure that no legal proceeding was taken to injunct the holding of the meeting.
The object of withholding these important documents, until it was quite late to act upon them, was to present to the Holding Company a fait accompli in the shape of the Board 's decision for allotment of rights shares to the existing Indian shareholders.
[794 C E] 13.
In so far as Devagnanam himself is concerned, there is room enough to suspect that he was the part author of the late postings of important documents, especially since he was the prime actor in the play of NILL 's Indianisation.
But even in regard to him, it is difficult to carry the case beyond the realm of suspicion and 'room enough ' is not the same thing as 'reason enough '.
[795 B C] 13A.
With regard to the impact on the legality of the offer and the validity of the meeting of May 2, (i) It is quite clear from the circumstances that the rights shares offered to the Holding Company could not have been allotted to anyone in the meeting of May 2, for the supposed failure of the Holding Company to communicate its acceptance before April 30.
The meeting of May 2, of which the main purpose was to consider 'Allotment ' of the rights shares must, therefore, be held to be abortive, [796 H 797 A] 705 (ii) The utter inadequacy of the notice to Sanders in terms of time stares in the face and needs no further argument to justify the finding that the holding of the meeting was illegal, at least in so far as the Holding Company is concerned.
It is self evident that Sanders could not possibly have attended the meeting.
There is, therefore, no alternative save to hold that the decision taken in the meeting of May 2 cannot, in the normal circumstances, affect the legal rights of the Holding Company or create any legal obligations against it.
[797 D E] 13B.
The dilution of the non resident interest in the equity capital of the Company to a level not exceeding 40% "within a period of 1 (one) year from the date of receipt of" the letter was of the very essence of the matter.
The sanction for enforcement of a conditional permission to carry on business, where conditions are breached, is the cessation, ipso facto, of the permission itself on the non performance of the conditions at the time appointed or agreed.
When NIIL wrote to the Bank on February 4, 1976 binding itself to the performance of certain conditions, it could not be heard to say that the permission will remain in force despite its non performance of the conditions.
Having regard to the provisions of section 29 read with sections 49, 56(1) and (3) and section 68 of FERA, the continuance of business after May 17, 1977 by NIIL would have been illegal, unless the condition of dilution of non resident equity was duly complied with.
[799 B; F H] 14.
By reason of the provisions of section 29(1) and (2) of FERA and the conditional permission granted by the RBI by its letter dated May 11, 1976 the offer of rights shares made by NIIL to the Holding Company could not possibly have been accepted by it.
[800 B] The acceptance of the offer of rights shares by the Holding Company would have resulted in a violation of the provisions of FERA and the directive of the Reserve Bank.
No grievance can be made by the Holding Company that since it did not receive the offer in time, it was deprived of an opportunity to accept it.
[800 D G] 14A.
An offer of shares undoubtedly creates "fresh rights" but, the right which it creates is either to accept the offer or to renounce it; it does not create any interest in the shares in respect of which the offer is made.
[801 B] Mathalone vs Bombay Life Assurance Co. ; referred to.
15(i) Before granting relief in an application under section 210 of the English as under section 397 of the Indian the Court has to satisfy itself that to wind up the company will unfairly prejudice the members complaining of oppression, but that otherwise the facts will justify the making of a winding up order on the ground that it is just and equitable that the company should be wound up.
The fact that the company is prosperous and makes substantial profits is no obstacle to its being wound up if it is just and equitable to do so.
[744 A B; 775 G] Scottish Co op.
Wholesale Society Ltd. vs Meyer , Re Associated Tool Industries Ltd. [1964] Argus Law Reports, 75, Ebrahimi vs Westbourne 706 Galleries LTd.
, Blissett vs Daniel [68] E.R. 1024.
Re Yenidge Tobacco Co. & Loch vs John Blackwood ; referred to.
(ii) On a true construction of section 397, an unwise, inefficient or careless conduct of a Director in the performance of his duties cannot give rise to a claim for relief under that section.
The person complaining of oppression must show that he has been constrained to submit to a conduct which lacks in probity, conduct which is unfair to him and which causes prejudice to him in the exercise of his legal and proprietary rights as a shareholder.
[748 E G] (iii) Technicalities cannot be permitted to defeat the exercise of the equitable jurisdiction conferred by section 397 of the .
Blissett vs Daniel referred to. 16.
An isolated act which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention or that such violation was burdensome, harsh and wrongful.
But a series of illegal acts following upon one another can, in the context, lead justifiably to the conclusion that they are a part of the same transaction, of which the object is to cause or commit the oppression of persons against whom those acts are directed.
[746 G 747 A] 17.
An isolated order passed by a Judge which is contrary to law will not normally support the inference that he is biased, but a series of wrong or illegal orders to the prejudice of a party are generally accepted as supporting the inference of a reasonable apprehension that the Judge is biased and that the party complaining of the orders will not get justice at his hands.
[747 B C] S.M. Ganpatram vs Sayaji Jubilee Cotton and Jute Mills Co. & Elder vs Elder referred to. 18.
It is generally unsatisfactory to record a finding involving grave consequences to a person on the basis of affidavits and documents without asking that person to submit to cross examination.
Men may lie but documents will not and often, documents speak louder than words.
But a total reliance on the written word, when probity and fairness of conduct are in issue, involves the risk that the person accused of wrongful conduct is denied an opportunity to controvert the inferences said to arise from the documents.
[754 E G] Re Smith and Fowcett Ltd. , 545; Nana Lal Zaver vs Bombay Life Assurance , 394 Piercy vs Mills [1920] (1) Chancery 77, Hogg vs Cramphorn, [1967] 1, Chancery 254, 260; Mills vs Mills [60] CLR 150, 160, Harlowe 's Hominees [121] CLR 483, 485 & Howard Smith vs Amphol ; , 831 Punt vs Symons ; Franzer vs Whalley ; referred to.
In the instant case the High Court was right in holding that, having taken up a particular attitude, it was not open to Devagnanam and his group to con 707 end that the allegation of mala fides could not be examined, on the basis of affidavits and the correspondence only.
There is ample material on the record in the form of affidavits correspondence and other documents, on the basis of which proper and necessary inferences can safely and legitimately be drawn.
[755B C] These documents and many more documents were placed on the record mostly by consent of parties, as the case progressed from stage to stage.
That shows that the parties adopted willingly a mode of trial which they found to be most convenient and satisfactory.
[756 A B] 19.
When the dominant motivation is to acquire control of a company, the sparring groups of shareholders try to grab the maximum benefit for themselves.
If one decides to stay on in such a company, one must capture its control.
If one decides to quit, one must obtain the best price for one 's holding, under and over the table, partly in rupees and partly in foreign exchange.
Then, the tax laws and the foreign exchange regulations look on helplessly, because law cannot operate in a vacuum and it is notorious that in such cases evidence is not easy to obtain.
[761 G H; 762A] 20.
It is difficult to hold that by the issue of rights shares the Directors of NIIL interfered in any manner with the legal rights of the majority.
The majority had to disinvest or else to submit to the issue of rights shares in order to comply with the statutory requirements of FERA and the Reserve Bank 's directives.
Having chosen not to disinvest, an option which was open to them, they did not any longer possess the legal rights to insist that the Directors shall not issue the rights shares.
What the Directors did was clearly in the larger interests of the Company and in obedience to their duty to comply with the law of the land.
The fact that while discharging that duty they incidentally trenched upon the interests of the majority cannot invalidate their action.
The conversion of the existing majority into a minority was a consequence of what the Directors were obliged lawfully to do.
Such conversion was not the motive force of their action.
[782 A E] Howard Smith Ltd. vs Ampol Petroleum Ltd. [1974] A.C. 821, 874, Punt vs Symons & Fraser vs Whalley [71] E.R. 361 Piercy vs Mills , Hogg vs Cramphorn , 260 referred to 21.
(i) The Directors have exercised their power for the purpose of preventing the affairs of the company from being brought to a grinding halt, a consumption devoutly wished for by Coats in the interest of their extensive world wide business.
[784 C] (ii) The mere circumstance that the Directors derive benefit as shareholders by reasons of the exercise of their fiduciary power to issue shares, will not vitiate the exercise of that power.
[785 E] (iii) The test is whether the issue of shares is simply or solely for the benefit of the Directors.
If the shares are issued in the larger interest of the 708 company that decision cannot be struck down on the ground that it has incidentally benefited the Directors in their capacity as share holders, [786 C] In the instant case the Board of Directors did not abuse its fiduciary power in deciding upon the issue of rights shares.
[786 D] Harlowe 's Nominess Pvt. Ltd. vs Woodside (Lakes Entrance) Oil Company No. Liability & Anr.
(121) CLR 483, 485, Trek Corporation Ltd. vs Miller et al (33) DLR 3d.
288; Nanalal Zaver & Anr.
vs Bombay Life Assurance Co. Ltd. , 419 429; Hirsche vs Sims , 660 661; Gower in Principles of Modern Company Law, 4th Edn.
578 referred to. 22.
Under section 287 (2) of the the quorum for the meeting of the Board of Director was two.
There can be no doubt that a quorum of two directors means a quorum of two directors who are competent to transact and vote on the business before the Board.
[786 E] 23.
(i) It is wrong to attribute any bias to Silverston for having acted as an adviser to the Indian shareholders in the Ketty meeting.
Silverston is by profession a solicitor and legal advisers do not necessarily have a biased attitude to questions on which their advice is sought or tendered.
Silverston 's alleged personal hostility to Coats cannot, within the meaning of section 300 (1) of the , make him person "directly or indirectly, concerned or interested in the contract or arrangement" in the discussion of which he had to participate or upon which he had to vote.
[787 E G] (ii) The concern or interest of the Director which has to be disclosed at the Board meeting must be in relation to the contract entered or to be entered into by or on behalf of the company.
The interest or concern spoken of by sections 299 (1) and 300 (1) cannot be a merely sentimental interest or ideological concern.
Therefore, a relationship of friendliness with the Directors who are interested in the contract or arrangement or even the mere fact of a lawyer client relationship with such directors will not disqualify a person from acting as a Director on the ground of his being, under section 300 (1) as "interested" Director.
Howsoever one may stretch the language of section 300 (1) in the interest of purity of company administration, it is next to impossible to bring Silverston 's appointment within the framework of that provision.
[788 A C] The argument that Silverston was an interested Director, that therefore his appointment as an Additional Director was invalid and that consequently the resolution for the issue of rights shares was passed without the necessary quorum of two disinterested Directors has no force.
[788 D E] 709 Firestone Tyre and Rubber Co. vs Synthetics and Chemicals Ltd., [1971] 41 Company Case 377 distinguished.
Silverston 's appointment as an Additional Director is not open to challenge on the ground of want of agenda on that subject.
Section 260 of the preserves the power of the Board of Directors to appoint additional Directors if such a power is conferred on the Board by the Articles of Association of the Company.
Article 97 of NIIL 's Articles of Association confers the requisite power on the Board to appoint additional Directors.
The occasion to appoint Silverston as an Additional Director arose only when the picture emerged clearly that the Board would have to consider the only other alternative for reduction of the non resident holding, namely, the issue of rights shares.
It is for this reason that the subject of appointment of an Additional Director could not have, in the state of facts, formed a part of the agenda.
[788 F.G; 789 A C] 25.
(i) The power to issue shares is given primarily to enable capital to be raised when it is required for the purposes of the company but that power is not conditioned by such need.
That power can be used for other reasons as for example to create a sufficient number of shareholders to enable the company to exercise statutory powers or to enable it to comply with legal requirements.
[789 D E] Punt vs Symons and Co., ; Hogg vs Cramphorn, ; Howard Smith vs Amphol, ; (ii) The minutes of the Ketty meeting of October 20 21, 1976 saying that it was agreed that the rights issues, with the Indian shareholders taking up the U.K. members ' rights, would be considered provided it was demonstrated by NIIL that "there is a viable development plan requiring funds that the expected NIIL cash flow cannot meet", cannot also justify the argument that the power of the Company to issue rights shares was, by agreement conditioned by the need to raise additional capital for a development plan.
[790 H; 791 A] (iii) In the instant case the rights shares were issued in order to comply with legal requirements which apart from being obligatory as the only viable course open to the Directors, was for the benefit of the company since, otherwise, its developmental activities would have stood frozen as of December 31, 1973.
The shares were not issued as a part of takeover war between the rival groups of shareholders.
[790 B C] 26.
It is not true to say, as a statement of law, that Directors have no power to issue shares at par, if their market price is above par.
These are primarily matters of policy for the Directors to decide in the exercise of their discretion and no hard and fast rule can be laid down to fetter that discretion.
Such discretionary powers in company administration are in the nature of fiduciary powers and must be exercised in faith.
Mala fides vitiate the exercise of such discretion.
[791 E & G] Hilder and Others vs Dexter , 480 referred to.
The definition of 'private company ' and the manner in which a 'public company ' is defined ("public company means a company which is not a private 710 company") bear out the argument that these two categories of companies are mutually exclusive.
But it is not true to say that between them, they exhaust the universe of companies.
A private company which has become a public company by reason of section 43A, may continue to retain in its articles, matters which are specified in section 3(1)(iii) and the number of its members may be or may at any time be reduced below 7.
[810 H; 811 A B] (i) A section 43A company may include in its articles as part of its structure, provisions relating to restrictions on transfer of shares, limiting the number of its members to 50, and prohibiting an invitation to the public to subscribe for shares, which are typical characteristics of a private company.
The expression 'public company ' in section 3(i)(iv) cannot therefore be equated with a 'private company ' which has become a public company by virtue of section 43A. [811 D E] (ii) A section 43A company can still maintain its separate corporate indentity qua debts even if the number of its members is reduced below seven and is not liable to be wound up for that reason.
[811 F] (iii) A section 43A company can never be incorporated and registered as such under the .
It is registered as a private company and becomes, by operation of law, a public company.
[811 G] (iv) The three contingencies in which a private company becomes a public company by virtue of section 43A (mentioned in sub sections (1), (1A) and (1B) read with the provisions of sub section (4) of that section) show that it becomes and continues to be a public company so long as the conditions in sub sections (1), (1A) or (1B) are applicable.
The provisos to each of these sections clarify the legislative intent that such companies may retain their registered corporate shell of a private company but will be subjected to discipline of public companies.
When necessary conditions do not obtain, the legislative device in section 43A is to permit them to go back into their corporate shell and function once again as private companies, with all the privileges and exemptions applicable to private companies.
The proviso to each of the sub sections of section 43A clearly indicates that although the private company has become a public company by virtue of that section, it is permitted to retain the structural characteristics of its origin, its birthmark.
[811 H 812 A B] (v) Section 43A when introduced by Act 65 of 1960 did not adopt the language either of section 43 or of section 44.
Under section 43 where default is made in complying with the provisions of section 3(1)(iii) a private company shall cease to be entitled to the privileges and exemptions conferred on private companies by or under this Act, and this Act shall apply to the company as if it were not a private company.
Under section 44 of the Act, where a private company alters its Articles in such manner that they no longer include the provisions, which under section 3(1)(iii) are required to be included in the Articles in order to constitute it a private company, the company "shall as on the date of the alteration cease to be a private company".
Neither of the 711 expression, namely, "This Act shall apply to the company as if it were not a private company" (section 43) nor that the company "shall. cease to be a private company (section 44) is used in section 43A.
If a section 43 A company were to be equated in all respects with a public company, that is a company which does not have the characteristics of a private company, Parliament would have used language similar to the one in section 43 or section 44, between which two sections, section 43A was inserted.
If the intention was that the rest of the Act was to apply to a section 43A company "as if it were not a private company", nothing would have been easier than to adopt that language in section 43A; and if the intention was that a section 43A company would for all purposes "cease to be a private company", nothing would have been easier than to adopt that language in section 43A. [812 E H; 813 A] (vi) A private company which becomes a public company by virtue of section 43A is not required to file a prospectus or a statement in lieu of a prospectus.
[813 C] After the Amending Act 65 of 1960 these distinct types of companies occupy a distinct place in the scheme of our : (1) private companies (2) public companies and (3) private companies which have become public companies by virtue of section 43A, but which continue to include or retain the three characteristics of a private company.
Private companies enjoy certain exemptions and privileges which are peculiar to their constitution and nature.
Public companies are subjected severely to the discipline of the Act.
Companies of the third kind like NIIL, which become public companies but which continue to include in their articles the three matters mentioned in clauses (a) to (c) of section 3(1)(iii) are also, broadly and generally, subjected to the rigorous discipline of the Act.
They cannot claim the privileges and exemptions to which private companies which are outside section 43A are entitled.
And yet, there are certain provisions of the Act which would apply to public companies but not to section 43A companies.
[813 D; 814 A C] There is no difficulty in giving full effect to clauses (a) and (b) of section 81(1) in the case of a company like NIIL, even after it becomes a public company under section 43A. Clause (a) requires that further shares must be offered to the holders of equity shares of the Company in proportion, as nearly as circumstances admit, to the capital paid up on these shares, while clause (b) requires that the offer further shares must be made by a notice specifying the number of shares offered and limiting the time, not being less than fifteen days from the date of the offer, within which the offer, if not accepted will be deemed to have been declined.
[815 H; 816 A B] The provision contained in clause (c) cannot be construed in a manner which will lead to the negation of the option exercised by the company to retain in its articles the three matters referred to in section 3(1)(iii).
Both these are statutory provisions and they are contained in the same statute.
They must be harmonised, unless the words of the statute are so plain and unambiguous and the policy of the statute so clear that to harmonise will be doing violence to those words and to that policy.
The policy of the statute if any 712 thing, points in the direction that the integrity and structure of the section 43 A proviso companies should, as far as possible not be broken up.
[817 E F] Park vs Royalty Syndicates and Re Pool Shipping Co. Ltd. referred to.
Palmer 's Company Law 22nd.
I para 12 18 Gower 's Company Law 4th End p. 351 referred to.
When section 43A was introduced by Act 65 of 1960, the legislature apparently overlooked the need to exempt companies falling under it, read with its first proviso, from the operation of clause (c) of sec.
81(1).
That the legislature has overlooked such a need in regard to other matters, in respect of which there can be no controversy, is clear from the provisions of sections 45 and 433(d) of the .
Undar section 45, if at any time the number of members of a company is reduced, in the case of a public company below seven, or in the case of a private company below two, every member of the company becomes severally liable, under the stated circumstances, for the payment of the whole debt of the company and can be severally sued therefor.
No exception has yet been provided for in section 45 in favour of the section 43A proviso companies, with the result that a private company having, say, three members which becomes a public company under section 43A and continues to function with the same number of members, will attract the rigour of section 45.
Similarly, under section 433(d) such a company would automatically incur the liability of being wound up for the same reason.
[818 A D] While construing the opening words of section 81(1)(c) it has to be remembered that section 43A companies are entitled under the proviso to that section to include provision in their Articles relating to matters specified in section 3(1)(iii).
The right of renunciation in favour of any other person is wholly inconsistent with the Articles of a private company.
If a private company becomes a public company by virtue of section 43A and retains or continues to include in its Articles matters referred to in section 3(1)(iii) it is difficult to say that the Articles do not provide something which is otherwise than what is provided in clause (c).
The right of renunciation in favour of any other person is of the essence of clause (c).
On the other hand, the absence of that right is of the essence of the structure of a private company, It must follow, that in all cases in which erstwhile private companies become public companies by virtue of section 43A and retain their old Articles, there would of necessity be a provision in their Articles which is otherwise than what is contained in clause (c).
Considered from this point of view, the argument as to whether the word "provide" in the opening words of clause (c) means "provide expressly" loses its significance.
[820 B D] In the context in which a private company becomes a public company under section 43A and by reason of the option available to it under the proviso the word "provide" must be understood to mean "provide expressly or by necessary implication".
The necessary implication of a provision has the same effect and relevance in law as an express provision has, unless the relevance of what is necessarily implied is excluded by the use of clear words.
[820 E F] 713 The right of renunciation is tentamount to an invitation to the public to subscribe for the shares in the company and can violate the provision in regard to the limitation on number of members.
Article 11, by reason of its clause (iv) prevails over the provisions of all other Articles if there is inconsistency between it and any other Article.
[821 C] 28.
Clause (c) of section 81(1) of the apart from the consideration arising out of the opening words of that clause, can have no application to private companies which have become public companies by virtue of section 43A and which retain in their Articles the three matters referred to in section 3(1)(iii) of the Act.
In so far as the opening words of clause (c) are concerned they do not require an express provision in the Articles of the Company which otherwise than what is provided for in clause (c).
It is enough, in order to comply with the opening words of clause (c).
that the Articles of the Company contain by necessary implication a provision which is otherwise than what is provided in clause (c).
Articles 11 and 50 of NIIL 's Articles of Association negate the right of renunciation.
[821 D F] 29.
The right to renounce shares in favour of any other person, which is conferred by clause (c) has no application to a company like NIIL and, therefore, its members cannot claim the right to renounce shares offered to them in favour of any other member or members.
The Articles of a company may well provide for a right of transfer of shares by one member to another, but that right is very much different from the right of renunciation, properly so called.
[821 G H] Re Poal Shipping Co. Ltd. referred to. 30.
A change in the pro rata method of offer of new shares is necessarily violative of the basic characteristics of a private company which becomes a public company by virtue of section 43A.
To this limited extent only, but not beyond it, the provisions of sub section (1A) of section 81 can apply to such companies.
[822 F] 31.
The following propositions emerge out of the discussions of the provisions of FERA, Sections 43A and 81 of the and of the Articles of association of NIIL: (1) The Holding Company had to part with 20% out of the 60% equity capital held by it in NIIL; [822 H] (2) The offer of Rights shares made to the Holding Company as a result of the decision taken by Board of Directors in their meeting of April 6, 1977 could not have been accepted by the Holding Company; [822 H; 823 A] (3) The Holding Company had no right to renounce the Rights shares offered to it in favour of any other person, member or non member; and [823 B] (4) Since the offer of Rights Shares could not have been either accepted or renounced by the Holding Company, the former for one reason and 714 the latter for another, the shares offered to it could, under article 50 of the articles of association, be disposed of by the directors, consistently with the articles of NIIL, particularly article 11, in such manner as they thought most beneficial to the Company.
[822 B C] 32.
These propositions afford a complete answer to the respondents ' contention that what truly constitutes oppression of the Holding Company is not the issue of Rights Shares to the existing Indian shareholders only but the offer of Rights Shares to all existing shareholders and the issue thereof to existing Indian shareholders only.
[823 D] 33.
It was neither fair nor proper on the part of NIIL 's officers not to ensure the timely posting of the notice of the meeting for 2nd May so as to enable Sanders to attend that meeting.
But there the matter rests.
Even if Sanders were to attend the meeting, he could not have asked either that the Holding Company should be allotted the rights shares or alternatively, that it should be allowed to "renounce" the shares in favour of any other person, including the Manoharan group.
The charge of oppression arising out of the central accusation of non allotment of the rights shares to the Holding Company must, therefore fail.
[823 H; 824 A B]
|
Civil Appeal No. 1440 of 1979.
Appeal by special leave from the judgment and order dated the 15th November, 1978 of the Allahabad High Court in Civil Misc.
Writ No. 8736 of 1978.
R.K. Garg, Manoj Swarup and Miss Lalita Kohli for the Appellant.
Yogeshwar Prasad, and Mrs Rani Chhabra, for the Respondent.
The Judgment of the Court was delivered by PATHAK, J.
The appeal by special leave is directed against a judgment of the Allahabad High Court dismissing a tenant 's writ petition arising out of proceedings consequential upon an order of ejectment.
The bungalow, 16 D, Beli Road, Allahabad, was owned by Raj Kumar Sinha, father of the third respondent, Kailash Shanker Sinha.
In February 1965, the bungalow was allotted to the appellant, Syed Asadullah Kazmi, and he was accordingly treated as the tenant of the premises.
At the time, Raj Kumar Sinha, with his family, including the third respondent, occupied another house at 14 D, Beli Road, Allahabad.
In October 1973, the third respondent applied for the release of the bungalow 16 D, Beli Road, Allahabad, now described as 26, B.K. Banerjee Road, Allahabad.
The attempt failed.
A fresh application was made in April, 1975.
It was allowed by the Prescribed Authority on 24th May, 1976 after overruling an objection filed by the appellant.
The appellant appealed and the appellate authority by its order dated 25th March, 1977 modified the order of the Prescribed Authority inasmuch as a portion only of the building was released in favour of the third respondent and the appellant was permitted to continue in the remaining portion, and the Prescribed Authority was directed to divide the bungalow accordingly.
The appellant filed a writ petition in the High Court against the order of the Appellate Authority, but the writ petition was dismissed.
Against its dismissal he applied in this Court for special leave to appeal and on 3rd January, 1978, that petition was also dismissed.
To give effect to the direction of the Appellate Authority, the Prescribed Authority meanwhile initiated proceedings for demar 79 cation of the premises and a partition scheme was prepared.
During the preparation of the partition scheme, Raj Kumar Sinha, the third respondent 's father, died.
On 22nd September, 1978, the appellant filed an application before the Prescribed Authority bringing the fact of this death to its notice and praying that the partition scheme should not be prepared.
The Prescribed Authority rejected the application.
Appeal by the appellant was dismissed by the Appellate Authority on the ground that the order dated 25th March, 1977 directing a division of the premises had become final and the controversy could not be re opened.
The appellant then filed a writ petition before the High Court, and the High Court has maintained the view taken by the Appellate Authority and dismissed the writ petition by its judgment dated 25th November, 1978.
We are of opinion that the High Court is right.
Plainly, the order dated 25th March, 1977 of the Appellate Authority releasing a portion of the premises in favour of the third respondent and leaving the remaining portion in the tenancy of the appellant acquired finality when the proceeding taken against it by the appellant failed.
The order having become final, the Prescribed Authority was bound to give effect to it.
In doing so, the Prescribed Authority was not acting outside its jurisdiction or contrary to law.
The application moved by the appellant before the Prescribed Authority requesting it to take into account the death of Raj Kumar Sinha was misconceived, because it did not lie with the Prescribed Authority to reopen proceedings which had been taken to the highest Court and had become final.
It is true that subsequent events must be taken into account by a statutory authority or court when considering proceedings arising out of landlord 's petition for ejectment of a tenant on the ground of the landlord 's personal need.
But in the present case, the order for release of a portion of the accommodation required finality before the death of Raj Kumar Sinha and the controversy concluded by it could not be reopened, The appellant has vehemently urged that being the highest court of the land it is open to us to reopen the proceeding for release initiated by the third respondent.
We do not think we can.
The present appeal is limited to the question which arose before the Prescribed Authority on the application of the appellant after the proceedings for release had acquired finality and we must be confined to the consideration of that question alone.
We cannot reopen that which has become final after this court dismissed the special leave petition of the appellant.
We may point out that we have been referred to section 24 of the U.P. Urban 80 Building Act, 1972 in support of the contention that the Prescribed Authority retains control over ejectment proceedings, but we are not impressed by that contention.
The appeal fails and is dismissed with costs.
section R. Appeal dismissed.
| IN-Abs | In February 1965, Bungalow No. 16 D, Beli Road (now 26 B.K. Banerjee Road), Allahabad was allotted to the appellant.
On an application made in April 1975 the prescribed authority allowed, on 24th May, 1976, the application directing the release of the bungalow to the landlord.
On appeal the appellate authority by its order dated 25th March, 1977 modified the order by releasing only a portion of the building and by permitting the appellant to continue in the remaining portion with a direction to the prescribed authority to divide the bungalow accordingly.
The said order dated 25th March, 1977 became final, since the writ petition challenging the said order was dismissed.
On the death of the landlord the appellant filed a fresh application before the prescribed authority not to proceed with the partition scheme.
Since the prescribed authority refused to take note of this subsequent event, the issue has come up before this Court by way of special leave.
Dismissing the appeal, the Court ^ HELD: 1.
The order dated 25th March, 1977 of the appellate authority releasing a portion of the premises in favour of the third respondent and leaving the remaining portion in the tenancy of the appellant acquired finality when the proceedings taken against it by the appellant failed.
The prescribed authority was bound to give effect to that final order and was not acting outside its jurisdiction or contrary to law.
[79 C D] 2.
It is true that subsequent events must be taken into account by a statutory authority or court when considering proceeding arising out of a landlord 's petition for ejectment of a tenant on the ground of the landlord 's personal need.
But in the present case the order for release of a portion of the accommodation acquired finality before the death of the landlord and the controversy concluded by it could not be reopened now.
[79 E F] 3.
The present appeal being limited to the question which arose before the prescribed authority on the application of the appellant after the proceedings for release had acquired finality, it is not open even to the Supreme Court, to reopen the proceeding for release.
[79 G H] 78
|
ivil Appeal No. 1665 and 1666 of 1970.
From the order dated the 25th July, 1968 of the Punjab and Haryana High Court in LPA Nos.
230 & 240 of 1968.
M.S. Dhillon for the Appellant in both the appeals.
Tirath Singh Munjral, G.K. Arora, S.S. Munjral and Gautam Bannerjee for the Respondents in both the appeals.
The Judgment of the Court was delivered by KOSHAL J.
By this judgment we shall dispose of Civil Appeals Nos.
1665 and 1666 of 1970 in which common questions of law have arisen for determination by this Court.
The facts leading to the two appeals are undisputed and may be briefly stated thus.
Licences to run liquor vends in various parts of Punjab during the financial year 1965 66 were sold by public auction shortly before the 1st April, 1965.
Auctions were held at numerous places subject to identical conditions which were supplied to the bidders in writing.
Condition No. 8 which is material for our purposes is reproduced below: "That the licensee shall lift each month the proportionate quota for the month fixed for his vend (s) or deposit still head duty realisable thereon.
In the event of any deficiency in the amount of still head duty realisable from the lifting of the full proportionate quota due to the short lifting of the quota by the licensee or non deposit of the amount of the still head duty, the said deficiency may be realised from the amount of security deposited by 689 him at the time of grant of licence.
The resulting deficiency in the amount of security shall be made good by the licensee within 7 days of such adjustment.
In case the short lifting of proportionate quota or short deposit of still head duty continues for two consecutive months or the licensee fails to make up the deficiency in the amount of security within the prescribed period of 7 days, his licence may be cancelled in addition to the recovery of deficiency in still head duty.
" Ajudhia Nath who figures as respondent No. 1 in each of the two appeals and who carries on business of selling country liquor either in his own name or in the name and style of M/s. Ajudhia Nath Bal Mukand (a business concern arrayed as respondent No. 2 in Civil Appeal No. 1665 of 1970) was the highest bidder for the auctions pertaining to 5 villages situated in the district of Amritsar and a couple of villages in Ferozepur district.
Accordingly the auctions were sanctioned in his favour and he was granted the necessary licences under the relevant provisions of the Punjab Excise Act (hereinafter referred to as the Act) and the rules framed thereunder.
The licensee started his liquour selling business in the said seven villages on the 1st April, 1965.
By the close of the financial year 1965 66, however, he was unable to lift the minimum quota of country liquor and also failed to deposit the still head duty which became payable by him under condition No. 8 above extracted.
He made applications claiming relief in the matter of payment of sums which had fallen due and such relief was granted to him in part by the Excise & Taxation Commissioner, Punjab, on the ground that sales of country liquor had been adversely affected by reason of the movement of population in the border areas of Punjab on account of the hostilities which broke out between India and Pakistan in the month of September 1965.
Not satisfied with the relief so granted Ajudhianath filed two petitions under article 226 of the Constitution of India before the High Court of Punjab and Haryana claiming, inter alia, that still head duty was an excise duty which could be levied only on manufacture of goods and which he was not liable to pay by reason of the admitted fact that he was not a manufacturer of liquor.
A grouse was also made by him of the fact that the applications claiming relief had been decided without affording to him an opportunity of being heard.
One of those petitions (Civil Writ Petition No. 2034 of 1966) related to 690 vends functioning in the two villages of Ferozepur District, while the other (Civil Writ Petition Nos 2035 of 1966) covered the 5 vends located in the 5 villages of Amritsar District.
The petitions were allowed by a single order dated the 9th May, 1967 passed by D.K. Mahajan, J., on the sole ground that a similar petition (Civil Writ Petition No. 2021 of 1966) had been allowed by Gurdev Singh, J., on the 27th March, 1966.
The proceedings for the recovery of the short fall in the deposit of still head duty by Ajudhia Nath which had been initiated by the State of Punjab and its concerned officers (appellants Nos. 1 to 4 in each of the appeals before us) were quashed and the Excise and Taxation Commissioner, Punjab (appellant No. 2 in both the appeals) was directed to dispose of the "cases" of the respondents "in accordance with law after hearing the petitioners".
D.K. Mahajan, J., adopted all the reasons on which Gurdev Singh, J., had based his order above mentioned.
Letters Patent Appeals preferred by the 4 appellants to the Division Bench of the High Court were summarily dismissed by Mehar Singh and Tuli, JJ., for the reason that a Letters Patent Appeal against the judgment of Gurdev Singh, J., above mentioned had met the same fate.
It is against the judgment of the Division Bench (which is dated the 29th August, 1969) that each of the appeals before us has been filed.
Mr. Dhillon, learned counsel for the appellants had drawn our attention to The State of Punjab vs Balbir Singh and Others, which reversed the judgment of Gurdev Singh, J., mentioned above and has contended that the very basis of the impugned judgment has consequently fallen to the ground.
The contention is correct.
As pointed out in Balbir Singh 's case (supra) the judgment of Gurdev Singh, J., in Civil Writ Petition No. 2021 of 1966 had proceeded merely on the ground that the petitioner firm therein had not been given an opportunity of being heard in relation to the demand notice issued to it for payment of the still head duty on the entire minimum quantity of liquor which that firm was required to lift under the licence.
In differing with the view 691 expressed by Gurdev Singh, J., this Court made a reference to the following observations of Chandrachud, J., (as he then was) in Har Shanker and Others vs The Dy.
Excise & Taxation Commissioner and Others which was followed in Shyam Lal vs State of Punjab "The announcement of conditions governing the auctions was in the nature of an invitation to an offer to those who were interested in the sale of country liquor.
The bids given in the auctions were offers made by prospective vendors to the Government.
The Government 's acceptance of those bids was the acceptance of willing offers made to it.
On such acceptance, the contract between the bidders and the Government became concluded and a binding agreement came into existence between them.
The successful bidders were then granted licences evidencing the terms of contract between them and the Government, under which they became entitled to sell liquor.
The licensees exploited the respective licences for a portion of the period of their currency, presumably in expectation of a profit.
Commercial considerations may have revealed an error of judgment in the initial assessment of profitability of the adventure but that is a normal incident of the trading transactions.
Those who contract with open eyes must accept the burdens of the contract along with its benefits.
The powers of the Financial Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim.
Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract.
By such a test no contract could ever have a binding force." and concluded that the demand for the short fall in still head duty was based on the term of a binding contract and that it sought to enforce the liabilities arising out of mutually agreed conditions of auction.
Such a demand, in the opinion of this 692 Court, could not be equated with a notice requiring the liquor vendor to show cause why his licence should not be cancelled.
In making this distinction this Court further relied upon State of Punjab vs Mulkh Raj and Co. wherein it was observed: "It was also held there that a cancellation of the licence under section 36 of the Punjab Excise Act, 1914, had to take place quasi judicially after due service of the notice on the licensee to show cause why it should not be cancelled.
Although, the merits of the last mentioned proposition need not be examined by us as it rests on a sound footing, yet, we find it difficult to uphold the order that the demand for a sum of Rs. 36,636.
On account of short fall should also be quashed on account of non compliance with rules of natural justice in cancelling the licence in proceedings under section 36 of the Act.
We think that the two liabilities were erroneously considered by the High Court to be inextricably linked up. . . . . . .
We do not think that, even if the respondent ought to have been given a hearing before cancelling the licence, this would dispense with his liability to deposit the amount of balance of the licence fee or invalidate the notice of demand for it." Thus, the proposition is by now well settled that although an opportunity of being heard has to be given to a liquor vendor when his licence is sought to be cancelled, the same principle of natural justice does not come into play when the demand is merely for payment of a sum becoming due under the conditions subject to which the licence was granted, and this proposition fully covers these appeals.
The demands for payment of the amount of the still head duty which had become due under the contracts accepted by the respondents and had remained unpaid were demands arising under condition No. 8 above extracted and had, therefore, resulted from the terms of those contracts.
No question of affording to the respondents any opportunity of being heard thus arises and the impugned judgment, is, therefore, liable to be reversed.
693 4.
Faced with the above situation, Shri Munjral, learned counsel for the respondents, raised the following two contentions: (a) Still head duty is a duty of excise which could only be levied on a manufacturer and not on a mere vendor of goods manufactured by others.
(b) If the still head duty mentioned in condition No. 8 above extracted cannot be regarded as a duty of excise, it nevertheless amounts to a tax of some other kind for levying which the State lacks authority.
Reliance in connection with contention (a) is placed on Entry 51 of List II forming part of Schedule VII to the Constitution of India and on section 31 of the Punjab Excise Act.
The relevant portions of these provisions state: Entry 51 "Duties of Excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India : (a) alcoholic liquors for human consumption;. .
Section 31 "An excise duty or a countervailing duty, as the case may be, at such rate or rates as the State Government shall direct, may be imposed, either generally or for any specified local area, on any excisable article (a) imported, exported or transported in accordance with the provisions of section 16; or (b) manufactured or cultivated under any licence granted under section 20; or (c) manufactured in any distillery established, or any distillery or brewery licenced under section 21;. 694 These provisions leave no room for doubt that a duty of excise on alcoholic liquors meant for human consumption cannot be recovered from the respondents because none of the 3 clauses of section 31 covers their business activities.
But then the first part of contention (a) that still head duty is a duty of excise cannot be accepted in view of the dicta in Har Shankar and others vs The Dy.
Excise & Taxation Commissioner and others (supra) and The State of Punjab vs Balbir Singh and others (supra) to the effect that the short fall in still head duty represents nothing but sums recoverable by the appellants under the terms of a contract which was entered into by the respondents with their eyes open and that the latter cannot be allowed to have the best of both the worlds by exploiting the contract so long as it suits them and by repudiating it if and when it does not work to their advantage.
Shri Munjral has vehemently contended that still head duty is only another name for excise duty inasmuch as it is nothing more or less than a duty leviable on the manufacture of alcoholic liquor.
For this proposition he places reliance on a Division Bench judgment of the High Court of Punjab & Haryana in M/s. Bhajan Lal Saran Singh & Co. vs The State of Punjab and others the approval of that judgment by this Court in Civil Appeals Nos.
1042 and 1043 of 1968 decided on 21st August, 1972, State of Madhya Pradesh vs Firm Gappulal etc.
and Excise Commissioner, U.P., Allahabad and others vs Ram Kumar and others.
These authorities, however, are of no help to him because, in every one of them, the still head duty which was mentioned in the condition corresponding to condition No. 8 in the present case was either expressly stated to be an excise duty or was assumed to be a duty of that character.
In fact, in the case of M/s. Bhajan Lal Saran Singh it was conceded on behalf of the State before the High Court that still head duty was an excise duty and that is why the nature of the charge as excise duty was taken for granted before the High Court as well as in this Court.
No question was either raised or decided as to whether it could at all be regarded as an excise duty.
However, in later cases, namely, Har Shankar and others vs The Dy.
Excise & Taxation Commissioner and others, (supra) and The State of Punjab vs Balbir Singh and others (supra) the demand for still head duty recoverable under condition No. 8 above extracted was specifically 695 held to be a demand for money which had become due under an obligation created by terms of the contract.
It is too late in the day, therefore, for Shri Munjral to contend that such a demand should be considered as one covering excise duty.
He, however, relies on the following passage in Har Shankar and others vs The Dy.
Excise & Taxation Commissioner and others (supra): "The second decision on which the appellants laid stress was rendered by the High Court of Punjab and Haryana in Jage Ram vs State of Haryana (C.W. No. 1376 of 1961 decided on March 12, 1968).
The argument is that this decision is based on the earlier decision of the High Court in Bhajan Lal vs State of Punjab (C.W. No. 538 of 1966 decided on February 6, 1967), that the decision in Bhajan Lal 's case was confirmed in appeal by this Court (C.A. Nos. 1042 and 1043 of 1968 decided on August 21, 1972), that there is no material difference between the rules and the procedure adopted in the instant cases and those which were struck down in Bhajan Lal 's case and therefore, the rules and the procedure followed herein must also be struck down for the same reasons.
This argument overlooks the significant difference between the rules struck down in Bhajan Lal 's case and in Jage Ram 's case and the amended Rules now in force.
Under the old Rule 36 (23 A) still head duty which was admittedly in the nature of excise duty was payable by the licencee even on quota not lifted by him.
The Rule and Condition No. 8 founded on it were therefore struck down in Bhajan Lal 's case as being beyond the scope of entry 51 of List II, the taxable event under the impugned Rule being the sale and not the manufacturer of liquor.
Rule 36 was amended on March 31, 1967 in order to meet the Judgment in Bhajan Lal 's case but the High Court found in Jage Ram 's case that even under the amended Rule, still head duty which was in the nature of excise duty was payable on unlifted quota of liquor.
The position obtaining under the Rules as amended on March 22, 1968 which are relevant for our purposes is in principle different as the still head duty is now only 0. 64 paise as against Rs. 17.60 per litre which was in force under the old Rules and excise duty as such is no longer payable on unlifted quota.
The principle governing the decisions in Bhajan Lal 's 696 case and Jage Ram 's case cannot, therefore, apply any longer".
(Emphasis supplied) Special stress has been laid by Shri Munjral on the underlined portion of the passage above extracted and it is contended by him that the judgments in the cases of Jage Ram and Bhajan Lal were neither disapproved nor dissented from but were merely distinguished in Har Shankar 's case, that while pointing out the distinction this Court took it for granted that in those earlier cases the charge of still head duty amounted to an excise duty and that condition No. 8 as obtaining in the present case being identical with the corresponding condition in those cases, it must be held that Har Shankar 's case is an authority for the proposition that the said condition No. 8 seeks to levy nothing but excise duty in the form of still head duty.
A careful perusal of the passage cited (which appears at first sight to lend colour to the contention) leaves no room for doubt, however, that in deciding Har Shankar 's case this Court was not called upon to adjudicate on the Constitutional propriety of condition No. 8 above extracted, nor with the question as to the nature of the levy covered by that condition.
All that the Court said was that the corresponding condition in Har Shankar 's case was a very different condition which could in no manner be construed to levy an excise duty.
Besides, it was pointed out in the passage above quoted that the still head duty mentioned in the relevant condition in the earlier cases (which was indentical with condition No. 8) was admittedly a duty of excise a fact to which we have already adverted while holding that condition No. 8 does not involve the imposition of a duty of exercise but makes provision only for recovery of sums becoming due under a contract.
We may also point out that the respondents are not connected in any manner whatsoever with the manufacture of alcoholic liquor and there was, therefore, no question at all of levying a duty of excise on their operations which were confined merely to the sale of liquor manufactured by others and which, therefore, commenced only after the process of manufacture was completely over.
For all these reasons, we repel the contention under examination.
Contention (b) is also without substance and need not detain us long.
For one thing, it was never raised at any earlier stage and its consideration is bound to work prejudice to the cause of the appellants.
Secondly, as already pointed out above, there 697 is no impediment in the way of the demand being regarded as the enforcement of an obligation arising under the contracts which the respondents had entered into and exploited so long as the same worked to their advantage and which were fully permissible under sub section (3) of section 34 of the Punjab Excise Act.
That sub section states : "(3) Every licence, permit or pass granted under this Act shall be granted (a) on payment of such fees, if any, (b) subject to such restrictions and on such conditions, (c) in such form and containing such particulars, (d) for such period, as the Financial Commissioner may direct".
According to Shri Munjral the payment of licence fees is provided for in the conditions of auction apart from condition No. 8 and, therefore, the latter cannot be regarded as providing for anything but the levy of a duty of excise or of some other kind.
The argument is fallacious in view of the language of clause (b) of the sub section just above reproduced.
That clause allows the imposition of conditions on the grant of a licence, in addition to the payment of the licence fees which is a matter covered by clause (a).
Condition No. 8 is, therefore, fully enforceable and there is no reason why still head duty should be regarded as a tax of any kind whatsoever.
For the reasons stated, both the appeals are accepted and the impugned judgment.
which cannot be sustained, is reversed so that both the petitions under article 226 of the Constitution of India filed by the respondents before the High Court and accepted by it are dismissed.
However, we leave the parties to bear their own costs.
V.D.K. Appeals allowed.
| IN-Abs | Condition 8 of the licence to run liquor vends in various parts of Punjab during the financial year 1965 66 laid down: (i) the licensee shall lift each month the proportionate quota for the month fixed for his vends or deposit still head duty realisable thereof (ii) Any deficiency in the amount of still head duty realisable from the lifting of the full proportionate quota due to the short lifting of the quota by the licensee or non deposit of the still head duty may be realised from the amount of security deposited by the licensee at the time of grant of licence; (iii) the resultant deficiency in the amount of security shall be made good by the licensee within seven days of such adjustment and (iv) if there is short lifting of proportionate quota or short deposit of still head duty continues for two consecutive months or the licensee fails to make up the deficiency in the amount of security within the prescribed period of seven days, his licence may be cancelled in addition to the recovery of still head duty.
Respondent Ajudhia Nath who was granted the necessary licences under the relevant provisions of the Punjab Excise Act and the Rules framed thereunder, was unable to lift the minimum quota of country liquor and also failed to deposit the still head duty which became payable by him under condition No. 8.
On an application made by him claiming relief in the matter of payment of sums which had fallen due, such relief was granted to him in part by the Excise and Taxation Commissioner, Punjab, on the ground that the liquor trade was badly affected by reason of the movement of population in the border area of Punjab on account of the hostilities which broke out between India and Pakistan in the month of September 1965.
Not satisfied with the relief so granted Ajudhia Nath filed two petitions under Article 226 of the Constitution before the High Court of Punjab and Haryana claiming, inter alia, that still head duty was an excise duty which could be levied only on manufacture of goods and which he was not liable to pay by reason of the admitted fact he was not a manufacturer of Liquor and that he was not given the opportunity of being heard in the matter covered by the applications claiming relief.
The petitions were allowed and the Letters Patent Appeals preferred by the State were dismissed.
Hence the appeals by special leave.
687 Allowing the appeals, the Court ^ HELD: 1.
The demand for the short fall in still head duty was based on the terms of a binding contract and it sought to enforce the liabilities arising out of mutually agreed conditions of auction.
Such a demand could not be equated with a notice requiring the liquor vendor to show cause why his licence should not be cancelled.
Although an opportunity of being heard has to be given to a liquor vendor when his licence is sought to be cancelled, the same principle of natural justice does not come into play when the demand is merely for payment of a sum becoming due under the conditions subject to which the licence was granted.
[691 G H, 692A, E F] Har Shankar and others vs The Dy.
Excise & Taxation Commissioner and others ; Shyam Lal vs State of Punjab, AIR 1976 SC 2045; State of Punjab vs Mulkh Raj and Co., AIR 1977 SC 1550 and The State of Punjab vs Balbir Singh and others, AIR 1977 SC 1717, followed.
A combined reading of Entry 51 of List II of Schedule VII to the Constitution of India and section 31 of the Punjab Excise Act no doubt makes it clear that a duty of excise on alcoholic liquors meant for human consumption cannot be recovered from a person unless any one of the three clauses of section 31 covers his business activities.
[693 C D, 694A] 2: 2.
Still head duty is not a duty of excise in view of the dicta laid down by the Supreme Court to the effect that the short fall in still head duty represents nothing but sums recoverable from the licensees under a contract which was entered into by them with their eyes open and that they cannot be allowed to have the best of both the words by exploiting the contract so long as it suits them and by repudiating it if and when it does not work to their advantage.
[694 B C] Har Shankar and others vs The Dy.
Excise & Taxation Commissioner and others, ; State of Punjab vs Balbir Singh and others, AIR 1977 SC 1717, applied.
Condition No. 8 of the licence does not involve the imposition of a duty of excise but makes provision only for recovery of sums becoming due under a contract.
The licensees are not connected in any manner whatsoever with the manufacture of alcoholic liquor and there was, therefore, no question at all of levying a duty of excise on their operations which were confined merely to the sale of liquor manufactured by others and which, therefore, commenced only after the process of manufacture was completely over.
[696 E G] M/s.
Bhajan Lal Saran Singh & Co. vs State of Punjab and others, 1967 Current Law Journal (Punjab and Haryana) 460; State of M.P. vs Firm Goppulal, ; ; Excise Commissioner, U.P., Allahabad and others vs Ram Kumar and others, , distinguished. 3: 1.
On the facts of this case still head duty cannot be regarded as a tax of some other kind nor can the question whether it does amount to such a tax 688 (for levying which the State lacks authority) be allowed to be raised since it was never raised at any earlier stage and its consideration is bound to work prejudice to the cause of the appellants.
Further there is no impediment in the way of the demand being regarded as the enforcement of an obligation arising under the contracts which the licensees had entered into and exploited so long as the same worked to their advantage and which were fully permissible under sub section (3) of section 34 of the Punjab Excise Act.
[696 H, 697 A B] 3: 2. Clause (b) of sub section (3) of section 34 of the Punjab Excise Act allows impositions of conditions on grant of the licences in addition to the payment of the licence fees which is a matter covered by clause (a).
Condition No. 8 is, therefore, fully enforceable and there is no reason why still head duty should be regarded as a tax of any kind whatsoever.
[697 D E]
|
Appeal No. 247 of 1954.
Appeal from the judgment and decree dated July 21, 19 53 of the Labour Appellate Tribunal of India, Third Bench, Lucknow in Appeal.
No. Calcutta 44 of 1952.
G. G. Mathur, for the appellant.
H. J. Umrigar, amicus curiae for the respondent, 874 1956.
October 23.
The Judgment of the Court was delivered by VENKATARAMA AYYAR J.
The appellant is a limited Company, which had been carrying on business in crushing sugarcane at a place called Pipraich in Gorakhpur District from the year 1932.
In 1946 it decided to expand its business, and with that object, sold its old machinery which had a crushing capacity of 160 tons per day, and purchased a new one with 650 tons capacity.
The new plant was installed in 1947, and it actually started working in 1948 49.
During this period, the sugar industry was passing through a crisis owing to shortage of sugarcane, and in consequence, the Government assumed control of its production and supply.
The quota which was allotted to the appellant 's Mill proved too small to its being worked profitably, with the result that in 1948 49 and 1949 50 the Company sustained losses which according to the appellant came to Rs. 2,67 042 7 4.
After several unsuccessful attempts at setting a larger supply, the management wrote to the Government on May 11, 1950, either to increase their quota or to permit them to sell the Mills.
In October, 1950, the Government granted permission for the sale of the plant and machinery, and pursuant thereto, the management sold them to a Madras party.
As the crushing season was then on, the appellant obtained from the purchaser a lease of the Mills for the current season agreeing to deliver possession thereof on the termination of the lease.
It should be mentioned that the appellant was also carrying on negotiations with the purchaser, for itself dismantling the machinery and erecting it at Madras for a lump consideration, expecting to perform the contract through its own workmen.
When the workmen became aware of the agreement of sale, their reaction to it was thoroughly hostile, and acting through their union, the respondent herein, they decided to prevent the transaction going through, as otherwise they would be thrown out of employment.
With that object, they moved the 875 Government to cancel the permission granted to the appellant for the sale of the Mills, and they also passed a resolution on December 26, 1950, to go on strike from January 12, 1951, and communicated the same to the appellant.
This led to correspondence between the parties, and as that is the foundation of the claim for compensation put forward by the respondent and awarded by the Tribunal, it becomes necessary to set it out with sufficient fulness.
On January 3, 1951, the Managing Director offered through the Manager of the Mills, to allot 25 per cent.
of the profit on the sale transaction with the Madras party on certain terms and subject to the condition "that the notice of strike should be withdrawn at once and today, so that arrangement of work could be made".
To this, the reply of the Union on January 5, 1951, was as follows: "With reference to the assurance given by the Managing Director, communicated by your goodself to us under your No. 975 dated 4th January 1951, asking us to withdraw the notice of strike, we regret to inform you that our fight is with the Government, which is not solved with this only.
Our members are bent upon keeping the Sugar mills here at any cost, either by strike, satyagrah, etc., or through any other means guided by our federation, otherwise there is no assurance of employment of thousands of creatures".
Then the letter proceeded to take exception to some of the terms, and finally wound up by stating that the workmen were waiting for their President Kashinath Pandey to advise them in the matter.
Replying to the objections raised by the respondent to some of the terms, the management wrote on January 8,1951, that they were ready to reconsider them, but insisted on the withdrawal of notice of strike as "the chief point".
On January 9,1951, Kashinath Pandey came to Pipraich, and discussed the matter with the management, and following upon it, the General Manager wrote to the respondent on January 10, 1951, that "in case the strike notice was withdrawn at once he would accede to the following points raised by the Union", and then the points were set down.
The 876 letter concluded by stating that the amount of compensation "will not be less than a lac".
The respondent replied to this on the same day that the workers were waiting for the "final order" of Kashinath Pandey in the matter, and assured the management that "in the meantime the strike was not coming off from the 12th".
After this, the appellant did not hear from the respondent, the strike also did not take place, and the crushing went on till the end of January, 1951, when the season came to an end.
One of the points that arises for our determination in this appeal is whether on this correspondence there was a concluded.
and binding agreement that the appellant should pay 25 per cent.
of the profits on the sale transaction to the workmen.
To continue the narration, the lease having expired with the crushing season, the purchaser came over to Pipraich to take delivery of the Mills and to arrange for the machinery being dismantled and removed to Madras for being erected there.
The appellant who, as already stated, was negotiating to get the dismantling done for a lump consideration found that its workmen were as hostile to it as ever, and refused to help in the work.
To adopt the language of the respondent in its written statement "they declined out of sentiment to dig their own graves".
After fruitless attempts at getting them to co 'operate in dismantling the machinery, the management put up the following notice on February 28, 1951: "The workers of Pipraich.
Sagar Mills Ltd. should know that we have sold our Mill to Madras party under the permission of the Government.
The party has arrived for dismantling.
Under the terms of agreement, we are bound to help them in this work.
So the workers should know that we can do this favour that we can take contract of dismantling here and erection in Madras and keep the workers engaged and request the purchasers for providing them in their concern.
Hence it is notified that workers who are not ready to co operate they should consider themselves to be discharged from 1st March 1951.
Fifteen days ' notice is served on the workers.
Those who 877 create obstructions will be deprived of benefit,, promised to them".
But the Union could not reconcile itself to the prospect of the Mills being shifted, and on March 4, 1951 Kashinath Pandey wrote a letter to the Government threatening to go on hunger strike, if the Mills were to be shifted from Pipraich.
The workmen were thus in no mood to accept the terms contained in the notice dated February 28, 1951, and so, the management had to issue further notice on March 14, 1951 in the following terms: "Whereas the workers have already been notified that we have sold our entire plant to a Madras party who have arrived to take charge of the Machines and whereas we have to hand over the plant from 15 3 1951 to the purchasers and thus there will be no work for our workers and whereas the Mazdoor Union, has already refused our suggestion to engage the workers in the work of dismantling and erection at Madras.
Now in pursuance of our notice dated 28 2 1951, it is notified that the following workers have been discharged from the services since 1 3 1951 subject of course to the payment of 15 days wages.
The workers are hereby asked to take their wages of 15 days on the 15th and 16th instant".
It appears from a notice dated March 16, 1951, sent by the appellant to the respondent, that after the notice dated March 14, 1951, was issued, Kashinath Pandey had a discussion with the management, as a result of which the date of termination of service of, the workers was extended from the 15th to 21st March pending the decision of the Government on the "future programme of the Pipraich factory", the workmen agreeing on their part to "take up the dismantling of the Mill after the said date".
But the Government declined by its letter dated March 21, 1951, to interfere with the sale of the machinery, and in accordance with the understanding reached above, the workers should have co operated with the appellant in dismantling the machinery from March 21.
But they declined to do so, and thereupon, acting in accordance with its notices dated February 28, 1951, 114 878 and March 14, 1951, the management duly discharged them.
In view of the inability of the appellant to take up the contract, the purchaser entered into direct negotiations with the workmen, and on 1 4 1951 concluded an agreement with them for dismantling the machinery.
The net result was that the appellant lost a contract on which, as admitted by the respondent, it would have earned a profit of at least Rs. 2 lakhs.
The workers.
, having taken the benefit of a direct contract with the purchaser for dismantling the machinery, next turned their attention to the appellant, and on the basis of the letters dated January 3, 1951, and January 10, 1951, sent a notice to it on April 19, 1951, asking for distribution among the workers of the "25 per cent labour share of the profits on sale of machinery".
By its letter dated June 19, 1951, the appellant repudiated.
the claim, and stated: "Then we also refer you to our notice dated 27 2 1951 in which we appealed to the labour to cooperate.
with us so that we might take the contract of dismantling here at Pipraich and erection at Etikoppaka and said definitely that those who do not co operate should consider themselves discharged.
This would have given us a good saving to meet the demand of the labour, but as you in spite of our appeal and notice refused to co operate, we had to suffer a heavy loss, for which you are directly responsible".
Thereafter, the respondent moved the Government to take action in the matter, and the result was that on November 16,1951, the U. P. Government issued a notification under section 3 of the U. P. Industrial Disputes Act XXVIII of 1947, hereinafter referred to as the Act, referring the following dispute to the adjudication of the Industrial Tribunal: "Whether the services of workmen, if so how many, were terminated by the concern known as Pipraich Sugar Mills Ltd., Pipraich, District Gorakhpur, without settlement of their due claims and improperly; and if so, to what relief are the workmen concerned entitled?" By its award dated February 28,1952, the Indus 879 trial Tribunal held firstly that the closure of the business and the sale of the machinery by the appellant was bona fide, as it had been continuously incurring losses and the supply position of sugarcane held out no immediate prospects of improvement, that the conduct of the workmen had been throughout unfair and such as to disentitle them to compensation but that the promise contained in the letters dated January 3 and 10, 1951, to pay 25 per cent.
of the profits realised by the sale of the Mills, was binding on the management.
It further held, repelling the contention of the appellant, that the notification dated November 16, 1951, was competent, notwithstanding that at that date the business had been closed.
The Tribunal then proceeded to ascertain the profits made by the appellant on its sale of the Mills, and held that a sum of Rs. 45,000 representing the 25 per cent.
of the net profits was payable to the workmen.
The management appealed against this decision but the same was confirmed by the Labour Appellate Tribunal by its order dated July 21, 1953.
The matter now comes before us.
in appeal under article 136.
As the appeal raised questions of importance, and as the respondent was unrepresented we requested Mr. Umrigar to assist us, and we are indebted to him for his learned and comprehensive argument.
Two contentions have been urged in support of the appeal: (1) The notification dated November 16, 1951, referring the dispute to the adjudication of the Industrial Tribunal is ultra vires, and the reference and the award therein are in consequence void; and (2) there was no concluded or binding agreement by the appellant to pay the workmen any share of profits in the sale transaction and the award is therefore bad on the merits.
Taking the first contention, the provision of law under which the impugned notification dated November 16, 1951, was issued by the State is section 3 of the Act, which runs as follows: "If in the opinion of the State Government, it is necessary or expedient so to do for securing the public safety or convenience, or the maintenance of 880 public order or supplies and services essential to the, life of the community, or for maintaining employment, it may, by general or special order, make provision (d) for referring any industrial disputes for conciliation or adjudication in the manner provided in the order".
An "industrial dispute", as defined in section 2(k) of the Industrial Disputes Act XIV of 1947 and by force of section 2, that definition applies to the Act"means any dispute or difference between employers and employees, 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 of labour, of any person".
Now, the contention of the appellant is that it is a condition precedent to the exercise by the State of its power under section 3 of the Act that there should be an industrial dispute, that there could be no industrial dispute according to this definition, unless there is a relationship of employer and employee; that in the present case, as the appellant sold its Mills, closed its business and discharged the workmen on March 21, 1951, paying to them in full whatever was due in accordance with the standing orders.
there was thereafter no question of any relationship of employer and employees between them that accordingly there was no industrial dispute at the date of the notification on November 16, 1951, and that it was therefore incompetent.
Reliance was placed in support of this position on the observation in Indian Metal and Metallurgical Corporation vs Industrial Tribunal, Madras(1) that the definition of an "industrial dispute" presupposes the continued existence of the industry, and on the decision in K. N. Padmanabha Ayyar vs The State of Madras(2) that there could be no industrial dispute with regard to a business, which was not in existence.
It cannot be doubted that the entire scheme of the Act assumes that there is in existence an industry, (1) A.I.R. 1953 Mad. 98, 102.
(2) 881 and then proceeds on to provide for various steps being taken, when a dispute arises in that industry.
Thus, the provisions of the Act relating to lock out, strike, lay off, retrenchment, conciliation and adjudication proceedings, the period during which the awards are to be in force have meaning only if they refer to an industry which is running and not one which is closed.
In Messrs Burn and Co., Ltd., Calcutta vs Their Workmen(1), this Court observed that the object of all labour legislation was firstly to ensure fair terms to the workmen, and secondly to prevent disputes between employers and employees, so that production might not be adversely affected and the larger interests of the public, might not suffer.
Both these objects again can have their fulfillment only in an existing and not a dead industry.
The view therefore expressed in Indian Metal and Metallurgical Corporation vs Industrial Tribunal, Madras (supra) and K. N. Padmanabha Ayyar vs The State of Madras (supra) that the industrial dispute to which the provisions of the Act apply is only one which arises out of an existing industry is clearly correct.
Therefore, where the business has been closed and it is either admitted or found that the closure is real and bona fide, any dispute arising with reference thereto would, as held in K. N. Padmanabha Ayyar vs The State of Madras (supra), fall outside the purview of the Industrial Disputes Act.
And that will a fortiori be so, if a dispute arises if one such can be conceived after the closure of the business between the quondam employer and em ployees.
In the light of the principles stated above, we must examine the nature of the dispute which is the subject matter of the reference under the impugned notification.
The claim of the workmen is that the promise made by the management in its letters dated January 3, 1951, and January 10, 1951, is a binding agreement and that they are entitled to be paid in accordance therewith.
Now, if this contention is well founded, the dispute relates to a claim which arose (1) Civil Appeal No. 325 of 1955, decided on October 11, 1956.
882 while the industry was in existence and between persons who stood in the relationship of employer and employees, and that would clearly be an industrial dispute as defined in the Act.
But it is argued for the appellant that even so, the 'notification dated November 16, 1951, would be incompetent as the industry had been closed before that date, and there was therefore no relationship of employer and employee at that point of time.
In other words, the power of the State to make a reference under section 3 will depend, according to the appellant, not only on the dispute having arisen in an existing industry but further, on the continued existence of that industry on the date of the notification.
We do not find anything in the language of section 3 of the Act to warrant the imposition of this additional limitation on the power of the State to make a reference.
That section only requires, apart from other conditions, with which we are not concerned, that there should be an industrial dispute before there can be a ref erence, and we have held that it would be an industrial dispute if it arises out of an existing industry.
If that condition is satisfied, the competence of the State for taking action under that section is complete, and the fact that the industry has since been closed can have no effect on it.
Any other construction would, in our opinion, result in serious anomalies and grave injustice.
If a workman improperly dismissed raises an industrial dispute, and before action is taken by the Government the industry is closed, what happens to the right which the Act gives him for appropriate relief, if the Act vanishes into thin air as soon as the industry is closed? If the contention of the appellant is correct, what is there to prevent an employer who intends, for good and commercial reason, to close his business from indulging on a large scale in unfair labour practices, in victimisation and in wrongful dismissals, and escaping the consequences thereof by closing down the industry? We think that on a true construction of section 3, the power of the State to make a reference under that section must be determined with reference not to the date,on which 883 it is made but to the date on which the right which is the subject matter of the dispute arises, and that the machinery provided under the Act would be available for working out the rights which bad accrued prior to the dissolution of the business.
It was next argued that even on this view, the notification dated November 16, 1951, was incompetent inasmuch as the management had offered by its letter dated January 3, 1951, to pay the workmen 25 per cent.
of the profits on the sale transaction only on April 30, 1951, and the right to the amount thus accrued to the workmen only after the closure of the business on March 21, 1951.
But this argument proceeds on a misapprehension of the correct position on the facts.
The true scope of the promise contained in the letter dated January 3, 1951, is that the workmen acquired thereunder a right in praesenti to 25 per cent.
of the profits, but that the amount became payable only on April 30, 1951, the reason obviously being that it could be precisely determined only after the transaction was completed.
In this view, as the claim for share of profits arose on January 3, 1951, and January 10, 1951, when the industry was working, the reference dated November 16, 1951, would be valid, notwithstanding that the business was closed on March 21, 1951.
That brings us on to a consideration of the second question, as to whether there was a concluded agreement binding the appellant to pay 25 per cent.
of the profits in.
the sale transaction to the workmen.
The Tribunal has answered it in the affirmative, and its finding was accepted by the Appellate Tribunal as, being one of fact, it had to be, under section 7 of the Industrial Dispute (Appellate Tribunal) Act No. XLVIII of 1950.
It is argued by Mr. Umrigar that following the usual practice of this Court in special appeals not to disturb findings of fact by Tribunals unless there were exceptional grounds therefore we should not interfere with the finding of the Industrial Tribunal that there was a concluded and enforceable agreement.
But our difficulty is that the Tribunal has spoken in two voices, and has given inconsistent 884 and conflicting findings, and it has consequently become necessary for us to determine which of its findings should be accepted as supported by materials.
We start with the letter dated January 3, 1951, wherein the management made an offer to pay 25 per cent.
of the profits of the sale transaction to the workmen.
It was expressly subject to the condition that the strike should be called off "at once and today".
That was not done.
On the other hand, the respondent made certain counter proposals in its letter dated January 5, 1951, and the management replied on January 8, 1951, that it would reconsider its terms provided the strike notice was withdrawn.
Thus, the offer contained in the letter dated January 3, 1951, was not accepted and lapsed.
Then on January 10, 1951, the management renewed its offer subject again to the condition that the strike notice was withdrawn at once.
The respondent passed no resolution withdrawing the notice, and in its reply dated January 10, 1951, it made it clear that it was waiting for Kashinath Pandey for it to come to a final decision '.
There was no further communication from the Union.
We do not see bow on this correspondence it could be held that there was a concluded agreement between the parties, and that is the view which the Tribunal itself took of it when it observed that "no final agreement could be arrived at. . and consequently the management served a notice on 28th February 1951".
But then, it went on to observe that, in fact, the workmen did not go on strike on January 12, 1951, and continued in service till they were served with notice of discharge on February 28, 1951, that that was consideration for the promise made by the agreement, which must therefore be taken to have become a term of service, and that in consequence "the promise of the management as contained in the letters of 3rd and 10th January 1951, is a binding agreement under which the workmen are entitled to compensation for termination of their services on the closure of the Mills".
This argument rests on a confusion of thought.
The question whether there was consideration.
for the promise made by the 885 management in its letters dated January 3, and January 10, 1951 arises only if the offer contained in the letters had been accepted by the respondent, so as to ripen into an agreement.
And if there was no concluded agreement between the parties, as the Tribunal itself had held, then the further question as to whether it was supported by consideration would not arise, nor would there be any question of its becoming one of the terms of the service.
It was argued that though a formal resolution withdrawing the strike was not passed, in fact there was no strike, and that must be taken to be acceptance of the offer by conduct.
That would not be acceptance as required by the 'appellant, and that alone would be sufficient to reject the contention of the respondent.
But this contention must fail even on the merits.
In its letter dated January 10, 1951, the respondent, while stating that the strike was not taking place on the 12th, made it clear that this was pending the final decision of the Union.
That clearly is not an acceptance of the offer.
The matter does not rest there.
, The object of the strike was, it should be remembered, not anything directly connected with the terms of employment but something collateral to it.
It was to prevent the Mills from being removed from Pipraich to Madras.
When the management offered to part with 25 per cent.
of the profits of the sale transaction, its object was clearly to disarm the opposition of the workmen and to get the machinery dismantled and delivered to the purchaser peacefully.
Did the workmen ever agree to it? As late as March 5, 1951, Kashinath Pandey wrote to the Government that if the Mills were to be shifted from Pipraich, he would go on hunger strike.
Even after the Government had informed him that the sale could not be interfered with, the workmen did not co operate with the management in the dismantling of the machinery with the result that the appellant had to give up the contract with reference thereto and to lose Rs. 2 lakhs profits.
To crown all, the workmen having successfully prevented the appellant from getting the contract for dismantling, themselves 886 entered into it directly with the purchaser and undoubtedly intercepted a part, if not the whole, of the profits which the appellant would have earned.
It is impossible to hold on these facts that there was a concluded agreement between the parties binding the appellant to give the workmen a share of the profits of the sale transaction.
It was next contended by Mr. Umrigar that even if there was no concluded agreement by the management to pay the workmen a share of profits on the sale transaction, it would have been open to the Tribunal to have awarded compensation for the termination of their services, treating it as retrench ment, and that the 'award of compensation of Rs. 45,000 which was what the management itself had suggested, might be sustained on that footing.
This contention assumes that the termination of the services of workmen, on the closure of a business, is retrenchment.
But retrenchment connotes in its ordinary acceptation that the business itself is being continued but that a portion of the staff or the labour force is discharged as surplusage and the termination of services of all the workmen as a result of the closure of the business cannot therefore be properly described as retrenchment.
It is 'however contended by Mr. Umrigar that the definition of retrenchment in section 2(oo) of the Industrial Disputes Act XIV of 1947 is wide enough to include discharge consequent on the, closure of business, and that under section 25 F, compensation could be awarded therefore Our attention has been invited on behalf of the appellant to the decision in J. K. Hosiery Factory vs Labour Appellate Tribunal(1), where it was held that retrenchment as defined in section 2(oo) does not comprehend discharge on the closure of business, but Mr. Umrigar contends that it is erroneous.
We do not consider it necessary to decide this question, as the definition of "retrenchment" in section 2(oo) of Act XIV 1947 and section 25 F therein were inserted by the Industrial Disputes (Amendment) Act No. XLIII of 1953, and we have held in Messrs Burn and Co., Ltd., Calcutta vs (1) A I.R. 1956 All. 498.
887 Their Workmen (supra) that this Act has no retrospective operation.
The rights of the parties to the present appeal must therefore be decided in accordance with the law as it stood on March 21, 1951, when the workmen were discharged.
It was next contended, on the strength of the decisions in Employees of Messrs India Reconstruction Corporation Limited, Calcutta vs Messrs India Reconstruction Corporation Limited, Calcutta(1) and Messrs Benett Coleman & Company Ltd vs Their Employees(2) that even prior to the enactment of Act XLIII of 1953, the Tribunals had acted on the view that retrenchment included discharge on closure of business, and had awarded compensation on that footing and that the award of the Tribunal in the present case could be supported in that view and should not be disturbed.
In Employees of Messrs India Reconstruction Corporation Limited, Calcutta vs Messrs India Reconstruction Corporation Limited, Calcutta (supra), the Tribunal observed at P. 576 as follows: "Ordinarily retrenchment means discharge from service of only the surplus part of the labour force but in the case of closure the whole labour force is dispensed with.
In substance the difference between closure and normal retrenchment is one of degree only.
As in the case of retrenchment so in the case of closure the workmen are not responsible for closing their jobs.
In both the cases, what is called compensation by way of retrenchment relief should be admissible".
We are unable to agree with these observations.
Though there is discharge of workmen both when there is retrenchment and closure of business, the compensation is to be awarded under the law, not for discharge as such but for discharge on retrenchment, and if, as is conceded, retrenchment means in ordinary parlance, discharge of the surplus, it cannot include discharge on ' closure of business.
Moreover, there was no question of closing of business in Employees of Messrs India Reconstruction Corporation Limited, Calcutta vs Messrs India Reconstruction Corporation (1) (1953] L.A.C. 563.
(2) 888 Limited, Calcutta (supra), as what happened there was that one of the units of the company, that at Calcutta, was closed and that would be a case of retrenchment, and the observations quoted above were purely obiter.
They were, however, quoted and followed without discussion by the Appellate Tribunal in Messrs Benett Coleman & Company Ltd. vs Their Employees (supra), which further remarked at p. 27: "Thus whether the closure was justified or not, the workmen who have lost their jobs would in any event get compensation.
If it was not bona fide or not justified, it may be that the measure of compensation would be larger than if it was otherwise".
For the reasons given above, we cannot assent to these observations.
It, should be mentioned that in Messrs Benett Coleman and Company Ltd. vs Their Employee (supra), there was no closure of business, but winding up of the Calcutta unit by a newspaper publishing company which had its headquarters at Bombay.
We must accordingly overrule this contention also.
We should add that the Tribunal was of the opinion that, apart from agreement, the workmen should not, in view of their conduct, be awarded compensation, and we entirely agree with it.
And as we have found against the agreement, we must allow this appeal, and set aside the award of compensation to the workmen made by the Tribunal.
In the circumstances, the parties will bear their own costs throughout.
Appeal allowed.
| IN-Abs | The appellant company could not work its Mills to full capa city owing to short supply of sugar cane and got the permission of the Government to sell its machinery but continued crushing cane under a lease from the purchaser.
The workmen 's Union in order to frustrate the transaction resolved to go on strike and communicated its resolution to the company.
There wag correspondence between the parties in course of which the company offered to pay to the workmen 25 per cent.
of the profits of the sale on condition that the strike notice must immediately be withdrawn.
The workmen did not fulfill the condition and made certain counter proposals.
The company insisted that the condition must first be fulfilled before the counter proposals could be considered and renewed its offer.
Although the workmen did not actually go on strike, they did not withdraw the strike notice, and did not co operate with the management in the dismantling and delivery of the machinery to the pur chaser, with the result that the company lost heavily.
On the expiry of the lease and closure of the industry, the services of the workmen were duty terminated by the company on March 21, 1951.
The workmen thereafter, claimed the share of profits on the basis of the offer made by the company in the correspondence and the dispute was referred to the Industrial Tribunal for adjudication by the U.P. Government by a notification under section 3 of the U.P. Industrial Disputes Act of 1947.
The Tribunal held that the company was bound by the offer it had made and awarded a sum of Rs. 45,000 to the workmen as representing their share of the profits.
On appeal the award of the Industrial Tribunal was affirmed by the Labour Appellate Tribunal.
It was contended on behalf of the appellant company that the notification was ultra vires, and the reference and the award void in consequence and that there having been no concluded agreement between the parties, it was not bound to pay.
Held, that the definition of an industrial dispute contained in section 2(k) of the Industrial Disputes Act XIV of 1947 and adopted by the U.P. Industrial Disputes Act XXVIII of 1947 contemplated the 873 existence of an industry and a subsisting relationship of employer and employee between the parties and, therefore, there could be no industrial dispute within the meaning of those Acts where the industry had been closed, and the closure was real and bona fide, if the dispute arose on such closure, or thereafter, if that could be conceived.
Section 3 of the U.P. Industrial Disputes Act of 1947 only required that there must be an industrial dispute before the Government could make a reference under that section arid, consequently, in the instant ease where the claim in dispute had arisen, if at all, prior to the closing of the industry, the Government was fully competent to issue the notification.
Indian Metal and Metallurgical Corporation vs Industrial Tribunal, Madras (A.I.R. and E. N. Padmanabha Ayyar vs The State of Madras ([1954] , approved.
Messrs Burn and Co. Ltd., Calcutta vs Their Workmen, (Civil Appeal No. 325 of 1955, decided on October 11, 1956), referred to.
In the instant case, however, as the findings of the Tribunal were inconsistent and conflicting, the court examined the correspondence and held that it did not establish that there was a concluded agreement between the parties whereby the workmen could be entitled to any share of the profits and, consequently, the award made by the Labour Appellate Tribunal must be sot aside.
Nor was the award sustainable as one for compensation for termination of the services of workmen on closure of the industry as such discharge was different from discharge on retrenchment, which implied the continuance of the industry and discharge only of the surplusage, and the workmen were not entitled either under the law as it stood on the day of their discharge or even on merits to any compensation.
Employees of Messrs India Reconstruction Corporation Limited, Calcutta vs Messrs India Reconstruction Corporation Limited, Calcutta ([1953] L.A.C. 563) and Messrs Benett Coleman & Company Ltd. vs Their Employees, ([1954] L.A.C. 24), distinguished and disapproved.
|
Civil Appeal No. 1794 (NL) of 1977.
22 From the award dated 23.3.1977 of the Industrial Tribunal, Maharashtra, Bombay in Reference (I.D.) No. 307 of 1968.
K.K. Venugopal, Rameshwar Nath and Ravinder Nath, for the Appellant.
M.K. Ramamurthi, A.D. Sastri and Mrs. Urmia Sirur, for the Respondent.
Shardul section Shroff and H.S. Parihar for the interveners.
The Judgment of the Court was delivered by GUPTA J.
This is an appeal by special leave from an award made by the Industrial Tribunal, Bombay, on December 9, 1976 in Reference No. 307 of 1968 directing reinstatement of 12 workmen dismissed by the appellant, Firestone Tyre and Rubber Company of India Private Limited.
The appellant company carries on the business of manufacturing tyres, tubes and several other products in Bombay.
Disputes arose between the management and the workmen employed in the company 's tyre curing department leading to a strike by these workmen from March 3, 1967.
This strike was called off on May 15, 1967, according to workmen on certain assurances given by the Commissioner of Labour.
The case of the management is that even after the workmen resumed work, they adopted a deliberate 'go slow ' policy resulting in fall in production.
On September 14, 1967 the management put up a notice asking the workmen to desist from continuing with the go slow tactics.
The notice however had no effect and from October 4, 1967 the workmen working in the tyre curing department again went on a strike.
Between October 27 and 31, 1967 the management issued chargesheets to 102 workmen alleging that they had resorted to wilful go slow.
The chargesheets issued were in identical language and they read as follows: "You are charged with the following act of misconduct under the Company 's certified standing order No. 24 (C), viz. 'Wilful slowing down in performance of work or abetment, or instigation thereof. ' 23 You have wilfully slowed down in performance of work as per particulars given below: " The particulars were then mentioned.
Three inquiry officers were appointed to inquire into the charges.
Almost all the workmen refrained from participating in the inquiries; the 12 workmen concerned in this appeal also remained absent.
The inquiry officers found the workmen guilty of adopting wilful go slow tactics.
The management accepted the findings of the inquiry officers and dismissed the workmen other than those who were 'protected workmen ' as defined in the explanation to section 33 (3) (b) of the .
The management also decided to dismiss the protected workmen.
As a reference concerning an earlier dispute (Reference No. 406 of 1967) was pending before the Tribunal, applications were made section 33 (2) (b) of the for approval of the action of the management in dismissing the workmen and under section 33 (3) (b) for permission to dismiss the protected workmen.
It appears that subsequently, on April 17, 1968 the parties reached a settlement.
The more important terms of the settlement were: (1) The Firestone Tyre Employees Union agreed to withdraw the strike.
(2) The dispute relating to the dismissal of 101 workmen (one of the workmen concerned having died in the meantime) was to be referred for adjudication by a joint application made by the parties under section 10 (2) of the .
(3) 77 of the dismissed workmen were to be re employed on temporary basis till the disposal of the adjudication by the Industrial Tribunal.
(4) The remaining 25 workmen, including the 12 we are concerned within this appeal, were not to be taken back but the management would pay to them 50 per cent of their basic wages and dearness allowance from the date of the retirement till the disposal of the adjudication by the Tribunal.
24 As agreed a joint application by the parties was made on which the Deputy Commissioner of Labour, Bombay, under section 10(2) of the (Reference No. 307 of 1968) referred to the Industrial Tribunal, Bombay, the disputes between the parties relating to the demands detailed in the schedule to the order of reference.
Two distinct matters are mentioned in paragraphs 1 and 2 of the schedule.
The second matter mentioned in paragraph 2 does not survive for consideration.
The first paragraph which is divided into two parts, (A) and (B) reads as follows: "SCHEDULE 1(A): The workmen listed at Serial Nos. 1 to 25 of 'Schedule I ' [which contains names of the 12 workmen concerned in this case] hereto should be reinstated in their former employment with continuity of service and other benefits and should be paid full wages, dearness allowance and other allowances from the date of dismissal of each of the workmen till each is so reinstated without any condition attached to such payment.
(B): The workmen listed at Serial Nos. 26 to 101 of 'Schedule I ' hereto who are at present re employed on a temporary basis should be granted reinstatement in their employment from the date of dismissal of each and should be granted continuity of service and other benefits and also should be paid full wages, dearness allowance and other allowances from the date of dismissal of each till each was reemployed, without any condition being attached to such payment." During the pendency of the reference all the 76 workmen covered by paragraph 1 (B) of the Schedule who had been taken back on temporary basis were made permanent as a result of settlements reached between these workmen and the management.
On behalf of 33 out of 76 of these workmen, the union entered into a settlement with the management, the remaining workmen of this group individually entered into settlements with the management.
The period during which the workmen were absent from duty was treated as leave without pay and continuity of their service was maintained.
25 The Union representing the aforesaid 33 workmen, and the remaining workmen out of this group of 76 individually, withdrew demand No. 1 (B) in view of the settlements entered into by and between these workmen and the management.
By an award dated January 10, 1973 the Tribunal disposed of demand No. 1 (B) as not pressed.
In the meantime 13 out of the 25 workmen covered by demand 1 (A) also reached a settlement with the management and withdrew the dispute relating to them; the terms of settlement were that these workmen would submit their resignations and be paid one month 's basic wages and dearness allowance for each year of service along with gratuity, leave wages, provident fund and the balance bonus due to them.
They were also to retain the wages for one month paid to them when they were dismissed.
The dispute on which the impugned award was made was thus restricted to demand No. 1 (A) concerning 12 workmen only out of 25.
The Tribunal by its award dated December 9, 1976 directed the appellant company to reinstate the 12 workmen named against serial Nos. 2, 3, 5, 7, 8, 10, 11, 13, 18, 22, 23, 25 of Schedule I to the order of reference with continuity of service and full wages, dearness and other allowances.
On the question of back wages, the matter was left to be decided later on evidence.
The dismissal of these workmen was set aside on the following findings: 1.
The inquiry held by the management was vitiated because, (a) chargesheets had not been served and notice of inquiry not given to 2 out of 12 workmen; (b) 2 out of the 3 inquiry officers were biased; (c) some of the workmen were not furnished with copies of certain documents relied on by the inquiry officers; and, (d) the chargesheets served on the workmen did not contain necessary particulars regarding the go slow tactics adopted by each of them.
All the 101 workmen had been found guilty of go slow but 76 of them were reinstated on a permanent basis and the remaining 25 workmen were denied the same 26 treatment for no good reason.
The management was thus guilty of discrimination and unfair labour practice.
We will take the finding of discrimination first as this is the ground on which the 12 workmen were straightaway ordered to be reinstated.
The Tribunal having found that the inquiries held against the workmen had not been proper noted that it was well settled that in such a situation the employer should be given an opportunity to adduce evidence before the Tribunal in support of the action taken by them, but proceeded to hold that in view of the other finding that the 12 workmen had been unfairly discriminated against, they were entitled to reinstatement and therefore no useful purpose would be served by permitting the management to adduce evidence seeking to justify the dismissal of the workmen on the ground of misconduct.
It was contended on behalf of the appellant that the Tribunal had no jurisdiction to address itself to the question of discrimination.
Section 10 (4) of the lays down: "Where in an order referring an industrial dispute to a Labour Court, Tribunal or National Tribunal under this section or in a subsequent order, the appropriate Government has specified the points of dispute for adjudication, the Labour Court or Tribunal or National Tribunal as the case may be, shall confine its adjudication to those points and matters incidental thereto".
In this case the points of dispute were specified in the schedule to the order of reference, and the Tribunal was therefore required to confine its adjudication to those points and matters that were incidental to them.
From a reading of demands 1(A) and 1(B) as a whole it is clear that the demand for reinstatement in respect of both groups of workmen as made arises on the alleged invalidity of the action taken by the management in dismissing these workmen.
The issue of unfair labour practice or discrimination by reason of subsequent reinstatement on a permanent basis of some and not all the 25 workmen was not a matter referred to the Tribunal for adjudication, nor it can be said to be in any way connected with or incidental to the right of reinstatement claimed by the 101 workmen from the date of their dismissal.
The fairness of subsequent absorption of some workmen is a matter quite irrelevant for judging the validity of the earlier dismissal of these workmen along with others; it is an entirely separate and independent question.
The Tribunal 27 also did not frame an issue on the alleged discrimination.
That being so, we think the Tribunal travelled outside its jurisdiction in recording a finding of unfair labour practice and discrimination.
We find no reason to disturb the finding that the inquiry held was not proper.
The Tribunal has found that the chargesheets issued were vague as they did not disclose the relevant material on which the charges were based.
It was contended on behalf of the Union on the basis of this finding that no useful purpose would be served by remitting the case to the Tribunal.
It is settled law now that when no inquiry has been held or the inquiry held has not been proper, the Tribunal has jurisdiction to allow the management to lead evidence to justify the action taken.
The contention is that the charge sheets being vague, the Tribunal would not be in a position to decide what evidence to let in, and, therefore, sending the matter back to the Tribunal would only be an idle formality.
It is not possible to accept this contention.
Normally an inquiry by the management starts by issuing a charge sheet to the workmen proposed to be discharged or dismissed.
In a case where the chargesheet is vague, it must be held that there has been no proper inquiry.
In M/s. Bharat Sugar Mills Ltd. vs Shri Jai Singh and others,(1) this Court held: "But the mere fact that no inquiry has been held or that the inquiry has not been properly conducted cannot absolve the Tribunal of its duty to decide whether the case that the workman has been guilty of the alleged misconduct has been made out.
The proper way for performing this duty where there has not been a proper inquiry by the management is for the Tribunal to take evidence of both sides in respect of the alleged misconduct".
Whether in a case, as the one before us, where it is found that proper charge sheets had not been served on the workmen, the Tribunal can ask the parties to lead evidence to enable the Tribunal to decide the dispute between them is directly covered by an authority of this Court.
In Management of Ritz Theatre (P) Ltd. vs Its Workmen, (2) Gajendragadkar J. (as he then was) speaking for the Court said: ". . if it appears that the departmental enquiry held by the employer is not fair in the sense that proper charge 28 had not been served on the employee or proper or full opportunity had not been given to the employee to meet the charge, or the enquiry has been affected by other grave irregularities vitiating it, then the position would be that the Tribunal would be entitled to deal with the merits of the dispute as to the dismissal of the employee for itself.
The same result follows if no enquiry has been held at all.
In other words, where the Tribunal is dealing with a dispute relating to the dismissal of an industrial employee, if it is satisfied that no enquiry has been held or the enquiry which has been held is not proper or fair or that the findings recorded by the Enquiry Officer are perverse, the whole issue is at large before the Tribunal.
This position also is well settled".
In view of the well settled legal position, the order directing reinstatement of the 12 workmen without a consideration of the merits of the case cannot be sustained.
We therefore remit the case to the Industrial Tribunal to decide the dispute concerning the demand specified in paragraph 1(A) of the Schedule to the order of Reference after giving the parties concerned an opportunity to lead evidence in support of their respective cases.
The appeal is allowed to the extent indicated above, this Court by order dated August 2, 1977 had directed the appellant to pay the costs of the appeal to the respondents in any event.
The respondents will be also entitled to retain the sums of money paid to them by the appellant under orders of this Court.
V.D.K. Appeal allowed.
| IN-Abs | The appellant company carries on the business of manufacturing tyres, tubes and several other products in Bombay.
The workmen in the company 's tyre curing department adopted a deliberate "go slow" policy resulting in fall in production.
On September 14, 1967 the management put up a notice asking the workmen to desist from continuing with the go slow tactics.
The notice, however, had no effect and from October 4, 1967 the workmen in the tyre curing department went on a strike.
Between October 27 and 31, 1967 the management issued chargesheets to 102 workmen alleging that they had resorted to wilful go slow.
The workmen refrained from participating in the inquiries conducted by three inquiry officers and the inquiry reports went against the workmen.
The management accepted the findings of the inquiry officers and dismissed the workmen other than those who were "protected workmen" as defined in the explanation to section 33 (3) (b) of the ; an application was made under the said provision for permission to dismiss the "protected workmen".
As a reference concerning an earlier dispute was pending before the Tribunal, an application was also made under section 33 (2) (b) of the Act for approval of the action of the management in dismissing the workmen.
Subsequently, on April 17, 1968 the parties reached a settlement.
Under the settlement the strike was withdrawn, the dispute concerning the dismissal of the workmen was referred for adjudication by a joint application made by the parties under section 10 (2) of the Act, and 76 of the dismissed workmen were re employed till the disposal of the adjudication by the Industrial Tribunal.
The demand set out in para 1 (A) of the Schedule to the order of reference relates to 25 workmen who were not reinstated and demand in para 1 (B) of the Schedule relates to the 76 workmen who were temporarily reinstated.
Following a further settlement all the 76 workmen mentioned in para 1 (B) were taken back and made permanent and the demand set out in Para 1 (B) was allowed to be withdrawn as not pressed by the award dated January 10, 1973.
In the meantime, 21 13 out of the 25 workmen covered by demand 1 (A) also reached a settlement with the management and withdrew the dispute relating to them.
The dispute on which the impugned award was made was thus restricted to demand in para 1 (A) concerning 12 workmen only out of 25.
The Tribunal by its award dated December 9, 1976 directed the company to reinstate these 12 workmen on the ground, inter alia, that they were denied for no valid reason the same treatment meted out to 76 other workmen and that the management was thus guilty of discrimination and unfair labour practice.
Hence the appeal by special leave.
Allowing the appeal in part and remitting the case to the Industrial Tribunal, the Court ^ HELD: 1.
The Tribunal travelled outside its jurisdiction in recording a finding of unfair labour practice and discrimination.
In this case, the points of dispute were specified in the Schedule to the order of reference, and the Tribunal was, therefore, required to confine its adjudication to those points and matters that were incidental to them.
From a reading of demands 1 (A) and 1 (B) as a whole it is clear that the demand for reinstatement in respect of both groups of workmen as made arises on the alleged invalidity of the action taken by the management in dismissing these workmen.
The issue of unfair labour practice or discrimination by reason of subsequent reinstatement on a permanent basis of some and not all the 25 workmen was not a matter referred to the Tribunal for adjudication, nor it can be said to be in any way connected with or incidental to the right of reinstatement claimed by the 101 workmen from the date of their dismissal.
The fairness of subsequent absorption of some workmen is a matter quite irrelevant for judging the validity of the earlier dismissal of these workmen along with others; it is an entirely separate and independent question.
The Tribunal also did not frame an issue on the alleged discrimination.
[26 H 27 A; 26 F G] 2.
It is settled law now that when no inquiry has been held or the inquiry held has not been proper, the Tribunal has jurisdiction to allow the management to lead evidence to justify the action taken.
Normally the inquiry by the management starts by issuing the charge sheet to the workmen proposed to be discharged or dismissed.
In a case where the charge sheet is vague it must be held that there has been no proper inquiry.
[27 B D] In the instant case, having found that proper charge sheet has not been served on the workmen, the Tribunal was entitled to ask the parties to lead evidence to enable the Tribunal to decide the merits of the dispute.
The order directing reinstatement of the 12 workmen without a consideration of the merits of the case cannot be sustained.
D] M/s. Bharat Suger Mills Ltd. vs Shri Jai Singh and others, at 690 and Management of Ritz Theatre (P) Ltd. vs Its Workmen, ; at 468, followed.
|
ivil Appeal Nos.
1192 94 of 1971.
From the judgment and order dated the 20th October, 1976 of the High Court of Madras in Tax Cases Nos.
205 to 207 of 1971.
S.T. Desai, A.K. Verma and J.B. Dadachanji for the Appellant.
A.K. Sen and A.V. Rangam for the Respondent.
The Judgment of the Court was delivered by VENKATARAMIAH J.
The appellant in these three appeals by special leave is a company engaged in the business of manufacture and sale of art silk yarn.
It has its factory at Sirumughai in the District of Coimbatore in the State of Tamil Nadu.
The appellant is registered as a dealer carrying on business at Coimbatore.
In the course of its business, it sold during the relevant period large quanti 46 ties of art silk yarn to various purchasers some of whom were weavers residing in the States of Maharashtra and Gujarat who had been issued cards under a scheme called 'Export Promotion Scheme ' entitling them to buy specified quantities of art silk yarn from specified manufacturers.
The question involved in these appeals relates to the exigibility of the sales effected in favour of Export Promotion Scheme card holders belonging to the States of Maharashtra and Gujarat to tax under the (hereinafter referred to as 'the Act ').
The assessment years are 1962 63, 1963 64 and 1964 65.
The details of the Export Promotion Scheme for distribution of art silk yarn referred to above were these: There were certain weavers in India who were entitled to an incentive in the form of import licences to import art silk yarn from abroad.
The said import entitlement was cut to a certain extent and indigenous art silk yarn at concessional price was allotted to them.
To regulate the scheme of allotment, a committee called the 'Art Silk Yarn Distribution Committee ' was constituted by the Government of India.
The Committee made allotments to different weavers by issuing allotment cards.
These allotment cards contained details of the quantity of allotment and the rayon yarn manufacturer from whom the allotted quantity of yarn could be drawn.
As per the terms of the card, the yarn manufacturer should offer to the allottee rayon yarn within seven days of the date of the card without waiting for the allottee to approach him.
A firm contract for the supply of yarn should be completed within a period of twenty one days from the date of allocation of the card.
If a firm commitment was not entered into by the allottee with the yarn manufacturer within twenty one days from the date of allocation of the card, the yarn manufacturer should return the allocation card to the Distribution Committee with suitable remarks on the card and a covering letter explaining the reasons for the return of the card.
Even in the case of actual fulfilment of the quota covered by the allocation card, the said card should be returned to the Distribution Committee after the delivery of the yarn was completed.
This in brief was the Scheme.
In the instant case, the appellant had supplied art silk yarn to certain card holders who were residing, as stated earlier, outside the State of Tamil Nadu.
It is stated that the appellant had a selling agent and distributor by the name M/s. Rayonyarns Import Company Ltd. at Bombay and the case of the appellant was that it had 47 supplied art silk yarn to the card holders in the States of Maharashtra and Gujarat through the said agent and the delivery of the goods was effected at Bombay.
In the assessment proceedings before the Joint Commercial Tax Officer, Coimbatore for the year 1964 65, the appellant claimed that the sales of art silk yarn through its agent at Bombay were not inter State sales as defined by section 3(a) of the Act as the movement of the goods in question from the State of Tamil Nadu to the State of Maharashtra or the State of Gujarat was not occasioned by the sales in question and that they were in fact sales which had taken place outside the State of Tamil Nadu.
The Joint Commercial Tax Officer rejected the contention of the appellant and treated the sales effected in favour of the Export Promotion Scheme card holders through the appellant 's agent at Bombay as inter State sales and levied tax under the Act accordingly.
He also revised the orders of assessment for the years 1962 63 and 1963 64 bringing to tax the turnover relating to transactions of similar nature during those years.
In the appeals filed by the appellant against the order of assessment for the year 1964 65 and of revised assessment for the years 1962 63 and 1963 64 before the Appellate Assistant Commissioner, (Commercial Taxes), Coimbatore, the orders passed by the Joint Commercial Tax Officer were affirmed.
The appellant then filed three appeals before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore against the orders passed in appeal by the Appellate Assistant Commissioner.
The Tribunal also held that the sales in favour of the Export Promotion Scheme card holders outside the State of Tamil Nadu were inter State sales and were liable to be taxed under the Act.
Aggrieved by the orders of the Tribunal, the appellant preferred three revision petitions before the High Court of Madras.
These petitions were dismissed.
Thereafter the appellant has come up in appeal to this Court by special leave.
Section 3(a) of the Act provides that a sale or purchase of goods shall be deemed to take place in the course of inter State trade or commerce if the sale or purchase occasions the movement of goods from one State to the other.
In order to substantiate its case, the appellant has placed before us the documents relating to one transaction stating that the decision on the true nature of the said transaction would govern all other transactions of sale in dispute as they were all of a similar kind.
Those documents relate to the supply of art silk yarn to a firm known as M/s. Ramesh Silk Fabrics at Surat in the State of Gujarat made in June, 1964.
The purchaser was issued an allocation card on November 7, 1963 bearing No. 48 3124.
Under the card, M/s. Ramesh Silk Fabrics was entitled to purchase 273 Kgs.
of indigenous art silk yarn from the appellant.
The following were the relevant terms of the card: "1.
The rayon manufacturers and/or our approved dealers shall ensure that the quantity sold is not more than the quantity allocated as indicated in column No. 4(b) on the reverse of the card.
The rayon manufacturer shall offer yarn to the allottee within seven days from the date of allocation card without waiting for the allottee to approach him.
Contract for the supply of yarn shall be concluded within 21 days from the date of the allocation card.
Particulars of the quantity of yarn sold by the rayon yarn manufacturer his approved dealer with the date of or sale shall be entered and signed by the seller in column (5) on the card.
No supply shall be made on allotment card on which corrections have not been attested by the Secretary or the Manager.
If firm commitment is not entered into by the allottee with the yarn manufacturer, the yarn manufacturer shall return the allocation card to the Distribution Committee, with suitable remarks on the card and a covering letter explaining the reasons for returning the card.
Allocation cards shall be returned to the Distribution Committee after the delivery of yarn has been completed.
" At the back of his allocation card, in column 4(a) the appellant is shown as the manufacturer and in column 4(b) the quantity allotted is shown as 273 Kgs.
Column (5) of the allocation card shows that quantity of 268 Kgs. had been supplied as per Invoice No. BC/132.
Then we have the Invoice No. BC/132 prepared in the name of the appellant by its agent, Rayon yarn Import Co. Pvt. Ltd. and signed by the agent for and on behalf of the appellant.
The cases containing goods sold had been marked as 5829, 8479 and 8505.
The Invoice contains a note which reads as follows: 49 "We have charged you 2% Central Sales Tax for which purpose you are required to send us immediately your regular 'C ' form correct in all respects as required by the law in force for the time being in the absence of which you are required to remit us balance sum of Rs . being the difference between the rate charged and the revised rate at 10% applicable in such case.
" But actually 2% tax was added and it was shown in the invoice as local sales tax of Maharashtra at 2% of the price.
A delivery order dated June 3, 1964 prepared by the agent at Bombay on behalf of the appellant also refers to the numbers of the cases containing goods as 5829, 8479 and 8505.
What is of significance is a letter dated May 23, 1964 written by the agent at Bombay to the appellant.
By that letter, the agent requested the appellant to send from the factory 69 cases of yarn bearing specific numbers including case No. 5829, 8479 and 8505.
The said letter further stated that the invoices of sale would be sent after the goods were sold by the agent.
What is attempted to be made out by the appellant is that the appellant was informing its agent at Bombay from time to time as and when goods were manufactured the number of the cases in which the goods had been packed and at the request of its agent it had despatched the goods to Bombay but not as a result of any sale of the said goods in favour of a purchaser.
According to the appellant, the sale had taken place at Bombay and the movement of goods to Bombay from the State of Tamil Nadu was not connected with the sale in question.
In order to constitute an inter State sale as defined in section 3(a) of the Act, two factors should co exist (i) a sale of goods and (ii) movement of goods from one State to another under the contract of sale.
If there is a conceivable link between a contract of sale and the movement of goods from one State to the other in order to discharge the obligation under the contract of sale, the inter position of an agent of the seller who may temporarily intercept the movement ought not to alter the inter State character of the sale.
The facts which are glaring in this case are: (1) the allotment of a certain quantity of art silk yarn produced by the appellant in favour of the allocation card holder; (2) the requirement that the appellant should offer to sell the quantity of goods allotted to the card holder within seven days; 50 (3) the requirement that contract of sale should be completed within twenty one days of the date of the allocation card; (4) the requirement that the card should be returned to the Committee if no contract of sale was concluded as stated above; and (5) the fact that the goods have been supplied expressly against the quota allotted under the allocation card.
Admittedly the allocation card bearing No. 3124 was issued on November 7, 1963 and it required the appellant to offer to sell the quantity of art silk yarn mentioned in it to the purchaser within seven days without even waiting for the purchaser approaching the appellant with a request to supply the goods in question.
The card contemplated a contract of sale to be completed within twenty one days of the date of its issue.
The invoice in question contained the number of the allocation card.
In the letter dated May 23, 1964 the agent requested the appellant to send the cases bearing Nos.
5829, 8479 and 8505 by lorry from Sirumughai and the said boxes were later on admittedly delivered to the purchaser on June 3, 1964.
These facts cumulatively suggest that the goods in question had been transported from the factory site of the appellant to Bombay for delivery to the purchaser as a result of the contract of sale established in accordance with the terms of the allocation card.
It is, however, argued on behalf of the appellant relying upon the decision of this Court in Tata Engineering and Locomotive Co. Ltd. vs Commissioner of Commercial Taxes, Jamshedpur and Anr.
that the sale effected by the appellant 's agent at Bombay could not be treated as the immediate case of movement of goods from the State of Tamil Nadu to the State of Maharashtra or the State of Gujarat, as the case be may.
The facts in the aforesaid case are distinguishable from the facts in the present case since it was held in that case that the procedure followed by the manufacturer, the appellant in that case together with the absence of any firm orders placed by the purchasers indicated that there were no transactions of sale within the meaning of section 2(g) of the Act and assuming that any firm orders had been received by the appellant therein, they could not be regarded as anything but mere offers.
This Court further held in that case that the appropriation of goods was done 51 at the appellant 's stockyard situated in the State where the vehicles were delivered to purchasers and it was open to the appellant till then to allot any vehicle to any purchaser or to transfer a vehicle from one stockyard to another.
One strong circumstance which existed in that case was the absence of the firm orders which occasioned the movement of goods from the State of Bihar to other States as can be seen from the following passage in that decision: "As regards the so called firm orders it has already been pointed out that none have been shown to have existed in respect of the relevant periods of assessment.
Even on the assumption that any such orders had been received by the appellant they could not be regarded as anything but mere offers in view of the specific terms in Exhibit 1 (the dealership agreement) according to which it was open to the appellant to supply or not to supply the dealer with any vehicle in response to such order.
" In the instant case there is clear evidence of the existence of a prior contract of sale as per terms of the allocation card.
The fact that actual sale pursuant to the said contract of sale had taken place subsequently does not militate against the transaction being treated an inter State sale under Section 3 (a) of the Act, since the movement of the goods delivered to the buyer was occasioned by the contract of sale brought into existence under the terms of the allocation card.
It was, however, faintly suggested that the evidence of what took place between the appellant and the allottee within twenty one days of the issue of the allocation card was lacking in this case.
Evidence about these facts was within the knowledge of the appellant and the appellant had not placed it before the assessing authority.
It is likely that if such evidence had been produced it would have gone against the appellant.
Even apart from that the finding recorded by the assessing authority the appellate authority, the Tribunal and the High Court on the basis of the terms of the allocation card and other material on record that there was a contract of sale within the stipulated time between the appellant and the allottee of art silk yarn is unassailable.
In the circumstances no assistance can be derived by the appellant from the case of Tata Engineering and Locomotive Co. Ltd. (supra).
The decision of this Court in Kelvinator of India Ltd. vs The 52 State of Haryana relied on by the appellant has also no bearing on this case.
The assessee in that case had its factory where it manufactured refrigerators at Faridabad in the State of Haryana and it moved the goods manufactured by it to its godown at Delhi.
The excise pass utilised for such movement was always in favour of self.
During the transport of goods, the assessee paid octroi payable for bringing goods into Delhi.
At Delhi, the assessee sold the goods to its distributors.
The Court on a consideration of the material before it held that even though there were prior distribution agreements entered into between the assessee and its distributors, the goods in question had not been moved pursuant to the said agreements from Faridabad to Delhi, and hence there was no inter state sale.
The facts of this case are, however, close to the facts in English Electric Company of India Ltd. vs The Deputy Commercial Tax officer & Ors.
Here also the assessee had its factory in the State of Tamil Nadu.
Its registered office was at Calcutta but it had branch offices at Madras, Bombay and other places.
A Bombay buyer wrote to the Bombay branch of the appellant in that case asking for lowest quotation in respect of the goods which were being manufactured in the factory in Tamil Nadu.
After some correspondence between the Bombay branch and the Madras branch, the Bombay branch, wrote to the Bombay buyer giving all the required particulars.
The Bombay buyer thereafter placed an order with the Bombay branch for certain goods.
The Bombay branch informed the Madras branch about the order placed by the Bombay buyer.
On receipt of the invoice from the Madras branch the Bombay branch wrote to the Bombay buyer that some of the goods indented by him were ready for despatch and asked for despatch instructions.
On receipt of such instructions, the Bombay branch asked the Madras Branch to send goods to Bombay.
The railway receipts were sent through the Bombay branch.
The goods were delivered to the Bombay buyer through clearing agents and the insurance charges were collected from the Bombay buyer.
The assessee claimed in the assessment proceedings that the sale was not an inter State sale but one which had taken place at Bombay between the Bombay branch and the Bombay buyer, The said contention was rejected by this Court with the following observations: "The appellant in the present case sent the goods direct from the Madras branch factory to the Bombay buyer 53 at Bhandup, Bombay.
The railway receipt was in the name of the Bombay branch to secure payment against delivery.
There was no question of diverting the goods which were sent to the Bombay buyer.
When the movement of goods from one State to another is an incident of the contract it is a sale in the course of inter State sale.
It does not matter in which State the property in the goods passes.
What is decisive is whether the sale is one which occasions the movement of goods from one State to another.
The inter State movement must be the result of a covenant, express or implied, in the contract of sale or an incident of the contract.
It is not necessary that the sale must precede the inter State movement in order that the sale may be deemed to have occasioned such movement.
It is also not necessary for a sale to be deemed to have taken place in the course of inter State trade or commerce, that the covenant regarding inter State movement must be specified in the contract itself.
It will be enough if the movement is in pursuance of and incidental to the contract of sale.
When a branch of a company forwards a buyer 's order to the principal factory of the company and instructs them to despatch the goods direct to the buyer and the goods are sent to the buyer under those instructions it would not be a sale between the factory and its branch.
If there is a conceivable link between the movement of the goods and the buyer 's contract, and if in the course of inter state movement the goods move only to reach the buyer in satisfaction of his contract of purchase and such a nexus is otherwise inexplicable, then the sale or purchase of the specific or ascertained goods ought to be deemed to have taken place in the course of inter State or commerce as such a sale or purchase occasioned the movement of the goods from one State to another, The presence of all intermediary such as the seller 's own representative or branch office, who initiated the contract may not make the matter different.
Such an interception by a known person on behalf of the seller in the delivery State and such person 's activities prior to or after the implementation of the contract may not alter the position.
" In the instant case, the allocation card was first sent in November, 1963 asking the appellant directly to make an offer of the 54 goods to the allottee.
The allottee was expected to communicate his desire to purchase the goods within twenty one days of the date of the allocation card.
Such communication brought into existence a contract sale directly between the appellant and the buyer.
The goods were admittedly sent pursuant to the said contract of sale.
The interposition at a later stage of the selling agent who acted on behalf of the appellant in the preparation of the invoice and the delivery of the goods would not alter the true character of the sale as the selling agent was just a conduit pipe.
The goods having been despatched from one State to another State pursuant to a contract of sale which came into existence directly between the appellant and the buyer within a few days after the date of the allocation card, the sale was an inter State sale.
The Tribunal and the High Court were, therefore, right in upholding the orders of the assessing authority levying tax under the Act on all sales which had taken place in favour of the Export Promotion Scheme card holders in Gujarat and Maharashtra even though the selling agent of the appellant at Bombay had on behalf of the appellant also dealt with such card holders at Bombay, as the transactions in question satisfied the tests laid down in the case of English Electric Company of India Ltd. (supra).
In the result the appeals fail and are dismissed with costs.
P.B.R. Appeals dismissed.
| IN-Abs | To regulate the allotment of indigenous art silk yarn, the Government of India constituted the Art Silk Yarn Distribution Committee which issued allotment cards to individual weavers.
Under the terms of the card without waiting for the allottee to approach the manufacturer the manufacturer had to offer the allottee art silk yarn within seven days of the date of allocation of the card and within a period of 21 days from the date of allocation of the card, a firm contract for the supply of yarn was to be completed.
The appellant, a manufacturer of art silk yarn with its factory in the State of Tamil Nadu, supplied yarn to cardholders in the States of Maharshtra and Gujarat by delivering the goods at Bombay through its selling agent at that place.
On the question of exigibility of the goods to Central Sales tax the appellant claimed that since the goods were despatched to Bombay at the request of the agent and not as a result of any sale in favour of the purchaser the sale had taken place at Bombay, and secondly since the movement of goods from the State of Tamil Nadu to Bombay was not connected with the sales the sales were not inter State sales within the meaning of section 3 (a) of the Central Sales Tax Act.
This claim was rejected by the Joint Commercial Tax Officer and his order was upheld at the different stages of appeal.
The High Court dismissed the appellant 's revision petitions.
On the question whether the sales were inter State sales, the Court ^ HELD: The goods having been despatched from one State to another pursuant to a contract of sale that came into existence directly between the buyer and seller within a few days after the date of the allocation card, the sale was an inter State sale.
To constitute an inter State sale within the meaning of section 3(a) of the Central Sales Tax Act there must co exist a sale of the goods and movement of 45 goods from one State to another under the contract of sale.
Where there is a link between a contract of sale and movement of goods from one State to another pursuant to the contract of sale, interposition of an agent ought not to alter the inter State character of the sale.
[49 F] In the instant case the card contemplated a contract of sale to be completed within 21 days of the date of its issue.
The agent requested the appellant to despatch certain number of cases to a purchaser and that was done.
These facts cumulatively suggest that the goods had been 'transported from the factory in Tamil Nadu to Bombay for being delivered to the purchaser as a result of contract of sale established in accordance with the terms of the allocation card.
[49 G 50 B;E] The fact that actual sale pursuant to the said contract had taken place subsequently does not militate against the transaction being treated as an inter State sale under section 3(a) because the movement of goods delivered to the buyer was occasioned by the contract of sale brought into existence under the terms of the allocation card.
[51 E] The authorities below have found, on the basis of the terms of the allocation card and other material on record, that there was a contract of sale within the stipulated time between the parties.
[51 G] English Electric Company of India Ltd. vs The Deputy Commercial Tax Officer & Ors., (1976) 38 S.T.C. 475, followed.
Tata Engineering and Locomotive Co. Ltd. vs Assistant Commissioner of Commercial Taxes.
Jamshedpur & Anr.
(1970) 26 S.T.C. 354 and Kelvinator of India Ltd. vs State of Haryana (1973) 32 S.T.C. 629, held inapplicable.
|
Civil Appeal No. 1759 of 1981 Appeal by special leave from the judgment and order dated 3rd December, 1980 of the Allahabad High Court in Civil Revision No. 525 of 1980 F.S. Nariman and K.K. Mohan, for the Appellant.
R.K. Garg, Pramod Swarup and Sunil Kumar Jain, for the Respondent.
The Judgment of the Court was delivered by PATHAK, J.
In a suit for ejectment of a lessee and for recovery of arrears of rent, does the court enjoy any discretion not to strike off the defence in case the defendant has defaulted in depositing the rent and has also failed to make any representation within the terms of Rule 5 of Order XV, Code of Civil Procedure? That question is raised in this defendant 's appeal by special leave against an order of the Allahabad High Court maintaining in revision that the trial court has no discretion in the circumstances but must strike off the defence.
The respondent as lessor filed a suit against the appellant as lessee for his ejectment and for recovery of arrears of rent.
The appellant filed a written statement and resisted the suit.
During the pendency of the suit the respondent filed an application praying that the appellant 's defence be struck off in view of Rule 5 of Order XV, Code of Civil Procedure, inasmuch as the appellant had committed default in depositing the rent regularly.
The appellant opposed the application and attempted to show that he had been depositing the rent as required by the law.
The trial court held that while the rental arrears admitted by the appellant to be due had been deposited in accordance with the relevant provision of sub rule (1) of Rule 5 of Order XV, he had failed to make regular deposits of the monthly rent accruing during the pendency of the suit as required by the other provision of the said Rule.
The trial court also noted that the appellant had failed to make any representation permitted him by sub rule (2) of Rule 5 of Order XV within the time prescribed in that provision.
Following a ruling of the Allahabad High Court 126 that in those circumstances the court was obliged to strike off the defence, that trial court did exactly that.
The appellant applied in revision to the High Court, and the High Court, in view of the view taken by a Division Bench in Puran Chand vs Pravin Gupta, affirmed the order of the trial court.
Rule 5 of Order XV, Code of Civil Procedure, was enacted by the U.P. Civil Laws (Amendment) Act 1972.
It provided that unless the defendant deposited the admitted rent or compensation at or before the first hearing of the suit and also deposited the monthly rent regularly, his defence was liable to be struck off.
There was a further provision entitling a defendant to make a representation and obtain further time to make the deposit.
The Rule was repealed by U.P. Act No. 57 of 1976 and was re enacted as follows: "Striking off defence an failure to deposit admitted rent, etc. (1) In any suit by a lessor for the eviction of a lessee after the determination of his lease and for the recovery from him of rent or compensation for use and occupation, the defendant shall, at or before the first hearing of the suit, deposit the entire amount admitted by him to be due together with interest thereon at the rate of nine per cent per annum and whether or not he admits any amount to be due, he shall throughout the continuation of the suit deposit the monthly amount due within a week from the date of its accrual and in the event of any default in making the deposit of the entire amount admitted by him to be due or the monthly amount due as aforesaid the court may subject to the provisions of sub rule (2) strike off his defence.
Explanation 1 . .
Explanation 2 . .
Explanation 3 . . (2) Before making an order for striking off defence, the court may consider any representation made by the defendant in that behalf provided such representation is made within ten days of the first hearing or of the 127 expiry of the week referred to in sub section (1) as the case may be.
(3) The amount deposited under this rule may at any time be withdrawn by the plaintiff; Provided that such withdrawal shall not have the effect of prejudicing any claim by the plaintiff disputing the correctness of the amount deposited; Provided further that if the amount deposited includes any sums claimed by the depositor to be deductable on any account the court may require the plaintiff to furnish security for such sum before he is allowed to withdraw the same".
The High Court held in Puran Chand (supra) that if the representation contemplated by sub rule (2) was not made within the time prescribed therein the court had no jurisdiction to entertain a representation made beyond time and to condone the delay in making it.
It held further that where no representation was made, or if made was filed beyond time, the court was bound to strike off the defence and enjoyed no discretion in the matter.
It appears on the facts in this case that no representation under sub rule (2) was made by the appellant.
The only question raised before us is whether, in the absence of such representation, the court was obliged to strike off the defence of the appellant.
It seems to us on a comprehensive understanding of Rule 5 of Order XV that the true construction of the Rule should be thus.
Sub rule (1) obliges the defendant to deposit, at or before the first hearing of the suit, the entire amount admitted by him to be due together with interest thereon at the rate of nine per cent per annum and further, whether or not he admits any amount to be due, to deposit regularly throughout the continuation of the suit the monthly amount due within a week from the date of its accrual.
In the event of any default in making any deposit, "the court may subject to the provisions of sub rule (2) strike off his defence".
We shall presently come to what this means.
Sub rule (2) obliges the court, before making an order for striking off the defence to consider any representation made by the defendant in that behalf.
In other words, 128 the defendant has been vested with a statutory right to make a representation to the court against his defence being struck off.
If a representation is made the court must consider it on its merits, and then decide whether the defence should or should not be struck off.
This is a right expressly vested in the defendant and enables him to show by bringing material on the record that he has not been guilty of the default alleged or if the default has occurred, there is good reason for it.
Now, it is not impossible that the record may contain such material already.
In that event, can it be said that sub rule (1) obliges the court to strike off the defence? We must remember that an order under sub rule (1) striking off the defence is in the nature of a penalty.
A serious responsibility rests on the court in the matter and the power is not to be exercised mechanically.
There is a reserve of discretion vested in the court entitling it not to strike off the defence if on the facts and circumstances already existing on the record it finds good reason for not doing so.
It will always be a matter for the judgment of the court to decide whether on the material before it, notwithstanding the absence of a representation under sub rule (2), the defence should or should not be struck off.
The word "may" in sub rule (1) merely vests power in the court to strike off the defence.
It does not oblige it to do so in every case of default.
To that extent, we are unable to agree with the view taken by the High Court in Puran Chand (supra).
We are of opinion that the High Court has placed an unduly narrow construction on the provisions of clause (1) of Rule 5 of Order XV.
In the circumstances, the appeal is allowed, the order dated December 3, 1980 of the High Court is set aside and the case is remanded to the High Court for fresh consideration.
In the circumstances, there is no order as to costs.
N.K.A. Appeal allowed.
| IN-Abs | Rule 5 of Order XV C.P.C. was re enacted by the U.P. Act 1976 and it provided that the defendant shall deposit the entire amount of rent due from him together with interest at or before the first hearing of the suit for eviction and also continue to deposit the monthly amount regularly and that on failure to do so, his defence was liable to be struck off.
Another rule provided that before striking off the defence, the Court may consider any representation made in that behalf.
The respondent filed a suit against the appellant for ejectment and recovery of arrears of rent.
The appellant filed written statement and resisted the suit.
The appellant during the pendency of the suit committed default in depositing the rent regularly and the respondent filed application under Rule 5 Order XV C.P.C. for striking off the appellant 's defence.
The appellant attempted to show that he had been depositing the rent as required by law.
The trial court accepted the application and held that the appellant had failed to make any representation permitted by him under sub rule (2) of Rule 5 of Order XV within time.
The trial court accordingly struck off the defence and the High Court affirmed the order of the trial court on the ground that where no representation was made or if made was filed beyond time, the Court was bound to strike off the defence and enjoyed no discretion in the matter.
Allowing the Special Leave Petition, ^ HELD: An order under sub rule (1) striking off the defence is in the nature of a penalty.
A serious responsibility rests on the court in the matter and the power is not to be exercised mechanically.
There is a reserve of discretion vested in the court entitling it not to strike off the defence if on the facts and circumstances already existing on the record, it finds good reason for not doing so.
It will always be a matter for the judgment of the court to decide whether on the material before it, notwithstanding the absence of a representation under sub rule (2), the defence should or should not be struck off.
The word "may" in sub rule (1) merely vests power in the court to strike off the defence.
It does not oblige it to do so in every case of default.
[128 C D] 125 Puran Chand vs Pravin Gupta, Civil Revision No. 356 of 1978 decided on October 30, 1980 All.
H.C. overruled.
|
Civil Appeal No. 1223 of 1977.
Appeal by special leave from the judgment and order dated the 22nd April, 1976 of the Andhra Pradesh High Court in W.A. No. 581 of 1971.
K.K.Venugopal and A. Subba Rao for the Appellant.
P. Ram Reddy, G.S. Narayana and G.N. Rao for Respondent No. 1.
H.S. Gururaj Rao and section Markandeya for Respondents Nos. 2, 5, 8, 14 and 21.
71 The Judgment of the Court was delivered by GUPTA J.
The vires of rule 3(d) of the Andhra Pradesh Police Service Rules, 1966 is in question in this appeal preferred by special leave.
The rule was challenged as invalid by respondent Nos. 1 to 23 by filing a writ petition in the Andhra Pradesh High Court.
A single Judge of the High Court dismissed the petition, his decision was reversed by a Division Bench on appeal declaring "rule 3(d) is discriminatory and violative of the principles of equality in article 16 of the Constitution of India." Rule 5(1) of the Andhra Pradesh Civil Services (Classification, Control and Appeal) Rules, 1963, framed in exercise of the powers conferred by the proviso to article 309 of the Constitution of India, classifies the civil services of the State into (a) the State Services, and (b) the Subordinate Services.
The State services are the superior class.
The Andhra Pradesh Police Service is one of the State services.
The subordinate services include, among others, the Andhra Pradesh Police Subordinate Service.
The Andhra Pradesh Police Service Rules, 1966, described as Special Rules for Andhra Pradesh Police were also made in exercise of the powers conferred by the proviso to article 309 of the Constitution.
Rule 2 of the 1966 Police Service Rules sets out the three categories of officers constituting the service, namely: category I composed of Commandants, Andhra Pradesh Special Police; category 2 which includes Deputy Superintendents of Police and Assistant Commissioners of Police, other than those in category 3; and category 3 comprising Deputy Superintendents of Police in various capacities including Assistant Commandants, Andhra Pradesh Special Police.
Rule 3 of the Andhra Pradesh Police Service Rules, 1966 lays down the method and conditions for appointment to posts in the different categories.
We are concerned in this appeal with Deputy Superintendents of Police belonging to categories 2 and 3 of the rules.
Appointment as Deputy Superintendent of Police in category 2 is made by (a) direct recruitment, or (b) 'recruitment by transfer ' from Andhra Pradesh Police Subordinate Service, or (c) appointment from category 3 of this service with the concurrence of the Public Service Commission provided that the number of such appointments does not exceed two in a calendar year.
Rule 3 (15) of the Andhra Pradesh State and Subordinate Services Rules, 1962, also framed under proviso to article 309 of the constitution, defines the expression "recruited by transfer"; from the definition it is clear that such recruitments are really by way of promotion.
It is further prescribed by the 1966 72 rules that officers appointed as Deputy Superintendents of Police from Category 3 to category 2 must pass certain tests and undergo further training and probation.
It is also required that they must complete 8 years of service as Deputy Superintendent of Police in category 3 and shall be below 40 years of age.
The impugned rule 3(d) of the Andhra Pradesh Police Service Rules, 1966 states: "The seniority of the Deputy Superintendents of Police, Category 2 appointed from the posts of Deputy Superintendents of Police, Category 3 shall be fixed in that category giving them credit for their entire service in the posts of the Deputy Superintendents of Police, Category 3".
Rules 3(d) thus gives a Deputy Superintendent of Police appointed to category 2 from category 3 the benefit of past service in the State Service for the purpose of seniority as against a member of the Subordinate Service appointed Deputy Superintendent of Police in category 2 by promotion, or a new recruit appointed to the same post directly.
The writ petition out of which this appeal arises was made by some of the Deputy Superintendents of Police in category 2 who were either recruited directly or "recruited by transfer" to the said posts before the 1966 Andhra Pradesh Police Service Rules came into force Respondents Nos. 2, 3 and 4 in the writ petition are Deputy Superintendents of Police appointed from category 3 to category 2 under the 1966 rules; they were working as Assistant Commandants in category 3 before appointment to Category 2.
The appellant before us was impleaded as the third respondent in the writ petition.
The validity of rule 3(d) of the Andhra Pradesh Police Service Rules is questioned on the ground that the appointment of a Deputy Superintendent of Police from category 3 to category 2 is really by way of promotion and validly the seniority in category 2 of an officer so promoted can be reckoned only from the date of his appointment to that category.
To support the contention that such an appointment is by way of promotion the following features are pointed out from the 1966 rules: (ii) not more than two persons can be appointed Deputy Superintendents of Police from category 3 to category 2 every year; (ii) the officers have to complete 8 years of service in category 3 before they can be appointed to category 2; (iii) these officers have to undergo training and probation for two years.
According to the writ petitioners who are respondents Nos. 1 to 23 in this Court these features conclusively prove that the appointment of a Deputy Superintendent of Police to category 2 from category 3 is by way of promotion.
These are also 73 the features that weighed with the Division Bench of the High Court in holding that rule 3(d) was invalid.
This is what the Division Bench observed: "Having regard to the rule of eligibility and qualifications of service of eight years in the category 3, the tests prescribed, the probation of two years. the training. are all indicative and, in our view, decisive that category 3 personnel are not equivalent to category 2 personnel.
We are further of the view, category 3 personnel attain the same status only on appointment to category 2.
" There appears to be no dispute on the following points: (1) categories 2 and 3 carry equal pay; (2) qualifications for direct recruits to both categories are the same; (3) promotion to either category is from the post of Inspector of Police which is a subordinate service, and the Inspectors of Police in the respective branches from whom promotions to the two categories are made also enjoy the same scale of pay.
The duties of the Deputy Superintendents of Police of category 2 and category 3 are however of a different nature.
The Deputy Superintendents of Police of Category 2 are normally concerned with the prevention, detection and investigation of crime and maintenance of law and order.
They constitute the principal police service of the State.
Assistant Commandants, Andhra Pradesh Special Police, are also designated as Deputy Superintendents of Police in category 3.
They are primarily a striking force employed also for maintaining law and order, but they are not concerned with the routine duties of the principal police service.
The promotional avenues for the officers of the two categories are also not the same.
Officers belonging to category 2 of the Andhra Pradesh Police Service are eligible to be promoted as Commandants, Home Guards, and Assistant Superintendent of Police.
They are also eligible to be considered for appointment to the Indian Police Service.
Officers of category 3 are eligible to be promoted as Commandants, Home Guards, but not as Assistant Superintendents of Police, nor are they eligible to be considered for appointment to the Indian Police Service.
It appears from the counter affidavit filed on behalf of the 74 State of Andhra Pradesh in the High Court which is based on Government Order No. 1513 dated November 28, 1961 that the limited chances of promotion open before officers of category 3 gave rise to discontent among them, and to prevent stagnation and avoid frustration among officers belonging to that category, government decided to throw open avenues of promotion of the officers of category 3 which were available to the officers belonging to category 2; however, the opportunity made available was a limited one in the sense that only to Deputy Superintendents of Police from category 3 were to be appointed as Deputy Superintendents of Police, category 2, in a year.
Rule 3 (a) of the Andhra Pradesh Police Service Rules, 1966 provides that Deputy Superintendents of Police in category 2 may be appointed by (a) direct recruitment, or (b) recruitment by transfer from Inspectors of Police, class I, in the Andhra Pradesh Police Subordinate Service, which is really a promotion for them, or (c) appointment from category 3 which is a State service.
The validity of the rule 3 (a) has not been challenged.
It is to be noted that rule 3 (a) itself treats appointment from category 3 as distinct from either direct recruitment or promotion.
It was contended on behalf of the appellant that if appointment to category 2 from category 3 was not direct recruitment or promotion, it could only be by way of transfer.
The point was urged also in the High Court.
On behalf of the appellant reference was made to fundamental rule 15 which authorises the transfer of a government servant from one post to another provided that the post to which he is transferred does not carry less pay.
Rule 33 (c) of the Andhra Pradesh State and Subordinate Services Rules, 1962 says: "The transfer of a person from one class or category of a service to another class or category carrying the same pay scale of pay shall not be treated as first appointment to the latter for purposes of seniority; and the seniority of a person so transferred shall be determined with reference to the date of his first appointment to the class or category from which he was transferred.
" The rule adds: Where any difficultly or doubt arises in applying this Sub rule, seniority shall be determined by the appointing authority." 75 Of course rule 3 of the Andhra Pradesh Police Service Rules not states specifically that appointments to category 2 from category 3 shall be considered as transfer making rule 33 (c) of the Andhra Pradesh State and Subordinate Services Rules applicable.
The answer of the respondents is that such appointments could not be treated as transfer because category 2 and category 3 are not of equal status.
There is however no rule saying that services in category 3 are inferior to those in category 2; both are State Services.
The learned single Judge of the High Court explains in his judgment why the fact that the Deputy Superintendents of Police in category 3 have to pass tests and undergo training and probation for appointment to category 2 does not warrant the conclusion that such appointment are by way of promotion: "Since the higher posts of Additional Superintendents of Police, Posts in the Indian Police Service etc., involve what may be called the ordinary police duties with which the members of the Andhra Pradesh Special Police are not likely to be familiar, the Government has further prescribed that officers appointed from category 3 to category 2 must pass certain tests and undergo further training and probation.
It is important to realise that the appointment of some outstanding officers from category 3 to category 2 is designed to achieve the two fold object of providing avenues of promotion for such outstanding officers and injecting new but proven blood, as it were, into category 2.
If this twin object is realised it becomes evident that appointment to category 2 from category 3 cannot be considered to be a promotion.
" In our view the explanation given by the single Judge is sound.
We find no basis for the claim that category 3 is inferior to category 2 in status.
We do not however think it necessary to decide whatever appointments to category 2 from category 3 amount to transfer attracting rule 33 (c) of the Andhra Pradesh State and Subordinate Services Rules.
Under Rule 3 (a) of the Andhra Pradesh Police Service Rules, 1966 appointment from category 3 is one method of recruitment to category 2 and the only question is whether giving credit to such appointees for past service in another category in the State Service is justified.
We have mentioned above the points of similarity in matters of recruitment and promotion to the two respective categories.
It has been noticed also that they carry the same scale of 76 pay.
Whether or not some credit should be given for past service in such circumstances is a matter of policy resting with government.
We do not find anything arbitrary or absurd in what rule 3 (d) prescribes, and that being so, the court cannot examine the matter and come to its own conclusion about what should be the length of past service for which credit should be given.
In Tamil Nadu Education Department Ministerial and General Subordinate Service Association vs State of Tamil Nadu and another.(1) this Court considering a similar contention that the length of service taken into consideration for fixing seniority had worked hardship on some of the employees, took the view that in such matters the court can only take an "overall view and should not attempt "a meticulous dissection" of the matter.
Once the principle is found to be rational", it was observed, a few "instances of hardship cannot be a ground to invalidate the order or the policy. this is an area where, absent arbitrariness and irrationality, the court has to adopt a hands off policy".
There is nothing irrational in giving the Deputy Superintendents of Police appointed to category 2 from category 3 credit for past services rendered by them in category 2 from 3 which is also a State Service as category 2.
The main ground on which the length of the past service for which credit has been given is questioned in this case is not that it was not rational but that category 3 being inferior in status to category 2, no credit could at all be given for past service in category 3.
We found no basis to support the claim of superiority for category 2 and in the facts of the case we do not think that the length of past service for which credit has been given is improper.
Accordingly we allow this appeal, set aside the decision of the Division Bench and restore that of the learned single Judge dismissing the writ petition.
The parties will bear their respective costs.
S.R. Appeal allowed.
| IN-Abs | Rule 5 (1) of the Andhra Pradesh Civil Services (Classification, Control and Appeal) Rules, 1963 classifies the Civil Services of the State into (a) State Services, and (b) Subordinate Services.
The Andhra Pradesh Police Service is one of the State services.
Rule 2 of the Andhra Pradesh Police Service Rules, 1966 framed under Article 309 of the Constitution sets out three categories of officers constituting the State Service, namely; category l composed of commandants, Andhra Pradesh Special Police; category II which includes Deputy Superintendents of police and Assistant Commissioners of Police other than in category III and category III comprising Deputy Superintendents of Police in various capacities including Assistant Commandants, Andhra Pradesh Special Police.
Rule 3 lays down the method and conditions for appointment to posts in the different categories.
Appointment as Deputy Superintendent of Police in category II is made by (a) direct recruitment, or (b) recruitment by transfer from Andhra Pradesh Police Subordinate Service, or (c) appointment from category III of this service with the concurrence of the Public Service Commission provided that the number of such appointments does not exceed two in a calendar year.
Under Rule 3 (d), "the seniority of the Deputy Superintendents of Police, category II appointed from the posts of Deputy Superintendents of the Police, category III shall be fixed in that category giving them credit for their entire service in the post of the Deputy Superintendents of Police.
" Rule 3 (d) thus gives a Deputy Superintendent of Police appointed to category II from category III the benefit of past service in the State Service for the purpose of seniority as against the Subordinate Service appointed Deputy Superintendent of Police in category II by promotion or a new recruit appointed to the same post directly.
Some of the Deputy Superintendents of Police in category II who were either recruited directly or "recruited by transfer" to the said posts before the 1966 Andhra Pradesh Police Service Rules came into force challenged the validity of the vires of Rules 3 (d) on the ground that the appointment of a Deputy Superintendent of Police from category III to category II is really by way of promotion and validly the seniority in category II of an officer so promoted can be reckoned only from the date of his appointment to that category II.
The writ petition was dismissed by learned Single Judge.
In appeal the Division Bench of the High 70 Court held Rule 3 (d) invalid, taking the view that category III personnel are not equivalent to category II personnel and that the former attains the same status only on appointment to category II.
Hence this appeal by respondent No. 3 in the writ petition who is a Deputy Superintendent of Police appointed from category III to category II under the 1966 rules.
Allowing the appeal, the Court ^ HELD: 1.
Rule 3 (d) of the Andhra Pradesh Police Service Rules, 1966 is valid.
There is nothing arbitrary or absurd in what Rule 3(d) prescribes as regards the credit regarding the length of the past service for which credit is to be given for the purpose of seniority.
Whether or not some credit should be given for past service in such circumstances is a matter of policy resting with Government.
That being so, in the absence of anything arbitrary or absurd in the provision, the Court cannot examine the matter and come to its own conclusion about what should be the length of past service in which credit should be given.
[75G 76B] Tamil Nadu Education Department Ministerial and General Subordinate Service Association vs State of Tamil Nadu and another.
; , followed.
There is no basis to support a claim of superiority for category II in the facts of the case.
Rule 3 (a) itself which has not been challenged, treats appointment from category III as distinct from either direct recruitment or promotion.
There is no dispute on the following points: (i) categories II and III carry equal pay; (ii) qualifications for direct recruits to both categories are the same; (iii) promotion to either category is from the post of Inspector of Police which is a Subordinate Service and the Inspectors of Police in their respective branches from whom promotions to the two categories are made also enjoy the same scale of pay.
The mere fact that there are some differences regarding the duties of the Deputy Superintendents of Police of category II and category III and their promotional avenues do not alter the position.
[76E, 74D, 73C G]
|
Civil Appeal No. 1968 of 1978.
Appeal by special leave from the judgment and order dated 22nd/23rd June/5th July 1978 of the High Court of Bombay (Nagpur Bench) in Special Civil Application No. 238 of 1978.
V.S. Desai, P.H. Parekh, C.B. Singh, B.L. Verma & Miss V. Caprihan for the Appellant.
R.H. Dhebar & M.N. Shroff for the Respondent.
The Judgment of the Court was delivered by PATHAK, J.
This appeal by special leave raises the important question whether the Commissioner of Sales Tax can revise under cl.
(a) of sub section
(1) of section 57 of the Bombay Sales Tax Act, 1959, an appellate order passed by the Assistant Commissioner when the assessee 's second appeal against that order is pending before the Maharashtra Sales Tax Tribunal.
The appellant is a partnership firm, carrying on the business of manufacturing and selling vegetable The Sales Tax Officer estimated the turnover for the calendar year 1971 and made an order dated 26th March, 1973 levying Sales Tax at Rs. 73,198.62 and a penalty of Rs. 36,197.64.
On the same date, another assessment order was made for the first six months of the year 1972, where again on the basis of an estimate the Sales Tax Officer computed the tax Rs. 81,745.71 and levied a penalty of Rs. 37,572.26.
The two assessment orders were apparently made under s.33 of the Bombay Sales Tax Act, 1959.
Against the assessment and penalty orders for 100 the two periods, the appellant appealed under cl.
(a) of sub section
(1) of section 55 of the Act to the Assistant Commissioner.
By a common order dated 29th September, 1973 the Assistant Commissioner reduced the quantum of the turnover and, consequently, the tax liability to Rs. 30,494.67 and the penalty to Rs. 11,745.71 for the first period and a tax liability of Rs. 16,447.33 and penalty of Rs. 5,572.26 for the second period.
Not fully satisfied by the relief granted, the appellant proceeded in second appeal to the Maharashtra Sales Tax Tribunal on 8th December, 1973.
During the pendency of the appeals before the Tribunal, the Deputy Commissioner, Nagpur issued two notices to the appellant on 24th April, 1974 requiring it to show cause why the appellate orders dated 29th September, 1973 passed by the Assistant Commissioner should not be revised under section 57 of the Act.
The appellant objected to the exercise of revisional power by the Deputy Commissioner during the pendency of the appeals before the Tribunal.
On 12th September, 1975 the Deputy Commissioner rejected the objection.
Against the order of rejection the appellant filed two appeals before the Tribunal, and by its order dated 27th October, 1977 the Tribunal dismissed the appeals.
At the same time, the Tribunal adjourned the two second appeals filed by the appellant against the appellate orders dated 29th September, 1973 passed by the Assistant Commissioner.
The Tribunal took the view that its deciding those appeals would result in nullifying the revisional power vested in the Deputy Commissioner.
The appellant filed a writ petition in the High Court of Bombay against the order of the Deputy Commissioner dated 12th September 1975 rejecting its preliminary objection and also against the order passed by the Tribunal on 27th October, 1977 dismissing his appeals, as well as the notices issued by the Deputy Commissioner on 24th April, 1974 in the purported exercise of his revisional power.
The only point pressed by the appellant before the High Court was that the Commissioner of Sales Tax could not exercise his revisional power against the appellate order of the Assistant Commissioner when a second appeal against that order was pending before the Tribunal.
The High Court turned down the plea by its order dated 5th July, 1978, observing that it was always open to the Commissioner to interfere in revision with an order prejudicial to the Revenue notwithstanding that such order may be already under appeal before the Tribunal.
The High Court felt compelled to take this view because, in its opinion, the statute did not provide any 101 other forum or jurisdiction for protecting the interests of the Revenue.
It relied on its earlier judgment in Commissioner of Sales Tax vs Motor and Machinery Manufactures Ltd., and also sought support from the observations of this Court in Commissioner of Income Tax vs Amritlal Bhogilal.
It spoke further of "the anomaly of overlapping jurisdiction" between the Commissioner and the Tribunal, and referred with approval to an earlier decision of the High Court in H. B. Munshi vs Oriental Rubber Industries Pvt.
Ltd. An assessment order under the Bombay Sales Tax Act is appealable under s.55 of the Act, and we may mention only that when the order is made by the Sales Tax Officer an appeal lies to the Assistant Commissioner, if the order is made by the Assistant Commissioner an appeal goes to the Commissioner and if it has been made by the Commissioner (or Deputy Commissioner or Additional Commissioner) an appeal lies before the Tribunal.
Sub section
(2) of s.55 provides for a second appeal against the appellate order of the Assistant Commissioner.
The second appeal lies at the option of the appellant, to the Commissioner or the Tribunal.
The Tribunal, it will be noticed, exercises appellate jurisdiction by way of second appeal in respect of an assessment order made by the Sales Tax Officer.
It also exercises, by way of first appeal, appellate jurisdiction over an assessment order made by the Commissioner.
It is at the apex of the appellate hierarchy, the Sales Tax Officer, the Assistant Commissioner and the Commissioner all of them being, therefore, subordinate to it.
S.57 of the Act provides for revisional jurisdiction.
"57 (1) Subject to the provisions of section 56 and to any rules which may be made in this behalf.
(a) the Commissioner may, of his own motion, call for and examine the record of any order passed (including an order passed in appeal) under this Act or the rules made thereunder by any officer or person subordinate to him, and pass such order thereon as he thinks just and proper; 102 Provided that, no notice in the prescribed form shall be served by the Commissioner under this clause after the expiry of three years from the date of the communication of the order sought to be revised, and no order in revision shall be made by him hereunder after the expiry of five years from such date; (b) the Tribunal, on application made to it against an order of the Commissioner (not being an order passed under sub section (2) of s.55 in second appeal) within four months from the date of the communication of the order, may call for and examine the record of any such order, and pass such order thereon as it thinks just and proper.
It will be noticed that while the Commissioner exercises revisional jurisdiction over an order passed by any officer or person subordinate to him, the Tribunal is the revisional authority over an order of the Commissioner (not being an order passed by the Commissioner disposing of a second appeal).
The Act thus constitutes the Tribunal an appellate as well as a revisional authority over the Commissioner.
Plainly, therefore, in quasi judicial matters the Commissioner is subordinate to the Tribunal.
Now it seems to us past question that when the appellate jurisdiction of superior authority is invoked against an order and that authority is seized of the case, it is inconceivable for a sub ordinate authority to claim to exercise jurisdiction to revise that very order.
The Tribunal is the supreme appellate and revisional authority under the statute.
It cannot be divested of its jurisdiction to decide on the correctness of an order, it cannot be frustrated in the exercise of that jurisdiction, merely because a subordinate authority, the Commissioner, has also been vested with jurisdiction over that order.
Unless the statute plainly provides to the contrary, that appears to us to be incontrovertible.
It is not open to the Commissioner to invoke his power under cl.
(a) of sub section
(1) of section 57 and summon the record of an order over which the Tribunal has already assumed appellate jurisdiction.
The subordinate status of the Commissioner precludes that.
The High Court felt burdened by the compulsion that unless a contemporaneous exercise of concurrent jurisdiction was read into sub section
(1) of s.57, so that both the Tribunal and the Commissioner 103 could be regarded as simultaneously enjoying "overlapping jurisdiction" in respect of the same order, it would be impossible to safeguard the interests of the Revenue; for, says the High Court, a second appeal is available only to a dealer and not to the Revenue, and an enterprising dealer could, by expeditiously filing a second appeal before the Tribunal effectively shut out the Commissioner from interfering with the order in the interests of the Revenue.
The High Court found itself driven to the conclusion that the Commissioner was entitled to revise an order at any stage, otherwise there could be cases where the assessment could not be enhanced.
The High Court, we think, has overlooked an important provision of the Act.
In our opinion, the appellate powers elaborated in sub section
(6) of s.55 take account of such a need.
Their comprehensive sweep can be judged from the terms of the sub section.
"(6) Subject to such rules of procedure as may be prescribed, every appellate authority (both in the first appeal and the second appeal) shall have the following powers: (a) in an appeal against an order of assessment, it may confirm, reduce, enhance or annul the assessment; or it may set aside the assessment and refer the case back to the assessing authority for making a fresh assessment in accordance with the direction given by it and after making such further inquiry as may be necessary; and the assessing authority shall thereupon proceed to make such fresh assessment and determine where necessary, the amount of tax, payable on the basis of such fresh assessment; (b) in an appeal against an order imposing a penalty, the appellate authority may confirm or cancel such order or vary it so as either to enhance or reduce the penalty.
(c) In any other case, the appellate authority may pass such orders in the appeal as it deems just and proper; Provided that, the appellate authority shall not enhance an assessment or a penalty or reduce the amount 104 of draw back, set off or refund of the tax, unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction".
Three distinct categories of cases are enumerated An appeal against an assessment order, an appeal against a penalty order and an appeal in any other case.
The power to enhance the liability is given to the appellate authority in the first two categories only.
We are concerned with one of them, an appeal against an order of assessment.
Now the sub section speaks of an "appellate authority both in the first appeal and the second appeal".
It is quite clear, therefore, that the appellate powers detailed in cl.
(a) have the same amplitude in a second appeal as in a first appeal.
An appellate authority disposing of a first appeal has power to enhance the assessment.
So has appellate authority in a second appeal.
We may also point out that when an appellate authority is considering a second appeal a "first appellate" order, it is examining an order which can be broadly described as an order of assessment.
It is a final order disposing of an appeal which, in a sense, is a continuation of the assessment.
A second appeal against such an order is an appeal against an order of assessment.
En passant, it will be noticed that sub section
(6) of s.55 of the Bombay Sales Tax Act is in pari materia with sub section
(1) of section 251 of the Income Tax Act, 1961.
The language is almost identical.
Sub section
(1) of section 251 sets forth the same three categories and the power to enhance is confined to an order of assessment and an order imposing a penalty.
But in the case of a second appeal under the Income tax Act, there is a distinct departure from the scheme under the Bombay Sales Tax Act.
S.253 does not expressly speak of the "power to enhance", and makes no distinction in regard to the extent of the appellate power between any of the cases in which a second appeal lies from an order under s.251.
It is evident then that in a second appeal under sub section
(2) of s.55 of the Bombay Sales Tax Act, the Tribunal has power to enhance the assessment.
That being so, plainly it is open to the Revenue to invoke that power in a pending second appeal filed by the dealer before the Tribunal.
The High Court is in error in concluding that the power to enhance an assessment can be discovered only in the 105 revisional jurisdiction of the Commissioner and nowhere else.
The compulsion which drove the High Court to the construction placed by it on sub section
(1) of s.57 of the Act does not have substance, and the entire sub stratum underlying the High Court judgment must give way.
On the view which finds favour with us we cannot approve of the law laid down on the point in Motor and Manufacturers Ltd. (supra) nor do we see any overlapping of, or conflict in, the powers of the Commissioner and the Tribunal inferred in Oriental Rubber Industries Pvt.
Ltd. (supra).
As regards the observation of this Court in Amritlal Bhogila (supra), that was not a case where a subordinate authority sought to exercise its revisional jurisdiction over an order pending in appeal before a superior authority.
No support can be derived by the respondent from that case.
For the same reason, Ramlal Onkarmal vs Commissioner of Income tax, Assam decided by the Assam High Court Kelpunj Enterprises vs Commissioner of Income tax, Kerala, decided by the Kerala High Court and Russell Properties (P) Ltd. vs A. Chowdhury, decided by the Calcutta High Court, placed before us by the respondent have no relevance.
Our attention has been invited to s.34 of the Maharashtra Agriculture Income Tax Act, 1962 where when defining the revisional power of the Commissioner the Legislature has expressly incorporated a provision prohibiting the Commissioner from exercising his revisional power against an order pending in appeal before the Assistant Commissioner or Tribunal.
It is urged that if a similar prohibition was intended against the Commissioner under the Bombay Sales Tax Act, an express provision to that effect would have been made.
Reference has also been made to the provisions in the conferring revisional jurisdiction.
We are not impressed by the contention.
The absence of an express provision cannot detract from the conclusion reached by us a conclusion flowing from the necessary intendment of the statute that the Commissioner being a subordinate authority to the Tribunal, cannot interfere with an order pending in appeal before the Tribunal, and further that the interest of the Revenue is protected by the power of enhancement vested in the Tribunal while disposing of a second appeal filed by a dealer.
106 In the result, the appeal is allowed, the judgment dated 5th July, 1978 of the High Court is set aside, and the order dated 29th October, 1977 of the Tribunal and the revisional proceedings before the Deputy Commissioner, including the orders made by him, are squared.
The appellant is entitled to its costs.
N.V.K. Appeal allowed.
| IN-Abs | The appellant, a partnership firm, was assessed by the Sales Tax Officer, who estimated the turnover for the Calendar year 1971, and for the first six months of the year 1972 and made two orders of assessment dated 26 March 1973 under section 33 of the Bombay Sales Tax Act, 1959 levying Sales Tax and penalty.
Against the assessment and penalty orders for the two periods, the appellant appealed under clause (a) of sub section (1) of section 55 of the Act to the Assistant Commissioner.
By a common order dated 29th September, 1973 the Assistant Commissioner reduced the quantum of the turnover and, consequently, the tax liability for each of the periods.
Not fully satisfied by the relief granted, the appellant proceeded in second appeal to the Sales Tax Tribunal on 8th December, 1973.
During the pendency of the appeals before the Tribunal, the Deputy Commissioner, issued two notices to the appellant on 24th April, 1974 requiring it to show cause why the appellate orders dated 29th September, 1973 passed by the Assistant Commissioner should not be revised under section 57 of the Act.
The appellant objected to the exercise of revisional power by the Deputy Commissioner during the pendency of the appeals before the Tribunal.
On 12th September 1975 the Deputy Commissioner rejected the objection.
Against the order of rejection the appellant filed two appeals before the Tribunal, and by its order dated 27th October, 1977 the Tribunal dismissed the appeals.
The Tribunal took the view that its deciding those appeals would result in nullifying the revisional power vested in the Deputy Commissioner.
The two second appeals filed by the appellant against the appellate orders dated 19th September, 1973 passed by the Assistant Commissioner were adjourned.
The appellant filed a writ petition in the High Court against the order of the Deputy Commissioner dated 12th September, 1975 rejecting its preliminary objection and also against the order passed by the Tribunal on 27th October, 1977 dismissing his appeals as well as the notices issued by the Deputy Commissioner on 24th April, 1974 in the purported exercise of his revisional power, contending that the Commissioner of Sales Tax could not exercise his revisional power against the appellate order of the Assistant Commissioner when a second appeal against that order was pending before the Tribunal.
98 The High Court rejected the appellant 's contention observing that as the statute did not provide any other forum or jurisdiction for protecting the interests of the Revenue, it was always open to the Commissioner to interfere in revision with an order prejudicial to the Revenue notwithstanding that such order may be already under appeal before the Tribunal.
Allowing the appeal to this Court, ^ HELD: 1.
It is not open to the Commissioner to invoke his power under clause (a) of sub section (1) of section 57 and summon the record of an order over which the Tribunal has already assumed appellate jurisdiction.
The subordinate status of the Commissioner precludes that.
[102 G] 2.
An assessment order under the Bombay Sales Tax Act is appealable under section 55 of the Act.
When the order is made by the Sales Tax Officer an appeal goes to the Assistant Commissioner.
If the order is made by the Assistant Commissioner an appeal goes to the Commissioner and if it has been made by the Commissioner or Deputy Commissioner or Additional Commissioner an appeal lies before the Tribunal.
Sub section (2) of section 55 provides for a second appeal against the appellate order of the Assistant Commissioner.
The second appeal lies at the option of the appellant to the Commissioner or the Tribunal.
The Tribunal exercises appellate jurisdiction by way of second appeal in respect of an assessment order made by the Sales Tax Officer.
It also exercises by way of first appeal, appellate jurisdiction over an assessment order made by the Commissioner.
It is at the apex of the appellate hierarchy, the Sales Tax Officer, the Assistant Commissioner and the Commissioner all of them being, subordinate to it.
[101 C E] 3.
While the Commissioner exercises revisional jurisdiction over an order passed by any officer or person subordinate to him, the Tribunal is the revisional authority over an order of the Commissioner.
The Act constitutes the Tribunal an appellate as well as a revisional authority over the Commissioner.
In quasi judicial matters the Commissioner is therefore subordinate to the Tribunal.
[102 D] 4.
The Tribunal is the supreme appellate and revisional authority under the statute.
It cannot be divested of its jurisdiction to decide on the correctness of an order, it cannot be frustrated in the exercise of that jurisdiction, merely, because a subordinate authority, the Commissioner, has also been vested with jurisdiction over that order.
Unless the statute plainly provides to the contrary that appears to be incontrovertible.
[102 F] 5.
The High Court was in error in concluding that the power to enhance an assessment can be discovered only in the revisional jurisdiction of the Commissioner and nowhere else.
[104 H 105 A] 6.
In a second appeal under sub section (2) of section 55 of the Bombay Sales Tax Act, the Tribunal has power to enhance the assessment.
That being so, it is open to the Revenue to invoke that power in a pending second appeal filed by the dealer before the Tribunal.
[104 G] 7.
The Commissioner being a subordinate authority to the Tribunal cannot interfere with an order pending in appeal before the Tribunal, especially when 99 the interest of the Revenue is protected by the power of enhancement vested in the Tribunal while disposing of a second appeal filed by a dealer.
[105 G] Commissioner of Sales Tax vs Motor and Machinery Manufacturers Ltd., (1976) 38 STC 78 over ruled.
Commissioner of Income Tax vs Amritlal Bhogilal distinguished.
Ramlal Onkarmal vs Commissioner of Income Tax, Assam , Kelpunj Enterprises vs Commissioner of Income Tax Kerala.
, Russell Properties (P.) Ltd. vs A. Chowdhury, inapplicable.
|
Civil Appeal No. 1224 of 1977.
Appeal by special leave from the judgment and order dated the 3rd September, 1976 of the Gujarat High Court in Special Civil Appln.
No. 1501 of 1974 84 F.S. Nariman, Dr. Y.S. Chitale, K.S. Nanavati, C.R. Gandhi, P.H. Parekh and Miss Vineeta Caprihan for the Appellant.
Soli J. Sorabjee, G.N. Desai and M.N. Shroff for Respondent No. 1 G.N. Desai, Prashant G. Desai and S.C. Patel for Respondent No. 2 S.K. Dholakia and R.C. Bhatia for Intervener Surat Municipality.
The Judgment of the Court was delivered by GUPTA J.
On June 26, 1965 the Surat Municipal Corporation, then called Surat Borough Municipality, declared its intention to make a town planning scheme under section 22 of the Bombay Town Planning Act, 1954 (hereinafter referred as the Act).
This was Town Planning Scheme Surat No. 8 (Umarwada).
On July 4, 1967 a draft scheme was published which included among other lands an area admeasuring 1,37,961 sq.
meters of which appellant as Karta of a Hindu undivided family was the lessee.
On May 10, 1968 Government of Gujarat granted sanction to the draft scheme.
Before the Town Planning Officer the appellant claimed compensation for deprivation of his right in the land at Rs. 50 per sq.
By his order made on November 4, 1971 the Town Planning Officer awarded compensation to the appellant at the rate of Rs. 2.40 p. per sq.
; the total compensation awarded was Rs. 3,31,455.
Not satisfied with the decision of the Town Planning Officer the appellant preferred an appeal.
Section 34 read with section 32(1) of the Act provides an appeal from the decision of the Town Planning Officer on certain specified matters to a Board of Appeal.
Before the Board of Appeal the appellant reduced his claim to Rs. 9.50 p. per sq.
The appellant 's grievance was that the compensation awarded was inadequate and further that the apportionment of compensation between the lessor and the lessee was not proper.
He also questioned the propriety of reserving such a large area of land for the scheme.
The Board of Appeal held that the appeal was not maintainable as the Act did not provide an appeal from a decision of the Town Planning Officer on matters dealt with by him in his order dated November 4, 1971.
The appellant then challenged the order of the Board of Appeal before the Gujarat High Court by filing a writ petition in which certain provisions of the Act were also challenged as unconstitutional and it was claimed 85 that the town planning scheme was consequently invalid.
The Gujarat High Court dismissed the writ petition agreeing with the Board of Appeal that the appeal was incompetent.
The constitutional questions raised in the writ petition could not be decided as Emergency was then in force in the country and rights conferred by Articles 14,19 and 31 of the Constitution on which the appellant 's contentions were based remained suspended at the time.
The High Court also relied on the decision of this Court in State of Gujarat vs Shri Shantilal Mangaldas which had upheld the validity of the Act.
The appeal before us is by special leave.
Mr. Nariman for the appellant submitted that in case we held that the appeal preferred by his client before the Board of Appeal was maintainable he would not press the grounds questioning the constitutional validity of the Act at this stage and the matter should then go back to the Board of Appeal for a decision on the adequacy of the Compensation; if however we found that the Board of Appeal was right in holding that the appeal was not maintainable, he would then urge the grounds challenging the validity of the Act.
The question is whether the order of the Town Planning Officer determining the amount of compensation payable to the appellant falls within any of the appealable clauses of section 32(1).
To be able to answer the question it will be necessary to examine the various clauses of section 32(1) and also certain other provisions of the Act.
The scheme of the Act has been analysed by this Court in State of Gujarat vs Shantilal Mangaldas (supra) and earlier in Maneklal Chhottalal and others vs M.G. Makwana and others; we will not attempt another comprehensive survey of all the provisions of the Act but refer to those of them which have some bearing on the question that falls to be decided.
Mr. Nariman drew our notice to the decision of this Court in State of Karnataka vs Shri Ranganatha Reddy where Untwalia, J, speaking for the court said at page 652 of the report that in Rustom Cavasjee Cooper vs Union of India, this Court apparently seeking to explain Shantilal 's case had "in substance" overruled the decision.
Even if Shantilal 's case was 86 overruled, that was on another point and the analysis of the scheme of the Act made in Shantilal cannot be questioned.
The long title of the Act states that it is an "Act to consolidate and amend the law for the making and execution of town planning schemes".
The Act has been made applicable to the State of Gujarat.
It is an Act providing for compulsory acquisition of land and payment of compensation for the land taken.
Some of the terms and expressions defined in section 2 of the Act are relevant.
Section 2 (2) defines "development Plan" as meaning a plan for the development or redevelopment or improvement of the entire area within the jurisdiction of a local authority prepared under section 3.
Section 3 requires every local authority to carry out a survey of the area within its jurisdiction and prepare and publish a development plan and submit it to the State Government for sanction.
Sub section (4) of section 2 defines local authority as a municipal corporation constituted under the Bombay Provincial Municipal Corporation Act, 1949 or a municipality constituted or deemed to be constituted under the Gujarat Municipalities Act, 1973.
Section 2 (9) defines "reconstituted plot" as a plot which is in any way altered by the making of a town planning scheme.
Chapter III of the Act provides for the making of town planning schemes.
Sub section (2) of section 18 which occurs in this chapter states that a town planning scheme may make provisions for any of the matters specified in clauses (a) to (k) of the sub section.
These matters include laying out of land, reclamation of unhealthy areas, laying out new streets of roads, construction and removal of buildings, bridges and other structures, providing for drainage, lighting and water supply, allotment or reservation of land for roads, open spaces, schools, markets and public purposes of all kinds.
Clause (1) says that apart from the matters specified, the town planning scheme may provide for "such other matter not inconsistent with the objects of this Act as may be prescribed".
Chapter IV which contains section 21 to section 30 bears the heading "Declaration of Intention to Make a Scheme and Making of a Draft Scheme".
Under section 22 a local authority may by resolution declare its intention to make a town planning scheme and is required to publish the scheme in the prescribed manner and despatch a copy thereof to the State Government.
Section 23 (1) provides that following the declaration of intention to make a scheme, the local authority shall make a draft scheme for the area 87 in respect of which the declaration has been made and publish it in the prescribed manner.
Section 25 mentions the particulars that a draft scheme shall contain; they include among other things, the area, ownership and tenure of each original plot; the extent to which it is proposed to alter the boundaries of original plots; and an estimate of the nett cost of the scheme to be borne by the local authority.
Sub section (1) of section 26 says that in the draft scheme the size and shape of every reconstituted plot shall be determined; as far as possible, to render it suitable for building purposes and where the plot is already built upon, to ensure that the building complies with the provisions of the scheme as regards open spaces.
For the purpose of sub section (1) the draft scheme may contain proposals which are enumerated in clauses (a) to (e) of sub section (2) of the section.
We may here refer to clauses (a), (b) and (d): "(a) to form a reconstituted plot by the alteration of the boundaries of an original plot; (b) to form a reconstituted plot by the transfer wholly or partly of the adjoining lands; (c) . . (d) to allot a plot to any owner dispossessed of land in furtherance of the scheme.
(e) . .
Under section 27, within one month from the date of publication of the draft scheme, any person affected by such scheme may communicate in writing to the local authority any objection relating to such scheme which the local authority has to consider.
Section 28 (1) requires the local authority to submit the draft scheme together with the objections to the State Government and at the same time apply for its sanction.
Under sub section (2) the State Government may within six months from the date of the submission of the draft scheme either sanction such scheme with or without modifications and subject to such conditions as it may think fit to impose or refuse to give sanction.
Chapter V which includes section 31 to section 43 provides for the appointment of the Town Planning Officer and constitution of the Board of Appeal.
Within one month from the date on which the sanction of the State Government to the draft scheme is 88 published, the State Government is required under section 31 (1) to appoint a Town Planning Officer.
The duties of the Town Planning Officer are enumerated in section 32 (1).
The provisions of sections 32, 33 and 34 have a direct bearing on the question of appealability of the Town Planning Officer 's decision, but we think it would be more helpful for appreciating the contentions raised on behalf of the appellant if we referred to certain other provisions of the Act before turning to the aforesaid section in Chapter V.
We need only mention here that drawing up the final scheme in accordance with the draft scheme is one of the duties of the Town Planning Officer who is required to forward the final scheme to the State Government for sanction.
In Chapter VI section 53 is the only relevant provision.
Section 53 lays down: "On the day on which the final scheme comes into force: (a) all lands required by the local authority shall, unless it is otherwise determined in such scheme, vest absolutely in the local authority free from all encumbrances; (b) all rights in the original plots which have been reconstituted shall determine and the reconstituted plots shall become subject to the rights settled by the Town Planning Officer".
Chapter VIII deals with "Finance".
It contains, inter alia, provisions specifying the principles on which compensation for the land taken is to be determined.
This chapter includes section 64 to section 78.
Section 64 (1) enumerates in clauses (a) to (f) the sums payable or spent and the expenses incurred by the local authority which are to be included in the costs of a town planning scheme.
Clause (d) mentions the sums payable as compensation for land reserved or designated for any public purpose or purposes of the local authority.
Clause (f) of section 64 (1) reads as follows: "any amount by which the total of the values of the original plots exceeds the total of the values of the plots included in the final scheme, each of such plots being estimated at its market value at the date of the declaration of intention to make a scheme with all the buildings and works thereon at that date and without references to improvements contemplated in the scheme other than improvements due to the alteration of its boundaries.
" 89 Sub section (2) of section 64 provides: "if in any case the total of the values of the plots included in the final scheme exceeds the total of the values of the original plots, each of such plots being estimated in the manner provided in clause (f) of sub section (1), then the amount of such excess shall be deducted in arriving at the costs of the scheme as defined in sub section (1).
" Section 65 explains the meaning of increment for the purposes of the Act as follows: "For the purposes of this Act the increments shall be deemed to be the amount by which at the date of the declaration of intention to make a scheme the market value of a plot included in the final scheme estimated on the assumption that the scheme has been completed would exceed at the same date the market value of the same plot estimated without reference to improvements contemplated in the scheme: Provided that in estimating such values the value of buildings or other works erected or in the course of erection on such plot shall not be taken into consideration.
" Section 66 (1) states that the costs of the scheme shall be met wholly or in part by a contribution to be levied by the local authority on each plot in the final scheme calculated in proportion to the increment which is estimated to accrue in respect of such plot by the Town Planning Officer.
Under sub section (2) of section 66 the "owner of each plot included in the final scheme shall be primarily liable for the payment of the contribution leviable in respect of such plot".
Under section 67 the amount by which the total value of the plots in the final scheme with all the buildings and works thereon allotted to a person falls short of or exceeds the total value of the original plots with all the buildings and works thereon of such person shall be deducted from or added to, as the case may be, the contributions leviable from such person, each of such plots being estimated at its market value at the date of the declaration of intention to make a scheme without reference to improvements contemplated in the scheme other than improvements due to the alteration of its boundaries.
As Shah J., speaking for the Court in State of Gujarat vs Shantilal Mangaldas and others observed: "(Section 67) is intended to make adjustments between the right to compensation for loss of 90 land suffered by the owner, and the liability to make contribution to the finances of the scheme".
Section 69 deals with the compensation payable in respect of any property or right which is injuriously affected by the making of a town planning scheme.
The section says: "The owner of any property or right which is injuriously affected by the making of a town planning scheme shall, if he makes a claim before the Town Planning Officer within the prescribed time, be entitled to obtain compensation in respect thereof from the local authority or from any person benefited or partly from the local authority and partly from such person as the Town Planning Officer may in each case determine.
Provided that the value of such property or right shall be held to be its market value at the date of the declaration of intention to make a scheme or the date of a notification under sub section (1) of section 24 without reference to improvements contemplated in the scheme".
Section 71 deals with the case of an owner of land who is not given a plot in the final scheme and also provides for a case where the amount payable to an owner exceeds the amount due from him.
Section 71 is as follows: "If the owner of an original plot is not provided with a plot in the final scheme or if the contribution to be levied from him under section 66 is less than the total amount to be deducted therefrom under any of the provisions of this Act, the net amount of his loss shall be payable to him by the local authority in cash or in such other way as may be agreed upon by the parties".
The appellant in the present case was not provided with a plot in the final scheme.
Section 87 in Chapter IX empowers the State Government to make rules consistent with the provisions of the Act to provide for all matters not specifically indicated therein.
The effect of the final scheme coming into force has been summarized by Shah J., in Shantilal 's case; we may quote here the following extract from page 349 of the report: "On the coming into force of the scheme all lands which are required by the local authority, unless otherwise 91 determined in the scheme, by the operation of section 53 (a) vest absolutely therein free from all encumbrances.
The result is that there is a complete shuffling up of plots of land, roads, means of communication, and rearrangement thereof.
The original plots are re constituted, their shapes are altered, portions out of plots are separated, lands belonging to two or more owners are combined into a single plot, new roads are laid out, old roads are diverted or closed up, and lands originally belonging to private owners are used for public purposes i.e. for providing open spaces, green belts dairies etc.
In this process the whole or parts of a land of one person, may go to make a reconstituted plot, and the plot so reconstructed may be allotted to another person and the lands needed for public purposes may be earmarked for those purposes.
The re arrangement of titles in the various plots and reservation of lands for public purposes require financial adjustments to be made.
The owner who is deprived of his land has to be compensated, and the owner who obtains a re constituted plot in surroundings which are conducive to better sanitary living conditions has to contribute towards the expenses of the scheme.
This is because on the making of a town planning scheme the value of the plot rises and a part of the benefit which arises out of the unearned rise in prices is directed to be contributed towards financing of the scheme which enables the residents in that area to more amenities, better facilities and healthier living conditions".
Under the Act the compensation payable to an owner for loss of land has to be determined on the basis of the market value of the land at the date on which the declaration of intention to make a scheme was made.
On the question whether the Act specifies a principle of compensation, it is observed in Shantilal 's case at page 357 of the report: "It is true that under the Act the market value of the land at the date of declaration of intention to make a scheme determines the amount to be adjusted, and that is the guiding rule in respect of all lands covered by the scheme.
The High Court was, in our judgment, right in holding that enactment of a rule determining payment or adjustment of price of land of which the owner was deprived by the 92 scheme estimated on the market value on the date of declaration of the intention to make a scheme amounted to specification of a principle of compensation within the meaning of Art, 31 (2).
Specification of principles means laying down general guiding rules applicable to all persons or transactions governed thereby.
Under the Land Acquisition Act compensation is determined on the basis of "market value" of the land on the date of the notification under s.4 (1) of that Act.
That is a specification of principle.
Compensation determined on the basis of market value prevailing on a date anterior to the date of extinction of interest is still determined on a principle specified.
Whether an owner of land is given a reconstituted plot or not, the rule for determining what is to be given as recompense remains the same.
It is a principle applicable to all cases in which by virtue of the operation of the Town Planning Act a person is deprived of his land whether in whole or in part".
We may now turn to sections 32, 33 and 34 occurring in chapter V.
It may be recalled that the appellant 's land was taken for purposes of the scheme but he was not given a reconstituted plot.
Section 32 (1) which enumerates the duties of the Town Planning Officer is set out below: "32 (1) In accordance with the prescribed procedure the Town Planning Officer shall (i) after notice given by him in the prescribed manner, define and demarcate the areas allotted to, or reserved, for a public purpose or purpose of the local authority and the reconstituted plots; (ii) after notice given by him in the prescribed manner, determine, in the case in which a reconstituted plot is to be allotted to persons in ownership in common, the shares of such persons; (iii)fix the difference between the total of values of the original plots and the total of the values of the plots included in the final scheme, in accordance with the provisions contained in clause (f) of sub section (1) of section 64; 93 (iv) determine whether the areas used, allotted or reserved for a public purpose of the local authority are beneficial wholly or partly to the owners or residents within the area of the scheme; (v) estimate the portion of the sums payable as compensation on each plot used, allotted or reserved for a public purpose or purpose of the local authority which is beneficial partly to the owners or residents within the area of the scheme and partly to the general public, which shall be included in the costs of the scheme; (vi) calculate the contribution to be levied on each plot used, allotted or reserved for a public purpose or purpose of the local authority which is beneficial partly to the owners or residents within the area of the scheme and partly to the general public; (vii)determine the amount of exemption, if any, from the payment of the contribution that may be granted in respect of plots exclusively occupied for the religious or charitable purposes; (viii)estimate the increment to accrue in respect of each plot included in the final scheme in accordance with the provisions contained in section 65; (ix) calculate the proportion in which the increment of the plots included in the final scheme shall be liable to contribution to the costs of the scheme in accordance with the provisions contained in section 66; (x) calculate the contribution to be levied on each plot included in the final scheme; (xi) determine the amount to be deducted from, or added to, as the case may be, the contribution leviable from a person in accordance with the provisions contained in section 67; (xii)provide for the total or partial transfer of any right in an original plot to a reconstituted plot or provide for the extinction of any right in an original plot in accordance with the provisions contained in section 68; 94 (xiii)estimate in reference to claims made before him, after the notice given by him in the prescribed manner, the compensation to be paid to the owner of any property or right injuriously affected by the making of a town planning scheme in accordance with the provisions contained in section 69; (xiv)draw in the prescribed form the final scheme in accordance with the draft scheme:" There is a proviso to section 32 (1) which is not relevant for the purpose of this appeal.
Section 33 says: "Except in matters arising out of clauses (v), (vi), (vii), (ix), (x) and (xiii) of sub section (1) of section 32, every decision of the Town Planning Officer shall be final and conclusive and binding on all persons." Section 34 provides an appeal to a Board of Appeal from any decision of the Town Planning Officer under clauses (v), (vi) (viii), (ix), (x) and (xiii).
Thus the decision of the Town Planning Officer is final and conclusive in all matters referred to in the various clauses of section 32 (1) except those mentioned in (v), (vi), (viii), (ix), (x) and (xiii).
It was claimed on behalf of the appellant that the Town Planning Officer 's decision in the appellant 's case was appealable either under clause (viii) or clause (xiii) of section 32 (1).
The Town Planning Officer has a duty under clause (viii) to calculate the increment to accrue in respect of each plot included in the final scheme (which we will refer to hereinafter as the final plot for brevity 's sake) in accordance with the provisions of section 65.
Under section 65 increment means the amount by which at the date of the declaration of the intention to make a scheme, the market value of a final plot calculated on the basis as if the improvements contemplated in the scheme had stood completed on that date exceeds the market value of the same plot when taken into account without the improvements.
The increment is thus the difference in the market value of the same final plot with the improvements and without the improvements on the aforesaid date.
The value of the original plot does not arise for consideration under clause (viii).
Rule 17 of the Bombay Town Planning Rules, 1955 sets out the particulars that a draft scheme shall contain in addition to the particulars specified in 95 section 25 of the Act.
Clause (v) of rule 17 mentions a "redistribution and valuation statement in Form 'B ' showing the estimated amounts to be paid to, or by, each of the owners included in the scheme".
Form B makes it clear that the increment is the difference in value of the same final plot in its developed and undeveloped conditions; Form B keeps the valuation of the original plot distinct from that of the final plot.
The appellant 's case therefore cannot fall under clause (viii).
Does the case fall under clause (xiii)? Under clause (xiii) the Town Planning Officer is required to estimate the compensation to be paid to the owner of any property or right injuriously affected by the making of a town planning scheme in accordance with the provisions of section 69.
Section 69 states that the owner of any property or right which is injuriously affected by the making of a town planning scheme shall be entitled to obtain compensation from the local authority or from any person benefited or partly from the local authority and partly from such person as the Town Planning Officer may in each case determine.
It seems obvious that the property or right which is injuriously affected by the making of a town planning scheme is a property or right other than that acquired for the purposes of the scheme.
The property or right affected remains with the owner who is entitled to compensation for such injurious affection.
When under the Act a plot of land is taken for the purposes of a town planning scheme, it cannot be suggested that land itself is injuriously affected; such a view is unsupportable both as a matter of language and having regard to the scheme of the Act.
On behalf of the appellant it was urged that clause (xiii) would cover the case of the appellant if only we read a few words in that clause and that we should do so to avoid injustice being done to the appellant and the owners of land similarly situated.
That we are afraid is not possible.
We find no compelling reason for restructuring that clause, and taking acquisition of land to mean 'injurious affection ' of the land acquired would be inconsistent with the entire scheme of the Act.
We may refer to clause 'fourthly ' of section 23 (1) of the land Acquisition Act, 1894 which requires the court to take into consideration in determining the amount of compensation to be awarded for land acquired under that Act, the damage sustained by the "person interested" "by reason of the acquisition injuriously affecting his other property".
The expression "person interested" as defined in section 3 of the Land Acquisition Act means all persons claiming an interest in compensation to be made on account of the acquisition of land under that Act.
It is made clear in clause 96 'fourthly ' that the damage is for injurious affection of some property other than the land acquired.
The sense in which the expression 'injurious affection ' is used in section 23 (1) of the Land Acquisition Act is the generally accepted meaning of that expression and we find nothing in the Act concerned in this case that suggests that it should be construed differently.
It was then argued that if neither clause (viii) nor clause (xiii) was applicable, then there was no clause in section 32 (1) of the Act that covers the appellant 's case.
The contention is not correct.
The owner of an original plot who is not provided with a plot in the final scheme gets his right to compensation from section 71 of the Act which says that the net amount of loss shall be payable to him by "the local authority in cash or in such other way as may be agreed upon by the parties".
The principle for determining the compensation is the same whether an owner of land is given a reconstituted plot or not; compensation is payable on the basis of the market value of the plot at the date of declaration of the intention to make a scheme.
In the appellant 's case it would be the value of the original plot and not the final plot.
In determining the difference between the total of the values of the original plots and the total of the values of the plots included in the final scheme, the Town Planning Officer under section 32 (1) (iii) has to find out the market value of each of the original plots at the date of the declaration of intention to make a scheme as provided in section 64 (1) (f).
Thus the Act contains the necessary provisions for estimating the compensation payable to an owner of land who has not been given a reconstituted plot.
We therefore hold that the High Court was right in finding that the decision of the Town Planning Officer determining the amount of compensation in the appellant 's case was not appealable.
In the view we take, Mr. Nariman should be allowed to urge the grounds concerning the constitutional validity of the Act.
This case may now be placed before a Constitution Bench for hearing.
An application has been filed on behalf of the appellant for leave to urge additional grounds; this application may also be considered by the Constitution Bench that will hear this appeal.
P.B.R. Appeal dismissed.
| IN-Abs | The Bombay Town Planning Act, 1954 (which was made applicable to the State of Gujarat) provides for the compulsory acquisition of land and payment of compensation for the land so acquired for the development or re development or improvement of the entire area within the jurisdiction of a local authority such as a municipal corporation or a municipality.
The Town Planning Scheme prepared under the Act may make provision for laying out new streets or roads, allotment or reservation of land for roads, open spaces and such other matters not inconsistent with the objects of the Act.
Before proceeding to acquire any land for town planning purposes, a local authority, by resolution, must declare its intention to make a town planning scheme and publish it in the manner prescribed.
The draft scheme may contain proposals such as to form a re constituted plot by the alteration of the boundaries of an original plot, to form a reconstituted plot by the transfer, wholly or partly, of the adjoining land, to allot a plot to any owner dispossessed of a land in furtherance of the scheme.
Any person affected by the scheme may communicate to the local authority concerned any objection relating to such scheme.
The scheme is then forwarded to the State Government for the requisite sanction.
The scheme of the Act envisages the appointment of a Town Planning Officer and constitution of a Board of Appeal.
It is the duty of the Town Planning Officer to draw up a final scheme in accordance with the draft scheme.
When the final scheme comes into force all lands required by the local authority shall vest absolutely in that authority free from all encumbrances and all rights in the original plots which have been reconstituted shall determine and the reconstituted plots shall become subject to the rights settled by the Town Planning Officer.
Section 64 (1) enumerates the sums payable or spent and the expenses incurred by the local authority which are to be included in the costs of a town planning scheme.
Under section 65 increment means the amount by which at the date of the declaration of intention to make a scheme the market value of a final plot calculated on the basis as if the improvement contemplated in the scheme had stood completed on that date.
Provision is made in section 67 to make adjust 82 ment between the rights to compensation for loss of land suffered by the owner and the liability to make contribution to the finance of the scheme.
Compensation payable to any owner for loss of lands has to be determined on the basis of the market value of the land at the date on which the declaration of intention to make a scheme was made.
Section 69 contemplates that the owner of any property or right which is injuriously affected by the making of a town planning scheme shall be entitled to obtain compensation from the local authority or from any person bona fide or partly from such person as the Town Planning Officer may in each case determine.
Section 32 enumerates duties of the Town Planning Officer and section 33 provides that except in matters arising out of clauses (v), (vi), (vii), (ix), (x) and (xiii) of section 32 (1) every decision of the Town Planning Officer shall be final and conclusive and binding on all persons.
An appeal from the decision of the Town Planning Officer under the six clauses mentioned in section 33 lies to the Board of Appeal.
The Surat Municipal Corporation declared its intention to make a town planning scheme under section 22 of the Bombay Town Planning Act, 1954.
The draft scheme published included an area of 1.37 lac square meters of which the appellant was the lessee.
Dissatisfied with the compensation awarded to him by the Town Planning Officer the apportionment of the compensation between the lessor and lessee and the propriety of reserving such a large area of land for the scheme the appellant preferred an appeal under section 34 read with section 32 (1) of the Act to the Board of Appeal.
The Board rejected the appeal as being not maintainable on the ground that the Act did not provide an appeal from a decision of the Town Planning Officer on matters dealt with by him in the impugned order.
Agreeing with the Board of Appeal the High Court dismissed the appellant 's writ petition.
In the appeal to this court it was contended on behalf of the appellant that the Town Planning Officer 's decision was appealable under clause (viii) or clause (xiii) of section 32(1) because he has a duty to calculate the increment to accrue in respect of each plot included in the final scheme in accordance with the provision of section 65.
Dismissing the appeal, ^ HELD: The High Court was right in holding that the decision of the Town Planning Officer determining the amount of compensation in the appellant 's case was not appealable.
[96 F] The decision of the Town Planning Officer is final and conclusive in all matters referred to in the various clauses of section 32 (1) except those mentioned in clauses (v), (vii), (viii), (ix), (x) and (xiii).
[94 E] The increment referred to in section 65 is the difference in the market value of the same final plot with the improvements and without the improvements on 83 the date of the declaration of intention to make a scheme.
The value of the original plot does not arise for consideration under clause (viii).
Form B referred to in clause (v) of rule 17 of the Bombay Town Planning Rules, 1955 makes it clear that the increment is the difference in value of the same final plot in its developed and undeveloped condition.
This form keeps the valuation of the original plot distinct from that of the final plot.
The appellant 's case cannot fall under clause (viii) of section 32.
[94 G 99 B] What is contemplated by section 69 is that the property or right which is injuriously affected by the making of a town planning scheme is a property or right other than that acquired for the purposes of the scheme.
The property or right affected remains with the owner who is entitled to compensation for such injurious affection.
When under the Act a plot of land is taken for the purposes of a town planning scheme it cannot be said that land itself is injuriously affected.
[95 C E] There is no compelling reason for restructuring clause (xiii) suggested by the appellant.
Taking acquisition of land to mean "injurious affection" of the land acquired would be inconsistent with the entire scheme of the Act.
[95 F] In determining the amount of compensation awarded for land acquired under the Land Acquisition Act, that Act requires the Court to take into consideration the damage sustained by the "person interested" by reason of the acquisition injuriously affecting his other property.
" A "person interested" means a person claiming an interest in compensation to be made on account of the acquisition of land under the Land Acquisition Act and the damage is for injurious affection of some property other than the land acquired.
There is nothing in the Act to suggest that the generally accepted meaning of the expressions "injurious affection" used in the Land Acquisition Act should be construed differently in this Act.
[95 G 96 B] The owner of an original plot who is not provided with a plot in the final scheme gets his right to compensation from section 71.
The principle for determining the compensation is the same whether an owner of land is given a reconstituted plot or not.
Compensation is payable on the basis of the market value of the plot at the date of declaration of the intention to make a scheme.
In the appellant 's case it would be the value of the original plot and not the final plot.
In determining the difference under section 32 (1) (iii) the Town Planning Officer has to find out the market value of each of the original plots at the date of the declaration of intention to make a scheme.
The Act contains necessary provisions for estimating the compensation payable to an owner of land who has not been given a reconstituted plot.
[96 C E]
|
Civil Appeal No. 1679 of 1979.
From the Judgment and Order dated 15 5 1979 of the Gauhati High Court in Election Petition No. 7/78.
S.S. Ray, N.R. Chowdhary and Parijath Sinha for the Appellant.
R. Karaanjawala and P.H. Parekh for Respondent No. 1. 632 The Judgment of the Court was delivered by FAZAL ALI, J.
This election appeal is directed against a judgment dated May 15, 1979 of the Gauhati High Court by which the High Court accepted the election petition filed by the petitioner Aju Newmai and set aside the election of the appellant, N.C. Zeliang who had been declared elected from the No. 6 Tening Assembly Constituency of the State of Nagaland.
For short, the respondent No. 1, namely, the election petitioner in the High Court, shall be hereinafter referred to as the 'Petitioner ' and N.C. Zeliang, who had won the election, as the 'appellant '.
The elections were held in the year 1977 and were contested by the petitioner, the appellant and others.
The appellant contested the election as a Congress candidate with the symbol of 'cow and a calf ' whereas the petitioner contested on the ticket of the United Democratic Front (U.D.F.) whose election symbol was 'Cock '.
The other candidates in the field were Jangkhosei and Paokholun.
We are, however, not concerned with these candidates.
It appears that the appellant polled 2224 votes as against the 2207 votes polled by the petitioner and thus defeated the petitioner by a margin of 17 votes, the total votes in the constituency being only 5,000.
The poll took place on 8 11 1977 and the last date for filing the nomination paper was 24 10 1977.
Being aggrieved by the declaration of the appellant as having been duly elected to the Assembly, the petitioner filed an election petition on 5 1 1978 in the High Court challenging the election of the appellant on several grounds including the allegation that he had filed a false return of the expenses and had incurred much more expenses than fixed by the authorities concerned.
The petitioner also alleged a number of other corrupt practices which had been committed by the appellant in the course of the election.
The appellant in his written statement strongly refuted all the allegations made by the petitioner and submitted that he had committed no corrupt practice and that the return which he had filed to the District Election Officer was absolutely correct and the expenses incurred by him were well below the permissible limit.
A large number of issues were framed by the High Court but the High Court appears to have accepted the election petition only on one issue, viz., issue No. 4, which related to the corrupt practice as contemplated by section 123(6) of the Representation of the People Act (hereinafter referred to as the 'Act ') in incurring the expenditure exceeding the permissible limit which amounted to a contravention of 633 section 77 of the Act.
The other allegations made by the petitioner were held by the High Court as not proved.
The learned counsel for the petitioner, who argued this case with tenacity and ingenuity, was unable to support the allegation made by the petitioner on any other issue framed by the court except issues No. 4 and 5.
As the pivotal controversy in the instant case rests on issue No. 4, we would like to take up the finding of the High Court on this issue first.
Issue No. 4, as framed by the High Court, may be extracted as follows: "Whether the Respondent No. 1 committed corrupt practice, as defined under sec.
123(6) of the Representation of the People Act, 1951, by incurring or authorising expenditure exceeding the permissible amount, in contravention of section 77 of the said Act, as alleged in paragraphs 10, 11 Ground No. (II) and Schedule B to the Petition? If so, is the election of Respondent No. 1 liable to be set aside?" This issue was based on the plea taken by the petitioner in paragraph 10 and ground No. II as also Schedule B to the petition and it may be necessary to traverse the allegations made by the petitioner regarding this issue.
Paragraph 10 appears to be an omnibus statement which contains a number of grounds including the question of incurring unauthorised expenditure with which alone we are concerned for the present, and may be extracted thus: "That the petitioner also states and contends that the election of Respondent No. 1 is liable to be declared void as he committed several corrupt practices, namely (1) the corrupt practice as defined in sub section (6) of section 123 of the Act, that is to say, incurring or authorising expenditure in contravention of section 77 of the Act; (2) the corrupt practice of bribery as defined in sub section (1) of section 123 of the Act; (3) the corrupt practice of hiring or procuring vehicles for the free conveyance of electors to and from certain polling stations within the said Assembly Constituency as defined in Section 123(5) of the Act.
The material facts and particulars of these corrupt practices are set out hereunder." Ground No. II of the petition may be extracted as follows: "For that the Respondent No. 1 committed the corrupt practice as set out in sub section (6) of section 123 of the Act by incurring or authorising expenditure in contravention of section 77 of the Act.
" 634 The material particulars relating to the allegation made in Ground No. II are contained in Schedule B to the petition, the relevant portion of which may be extracted thus: "B 1.
In his return of election expenses, the Respondent No. 1 returned the total expenditure of Rs. 1323.69.
. . . . B 3.
Expenses incurred in connection with hire charges of vehicles and petrol and mobil oil consumed on account of these vehicles and in purchasing accessories: (i) The respondent hired a jeep bearing No. NLK 4308 from Wilubo of Dimapur and paid hire charge of Rs. 3000 including the cost of the driver to the said owner.
(ii) On 3 11 1977 the Respondent No. 1 purchased two tyres valued at Rs. 720 from the firm Motilal Dungarmall of Dimapur and one exide battery from the firm Bakliwal and Gangwals of Dimapur at the cost of Rs. 540 for the purpose of the aforesaid vehicle No. NLK 4308.
(iii) On 28 10 1977 the Respondent purchased petrol worth Rs. 240 for the vehicle No. NLK 6284 used by him for the purpose of election from the firm of Pulchand Trilokchand, Dimapur under voucher No. 270800.
" We have already mentioned that all the allegations made by the petitioner were stoutly denied by the appellant.
Thus, from the allegations made by the petitioner so far as issue No. 4 is concerned, the gravamen of the charge against the appellant was that while he had shown a total expenditure of Rs. 1323.69 in his return filed before the District Election Officer yet he had incurred expenditure far exceeding the same Paragraphs B 3(i), (ii) and (iii) of Schedule B to the petition, extracted above.
show that the appellant had incurred a total expenditure of Rs. 3960.
According to the petitioner these expenses were incurred on the hiring of jeeps and purchasing tyres and other accessories for jeep NLK 4308 which was used for the purpose of election campaign.
The permissible limit being Rs. 2,500 only, the expenditure incurred, according to the petitioner, exceeded the limit by Rs. 1460.
It was also alleged by the petitioner that jeep No. NLK 4308 was hired by the appellant from one Wilubo of Dimapur who was paid hiring charges of Rs. 3,000.
We might state here that according to the finding of the High Court, the petitioner himself admitted in his evidence that the expenditure incurred 635 for the purchase of tyres and battery (Rs. 720 and Rs. 540 respectively) were included in the amount of Rs. 3,000, the balance being the hire charges.
The petitioner, therefore, contended that, at any rate, the appellant had exceeded the expenses incurred in the election by at least Rs. 500, a fact which, according to him, he had proved to the satisfaction of the court.
We have gone through the judgment of the High Court carefully and what we find is that the High Court has not made any attempt to determine whether there was any legal and acceptable evidence to prove the corrupt practice alleged against the appellant.
It is now well settled by a large catena of authorities that a charge under section 123 of the Act must be proved by clear and cogent evidence as a charge for a criminal offence.
It is not open to the court to hold that a charge of corrupt practice is proved merely on a preponderance of probabilities but it must be satisfied that there is evidence to prove the charge beyond a reasonable doubt.
The electoral process in this country is an extremely expensive one and by declaring the election of a candidate null and void, the entire process, so far as the candidate is concerned is set at naught resulting in re election.
Such a course should be adopted only when the allegation of corrupt practice is proved conclusively.
In K.M. Mani vs P.J. Antony & Ors.(1), this Court while referring to a large number of cases observed as follows: "An allegation regarding the commission of a corrupt practice at an election is a very serious matter not only for the candidate but for the public at large as it relates to the purity of the electoral process.
. . . In taking that view the trial court lost sight of the requirement that the allegation regarding the commission of a corrupt practice is in the nature of a quasi criminal proceeding which has to be established beyond reasonable doubt and not merely by preponderance of probabilities.
In Mohan Singh 's case ; it has been held that the onus of proving the commission of a corrupt practice is not discharged on proof of mere preponderance of probability as in a civil suit, and it must be established beyond reasonable doubt by evidence which is clear and unambiguous.
636 In Balakrishna ; it has been held that while consent may be inferred from circumstantial evidence, the circumstances must point unerringly to the conclusion and must admit of no other explanation, for a corrupt practice must be proved in the same way as a criminal charge. .
The election petitioner must therefore exclude every hypothesis except that of guilt on the part of the returned candidate or his election agent, and the trial court erred in basing its finding on a mere probability.
" It is not necessary to multiply authorities on this point because the law has been fully crystallised on the subject.
The petitioner who was examined as PW 1 has clearly stated in his evidence that he was told by Wilubo that the appellant had hired Jeep No. NLK 4308 from him for a lump sum of Rs. 3,000 which were the hire charges.
The witness further admitted that Wilubo was his relation being the brother of his elder brother 's wife and was staying at Dimapur.
Thus, the petitioner himself had no personal knowledge as to the actual hiring charges paid to Wilubo by the appellant and his source of information is based on what he heard from Wilubo.
Wilubo, however, who was examined as a witness for the appellant, has denied these allegations and has also denied having told the petitioner that his Jeep was hired by the appellant, much less for a sum of Rs. 3,000.
Mr. Karanjawala, appearing for the petitioner, vehemently contended that the manner in which Wilubo was examined by the appellant as his witness shows that he was not speaking the truth.
It was pointed out that, to begin with, Wilubo was cited as a witness for the petitioner and summons were issued to Wilubo but he evaded service and ultimately a warrant had to be issued when the counsel for the appellant informed the court that Wilubo would be examined as a witness for the appellant.
Our attention was also drawn to the cash memos.
which show that the tyres costing Rs. 720 and battery worth Rs. 540 were purchased.
Even accepting this part of the case, all that has been shown is that a sum of Rs. 1260 was spent so far as jeep No. NLK 4308 was concerned.
But this fact by itself was not sufficient to prove the allegations made by the petitioner against the appellant.
It had further to be shown by the petitioner to the satisfaction of the court that Wilubo had charged a hiring charge of Rs. 3,000 or nearabout that from the appellant and that he himself had purchased the tyres and battery.
Wilubo had denied this allegation, the evidence of the petitioner on this point is purely hearsay and, therefore, inadmissible in evidence.
It was, however, argued by Mr. Karanjawala 637 that from the evidence of the witnesses produced by the petitioner, it would appear that Jeep No. 4308 was freely used for a large number of days from which it could be safely presumed that the charges for the jeep must have been in the region of Rs. 3,000.
In the first place, there is no clear evidence of any of the witnesses examined by the petitioner to show the exact period for which the jeep was used or the distance which it had traversed nor is there anything to show that such an amount as Rs. 3,000 could have been paid as hiring charges to Wilubo by the appellant.
The evidence merely shows that the jeep was used either on the election day, or a day after or a day before that.
There is no evidence to show what were the customary hiring charges for jeeps or cars in the localities where the jeep is said to have been used by the appellant.
It is, however, suggested by Mr. Karanjawala that as Wilubo appears to be a man of small means, it must be presumed that he must have made a lot of money by hiring out the jeep to the appellant.
This is also a pure conjecture and cannot be pressed into service for unseating the appellant which can be done only if the evidence, even if it consists of circumstantial evidence must be clear and conclusive.
We have been taken through the evidence of PWs 1, 5, 6, 13 and 20 but none of these witnesses gives us any idea of the prevailing rate of hire in the localities concerned which could have been paid by the appellant to Wilubo for the jeep.
The evidence led by the petitioner falls far short of the standards required by law.
Another important circumstance that militates against the case of the petitioner is that while the petitioner admits in his evidence that he used to maintain some sort of a diary of his electioneering yet he had not produced it on the plea that he did not remember where he had kept the diary.
In this connection, the petitioner deposed as follows: "I had maintained some sort of a diary of my electioneering.
The diary was of course not maintained regularly.
I do not remember where I kept the diary.
I have not filed the same in Court.
" It is, therefore, manifest that the diary would have been the best evidence to show that as to how many days the jeep was used or for what distance and as also the hiring charges paid by the appellant to Wilubo.
The petitioner has withheld the diary and has not filed the same in the court from which a natural presumption arises that if he had produced the diary it would have gone against his case.
Even PW 6 who, according to the petitioner, was an independent witness, has merely said that he knew that the appellant had used a jeep but he does not 638 either give the dates when the jeep was used or the distance which it had traversed.
He, however, further admits that although he had seen the jeep he did not see the appellant, Zeliang in it.
This, therefore, falsifies his allegation that the jeep was used by the appellant.
The evidence of other witnesses on this point is also not helpful to the petitioner and is even more vague than the evidence of PW 6.
In fact, there is some evidence to show that the appellant had visited various places in his constituency even on foot.
In the absence of such evidence it was not open to the High Court to accept the speculation of the petitioner that the appellant must have incurred hiring charges for the jeep exceeding Rs. 2,000 or so.
The appellant has denied having incurred any expenditure on the purchase of tyres and battery but taking the case of the petitioner at the highest and assuming that an expenditure of Rs. 720 for the tyres and Rs. 540 for the battery was incurred as is proved from the cash memos, produced by the petitioner, there is no reliable or credible evidence to show that the appellant had himself met the cost of these articles and used them for his election campaign.
Thus, the expenses indicated above are not at all relatable to the jeep in question.
In these circumstances therefore, we are clearly of the opinion that there is no legal evidence to support the corrupt practice alleged by the petitioner in that he had incurred expenditure beyond Rs. 2,500 and thus the petitioner has not been able to prove that the return of expenses filed by the appellant before the District Election Officer was wrong or inaccurate and in excess of the permissible limit.
Hence, the finding of the High Court on this point cannot be sustained.
Realising this difficulty, Mr. Karanjawala strongly pressed issue No. 5 framed by the High Court on the basis of one of the allegations made by the petitioner.
The High Court has, however, clearly held that the allegation which formed the subject matter of issue No. 5 has not been proved at all by the petitioner.
Mr. Karanjawala assailed the finding of the High Court on this point and submitted that this allegation was clearly proved by the petitioner.
There, however, appears to be an insurmountable obstacle in accepting the contention of the counsel for the petitioner on this point.
It is well settled that an allegation of corrupt practice must be clearly pleaded in the petition and the particulars given in the schedule.
Corrupt practice being in the nature of a fraud, it is not permissible to plead one kind of fraud or one kind of corrupt practice and prove another though they may be inter connected.
The High Court has rightly found that as the petitioner pleaded that it was the appellant himself who had held a feast, invited his voters and exhorted them to vote for him, the evidence shows that the appellant had not held the feast at all but it 639 was hosted by one of his agents in which the appellant was present and therefore it cannot be presumed that the feast was held at the instance of the appellant.
The High Court held that the allegation pleaded was not proved by the evidence which in fact was contrary to the pleadings and therefore no notice of such a corrupt practice could be taken.
With due respect, we find ourselves in complete agreement with the reasons given by the High Court on this aspect of the matter.
Issue No. 5 may be extracted thus: "Whether Respondent No. 1 committed corrupt practice of bribery, as defined under section 123(1)(a)(b) of the Representation of the People Act, 1951 by offering himself or by his agents with his consent, gratification by way of entertaining the electors of No. 6 Tening Assembly Constituency of the Nagaland Legislative Assembly with feasts, with the object, directly or indirectly, of inducing them to vote for the Respondent No. 1, as alleged in paragraphs 10, 11 (Ground No. III) and Schedule C to the petition? If so, is the election of Respondent No. 1 liable to be set aside?" In Schedule C the particulars given show that the appellant gave a feast on 2 11 77 and on 31 10 77 and on 12 11 77 to the electorate and purchased a pig on all these occasions for hosting the voters.
The evidence led, however, shows that no feast was hosted by the appellant at all but was done by some other person who was his agent while the appellant was present.
It is, therefore, manifest that the exact corrupt practice pleaded by the petitioner in Schedule C was not proved but was in direct variance with the evidence which he led on this point.
On this ground alone, therefore, the petitioner would have to be put out of court so far as issue No. 5 is concerned.
No other point was pressed before us by the counsel for the parties.
For the reasons given above, we are satisfied that there is no legal evidence to prove the corrupt practice alleged against the appellant that he had exceeded the limit of expenditure fixed in using the jeep, even if he had taken it from Wilubo.
Issue No. 5 also was rightly held by the High Court not proved.
In this view of the matter, the appeal is allowed.
The order of the High Court setting aside the election of the appellant and unseating him is hereby quashed.
In the peculiar circumstances of the case, there will be no order as to costs.
P.B.R. Appeal allowed.
| IN-Abs | In the elections to the State Assembly in 1977 the appellant was declared elected.
The election petitioner, who was one of the defeated candidates, alleged in his petition that the appellant had filed a false return of the expenses and thereby committed corrupt practice within the contemplation of section 123(6) of the Representation of the People Act, 1951.
Accepting the allegation the High Court set aside his election.
Allowing the appeal.
^ HELD: (1) The High Court has not made any attempt to determine whether there was any legal and acceptable evidence to prove corrupt practice alleged against the appellant.
It is well settled that a charge under section 123 of the Act must be proved by clear and cogent evidence as a charge for a criminal offence.
It is not open to the Court to hold that a charge of corrupt practice is proved merely on a preponderance of probabilities but it must be satisfied that there is evidence to prove the charge beyond a reasonable doubt.
[635 B D] K.M. Mani vs P.J. Antony & ors. ; referred to.
(i) In the instant case the petitioner himself had no personal knowledge as to the actual expenses in hiring taxies and his source of information was based on what others said.
The evidence led by the petitioner falls far short of the standards required by law.
[636 D, 637E] (ii) The petitioner claimed that he maintained a diary of the electioneering.
Yet he did not produce it in Court from which a natural presumption arises that if he had produced the diary it would have gone against his case.
[637 G H] (2) Corrupt practice being in the nature of a fraud, it is not permissible to plead one kind of fraud or one kind of corrupt practice and prove another though they may be inter connected.
The High Court has rightly found that the petitioner pleaded that it was the appellant who had held a feast at which he invited his voters and exhorted them to vote for him.
But the evidence shows that the appellant had not held the feast but it was hosted by one of his agents at which the appellant was present and, therefore, it could not be proved that the feast was held at the instance of the appellant.
[638 G 639A]
|
Civil Appeal No. 3133 of 1979 Appeal by special leave from the judgment and order dated the 30th July, 1979 of the Allahabad High Court in Sales Tax Revision No. 573 of 1979.
150 G.L. Sanghi, Bharat Ji Aggarwal, Naresh Kumar Sharma and Vineet Kumar for the appellant.
S.C. Manchanda and Mrs. Sobha Dixit for the respondent.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
The short point for consideration in this appeal is whether the expression 'cooked food ' used in certain notifications issued under the U.P. Sales Tax Act, 1948 (U.P. Act XV of 1948) (hereinafter referred to as 'the Act ') can be construed as including within its meaning 'biscuits ' also.
The assessee, the appellant herein, is a registered firm engaged in the business of manufacture and sale of biscuits intended for human consumption.
The assessee is a registered dealer under the Act.
During the assessment proceedings under the Act for the year 1972 73 the assessee claimed that the turn over relating to biscuits manufactured and sold by it amounting to Rs. 35,09,920.38 P. was liable to be taxed at two per cent which was the rate prescribed by a notification issued by the State Government for cooked food contending that 'cooked food ' included 'biscuits ' also.
The notification relied on was one issued on October 6, 1971 under subsection (2) of section 3 A of the Act in supersession of an earlier notification dated July 1, 1969.
In both the notifications the tax was fixed at two per cent of the turn over payable at all points of sale in the case of cooked food.
The Assistant Commissioner (Tax Assessment) Sales Tax, Kanpur who was the assessing authority rejected the contention of the assessee that cooked food included biscuits also and imposed tax at the rate of three and a half per cent on the turn over relating to biscuits treating the same as an unclassified commodity.
An appeal filed against the order of the assessing authority before the Deputy Commissioner Sales Tax and a further appeal before the Judge (Appeal) Sales Tax, Lucknow were unsuccessful.
The High Court of Allahabad also declined to interfere with the said order.
This appeal by special leave is filed against the order of the High Court under Article 136 of the Constitution.
The only ground urged before us is that biscuits should have been treated by the authorities under the Act and by the High Court as cooked food and sales tax should have been levied on the turnover of biscuits at the rate prescribed in respect of cooked food under the notification referred to above.
The argument urged on 151 behalf of the appellant is that biscuit which was consumed by human being for nourishment is food and since it is prepared by baking which is a kind of cooking process it should be treated as cooked food.
Relying on some foreign English dictionaries it is contended that cooking means preparation of food by application of heat as by boiling, baking, roasting, broiling etc.
and biscuit should therefore be treated as cooked food.
What is of significance in this case is that the Hindi version of the notification issued uses the expression cooked food (pakaya hua bhojan) for 'cooked food ' found in the notification in English language.
It is a well settled rule of construction that the words used in a law imposing a tax should be construed in the same way in which they are understood in ordinary parlance in the area in which the law is in force.
If an expression is capable of a wider meaning as well as narrower meaning the question whether the wider or the narrower meaning should be given depends on the context and the background of the case.
In Hinde vs Allmond the question was whether tea was an "article of food" within the meaning of an Order designed to prohibit the hoarding of food namely Food Hoarding Order of 1917.
The learned judges held it was not even though in some other decisions it had been held to be an "article of food".
Shearman, J. one of the judges said that he rested his judgment on the common sense interpretation of the word 'food ' in the Order, apart from its meaning in any other statute '.
It is interesting to note that in a case before the Allahabad High Court in Annapurna Biscuit Manufacturing Co. vs State of U.P. the assessee had contended that biscuit was an article of confectionery and that contention was negatived.
It is relevant to note, as we have mentioned earlier, that when the Hindi text of the notification was issued contemporaneously with the English version, the words ( 'pakaya hua bhojan ') were used as the equivalent of the words 'cooked food '.
It may be that biscuit is served at tea time and in its wider meaning 'cooked food ' may include biscuit.
But ordinarily biscuit is not understood as cooked food.
If a person goes to a hotel or restaurant and asks for some cooked food or cooked food ( 'pakaya hua bhojan ') certainly he will not be served with biscuits in Uttar Pradesh.
While it is not necessary to state in the present case as to what all items may be called as cooked food, we can definitely say that in the context and background of the notification biscuit cannot be treated as cooked food.
152 The High Court of Allahabad has in an earlier case in Commissioner of Sales Tax vs Jassu Ram Bakery Dealer held that biscuit was not cooked food.
The High Court of Madhya Pradesh has also taken the same view in Commissioner of Sales Tax Madhya Pradesh vs Shri Ballabhdas Iswardas.
We approve of the views expressed in the aforesaid decisions.
There is no ground to interfere with the orders under appeal.
In the result, this appeal fails and is dismissed.
No costs.
S.R. Appeal dismissed.
| IN-Abs | Dismissing the appeal, the Court ^ HELD: 1.
In the context and background of the notification "biscuit" cannot be treated as "cooked food".
In the Hindi text of the notification, issued contemporaneously with the English version, the words (cooked food) were used as the equivalent for cooked food.
Ordinarily biscuit is not understood as "cooked food".
Nor any one asking for some "cooked food" in a hotel will be served with "biscuits" in Uttar Pradesh.
The item has been correctly treated as "unclassified commodity" and tax levied accordingly.
[151F,G,H] Commissioner of Sales Tax vs Jassu Ram Bakery Dealer, 38 S.T.C. 461; Commissioner of Sales Tax Madhya Pradesh vs Shri Bailabhdas Iswardas, 21 S.T.C. 309, approved.
It is a well settled rule of construction that the words used in a law imposing a tax should be construed in the same way in which they are understood in ordinary parlance in the area in which the law is in force.
If an expression is capable of a wider meaning as well as narrower meaning the question whether the wider or the narrower meaning should be given depends on the context and the background of the case.
[151 C E] Hinde vs Allmond, , quoted with approval.
|
etition (Criminal) No. 2690 of 1981.
(Under article 32 of the Constitution of India) AND Writ Petition (Criminal) No. 3241 of 1981.
(Under article 32 of the Constitution of India) Ram Jethmalani and M.S. Ganesh for the Petitioner in W.P. No. 2690/81.
O.P. Rana and R.N. Poddar for the Respondents in W.P. No. 2690/81.
Ram Jethmalani and Miss. Rani Jethmalani for the Petitioner in W.P. No. 3241 /81.
Hardyal Hardy, section Narayanan and Miss A. Subhashini for the Respondents in W.P. No. 3241/81.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
These two Writ Petitions (Criminal) may be disposed of by a single judgment as some of the questions raised are common to both.
To begin with, we may refer to the facts in Writ Petition (Criminal) No. 2690 of 1981.
The Government of Maharashtra, in exercise of the powers under Sec.
3(1) of the COFEPOSA, directed the detention of Sunder Shankardas Devidasani by an order dated March 9, 1981, with a view to prevent him from smuggling goods and abetting the smuggling of goods.
The 142 grounds of detention, also of the same date, were duly served on the detenu.
The detenu made a representation on April 14, 1981 and this was rejected by the Government on April 25, 1981.
A further representation made by the detenu on April 25, 1981 was also rejected on May 2, 1981.
In the mean time the Advisory Board met on April 29, 1981 and considered the case of the detenu.
By a letter dated May 6, 1981 the detenu was informed by the Advisory Board that the Board had reported to the Government of Maharashtra advising them that there was sufficient material to justify his detention.
In this application for the issue of a Writ of Habeas Corpus, the first submission of Shri Jethmalani, learned counsel for the detenu, was that although it was the Government that was required by Sec. 8(b) of the COFEPOSA to make the reference to the Advisory Board, in the instant case, it was not the Government but one of its subordinate officers that had made the reference.
There was thus, according to Shri Jethmalani, a departure from the prescribed procedural requirement and for that reason the continued detention of the detenu for any period longer than five weeks mentioned in Sec 8(b) was illegal.
Shri Jethmalani 's contention was that Sec. 8 (b) required the Government to make a reference to the Advisory Board within five weeks from the date of detention and this meant that the Government had first to decide that it was necessary to detain the person for more than five weeks and then to forward the reference to the Advisory Board.
The learned counsel would have it that the making of a reference to the Advisory Board necessitated a decision to detain the detenu for more than five weeks and this decision could be taken by the Government only and none else.
We are unable to agree with the submission of Shri Jethmalani.
article 22 (4) (a) of the Constitution prescribes that no law providing for preventive detention shall authorise the detention of a person for a longer period than three months unless an Advisory Board consisting of persons who are, or have been, or are qualified to be appointed as, Judges of a High Court has reported before the expiration of the said period of three months that there is in its opinion sufficient cause for such detention.
article 22 (7) (c) empowers Parliament, by law, to prescribe the procedure to be followed by an Advisory Board in an enquiry under article 22 (4) (a).
Sec. 3 (1) of the COFEPOSA authorises the Central Government, the State Government an officer of Central Government, not below the rank of a Joint Secretary specially empowered in that behalf, or an Officer 143 of a State Government not below the rank of a Secretary specially empowered in that behalf to make an order directing that a person be detained, if satisfied, with respect to that person, that it is necessary to detain him with a view to preventing him from acting in any manner prejudicial to the conservation or augmentation of foreign exchange or with a view to preventing him from smuggling goods, etc.
Sec. 3 (3) provides for the communication of the grounds of detention to the detenu to enable him to make a representation.
The communication has to be ordinarily not later than five days of the date of detention though in exceptional circumstances, for reasons to be recorded in writing, it may be fifteen days.
Sec. 8 provides for the constitution of Advisory Boards and the procedure to be followed by them.
Sec. 8 (b) obliges the appropriate Government, within five weeks from the date of detention of a person under a detention order, to make a reference in respect of the detention to the Advisory Board to enable the Advisory Board to make the report under article 22 (4) (e) of the Constitution.
Sec. 8 (c) prescribes the procedure to be followed by the Advisory Board and requires the Advisory Board to submit its report within eleven weeks from the date of detention of the person concerned.
Sec, 8 (f) stipulates that the appropriate Government shall revoke the detention order and cause the person to be released forthwith if the Advisory Board has reported that there is in its opinion no sufficient cause for the detention of the person concerned.
If the Advisory Board reports that there is in its opinion sufficient cause for the detention of the person, the appropriate Government may confirm the detention order and continue the detention of the person concerned for such period as it thinks fit.
11 empowers the State Government to revoke an order of detention made by an Officer of the State Government, and the Central Government to revoke an order of detention made by a State Government, an officer of a State Government or an Officer of the Central Government.
The power of the State Government and the Central Government, under Sec.
11 of the COFEPOSA, to revoke orders of detention is in addition to the power under Sec.
21 of the General Clauses Act to revoke their own orders.
The first important factor to be noticed here is that the period for which a person is to be detained under the COFEPOSA is not to be determined and specified at the time of making the original order of detention under Sec.
It has to be determined and specified at the time of confirming the order of detention under Sec. 8 (f), after receiving the report of the Advisory Board.
The second factor 144 of importance which calls for attention is that while an order of detention may be made by the State Government, the Central Government or an Officer of either Government specially empowered in that behalf, an order of detention may only be confirmed by the appropriate Government.
Keeping in mind these two factors, we may now examine the time scheme under the COFEPOSA.
First the detaining authority, who may be the Central Government, the State Government or an Officer of either Government, specially empowered in that behalf, must be satisfied that it is necessary to detain a person with a view to preventing him from acting in a certain manner or doing certain things, and if so, satisfied, an order of detention may be made (Sec. 3 (1), COFEPOSA).
The order of detention has not to specify the proposed period of detention at that stage.
Within five days of the detention, the detenu is required to be furnished with the grounds of detention so as to enable him to make a representation to the detaining authority (article 22(5) of the Constitution and Sec.
3(3), COFEPOSA).
Thereafter, within three months from the date of detention, the Advisory Board has to report the sufficiency of cause for such detention.
This is a constitutional mandate (article 22(4) of the Constitution).
In order to enable the Advisory Board to discharge its constitutional obligation, the Government is required to make a reference to the Advisory Board within five weeks from the date of detention (Sec. 8(b) of COFEPOSA).
The Advisory Board in its turn is charged with the task of submitting a report within eleven weeks from the date of detention, specifying its opinion as to whether or not there is sufficient cause for the detention of the person concerned (Sec. 8(c), COFEPOSA).
Quite obviously the period of eleven weeks from the date of detention prescribed for the submission of the report of the Advisory Board is to enable compliance with the Constitutional time limit of three months.
On receipt of the report the Government has to revoke the detention, if the Board has reported that there is no sufficient cause for the detention or, to confirm the order of detention and specify the period of detention if the Board has reported that there is sufficient cause for the detention (Sec. 8(f) COFEPOSA).
In the meanwhile, at any time, the Central Government in any case, and the State Government if the order of detention was made by the State Government or by an Officer of the State Government, are entitled to revoke the order of detention.
Thus there is no Constitutional or Statutory obligation on anyone, until after the report of the Advisory Board is received to decide finally or tentatively upon the period of detention.
The initial compulsion on the detaining authority before making an order of detention is 145 to arrive at the satisfaction that it is necessary to detain the person concerned with a view to preventing him from acting in a certain manner or with a view to preventing him from committing certain acts.
The obligation to specify the period of detention is upon the appropriate Government and that has to be done at the final stage, after consideration of the report of the Advisory Board.
There is no intermediate stage at which any tentative conclusion is to be arrived at by the Government regarding the period of detention though, at any and every stage, the Government has the full liberty to revoke the order of detention.
We are, therefore, of the view that the act of making a reference to the Advisory Board is a mechanical or ministerial act involving no exercise of discretion, though of course the Government is at that stage, as at all other stages, at liberty to revoke the order of detention.
The prescription of five weeks in Sec.
8(b) of the COFEPOSA for the making of a reference to the Advisory Board is with a view to enable the fulfilment of the Constitutional requirement of article 22(4) and not with a view to imposing an obligation upon the Government to consider the question of the length of detention and arrive at a tentative conclusion even at that stage.
We, therefore, reject the first submission of Shri Jethmalani.
The second submission of the learned counsel for the detenu was that the representation was disposed of by the Minister of State, Home Affairs, Government of Maharashtra without any authority to do so.
It is somewhat strange that this contention should have been raised before us.
We understand that this very contention was previously raised in another Writ Petition and that the relevant standing order was produced before the Court at the hearing of the Writ Petition and that it was also shown to the learned counsel.
The standing order is made by Shri A.R. Antulay, Chief Minister of Maharashtra and Minister for Home and it directs allotment of the business appertaining to "All cases of and the Conservation of Foreign Exchange and Prevention of Smuggling Activities.
Maharashtra Detention Order, 1974 and all other matters arising under the provisions of the said Act and the said order . . and any other orders issued under this Act, except.
. ." (We are not concerned with the exceptions) to the Minister of State for Home, Shri Abhey Singh Maharaj Raje Bhosale.
Rule 6 of the Maharashtra Govt.
Rules of Business made by the Governor of Maharashtra in exercise of the powers conferred by Article 166 (2) and (3) of the Constitution provides that the Chief Minister and a 146 Minister in consultation with the Chief Minister may allot to a Minister of State or a Deputy Minister any business appertaining to a Department or a part of a Department.
It is, therefore, clear that the Minister of State, Home Affairs, Government of Maharashtra was entitled to deal with the representation of the detenu.
It was suggested that it would have been more appropriate if the representation had been considered by the very individual who had exercised his mind at the initial stage of making the order of detention, namely the Secretary to the Government, Shri Samant.
There is no substance in this suggestion.
The order of detention was not made by Shri Samant as an Officer of the State Government specially empowered in that behalf but by the State Government itself acting through the instrumentality of Shri Samant, a Secretary to Government authorised to so act for the Government under the Rules of Business.
Governmental business can never get through if the same individual has to act for the Government at every stage of a proceeding or transaction, however, advantageous it may be to do so.
Nor can it be said that it would be to the advantage of the detenu to have the matter dealt with by the same individual at all stages.
It may perhaps be to the advantage of the detenu if fresh minds are brought to bear upon the question at different stages.
It is unnecessary to pursue the matter any further as we find no constitutional or legal infirmity in the representation having been considered by the Minister of State, Home Affairs, Government of Maharashtra.
The learned counsel next submitted that the detenu was not permitted to be represented by a lawyer despite his request that he might be allowed to engage the services of a lawyer before the Advisory Board.
In his representation to the Government the detenu did make a request to be permitted to be represented by a lawyer.
The Government informed him that under the provisions of Sec. 8(e) of the COFEPOSA he was not entitled to be represented by a lawyer before the Advisory Board and therefore, it was not possible to grant his request.
The complaint of the learned counsel for the detenu was that while a detenu may not be entitled, as of right, to be represented by a lawyer before the Advisory Board, there was no bar against a lawyer being permitted to appear before the Advisory Board and therefore, the request of a detenu to be represented by a lawyer had to be considered on the merits of each individual case.
This the learned counsel submitted had not been done in the present case and the detenu 's request was never placed before the Advisory Board.
It is true that while Sec. 8(e) disentitles 147 a detenu from claiming as of right to be represented by a lawyer, it does not disentitle him from making a request for the services of a lawyer.
We agree that the importance of legal assistance can never be over stated and as often than nota dequate legal assistance may be essential for the protection of the Fundamental Right to life and personal liberty guaranteed by Article 21 of the Constitution and the Right to be heard given to a detenu by Sec.
8(e), COFEPOSA.
These rights may be jeopardised and reduced to more nothings without adequate legal assistance.
That would depend on the facts of each individual case, in the light of the intricacies of the problems involved and other relevant factors.
Therefore, where a detenu makes a request for legal assistance, his request would have to be considered on its own merit in each individual case.
In the present case, the Government merely informed the detenu that he had no statutory right to be represented by a lawyer before the Advisory Board.
Since it was for the Advisory Board and not for the Government to afford legal assistance to the detenu the latter, when he was produced before the Advisory Board, could have; if he was so minded, made a request to the Advisory Board for permission to be represented by a lawyer.
He preferred not to do so.
In the special circumstances of the present case we are not prepared to hold that the detenu was wrongfully denied the assistance of counsel so as to lead to the conclusion that procedural fairness, a part of the Fundamental Right guaranteed by Article 21 of the Constitution was denied to him.
The last submission of the learned counsel was that there was a non application of the mind of the detaining authority, first in making the order of detention and later in considering the representation of the detenu.
It was contended that the recital in the grounds of detention that detenu had made a statement that certain documents received at the detenu 's residence at the time of search pertained to the order dated 29.11.1980 of Shri Abdullahi Amin, Attache, Sudan Consulate was not correct and that the detenu 's statement contained no such recital.
It was said that the grounds of detention read as if the detenu had admitted the existence of the order dated 29.11.80 in the statement made by him.
We do not find any substance in this submission.
A reading of the document leaves no such impression.
All that was said was that the documents received by post at the time of search pertained to an order dated 29.11.80 and not that there was admission by the detenu that there was ever an order dated 29.11.80.
It was then contended that in the course of communication of the grounds of detention the detenu was informed that 148 it was against the public interest to disclose the source of intelligence and the further facts contained therein.
The actual sentence by which privilege was claimed against disclosure was as follows: "I consider it against public interest to disclose the source of intelligence referred to in the grounds furnished above and further consider it against public interest to disclose further facts contained therein".
The argument was that the grounds did not state that the Government considered it against public interest to disclose the source of intelligence and the further facts contained therein but that it was the Assistant Secretary to the Government of Maharashtra who signed at the bottom of the grounds that though it was against the public interest to disclose the source of intelligence and the facts contained therein.
The emphasis was on the use of the first person by the Assistant Secretary.
This was explained by the respondents as a Clerical mistake and was later rectified by making suitable corrections.
It was contended that the discovery of the mistake and its rectification was after the Advisory Board had submitted its report, though the detenu had even earlier, raised the question that it was the Government and not the Assistant Secretary that could claim privilege.
It was not brought to the notice of the Advisory Board at any time that the mistake was only clerical.
We have the least hesitation in rejecting the contention.
The mistake is so obviously clerical that we cannot permit the detenu to take advantage of it.
In the result W.P. No. 2690/81 is dismissed.
The first two questions raised in the previous Writ Petition are common to Writ Petition No. 3241 of 1981 also.
An additional point was sought to be raised that the copy of a certain document was not supplied to the detenu but after verification the point was abandoned by the learned counsel.
This Writ Petition is also dismissed.
N.V.K. Petitions dismissed.
| IN-Abs | The husband of the petitioner was detained by the State Government under section 3(1) of the with a view to prevent him from smuggling goods and abetting the smuggling of goods.
His representation to the State Government was rejected.
The Advisory Board informed him by a letter that the Board had reported to the Government advising them that there was sufficient material to justify his detention.
In the writ petition filed in this Court it was contended on behalf of the detenu: (1) although it was the Government that was required by section 8(b) of the COFEPOSA to make the reference to the Advisory Board, it was not the Government but one of its subordinate officer that had made the reference, and that this departure from the prescribed procedural requirement had made the continued detention of the detenu for any period longer than the five weeks mentioned in section 8(b) illegal; (2) the representation was disposed of by the Minister of State of Home Affairs of the State Government without any authority to do so; (3) the detenu was not permitted to be represented by a lawyer despite his request that he might be allowed to engage the services of a lawyer before the Advisory Board; (4) there was a non application of the mind of the detaining authority first in making the 139 order of detention and later in considering the representation of the detenu; and (5) that it was the Assistant Secretary to the State Government who signed at the bottom of the grounds that he thought it was against the public interest to disclose the source of intelligence and the facts contained therein.
In the connected writ petition, only the first two of the aforestated contentions were raised.
Dismissing the writ petitions, ^ HELD: 1.(i) The order of detention has not to specify the proposed period of detention at that stage.
Within five days of the detention, detenu is required to be furnished with the grounds of detention so as to enable him to make a representation to the detaining authority.
(Article 22(5) of the Constitution and section 3(3), COFEPOSA).
Thereafter, within three months from the date of detention, the Advisory Board has to report on the sufficiency of cause for such detention.
This is a constitutional mandate (Article 22(4) of the Constitution).
In order to enable the Advisory Board to discharge its constitutional obligation the Government is required to make a reference to the Advisory Board within five weeks from the date of detention.
(Section 8(b) of COFEPOSA).
The Advisory Board in its turn is charged with the task of submitting a report within eleven weeks from the date of detention, specifying its opinion as to whether or not there is sufficient cause for the detention of the person concerned (Section 8(c) COFEPOSA).
The period of eleven weeks is to enable compliance with the Constitutional time limit of three months.
On receipt of the report the Government has to revoke the detention, if the Board has reported that there is no sufficient cause for the detention or, to confirm the order of detention and specify the period of detention if the Board has reported there is sufficient cause for the detention.
(Section 8(f) COFEPOSA).
In the meanwhile at any time the Central Government in any case, and the State Government if the order of detention was made by the State Government or by an Officer of the State Government, are entitled to revoke the order of detention.
[144 C G] (ii) There is no constitutional or statutory obligation on any one, until after the report of the Advisory Board is received to decide finally or tentatively upon the period of detention.
The initial compulsion on the detaining authority before making an order of detention is to arrive at the satisfaction that it is necessary to detain the person concerned with a view to preventing him from acting in a certain manner or with a view to preventing him from committing certain acts.
The obligation to specify the period of detention is upon the appropriate Government and that has to be done at the final stage, after consideration of the report of the Advisory Board.
There is no intermediate stage at which any tentative conclusion is to be arrived at by the Government regarding the period of detention though, at any and every stage, the Government has the full liberty to revoke the order of detention.
[144 H 145 C] (iii) The act of making a reference to the Advisory Board is a mechanical or ministerial act involving no exercise of discretion, though of course the Government is at the stage, as at all other stages at liberty to revoke the order of detention.
The prescription of five weeks in section 8(b) of the 140 COFEPOSA for the making of a reference to the Advisory Board is with a view to enable the fulfilment of the constitutional requirement of Article 22(4) and not with a view to imposing an obligation upon the Government to consider the question of the length of detention and arrive at a tentative conclusion even at that stage.
[145 D] 2.(i) The Maharashtra Government Rules of Business made by the Governor in exercise of the powers conferred by Article 166(2) and (3) of the Constitution provides by Rule 6 that the Chief Minister and a Minister in consultation with the Chief Minister may allot to a Minister of State or a Deputy Minister any business appertaining to a Department or a part of a Department.
The Standing Order made by the Chief Minister of Maharashtra and Minister for Home directs allotment of the business appertaining to "All cases of and the Conservation of Foreign Exchange and Prevention of Smuggling Activities . . .
Maharashtra Detention Order, 1974 and all other matters arising under the provisions of the said Act and the said Order. .and any other orders issued under this Act, except. ." to the Minister of State for Home.
The Minister of State for Home Affairs was therefore entitled to deal with the representation of the detenu.
[145 H, F G; 146 A] (ii) Governmental business can never get through if the same individual has to act for the Government at every stage of a proceeding or transaction, however, advantageous it may be to do so.
Nor can it be said that it would be to the advantage of the detenu to have the matter dealt with by the same individual at all stages.
It may perhaps be to the advantage of the detenu if fresh minds are brought to bear upon the question at different stages.
There is therefore no substance in the suggestion that the representation of the detenu should have been considered by the very individual who had exercised his mind at the initial stage of making the order of detention.
[146 D, B] 3.
While section 8(e) disentitles a detenu from claiming as of right to be represented by a lawyer, it does not disentitle him from making a request for the services of a lawyer.
The importance of legal assistance can never be over stated and adequate legal assistance may be essential for the protection of the Fundamental Right to life and personal liberty guaranteed by Article 21 of the Constitution and the Right to be heard given to a detenu by section 8(e) of COFEPOSA.
These rights may be jeopardised and reduced to mere nothings without adequate legal assistance.
That would depend on the facts of each individual case, in the light of the intricacies of the problems involved and other relevant factors.
Therefore, where a detenu makes a request for legal assistance, his request would have to be considered on its own merit in each individual case.
[146 H 147 C] In the instant case, the State Government merely informed the detenu that he had no statutory right to be represented by a lawyer before the Advisory Board.
Since it was for the Advisory Board and not for the Government to afford legal assistance to the detenu the latter, when he was produced before the Advisory Board, could have, if he was so minded, made a request to the Advisory Board for permission to be represented by a lawyer.
He preferred not to do so.
The detenu was, therefore, not wrongfully denied the assistance of 141 counsel as to the conclusion that procedural fairness, a part of the Fundamental Right guaranteed by Article 21 of the Constitution was denied to him.
[147 D E] 4.
A reading of the grounds of detention reveals that all that was said was that the documents received by post at the time of search pertained to an order dated 29.11.1980 and not that there was any admission by the detenu that there was ever an order dated 29.11.1980.
[147 H] 5.
The mistake that it was only the Assistant Secretary of the State Government who signed at the bottom of the grounds that it was against the public interest to disclose the source of intelligence was explained by the respondents as a clerical mistake, and was later rectified by making suitable corrections.
[148 C E]
|
Civil Appeals No. 2815 & 2816 of 1980.
110 Appeals by special leave from the Award dated the 3rd September, 1980 of the National Industrial Tribunal at Bombay in Complaint No. NTB 2 and NTB 3 of 1980 arising out of Reference No. NTB 1 of 1979.
WITH CIVIL APPEAL NO.
2607 of 1980 Appeal by special leave from the Award dated the 3rd Sept. 1980 passed by the National Industrial Tribunal, Bombay in Complaints Nos.
NTB 2 & 3 of 1980 in Reference No. NTB 1 of 1979.
AND CIVIL APPEAL NO.
3150 of 1980 Appeal by Special leave from the Award dated 3rd September, 1980 passed by the National Industrial Tribunal, Bombay in Complaints Nos.
NTB 2 & 3 of 1980 in Reference No. NTB 1 of 1979.
F.S. Nariman R.A. Shroff, H.S. Parihar and Shradul section Shroff, for the Appellant in CAS 2815 16/80, for Respondent No. 2 in CA.
2607/80 & for Respondent No. 1 in C.A. 3150/80.
C. N. Murthy and P. P. Mittal for Respondent No. 1 in CA.
2815 16/80.
M.K. Ramamurthy, P.S. Khera and S.K. Dawar, for RR 2 70 in CAS.
2815 16/80, for Respondent No. 3 in CA 2607/80 & for Respondent Nos. 3 & 40 67 in CA.
3150/80.
K.K. Venugopal, C.N. Murthy and P.P. Mittal 1980 for the Appellants.
A.K. Sen, A.K. Gupta, Brij Bhushan, N.P. Mahendra and Miss Renu Gupta, for the Appellants in CA.
3150/80.
S.K. Bisaria for RR.
2 4 and 6 39 in CA.
3150/80.
The Judgment of the Court was delivered by GUPTA, J.
These are four appeals by special leave from an Award of the National Industrial Tribunal, Bombay, made on September 3, 1980 disposing of two complaints under section 33 A of the holding that the employer, 111 Reserve Bank of India, Bombay had changed to the prejudice of the complainants their conditions of service by modifying the existing scheme of promotion during the pendency of a reference before the Tribunal and had thereby contravened the provisions of section 33 (1) (a) of the Act.
Civil Appeals 2815 and 2816 of 1980 have been preferred by the Reserve Bank of India, Bombay.
In civil appeal 2607 of 1980 the appellants are some of the stenographers employed in the Bombay office of the Reserve Bank of India.
The four appellants in civil appeal 3150 of 1980 are also employees of the Reserve Bank of India, Bombay, one of whom is a clerk grade I and the other three are officiating as staff officers grade A.
How the appellants in Civil Appeals 2607 and 3150 are affected by the Award will appear from the facts stated below.
The facts leading to the making of the complaints under section 33 A are as follows.
On June 16, 1979 the Government of India, Ministry of Labour, in exercise of powers conferred by section 7B of the constituted a National Industrial Tribunal with headquarters at Bombay and referred to it for adjudication an industrial dispute existing between the Reserve Bank of India and their class III workmen.
The dispute as described in the schedule to the order of reference related to "specific matters pertaining to class III workmen" enumerated in the schedule.
The schedule listed 35 matters in all, item No. 12 of which is described as 'Promotion '.
On May 13, 1972 appellant Reserve Bank of India, Bombay, had issued Administration Circular No. 8 introducing a revised scheme for promotion of employees as Staff Officers Grade A.
This Circular No. 8 prescribed as a condition for promotion passing a test consisting of three papers on the following subjects: noting, drafting, precis & essay writing, (ii) Reserve Bank of India Act, and (iii) functions and working of the Reserve Bank of India.
Candidates with less than 15 years ' service in class III cadre at the time of the test and who had not passed in the subjects 'Practice and Law of Banking ' and 'Book keeping and Accounts ' in Part I of the Institute of Bankers Examination were to appear and pass in an extra paper divided into two parts on the aforesaid two subjects.
Candidates who had passed in either or both these subjects in part I of the Institute of Bankers Examination were exempted from appearing in the corresponding part or both parts of this paper.
The circular further provided that an estimate of the vacancies anticipated to occur in each office during a 'panel year ' i. e. from September 1 to 112 August 31, was to be declared by the Bank in advance and the number of candidates in that office to be called for the test to fill the vacancies in that office was not to exceed twice the number of such vacancies.
A candidate who had been unsuccessful in more than one test was to be treated as a repeater and the number of such repeaters sitting for a test would be in addition to the aforesaid number of candidates.
An employee in the substantive rank of teller, stenographer grade II, stenographer grade I or personal assistant was eligible to appear in the test under this circular provided he had put in a minimum period of 15 years ' service in class III cadre.
A further condition relating to these three types of employees, tellers, stenographers and personal assistants, was that they could be called to appear in the test only if a clerical candidate of the same length of service found a place within twice the number in the combined seniority list.
The said three types of employees were required to pass both parts I and II of the Institute of Bankers examination, or if they were graduates, in part I only.
Those of them who would pass the test were to be posted on the clerical desk for one year for acquiring experience and thereafter they were to be absorbed in the next list to be prepared on the result of the test succeeding the one in which they had passed.
They were to rank in seniority below the juniormost successful candidate in the test in which they qualified.
A further requirement was that the stenographers and personal assistants should have worked for at least 5 years as such; this condition was thought necessary because it was possible that some of them may have been employed as typists for some time.
Feeling that the aforesaid circular No. 8 adversely affected them, the Stenographers filed a writ petition in the Andhra Pradesh High Court challenging the validity of the circular.
The main grievance seems to have been that by the said Circular No. 8 they were placed en bloc below the clerks which made the chances of promotion so far as they were concerned illusory.
The Andhra Pradesh High Court dismissed the writ petition with the following observations: ". .the clerks and the stenographers who have passed at the qualifying written examination do not acquire any right to promotion by merely being put in a panel.
As observed by the Supreme Court in the case cited in Gangaram vs Union of India, A.I.R. 1970 S.C. 2178, the effect of passing at the qualifying examination is only 113 to remove a hurdle in their way for further promotions to the posts of staff officers, grade II.
In the matter of actual promotion there is nothing illegal in the department promoting the clerks as a group in the first instance and postponing the promotions of the stenographers to a later stage. .It is urged on behalf of the petitioners that previous to the new scheme, the stenographers were placed at the top of the clerks en bloc and that they have now been brought to the bottom.
This argument is based upon a misconception that the panel creates any rights.
Hence nothing turns upon the place fixed in the panel".
The High Court however made certain recommendations "to avoid frustration and dissatisfaction among the stenographers".
It was suggested that "the Reserve Bank may frame suitable rules for fixing the seniority among the staff officers, grade II, on some rational and equitable principles, i.e., by length of service or marks obtained at the qualifying examination or by adopting a reasonable ratio between the two classes, so that the chances of further promotions for the stenographers may not be illusory".
This judgment was delivered on March 5,1973.
In the months of March and November, 1973 charters of demand were submitted respectively by the All India Reserve Bank Workers Organisation and the All India Reserve Bank Employees Association.
The latter Association is the one which is recognised by the Bank.
On January 23, 1976 by Administration Circular No. 5 the Bank modified Circular No. 8 to remedy the alleged adverse effect suffered by the stenographers as a result of Circular No. 8.
On June 16, 1979 the order referring to the National Tribunal at Bombay the dispute between the Bank and the class III workmen was made.
The All India Reserve Bank Employees Association filed a writ petition in the Calcutta High Court in July 1979 challenging this order of reference.
The High Court at Calcutta issued an injunction restraining the National Tribunal from adjudicating on the reference until the writ petition was disposed of.
A settlement was thereafter reached between the Bank and the All India Reserve Bank Employees Association and the injunction was vacated.
On November 21, 1979 the Bank and the Association applied to the Tribunal jointly for making an award on the basis of the settlement.
In the meantime on October, 10, 1979 the impugned Circular No. 6 was issued.
The following changes were introduced by Circular 114 No. 6 in the scheme of promotion set out in Circular No. 8 relating to personal assistants, stenographers, tellers and the clerical staff: (1) The eligibility period so far as these three types are concerned was reduced from 15 years to 10 years service.
(2) The condition requiring stenographers and personal assistants to put in 5 years service as such was dispensed with.
(3) Their period of training on clerical desk was reduced from 1 year to six months.
(4) They were to be fitted according to the length of their service in the panel for the year in which they passed the test and not in the next panel as before.
(5) Those who are graduates among these three groups, even if they had not passed in all the subjects in part I of Indian Institute of Bankers examination, would be eligible for exemption from appearing in the additional paper on 'Practice and Law of Banking ' and 'Book keeping and accounts ' if they had passed in these two subjects in the said examination.
(6) This benefit of exemption which was available to the clerical staff of 15 years ' standing previously was extended to those of them who had put in only 10 years service.
The two complaints (complaint Nos. 2 and 3 of 1980) on which the impugned award has been made were filed respectively on July 22, 1980 and August 1, 1980.
The complainants who were clerks grade I had passed the test in the panel year 1978 79 and were empanelled for promotion to the post of staff officer grade A.
The grievance made in the two complaints is that the result of the changes introduced in the promotional scheme by Circular No. 6 relaxing for the stenographers and personal assistants the conditions they were required to satisfy to be able to sit for the test and permitting them to be fitted according to the length of their service in the panel for the year in which they had passed the test, was that many who could not have been considered for promotion in preference to the complainants had circular No. 8 been in force, would 115 now be entitled to a higher preference.
According to the complainants the alterations made during the pendency of the reference before the National Tribunal amounted to changing their conditions of service to their prejudice in violation of section 33 (1) (a) of the .
The complainants in complaint No. 2 of 1980 stated that if the alterations introduced by Circular No. 6 were allowed to continue "the chances of promotion would become bleak for them '; complainants in complaint No. 3 of 1980 also expressed a similar apprehension that as a result of the changes introduced "their chances of promotion would recede further and further".
The appellants in civil appeal 2607 of 1980 who are stenographers acquired eligibility to appear in the qualifying test because of the modifications introduced in the existing scheme by Circular No. 6.
All the four appellants in civil appeal 3150 of 1980 are from clerical cadre, three of whom are officiating as staff officers grade A; they are also beneficiaries of the relaxations made in the existing scheme by circular No. 6.
The appellants in both these appeals are obviously affected by the Award allowing the complaints and declaring circular No. 6 as invalid.
Section 33 (1) (a) prohibits the employer during the pendency of a proceeding in respect of an industrial dispute before a Labour Court or Tribunal or National Tribunal from altering to the prejudice of the workmen concerned in the dispute their existing conditions of service.
Sub section (2) of section 33, however, permits the employer to alter the conditions of service in regard to any matter not connected with the dispute in accordance with the standing orders applicable to the workman concerned or in accordance with the terms of the contract between the employer and the workman.
The right given to the employer under sub section (2) is subject to the condition laid down in sub section (3) of section 33 that the right can be exercised only with the express permission in writing of the authority before which the proceeding is pending.
Section 33 A of the Act provides that where an employer contravenes the provisions of section 33 during the pendency of proceedings before a Labour Court, Tribunal or National Tribunal any employee aggrieved by such contravention may make complaint in writing to such Labour Court, Tribunal or National Tribunal, and on receipt of such complaint the Labour Court, Tribunal or National Tribunal shall adjudicate upon the complaint as if it were a dispute referred to it or pending before it in accordance with the provisions of the Act and submit its award to the appropriate government.
Section 31 (1) of the Act provides for penalty for contravention of the provisions of section 33; an 116 employer found guilty of such contravention is punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees or with both.
In this case circular No. 6 was not introduced with the permission of the National Tribunal, Bombay, before which the reference was pending; to determine whether thereby the provisions of section 33 have been contravened, the question that requires to be answered is whether the alterations introduced by Circular No. 6 are connected with the dispute pending in reference before the National Tribunal.
This again leads to the question, what was the dispute that was referred to the National Tribunal for adjudication? According to the complainants their promotional prospects were adversely affected by the impugned circular.
Item 12 of the schedule annexed to the order of reference is described as 'Promotion '.
Demand No. 19 in the charter of demands presented by the All India Reserve Bank Employees Association mentions 'Promotional avenues ' but, as the National Tribunal itself noticed, the matters specified under the head 'promotional avenues ' relate to the creation of more promotional posts and the upgrading of certain posts.
Demand No. 19 does not thus relate to the promotional scheme in question.
The impugned award also refers to demand No. 27 of the charter of demands submitted by the All India Reserve Bank Workers organisation.
Demand No. 27 is described as 'Promotional Policy ' and all that is said in the charter of demands under this head is that the matter "should be discussed and finalised on the basis of pre requisites of promotional policy submitted in 1969".
It is not therefore clear how demand No. 27 could have a connection with the promotional scheme set out in circular No. 6 issued in 1979.
The award does not refer to the statements of claim filed on behalf of the workmen; it is likely that because of the order of injunction issued by the Calcutta High Court to which we have earlier referred, the unions representing the workmen were not able to file their statements of claim before the National Tribunal disposed of the complaints under section 33A.
The Tribunal however held: " contemplates reference in wider terms than the actual item in dispute.
Section 10 (IA) of the which provides for the appointment of the National Tribunal shows that the Central Government could form its opinion not only on the existing dispute but also on the apprehended dispute and the order of reference can cover not only the dispute but any matter appearing to be connected with or relevant to the dispute.
In view of it, it cannot be said that when the item 'Promotion ' has been referred to 117 the Tribunal, it has the limitation of remaining in the frame work of the demand. the Tribunal has the jurisdiction to decide on the natural meaning of the words used in the item of reference.
The item seems to have been deliberately stated in terms. it looks to be referring to the process involving promotions." Having said so the Tribunal added: "The extent of such process will have to be carefully defined because there is no dispute with the axiomatic principle that promotion is a matter in the discretion of the employer".
It is difficult to follow the steps of reasoning in the extract from the award quoted above; it is also not clear how the view expressed therein helps in ascertaining what was the dispute referred to the Tribunal for adjudication.
No one can deny that under section 10 (IA) the Central Government could refer to the National Tribunal an existing or an apprehended dispute; the order or reference in this case however shows that it was not an apprehended dispute but an industrial dispute that "exists between the employers in relation to the Reserve Bank of India and their class III workmen in respect of the matters specified in the schedule" annexed to the order which was referred to the Tribunal for adjudication.
As section 10 (IA) expressly says, any matter appearing to be connected or relevant to the existing or apprehended dispute can also be referred to the National Tribunal for adjudication, but obviously unless it is determined what the dispute was that has been referred for adjudication, it is not possible to say whether a particular matter is connected with it.
The Tribunal thought it unjust to restrict the meaning of the word 'promotion ' to what was suggested by the charters of demand and decided to give it its "natural meaning" which according to the Tribunal includes "the process involving promotion".
The question however remains how did the Tribunal satisfy itself that when by the order of reference a specific matter, namely, 'promotion ' was referred to it for adjudication, it was implied that the word should be given a "natural meaning" in the sense in which the Tribunal understood it.
We do not think it reasonable to suppose that the order of reference required the Tribunal to adjudicate on all possible matters relating to promotion.
We therefore accept the contention of the appellants that the Tribunal should have defined the area of the dispute referred to it for adjudication before proceeding to consider whether the promotional scheme set out in Circular No. 6 could be said to be connected with that dispute.
118 Having reached this conclusion we should have sent the matter back to the National Tribunal for ascertaining the scope of the dispute referred to it for adjudication, if the assumption were correct that the alterations in the promotional scheme introduced by Circular No. 6 amounted to changing the conditions of service of the complainants; if not, remitting the matter to the Tribunal will be unnecessary.
What Circular No. 6 did was to relax for stenographers and personal assistants the conditions they had to satisfy to be able to sit for the test.
If they passed the test, they would get into the penal along with employees belonging to the clerical cadre who also had passed the test.
Vacancies in the post of staff officer Grade A are filled by recruiting employees from the panel.
The panel, it appears from the award, is a permanent one.
How those who come out successful in the test are to be fitted in the panel has been stated earlier.
The panel is made up of employees belonging to different cadres.
It is difficult to see how alteration of the conditions of eligibility governing employees belonging to a particular cadre can amount to changing the conditions of service of employees who belonged to another cadre, assuming for the present that the said conditions were conditions of service.
The changes introduced in respect of the stenographers and personal assistants may have an impact on the promotional prospects of employees from another cadre who are already in the panel or even of those who were expecting to be included in the panel, but it is not possible to agree that this would amount to changing their conditions of service.
It is difficult to think of the conditions of service of an employee as including an implied right to prevent the employer from altering the conditions of service of other employees.
In a given case such alteration may be inequitable, and a way may be found in the to redress the grievance of the employees affected thereby, but in this case the question is whether if amount to altering the condition of service of the complainants.
In Reserve Bank of India vs N.C. Paliwal this Court upheld the validity of the combined seniority scheme introduced by the Reserve Bank for the clerical staff.
The first paragraph of the head note to the report summarizes the facts on which challenge to the scheme was based: "At every centre of the Reserve Bank of India there were five departments, the General Department and four Specialised Departments.
There was a separate 119 seniority list for the employees in each Department at each centre and confirmation and promotion of employees was only in the vacancies arising within their Department at each centre.
There were two grades of clerks in each Department, namely, Grade I and Grade II.
The pay scales of Grade I and Grade II clerks in all the departments were the same and their conditions of service were also identical.
There was automatic promotion from Grade II to Grade I and when a clerk from Grade II was promoted to officiate in Grade I, he got an additional officiating allowance of Rs. 25/ per month.
There were also several categories of non clerical posts in the General as well as Specialised Departments, and their pay scale was the same as that of Grade II clerks.
In view of expanding activities in the Specialised Departments, there were greater opportunities for confirmation and promotion for employees in the Specialised Departments than in the General Department.
This gave rise to dissatisfaction amongst employees in the General Department and they claimed equal opportunities by having a combined seniority list for all the clerks for confirmation and promotion.
The Reserve Bank, sought to justify the separate seniority lists on the ground that the work in each department was of a special nature and inter transferability was undesirable and hard to achieve.
As a result of the recommendation of the National Tribunal.
however, the Reserve Bank introduced the Optee Scheme of 1965 as a first step towards equalization of opportunities.
Under the scheme, the option to go over to the Specialised Departments was confined to confirmed Grade II clerks and officiating Grade I clerks in the General Department.
If he exercised the option, he was eligible to be selected.
If he was selected.
he would be entitled to be absorbed only as Grade II clerk in one of the Specialised Departments with the result that if he was an officiating Grade I clerk in the General Department at the time of the exercise of the option, he would lose the benefit of officiation in Grade I in the General Department as also the monetary benefit of Rs. 25/ .
His seniority in the cadre of Grade II clerks in the Specialised Department in which he was absorbed would be deter 120 mined on the basis of his length of service calculated from the date of his recruitment if he was a graduate when he joined service, or from the date of his graduation if he became a graduate whilst in service.
It was argued in Paliwal 's case that the combined list was invalid because it discriminated against the petitioners vis a vis other grade II clerks who had opted under the optee Scheme of 1965.
This Court held: "The contention of the petitioners was that some of the Grade II clerks who had opted under the optee Scheme of 1965 were promoted as Grade I Clerks, while the petitioners continued as Grade II Clerks and before their turn for promotion could arrive, the Combined Seniority Scheme was brought into force and that prejudicially affected their promotional opportunities and thus brought about unjust discrimination between persons belonging to the same class.
This contention has no force and must be rejected.
We have already discussed and shown that it was competent to the Reserve Bank to introduce the Combined Seniority Scheme for the purpose of integrating the clerical staff in all the departments and the Reserve Bank was not bound to wait until all the transferee Grade II Clerks under the optee Scheme of 1965 were promoted as Grade I Clerks in their respective Specialised Departments.
There was no such assurance given by the Reserve Bank when it introduced the optee Scheme of 1965.
What it did was merely to equalise the opportunities of Grade II Clerks in the General Departments with those of Grade II Clerks in the Specialised Departments.
The Reserve Bank did not undertake that it will not take any steps for bringing about total integration of the Clerical services until all the transferee Grade II Clerks were promoted.
The Reserve Bank was entitled to introduce the Combined Seniority Scheme at any time it thought fit and the validity of the Combined Seniority Scheme cannot be assailed on the ground that it was introduced at a time when some of the transferee Grade II Clerks still remained to be promoted and was discriminatory 121 against them.
It may be that some transferee Grade II Clerks had already obtained promotion as Grade I Clerks by the time the Combined Seniority Scheme was introduced, while others like the petitioners had not.
But that cannot be helped.
It is all part of the incidence of service and in law, no grievance can be made against it." These observations in Paliwal 's case are equally applicable to the case before us.
It was competent for the Bank to introduce a combined promotional scheme for the clerical staff, stenographers, and personal assistants and the Bank was not bound to wait until all employees belonging to the clerical cadre whose names were already in the panel when circular No. 6 was introduced had been promoted as staff officers Grade A.
There was no such assurance given by the Bank when it introduced circular No. 8 on which the complainants rely.
The Bank did not undertake that it would not take any step to change the conditions the stenographers and the personal assistants were required to satisfy to be able to appear in the test until all the clerks already empanelled were promoted.
Circular No. 6 cannot therefore be assailed on the ground that it was introduced when some employees belonging to the clerical grade whose names were already in the panel remained to be promoted.
That cannot be helped, and, as observed in Paliwal 's case, "it is all part of the incidence of service and in law no grievance can be made against it".
Being in the panel in any particular year does not ensure a fixed place in the panel for an employee until he is promoted.
It may be recalled that in 1964 and again by circular No. 8 in 1972 the stenographers conditions of service were altered to their prejudice.
The right the complainants now claim is based on the change in the conditions of service of the stenographers made to their detriment earlier.
The grievance of the complainants really relates to the changes affecting their chances of promotion.
We have earlier quoted from the charters of demand to show that the complainants themselves looked upon the alterations made by circular No. 6 as affecting their "chances of promotion".
It is well settled that a rule which affects the promotion of a person relates to his condition of service but this is not so if what is affected is a chance of 122 promotion only.
This Court in Mohd. Shujat Ali and others etc.
vs Union of India & Ors. etc.
held: "But when we speak of a right to be considered for promotion, we must not confuse it with mere chance of promotion the latter would certainly not be a condition of service. that though a right to be considered for promotion is a condition of service, mere chances of promotion are not." In Shujat Ali 's case the respondents went down in seniority and it was urged that this affected their chances of promotion.
In Shujat Ali reference was made to earlier decision of this Court, State of Mysore vs G.B. Purohit where also it was held that though a right to be considered for promotion is a condition of service, mere chances of promotion are not and that a rule which merely affects chances of promotion cannot be regarded as varying a condition of service.
The facts of Purohit 's case and what was decided in that case have been summarized in Shujat Ali 's case as follows: "What happened in State of Mysore vs G.B. Purohit was that the districtwise seniority of Sanitary Inspectors was changed to Statewise seniority and as a result of this change, the respondents went down in seniority and became very junior.
This, it was urged, affected their chances of promotion which were protected.
This contention was negatived and Wanchoo J., as he then was, speaking on behalf of this Court observed: It is said on behalf of the respondents that as their chances of promotion have been affected their conditions of service have been changed to their disadvantage.
We see no force in this argument because chances of promotion are not conditions of service.
" The fact that as a result of the changes made by circular No. 6 the complainants lost a few places in the panel affects their chances of promotion but not the right to be considered for promotion.
123 that being so, it cannot be said that the alterations made by circular No. 6 amount to changing the conditions of service of the complainants; the grievance made by the complainants does not therefore appear to have any basis.
The appeals are accordingly allowed and the complaints dismissed, in the circumstances of the case the parties will bear their own costs.
V.D.K. Appeals allowed.
| IN-Abs | On May 13, 1972 the Reserve Bank of India, Bombay issued Administration Circular No. 8 introducing a revised scheme for promotion of employees as staff officers Grade A. Feeling that the aforesaid Circular adversely affected them, the stenographers filed a writ petition in the Andhra Pradesh High Court challenging its validity, Their grievance was that by the said circular No. 8 they were placed en bloc below the clerks which made their chances of promotion illusory.
On March 5, 1973 the Andhra Pradesh High Court dismissed the writ petition, but made certain recommendations to avoid frustration and dissatisfaction among the stenographers.
In 1973 charters of demands were submitted to the Reserve Bank of India by the employees ' associations.
On January 23, 1976 the Bank issued Administration Circular No. 5 modifying Circular No. 8 to remedy the alleged adverse effect suffered by stenographers as a result of Circular No. 8.
On June 16, 1979, the Central Government in exercise of powers conferred by section 7B of the constituted a National Industrial Tribunal with head quarters at Bombay and referred to it for adjudication an industrial dispute existing between the Reserve Bank of India and their Class III workmen.
The dispute as described in the Schedule to the order of reference related to "specific matters. . pertaining to Class III workmen" enumerated in the Schedule.
The Schedule listed 35 matters in all, item No. 12 of which is described as "promotion".
During the pendency of the reference, on October 10, 1979 the Reserve Bank of India issued Administration Circular No. 6 introducing certain change in the scheme of promotion set out in circular No. 8 by relaxing certain conditions of eligibility for the personal assistants, stenographers, tellers and the clerical staff.
Feeling aggrieved, some clerks (Grade I) who were empanelled for promotion to the post of Staff Officer Grade A after passing the test, filed two complaints before the National Tribunal under section 33A of the Industrial Dispute Act alleging (i) that as a result of Circular No. 6 many who could not have been considered for promotion in preference to the complainants had Circular No. 8 been in force, would now be entitled to a higher preference, 108 and (ii) that the alterations made during the pendency of the reference before the National Tribunal amounted to changing their conditions of service to their prejudice in violation of section 33 (1) (a) of the inasmuch as their chances of promotion would recede.
The National Tribunal by its award dated September 3, 1980 disposed of these two complaints holding that the Reserve Bank of India had changed to the prejudice of the complainants their conditions of service by modifying the existing scheme of promotion during the pendency of a reference before the Tribunal and thereby contravened the provisions of section 33 (1) (a).
Hence the appeals by special leave.
Allowing the appeals and dismissing the complaints, the Court ^ HELD: 1: 1.
The order of reference did not require the Tribunal to adjudicate on all possible matters relating to promotion.
The Tribunal should have defined the area of the dispute referred to it for adjudication before proceeding to consider whether the promotional scheme set out in Circular No. 6 could be said to be connected with that dispute.
[117 G H] 1 : 2.
Item No. 12 of the Schedule annexed to the order of reference is described as "promotion".
Demand No. 19 in the Charter of Demands presented by the All India Reserve Bank Employees Association mentions "promotional avenues", but the matters specified under the head "promotional avenues" relate to the creation of more promotional posts and the upgrading of certain posts.
Demand No. 19 does not thus relate to the promotional scheme in question.
Demand No. 27 of the Charter of Demands submitted by the All India Reserve Bank Workers Organisation is described as "promotional policy" and all that is said in the charter of demands is that the matters "should be discussed and finalised on the basis of prerequisites of promotional policy submitted in 1969".
Demand No. 27 could, therefore, have no connection with the promotional scheme set out in Circular No. 6 issued in 1979.
[116 C E] 1: 3.
Under section 10 (1A) the Central Government could refer to the National Tribunal an existing or an apprehended dispute; the order or reference in this case shows that it was not an apprehended dispute but an industrial dispute that "exists between the employers in relation to the Reserve Bank of India and their class III workmen in respect of the matters specified in the schedule" annexed to the order which was referred to the Tribunal for adjudication.
As section 10 (1A) expressly says, any matter appearing to be connected or relevant to the existing or apprehended dispute can also be referred to the National Tribunal for adjudication, but obviously unless it is determined what the dispute was that has been referred for adjudication, it is not possible to say whether a particular matter is connected with it.
[117 C E] 2: 1.
What circular No. 6 did was to relax for stenographers and personal assistants the conditions they had to satisfy to be able to sit for the test.
It they passed the test, they would get into the panel along with employees belonging to the clerical cadre who also had passed the test.
Vacancies in the posts of staff officer Grade A are filled by recruiting employees from the panel.
The panel is a permanent one.
Alterations of the conditions of the eligibility governing employees belonging to a particular cadre can amount to changing the conditions of service of employees who belonged another cadre, assuming for the present 109 that the said conditions were conditions of service.
The changes introduced in respect of the stenographers and personal assistants may have an impact on the promotional prospects of employees from another cadre who are already in the panel or even of those who were expecting to be included in the panel, but this would not amount to changing their conditions of service.
The conditions of service of an employee cannot include an implied right to prevent the employer from altering the conditions of service of other employees.
In a given case such alteration may be inequitable, and a way may be found in the to redress the grievance of the employees affected thereby.
[118 B F] 2: 2.
It was competent for the Bank to introduce a combined promotional scheme for the clerical staff, stenographers, and personal assistants and the Bank was not bound to wait until all employees belonging to the clerical cadre whose names were already in the panel when Circular No. 6 was introduced had been promoted as staff officers Grade A.
There was no such assurance given by the Bank when it introduced Circular No. 8.
The Bank did not undertake that it would not take any step to change the conditions of the stenographers and the personal assistants were required to satisfy to be able to appear in the test until all the clerks already empanelled were promoted.
Circular No. 6 cannot therefore be assailed on the ground that it was introduced when some employees belonging to the clerical grade whose names were already in the panel remained to be promoted.
[121 B E] Being in the panel in any particular year does not ensure a fixed place in the panel for an employee until he is promoted.
The right the complainants now claim is based on the change in the conditions of service of the stenographers made to their detriment earlier.
[121 E F] Reserve Bank of India vs N.C. Paliwal ; , followed.
It is well settled that a rule which affects the promotion of a person relates to his condition of service but this is not so if what is affected is a chance of promotion only.
Though a right to be considered for promotion is a condition of service, mere chances of promotion are not and that a rule which merely affects chances of promotion cannot be regarded as varying a condition of service.
[121 G H, 122 A, C D] The fact that as a result of the changes made by Circular No. 6 the complainants lost a few places in the panel affects their chances of promotion but not the right to be considered for promotion.
That being so, it cannot be said that the alterations made by Circular No. 6 amount to changing the conditions of service of the complainants; the grievance made by the complainants does not therefore appear to have any basis.
[122 G H, 123 A B] Mohd. Shujat Ali and others etc.
vs Union of India & Ors. etc.
; , ; State of Mysore vs G.B. Purohit, C.A. 2281 of 1965 decided on 25 1 1967 (S.C.) unreported, applied.
|
Appeal No. 323 of 1955.
Appeal from the judgment and order dated July 2, 1953 of the Bombay High Court in Special Civil Application No. 159 of 1953.
R. J. Kolah and A. C. Dave, for the appellant.
H. R. Gokhale, K. R. Chaudhury and M. R. Rangaswamy, for respondent No. 2. 1956.
October 31.
The Judgment of the Court was delivered by GOVINDA MENON J.
On July 20, 1954, the High Court of Judicature at Bombay granted a certificate of fitness under article 133(1) (c) of the Constitution 940 that the judgment of that court dated July 2, 1953, passed in Special Civil Application No. 159 of 1953, was a fit one for appeal to the Supreme Court as it involved a substantial question of law, and it is in pursuance of such certification that the above appeal is now before this court.
A brief resume of the facts and circumstances, which led to the application for a writ of certiorari in the High Court, becomes necessary for a correct appreciation of the question of law involved and may, therefore, be shortly stated.
The appellant which may hereafter, for the purpose of convenience, be called "The Mill", is a limited company owning and possessing a Cotton Textile Spinning and Weaving Mill situated in Poona, employing a large number of workmen who have a union of theirs.
The first respondent is a workman employed by the Mill and the second respondent is the Poona Girni Kamagar Union of which the first respondent is a member.
Respondents 3 to 5 were formally added as parties in the first in stance, but their names were struck off as unnecessary at the time of the hearing.
The appellant was running 580 looms, for working which one weaver had been allotted at the rate of two looms; and when things were in that state on August 29, 1951, the Management issued a notice to the effect that from September 1, 1951, it was desired to carry on an experiment of four looms to a weaver for a period of 2 months, on 16 looms.
If at the end of that period or before the expiry of the same it was found that the working was successful, the Management would introduce the scheme after giving the notice of change required under the Act.
The object of this notice was ostensibly to introduce rationalization or rather efficiency system of work, if and when the suggested experiment proved successful.
As a result of this notice on September 4, 1951, the Secretary of the Union wrote to the Manager of the appellant Mill intimating that under the Bombay Industrial Relations Act the Management could not legally introduce any change in the existing system ,of working without first giving notice of the change 941 in the prescribed form to the representatives of the Union and workers and without going through the other procedure prescribed by the Act; and the Management were further informed that if they insisted in carrying on the change illegally, the workmen would be free to move the proper courts.
The notice also stated that the introduction of the new system would affect the workers ' wages and cause great hardship; and that if anything untoward happened, the blame would be wholly on the management, as it would be impossible for the Union to control the workers in the matter.
Four workers volunteered to work the experiment and started working accordingly on the 16 looms on September 6, 1951, whereupon the other workmen raised an objection and the four loyal workmen were prevented from continuing with the experimental work.
But the Management did not withdraw the notice and none except the 4, was required by the Management to take part in the experiment.
The second shift among the workmen also refused to work with the result that there was a complete strike in the Mills between the 6th and the 26th of September, 1951.
On September 10, 1951 the appellant filed an application under sections 78 and 97 of the Bombay Industrial Relations Act, 1946 (Bom.
XI of 1947), praying that the strike resorted to by the weavers working on both the shifts commencing on September 6, 1951, and continuing till the presentation of the application be declared illegal being in contravention of the provisions of the said Act.
On September 16, 1951 the Vice President of the Mill Mazdoor Sabha filed a written statement in answer to the above com plaint stating that the workers did not strike work in contravention of the Bombay Industrial Relations Act and that the weavers never refused to do their proper and usual work but refused only to do the illegal work insisted on them by the employers; in other words, they were agreeable to have two looms per weaver and not to work the attempted experiment.
Within three days of the filing of the above written 942 statement, two of the workers filed an application under sections 78 and 98 of the Bombay Industrial Relations Act before the same Labour Court against the Management praying for a declaration that the action of the Management had resulted in an illegal lockout in contravention of the Act, and, therefore, the Management should be ordered to withdraw the said illegal change.
The appellant filed a written statement countering the allegations contained in the application for the declaration of an illegal lockout and 'stated that their action was not in contravention of the Bombay Industrial Relations Act, as it did not constitute an illegal change.
The Labour Court at Bombay heard both the applications together and by a combined order dated September 26, 1951, held that since the Management had not compelled any one to accept any work, their action could not be considered an illegal lockout.
At the same time, it held that the workers did not create a situation amounting to an illegal strike.
The result of these findings was the negation of the grant of the prayers contained in the respective applications, but in addition, the court declared that the action of the Management was an illegal change and, therefore, the notice whereby the experiment was attempted to be tried, should be withdrawn.
The workers were content with the outcome of their application but the Management having been aggrieved by the declaration that their action amounted to an 'illegal change ' filed an appeal before the Labour Appellate Tribunal at Bombay (Appeal No. 293 of 1951) upon which the learned Judges of the Labour Appellate Tribunal took the view that the strike by the workmen was illegal.
They also concluded that there was no lockout on the part of the Management.
That being the case, the order of the Labour Court declaring that there was an illegal change was set aside with the declaration that the strike in question was illegal with the necessary consequences.
I In order to get the said order of the Labour Appellate Tribunal quashed, an application for a writ 943 of certiorari under articles 226 and 227 of the Constitution was filed by the two of the workers before the High Court of Bombay where Chagla C.J. and Dixit J., took the view that since the decision of the Appellate Tribunal was erroneous, the same should be quashed, with the result that the decision of the Labour Court was upheld.
It is this judgment that is under appeal before us as a result of the certificate granted by the High Court of Bombay.
A reading of the relevant portions of the statute is necessary to find out whether the order appealed against is justified or not.
The Bombay Industrial Relations Act, 1946 was enacted to regulate the relations of employer and employees, to make provisions for the settlement of industrial disputes and to provide for certain other purposes.
This statute repealed the Bombay Trade 'Disputes Conciliation Act, 1934 and the Bombay Industrial Disputes Act, 1938.
Section 3(8) defines "change" as meaning an alteration in an industrial matter and sub section
(15) contains a definition of 'illegal change ' as meaning an illegal change within the meaning of sub sections
(4) & (5) of section 46 which are in the following terms: "(1) . . . . . . . (2) . . . . . . . . (3) . . . . . . . . (4)Any change made in contravention of the provisions of sub sections (1), (2) and (3) shall be illegal.
(5)Failure to carry out the terms of any settlement, award (registered agreement or effective order or decision of a Wage Board), (a Labour Court or the Industrial Court affecting, industrial matters) shall be deemed to be an illegal change".
Section 42 which speaks of change may also be quoted so far as it is relevant for our purpose: "(I) Any employer intending to effect any change in respect of an industrial matter specified in Schedule II shall give notice of such intention in the prescribed form to the representative of employees.
He shall send a copy of such notice to the Chief Conciliator, the Conciliator for the industry concerned for the 944 local area, the Registrar, the Labour Officer and such other person as may be prescribed: He shall also affix a copy of such notice at a conspicuous place on the premises where the employees affected by the change are employed for work and at such other place as way be directed by the Chief Conciliator in any particular case.
"Industrial matter ' has also been defined in the Act in section 3(18) in the following words: "Industrial matter ' means any matter relating to employment, work, wages, hours of work, privileges, rights or duties of employers or employees, or the mode, terms and conditions of employment, and includes: (a)all matters pertaining to the relationship between employers and employees, or to the dismissal or non employment of any person; ( b) all matters pertaining to the demarcation of functions of any employees or classes of employees; (c) all matters pertaining to any right or claim under or in respect of or concerning a registered agreement or a submission, settlement or award made under this Act; (d)all questions of what is fair and right in relation to any industrial matter having regard to the interest of the person immediately concerned and of the community as a whole;".
Schedule II, para 4 mentions "rationalization or other efficiency system of work" and therefore when any such rationalization is introduced, it is obligatory upon the employer to give notice of such an intention in the prescribed form to the representatives of the employees.
We may also refer to section 3(35 A) defining 'stoppage ' in the following terms: " Stoppage ' means a total or partial cessation of work by the employee in an industry acting in combination or a concerted refusal or a refusal under a common understanding of employees to, continue to work or to accept work, whether such cessation or refusal is or is not in consequence of an industrial dispute;".
945 Sub section (36) defines 'strike ' as follows: " 'Strike ' means a total or partial cessation of work by the employees in an industry acting in combination or a concerted refusal or a refusal under a common understanding of employees to continue to work or to accept work, where such cessation or refusal is in consequence of an industrial dispute".
Chapter XIV of the statute concerns itself with illegal strikes and lockouts of which section 97 deals with illegal strikes, whereas section 98 deals with an illegal lockout.
According to section 97(1)(c), a strike shall be illegal if it is commenced or continued only for the reason that the employer has not carried out the provisions of any standing order or made "an illegal change".
In considering whether the strike in question was illegal.
the learned Judges of the High Court have expressed the opinion that there is a common law right for an employee to stop work and that it is only by statutory prohibition that certain strikes have been made illegal in the interest of labour relations.
In the present case since there had been no 'illegal change" effected by the employer, the High Court took the view that on the very finding of the Appellate Tribunal that the change was a legal change, the strike in question did not come within the ambit of section 97.
Learned counsel for the appellant has pressed two arguments before us with regard to the construction of section 97 (1) (e) of the Bombay Industrial Relations Act., 1946.
His first argument is that the High Court was in error when it held that there was any such right as a common law right of an employee to go on strike and section 97 constituted an inroad on that right.
Learned counsel has submitted that under section 97 (f) (c) a strike shall be illegal if it is commenced or continued only for the reason that the employer has not carried out the provisions of any standing order or has made an illegal change; if a strike is illegal when it is com menced or continued only for the reason that the employer has made an illegal change, a fortiori it must be illegal when it is commenced or continued for a legal change.
The contention of learned counsel is 128 946 that by necessary implication cl.
(c) condemns a strike which is commenced or continued for a change which is not illegal.
The second argument of learned counsel is that the true scope and effect of cl.
(c) is this: the word 'only ' occurring in the clause goes with the word 'reason ' and if the strike is commenced or continued for the only reason that the employer has made an illegal change, it shall be illegal.
The test is not whether there was a legal or illegal change in fact but what was the reason for which the employees went on strike, and if the employees.
commenced or continued a strike only for the reason that the employer had made an illegal change, the strike would be illegal within the express terms of the clause.
In our opinion it is unnecessary to decide in this case whether the first argument of learned counsel for the appellant is correct or not; because we are I clearly of the opinion that the second argument with regard to the construction of section 97 (1) (c) is correct and should prevail.
In this case the workmen themselves came to court with the plea that the action of the employer amounted to an illegal change.
In their application to the Labour Court, they said: "That for the above mentioned reasons it is prayed that this Honourable Court be pleased to declare the said lockout by the opponent Mills as illegal being in con travention of the Bombay Industrial Relations Act, and the opponent be ordered to withdraw the said illegal change".
It is obvious, therefore, that the workmen in this case struck work only for the reason that the change or experiment made by the appellant employer was an illegal change.
The action of the workmen, therefore, came within the express terms of section 97 (1) (c) of the Act.
The learned Chief Justice did not consider this aspect of the case, and reached a conclusion with regard to the legality of the strike on a reasoning which did not give full effect to the words used in s.97(1)(c).
In our view,the true test was to find out the reason for which the strike was commenced or continued, and it was unnecessary to consider or decide whether there was a common law right of the workmen to go on strike or whether the work 947 men had the right to go on strike as a means of collective bargaining against a change which they did not like.
Mr. Gokhale appearing for the workmen has taken us through the different provisions of the Bombay Industrial Relations Act, 1946, and has contended that the workmen have the right to go on strike as a means of collective bargaining against any measure adopted by the employer which the workmen may consider to be detrimental to their interests, provided the strike does not come within the prohibited ambit of section 97.
Even assuming that Mr. Gokhale is right in his contention, it is clear to us that if the workmen commence or continue a strike for the only reason that the employer has made an illegal change, they come within the express terms of section 97 (1) (c).
It is immaterial whether the change is subsequently found by the Labour Court to be a legal change.
It is worthy of note that there is a separate provision for imposing a penalty on an employer who makes an illegal change.
The relevant consideration, however, with regard to section 97 (1) (c) is the reason for which the strike is commenced or continued.
That reason in this particular case is clear enough.
The workmen themselves said that they commenced and continued the strike because the employer had made an illegal change.
That being the position, the strike was illegal within the express terms of section 97(1)(c) of the Act.
We are, therefore, of the opinion that, on a proper interpretation of section 97(1) (c) of the Act, the strike which was commenced and continued from September 6, to September 26, 1951, was clearly illegal.
The appeal is, accordingly, allowed and the order of the High Court dated July 2, 1953, is set aside.
The result, therefore, is that the order of the Labour Appellate Court dated September 4, 1952, stands, with the declaration that the strike in question was illegal with its usual consequences.
In this case, the appellant had agreed, while asking for a certificate from the Bombay High Court for leave to appeal to the Supreme Court, to pay the taxed costs of the respondents in one set.
Learned 948 counsel for the appellant himself has drawn our attention to the agreement.
In view of that it is not necessary for us to decide in this case whether it was open to the Bombay High Court to pass any order about costs in this Court while granting a certificate of fitness under article 133(1) (c) of the Constitution, and we direct that the appellant should pay to the respondents the costs of this appeal in one set and bear its own costs thereof.
Appeal allowed.
| IN-Abs | By section 97(1)(c) of the Bombay Industrial Relations Act, 1946: "A strike shall be illegal if it is commenced or continued only for the reason that the employer has not carried out the provisions of any standing order or has made an illegal change".
The management of the appellant Mill desiring to make a change in the existing system of working started making an experiment by asking a few workmen who had volunteered to work at the rate of four looms to a weaver for a period of two months.
The other workers objected that this was an illegal change on the ground that the management could not legally introduce any change without first going through the procedure prescribed by the Act, and went on strike.
The question was whether the strike was illegal.
Held, that as the workmen had gone on strike only for the reason that the change or experiment made by the appellant was an illegal change, their action came within the express terms of B. 97(1)(c) of the Act and the strike was illegal.
|
Civil Appeals Nos. 2014 to 2016 of 1977 Appeals by special leave from the judgment and order dated the 17th November, 1976 of the Allahabad High Court in Civil Misc.
Writ Nos. 107, 108, & 357 of 1976.
S.S. Ray, Depankar Gupta, Raja Ram Agarwal, O.P. Khaitan, N.R. Khaitan, Bharat Ji Agarwal, Mrs. Neelam Thakur and Umesh Khaitan for the Appellants.
131 S.C. Manchanda, R. Ramchandran and O.P. Rana for the Respondent.
The appellant, the Hindustan Aluminium Corporation Limited, carries on the business of manufacturing and dealing in aluminium metal and various aluminium products.
On December 1, 1973 the State of Uttar Pradesh notified under section 3 A (2) of the U.P. Sales Tax Act, 1948 that the turnover in respect of the following goods set forth in item No. 6 of the attached schedule would be liable to tax at all points of sale at 3 1/2% "6.
All kinds of minerals and ores and alloys except copper, tin, zinc, nickel or alloy of these metals only.
" On May 30, 1975 the State of Uttar Pradesh published a notification, under section 3A (2 A) of the Act, in which item No. 1 of the schedule read as follows: "1.
All kinds of minerals, ores, metals and alloys except those included in any other notification issued under the Act." and a rate of 2% was prescribed.
The notification dated December 1, 1973 was amended and item No. 6 was deleted.
On August 14, 1975 the U.P. Legislature enacted the U.P. Sales Tax (Amendment and Validation) Act, 1975 section 31 (7) of which amended the aforesaid notification of May 30, 1975 retrospectively, so that it would be deemed always to have read as follows: "1.
All kinds of minerals, ores, metals, and alloys including sheets and circles used in the manufacture of brass 132 wares and scraps containing only any of the metals, copper, tin, zinc, or nickel except those included in any other notification issued under the Act.
" On July 11, 1975 the appellant wrote to the Sales Tax Officer contending that the aluminium ingots, billets, rolled products, extrusions and other aluminium products manufactured and sold by it upto May 31, 1975 fell within item No. 6 of the notification dated December 1, 1973 and thereafter their sale was covered by item No. 1 of the notification dated May 30, 1975.
However, the Commissioner of Sales Tax, U.P. issued a circular on October 15, 1975 to all Sales Tax Officers advising that aluminium ingots only should be taxed as "metal", and in regard to other items such as rods, bars, rolled products, extrusion sections tax at the rate of 7% would be payable as on unclassified items.
On December 30, 1975, the Sales Tax Officer made provisional assessments under rule 41(3), U.P. Sales Tax Rules, 1948 for the quarters ending June 30, 1975 and September 30, 1975.
The Sales Tax Officer applied a rate of 3 1/2% under the Notification of December 1, 1973 to aluminium ingots only and treated the remaining products as unclassified items attracting sales tax at 7%.
Similarly under the Notification of May 30, 1975 a rate of 2% was applied to the turnover of aluminium ingots while the remaining products were charged to tax at 7% as unclassified items.
The appellant filed a writ petition in the Allahabad High Court against the provisional assessments.
During the pendency of the writ petition the Sales Tax Officer made a final assessment order for the assessment year 1975 76 on August 3, 1976.
The writ petition was amended in the High Court and relief was now sought against the final assessment order.
On November 17, 1976 the High Court passed judgment on the writ petition holding that while aluminium ingots, wire bars and billets would fall in the category "metals and alloys", rolled products prepared by rolling ingots and extrusions manufactured from billets must be regarded as different commercial commodities from the ingots and billets and therefore outside the category of "metals and alloys".
The rolled products included plates, coils, sheets, circles and strips.
The extrusions were manufactured in the shape of bars, rods, structurals, tubes, angles, channels and different types of sections.
In regard to properzi redraw rods, the High Court considered that a further 133 enquiry was necessary and therefore directed the Sales Tax Officer to re examine the matter.
The present appeals are directed against the part of the High Court judgment refusing relief in regard to rolled products and extrusions.
It is vehemently contended that the High Court has erred in holding that the rolled products and extrusions are new commercial commodities distinct from the aluminium ingots and billets from which they are prepared.
It is urged that they represent the marketable form merely of ingots and billets.
We have been referred to a number of documents and publications as well as the Aluminium (Control) Order, 1970, and the submission is that when reference is made to aluminium as a metal it includes rolled products and extrusion products.
We are not satisfied that the appellant is right.
There is no doubt that, as laid down by this Court in Porritts & Spencer (Asia) Ltd. vs State of Haryana, a word describing a commodity in a sales tax statute should be interpreted according to its popular sense, the sense being that in which people conversant with the subject matter with which the statute is dealing would attribute to it.
Words of everyday use must be construed not in their scientific or technical sense but as understood in common parlance.
That principle has been repeatedly reaffirmed in the decisions of this Court.
It holds good where a contest exists between the scientific and technological connotation of the word on the one hand and its understanding in common parlance on the other.
We are here concerned, however, with a very different situation.
We are concerned, with the manner in which these and similar expressions have been employed by those who framed the relevant notifications, and with the inference that can be drawn from the particular arrangement of the entries in the notifications.
We must derive the intent from a contextual scheme.
Section 3A of the U.P. Sales Tax Act empowers the State Government to prescribe, by notification, the rate, and the point at which the tax may be imposed on the sale of a commodity.
A consideration of the notifications issued from time to time will show that the expression "metal" has been generally employed to refer to the metal in its primary sense.
The reference is to the metal in the form in which it is marketable as a primary commodity.
Subsequent 134 forms evolved from the primary form and constituting distinct commodities marketable as such must be regarded as new commercial commodities.
The notification No. ST 2631/X 902 (64) 50 of November 21, 1952, for example, sets forth two clauses: (a) Copper, tin, nickel, or zinc or any alloy, containing any of these metals only, and (b) Scrap, meant for melting, and sheets including circles meant for making brass ware, and containing only any or all of the said metals, viz., copper, tin, nickel and zinc.
It is clear that while clause (a) makes specific reference to certain metals, clause (b) separately sets forth the products which emerge as a result of processing the original metal.
Clause (b) speaks of sheets, including circles meant for making brass ware, and containing only any or all of the metals specified in clause (a).
A sheet of copper only or tin only or nickel only or zinc only is regarded as belonging to a distinct entry in the notification from copper, tin, nickel or zinc in its unfabricated from.
This schematic arrangement has been followed in notification No. ST 3500/X dated May 10, 1956, notification No. 1366/X 990 1956, dated April 1, 1960 and notification No. St 9377/X 906 (AB 4) 1971 dated October 6, 1971.
In all those notifications the framers of the notifications followed the scheme that one clause dealt with the metal in its original saleable form and another separate clause dealt with fabricated forms in which it was saleable as a new commodity.
It is admitted before us on behalf of the appellant that aluminium ingots and billets are saleable commodities as such in the market.
In the circumstances the inference is irresistible that when such a notification refers to a metal, it refers to the metal in the primary or original form in which it is saleable and not to any subsequently fabricated form.
It is true that in the notification dated May 30, 1975, as amended retrospectively on August 14, 1975, the entry reads: "All kinds of minerals, ores, metals and alloys including sheets and circles used in the manufacture of brass wares and scraps containing only any of the metals, copper, tin, zinc, or nickel except those included in any other notification issued under the Act.
" But here, the expression "including" does not enlarge the meaning of the word "metal" and must be understood in a conjunctive sense, 135 as a substitute for "and".
This is the reasonable and proper construction having regard to the scheme followed in the framing of notifications.
It is urged that item No. 6 in the notification of 1973 and Item No. 1 in the notification of 1975 speak of "all kinds of minerals, ores, metals and alloys" and, it is said, the word "all" should be given its fullest amplitude so as to include even subsequently fabricated forms of the metal.
It seems to us that the construction suggested is inconsistent with the scheme to which we have referred.
While broadly a metal in its primary form and a metal in its subsequently fabricated form may be said to belong to the same genus, the distinction made between the two constitutes a dichotomy of direct significance to the controversy before us.
The question whether rolled steel sections are a different commodity from scrap iron ingots was considered by this Court in Devi Das Gopal Krishnan and Others vs The State of Punjab and Others, and this Court had no hesitation in holding that when scrap iron ingots are converted into rolled steel sections they go through a process of manufacture which brings into existence a new marketable commodity.
We are of the opinion that the same conclusion must follow when aluminium ingots and billets are converted into aluminium rolled products and extrusion products.
Learned counsel for the appellant places reliance on Tungabhadra Industries Ltd., Kurnool vs Commercial Tax Officer, Kurnool where this Court took the view that hydrogenated "groundnut oil" commonly called Vanaspati was "ground nut oil" within the meaning of rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939.
In that case, the Court was of opinion that the process of hydrogenation did not alter the essential identity of the oil, and reference was made to the broad compass of the expression "groundnut oil", besides the circumstance that the use to which the original groundnut oil could be put would also be the use to which the hydrogenated oil could be applied.
It seems to us that the case is distinguishable.
We then turn to State of Madhya Bharat (now the State of Madhya Pradesh) and Others vs Hiralal, the next case placed before us.
This Court held that scrap iron, when put through a process of re rolling to produce attractive and acceptable forms of iron and steel in the shape of 136 bars, flats and plates, must be regarded as continuing to be "iron and steel" for the purpose of the notification issued under the Madhya Bharat Sales Tax Act.
The case, however, has been distinguished by this Court in State of Tamil Nadu vs Pyare Lal Malhotra on the ground that the nature of the raw material from which the goods were made was the decisive criterion for deciding the earlier case.
It observed "The language of the notification involved there made it clear that the exemption was for the metal used.
In the cases before us now, the object of single point taxation is the commercial commodities and not the substance out of which it is made.
Each commercial commodity here becomes a separate object of taxation in a series of sales of that commercial commodity so long as it retains its identity as that commodity.
" And the Court then referred with approval to Devi Dass Gopal Krishnan (supra).
Our attention has been invited to State of Gujarat vs Shah Veljibhai Motichand, Lunawada where the Gujarat High Court held that corrugated iron sheets were merely "iron" in another shape and form and could not be regarded as articles or products manufactured or fabricated out of iron.
We have perused the three judgments delivered in that case but it seems to us that the majority opinion is of doubtful validity, specially having regard to the observations of this Court made in Pyare Lal Malthora (supra).
We are also referred to Maharaja Book Depot vs State of Gujarat.
This Court held that an exercise book is "paper" as defined in section 2(a) (vii) of the and Item 13 in Schedule I to the Gujarat Essential Articles Dealers (Regulation) Order 1971.
The Court accepted that construction on the ground that it would be in consonance with and would carry out effectively the object or purpose of the Act and the Regulation Order.
It is desirable to recall that the was enacted to control the distribution and price of essential commodities.
A sufficiently comprehensive interpretation was called for 137 in order that all products essential to the community which would reasonably fall within the scope of the definition could be covered.
Learned counsel for the appellant relies on the wide definition of the word "aluminium" in the Aluminium (Control) Order, 1970, but we must remember that the word has been given the broad definition set out there only for the purposes of that Control Order.
It cannot be pressed into service for resolving the controversy before us.
Learned counsel for the appellant also relies on the Glossary of Terms for Aluminium and Aluminium Alloys prepared by the Indian Standards Institution(1), the Glossary of Terms prepared by the British Standards Institution(2), Engineering Metallurgy(3), Non Ferrous Metals and their Alloys(4), Metal Industry: Hand Book and Directory, 1962 and allied literature.
In considering the material, it is necessary to caution ourselves that the literature is concerned with conceptions particular to the aluminium industry, while we are here concerned with the application of a sales tax statute.
Finally, it is urged that two interpretations are possible of the relevant entries in the notifications of 1973 and 1975 and therefore the interpretation favourable to the dealer should be adopted.
We are of the definite opinion that the only interpretation possible is that aluminium rolled products and extrusions are regarded as distinct commercial items from aluminium ingots and billets in the notifications issued under the U.P. Sales Tax Act.
In the result, the appeals fail and are dismissed with costs.
| IN-Abs | Pursuant to a circular issued by the Commissioner of Sales Tax that aluminium ingots only should be taxed at the lower rate and that all other items like rods, bars, rolled products, extrusion sections etc. should be taxed at higher rates as unclassified items, the Sales Tax Officer taxed aluminium ingots manufactured by the appellant at the lower rate; and treating the remaining products manufactured by them as unclassified items taxed them at the higher rate.
The High Court, dismissing the appellant 's writ petition impugning the assessment made by the Sales Tax Officer, held that while aluminium ingots, wire bars and billets would fall in the category of "metals and alloys", rolled products prepared by rolling ingots and extrusions manufactured from billets were different commercial commodities from the ingots and billets and that they fell outside the category of "metals and alloys".
The method of assessment made by the Sales Tax Officer was, therefore, upheld.
In appeal to this Court it was contended that the High Court erred in holding that the rolled products and extrusions were new commercial commodities, distinct from the aluminium ingots and billets from which they were prepared and that they represented the marketable form merely of ingots and billets.
Dismissing the appeal, ^ HELD: The expression 'metal ' has been generally employed in the relevant notifications to refer to the metal in its primary sense i.e. in the form in which it is marketable as a primary commodity.
Subsequent forms evolved from the primary form and constituting distinct commodities marketable as such must be regarded as new commercial commodities.
In all the relevant notifications, therefore, the framers followed the scheme that one clause dealt with metal in its original saleable form and another separate clause dealt with fabricated forms in which it was saleable as a new commodity.
Aluminium ingots and billets are saleable commodities as such in the market.
When such a notification refers to a metal it refers to the metal in the primary or original form in which it is saleable and not to any subsequently fabricated form.
[133 H; The word "all" occuring in "all kinds of minerals, ores, metals and alloys including sheets. " in the notification cannot be interpreted to include even subsequently fabricated forms of the metal, for such an interpretation would be inconsistent with the scheme of the notifications.
While broadly a metal in its primary form and a metal in its subsequently fabricated form may be said to belong to the same genus, the distinction made between the two constitutes a dichotomy of direct significance to the controversy in the instant case.
[135 B C] Having regard to the scheme followed in the framing of the notifications, the expression "including" does not enlarge the meaning of the word "metal".
It must be understood in a conjunctive sense, as a substitute for "and".
[134 H] Devi Dass Gopal Krishnan and Others vs The State of Punjab and Others [1967] 20 S.T.C. 430 followed.
Tungabhadra Industries Ltd., Kurnool vs Commercial Tax Officer, Kurnool [1960] 11 S.T.C. 827 and State of Madhya Bharat (now State of Madhya Pradesh) and Others.
vs Hiralal [1966] 17 S.T.C. 313 distinguished.
State of Tamil Nadu v Pyare Lal Malhotra [1976] 37 S.T.C. 319 and 325, & Maharaja Book Depot vs State of Gujarat ; referred to.
State of Gujarat vs Shah Velijibhai Motichand, Lunawada [1969] 23 S.T.C. 288 not approved.
A word describing a commodity in a sales tax statute should be interpreted according to its popular sense, the sense in which people conversant with the subject matter with which the statue is dealing would attribute to it.
Words of everyday use must be construed not in their scientific or technical sense but as understood in common parlance.
But what is relevant in the circumstances of the present case is the manner in which these and similar expressions have been employed by those who framed the relevant notifications and with the inference that can be drawn from the particular arrangement of the entries in the notifications.
The intent must be derived from a contextual scheme.
[133 D F] Porritts & Spencer (Asia) Ltd. vs State of Haryana [1978] 42 S.T.C. 433 followed.
|
Civil Appeal No. 1006 of 1971 Appeal by special leave from the judgment and order dated the 23rd September, 1970 of the Gujarat High Court in C.R.A. Nos.
1295 of 1966, 49 and 50 of 1967.
S.K. Dholakia and R.C. Bhatia for the Appellant.
M.V. Goswami for the Respondent.
The Judgment of the Court was delivered by SEN, J.
This appeal, by special leave from a judgment of the Gujarat High Court, involves the question of comparative hardship under section 13(2) of the Bombay Rent, Hotel and Lodging House Rates Control Act, 1947 for brevity 'the Act '.
First as to the facts.
The appellant plaintiff is a merchant who settled in Africa and was carrying on business in Kampala in 155 Uganda.
Due to political upheaval in that country, he along with his family migrated to India in 1964 and began living in a rented house at Rajkot, where he owns a building known as 'Trivedi House '.
On September 21, 1964 he brought a suit for eviction of the respondent defendant, Laxmishanker Tribhoyan, from the suit premises, which consists of a shop on the ground floor of the said building, on the ground that he reasonably and bona fide required the suit premises for starting his business.
The defendant denied the claim and pleaded that the plaintiff did not want to settle down at Rajkot and had already gone back to Africa and that, in any event, even if the plaintiff 's alleged need under section 13(1) (g) of the Act were proved, no decree for eviction could be passed because of comparative hardship by reason of section 13(2) of the Act.
It was alleged that the defendant was a man of slender means and had built up a good will by running his business from the suit premises over the years and he would be put to greater hardship as it would disrupt his business if he were evicted therefrom.
The court of first instance as well as the District Judge in appeal upheld the plaintiff 's claim under section 13(1) (g) of the Act and decreed the suit.
In revision, the High Court held that the finding of the courts below as to the plaintiff 's need to be reasonable and bona fide being a finding of fact could not be interfered with under section 29(2) of the Act, but non suited the plaintiff 's on the ground of comparative hardship under section 13(2) of the Act.
As regards comparative hardship, both the courts below held that the defendant was not in actual possession of the suit premises, but had inducted one Labhshanker as his licensee, who was in occupation thereof, and, therefore, question of hardship under section 13(2) of the Act did not arise.
They further held that the licensee, Labhshanker, owned a separate shop of his own from where he was carrying on his business and had taken the suit premises from the defendant for using it as a godown and, therefore, there was no question of any hardship to him as he would be put to the inconvenience of shifting his goods to his own shop.
The High Court, however, differed from the courts below and held that the defendant would be put to greater hardship.
In coming to that conclusion, the High Court observes: "Although the defendant Laxmishankar Tribhoyan was not in actual occupation of the shop, the aforesaid Labhshanker was running the business on his behalf and paying the defendant a fixed amount of maintenance because he was aged and infirm and also because he was his uncle and, therefore, if we were to confirm the decree for eviction of the courts below, the defendant would be deprived 156 of his only source of livelihood for he was dependent on Labhshanker who was running his business from the suit premises.
" As regards the plaintiff, the High Court was pleased to observe: "Now so far as the plaintiff is concerned, he has his one leg in Rajkot and another in Africa.
Therefore, there is still uncertainty of his settling down in Rajkot." In that view of the matter it held that no decree for eviction under section 13(1) (g) of the Act can be passed and accordingly reversed the decree of the courts below: Section 13(2) of the Act reads as follows: 13(2) No decree for eviction shall be passed on the ground specified in clause (g) of sub section (1) if the Court is satisfied that, having regard to all the circumstances of the case including the question whether other reasonable accommodation is available for the landlord or the tenant, great hardship would be caused by passing the decree than by refusing to pass it.
Where the Court is satisfied that no hardship would be caused either to the tenant or to the landlord by passing the decree in respect of a part of the premises, the Court shall pass the decree in respect of such part only.
It is plain upon the language of section 13(2) of the Act that it creates a further fetter on the power of the courts to pass a decree for eviction once it held in favour of the plaintiff on the issue of reasonable and bona fide requirement under section 13(1) (g) of the Act.
The words "No decree for eviction shall be passed" make it incumbent on the court not to pass a decree on the ground specified under section 13(1) (g) of the Act unless it is satisfied as to the comparative hardship caused to the landlord and the tenant by passing a decree than by refusing it.
In dealing with the question, the court is only concerned with the hardship of the landlord and the tenant and not to a complete stranger.
Under section 13(2) of the Act, if there is greater hardship to the tenant, the court should refrain from making an order for eviction under section 13(1) (g) of the Act.
On the other hand, if the making of an order of eviction under section 13(1) (g) of the Act would cause no such hardship, the court has no jurisdiction but to pass such an order.
The Legislature by enacting section 13(2) of the Act seeks to strike a just balance between the landlord and the tenant so that the order of eviction under section 13(1) (g) of the Act does not cause any hardship 157 to either side.
The considerations that weigh in striking a just balance between the landlord and the tenant were indicated in a series of decisions of the Court of Appeal, interpreting an analogous provision of the Rent and Mortgage Interest Restrictions (Amendment) Act, 1933 (c. 32), section 3(1), Sched.
I, para (h): Sims vs Wilson, Fowle vs Bell, Smith vs Penny, Chandler vs Strevett and Kelly vs Goodwin.
One of the most important factors in considering the question of greater hardship is whether other reasonable accommodation is available to the landlord or the tenant.
The court would have to put in the scale other circumstances which would tilt the balance of hardship on either side, including financial means available to them for securing alternative accommodation either by purchase or by hiring one, the nature and extent of the business or other requirement of residential accommodation, as the case may be.
It must, however, be observed that the existence of alternative accommodation on both sides is an important but not a decisive factors.
On the issue of greater hardship the English courts have uniformly laid down that the burden of proof is on the tenant.
We are inclined to the view that on the terms of section 13(2) of the Act, the decision cannot turn on mere burden of proof, but both the parties must lead evidence.
The question whether or not there would be greater hardship caused to the tenant by passing the decree must necessarily depend on facts and circumstances of each case.
Under section 29(2) of the Act as substituted by Gujarat Act 18 of 1965, although the High Court has a wider jurisdiction than the one exercisable under section 115 of the Code of Civil Procedure, 1908, its revisional jurisdiction could only be exercised for a limited purpose with a view to satisfying itself that the decision was according to law.
It cannot be said that the courts below failed to apply their mind to the requirements of section 13(2) of the Act as to comparative hardship or their finding was manifestly perverse or erroneous.
That being so, the High Court could not substitute its own finding for the one reached by the courts below on a reappraisal of the evidence.
It is indeed difficult to appreciate the line of reasoning adopted by the High Court in non suiting the plaintiff.
On the 158 admitted facts, the plaintiff is a displaced person from Africa and was carrying on business in Kampala in Uganda.
Due to political upheaval in that country, in 1964 he, along with his family, migrated to India and began living in a rented house in Rajkot.
He proved that he reasonably and bona fide required the suit premises under section 13(1) (g) of the Act.
Admittedly, he has the requisite experience and wherewithal to carry on business, as it is on record that he has been carrying on business in Kampala for over 30 years.
The mere fact that the plaintiff had gone back to Uganda for winding up his business there, is not a circumstance against him.
On the contrary, it was indicative of his intention to start his business from the suit premises.
As against this, the defendant was not in actual possession of the suit premises but had placed one Labhshanker in occupation thereof who had a separate shop of his own and using the suit premises as a godown.
Merely because the defendant who was aged and infirm and Labhshanker as his licensee and under an arrangement was paying a fixed amount to the defendant by way of maintenance did not imply that the passing of a decree under section 13(1) (g) of the Act would cause greater hardship to the defendant than to the plaintiff.
Further, the High Court failed to appreciate that perhaps old age and infirmity night have been relevant considerations in judging the issue of greater hardship under section 13(2) of the Act if the defendant were himself to carry on business from the suit premises and not where, as here, he had admittedly parted with possession in favour of a stranger.
It was clearly in error in spelling out a new case for the defendant of the so called arrangement between himself and a stranger, Labhshanker, for which there is no foundation in the pleadings and which could not in law be pleaded in answer to the plaintiff 's claim under section 13(1)(g) of the Act.
That apart, during the pendency of the appeal, the defendant Laxmishanker Tribhoyan having died, the question of greater hardship under section 13(2) of the Act does not arise.
For all these reasons, the judgment and order of the Gujarat High Court are set aside and the judgment and decree passed by the courts below decreeing the plaintiff 's suit for eviction under section 13(1) (g) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, are restored with costs throughout.
P.B.R Appeal allowed.
| IN-Abs | In his suit under section 13(1)(g) of Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 seeking the eviction of the respondent defendant from the suit premises, the plaintiff appellant claimed that after having been displaced from Uganda on account of political upheaval in that country he intended to settle down in his native town and that therefore, he reasonably and bonafide required the suit premises under the defendant 's occupation for setting up his business.
In replication the defendant claimed that he, a man of slender means, had built up his goodwill by running a business from the premises over the years and his eviction from the premises would put greater hardship on him than on the plaintiff.
In support of his case he pleaded that section 13(2) of the Act makes it incumbent on the Court to refrain from passing an order of eviction under section 13(1)(g) if it is satisfied that it causes greater hardship to the tenant than to the landlord.
The court of first instance, and in appeal the District Judge, negatived the defendant 's claim of comparative hardship to him because the defendant himself was not in actual possession of the premises but had in fact inducted another person who had his own business elsewhere in the town but used the suit premises as a mere godown.
On appeal the High Court declined to pass an order of eviction under section 13(1)(g).
It held that the defendant, who in his old age was receiving some maintenance from the licensee for the use of the premises, would be deprived of his only source of livelihood were he evicted from the premises and that secondly the fact that the plaintiff had gone back to Uganda showed that he was not sure whether to settle down in India or go back to Uganda.
Allowing the appeal.
^ HELD: Section 13(2) seeks to strike a just balance between the landlord and tenant.
In considering the question of greater hardship the Court would have to take into account the circumstances which would tilt the balance of hardship either way.
The existence of alternative accommodation on both sides is an important though not a decisive factor.
On the terms of section 13(2) 154 the question whether or not there would be greater hardship to the tenant by passing the decree cannot turn on mere burden of proof but the parties must lead evidence.
[157 A D] The High Court erred in non suiting the plaintiff.
There is enough evidence to show that he came from Uganda as a result of political upheaval in that country, that he had considerable business experience in that country and that he had the requisite wherewithal to carry on business.
In contrast the defendant was not in actual possession of the suit premises but had given possession of the premises to another person who had a separate shop of his own, who only used the premises as his godown.
The mere circumstance that the defendant was aged and infirm and that the licensee paid him some amount regularly would not imply that a decree under section 13(1)(g) would cause greater hardship to the defendant.
Section 13(2) would have been relevant had the defendant himself been in possession of the premises.
In any event the defendant having died the question of greater hardship to him under section 13(2) would not arise.
[158 A F] Although the jurisdiction exercisable by the High Court under the Act is wider than its jurisdiction under section 115 C.P.C. its revisional jurisdiction under the Act could only be exercised for the limited purpose of satisfying itself that the decision of the Courts below was according to law.
So long as the finding of the Courts below was not perverse or erroneous the High Court cannot, on a reappraisal of the evidence, substitute its own finding for the one reached by the Courts below.
[157 E F] In dealing with the question of comparative hardship the Court is only concerned with the hardship of the landlord and the tenant but not of a complete stranger.
[157 F G]
|
Civil Appeal No. 564 of 1970.
Appeal by special leave from the judgment and decree dated the 3rd April, 1969 of the Kerala High Court in S.A. No. 266 of 1968.
A.S. Nambiyar for the Appellants.
K.T. Harindra Nath, N. Sudhakaran and M.R.K. Pillai for Respondent No. 1.
The Judgment of the Court was delivered by KOSHAL, J.
This appeal by special leave is directed against the judgment dated 3rd of April, 1969 of the High Court of Kerala rendered in a Second Appeal arising from a suit for partition of immovable property.
The suit was filed in the Court of Munsiff at Parappanangadi in the year 1938.
That Court passed a preliminary decree for partition on the 18th February, 1940 and thereafter the parties took no further interest in the matter for more than two decades.
In the mean time the High Court passed an order dated December 22, 1956 redefining the territorial limits of the Courts of Munsiffs functioning in district Calicut, of which the Court of Munsiff at Parappanangadi was one.
According to that order the territory in which the property disputed in the suit was situated, came under the territorial jurisdiction of the Munsiff 's Court at Manjeri and it was in that Court that the plaintiff filed, on the 18th January, 1966 an application (I.A. No. 109 of 1966) praying that a final decree in the suit be passed.
Defendant No. 12 (who is now dead and is represented in this appeal by respondents No. 1 and Ors.) immediately took an objection that the Manjeri Court had no territorial jurisdiction to hear the application and that the matter should have been agitated in the Court of Munsiff at Parappananagadi.
The objection was overruled by the Manjeri Court which proceeded to partition the property by metes and bounds and ultimately passed a final decree in that behalf on 9th July, 1968.
An appeal was filed 185 against final decree by defendant No. 12 in the Court of District Judge before whom the objection to the jurisdiction assumed by the Manjeri Court was again taken but was repelled with the result that the final decree was confirmed.
The third round of litigation in regard to question of jurisdiction took place in the High Court wherein a learned single Judge upheld the objection and ruled that it was only the Parappanangadi Court that had the territorial jurisdiction to entertain the application praying for final decree and that the assumption of such jurisdiction by the Manjeri Court was not justified.
The objection being upheld, the final decree was set aside and there was thus no occasion for the High Court to decide the other points arising in this appeal.
We have heard learned counsel for the parties on the question of jurisdiction.
An unfortunate aspect of this litigation has been that although that question has been agitated already in three courts and has been bone of contention between that parties for more than a decade, the real provision of law which clinches it was never put forward on behalf of the appellant before us nor was adverted to by the learned District Judge or the High Court.
That provision is contained in sub section (1) of Section 21 of the Code of Civil Procedure which runs thus: "21 (1) No objection as to the place of suing shall be allowed by any Appellate or Revisional Court unless such objection was taken in the Court of first instance at the earliest possible opportunity and in all cases where issues are settled, at or before such settlement, and unless there has been a consequent failure of justice." In order that an objection to the place of suing may be entertained by an appellate or revisional court, the fulfilment of the following three conditions is essential: (1) The objection was taken in the Court of first instance.
(2) It was taken at the earliest possible opportunity and in cases where issues are settled, at or before such settlement.
(3) There has been a consequent failure of justice.
All these three conditions must co exist.
Now in the present case conditions Nos. 1 and 2 are no doubt fully satisfied; but then 186 before the two appellate Courts below could allow the objection to be taken, it was further necessary that a case of failure of justice on account of the place of suing having been wrongly selected was made out.
Not only was no attention paid to this aspect of the matter but no material exists on the record from which such failure of justice may be inferred.
We called upon learned counsel for the contesting respondents to point out to us even at this stage any reason why we should hold that a failure of justice had occurred by reason of Manjeri having been chosen as the place of suing but he was unable to put forward any.
In this view of the matter we must hold that the provisions of sub section above exracted made it imperative for the District Court and the High Court not to entertain the objection whether or not it was otherwise well founded.
We, therefore, refrain from going into the question of the correctness of finding arrived at by the High Court that the Manjeri Court had territorial jurisdiction to take cognizance of the application praying for final decree.
In the result we accept the appeal, set aside the judgment of the High Court and remand the case back to it for deciding on merits the appeal which culminated in that judgment.
As the proceedings for the final decree have been pending since 1966, we further direct that the High Court shall decide the appeal last mentioned at the earliest possible and, in any case, within three months from the receipt of the records from this Court.
The Registry shall take immediate steps to have the records despatched to the High Court.
There will be no order as to costs.
S.R. Appeal allowed.
| IN-Abs | In a suit for partition of immovable property filed in the Court of Munsiff Parappanangadi in the year 1938 that Court passed a preliminary decree for partition on the 18th February, 1940.
The parties to the suit took no further interest in the matter for more than two decades.
In the meantime according to the order of the High Court of Kerala dated December 22, 1956 refining the territorial limits of the Courts of Munsiffs functioning in district Calicut, of which the Court of Munsiff at Parappanangadi was one, the suit property came under the territorial jurisdiction of the Munsiff 's Court at Manjeri.
The plaintiff on the 18th January, 1966 filed an application praying that a final decree the suit be passed.
Defendant No. 12 immediately took an objection that the Manjeri Court had no territorial jurisdiction to hear the application and that the matter should have been agitated in the Court of Munsiff at Parappanagadi.
The objection was overruled by the Manjeri Court which proceeded to partition the property metes and bounds and ultimately passed a final decree in that behalf on 9th July, 1968.
An appeal filed against the final decree by defendant No. 12 failed, but he succeeded before learned single Judge of the Kerala High Court who ruled that it was only the Parappanangadi Court that had the territorial jurisdiction to entertain the application and the final decree was set aside.
Hence the appeal by special leave.
Allowing the appeal, the Court ^ HELD: 1:1.
In order that an objection to the place of suing may be entertained by any appellate or revisional Court, the fulfilment of the following three conditions is essential, according to the provisions contained in sub section (1) of section 21 of the Code of Civil Procedure: (i) The objection was taken in the Court of first instance; (ii) it was taken at the earliest possible opportunity and in case where issues are settled, at or before such settlement; (iii) there has been a consequent failure of justice.
[185 F G] 1:2.
In the present case conditions Nos. 1 and 2 are no doubt fully satisfied; but before the two appellate Courts below could allow the objection to be taken, it was further necessary that a case of failure of justice on account of the place suing having been wrongly selected was made out.
Since the respondents failed to point out even before this Court that a failure of justice had occurred by reason 184 of Manjeri having been chosen as the place of suing, the provisions of sub section (1) of section 21 of the Code of Civil Procedure made it imperative for the District Court and the High Court not to entertain the objection, whether or not it was otherwise well founded.
[185 H, 186 A C]
|
tition Criminal No. 1892 of 1981.
Under Article 32 of the Constitution of India Ram Jethmalani, Vineet Kumar, M. G. Karmali and Naresh K Sharma for the Petitioner.
The Judgment of the Court was delivered by BHAGWATI J.
: This is a petition for a writ of Habeas Corpus for securing the release of one Hasnain Mukhtar Hussain Lakdawala (hereinafter referred to as the detenu) who has been detained by the Government of Maharashtra under an order of detention dated 31st December 1980 made in exercise of the powers conferred under section 3(1) of the (hereinafter referred to as the COFEPOSA.
This order of detention though dated 31st December 1980 was served on the detenu on 17th January 1981 and alongwith the order of detention, a communication, also dated 31st December 1980, was served on the detenu containing the grounds of detention.
The Government of Maharashtra also served on the detenu at the same time a letter dated 7th January 1981 enclosing copies of the documents relied upon in the grounds of detention.
It appears that on 6th February 1981 the advocate of the detenu addressed a letter to the Superintendent, Bombay Central Prison where the detenu was then confined and alongwith this letter he forwarded nine copies of the representation which was to be submitted by the detenu to the Government of Maharashtra against the order of detention.
This letter was delivered by the authorities in charge of the Bombay Central Prison to the detenu on 6th February 1981, but on the same day the detenu was shifted from the Bombay Central Prison to Nasik 291 Road Central Prison and the nine copies of the representation were therefore carried by the detenu with him to the Nasik Road Central Prison and from there, the requisite number of copies of the representation duly signed by the detenu were forwarded to the Government of Maharashtra and the Chairman of the Advisory Board on 10th February 1981.
This representation was however rejected by the Government of Maharashtra by its letter dated 25th February 1981.
It appears that a copy of the representation was also sent by the detenu to the Central Government and by its letter dated 26th February 1981 the Central Government too rejected the representation.
In the meantime, the case of the detenu was referred to the Advisory Board and on 11th March 1981, the detenu was called for an oral hearing by the Advisory Board and at this meeting the detenu handed over to the Chairman and Members of the Advisory Board four copies of a further representation dated 11th March 1981 addressed by him jointly to the Chairman and the Members of the Advisory Board and the Government of Maharashtra praying that the Government of Maharashtra may be pleased to revoke the order of detention and set the detenu at liberty.
The Advisory Board considered the case of the detenu and by a letter dated 16th March 1981, the Secretary of the Advisory Board intimated to the advocate of the detenu that the Advisory Board had by its report dated 12th March 1981 advised the Government of Maharashtra that there was sufficient cause for the detention of the detenu.
The State Government thereafter in exercise of the powers conferred under clause (f) of section 8 passed an order dated 23rd March 1981 reciting the opinion given by the Advisory Board and confirming the order of the detention.
The petitioner who is the wife of the detenu thereupon preferred the present writ petition challenging the order of detention made by the Government of Maharashtra as also the continuance of the detention under the subsequent order dated 23rd March 1981.
There were several grounds urged on behalf of the petitioner in support of the petition and each one of them was seriously pressed before us by Mr. Jethmalani on behalf of the petitioner.
The first ground was that the order of detention was made by one P. V. Nayak, Secretary to Government, Revenue and Forest Department and Ex officio Secretary to Government, Home Department while the representation made by the detenu against the order of detention was considered and disposed of by the Minister of State for Home Affairs not by P. V. Nayak and hence there was no effective consideration of the representation of the detenu as required by law.
The argument on behalf of the detenu was that the representation of a 292 detenu must be considered by the same person who has passed the order of detention and since in the present case, the representation was considered by a different person, it was not a valid and proper consideration of the representation and the continuance of the detention of the detenu was therefore invalid There was also another related ground urged on behalf of the petitioner and it was that the Minister of State for Home affairs who considered the representation of the detenu was not competent to do so, both by reason of lack of authority as also in view of the fact that the case had already been dealt with by P. V. Nayak.
We do not think there is any substance in either of these two grounds.
If we look at the order of the detention, it is clear that it was not made by P. V. Nayak in his indi vidual capacity as an officer of the State Government but it was made by him as representing the State Government.
It was the State Government which made the order of detention acting through the instrumentality of P. V. Nayak, Secretary to Government who was authorised so to act for and on behalf of and in the name of the State Government under the Rules of Business.
Rule 15 of the Rules of Business of the Government of Maharashtra provided that those Rules may "to such extent as necessary be supplemented by instructions to be issued by the Governor on the advice of the Chief Minister" and in exercise of the power conferred under this Rule, the Governor of Maharashtra issued Instructions for the more convenient transaction of the business of the Government.
Clauses (4), (5) and (6) of these Instructions as they stood at the material time provided inter alia as under: 4.
Except as otherwise provided in these Instructions, cases shall ordinarily be disposed of by, or under the authority, of the Minister in charge, who may by means of standing orders give such directions as he thinks fit for the disposal of cases in the Department, Copies of such standing orders shall be sent to the Governor and the Chief Minister.
5 Each Minister shall arrange with the Secretary of the Department what matters or classes of matters are to be brought to his personal notice.
Except as otherwise provided in these instructions, cases shall be submitted by the Secretary in the Department to which the case belongs to the Minister in charge.
293 Pursuant to the instructions contained in these clauses, Shri A. R. Antulay, Chief Minister of Maharashtra and Minister incharge of the Home Department, issued a Standing order dated 18th July 1980 directing that cases under sub section (I) of section 3 of the COFEPOSA Act need not be submitted to him or to the Minister of State for the Home Department and that such cases may be allotted to and disposed of by any of the six officers mentioned there one of them being P. V. Nayak.
On the same day, another Standing order was issued by Sh.
A. R. Antulay Chief Minister of Maharashtra and Minister in charge of Home Department in pursuance of the provisions contained in Rule 6 of the Rules of Business, directing inter alia that all cases appertaining to the COFEPOSA Act and all other matters arising under the provisions of that Act may be allotted to the Minister of State for Home Affairs.
This latter Standing order provided that nothing contained in it shall affect the directions contained in the earlier Standing order issued on the same day.
It will therefore be seen that P. V. Nayak was authorised under the earlier Standing order dated 18th July 1980 to deal with and dispose of cases under sub section (I) of section 3 of the COFEPOSA and it was in exercise of the authority thus conferred upon him that P. V. Nayak acting for the State Government made the order of detention against the assessee under sub section (I) of section 3.
[t was the State Government which made the order of detention and not P. V. Nayak in his individual capacity.
The representation made by the detenu against the order of detention was also therefore required to be considered by the State Government and either it could be disposed of by P. V. Nayak acting for the State Government under the earlier Standing order dated 18th July 1980 or the Minister of State for Home could dispose it of under the later Standing order dated 18th July 1980.
Whether P. V. Nayak considered the representation and disposed it of or the Minister of State for Home did so would be immaterial, since both had authority to act for the State Government and wherever be the instrumentality, whether P. V. Nayak or the Minister of State for Home, it would be the State Government which would be considering and dealing with the representation.
The only requirement of Article 22 (5) is that the representation of the detenu must be considered by the detaining authority which in the present case is the State Government and this requirement was clearly satisfied because when the Minister of State for Home considered the representation and rejected it, he was acting for the State Government and the consideration and rejection of the representation was by the State Government.
There is no requirement express or implied in any provision of the COFEPOSA that the same person who acts for 294 the State Government in making the order of detention must also consider the representation of the detenu.
In fact, as pointed out by Chinnappa Reddy, J. in Smt.
Kavita vs State of Maharashtra(l) a Government business can never get through if the same individual has to act for the Government in every case or proceeding or transaction, however advantageous it may be to do so.
" Moreover it would really be to the advantage of the detenu if his representation is not considered by the same individual but fresh mind is brought to bear upon it.
We do not therefore see any constitutional or legal infirmity in the representation having been considered by the Minister of State for Home.
The next contention of Mr. Jethmalani on behalf of the petitioner was that there was nothing to show that the decision to confirm the order of detention and continue the detention of the detenu was taken by the State Government as required by clause (f) of section 8 and hence the continuance of the detention was invalid.
lt is really difficult to appreciate this contention urged on behalf of the petitioner.
It is clear from the annexures to the writ petition that after receipt of the opinion of the Advisory Board that there was in its opinion sufficient cause for the detention of the detenu, the State Government in exercise of the powers conferred under clause (f) of section 8, made an order dated 23rd March 1981 confirming the detention order and continuing the detention of the detenu.
This order was expressed to be made "By order and in the name of the Governor of Maharashtra" and was authenticated by the Under Secretary to the Government of Maharashtra Home Department.
It recited in so many terms that it was the State Government which was confirming the order of detention and continuing the detention of the detenu and no material has been placed before us on behalf of the detenu to displace the correctness of this recital.
There can therefore be no doubt that the ord r confirming the detention of the detenu was made by the State Government.
Moreover, we have the statement on oath made by C. V. Karnik, Assistant Secretary to the Government of Maharashtra, Home Department that "the Government of Maharashtra thereafter under clause (f) of section 8 of the said Act confirmed the said detention order by an order dated 23rd March 1981.
" lt was then contended by Mr. Jethmalani on behalf of the petitioner that under clause (b) of section 8 it as the obligation of 295 the State Government to make a reference to the Advisory Board A within five weeks from the date of detention of the detenu and there was nothing to show that the State Government had made such a reference to the Advisory Board.
This contention is also without substance and totally futile, because it is clear from the statement of C. V. Karnik in his affidavit that it was the State Government which referred the case of the detenu to the Advisory Board under clause (b) of section 8 and no material has been placed before us on behalf of the detenu controverting the correctness of this statement.
Mr. Jethmalani also raised another contention in this connection and it was that, before making a reference to the Advisory Board, the State Government had not applied its mind to the question whether it was necessary to detain the detenu for a period longer than three months and this non application of mind vitiated the reference to the Advisory Board and the subsequent order of confirmation following upon it.
The argument of Mr. Jethmalani was that it was only if the State Government decided to detain a person for a period longer than three months that it was required to refer the case of such person to the Advisory Board and it was therefore necessary for the State Government in every case of detention to apply its mind and consider at least before making a reference to the Advisory Board whether the detention was to be continued for a period longer than three months.
We are of the view that this argument is not well founded and must be rejected.
It is clear that under clause (4) of Article 22 no law providing for preventive detention can authorise the detention of a person for a period longer than three months unless the Advisory Board has reported before the expiration of the period of three months that there is in its opinion sufficient cause for such detention.
This requirement of clause (4) of Article 22 is satisfied by the enactment of section 8 iq the COFEPOSA.
Section 8 clause (b) provides that in case of every detention the appropriate Government shall, within five weeks from the date of detention, make a reference to the Advisory Board and the Advisory Board is required to make a report as to whether or not there is sufficient cause for the detention of the detenu and submit the same to the appropriate Government within eleven weeks from the date of detention of the detenu.
The period of eleven weeks from the date of detention is prescribed for the submission of the report obviously because under clause (4) of Article 22 no detention can lawfully continue for a period longer than three months unless the Advisory Board has reported before the expiration of the period of three months that there is in its opinion sufficient cause for such detention.
But one thing is clear that this provision for reference to the Advisory Board is not confined to cases where 296 the detaining authority has already come to a decision that the detention shall be continued for a period longer than three months.
It applies equally where the detaining authority has not yet made up its mind as to how long the detention shall continue or even where the detention is to continue for a period of three months or less.
Whenever any order of detention is made, whether the detention is to continue for a period longer than three months or a period of three months or less or the detaining authority has not yet applied its mind and determined how long the detention shall be continued, the appropriate Government is bound within five weeks from the date of detention to make a reference to the Advisory Board and if it fails to do so, the continuance of the detention after the expiration of the period of five weeks would be rendered invalid.
The Advisory Board is, in every such case where a reference is made, required to submit its report within eleven weeks from the date of detention and if it reports that there is in its opinion no sufficient cause for detention the detaining authority is bound to release the detenu forthwith, even though a period of three months may not have expired since the date of detention.
This is a safeguard provided by the COFEPOSA Act, which is applicable in all cases of detention, whether the detention is to be continued beyond a period of three months or not and whether or not the detaining authority has applied its mind and determined, before making a reference to the Advisory Board, as to what shall be the period of detention.
We are clearly of the view that it is not at all necessary for the detaining authority to apply its mind and consider at the time of passing the order of detention or before making a reference to the Advisory Board, as to what shall be the period of detention and whether the detention is to be continued beyond a period of three months or not.
The only inhibition on the detaining authority is that it cannot lawfully continue the detention for a period longer than three months unless the Advisory Board has, before the expiration of the period of three months, reported that three is in its opinion sufficient cause for such detention.
We must therefore hold that the State Government did not commit any breach of its constitutional or legal obligation in making a reference to the Advisory Board without first determining the period for which the detenu was to be detained.
Mr. Jethmalani on behalf of the petitioner lastly submitted that there was unreasonable delay on the part of the State Government in considering the representation of the detenu and this delay was fatal to the validity of the continuance of the detention.
This contention is also without substance and must be rejected.
It is no 297 doubt true that the advocate of the detenu sent nine copies of the representation to the detenu on 6th February, 1981 and these nine copies came to be forwarded to various authorities only on 10th February, 1981 but the affidavit of B. B. Mulay, Jailer attached to the Bombay Central Prison, shows that these nine copies were handed over by B. B. Mulay to the detenu as soon as they were received by him from the emissary of the detenu 's advocate and the detenu got B these documents on the same day, namely 6th February, 1981.
B. B. Mulay asked the detenu to sign the representation and hand over the same for being forwarded to the State Government but the detenu stated that he would sign the representation only after going through it and he therefore carried the nine copies of the representation with him to the Nasik Central Jail where he was shifted in the evening of 6th February, 1981 and it was only on 10th February, 1981 that he signed all the nine copies of the representation and handed over the same to C. P. Gaekwad, Jailer, In charge of the Nasik Central Prison and according to the affidavit of C. P. Gaekwad, these nine copies of the representation duly signed by the detenu were forwarded to the respective authorities on the same day.
There was therefore no un reasonable delay on the part of the State authorities at this stage.
Proceeding further we find that the representation sent by the detenu was received in the Home Department of the State Government on 13th February, 1981 and on the same day, a letter was addressed by the Home Department to the Collector of Customs calling for his remarks in regard to the various allegations contained in the representation and para wise comments were received from the Customs Department on 21st February, 1981.
Now, it cannot be said that the Government acted unreasonably in forwarding the representation of the detenu to the Collector of Customs and waiting for the para wise comments of the Customs Authorities, since there were various allegations made in the representation which called for the comments of the Customs Department and without such comments, the State Government could not fairly and properly consider the representation of the detenu.
It may be noted that the communication from the Home Department dated 13th February, 1981 could not have reached the Collector of Customs until 16th February, 1981 because 14th and 15th February were Saturday and Sunday and therefore closed holidays.
The reply of the Customs Authorities which was received on 21st February 1981 must have been despatched on 20th February and therefore the Customs Authorities did not have more than four or five days within which to give their comments in regard to the various allegations contained in the repre 298 sentation of the detenu and this time taken by the Customs Authorities cannot be regarded as unreasonable.
We do not think that in these circumstances the State Government could be said to be guilty of any unreasonable delay so far as the period between 13th February and 21st February, 1981 is concerned.
There was also no unreasonable delay after 21st February, 1981.
The affidavit of C. V. Karnik shows that the representation of the detenu was immediately put up before the Minister of State for Home for consideration, in the light of the comments received from the Customs Authorities and the representation was considered and rejected by the Minister of State for Home on 23rd February, 1981 and necessary intimation to that effect was conveyed to the detenu by a letter dated 25th February 1981.
It is impossible to hold in these circumstances that there was any unreasonable delay on the part of the State Government in considering the representation of the detenu and this contention of Mr. Jethmalani must be rejected.
These were all the contentions urged on behalf of the petitioner and since there is no substance in them, the petition fails and is dismissed.
section R. Petition dismissed.
| IN-Abs | One Hasnain Mukhtar Hussain Lakdawala was detained by the Government of Maharashtra by an order of detention dated 31st December, 1980 passed under section 3(1) of COFEPOSA, 1974.
The order of detention was served on the detenu on 17th January, 1981 along with a communication dated 31st December, 1980 and a letter dated 7th January, 1981 was also served enclosing copies of the documents relied upon in the grounds of detention.
A letter dated 6th February, 1981 along with nine copies of the representation to be made by the detenu sent by the detenu 's advocate to the Superintendent, Bombay Central Prison, though handed over to the detenu by the prison authorities on the same day was carried by the detenu to the Nasik Road Central Prison to which he was shifted on that day.
The requisite copies of the representation duly signed by the detenu were forwarded to the Government and the Chairman of the Advisory Board on 10th February, 1981.
The State Government, however, rejected the representation by its letter dated 25th February, 1981.
A copy of the representation sent to the Central Government was also rejected on 26th February 1981.
In the meantime, the case of the detenu was referred to the Advisory Board and on 11th March 1981, when the detenu was called for an oral hearing, the detenu handed over four copies of a further representation dated 11th March 1981, praying for revocation of the detention order.
The Advisory Board consi dered the case and by its report dated 12th March 1981 advised the State Government that there was sufficient cause for the detention of the detenu, and through its letter dated 16th March, 1981 apprised the detenu 's advocate of the position.
The State Government thereafter confirmed the order of detention.
Hence the writ petition by the detenu 's wife.
Dismissing the petition, the Court, ^ HELD: 1:1.
There was no constitutional or legal infirmity in the representation of the detenu having been considered by the Minister of State for Home.
[294 B] 1:2.
The only requirement of Article 22(5) of the Constitution is that the representation of detenu must be considered by the detaining authority which in 289 the present case was the State Government and this requirement was clearly satisfied, because when the Minister of State for Home considered the representation and rejected it, he was acting for the State Government and the consideration and rejection of the representation was by the State Government.
[293 G] 1:3.
There is no requirement express or implied in any provision of COFEPOSA that the same person who acts for the State Government in making the order of detention must also consider the representation of detenu.
More over, it would really be to the advantage of the detenu, if his representation is not considered by the same individual but fresh mind is brought to bear upon it.
[293 H 294 B] In view of the clear provisions of Rule IS of the Rules of Business of the Government of Maharashtra, clauses 4 to 6 of the Instructions issued by the Governor thereunder and the two standing orders dated 18th July 1980 it was immaterial, whether P.V. Nayak considered the representation and disposed it of, or the Minister of State for Home did so, since both had authority to act for the State Government and whatever be the instrumentality, it would be the State Government which would be considering and dealing with the representation [292 D H; 293 F] Smt.
Kavita vs State of Maharashtra, [1982] I S.C.R. 138, followed.
The State Government did not commit any breach of its constitutional or legal obligation in making a reference to the Advisory Board without first determining the period for which the detenu was to be detained.
[296 G] 2:2.
It is not at all necessary for the detaining authority to apply its mind and consider at the time of passing the order of detention or before making a reference to the Advisory Board, as to what shall be the period of detention and whether the detention is to be continued beyond a period of three months or not.
The only inhibition on the detaining authority is that it cannot lawfully continue the detention for a period longer than three months unless the Advisory Board has, before the expiration of the period of three months, reported that there is in its opinion sufficient cause for such detention.
[296 E F] 2:3.
The requirement of clause (4) of Article 22 of the Constitution is satisfied by the enactment of section 8(b) of the COFEPOSA.
This provision for reference to the Advisory Board is not confined to cases where the detaining authority has already come to a decision that the detention shall be continued for a period longer than three months.
It applies equally where the detaining authority has not yet made up its mind as to how long the detention shall continue or even where the detention is to continue for a period of three months or less.
Whenever any order of detention is made, whether the detention is to continue for a period longer than three months or a period of three months or less or the detaining authority has not yet applied its mind and determined how long the detention shall be continued, the appropriate Government is bound within five weeks from the date of detention to make a reference to the Advisory Board and if it fails to do so, the continuance of the detention after the expiration of the period of five weeks should be rendered invalid.
The Advisory Board is, in every such case where a reference is made, required to submit its report 290 within eleven weeks from the date of detention and if it reports that there is in its opinion no sufficient cause for detention, the detaining authority is bound to release the detenu forthwith, even though a period of three months may not have expired since the date of detention.
This is a safeguard provided by the COFEPOSA, which is applicable in all cases of detention, whether the detention is to be continued beyond a period of three months or not and whether or not the detaining authority has applied its mind and determined, before making a reference to the Advisory Board, as to what shall be the period of detention.
[295 F 296 E] 3.
The State Government, in the instant case, cannot be said to be guilty of any unreasonable delay, at any stage, in considering the representation of the detenu.
[297D, 299 B, D]
|
Civil Appeal No. 1932 of 1970.
Appeal by special leave from the judgment and decree dated the 31st December, 1969, of the Madras High Court in Second Appeal No. 348 of 1966, M. Natesan, Mrs. Janaki Ramachandran and K. Kumar for the Appellants.
Vepa P. Sarathy, Gopal Subramanian and Mrs. section Gopalakrishnan, for the Respondents.
The Judgment of the Court was delivered by BAHARUL ISLAM, J.
This appeal by special leave is by the plaintiffs.
The material facts of the case are that the suit land belonged to one Venkataramabhadra Naidu, a Zamindar (hereinafter 'Naidu '), who donated it to Bhoodan Yagna on August 18, 1953 by executing documents, Exs.
B 1 and B 2, which were unregistered deeds.
Later in 1958, in Madras Bhoodan Yagna Act, 1958 (hereinafter 'The Bhoodan Act ') came into force.
The Madras Bhoodan Yagna Board constituted under section 3 of the Bhoodan Act and functioning under the Act allotted the suit land to the defendants who claimed to have been in possession of the land since before the donation.
On August 3, 1960, Naidu sold the suit land to the plaintiff by a registered sale deed for a sum of Rs. 2000.
The plaintiffs alleged that they were in possession of the suit land but as the defendants were interfering in their possession, they filed the suit for declaration of their title to, and possession of, the suit land.
176 The plaintiffs ' case was that as the donation of the land by Naidu was not by any registered deed, no title passed to the Bhoodan Board and subsequently to its allottees, namely, the defendants and that Naidu validly transferred title to them.
The defendants ' case, inter alia, was that the land vested in the Bhoodan Board under the provisions of the Bhoodan Act, and Naidu had no saleable interest thereto which he could transfer to the plaintiffs by the sale deed.
The Trial Court decreed the plaintiffs ' suit.
The decree was upheld by the First Appellate Court on appeal by the defendants.
Both the courts held that the donation of the suit and by Naidu was not in conformity with Section 17 of the Registration Act and Section 12 of the Transfer of Property Act and as such title to the suit land did not pass from Naidu to the Bhoodan Board.
The defendants preferred a second appeal before the High Court.
The High Court reversed the decree of the courts below and dismissed the plaintiffs ' suit.
It has to be mentioned that the First Appellate Court passed its decree on October 1, 1962 while the High Court passed its impugned decree on 31st December, 1969; while in the meantime, in 1964, the Madras Bhoodan Yagna Act of 1958 was amended by the Madras Bhoodan Yagna (Amendment) Act, 1964 (hereinafter 'the Bhoodan (Amendment) Act ').
Learned counsel for the appellants submits that the donation of the suit land by Naidu to the Bhoodan Board was before the passing of the Bhoodan Act of 1958 and the Bhoodan (Amendment) Act of 1964; as such the provisions of these two Acts could not save the donation of the suit land by Naidu to Bhoodan Board from the operation of the relevant provisions of the Transfer of Property Act and the Indian Registration Act.
In other words, the submission is that the donation was invalid for want of a registered deed.
It may be mentioned that counsel of the appellants has not challenged the validity or vires of the provisions of the Bhoodan Act or Bhoodan (Amendment) Act.
His submission is that the above provisions do not have retrospective effect.
The object of the Bhoodan Act is, as it appears from the preamble, "to facilitate the donation of lands for the Bhoodan Yagna 177 initiated by Shri Acharya Vinobha Bhave and the transfer and settlement of such lands for the benefit of landless poor persons or for community purposes and to provide in Gramdan Villages for the vesting of lands in, and the management of those lands by the Sarvodaya Panchayat in the State of Madras." 'Bhoodan Yagna ' has been defined under clause (a) of section 2 as meaning "the movement initiated by Shri Acharya Vinobha Bhave for the acquisition of lands through voluntary gifts for distribution to landless poor persons, cooperative societies or Sarvodaya Panchayats or for community purposes.
" It is why, therefore; it appears, the donations of land to Bhoodan Yagna were exempted from the operation of the Indian Registration Act and the Transfer of Property Act, as it will, presently appear.
I shall first refer to the relevant provisions of the original Bhoodan Act (of 1958) and examine the position of the law that was before the amendment of 1964.
Section 3 of the Bhoodan Act provided for the establishment and incorporation of a Board to be called "The Madras State Bhoodan Yagna Board" (herein after the 'Bhoodan Board ').
Section 11 of the Bhoodan Act provided, "All lands donated for the purposes of the Bhoodan Yagna whether before (emphasis added) or after the commencement of this Act shall, subject to the provisions of section 16, 17 and 20, vest in the State Board".
Section 11 clearly shows that the intention of the Legislature was to bring in to the purview of the Bhoodan Act lands donated by any person before the commencement of the Bhoodan Act.
Clause (a) of sub section (1) of Section 16 which is material is in the following terms: "16(1) Notwithstanding anything to the contrary contained in any other law for the time being in force, (a) any owner may, by declaration made in the prescribed manner, donate his land for the Bhoodan Yagna.
Provided that . . . .
Provided further that . .
Sub section (3) to Section 16 reads: 178 "Every declaration made under sub section (1) shall be filed with the Tahsildar or the Deputy Tahsildar in independent charge having jurisdiction in the taluk or sub taluk where the land is situate." Sub section (1) of Section 17 provided "Every declaration filed under sub section (3) of section 16 shall, as soon as may be, be published in the Fort St. George Gazette and in such other manner as may be prescribed." Any person whose interest were affected by the declaration of the donation might file objections before the Tahsildar or Deputy Tahsildar under sub section (2).
Under sub section (3), the Tahsildar or the Deputy Tahsildar had to register every such objection, fix a date of hearing and give notice of the date of hearing to the donor, and the objector, the Bhoodan Board and the Local Committee concerned, and then under sub section (4), had to investigate and dispose of the objection, and by an order confirm the declaration or declare it null and void.
Sub sections (5) and (6) which are important were in the following terms: "Sub section (5) If the Tahsildar or the Deputy Tahsildar confirms the declaration, then, notwithstanding anything contained in any other law for the time being in force, all the right, title and interest of the donor in such land shall stand transferred to and vest in the State Board for the purchases of the Bhoodan Yagna (emphasis added).
Sub section (6) Every order under sub section (5) confirming a declaration shall be published in the Fort St. George Gazette and on such publication, the donation of land shall, subject to the provisions of section 23, be irrevocable.
" Sub section (5) in clear terms lays down that on the confirmation of the declaration of the donation, notwithstanding the provisions of 'any other law ', (to wit the Transfer of Property Act and the Indian Registration Act in this case) right, title and interest in the land "shall stand transferred to and vest in" the Bhoodan Board.
And after publication of the order of confirmation of the donation, it can be challenged only by a suit contemplated by Section 23.
179 Sub section (1) of section 20 provided that "The State Board shall prepare a list of all lands donated for purposes of Bhoodan Yagna prior to (emphasis added) the commencement of this Act" showing the area, description and other particulars of the land, the name and address of the donor and allied matters.
Sub section (1) to section 20 also shows that the Bhoodan Act was intended to include the donations made prior to the commencement of this Act.
Sub section (2) provides for publication of the list prepared under sub section (1) in the Fort St. George Gazette.
The proviso added after sub section (3) of section 20, and sub section (4) of section 20 are important and need be extracted.
They are as follows: "Sub section (3). . .
Provided that where an order is made by the Inquiry Officer under sub section (4) of section 17 confirming the donation, such donation shall be deemed to have been accepted with effect from the date on which the donation was made and for this purpose, this Act shall be deemed to have been in force on such date.
Sub section (4) Where such land has been granted to any person it shall, with effect from the date of grant, be deemed further to have been granted to the grantee under and in accordance with the provisions of Section 19." These two are deeming provisions and are a complete answer to the appellants ' contention.
The meaning of the proviso is that although the Bhoodan Act was not in existence at the time a donation was made its acceptance by the Tahsildar or Deputy Tahsildar later on after the commencement of the Act, (as in the case in hand), by virtue of the deeming provision, the Act shall be deemed to be in existence on the date of the donation.
Sub section (4) had made a similar deeming provision for the grant made in favour of a grantee before the coming into force of the Bhoodan Act.
Section 24 reads: "Notwithstanding anything contained in any other law, every declaration and every grant of land made or deemed to have been made under this Act shall be and be deemed always to have been exempt from the payment of stamp duty and of encumbrance certificate fee, registration fee or of the fee payable for the attestation of a power of attorney under section 33, sub section 180 (2), of the Indian (Central Act XVI of 1908)." (emphasis added).
The provision of this section also shows that donations and grants under the Bhoodan Act were exempted from the provisions of the Transfer of Property Act and the Indian with retrospective effect.
The above considerations leave no doubt at all that the provisions of the Bhoodan Act had retrospective effect and intended to include donations of land by any person to the Bhoodan Yagna made before the commencement of the Bhoodan Act, and such donations were also exempted from the relevant provisions of the Transfer of Property Act and the Indian with retrospective effect.
Section 23 made the order of Tahsildar or Deputy Tahsildar under sub section (4) of Section 17, final and not subject to appeal or revision.
An aggrieved party however was not without remedy.
Under the proviso of section 23, any person whose interest was affected as a result of the donation to the Bhoodan Yagna, whether before or after the commencement of the Act, might file a suit to set aside the order of the Tahsildar or the Deputy Tahsildar.
The plaintiffs in the present suit (appellants before us) filed no such suit.
Let us now turn to the relevant provisions of the Bhoodan (Amendment) Act of 1964.
There was no material amendment to section 16 of the original Act.
Only "The State Board" was substituted for "Tahsildar or Deputy Tahsildar".
There was also no material amendment to Section 17.
"Tahsildar or Deputy Tahsildar" was replaced by 'Inquiry Officer '.
Only with the substitution of 'Inquiry Officer ' for 'Tahsildar or Deputy Tahsildar ', section 20 and section 23 have been retained.
Section 24 as amended is as follows: "Notwithstanding anything contained in any other law, every declaration and every grant of land made or deemed to have been made under this Act shall be and be deemed always to have been exempt from registration and payment of stamp duty and of encumbrance certificate fee.
" A comparison of the new section 24 with the old section 24 shows that there has been no change in the law so far as registration and stamp duty were concerned.
181 10.
Section 11 of the Bhoodan (Amendment) Act of 1964 is new and very important.
Clauses (b) and (c) which are material for our purpose need be extracted: "Section 11 Notwithstanding anything contained in any judgment, decree or order of any Court, no donation of any land for the Bhoodan Yagna or for Gramdan and no grant of any such land made or deemed to have been made under the principal Act as in force immediately before the commencement of this Act, shall be deemed to be invalid on the ground only that the donation or the grant of land as aforesaid was not made in accordance with any law relating to transfer of property or registration, and any such donation or grant of land shall, for all purposes, be deemed to be and to have always been validly made and accordingly (a) . . (b) no suit or other proceeding shall be maintained or continued in any Court for the declaration of title to, or the recovery of possession of, any land donated for the Bhoodan Yagna or for Gramdan on the ground that the donation was not made in accordance with the law relating to transfer of property or registration; (c) no Court shall enforce any decree or order declaring any donation of land for the Bhoodan Yagna or for Gramdan to be invalid or directing the recovery of possession of any such land by the person who donated it or any other person claiming under him, on ground referred to in clause (b): Provided that. . .
Provided further that. . .
Provided also that. . . . Explanation. . . . . " Clause (b) of section 11 of the Bhoodan (Amendment) Act puts a bar on the maintenance of a suit or other proceedings in any Court for the declaration of title to, or recovery of possession of, any land donated for the Bhoodan Yagna on the ground that the transfer (donation) was not in accordance with the provisions of the 182 Transfer of Property Act or Indian .
Clause (c) to section 11 goes one step further and lays down that even if a decree has already been passed in such a suit, no court shall execute a decree in a suit referred to in clause (b).
It is thus seen that the law both under the old and the new Acts so far as the operation of the provisions of the Transfer of Property Act and the is concerned, is the same.
The law ingrained in section 11 is merely declaratory in express terms of the already existing law under the Bhoodan Act of 1958.
The second appeal that was pending before the High Court fell within the mischief of clause (b) of section 11.
Even if there had been no appeal by the defendants, the execution of the decree passed by the First Appellate Court could have been successfully objected to by the defendant or any other person as void on the ground that the suit itself was barred under section 23 of the old Act itself.
This appeal has no merit and is dismissed with costs.
N.K.A. Appeal dismissed.
| IN-Abs | The suit land belonged to one Naidu who donated it to Bhoodan Yagna in 1953 through unregistered deeds.
Later the Madras Bhoodan Yagna Act 1958 came into force and this Act of 1958 was further amended by Bhoodan (Amendment) Act 1964.
The said land was allotted to the respondents under the Act who claimed to have been in possession of the land since before the donation.
Naidu sold the suit lands to the appellants by a registered sale deed.
The appellants filed the suit for declaration of their title to, and possession of, the said land and pleaded that (i) as the donation of the land by Naidu was not by any registered deed, no title could be passed to the Bhoodan Board and subsequently to the respondents and (ii) Naidu validly transferred title of the lands to them.
The respondents pleaded that (i) the land vested in the Bhoodan Board under the Bhoodan Act and (ii) Naidu had no saleable interest thereto which he could transfer to the appellants by the deed of sale.
The trial court decreed the appellant 's suit which was upheld by the first appellate court.
The respondents preferred second appeal before the High Court which reversed the decree of the courts below and dismissed the plaintiff 's suit.
On appeal, it was argued by the appellants that the donation was invalid for want of registered deed and the provisions of the Bhoodan (Amendment) Act do not have retrospective effect.
Dismissing the appeal, ^ HELD: 1.
The object of the Bhoodan Yagna Act is "to facilitate the donation of lands for the Bhoodan Yagna initiated by Shri Acharya Vinoba Bhave and the transfer and settlement of such land for the benefit of poor landless persons or for community purposes and to provide in Gramdan villages for the vesting of lands in, and the management of those lands by the Sarvodaya Panchayat in the State of Madras." [176 H, 177 A B] 2.
Section 11 clearly shows that intention of the Legislature was to bring in to the purview of the Bhoodan Act lands donated by any person before the commencement of the Bhoodan Act.
The law ingrained in section 11 is merely declaratory in express terms of the already existing law under the Bhoodan Act of 1958.
[177 E F, 182 B] 175 3.
Clause (b) of section 11 of the Bhoodan (Amendment) Act puts a bar on the maintenance of a suit or other proceedings in any Court for the declaration of title to, or recovery of possession of, any land donated for the Bhoodan Yagna on the ground that the transfer (donation) was not in accordance with the provisions of the Transfer of Property Act or Indian Registration Act.
Clause (c) to section 11 goes one step further and lays down that even if a decree has already been passed in such a suit, no court shall execute a decree in a suit referred to in clause (b).
[181 G H, 182 A B] 4.
Section 24 of the Act leaves no doubt that the provisions of the Bhoodan Act had retrospective effect and intended to include donations of land by any person to the Bhoodan Yagna made before the commencement of the Bhoodan Act, and such donations were also exempted from the relevant provisions of the Transfer of Property Act and the Indian Registration Act with retrospective effective.
[180 B C]
|
ivil Appeal No. 1558 (L) of 1978.
Appeal by special leave from the Award dated the 4th August, 1977 of the Industrial Tribunal Maharashtra, Bombay in Reference (IT) No. 248 of 1975 published in M.O.G. Part I (L) dated 3rd November, 1977.
C.L. Dudhia, K.L. Hathi and Mrs. Hemantika Wahi, for the Appellant.
G.B. Pai, Manik A. Gagrat, G. Subramaniam, S.S. Shroff, D.P. Mohanty and T.R. Das, for the Respondents.
This appeal by special leave is directed against the award of the Industrial Tribunal Maharashtra, Bombay, dated September 22, 1977, in Reference (I.T.) No. 248 of 1975 in the industrial dispute between the respondent and the workmen employed by it and published in Maharashtra Government Gazette on November 3, 1977.
Though the demands made by the workers ' Union and the adjudication thereon by the Tribunal related to items like wage scale, dearness allowance, extra show allowance, gratuity, service conditions of non permanent staff and retrospectivity, while granting special leave this Court confined the appeal to three points, namely, (i) retrospectivity of the award, (ii) linkage of dearness allowance to some rational principle and (iii) construction of section 4 (5) of the , and leave was expressly refused in regard to the other grounds mentioned in the special leave petition.
We, therefore, proceed to deal with the aforesaid three points on which arguments were advanced before us by counsel on either side.
It may be stated that prior to the impugned award the wages and gratuity of the workers were governed by the earlier award in Reference No. 1 of 1968 published on 3.7.1969 which was effective from 1.1.1967 while dearness allowance was governed by the award in Reference No. 440 of 1970 effective from 1.1.1970 Both these 167 awards were duly terminated by notice and fresh demands for revision of wage scales, dearness allowance, etc.
effective from 1.1.1974 were submitted by the Union to the Management on 15.4.1974.
The Reference to the Tribunal was made on 10.7.1975 and by the impugned award the Tribunal granted the revision in wage scales and dearness allowance with effect from 1.1.1977.
Counsel for the appellant Union contended that the Tribunal erred in not granting the revision with effect from 1.1.1974 as demanded and at any rate the same should have been granted from 10.7.1975 being the date of Reference, especially when the Tribunal found the financial capacity of the respondent very sound and admittedly there had been a steep rise in the cost of living index.
He pointed out that the Tribunal while refusing to grant retrospective effect had erroneously observed that there will be "too much financial burden on the company" as, according to him, such additional burden could not have been more than Rs. 1,00,000/ or Rs. 1,20,000/ a year during the three years 1974, 1975 and 1976.
In support of his contention counsel referred to three decisions of this Court, namely, Wenger and Co. and others vs Their Workmen, Bengal Chemical and Pharmaceutical Works, Ltd. vs Its Workmen and another and Hydro (Engineers) (Pvt.) Ltd. vs Their workman.
It is difficult to accept this contention and interfere with the discretion exercised by the Tribunal in the matter which can be done only if it is shown to have been unreasonably exercised.
Under section 17A(4) of the it is a matter of discretion for the Tribunal to decide having regard to the circumstances of each case from which date its award should come into operation and no general rule can be laid down as to the date from which the Tribunal should bring its award into force and this Court shall not interfere with the Tribunal 's order in that behalf unless substantial ground is made out showing unreasonable exercise on its part.
Even the three decisions cited by the counsel clearly brings out the aforesaid position in law.
The Tribunal was deciding the Reference in August 1977 and though the additional burden may not have been more than Rs. 1,00,000/ or Rs. 1,20,000/ per year for the three years 1974, 1975 and 1976 if retrospective effect was given to the revision, no material was placed before the Tribunal by either party as to whether the profits earned by the Company for the said three years had been disbursed or were still available with the company at 168 the time of making the award a factor relevant on the question of granting retrospectivity.
Even before us no light could be thrown on the point by counsel on either side.
Further there was on record a statement showing the financial position of the company for the years 1968 to 1975 (year ending being 31st August) produced by the appellant Union itself at exhibit U5 which clearly showed that the profits of the company before taxation and depreciation had dwindled consistently for the years 1973, 74 and 75, such profits for each of the said three years being Rs. 6,80,912/ , Rs. 6,51,181/ and Rs. 5,70,884/ .
Presumably it was in view of such decreasing trend in the profits made by the company during the three years that the Tribunal felt that it would be proper to give the revision in wage scales and dearness allowance only from 1.1.1977 onwards and not to give any retrospective effect.
It cannot be said that the discretion has been unreasonably exercised by the Tribunal.
Coming to the second point of linkage of dearness allowance with some rational principle the Union 's contention before the Tribunal was, and the same contention has been reiterated by the counsel for the Union in the appeal that the dearness allowance should be linked with the cost of living index and Consumers ' Price Index Number.
It was pointed out that the Bombay Working Class Consumers ' Price Index was 800 in 1970 (when the earlier award in the matter of D.A. was given), that it had gone upto 1372 in 1977 and that, therefore, dearness allowance on Index No. 999 1,000 should be fixed on 4 weekly basis with a variation for every ten points rise or fall.
But the Tribunal negatived the contention and fixed the dearness allowance on the normal principle of industry cum region and only reason for not linking it to the cost of living index was that such linkage did not obtain in any concern falling in the category of Cinema Exhibiting Industry which could not be compared with manufacturing industries like textile where such linkage operated.
Counsel for the appellant Union pointed out that the same adjudicator (Shri B.B. Tambe) as Sole Arbitrator in Reference (VA) No. 1 of 1979 in the industrial dispute between M/s Alankar Theatre and 38 other theatres of Bombay (cinemas falling in classes A 1, A, B and C) and the workmen employed under them had made an award on June 27, 1980 (published in Maharashtra Government Gazette on October 9, 1980) wherein dearness allowance has been linked with the rise in the cost of living index and the Consumers ' Price Index Number.
The result has been that in Cinema Exhibiting Industry all the other 39 theatres will be paying to their workers dearness allowance linked with the cost of living index while 169 in the case of workmen of Metro Theatre these will be no such linkage which would be contrary to normal uniformity which is always desirable in one and the same industry.
We find considerable force in this contention urged by counsel for the appellant Union.
On the other hand, counsel for the Company pointed out that the aforesaid award of Shri Tambe in Reference(VA)No.
1 of 1979 dated June 27, 1980 is under challenge before the Bombay High Court in Writ Petition No. 79 of 1981 at the instance of the management and as such the question whether dearness allowance in the Cinema Exhibiting Industry should be linked with the cost of living index is still pending consideration before the High Court.
Moreover, he urged that there are certain peculiar features of the Cinema Exhibiting Industry by reason of which it would be inappropriate to link the dearness allowance payable to worker in that industry with the cost of living index.
For instance, he pointed out, that unlike manufacturing concerns.
there is little scope for enhancing the profits in Cinema Exhibiting Industry inasmuch as the principal source of income being box office collection the same is connected with and limited by the seating accommodation in any theatre.
However, notwithstanding this limiting factor the same adjudicator has granted the linkage in case of 39 cinema houses in Bombay which shows that other factors must have weighed with him as outweighing this limiting factor.
We are clearly of the opinion that uniformity on this aspect is highly desirable in one and the same industry.
The main reason for the refusal to grant such linkage (i.e. linking the D A. with the cost of living index) having disappeared the question will have to be considered afresh.
We do not think that adequate and sufficient material is available on the record of this case before us to decide this issue satisfactorily.
Further it would not be advisable to direct the parties before us to intervene in the matter pending before the High Court, for, material which may be peculiar to Metro Cinema may have to be produced and considered before the issue is properly decided.
We, therefore, remand this issue back to the Industrial Tribunal for disposal in accordance with law with a direction that the Tribunal should give opportunity to both the parties to produce additional material and after hearing them should decide the same afresh.
It will be open to the management to raise all contentions including the contention that dearness allowance should not be linked with cost of living index but should be granted on normal principle of industry cum region formula.
We wish to make it clear that in case the issue is answered by the Tribunal in favour of the company, the appellant Union shall not raise any contentions on the quantum of dearness allowance that has been 170 allowed by the Tribunal in its award on the basis of industry cum region formula, for the quantum aspect of the revision has become final by reason of the limited leave that was granted by this Court while admitting the appeal.
We shall next deal with the last question pertaining to the construction of section 4(5) of the .
The question of construction arises this way.
It appears that existing scheme of gratuity in the Metro Theatre Bombay was as per the award in Reference (IT No. 1 of 1968 and the same had been modified by an agreement between the parties in this Court, which, the Union contended, had become extremely inadequate and desired to have a more beneficial scheme in some respect for its workers.
Counsel for the Union urged that it was open to the Tribunal to give more benefits than were available under the scheme contemplated by the Act and in that behalf reliance was placed on section 4(5) of the Act.
Counsel for the Company contended the expression 'award ' in section 4(5) meant an existing award and as such if under the existing award better terms were given to the employees these will not be affected.
It was also urged that the Act was exhaustive and was intended to ensure uniform payment of gratuity to the employees throughout the country.
The Tribunal accepted the contention of the Management and held that it could not go beyond the scheme contemplated by the Act, and, therefore directed that the gratuity scheme as per the Act shall prevail subject to the modifications arrived at under the terms of settlement, if any, if they were more beneficial.
Counsel for the appellant Union urged before us that no standardisation of any gratuity scheme was contemplated by the Act as was clear from the express provisions contained in section 4(5) and section 5 of the Act and that enactment being a beneficial piece of legislation section 4(5) should be construed in favour of the employees and that, therefore, the Tribunal 's view that it could not grant anything beyond the scheme contemplated by the Act was erroneous.
In support of such construction reliance was placed upon this Court 's decision in Alembic Caemical Works Company Ltd. vs Its Workmen where a similar provision under the Factories Act was construed as conferring power on the Tribunal to fix the quantum 171 of leave on a scale more liberal than the one provided by the Act.
We find considerable force in this submission.
Section 4(1) of the Act provides that the gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years (a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death or disablement due to accident or disease; sub section
(2) provides that for every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days ' wages based on the wages last drawn by the employee and sub section
(3) provides that the amount of gratuity payable to an employee shall not exceed 20 months ' wages.
This is the main scheme of gratuity contemplated by the Act.
Then comes sub section
(5) which runs thus: "5.
Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.
" The question for consideration is whether expression 'award ' occurring in the above provision means an existing award or would include any award whatsoever to be made by an adjudicator under the .
In the first place there is nothing in the provision which limits the expression 'award '.
Secondly, it cannot be and was not that under the above provision a gratuity scheme obtaining under an existing agreement or contract could be improved upon by a fresh agreement or fresh contract between the employer and the employee and if that be so there is no reason why the expression 'award ' should be construed as referring to an 'existing award ' and not to include a fresh award that may be made by an adjudicator or an Industrial Court improving in favour of the employees the scheme obtaining under the Act or the existing award.
Thirdly, the very fact that under the above provision better terms of gratuity could be obtained by employee by an agreement or contract with the employer notwithstanding the scheme of gratuity obtaining under the Act clearly suggests that no standardisation of the gratuity scheme contemplated by the Act was intended by the Legislature.
This also becomes amply clear from the provisions of section 5 which confer power upon the appropriate Government to exempt establishment to which the Act applies from operation of the provisions of the Act if in its opinion the employees in such establishment, are in receipt of gratuity benefits not less favourable than benefits confer 172 red under the Act.
Therefore, on true construction we are clearly of the view that the expression 'award ' occurring in the above provisions does not mean and cannot be confined to 'existing award ' but includes any award that would be made by an adjudicator wherein better terms of gratuity could be granted to the employees if the facts and circumstances warrant such grant.
It is true, as has been observed, by this Court in State of Punjab vs Labour Court Jullundur and Ors.
that the Act enacts a complete Code containing detailed provisions covering all essential features of the scheme for payment of gratuity.
But it is also clear that the scheme envisaged by the enactment secures the minimum for the employees in that behalf and express provisions are found in the Act under which better terms of gratuity if already existing are not merely preserved but better terms could be conferred on the employee in future.
In other words, the view taken by the Tribunal that it could not go beyond the scheme of gratuity contemplated by the Act is clearly erroneous.
The decision of this Court in Alembic Chemical Works Limited (supra), which was under the Factories Act, also lends support to such beneficent construction.
In that case the Industrial Tribunal had fixed the quantum of leave, privilege and sick, for the staff of a manufacturing concern on a scale more liberal than the one in force for the operatives of the same concern.
In also made necessary direction regarding accumulation of such leave.
The quantum of leave so fixed by the Tribunal was larger than the quantum of leave prescribed under the provisions of section 79(1) of the Factories Act.
It was contended that section 79 of the Act was exhaustive and had self contained provisions with regard to the granting of annual leave with wages to the employees, that it had the effect of introducing standardisation in the matter of leave and that no addition to the said leave could be made either by a contract or by an award.
This Court negatived the said contention on the language of section 79(1) itself.
Additionally, provisions of section 78 were relied upon which recognised exemptions to the leave prescribed by section 79(1).
Section 78(1) provided that provisions of Chapter VIII including section 79(1) shall not operate to the prejudice of any right to which a worker may be entitled "under any other law or under the terms of any award, agreement or contract of service", and a proviso to this sub section laid down that when such award, agreement or contract of service provided for longer annual leave with wages than provided under the 173 Chapter, the worker shall be entitled only to such longer annual leave.
It was contended that the expression "any award" in section 78(1) applied only to existing award.
The Court negatived this contention and held that the contention was plainly inconsistent with a fair and reasonable construction of the said provision and that section 78(1) protected not merely awards, agreements or contracts of service then existing but also those that would come into existence later.
In the instant case also we are clearly of the opinion that the phrase "under any award, agreement or contract with the employer" occurring in section 4(5) is intended to cover future awards, agreements or contracts with the employer since existing better terms of gratuity are intended to be protected by issuance of a notification under section 5 of the Act.
We may also state here that in the other adjudication done by the same adjudicator (Shri B.B. Tambe) as the Sole Arbitrator in Reference (VA) No. 1 of 1979 (M/s. Alankar Theatre and 38 other theatres vs The workmen employed under them) he has come to a contrary conclusion and has held that under section 4(5) of the payment of Gratuity Act an adjudicator can grant better terms of gratuity and has actually proceeded to grant better terms of gratuity to the workmen employed in all the theatres concerned in that Reference.
(Vide para 140 of the Award).
Realising this position, counsel for the company before us fairly conceded that the employees in the Metro Cinema would also be entitled to better terms of gratuity the same as given to employees in other cinema Houses.
Counsel for the parties, therefore, agreed before us that gratuity scheme as set out by Shri Tambe in para 140 of his award dt.
27 6 1980 in Reference (VA) No. 1 of 1979 should apply to the workmen of Metro Cinema.
We accordingly, direct that the gratuity scheme as set out in paragraph 140 of the above award would be applicable to the workmen of Metro Cinema with effect from 1.1.1977.
In the result the appeal is partly allowed on the point of gratuity as indicated above and on the question of linkage the appeal is remanded to the Tribunal for disposal according to law as directed above.
The appeal as regards retrospectivity is dismissed.
In the circumstances the parties will bear their own costs.
V.D.K. Appeal allowed in part.
| IN-Abs | The wages and gratuity of the workers of Metro Theatre were governed by an earlier award in Reference No. 1 of 1968 published in 3 7 1969 which was effective from 1 1 1967, while dearness allowance was governed by the award in Reference No. 440 of 1970 effective from 1 1 1970.
Both these awards were duly terminated by notice and fresh demands for revision of wage scales, dearness allowance, etc.
effective from 1 1 1974 were submitted by the workers Union to the Management on 15 4 1974.
A reference (IT) No. 248 of 1975 was made on 10 7 1975 to the Industrial Tribunal which by its award dated September 22, 1977 published in Maharashtra Government Gazette on November 3, 1977 granted the revision in wage scales and dearness allowance with effect from 1 1 1977.
While granting special leave against the impugned award the Court confined the appeal to three points, namely: (i) retrospectivity of the award: (ii) linkage of dearness allowance to some rational principle and (iii) construction of section 4(5) of the Payment of Gratuity Act, 1971.
Allowing the appeal in part on the point of gratuity and remanding to the Tribunal on the question of linkage of dearness allowance, the Court.
^ HELD: 1.
Under section 17A(4) of the it is a matter of discretion for the Tribunal to decide having regard to the circumstances of each case from which date its award should come into operation and no general rule can be laid down as to the date from which the Tribunal should bring its award into force and the Supreme Court shall not interfere with the Tribunal 's order in that behalf unless substantial ground is made out showing unreasonable exercise or its part.
In the instant case, in the absence of any material placed before the Tribunal or even before the Supreme Court by either party as to whether the profits earned by the Company for the years 1974, 1975 and 1976 had been disbursed or were still available with the Company at the time of making the award, a factor relevant on the question of granting retrospectivity and also in view of decreasing trend in the profits made by the Company during the said three years, according to the Exhibit U 5 marked by the appellant Union itself, presumably the Tribunal felt that it would be proper to give the revision in wage scales and dearness allowance only from 1 1 1977 onwards and not to give any retrsopective effect.
[167 E H, 168 A C] 165 Wenger and Co. and others vs Their Workmen, 1963 II L.L.J. 403: Bengal Chemical and Pharmaceutical Works Ltd. vs Its Workmen and Another, 1969 I L.L.J. 751 and Hydro (Engineers) (Pvt.) Ltd. vs Their Workmen, 1969 I L.L.J. 713, followed.
On the question of linkage of dearness allowance with some rational principle, uniformity is highly desirable in one and the same industry.
The very same adjudicator, Shri B.B. Tambe, yet in other Reference (VA) No. 1 of 1979 dated June 27, 1980 had awarded payment of dearness allowance linked with the cost living index, while in the instant case, fixed dearness allowance on the normal principle of industry cum region.
[168 C, G H, 169 A] 3:1.
On true construction of section 4(5) of the Payment of Gratuity Act, the expression "award" occurring in the said provision does not mean and cannot be confined to "existing award" but includes any award that would be made by an adjudicator wherein better terms of gratuity could be granted to the employees if the facts and circumstances warrant such grant.
In the first place, there is nothing in the provision which limits the expression "award".
Secondly, it cannot be and was not that under the above provision a gratuity scheme obtaining under existing agreement or contract could be improved upon by a fresh agreement or fresh contract between the employer and the employee and if that be so, there is no reason why the expression "award" should be construed as referring to an existing award and not to include a fresh award that may be made by an adjudicator or an Industrial Court improving in favour of the employees the scheme obtained under the Act or the existing award.
Thirdly, the very fact that under the above provision better terms of gratuity could be obtained by an employee by an agreement or contract with the employer notwithstanding the scheme of gratuity obtaining under the Act clearly suggests that no standardisation of the gratuity scheme contemplated by the Act was intended by the Legislature.
[171 D H, 172 A] 3:2.
It is true that the Payment of Gratuity Act enacts a complete Code containing detailed provision covering all essential features of the scheme for payment.
But it is also clear that scheme envisaged by the enactment secures the minimum for the employees in that behalf and express provisions are found in the Act under which better terms of gratuity if already existing are not merely preserved but better terms could be conferred on the employee in future.
[172 A C] State of Punjab vs Labour Court Jullundur and Ors. ; , followed.
Alembic Chemical Works Company Ltd. vs Its Workmen, , explained.
The phrase "under any award, agreement or contract with employer" occuring in section 4(5) of the Payment of Gratuity Act is intended to cover future awards agreements or contracts with the employer since existing better terms of gratuity are intended to be protected by issuance of a notification under section 5 of the Act.
[173 B C] 166 [To maintain uniformity and to be in conformity with the Award made by the same adjudicator in Reference (VA) No. 5 of 1970 M/s. Alankar and 39 others vs The Workmen employed under them, the Court directed that the gratuity scheme as set out in paragraph 140 of that award be applicable to the workmen of Metro Cinema with effect from 1 1 1970.]
|
Civil Appeal No. 2173 of 1970.
From the judgment and order dated 29th October, 1969 of the Madhya Pradesh High Court in Misc.
Petition No. 89 of 1967.
Gyan Chand Mathur and A.G. Ratnaparkhi for the Appellant.
D.P. Mohanty and R.A. Shroff for Respondent No. 1.
The judgment of the Court was delivered by KOSHAL J.
This is an appeal by certificate granted by the High Court of Madhya Pradesh against a judgment of a learned Single Judge of that Court dismissing with costs a petition filed by the present appellant under article 226 of the Constitution of India challenging his demotion from the post of Superintendent of Police to that of Deputy Superintendent of Police.
The facts giving rise to the dispute between the appellant and the State of Madhya Pradesh are now admitted on all hands and may be briefly stated.
Prior to 13th April 1960 the appellant was a member of the Madhya Pradesh State Police Service and was working as a Deputy Superintendent of Police.
On that date a meeting of the Committee set up in accordance with regulation 3 of the India Police Service (Appointment by Promotion) Regulations, 1955 (hereinafter called the Regulations) was held, and therein was prepared a list of such members of the State Police Service as were eligible and suitable for promotion to the Indian Police Service.
The said Committee is popularly known as the "Selection Committee" and will be so referred to hereinafter.
The list was approved by the Union Public Service Commission and thus became the Select List as envisaged in regulation 7 of the Regulations.
The appellant was accordingly promoted to the Indian Police Service and was posted as a Superintendent of Police which position he held till the impugned reversion effected by an order dated 11th September, 1964.
The reason for that reversion was that on the 18th of 355 September 1963 the Selection Committee reviewed the Select List, A purporting to act in accordance with regulation 5 of the Regulations and recommended that the appellant and 27 others be superseded The sole ground for the supersession was thus stated by the Selection Committee: "The Committee consider that, on an overall assessment, the records of these officers are not such as to justify their appointment to the Indian Police Service at this stage.
The reversion of the appellant was challenged before the High Court with the contention inter alia that the ground set out by the Selection Committee in that behalf did not specify any reason, good, bad or indifferent, for his supersession, that under regulation 5 of the Regulations it was duty of the Selection Committee to record reasons and that not having been done the review of the Select List made on the 18th of September, 1963 was clearly in contravention of the Regulations and, therefore, as good as non est.
Th contention was turned down by the learned Single Judge of the High Court, who dismissed the appellant 's petition, with the following observations: "The contention of learned counsel for the applicant that the giving of reasons under sub regulation (5) of regulation 5 for superseding an officer makes the order justiciable, does not appeal to us.
It is not for the Court to see whether the reasons given by the Committee are sufficient or not, but it is for the State Government and the Central Public Service Commission to see the sufficiency of the reasons.
" The contention thus rejected has been reiterated before us.
Regulations 5 and 7 of the Regulations may be reproduced here with advantage: "5.
Preparation of a list of suitable officers.
(1) The Committee shall prepare a list of such members of the State Police Service as satisfy the condition specified in regulation 4 and as are held by the Committee to be suitable for promotion to the Service.
356 (2) The selection for inclusion in such list shall be based on merit and suitability in all respects with due regard to seniority.
(3) The names of the officers included in the list shall be arranged in order of seniority in the State Police Service; Provided that any junior officer who in the opinion of the Committee is of exceptional merit and suitability may be assigned a place in the list higher than that of officers senior to him.
(4) The list so prepared shall be reviewed and revised every year.
(5) If in the process of selection, review or revision it is proposed to supersede any members of the State Police Service, the Committee shall record its reasons for the proposed supersession.
Select List.
(1) The Commission shall consider the list prepared by the Committee along with the other documents received from the State Government and, unless it considers any change necessary, approve the list.
(2) If the Commission consider it necessary to make any changes in the list received from the State Government, the Commission shall inform the State Government of the changes proposed and after taking into account the comments, if any, of the State Government, may approve the list finally with such modification, if any, as may, in its opinion, be just and proper.
(3) The list as finally approved by the Commission shall form the Select List of the members of the State Police Service.
(4) The Select List shall ordinarily be in force until it is reviewed or revised in accordance with sub regulation (4) of regulation 5: 356 Provided that in the event of a grave lapse in the conduct or performance of duties on the part of any member of the State Police Service included in the Select List, a special review of the Select List may be made at any time at the instance of the State Government and the Commission may.
if it so thinks fit, remove the name of such member of the State Police Service from the Select List.
" It is not disputed that a Select List may be reviewed as stated in sub regulation (4) of regulation 7 read with sub regulation (5) of regulation 5.
So all that has to be determined is whether the Selection Committee was bound to give reasons for the supersession of the appellant and whether the note recorded by it which sets out the ground for supersession does give any reason at all.
The matter is really covered by a decision of this Court in Union of India vs Mohan Lal Capoor and others.
In that case also the ground set out by the Selection Committee for the proposed supersession was: "On an over all assessment, the records of these officers are not such as to justify their appointment to the Indian Administrative Service/Indian Police Service at this stage in preference to those selected.
" Except for the words "in preference to those selected" the ground just above set out is identical with the ground given by the Selection Committee in the case of the appellant.
Rejecting this ground as being no statement of reasons within the meaning of sub regulation (5) of regulation 5, Mathew, J., speaking for the Court, observed: "We next turn to the provisions of Regulation 5 (5) imposing a mandatory duty upon the Selection Committee to record "its reasons for proposed supersession".
We find considerable force in the submission made on behalf of the respondents that the "rubber stamp" reason given mechanically for the supersession of each officer does not amount to "reasons for the proposed supersession.
" 358 the most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion.
This apology for reasons to be recorded does not go beyond indicating a conclusion in each case that the record of the officer concerned is not such as to justify his appointment "at this stage in preference to those selected".
"In the context of the effect upon the rights of aggrieved persons, as members of a public service who are entitled to just and reasonable treatment, by reason of protections conferred upon them by articles 14 and 16 of the Constitution, which are available to them throughout their service, it was incumbent on the Selection Committee to have stated reasons in a manner which would disclose how the record of each officer superseded stood in relation to records of others who were to be preferred, particularly as this is practically the only remaining visible safeguard against possible injustice and arbitrariness in making selections.
If that had been done, facts on service records of officers considered by the Selection Committee would have been correlated to the conclusions reached.
Reasons are the links between the materials on which certain conclusions are based and the actual conclusions.
They disclose how the mind is applied to the subject matter for a decision whether it is purely administrative or quasi judicial.
They should reveal a rational nexus between the facts considered and the conclusions reached.
Only in this way can opinions or decisions recorded be shown to be manifestly just and reasonable.
We think that it is not enough to say that preference should be given because a certain kind of process was gone through by the Selection Committee.
This is all that the supposed statement of reasons amounts to.
We, therefore, think that the mandatory provisions of Regulation 5 (5) were not complied with.
" With respect we fully agree and hold that the Select List prepared in accordance with the recommendations of the Selection Committee made in its meeting held on the 18th of September 1963 contravened the mandate in sub regulation 5 of regulation 5. 5.
In the result we accept the appeal, set aside the impugned judgment and quash the Select List just above mentioned in so far 359 as it relates to the appellant, as also the order of his reversion.
He shall be entitled to all consequential benefits even though he has since retired from service.
In the circumstances of the case, however, we leave the parties to bear their respective costs.
P.B.R. Appeal allowed.
| IN-Abs | On being selected by a Selection Committee constituted under the Indian Police Service (Appointment by Promotion) Regulations, 1955 the appellant, a Deputy Superintendent of Police prior to 13th April, 1960, was promoted as Superintendent of Police.
In September, 1963, purporting to act under regulation 5 of the Regulations, the Selection Committee recommended his supersession, along with some others, on the ground that the Committee considered that the records of "the officers were not such as to justify their appointment to the Indian Police Service at this stage".
He was reverted in September.
Before the High Court the appellant contended that the Selection Committee 's failure to specify the reasons for his supersession, in contravention of the Regulations, rendered the list non est.
This plea was rejected.
Allowing the appeal: ^ HELD: The Select List reverting the appellant to a lower post prepared in accordance with the recommendations of the Selection Committee contravened the mandate in sub regulation (5) of Regulation 5.
[358 G] Regulation 5(5) imposed a mandatory duty upon the Selection Committee to record its reasons for the proposed supersession.
In the context of the protection conferred on public servants by articles 14 and 16 of the Constitution it was incumbent on the Selection Committee to have stated reasons in a manner which would disclose how the record of each officer superseded stood in relation to the records of others who were to be preferred.
This is the only visible safeguard against possible injustice and arbitrariness in making selections.
Had that been done it would have been possible to correlate facts on service records considered by the Selection Committee with the conclusions reached.
[358 C] 354 Reasons which are the links between the materials on which certain conclusions are based and the actual conclusions disclose how the mind is applied to the subject matter for a decision, They should reveal a rational nexus between the facts considered and the conclusions reached.
[358 E] Union of India vs Mohan Lal Capoor & Ors., ; ; applied.
|
Civil Appeal Nos.
2110 and 21 1 1 of 1978.
Appeals by special leave from the judgment and order dated the 1st February, 1978 of the Delhi High Court in I.T.C. Nos.
14 and 15 of 1974.
311 WITH Civil Appeal Nos.
1184 85 of 1981.
Appeals by special leave from the order dated the 28th September, 1973 of the Income Tax Appellate Tribunal Delhi Bench in I.T.A. No 386 and 387 of 1972 73.
Soli J. Sorabjee, T.A. Ramachandran, Parkash Sarup, Ravinder Narain and Talat Ansari for the Appellant in all the Appeals.
P.A. Francis, S.P. Nayar and Miss A. Subhashini for the Respondent in all the Appeals.
The Judgment of the Court was delivered by C BHAGWATI, J.
These appeals by special leave raise a common question of law relating to the determination of annual value of a building for the purpose of chargeability to tax under the Income tax Act, 1961 where the building is governed by the provisions of the Rent Control legislation but the standard rent has not yet been ID fixed.
The facts giving rise to these appeals are few and may be briefly stated as follows: The assessee constructed a warehouse in Delhi some time in 1961 at a total cost of Rs. 4,13,000/ .
The warehouse consisted of two portions on the ground floor, one on the north and the other on the south and also a mezzanine floor and a first floor.
On 19th March, 1962, the assessee let out the whole of the first floor to the American Embassy at the rent of Rs. 5810/ per month and subsequently on 1st April, 1964 she let out the northern portion of the ground floor together with the mezzanine floor to the same tenant at the rent of Rs. 6907/ per month and on 7th December, 1964 the northern portion of the ground floor was let out to the same tenant at the rent of Rs. 6640/ per month.
Thus the entire warehouse was let out by the assessee to the American Embassy with different portions let out under different tenancies commencing on different dates.
On 17th July, 1967, however, a new lease was entered into between the assessee and the American Embassy for letting out of the entire warehouse at the rent of Rs. 34,797/ per month and this lease came into effect from 1st April, 1968.
The assessee thus started receiving rent at the rate of Rs. 34,797/ per month in respect of the entire warehouse from 1st April, 1968.
The question arose in the course of assessment of the assessee to income tax for the assessment years 1969 70 and 1970 71 as to how the annual value of the warehouse should be determined for the 312 purpose of chargeability to income tax under the head "Income from house property".
Now income from house property chargeable to tax is computable under section 22 which provides that the annual value of property consisting of any buildings or lands appurtenant thereto, of which the assessee is the owner, shall be chargeable to income tax under the head "Income from house property".
Where, therefore, the assessee owns a building, the annual value of such building is chargeable to income tax under the head "income from house property" under section 22.
But the question immediately arises: how is the annual value to be determined ? The answer is provided by section 23 which lays down the mode of determination of annual value.
Sub section (l) of that section as it stood at the material time provided that "for the purposes of section 22, the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year.
The assessee therefore claimed that on a proper construction of sub section (I) of section 23, it was not the actual rent received by the assessee for the warehouse that was material for determining the annual value of the warehouse but the hypothetical amount for which the warehouse might reasonably be expected to let from year to year and since the Delhi Rent Control Act 1958 (hereinafter referred to as the Rent Act) was applicable in the area in which the warehouse was situate, the warehouse could not reasonably be expected to let from year to year at a rent exceeding the standard rent determinable under the provisions of that Act.
The Income Tax officer however, took the view that the actual rent received by the assessee provided the most accurate and satisfactory measure of the amount for which the warehouse might reasonably be expected to let from year to year and the annual value of the warehouse must therefore be taken to be the actual rent received by the assessee and he accordingly assessed the assessee to tax on the basis of the actual rent received by her.
The assessee preferred an appeal to the Appellate Assistant Commissioner for each of the two assessment years challenging the correctness of the view taken by the Income tax officer and contending that the annual value of the warehouse must be taken to be the standard rent determinable under the provisions of the Rent Act, but the appeals were unsuccessful and the determination of the annual value made by the Income tax officer was affirmed.
The Tribunal also took the same view on further appeals by the assessee and by a consolidated order dated 28th September, 1973, confirmed the assessments made on the assessee on the basis of the actual rent received by her.
The Tribunal held relying on the decision of this Court in M.M. Chawala vs J section Sethi, that, in the 313 absence of fixation of standard rent, the agreed rent which is legally A recoverable and not tainted by fraud, relationship or any other consideration must be taken to be the standard rent and hence the actual rent received by the assessee was rightly taken as the annual value of the warehouse.
In the mean time, an application was made for fixation of the standard rent of the warehouse by the new tenant who came to occupy the warehouse after the American Embassy vacated it and on this application, the Rent Controller by an order dated 13th March, 1973 fixed the standard rent at Rs. 34,848.00 per annum under the provisions of the Rent Act.
The assessee aggrieved by the order dated 28th September 1973 made by the Tribunal, preferred two applications one in respect of each assessment year, seeking reference of five questions which, according to the assessee, arose out of the order of the Tribunal, but the Tribunal by a common order dated 26th February, 1974, rejected the applications on the ground that there was only one question of law which arose out of the order of the Tribunal but that was concluded by the decision of this Court in M.M. Chawla 's case (supra) and so far as the other questions were concerned, they were all questions of fact and hence not referable under section 256 (1) of the Income tax Act, 1961.
The assessee thereupon preferred two applications before the High Court of Delhi under section 256 (2) of the Income tax Act, 1961 for directing the Tribunal to make a reference, but these applications also met with the same fate and on the same grounds which found favour with the Tribunal, they were rejected by the High Court by judgment dated 1st February, 1978.
This led to the filing of two petitions for special leave to appeal, one in respect of each assessment year, and these petitions were allowed and special leave granted by this Court, giving rise to civil appeals Nos.
2110 and 2111 of 1978.
Since these two appeals were directed against the judgment of the High Court refusing two call for a reference from the Tribunal, the only question which could have been considered by the Court in these appeals was as to whether any questions of law arose out of the order of the Tribunal requiring to be referred to the High Court and therefore even if the assessee succeeded in the appeals there would not be an end to the litigation but the questions of law formulated by this Court would have to be referred by the Tribunal to the High Court and then the High Court would have to hear the reference and answer the questions referred to it.
This would have delayed considerably the final determination of the questions of law arising out of the order of the Tribunal and it was, therefore.
agreed between the Parties that the following two ques 314 tions of law should be decided by the Court in these appeals, since they admittedly arose out of the order of the Tribunal: (1) "Whether, on the facts and in the circumstances of the case, the actual rent received by the assessee or the standard rent under the Delhi Rent Control Act, should be taken to be the "annual value" of the property within the meaning of section 23 of the Income Tax Act, 1961, (2) Whether, there was any material on record on which the Tribunal could hold that the receipt of Rs. 4,17,674/ from the American Embassy would he reasonable rent for which the property might be let in spite of the fact that properties in the immediate neighbourhood let out to the Bank of Baroda and Indian Oxygen Company Ltd. were let at rents considerably lower.
This Court accordingly made an order directing that these two questions of law should be disposed of by the Court directly, without calling for a reference from the Tribunal.
However, since some doubt was felt whether this Court could directly dispose of the two questions of law arising out of the order of the Tribunal without calling for a reference, the assessee by way of abundant caution preferred two petitions for special leave to appeal directed against the order of the Tribunal dated 28th September, 1973 and on these petitions, special leave was granted by this Court and that is how Civil Appeal Nos.
1184 1185 of 1981 have come up for hearing before us along with C.A. Nos. 2110 and 2111 of 1978.
Though two questions have been formulated by this Court as arising out of the order of the Tribunal dated 28th September, 1973, it is the first which really formed the subject matter of controversy between the parties and since, in our view, that question has to be answered in favour of the assessee, it is not necessary to embark upon a consideration of the second question.
So far as the first question is concerned, it stands concluded by the recent decision of this Court in Dewan Daulat Rai Kapoor etc.
vs New Delhi Municipal Committee.(1) There were three appeals decided by a common judgment in that case and the question which arose for determination in these appeals was as to how the annual value of a 315 building should be determined for levy of house tax where the building is governed by the provisions of the Rent Act, but the standard rent has not yet been fixed.
One of these appeals related to a case where the building was situate within the jurisdiction of the New Delhi Municipal Committee and was liable to be assessed to house tax under the Punjab Municipal Act, 1911 while the other two related to cases where the building was situate within the limit of the Corporation of Delhi and was assessable to house tax under the Delhi Municipal Corporation Act, 1957.
The house tax under both statutes was levied with reference to the 'annual value ' of the building.
The 'annual value ' was defined in both statutes in the same terms, barring a second proviso which occurred in section 116 of the Delhi Municipal Corporation Act, 1957, but was absent in section 3 (1) (b) of the Punjab Municipal Act, 1911.
This proviso was however not material as it dealt with a case where the standard rent was fixed under the provisions of the Rent Act, while in none of the cases before the Court was the standard rent fixed in respect of the building involved in such case.
According to the definition given in both statutes, the 'annual value ' of a building meant the gross annual rent at which the building might reasonably be expected to let from year to year.
The controversy between the parties centered round the question as to what is the true meaning and effect of the expression "the gross annual rent at which such house or building. may reasonably be expected to let from year to year" occurring in the definition in both statutes.
The argument of the Municipal Authorities was that since the standard rent of the building was not fixed by the Controller under section 9 of the Rent Act in any of the cases before the Court and in each of the cases the period of limitation prescribed by section 12 of the Rent Act for making an application for fixation of the standard rent had expired, the landlord in each case was entitled to continue to receive the contractual rent from the tenant without any legal impediment and hence the annual value of the building was not limited to the standard rent determinable in accordance with the principles laid down in the Rent Act, but was liable to be assessed by reference to the contractual rent recoverable by the landlord from the tenant.
The Municipal Authorities urged that if it was not penal for the landlord to receive the contractual rent from the tenant, even if it be higher than the standard rent determinable under the provisions of the Rent Act, it would not be incorrect to say that the landlord could reasonably expect to let the building at the contractual rent and the contractual rent therefore provided a correct measure for determination of the annual value of the building.
This argument 316 was hower rejected by the court and it was held that even if the standard rent of a building has not been fixed by the Controller under section 9 of the Rent Act, the landlord cannot reasonably expect to receive from a hypothetical tenant anything more than the standard rent determinable under the provisions of the Rent Act and this would be so equally whether the building has been let out to a tenant who has lost his right to apply for fixation of the standard rent by reason of expiration of the period of limitation prescribed by section 12 of the Rent Act or the building is self occupied by the owner.
Therefore, in either case, according to the definition of 'annual value ' given in both statutes, the standard rent determinable under the provisions of the Rent Act and not the actual rent received by the landlord from the tenant would constitute the correct measure of the annual value of the building.
The court pointed out that in each case the assessing authority would have to arrive at its own figure of the standard rent by applying the principles laid down in the Rent Act for determination of the standard rent and determine the annual value of the building on the basis of such figure of the standard rent.
The court, on this view, negatived the attempt of the Municipal Authorities in each of the cases to determine the annual value of the the building on the basis of the actual rent received by the landlord and observed that the annual value of the building must be held to be limited by the measure of the standard rent determinable on the principles laid down in the Rent Act and it could not exceed such measure of the standard rent.
Now this was a decision given on the interpretation of the definition of 'annual value ' in the Delhi Municipal Corporation Act, 1957 and the Punjab Municipal Act, .911 for the purpose of levy of house tax, but it would be equally applicable in interpreting, the definition of 'annual value ' in sub sec.
(1) of section 23 of the Income tax Act, 1961, because these definitions are in identical terms and it is impossible to distinguish the definition of 'annual value ' in sub sec.
(I) of section 23 of the Income tax Act, 1961 from the definition of that term in the Municipal Corporation Act, 1957.
and the Punjab Municipal Act, 1911.
We must therefore hold, on an indentical line of reasoning, that even if the standard rent of a building has not been fixed by the Controller under section 9 of the Rent Act and the period of limitation prescribed by section 12 of the Rent Act for making an application for fixation of the standard rent having expired, it is no longer competent to the tenant to have the standard rent of the building fixed, the annual value of the building according to the definition given in sub section (l) of section 23 of the Income tax Act, 1961 must be held to be the standard rent determinable under 317 the provisions of the Rent Act and not the actual rent received by the landlord from the tenant.
This interpretation which we are placing on the language of sub section (1) of sec.
23 of the Income tax Act, 1961, may be regarded as having received legislative approval, for we find that by section 6 of the Taxation Laws (Amendment) Act, 1975, sub section (I) of section 23 has been amended and it has now been made clear by the introduction of clause (b) in that sub section that where the property is let and the annual rent received or receivable by the owner in respect thereof is in excess of the sum for which the property might reasonably be expected to let from year to year, the amount so received or receivable shall be deemed to the annual value of the property.
The newly added clause (b) clearly postulates that the sum for which a building might reasonably be expected to let from year to year may be less than the actual amount received of receivable by the landlord from the tenant.
We are therefore of the view that in the present case the standard rent of the warehouse determinable under the provisions of the Rent Act must be taken to be the annual value within the meaning of sub section (1) of section 23 of the Income tax Act, 1961 D and the actual rent received by the assessee from the American Embassy cannot of itself be taken as representing the correct measure of the annual value.
We must therefore address ourselves to the question as to what would be the standard rent of the warehouse determinable under the provisions of the Rent Act for the assessment year 1969 70 and 1970 71 the relevant accounting years being 1st April 1968 to 31st March 1969 and I st April 1969 to 31 st March 1970.
Now 'standard rent ' is defined in section 2 (k) to mean the standard rent referred to in section 6 or where the standard rent has been increased under section 7, such increased rent.
Section 6 lays down different formulae for determination of standard rent according to different situations.
Clause (A) of sub section (1) enacts provisions for determination of standard rent in case of residential premises.
but we need not refer to those provisions, since we are concerned in the present case not with residential premises but with a warehouse which constitutes non residential premises.
The provisions applicable for determination of standard rent in the case of non residential premises are set out in clause (B) of sub section (I) and there also, we are concerned only with sub clause (2) because the warehouse was admittedly let out for the first time after 2nd June, 1944.
Since the standard rent of the warehouse was not at any time fixed under the Delhi and Ajmer Merwara Rent Control Act, 1947, or the Delhi and Ajmer Rent 318 Control Act, 1952, the standard rent was liable to be determined under paragraph (b) of sub clause (2) which provides that "the rent calculated on the basis of seven and one half per cent per annum of the aggregate amount of the reasonable cost of construction and the market price of the land comprised in the premises on the date of the commencement of the construction" shall be taken to be the standard rent of the premises.
There is a proviso to this paragraph which says that" where the rent so calculated exceeds twelve hundred rupees per annum, this clause shall have effect as if for the words "seven and one half per cent" the words "eight and five eighth per cent" had been substituted.
" But all these provisions for determination of standard rent are subject to the overriding provision enacted in sub section (2) which provides in clause (b), which is the clause applicable in the present case since the warehouse was constructed on or after 19th June, 1955, that in case of such premises. "the annual rent calculated with reference to the rent agreed upon between the landlord and the tenant when such premises were first let out shall be deemed to be the standard rent for a period of five years from the date of such letting out. " Now the first floor of the warehouse was first let out at the rent of Rs. 5810/ per month from 19th March 1962 and therefore under clause (b) of sub section (2) the rent of Rs. 5810/ per month would be the standard rent of the first floor of the warehouse for the period of five years from 19th March 1962 up to 18th March 1967 and thereafter the standard rent would have to be determined under paragraph (b) sub clause (2) of clause (B) of sub section (I) and this latter figure would represent the standard rent of the warehouse determinable under the provisions of the Rent Act for the accounting years 1st April 1968 to 31st March 1969 and 1st April 1969 to 31st March 1970.
The next portion of the warehouse let out to the American Embassy was the northern portion of the ground floor together with the mezzanine floor for the period of five years from 1st April 1964 up to 31st March 1969 under clause (b) of sub section (2) and thereafter it would have to be deter mined under paragraph (b) of sub clause (2) of clause (B) of sub section (1).
Thus for the accounting year 1st April 1968 to 31st March 1969 the standard rent of the northern portion of the ground floor and the mezzanine floor determinable under the provisions of the Rent Act would be Rs. 6907/ per month while for the accounting year 1st April 1969 to 31st March 1970, the standard rent would be that determinable under paragraph (b) of sub clause (2) of clause (B) of sub section (1).
That leaves the southern portion of the ground floor which was first let out to the American Embassy at the rent of Rs. 6640/ per 319 month from 7th December 1964, and according to clause (b) of sub A section (2), the standard rent of this portion would be Rs. 66401 per month for the period of five years from 7th December, 1964 up to 6th December, 1969 and thereafter it would be determinable under paragraph (b) of sub clause 2 of clause (B) of sub section (1).
Thus for the accounting year 1 st April 1968 to 31 st March 1969 and I st April 1969 to 6th December 1969 the standard rent of the southern portion of the ground floor determinable under the provisions of the Rent Act would be Rs. 66401 per month, while for the remaining portion of the accounting year from 7th December 1969 to 31st March 1970, the standard rent would be determinable under paragraph (b) of sub clause (2) of clause (B) of sub section (1).
The annual value of the warehouse for the purpose of chargeability to income tax for the assessment years 1969 70 and 1970 71 would have to be determined on the basis of the standard rent of different portions of the warehouse determinable under clause (b) of sub section (2) and paragraph (b) of sub clause (2) of clause (B) of sub section (1) of section 6 of the Rent Act as discussed above.
D We accordingly answer question No. 1 in favour of the assessee by holding that the standard rent of different portions of the warehouse determinable under the provisions of the Rent Act as indicated above and not the actual rent received by the assessee from the American Embassy should be taken be the annual value of the warehouse within the meaning of sub section (I) of section 23 of the Income tax Act, 1961.
On this view taken by us, the the assessee did not press question No. 2 and hence it is not necessary to answer it.
We allow the appeals of the assessee to this limited extent and direct that the Revenue will pay the costs of the appeals to the assessee.
| IN-Abs | The appellant assessee constructed a warehouse and let out different portions under different tenancies commencing on different dates.
Later on a new lease was entered into between the assessee and her tenant for letting out of the entire warehouse and the assessee started receiving rent at the rate of Rs. 34,797/ per month in respect of the entire warehouse from 1st April, 1968.
In the course of assessment of the assessee for the assessment years 1969 70 and 1970 71 the question arose as to how the "annual value" of the warehouse should be determined for the purpose of chargeability to income tax under the head "income from house property".
The assessee claimed before the Income.
Tax officer that on a proper construction of sub section (I) of section 23, it was not the actual rent received by her from the warehouse that was material for determining the annual value of the warehouse but the hypothetical amount for which the warehouse might reasonably be expected to be let from year to year, and since the Delhi Rent Control Act 1958 was applicable in the area in which the warehouse was situate, the warehouse could not reasonably be expected to be let from year to year at a rent exceeding the standard rent determinable under the provisions of that Act.
The Income Tax officer rejected this claim and took the view that the actual rent received by the assessee provided the most accurate and satisfactory measure of the amount for which the warehouse might reasonably be expected to let from year to year and the annual value of the warehouse must therefore be taken to be the actual rent received by the assessee and he accordingly assessed the assessee to tax on the basis of the actual rent.
The assessee 's appeals for each of the two assessment years to the Appellate Assistant Commissioner were unsuccessful.
The Income Tax Tribunal took the same view on further appeals by the assessee and held relying on the decision of this Court in M. M. Chawla vs J. section Sethi that in the absence of fixation of standard rent, the agreed rent which is legally recoverable and not tainted by fraud, relationship or any other consideration must be taken to be the standard rent and hence the actual rent received by the assessee was rightly taken as the annual value of the warehouse.
310 The assessee 's applications to the Tribunal as well as to the High Court for the making of a reference under section 256 of the Income Tax Act, 1961 were also dismissed.
Allowing the appeals to this Court, ^ HELD: 1.
The annual value of the building according to the definition given in sub section (l) of section 23 of the Income Tax Act, 1961 is the standard rent determinable under the provisions of the Rent Act and not the actual rent received by the landlord from the tenant.
[316 H 317 A] 2.
In Dewan Daulat Rai Kapoor etc.
vs New Delhi Municipal Committee ; a decision of this Court given on the interpretation of the , definition of 'annual value ' in the Delhi Municipal Corporation Act 1957 and the Punjab Municipal Act 1911 for the purpose of levy of house tax, it was held that even if the standard rent of a building has not been fixed by the Controller under section 9 of the Rent Act, the landlord cannot reasonably expect to receive from a hypothetical tenant anything more than the standard rent determinable under the provisions of the Rent Act and this would be equally so whether the building has been let out to a tenant who has lost his right to apply for fixation of standard rent by reason of expiration of the period of limitation prescribed by section 12 of the Rent Act or the building is self occupied by the owner, and that the standard rent determinable under the provisions of the Rent Act and not the actual rent received by the landlord would constitute the correct measure of the annual value of the building.
[314 H, 316 A C] 3.
This decision though given on the interpretation of the definition of 'annual value ' in the Delhi Municipal Corporation Act 1957 and the Punjab Municipal Act 1911 for the purpose of levy of house tax, would be equally applicable in interpreting the definition of 'annual value ' in sub section (I) of section 23 of the Income Tax Act, 1961 because these definitions are in identical terms and it is impossible to distinguish the definition of 'annual value ' in sub section (1) of section 23 of the Income Tax Act, 1961 from the definition of that term in the Municipal Corporation Act 1957, and the Punjab Municipal Act, 1911.
In the instant case the annual value of the warehouse for the purpose of chargeability to income tax for the assessment years 1969 70 and 1970 71 would have to be determined on the basis of the standard rents of different portions of the warehouse determinable under clause (b) of sub section (2) and paragraph (b) of sub clause (2) of clause (B) of sub section (I) of section 6 of the Rent Act.
[319 C]
|
ition No. 2701 of 1981.
(Under article 32 of the Constitution of India.) section K Mehta, P. N. Puri, E. M. Sardul Anam, M. K Dua and K M. Jain for the Petitioner.
V. M. Tarkunde and section K Jain for Respondents Nos. 7, 8, 15, 25 28, 29, 31, 33, 38, 41.
K Parasaran Sol.
Gen. and Badri Das Sharma for Respondent No. 1.
N.L. Jain and Badri Das Sharma for Respondent No. 2.
Badri Das Sharma for Respondent No. 3.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
What is the ideal mode of selection to a Public Service, by written examination, by oral test (viva voce), or by a combination of both ? If the last, what is the proper, relative weight that should be attached to the written examination and the oral test ? Is the oral test so pernicious in practice, as suggested by some, that it should be abandoned without regrets or the weight to be attached to it be made minimal ? Has any such consensus emerged among the informed and the cognoscenti as to require the Court to scrap a selection as arbitrary on the sole ground that the weight accorded to the oral test appeared to be high ? 323 Pursuant to the Rajasthan Judicial Service rules made by the Governor of Rajasthan in consultation with the Rajasthan Public Service Commission and the High Court of Rajasthan, the Rajasthan Public Service Commission held a competitive examination for recruitment of Munsifs.
The competitive examination consisted of a written examination with two papers in law carrying 100 marks each and two papers, one in Hindi and the other in English, each carrying SO marks and a viva voce examination carrying 100 marks.
The viva voce examination was conducted by a Board consisting of Hon 'ble Mr. Justice P. D. Kudal, Judge, Rajasthan High Court, Shri Hari Datt Gupta, Chairman, Rajasthan Public Service Commission, Adaviappa, Member, Rajasthan Public Service Commission and an expert.
The expert Member was either Dr. I. C. Saxena, or Shri Kagzi or Shri Jallan who sat by rotation.
Schedule III of the Rajasthan Judicial Service rules prescribes the criteria to be considered and the matters to be tested in the viva voce examination.
The relevant paragraph is as follows: "In interviewing the candidates, the suitability for employment to the judicial service shall be decided with reference to his record at the school, College and University and his character, personality, address and physique.
The questions which may be put up to him may be of a general nature and will not necessarily be academic or legal.
The candidates will also be put questions to test the general knowledge including knowledge of current affairs and present day problems.
The marks so awarded shall be added to the marks obtained in the written test by each candidate. '.
The result of the competitive examination was announced by the Rajasthan Public Service Commission on March 12, 1981 and respondent Nos. 3 to 41 were declared selected for appointment.
Out of the 39 candidates who were selected for appointment, one belonged to the scheduled castes and the rest belonged to the general category.
The last of the candidates belonging to the general category who was selected for appointment obtained a total of 190 marks in the examination, 135 in written examination and 55 in the viva voce.
The petitioner who obtained a total of 189 marks, 159 in the written test and 30 in the viva voce was not selected for appointment.
He has filed the present writ petition under article 32 of the Constitution questioning the selection.
324 Shri Mehta learned counsel for the petitioner raised two principal contentions before us.
The first was that the entire selection was vitiated by the allocation of 25 percent of the total marks for the viva voce examination.
The submission was that the allocation of so high a percentage of marks for the interview test introduced an irredeemable element of arbitrariness so as to offend Articles 14 and 16 of the Constitution.
In support of this submission reliance was placed on the decisions of this Court in Ajay Hasia etc.
Khalid Mujib Sehravardi & ors.
etc.(l) Shri Mehta 's second contention was that marks were awarded in the interview test in a single lot instead of sub dividing and awarding marks separately under various heads for the various matters tested in the interview.
Reliance was placed on Periakaruppan vs Stare of ' Tamil Nadu (2).
The object of any process of selection for entry into a public service is to secure the best and the most suitable person for the job, avoiding patronage and favouritism.
Selection based on merit, tested impartially and objectively, is the essential foundation of any useful and efficient public service.
So, open competitive examination has come to be accepted almost universally as the gateway to public services".
"The ideal in recruitment is to do away with unfairness(3)".
"Competitive examinations were the answer to the twin problems represented by democracy and the requirements of good administration.
They were the means by which equality of opportunity was to be united with efficiency.
By this means favouritism was to be excluded and the goal of securing the best man for every job was to be achieved(4)".
"open competitive examinations are a peculiarly democratic institution.
Any qualified person may come forward.
His relative competence for appointment is determined by a neutral, disinterested body on the basis of objective evidence supplied by the candidate himself.
No one has "pull"; everyone stands on his own feet.
The system is not only highly democratic it is fair and equitable to every competitor.
The same rules govern, the same procedures apply, the same yardstick is used to test competence(S).
How should the competitive examination be devised ? The 325 Kothari Committee on Recruitment Policy and Selection methods in their report said: "A system of recruitment almost totally dependent on assessment of a person 's academic knowledge and skills, as distinct from ability to deal with pressing problems of economic and social development, with people, and with novel situations cannot serve the needs of today, much less of tomorrow.
We venture to suggest that our recruitment procedures should be such that we can select candidates who can not only assimilate knowledge and sift material to understand the ramifications of a situation or a problem but have the potential to develop an original or innovative approach to the solution of problems".
It is now well recognised that while a written examination assesses a candidate 's knowledge and intellectual ability, an interview test is valuable to assess a candidate 's overall intellectual and personal qualities.
While a written examination has certain distinct advantage over the interview test there are yet no written tests which can evaluate a candidate 's initiative, alertness, resourcefulness, dependableness, cooperativeness, capacity for clear and logical presentation, effectiveness, in discussion, effectiveness in meeting and dealing with others, adaptability, judgment, ability to make decision, ability to lead, intellectual and moral integrity.
Some of these qualities may be evaluated, perhaps with some degree of error, by an interview test, much depending on the constitution of the interview Board.
O. Glenn Stahl in his Public Personnel Administration points out: "Any form of written test possesses certain administrative advantages over the oral and performance types.
The written form is much easier and cheaper to administer.
It can be given to a large number of individuals at the same time, thus conserving the time of the examiners.
As a general rule it is easier to evaluate objectively, and the technical proficiency demanded in rating is usually, although not always, less.
The oral test has long served as a basic selection tool in private employment but has been more slowly accepted in the public field.
This conservatism arises out of three considerations: (I) the difficulty of developing valid and reliable oral tests; (2) the difficulty of securing a reviewable record of an oral test; and (3) public suspicion of the oral as a channel for the exertion of politi 326 cal influence through the destruction of anonymity.
Despite these acknowledged disadvantages, however, orals have been used increasingly in public personnel testing and have become important instruments wherever tests of personal attributes are considered essential.
As we have noted no satisfactory written tests have yet been devised for measuring such personal characteristics as initiative, ingenuity and ability to elicit cooperation, many of which are of prime importance.
When properly employed, the oral test today deserves a place in the battery used by the technical examiner.
The general principle is that resort should never be had to an oral if the relevant factor to be tested can be measured at some other point in the examining process.
The reason is that the reliability of the oral, even under the best of conditions, tends to be lower than that of the well designed written test.
The oral test should be confined, then, to the evaluation of relevant traits which cannot be measured in any other way" (p. 92) In the United Nations Hand Book on Civil Service Laws and Practice it is said: ". the written papers permit an assessment of culture and intellectual competence.
The interview permits an assessment of qualities of character which written papers ignore; it attempts to assess the man himself and not his intellectual abilities".
Thus, the written examination assesses the man 's intellect and the interview test the man himself and "the twain shall meet" for a proper selection.
If both written examination and interview test are to be essential features of proper selection, the question may arise as to the weight to be attached respectively to them.
In the case of admission to a college, for instance, where the candidate 's personality is yet to develop and it is too early to identify the personal qualities for which greater importance may have to be attached in later life, greater weight has per force to be given to performance in the written examination.
The importance to be attached to the interview test must be minimal.
That was what was decided by this Court in Periakaruppan vs State of Tamil Nadu, Ajay Hasia etc.
vs Khalid Mujib Sehravardi & ors.
, (supra) and other cases.
On the other hand, in the case of services to which recruitment has necessarily to be made from persons of mature 327 personality, interview test may be the only way, subject to basic and essential academic and professional requirements being satisfied.
To subject such persons to a written examination may yield unfruitful and negative results, apart from its being an act or cruelty to those persons.
There are, of course, many services to which recruitment is made from younger candidates whose personalities are on the threshold of development and who show signs of great promise, and the discerning may in an interview test, catch a glimpse of the future personality.
In the case of such services, where sound selection must combine academic ability with personality promise, some weight has to be given, though not much too great weight, to the interview test.
There cannot be any rule of thumb regarding the precise weight to be given.
It must vary from service to service according to the requirements of the service.
the minimum qualifications prescribed, the age group from which the selection is to be made, the body to which the task of holding the interview test is proposed to be entrusted and a host of other factors.
It is a matter for determination by experts.
It is a matter for research.
It is not for Courts to pronounce upon it unless exaggerated weight has been given with proven or obvious oblique motives.
The Kothari Committee also suggested that in view of the obvious importance of the subject, it may be examined in detail by the Research Unit of the Union of Public Service Commission.
In this background, let us now examine the situation presented by the Rajasthan rules.
The Rajasthan Judicial Service rules leave been made by the Governor of Rajasthan in consultation with the High Court of Rajasthan and the Rajasthan Public Service Commission.
The High Court may be expected to know the precise requirements of the judicial service of the State and the calibre of the available source material, while the Public Service Commission is an expert body thoroughly conversant with recruitment policies and selection methods.
Both the High Court and the Public Service Commission are independent bodies, outside executive control, occupying special positions and enjoying special status under the constitution.
Neither is an outside agency.
Both are well acquainted with the particular needs of their State and the people.
If the Governor, in consultation with the High Court and the Public Service Commission of the State makes rules stipulating seventy five percent of the marks for the written examination and twenty five percent for the interview test, on what basis can a Court say that twenty five percent for the interview test is on the high side ? It must not also be forgotten that the interview test is generally conducted 328 and was, in the present case, conducted by a body consisting of a Judge of the High Court, the Chairman and a member of the Public Service Commission an d a special invitee expert.
There can surely be no legitime grievance or hint of arbitrariness against this body.
Yet another factor worthy of consideration is that the candidates expected to offer themselves for selection are not raw Graduates freshly out of college but are persons who have already received a certain amount of professional training.
The source material is such that some weightage must be given to the interview test and can it possibly be said that twenty five per cent of the total marks is an exaggerated weightage.
We may add here that it has been made clear by the Chairman, Rajasthan Public Service Commission on whose behalf a counter affidavit has been filed before us that the marks obtained by the candidates at the written examination were not made available to the members of the interview Board either before or at the time of the interview.
We are unhesitatingly of the view that the selection cannot be struck down on the ground that more than due weightage was given to the interview test.
The second ground of attack must fail for the same reason as the first ground of attack.
The rules themselves do not provide for the allocation of marks under different heads at the interview test.
The criteria for the interview test bas been laid down by the rules.
lt is for the interviewing body to take a general decision whether to allocate marks under different heads or to award marks in a single lot.
The award of marks under different heads may lead to a distorted picture of the candidate on occasions.
On the other hand the totality of the impression created by the candidate on the interviewing body may give a more accurate picture of the candidate 's personality.
It is for the interviewing body to choose the appropriate method of marking at the selection to each service.
There cannot be any magic formulae in these matters and courts cannot sit it judgment over the methods of marking employed by interviewing bodies unless, as we said, it is proven or obvious that the method of marking was chosen with oblique motive.
Both the cases cited before us Periakaruppan 's case and Ajay Hasia 's case were cases of admission to colleges.
We have already pointed out that the provision for marks for interview test need not and cannot be the same for admission to colleges and entry into public services.
In fact in Periakaruppan 's case, even in the case of college admissions the Court observed: 329 "While we do feel that the marks allotted for interview are on the high side and it may be appropriate for the Government to re examine the question, we are unable to uphold the contention that it was not within the power of the Government to provide such high marks for interview or that there was any arbitrary exercise of power".
It is true that in Periakaruppan 's case the Court held that the non allocation of marks under various heads in the interview test was illegal but that was because the instructions to the Selection Committee provided that marks were to be awarded at the interview on the basis of five distinct tests.
It was thought that the failure to allocate marks under each head or distinct test was an illegality.
But, in the case before us, the rule merely and generally indicates the criteria to be considered in the interview test without dividing the interview test into distinct, if we may so call them, sub tests.
We do not think that Periakaruppan 's case, which, as we said, deals with admission to a college, affords any true guidance to us.
Ajay Hasia 's case was also a case of admission to a college.
The Court while upholding the interview test as not irrational or irrelevant though unsatisfactory and capable of abuse, made the following observation: "We would, however, like to point out that in the matter of admission of colleges or even in the matter of public employment, the oral interview test as presently held should not be relied upon as an exclusive test, but it may be resorted to only as an additional or supplementary test and, moreover, great care must be taken to see that persons who are appointed to conduct the oral interview test are men of high integrity, calibre and qualification".
The Court then proceeded to consider the next question raised before them, whether the allocation of 33 113 percent of the total marks for the interview test vitiated the selection procedure as arbitrary and unreasonable.
It was held that it did and reference was made to the fact that even for selection of candidates for the Indian Administrative Service the marks allocated for the interview test were only 12.2 percent of the total.
It was then observed, "under the existing circumstances, allocation of more than 15% of the total marks for the oral interview would be arbitrary and unreasonable and would be liable to be struck down as constitutionally invalid".
The observations of the Court were made, primarily 330 in connection with the problem of admission to colleges, where naturally, academic performance must be given prime importance.
The words "or even in The matter of public employment" occurring in the first extracted passage and the reference to the marks allocated for the interview test in the Indian Administrative Service examination were not intended to lay down any wide, general rule that the same principle that applied in the matter of admission to colleges also applied in the matter of recruitment to public services.
The observation relating to public employment was per incuriam since the matter did not fall for the consideration of the Court in that case.
Nor do we think that the Court intended any wide construction of their observation.
As already observed by us the weight to be given to the interview test should depend on the requirement of the service to which recruitment is made, the source material available for recruitment, the composition of the interview Board and several like factors.
Ordinarily recruitment to public services is regulated by rules made under the proviso to article 309 of the Constitution and we would be usurping a function which is not ours, if we try to redetermine the appropriate method of selection and the relative weight to be attached to the various tests.
If we do that we would be rewriting the rules but we guard ourselves against being understood as saying that we would not interfere even in cases of proven or obvious oblique motive.
There is none in the present case.
The Writ Petition is therefore dismissed but in the circumstances there will be no order regarding costs.
V.D.K. Petition dismissed.
| IN-Abs | Pursuant to the Rajasthan Judicial Service Rules made by the Governor of Rajasthan in consultation with the Rajasthan Public Service Commission and the High Court of Rajasthan, the Rajasthan Public Service Commission held a competitive examination for recruitment of Munsifs.
The competitive examination consisted of a written examination with two papers in law carrying 100 marks each and two papers, one in Hindi and the other in English, each carrying SO marks and a viva voce examination carrying 100 marks.
The viva voce examination was conducted by a Board consisting of Hon 'ble Mr Justice P. D. Kudal, Judge, Rajasthan High Court, Shri Hari Dutt Gupta, Chairman, Rajasthan Public Service Commission, Adaviappa, Member, Rajasthan Public Service Commission and an expert.
The expert Member was either Dr. I.C. Saxena, or Shri Kagzi or Shri Jallan who sat by rotation.
Out of the 39 candidates (respondents 3 to 41) who were selected for appointment, one belonged to the scheduled caste and the rest belonged to the general category.
The last of the candidates belonging to the general category who was selected for appointment obtained a total of 190 marks in the examination, 135 in the written examination and 55 in the viva voce.
The petitioner who obtained a total of 189 marks, 159 in the written test and 30 in the viva voce was not selected for appointment.
Hence the writ petition, by the petitioner contending: (a) the allocation of so high percentage of marks for the interview test introduced an irredeemable element of arbitrariness so as to offend Articles 14 and 16 of the Constitution; (b) awarding of marks in the interview test in a single lot instead of sub dividing and awarding marks separately under various heads for the various matters tested in the interview was bad in law.
Dismissing the writ petition, the Court ^ HELD: 1.
The object of any process of selection for entry into a public service is to secure the best and tho most suitable person for the job, avoiding patronage and favouritism.
Selection based on merit, tested impartially and objectively, is the essential foundation of any useful and efficient public service.
[324 C D] 321 1:2.
While a written examination assesses a candidate 's knowledge and intellectual ability, an interview test is valuable to assess a candidate 's overall intellectual and personal qualities.
While a written examination has certain distinct advantages over the interview test there are yet no written test: which can evaluate a candidate 's initiative, alertness resourcefulness, dependableness, co operativeness, capacity for clear and logical presentation, effectiveness in discussion, effectiveness in meeting and dealing with others, adaptability, judgement, ability to make decision, ability to lead, intellectual and moral integrity.
Some of these qualities may be evaluated, perhaps with some degree of error, by an interview test, much depending on the constitution of the interview Board.
Thus the written examination assesses the man 's intellect and the interview test the man himself and "the twain shall meet" for a proper selection.
[325 C E, 326 F] 2.
As regards the weight to be attached respectively to the written test and the oral test, there cannot be any rule of thumb regarding the precise weight to be given.
It must vary from service to service according to the requirements of the service, the minimum qualifications, prescribed, the age group from which the selection is to be made, the body to which the task of holding the interview test is proposed to be entrusted and a host of other factors.
It is a matter for determination by experts and for research.
It is not for courts to pronounce upon it unless exaggerated weight has been given with proven or obvious oblique motives.
[326 F. 327 C D] Periakaruppan vs State Tamil Nadu, [1971] 2 S.C.R. and Ajay Hasia etc.
vs Khalid Mujlb Sehravardi & Ors., A.I.R. 1981 S.C. 487, explained.
Ordinarily recruitment to public services is regulated by rules made under the proviso to Article 309 of the Constitution and courts would be usurping a function which is not theirs, if they try to redetermine the appropriate method of selection and the relative weight to be attached to the various tests.
If the courts do that, they will be rewriting the rules but, however, courts would interfere certainly in cases of proven or obvious oblique motives.
[330 C D] In the instant case, the selection cannot ba struck down on the ground that more than due weightage was given to the interview test: (a) The Rajasthan Judicial Service Rules have been made by the Governor of Rajasthan in consultation with the High Court of Rajasthan and the Rajasthan Public Service Commission.
Both are well acquainted with the particular needs of their State and the people.
If the Governor, in consultation with the High Court and the Public Service Commission of the State makes rules stipulating seventy five per cent of the marks for the written examination and twenty five per cent for the interview test, Courts have no basis on which to say that twenty five per cent for the interview test is on the high side; (b) the interview test is generally conducted and was, in the present case, conducted by a body consisting of a Judge of the High Court, the Chairman and a member of the Public Service Commission and a special invitee expert, and as such no legitimate grievance or hint of arbitrariness could be made against this body; (c) the candidates expected to offer themselves for selection are not raw graduates freshly out of college but are persons who have already received a certain amount of professional training.
The source material is such that some weightage must be given to the interview test 322 and (d) the marks obtained by the candidates at the written examination were not made available to the members of the interviewing Board either before or at the time of the interview.
[327 E H, 328 A C] 4.
Courts cannot sit in judgment over the methods of marking employed by interviewing bodies unless, it is proven or obvious that the method of marking was chosen with oblique motive.
In the instant case, the Rajasthan Judicial Rules generally indicate the criteria to be considered in the interview test without dividing the interview test into distinct sub tests.
It is for the interviewing body to take a general decision whether to allocate marks under different heads or to award marks in a single lot.
The award of marks under different heads may lead to a distorted picture of the candidate on occasions.
On the other hand, the totality of the impression created by the candidate on the interviewing body may give a more accurate picture of the candidate 's personality.
[328 D G] Periakaruppan vs State of Tamil Nadu, [1971] 2 S.C.R. 430 and Ajay Hasia etc.
vs Khalid Mujib Sheravardi and Ors., ; , discussed and distinguished.
|
Civil Appeal No. 2324 of 1980.
Appeal by special leave from the judgment and order dated the 23rd April, 1979 of the Allahabad High Court in Civil Misc.
Writ No. 2228 of 1979.
Dr. L. M. Singhvi, and section K. Verma for the Appellant.
Mrs. Shobha Dikshit for Respondent Nos.
I & 2.
section N. Kacker and B. R. Agarwala & P. G. Gokhale for Respondent No. 4.
The Judgment of the Court was delivered by CHANDRACHUD, C. J.
: The question which arises for consideration in this appeal is whether the appellant, Dr. R. K. 285 Khandelwal, is entitled to be admitted to the M. D. Course in Paediatrics of the Agra University and whether in denying him that opportunity, the State has violated any of his legal rights.
The appellant passed his M.B.B.S. Examination from the section N. Medical College, Agra, in December 1976 and completed his internship in December 1977.
Being desirous of prosecuting post graduate studies in Paediatrics, he took a year s house job in the Paediatrics Department of the section N. Medical College Hospital, which he completed in January 1979.
He then applied for admission to the M. D. Course in Paediatrics for the academic year 1979 80.
He was admitted to the D.C.H. Course but he was refused admission to the M.D. Course on two grounds: First, that amongst the applicants for the M. D. Course in Paediatrics there were four students who had secured higher marks than him in the M.B.B.S. Examination, and second, that on the basis of the 1:1 ratio between teachers and students, there were only four seats available for the post graduate course in Paediatrics.
The appellant filed a writ petition in the High Court of Allahabad challenging the decision of the College by which he was denied admission to M.D. (Paediatrics).
That petition was dismissed summarily by a Division Bench of the High Court on the ground that the relief of mandamus sought by the appellant could not be granted to him since he had failed to establish that any of his legal rights was violated.
This appeal by special leave is directed against the High Court 's order dated April 23, 1979.
The appellant, as stated earlier, was admitted to the D.C.H. Course after he had finished his house job in Paediatrics.
His case is that for many years in the past, candidates who had passed the D.C.H. Examination were preferred for admission to the M. D. Course but that the University suddenly discontinued that practice, as a result of which he had to compete with others who had passed their M.B.B.S. Examination.
There is no substance in this contention and in any case the appellant cannot make a grievance of a change in the practice for admission to the particular course.
Admittedly, there was no rule at any time requiring that an applicant seeking admission to the M.D. Course in Paediatrics had to pass his D.C.H. Examination.
All that is alleged is that such a practice was recognised over many years or at least, that such was the under standing of all concerned.
Both the practice and the understanding have been denied on behalf of the College.
But apart from that, 286 discontinuance of a mere practice cannot sustain a charge of injury to legal rights.
The practice had not ripened into a rule and the University was under no obligation to admit only those who had passed their D.C.H. Examination.
We also feel some difficulty on the facts before us in accepting the contention of the appellant that passing the D.C.H. Examination was a passport for admission to the M.D. Course.
It may, at the highest, be said that it was easier for students to get admitted to the M.D. Course after passing the additional examination of D.C.H. after the M.B.B.S. Examination.
The appellant applied for admission to the M.D. (Paediatrics Course for the academic year 1979 80.
He had passed his M.B.B.S. Examination in December 1976.
There were other students who had applied for admission to the M.D. Course in Paediatrics along with the appellant.
Some of them had passed their M.B.B.S. Examination prior to December 1976 and had secured higher marks than the marks obtained by the appellant in the December 1976 Examination.
The number of seats being limited, admissions were given according to merit and the four students who had secured highest number of marks were given preference to others regardless of the year in which they had passed their M.B.B.S. Examination.
No one was admitted to the 1979 80 academic year for the M.D. Course in Paediatrics, who had secured lesser marks than the appellant.
The four students who secured admission had obtained marks varying between 60.06% to 65.80% while the appellant had secured 58.56% marks only.
He was sixth in order of merit amongst the applicants and there were only four seats available bearing in mind the ratio of 1:1 between the teachers and the students.
Dr. Singhvi, who appears on behalf of the appellant, raised a further contention that the ratio 1:1 was relaxed from time to time by the University and that the appellant was discriminated against by the arbitrary refusal of the authorities to relax the ratio in his favour.
We are prepared to accept that if there is a power to relax the ratio, that power must be exercised reasonably and fairly.
It cannot be exercised arbitrarily to favour some students and to disfavour some others.
But the difficulty in the way of the learned counsel is that this point of discrimination was not taken in the Writ Petition which was filed in the High Court, it was not argued in the High Court and is not even mentioned in the Special Leave Petition before us.
The question as to whether the authorities have the power to relax the ratio and the further question as to whether that power has been exercised arbitrarily in this case raise new points 287 into which it is difficult for us to enquire for the first time.
We are therefore unable to entertain the submission made by the counsel.
The appellant has thus failed to make out a case of injury to any of his legal rights, for which reason the appeal must fail.
The appeal is accordingly dismissed.
But considering that under interim orders passed by this Court from time to time the appellant has appeared for the M.D. Examination on the completion of the Course, we hope that the University and the S.N. Medical College will take a sympathetic view of the appellant 's case and have his result declared.
It may be mentioned that because of the interim orders passed by this Court directing the College and the University to admit the appellant to the M.D. Course in Paediatrics, the College cancelled the appellant 's admission to the D.C.H. Course.
That may have been right because no student can do the D.C.H. Course and the M D. Course simultaneously.
But the point of the matter is that if this Court were not to direct as an interim measure that the appellant should be allowed to prosecute his studies in M.D. Paediatrics (subject to the result of this Appeal), the appellant might have completed his D.C.H. Course and, subject to being admitted to the M.D. Course within a year or so from now he would have taken his M.D. Examination after passing the D.C.H. Examination.
The authorities concerned will bear in mind that the appellant should not be placed in a worse position than he would have been in, had he not filed this appeal.
Therefore, if the appellant has passed the examination, he should be declared to have passed it like any other student.
He should not be subjected to any disadvantage for the reason that he was not entitled initially to be admitted to the M.D. Course in Paediatrics.
If he has failed, he should be permitted to take the examination again (or again and again) in accordance with the rules of the University.
Since the result of the other students, who had appeared for the M.D. Examination along with the appellant, was declared in February 1981, we hope that the appellant 's result would be declared forthwith.
There will be no order as to costs.
N.V.K. Appeal dismissed.
| IN-Abs | The appellant applied for admission to the M.D. (Paediatrics) Course for the academic year 1979 80.
He had passed his M.B.B.S. Examination in December, 1976.
There were other students who had applied for admission along with the appellant.
Some of them had passed their M.B.B.S. Examination prior to December 1976 and had secured higher marks than the appellant.
The number of seats being limited, admissions were given according to merit and four students who had secured the highest number of marks were given preference to others regardless of the year in which they had passed their M.B.B.S. Examination.
The appellant filed a writ petition in the High Court challenging the E decision of the college by which he was denied admission.
The petition was dismissed summarily by a Division Bench on the ground that the relief of mandamus could not be granted since the appellant had.
failed to establish that any of his legal rights was violated.
In the appeal to this Court it was contended on behalf of the appellant that: (a) For many years in the past candidates who had passed the D.C.H. Examination were preferred for admission to the M.D. Course but that the University suddenly discontinued that practice, as a result of which he had to compete with others who had passed their M.B.B.S. Examination, and (b) the ratio 1:1 between teachers and students was relaxed from time to time by the University and that the appellant was discriminated against by the arbitrary refusal of the authorities to relax the ratio in his favour.
Dismissing the appeal, ^ HELD: The appellant has failed to make out a case of injury to any of his legal rights.
Because of interim orders passed by this Court directing the College and the University to admit the appellant to M.D. Course in Paediatrics, the College cancelled the appellant 's admission to the D.C.H. Course.
If the appellant has passed the M.D. Examination, he should be declared to have passed it like any other student.
He should not be subjected to any disadvantage for the 284 reason that he was not entitled initially to be admitted to the M.D. Course in Paediatrics.
If he has failed he should be permitted to take the examination again (or again and again) in accordance with the rules of the University.
Since the result of the other students, who had appeared for the M.D. Examination along with the appellant, was declared in February, 1981 the appellant 's result to be declared forthwith.
[287 B F] (a) There was no rule at any time requiring that an applicant seeking admission to the M.D. Course in Paediatrics had to pass his D.C.H. Examination.
That such a practice was recognised over many years or that such was the understanding of all concerned has been denied on behalf of the College.
Besides discontinuance of a mere practice cannot sustain a charge of injury to legal rights.
The practice had not ripened into a rule and the University was under no obligation to admit only those who had passed their D.C.H. Examination.
The appellant therefore cannot make a grievance of a change in the practice for admission to the M.D. Course.
[285 G 286 B] In the instant case no one was admitted to the M.D. Course who had secured lesser marks than the appellant.
He was sixth in order of merit and there were only four seats available.
[286 E] (b) If there is a power to relax the ratio, that power must be exercised reasonably and fairly.
It cannot be exercised arbitrarily to favour some students and to disfavour some others.
[286 G] In the instant case this point of discrimination was not taken in the writ petition filed in the High Court, not argued in the High Court, and not even mentioned in the Special Leave Petition.
The question as to whether the authorities have the power to relax the ratio and the further question as to whether that power has been exercised arbitrarily raise new points into which it is difficult to enquire for the first time.
This plea cannot therefore be entertained.
[286 H 287 A]
|
Appeal No 320 of 1955.
Appeal by special leave from the judgment and order dated October 19, 1954 of the Labour Appellate Tribunal of India at Bombay in Appeal No. 76 of 1954.
H. J. Umrigar, E. J. Muharir and Rameshwar Nath, for the appellant.
section W. Dhabe and R. A. Govind, for the respondent.
November 6.
The Judgment of the Court was delivered by VENKATARAMA AYYAR J.
The Central Provinces Transport Services Ltd., Nagpur, was, at the material dates, a public limited company, and the respondent was employed as a mechanic therein.
In June 1950, goods belonging to the Company were stolen, 958 and suspicion fell on the respondent.
There was an enquiry into the matter, and that resulted in his dismissal on June 28, 1950, on the ground of gross negligence and misconduct.
He was then prosecuted on a charge of theft, but that ended in his acquittal on March 3, 1952.
Thereafter, be applied to the Company to be reinstated, and failing to get redress, filed on October 1, 1952, an application before the Labour Commissioner under section 16(2) of the Central Provinces and Berar Industrial Disputes Settlement Act XXIII of 1947, hereinafter referred to as the Act, for reinstatement and compensation.
The Company resisted the claim on the ground, inter alia, that as the applicant had been dismissed on June 28, 1950, he was not an employee on the date of the applica tion, that accordingly there was no "industrial dispute touching the dismissal of an employee" as required by section 16, sub sections
(1) and (2) of the Act, and that, in consequence, the proceedings under that section were incompetent.
The Assistant Labour Commissioner, before whom the matter came up for hearing, agreed with this contention, and dismissed the application.
The respondent preferred a revision against this order to the Provincial Industrial Court ,under a. 16(5) of the Act, and by its order dated February 5, 1954, that Court held that a dismissed employee was an employee as defined in section 2(10) of the Act, that a dispute by such an employee was an industrial dispute within section 2(12) of the Act,.
and that the application under section 16(2) of the Act was therefore maintainable.
In the result, the order of dismissal was set aside and the matter remanded for enquiry on the merits.
Against that order, the Company appealed to the Labour Appellate Tribunal, which by its order dated October 19, 1954, affirmed the decision of the Provincial Industrial Court, and dismissed the appeal.
The Company has preferred the present appeal against this order under article 136.
Pending the appeal to this Court, the Company went into liquidation and has been taken over by the State of Madhya Pradesh, and is now being run under the name of Central Provinces Transport Services (under 959 Government ownership), Nagpur.
On the application of the respondent, the record has been suitably amended.
The point for decision in this appeal is whether an application for reinstatement and compensation by a dismissed employee is maintainable under section 16 of the Act.
That section, so far as is material to the Present question, runs as follows: "(1) Where the State Government by notification so directs, the Labour Commissioner shall have power to decide an industrial dispute touching the dismissal, discharge, removal or suspension of an employee working in any industry in general or in any local area as may be specified in the notification. "(2) Any employee, working in an industry to which the notification under sub section (1) applied may within six months from the date of such dismissal, discharge, removal or suspension, apply to the Labour Commissioner for reinstatement and payment of compensation for loss of wages".
The argument of Mr. Umrigar for the Appellant is that it is a condition prerequisite to the entertainment of an application for reinstatement under this section that there should be an industrial dispute touching the dismissal of an employee, that there was none such in this case, because the respondent was not an employee on the date of the application, having been dismissed long prior thereto and further because his dispute was an individual and not an industrial dispute.
It will be convenient at this stage to refer to the relevant provisions of the Act, as they stood on the material dates.
Section 2(10) defines an employee as follows: "employee" means any person employed by an employer to do any skilled or unskilled manual or clerical work for contract or hire or reward in any industry and includes an employee discharged on account of any dispute relating to a change in respect of which a notice is given under section 31 or 32 whether before or after the discharge".
Section 2(12) defines "industrial dispute" as meaning 960 "any dispute or difference connected with an industrial matter arising between employer and employee or between employers or employees".
Under section 2(13), "industrial matter" means "any matter relating to work, pay, wages, reward, hours, privileges, rights or duties of employers or employees, or the mode, terms and conditions of employment or refusal to employ and includes questions pertaining to (a) the relationship between employer and employee, or to the dismissal or non employment of any person. ') It is not disputed that a question of reinstatement is an industrial matter as defined in section 2(13) of the Act.
The controversy relates to the question whether it is an industrial dispute as defined in section 2(12) of the Act ' The contention of the appellant is that it does not fall within that definition., because the further condition prescribed by section 2(12) that it must be between an employer and employee is not satisfied.
It was argued by Mr. Umrigar that when the respondent was dismissed on June 28, 1950, his employment came to an end, and that he could not thereafter be termed an employee, as that word is ordinarily understood, that it could not have been the intention of the legislature to include in the definition of an employee even those who had ceased to be in service.
, as otherwise there was no need for the further provision in section 2(10) that discharged employees would in certain cases be employees; and that, in any event, the inclusive portion of the definition would, on the principle Expressio unius est exclusive alterius, operate to exclude all exemployees, other than those mentioned therein.
The question whether a dismissed employee is an employee as defined in section 2(10) of the Act must be held to be practically concluded by the decision of the Federal Court in Western India Automobile Association vs Industrial Tribunal, Bombay(1).
There, the point for determination was whether a claim for reinstatement by a dismissed workman was an industrial dispute as defined in section 2(k) of the XIV of 1947.
It was held that the definition in section 2(k) including as it did, all disputes or (1) 961 differences in connection with employment or non employment of a person was sufficiently wide to include a claim for reinstatement by a dismissed workman.
Counsel for the appellant sought to distinguish that decision on the ground firstly, that it was given on a. statute different from what we are concerned with in this appeal, and secondly, that the reference there, included other items of dispute, which un doubtedly fell within the Act, and the question of reinstatement took its complexion from those items.
We do not see any force in.
either of these contentions.
Section 2(12) and section 2(13) of the Act are substantially in pari materia with section 2(k) of Act XIV of 1947, and the ratio of the decision in Western India Automobile Association vs Industrial Tribunal, Bombay (supra) will be as much applicable to the one enactment as to the other.
, Nor does it make any difference that there were comprised in the reference other items which fell within the definition under section 2(k), because if the Government had no jurisdiction under the Act to refer the question of reinstatement of dismissed employee for adjudication, ' then the to that extent, be treated as a nullity,reference must, and it would be immaterial that it was intravires as regards the other items of dispute.
We are also unable to accede to the contention of the appellant that the inclusive clause in section 2(10) of the Act, is an indication that the legislature did not intend to include within that definition those who had ceased to be in service.
In our opinion, that clause Was inserted ex abuNdanti cautela to repel a possible contention that employees discharged under sections 31 and 32 of the Act would not fall within section 2 (10), and cannot be read as importing an intention generally to exclude dismissed employees from that definition.
On the other hand, section 16 of the Act expressly provides for relief being granted to dismissed em ployees by way of 'reinstatement and compensation, and that provision must become useless and inoperative, if we are to adopt the construction which the appellant seeks to put on the definition of employee in section 2(10).
We must accordingly bold agreeing with 125 962 the decision in Western India Automobile Association V. Industrial Tribunal, Bombay (supra) that the definition of "employee" in the Act would include one who has been dismissed and the respondent cannot be denied relief only by reason of the fact that he was iiot in employment on the date of the application.
It was next contended that even assuming that the respondent was an "employee" as defined in section 2 (10) of the Act, his dimissal could not be held to be an industrial dispute as defined in section 2(12), because that term properly meant that the dispute was one between employer on the one hand and the industry represented by its workmen as a class on the other, and that a dispute between the employer and a single employee would be an individual dispute and would therefore be outside the purview of a. 2(12).
It was argued in support of this contention that the object of all tabour legislation was not so much to deal with individual rights of workmen, for the enforcement of which there was an appropriate forum in the ordinary courts of the land as to regulate the relation between capital and labour, treating them as distinct entities, so that public peace and order might not be disturbed and production might not suffer, and for that end, to recognise the right of labour to speak and act as a body for the protection of its common interests and to provide a machinery for speedy settlement of disputes which that body might raise; and that it could not have been the intention of the legislature, where the above considerations did not operate, to interfere with the normal relations between employer and employee under the law and to provide an additional forum to the employee to vindicate his rights.
Reliance was placed in support of this contention on decisions of the Madras, Calcutta and Patna High Courts and of Industrial Tribunals.
The question whether a dispute by an individual workman would be an industrial dispute as defined i section 2(k) of the Act XIV of 1947, has evoked considerable conflict of opinion both in the High Courts and in Industrial Tribunals, and three different views have been expressed thereon: (I) A dispute which concerns 963 only the rights of individual workers, cannot be held to be an industrial dispute.
That was the opinion expressed in Kandan Textiles vs Industrial Tribunal(1).
There, Rajamannar C. J. observed that though the language of the definition in section 2(k) was wide enough to include such a dispute, the provisions of section 18 suggested that something more than an individual dispute between a worker and the employer was meant by an industrial dispute.
The other learned Judge, Mack J., was more emphatic in his opinion, and observed that the Act was "never intended to provide a machinery for redress by a dismissed workman".
It became, however, unnecessary to decide the point, as the court came to the conclusion that the reference it self was bad for the reason that there was no material on which the Government could be satisfied that there was a dispute.
The views expressed in Kandan Textiles vs Industrial Tribunal (supra) were approved in Manager, United Commercial Bank Ltd. V. Commissioner of Labour(2); but here again, the observations were obiter, as the point for decision was whether a right of appeal conferred by section 41 of the Madras Shops and Establishments Act XXXVI of 1947 was taken away by implication by Act XIV of 1947.
The question, however, arose directly for decision in J. Chowdhury vs M. C. Banerjee(3), in which the order of the Government referring the dispute of a dismissed employee to the adjudication of a Tribunal was attacked as incompetent, and it was held by Mitter J., following the observations in Kandan Textiles V. Industrial Tribunal (supra) that the dispute in question was not an industrial dispute, and that the reference was, in consequence, bad.
(11)A dispute between an employer and a single employee can be an industrial dispute as defined in section 2(k).
That was the decision in Newspapers Ltd., Allahabad vs State Industrial Tribunal, U.P. (i).
In that case a reference of a dispute by a dismissed employee and the award of the Tribunal passed on that refer (1) A.I.R. (2) A.I.R. 1951 Mad. 141.
(8) (4) A.I.R. 1954 All.
516, 964 ence were attacked as bad on the ground that the dispute in question was not an industrial dispute within section 2(k) of Act XIV of 1947, and it was held by Bhargava J., that an industrial dispute could come into existence even if the parties thereto were only the employer and a single employee and that the reference and the award were, in consequence, valid.
A similar decision was given by a Full Bench of the Labour Appellate Tribunal in Swadeshi Cotton Mills Company Ltd. vs Their Workmen(1).
(III) A dispute between an employer and a single employee cannot per se be an industrial dispute, but it may become one if it is taken up by the Union or a number of workmen.
That was held by Bose J., in Bilash Chandra Mitra vs Balmer Lawrie & Co.(2), by Ramaswami and Sarjoo Prosad JJ., in New India Assurance Co. vs Central Government Industrial Tribunal(3) and by Balakrishna Ayyar J., in Lakshmi, Talkies, Madras vs Munuswami and others(4) and by the Industrial Tribunals in Gordon Woodroffe & Co. (Madras).
Ltd. vs Appa Rao(5) and Lynus & Co. vs Hemanta Kumar Samanta(6).
The preponderance of judicial opinion is clearly in favour of the last of the three views stated above, and there is considerable reason behind it.
Notwithstanding that the language of section 2(k) is wide enough to cover a dispute between an employer and a single employee, the scheme of the does appear to contemplate that the machinery provided therein should be set in motion, to settle only disputes which involve the rights of workmen as a class and that a dispute touching the individual rights of a workman was not intended to be the subject of an adjudication under the Act, when the same bad not been taken up by the Union or a number of workmen.
If that were the correct position, the respondent was not entitled to apply under section 16(2) of the Act as the workmen in the industry had not adopted his dispute as their own and chosen to treat it as (1) (3) A.I.R. 1953 Patna 321.
(5) (2) A.I.R. 1953 Cal. 613.
(4) (6) 965 their ' casus belli with the Company.
But then, we are directly concerned in this appeal not with the XIV of 1947 but with the Central Provinces and Berar Industrial Disputes Settlement Act XXIII of 1947, and in the view which we take of the rights of the respondent under that statute, there is no Deed to express a final opinion on the question whether a dispute simpliciter between an employer and a workman would be an industrial dispute within 9. 2(k) of Act XIV of 1947.
Now, the Central Provinces and Berar Industrial Disputes Settlement Act XXIII of 1947 with which we are concerned, is not in pari materia with Act XIV of 1947.
It no doubt covers the ground occupied by that Act, and contains provisions relating to arbitration, adjudication, awards, strikes and lock outs.
But it contains more.
It enacts in Ch.
IV provisions which are intended to regulate the contract of employment between employer and workmen, a subject which is covered by a distinct piece of Central legislation, Industrial Employment (Standing Orders) Act XX of 1946.
The object of that Act was, as appears from the preamble thereto, "to require employers in industrial establishments formally to define conditions of employment under them", whereas the object of the XIV of 1947 is, as set out in its preamble, "to make provision for the investigation and settlement of industrial disputes and for certain other purposes".
Thus, even though the two enactments are pieces of what is termed labour legislation, their objects and their vision are different.
While Act XIV of 1947 may be said to be primarily concerned with disputes of labour as a class Act XX of 1946 is directed to getting the rights of an employee under a contract defined.
Now, as the Central Provinces and Berar Industrial Disputes Settlement Act XXIII of 1947 covers the ground occupied by both Act XX of 1946 and Act XIV of 1947, it would be proper to interpret the expression "industrial dispute" therein in a sense wider than what it bears in Act XIV of 1947, so as to cover not only disputes of workmen as a class but also their individual disputes.
966 And this view receives considerable support from other provisions of the Act.
Section Al enacts that an ap plication under that section can be made either by an employer or employee concerned or by a representative of the employees concerned.
Section 2(24) defines "representative of employees" as meaning a union or where there is no union, persons elected by the employees not exceeding five.
Thus, there is a clear recognition of the rights of an individual employee as distinguished from a class of employees, to move for redress.
It is argued by Mr. Umrigar that this re cognition is only for the purpose of section 41 and that no inference can be drawn therefrom that the employee has a similar right to apply under section 16(2).
But the importance of section 41 consists in this that it indicates that the Act has in contemplation the enforcement of individual rights of workmen also.
Then we have section 53, which runs as follows: "Save with the permission of the authority holding any proceeding under this Act, no employee shall be allowed to appear in such proceeding except through the representative of employees: Provided that where only a single employee is concerned he may appear personally".
, This section again recognises the rights of employees to agitate their individual rights under the provisions of the Act.
Section 16 is intended, in our opinion, to enable an employee to enforce his individual rights when there is an order of dismissal, discharge, removal or suspension, and in the context, "industrial dispute" must be interpreted as including the claim of an employee who has been dismissed, for reinstatement and compensation.
The view taken by the Industrial Court and the Labour Appellate Tribunal as to the meaning of "industrial dispute" in the Central Provinces and Berar Industrial Disputes Settlement Apt XXIII of 1947" is therefore correct, and this appeal must be dismissed with costs.
Appeal dismissed.
APPENDIX Reference to the memory of late Dr. Bijan Kumar Mukherjea, Ex Chief Justice of India, by the Judges and members of the Bar of the Supreme Court of India assembled at a meeting on February 23, 1956.
section R. DAS, C.J. Mr.
Attorney General we have met here today under the shadow of death to mourn the passing away of one who only the other day was our Chief Justice and beloved leader.
He had been ailing for some time but we did not anticipate that his end was so near.
Therefore, when the melancholy news came suddenly over the wires, my colleagues and I felt a severe shook as all of you must also have done.
We have assembled here today to pay our respectful homage to the memory of our departed leader.
Bijan Kumar Mukherjea was born on August 15 ' 1891.
His father late R. D. Mukherjea was a Sanskrit ' scholar.
He was a Vakil of the Calcutta High Court but used to practice at Hooghly.
Mukherjea had his early education at Hooghly and thereafter at Calcutta.
He obtained his Master 's Degree in History.
In B.L. and M.L. examinations he topped the list of successful candidates and secured University gold medals.
He was Ananth Deb Research Prizeman.
Bijan Kumar Mukherjea was enrolled as a Vakil o the Calcutta High Court on the Appellate Side on January 9, 1914.
Shortly thereafter Sir Ashutosh Mookerjee, who had an eye for discovering talents, offered him a lectureship in the University Law College.
This was a great help to the struggling junior and indeed, changed the whole course of his life and career, for the stipend, meager as it was, enabled him to struggle at the Bar of the Calcutta High Court instead of moving to Patna where a new High Court had recently been set up.
His rise at the Bar was not meteoric but was a steady one.
He passed through the hard trial but momentary disappointments or set backs did not dim his enthusiasm or dishearten him.
While practising at the Bar, he 126 968 secured his Doctorate in Law.
His academic distinctions and studious habit stood him in good stead.
His scholarly erudition, good grounding in legal principles and deep insight into human nature soon brought him to the forefront of the profession.
To his legal learning and forensic skill was added a graceful style of advocacy ,Which was entirely his own.
His merit was soon recognised and in or about 1934 he was appointed the junior Government Pleader and within two years the senior Government Pleader.
True to tradition he was elevated to the High Court Bench in 1936 Distinguished as an Advocate he became greater as a Judge.
His sweet temper and amiable disposition endeared him to his colleagues as well as to the members of the Bar and particularly to the junior members.
I am happy to bear testimony to his kindness, courtesy and consideration for his colleagues for I had the privilege of sitting with him on the Bench of the Calcutta High Court.
In 1947 he served on the Boundary Commission.
In 1948 Bijan Kumar Mukherjea along with Shri Mehr Chand Mahajan, who happily is with us, was called upon to serve as a Judge of the Federal Court.
He readily responded to the call of duty and came all the way to New Delhi leaving at Calcutta his only son to whom he had been both a father and a mother.
In the midst of his work on the Bench, he could find time to prepare and deliver his Tagore Law Lectures on the Hindu Law of Endowments.
On the retirement of Shri Mahajan on December 23, 1954, Mukherjen, became the the fourth Chief Justice of this Court.
He brought with him here his profound legal scholarship, a clear thinking and rational mind and a burning sense of justice.
The Law Reports will bear testimony to his sound erudition, and his masterly grasp of the fundamental principles which lie at the root of our legal system.
His judgments had a freshness and a compactness and were not mere collections of precedents.
He delved deep into the foundations of the law and analysed the underlying principles with clarity and precision.
By his judgments he made 969 priceless contributions to our legal literature.
As a Judge he shed lustre on the High Court at Calcutta as well as on this Court.
His energy was not confined to law only.
He was closely associated with the Scout movement in Bengal.
He was a profound Sanskrit scholar and earned the degree of Saraswati.
Perhaps he imbibed his Sanskrit scholarship from his revered father.
He became President of the Bengal Sanskrit Association.
He was also a Fellow of the Calcutta University.
He was also a good student of philosophy.
He had sensitive and fine literary tastes and he could recite from memory long passages from Tagore 's works as well as from the works of Sanskrit and English poets.
He was an essentially religious main with a scrupulously chaste character.
He was pure in thought, word and deed.
Mukherjea was loved and respected because of his deep human sympathy, piety and the nobility of his character.
He drew people towards him and radiated a serenity on all who came into contact with him.
I have heard more than one person say that on returning home after a visit to Mukherjea he felt that he had returned as a better man.
He was ailing and undergoing suffering and pain and death must have brought relief and deliverance to him.
But by his premature retirement and death our Court and country have lost an illustrious Chief Justice, an erudite scholar, a sound jurist and above all, a great gentleman and we, who had the privilege of working with him and sharing our joys and sorrows with him, have lost a brilliant colleague, a respected leader and a lovable friend.
We mourn his death as a personal loss and we pay our respectful homage and sincere tribute of appreciation and affection to the memory of the great departed soul.
May his soul rest in eternal peace.
We also offer our sincere sympathies to his son who is an Advocate of this Court.
M. C. Setalvad, Attorney General of India.
My Lords, The Bar respectfully associates itself with all that has fallen from my Lord the Chief Justice.
970 His ill health followed by his painful illness which led to his premature retirement made us all feel that he would not be with us for long.
Yet when the news of the end came, so endearing was his personality and so great his kindness to everyone who came it contact with him, that all of us were deeply touched.
Rarely has one the privilege of appearing before a Judge with such a deep knowledge of fundamental principles in all branches of the law and an unfailing and quick grasp of legal issues.
Whether it was a question relating to Hindu Religious Endowments, a subject in which he had made extensive research, or a constitutional question or a question of the law of contract his piercing intellect and analytical mind immediately perceived the points that arose, the Counsel had to be prepared to deal with a series of searching questions on all the legal aspects which arose.
His erudition in law is writ large in the numerous judgments delivered by him scattered over the reports of this Court during the last six years.
His masterly exposition of the doctrine of equality before the law in Cheranjitlal 's case and his analysis of the law of frustration of contract with a view to show that in India it had its roots not in the theory of a term implied by the parties but in a positive statutory provision, are landmarks in the development of our law of the Constitution and our law of contract.
Truly did Justice Douglas of the United States speak in his recently delivered Tagore ' Law Lectures of the march of.
legal doctrine from Marshall to Mukherjea.
Nor were his interests confined to the sphere of law.
He was a keen student of philosophy and literature, had a profound knowledge of Sanskrit and was deeply interested in all literary and cultural problems.
He had a prodigious memory and even a few minutes with him gave one glimpses of many an interesting event in the history and politics of Bengal.
Great as a Judge and a learned scholar, he was, I think, even greater as a man.
Simple and unassuming, gentle and kind, frank and outspoken, he won the affection of all who.
came to know him.
A few months 971 ago, a member of the Bar was brought before a Bench over which he presided to answer a charge of misconduct which he admitted.
Considering the question of punishment, the late Chief Justice asked Counsel assisting the Court whether it would be just to punish the Advocate with a year 's suspension when he had a family dependent on his professional earnings.
That was a question truly characteristic of him and showed his kindly heart.
We at the Bar voice our deep grief at the sad demise of a great and distinguished Chief Justice and extend our warm sympathies to his bereaved family.
| IN-Abs | In June, 1950, goods belonging to the appellant company were stolen and as the result of an enquiry the respondent was dismissed on the ground of gross negligence and misconduct.
He was prosecuted on a charge of theft but was acquitted in March, 1952, and thereupon he made an application before the Labour Commissioner 957 for reinstatement and compensation under section 16(2) of the Central Provinces and Barar Industrial Disputes Settlement Act, 1947.
It was contended for the appellant that the application was not main tainable because (1) the respondent was not an employee on the date of the application, having been dismissed long prior thereto and (2) his dispute was an individual and not an industrial dispute Held, (1) that the definition of "employee" in section 2(10) of the Act includes one who has been dismissed and has ceased to be in service, and that the inclusive clause therein was inserted ex abundanti cautela to repel a possible contention that employees discharged under sections 31 and 32 of the Act would not fall with Ins. 2(10) and cannot be read as importing an intention generally to exclude dismissed employees from that definition.
Western India Automobile Association vs Industrial Tribunal Bombay ([1949] F.C.R. 321), relied on.
(2) that a dispute between an employer and an employee who has been dismissed and who makes a claim for reinstatement and compensation, would be an industrial dispute within the meaning of section 2(12) of the Act, and section 16 enables the employee to enforce his individual rights against an order of dismissal, discharge, removal or suspension.
Quaere, whether a dispute simpliciter between an employer and a workman would be an industrial dispute within section 2(k) of the (XIV of 1947).
|
Civil Appeal No. 662 of 1981 Appeal by special leave from the judgment and order dated the 15th January, 1981 of the Bombay High Court in Letters Patent Appeal No. 611 of 1980.
Soli J. Sorabji G.L. Sanghi, P.H. Parekh, P.K. Shroff and Gautam Philips for the Appellant.
R.P. Khambata, B.R. Agarwala, K.P. Khambata, Ashok C. Mehta and Miss Halida Khatun for Respondent No. 1.
K.K. Venugopal, R. Vaidya, M.B. Rele, Rajiv K. Garg and N.D. Garg for Respondent No. 2.
The following judgments were delivered: FAZAL ALI, J.
This appeal by special leave is directed against an Order dated January 15, 1981 of the Division Bench of the Bombay High Court by which the appeal filed by the appellant against the Order of the Trial Judge was dismissed on the ground that the appeal was not maintainable as the Order impugned was 197 not a judgment within the meaning of clause 15 of the Letters Patent of the High Court.
After hearing counsel for the parties at great length we passed the following Order on April 22, 1981: "We have heard counsel for the parties at great length.
In our opinion, the appeal before the High Court was maintainable and the High Court should have entertained and decided it on merits.
We, therefore, allow this appeal, set aside the judgment dated January 15, 1981 of the Division Bench of the Bombay High Court and remand the case to the same and decide it on merits.
The High Court will dispose of the appeal as quickly as possible.
The interim order passed by this Court on February 16, 1981 will continue until the High Court disposes of the appeal.
Liberty to parties to approach the High Court for fixing an early date of hearing.
In the circumstances, there will be no order as to costs.
Reasoned judgment will follow.
" We now set out to give the reasons for the formal Order allowing the appeal which was passed by us on the aforesaid date.
As we are not at all concerned with the facts of the case it is not necessary to detail the same in this judgment.
Suffice it to say that the plaintiff appellant had filed a suit on the original side of the Bombay High Court for specific performance of a contract and prayed for an interim relief by appointing a receiver of the suit property and injuncting the defendant from disposing of the suit property during the pendency of the suit.
The single Judge after hearing the notice of motion dismissed the application for appointment of receiver as also for interim injunction.
Thereafter, the plaintiff appellant filed an appeal before the Bombay High Court which dismissed the appeal as being non maintainable on the ground that the Order impugned (order of the Single Judge) was not a judgment as contemplated by clause 15 of the letters patent of the High Court.
Hence, this appeal by special leave.
The substantial questions of law raised in this appeal by the Counsel for the parties are as to the scope, ambit and meaning of 198 the word 'judgment ' appearing in clause 15 of the Letters Patent of the Bombay High Court and corresponding clauses in the Letters Patent of other High Courts.
We might mention here that the significance of the word 'judgment ' assumes a special importance in those High Courts which have ordinary civil jurisdiction depending on valuation of the suit or the action.
These High Courts are Calcutta, Bombay, Madras as also Delhi and Jammu & Kashmir.
The other High Courts do not have any ordinary civil jurisdiction but their original jurisdiction is confined only to a few causes like probate and administration, admiralty and cases under .
It seems to us that the interpretation of the word 'judgment ' appearing in the Letters Patent of the High Court has been the subject matter of judicial interpretation by decisions rendered by various High Courts in India.
Unfortunately, however, the decisions are by no means consistent or unanimous.
On the other hand, there appears to be a serious divergence of judicial opinions and a constant conflict between the High Courts regarding the true scope, ambit and meaning of the word 'judgment ' appearing in the Letters Patent so much so that a colossal controversy has been raging in this country for more than a century.
Several tests have been laid down by leading judgments of the Calcutta, Madras and Rangoon High Courts.
Other High Courts have either followed one or the other of the leading judgments regarding the validity of the tests laid down by the three High Courts.
The Calcutta High Court appears to have followed the leading case of its court in The Justices of the Peace for Calcutta vs The Oriental Gas Company where Sir Richard Couch, C.J. had laid down a particular test on a rather strict and literal interpretation of the Letters Patent.
Later decisions of the Calcutta High Court have followed this decision of Sir Richard Couch, C.J. with some modifications and clarifications.
The Madras High Court has taken a very liberal view in its decision in T.V. Tuljaram Row vs M.K.R.V. Alagappa Chettiar.
The Bombay High Court seems to have consistently taken the view that no interlocutory order can ever be said to be a judgment within the meaning of the Letters Patent so as to be appealable from the order of a Single Judge exercising original civil jurisdiction (hereinafter referred to as 'Trial Judge ') to a larger Bench.
The Rangoon High Court speaking through Sir Page, C.J. in In Re Dayabhai Jiwandas & Ors vs A.M.M. Murugappa Chettiur has placed a very narrow interpretation on 199 the term 'judgment ' and has almost equated it with a decree passed by a civil court.
This Court also has incidentally gone into the interpretation of the word 'judgment ' and has made certain observations but seems to have decided the cases before it on the peculiar facts of each case without settling the conflict or the controversy resulting from the divergent views of the High Courts.
This Court, however, has expressed a solemn desire and a pious wish that the controversy and the conflict between the various decisions of the High Courts has to be settled once for all some time or the other.
In this connection, in Asrumati Debi vs Kumar Rupendra Deb Raikot & Ors.
this Court observed as follows: "In view of this wide divergence of judicial opinion, it may be necessary for this Court at some time or other to examine carefully the principles upon which the different views mentioned above purport to be based and attempt to determine with as much definiteness as possible the true meaning and scope of the word 'judgment ' as it occurs in clause 15 of the Letters Patent of the Calcutta High Court and in the corresponding clauses of the Letters Patent of the other High Courts.
We are, however, relieved from embarking on such enquiry in the present case as we are satisfied that in none of the views referred to above could an order of the character which we have before us, be regarded as a 'judgment ' within the meaning of clause 15 of the Letters Patent".
(Emphasis supplied) Similarly, in the case of State of Uttar Pradesh vs Dr. Vijay Anand Maharaj, this Court noticed the divergence of judicial opinions on the subject and observed as follows : "The scope of the expression "judgment" came under the judicial scrutiny of the various High Courts, there is a cleavage of opinion on that question. . . 200 The foregoing brief analysis of judgment shows that the definition given by the Madras High Court is wider than that given by the Calcutta and Nagpur High Courts.
It is not necessary in this case to attempt to reconcile the said decision or to give a definition of our own, for on the facts of the present case the order of Mehrotra, J., would be a judgment within the meaning of the narrower definition of that expression".
After, however, analysing the various judgments this Court did not think it necessary to give any definition of its own and refrained from giving a final decision on the question as to the scope and meaning of the word 'judgment ' appearing in the Letters Patent.
Mudholkar, J. in his concurring judgment expressly refrained from expressing any opinion on the subject.
Again in a later decision in Shankarlal Aggarwal & Ors.
vs Shankarlal Poddar & Ors.
the conflict in the various decisions of various High Courts was again noticed and this Court observed as follows: "There has been very wide divergence of opinion between the several High Court in India as to the content of the expression 'judgment ' occurring in Cl.
15 of the Letters Patent. . .
We consider that occasion has not arisen before us either since in view of the construction which we have adopted of section 202 of the Indian the scope of the expression 'judgment ' in the Letters Patent does not call for examination or final decision".
(Emphasis ours) There are other decisions of this Court also which have touched the fringes of the question but did not choose to give a final verdict on the vexed question and preferred to decide the cases on their own facts.
We shall briefly refer to these decisions at a later stage of this judgment.
With due deference to the desire of this Court to settle the controversy in question once for all, the very able, detailed and lengthy arguments advanced by counsel for the parties on various shades, features and aspects of the interpretation of the word 'judg 201 ment ' appearing in the Letters Patent, the serious legal controversy raging in this country for over a century between the various High Courts resulting in an irreconciliable element of judicial uncertainty in the interpretation of the law and further having regard to the huge backlog and accumulation of arrears in the High Courts, we are clearly of the opinion that the time has now come when the entire controversy on the subject should be set at rest and an authoritative pronouncement on the matter may be given by us so as to maintain complete consistency in deciding the matter by the High Courts whenever it arises.
Mr. Sorabjee, learned counsel for the appellants has submitted four important points of law dwelling on the various facts of the question at issue: (1) It was contended that the provisions of section 104 read with order 43 Rule 1 of the Code of Civil Procedure, 1908 (hereinafter referred to as 'Code of 1908 ') does not impose any bar on the trial held by the Trial Judge and thus by virtue of these provisions the order impugned (the order of the trial court refusing to appoint Receiver and to grant injunction) falls squarely under clauses (r) and (s) of order 43 Rule 1 of the Code of 1908 and is therefore appealable to a larger Bench.
In amplification of this contention it was submitted that the Trial Judge is governed by the procedure prescribed by the Code of 1908 in all matters and hence there is no reason why order 43 Rule 1 should not apply to any order passed by the Trial Judge under any of the clauses of order 43 Rule 1 read with section 104.
(2) Even if we assume that the Letters Patent was a special law which overrides the provisions of the Code of Civil Procedure, the power under section 104 read with order 43 Rule 1 is in no way inconsistent with cl. 15 of the Letters Patent.
Section 104 merely provides an additional remedy and confers a new jurisdiction on the High Court without at all interfering with or overriding the existing provisions of the Letters Patent.
202 (3) Even if order 43 Rule 1 did not apply in terms, the orders which have been mentioned as being appealable to a larger Bench could form valuable guidelines for the Court in arriving at the conclusion that such orders amount to judgments of the Single Judge as contemplated by the Letters Patent.
(4) Even if section 104 read with order 43 Rule 1 does not apply, an order refusing to appoint a receiver or to grant injunction has the trappings and attributes of finality as it affects valuable rights of the plaintiff in an ancillary proceeding though the suit is kept alive and would, therefore, amount to a judgment within the meaning of the Letters Patent.
The learned counsel for the respondents while countering the arguments of Mr. Sorabjee submitted the following propositions: (1) section 104 read with order 43 Rule 1 could not apply to the original trial by the Trial Judge which is governed by the Letters Patent alone.
(2) It was further argued that the forum for an appeal contemplated by section 104 is the same as that for appeals under sections 96 to 100 of the Code of 1908, that is to say, appeals from the courts in the mofussil (district courts) to the High Court and it has no application to internal appeals within the High Court.
In other words, the forum under which an appeal lies from one Judge of the High Court to a larger Bench is not a forum contemplated by section 104 at all but is created by the Letters Patent.
(3) If section 104 of the Code of 1908 is held to be applicable to proceedings before the Trial Judge of the High Court certain strange anomalies will arise, viz., where an appeal lies from a district court under order 43 Rule 1 before a Single Judge, a further appeal will have to lie before a larger Bench against the order of the Trial Judge although section 104 prevents a second appeal against miscellaneous orders under order 43 Rule 1 and permits only one appeal.
This will, therefore, lead to an inconsistent and anomalous position.
203 (4) The word 'judgment ' should be strictly construed as was done by Sir Richard Couch, C.J. in Oriental Gas Company 's case (supra) so as to include only those orders of the Trial Judge which are of a final nature and effectively decide the controversy of the issues in dispute.
We would first deal with the point relating to the applicability of section 104 read with order 43 Rule 1 of the Code of 1908 because it seems to us that the arguments of Mr. Sorabjee on this score are well founded and must prevail.
Moreover, some of the decisions of this Court, those of the Privy Council and other High Courts support the propositions adumbrated by Mr. Sorabjee.
In order, however, to appreciate the applicability of section 104 read with Order 43 Rule 1, it may be necessary to examine some important provisions of the Code of Civil Procedure as also the previous history which led to the enactment of section 104 by the Code of 1908.
It appears that prior to the Code of 1908 in the earlier Code of Civil Procedure there were two kinds of appeals to the High Court (1) appeals against judgments and decrees of the Trial Judge, and (2) appeals against orders, either interlocutory or quasi final, passed by the court during the pendency of the suit or proceedings.
In the Civil Procedure Code of 1877 the section corresponding to order 43 Rule 1 of the Code of 1908 was section 588 which provided for appealable orders under clauses (a) to (t).
Section 588 of the Code of 1877 provided that an appeal from any order specified in section 588 shall lie to the High Court or when an appeal from any other order is allowed by the Chapter it would lie to the Court to which an appeal would lie from the decree in the suit in respect of which such order was made or when such order is passed by a court other than the High Court, then to the High Court.
A perusal of sections 588 and 589 of the Code of 1877 would clearly show that the statute made no distinction between appeals to the High Courts from the district courts in the mofussils or internal appeals to the High Courts under the Letters Patent.
Section 591 clearly provided that except the orders mentioned in section 588 no further appeal could lie from any order passed by any court in exercise of its original or appellate jurisdiction.
Section 591 may be extracted thus: "591.
No other appeal from orders; but error therein may be set forth in memorandum of appeal against decree.
204 "Except as provided in this chapter, no appeal shall lie from any order passed by any Court in the exercise of its original or appellate jurisdiction but if any decree be appealed against, any error, defect or irregularity in any such order, affecting the decision of the case, may be set forth as a ground of objection in the memorandum of appeal".
In other words, the position was that while the statute provided only for appeals against orders, all other appeals could only be against a decree passed by the court concerned.
The statute there fore, did not contemplate any other appeal except those mentioned in sections 588 and 591.
The Code of 1877 was later on replaced by the Code of 1882 but the provisions remained the same.
In view of the rather vague and uncertain nature of the provisions of sections 588 to 591 a serious controversy arose between the various High Courts regarding the interpretation of section 588.
The Bombay and Madras High Courts held that under cl. 15 of the Letters Patent of the said High Courts, an appeal could lie only from orders passed under section 588 and not even under the Letters Patent.
In Sonba 'i vs Ahmedbha 'i Habibha 'i a Full Bench of the Bombay High Court held that under cl. 15 of the Letters Patent an appeal to the High Court from an interlocutory order made by one of the Judges lies only in those cases in which an appeal was allowed under the Code of Civil Procedure, that is to say, under sections 588 and 591 of the Code of 1877.
The Madras High Court in Rajgopal & Ors (in Re: L.P.A. No. 8 of 1886 took the same view.
Then came the decision of the Privy Council in the case of Hurrish Chunder Chowdry vs Kali Sundari Debia which while considering section 588 made the following observations: "It only remains to observe that their Lordships do not think that section 588 of Act X of 1877, which has the effect of restricting certain appeals is from one of the Judges of the Court to the full Court." (Emphasis ours) 205 This judgment gave rise to a serious conflict of opinions in the High A Courts in India.
The High Courts of Calcutta, Bombay and Madras held that in view of the decision of the Privy Council in the aforesaid case, even though an order may not have been appealable under section 588 it could be appealable provided it was a judgment within the meaning of cl. 15 of the Letters Patent of the respective High Courts.
Toolsee Money Dassee vs Sudevi Dassee,, Secretary of State vs Jehangir; Chappan vs Modin Kutti, However, the Allahabad High Court in Banno Bibi vs Mehdi Husain held that if an order was not appealable under sections 588 and 591 of the Code of 1877 it could not be appealed against even under the Letters Patent of the High Court.
This view was affirmed by a later decision of the same High Court in Muhammad Naim ul Lah Khan vs Ihsan ul Lah Khan.
With due respect we would like to point out that the pointed and terse observations of the Privy Council did not leave any room for any doubt or speculation in the matter.
While construing section 588, the Judicial Committee in Hurrish Chunder Chowdry 's case (supra) had made it clear that appeals would lie under section 588 to the High Court and the section did not contain any restriction to the effect that appeal against the orders of the Trial Judge mentioned in section 588 would not lie to a larger Bench of the High Court.
In other words, the Privy Council intended to lay down clearly that section 588 did not affect nor was it inconsistent with the provisions of the Letters Patent and hence those orders of the Trial Judge which fell beyond section 588 could be appealable to a larger Bench under the Letters Patent if those orders amounted to judgment within the meaning of cl. 15 of the Letters Patent.
Therefore, the views taken by the Calcutta, Bombay and Madras High Courts, referred to above, were undoubtedly correct.
At any rate, since a fresh controversy had arisen, the legislature stepped in to settle the controversy by enacting the new section 104 in the Code of 1908.
Section 104 made it clear that appeals against orders mentioned in order 43 Rule 1 were not in any way inconsistent with the Letters Patent and merely provided an additional remedy by allowing appeals against miscellaneous Orders passed by the Trial Judge to a larger Bench.
In other words, the legislature gave full statutory effect to the views of the Calcutta, 206 Bombay and Madras High Courts.
Even after the introduction of section 104, the conflict between the various High Courts still continued as to whether or not section 104 would apply to internal appeals in the High Court.
That is the question which we shall now discuss.
To begin with, it is not disputed that a Trial Judge has to follow the entire procedure laid down by the Code of 1908 starting from the presentation of the plaint right up to the delivery of the judgment.
The only difference in the assumption of jurisdiction by the High Court is that a suit of a particular valuation has to be instituted in the High Court rather than in the District court.
Secondly, it is indisputable that any final judgment that the Trial Judge passes deciding the suit one way or the other amounts to a decree and under the provisions of the Letters Patent an appeal lies to a larger Bench which normally is a Division Bench as provided for under the Rules made by various High Courts.
Thirdly, the Letters Patent itself does not define the term 'judgment ' and has advisedly not used the word 'decree ' in respect of any judgment that may be given by the Trial Judge.
Section 5 of the Code of 1908 may be extracted thus: "5.
Application of the Code to Revenue Courts: (1) Where any Revenue Courts are governed by the provisions of this Code in those matters of procedure upon which any special enactment applicable to them is silent the State Government may, by notification in the Official Gazette, declare that any portions of those pro visions which are not expressly made applicable by this Code shall not apply to those Courts, or shall only apply to them with such modifications as the State Government may prescribe.
(2) "Revenue Court" in Sub section (1) means a court having jurisdiction under any local law to entertain suits of other proceedings relating to the rent, revenue or profits of land used for agricultural purposes, but does not include a Civil Court having original jurisdiction under this Code to try such suits or proceedings as being suits or proceedings of a civil nature " The importance of this section is that wherever the provisions of the Code of Civil Procedure are sought to be excluded by any special enactment which may be silent on the point, the State 207 Government can by notification apply the provisions of the Code to Revenue courts.
A bare perusal of this section would clearly reveal that excepting Revenue courts all other Civil courts would normally be governed by the provisions of the Code of Civil Procedure in the matter of procedure.
Section 4(1) of the Code of 1908 which is a saving provision clearly provides that in the absence of any specific provision to the contrary the provisions of the Code does not limit or affect any special or local law.
Thus, the test contained in section 4 is not applicable in the instant case because even if the Letters Patent of the High Court be deemed to be a special law as contemplated by section 4, the provisions of section 104 do not seek to limit or affect the provisions of the Letters Patent.
This now takes us to section 104 of the Code of 1908, the relevant portion of which may be extracted thus: "104.(1) An appeal shall lie from the following orders, and save as otherwise expressly provided in the body of this Code or by any law for the time being in force, from no other orders: (a) to (f) annulled; (ff) an order under section 35 A (g) an order under section 95; (h) an order under any of the provisions of this Code imposing a fine or directing the arrest or detention in the civil prison of any person except where such arrest or detention is in execution of a decree; (1) any order made under rules from which an appeal is expressly allowed by rules: (2) No appeal shall lie from any order passed in appeal under this section.
" Thus by the force of section 104 all appeals as indicated in the various clauses of order 43 Rule 1 viz. (a) to (w) would lie to the appellate court.
Section 105 clearly provides that no appeal shall lie from any order of a Court made in the exercise of its original or appellate 208 jurisdiction except according to the procedure laid down by the Code.
The relevant part of section 105 (1) may be extracted thus: "105.
(1) Save as otherwise expressly provided no appeal shall lie from any order made by a Court in the exercise of its original or appellate jurisdiction; but where a decree is appealed from, any error, defect or irregularity in any order, affecting the decision of the case, may be set forth as a ground of objection in the memorandum of appeal.
" Finally, order, 49 Rule 3 expressly exempts matters contained in clauses (1) to (6) of Rule 3 from the operation of the extraordinary original civil jurisdiction of the chartered High Courts, that is to say, the jurisdiction conferred on the High Court by the Letters Patent.
The relevant portion of this provision may be extracted thus: "O. 49.
(3) The following rules shall not apply to any Chartered High Court in the exercise of its ordinary or extraordinary original civil jurisdiction, namely: (1) rule 10 and rule 11, clauses (b) & (c), of order VII; (2) rule 3 of order X; (3) rule 2 of order XVI; (4) rules 5, 6, 8, 9, 10, 11, 13, 14, 15, and 16 (so far as relates to the manner of taking evidence) of Order XVIII; (5) rules 1 to 8 of order XX; and (6) rule 7 of order XXXIII (so far as relates to the making of a memorandum); and rule 35 of order XLI shall not apply to any such High Court in the exercise of its appellate jurisdiction" It may be pertinent to note that although a number of rules have been exempted from the operation of the Code, order 43 Rule 209 1 and the clauses thereunder have not been mentioned in any of these clauses.
Thus, a combined reading of the various provisions of the Code of Civil Procedure referred to above lead to the irresistible conclusion that section 104 read with order 43 Rule 1 clearly applies to the proceedings before the Trial Judge of the High Court.
Unfortunately, this fact does not appear to have been noticed by any of the decisions rendered by various High Courts.
We might further point out that section 117 of the Code of 1908 expressly applies the provisions of the Code to High Courts also.
Section 117 may be extracted thus: "117.
Save as provided in this Part or in Part X or in rules, the provisions of this Code shall apply to such High Courts".
We find ourselves in complete agreement with the arguments of Mr. Sorabjee that in the instant case section 104 read with Order 43 Rule 1 does not in any way abridge, interfere with or curb the powers conferred on the Trial Judge by cl. 15 of the Letters Patent.
What section 104 read with order 43 Rule 1 does is merely to give an additional remedy by way of an appeal from the orders of the Trial Judge to a larger Bench.
Indeed, if this is the position then the contention of the respondent that section 104 will not apply to internal appeals in the High Courts cannot be countenanced.
In fact, the question of application of the Code of Civil Procedure to internal appeals in the High Court does not arise at all because the Code of Civil Procedure merely provides for a forum and if order 43 Rule 1 applies to a Trial Judge then the forum created by the Code would certainly include a forum within the High Court to which appeals against the judgment of a Trial Judge would lie.
It is obvious that when the Code contemplates appeals against orders passed under various clauses of order 43 Rule 1 by a Trial Judge, such an appeal can lie to a larger Bench of the High Court and not to any court subordinate to the High Court.
Hence, the argument that order 43 Rule 1 cannot apply to internal appeals in the High Court does not appeal to us although the argument has found favour with some of the High Courts.
We might also reiterate that prior to the Code of 1908, in the Code of 1877 an identical provision like order 43 Rule 1 also existed in the shape of section 588 which was absolutely in the same terms 210 as order 43 Rule 1 and its various clauses.
Of course, section 104 was conspicuously absent from the Codes of 1877 or 1882.
As indicated earlier, the question of the application of section 588 (now Order 43 Rule 1) was considered as early as 1882 in Hurrish Chunder Chowdary 's case (supra) where the Privy Council in very categorical terms observed thus: "It only remains to observe that their Lordships do not think that section 588 of Act X of 1877, which has the effect of restricting certain appeals, applies to such a case as this, where the appeal is from one of the Judges of the Court to the full Court.
" We have already shown that a perusal of these observations leaves no room for doubt that the Privy Council clearly held that section 588 undoubtedly applied to appeal from one of the Judges of the High Court to the Full Court, which really now means the Division Bench constituted under the Rules.
In spite of the clear exposition of the law on the subject by the Privy Council it is rather unfortunate that some High Courts have either misinterpreted these observations or explained them away or used them for holding that s.588 does not apply to High Courts.
We shall deal with those judgments and point out that the view taken by the High Courts concerned is not at all borne out by the ratio decidendi of the Privy Council.
So far as the applicability of section 588 to proceedings in the High Courts is concerned, in a later decision the Privy Council reiterated its view in unmistakable terms.
In Mt. Sabitri Thakurain vs Savi & Anr., their Lordships observed as follows: "Section 15 of the Letters Patent is such a law and what it expressly provides, namely an appeal to the High Court 's appellate jurisdiction from a decree of the High Court in its original ordinary jurisdiction, is thereby saved.
Thus regulations duly made by orders and Rules under the Code of Civil Procedure, 1908 are applicable to the jurisdiction exercisable under the Letters Patent, except that they do not restrict the express Letters Patent appeal".
Though not directly, some observations made by this Court also support the consistent view taken by the Privy Council that order 43 Rule 1 applies to the original proceedings before the Trial 211 Judge.
In Union of India vs Mohindra Supply Co., this Court made the following observations: "The intention of the legislature in enacting sub section (1) of section 104 is clear: the right to appeal conferred by any other law for the time being in force is expressly preserved.
This intention is emphasised by section 4 which provides that in the absence of any specific provision to the contrary nothing in the Code is intended to limit or otherwise affect any special jurisdiction or power conferred by or under any other law for the time being in force.
The right to appeal against judgments (which did not amount to decrees) under the Letters Patent, was therefore not affected by section 104 (1) of the Code of Civil Procedure, 1908".
Thus, this Court has clearly held that the right to appeal against judgments under the Letters Patent was not affected by section 104 (1) of the Code of 1908 and the decision therefore fully supports the argument of Mr. Sorabjee that there is no inconsistency between the Letters Patent jurisdiction and section 104 read with order 43 Rule 1 of the Code of 1908.
Similarly, in Shankarlal Aggarwal 's case (supra) this Court while construing the provisions of section 202 of the Indian observed as follows: "There was no doubt either that most of the orders or decisions in winding up would not be comprehended within the class of appealable orders specified in section 104 or O. 43 r.1.
If therefore the contention of the respondent were accepted it would mean that in the case of orders passed by the District Courts appeals would lie only against what would be decrees under the Code as well as appealable orders under section 104 and o. 43 r.1.
and very few of the orders passed in the Courts of the winding up would fall within these categories.
On the other hand, the expression "judgment" used in cl. 15 is wider.
The learned Judge therefore rejected a construction which would have meant that the same orders passed by District Courts and by a Single Judge of a High Court would be subject to different rules as to appealability".
There is yet another aspect of the matter which shows that section 104 merely provides an additional or supplemental remedy by way 212 of appeal and, therefore, widens rather than limits the original jurisdiction of the High Court.
For instance, in this very case with which this Court was dealing, an order passed under section 202 of the was appealable to a larger Bench and yet it was argued that the order being of an interlocutory nature would not be a judgment and therefore no appeal would lie to the Division Bench.
This contention was negatived by the Supreme Court and it was held that against the order passed by a Trial Judge under the , an appeal would lie to the Division Bench.
On a parity of reasoning, therefore, section 104 read with order 43 Rule 1 expressly authorises and creates a forum for appeal against orders falling under various clauses of order 43 Rule 1, to a larger Bench of the High Court without at all disturbing, interfering with or overriding the Letters Patent jurisdiction.
There are a number of other Acts also which confer additional powers of appeal to a larger Bench within the High Court against the order of a Trial Judge.
Take, for instance, a case under the Arbitration Act.
Suppose in a suit the matter is referred to arbitration and after the award is filed by the Arbitrator certain objections are taken, under section 39 of the Arbitration Act an appeal would lie to a Larger Bench from the order of a Single Judge disposing of the objections taken by the parties against the award.
Section 39 runs thus: "39.
Appealable orders. (1) An Appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorised by law to hear appeals from original decree of the Court passing the orders; An Order (i) superseding an arbitration; (ii) on an award stated in the form of a special case; (iii)Modifying or correcting an award; (iv) filing or refusing to file an arbitration agreement; (v) staying or refusing to stay legal proceedings where there is an arbitration agreement; (vi)setting aside or refusing to set aside an award: Provided that the provisions of this section shall not apply to any order passed by a small Cause Court.
213 (2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court".
It cannot be contended by any show of force that the Order passed by the Trial Judge being an interlocutory order, no appeal would lie to the Division Bench or that the provisions of the Arbitration Act giving a right of appeal to a litigant from the order of a Trial Judge to the Division Bench in any way fetter or override the provisions of the Letters Patent.
There are, however, a number of decisions of the various High Courts which have held that the provisions of order 43 Rule 1 clearly apply to a Trial Judge.
As early as 1872, the Bombay High Court in Sonba 'i 's case (supra) held that in regard to appeals against orders of the Trial Judge the practice of the Bombay High Court has been that in all matters the provisions of the Code concerned would be applicable.
In this connection, Sargent, Acting C.J., speaking for the court observed as follows: "the word "judgment" may be taken to include any preliminary or interlocutory judgment, decree, order, or sentence within the meaning of clause 40, and effect may be given to section 37 by limiting the orders open to appeal to those orders which are expressly declared appealable in the various sections of the Civil Procedure Code, or in other words by incorporating the provisions of the Civil Procedure Code relating to appeals with Sec.
IS of the Letters Patent, and holding the word 'judgment ' to mean all judgments and orders which are appealable under the provisions of the Civil Procedure Code".
This case was followed by a Division Bench of the Madras High Court which clearly held that an order passed under section 592 was controlled by section 588.
We have already pointed out that in the Code prior to 1882, order 43 Rule 1 appeared in the shape of section 588 and even under order 43 Rule 1 an order rejecting an appeal in forma pauperis is not appealable and does not appear in any of the clauses of order 43 Rule 1.
The Madras High Court in Rajgopal 's case (supra), relying on the decision of the Bombay High Court, observed thus: 214 "An order passed under section 592 of the Code of Civil Procedure rejecting an appeal in forma pauperis is not appealable under section 588, which provides that no appeal shall lie from orders not specified in that section.
It has already been decided in Achaya vs Ratnavelu (ILR that section 15 of the Letters Patent is controlled by a similar section in the Civil Procedure Code, which provided that an order shall be final, and that enactments to such effect are not beyond the legislative powers of the Governor General in Council".
Thus, even in the earlier times the High Court had veered round to the view that section 588 would be applicable to the High Courts also even in respect of internal appeals in, the High Court.
Similarly, in Ruldu Singh vs Sanwal Singh, Shadi Lal, C.J. Speaking for the court observed thus; Now, section 588 of the old Code, which has now been replaced by section 104 and Order XLIII, rule of the new Code, enacted that an appeal lay from the orders specified in that section and from no other orders"; and it was consequently decided by a Full Bench of that Court in Muhammad Naim ul Lah Khan vs Ihsan Ullah Khan All. 226 that clause 10 of the Letters Patent was controlled in its operation by section 588, and that no appeal lay under the Letters Patent from an order made under the Code if it was not one of the orders enumerated in that section.
Section 104 of the new Code, however, expressly saves the right of appeal otherwise provided by 'any law for the time being in force '.
It seems to us that the object of the Legislature in enacting sub section (2) was to make it clear that there was no second appeal under the Code from the orders specified in Sub section (1) of section 104, and that sub section (2) was not intended to override the express provisions of the letters patent." The Lahore High Court relied on the decision of the Privy Council in Hurrish Chunder Chowdrys case (supra).
The High Court further held that section 104 does not in any way take away the 215 right of appeal conferred by the Letters but Patent of the High Court merely bars a second appeal from orders passed under O.43 R. 1 to Division Bench.
A contrary view was taken by the Allahabad High Court in Ram Sarup vs Kaniz Ummehani where the following observations were made: "It may, however, be conceded that this saving clause does not occur in sub section (2) of section 104.
But under the corresponding section 588 of the old Code, where the words were "orders passed in appeal under this section shall be final", their Lordships of the Privy Council in Hurrish Chunder Chowdhry vs Kalisunduti Debi Cal. 482 observed that section 588, which had the effect of restricting certain appeals, did not apply to a case where the appeal is from one of the Judges of the High Court to the Full Court to the full Court.
In any case section 104 (2) does not contain any express provision which would suggest that the provisions of the Letters Patent have been abrogated.
We accordingly hold that under clause 10 of the Letters Patent an appeal lies from the order of a single Judge passed in appeal." With due deference to the Hon 'ble Judges we are of the opinion that the decision of the Allahabad High Court on this point is based on a serious misconception of the legal position.
It is true that section 104 was introduced by the Code of 1908 and the aforesaid section, as we have already indicated, clearly saved the Letters Patent jurisdiction of the High Court.
From this, however, it does not necessarily follow that the restriction that there is no further appeal from the order of a Trial Judge to a larger Bench would be maintainable or permissible.
In the first place, once section 104 applies and there is nothing in the Letters Patent to restrict the application of section 104 to the effect that even if one appeal lies to the Single Judge, no further appeal will lie to the Division Bench.
Secondly, a perusal of clause 15 of the Letters Patent of the Presidency High Courts and identical clauses in other High Courts, discloses that there is nothing to show that the Letters Patent ever contemplated that even after one appeal lay from the subordinate court to the Single Judge, a second appeal would again lie to a Division Bench of the Court.
All that the Letters Patent provides for is that where the Trial Judge passes an order, an appeal against the judgment of the said Trial Judge would 216 lie to a Division Bench.
Furthermore, there is an express provision in the Letters Patent where only in one case a further or a second appeal could lie to a Division Bench from an appellate order of the Trial Judge and that is in cases of appeals decided by a Single Judge under section 100 of the Code of Civil Procedure.
Such a further appeal would lie to a Division Bench only with the leave of the court and not otherwise.
The relevant portion of cl. 15 of the Letters Patent may be extracted thus: "And we do further ordain that an appeal shall lie to the said High Court of Judicature at Madras, Bombay, Fort William in Bengal from the judgment.
Of one Judge of the said High Court or one Judge of any Division Court, pursuant to section 108 of the Government of India Act, and that notwithstanding anything hereinbefore provided, an appeal shall lie to the said High Court from a judgment of one Judge of the said High Court or one Judge of any Division Court, pursuant to section 108 of the Government of India Act, made (on or after the first day of February, 1929) in the exercise of appellate jurisdiction in respect of a decree or order made in the exercise of appellate jurisdiction by a Court subject to the superintendence of the said High Court where the Judge who passed the judgment declares that the case is a fit one for appeal.
" A perusal of the Letters Patent would clearly reveal two essential incidents (1) that an appeal shall lie against any order passed by the Trial Judge to a larger Bench of the same High Court, and (2) that where the Trial Judge decides an appeal against a judgment or decree passed by the district courts in the mofussil, a further appeal shall lie only where the judge concerned declares it to be a fit one for appeal to a Division Bench.
Thus, the special law, viz., the Letters Patent, contemplates only these two kinds of appeals and no other.
There is, therefore, no warrant for accepting the argument of the respondent that if order 43 Rule 1 applies, then a further appeal would also lie against the appellate order of the Trial Judge to a Division Bench.
As this is neither contemplated nor borne out by the provisions of the Letters Pantent extracted above, the contention of the respondent on this score must be overruled.
A further second appeal Lying to a Division Bench from an appellate order of the Trial Judge passed under order 43 Rule 1 is wholly foreign to the scope and spirit of the Letters Patent.
Un 217 fortunately however, the Allahabad High Court in Ram Sarup 's case (supra) refused to follow a Division Bench decision in Piari Lal vs Madan Lal and also tried to explain away the Full Bench decision in Ram Sarup 's case (supra) where it was clearly pointed out that in such cases no further appeal would lie to the Division Bench under the Letters Patent.
The distinction drawn by the Allahabad High Court regarding the application of section 104 is a distinction without any difference.
Sir John Edge, C.J., in Muhammad Naim ul lah Khan 's case (supra) dealing with this aspect of the matter observed thus: "It appears to me that the Code of Civil Procedure (Act No. XIV of 1882), as did Act No. X of 1877, contemplates a High Court in two aspects.
It contemplates a High Court doing the ordinary work of a Court of original and appellate jurisdiction; having the necessary powers of review and revision in certain cases and certain other powers such as are generally found vested in the Courts of the importance of High Courts. whatever those powers may be, it is quite clear to my mind that the power conferred on a High Court under Chapter XLV of the Code of Civil Procedure are special powers and entirely distinct from the ordinary powers required by the High Court in the carrying on of its ordinary judicial business." and Mahmood, J. Observed thus: "To hold then that where this statute of ours, namely, our present Code of Civil Procedure, declares a decree or order non appealable, such decree or order can be made the subject of consideration by the whole of this Court under the Letters Patent, is to hold that wherever no appeal lies to this Court the ceremony of presenting it to this Court to a Single Judge of this Court who would undoubtedly reject the appeal, makes it the subject of consideration by a Bench of the Court.
" The other Judges agreed with the view taken by the Chief Justice and Mahmood, J. In Piari Lal 's case (supra) which was decided after section 104 was introduced in the Code of 1908, the following observations were made: 218 "A preliminary objection has been taken to the hearing of the appeal based on the Full Bench decision in the case of Muhammad Naimullah Khan vs Ihsan ullah Khan All. 226.
Section 104 of the Code of Civil Procedure provides for the cases in which an appeal shall lie against an "order '.
Clause (ii) provides that "No appeal shall lie from any order passed in appeal under this section".
The contention of the respondent in the preliminary objection is that no second appeal lies and reliance is placed upon the authority quoted to show that even a Letters Patent appeal is not permissible.
We are of course bound by the Full Bench ruling of this Court.
It is contended, however, that the words in section 588 of the Code of Civil Procedure, which was in force when the decision in the Full Bench case was given, differed from the words of the present Code.
The only difference is that in the old Code the words were "The order passed in appeals under this section shall be final", whereas in the present Code the words are "No appeal shall lie".
We cannot see how the change in the words can in any way help the appellant.
Possibly the reason for the change is that under the words in the old Code it might have been argued that even a "revision" or a "review of judgment" would not lie against an order passed by an appellate court.
We think the preliminary objection must prevail and we accordingly dismiss the appeal with costs." Thus, in these two cases it was clearly held that where a Trial Judge had passed an order in an appeal against an order passed by the district judge under order 43 Rule 1, a further appeal under the Letters Patent was not maintainable.
This view is fully supported by the express language in which clause 15 of the Letters Patent has been couched, as referred to above.
Thus the latter decision of the Allahabad High Court in Ram Sarup 's case (supra) was clearly wrong in holding that an appeal under the Letters Patent would lie even against an appellate order of the Trial Judge passed under O.43, R. 1 even though it was prohibited by section 104 (2) of the Code.
Similarly, in Chappan 's case (supra) the Court on an interpretation of section 588 (which now corresponds to the present Order 43 Rule 1 clearly held that an appeal would lie to the High Court 219 against the orders contemplated in various clauses of section 588 of the Code of 1877.
The Court held thus: "The result of this judgment (so far as it applies to the question before us) appears to me to come to this, that if the order made by a single Judge only amounts to an order such as is intended by chapter XLII of the Code, it is not appealable unless it is within section 588." The Madras case heavily relied on the decision of the Privy Council in Hurrish Chunder Chowdry 's case (supra).
In Lea Badin vs Upendra Mohan Roy Chaudhury & Ors.
while criticising the judgment of Sir Richard Couch, C.J. in The Justice of the Peace for Calcutta (supra) the Court as an alternative argument clearly held that order 43 Rule 1 would apply pro tanto to the Trial Judge and on this ground also the order would be appealable to a Division Bench.
In this connection, the celebrated jurist Sir Manmatha Nath Mookerjee, J. Observed as follows: "But there is another and a far simpler ground on which it must be held that an appeal is competent.
The order in the present case is one for which a right of appeal is provided in cl.
(s) of r. 1 of or 43 of the Code.
Under the present Code (Act V of 1908) it cannot be contended that the Code and the Rules made under it do not apply to an appeal from a learned Judge of the High Court " Another important decision regarding the applicability of order 43 Rule 1 to an order passed by the Trial Judge was rendered by a Full Bench in Mathura Sundari Dassi vs Haran Chandra Shaha & Ors.
where Sanderson, C.J. Observed thus: "By the terms of section 117, the Code is made applicable to the High Court, and O. 43, R. 1 gives a right of appeal in the very case under discussion.
But it is said that this Code and the rules made under it do not apply to an appeal from a learned Judge of the High Court.
I cannot follow that argument.
It is part of the defendant 's case that O.9 R. 8 applies.
That order is in effect a part of the Civil Procedure Code.
It seems to me strange that the plaintiff 220 should be subjected to O. 9, R. 8 and be liable to have his suit dismissed for want of appearance, yet when he has had his suit dismissed under one of the rules of the Code and wants to call in aid another of the rules which when his application for reinstatement has been refused gives him a right of appeal against that refusal, he is met with the argument that he cannot call in aid that rule because there is no appeal from the learned Judge of the High Court under the Civil Procedure Code.
I think this is not a true view or a reasonable construction to put upon the Code and the rules made under it.
In my judgment, the Code and the rules do apply and the plaintiff has a right of appeal." and Woodroffo 'J ' made similar observations: "Whether or not as a question of jurisdiction an appeal lies under clause 15 of the Letters Patent in a case in which an appeal is allowed under the Code, I think it may be said that there are prima facie grounds for holding that an appeal should be held to lie under the Letters Patent where it is allowed under the Code; for the fact that the Legislature has in the Code allowed an appeal in a particular case, a affords to my mind prima facie grounds for supposing that case is of a class which this Court considers appealable under its Letters Patent.
Looking at the nature of the order appealed from, I think I should hold that it is appealable as a 'judgement ' under the Letters Patent." and Mookerjee, J. Observed thus: "The term "Rule" which finds a place in section 117 is defined in clause 18 of section 2 of the Code to mean "a rule contained it the First Schedule or made under section 122 or section 125.
" our attention has not been drawn to any such rule which makes O. 43, R, 1, clause (c) inapplicable.
On the other hand, O. 49, R. 3 which excludes the operation of other rules, lends support to the contention of the appellant that O. 43, R. 1 clause (c) is applicable to the present appeal.
"section 104 of the Code of 1908 is materially different from section 588 of the Code of 1882.
It provides that lie from 221 the orders mentioned in the first clause of that section and, save as otherwise expressly provided in the body of the Code or by any law for the time being in force from no other orders.
" The effect of section 104 is thus, not to take away a right of appeal given by clause 15 of the Letters Patent, but to create a right of appeal in cases even where clause 15 of the Letters Patent is not applicable.
I hold accordingly that this appeal is competent under Clause (c), R. 1, O. 43 of the Civil Procedure Code.
I am further of opinion that the appeal is competent also under Clause 15 of the Letters Patent." (Emphasis ours) We find ourselves in complete agreement with the view taken and the reasons given by the three eminent Judges in the aforesaid case which furnishes a complete answer to the arguments of the respondents that order 43, Rule I will have no application to internal appeals in the High Court under the provisions of the Letters Patent.
A similar view was taken in Lea Badin 's case (supra) where the following observations regarding the applicability of order 43 Rule I in respect of an order passed by a Trial Judge were made: "As an order refusing an application for the appointment of a receiver based on provision in the indenture of hypothecation, that on a breach of any one of the covenants contained therein the plaintiff 's assignor would be entitled to have a receiver appointed, the order has determined a right which is one of the matters in the controversy itself, and so it satisfies the definition of Couch, C.J., as well.
The order appealed from in this case is, in our opinion, a judgment ' within the meaning of Cl.
IS, Letters Patent.
We may add that there are decisions of this Court in which orders discharging or refusing to discharge a receiver appointed in a suit, after the suit had come to an end or had become infectious, have been held to be ' judgments ' and so appealable.
But there is another and a far simpler ground on which it must be held that an appeal is competent.
The order in the present case is one for which a right of appeal is provided in cl.
(s), R. 1, 222 O. 43 of the Code.
Under the present Code (Act S of 1908) it cannot be contended that the Code and the Rules made under it do not apply to an appeal from a learned Judge of the High Court, such a contention was elaborately dealt with and repelled in the case of Malhura Sundari Dassi vs Haran Chandra Shaha & Ors.
(AIR (Emphasis ours) In Toolsee Money Dassee & Ors.
vs Sudevi Dassee & ors.
(supra) Maclean, C.J. while relying on the decision of the Judicial Committee in Hurrish Chunder Chowdry 's case made the following pithy observations: "To my mind the first of these points has been authoritatively decided against the view of the present respondents by the Judicial Committee of the Privy Council in the case of Hurrish Chunder Chowdhry vs Kali Sunderi Debi (10 I. A. 4).
I need not travel into the facts of that case, but there their Lordships said at page 494 of the report in the Indian Law Reports: "It only remains to observe that their Lordships do not think that section 588 of Act X of 1877, which has the effect of restricting certain appeals, applies to such a case as this where the appeal is from one of the Judges of the Court to the Full Court.
" It is clear from the report that the point was elaborately argued, and the clear expression of their Lordships ' opinion must be read in connection with that argument." and Prinsep, J. who agreed with the Chief Justice, made the following identical observations: "We have it, therefore, that if beyond clause 15 of the Letters Patent, 1865, section 588 of the Code of Civil Procedure gives the right of appeal against any order of the description specified therein, there is no Court of Appeal constituted to hear it, if such order not being a judgment had been made by the Judge on the original Side of the High Court. .
I understand this to mean that section 588 does not affect any matter coming within clause 15 of the Letters 223 Patent, and if I may venture to say so, the reasons which led to the expression of that opinion and which have not been given in the judgment reported may be those stated by me for arriving at the same conclusion.
I have no doubt that we are bound to follow to the fullest extent the opinion expressed by their Lordships of the Privy Council that section 588 of the Code does not apply to the case now before us, and that this matter has thus become settled law".
And Ammer Ali, J. while dissenting from the applicability of section 588 held that the order appealable under section 588 was a judgment within the meaning of the Letters Patent.
Two decisions of the Rangoon High Court also have consistently taken the view that the provisions of section 104 read with order 43 Rule I apply to the Trial Judge.
In P. Abdul Gaffor vs The Official Assignee (1) the following observations were made: For an order made in exercise of the ordinary original civil jurisdiction to be appealable, it must come either under order XLIII, Rule 1 or be a judgment within the meaning of Section 13 of the Letters Patent, so that for the purpose of this application the appellant must establish that it is a judgment within the meaning of section 13".
(Emphasis ours) The question of the applicability of order 43 Rule I to an appeal from the Trial Judge under the Letters Patent was raised and decided by the Jammu & Kashmir High Court in Abdul Samad & Ors.
vs The State of J & K (2) a decision to which one of us (Fazal Ali, C.J. as he then was) was a party.
After an exhaustive review of various decisions on the subject, the High Court observed as follows: G The legal position that emerges, therefore, is that orders of the character specified in Section 104 and order 43, Rule I, Civil P.C. excepting clause (JJ) thereof, would 224 be construed as judgments and an appeal against any one of such orders would lie to the.
Division Bench of the High Court notwithstanding the fact that it is passed by one of the judges of the High Court sitting on the original side".
It may be mentioned that like the Presidency High Courts, the High Court of Jammu & Kashmir had also been invested with ordinary civil original jurisdiction.
The question of the applicability of order 43 Rule 1 to an appeal against an order of a Trial Judge to the Division Bench was directly in point and fully considered by a Division Bench of the Calcutta High Court and a Full Bench of the Rangoon High Court.
In Kumar Gangadhar Bagla vs Kanti Chunder Mukerjee & Anr.
while dwelling on this aspect of the matter it was observed as follows: "Mr. Bose did not seek to argue, that the formal order of the 7th of June, 1935, was one of the appealable orders provided for in the Code of Civil Procedure.
On the contrary, he went so far as to aver with considerable vehemence that neither sec. 104 nor order XLIII, r. l of the Civil Procedure Code has any application to the High Court.
I would point out that it is clear from sec.
117 of Code of Civil Procedure and still clearer from Or.
XLIX, r. 3, C.P.C., that both sec.
104 and Or.
XLIII, r. 1, do apply to the High Court".
(Emphasis ours) It is manifest from the observations made above that in view of the clear and explicit provisions of section 117 and order 49 Rule 3 which while exempting other provisions from the jurisdiction of the High Court did not exempt the various clauses of order 43 Rule 1.
An identical view seems to have been taken by Sir Page, C.J. in a Full Bench decision of the Rangoon High Court in In re: Dayabhai Jiwandas & Ors.
(supra) where the Chief Justice pithily observed as follows : "In many statutes in India, of course, a Right of appeal from an order passed pursuant to the statute is expressly provided, and in such cases an appeal will lie on the terms and conditions therein prescribed.
I will not pause to enumerate or discuss these enactments, although 225 many such statutes were cited at the Bar.
But, except A where otherwise a right of appeal adhoc is given under some statute or enactment having the force of a statute, the right of appeal from orders that do not amount to "judgment" is regulated by the provisions of the Code of Civil Procedure; (see section 104 and order 43, Rule 1)".
Thus, there appears to be a general consensus of judicial opinions on the question of the applicability of order 43 Rule 1 to Letters Patent appeals.
This now brings us to the second limb of the argument of Mr. Sorabjee that even assuming that order 43 Rule I does not apply to the High Court so far as the Trial Judge of the said court is concerned, there can be no doubt that the orders indicated in various clauses of order 43 Rule 1 possess the attributes and incidents of a final order which conclusively decides a particular issue so far as the Trial Court is concerned.
Thus, there can be no difficulty, even without applying order 43 Rule 1 to hold by a process of analogical reasoning that the appeals and orders mentioned in the various sub clauses would amount to a judgment within the meaning of cl. 15 of the Letters Patent because they contain the traits, trappings and qualities and characteristics of a final order.
In other words, the argument advanced was that we could still apply the provisions of order 43 Rule 1 by the process of analogy.
We fully agree with this argument because it is manifest that the word 'judgment ' has hot been defined in the Letters Patent but whatever tests may be applied, the order passed by the Trial Judge appealed against must have the traits and trappings of finality and there can be no doubt that the appealable orders indicated in various clauses of order 43 Rule I are matters of moment deciding valuable rights of the parties and in the nature of final orders so as to fall `within the definition of 'judgment '.
This Court in Radhey Shyam vs Shyam Behari Singh (1) clearly held that an application under order 21 rule 90 to set aside the auction sale is a judgment as the proceeding raises a controversy between the parties regarding their valuable rights.
In this connection, this Court observed thus : "In our view an order in a proceeding under o. XXI, r. 90 is a "judgment" inasmuch as a proceeding raises 226 a controversy between the parties therein affecting their valuable rights and the order allowing the application certainly deprives the purchaser of rights accrued to him as a result of the auction sale".
On a parity of reasoning, an order refusing to appoint a receiver or grant an injunction and similar orders mentioned in various clauses of order 43, Rule 1 fall within the tests laid down by this Court in the aforesaid case.
We are aware that there are some decisions which have taken a contrary view by holding that section 104 read with order 43 Rule I does not apply to a Trial Judge under the Letters Patent.
These decisions do not appear to have considered the various shades and aspects and the setting of the provisions of sections 104 and 117 and order 49 Rule 3 but seem to have proceeded on the basis that the Letters Patent being a special law or a special jurisdiction, the same over rides section 104 which in terms does not apply where a special law makes certain special provisions.
We now proceed to discuss these cases briefly.
In Pandy Walad Dagadu Mahar & Anr.
vs Jammadas Chotumal Marwadi (1) the identical point which is at issue in the instant appeal was not involved and the finding given by the High Court was merely incidental.
The Division Bench seems to have relied on a judgment of Sir Basil Scott and Hayward, JJ.
where the question was only incidentally dealt with.
Martin, J.
In Pandy 's case observed thus : "Shortly stated, therefore, this Full Bench decision amounts to this,.
that appeals under the Letters Patent are governed by the Letters Patent, and appeals under Code are governed by the Code.
Further, the Code only deals with appeals from certain Courts and it does not deal with appeals within the High Court from the decision of one Judge of the Court to another.
That is in my opinion, the true view of the relative position of the Letters Patent and the Code".
With due respect, a close analysis of this decision would reveal that the Judges followed a fallacious process of reasoning, According to their opinion, the appeals under the Code of Civil 227 Procedure and those under the Letters Patent were, so to say two separate compartments having different spheres of their own.
With due deference, we might point out that such a view is based on a total misinterpretation and misconstruction of the true nature and object of the Code of Civil Procedure and the Letters Patent.
In fact, as we have pointed out earlier, there is no inconsistency, whatsoever between the Letters Patent and section 104 read with order 43 Rule l; The first premise of the Court that internal appeals in the High Court were governed by the Letters Patent alone and not by the Code appears to be legally fallacious.
We have already pointed out that a large number of decisions, including the Privy Council, have clearly taken the view that although the Letters Patent is a special law certain provisions of the Code of Civil Procedure in the matter of procedure do apply to appeals against the decision of a Trial Judge to a larger Bench or to quote the Bombay Judges to 'internal appeals '.
Secondly, the Court completely overlooked the legal effect of section 117 and order 49 Rule 3 which completely demolishes the presumptuous process of logic adopted by the court.
Thirdly, the Court appears to have overlooked that far from excluding the Code there could be other special Acts which could and did confer additional jurisdiction even in internal appeals to the High Court, viz., from an order passed by a Trial Judge to a larger Bench, for instance, section 39 of the Arbitration Act or section 202 of the Indian and other similar local or special Acts.
If these special Acts could without affecting the jurisdiction of the Letters Patent or overriding the same provided a supplementary or additional jurisdiction, there was no reason why the Code of Civil Procedure also could not do the same particularly when the Trial Judge had to adopt the procedure contained in the Code, starting from the presentation of the plaint to the delivery of judgment.
Fourthly, the Division Bench does not seem to have considered the fact that what the Letters Patent did was merely to confer original civil jurisdiction on the High Court to be exercised by a Single Judge, who would undoubtedly be a Trial Judge, but of an elevated status so that only such suits could be filed in the Court of the said Judge as are of a very high valuation which may differ from High Court to High Court.
This was done in order that in heavy suits involving substantial questions of fact and law, the hearing of the suit by a senior Court of the status of a High Court Judge would repose, endeanr and generate greater confidence in the people.
Thus if, interlocutory orders passed by District courts in the mofussil could be appealable to the High Court, there was no reason why inter 228 locutory orders passed by a Trial Judge could not be appealable to a larger Bench irrespective of the question whether or not they were judgments within the meaning of cl. 15 of the Letters Patent.
This appears to us to be the cardinal philosophy of the Code in applying the provisions of order 43 Rule I, to the original suit tried by the Single Judge (Trial Judge).
Furthermore, the concept of internal appeals in the High Court seems to be a legal fiction without any factual existence imported by some of the High Courts in order to get rid of some of the provisions of the Code of Civil Procedure which is totally opposed not only to the aim and object of the Code but also to the very spirit of the Letters Patent.
In a later judgment of the Bombay High Court in Vaman Ravji Kulkarni vs Nagesh Vishnu Joshi & Ors.,(1) the following observations were made: "I am, with respect, of opinion that the view taken by the full Bench of the Madras and Calcutta High Courts in the cases referred to above is correct, and that the question must be regarded as having been finally settled by the decision of the Privy Council in 10 I. A. 4.
(Hurrish Chunder Chowdry vs Kali Sundari Debi) section 104.
Civil P.C., which refers only to appeals to the High Court from Courts subordinate to it, cannot apply to appeals filed under Cl.
15 of the Letters Patent from a single Judge OF the High Court to a bench.
(Wadia, J.) . .
There can be no doubt that the provisions of the Letters Patent have conferred special powers regarding appeals within the High Court.
Those powers are not specifically taken away by section 104, Civil P.C. and are not, therefore, affected by it .
Special enactments are not repealed by later general Acts unless there be some express reference to the previous legislation or a necessary inconsistency in the two Acts standing together, which prevents the maxim from being applied.
Sub section (2) of section 104, Civil P.C., does not refer to the Letters Patent and say that in spite of Cl. 15 of the Letters Patent no appeal lies from any order passed in an appeal under Sub section
Sub section
(2) is in no way 229 inconsistent with cl. 15 of the Letters Patent and the two can stand together, the former applying to appeals under the Code, and the latter to special appeals within the High Court.
I am satisfied that section 104, Civil P.C .
does not control cl. 15 of the Letters Patent, and in spite of the absence of a saving clause in sub section
(2) of section 104 does not affect or cut down the right of appeal conferred by the Letters Patent." (Lokur, J.) As regards the first part of the observations of Wadia, J, we are constrained to observe that the learned Judge has not correctly construed the true ratio of the decision of the Privy Council in Hurrish Chunder Chowdry 's case (supra) where, as indicated, the Privy Council has in express terms held that section 588 (which now corresponds to order 43 Rule 1) clearly applies to appeals against orders of a Trial Judge to a larger Bench of the High Court.
Similarly, the observations made by Lokur, J. run against the plain interpretation of section 104 by assuming that there is a conflict between section 104 read with order 43 Rule I and the Letters Patent when in fact, as pointed out, there is no such conflict at all all that section 104 does is to give an additional jurisdiction apart from the Letters Patent which is in no way unconstitutional with the Letters Patent.
We may like to observe here that there is no non obstante clause in the provisions of the Letters Patent to indicate that the provisions of the Code of Civil Procedure, particularly section 104 would not apply either expressly or by necessary intendment.
In this view of the matter, therefore, we are clearly of the opinion that the Bombay decisions are wrongly decided and must, therefore, be overruled.
In Vishnu Pratap and Ors.
vs Smt.
Revati Devi and Ors.(l) the Court held that no appeal against an order passed by a Trial Judge under section 202 of the would lie to a Division Bench in view of the Letters Patent.
This argument was negatived and overruled in Shankarlal Aggarwal 's case (supra) as already discussed above.
As regards the applicability of order 43, the following observations were made in Vishnu Pratap 's case: "It is true that orders 40 & 43 both apply to the High Court but the question here is whether o. 43 makes provision for an appeal from one court to another or it is intended to cover cases of an appeal from one Judge to a bench of 230 the same Court.
While section 96 deals with original decree, section 104 Civil P.C. deals with orders, not being decrees, and the orders that are appealable are set out under o. 43, C.P.C. The question of an appeal from one Court to another Court is no doubt governed by the provisions of the Code of Civil Procedure but the provision for appeal from one Judge of a Court to a bench of the same Court is not provided for by the Code and must be governed by the Letters Patent.
If section 104 read with O. 43 makes all these orders appealable then what would be the Court to which appeals would lie from an order passed by a Division Bench and not by a single Judge.
We are not satisfied that section 104 or O. 43 ever intended to deal with appeals from a Judge or Judges of one Court to a larger number of Judges in the same Court.
It is no doubt true, as has been held by their Lordships of the Judicial Committee.
in 'Mt. Sabitri Thakurain vs Savi ' (AIR that section 104 as well as o. 43 apply to High Courts but it does not mean that they give any right to an appeal from an order by a Judge or Judges of that Court to a larger number of Judges of the same Court independently of the Letters Patent of the Court.
As we have said if o. 43 or section 104, Civil P.C., were made applicable per se, without reference to the Letters Patent, then even an order passed by a bench would come under those provisions, but before an appeal can be filed there will have to be a Court constituted for hearing an appeal and the only provision for hearing an appeal, from the judgment of a single Judge, by a bench of two or more Judges of the same Court is contained in the Letters Patent of the Chartered High Courts.
An order, to come under the Letters Patent must be a judgment, and, if an order is not a judgment, then cl. 10 of the Letters Patent would not apply and there is no provision for constituting a bench of more than one Judge to hear such an appeal.
We, therefore, fail to understand how O. 43 R. 1, or section 104, Civil P.C. without any reference to cl. 10 of the Letters Patent, can help the appellants. ' In this case also, the line of reasoning adopted by the court is the same as that of the Bombay High Court referred to above.
231 One of the reasons given is that while order 43 makes provision for A appeal from one court to another, it is not intended to apply to an appeal from one Judge of the High Court to a bench of the same Court.
No reasons have been given by the Judges for holding why this is not so particularly in the face of the clear provisions of section 117 and order 49 Rule 3, as discussed above.
Thus, the first part of R the reasoning of the High Court is totally irrelevant and wholly unintelligible.
The point at issue is if section 104 read with order 43, Rule I applies to an order passed by District Courts in the mofussil, why could it not apply to the one passed by the Trial Judge when the Letters Patent does not in any way bar such an appeal.
Another ground taken by the Court is that if order 43 Rule I is made applicable to the High Court then a strange anomaly will arise in that where an appeal lies to the Division Bench, how could a further appeal lie to some other bench of the court.
This argument also is based on a misconception of order 43 Rule 1.
It is manifest that if order 43 Rule I were to apply to orders passed by the Trial Judge, the order would be one passed by only one Judge of the High Court and, therefore, in the context of the original jurisdiction exercised by a Single Judge of the High Court, the appellate jurisdiction would lie with the Division Bench as contemplated by the Letters Patent and the Rules framed by the High Court.
We are unable to see any anomaly or inconsistency in this position.
Thirdly, the court seems to have relied on a decision of the Privy Council in Mt. Sabitri Thakurain vs Savi (AIR and has interpreted the ratio of this case to mean that section 104 would not apply to High Courts which is exactly what the Privy Council does not say.
With due respect, therefore, the learned Judges have not correctly appreciated the decision of the Privy Council which has nowhere indicated that order 43 Rule I would not apply to internal appeals in the High Court.
On the other hand their Lordships of the Privy Council had held to the contrary as discussed above.
For these reasons, therefore, we are of the opinion that this case has also not been correctly decided and we disapprove the reasons given and the decision taken in this case.
We might also notice a full Bench decision of the Nagpur High Court in Madhukar Trimbaklal vs Shri Sati Godawari Upasani Maharaj 232 of Sakori & Ors.
(1) where Niyogi, J. Observed as follows : "Clause 10, Letters Patent defines the appellate jurisdiction of the High Court vis a vis the judgment passed by a single Judge of that Court.
It should be observed that the Civil Procedure Code does not make any provision in this behalf.
The right of appeal from a decree of a single Judge to the High Court is not governed by section 96 or section 100 or section 104, Civil P.C., but by cl. 10, Letters Patent.
This right of appeal depends on the special provision made in the Charter.
section 4, Civil P.C., provides that the Code does not affect any special jurisdiction or power conferred, or any special form of procedure prescribed by or under any other law for the time being in force.
Since the special jurisdiction or power is conferred on the High Court by cl. 10, Letters Patent the provisions in the Civil Procedure Code regarding appeals cannot come into operation in regard to an appeal from a single Judge of the High Court to the High Court".
With due respect, we are unable to agree with the opinion expressed by Niyogi, J. who has made a bald statement that the Code of Civil Procedure does not make any provision in regard to an appeal from an order passed by a Trial Judge to a Division Bench and that the right of appeal from a decree of a Civil Judge to a High Court is not governed by section 100 or section 104 but by cl. 10 of the Letters Patent of the Nagpur High Court.
Here again, the learned Judge seems to have committed an error apparent on the face of the record.
An examination of the language of sections 96 to 100 would clearly show that the scope of these sections is quite different from that of section 104.
Sections 96 to 100 expressly deal with the forum of appeal provided by the Code against decrees or orders amounting to decrees passed by the District Court in the mofussil.
Section 104 is couched in very general terms and cannot be limited to appeals against orders passed by the courts contemplated in sections 96 to 100.
Moreover, section 104 does not deal with appeal against a decree at all but provides a forum for appeal against orders under order 43 Rule I which are mainly orders of a final or quasi final nature passed during the pendency of a suit.
Section 104, therefore, has a much wider application, as discussed above, and neither overrides the Letters Patent nor is it inconsistent with the same.
For these reasons, therefore, we are unable to accept the line of reasoning adopted by the aforesaid High Court in holding 233 that section 104 does not apply to internal appeals in the High Court and A we accordingly overrule this decision.
A some what identical view was taken by a later decision of the Nagpur High Court in Ratanlal Jankidas Agarwal vs Gajadhar & Ors.
(l) Where the following observations were made "Firstly, O. 43 has not been made applicable to appeals from appellate decrees by o. 43, R. 1, though the rules of o. 41 have been made applicable to them.
So section 104 bars an appeal from the order.
Moreover, the Civil Procedure Code makes no provision for an appeal within the High Court, that is to say, from a single Judge of the High Court.
Power is given to a Division Bench of the High Court to hear appeals from decisions of a single ' ' Judge of the High Court only under cl. 10 of the Letters Patent".
For the reasons which we have already given above, we hold that the learned Judges have fallen into the same error which was committed by the earlier Nagpur case.
The first reasoning given by Mangalmurti, J. that order 43 is not applicable to appeals from appellate decrees is wholly irrelevant because the question is whether under order 43 Rule 1, an appeal could lie from a Trial Judge to a Division Bench of the High Court.
Secondly, the learned Judge says that section 104 bars a second appeal from the order and that the Code of Civil Procedure makes no provision for appeal within the High Court.
Here again, the learned Judge is wrong because we have already pointed out that as far back as Hurrish Chunder Chowdry 's case (supra) it was clearly held by the Judicial Committee that section 588 was applicable even to internal appeals in the High Court.
On a parity of reasoning, therefore, on the basis of which we have overruled the decisions of the other High Courts, taking a similar view we find ourselves unable to agree with the view taken by Mangalmurti and Bose, JJ.
in the aforesaid case and hold that this case is not correctly decided.
A later decision of the Allahabad High Court also seems to have taken the same view.
In Standard Glass Beads Factory & Anr.
vs Shri Dhar & Ors.
(2) the following observations were made : "Such an order if made by a subordinate court is appealable under or.
43 R. 1, C.P.C.; it is, as we have seen an order from which in England an appeal lies, without 234 leave, to the Court of Appeal.
If the narrower view of the meaning of the word 'judgment ' be correct such an order when made by a Judge of a High Court in India exercising original jurisdiction would not be appealable".
Here also with due deference to the Judges constituting the Full Bench, we are of opinion that they committed an error in drawing inspiration from the procedure prevailing in England in the court of appeal.
In the first place the hierarchy of the Courts in India under the Civil Procedure Code is essentially different from that in the United Kingdom.
Secondly, there is no provision existing in the English law corresponding to Order 43 Rule 1 of an appeal from a Trial Judge to a Division Bench under various circumstances.
Lastly, this case does not seem to have considered a large number of decisions referred to by us, clearly holding that section 104 read with order 43 Rule I applies to appeals under the Letters Patent in the High Court.
For these reasons, therefore, we hold that this case also was not correctly decided and must be overruled.
Another case taking a contrary view is again a case of the Bombay High Court which also makes a rather interesting reading.
In J.K Chemicals Ltd. vs Kreba and Co. (1) Desai, J. speaking for the court observed on this part of the case thus: "The reply to the said argument is that the provisions of section 104 and O. 43, R. I provide for an appeal only from the subordinate Court to the higher Court and not from one part of the Court to the other.
It has been held that the provisions relating to appeals contained in the Civil Procedure Code deal with appeals from subordinate Courts to higher Courts and do not deal with appeals from the decisions and decrees of the High Court in the exercise of its ordinary or extra ordinary civil jurisdiction except so far as the appeal to the Supreme Court is concerned.
The subject of an appeal from the decision of a single Judge of the High Court to a Division Bench of the same High Court is dealt with only under the Letters Patent and such right is not governed by the provisions of the Civil Procedure Code relating to appeals.
This view has been taken consistently by the High Courts in India and also by the Privy Council (see Hurrish Chunder vs Kali Sunderi Debi (1883) ILR at p. 494)".
235 The first part of the observations follows the reasonings of the A two decisions of the Bombay High Court, discussed above, and are therefore open to the same criticism which we have levelled against the previous decisions.
Secondly, the court seems to think that all the High Courts in India have consistently taken the view that order 43 Rule 1 does not apply to internal appeals in the High Courts.
This is doubtless factually incorrect because we have referred to a large number of decisions which have taken a contrary view.
The High Court was, therefore, not quite correct in observing that the High Courts in India had taken a consistent view in regard to this matter.
Thirdly, the High Court seems to have relied heavily on the decision of the Privy Council in Hurrish Chunder Chowdry 's case (supra) and on Chappan 's case (supra) in holding that order 43 did not apply to internal appeals in the High Courts which were governed by the Letters Patent alone.
Here also, with due respect, the High Court has gravely erred.
We have pointed out while dealing with Hurrish Chunder Chowdry 's case (supra) that the Privy Council had clearly laid down that section 588 applied to the High Court and this position has been understood in this very sense by several judgments discussed above.
The High Court, therefore, has not correctly appreciated the real ratio of the Privy Council case, referred to above.
As regards Chappan 's case (supra), the conclusion of the High Court is not borne out by the ratio of the Full Bench in the said case.
It would appear that the Full Bench in the aforesaid case was concerned with two questions: (1) Whether in view of section 622 of the old Code (which corresponds to section 115 of the Code of 1908) an order passed by a trial Judge could be revised by a larger Bench, and (2) Whether the right of appeal given by cl. 15 of the Letters Patent against an order passed by a trial Judge was controlled and limited by sections 588 and 591 of the Code of 1877 (which now corresponds to order 43 Rule 1).
In the instant case we are not concerned with the revisional power but only with what old section 588 was.
Far from deciding that section 588 was not controlled by the Letters Patent, the learned Judge decided to the contrary.
To begin with, Benson, J. formulated 236 the questions referred to the Full Bench thus : (1) Whether the jurisdiction exercised by the High Court under section 622, Civil Procedure Code, is included in the expression "appellate jurisdiction" as used in section 13 of the High Court Act (24 and 25 Vict.
104 and in section 36 of the Letters Patent of 1866, and (2) Whether the right of appeal given by section 15 of the Letters Patent against an order passed by a single Judge of the High Court is controlled and limited by sections 588 and 591, Civil Procedure Code? I am of opinion that both of these questions must be answered in the affirmative".
and Shephard, Acting C.J. Observed as follows: "Accordingly I think it must be assumed that the judgment of a single Judge acting under section 622 of the Code is open to appeal, unless the right of appeal has been taken away by section 588 of that Code.
On that question I entirely agree with Mr. Justice Subramania Ayyar.
The question is, in my opinion, concluded by authority which it is beyond our province to criticise".
and Boddam, J. expressed the following opinion : "The result of this judgment (so far as it applies to the question before us) appears to me to come to this, that if the order made by a single Judge only amounts to an order such as is intended by chapter XLIII of the Code, it is not appealable unless it is within section 588".
and Moore, J. Observed as follows : "It is clear, however, that this could not have been done, for the provisions of sections 588 and 591 do, in certain cases, most certainly apply to the High Court.
For example, section 588, clause 1, provides that if a District Munsif passes an order under section 20 of the Code, an appeal lies to the District Judge, but that there is no second appeal to the High Court, while if a District Judge passes 237 such an order an appeal can be preferred to the High Court.
Whatever view be taken of section IS of the Letters Patent it would have been impossible to include section 588 among those sections that do not apply to the High Court".
Thus, the ratio decidendi of the decision clearly goes to indicate that the Full Bench of the Madras High Court had held in no uncertain terms that section 588 applied to the High Court and orders mentioned therein passed by a Trial Judge would be appealable to a larger Bench.
This, therefore, knocks the bottom out of the decision of the Bombay High Court when Chappan 's case (supra) in no way supported the view taken by them.
For the reasons given above, we hold that J.K Chemicals 's case (supra) was also wrongly decided and can no longer be treated as good law.
It is rather unfortunate that despite clear, explicit, pointed and pragmatic observations of the Privy Council in Hurrish Chunder Chowdry 's case (supra) and further clarification by the legislature by introducing section 104 of the Code of 1908, some of the High Courts n seem to have stuck to the antiquated view that the provisions of order 43 Rule I do not apply to internal appeals within the High Courts.
Thus after considering the arguments of counsel for the parties on the first two limbs of the questions, our conclusions are : (1) That there is no inconsistency between section 104 read with order 43 Rule I and the appeals under the Letters Patent and there is nothing to show that the Letters Patent in any way excludes or overrides the application of section 104 read with order 43 Rule I or to show that these provisions would not apply to internal appeals within the High Court.
(2) That even if it be assumed that order 43 Rule I does not apply to Letters Patent appeals, the principles governing these provisions would apply by process of analogy.
(3) That having regard to the nature of the orders contemplated in the various clauses of order 43 Rule 1, there can be no doubt that these orders purport to decide valuable rights of the parties in ancillary proceedings even though the suit is kept alive and 238 that these orders do possess the attributes or character of finality so as to be judgments within the meaning of cl. 15 of the Letters Patent and hence.
appealable to a larger Bench.
(4) The concept of the Letters Patent governing only the internal appeals in the High Courts and the Code of Civil Procedure having no application to such appeals is based on a serious misconception of the legal position.
This now brings us to the second important point which is involved in this appeal.
Despite our finding that section 104 read with order 43 Rule I applies to Letters Patent appeals and all orders passed by a Trial Judge under clauses (a) to (w) would be appealable to the Division Bench, there would still be a large number of orders passed by a Trial Judge which may not be covered by order 43 Rule l.
The next question that arises is under what circumstances orders passed by a Trial Judge not covered by order 43 Rule 1 would be appealable to a Division Bench.
In such cases, the import, definition and the meaning of the word 'judgment ' appearing in cl.
15 assumes a real significance and a new complexion because the term 'judgment ' appearing in the Letters Patent does not exclude orders not falling under the various clauses of order 43 Rule 1.
Thus the serious question to be decided in this case and which is indeed a highly vexed and controversial one is as to what is the real concept and purport of the word 'judgment ' used in cl.
IS of the Letters Patent.
The meaning of the word 'judgment ' has been the subject matter of conflicting decisions of the various High Courts raging for almost a century and in spite of such length of time, unfortunately, no unanimity has so far been reached.
As held by us earlier it is high time that we should now settle this controversy once for all as far as possible.
We now proceed to deal with the main controversy as to what is the true scope, meaning and purport of the word 'judgment ' used in cl. 15 of the Letters Patent.
Numerous authorities on both sides were cited before us in the course of the very able arguments advanced by counsels for the parties and it appears that there are three leading judgments which have spelt out certain tests to determine as to when an order passed by a Trial Judge can be said to be a 'judgment ' within the meaning of.
cl IS of the Letters Patent.
A very narrow view on this point was taken by a Division Bench 239 Of the Calcutta High Court in the case of The Justice of the Peace for Calcutta (supra) where Sir Couch, C.J. On an interpretation of cl. 15 of the Letters Patent observed thus: "We think that "judgment" in clause 15 means a decision which affects the merits of the question between the parties by determining some right or liability.
It may be either final, or preliminary, or interlocutory, the difference between them being that a final judgment determines the whole cause or suit, and a preliminary or interlocutory judgment determines only a part of it, leaving other matters to be determined.
" An analysis of the observations of the Chief Justice would reveal that the following tests were laid down by him in order to decide whether or not an order passed by the Trial Judge would be a judgment: (1) a decision which affects the merits of the question between the parties; (2) by determining some right or liability; (3) the order determining the right or liability may be final, preliminary or interlocutory, but the determination must be final or one which decides even a part of the controversy finally leaving other matters to be decided later.
Thus, examining the tests laid down by Sir Richard Couch, C.J,, it seems to us that the view taken by the learned Chief Justice appears to place a very strict and narrow interpretation on the word 'judgment ' under which orders deciding matters of moment or valuable right of the parties without finally deciding the suit may not amount to a judgment and hence, not appealable.
In giving this interpretation the learned Chief Justice was guided by two considerations: (I) that a liberal interpretation may allow vexed litigants to carry any discretionary order of the Trial Court in appeal, and (2) that it would confer more extensive right to appeal against the Judge sitting on the original side than the right of appeal given to a Trial Judge sitting in the mofussil.
We are doubtless impressed with the argument of the Chief Justice and fully appreciate the force of the reasons given by him but we feel that despite those considerations the law must be interpreted as it stands and a court is not 240 justified in interpreting a legal term which amounts to a complete distortion of the word 'judgment ' so as to deny appeals even against unjust orders to litigants having genuine grievances so as to make them scapegoats in the garb of protecting vexatious appeals.
In such cases, a just balance must he struck so as to advance the object of the statute and give the desired relief to the litigants, if possible.
Although it is true that this decision is practically the locus classicus so far as the Calcutta High court is concerned and has been consistently followed by later decisions at the same time it cannot be denied that in a number of cases the conscience of the Judges was so shocked that they tried to whittle down or soften the rigours of this decision so much so that in one case the observations of the Chief Justice were not only not followed but were described as antiquated and in other cases the Judges strongly expressed them selves that the High court should give up its fondness to stick to the principles laid down by the learned Chief Justice.
It is not necessary for us to burden this judgment with later decisions of the Calcutta High court in trying to comment on the correctness of the principles laid down by sir Couch, c J. but a few instances may be quite revealing.
In Chandi Charan Saha vs Jnanendra Nath Bhattacharjee and Ors.
,(l) Sir Asutosh Mookerjee in his leading judgment modified the strict rule of interpretation of 'judgment ' laid down by sir Couch, C.J. and pointed out that the words 'merits of the question between the parties by determining a right of liability ' were not to be confined or restricted to the controversy in a suit itself but could take within its fold any right involved in any application which puts an end to the suit or the proceeding.
sir Mookerjee, J. has widened the scope of the observations of sir Couch, c.
J and adopted some of the observations of Sir White, C.J. in Tuljaram Row 's case (supra) and in this connection observed thus: "It is plain that the expression 'some right or liability is not restricted to the right in controversy in the suit itself on the other hand, if we adopt the wider definition formulated by White C.J. in the case of Tuljaram Row vs Alagappa Chettiar (ILR , the decision is unquestionably a judgment within the meaning of the Letters Patent.
The test is, not what the form of the adjudication is, but what is its effect in the suit or proceeding in which 241 it is made.
If its effect, whatever its form may be and whatever may be the nature of the application on which it is made, is to put an end to the suit or proceeding so far as the Court before which the suit or proceeding is pending is concerned, or if its effect, if it is not complied with, is to put an end to the suit or proceeding, the adjudication is a judgment: Mathura vs Haran Cal. 857).
" In Lea Badin 's case (supra), the following observations were made: "To remove the incongruity which appears in the decision of this Court and to lay down some definite rule by which orders might be tested when it has to be determined whether or not they are 'judgments ' within the meaning of the clause, this Court will some day have to abandon its fond adherence to the antiquated definition of Couch, C.J., and boldly acknowledge its allegiance to the tests laid down by White, C.J." (Emphasis supplied) After making these observations the Court further reiterated the position in the following words.
"In more decisions than one of this Court this definition of 'Judgment ' given by Couch, C.J. has been described as classical, and yet in a long course of decisions this Court has repeatedly expressed the view that the definition is absolutely exhaustive.
Treating this definition as not of an inflexible character and yet not expressly purporting to extend it, the Court has in numerous cases emphasised the necessity of scrutinizing the nature of the decision in each particular case in order to find out whether the decision amounts to a 'judgment ' within the meaning of the Clause.
In Shorab Merwanji Modi and Anr.
vs Mansata Film Distributors and Anr., the following observations were made: "On a strict construction of the Calcutta test, the Tight or liability must mean some right or liability which is 242 a subject matter of controversy in the suit or proceeding but in its application to individual cases, that strict construction has not been adhered to and was indeed often departed from by Couch, J., himself who was the author of the test.
Orders concerning the jurisdiction of the Court to entertain a suit, as distinguished from matters of the actual dispute between the parties, were held by him to come within the category of judgments." In Mooammed Felumeah vs section Mondal & Ors.
the Court pithily observed as follows: "Now, so far as this Court is concerned, there is a considerable body of judicial opinion, which, while holding that Sir Richard Couch 's above definition is classical and of pre eminent practical importance and usefulness, has consistently refused to regard it as, in any sense.
exhaustive or inflexible.
Indeed, in essence and truth, it has been accepted merely as the starting point on a broad open field, stretched in front of it in all its vastness and immense magnitude, and Judges have always endeavoured to extend it and expand the different aspects of the term and to give it a wide and extended meaning, though, of course, within certain limits.
" The other leading case which puts even a narrower interpretation and in our opinion, a clearly wrong one, on the word 'judgment ' is the Full Bench decision of the Rangoon High Court In Re Dayabhai Jiwandas 's case (supra) where the following observations were made: "I am of opinion that in the Letters Patent of the High Courts the word judgment ' means and is a decree in a suit by which the rights of the parties at issue in the suit are determined." With due respect to the learned Chief Justice and the Judges who agreed with him, we are unable to accept the interpretation of the word judgment ' given by the Chief Justice which runs counter to the very spirit and object of the word 'judgment ' appearing in cl. 15 of the Letters Patent.
The learned Chief Justice seems to 243 have fallen into the error of equating the word 'judgment ' with 'decree ' as used in the Code of Civil Procedure when, as pointed out above, the words 'judgment ' and 'decree ' used in the Code cannot form a safe basis to determine the definition of the word 'judgment ' in the Letters Patent particularly when the Letters has deliberately dropped the word 'decree from judgment. ' We are, therefore, unable to hold that the view taken by the Chief Justice, Sir Page, is correct and accordingly overrule the same.
The next leading case which lays down the test of a 'judgment ' and which seems to have found favour with most of the High Courts in India is the test laid down by Sir Arnold White, C.J. in Tuljaram Row 's case (supra) where the learned Chief Justice pointedly spelt out various tests and observed thus: "The test seems to me to be not what is the form of the adjudication but what is its effect in the suit or proceeding in which it is made.
If its effect, whatever its form may be, and whatever may be the nature of the application on which it is made, is to put an end to the suit or proceeding so far as the Court before which the suit or proceeding is pending is concerned, or if its effect, if it is not complied with, is to put an end to the suit or proceeding, I think the adjudication is a judgment within the meaning of the clause.
An adjudication on an application which is nothing more than a step towards obtaining a final adjudication in the suit is not, in my opinion, a judgment within the meaning of the Letters Patent.
" I think, too, an order on an independent proceeding which is ancillary to the suit (not instituted as a step towards judgment, but with a view to rendering the judgment effective if obtained) e.g., an order on an application for an interim injunction, or for the appointment of a receiver is a 'judgment ' within the meaning of the clause.
" Analysing the observations of the learned Chief Justice it would appear that he has laid down the following tests in order to assess the import and definition of the word 'judgment ' as used in cl.
IS of the Letters Patent : (1) It is not the form of adjudication which is to be seen but its actual effect on the suit or proceeding; 244 (2) If, irrespective of the form of the suit or proceeding, the order impugned puts an end to the suit or proceeding it doubtless amounts to a judgment; (3) Similarly, the effect of the order, if not complied with, is to terminate the proceedings, the said order would amount to a judgment; (4) Any order in an independent proceeding which is ancillary to the suit (not being a step towards judgment) but is designed to render the judgment effective can also be termed as judgment within the meaning of the Letters Patent.
So far as this test is concerned, the learned Chief Justice had in mind orders passed by the Trial Judge granting or refusing ad interim injunction or appointing or refusing to appoint a receiver.
(5) An order may be a judgment even if it does not affect the merits of the suit or proceedings or does not determine any rights in question raised in the suit or proceedings.
(6) An adjudication based on a refusal to exercise discretion the effect of which is to dispose of the suit, so far as that particular adjudication is concerned, would certainly amount to a judgment within the meaning of the Letters Patent.
Similarly, Krishnaswami Ayyar, J., who agreed with tile Chief Justice in the above case, pointed out that even an interlocutory judgment which determines some preliminary or subordinate point or plea or settles some step without adjudicating the ultimate right of the parties may amount to a judgment.
With due respect we think that if the observations of Krishnaswamy Ayyar, J. are carried to its logical limit every interlocutory order would have to be held to be appealable.
So far as the tests laid down by White, C.J., and as analysed by us, are concerned we are inclined to agree generally with these tests though we feel that some of the tests laid down are far too 245 wide and may not be quite correct.
While the view taken by Sir Richard Couch, C.J. in The Justice of the Peace for Calcutta (supra) is much too strict, the one taken by Sir White, C.J. is much too wide.
The correct test seems to lie somewhere in between the tests laid down by the aforesaid jurists.
We might point out that the tests laid down by the Calcutta High Court have been consistently followed by the Bombay High Court and also by a large majority of the later decisions of the Calcutta High Court in Lea Badin vs Upendra Roy Chaudhury, Kumar Gangadhar vs Kanti Chunder Mukherjee, Shorab Merwanji Modi vs Mansata Film Distributors, Mohammed Felumeah vs section Mondal.(supra) Some of the decisions have sounded a discordant note and have gone to the extent of characterising the view of Sir Couch, C.J, as being antiquated and have strongly expressed the view that the Calcutta High Court should give up its fondness for the strict test laid down by Sir Couch in The Justice of the Peace for Calcutta 's case.
On the other hand, the tests laid down by Sir White, C.J. in Tuljaram Row 's case have been followed by the Lahore High Court in Ruldu Singh vs Sanwal Singh and by some other High Courts in Standard Glass Beads Factory Shri Dhar & Ors.
and later decisions of the Madras High Court as also by Andhra Pradesh High Court in Kuppa Viswappathi vs Kuppa Venkata Krishua Sastry.
A Full Bench of the Allahabad High Court, however, in Mt. Shahzadi Begam vs Alak Nath dissented from the view taken by the Madras High Court and held that the tests laid down by that High Court in the aforesaid case were rather too wide.
In this connection, Sulaiman, C.J., speaking for the Court observed as follows : "We would like to point out that the test laid down by the learned Chief Justice of the Madras High Court is put in too wide a language and cannot be accepted as laying down the correct criterion".
Similarly, in a later Full Bench decision of the Nagpur High Court in Manohar Damodar Bhoot vs Baliram Ganpat Bhoot, Hidayatullah.
J. (as he then was) who wrote the leading judgment, very pithily described the essential requisites and the exact meaning 246 of the word 'judgment ' as used in the Letters Patent and observed thus: "A judgment means a decision in an action whether final, preliminary or interlocutory which decides either wholly or partially, but conclusively in so far as the Court is concerned, the controversy which is the subject of the action.
It does not include a decision which is on a matter of procedure, nor one which is ancillary to the action even though it may either imperil the ultimate decision or tend to make it effective.
The decision need not be immediately executable 'per se ' but if left untouched must result inevitably without anything further, save the determination of consequential details, in a decree or decretal orders, that is to say, an executive document directing something to be done or not to be done in relation to the facts of the controversy.
The decision may itself order that thing to be done or not to be done or it may leave that over till after the ascertainment of some details but it must not be interlocutory having for its purpose the ascertainment of some matters or details prior to the determination of the whole or any part of the controversy".
The pointed observations of the Hon 'ble Judge try to synthesize the conflicting views taken by the Calcutta and the Madras High Courts and, in our opinion, they represent the true scope and import of the word 'judgment ' as used in the Letters Patent.
The learned Judge while making these observations has made an exhaustive analysis of a large number of cases.
Having dealt with the main cases of the various High Courts reflecting different and variant views, we do not think it necessary to multiply authorities on this subject which have been fully debated in the decisions we have referred to.
We shall now proceed to refer to the decisions of this Court with respect to the incidental observations made by them regarding the scope and meaning of the word 'judgment ' before giving our own view of the matter.
Before, however, dealing with the cases of this Court we might indicate that in view of the decisions taken by us regarding the applicability of section 104 read with order 43 Rule 1 even to internal appeals in the High Court, the controversy regarding the meaning of the word 'judgment ' has been largely narrowed down and sufficiently abridged because the orders mentioned in clauses (a) to (w) of order 43 Rule 1 having 247 been held to be appealable, there would be only a few cases left in A which the question as to whether or not the orders passed by the Trial Judge are judgments would arise.
After discussing the decisions of this Court, we shall give a list of illustrative cases which may justly be described as 'judgment ' within the meaning of the Letters Patent so as to cover almost the entire field though a few cases still may have to be determined according to the principles laid down.
The first decision of this Court which is relevant is Asrumati Debi 's case (supra).
In this case the only question involved was whether an order transferring a suit under cl. 13 of the Letters Patent satisfied the tests of a judgment as mentioned in cl. 15 of the Letters Patent.
This Court referring to the Calcutta and Madras decisions refrained from giving any particular decision except that they held that the mere order of transfer under cl. 13 of the Letters Patent could not be said to be a judgment and was therefore not appealable.
This Court pointed out that the order neither affected the merits of the controversy not did it terminate or dispose of the suit.
In this connection, the Court observed as follows: "The judgment must be the final pronouncement which puts an end to the proceeding so far as the court dealing with it is concerned.
It certainly involves the determination of some right or liability, though it may not be necessary that there must be a decision on the merits. .
We have indicated that the essential features of a 'judgment ' are according to both the, Calcutta and the Madras High Courts and all that we need say is that, in our opinion, an order under clause 13 of the Letters Patent does not satisfy the tests of a 'judgment ' as formulated by either of these High Courts".
Apart from this what is more important is that the Court clearly observed that as an order granting leave under cl. 12 of the Letters Patent constitutes the very foundation of the suit, hence if by an order such leave is rescinded the suit automatically comes to an end and there can be no doubt that such an order would be a judgment.
In this connection, this Court observed as follows: "Leave granted under clause 12 of the Letters Patent constitutes the very foundation of the suit which is 248 instituted on its basis.
If such leave is rescinded, the suit automatically comes to an end and there is no doubt that such an order would be a judgment".
Thus, from this case an important test that can be spelt out is that where an order which is the foundation of the jurisdiction of the Court or one which goes to the root of the action, is passed against a particular party, it doubtless amounts to a judgment.
As we have already pointed out apart from these observations this Court refused to embark on an enquiry as to in what cases an order passed by a Trial Judge would be a 'judgment ' for purposes of appeal before a larger Bench.
Again in Union of India vs Mohindra Supply Co. (supra) this Court clearly held that in enacting section 104 the intention of the Legislature was to preserve the Letters Patent jurisdiction of the High Court and provided for a right to appeal from the Trial Judge to the Division Bench without affecting the provisions of the Code of 1908.
In this connection, the Court observed as follows : "Under the Code, as amended, the view has consistently been taken that interlocutory judgments (i.e., decisions though not amounting to decrees which affect the merits of the questions between the parties by determining some right or liability) passed by single Judges of Chartered High Courts were appealable under the Letters Patent".
We might mention here that the observations of this Court completely demolish the arguments of some of the High Courts that section 104 does not apply to internals in the High Court because this Court while referring to the Code made specific reference to section 104 in the previous paragraph.
Apart from this, there is no observation by this Court regarding essential requisites of a Judgment.
In State of U.P. vs Dr. Vijay Anand Maharaj (supra) the order impugned passed by the Single Judge was an order dismissing an application filed by the applicant to review the order of the Trial Judge.
The question for determination was whether the order was a judgment so as to be appealable to the Division Bench.
This Court referred to the observations of Hidayatullah, J. extracted in Manohar V. Baliram (supra) and though they did not expressly approve this decision they indirectly seem to have been impressed by the reasons given by Hidayatullah, J. Nothing further was said by this Court because it held that on the facts of that case the 249 order of the Trial Judge dismissing the application for review was A appealable.
We might mention here that under clause (w) of order 43 Rule 1 an order granting an application for review is appealable.
On a parity of reasoning, therefore, an order dismissing an application for review would also be appealable under the Letters Patent being a judgment though it is not made appealable under order 43 Rule 1.
In Shankarlal Aggarwal 's case (supra) while indicating the divergence of judicial opinion on the subject this Court held that an order under section 202 of the Indian was a judgment within the meaning of Letters Patent and therefore appealable.
We might mention here that the which confers additional original jurisdiction on the Trial Judge expressly makes an order passed by the Trial Judge under section 202 appealable and, therefore, it is manifest that any order passed under section 202 would have to be appealable under the and therefore it was rightly construed as a judgment.
In Radhey Shyam vs Shyam Behari (supra) the question was whether in an application under order 21 rule 90 to set aside an auction sale an order passed by the Court would be a judgment affecting valuable rights.
This Court held that an order in such proceedings affected valuable rights and was therefore appealable.
In this connection, the Court observed as follows: "In our view an order in a proceeding under O. XXI, r. 90 is a "judgment" in as much as such a proceeding raises a controversy between the parties therein affecting their valuable rights and the order allowing the application certainly deprives the purchaser of rights accrued to him as a result of the auction sale.
" Thus, the only point which emerges from this decision is that whenever a Trial Judge decides a controversy which affected valuable rights of one of the parties, it must be treated to be a judgment within the meaning of the Letters Patent.
250 The last case of this Court to which our attention has been drawn is Shanti Kumar R. Canji vs The Home Insurance Co. Of New York where the court was considering the effect of an order passed by the Trial Judge allowing amendment of the plaint and the question at issue was whether such an order would be a judgment within the meaning of the Letters Patent.
The following observations were made by this Court in the aforesaid case.
"We are in agreement with the view expressed by the High Court at Calcutta in the M.B. Sirkar 's case (AIR 1956 Cal. 630) as to when an order on an application for amendment can become a judgment within the meaning of clause 15 of the Letters Patent.
If an amendment merely allows the plaintiff to state a new cause of action or to ask a new relief or to include a new ground of relief all that happens is that it is possible for the plaintiff to raise further contentions in the suit, but it is not decided whether the contentions are right.
Such an amendment does nothing more than regulate the procedure applicable to the suit.
It does not decide any question which touches the merits of the controversy between the parties.
Where, on the other hand, an amendment takes away from the defendant the defence of immunity from any liability by reason of limitation, it is a judgment within the meaning of clause 15 of the Letters Patent.
The reason why it becomes a judgment is that it is a decision affecting the merits of the question between the parties by determining the right or liability based on limitation.
It is the final decision as far as the trial court is concerned.
In finding out whether the order is a judgment within the meaning of clause 15 of the Letters Patent it has to be found out that the order affects the merits of the action between the parties by determining some right or liability.
The right or liability is to be found out by the court.
The nature of the order will have to be examined in order to ascertain whether there has been a determination of any right or liability".
(Emphasis ours) 251 Thus, having noticed the ratio of some of the cases of this Court referred to above, regarding the tests to determine the import and meaning of the word 'judgment ' we now proceed to deal with the specific question after interpreting cl.15 of the Letters Patent of the Bombay High Court and the corresponding clauses of Letters Patent of other High Courts.
We shall endeavour to interpret the connotation and the import of the word 'judgment ' particularly in the light of pertinent and pointed observations made by this Court on earlier occasions as discussed above.
The relevant portion of cl. 15 of the Letters Patent may be extracted thus : "We do further ordain that an appeal shall lie to the said High Court of Judicature at Madras, Bombay, Fort William in Bengal from the judgment. . of one Judge of the said High Court. " Clause 15 makes no attempt to define what a judgment is.
As Letters Patent is a special law which carves out its own sphere, it would not be possible for us to project the definition of the word 'judgment ' appearing in section 2 (9) of the Code of 1908, which defines 'judgment ' into the Letters Patent: "judgment ' means the statement given by the Judge of the grounds of a decree or order".
In Mt. Shahzadi Begam vs Alak Nath and Ors., Sulaiman, C.J., very rightly pointed out that as the Letters Patent were drafted long before even the Code of 1882 was passed, the word 'judgment ' used in the Letters Patent cannot be relatable to or confined to the definition of 'judgment ' as contained in the Code of Civil Procedure which came into existence long after the Letters Patent were given.
In this connection, the Chief Justice observed as follows : "It has been held in numerous cases that as the Letters Patent were drafted long before even the earlier Code of 1882 was passed, the word 'judgment ' used therein does not 252 mean the judgment as defined in the existing Code of Civil Procedure.
At the same time the word 'judgment ' does not include every possible order, final, preliminary or interlocutory passed by a Judge of the High Court".
We find ourselves in complete agreement with the observations made by the Allahabad High Court on this aspect of the matter.
The definition of the word 'judgment ' in sub section
(9) of section 2 of the Code of 1908 is linked with the definition of 'decree ' which is defined in sub section
(2) of section 2 thus: "decree" means the formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit and may be either preliminary or final.
It shall be deemed to include the rejection of a plaint and the determination of any question within section 47 or section 144, but shall not include (a) any adjudication from which an appeal lies as an appeal from an order, or (b) any order of dismissal for default.
Explanation: A decree is preliminary when further proceedings have to be taken before the suit can be completely disposed of.
It is final when such adjudication completely disposes of the suit.
It may be partly preliminary and partly final".
Thus, under the Code of Civil Procedure, a judgment consists of the reasons and grounds for a decree passed by a court.
As a judgment constitutes the reasons for the decree it follows as a matter of course that the judgment must be a formal adjudication which conclusively determines the rights of the parties with regard to all or any of the matters in controversy.
The concept of a judgment as defined by the Code of Civil Procedure seems to be rather narrow and the limitations engrafted by sub section
(2) of section 2 253 cannot be physically imported into the definition of the word 'judgment ' as used in cl. 15 of the Letters Patent because the Letters Patent has advisedly not used the terms 'order ' or 'decree ' anywhere.
The intention, therefore, of the givers of the Letters Patent was that the word 'judgment ' should receive a much wider and more liberal interpretation than the word 'judgment ' used in the Code of Civil Procedure.
At the same time, it cannot be said that any order passed by a Trial Judge would amount to a judgment; otherwise there will be no end to the number of orders which would be appealable under the Letters Patent.
It seems to us that the word 'judgment ' has undoubtedly a concept of finality in a broader and not a narrower sense.
In other words, a judgment can be of three kinds :.
(1) A Final Judgment a judgment which decides all the questions or issues in controversy so far as the Trial Judge is concerned and leaves nothing else to be decided.
This would mean that by virtue of the judgment, the suit or action brought by the plaintiff is dismissed or decreed in part or in full.
Such an order passed by the Trial Judge indisputably and unquestionably is a judgment within the meaning of the Letters Patent and even amounts to a decree so that an appeal would lie from such a judgment to a Division Bench (2) A preliminary judgment This kind of a judgment may take two forms (a) where the Trial Judge by an order dismisses the suit without going into the merits of the suit but only on a preliminary objection raised by the defendant or the party opposing on the ground that the suit is not maintainable.
Here also, as the suit is finally decided one way or the other, the order passed by the Trial Judge would be a judgment finally deciding the cause so far as the Trial Judge is concerned and therefore appealable to the larger Bench.
(b) Another shape which a preliminary judgment may take is that where the Trial Judge passes an order after hearing the preliminary objections raised by the defendant relating to maintainability of the suit, e.g., bar of jurisdiction, res Judicata, a manifest defect in the suit, absence of notice under section 80 and the like, and these objections are decided by the Trial Judge 254 against the defendant, the suit is not terminated but continues and has to be tried on merits but the order of the Trial Judge rejecting the objections doubtless adversely affects a valuable right of the defendant who, if his objections are valid, is entitled to get the suit dismissed on preliminary grounds.
Thus, such an R order even though it keeps the suit alive, undoubtedly decides an important aspect of the trial which affects a vital right of the defendant and must, therefore, be construed to be a judgment so as to be appealable to larger Bench.
(3) Intermediary or Interlocutory judgment Most of the interlocutory orders which contain the quality of finality are clearly specified in clauses (a) to (w) of order 43 Rule 1 and have already been held by us to be judgments within the meaning of the Letters Patent and, therefore, appealable.
There may also be interlocutory orders which are not covered by o. 43 R.1 but which also possess the characteristics and trappings of finality in that, the orders may adversely affect a valuable right of the party or decide an important aspect of the trial in an ancillary proceeding.
Before such an order can be a judgment the adverse effect on the party concerned must be direct and immediate rather than indirect or remote.
For instance, where the Trial Judge in a suit under order 37 of the Code of Civil Procedure refuses the defendant leave to defend the suit, the order directly affects the defendant because he loses a valuable right to defend the suit and his remedy is confined only to contest the plaintiff 's case on his own evidence without being given a chance to rebut that evidence.
As such an order vitally affects a valuable right of the defendant it will undoubtedly be treated as a judgment within the meaning of the Letters Patent so as to be appealable to a larger Bench.
Take the converse case in a similar suit where the trial Judge allows the defendant to defend the suit in which case although the plaintiff is adversely affected but the damage or prejudice caused to him is not direct or immediate but of a minimal nature and rather too remote because the plaintiff still possesses his full right to show that the defence is 255 false and succeed in the suit.
Thus, such an Order passed by the Trial Judge would not amount to a judgment within the meaning of cl. 15 of the Letters Patent but will be purely an interlocutory order.
Similarly, suppose the Trial Judge passes an Order setting aside an exparte decree against the defendant, which is not appealable under any of the clauses of O. 43 R.1 though an order rejecting an application to set aside the decree passed exparte falls within O. 43 R.l cl.
(d) and is appealable, the serious question that arises is whether or not the order first mentioned is a judgment within the meaning of Letters Patent.
The fact, however, remains that the order setting aside the ex parte decree puts the defendant to a great advantage and works serious injustice to the plaintiff because as a consequence of the order, the plaintiff has now to contest the suit and is deprived of the fruits of the decree passed in his favour.
In these circumstances, therefore, the order passed by the Trial Judge setting aside the ex parte decree vitally affects the valuable rights of the plaintiff and hence amounts to an interlocutory judgment and is therefore, appealable to a larger Bench.
In the course of the trial, the Trial Judge may pass a number of orders whereby some of the various steps to be taken by the parties in prosecution of the suit may be of a routine nature while other orders may cause some inconvenience to one party or the other, e.g., an order refusing an adjournment, an order refusing to summon an additional witness or documents, an order refusing to condone delay in filing documents, after the first date of hearing an order of costs to one of the parties for its default or an order exercising discretion in respect of a procedural matter against one party or the other.
Such orders are purely interlocutory and cannot constitute judgments because it will always be open to the aggrieved party to make a grievance of the order passed against the party concerned in the appeal against the final judgment passed by the Trial Judge.
Thus, in other words every interlocutory order cannot be regarded as a judgment but only those orders would be judgments which decide matters of moment or affect vital and valuable rights 256 of the parties and which work serious injustice to the party concerned.
Similarly, orders passed by the Trial Judge deciding question of admissibility or relevancy of a document also cannot be treated as judgments because the grievance on this score can be corrected by the appellate court in appeal against the final judgment.
We might give another instance of an interlocutory order which amounts to an exercise of discretion and which may yet amount to a judgment within the meaning of the Letters Patent.
Suppose the Trial Judge allows the plaintiff to amend his plaint or include a cause of action or a relief as a result of which a vested right of limitation accrued to the defendant is taken away and rendered nugatory.
It is manifest that in such cases, although the order passed by the trial Judge is purely discretionary and interlocutory it causes gross injustice to the defendant who is deprived of a valuable right of defence to the suit.
Such an order, therefore, though interlocutory in nature contains the attributes and characteristics of finality and must be treated as a judgment within the meaning of the Letters Patent.
This is what was held by this Court in Shanti Kumar 's case (supra), as discussed above.
Let us take another instance of a similar order which may not amount to a judgment.
Suppose the Trial Judge allows the plaintiff to amend the plaint by adding a particular relief or taking an additional ground which may be inconsistent with the pleas taken by him but is not barred by limitation and does not work serious injustice to the defendant wh o would have ample opportunity to disprove the amended plea taken by plaintiff at the trial.
In such cases, the order of the Trial Judge would only be a simple interlocutory order without containing any quality of finality and would therefore not be a judgment within the meaning of cl. 15 of the Letters Patent The various instances given by us would constitute sufficient guidelines to determine whether or not an order passed by the Trial Judge is a judgment within the meaning of the Letters Patent.
We must however hasten to add that instances given by us are illustrative and not exhaustive.
We have already referred to the various tests laid down by the Calcutta, Rangoon and Madras High Courts.
So far as the Rangoon High Court is concerned we have already pointed out that the strict test that an order passed by the Trial Judge would be a judgment only if it amounts to a decree 257 under the Code of Civil Procedure, is legally erroneous and opposed to the very tenor and spirit of the language of the Letters Patent.
We, therefore, do not approve of the test laid down by the Rangoon High Court and that decision therefore has to be confined only to the facts of that particular case because that being a case of transfer, it is manifest that no question of any finality was involved in the order of transfer.
We would like to adopt and approve of generally the tests laid down by Sir White, C.J. in Tuljaram Row 's case (supra) (which seems to have been followed by most of the High Courts) minus the broader and the wider attributes adumbrated by Sir White, C.J. Or more explicitly by Krishnaswamy Ayyar, J. as has been referred to above.
Apart from the tests laid down by Sir White, C.J., the following considerations must prevail with the court: (1) That the Trial Judge being a senior court with vast experience of various branches of law occupying a very high status should be trusted to pass discretionary or interlocutory orders with due regard to the well settled principles of civil justice.
Thus, any discretion exercised or routine orders passed by the Trial Judge in the course of the suit which may cause some inconvenience or, to some extent, prejudice one party or the other cannot be treated as a judgment otherwise the appellate court (Division Bench) will be flooded with appeals from all kinds of orders passed by the Trial Judge.
The courts must give sufficient allowance to the Trial Judge and raise a presumption that any discretionary order which he passes must be presumed to be correct unless it is ex facie legally erroneous or causes grave and substantial injustice.
(2) That the interlocutory order in order to be a judgment must contain the traits and trappings of finality either when the order decides the questions in controversy in an ancillary proceeding or in the suit itself or in a part of the proceedings.
(3) The tests laid down by Sir White, C.J. as also by Sir Couch, C.J. as modified by later decisions of the Calcutta High Court itself which have been dealt with by us elaborately should be borne in mind.
258 Thus, these are some of the principles which might guide a Division Bench in deciding whether an order passed by the Trial Judge amounts to a judgment within the meaning of the Letters Patent.
We might, however, at the risk of repetition give illustrations of interlocutory orders which may be treated as judgments: (1) An order granting leave to amend the plaint by introducing a new cause of action which completely alters the nature of the suit and takes away a vested right of limitation or any other valuable right accrued to the defendant (2) An order rejecting the plaint.
(3) An order refusing leave to defend the suit in an action under Order 37, Code of Civil Procedure.
(4) An order rescinding leave of the Trial Judge granted by him under clause 12 of the Letters Patent.
(5) An order deciding a preliminary objection to the maintainability of the suit on the ground of limitation, absence of notice under section 80, bar against competency of the suit against the defendant even though the suit is kept alive.
(6) An order rejecting an application for a judgment on admission under order 12 Rule 6.
(7) An order refusing to add necessary parties in a suit under section 92 of the Code of Civil Procedure.
(8) An order varying or amending a decree.
(9) An order refusing leave to sue in forma pauperis.
(10) An order granting review.
(11) An order allowing withdrawal of the suit with liberty to file a fresh one.
(12) An order holding that the defendants are not agriculturists within the meaning of the special law.
(13) An order staying or refusing to stay a suit under section 10 of the Code of Civil Procedure.
259 (14) An order granting or refusing to stay execution of the decree.
(15) An order deciding payment of court fees against the plaintiff.
Here, it may be noted that whereas an order deciding the nature of the court fees to be paid by the plaintiff would be a judgment but this order affects only the plaintiff or the Government and not the defendant.
Thus, only the plaintiff or the Government as the case may be will have the right to file an appeal in the Division Bench and not the defendant because the question of payment of court fees is a matter between the Government and the plaintiff and the defendant has no locus in this regard.
We have by way of sample laid down various illustrative examples of an order which may amount to judgment but it is not possible to give such an exhaustive list as may cover all possible cases.
Law with its dynamism, pragmatism and vastness is such a large ocean that it is well nigh impossible for us to envisage or provide for every possible contingency or situation so as to evolve a device or frame an exhaustive formula or strategy to confine and incarcerate the same in a straitjacket.
We, however, hope and trust that by and large the controversy raging for about a century on the connotation of the term 'judgment ' would have now been settled and a few cases which may have been left out, would undoubtedly be decided by the court concerned in the light of the tests.
Observations and principles enunciated by us.
In the instant case, as the order of the Trial Judge was one refusing appointment of a receiver and grant of an ad interim injunction, it is undoubtedly a judgment within the meaning of the Letters Patent both because in view of our judgment, order 43 Rule 1 applies to internal appeals in the High Court and apart from it such an order even on merits contains the quality of finality and would therefore be a judgment within the meaning of cl. 15 of the Letters Patent.
The consistent view taken by the Bombay High Court in the various cases noted above or other cases which may not have been noticed by us regarding the strict interpretation of cl. 15 of the Letters Patent are hereby overruled and the Bombay High Court is directed to decide the question in future in the light of our decision.
We, therefore, hold that the order passed by the Trial Judge in the instant case being a judgment within the meaning of cl. 15 of the 260 Letters Patent, the appeal before the Division Bench was maintainable and the Division Bench of the High Court was in error in dismissing the appeal without deciding it on merits.
We have already directed the High Court to decide the appeal on merits by our formal order dated April 22, 1981.
Before closing this judgment we may indicate that we have refrained from expressing any opinion on the nature of any order passed by a Trial Judge in any proceeding under article 226 of the Constitution which are not governed by the Letters Patent but by rules framed under the Code of Civil Procedure under which in some High Courts writ petitions are heard by a Division Bench.
In other High Court writ petitions are heard by a Single Judge and a right of appeal is given from the order of the Single Judge to the Division Bench after preliminary hearing, In the circumstances we make no order as to costs.
AMARENDRA NATH SEN, J.
The only question which falls for determination in this appeal by special leave is whether an order passed by a Single Judge on the original side of the Bombay High Court refusing to grant an injunction or to appoint a receiver in an interlocutory application made in the suit, is appealable or not ? In other words, the maintainability of an appeal filed before a Division Bench of the Bombay High Court against an order of a learned single Judge of the High Court dismissing an interlocutory application for injunction and for appointment of a receiver by way of interim relief pending final disposal of the suit in the original side of the High Court, forms the subject matter of the present appeal.
The question is of some importance, as there appears to be no uniformity of the view amongst the various High Courts on the competence and the maintainability of such an appeal.
The appellant has filed in the original side of the Bombay High Court a suit for specific performance of an agreement dated 12th January, 1979.
In the said suit the appellant, as plaintiff in the suit, took out a notice of motion seeking the following reliefs: (a) that pending the hearing and final disposal of the suit, the respondent i.e. the defendant in the suit, be restrained by an order and injunction from in any 261 manner dealing with or disposing of or alienating or A encumbering the right, title and interest in respect of the said lands and the said land or any part thereof or parting possession of the said land or any part thereof; (b) that pending the hearing and final disposal of the suit, the Court receiver High Court Bombay or some other fit and proper person be appointed receiver of the said lands which forms the subject matter of the agreement, with all powers under 0.40, rule I of the Code of Civil Procedure; (c) ad interims in terms of prayers (a) (b); and (d) for such further and other reliefs as the nature and circumstances of the case may require.
A learned single Judge dealing with the said application of the appellant on the original side of the Bombay High Court dismissed the said application.
Against the order of the learned single Judge, the appellant preferred an appeal to the High Court of Bombay.
A preliminarily objection has been raised before the appellate Court as to the maintainability of the appeal on the ground that no appeal lay from the order of the learned Single Judge on the original side of the High Court, as the order could not be considered to be a 'judgment ' within the meaning of cl.
IS of the Letters Patent and the appeal was incompetent and not maintainable.
The appellate Court for reasons recorded in the Judgment upheld the said preliminary objection, holding that the order under appeal was not a judgment and no appeal would lie from the said order and the appeal, therefore was incompetent and not maintainable.
Against the order of the Division Bench of the Bombay High Court, the appellant has preferred this appeal by special leave granted by this Court.
After the hearing of the appeal was concluded, this Court in view of the urgency of the matter passed an order allowing the appeal and remanding the matter to the Bombay High Court for decision of the appeal on merits and this Court observed at the time of the passing of the order that this Court would state reasons later on.
The full text of the order has been set out in the judgment of my learned brother Fazal Ali.
J. 262 I have had the benefit of reading the judgment of my learned brother Fazal Ali, J. in advance.
I concur generally with the views expressed by my learned brother.
1, however, propose to state my own reasons for the order earlier passed by us.
The learned counsel appearing on behalf of the respective parties invited us only to decide the question of appealability of the order under appeal without going into the merits of the case.
The learned counsel for the parties have submitted before us that there is a conflict of decisions on the question of appealability of an order of this kind and maintainability of an appeal from such an order and this Court should resolve the conflict and decide the question of appealability of such an order and necessarily the maintainability of the appeal to a Division Bench of the High Court.
It has been further submitted before us that in the event of this Court holding that an appeal lay from the order in question and an appeal to the the Division Bench from the order was competent and maintainable, this Court should remand the appeal to the High Court for decision on merits and should not in this appeal go into the merits of the case.
The learned counsel for the parties, in view of the aforesaid submissions made, did not advance any arguments on the merits of the case before us.
The only question with which we are concerned in this appeal, as I have already indicated, therefore, is whether the order of the learned Single Judge refusing to grant an injunction or to appoint a receiver on the interlocutory application of the appellant, is appeal able or not; or, whether the appeal against the order of the learned Single Judge to the Division Bench of the High Court is competent and maintainable or not.
Mr. Sorabjee, learned counsel appearing on behalf of the appellant, has raised two principal contentions.
The first contention urged by Mr. Sorabjee is that in view of the provisions contained in section 104 of the Code of Civil Procedure read with order 43 thereof, the order is appealable under the Code and an appeal from the order becomes clearly maintainable.
The other contention raised by Mr. Sorabjee is that the order should in any event be considered to be a judgment within the meaning of clause IS of the Letters Patent, bearing in mind the provisions contained in section 104 of the Code of Civil Procedure and also order 43 thereof.
In support of his first contention, Mr. Sorabjee has argued that an appeal is a creature of statute and in the absence of any 263 statutory provisions making any other appealable no appeal will A normally lie against any order passed by a single Judge.
Mr. Sorabjee contends that cl.
I S of the Letter Patent makes such provision for an appeal being filed against any order passed by a learned Single Judge on the original side of the High Court.
It is the contention of Mr. Sorabjee that as Cl. 15 of the Letters Patent makes provision for preferring an appeal against an order passed by a learned Single Judge on the original side, provided the conditions laid down in the said clause are satisfied, Code of Civil Procedure and various other Statutes also make provision regarding appeal from orders passed by a learned Single Judge.
Mr. Sorabjee has submitted that the Code of Civil Procedure confers substantive rights of preferring appeals against particular orders specified in the Code.
In this connection Mr. Sorabjee has drawn our attention to section 104 and also order 43 of the Code of Civil Procedure.
Mr. Sorabjee argues that the Code of Civil Procedure confers a right of appeal on a litigant in respect of the orders which have been made statutorily appealable by the provisions contained in section 104 and order 43 of the Code of Civil Procedure.
It is the argument of Mr. Sorabjee that the Code of Civil Procedure makes inter alia general provisions with regard to appeals and also specifically confers on the litigant a right in respect of various orders, just as various other statutes make special or specific provisions with regard to the right of appeal in respect of any order under the particular statute.
Mr. Sorabjee has submitted that section 104 of the Civil Procedure Code and order 43 thereof clearly apply to the original side of a High Court.
In support of these submissions, Mr. Sorabjee has drawn our attention to the various provisions of the Code and particularly to Ss. 4, 98 104, 116 to 120, and section 122 and to order 43 rule 1 thereof.
Mr. Sorabjee in this connection has also relied on the following decisions : 1.
Mathura Sundari Dass vs Haran Chandra Shall(1) 2.
Lea Badin vs Upendra Mohan Roy Choudhary (2) 3.
Union of India vs Mohindra Supply Co. (3) 4.
Kumar Gangadhar Bagla vs Kanti Chander Mukherji (4) 5.
Sonbai vs Ahmedbhai Habibhai (5) 264 Mr. Sorabjee has criticised the view expressed by the Bombay High Court that section 104 of the Code of Civil Procedure and order 43 thereof do not apply to an order passed by a learned Single Judge on the original side of the High Court and an order passed by a learned Single Judge on the original side can only become appealable if the order can be said to be a 'judgment ' within the meaning of cl. 15 of the Letters Patent.
Mr. Sorabjee comments that cl.
IS of the Letters Patent does not, in any way, seek to control or curb the provisions contained in section 104 and order 43 of the Code of Civil Procedure.
He submits that a plain reading of the various sections of the Code of Civil Procedure make it clear that the pro visions contained in section 104 and order 43 of the Code are applicable to the original side of the High Court.
It is his submission that the provisions of the Code and the provisions contained in cl. 15 of the Letters Patent are not at all in conflict, as, clause IS of the Letters Patent may make such orders which may not be appealable under the Code, still appealable as judgment under cl. 15 of the Letters.
Patent.
In other words, it is the submission of Mr. Sorabjee that cl.
IS of the Letters Patent and the provisions of the Code are indeed supplementary to each other.
Mr. Sorabjee has fairly submitted that before the Division Bench of the Bombay High Court this argument that the order is appealable under the provisions of the Code and the appeal is, there t fore, competent was not advanced.
It is his submission that this argument was not advanced before the Division Bench of the Bombay High Court, as the view of the Bombay High Court has been that the provisions of section 104 and of order 43 of the Code of Civil Procedure do not apply to the original side of the Bombay High Court.
Mr. Sorabjee has argued that though in this appeal this aspect was not argued before the Division Bench of the Bombay High Court, he is entitled to urge this point before this Court as this point is a pure point of law.
Mr. Sorabjee has next contended that in any event the order under appeal should be considered to be a judgment within the meaning of cl. 15 of the Letters Patent.
He argues that the word 'judgment ' in clause 15 of the Letters Patent should be construed liberally so as to include within its fold any order which has been made appealable by virtue of the provisions contained in the Code or in any other statute.
He submits that such an interpretation will be in conformity with the principles of justice and will truly reflect intention of the Legislature and will avoid any kind of conflict 265 between the provisions contained in cl. 15 of the Letters Patent and A the provisions contained in the Code of Civil Procedure and in any other statute.
It is his submission that the word 'judgment ' in cl. 15 of the Letters Patent may include various other orders which may not otherwise be appealable under the provisions of the Code or any other Statute but may still become appealable as 'judgment ' by virtue of the provisions contained in the Letters Patent.
In other words, it is the contention of Mr. Sorabjee that the expression 'judgment ' in cl. 15 of the Letters Patent should be so construed as to include necessarily all orders which are appealable under any statute and also in appropriate cases various other orders which are not expressly made appealable by any statute.
He contends that the provisions of the Code contained section 104 and order 43 or in any other statute with regard to the appealability of any order do not have the effect of curtailing or affecting the special jurisdiction and power of the Court of entertaining an appeal from any other order, if the Court is satisfied that the order is in effect a judgment within the meaning of cl. 15 of the Letters Patent.
Mr. Sorabjee has submitted that as to the true meaning, effect and import of the word 'judgment ' in cl. 15 of the Letters Patent, there is a divergence of judicial opinion, and the word `judgment ' has come up for consideration before various Courts in many cases.
In this connection, Mr. Sorabjee has referred to the following decisions : 1.
The Justice of the Peace for Calcutta vs The Orientatal Gas Co. Ltd. (1) 2.
T.V. Tulzaram Row vs M.K.R.V. Allagappachettiar (2) 3.
Ruldu Singh vs Sanwal Singh (3) 4.
Shah Hari Dial & Sons vs Sohnamal Beliram (4) 5.
In Re: Dayabhai Jiwandas and Ors.
vs A.M.M. Muru gappa Chettiar (5) 6.
Abdul Samad & Ors.
vs State of J. & K. (6) 266 7.
Standard Glass Beads Factory vs Shri Dhar & Ors.(1) 8.
Sri Raja Vallanki Venkata Chinnayamma Rao Bahadur Zimidarni Garu vs Sri Raja Kotagiri Subemma Rao Bahadur Zimidarni Garu (2) 9.
Chitaranjan Mandal vs Shankar Prosad Sahani (3) 10.
Manohar Damadar Bhoot vs Baliram Ganpat Bhoot (4) 11.
Masanta Film Distributors Calcutta vs Sorab Marwanji Modi (5) 12.
J.K. Chemicals Ltd. vs Kreba and Co.(6) 13.
Kedar Nath Mitter vs Denobandhu Shaha(7) 14.
Shorab Merwanji Modi and Anr.
vs Mansata Film Distributors and Anr.(8) 15.
M.B. Sarkar and Sons vs Powell and Co.(9) 16.
Asrumati Devi vs Kumar Rupendra Deb Rai and Ors.(10) 17.
State of U.P. vs Dr. Vijay Anand Maharaj(11) 18.
National Bell Co. vs Metal Goods Co. (P) Ltd.(12) 19.
Shanti Kumar R. Canji vs The Home Insurance Co. Of New York(13) Mr. Sorabjee has submitted that this Court should lay down the guidelines or enumerate the principles to remove the confusion and resolve the conflict in the sphere of judicial determination as 267 to what constitutes 'judgment ' within the meaning of cl 15 of the Letters Patent.
Mr. Kapadia and Mr. Venugopal, learned counsel for the Respondents, have submitted that the provisions of the Code of Civil Procedure contained in section 104 and order 43 thereof are not applicable to the original side of the Bombay High Court which is a Chartered High Court in view of the provisions contained in cl. 15 of the Letters Patent.
They have argued that special jurisdiction has been conferred in the matter of preferring an appeal against an order of a Single Judge on the original side of a Chartered High Court by cl. 15 of the Letters Patent and this special jurisdiction of the High Court cannot in any way be affected by the provisions of the Code.
In support of this contention reference has been made to Ss. 3 and 4 of the Code of Civil Procedure and particular reliance has been placed on section 4.
They have also strongly relied on the decision of the Bombay High Court in the case of Vaman Raoji Kulkarni vs Nagesh Vishnu Joshi(1) and also on the decision of the same High Court in the case of J.K. Chemicals Ltd. vs Kreba and Co. (supra).
They have submitted that these judgments for cogent reasons recorded therein represent correct law and the view expressed by the Bombay High Court to the effect that section 104 and order 43 of the Code of Civil Procedure do not apply to the original side of the Bombay High Court, has been consistently followed by the Bombay High Court and should be upheld by this Court.
They have also relied on the following observations of the Judicial Committee in the case of Hurrish Chunder Chowdhry vs Kali Sundari Debia(2) at p. 17: "It only remains to observe that their Lordships do not think that sec.
588 of Act X. Of 1877, which has the effect of restricting certain appeals, applies to such a case as this, where the appeal is from one of the Judges of the Court to the full Court.
" They have argued that if the provisions of the Code are not held to be applicable to the original side of the Bombay High Court, then the appeal from the order of the learned Single Judge can only be maintained if the order becomes a 'judgment ' within the meaning 268 of cl. 15 of the Letters Patent.
They have contended that an order on an interlocutory application refusing to grant an injunction or appoint a receiver cannot be considered to be a 'judgment within the meaning of cl. 1 S of the Letters Patent, as such an order virtually does not decide anything and does not in any way affect the merits of the suit.
They have also relied on the decisions which were cited by Mr. Sorabjee and they have placed particular reliance on the decision of the Bombay High Court in the case of J.K. Chemicals Ltd. vs Kreba and Co. (supra).
Mr. Kapadia and Mr. Venugopal have both pointed out to us that the question of appealability of the order under the provisions of the Code was not argued before the High Court in the instant case and was sought to be argued for the first time in this Court.
Both of them, however, have fairly stated that the question is one of law and one of of considerable importance and the Court should decide the same.
I propose to deal with the question of applicability of the provisions contained in section 104 and order 43 of the Code of Civil Procedure to the original side of the Bombay High Court in the first instance.
Before I deal with the contentions urged by the counsel for the respective parties, it will be convenient to consider the relevant provisions of the Code.
section I of the Code makes it clear that the Act is applicable to whole of India excepting the places mentioned in the said section and the Act, therefore, applies to Maharashtra.
section 3 of the Code provides that for the purpose of this Code, the District Court is subordinate to the High Court, and every Civil Court of a grade inferior to that of a District Court and every Court of Small Causes is subordinate to the High Court and District Court.
section 4 of the Code reads: "(1) In the absence of any specific provision to the contrary, nothing in this Code shall be deemed to limit or otherwise affect any special or local law now in force or any special jurisdiction or power conferred, or any special form of procedure prescribed, by or under any other law for the time being in force.
(2) In particular and without prejudice to the generality of the proposition contained in sub section (1), nothing in this Code shall be deemed to limit or otherwise 269 affect any remedy which a landholder or landlord may have under any law for the time being in force for the recovery of lent of agricultural land form the produce of such land.
" section 5 of the Code deals with the applicability of the provisions of the Code to Revenue Courts.
section 100 of the Code deals with appeals from Appellate Decree and section 100 A which has been introduced into the Code w.e.f.
1.2.1977 by the Amending Act, 104 of 1976 provides that notwithstanding anything contained in Letters Patent for any High Court or in any other instrument having the force of law or in any other law for the time being in force, where any appeal from an appellate decree or order is heard and decided by a single Judge of a High Court, no further appeal shall lie from the judgment, decision or order of such Single Judge in such appeal or from any decree passed in such appeal.
The material provisions of section 104 are: "section 104 (1); An appeal shall lie from the following orders, and save as otherwise expressly provided in the body of this Code or by any law for the time being in force, from no other orders : x x x x x x x x (ff) an order under section 35A; (fa) an order under section 91 or section 92 refusing leave to institute a suit of the nature referred to in section 91 or section 92 as 'the case may be; (g) an order under S 95; (h) an order under any of the provisions of this Code imposing a fine or directing the arrest or detention in the Civil prison of any person except where such arrest or detention is in execution of a decree; (i) any order made under rules from which an appeal is expressly allowed by rules; Provided that no appeal shall lie against any order specified 270 in clause (i) save on the ground that no order, or an order for the payment of a less amount, ought to have been made.
(2) No appeal shall lie from any order passed in appeal under this section.
" Sections 105 and 106 may also be quoted: "(1) Save as otherwise expressly provided no appeal shall lie from any order made by a Court in the exercise of its original or appellate jurisdiction; but, where a decree is appealed from, any error, defect or irregularity in any order, affecting the decision of the case, may be set forth as a ground of objection in the memorandum of appeal; (2) Notwithstanding anything contained in sub section (1), where any party aggrieved by an order of remand from which an appeal lies does not appeal the reform, he shall thereafter be precluded from disputing its correctness.
section 106: Where an appeal from any order is allowed it shall lie to the Court to which an appeal would lie from the decree in the suit in which such order was made, or where such order is made by a court (not being a High Court) in the exercise of appellate jurisdiction, then to the High Court. ' ' Special provisions relating to the High Courts, not being the court of a Judicial Commissioner, are made in para IX of the Code which consists of five sections namely Ss.
116 to 120 and the said sections are as follows: "section 116: This Part applies only to High Courts not being the Court of a Judicial Commissioner.
section 117: Save as provided in this Part or in part X or in rules, the provisions of this Court shall apply to such High Courts.
section 118: Where any such High Court considers it necessary that a decree passed in the exercise of its original civil jurisdiction should be executed before the amount of 271 the costs incurred in the suit can be ascertained by taxation, the Court may order that the decree shall be executed forthwith, except as to so much thereof as relates to the costs: and, as to so much thereof as relates to the costs, that the decree may be executed as soon as the amount of the costs shall be ascertained by taxation.
section 119: Nothing in this Code shall be deemed to authorise any person on behalf of another to address the Court in the exercise of its original civil jurisdiction, or to examine witnesses, except where the Court shall have in the exercise of the power conferred by its charter authorised him so to do, or to interfere with the power of the High Court to make rules concerning advocates, vakils and attorneyes.
section 120: The following provisions shall not apply to the High Court in the exercise of its original civil jurisdiction, namely, secs.
16, 17 and 20.
section 122 empowers the High Courts, not being the Court of a Judicial Commissioner to make rules regulating their own procedure and the procedure of the Civil Courts subjects to their superintendence.
section 129 further provides: "Notwithstanding anything in this Code, any High Court not being the Court of a Judicial Commissioner may make such rules not inconsistent with the Letters Patent or order or other law establishing of it to regulate its own procedure in the exercise of its original civil jurisdiction as it shall think fit, and nothing herein contained shall affect the validity of any such rules in force at the commencement of this Code.
The material provisions contain in O. XLIII of the Code of Civil Procedure may be set out: "An appeal shall lie from the following orders under the provisions of section 104, namely: x x x x x x x x 272 (q) an order under rule 2, rule 3 or rule 6 of order XXXVIII: (r) an order under rule 1, rule 2, rule 2A, rule 4 or rule 10 of O. XXXIX; (s) an order under rule 1, or rule 4 of order XL.
x x x x 2.
The rules of O. XLI shall apply, so far as may be, to appeals from orders." On a proper analysis of the relevant provisions of the Code there cannot be, in my opinion, any manner of doubt that section 104 and order 43 of the Code of Civil Procedure apply, to the original side of the Bombay High Court.
It is not in dispute and it cannot be disputed that the Code of Civil Procedure applies to the High Court.
section 1 of the Code which provides for territorial extent of the operation of the Code makes this position abundantly clear.
The argument is that section 104 and order 43 of the Code do not have any application to the original side of the High Court, although various other provisions of the Code may apply to the High Court including its original side.
This argument, as we have earlier noticed, is made mainly on the basis of the provisions contained Ss. 3 and 4 of the Code.
section 3 of the Code deals with subordination of Courts.
It is no doubt true that a learned Single Judge dealing with any matter on the original side discharges his duties as a Judge of the High Court, and he can, therefore, be in no way subordinate to the High Court.
When a division Bench of a High Court hears an appeal from any decree, order or judgment of any Single Judge of the High Court in its original side there can be no question of any subordination of the Judge, presiding over a Bench on the original side of the High Court to the High Court.
An appeal admittedly lies to a division Bench of the High Court from any order passed by a learned single Judge on the original side under cl. 15 of the Letters Patent, if the order is a 'Judgment ' within the meaning of the said clause.
An appeal also admittedly lies from a decree passed by a Single Judge on the original side of the High Court to a division Bench of the High Court.
A division Bench, properly constituted, is perfectly competent to hear an appeal from any such order which may constitute a judgment within the meaning of cl. 15 and from any decree by a Single Judge on the original side of the 273 High Court.
In the same way, in case of any other order in respect of which right to prefer any appeal has been conferred by a statute, a division Bench of the High Court will be competent to hear such an appeal.
S.3 of the Code, in my opinion, has really no bearing on the question and creates no bar to the competence and maintainability of an appeal from an order passed by a Judge on the original side, if the order is otherwise appealable.
section 4 of the Code has been enacted to preserve any special or local law in force.
An analysis of the material part of this section clearly indicates that in the absence of any specific provision to the contrary, no provision in the Code shall be deemed to limit or otherwise affect any special or local law in force or special jurisdiction or power conferred or any special form of procedure prescribed by or under any Jaw for the time being in force.
The argument that section 104 and order 43 of the Code affect the special jurisdiction or power conferred on the High Court under cl. 15 of the Letters Patent is, to my mind, untenable.
15 of the Letters Patent was enacted to provide for an appeal from the Courts of original jurisdiction to the High Court in its appellate jurisdiction and the said clause undoubtedly confers power for the hearing of an appeal from a judgment of any judge on the original side of the High Court.
Though cl. 15 makes special provisions in relation to appeal from a judgment of a learned single Judge on the original side, yet it cannot be said that the side clause intended to lay down that in no other case an appeal will lie from an order passed by any learned Judge on the original side, even if any specific provision is made in any other statute making any other order appealable.
An appeal, it has to be remembered, is a creature of a statute and litigant generally does not have a right of appeal against any decision of a competent Court unless a right of appeal has been specifically conferred on the litigant by law.
Cl. 15 of the Letters Patent confers on the litigant a right to prefer an appeal against any judgment.
Any order which is considered to be a 'judgment ' will be appealable by virtue of the provisions contained in cl. 15 of the Letters Patent.
In the same way other statutes may confer on the litigant the right to prefer an appeal against an order; and by virtue of the provisions of the statute such an order shall become appealable.
If any other statute confers on the litigant any right to prefer an appeal in respect of any other order, it cannot be said that such a provision creating a right of appeal in any way affects the provisions contained in cl. 15 of the Letters Patent.
The special power and jurisdiction of the High court under cl. 15 to entertain an appeal from any judgment is in no way affected and is fully retained; 274 and in addition to the said power, a High Court may be competent to entertain other appeals by virtue of specific statutory provisions.
section 4 of the Code cannot, therefore, be said to be in conflict with the provisions contained in cl. 15 of the Letters Patent and section 4 of the Code does not limit or otherwise affect the power and jurisdiction of the High Court under cl. 15 of the Letters Patent.
On the other hand, the Code contains specific provisions which go to indicate in which case or to which Court the provisions of the Code, may or may not be applicable.
section S of the Code makes specific provisions regarding the nature and manner of applicability of the Code to Revenue Courts and the Revenue Court has also been defined in the said section.
On the other hand, in Ss. 116 to 120 it is convincingly indicated that section 104 and order 43 of the Code of Civil Procedure apply to the original side of a High Court.
Ss. 116 to 120 are contained in part IX of the Code which makes special provisions relating to High Courts (not being the Court of Judicial Commissioner).
section 117 specifically provides that the provisions of the Code shall apply to High Court save as provided in part IX or in part X. section 120 contained in part IX lays down that the provisions contained in Ss. 16, 17 and 20 of the Code shall not apply to the High Court in the exercise of its original civil jurisdiction.
Part X which deals with rules and manner of framing thereof does not have any material bearing on the question of applicability of section 104 and order 43 of the Code to the original side of the High Court.
The effect of the special provisions contained in part IX relating to High Courts, therefore, clearly appears to be that the provisions of the Code have as provided in Part IX or Part X or in rules, apply to the original side of the High Court and Ss. 16,17 and 20 of the Code do not apply to the High Court in the exercise of its original civil jurisdiction.
section 104 of the Code is contained in part VII which deals with appeals.
Part VII of the Code dealing with appeals consists of the sections commencing from Ss. 96 to 112.
This part VII dealing with appeals makes provisions for an appeal from original decrees, appeals, appellate decrees, appeals from orders, general provisions relating to appeals and also appeals to the Supreme Court.
section 104 of the Code provides for appeals from orders and clearly stipulates that an appeal shall lie from the orders mentioned therein and save as otherwise expressly provided in the body of the Code or by any law for the time being in force, from no other order.
Order 43 which is attracted by section 104 of the Code clearly provides that an appeal shall lie from the orders mentioned in rule 1 of o. 43 under the provisions of section 104 and the orders referred to therein particularly in (q), (r) and (s) clearly 275 indicate that the order in question is an appealable order.
As I have earlier observed that an appeal is a creature of a statute and the right to appeal is only enjoyed, if law confers any right.
The Code of Civil Procedure clearly makes the order in question an appealable one.
The legislature has thought it fit to confer a right on the litigant to prefer an appeal in respect of the orders mentioned in section 104 of the Code read with order 43 thereof.
A Court will be slow to deprive a litigant of the statutory right merely on the ground that the order in question has been passed by a learned Judge on the original side of the High Court.
It may further be pointed out that section 104 which makes the order under appeal and also various other orders referred to therein appealable under the Code, recognises that apart from the order made appealable under the Code there may be other orders appealable by any law for the time being in force and further provides that no appeal will lie from any orders other than the orders expressly provided in the body of the Code or by any other law in force.
The right of appeal against a judgment of a learned single Judge on the original side under cl. 15 of the Letters Patent is a right conferred by any other law in force.
It may be pertinent to point out in this connection that by incorporating section 100A in the Code (by the Amending Act 104 of 1976, section 38), the Legislature has thought it fit to interfere with the right of appeal in certain cases, even if such right had been conferred by Letters Patent or any other law.
This right of appeal under cl. 15 of the Letters Patent is in no way curtailed or affected by section 104 of the Code of Civil Procedure and section 104 seeks to confer the right of preferring an appeal in respect of the various orders mentioned therein.
In other words, by virtue of the provisions contained in section 104(1), a litigant enjoys the right of preferring an appeal in respect of various orders mentioned therein, even though such orders may or may not be appealable under cl. 15 of the Letters Patent as a judgment and the right of appeal under cl.
15 of the Letters Patent remains clearly unimpaired.
In this connection the following observations of this Court in the case of Union of India vs Mohindra Supply Co. (supra) at p. 511 may be usefully quoted: "The intention of the legislature in enacting the sub s.(1) of section 104 is clear: the right to appeal conferred by any other law for the time being in force is expressly preserved This intention is emphasised by section 4 which provides that in the absence of any specific provision to the contrary 276 nothing in the Code is intended to limit or otherwise affect any special jurisdiction or power conferred by or under any other law for the time being in force.
The right to appeal against judgments (which did not amount to decrees under the Letters Patent, was therefore not affected by section 104(1) of the Code of Civil Procedure, 1908".
It will be apt in this connection to bear in mind the view expressed by the Privy Council in the case of Mt. Savitri Thakurain vs Savi and Anr.,(1) the Judicial Committee held at p. 82 83 as follows: "The orders and rules under the Code are by Section 121 given the same affect as if they had been enacted in the Code, and therefore order 41, Rule 10, is one of the pro visions of the Code.
It applies to appeals in the High Court, including the present appeal, unless any particular section of the Act can be found to exclude it.
Section 104(1) is the section relied on for this purpose It prescribes what orders shall be appealable and enumerates them, and among the orders enumerated there is not included such an order as that made by Choudhary, J. Out of the operation of Section 104 there are, however, expressly excepted matters, which are otherwise expressly provided for in the body of the Code.
In order to appreciate the full effect of section 104 it should be compared with the corresponding section of the Act of 1882, Section 588.
The earlier section enacted that appeals should lie in certain cases, which it enumerated, 'and from no other such orders. ' This raised this question nearly whether an appeal, expressly given by Section 15 of the Letters Patent and not expressly referred to in Section 588 of the Code of 1882, could be taken away by the general words of the section 581 and in the wording of section 104 of the Act of 1908 is significant for it runs, 'and same as otherwise expressly provided. by any law for the time being in force, from the other orders '.
Section 15 of the Letters Patent is such a law, and what it expressly provides namely, an appeal to the High Court 's appellate jurisdiction from a decree of the High 277 Court in its original ordinary jurisdiction, is thereby saved.
Thus regulations duly made by orders and Rules under the Code of Civil Procedure, 1908 are applicable to the jurisdiction exercisable under the Letters Patent, except that they do not restrict the express Letters Patent appeal.
" The effect of sub section (1) section 104, therefore, is clearly not to affect any existing special or local law or any special jurisdiction or power conferred and to preserve any existing right of appeal whether under any statute or the Letters Patent and to create a further right of preferring an appeal in respect of the orders enumerated therein.
C In the case of Mathura Sundari Dassi vs Haran Chandra Shaha and Ors.
(supra), Sanderson, C.J. Observed at p. 362 as follows: "I would be very loth to hold that this order is not a 'judgment ' within the meaning of cl. 15 of the Letters Patent, but it is not necessary in my judgment to give a definite opinion upon it because I think, on the second point, the Code does give a right of appeal.
By clause 14 of the Letters Patent it is provided as follows: 'And we do further ordain and declare that all the provisions of these our Letters Patent are subject to the legislative powers of the Governor General in Council, exercised at meetings for the purpose of making law and regulations '.
By the terms of section 117 the code is made applicable to the High Court, and o. 43.
R. 1, gives a right of appeal in the very case under discussion.
But it is said that this Code and the rules made under it do not apply to an appeal from a learned Judge of the High Court.
I cannot follow that argument.
It is part of the defendant 's case that O.9, R. 8 applies.
That order is in effect a part of the Civil Procedure Code.
It seems to me strange that the plaintiff should be subjected to O.9, R. 8, and be liable to have his suit dismissed for want of appearance, yet when he has had his suit dismissed under one of the rules of the Code and wants to call in aid another of the rules which when his application for reinstatement has been refused gives him a right of appeal against that refusal, he is met with the argument that he cannot call in aid that rule because there is no appeal from the learned Judge of the High Court under the Civil Procedure Code.
I think this 278 is not a true view or a reasonable construction to put upon the Code and the Rules made under it.
In my judgment, the Code and the rules do apply and the plaintiff has a right of appeal.
" Sri Aushotosh Mookherji in his judgment in the same case at pp.
364 365 held as follows: "The question, consequently, arises whether O,43, r. 1, clause (c), is applicable to an order under o. IX, r. 9, made by a Judge on the original side of this Court.
On behalf of the appellant, reliance has been placed upon section 117 of the Code which lays down that 'save as provided in this part or in part X or in rules, the High Court established under the Indian High Courts Act, 1961. ' The only provision in Part IX, which may have any possible hearing is that contained in section 120 which obviously does not touch the present question.
The provision in Part X, which deal with the matter, is contained in section 129: this also does not militate against the contention of the appellant.
The term 'rule ', which finds a place in section 117, is defined in clause 18 of section 2 of the Code to mean 'a rule contained in the first Schedule or made under section 122 or section 125 '.
Our attention has not been drawn to any such rule which makes o. 43, R. 1, Clause (e), inapplicable.
On the other hand O.49, R. 3, which excludes the operation of other rules, lends support to the contention of the appellant that o. 43, r. 1, cl.
(c) is applicable to the present appeal.
But it has been argued on behalf of the respondents, on the authority of the decision of the Judicial Committee in Hurriah Chandra Choudhary vs Kali Sudari Dasi that the Civil Procedure Code, in so far as it provides for appeals, does not apply to an appeal preferred from a decision of one Judge of a High Court to the Full Court.
The true effect of the decision of the Judicial Committee was considered by this Court in Toolses Money Dassesv.
Sudevi Dasses (1890) 25 Cal. 361) but it is not necessary for my present purpose to determine its hearing in all its implications, because in my opinion, the law has been substantially altered since that decision was pronounced.
section 104 279 Of the Code of 1908 is materially different from section 588 of Code of 1882.
It provides that an appeal shall lie from the orders mentioned in the first clause of that section, and save as otherwise expressly provided in the body of the Code or by any law for the time being in force, from no other orders '.
The effect of section 104 is thus, not to take away a right of appeal given by clause IS of the Letters Patent, but to create a right of appeal in cases even where clause 15 of the Letters Patent is not applicable.
I may here observe perethically that in the case of Tooles Money Dasses vs Sudevi Dasses.
Princep J. felt pressed by the argument that if an appeal was deemed to have been allowed by the Code of Civil Procedure, there was no provision for the Constitution of a Court to which such an award might be preferred.
section 106 of the Code, however, lays down that "where an appeal from any order is allowed, it shall lie to the Court to which an appeal would lie from the decree in the suit in which such order was made. ' Consequently, where a right of appeal has been so given, it would be the duty of this Court to constitute a Court of Appeal under section 13 of the Indian High Courts Act.
1 hold accordingly that this appeal is competent under cl.
tc), R. 1, o. 43 of the Civil Procedure Code.
" In the case of Lea Badin vs Upendra Mohan Roy Chaudhry (supra), a Division Bench of the Calcutta High Court held at p. 37 as follows: "But there is another and far simpler ground on which it must he held that an appeal is competent.
The order in the present case is one for which a right of appeal ii provided in cl.
R. 1, o. 43 of the Code.
Under the pre sent Code (Act 5 of 1908) it cannot be contended that the Code and the Rules made under it do not apply to an appeal from a learned Judge of the High Court; such a contention was elaborately dealt with and repelled in the case of On a plain reading of the various provisions of the Code and on a proper construction thereof I have no hesitation in holding that section 104 of the Code of Civil Procedure applies to the original side of the High Court and the order in question is clearly appealable by virtue of the provisions contained in section 104(1) read with order 280 43 thereof.
The authorities to which I have referred also lend support to the view that I have taken.
A contrary view expressed by any High Court must necessarily be considered to be wrong and incorrect.
The leading decision of the Bombay High Court in the case of Baman Rao Kulkarini vs Naresh Vishnu Joshi (supra) proceeds on an incorrect appreciation and interpretation of the provisions of the Code.
As I have earlier discussed, there is no question of section 104 of the Code of Civil Procedure purporting to control of cl. 15 of the Letters Patent.
It may, on the other hand, be said that section 104 of the Code seeks to supplement cl. 15 of the Letters Patent by conferring a right of appeal in the case of various orders mentioned in sub section (1) of section 104, which brings in its purview section 43 of the Code.
The further approach of the Bombay High Court in that case as to subordination of a judge of the High Court sitting singly on the original side, is fallacious and untenable.
An appeal under cl. 15 of the Letters Patent from a judge sitting singly on the original side of the High Court becomes competent to a division Bench and a learned judge against whose judgment the appeal is preferred does not become subordinate to the High Court.
There is in fact no question of subordination at all.
The observations of the Judicial Committee in the case of Hurish Chandra Choudhary vs Kali Sudari Dasi (supra) at p. 17 relied on by the learned counsel for the Respondents are of no material assistance to them.
I have already quoted the said observations of the Judicial Committee.
The said observations made in relation to the provisions of section 588 of the Act 10 of 1877 only go to lay down that the said section which has the affect of restricting certain appeals does not have the affect of restricting the right of appeal under cl. 15 of the Letters Patent and does not apply to a case where an appeal is one under cl. 15 of the Letters Patent.
It may further be noted that the law has since the said decision been substantially altered and section 104 of the Code of Civil Procedure of 1908 is materially different from section 588 of the Code of 1882.
This decision of the Judicial Committee has already come up for consideration by a division Bench of the Calcutta High Court in the Mathura Sudari Dassi vs Haran Chandra Shaha (supra).
I, therefore, accept the first contention of Mr. Sorabjee that the order in question is appealable under section 104 (1) of the Code read with order 43 thereof and the said provisions of the Code apply to the original side of the Bombay High Court and the appeal preferred 281 from the order of the learned single judge to the Division Bench of A the Bombay High Court was competent and maintainable.
In view of my accepting the first contention of Mr. Sorabjee it does not really become necessary for me to consider the other contention raised by him, namely, that the order in question is also appealable as a 'judgment ' under cl. 15 of the Letters Patent.
As elaborate arguments have been advanced on this aspect and various decisions have been cited, my learned brother Fazal Ali, J. has in his judgment also considered this aspect and has dealt with various cases, in deference to the submissions made from the bar that this Court should lay down guidelines as to what will constitute a 'judgment ' within the meaning of cl.
l S of the Letters Patent.
An order which is appealable under the Code or under any other statute becomes appealable as the statute confers a right on the litigant to prefer an appeal against such an order.
Such an order may or may not be appealable as 'judgment ' under cl. 15 of the Letters Patent.
An order which may be appealable under cl.
IS of the Letters Patent as a 'judgment ' becomes appealable as Letters Patent confers on the litigant a right of appeal against such an order as 'judgment '.
An order appealable under the Letters Patent may or may not be appealable under the Code.
A right of appeal is a creature of Statute.
A litigant does not have an inherent right to prefer an appeal against an order unless such a right is conferred on the litigant by law.
Certain orders become appealable under the Code, as the Code makes such orders appealable.
Other Statutes may confer a right of appeal in respect of any order under the Statute.
The Letters Patent by cl. 15 also confers a right to prefer an appeal against a 'judgment '.
An order which satisfies the requirements of 'judgment ' within the meaning of cl.
15 becomes appealable under the Letters Patent.
What kind of an order will constitute a 'judgment ' within the meaning of cl. 15 of the Letters Patent and will become appealable as such much necessarily depend on the facts and circumstances of each case and on the nature and character of the order passed.
The question whether a particular order constitutes a judgment within the meaning of cl. 15 of the Letters Patent to be appealable under the provisions thereof has come up for consideration before the various Courts in a number of decision.
Very many decisions have been cited in the present case and they have been considered by my learned brother, Fazal Ali, J. in his judgment.
The question indeed, is not free from difficulties and divergent views have been expressed by different Courts and by various learned 282 Judges.
This Court had also the occasion to consider as to what may constitute a judgment within the meaning of cl. 15 of the Letters Patent in certain cases.
In the case of Shanti Kumar R. Canji vs The Home Insurance Co. Of New York (Supra) this Court referring to the earlier decision of this Court in the case of Asrumati Debi vs Kumar Rupendra Deb Rajkot & ors (supra), observed at p. 550 "This Court in Asrumati Debi 's case said that a judgment within the meaning of cl. 15 of the Letters Patent would have to satisfy two tests.
First, the judgment must be the final pronouncement which puts an end to the proceedings as far as the Court dealing with it is concerned.
Second, the judgment must involve the determination of some right or liability though it may not be necessary that there must be a decision on merits".
This Court further observed at p. 555 "The view of the High Courts of Calcutta and Madras with regard to the meaning of 'judgment ' are with respect preferred to the meaning of 'judgment ' given by the Rangoon and Nagpur High Court.
" This Court also held at p. 556 "In finding out whether the order is a 'judgment ' within the meaning of cl.
IS of the Letters Patent it has to be found out that the order affects the merits of the action between the parties by determining some right or liability.
The right or liability has to be found out by a Court.
The nature of the order will have to be examined in order to ascertain whether there has been a determination of any right or liability.
" In my opinion, an exhaustive or a comprehensive definition of 'judgment ' as contemplated in ch IS of the Letters Patent cannot be properly given and it will be wise to remember that in the Letters Patent itself, there is no definition of the word 'judgment '.
The expression has necessarily to be construed and interpreted in each particular case.
It is, however, safe to say that if any order has the effect of finally determining any controversy forming the subject matter of the suit itself or any part thereof or the same affects the question of Court 's jurisdiction or the question of limitation, such an order will normally constitute 'judgment ' within the meaning of cl.
IS of the Letters Patent.
I must not, however, be understood to say that any other kind of order may not become judgment within the meaning of cl.
IS of the Letters Patent to be appealable under the provisions thereof.
As already stated, it is not necessary to decide in the present case whether the order in question would be appealable under cl.
IS of the Letters Patent as judgment; and I, therefore, refrain from expressing any opinion on this question.
| IN-Abs | In a suit for specific performance of an agreement to sell filed on the original side of the Bombay High Court the plaintiff (appellant) prayed for certain interim reliefs.
A single Judge of the High Court dismissed the application.
A Division Bench of the High Court, on appeal by the plaintiff, held that the appeal was not maintainable on the ground that the impugned order of the single Judge was not a 'judgment ' within the meaning of clause 15 of the Letters Patent of the High Court.
In appeal to this Court it was contended on behalf of the appellant that since the trial Judge is governed by the procedure prescribed by the Code of Civil Procedure, by virtue of the provisions of section 104 read with Order 43 Rule (1) the impugned order is appealable to a larger Bench; (2) assuming that the Letters Patent was a special law, section 104 read with Order 43 is in no way inconsistent with clause 15 of the Letters Patent; (3) even if section 104 read with Order 43 Rule 1 does not apply an order refusing to appoint a receiver or to grant injunction has the attributes of finality and, therefore, amounts to a judgment ' within the meaning of Letters Patent.
Allowing the appeal ^ HELD: (per Fazal Ali and A. Varadarajan, JJ.) (Amarendra Nath Sen, J. concurring.) Since the Order of the trial Judge was one refusing appointment of a receiver and grant of ad interim injunction, it is a 'judgment ' within the meaning of the Letters Patent both because order 43 rule 1 applies to internal appeals in the High Court, and such an order even on merits contains the quality of finality and would be a judgment within the meaning of clause 15 of Letters Patent.
Hence an appeal is maintainable to the Division Bench.
The Division Bench was in error in dismissing the appeal without deciding it on merits.
[259 F G] 188 There is no inconsistency between section 104 read with Order 43 Rule 1, C.P.C. and appeals under Letters Patent.
There is nothing to show that Letters Patent in any way excludes or overrides the application of section 104 read with Order 43 Rule 1 or that these provisions do not apply to internal appeals within the High Court.
[237 E F] Code of Civil Procedure 1877, by sections 588 and 589, did not make any distinction between appeals to the High Court from the District Court and internal appeals to the High Court under Letters Patent.
Notwithstanding the clear enunciation of law by the Privy Council that section 588 did not affect nor was it inconsistent with the provisions of Letters Patent and that, therefore, orders of a trial Judge which fall beyond section 588 could be appealable to a larger bench under the Letters Patent if its orders amounted to a 'judgment ' within the meaning of clause 15 of the Letters Patent, there was a serious controversy among the High Courts on this question.
Section 104 of the C.P.C., 1908 made it clear that appeals against orders mentioned in Order 43 Rule 1 were not in any way inconsistent with the Letters Patent but merely provide additional remedy by allowing appeals against miscellaneous orders passed by the trial Judge to a larger bench.
[205 E G] In dealing with a suit the trial Judge has to follow the procedure prescribed by the Code.
It is indisputable that any final judgment passed by the trial Judge amounts to a decree and under the provisions of the Letters Patent an appeal lies to a larger bench.
Letters Patent itself does not define the term 'judgment ' and has advisedly not used the word 'decree ' in respect of a judgment given by the trial Judge.
[206 B D] Section 5 of the Code empowers the State Government to apply the provisions of the Code where any enactment is silent as to its applicability.
Section 5 makes clear that, excepting the Revenue Courts, all other Civil Courts would normally be governed by the provisions of the Code in the matter of procedure.[206H,207A] Section 4 of the Code which provides that in the absence of any specific provision to the contrary the provisions of the Code do not limit or affect any special or local law, is not applicable in the instant case because even if the Letters Patent is deemed to be a special law within the meaning of this section the provisions of section 104 do not seek to limit or affect the provisions of the Letters Patent.
[207 B C] By force of section 104 all appeals, as indicated in the various clauses of Order 43 Rule 1, would lie to the appellate court.
In short a combined reading of the various provisions of the Code leads to the conclusion that section 104 read with Order 43 Rule 1 clearly applies to proceedings before a trial Judge of the High Court.
[207 H; 209 B] In the instant case, therefore, section 104 read with Order 43 Rule 1 does not in any way abridge or interfere with or curb the powers conferred on the trial Judge by clause 15 of Letters Patent.
They only give an additional remedy by way of appeal from the orders of the trial Judge to a larger bench.
That being so there is no force in the respondent 's argument that these provisions do not apply to internal appeals in the High Court.
[209 D E] 189 Hurrish Chunder Chowdry vs Kali Sundari Debia, 10 I.A. 4, Mt. Sabitri Thakurain vs Savi & Anr.
A.I.R. 1921 P.C. 80, Union of India vs Mohindra Supply Co., ; and Shankarlal Aggarwal & Ors.
vs Shankarlal Poddar & Ors. , referred to.
A number of enactments, as for example, section 202 of the and section 39 of the Arbitration Act widen, rather than limit, the original jurisdiction of the High Court by conferring additional or supplementary remedy by way of appeal to a Division Bench from the judgment of a single Judge.
On a parity of reasoning, therefore, section 104 read with Order 43 Rule 1 expressly authorises and creates a forum for appeal against orders falling under the various clauses of Order 43 Rule 1 to a larger bench of the High Court without disturbing, interfering with or over riding the Letters Patent jurisdiction.
[211 B C] Dayabhai Jiwandas & Ors.
vs A.M.M. Murugappa Chettiar, I.L.R. 13 Rangoon 457, Sonbai vs Ahmedbhai Habibhai [1872] 9 Bom.
HC Reports.
398, Rajagopal & Ors.
(in Re. LPA 8 of Mad. 447, Ruldu Singh vs Sanwal Singh Lahore 188, Lea Badin vs Upendra Mohan Roy Chaudhary & Ors. , Mathura Sundari Dassi vs Haran Chandra Shaha & Ors.
A.I.R. 1916 Cal.
361 Abdul Samad & Ors.
vs The State of J & K. A.I.R. 1969 J&K 52, and Kumar Gangadhar Bagla vs Kanti Chunder Mukerjee & Anr., , approved.
Ram Sarup vs Kaniz Ummehani, ILR 1937 All.
386 over ruled.
Assuming that Order 43 Rule 1 does not apply to Letters Patent appeals the principles governing these provisions would apply by process of analogy.
The provisions of Order 43 Rule 1 possess the traits, trappings and qualities and characteristics of a final order.
Although the word 'judgment ' has not been defined in the Letters Patent but whatever test may be applied the order passed by the trial Judge appealed against must have the traits and trappings of finality.
The appealable orders indicated in the various clauses of Order 43 Rule 1 are matters of moment deciding valuable rights of the parties and are in the nature of final orders so as to fall within the definition of 'judgment '.
[237G; 225 E F] Radhey Shyam vs Shyam Behari Singh ; referred to.
Pandy Walad Dagadu Mahar & Anr.
vs Jamnadas Chotumal Marwadi, ; Vaman Ravi Kulkarni vs Nagesh Vishnu Joshi & Ors, A.I.R. 1940 Bom. 216; Vishnu Pratap & Ors.
vs Smt.
Revati Devi & Ors.
A.I.R. 1953 All.
647; Madhukar Trimbaklal vs Shri Sati Godawari Upasani Maharaj of Sakori & Ors. ; Ratanlal Jankidas Agarwal vs Gajadhar & Ors.; A.I.R. 1949 Nagpur 188; Beads Factory & Anr.
vs Shri Dhar & Ors.
A.I.R. 1960 All. 692; J. K. Chemicals Ltd. vs Kreba & Co.; A.I.R. 1967 Bom.
56, overruled.
Having regard to the nature of the orders contemplated in the various clauses of Order 43 Rule 1 which purport to decide valuable rights of the parties in the ancillary proceedings even though the suit is kept alive these orders possess the attributes or characteristics of finality so as to be judgments within the meaning of clause 15 of the Letters Patent.
They are therefore, appealable to a larger 190 bench.
The concept of the Letters Patent governing only the internal appeals in the High Courts and the Code of Civil Procedure having no application to such appeals is based on a serious misconception of the legal position.
[237H 238A B] The question to be decided in this case which is a vexed and controversial one is as to what is the real concept and purport of the word 'judgment ' used in the Letters Patent.
The meaning of the word 'judgment ' has been the subject matter of conflicting decisions of the various High Courts raging for almost a century and over which despite the length of time no unanimity had been reached and it is high time that this controversy should be settled once and for all as far as possible.
[238 E F] Out of the numerous authorities cited three leading judgments have spelt out certain tests for determining as to when an order passed by a trial Judge can be said to be a 'judgment ' within the meaning of clause 15 of the Letters Patent and we are inclined to agree generally with the tests laid down in these cases though some of the tests laid down are far too wide and may not be correct.
[238 G H] While the view taken in the Justices of the Peace for Calcutta vs The Oriental Gas Company (VIII Bengal L.R. 433) is much too strict, the one taken in T. V. Tuljaram Row vs M.K.R.V. Alagappa Chettiar (ILR 35 Madras 1) is much too wide.
The correct test seems to lie somewhere in between the tests laid down in these cases.
Similarly the full Bench decision in Manohar Damodar Bhoot vs Baliram Ganpat Bhoot (AIR 1952 Nagpur 357) pithily described the essential requisites and the exact meaning of the word 'judgment ' as used in the Letters Patent.
The pointed observations made in this case try to synthesize the conflicting views taken by the Calcutta and Madras High Courts.
They represent the true scope and import of the word 'judgment ' as used in the Letters Patent.
[The Court reviewed the entire case law on the subject laying down various tests to determine what a judgment is.] The test for determining as to when an order passed by a trial Judge can be said to be a 'judgment ' within the meaning of the Letters Patent are: (1) Where an order, which is the foundation of the jurisdiction of the Court or one which goes to the root of the action, is passed against a particular party, it amounts to a judgment.
[248 B C] Asrumati Debi vs Kumar Rupendra Deb Raikot ; (2) An order dismissing an application for review would be appealable under the Letters Patent being a judgment, though it is not made appealable under Order 43 rule 1.
[249 B] State of Uttar Pradesh vs Dr. Vijay Anand Maharaj ; (3) The which confers original jurisdiction on the trial Judge expressly makes an order passed by the trial Judge under section 202 appealable and, therefore, any order passed under that section would be appealable under the and is, therefore, a judgment.
[249 C D] 191 Shankarlal Aggarwal vs Shankerlal Poddar (4) Whenever a trial Judge decides a controversy which effects valuable rights of one of the parties it is a judgment within the meaning of the Letters Patent.
[249 H] Radhey Shyam vs Shyam Behari Singh ; (5) Where an order passed by the trial Judge allowing amendment of the plaint, takes away from the defendant the defence of immunity from any liability by reason of limitation, it is a judgment within the meaning of clause 15 of the Letters Patent.
[250 A B] Shanti Kumar R. Canji vs The Home Insurance Co. of New York ; (6) Clause 15 of the Letters Patent does not define the term 'judgment '.
The Letters Patent is a special law which carves out its own sphere and it would not be possible to project the definition of the word 'judgment ' as defined in the Code of Civil Procedure.
Letters Patent were drafted long before the Code of Civil Procedure of 1882 was enacted.
The word 'judgment ' used in the Letters Patent does not mean a 'judgment ' as defined in the Code.
At the same time it does not include every possible order final, preliminary or interlocutory passed by a Judge of the High Court.
[251 D E] Mt. Shahzadi Begum vs Alak Nath & Ors.
A.I.R. 1935 All 628.
Under the Code of Civil Procedure a judgment consists of reasons and grounds for a decree passed by a Court.
As a judgment constitutes the reasons for the decree, it follows as a matter of course that the judgment must be a formal adjudication which conclusively determines the rights of the parties with regard to all or any of the matters in controversy.
The concept of a judgment as defined in the Code seems to be rather narrow and the limitations engrafted by section 2(2) cannot be physically imported into the definition of the word 'judgment ' as used in clause 15 of the Letters Patent because the Letters Patent has advisedly not used the terms 'order ' or 'decree ' anywhere.
The intention of the givers of the Letters Patent was that the word 'judgment ' should receive a much wider and more liberal interpretation than the word 'judgment ' used in the Code of Civil Procedure.
At the same time, it cannot be said that any order passed by a trial Judge would amount to a judgment; otherwise there will be no end to the number of orders which would be appealable under the Letters Patent.
The word 'judgment ' has a concept of finality in a broader and not a narrower sense.
[2 52 G H; 253 A C] A judgment can be of three kinds: (1) A final judgment: A judgment, which decides all the questions or issues in controversy so far as the trial Judge is concerned and leaves nothing else to be decided is a final judgment.
This would mean that by virtue of the judgment, the suit or action brought by the plaintiff is dismissed or decreed in part or in full.
Such an order passed by the trial Judge is a judgment within the 192 meaning of the Letters Patent and amounts to a decree so that an appeal would lie from such a judgment to a Division Bench.
[254 D E] (2) A preliminary judgment: A preliminary judgment may be of two forms: (i) where the trial Judge by an order dismisses the suit without going into the merits of the suit but only on a preliminary objection raised by the defendant or the party opposing on the ground that the suit is not maintainable.
Since the suit is finally decided one way or the other, the order passed by the trial judge would be a 'judgment ' finally deciding the cause so far as the trial Judge is concerned and, therefore, appealable to a larger bench; (ii) where the trial Judge passes an order after hearing the preliminary objections raised by the defendant relating to the maintainability of the suit as for example, bar of jurisdiction, res judicata, a manifest defect in the suit, absence of notice under section 80 and the like.
An order of the trial Judge rejecting these objections adversely affects a valuable right of the defendant who, if his objections were held to be valid, is entitled to get the suit dismissed on preliminary grounds.
Such an order, though it keeps the suit alive, decides an important aspect of the trial which affects a vital right of the defendant and must, therefore, be construed to be a judgment so as to be appealable to a larger bench.
[254 F H; 255 A B] (3) Intermediary or Interlocutory judgment: Most of the interlocutory orders which contain the quality of finality are clearly specified in clause (a) to (w) of Order 43 Rule 1.
They are judgments within the meaning of the Letters Patent and, therefore, appealable.
There may also be interlocutory orders not covered by Order 43 Rule 1 but possessing the characteristics and trappings of finality because they adversely affect a valuable right of the party or decide an important aspect of the trial in an ancillary proceeding.
Before such an order can be a judgment the adverse effect on the party concerned must be direct and immediate rather than indirect or remote.
Thus when an order vitally affects a valuable right of the defendant it will be a judgment within the meaning of Letters Patent so as to be appealable to a larger bench.
[255 C E; 256 A] Every interlocutory order cannot be regarded as a judgment but only those orders would be judgments which decide matters of moment or affect vital and valuable rights of the parties and which work serious injustice to the party concerned.
[256 H 257 A] The following considerations should prevail with the Court in deciding whether or not an order is a judgment: (1) The trial Judge being a senior court with vast experience of various branches of law occupying a very high status, should be trusted to pass discretionary or interlocutory orders with due regard to the well settled principles of civil justice.
Thus any discretion exercised or routine orders passed by the trial Judge in the course of the suit which may cause some inconvenience or, to some extent, prejudice one party or the other cannot be treated as a judgment.[258D E] (2) An interlocutory order, in order to be a judgment, must contain the traits and trappings of finality either when the order decides the question in controversy in ancillary proceeding or in the suit itself or in a part of the proceedings.
[258 G] 193 It is not the form of adjudication which has to be seen but its actual effects on the suit or proceedings.
[243 H] If irrespective of the form of the suit or proceeding, the order impugned puts an end to the suit or proceeding it doubtless amounts to a judgment.
[244A] If the effect of the order, if not complied with, is to terminate the proceedings, the said order would amount to a judgment.
[244 B] An order in an independent proceeding which is ancillary to the suit, (not being a step towards judgment) but is designed to render the judgment effectively can also be termed as judgment within the meaning of the Letters Patent.
[244C] An order may be a judgment even if it does not affect the merits of the suit or proceedings or does not determine any rights in question raised in the suit or proceedings.
[244 D E] An adjudication based on a refusal to exercise discretion, the effect of which is to dispose of the suit, so far as that particular adjudication is concerned, would amount to a judgment within the meaning of the Letters Patent.
[244 E F] Some illustrations of interlocutory orders which may be treated as judgments may be stated thus: (1) An order granting leave to amend the plaint by introducing a new cause of action which completely alters the nature of the suit and takes away a vested right of limitation or any other valuable right accrued to the defendant.
[258 B C] (2) An order rejecting the plaint.
[258 C] (3) An order refusing leave to defend the suit in an action under Order 37, Code of Civil Procedure.
[258 C] (4) An order rescinding leave to the trial Judge granted by him under clause 12 of the Letters Patent.
[258 D] (5) An order deciding a preliminary objection to the maintainability of the suit on the ground of limitation, absence of notice under section 80, bar against competency of the suit against the defendant even though the suit is kept alive.
[258 D E] (6) An order rejecting an application for a judgment on admission under Order 12 Rule 6.
[258 E F] (7) An order refusing to add necessary parties in a suit under section 92 of the Code of Civil Procedure.
[258 F] (8) An order varying or amending a decree.
[258 F G] (9) An order refusing leave to sue in forma pauperis.
[258 F G] (10) An order granting review.
[258 F G] 194 (11) An order allowing withdrawal of the suit with liberty to file a fresh one.
[258 G H] (12) An order holding that the defendants are not agriculturists within the meaning of the special law.
[258 G H] (13) An order staying or refusing to stay a suit under section 10 of the Code of Civil Procedure.
[258 H] (14) An order granting or refusing to stay execution of the decree.
[259A] (15) An order deciding payment of court fee against the plaintiff.
[259 B] (per Amarendra Nath Sen J concurring) On a plain reading and proper construction of the various provisions of the Code of Civil Procedure, section 104 of the Code applies to the original side of the High Court of Bombay and the impugned order of the single Judge is appealable to a Division Bench under this section read with Order 43 thereof.
[279 H; 280 A] The right of appeal under clause 15 of the Letters Patent is in no way curtailed or affected by section 104.
By virtue of the provisions of section 104(1) a litigant enjoys the right of preferring an appeal in respect of various orders mentioned therein, even though such orders may or may not be appealable under clause 15 of the Letters Patent as a judgment and the right of appeal under clause 15 remains clearly unimpaired.
[275 E G] The argument of the respondent, based mainly on the provisions of sections 3 and 4 of the Code of Civil Procedure that even if various other provisions of the Code apply to the Bombay High Court, including its original side, the provisions of section 104 read with Order 43 could not apply to the original side of a Chartered High Court because the jurisdiction conferred by clause 15 of the Letters Patent is a special jurisdiction is without force.
[267 B C] That by virtue of section 1 (which provides for territorial extent of the operation of the Code) the Civil Procedure Code applies to the State of Maharashtra cannot be disputed.
[268 E F] Section 3 which deals with subordination of Courts to the High Court has no bearing on the point in issue and does not create any bar to the competence and maintainability of an appeal from an order passed by a single Judge on the original side if the order is otherwise appealable.
While dealing with any matter on the original side of the High Court a single Judge is in no way subordinate to the High Court.
Nor again, could there be a question of his being a subordinate to the Division Bench which hears an appeal from his judgment.
If any order passed by him on the original side is a 'judgment ' within the meaning of clause 15 of the Letters Patent an appeal lies to a Division Bench.
[272 E G] Similarly there is no force in the argument that since section 104 and Order 43 of the Code affect the special jurisdiction conferred on the High Court under 195 clause 15 of Letters Patent these provisions are not applicable to the present case.
[273 C D] Section 4 of the Code cannot be said to be in conflict with the provisions of clause 15; nor can it be said that it limits or otherwise affects the power and jurisdiction of the High Court under clause 15.
[274 A B] Section 4 provides that nothing in the Code shall be deemed to limit or otherwise affect any special or local law in force or any special jurisdiction conferred by or under any law for the time being in force.
Clause 15 confers on the litigant a right to prefer an appeal from the court of original jurisdiction to the High Court in its appellate jurisdiction.
It confers a right of appeal from a judgment of any Judge on the original side to the High Court.
Though this clause is a special provision it cannot be said that it is intended to lay down that no appeal would lie from an order of a single Judge on the original side even if specific provision is made in any statute making the order appealable.
By virtue of this provision any order considered to be a judgment would be appealable.
If a statute confers on the litigant right of appeal, it cannot be said that such provision would affect the special provisions of clause 15.
This special power is in no way affected and is fully retained.
In addition, the High Court may be competent to entertain other appeals by virtue of specific statutory provisions.
[273 C H: 274 A] On the contrary, the Code contains specific provisions indicating cases in which its provisions are or are not applicable, as for example section 5, which makes specific provision regarding the nature and manner of applicability of the Code to revenue courts.
Sections 116 to 120 clearly indicate that section 104 and order 43 apply to the original side of the High Court.
Section 104 and Order 43 which is attracted by section 104, clearly provide that an appeal shall lie from the orders mentioned in rule 1 of Order 43.
The impugned order is one such order and is clearly appealable.
When the legislature conferred such a right on the litigant a Court would be slow to deprive him of the statutory right merely on the ground that the order had been passed by a single Judge on the original side of the High Court.
[274 B E] Section 104 recognises that, apart from the orders made appealable under the Code, there may be other orders appealable by any law for the time being in force.
It further provides that no appeal will lie from any orders other than orders expressly provided in the Code or by any other law in force.
The right of appeal against a judgment of a single Judge on the original side under clause 15 is a right conferred by "any other law in force".
[275 C E] Union of India vs Mohindra Supply Co. ; and Mt. Savitri Thakurain vs Savi and Anr.
referred to.
Mathura Sundari Dassi vs Haran Chandra Shaha, A.I.R. and Lea Badin vs Upendra Mohan Roy Choudhary, A.I.R. 1935 Cal.
35 approved.
Vaman Raoji Kulkarni vs Nagesh Vishnu Joshi, A.I.R. overruled.
Hurrish Chander Chowdhry vs Kali Sundari Debia, 10 I.A. 4, held in applicable.
196 Unless a right is conferred on him by law, a litigant does not have an inherent right of appeal.
An order appealable under the C.P.C. or any other statute becomes appealable because the concerned statute confers a right of appeal on the litigant.
But yet such an order may or may not be appealable as 'judgment ' under clause 15 of the Letters Patent.
An order appealable under clause 15 as a 'judgment ' becomes appealable because the Letters Patent confers the right of appeal against such order as 'judgment '.
Similarly an order appealable under the Letters Patent may or may not be appealable under the Code.
[281 C E] The Letters Patent, by clause 15, confers a right of appeal against a 'judgment ' and therefore an order which satisfies the requirements of 'judgment ' within the meaning of clause 15 becomes appealable.
What kind of order will constitute a 'judgment ' within the meaning of this clause and become appealable as such must necessarily depend on the facts and circumstances of each case and on the nature and character of the order passed.
[281 F G] A comprehensive definition of 'judgment ' contemplated by clause 15 cannot properly be given.
Letters Patent itself does not define 'judgment '.
The expression has necessarily to be construed and interpreted in each case.
But yet it is safe to say that if an order has the effect of finally determining any controversy forming the subject matter of the suit itself or any part thereto or the same affects the question of the Court 's jurisdiction or the question of limitation, it normally constitutes 'judgment ' within the meaning of clause 15 of Letters Patent.
[282 E G]
|
N: Criminal Appeal No. 126 of 1975.
Appeal by special leave from the judgment and order dated the 19th/20th February, 1974 of the Bombay High Court in Criminal Appeal No. 1549 of 1971.
O. P. Rana and R. N. Poddar for the Appellant.
Ram Jethmalani and Miss Rani Jethmalani for the Respondent.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
It is one of the sad and distressing features of our criminal justice system that an accused person, resolutely minded to delay the day of reckoning, may quite conveniently and comfortably do so, if he can but afford the cost involved, by journeying back and forth, between the Court of first instance and the superior Courts, at frequent interlocutory stages.
Applications abound to quash investigations, complaints and charges on all imaginable grounds, depending on the ingenuity of client and counsel.
Not infrequently, as soon as a court takes cognizance of a case requiring sanction or consent to prosecute, the sanction or consent is questioned as improperly accorded, so soon as a witness is examined or a document produced, the evidence is challenged as illegally received and many of them are taken up to the High Court and some of them reach this Court too on the theory that 'it goes to the root of the matter '.
There are always petitions alleging 'assuming the entire prosecution case to be true, no offence is made out '.
And, inevitably proceedings are stayed and trials delayed.
Delay is a known defence tactic.
With the passage of time, witnesses cease to be available and memories cease to be fresh.
Vanishing witnesses and fading memories render the onus on the prosecution even more burdensome and make a welter weight task a heavy weight one.
Sure, we do not mean to suggest that the responsibility for delaying criminal trials is always to be laid at the door of the rich and the reluctant accused.
We are not unmindful of the delays caused by the tardiness and tactics of the prosecuting 302 agencies.
We know of trials which are over delayed because of the indifference and somnolence or the deliberate inactivity of the prosecuting agencies.
Poverty struck, dumb accused persons, too feeble to protest, languish in prisons for months and year on end awaiting trial because of the insensibility of the prosecuting agencies.
The first Hussainara case (Hussainara Khatoon & Ors.
vs Home Secretary, State of Bihar, Govt.
Of Bihar, Patna)(1) was one like that.
Sometimes when the evidence is of a weak character and a conviction is not a probable result, the prosecuting agencies adopt delaying tactics to keep the accused persons in incarceration as long as possible and to harass them.
This is a well known tactic in most conspiracy cases.
Again, an accused person may be seriously jeopardised in the conduct of his defence with the passage of time.
Witnesses for the defence may become unavailable and their memories too may fade like those of the witnesses for the prosecution.
In such situations in appropriate cases, we may readily infer an infringement of the right to life and liberty guaranteed by article 21 of the Constitution.
Denial of a speedy trial may with or without proof of something more lead to an inevitable inference of prejudice and denial of justice.
It is prejudice to a man to be detained without trial.
It is prejudiced to a man to be denied a fair trial.
A fair trial implies a speedy trial.
In Hussainara Khatoon vs State of ' Bihar(1), this Court said (at p. 179). "Speedy trial is of the essence of criminal justice and there can be no doubt that delay in trial by itself constitutes denial of justice.
It is interesting to note that in the United States, speedy trial is one of the constitutionally guaranteed rights.
The Sixth Amendment to the Constitution provides that" 'In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial '.
So also Article 3 of the European Convention on Human Rights provides that: 'every one arrested or detained shall be entitled to trial within a reasonable time or to release pending trial '.
We think that even under our Constitution, though speedy trial is not specifically enumerated as a fundamental right, 303 it is implicit in the broad sweep and content of Article 21 as R interpreted by this Court in Maneka Gandhi vs Union of India(1).
We have held in that case that Article 21 confers a fundamental right on every person not to be deprived of his life or liberty except in accordance with the procedure prescribed by law and it is not enough to constitute compliance with the requirement of that Article that some semblance of a procedure should be prescribed by law, but that the procedure should be 'reasonable, fair and just '.
If a person is deprived of his liberty under a procedure which is not 'reasonable, fair and just ', such deprivation would be violative of his fundamental right under Article 21 and he would be entitled to enforce such fundamental right and secure his release.
Now obviously procedure prescribed by law for depriving a person of his liberty cannot be 'reasonable, fair or just ' unless that procedure ensures a speedy trial for determination of the guilt of such person.
No procedure which does not ensure a reasonable, quick trial can be regarded as 'reasonable, fair or just ' and it would fall foul of Article 21.
There can, therefore, be no doubt that speedy trial and by speedy trial we mean reasonably expeditious trial, is an integral and essential part of the fundamental right to life and liberty enshrined in Article 21".
What is the remedy if a trial is unduly delayed ? In the United States, where the right to a speedy trial is a constitutionally guaranteed right, the denial of a speedy trial has been held to entitle an accused person to the dismissal of the indictment or the vacation of the sentence.
But in deciding the question whether there has been a denial of the right to a speedy trial, the Court is entitled to take into consideration whether the defendant himself was responsible for a part of the delay and whether he was prejudiced in the preparation of his defence by reason of the delay.
The Court is also entitled to take into consideration whether the delay was unintentional, caused by over crowding of the Court 's docket or under staffing of the Prosecutors.
Strunk vs United States(2) is an instructive case on this point.
As pointed out in the first Hussainara case, (supra) the right to a speedy trial is not an expressly guaranteed constitutional right in India but is implicit in the right 304 to a fair trial which has been held to be part of the right to life and liberty guaranteed by article 21 of the Constitution.
While a speedy trial is an implied ingredient of a fair trial, the converse is not necessarily true.
A delayed trial is not necessarily an unfair trial.
The delay may be occasioned by the tactic or conduct of the accused himself.
The delay may have caused no prejudice whatsoever to the accused.
The question whether a conviction should be quashed on the ground of delayed trial depends upon the facts and circumstances of the case.
If the accused is found to have been prejudiced in the conduct of his defence and it could be said that the accused had thus been denied an adequate opportunity to defend himself, the conviction would certainly have to go.
But if nothing is shown and there are no circumstances entitling the Court to raise a presumption that the accused had been prejudiced there will be no justification to quash the conviction on the ground of delayed trial only.
In the present case, in the beginning, three persons, Champalal Punjaji Shah, Poonam Chand and Mohan Lal were charged by the learned Additional Chief Presidency Magistrate 8th Court, Esplanade, Bombay, with offences under section 120B of the Indian Penal Code read with 135 of the Customs Act and rule 126P (2) (ii) and (iv) of the Defence of India Rules, 1962, 135(a) and (b) and (i) of the Customs Act and rule 126P (2) (ii) and rule 126P (2) (iv) of the Defence of India Rules.
After some evidence had been led by the prosecution, the Public Prosecutor filed an application before the learned Magistrate requesting permission to withdraw from the prosecution against accused No. 2, Poonam Chand.
Permission was granted and thereafter Poonam Chand was examined by the prosecution as their witness.
After some vicissitudes, necessitated by the respondent Champalal Punjaji Shah taking the matter to the higher courts, the trial finally concluded and by a judgment dated December 13, 1971 the learned Magistrate acquitted Mohan Lal, accused No. 3 but convicted accused No. 1, Champalal Punjaji Shah under various heads of the charge and sentenced him to suffer imprisonment for various terms ranging from two years to four years and to the payment of fine of Rs. 10,000 on each of different counts.
The substantive sentence of imprisonment were directed to run concurrently.
On appeal, the respondent was acquitted by the High Court.
The State of Maharashtra has filed the present appeal against the judgment of the High Court of Bombay after obtaining special leave from this Court under article 136 of the Constitution.
The brief facts of the case may now be stated.
On May 30, 1965, on information received, P.W. 4, the Superintendent of 305 Central Excise, and P.W. 1, the Deputy Superintendent of Central Excise, accompanied by other Central Excise officers and two panchas, Savalram Ganpat Bhagat (P.W. 7) and another went to fiat No. 14 on the first floor of a building known as Vidya Vihar on Tulsi Pipe Road, Dadar, Bombay.
The flat had two doors, one away from the staircase, locked from the outside and another near the staircase and closed from inside.
P.W. 1 pressed the calling bell and the door was opened by Poonam Chand.
Another person was sitting on a sofa inside the room.
He was accused No. 1.
On seeing the Central Excise officers accused No. 1 got up and went towards them.
PW 1 told the accused that he was authorised to search the room and showed them the authorisation given to him by PW 4.
The room was then searched.
The rear side of the entrance door had a handle from which was hanging a 'Tiger ' brass lock.
Besides the sofa there was a steel almirah.
PW 1 asked accused No. 1 to open the almirah.
Accused No. 2 Poonam Chand then took out a bunch of keys from the pocket of his trousers and opened the almirah.
There were eight drawers in the steel almirah.
These drawers contained some documents.
It was noticed that the two bottom drawers had false bottoms.
When the false bottoms were pulled out and searched, they were found to contain 11 jackets in each of which there were 100 slabs of gold weighing 10 tolas each.
The total quantity of gold found secreted in the almirah was 11,000 tolas.
The gold slabs had foreign markings on them.
A key was also found in that almirah and this key was found to fit the 'Tiger ' lock which was hanging from the inner handle of the front door of the flat.
Thereafter accused No. 1 's person was searched and some documents and two bunches of keys, one containing eight keys and the other containing three keys were found.
The bunch of eight keys was found to fit the steel almirah from which the slabs of gold were recovered.
Two of the three keys of the other bunch were obviously keys of a scooter while the third key was found to fit the 'Tiger ' lock which was on the handle of the back of the front door of the flat.
Thereafter a panchnama was prepared.
During the course of the investigation it was found that .
the flat was taken on a 'leave and licence ' basis by accused No. 3.
After the investigation was completed a complaint was filed for the various offences mentioned by us at the outset.
The case of the respondent was that he had purchased a scooter from Mohan Lal and had gone to the flat of Mohan Lal that night for completing some negotiations.
When he was coming from the building he was dragged into flat No. 14 by the Customs 306 officers.
He had nothing to do with the flat nor did he have anything to do with the gold found in the flat.
The bunch of eight keys was not found on his person as alleged by the prosecution.
The bunch of three keys was on his person but two out of the three keys were of the scooter purchase by him from accused No. 3.
Shri Jethmalani, learned counsel for the respondent initially challenged the reception of the evidence of Poonam Chand into the record but desisted from doing so when we told him that he might confine himself to the rest of the evidence which appeared to us to be sufficient to hold the respondent guilty of the offence with which he was charged.
The three outstanding circumstances established against the respondent and not disputed before us by the learned counsel for the respondent were (1) the presence of the respondent in the flat at the time of the raid by the Central Excise officers and the recovery of the gold slabs of foreign origin from the steel almirah and (2) the recovery of the bunch of eight keys from his person which keys fitted the almirah from which the gold slabs were recovered and (3) the recovery of a bunch of three keys from his person one of which fitted the lock which was hanging from the inside handle of the door of the flat.
To any mind, unassailed by "some light, airy, unsubstantial doubt that may flit through the minds of any of us about almost anything at sometime or other( ')" these circumstances should be sufficient to draw an inference of guilt.
The High Court however thought that the steel almirah in the flat was not shown to have been specially made and that the keys of a similar almirah could well fit it and that was perhaps how the keys recovered from the accused did fit the almirah in the flat.
That of course was not the plea of the accused nor was it a suggestion made to the prosecution witnesses.
We agree with the submission that circumstantial evidence must be of a conclusive nature and circumstances must not be capable of a duality of explanations.
It does not however mean that the Court is bound to accept any exaggerated, capricious or ridiculous explanation which may suggest itself to a highly imaginative mind.
It is well to remember that the Evidence Act considers a fact as "proved" when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent mind ought under the circumstances of the particular case, to act upon the supposition that it exists.
It is also 307 worthy of remembrance that a Court may presume the existence of A any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business in their relation to the facts of the particular case.
We are unhesitatingly of the view that the explanation fancied by the High Court was a wholly unreasonable explanation in the circumstances of the case.
Shri Jethmalani reminded us first that we were considering circumstantial evidence, second we were dealing with an appeal against acquittal and third we were exercising our extraordinary but exceptional jurisdiction under article 136.
Indebted as we are to him, for his forceful presentation of the reasons against interference with the judgment of the High Court, we think that, interference in this case is imperative and hesitation to interfere will lead to a miscarriage of justice.
Shri Jethmalani also urged that the trial of the respondent was considerably delayed, that there was thus a violation of the fundamental right to life and liberty guaranteed under article 21 of the Constitution and that was a sufficient ground to entitle the accused to a dismissal of the complaint against him.
We have earlier discussed the relevant principles which should guide us in such situations.
In this case the accused himself was responsible for a fair part of the delay.
He has also not been able to show cause how he was prejudiced in the conduct of his defence by reason of the delay, Shri Jethmalani then suggested that the long lapse of time since the commission of the offence should be taken into account by us and we should refuse to interfere with the order of acquittal or at any rate we should not send the accused back to prison particularly in view of the fact that the accused was preventively detained for over two and nearly three years on the basis of the very acts complained of in this particular case.
We are afraid we are unable to agree with Shri Jethmalani.
The offence is one which jeopardises the economy of the country and it is impossible to take a casual or a light view of the offence.
It is true that where the offence is of a trivial nature such as a simple assault or the theft of a trifling amount, we may hesitate to send an accused person back to jail as it would not be in the public interest or in the interest of anyone to do so.
But the offences with which we are concerned and the stakes involved clearly show that sympathy in this case would be misplaced.
We therefore, set aside the judgment of the High Court and restore that of the learned Additional Chief Presidency Magis 308 trate, 8th Court, Esplanade, Bombay.
The respondent will surrender forthwith.
The gold slabs will stand confiscated to the Central Government.
The appeal is allowed.
P.B.R. Appeal allowed.
| IN-Abs | Under the present system of criminal justice an accused person resolutely minded to delay the day of reckoning, may quite conveniently and comfortably do so, if he can but afford the cost involved, by journeying back and forth between the court of first instance and the superior Courts at frequent interlocutory stages, by filing applications to quash investigations, complaints and charges on all imaginable grounds.
Delay is a known defence tactic.
All this is not to say that the responsibility for delaying criminal trials should always be laid at the door of the rich and the reluctant accused.
Delays caused by tardiness, indifference and somnolence or the deliberate inactivity of prosecuting agencies are not uncommon or unknown.
As a result of the delaying tactics of prosecuting agencies an accused person may be seriously jeopardised in the conduct of his defence.
In such a situation it may be possible to infer infringement of the right to life and liberty guaranteed by Article 21 of the Constitution.
Denial of a speedy trial may lead to an inference of prejudice and denial of justice.
Hussainara Khatoon vs State of Bihar, [ 1979] 3 SCR 169, referred to.
In deciding whether there has been denial of the right to speedy trial, the court is entitled to take into consideration whether the defendant himself was responsible for a part of the delay.
whether he was prejudiced in the preparation of his defence by reason of the delay and whether the delay was unintentionally caused by reason of overcrowding of the Court 's docket or under staffing of prosecutors and so forth.
Though in India the right of speedy trial is not an expressly guaranteed constitutional right it is implicit in the right to fair trial which is a part of the right to life and liberty guaranteed by Article of the Constitution.
While a speedy trial is an implied ingredient of a fair trial the converse is not necessarily true.
A delayed trial is not necessarily an unfair trial.
The question whether conviction should be quashed on grounds of delayed trial depends upon the facts and circumstances of a case.
If it is shown to the 300 satisfaction of the Court that the accused had been prejudiced in the conduct of his defence and thus had been denied adequate opportunity to defend himself the conviction would have to be set aside.
There would, on the contrary, be no justification to quash a conviction on the ground of delayed trial unless it is shown that there are circumstances entitling the court to raise a presumption that the accused had been prejudiced.
[304 B C] In the instant case in a surprise raid on the house of the respondent, Central Excise officers discovered a large quantity of gold bars with foreign markings concealed in the false bottom of a steel almirah, the keys of which were found with him.
On a charge for offences under section 120B I.P.C. read with section 135 Customs Act and rule 126P(2)(ii) and (iv) of the Defence of India Rules 1962, the Additional Chief Presidency Magistrate convicted the respondent and variously sentenced him under different counts with imprisonment and fine.
On appeal the High Court acquitted him. ^ HELD: Although it is settled law that circumstantial evidence must be of a conclusive nature and circumstances must not be capable of a duality of explanations, the Court is not bound to accept any exaggerated, capricious or ridiculous explanation which may suggest itself to a highly imaginative mind.
The three circumstances established in the instant case were: (1) presence of the respondent in the flat at the time of the raid by Central Excise officers and recovery of gold slabs with foreign markings from the steel almirah: (2) recovery from his person of a bunch of eight keys which fitted the almirah and (3) recovery of a bunch of three keys from his person, one of which fitted the lock hanging from the inside handle of the door of the flat.
The explanation fancied by the High Court that the steel almirah in the flat was not shown to have been specially made and that the keys of a similar almirah could well fit it and that perhaps was how the keys recovered from the respondent did fit the almirah in the flat, was a wholly unreasonable explanation in the circumstances of the case.
This was not the plea of the respondent, nor did he make any such suggestion to the prosecution witnesses.
[306 FG & CD] Notwithstanding the fact that the case is based on circumstantial evidence and this is an appeal against acquittal and that this Court is exercising extraordinary but exceptional jurisdiction under Article 136 of the Constitution, interference with the judgment of the High Court in the instant case is imperative hesitation to do which would lead to miscarriage of justice.
[307 C] The respondent being himself responsible for a fair part of the delay, could not complain that there was violation of his fundamental right to life and liberty guaranteed under Article 21; nor has he shown how he was prejudiced in the conduct of his defence by reason of the delay.
[307 E] Nor again would the fact that there was a long lapse of time since the commission of the offence or that the respondent was preventively detained for over two years be of any avail to him because the offence was one which jeopardised the country s economy.
It is impossible to take a casual or light view of 301 such an offence.
It is only where the offence is of a trivial nature as for example, a simple assault or theft of a trilling amount that the Court might hesitate to send the accused back to jail after a long lapse of time; but the nature of the offence and the stakes involved in this case do not merit any sympathy being shown to the respondent.
[307 G H]
|
Civil Appeal No. 965 of 1980 Appeal by special leave from the judgment dated the 28th November, 1979 of the Allahabad High Court in Civil Revision No.661 of 1977.
Manoj Swarup & Miss Lalita Kohli for the Appellant.
R. N. Sharma and N. N. Sharma for the Respondent.
The Judgment of the Court was delivered by BALAKRISHNA ERADI, J.
This appeal by special leave is against a judgment rendered by the First Additional District Judge, Bulandshahr, allowing a Revision Petition filed before him by the respondent herein.
333 The respondent is the owner of a shop building in Jahangirabad town which he had let out to the appellant on a month to month tenancy basis.
A suit for ejectment was filed by the respondent in the Court of Small Causes (Civil Judge), Bulandshahr, praying for eviction of the appellant from the shop under Section 2() (2) (a) of the U. P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972 (for short, the Act) on the ground that the tenant was in arrears of rent for not less than four months commencing from April 9, 1972 and had failed to pay the same to the landlord within one month from the date of service upon him of a notice of demand (October 19, 1972).
It was alleged in the plaint that the agreed rent of the shop was Rs. 100/ per month and that the tenant had kept the rent in arrears from April 9, 1972 onwards despite notice having been served on him on October 19, 1972 demanding payment of arrears of rent and determining the tenancy.
The appellant (defendant) pleaded in defence that the rent was only Rs. 90/ per month, that he had not committed any default in payment of the same and hence the suit for ejectment was not maintainable.
According to the defendant, after service of the notice of demand for payment of arrears of rent, the respondent had approached him with a request to stand surety for him for the payment of arrears of sales tax due by him for the realisation of which the Amin had come with a warrant for the arrest of the respondent and since the appellant had acceded, to the said request and stood surety for the respondent there could be no further question of any arrears of rent being outstanding as due by him to the respondent.
The trial court held that the rent of the shop was Rs. 90/ per month, that it had been kept in arrears by the tenant from April 9, 1972 onwards and a default had been committed by the tenant in payment of arrears of rent of more than four months after the notice of demand.
Notwithstanding the aforesaid finding that there had been such default committed by the tenant, the trial court took the view that the conduct of the plaintiff respondent in inducing the defendant to stand surety for him for the payment of sales tax arrears due by him constituted a waiver of the demand made in the notice for surrender of possession on the ground of arrears of rent made.
On this reasoning, the trial court denied the plaintiff the relief of ejectment and decreed the suit only for recovery of arrears of rent.
The respondent plaintiff carried the matter in revision before District Court, Bulandshahr.
The learned District Judge found that 334 the plea of waiver had not been put forward by the defendant either in the written statement or in any other manner at any stage before the trial court and that the issue covering the question of waiver had been framed by the trial court of its own accord.
The District Judge further found on the merits that no conduct amounting to waiver on the part of the plaintiff had been established by the evidence because even according to the case of the defendant himself, excepting for standing surety for the plaintiff, he had not actually made any payment on behalf of the plaintiff towards the sales tax dues since the plaintiff had specifically refused to make any endorsement in the Rent Deed adjusting the proposed payment of sales tax against the arrears of rent due by the defendant.
Inasmuch as the trial court had found that the default in payment of the arrears of rent for a period exceeding four months had been committed by the defendant and it had denied a relief of ejectment only on the reasoning that there had been a waiver of the demand for eviction on the part of the plaintiff, the District Judge allowed the Revision Petition and granted the plaintiff a decree for ejectment under Section 20 (2) (a) of the Act.
Thereafter, the appellant defendant took up the matter in further revision before the High Court under Section 115, Code of Civil Procedure.
The High Court by its judgment dated November 28, 1979 confirmed the findings of the District Judge and dismissed the Revision Petition.
The defendant thereupon approached this Court for the grant of special leave to appeal against the said judgment of the High Court.
It would appear that, at the time of the preliminary hearing of the Special Leave Petition, the appellant realised that the Revision Petition filed by him before the High Court was not maintainable in law.
Hence, this position was conceded by the appellant before a Bench which heard the Special Leave Petition and a request was made by the appellant for the grant of special leave to him to appeal against the judgment of the District Court.
That request was granted by order of this Court dated April 23, 1980.
This Civil Appeal is thus directed against the judgment of the District Judge.
After hearing counsel on both sides, we are satisfied that the District Court was perfectly right in its view that there had not been any conduct on the part of the plaintiff which would constitute a waiver by him of the demand for surrender of possession made as 335 per the notice dated October 9, 1972 which was served on the tenant on October 19, 1972.
As rightly observed by the District Court, the defendant had not put forward any plea of waiver in the written statement filed by him before the trial court and the absence of any specific pleading in that behalf, the trial court was not really called upon to go into the question of waiver.
Further, it being the specific case put forward by the defendant himself that no amount whatever had been paid by the appellant defendant to the sales tax authorities on behalf of the plaintiff and that the respondent plaintiff was not agreeable to make any endorsement on the Rent Deed adjusting the proposed payment of sales tax against the arrears of rent, we fail to see how it can be said that there had been any waiver by the plaintiff respondent of the demand for surrender of possession already made by him as per the notice dated October 9, 1972.
The finding rendered b)! the trial court that the effect of the notice had been effaced by the subsequent conduct on the part of the landlord which amounted to a waiver was manifestly illegal and perverse and it was rightly set aside by the District Judge.
Before us, an additional point was sought to be raised by the appellant which had not been put forward by him either before the trial court or before the District Judge at the revisional stage.
It was urged that on the date of first hearing of the suit the defendant had deposited into the trial court an amount of Rs. 1,980/ and hence he is entitled to the benefit of sub section (4) of Section 20 of the Act which empowers the Court to pass an order relieving the tenant against his liability for eviction on the ground mentioned in clause (a) of sub section (2) of the said Section.
It is necessary in this context to reproduce clause (a) of sub section (2) and sub section (4) of Section 20 of the Act.
They are in the following terms: "20 (2). . . . . . . (a) that the tenant is in arrears of rent for not less than four months, and has failed to pay the same to the landlord within one month from the date of service upon him of a notice of demand.
(4) In any suit for eviction on the ground mentioned in clause (a) of sub section (2), if at the first hearing of the suit, the tenant unconditionally pays or tenders to the landlord the entire amount of rent and damages for use and occupation of the building due from him (such damages for 336 use and occupation being calculated at the same rate as rent) together with interest thereon at the rate of nine per cent per annum and the landlord 's costs of the suit in respect thereof, after deducting therefrom any amount already deposited by the tenant under sub section (I) of Section 30, the court may, in lieu of passing a decree for eviction on that ground, pass an order relieving the tenant against his liability for eviction on that ground: Provided that nothing in this sub section shall apply in relation to a tenant who or any member of whose family has built or has otherwise acquired in a vacant state, or has got vacated after acquisition, any residential building in the same city, municipality, notified area or town area.
" The provisions of sub section (4) will get attracted only if the tenant has, at the first hearing of the suit, unconditionally paid or tendered to the landlord the entire amount of rent and damages for use and occupation of the building due from him together with interest thereon at the rate of nine per cent per annum and the landlord 's costs of the suit in respect thereof, after deducting therefrom any amount already deposited by him under sub section (I) of Section 30.
There is absolutely no material available on the record to show that the alleged deposit of Rs. 1,980/ was made by the tenant on the first date of hearing itself and, what is more important, that the said deposit was made by way of an unconditional tender for payment to the landlord.
The deposit in question is said to have been made by the appellant on January 25, 1974.
It was only subsequent thereto that the appellant filed his written statement in the suit.
It is noteworthy that one of the principal contentions raised by the appellant defendant in the written statement was that since he had stood surety for the landlord for arrears of sales tax, there was no default by him in the payment of rent.
In the face of the said plea taken in the written statement, disputing the existence of any arrears of rent and denying that there had been a default, it is clear that the deposit, even it was made on the date of the first hearing, was not an unconditional tender of the amount for payment to the landlord.
Further, there is also nothing on record to show that what was deposited was the correct amount calculated in accordance with the provisions of Section 20 (4).
In these circumstances, we hold that the appellant has failed to establish that he has complied with the conditions specified in sub section (4) of Section 20 and hence he is 337 not entitled to be relieved against his liability for eviction on the ground set out in clause (a) of sub section (2) of the said Section.
This appeal is, therefore, devoid of merits and is accordingly dismissed.
We direct the parties to bear their respective costs.
N. K. A. Appeal dismissed.
| IN-Abs | The respondent landlord filed a suit under section 20(2)(a) of the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act 1972 against the appellant praying for his eviction from the suit premises.
It was alleged that the tenant was in arrears of rent for not less than four months from April 9, 1972, that he had failed to pay the same within one month from the date of the notice to him and that the tenant had declined to pay arrears of rent despite the notice.
While denying the allegation of default in payment of rent the tenant claimed that since he stood surety for the landlord for the payment of arrears of sales tax payable by him there could not be any question of arrears of rent being outstanding against him to the landlord.
Although the trial Court found it as a fact that the tenant had committed default in payment of rent for more than four months after the notice of demand had been issued it held that the landlord 's action in inducing the tenant to stand surety for him for payment of arrears of sales tax constituted waiver of the demand for rent and that for this reason the landlord was not entitled to the relief of ejectment.
In revision the District Judge found that the tenant had at no stage of the proceedings before the trial Court put forward the plea of waiver but that an issue had been framed by the trial Court of its own accord.
On merits the District Judge held that no conduct on the part of the landlord which amounted to waiver had been established because the tenant had not actually made any payment on behalf of the landlord towards the sales tax dues.
The High Court dismissed the tenant 's revision petition under section 115 C.P.C. [Since in the special leave petition the tenant contended that the revision petition Sled by him in the High Court was not maintainable in law, this Court granted special leave to appeal against the judgment of the District Court.] 332 Dismissing the appeal, ^ HELD: The District Court was right in holding That in the absence of any plea of waiver put forward by the tenant the trial Court was not really called upon to go into that question.
Therefore, the finding of the trial Court that the landlord 's notice had been effaced by his (landlord 's) subsequent conduct which amounted to waiver was manifestly illegal and perverse.
It was the specific case of the tenant that no amount whatever had been paid by him to the sales tax authorities on behalf of the landlord.
Neither did the landlord make any endorsement on the rent deed adjusting the proposed payment of sales tax against arrears of rent.
[335 A D] Having failed to establish that he had complied with the conditions specified in section 20(4) of the Act the tenant is not entitled to be relieved against his liability for eviction on the ground set out in section 20(2 )(a) of the Act.
[336 H 337 A] The provisions of section 20(4) will get attracted only if the tenant had at the first hearing of the suit unconditionally paid or tendered to the landlord the entire amount of rent and damages due from him for use and occupation of the building together with interest thereon at 9% per annum.
There is nothing on record to show that the deposit was made on the first date of hearing and that it was made by way of unconditional tender for payment to the landlord.
On the contrary the tenant in his written statement, had stated that since he had IL stood surety for the landlord 's arrears of sales tax, there was no default by him r in the payment of rent.
In the face of a plea disputing the existence of any arrears of rent and denying the default the deposit even if made on the date of the first hearing, was not an unconditional tender of the amount for payment to the landlord.
Nor is there anything on the record to show that what was deposited was the correct amount calculated in accordance with the provisions of section 20(4) of the Act.
[336 D H]
|
ivil Appeal Nos.
1725 26 of 1973.
From the judgment and order dated 27th October, 1972 of the Allahabad High Court in Special Appeals Nos. 424 and 425 of 1971.
P. N. Lekhi, M.K. Garg and V. K. Jain for the Appellants.
A. P. section Chauhan and C.K. Ratnaparkhi for the Respondents.
The Judgment of the Court was delivered by TULZAPURKAR, J.
These appeals by certificate granted by the Allahabad High Court raise the following substantial question of law of general importance which needs to be decided by this Court: "Whether the view taken by the Full Bench in Smt.
Maya vs Raja Dulaji and others (1) that the lessor/landlord should not only be disabled person on the relevant dates, but that he should continue to live on the date immediately preceding the date of vesting, within the meaning of clauses (h) of section 21 (1) of the U.P. Zamindari Abolition and Land Reforms Act, represents a correct construction of clause (h) of section 21(1) of the Act ?" The facts giving rise to the aforesaid question may be stated.
One Smt Ram Kali, widow of Tikam Singh, was the land holder of the plots (agricultural land) in dispute situated in villages Agaota 371 and Khaiya Khera in District Bulandshahr (U.P.).
On June 14, 1945 Smt.
Ram Kali who was a Sirdar and a 'disabled person ' falling within section 157 (1) of the U.P. Zamindari Abolition and Land Reforms Act, 1950 (hereinafter called "the Act") executed a registered deed of lease for a period of S years in favour of Uttam Singh (the predecessors in title of the respondents) but before the expiry of the period of S years she died in August, 1945 and Dan Sahai (her husband 's real brother and predecessors in title of the appellants) inherited her interest.
Dan Sahai was also a 'disabled person ' within the meaning of section 157(1) of the Act.
It seems that after the expiry of the period of the registered lease Uttam Singh and Murli Singh continued to hold the land as tenants from year to year under Dan Sahai.
In consolidation proceedings a question arose whether Uttam Singh and Murli Singh, who were lessees under Smt.
Ram Kali and Dan Sahai acquired the status of Sirdars or they remained Asamis of the plots in dispute.
The case of Dan Sahai was that they were Asamis and not adhivasis entitled to be treated as Sirdars under section 240 of the Act and that depended upon whether as tenants or occupants of the plots in dispute their case fell within the provisions of section 21(1) (h) of the Act.
The contention of Dan Sahai was that since Smt.
Ram Kali was a disabled person on the date of letting and since he who succeeded her was also a disabled person on April 2, 1946, the lease in favour of Uttam Singh and Murli Singh would fall within section 21(1) (h) and as such Uttam Singh and Murli Singh shall be deemed to be Asamis.
On the other hand the contention on behalf of Uttam Singh and Murli Singh was that the land holder should not only be a disabled person on both the dates mentioned in sub cl.
(a) of cl.
(h) of section 21(1? (being the date of letting as also April 9, 1946) but the same landlord should continue to live on the date immediately preceding the date of vesting (which is 1 7 1952 under the Act) and since in the instant case the same landlord who had let out the plots and who was disabled person on the date of letting had not continued to live on the date immediately preceding the date of vesting section 21(1) (b) was totally inapplicable and, therefore, they were entitled to be treated as Sirdars.
The Division Bench of the Allahabad High Court in Special Appeals Nos.
424 425 of 1971 accepted the contention raised by counsel on behalf of Uttam Singh and Murli Singh (the respondents ' predecessors) relying on the view taken by the Full Bench in Smt.
Maya vs Raja Dulaji and others (1) and decided the appeals in their favour by holding that they were not Asamis but had become Sirdars.
372 At the outset it may be stated that it was not disputed either in the lower courts or before us that both Smt.
Ram Kali as well as Shri Dan Sahai who succeeded to her interest in the plots after her death were disabled persons under section 157((1) of the Act.
In fact it was accepted by both the sides that on the date of letting (being 14th June, 1945) Smt.
Ram Kali, the then land holder was a disabled person and on 9th April, 1946 (being the other relevant date under sub clause (a) of clause (h) of section 21(1) Dan Sahai, the then land holder, was a disabled person who continued to be the land holder upto the date of vesting, and the question is whether in such 8 case the occupation of the plots by Uttam Singh and Murli Singh under the lease from both of them would fall within the provisions of section 21(1) (h) of the Act.
The relevant provision runs thus: "21(1) Notwithstanding anything contained in this Act, every person who, on the date immediately preceding the date of vesting, occupied or held land as . . (h) a tenant of sir of land referred to in sub clause (a) of clause (i) of the explanation under section 16, a sub tenant referred to in sub clause (ii) of clause (a) of section 20 or an occupant referred to in sub clause (i) of the said section where the land holder or if there are more than one land holders, all of them were person or persons belonging (a) if the land was let out or occupied prior to the ninth day of April, 1946, both on the date of letting or occupation, as the case may be, and on the ninth day of April, 1946, and (b) if the land was let out or occupied on or after the ninth day of April, 1946, on the date of letting or occupation, to any one or more of the classes mentioned in sub section (I) of Section 157.
shall be deemed to be an asami thereof " 373 In other words, section 21 (1) (h) provides that every person occupying or A holding land in any one of the capacities mentioned in cl.
(h) on the date immediately preceding 1 7 1952 shall be deemed to be an Asami thereof notwithstanding anything contained in the Act, if the landholder or if there are more than one all of them were disabled persons within the meaning of section 157(1), both on the date of letting as well as on April 9, 1946 where the letting has taken place prior to April, 9, 1946, or were disabled persons on the date of letting if the letting has occurred after April 9, 1946.
In the instant case it is not disputed that Uttam Singh and Murli Singh were on the date immediately preceding the date of vesting holding or occupying the plots in question in one or the other capacity mentioned in cl.
(h); secondly, since the letting was prior to April 9, 1946 sub cl.
(a) of cl.
(h) is attracted and it is also not disputed that on the date of letting the then land holder (Smt.
Ram Kali) was a disabled person and on April 9, 1946 the then land holder Dan Sahai, who succeeded her, was also a disabled person under section 157(1) of the Act.
Incidentally Dan Sahai continued to be the land holder on the date immediately preceding 1.7 1952.
On these facts it seems to us clear that all the requirements of section 21(1) (h) could be said to have been satisfied but the Division Bench relying upon the Full Bench decision in Smt.
Maya vs Raja Dulaji and others (supra) held that Uttam Singh and Murli Singh were not Asamis and had become Sirdars because section 21(1) (h) was not attracted inasmuch as in their view it was a requirement of that provision that not merely should the land holder be a disabled person on both the dates mentioned in sub cl.
(a) of cl.
(h) but the same land holder should continue to be landholder on the date immediately preceding the date of vesting (i.e. the identity of the disabled land holder or landholders on both the dates and the land holder or land holders seeking the benefit or protection of the provision on the date immediately preceding 1.7.1952 must, remain unchanged) and this requirement was not satisfied in this case.
The question is whether on true construction of the provision such a requirement can be read into the said provision ? In Smt.
Maya vs Raja Dulaji and others (supra) the facts were that the disputed plots belonged to one Bijain and were inherited on his death by his widow Smt.
Lakshmi and when Smt.
Lakshmi died her minor unmarried daughter Kumari Maya became the land holder.
Her elder sister Saheb Kunwar acting as her guardian executed a registered lease of the plots in favour of the plaintiffs (Ram Charan and others) on 15.10.1947 for a period of five years (a case falling under sub cl.
(b) of cl.
Later on Maya was also married to her 374 sister 's husband Thakurdas who was admitted to the holding as co tenant with Maya, with the consent of the Zamindar in the year 1948.
Thus on the date of vesting (1.7.1952) both Maya (who was still minor and disabled person) as well as her husband Thakurdas were the land holders of the plots in question.
The lessee plaintiffs filed a suit in the year 1954 for a declaration that they had become Adhivasis of the land on the coming into force of the U.P.Z.A. and L.R. Act and had subsequently acquired Sirdari rights on the passing of the U.P. Act XX of 1954 The suit was decreed by both the Courts below and hence Maya defendant preferred a second appeal to the High Court.
The question raised for determination was whether for the purposes of section 21 ( 1) (h) the disability of the landholders who were in existence on the date of vesting was material or the disability of the land holders who let out the land was a deciding factor? The Court noticed that section 21(1) (h) had been introduced in the Act for the first time by U.P. Act XVI of 1953 with retrospective effect from July 1, 1952 and was later on amended by U.P. Act XX of 1954 and has thereafter continued in its present form.
Section 21(1) (h), as originally enacted, in express terms required that "the land holder or if there are more than one landholder all of them were person or persons belonging, both on the date of letting and on the date immediately preceding the date of vesting, to any one or more of the classes mentioned in sub section
(2) of section 10 or cl.
(viii) of sub section
(I) of section 157".
As a result of the amendment made by Act XX of 1954 the words "both on the date of letting and on the date immediately preceding the date of vesting" were omitted.
In other words, by the amendment the requirement that disability of the land holder should subsist on the date immediately preceding the date of vesting was deleted.
The Full Bench accepted the position that for purposes of section 21(1) (h), in its present form, the disability of the land holder need not continue or subsist on the date immediately preceding the date of vesting and might cease on or before the date of vesting but took the view that in the case before it there were two land holders on the date immediately preceding the date of vesting, namely, Smt.
Maya and her husband Thakurdas, that a new body of 'land holders ' had come into existence subsequent to the date of letting and that all of them were not land holders who had let out the land as disabled person and, therefore, the plaintiffs became Adhivasis and the defendants were not entitled to the benefit of section 21(1) (h) of the Act.
In other words, the Full Bench has been of the view that for purposes of section 21(1) (h) it is necessary that the land holders on the date immediately preceding the date of vesting must be the same persons as those who let out the 375 land and suffered from disability on the date of letting, and also on A April 9, 1946 in case the letting was before that date.
In other words, the identity of the land holder or land holders must remain unchanged up to the date of vesting.
For reading such a requirement into the provision the Full Bench has given two reasons: (a) that such a requirement arises on construction of certain words used in cl.
(h) (vide: para 17 of the Judgment) and (b) that the protection given to a disabled landholder was intended to be a personal protection granted to the very individual who let out the land as a disabled person and this was warranted by a historical survey of parallel provisions contained in the preceding Tenancy Laws in U.P. (vide: Para 19).
According to the Full Bench the crucial words used in cl.
(h) are "where the landholder or if there are more than one land holder all of them were person or persons belonging" to any one or more of the classes of disabled persons under section 157(1) and the Full Bench has reasoned "the word 'are ' and the word 'them ' together with the word 'were ' in the aforementioned phrase clearly show that the intention of the Legislature was that on the date of vesting the 'land holder ' should be the very person who was the land holder on the relevant dates, to earn the benefit of cl.
(h) of section 21(1)".
The Court observed that section 21(1) (b) could bear the interpretation suggested by counsel for Smt.
Maya only if the words 'or their predecessor in interest ' were added before the words "all of them".
The Court has further stated that historical survey of the parallel provisions contained in the preceding Tenancy Laws showed that the protection given to a disabled person had always been in the nature of a personal protection granted to the very individual who let out the land as a disabled land holder and the protection ceased to be available when the identity or personality of that land holder is changed and in that behalf reliance was placed on certain provisions of the Agra Tenancy Act, 1926 and U.P. Tenancy Act, 1939.
In our view neither reason holds good for sustaining the literal construction placed upon the provision by the Full Bench.
It is true that cl.
(h) contains the phrase "where the land holder or if there are more than one landholder, all of them were persons belonging" to any one or more of the classes mentioned in section 157(1), but for arriving at the correct interpretation of this crucial phrase it is necessary to have regard to the definition of 'landholder ' and the provisions of section 157 of the Act with which section 21(1) (h) is inter connected.
376 Under section 3(26) of the Act, the definition of 'landholder ' as given in the U.P. Tenancy Act 1939 has been adopted since the expression is not defined in the Act.
That expression has been defined in section 3(11) of the U.P. Tenancy Act 1939 thus: "Landholder" means the person to whom rent is or, but for a contract express or implied would be, payable.
" This definition must be read in light of section 3(1) of that Act which runs thus: "All words and expressions used to denote the possessor of any right, title or interest in land, whether the same be proprietary or otherwise, shall be deemed to include the predecessors and successors in right, title or interest of such Person." In other words, the expression 'landholder ' who obviously is a possessor of interest in land under section 3(11) means a person to whom rent is payable, and under section 3(1) by legal fiction it shall include his predecessor in interest as also successor in interest to whom the rent was or is payable.
It is such definition that will have to be read in the U.P.Z.A. and L.R. Act wherever that expression occurs.
It is thus obvious that the expression 'landholder ' occurring in section 21(1) (h) must mean a person to whom rent is payable and by fiction would include his predecessor in interest.
Read in this light there would be no question of adding the word predecessor in interest of the land holder in section 21(1) (h) as that would be implicit in the term 'landholder ' on account of the deeming provision of section 3(1) read with section 3(11) of the Tenancy Act, 1939.
It does appear that this aspect of the matter was not brought to the notice of the Full Bench when it construed the concerned crucial phrase.
Moreover after the amendment effected by Act XX of 1954 the thrust of cl.
(h) is on the landholder or landholders being disabled persons on the material dates only.
Further section 157(1) permits leases by disabled persons and says that a Bhumidhar or an Asami holding land in lieu of maintenance allowance under section 11, who is a disabled person falling under any of the clauses (a) to (g), may let the whole or any part of his holding; and the proviso thereto is very important which runs thus: "Provided that in the case of a holding held jointly by more persons than one, but one or more of them but not 377 all are subject to the disabilities mentioned in clause (a) to (g), the person or persons may let out his or their share in the holding." And sub section
(2) provides that where any share of a holding has been let out under the aforesaid proviso the Court may on an application of the Asami or the tenure holder determine the share of the lessor in the holding and partition the same.
Having regard to the aforesaid proviso under which even in the case of a joint holding a lease of his share by a disabled land holder is permissible and the same is liable to be separated by a partition it is obvious that the expression "all of them" must refer to all such land holders who were disabled land holders on the material dates.
When under the proviso to s 157(1) a lease of his share by a disabled land holder in joint holding (held alongwith a non disabled person) is expressly permitted and under section 157(2) the Court has to determine such share of the disabled lessor and partition the same on an application being made in that behalf, it is difficult to accept that the Legislature intended to deprive the protection of section 21(1) (h) to such disabled land holder simply because on the date immediately preceding the date of vesting such land holder comes to hold the land jointly with some other non disabled land holder.
In other words on the facts found in the Full Bench case when on the date of letting the entire holding belonged to Smt.
Maya who was a disabled person and on the date of vesting she alongwith her husband Thakurdas (a non disabled person) became joint holder, could Smt.
Maya at any rate to the extent of her share in the joint holding be denied the benefit of section 21(1) (h) notwithstanding the proviso to section 157(1) and section 157(2) being in the Statute ? The answer is obviously in the negative.
In fact in view of the fact that on the material date (being the date of letting) the entire holding belonged to Smt Maya the disabled person, and having regard to the deeming provision which has to be read in the definition of 'landholder ' and having regard to the thrust of amended cl.
(h) which does not require that the successor in interest be a disabled person on the date of vesting, the benefit of section 21 (1) (h) should have been extended or made available in respect of the entire holding.
In other words, on true construction of the crucial phrase occurring in cl.
(h) it is not possible to read into the provision the additional requirement, namely, that the identity of the land holder or land holders must remain unchanged up to the date of vesting.
378 Coming to the second reason the Full Bench has observed that a historical survey of parallel provisions of the Agra Tenancy Act 1926 and U.P. Tenancy Act, 1939 supported the conclusion that protection was granted only to the very individual who let out the land as a disabled land holder and the protection ceased when the identity of the personality of that land holder changed and in that behalf reference was made to section 29(6) and (7) of the former Act and section 41 (2) of the latter Act.
Now apart from the fact that the scheme of the U.P.Z.A. and L.R. Act is different from these two earlier enactments, a careful analysis of the two provisions in the earlier enactments will clearly show that in each of the provisions express words had been used conferring personal rights on the individuals concerned which is not the case with section 21(1) (h) of the Act.
Having regard to the above discussion we are of the opinion that the view taken by the Full Bench of Allahabad High Court in Smt.
Maya vs Raja Dulaji and others (supra) does not represent the correct construction of section 21(1) (h) of the Act.
On true construction of the said provision in our view, the benefit thereof would be available to the land holder on the date of vesting, if the same landholder or his predecessor existing on the material dates was a person or persons belonging to one or more of the classes mentioned in section 157(1) of the Act.
Since in the instant case, which falls under sub cl.
(a) of cl.
(h), on the date of actual letting Smt.
Ram Kali was disabled person and since on the next material date, namely, April, 9 1946 Dan Sahai (successor in interest of Smt.
Ram Kali) was also a disabled person, the land holder on the date of vesting, who incidentally happened to be Dan Sahai, would be entitled to the benefit of section 21(1) (h) and the respondents (successors of Uttam Singh and Murli Singh) would remain Asamis and cannot be said to have become Sirdars.
We might mention that after the arguments in these appeals were concluded and our Judgment was ready for pronouncement we were informed that in a later case Dwarika Singh vs Dy.
Director of Consolidation (l) a larger Bench of S Judges of the Allahabad High Court has, by majority, overruled the view taken in Smt.
Maya 's case.
379 In the result the appeals are allowed, the orders of the Division Bench in Special Appeals Nos.
424 425 of 1971 are set aside and for reasons given by us above, the decision of the learned Single Judge dated May 10, 1971 is restored.
We direct that each party will bear its own costs.
section R. Appeals allowed.
| IN-Abs | One Smt.
Ram Kali, widow of Tikam Singh, was the land holder of the agricultural lands in dispute situated in villages Agaota and Khaiya Khera in District Bulandshahr (U.P.).
On June 14, 1915 Smt.
Ram Kali, who was a Sirdar and a "disabled person" falling within section 157(1) of the U.P. Zamindari Abolition and Land Reforms Act, 1950, executed a registered deed of lease fora period of five years in favour of Uttam Singh and Murli Singh (the predecessors in title of the respondents) but before the expiry of the period of five years she died in August, 1945 and Dan Sahai, who was also "disabled person" within the meaning of section 157(1) of the Act, (her husband 's real brother and predecessors in title of the appellants) inherited her interest.
After the expiry of the period of registered lease Uttam Singh and Murli Singh continued to hold the lands as tenants from year to year under Dan Sahai.
In consolidation proceedings a question arose, whether Uttam Singh and Murli Singh, who were lessees (adhivasis) under Smt.
Ram Kali and Dan Sahai acquired the status of Sirdars, being entitled to be treated so under section 240B of the Act or they remained Asamis of the plots in dispute.
The Division Bench of the Allahabad High Court, relying on the earlier view taken by its Full Bench in Smt.
Maya vs Raja Dulaji and others , decided the appeals in favour of the respondents by holding that they were not Asamis but had become Sirdars.
Hence the appeals by certificate by successors in title of Ram Kali and Dan Sahai.
Allowing the appeals, the Court ^ HELD: 1.
On true construction of section 21(1)(h) of the U.P. Zamindari Abolition and Land Reforms Act the benefit thereof would be available to the land holder on the date of vesting, if the same land holder or his predecessor existing on the material dates was a person or persons belonging to one or more clauses mentioned in section 157(1) of the Act.
[378 C D] Since, in the instant case, which falls under sub clause (a) of clause (h) on the date of actual letting Smt.
Ram Kali was a "disabled person" and since on the next material date, namely, April 9,1946 Dan Sahai (successor in interest of Smt.
Ram Kali) was also a disabled person, the land holder on the date of vesting who incidentally happened to be Dan Sahai would be entitled to the benefit of section 21(1)(h) and the respondents (successors of Uttam Singh and 369 Murli Singh) would remain Asamis and cannot be said to have become Sirdars within the meaning of section 240B of the U.P. Zamindari Abolition and Land Reforms Act, 1950.
[378 E F] 2.
Section 21(1)(h) of the U.P. Zamindari Abolition and Land Reforms Act, 1950 provides that every person occupying or holding land in any one of the capacities mentioned in clause (h) on the date immediately preceding 1 7 1952 shall be deemed to be an Asami thereof notwithstanding anything contained in the Act, if the land holder or if there are more than one all of them were "disabled persons" within the meaning of section 157(1) both on the date of letting as well as on April 9, 1946 where the letting has taken place prior to April 9, 1946 or were disabled persons on the date of letting if the letting has occurred after April 9, 1946.
[373 A B] 3:1.
It is true that clause (h) contains the phrase "where the land holder or if there are more than one land holder all of them were person or persons belonging" to any one or more than one of the clauses mentioned in section 157(1) of the Act.
Under section 3(26) of the Act, the definition of "landholder" as given in the U.P. Tenancy Act, 1939 has been adopted since the expression is not defined in the Act.
The expression "land holder" who obviously is a possessor of interest in land under section 3(11) of the U.P. Tenancy Act, 1939 means a person to whom rent is payable, and under section 3(1), ibid.
by legal fiction it shall include his predecessor in interest as also successor in interest to whom the rent was or is payable.
It is such definition that will have to be read in the U.P. Zamindari Abolition and Land Reforms Act wherever that expression occurs.
Therefore the expression "land holder" occurring in section 21(1)(h) of the Act must mean a person to whom rent is payable and by fiction would include his predecessor in interest.
Read in this light there would be no question of adding the words predecessor in interest of the land holder in section 21(1)(h) as that would be implicit in the term "land holder" on account of deeming provision of section 3(1) read with section 3(11) of the U.P. Tenancy Act, 1939.
[375 G H, 376 A, D F] 3:2.
Section 157(1) of the U P. Zamindari Abolition and Land Reforms Act permits leases by disabled persons and provides that a Bhumidar or on an Asami holding land in lieu of maintenance allowance under section 11, who is a disabled person falling under any of the clauses (a) to (g), may let the whole or any part of his holding, "provided that in the case of a holding held jointly by more persons than one, but one or more of them but not all are subject to the disabilities mentioned in clauses (a) to (g), the person or persons may let out his or their share in the holding".
Having regard to the proviso under which even in the case of a joint holding a lease of his share by a disabled land holder is permissible and the same is liable to be separated by a partition, the expression "all of them" must refer to all such land holders who were disabled land holders on the material dates.
When under the proviso to section 157(1) a lease of his share by a disabled land holder in joint holding (held along with a non disabled person) is expressly permitted and under section 157(2) the Court has to determine such share of the disabled lessor and partition the same on an application being made in that behalf, it cannot be said that the Legislature intended to deprive the protection of section 21(1)(h) to such disabled land holder simply because on the date immediately preceding the date of vesting such land holder comes to hold the 370 land jointly with some other non disabled land holder.
On true construction of the crucial phrase occurring in clause (h) it is not possible to read into the provision the additional requirement, namely, that the identity of the land holder or land holders must remain unchanged up to the date of vesting.
[376 G H, 377 A, B D, G H] Further the scheme of the U.P. Zamindari Abolition and Land Reforms Act is different from the Agra Tenancy Act, 1926 and U.P. Tenancy Act, 1939.
In each of the two provisions of these two Acts express words have been used conferring personal rights on the individuals concerned which is not the case with section 21(1)(h) of the Zamindari Abolition and Land Reforms Act.
[378 B C] Smt.
Maya vs Raja Dulaji and Ors.
[1 over ruled.
Dwarika Singh vs Dy.
Director of Consolidation All W.C. 213 1981 All.
L.J. 484 approved.
|
: Special Leave Petition (Criminal) No. 3459 of 1980.
From the judgment and order dated the 1st August, 1980 of the High Court of Calcutta in Criminal Appeal No. 18 of 1980.
A. P. Chatterjee, A.K. Ganguly and B. K Chatterjee for the Petitioner.
The respondents, who are all Police officers, were tried by the learned Judge, City Sessions Court, Calcutta, under section 302 read with section 34 of the Penal Code, on the charge that at about 10.00 p.m. On November 11, 1970 they, along with Bibhuti Chakraborty the then Deputy Commissioner of Police (North Division), P. R. Dey, the then Assistant Commissioner of Police (N.S.) and some others, caused the death of Ranjit Chakraborty and Samir Chakraborty by causing them gunshot injuries.
The case of the prosecution is that the deceased Ranjit and his brother Samir were sitting outside their house when three police vehicles carrying the respondents and other Police officers, numbering about 15 or 20 in all, suddenly stopped in front of the house.
The Police officers, led by Bibhuti Chakraborty, rushed towards them and their elder brother Benoy, with revolvers in their hands.
Ranjit disclosed that he was a constable of the Calcutta Police and Samir said that he was an N. V. F. cadet.
Bibhuti Chakraborty then fired a shot from his revolver at Ranjit from a point blank range.
Respondent 2, Chitta Ranjan Ganguly, and respondent 4, Bimal Thakur pursued Ranjit who had in the meanwhile rushed into his house.
They dragged him out of the house, whereupon respondent 4 fired a shot at him.
The other Police officers, including some of the respondents, also fired at Ranjit.
In the meantime, the other brother Samir, who was trying to get into the house, was caught hold of by 363 some of the respondents and respondent 1, Shew Mangal Singh, fired a shot at him.
Samir and Ranjit were thereafter dumped in to a Police jeep and the convoy of the Police officers went to a place near Rajarghat on the bank of the river Hooghly.
Samir was crying in agony.
Some of the Police officers who were sitting in an Ambassador car ordered that Samir 's voice should be silenced.
Thereupon respondent 3 Anil Maitra: who was sitting in a jeep, fired a shot at him.
Ranjit and Samir were then taken to R. G. Kar Hospital, where Ranjit was declared dead.
Samir died within a few minutes thereafter, before any medical assistance could be given to him.
Their brother Benoy was taken into custody by the Police Officers and was produced before a Magistrate on the following day, when he was released on bail.
The defence of the respondents is that they were on patrol duty Led by Bibhuti Chakraborty, the Deputy Commissioner of Police.
When the police party entered Shyampukur Street, they were attacked by some persons, as a result of which respondent 1 Shew Mangal Singh was injured.
He was immediately removed by respondent 2 and P. R. Dey, the Assistant Commissioner of Police, to the R.G. Kar Hospital.
Thereafter the Deputy Commissioner of Police gave firing orders, as a result of which Ranjit and Samir received injuries.
The contention of respondents 1 and 2 is that they were implicated falsely in the case after an attempt to pressurise them into deposing against the Deputy Commissioner had failed.
The prosecution was initiated on the basis of a private complaint filed on December 22, 1970 by Benoy Chakraborty (P. W. l).
In addition to the four respondents, Deputy Commissioner Bibhuti Chakraborty and Assistant Commissioner P. R. Dey were also included in the array of the accused.
The learned Additional Chief Metropolitan Magistrate, Calcutta, issued process against the respondent but refused to do so against the two other officers on the ground of want of sanction for their prosecution under section 197 of the Code of Criminal Procedure.
The complainant applied for sanction under section 197 Cr. P. C., for the prosecution of the two officers but his application was rejected.
In July 1977, after the change of Government, the complainant filed another application for sanction, which was granted on August 4, 1977.
But the officers filed a petition in the High Court under Article 226 of the Constitution challenging the order of sanction.
A learned single Judge dismissed that petition but in 364 appeal, a Division Bench of the High Court set aside the order sanctioning prosecution on the ground of mala fides on the part of the State Government and on the ground of violation of the rules of natural justice.
There the matter rested in so far as those two officers are concerned.
The learned trial Judge convicted the respondents under section 302 read with section 34 of the Penal Code and sentenced them to life imprisonment.
In an appeal by the respondents, the High Court has acquitted them, against which the State of West Bengal has filed this Special Leave Petition under Article 136 of the Constitution.
The learned Advocate General of the State of West Bengal, who appeared to defend the appeal in the High Court, contended there that this is not a normal case of murder but a rather unique one in which the protectors of law and order had themselves become predators and, in the circumstances, there were bound to be loop holes in the prosecution case.
It was urged in the High Court that one should not, therefore, expect or insist upon the same standard of proof as in other criminal cases.
In regard to the discrepancies in the evidence of the prosecution witnesses, it was urged by the learned Advocate General in the High Court, that the witnesses were deposing nearly nine years after the date of the incident, as a result of which there were bound to be discrepancies in their evidence.
On the question of application of section 34, it was urged in the High Court on behalf of the State Government that even if it may not be possible to apportion the guilt amongst the accused, their mere presence at the spot would establish their involvement in the offences with which they were charged.
The judgment of the High Court shows that in the year 1970 71 certain parts of the State of West Bengal, including the City of Calcutta, were passing through a critical period of lawlessness on account or the "Naxal Movement".
A sitting Judge of the High Court and a member of the Higher Judicial Service were killed in Calcutta during that period.
Political leaders, businessmen and members of the Police Force also met with their death during that period of turbulence.
Benoy Chakraborty (P. W. l) admitted in his evidence to have stated in the committal Court that newspapers had reported seven or eight murders between August 1970 and April 1971.
Manicklal Ghose (P. W. ') stated in his evidence that many 365 murders were committed during 1970 71 within the jurisdiction of A the Shyampukur Thana.
On an analysis of the prosecution evidence, the High Court found it impossible to hold that the incident in question had happened in the manner alleged by the prosecution.
According to the High Court, the police, while on patrol duty, were compelled to open fire after respondent l, Shew Singh, received injuries as a result of the mob violence.
Since the orders given by the Deputy Commissioner to open fire were justified, respondents were bound to obey the lawful orders of their superior officer.
On this ground alone, according to the High Court, the accused were entitled to be acquitted.
Learned counsel who appears for the State of West Bengal argued this Special Leave Petition for quite some time and in addition, at our direction, he filed written submissions in support of the petition.
We adjourned the matter to enable us to go through those submissions.
Having done so we are unable to hold that this is a fit case for granting leave to the State Government to appeal against the judgment of the High Court.
A very interesting and important question was raised in the High Court as to whether the command of a superior officer to open fire affords a complete defence to a subordinate officer if, while acting in the execution of that command he causes injury or death.
The High Court has referred in its judgment to passages from Cross E and Jones ' "Introduction of Criminal Law" (8th edition, page 371); Granville William 's Text Book of Criminal Law (1978 edition, page 408); Smith & Hogan 's Criminal Law (1978 edition, page 209); Colin Howard 's Criminal Law (page 424) and to a South African Case.
It is unnecessary for us to go into that question for the simple reason that we are of the view that the High Court was justified in coming to the conclusion that the particular situation warranted and justified the order issued by the Deputy Commissioner of Police to open fire.
If that order was justified and is therefore lawful, no further question can arise as to whether the respondents, who acted in obedience to that order, believed or did not believe that order to be lawful.
Such an enquiry becomes necessary only when the order of the superior officer, which is pleaded as a defence, is found not to be in conformity with the commands of the law.
Section 76 of the Penal Code provides that nothing is an offence which is done by a person who is, or who by reason of a mistake of fact and not by reason of a mistake of law in good faith 366 believes himself to be, bound by law, to do it.
The illustration to that section says that if a soldier fires on a mob by the order of his superior officer, in conformity with the commands of the law, he commits no offence.
The occasion to apply the provisions of the section does not arise in the instant case since the question as to whether the accused believed in good faith on account of a mistake of fact that he was bound by law to do the act which is alleged to constitute an offence, would arise only if, to the extent relevant in this case, the order or command of the superior officer is not justified or is otherwise unlawful.
Since the situation prevailing at the scene of the offence was such as to justify the order given by the Deputy Commissioner of Police to open fire, the respondents can seek the protection of that order and plead in defence that they acted in obedience to that order and therefore they cannot be held guilty of the offence of which they are charged.
That is the purport of the illustration to section 76.
But considering that a little politics appears to have got mixed up with the trial of this case, it would be more satisfactory not to rest our judgment on this aspect of the matter and to consider whether the evidence led by the prosecution is such on which a conviction can safely be founded.
The particular night on which the incident took place was cloudy and it was drizzling.
On the question whether the witnesses were able to identify the respondents, it is very difficult to take them at their word when their evidence suffers from the various contradictions to which the High Court has referred.
The witnesses were deposing to the incident nearly nine years later and it appears that the made good the lapses of memory by giving a free play to their imagination.
Their evidence leaves much to be desired and is insufficient to establish the complicity of the respondents in causing the death of Ranjit and Samir Chakraborty.
Benoy lodged his complaint (Ext. 2) more than a month after the incident and yet there are material discrepancies between what he stated in the complaint and what he said in his evidence.
Manick is an important witness from the point of view of the prosecution because he was in the company of Benoy from the beginning of the incident until they were released on bail the next day.
It is surprising that in the list of witnesses filed by Benoy along with his complaint, Manick 's name does not figure at all.
Towards the end of his written submissions, learned counsel for the State of West Bengal has extracted passages from a judgment 367 of this Court in section section Bobade vs State of Maharashtra(1) to the effect A that a miscarriage of justice may arise from the acquittal of the guilty no less than from the conviction of the innocent and that if unmerited acquittals become general, they tend to lead to a cynical disregard of the law.
With respect, we share this opinion but do not appreciate its relevance here.
Courts must take equal care to ensure that the innocent are not convicted and the guilty are not acquitted but, what the High Court has done is to acquit the innocent.
Relying upon the observations in section section Bobade, the learned counsel has stated further that the judicial instrument has a public accountability and that the history will never forgive "us" if police officers, undoubtedly guilty of murder, are acquitted "lightheartedly".
We cannot agree more.
But the snag lies in the self righteous assumption that respondents are "undoubtedly guilty of murder" or that they have been acquitted by the High Court "lightheartedly".
Respondents are undoubtedly not guilty of murder and the High Court ' s judgment reflects its serious concern for justice.
Judgments of acquittal are not to be condemned as "lighthearted" for the reason that the Government considers that it has a stake in the conviction of the accused.
For these reasons, we dismiss the Special Leave Petition.
N V. K. Petition dismissed.
| IN-Abs | The respondents were police officers.
The prosecution alleged that when the deceased and his brother were sitting outside the house three police vehicles carrying the respondents and other police officers suddenly stopped in front of their house and that a police officer rushed towards them and when the deceased disclosed his identity the officer fired at point blank range.
The shot having missed him, he rushed in the house.
Pursuing him respondents 2 and 4 dragged him out of the house, whereupon respondent 4 fired a shot at him.
In the meanwhile, the other brother, who was trying to get into the house was caught hold of by some of the respondents and respondent 1 fired at him.
The two brothers were thereafter dumped into a police jeep, and the convoy of police officers departed from the scene of the occurrence.
Both the brothers were taken to the hospital where the deceased was declared dead on the spot and his brother died, before any medical assistance could be given to him.
The defence of the respondents was as follows: that while they were on patrol duty led by one of the officers, they were attacked by some persons, as a result of which respondent 1 was injured and was removed to the hospital.
When fire was opened under orders of the officer the two deceased received injuries, and that respondents 1 and 2 were falsely implicated after an attempt to pressurise them into deposing against the officer had failed.
Prosecution was initiated on the basis of a private complaint filed by the third brother of the deceased implicating the respondents and two officers.
No action was taken against the two officers for want of section 197 of the Code of Criminal Procedure.
While the trial judge convicted and sentenced the respondents, the High Court acquitted them.
Before the High Court it was contended on behalf of the 361 State that this was a case in which the protectors of law and order had become A predators and in the circumstances the Court should not, insist upon the same standard of proof as in other criminal cases, and as the witnesses were desposing nearly nine years after the date of the incident there was bound to be discrepancies in their evidence.
Taking note of the unsettled political conditions prevailing in Calcutta during the time, and on an analysis of the prosecution evidence, the High Court found it impossible to believe that the incident had happened in the manner alleged by the prosecution.
Believing the defence version that there was mob violence which resulted in injuries to Respondent I and that in the circumstances the respondents were bound to obey the orders given by their officer, the High Court acquitted them.
Dismissing the Special Leave Petition of the State, ^ HELD: 1.
If the order to open fire was justified as found by the High Court and is therefore lawful, no further question can arise whether the respondents, who acted in obedience to that order, believed or did not believe it to be lawful.
[365 F G] In the instant case since the situation prevailing at the scene of the offence was such as to justify the order given by the officer to open fire, the respondents could plead in defence that they acted in obedience to that order and therefore they could not be held guilty of the offence of which they were charged.
[366 C] 2.
A miscarriage of justice may arise from the acquittal of the guilty no less than from the conviction of the innocent and that if unmerited acquittal become general, they tend to lead to a cynical disregard of the law.
Courts must take equal care to ensure that the innocent are not convicted and the guilty are not acquitted.
[367 A B] E In the instant case, what the High Court has done is to acquit the innocent.[367 B] S.S. Bobade vs State of Maharastra ; referred to.
It is a self rigteous assumption to argue that the respondents are "undoubtedly guilty of murder" or that they have been acquitted by the High Court "light heartedly".
Respondents are undoubtedly not guilty of murder.
The High Court 's judgment reflects its serious concern for justice.
Judgments of acquittal are not to be condemned as "light hearted" for the reason that the Government considers that it has a stake in the conviction of the accused.
[367 C D] In the instant case the particular night on which the incident took place was cloudy and it was drizzling.
It is very difficult to take the witnesses at their word when their evidence suffers from various contradictions.
The witnesses were deposing to the incident nearly nine years later.
Their evidence is insufficient to establish the complicity of the respondents in causing the death of the deceased.
The surviving brother lodged the complaint more than a month after the incident.
The name of PW. 2 an important witness who was in the company of P.W. 1 from the beginning of the incident was not mentioned in the complaint.
[366 E H] 362
|
ivil Appeal No. 353 of 1 969.
From the judgment and decree dated the 19th/20th July, 1965 of the High Court of Gujarat at Ahmedabad in First Appeal No. 584 of 1960.
M.N. phadke, section C. Patel and R.N. Poddar for the appellant.
552 D.V. Patel, R.A. Shraff, Gopal Subramaniam and D.P. Mohanty for the respondent.
The order of the Court was delivered by KOSHAL, J. The sole respondent in this appeal died on the 10th December, 1978.
He was also arraigned as an appellant in the connected appeal (Civil Appeal No. 2132 of 1977) in which an application was made on the 20th February 1979 stating the factum and the date of the demise.
A copy of that application was delivered on the date last mentioned to the clerk of learned counsel for the appellant State, who, however, took no step to move the Court for having the legal representatives of the deceased respondent brought on the record in the present appeal till the 29th August, ]979 when an application was made for that purpose, but without being accompanied by any affidavit containing averments as to why the inordinate delay in filing the application should be condoned.
An affidavit of the type just mentioned was filed in Court on 4th March, 198().
It is common ground between the parties that on the death of the sole respondent to the appeal the right to sue survived to his legal representatives.
No application having been made within 90 days of the death, the appeal abated on the 11th March.
1979 and an application for having the abatement set aside could have been made within the period of 60 days following that date.
(Article 121 of the Limitation Act).
The application actually made in that behalf was thus time barred by more than 3 months and a half.
Mr. Phadke, learned counsel for the appellant does not dispute this proposition.
He urges.
however, that the delay in making the application last mentioned should be condoned and the abatement of the appeal set aside.
No sufficient cause, however, for the condonation of the delay is made out from any material on the record.
As pointed out earlier, the clerk of the learned counsel for the appellant was served with a copy of the application dated 23rd February, 1979 on that date itself and no reason, good, bad or indifferent is assigned for the failure of that counsel right from the 20th February, 1979 to the 29th August, 1979 to move the Court till the 29th August, 1979 either for having the legal representatives of the deceased brought on the record or for having the abatement set aside after it had taken place.
His knowledge of the death of the respondent must be attributed to the appellant State 553 also and his negligence in not moving the Court in time must be deemed to be that of the appellant.
Mr. Phadke also contended that he had a strong case for the acceptance of the appeal on merits and that the same should be regarded as a very good reason for the condonation of the delay.
The contention is wholly without substance.
The abatement stands in the way of the appeal being heard on merits which cannot, therefore, be looked into.
No grounds for the condonation of the delay having been made out we refuse to set aside the abatement.
The appeal is accordingly dismissed.
| IN-Abs | Dismissing the appeal by special leave, the Court ^ HELD: The abatement stands in the way of the appeal being heard on merits.
In the instant case, (a) on the death of the sole respondent to the appeal the right to sue survived to his Legal representatives; (b) no application having been made within 90 days of the death.
the appeal abated on the 11th of March, 1979 and an application for having the abatement set aside could have been made within the period of 60 days following that date, under Article 121 of the Limitation Act; and (c) the application actually made to set aside the abatement was time barred by more than three months and a half.
The clerk of the learned counsel for the appellant was served with a copy of the application dated 23rd February, 1979 on that date itself and no reason, good, bad or indifferent is assigned for the failure of that counsel right from the 20th February, 1979 to the 29th August, 1979 either for having the legal representatives of the deceased brought on the record or for having the abatement set aside after it had taken place.
His knowledge of the death of the respondent must be attributed to the appellant State also and his negligence in not moving the Court in time must be deemed to be that of the appellant.
[652 E H, 653 A, B]
|
Civil Appeal No. 321 (N) of 1970.
From the judgment and order dated the 30th July, 1968 of the Assam & Nagaland High Court at Gauhati in Civil Rule No. 420 of 1966.
S.K. Nandy and Krishna Prosad for the Appellants.
S.N. Choudhary for the Respondents.
The Judgment of the Court was delivered by VARADARAJAN, J.
This appeal by special leave is by the respondents in Civil Rule 420 of 1966 against the Judgment and order dated 30th July, 1968 passed by the Division Bench of the 556 High Court of Assam and Nagaland, allowing the Writ petition with no order as to costs.
That writ petition was filed under article 226 of the Constitution for quashing the order of requisition issued by the Deputy Commissioner, Lakhmipur Dibrugarh, the second appellant in this appeal and the first respondent in the writ petition under Memo No. LA/27511 15/R dated 25.10.1966.
The Memo was issued in exercise of the powers conferred by section 29 (i) of the Defence of India Act, 1962 (51 of 1962) read with the Notification of the Government of India, Ministry of Home Affairs No.
S.O. 1888 dated 10th June, 1965 in respect of the properties described in the schedule attached thereto viz. Sookerating Tea Estate and Budla Beta Tea Estates, situate in Dum Duma, Mauza Lakhmipur District on the ground that the lands were necessary for securing the defence of the country and efficient conduct of military operations.
During the Second World War, in 1940 the Government of India acquired for defence purposes a part of Sookerating Tea Estate with its adjoining lands measuring in all 769.20 acres for constructing an air field.
The air field was constructed over an area of 469 acres and on the remaining 300.20 acres there were tea bushes which were growing wild and overgrown with thick jungles.
After the war was over, the area on which the air field had been constructed viz. 469 acres was transferred to the State Government for its use.
In the writ petition it was stated that area was still Lying unused.
The Government of India wanted to lease out the said 300.20 acres to some established tea planters with a view to earn foreign exchange.
The respondent, a registered partnership firm owning the Bagrodia Tea Estate negotiated with the Estates Military officer, Assam Circle at Shillong and the Ministry of .
Defence, Government of India and entered into an agreement of lease dated 2.3.1962 in respect of the land on a rent of Rs. 6304.20 per annum for a term of one year renewable for a period of one year at a time if the land was not required by the lessor.
The respondent took possession of the land on 10.3.1962 after paying the annual rent in advance on 2.3.1962.
It was alleged in the writ petition that the respondent thereafter improved the land at a cost of Rs. 1,75,000/ and made it into a well managed tea garden.
The Military Estates officer was putting off the execution of the lease deed on some pretext or the other, though the respondent had deposited the requisite stamp papers for the execution of the lease deed.
When the respondent approached the Government of India through a Member of Parliament, the Deputy Minister for Defence 557 informed the Member of Parliament by his letter dated 20.12.1962 that the land was required for defence purposes and that it would not be possible to extend the current lease.
Subsequently the Defence Minister informed the Member of Parliament by his letter dated 1.4.1963 that as several tea planters have evinced interest in the estate it was decided to auction the leasehold right in the land on an annual basis subject to the condition that the land might be resumed for defence purposes at short notice.
No action was taken on the respondent 's request made on 25 1.1963 for renewal of the lease.
But the Military Estate officer, Jorhat Circle, the 4th appellant, issued a notice on 20.3.1963 for leasing the land for one year by public auction.
The respondent filed a writ petition in the High Court and obtained rule nisi as well as an interim order restraining the appellants from giving effect to the said notice dated 20.3.1963.
The petition filed by the appellants on 28.5.1963 for restraining the respondent from plucking tea leaves was rejected.
The respondent filed Title Suit No. 30 of 1963 in the Court of the Subordinate Judge, Upper Assam Districts, Dibrugarh on 18.7.1963 for certain reliefs including confirmation of possession of the land and specific performance of the agreement to lease and obtained an interim.
injunction restraining the appellants from interfering with the possession of the land.
The writ petition was not pressed in view of the institution of Title Suit No. 30 of 1963 by the respondent.
The respondent filed Title Suits Nos. 6 of 1964 and 13 of 1965 in the same Court praying for the same reliefs in respect of the years 1964 and 1965 and obtained temporary injunction.
The respondent filed Title Suit No. 4 of 1966 in the same court for the same relief.
All those suits were pending on the date of institution of the present writ petition.
The respondent received the impugned order of requisition on 26.10.1966 from the second appellant and Subsequently filed the present writ petition for the aforesaid reliefs on several grounds.
The appellants in this appeal and other respondents in the writ petition filed counter affidavits opposing the petition and contending inter alia that the question of requisition of the land for defence purposes has been decided upon by the Government of India and the impugned order is bonafide and has been made by the competent authority under the Defence of India Act.
Two contentions were urged before the Division Bench of the High Court on behalf of the respondent.
The first was that the second appellant, the Deputy Commissioner, Dibrugarh, who has 558 issued the impugned order has stated in the order that in his opinion it was necessary to requisition the property, and it was urged before the learned Judges of the High Court that the Deputy Commissioner was not competent to form the opinion.
Section 29 (I) of the Defence of India Act, 1962 (Sl of 1962) reads: (1) "Notwithstanding anything contained in any other law for the time being in force, if in the opinion of the Central Government or the State Government it is necessary or expedient so to do for securing the defence of India, civil defence, public safety, maintenance of public order or efficient conduct of Military operations, or for maintaining supplies and services essential to the life of the Community that Government may by order in writing requisition any immovable property and may make such further orders as appear to that Government to be necessary or expedient in connection with the requisitioning: Provided that no property or part thereof which is exclusively used by the public for religious worship shall be requisitioned.
" Clauses (a), (b) and (c) of Section 40(I) of the Defence of India Act provide for delegation of the power or duty under the Act or by any rule made thereunder and read: Section 40 Power to delegate: (i) The Central Government may by order, direct that any power or duty which by this Act or by any rule made under this Act is conferred or imposed upon the Central Government shall, in such circumstances and under such conditions, if any, as may be specified in the direction be exercised or discharged also, (a) by any officer or authority subordinate to the Central Government, or (b) whether or not the power or duty relates to a matter with respect to which a State Legislature has power to make laws, by any State 559 Government or by any officer or authority subordinate to such Government, or (c) by any other authority.
" The opinion that the land is necessary for defence purposes can be formed in view of section 40(I) (c) of the Defcnce of India Act by any authority to whom the power to requisition under section 29 (1) of that Act has been delegated by the Government of India.
The Ministry of Home Affairs had, by Notification No. S.O. 1888 dated 10.6.1965 published in the Gazette of India (Extraordinary) dated 11.6.1965, delegated the power conferred by section 29 of the Act to all Collectors, District Magistrates, Additional District Magistrates and Deputy Commissioners in the States and all Political officers in the North Eastern Front Area.
The learned Judges of the High Court have held that the Notification is valid and that the delegation can be unrestricted and found the first contention to be untenable.
No argument was advanced before us by learned counsel for the respondent in regard to that contention.
The first contention has, therefore, to be held to be untenable.
The second contention urged before the High Court successfully on behalf of the respondent was that the impugned order of requisition is malafide.
There can be no doubt that if any authority exercised any power conferred on him by law in bad faith or for collateral purpose, it is an abuse of power and a fraud on the statute.
In such a case there can be no difficulty in striking down that act of the authority by the issue of an appropriate writ under article 226 of the Constitution.
It is true that the Deputy Minister for Defence informed the Member of Parliament who appears to have been pleading for the respondent by his letter dated 20.12.1962 (annexure 'C ' to the writ petition) that the current lease of the land could not be extended because the land was required for defence purposes and that in the subsequent letter dated 1.4.1963 (annexure 'D ' to the writ petition) the then Minister for Defence had informed the said Member of Parliament that since several tea planters have evinced interest in the land it would be in the public interest to auction the leasehold right only on an yearly basis subject to the condition that the land can be resumed at short notice for defence purposes.
In his affidavit the Deputy Commissioner, Lakhimpur, the second appellant has stated that the land was not required for defence purposes until 1964 and that the need for defence purposes arose thereafter and the impugned order was issued.
560 It must be noted in this connection that it was not disputed before us that the war with Pakistan started in June 1965.
This Court could even take judicial notice of that fact The impugned requisition order was passed on 25.10.1966.
Therefore, it cannot be stated that there was no need of the land for defence purposes in October 1966 from the mere fact that Deputy Minister for Defence had stated in his letter dated 20 12.1962 referred to above that the current lease could not be extended because the land was required for defence purposes and the Minister for Defence had stated in his letter dated 1.4.1963, referred to above, that as several tea planters have evinced interest in the land it would be in the public interest to auction the leasehold right in the land on a yearly basis alone subject to the condition that it can be resumed at a short notice for defence purposes.
That letter of the Minister for Defence does not altogether rule out the possibility of the land being required for defence purposes at any time and being made available for those purposes at short notice.
Defence requirements may change from time to time depending upon various factors including intelligence reports about the enemy 's movements and preparations for war.
The High Court has held in favour of the respondent on the question of want of bonafides on the part of the appellants on the basis that in the aforesaid title suits filed by the respondent it was not pleaded by the appellants that the land was required for defence purposes.
The learned Judges of the High Court appear to have accepted the submission made before them on behalf of the respondent in this appeal that no such plea had been raised in the pleadings in the title suits filed by the respondent.
That submission is incorrect, and it is unfortunate that the attention of the learned Judges had not been invited to the material on record to ., show that such a contention was in fact put forward by the 4th appellant in his pleading in the title suits.
In the auction notice (annexure 'E ') dated 20.3.1963 itself it was stated that the lease will be subject to the condition that whenever the Government needs the land for defence purposes it will be determined by issue of notice giving 30 days time without payment of any compensation.
In the written statement dated 17.7.1965 filed by the 4th appellant in the Title Suit No. 6 of 1965, it was stated in respect of the allegation made in para 26 of the plaint in that suit that since the land is required for defence purposes the defendant was not bound to renew the lease and that even in Title Suit No. 6 of 1964 the defendants have filed written statement contesting the claim of the respondent/plaintiff.
It was also stated in that written statement in regard to the allegations made in para 11 of the plaint that the 561 land is required for defence purposes.
In regard to the allegations in paragraph 26 of the plaint it was contended in the written statement that the land is required for defence purposes and that any lease under the present emergency would be detrimental to the interests of the defence of the country.
Even in the counter affidavit dated 17.7.1965 filed in the application for interim injunction moved in the Title Suit No. 15 of 1965 the 4th appellant had stated that the land is required for defence purposes, and there is no question of holding any auction for lease of the land, that if the order of interim injunction is not vacated the defence preparation of the country will be hampered as the land is urgently needed for defence purposes and the interest of the nation will suffer, that no irreparable loss or damage which cannot be compensated in money would result from vacating the injunction and that on the other hand denying the use of the land for defence purposes at this critical juncture would cause irreparable loss to the Government and the nation as a whole.
In the written statement dated 22.6.1965 filed in Title Suit No. 4 of 1966 the 4th appellant had stated with regard to allegations made in para 11 of the plaint that it is asserted that the land is bonafide required for defence purposes.
Thus it is seen from the materials on record that at least in Title Suits Nos. 15 of 1965 and 4 of 1966, the plea that the land was required urgently for defence purposes was taken by the 4th appellant who appears to have put forward the defence of the appellants in this appeal as a whole.
The learned judges of the High Court were, therefore, not right in observing in their judgment that the intention of the Government is to lease the land to the highest bidder in the hope of getting a large amount of money because the land had been developed into a working tea garden, that the purpose cannot be said to be bonafide and that it must be held that the land is being requisitioned only for collateral purposes.
The only basis for this inference of the learned Judges of the High Court is the supposed failure of the defendants in the title suits filed by the respondent to take the plea that the land is required for defence purposes.
That basis being found to be wrong and unavailable.
it is not possible to agree with the learned Judges of the High Court that the requirement of the land for defence purposes was not bonafide.
The Government of India whose case the 4th appellant had put forward in the respondent 's title suits as mentioned above is the most competent authority to know when the need for defence purposes will arise or has arisen, and there is no material on record to hold in this case that the land was not required on the date of impugned requisition bonafide for defence purposes and that the appellants were putting forward such 562 a case in the impugned order only as a ruse to auction the land for larger amount of rent.
Under these circumstances we find ourselves unable to uphold the judgment of the learned Judges of the High Court.
We accordingly allow the appeal with costs and dismiss the writ petition.
P.B.R. Appeal allowed.
| IN-Abs | On a part of a large area of land acquired by the Government during World War II an aerodrome was constructed and on the remaining 300 odd acres which remained unused a thick jungle grew over the years.
Pursuant to the decision of the Government of India to lease out the unused portion of the land, the respondent entered into an agreement with the Government and took possession of the land after paying one year s rent in advance.
The respondent alleged that, after taking possession of the land, he had spent a large sum of money in clearing the jungle and making it a well managed tea garden.
He also alleged that the concerned Government officials were putting off execution of the lease deed on some pretext or the other.
Having had no satisfactory reply from the Government, the respondent moved the Government of India through a Member of Parliament who was informed that the land was required for defence purposes and that it would not be possible to extend the lease.
A few months later the Defence Minister informed the Member of Parliament that the Government had decided to auction the lease hold right on an annual basis in order that possession of the land could be resumed for defence purposes at short notice.
A notice for public auction was thereafter issued .
The respondent filed a writ petition in the High Court and obtained an order restraining the appellants from auctioning the land.
In the meantime the respondent filed title suits against the Government.
The respondent contended that the auction notice was malafide because having found that the jungle had been cleared and the land had been developed into a workable tea garden, the Government wished to lease the land to the highest bidder for getting a large amount of money and that this was for a collateral purpose. ' The High Court upheld this contention.
555 Allowing the appeal, ^ HELD: If any authority exercised in bad faith or for collateral purpose power conferred on it by law such action would be struck down as an abuse of power and a fraud on the statute.
[559 E F] In the present case however there is much evidence on record to establish that there was no lack of bona fides OD the part of the Government and that the action sought to be taken by it was not for a collateral purpose.
Had the attention of the High Court been drawn to the material on record, there was no possibility of the High Court coming to the conclusion that it did.
Although in 1962 the Deputy Minister for Defence in the first instance informed the member of Parliament, who interceded on behalf of the respondent that the land was required for defence purposes and for that reason it would not be possible to extend the then current lease but later stated that it was decided to lease out the land to the highest bidder by way of public auction on a yearly basis and the Deputy Commissioner in the affidavit had stated that the land was not required for defence purposes until 1964, the need for defence purposes did arise when the war with Pakistan broke out in 1965.
It could not, therefore, h said that the Government did not need the land for defence purposes in 1966 when the order was issued.
Defence requirements depend on many unforeseeable factors.
[559 F H] That apart, the appellants did state right from the beginning that the lease was subject to the condition that whenever the Government needed the land for defence purposes it would be determined by notice without payment of compensation and that the Government was not bound to renew the lease.
[560 F G] There is, therefore, nothing to support the Finding of the High Court that the Government had never put forward the plea that the land would be required for defence purposes at any stage in the title suits and that it was putting forward such a case only as a ruse to auction the land for a larger amount of rent.
[561H]
|
Civil Appeal No. 1376 of 1978.
(Appeal by special leave from the judgment and order dated the 1st February, 1978 of the Kerala High Court in M.F.A. No. 53 of 1977) L.N. Sinha, Attorney General, J. M. Joseph, K John and Shri Narain for the Appellant.
D C.S. Vaidlyanathan, (A.C.), for the Respondent.
The Judgment of the Court was delivered by CHANDRACHUD, C.J.
The question which arises in this appeal by special leave is whether a debt owed by the respondent, an agriculturist, to the appellant The State Bank of Travancore falls within the purview of the Kerala Agriculturists ' Debt Relief Act, 11 of 1970, hereinafter called 'the Act '.
The respondent had an overdraft Account with the Erattupetta Branch of the Kottayam Orient Bank Ltd., at the foot of which he owed a sum of over Rs. 3000/ to the Bank.
The said Bank which was a 'Banking Company ' as defined in the Banking Regulation Act, 1949, was amalgamated with the appellant Bank with effect from June 17, 1961 in pursuance of a scheme of amalgamation prepared by the Reserve Bank of India in exercise of the powers conferred by section 45 (4) of the Banking Regulation Act and sanctioned by the Central Government under sub section (7) of section 45.
Upon the amalgamation, all assets and liabilities of the Kottayam Orient Bank stood transferred to the appellant Bank.
The notification containing the scheme of amalgamation was 342 published in the Gazette of India Extra ordinary dated May 16, 1961 .
The appellant filed a suit (O.S. No. 28 of 1963) in the Sub Court, Meenachil, against the respondent for recovery of the amount due from him in the overdraft Account with the Kottayam Orient Bank, the right to recover which had come to be vested in the appellant as a result of the aforesaid scheme of amalgamation.
That suit was decreed in favour of the appellant, but when it took out execution proceedings in the Sub Court, Kottayam, the respondent filed a petition under section 8 of the Act seeking amendment of the decree in terms of the provisions of the Act.
The respondent claimed that he was an agriculturist within the meaning of the Act and was therefore entitled to the benefit of its provisions, including those relating to the scaling down of debts.
The learned Subordinate Judge assumed, what was evidently not controverted, that the respondent was an agriculturist.
But the learned Judge held that the respondent was not entitled to the benefit of the provision regarding scaling down of the debt because the debt, having been once owed by him to the Kottayam Orient Bank Ltd., which was a 'Banking Company as defined in the Banking Regulation Act, 1949, was outside the purview of section 5 of the Act which provided for the scaling down of debts owed by agriculturists.
According to the learned Judge, the respondent was only entitled to the benefit of the proviso to section 2 (4) (l) of the Act under which the amount could be repaid in eight half yearly instalments.
Since the relief which the respondent had asked for was that his debt should be scaled down and since he was held not entitled to that relief, his application was dismissed by the learned Judge.
The respondent preferred an appeal to the High Court of Kerala, the maintainability of which was challenged by the appellant on the ground that no appeal lay against the order passed by the Subordinate Judge on the application filed by the respondent under section 8 of the Act.
The High Court accepted the preliminary objection but granted permission to the respondent to convert the appeal into a Civil Revision Application and dealt with it as such.
In view of the general importance of the questions involved in the matter, the revision application was referred by a Division Bench to the Full Bench.
It was contended in the High Court on behalf of the appellant, Bank that the debt owed to it by the respondent was excluded 343 from the operation of the Act by reason of section 2 (4) (a) (ii) and section 2 (4) (1) of the Act.
By its judgment dated February 1, 1978 the High Court rejected that contention, allowed the Revision Application and held that the respondent was entitled to all the relevant benefits of the Act, including the benefit scaling down of the debt.
The Bank questions the correctness of that judgment in this appeal.
Section 8 of the Act provides, in so far as is material, that where, before the commencement of the Act, a court has passed a decree for, the repayment of a debt, it shall, on the application of a judgment debtor, who is an agriculturist, apply the provisions of the Act to such a decree and shall amend the decree accordingly.
It is in pursuance of this section that the respondent applied to the executing Court for amendment of the decree.
Section 4(1) of the Act provides that notwithstanding anything contained hl any law or contract or in a decree of any court, but subject to the provisions of sub section (5), an agriculturist may discharge his debts in the manner specified in sub sections (2) and (3).
Sub section (2) of section 4 provides that if any debt is repaid in seventeen equal half yearly instalments together with interest at the rates specified in section 5, the whole debt shall be deemed to be discharged.
Sub section (3) specifies the period within which the instalments have to be paid.
The respondent claims the benefit of the provision contained in section 4 (1) of the Act.
In order to decide whether the respondent is entitled to the relief claimed by him, it would be necessary to consider the provisions of sections 2 (1) and 2 (4) of the Act.
The short title of the Act shows that it was passed in order to give relief to indebted agriculturists in the State of Kerala.
The State Legislature felt the necessity of passing the Act because, the Kerala Agriculturists ' Debt Relief Act, 31 of 1958, conferred benefits on agricultural debtors in respect of debts incurred by them before July 14, 1958 only.
The Statement of objects and Reasons of the Act slows that the agricultural indebtedness amongst the poorer sections of the community showed an upward trend after July 14, 1958 owing to various economic factors.
A more comprehensive legislation was therefore introduced by the State Legislature in the shape of the present Act in substitution of the Act of 1958.
The Act came into force on July 14, 1970.
Section 2 (1) of the Act which defines an "agriculturist" need not be reproduced because it was common ground at all stages bet 344 ween the parties that the respondent is an agriculturist within the meaning of the definition in section 2 (1).
Section 2 (4) of the Act, in so far as is material for our purposes, reads thus: "Section 2 (4):"debt" means any liability in cash or kind, whether secured or unsecured, due from or incurred by an agriculturist on or before the commencement of this Act, whether payable under a contract, or under a decree or order of any court, or otherwise, but does not include: (a) any sum payable to: (i) the Government of Kerala or the Government of India or the Government of any other State or Union territory or any local authority; or (ii) the Reserve Bank of India or the State Bank of India or any subsidiary bank within the meaning of clause (k) of section 2 of the State Bank of India (Subsidiary Act, 1959, or the Travancore Credit Bank (in liquidation) constituted under the Travancore Credit Bank Act, IV of 1113: Provided that the right of the bank to recover the sum did not arise by reason of: (A) any assignment made or (B) any transfer effected by operation of law, subsequent to the 1st day of July, 1957".
As stated above, the respondent is admittedly an agriculturist and he owes a sum of money to the appellant Bank under a decree passed in its favour by the Sub Court, Meenacil, in O.S. No. 28 of 1963.
The liability which the respondent owes to the appellant Bank is therefore a "debt" within the meaning of section 2 (4) of the Act.
But certain liabilities are excluded from the ambit of the definition of "Debt".
The liabilities which are thus excluded from the definition of debt are specified in clauses (a) to (n) of section 2 (4).
We are concerned in this appeal with the liabilities specified in clause (a) (ii) and clause (1) of section 2 (4), which are excluded from 345 the operation of clause 2 (4).
We will first consider the implications of the exclusion provided for in sub clause (ii) of clause (a) of section 2 (4).
Under the aforesaid sub clause, any sum payable to a subsidiary bank within the meaning of section 2 (k) of the , is excluded from the definition of "debt".
Section 2 (k) of the Act of 1959 defines a "subsidiary bank" to mean any new bank, including the Hyderabad Bank and the Saurashtra Bank.
The expression "new bank" is defined in section 2 (f) of the Act of 1959 to mean any of the banks constituted under section 3.
Section 3 provides that with effect from such date, as the Central Government may specify, there shall be constituted the new banks specified in the section.
Clause (f) of section 3 mentions the State Bank of Travancore amongst the new banks which may be constituted under section 3.
It is thus clear that the appellant Bank, namely, the State Bank of Travancore, is a subsidiary bank as contemplated by sub clause (ii) of clause (a) of section 2 (4) of the Act.
If the matter were to rest there, the decretal amount payable by the respondent to the appellant Bank will not be a debt within the meaning of section 2 (4) of the Act, since the appellant is a subsidiary bank within the meaning of section 2 (k) of the .
But by reason of clause (B) of the proviso to section 2 (4) (a) (ii) of the Act, the amount payable to a subsidiary bank is not to be regarded as a debt within the meaning of the Act, only if the right of the subsidiary bank to recover the amount did not arise by reason of any transfer effected by operation of law subsequent to July 1, 1957.
The proviso is thus in the nature of an exception to the exceptions contained in section 2 (4) (a) (ii) of the Act.
The respondent initially owed a sum exceeding Rs. 3000/ to the Erattupetta Branch of the Kottayam Orient Bank Ltd. which was amalgamated with the appellant Bank with effect from June 17, 1961 pursuant to an amalgamation scheme prepared by the Reserve Bank of India.
All the rights, assets and liabilities of the Kottayam Orient Bank were transferred to the appellant Bank as a result of the amalgamation.
The notification containing the scheme of amalgamation was published on May 16, 1961.
Thus, the right of the appellant Bank, though it is a subsidiary Bank, to recover the amount from the respondent arose by reason of a transfer effected by operation of law, namely, the scheme of amalgamation, which came into effect after July 1, 1957.
Since clause (B) of the proviso to section 2 (4) (a) (ii) is attracted, the appellant Bank will not be entitled to the benefit of the exclusion contained in section 2 (4) (a) 346 (ii) of the Act and the respondents claim to the benefits of the Act will remain unaffected by that provision.
That makes it necessary to consider the question whether the appellant Bank can get the advantage of any of the other exclusionary clauses (a) to (n) of section 2 (4) of the Act.
The only other clause of section 2 (4) which is relied upon by the appellant in this behalf is clause (1), according to which the word 'debt ' as defined in section 2 (4) will not include: "any debt exceeding three thousand rupees borrowed under a single transaction and due before the commencement of this Act to any banking company; (emphasis supplied) Provided that in the case of any debt exceeding three thousand rupees borrowed under a single transaction and due before the commencement of this Act to any banking company, any agriculturist debtor shall be entitled to repay such debt in eight equal half yearly instalments as provided in sub section (3) of section 4, but the provisions of section 5 shall not apply to such debt.
" The question for consideration is whether the amount which the respondent is liable to pay under the decree was "due before the commencement of the Act to any Banking Company".
Turning first to the question whether the appellant Bank is a banking company, the learned Subordinate Judge assumed that it is, but no attempt was made to sustain that finding in the High Court.
Shri Abdul Khader, who appears on behalf of the appellant conceded before us that it is not a banking company.
The concession is rightly made, since according to section 2(2) of the Act, 'Banking Company ' means a banking company as defined in the Banking Regulation Act, 1949.
Section S(c) of the Act of 1949 defines a banking company to mean any Company which transacts the business of banking in India (subject to the provision contained in the Explanation to the section).
Thus, in order that a bank may be a banking company, it is in the first place necessary that it must be a "company".
The State Bank of Travancore, which is the appellant before us, is not a 'company ' properly so called.
It is a subsidiary bank which falls within the definition of section 2(k) of the .
It was established by the Central Government in accordance with the Act of 1959 and is not a 'company ' and 347 therefore, not a banking company.
It must follow that the decretal debt which the respondent is liable to pay to the appellant is not owed to a banking company.
It was indeed not owed to any banking company at all on July 14, 1970, being the date on which the Act came into force.
It may be recalled that the respondent owed a certain sum exceeding three thousand rupees to the Kottayam Orient Bank Ltd., a banking company, on an overdraft account.
That Bank was amalgamated with the appellant Bank with effect from May 16, 1961, as a result of which the latter acquired the right to recover the amount from the respondent.
It filed Suit No. 28 of 1963 to recover that amount and obtained a decree against the respondent.
lt is precisely this small conspectus of facts, namely, that the amount was at one time owed to a banking company but was not owed to a banking company at the commencement of the Act, which raises the question as regards the true interpretation of clause (1) of section 2 (4).
The fact that the amount which the respondent owes to the appellant was not owed to a banking company on the date on which the Act came into force, the appellant not being a banking company, does not provide a final solution to the problem under consideration.
The reason for this is that clause (1) of section 2(4) speaks of a debt "due before the commencement" of the Act to any banking company, thereby purporting to make the state of affairs existing before the commencement of the Act decisive of the application of that clause.
The contention of the learned Attorney General, who led the argument on behalf of the appellant, is that the respondent owed the debt before the commencement of the Act to a banking company and, therefore, the appellant is entitled to claim the benefit of the exclusion provided for in clause (1).
The argument is that, for the purposes of clause (1), it does not matter to whom the debt is owed on the date of the commencement of the Act: what matters is to whom the debt was owed before the commencement of the Act.
The learned Attorney General is apparently justified in making this submission which rests on the plain language of clause (1) of section 2(4), the plain, grammatical meaning of the words of the statute being generally a safe guide to their interpretation.
But having considered the submission in its diverse implications, we find ourselves unable to accept it.
348 In order to judge the validity of the submission made by the Attorney General, one must of necessity have regard to the object and purpose of the Act.
The object of the Act is to relieve agricultural indebtedness.
In order to achieve that object, the legislature conferred certain benefits on agricultural debtors but, while doing so, it excluded a class of debts from the operation of the Act, namely, debts of the description mentioned in clauses (a) to (n) of section 2(4).
One class of debts taken out from the operation of the Act is debts owed to banking companies, as specified in clause (1).
The reason for this exception is obvious.
It is notorious that money lenders exploit needy agriculturists and impose upon them harsh and onerous terms while granting loans to them.
But that charge does not hold true in the case of representative institutions, like banks and banking companies.
They are governed by their rules and regulations which do not change from debtor to debtor and which, if any thing, are intended to benefit the weaker sections of society.
It is for this reason that debts owing to such creditors are excepted from the operation of the Act.
A necessary implication and an inevitable consequence of the Attorney General 's argument is that in order to attract the application of clause (1) of section 2 (4), it is enough to show that the debt was, at some time before the commencement of the Act, owed to a banking company; it does not matter whether it was in its inception owed to a private money lender and, equally so, whether it was owed to such a money lender on the date of the commencement of the Act.
This argument, if accepted, will defeat the very object of the Act.
The sole test which assumes relevance according to that argument is whether the debt was owed, at any time before the commencement of the Act, to a banking company.
It means that it is enough for the purpose of attracting clause (1) that, at some time in the past, may be in a chain of transfers, the right to recover the debt was vested in a banking company.
A simple illustration will elucidate the point.
If a private money lender had initially granted a loan to an agricultural debtor on usurious terms but the right to recover that debt came to be vested in a banking company some time before the commencement of the Act, the debtor will not be able to avail himself of the benefit of the provisions of the Act because, at some point of time before the commencement of the Act, the debt was owed to a banking company.
And this would be so irrespective of whether the banking company continues to be entitled to recover the debt on the date of the commencement of the Act.
Even if it assigns its 349 right to a private individual, the debtor will be debarred from claiming the benefit of the Act because, what is of decisive importance, according to the Attorney General 's argument is the fact whether, some time before the commencement of the Act, the debt was due to a banking company.
We do not think the Legislature could have intended to produce such a startling result.
The plain language of the clause, if interpreted so plainly, will frustrate rather than further the object of the Act.
Relief to agricultural debtors, who have suffered the oppression of private moneylenders, has to be the guiding star which must illumine and inform the interpretation of the beneficent provisions of the Act.
When clause (1) speaks of a debt due "before the commencement" of the Act to a banking company, it does undoubtedly mean what it says, namely, that the debt must have been due to a banking company before the commencement of the Act.
But it means something more: that the debt must also be due to a banking company at the commencement of the Act.
We quite see that we are reading into the clause the word "at" which is not there because, whereas it speaks of a debt due "before" the commencement of the Act, we are reading the clause as relating to a debt which was due "at" and "before" the commencement of the Act to any banking company.
We would have normally hesitated to fashion the clause by so restructuring it but we see no escape from that course, since that is the only rational manner by which we can give meaning and content to it, so as to further the object of the Act.
There is one more aspect of the matter which needs to be amplified and it is this: When clause (1) speaks of a debt due before the commencement of the Act, what it truly means to convey is not that the debt should have been due to a banking company at some point of time before the commencement of the Act, but that it must be a debt which was incurred from a banking company before the commencement of the Act.
Thus, the application of clause (1) is subject to these conditions: (i) The debt must have been incurred from a banking company; (ii) the debt must have been so incurred before the commencement of the Act, and (iii) the debt must be due to a banking company on the date of the commencement of the Act.
These are cumulative conditions and unless each one of them is satisfied, clause (1) will not be attracted and the exclusion provided for there 350 in will not be available as an answer to the relief sought by the debtor in terms of the Act.
Our attention was drawn by the Attorney General to the provisions of sections 2 (4) and 2 (4) (j) of the Act the former using the expression "on or before the commencement" of the Act and the latter "at the commencement" of the Act.
Relying upon the different phraseology used in these two provisions and in clause (1) inter se, he urged that the legislature has chosen its words carefully and that when it intended to make the state of affairs existing "at" the commencement of the Act relevant, it has said so.
We are not impressed by this submission.
Section 2 (4) which defines a "debt" had to provide that debt means a liability due from or incurred by an agriculturist "on or before the commencement" of the Act.
It could not be that liabilities incurred before the commencement of the Act would be "debts" even though they are not due on the date of commencement of the Act.
The words "on or before the commencement" of the Act are used in the context of liabilities "due from or incurred" by an agriculturist.
For similar reasons, clause (j) had to use the expression "at the commencement" of the Act, the subject matter of that clause being debts due to widows.
The benefit of the exclusion provided for in clause (j) could only be given to widows to whom debts were due "at the commencement" of the Act.
The legislature could not have given that benefit in respect of debts which were due before but not at the commencement of the Act.
Thus, the language used in the two provisionals on which the learned Attorney General relies is suited to the particular subject matter with which those provisions deal and is apposite to the context in which that language is used.
We have given to the provision of clause (1) an interpretation which, while giving effect to the intention of the legislature in the light of the object of the Act, brings out the true meaning of the provision contained in that clause.
The literal construction will create an anomalous situation and lead to absurdidities and injustice.
That construction has therefore to be avoided.
Any other interpretation of clause (1) will make it vulnerable to a constitutional challenge on the ground of infraction of the guarantee of equality.
The object of the Act being to confer certain benefits on agricultural debtors, the legislature would be under an obligation, while excepting a certain category of debts from the operation of the Act, to make a classification which will answer the test of article 14.
Debts incurred from banking companies and due to such companies at the commencement of the Act would fall into 351 a separate and distinct class, the classification bearing a nexus with A the object of the Act.
If debts incurred from private money lenders are brought within the terms of clause (1) on the theory that the right to recover the debt had passed on to a banking company sometime before the commencement of the Act, the clause would be unconstitutional for the reason that it accords a different treatment to a category of debts without a valid basis and without the classification having a nexus with the object of the Act.
In State of Rajasthan vs Mukanchand section 2 (e) of Jagirdar 's Debt Reduction Act, 1937 was held invalid on the ground that it infringed Article 14 of the Constitution.
The object of that Act was to reduce the debts secured on jagir lands which had been resumed under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act.
The Jagirdar 's capacity to pay debts had been reduced by the resumption of his lands and the object of the Act was to ameliorate his condition.
It was held that no intelligible principle underlies the exempted category of debts mentioned in section 2(e) since the fact that the debts were owed to a government or to a local authority or similar other bodies, had no real relationship with the object sought to be achieved by the Act.
In Fatehand Himmatlal vs Slate of Maharashtra, in which the constitutionality of the Maharashtra Debt Relief Act, 1976 was challenged, it was held by this Court that the exemption granted by the statute to credit institutions and banks was reasonable because liabilities due to Government, local authorities and other credit institutions were not tainted by the view of the debtor 's exploitation.
Fatehchand would be an authority for the proposition that clause (1), in the manner interpreted by us, does not violate Article 14 of the Constitution.
Shri Vaidyanathan, who appears on behalf of the respondent, contended that the claim made by the appellant Bank falls squarely under section 2 (4) (a) (ii) of the Act and that if the appellant is not entitled to the benefit of the specific provision contained therein, it is impermissible to consider whether it can claim the benefit of some other exclusionary clause like clause (1).
Counsel is right to the extent that the appellant is not entitled to claim the benefit of the provision contained in section 2 (4)(a)(ii) because of Proviso B to that 352 section.
The simple reason in support of this conclusion is that the right of the appellant to recover the debt arose by reason of a transfer effected by operation of law subsequent to July 1, 1957.
We have already dealt with that aspect of the matter.
But we are not inclined to accept the submission that if a particular case falls under a specific clause of section 2 (4) which is found to be inapplicable, the creditor is debarred from claiming the benefit of any of the other clauses (a) to (n).
The object of the exclusionary clauses is to take category of debts from out of the operation of the Act and there is no reason why, if a specific clause is inapplicable, the creditor cannot seek the benefit of the other clauses.
The exclusionary clauses, together, are certainly exhaustive of the categories of excepted debts but to make those clauses mutually exclusive will be to impair unduly the efficacy of the very object of taking away a certain class of debts from the operation of the Act.
We are not therefore, inclined to accept the submission made by the learned counsel that section 2 (4) (a) (ii) is exhaustive of all circumstances in which a subsidiary bank can claim the benefit of the exceptions to section 2 (4).
For these reasons we affirm the view of the High Court that the exclusion provided for in clause (1) of section 2 (4) of the Act can be availed of if the debt is due to a banking company at the time of the commencement of the Act.
We have already indicated that the other condition which must be satisfied in order that clause (1) may apply is that the debt must have been incurred from a banking company before the commencement of the Act.
For these reasons we dismiss the appeal.
Appellant will pay the costs of the respondent throughout.
S.R. Appeal dismissed.
| IN-Abs | The respondent had an overdraft account with the Erattupetta Branch of the Kottayam orient Bank Ltd. at the foot of which he owed a sum of over Rs. 3000/ to the Bank.
The said Bank which was a 'Banking Company ' as defined in the Banking Regulation Act, 1949, was amalgamated with the appellant Bank with effect from June 17, 1961.
The appellant Bank filed a suit (O,S, 28 of 1963) in the Sub Court, Meenachil, against the respondent for recovery of the amount due from him in the overdraft Account with the Kottayam orient Bank, the right to recover which had come to be vested in the appellant as a result of the scheme of amalgamation.
The suit was decreed in favour of the appellant but when it took out execution proceedings in the Sub Court, Kottayam, the respondent filed an application under section 8 of the Kerala Agriculturists ' Debt Relief Act claiming that being an agriculturist within the meaning of that Act, he was entitled to the benefit of its provisions including those relating to the scaling down of debts.
The learned Subordinate Judge dismissed the application holding: (i) that the respondent was not entitled to the benefit of the provisions regarding scaling down of the debt because the debt, having been once owed by him to the Kottayam orient Bank Ltd. which was a Banking Company as defined in the Banking Regulation Act, 1949, was outside the purview of section S of the Act which provided for the scaling down of debts owed by agriculturists; and (ii) that he was only entitled to the benefit of the proviso to section 2(4) (l) of the Act under which the amount could be repaid in eight half yearly instalments The Revision Application preferred by the respondent was referred to the Full Bench of the High Court.
It was contended on behalf of the appellant Bank that the debt owed to it by the respondent was excluded from the operation of the Act by reason of section 2 (4) (a) (ii) and section 2 (4) (1) of the Act.
By its judgment dated February 1, 1978 the High Court rejected that contention, allowed the Revision Application and held that the respondent was entitled to all the relevant benefits of the Act, including the benefit of scaling down of the debt and hence the appeal by special leave.
339 Dismissing the appeal, the Court ^ HELD: 1:1.
The appellant Bank will not be entitled to the benefit of the exclusion contained in section 2 (4) (a) (ii) of the Kerala Agriculturists ' Debt Relief Act, 1970 in view of clause (B) of the proviso to the section and the respondent 's claim to the benefits of the Act will remain unaffected by that provision.
[345H, 346 A] 1: 2.
The respondent is admittedly an agriculturist and he owes a sum of money to the appellant Bank under a decree passed in its favour by the Sub Court, Meenachil, in O.S. No. 28 of 1963.
The liability which the respondent owes to the appellant Bank is, therefore a "debt" within the meaning of section 2 (4) of the Act.
[344 F G] However, since the appellant Bank, namely, the State Bank of Travancore, .
is a subsidiary bank within the meaning of section 2 (k) of the and also as contemplated by sub clause (ii) of clause (a) of section 2(4) of the Act, the decretal amount payable by the respondent to the appellant Bank will not be a debt within the meaning of section 2(4) of the Act.
[345 C D] 1: 3.
By reason of clause (B) of the proviso to section 2 (4) (a) (ii) of the Act, which proviso is in the nature of an exception to the exceptions contained in the said section the amount payable to a subsidiary bank is not to be regarded as a debt within the meaning of the Act, only if the right of the subsidiary bank to recover the amount did not arise by reason of any transfer effected by operation of law subsequent to July 1, 1957.
Here, the notification containing the scheme of amalgamation was published on May 16.
Thus, the right of the appellant Bank, though is a subsidiary Bank, to recover the amount from the respondent arose by reason of a transfer effected by operation of law, namely, the scheme of amalgamation, which came into effect after July 1, 1957.
[345 D E, G] 2: l.
The State Bank of Travancore, is not a 'company ' properly so called.
It is a subsidiary bank.
It was established by the Central Government in accordance with The Act of 1959 and is not a 'company and, therefore not a banking company.
Therefore, the decretal debt which the respondent is liable to pay to the appellant is not owed to a "banking company".
It was indeed not owed to any "banking company" at all on July 14, 1970 being the date on which the Act came into force.
[346 G H, 347 A] 3: 1.
The exclusion provided for in clause (I) of section 2 (4) of the Act can be availed of, if the debt is due to a banking company at the time of the commencement of the Act.
[352 D E] 3: 2.
The object of the Act is to relieve agricultural indebtedness.
In order to achieve that object, the legislature conferred certain benefits on agricultural debtors but, while doing so, it excluded a class of debts from the operation of the Act, namely, debts of the description mentioned in clauses (a) to (n) of section 2 (4).
One class of debts taken out from the operation of the Act is debts owed to banking companies, as specified in clause (1).
The reason for this exception being that, unlike money lenders who 340 exploit needy agriculturists and impose upon them harsh and onerous terms while granting loans to them, representative institutions, like banks and banking companies, are governed be their rules and regulations which do not change from debtor to debtor and which, if anything, are intended to benefit the weaker sections of society.
[348 A C] 3: 3.
Relief to agricultural debtors who have suffered the oppression of private money lenders, has to be the guiding star which must illumine and inform the interpretation of the beneficient provisions of the Act.
When clause (1) speaks of a debt due "before the commencement" of the Act to a banking company, it does undoubtedly mean what it says, namely, that the debt must have been due to a banking company before the commencement of the Act.
But it means something more: that the debt must also be due to a banking company at the commencement of the Act.
Reading into the clause the word "at" which is not there, is the only rational manner by which meaning and content could be given to it, so as to further the object of the Act.
[349 B E] Further clause (I) speaks of a debt due before the commencement of the Act, what it truly means to convey is not that the debt should have been due to a banking company at some point of time before the commencement of the Act, but that it must be a debt which was incurred from a banking company before the commencement of the Act.
[349 E F] Thus, the application of clause (I) is subject to these conditions: (i) The debt must have been incurred from a banking company; (ii) the debt must have been so incurred before the commencement of the Act; and (iii) the debt must be due to a banking company on the date of the commencement of the Act.
These are cumulative conditions and unless each one of them is satisfied, clause (I) will not be attracted and the exclusion provided for therein will not be available as an answer to the relief sought by the debtor in terms of the Act.
[349G H, 350 A] 3: 4.
Section 2 (4) which defines a "debt" had to provide that debt means a liability due from or incurred by an agriculturist "on or before the commencement" of the Act.
It could not be that liabilities incurred before the commencement of the Act would be "debts" even though they are not due on the date of commencement of the Act.
The words "on or before the commencement" of the Act are used in the context of liabilities "due from or incurred" by an agrieculturist.
For similar reasons, clause (j) had to use the expression "at the commencement" of the Act, the subject matter of that clause being debts due to widows.
The benefit of the exclusion provided for in clause (j) could only be given to widows to whom debts were due "at the commencement" of the Act.
The legislature could not have given that benefit in respect of debts which were due before but not at the commencement of the Act.
Thus, the language used in the two provisions is suited to the particular subject matter with which those provisions deal and is apposite to the context in which that language is used.
[350 C F] 3:5.
The object of the Act being to confer certain benefits on agricultural debtors, the legislature would be under an obligation, while excepting a certain category of debts from the operation of the Act, to make a classification which will answer the test of article 14.
Debts incurred from banking companies and 341 due to such companies at the commencement of the Act would fall into a separate and distinct class, the classification bearing a nexus with the object of the Act.
If debts incurred from private money lenders are brought within the terms of clause (I) on the theory that the right to recover the debt had passed on to a banking company sometime before the commencement of the Act, the clause would be unconstitutional for the reason that it accords a different treatment to a category of debts without a valid basis and without the classification having a nexus with the object of the Act.
[350G H, 357A B] State of Rajasthan vs Mukanchand ; ; Fatehchand Himmatlal vs State of Maharashtra, ; , applied.
|
Civil Appeal Nos.
1286 1291 of 1973.
Appeals by certificate from the judgment and order dated the 30th June, 1972 of the Andhra Pradesh High Court at Hyderabad in Referred Case No. 5 of 1971.
507 A. Subba Rao for the Appellant.
S.C. Manchanda, and Miss A. Subhashini, for the Respondent.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
The only question which arises for consideration in these six appeals by certificate is whether an order of assessment passed under the Indian Income tax Act, 1922 (hereinafter referred to as 'the Act ') by the Income tax Officer in the case of a Hindu undivided family without holding an inquiry into the validity of the claim made within a reasonable time by a member of the Hindu family that a partition had taken place among the family is liable to be merely cancelled in appeal by the Income tax Appellate Tribunal (for short, 'the Tribunal ') without a further direction to the assessing authority either to modify the assessment suitably or to pass a fresh order of assessment in accordance with law.
The assessee is a Hindu undivided family and the assessment years are 1955 56 and 1957 58 to 1961 62.
An assessment order made on May 30, 1959 in respect of the assessment year 1955 56 had been set aside by the Appellate Assistant Commissioner on February 24, 1962 with a direction to make a fresh assessment.
When fresh assessment proceedings were commenced pursuant to the above said direction in respect of the assessment year 1955 56,, the assessment proceedings for the assessment years 1957 58 and 1958 59 were also taken up.
Earlier a letter had been addressed on October, 10, 1960 by Kapurchand Shrimal to the Income tax Officer in connection with a notice received by the assessee under section 18A (1) of the Act in respect of the assessment year 1961 62 stating that all the movable and immovable properties of the assessee had been partitioned by metes and bounds under partition deeds and that the Hindu undivided family (the assessee) was no longer receiving any income as such and there was therefore no question of payment of any advance tax by it.
The second para of that letter contained a specific request to record the factum of the partition for the purpose of the Act.
Again on June 16, 1961 M/s S.G. Dastagir and Co. addressed a letter on behalf of the assessee in connection with advance tax demanded for the assessment year 1962 63, the second para of which contained a similar request for recording the factum of partition.
Before the fresh assessments were completed for the three years referred to above a third letter dated March 11, 1962 was addressed to the same 508 officer who received it on the next day itself in which again there was a claim made regarding the partition.
But this letter however was written specifically in respect of the assessment year 1957 58.
On March 21, 1962, M/s S.G. Dastagir too addressed a further letter to the Income tax Officer reminding him of the earlier letters of October 10, 1960 and June 16, 1961 and that letter stated: "Apart from these letters the matter has been discussed with you on a number of occasions personally during the course of the assessment proceedings of the year 1957 58 and your attention has already been drawn to the facts that an order under section 25A has to be passed before the completion of the assessment for the year 1957 58.
The letter dated 11th March, 1962 was addressed to you by the assessee only when it was gathered that you were going to pass the assessment order for the year 1957 58 without making the contemplated enquiry under section 25A." The assessments for the years 1955 56 to 1958 59 were however completed between August 31, 1962 and March 27, 1963 without holding an inquiry as contemplated by section 25A of the Act regarding the factum of partition.
The Income tax Officer, thereafter started an inquiry under section 25A and by his order dated March 30, 1965 refused to record the partition.
On appeal the Appellate Assistant Commissioner by his order dated November 8, 1967 set aside the said order and directed the Income tax Officer to record the partition under section 25A as on July 10, 1960.
That order became final as no appeal was filed against it by the Department.
It should be stated here that the Income tax Officer passed assessment orders against the assessee for the assessment years 1959 60, 1960 61 and 1961 62 on March 26, 1964, March 30, 1965 and March 26, 1966 respectively before the Appellate Assistant Commissioner held that the partition had taken place on July 10, 1960.
In the appeals filed before the Appellate Assistant Commissioner against the assessment orders for the years in question i.e. 1955 56 and 1957 58 to 1961 62 it was contended that the assessments were liable to be set aside on the ground that the inquiry into the claim of partition which was a condition precedent for making an order of assessment on the Hindu undivided family had not been made as required by section 25A of the Act.
The Appellate Assistant Commissioner rejected the above contention.
The assessee there upon filed appeals before the Tribunal against the orders of the 509 Appellate Assistant Commissioner and one question which was A common to all the appeals that was urged before the Tribunal was about the validity of the assessment made against the assessee (Hindu undivided family) without holding an inquiry regarding the claim of partition before the assessment proceedings were completed.
While the assessee contended that the assessments were liable to be cancelled on account of the non compliance with the mandatory provisions of section 25A of the Act it was urged on behalf of the Department that in fact there was no violation at all of section 25A and even if it was held that there was any such violation the proper order to be passed was either to direct the Income tax officer to give effect to section 25A (2) of the Act without cancelling the assessments made on the assessee or to set aside the assessments with a direction to the Income tax Officer to pass fresh orders of assessment.
On a consideration of the submissions made by the parties, the Tribunal came to the conclusion that the assessments which had been made without holding an inquiry into the claim of partition as required by section 25A of the Act were illegal and void Accordingly it cancelled the assessments and added 'We do not consider it necessary to direct fresh assessments.
It would be open to the Income tax Officer to do so if the law otherwise so permits. ' Thereafter at the instance of the Revenue a reference was made by the Tribunal to the High Court of Andhra Pradesh under section 66(1) of the Act in all the cases for a decision on the following question: "Whether on the facts and in the circumstances of the case, the assessments made by the Income tax Officer on the Hindu undivided family of Shri Kapurchand Shrimal for the years under reference without passing an order under section 25A were valid ?" We are not concerned in these appeals with another question arising out of the assessment order made for the year 1958 59 which was also referred alongwith the above common question.
The High Court after hearing the learned counsel for the parties answered the common question which arose in all the appeals stating that the assessment made by the Income tax Officer without passing the order under section 25A on the claim of partition were valid but only required modification and directed the Tribunal while giving effect to the order of the High Court to direct the Income tax Officer to modify the assessments in the light of section 25A (2) of 510 the Act.
Aggrieved by the decision of the High Court the assessee has filed these appeals.
Section 25A of the Act which arises for consideration in these cases reads thus: "25A. Assessment after partition of a Hindu undivided family (1) Where, at the time of making an assessment under section 23, it is claimed by or on behalf of any member of a Hindu family hitherto assessed as undivided that a partition has taken place among the members of such family, the Income tax Officer shall make such inquiry thereinto as he may think fit, and, if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions he shall record an order to that effect: Provided that no such order shall be recorded until notices of the inquiry have been served on all the members of the family.
(2) Where such an order has been passed, or where any person has succeeded to a business, profession or vocation formerly carried on by a Hindu undivided family whose joint family property has been partitioned on or after the last day on which it carried on such business, profession or vocation, the Income tax Officer shall make an assessment of the total income received by or on behalf of the joint family as such, as if no partition had taken place, and each member or group of members, shall in addition to any income tax for which he or it may be separately liable and notwithstanding anything contained in sub section (1) of section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it; and the Income tax Officer shall make assessments accordingly on the various members and groups of members in accordance with the provisions of section 23; Provided that all the members and groups of members whose joint family property has been partitioned shall be liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family as such.
511 (3) Where such an order has not been passed in respect A of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be a Hindu undivided family.
A Hindu undivided family is an entity which is treated as an assessee for the purposes of the Act.
In the Act as it was originally passed there was no effective machinery to assess the income which was received by a Hindu undivided family during an accounting year but was no longer in existence as such at the time of assessment.
By reason of section 14(1) of the Act which provided that no tax would be payable by an assessee in respect of any sum which he received as a member of a Hindu undivided family, there was further difficulty in subjecting such income tax.
Section 25A was, therefore, enacted to get over these difficulties by providing for a special procedure to be followed in a case where a claim was made that there has been a partition satisfying the tests laid down in that section.
Sub section (3) of section 25A of the Act provides that a Hindu undivided family which is being assessed as such shall be deemed for the purposes of the Act to continue to be a Hindu undivided family until an order is passed under sub section (1) of section 25A that a partition has taken place among the members of the family as stated therein.
Sub section (1) of section 25A provides that if at the time of making as assessment a claim is made by or on behalf of any member of a Hindu undivided family which is being assessed till then as undivided that a partition has taken place among the members of such family, the Income tax officer shall make such inquiry there into as he may think fit and if he is satisfied that the joint family property has been partitioned among the various members groups of members in definite portions he shall record an order to that effect.
Such order can however be made only after notices of the inquiry have been served on all the members of the family.
It may be noted that sub section (I) of section 25A does not actually prescribe the form in which such a claim can be made.
It does not also state the specific stage of the assessment proceedings when such claim should be made.
Sub section (2) of section 25A of the Act provides that where an order is passed under sub section (1) thereof recording the partition or where any person has succeeded to a business, profession or vocation formerly carried on by a Hindu undivided family where joint family property has been partitioned on or after the last day on which it carried on such business, profession or vocation the Income tax officer shall make an assessment of the total income received by or on behalf of the 512 joint family as such as if no partition had taken place and each member or group of members shall, in addition to any income tax for which he or it may be separately liable and notwithstanding any thing contained in sub section (section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it.
The Income tax officer is further authorised to make assessments accordingly on various members and groups of members in accordance with section 23 of the Act.
By virtue of the proviso to sub section (2) of section 25A of the Act the liability which so long as an order was not recorded under sub section (I) of section 25A was restricted to the assets of ., the Hindu undivided family is transformed when such an order is recorded into the personal liability of the members for the amount of tax due by the family.
In these appeals there is a finding of fact recorded by the Tribunal that a proper and valid request for recording a partition had been made as far back as October 10, 1960.
The first of the assessment orders impugned in these appeals was passed on August 31, 1962 by the Income tax officer and the other assessment orders were passed subsequently.
It is not shown that the Income tax officer before whom the claim of partition had been made on October 10, 1960 had not got reasonable time to inquire into the claim and then to make the assessment orders on the basis of the finding on the question of partition.
Admittedly all the orders of assessment were passed against the assessee (Hindu undivided family) before holding an inquiry as required by section 25A (I) of the Act into the claim of partition.
In fact the Income tax officer refused to record the partition only on March 30, 1965 but in appeal the Appellate Assistant Commissioner held that a partition had taken place as on July 10, 1960 by his order dated November 8, 1967 and that order had become final.
The questions for consideration are whether under these circumstances the orders of assessment can be treated as valid orders and if they are not whether the Income tax officer can be directed by the appellate authority to pass fresh orders of assessment in accordance with law.
The first decision relied on by the assessee is Kalwa Devadattam and two ors.
vs The Union of.
India and ors.(l) That was a case arising out of a suit in which the validity of certain assessment 513 Orders passed against a Hindu undivided family under the Act and A the proceedings instituted to recover the amounts payable under these assessment orders by sale of certain properties had been questioned.
The plaintiffs in that suit were the sons of one Nagappa.
Nagappa and the plaintiffs who formed a Hindu joint family had carried on business and the said family had been assessed to tax under the Act.
When proceedings were instituted to recover the dues under the assessment orders for the sale of some properties, the plaintiffs filed the suit contending that some of the properties could not be sold as they were their separate properties and the remaining properties could not be sold as they had been allotted to them on partition of the joint family estate on March 14, 1947 before the orders of assessment were made by the income tax authorities.
The claim of the plaintiffs based on the ground of non compliance with section 25A of the Act was rejected by this Court with these observations: "It may be assumed that by this statement within the meaning of section 25A it was claimed "by or on behalf of any member of a Hindu family hitherto assessed as undivided" that a partition had taken place among the members of his family and that the Income tax officer was bound to make an inquiry contemplated by section 25A.
But no inquiry was in fact made and no order was recorded by the Income tax officer about the partition: by virtue of sub section
(3) the Hindu family originally assessed as undivided had to be deemed for the purposes of the Act to continue to be a Hindu undivided family.
If by the assessment of the family on the footing that it continued to remain undivided Nagappa or his sons were aggrieved their remedy was to take an appropriate appeal under section 30 of the Indian Income tax Act and not a suit challenging the assessment.
The method of assessment and the procedure to be followed in that behalf are statutory, and any error or irregularity in the assessment may be rectified in the manner provided by the statute alone, for section 67 of the Indian Income tax Act bars a suit in any Civil Court to set aside or modify any assessment made under the Act.
The Income tax officer made the assessment of tax under the Act.
Granting that he committed an error in making the assessment without holding an inquiry into the partition alleged by Nagappa, the error could be rectified by resort to the machinery provided under the Act and not by a suit in a Civil Court.
" 514 This Court dismissed the suit against the Revenue on three independent grounds: (1) the suit which was in substance one for setting aside an assessment was in law not maintainable because of section 67 of the Act; (2) that in the absence of an order under section 25A (1 assessment of the Hindu joint family was properly made; and (3) even if an order recording partition was made the liability of the plaintiffs to pay income tax assessed on the family could still be enforced against them jointly and severally under section 25A (2) proviso.
The above case was not obviously one in which an order of assessment which had been passed contrary to section 25A of the Act had been challenged in an appeal under the Act.
The next case relied on by the assessee is Additional Income tax officer, Cuddapah vs A. Thimmayya & Anr.(l) There again the question raised was a different one although some of the material facts were similar to the facts in these appeals.
The facts there were those: Krishnappa and his two sons Thimmayya and Venkatanarsu constituted a Hindu undivided family which had carried on some business during the previous years corresponding to assessment years 1941 42 to 1946 47.
When the assessment proceedings for these years were pending, on May 20, 1946 Venkatanarsu claimed before the 'Income tax officer that the property of the family had been partitioned among the members of the family in definite portions.
The said claim was not disposed of till June 30, 1952.
In the meanwhile assessments for the five years in question were completed between September 30, 1948 and November 30, 1950 resulting in a tax liability of Rs. 67,750/ in the aggregate for the five years.
Appeals were preferred against the said orders of assessment but in the appeals it was not contended that the orders were illegal as no inquiry had been made as contemplated in section 25A (1).
The appeals were unsuccessful.
On June 30, 1952, the Income tax officer made an order under section 25A recording that a partition had taken place on November 2, 1946.
As the tax due was not paid the Income tax officer made the order under section 46(S) of the Act on June 25, 1958 calling upon the managing director of a private limited company which had taken over the business of Krishnappa and his two sons not to pay the salaries payable to Thimmayya and Venkatanarsu by the company and to pay it to the credit of Government of India towards the payment of arrears of income tax referred to above.
Thimmayya and 515 Venkatanarsu questioned that order before the High Court under A Article 226 of the Constitution.
The High Court held that the order on the claim made under section 25A(I) on June 30, 1952, was given "a clear retrospective operation", and the Income tax officer was bound "to give effect to that order recognising the partition and to follow up the consequences which flowed from the order".
In the view of the High Court, the petitioners were entitled to insist upon an order for apportionment under section 25A (2) and without such an order, proceedings for collection of tax could not be commenced against them under the proviso to sub section (2) of section 25A.
On appeal this Court held that because prior to the orders of assessment there was no order recording that the property of the family had been partitioned among the members of the family no personal liability of the members arose under the proviso to section 25A (2) to pay the tax assessed thereunder and the remedy of income tax authorities was to proceed against the property, if any, of the Hindu undivided family.
It was therefore held that the Income tax officer was not competent to make the order under section 46 (5) directing the company to withhold the tax from the salaries payable to Thimmayya and Venkatanarasu.
The relevant observations of this Court are these: "In the present case no orders were recorded by the lncome tax officer at the time of making assessments in respect of the five years, and therefore no personal liability of the members of the family arose under the proviso to sub section (2).
The Income tax officer does not seek to reach in the hands of Thimmayya and Venkatanarsu the property which was once the property of the Hindu undivided family: he seeks to reach the personal income of the two respondents.
That the Income tax officer could do only if by virtue of the proviso to sub section (2) a personal liability has arisen against them.
In the absence of an order under sub section (1), however, such a liability does not arise against the members of the Hindu undivided family, even if the family is disrupted.
We are therefore of the view, but not for the reasons mentioned by the High Court, that because there has been before the orders of assessment no order recording that the property of the family has been partitioned among the members, the two respondents are not personally liable to satisfy the tax due by the joint family.
The remedy of the income tax authorities, in the circumstances of the case, 516 was to proceed against the property, if any, of the Hindu undivided family.
That admittedly they have not done.
" It will be seen that in this case no question was raised as to whether the assessment orders were void as they were passed without holding an inquiry as required by section 25A (I) of the Act.
The only question was whether in the absence of an order under section 25A (1), any personal liability can be enforced against the members of the joint family.
Strong reliance is, however, placed on behalf of the assessee on the decision of the Andhra Pradesh High Court in Karri Ramakrishna Reddy vs Tax Recovery officer, Vijayawada( ') which involved the interpretation of section 171 of the Income tax Act, 1961, which, in so far as the question involved in these appeals is concerned, contains similar provisions.
In that case a person who was a member of a Hindu undivided family questioned in a proceeding under Article 226 of the Constitution an assessment made against the Hindu undivided family after it had been partitioned without holding an inquiry as required by section 1.71 (2) of the Income tax Act, 1961 even when a claim of partition had been made by his father in the assessment proceedings.
The petitioner therein con tended that such an order would not be binding upon the other members of the family.
The High Court accepted the contention of the petitioner therein and held that the assessment order could not be enforced against him.
This again is a case where the validity of the assessment order had been questioned not in an appeal filed against it but in a separate proceeding.
The observations made therein may not, therefore, be of much assistance to the assessee because we are concerned in these appeals with the powers of the appellate authority where appeals are filed against the assessment orders themselves contending that there has been non compliance with section 25A(I).
Moreover it appears that certain observations made in that case in respect of the decision of this Court in Additional Income tax officer, Cuddapah vs A. Thimmayya & Anr.(2) and the Full Bench decision of the Andhra Pradesh High Court in Commissioner of Income tax vs Tatavarthy Narayanamurthy (3) need further examination.
We refrain from expressing any opinion on 517 the correctness of this decision which does not even appear to have been cited before the High Court when the reference out of which these appeals arise was argued.
From a fair reading of section 25A of the Act it appears that the Income tax officer is bound to hold an inquiry into the claim of partition if it is made by or on behalf of any member of the Hindu undivided family which is being assessed hitherto as such and record a finding thereon If no such finding is recorded, sub section (3) of section 2SA of the Act becomes clearly attracted.
When a claim is made in time and the assessment is made on the Hindu undivided family without holding an inquiry as contemplated by section 25A (1), the assessment is liable to be set aside in appeal as it is in clear violation of the procedure prescribed for that purpose.
The Tribunal was, therefore, right in holding that the assessments in question were liable to be set aside as there was no compliance with section 25A (l) of the Act.
It is, however, difficult to agree with the submission made on behalf of the assessee that the duty of the Tribunal ends with making a declaration that the assessments are illegal and it has no duty to issue any further direction.
It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute.
The statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature.
In interpreting section 25A (l) we cannot also be oblivious to cases where there is a possibility of claims of partition being made almost at the end of the period within which assessments can be completed making it impossible for the Income tax officer to hold an inquiry as required by section 25A (1) of the Act by following the procedure prescribed therefor.
We, however, do not propose to express any opinion on the consequence that may ensue in a case where the claim of partition is made at a very late stage where it may not be reasonably possible at all to complete the inquiry before the last date before which the assessment must be completed.
In the instant case, however, since it is not established that the claim was a belated one the proper order to be passed is to set aside the assessments and to direct the Income tax officer to make fresh assessments in accordance with the procedure prescribed by law.
The Tribunal, therefore, erred in merely cancelling the assessment orders and in not issuing further directions as stated above.
518 We do not, however, agree with the orders made by the High Court by which it upheld the assessments and directed the Income tax officer to make appropriate modifications.
Such an order is clearly unwarranted in the circumstances of this case.
The order of the High Court is, therefore, set aside.
The question referred by the Tribunal to the High Court does not appear to be comprehensive enough to decide the matter satisfactorily.
The question may have to be read as including a further question regarding the nature of the orders to be passed by the Tribunal if the orders of assessments are held to be contrary to law.
In the light of the above, we hold that the orders of assessments are liable to be set aside but the Tribunal should direct the Income tax officer to make fresh assessments in accordance with law.
The appeals are accordingly disposed of.
There shall be no order as to costs.
S.R. Appeals allowed.
| IN-Abs | The assessee is a Hindu undivided family and the assessment years are 1955 56 and 1957 58 to 1961 62.
The assessee addressed on October 10, 1960 to the Income tax Officer in connection with a notice received under section 18A(1) of the Act in respect of the assessment year 1961 62 stating that all the movable and immovable properties of the assessee had been partitioned by metes and bounds under partition deeds and that the Hindu undivided family was no longer receiving any income as such and there was therefore no question of payment of any advance tax by it.
A specific request to record the factum of the partition for that purpose of the Act effective from July 10, 1960 was also prayed for.
This was followed by another letter on June 16, 1961 by M/s. S.G. Dastagir and Co.
On behalf of the assessee in connection with advance tax demanded for the assessment year 1962 63 with a similar request.
Before fresh assessments were completed for the years 1955 56, 1957 58 and 1958 59 as per the orders of the Appellate Assistant Commissioner dated February 24, 1962 a third letter dated March 11, 1962 was addressed to the same Income tax Officer with a similar request for recording the factum of partition.
Another letter dated March 21, 1962 was addressed by M/s. S.G. Dastagir & Co. reminding the Income tax Officer of the earlier letters of October 10, 1960 and June 16, 1961.
The assessment for the years 1955 56 to 1958 59 were, however, completed between August 21, 1962 and March 27, 1963 without holding any inquiry as contemplated by section 25A of the 1922 Act regarding the factum of partition.
The Income tax Officer thereafter started an inquiry under section 25A and by his order dated March 30, 1965 refused to record the partition.
On appeal against the refusal the Appellate Assistant Commissioner by his order dated November 8, 1967 set aside the said order and directed the Income tax Officer to record the partition under section 25A as on July 10, 1960.
That order became final as an appeal was filed against it by the Revenue.
In the appeals filed before the Assistant Appellate Commissioner against the assessment orders for the years in question, that is, 1955 56 and 1957 58 to 1961 62 the assessee con 506 tended that the assessments were liable to be set aside on the ground that the inquiry into the claim of partition which was a condition precedent for making an order of assessment on the Hindu undivided family had not been made as required by section 25A of the Act.
The Appellate Assistant Commissioner rejected the said contention, but the appeals preferred before the Tribunal were allowed.
The Tribunal cancelled the assessments without any directions to make fresh assessments.
At the instance of the Revenue a reference was made by the Tribunal to the High Court of Andhra Pradesh under section 66(1) of the Act.
The High Court answered the reference in favour of the Revenue and hence the appeals.
Allowing the appeals, the Court ^ HELD: (1) Under section 25A of the 1922 Act the Income tax Officer was bound to hold an inquiry into the claim of partition if it is made by or on behalf of any member of the Hindu undivided family which is being assessed hitherto as such and record a finding thereon.
If no such finding is recorded sub section (3) of section 25A of the Act becomes clearly attracted.
When a claim is made in time and the assessment is made on the Hindu undivided family without holding an inquiry as contemplated by section 25A(1), the assessment is liable to be set aside in appeal as it is in clear violation of the procedure prescribed for that purpose, [517 A C] Kalwa Devadattam and two Ors.
vs The Union of India and Ors., ; ; Additional Income tax Officer, Cuddapah vs A. Thimmayya & Anr., and Karri Ramkrishna Reddy vs Tax Recovery Officer, Vijayawada, , discussed and distinguished.
(2) The duty of the Tribunal does not end with making declaration that the assessments are illegal and it is duty bound to issue further directions.
The appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute.
The statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature.
[517 D E] In the instant case, however, since it is not established that the claim was a belated one the proper order to be passed is to set aside the assessments and to direct the Income tax Officer to make fresh assessments in accordance with the procedure prescribed by law.
The Tribunal, therefore, erred in merely cancelling the assessment orders and in not issuing further directions.
[517 G H]
|
ivil Appeal No. 220 I of 1978.
From the judgment and order dated the 13th September, 1978 of the Central Govt.
, Ministry of Finance Department 'of Revenue, New Delhi in order No. 819 of 1978.
V. J. Taraporavala, J. B. Dadachanji and Shri Narain for the appellants.
N.C. Talukdar and R.N. Poddar for the Respondent.
The Judgment of the Court was delivered by BALAKRISHNA ERADI, J.
This appeal by special leave is directed against an order dated August 3, 1978 passed by the Government of India under Section 16 of the Central Excise and Salt Act, 1944 (hereinafter referred to as the Act), rejecting a Revision Petition filed by the present appellant and confirming the view taken by the Appellate Collector of Excise, Bombay, that the appellant herein is not entitled to the benefit of the exemption from duty of excise conferred by a Notification No. 4/68 CE dated January 20, 1968.
The appellant Company which has its factories at Sion East and Andheri East in Bombay is engaged in the manufacture of various process chemicals required for the Textile industry.
Amongst the process chemicals so manufactured by them are substances known as emulsifiers and wetting out agents.
These products fall within the scope of Tariff Item 15AA of the First Schedule to the Act, which reads: "Organic Surface Active Agents (other than soap); Surface Active preparations and washing preparations, whether or not containing soap.
" For use as raw material for the manufacture of the emulsifiers wetting out agents, the appellant Company had purchased a total quantity of 1,64,500 kgs.
Of organic surface active agents from another company called 'The Industrial General Products Private 624 Limited '.
The aforesaid organic surface active agents sold to the appellant by the Industrial General Products Private Limited had not been subjected to the levy of excise duty inasmuch as the said supplier Company was eligible for exemption from payment of excise duty on account of the fact that the goods were manufactured by it without the aid of power.
Emulsifiers/wetting out agents, etc.
intended for use in any industrial process were exempted from the levy of duty under Entry 15AA of the First Schedule to the Act, subject to certain conditions, by a Notification dated January 20, 1968 issued by the Government of India.
The relevant part of that Notification is in the following terms: "The Central Government has exempted the excisable goods specified in column (2) of the Table hereto annexed and falling under this Item from the whole of the duty of excise leviable thereon subject to the conditions laid down in the corresponding entries in column (3) of the said Table.
TABLE Sl.
Description Conditions No. (1) (2) (3) 1. . . 2. . . 3. . . 4.
Emulsifiers, wetting out If in respect of surface agents, softness and active agents used in the other like preparations manufacture of such intended for use in any emulsifiers, wetting out industrial process.
agents, softners and other like preparations the appropriate amount of the duty of excise or the additional duty under section 2A of the Indian Tariff Act 1934 (32 of 1934), has already been paid or where such surface active agents are purchased from the open market on or after the 20th day of January, 1968.") 625 It is common ground that the organic surface active agents A used by the appellant as raw material for the manufacture of emulsifiers/wetting out agents were purchased by it.
subsequent to the 20th day of January 1968.
The Central Excise authorities originally treated the manufactured product, namely the emulsifiers etc.
as exempt from levy of duty by virtue of the Notification dated January 20, 1968.
But, subsequently, by a notice dated August 6, 1974, issued by the Superintendent of Central Excise, Inspection Group No. 1, Bombay Division V, the appellant Company was directed to show cause why an amount of Rs. 1,21,709.57 should not be recovered from the Company by way of excise duty in respect of the period August 1973 to February 1974 on the ground that the said amount represented escaped duty in respect of the emulsifiers/ wetting out agents manufactured by the petitioner Company during the aforesaid period.
In reply to the said notice, the appellant Company objected to the said demand contending that it was entitled to the benefit of exemption from levy of duty in respect of the manufactured products under the Notification dated January 20, 1968 inasmuch as surface active agents used in the manufacture of the emulsifiers/wetting out agents had been purchased by the appellant from the open market after the 20th day of January 1968.
This contention was rejected by the concerned Assistant Collector.
He took the view that, in order to attract the exemption provided for in the aforesaid Notification, duty should actually have been paid in respect of the surface active agents used as raw material and since the appellant had purchased the raw material from a manufacturing unit which was exempt from the levy of excise duty for the reason that the manufacture was carried out by it without the aid of power, the conditions prescribed in the Notification were not fulfilled.
The said order was confirmed by the Appellate Collector of Central Excise, Bombay, before whom the matter was carried in appeal by the present appellant.
While upholding the view taken by the Assistant Collector that the benefit of the exemption granted by the Notification would be available only in cases where the raw material, namely, the surface active agents had been subjected to duty at the primary stage, the Appellate Collector went further and held that the purchase of the aforesaid raw material effected by the appellant from M/s. Industrial General Products Private Limited could not be regarded as "purchased from the open market" and that for this 626 additional reason also, the appellant was ineligible to claim the benefit of the exemption.
A Revision Petition filed by the appellant before the Government of India was rejected by the order (Exh. 'A ') dated August 3, 1978, wherein the Central Government took the view that "purchases made from a particular manufacturer, the production from whose factory is exempt from payment of duty, being manufactured without the aid of power, cannot be treated at par with purchases made from the open market".
It is against this order of the Government of India that the appellant has come up to this Court with this appeal.
The language used in Columns (2) and (3) of the Table appended to the Notification dated January 20, 1968 is simple and unambiguous.
It shows that the benefit of the exemption will be available in respect of the emulsifiers/wetting out agents provided that either of the following two conditions is fulfilled: (a) Excise duty (inclusive of additional duty under section 2A) should have been already paid in respect of the surface active agents used as raw material in the manufacture of the emulsifiers, wetting out agents, etc. (b) The surface active agents used as raw material for the manufacture of the emulsifiers/wetting out agents should have been purchased from the open market on or after the 20th day of January, 1968.
The first of the aforementioned conditions was obviously not satisfied in the present case since the surface active agents were purchased by the appellant Company from a manufacturer who was exempt from payment of excise duty on account of the fact that the process of manufacture was being carried out without the aid of power.
The appellant Company contends that the second of the aforesaid conditions, namely, that the surface active agents should have been purchased from the open market on or after the 20th day of January 1968 was fully satisfied in the present case, and hence it was entitled to the benefit of the exemption granted by the Notification, That the appellant had purchased the surface active agents used in the manufacture of the emulisifiers/wetting out agents subsequent to the 20th day of January, 1968 is undisputed.
The purchases of the raw material had been made by the appellant from 627 the Industrial General Products Private Limited.
The short question to be considered is, whether those transactions of purchase effected by the appellant from the Industrial General Products Private Limited can be regarded as purchases "from the open market"? In determining the eligibility of a person for the benefit of the exemption conferred by the Notification on the basis of the fulfillment of the second of the aforementioned conditions, it is wholly irrelevant to enquire whether duty of excise had already been paid in respect of the surface active agents purchased and utilised as raw material for the manufacture of the emulsifiers/wetting out agents.
The sole question to be examined is, whether the surface active agents used in the manufacture of the emulsifiers were purchased "from the open market" on or after the 20th day of January, 1968 ? The Assistant Collector as well as the Appellate Revisional Authorities have taken the view that the exemption granted by the Notification will get attracted only if the surface active agents used as raw material had been already subjected to levy of duty at the primary stage.
In our opinion, the said view is based on an erroneous interpretation of the provisions contained in item 4 of the Table appended to the Notification.
The condition that the duty of excise should have already been paid on the raw material (surface active agents) has no application to cases covered by the second part of Column (3) of Sl.
No. 4 of the Table, namely, cases where the surface active agents were purchased from the open market on or after the 20th day of January, 1968.
That brings us back to the question, whether the purchases effected by the appellant from M/s. Industrial General Products Private Limited were purchases "from the open market"? Having due regard to the context in which the expression "open market ' ' has been used in the Notification, it would be wholly wrong to understand the said expression "open market" as connoting only a market yard, bazar or a shopping complex where goods are offered for sale.
Industrial chemicals (which have to he ordinarily purchased in bulk for use as raw material in the manufacture of secon dary products) are not commodities that are usually exposed for sale in bazars and shops.
Such bulk purchases of chemicals etc., are effected by placing orders with the concerned manufacturing units.
In our opinion, if the transactions of sale and purchases are effected under conditions enabling every person desirous of purchasing the goods in question to place orders with such manufac 628 turing unit and obtain supplies, they will constitute purchases "from the open market".
We may in this context refer with advantage to the following observations of Swinfen Eady, J. in Inland Revenue Commissioners vs Clay(l), where the Court of appeal had to consider the scope of the expression "open market" occurring in section 25 (1) of the Finance Act, 1910 (10 Edw. 7, c. 8): "The market is to be the open market, as distinguished from an offer to a limited class only, such as the members of the family.
The market is not necessarily an auction sale.
The section means such amount as the land might be expected to realize if offered under conditions enabling every person desirous of purchasing to come in and make an offer, and if proper steps were taken to advertise the property and let all likely purchasers know that the land is in the market for sale.
" We fully agree with these observations.
In the present case, it was open to every person desirous of purchasing the surface active agents to place orders with the manufacturing Company, namely, M/s. Industrial General Products Private Limited, and obtain the supply on payment of the price at the prevailing rate.
The sales by the said Company were not to a limited class only.
Hence, the purchases of the surface active agents effected by the appellant from M/s. Industrial General Products Private Limited ' have to be treated as purchases made "from the open market.
" The denial to the appellant of the benefit of the exemption provided for by the Notification was, therefore, clearly illegal.
Accordingly, we allow this appeal, set aside the orders passed by the Government of India, the Appellate Collector, Bombay and the Assistant Collector of Central Excise, Bombay, and declare that the appellant Company is entitled to the benefit of the exemption granted by the Notification dated January 20, 1968 in respect of the emulsifiers, wetting out agents, softners etc., manufactured by the Company for use during the relevant period (August 1973 to February 1974).
The respondent shall pay costs to the appellant Company in this appeal.
N.K.A. Appeal allowed.
| IN-Abs | The appellant company manufactured various process chemicals required for the Textile Industry.
The process chemicals so manufactured by them are substances known as emulsifiers and wetting out agents and they fall within the scope of tariff item 15AA of the first schedule to the Central Excise and Salt Act 1944.
The appellant purchased 164500 kgs.
Of organic surface active agents from the "Industrial General Products Pvt. Ltd.".
The organic surface active agents sold to the appellant by the Industrial General Products Pvt.
Ltd. had not been subjected to the levy of excise duty in as much as the said supplier company was eligible for exemption from payment of Excise Duty on account of the fact that the goods were manufactured by it without the aid of power.
Emulsifiers/wetting out agents etc.
intended for use in any industrial process were exempted from the levy of duty under entry 15AA, by a notification dated 20.1.1968 issued by the Government of India, subject to the condition that if in respect of surface active agents used in the manufacture of such emulsifiers, wetting out agents, softners and other like preparations the appropriate amount of the duty of excise or the additional duty under section 2A of the Indian Tariff Act 1934 (32 of 1934), has already been paid or where such surface active agents are purchased from the open market on or after the 20th day of January, 1968.
F It is common ground that the organic surface active agents used by the appellant as raw material for the manufacture of emulsifiers/wetting out agents were purchased by it subsequent to the 20th day of January, 1968.
The Central Excise authorities originally treated the manufactured product, namely the emulsifiers etc.
as exempt from levy of duty by virtue of the Notification dated January 20, 1968.
But, subsequently by a notice dt.
August 6, 1974 issued by the superintendent of Central Excise, the appellant was directed to show cause why an amount of Rs. 1, 21,709.57 should not be recovered from the appellant by way of excise duty in respect of the period August 1973 to February 1974 on the ground that the said amount represented escaped duty in respect of the emulsifiers/wetting out agents manufactured by the appellant during the aforesaid period.
The appellant in reply contended that it was entitled to the benefit of exemption from levy of duty in respect of the manufactured products under the notification dated 20.1.1968.
This contention was rejected by the Assistant 622 Collector and his order was confirmed by the appellate collector of central excise.
A revision petition filed by the appellant before the respondents (union of India) was rejected by order dated August 3.
1978 wherein the Central Government took the view that "purchases made from a particular manufacturer, the production from whose factory is exempt from payment of duty, being manufactured without the aid of power, cannot be treated at par with purchases made from the open market".
In the appeal filed by special leave, it was contended that the condition that the surface active agents should have been purchased from the 'open market ' on or after the 20th day of January 1968 was fully satisfied in the present case, and hence the appellant was entitled to the benefit of the exemption granted by the Notification.
Allowing the appeal, ^ HELD: 1.
The appellant Company is entitled to the benefit of the exemption granted by the Notification dated January 20, 1968 in respect of the emulsifiers, wetting out agents, softners etc.
manufactured by the Company for use during the relevant period (August 1973 to February 1974).
[628 G] 2.
In determining the eligibility of a person for the benefit of the exemption conferred by the Notification on the basis of the fulfillment of the second of the aforementioned conditions, it is wholly irrelevant to enquire whether duty of excise had already been paid in respect of the surface active agents purchased and utilised as raw material for the manufacture of the emulsifiers/wetting out agents.
[627 A B] 3.
Having due regard to the context in which the expression 'open market" has been used in the Notification, it would be wholly wrong to understand the said expression "open market" as connoting only a market yard, bazar or a shopping complex where goods are offered for sale.
Industrial Chemicals (which have to be ordinarily purchased in bulk for use as raw material in the manufacture of secondary products) are not commodities that are usually exposed for sale in bazars and shops.
Such bulk purchases of chemicals etc., are effected by placing orders with the concerned manufacturing units.
[627 E G] 4.
If the transactions of sale and purchase are effected under conditions enabling every person desirous of purchasing the goods in question to place orders with such manufacturing unit and obtain supplies, they will constitute Purchases "from the open market".
[627 G H, 628 A] Inland Revenue Commissioners vs Clay, referred to.
In the present case, it was open to every person desirous of purchasing the surface active agents to place orders with the manufacturing company, namely MIS Industrial General Products Private Limited, and obtain the supply on payment of the price at the prevailing rate.
The sales by the said Company were not to a limited class only.
Hence, the purchases of the surface active agents effected by the appellant from M/s Industrial General Products Private Limited have to 623 be treated as purchases made "from the open market".
The denial to the appellant of the benefit of the exemption provided for by the Notification was, therefore, clearly illegal.
[628 D F]
|
Appeals Nos.
32 to 34 of 1955.
Appeal by special leave from the judgment and order dated September 5, 1952, of the Calcutta High Court in Civil Revision cases Nos.
3257, 3258 and 3259 of 1951 arising out of the order dated September 7, 1951, of the Court of Small Causes at Calcutta, 4th Bench, in Rent Appeal Nos. 115, 743 and 744 of 1951.
C. K. Daphtary, Solicitor General of India, D. N. Mookerji and Sukumar Ghose, for the appellant.
S.C. Janah and S.N. Mookerji, for the respondent.
November 9.
The Judgment of the Court was delivered by SINHA J.
Thesubstantial question for determination in these three analogous appeals by special leave 22 is whether the provisions of section 9 of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950 (which hereinafter will be referred to as "the Act") apply to the three promises which formed the subject matter of three separate proceedings in the courts below; and, if so, which clause thereof.
The common landlord is the appellant in each case the respondent in each case being the tenant of the particular tenement.
In order to appreciate the points of law at issue between the parties, it is necessary to state the relevant facts shorn of all details relating to the basic rent and the standard rent fixed at different stages of the proceedings.
Those details are not necessary for the determination of these appeals.
The undisputed facts are that the appellant is seized and possessed of several municipal holdings collectively known as the Karnani Mansions, 25 A, Park Street, together with adjoining premises situated at the junction of Park Street and Free School Street in the city of Calcutta.
There are about 210 flats of different types and shop rooms in the said Karnani Mansions let out separately to tenants.
The tenant in each of the three cases leading up to the appeals in this Court had been inducted by the predecessor in title of the appellant.
In each case the tenancy consisted of a single room, a bath and a covered verandah.
The tenant has also the use of a number of fans, plug points, towel racks, besides a basin, a commode and a glass shelf.
The landlord also supplies without any additional charge electrical energy for consumption by the tenant for the use of lamps, fans, radio, ovens for cooking, for ironing, laundering and refrigerators.
The landlord is also responsible for repairs of the electric installations and sanitary fittings, as also for supplying service of night guards, sweepers, liftmen etc.
The tenant in each case applied before the Rent Controller of Calcutta under section 9 read with Schedule A of the Act for fixation of standard rent in respect of the flat occupied by the applicant.
The landlord resisted the application on the ground, inter alia, that the Rent Controller was not authorised by the Act to deal with the tenancies in question because 23 the premises were outside the scope of the Act; that there had been a great increase in the cost of maintenance, as also of repairs and replacements of electric and other installations, that there had been a considerable enhancement of the charge for electricity supplied by the Calcutta Electric Supply Corporation Ltd. and of Government duty on the same; that if the court held that these premises were governed by the ' provisions of the Act, the landlord was entitled to proportionate increase in respect of those charges; that the fact that the Act does not make specific provision for increasing the rent with reference to the charges aforesaid would also point to the conclusion that the Act was not intended to the applied to the tenancies in question.
The Rent Controller after having inspections made of the premises in question fixed a standard rent in accordance with the rules laid down in Schedule A to the Act.
The rent thus standardized was to take effect from September 1, 1950.
The appellant preferred an appeal to the Chief Judge of the Small Cause Court, Calcutta, against the aforesaid order of the Rent Controller.
The Appellate Authority allowed the landlord 's appeal in part by setting the standard rent at a higher figure than that arrived at by the Rent Controller by applying the provisions of cl.
(g) of section 9.
The Appellate Authority aforesaid negatived the landlord 's contention that the premises in question providing the special services and amenities aforesaid were outside the ambit of the Act.
It gave the landlord relief in respect of the higher charges for electric consumption and Government duty aforesaid.
The standard rent thus fixed by the appellate authority was in excess of the original rent agreed between the parties.
The tenant in each case moved the High Court of Calcutta in its revisional jurisdiction.
The learned single Judge of the High Court, who heard the revisional applications allowed them in part, giving effect virtually, though not entirely, to the decision of the Rent Controller and holding that cl.
(g) of section 9 of the Act was not attracted to the facts and circumstances of the cases before the court.
He relied upon a Division Bench ruling of the same Court in the case of Residence 24 Ltd. vs Surendra Mohan(1), which, it is agreed at the Bar, is on all fours with the facts and circumstances of the present case.
After the rejection by the High Court of of the appellant 's petition for a certificate under article 133 of the Constitution, the appellant obtained from this Court special leave to appeal on common questions of law.
Hence the appeals in each of these three cases have been heard together.
In these appeals the learned Solicitor General appearing on behalf of the appellant raised substantially two points for determination, namely, (1) that the Act does not apply to the premises in question in view of the specify incidents of the tenancy as disclosed in the terms of the lease in the standard form as exhibited in Civil Appeal No. 42 of 1955 (Exhibit J) between the appellant and Miss M. Augustin, and as found by the courts of fact below; and (2) alternatively, that if the Court were to come to the conclusion that the premises in question were within the ambit of the Act, clause (g) of section 9 should be applied to the tenancies in question as determined by the appellate authority aforesaid.
Adverting to the first point raised on behalf of the appellant, we have to notice an argument which was raised for the first time before 'us, namely, that the definition of " premises " in section 2 (8) would not in terms apply to the tenements in question and that if any provisions of the Act could be attracted totes cases, cl.
(3) of section 2 defining " hotel or lodging house " could more appropriately be applied to the tenancies in question.
As this point in this form has not been raised in the courts below or even in the statement of the case in this Court, we refuse to go into that question, even assuming that the controversy thus raised does not require any fresh findings of fact.
These cases have not been fought on that ground and, in our opinion, it is too late to raise for the first time a controversy in that form.
We have therefore to examine the question whether the definition of " Premises " as contained in section 2 (8) of the Act is not comprehensive enough to be (1) A.1.R. 1951 Cal 126 25 applicable to these cases.
The definition is in these terms: " premises ' means any building or part of a building or any hut or part of a hut let separately and includes (a)the gardens, grounds and out houses (if any) appertaining to such building or part of a building or hut or part of a hut, (b)any furniture supplied or any fittings affixed by the landlord for use of the tenant in such building or part of a building or hut or part of a hut, but does not include a room or part of a room or other accommodation in a hotel or lodging house or a stall in a municipal market as defined in clause (44) of section 3 of the Calcutta Municipal Act, 1923, or in any other market maintained by or belonging to a local authority or a stall let at variable rents at different seasons of the year for the retail sale of goods in any other market as defined in clause (39) of section 3 of the Calcutta Municipal Act, 1923, or clause (30) of section 3 of the Bengal Municipal Act, 1932 ".
It has been contended for the appellant that premises " thus defined do not include tenements with the special facilities and conveniences agreed by the landlord to be supplied to the tenants.
In this connection reference was made to the definition of " premises " as contained in the previous legislation like the Calcutta Rent Act (Bengal Act III), 1920, the Calcutta House Rent Control Order, 1943, the Calcutta Rent Ordinance (No. V), 1946 and the West Bengal Premises Rent Control (Temporary Provisions) Act, XXXVIII of 1948, which has been replaced by the Act.
It will serve no useful purpose to go into the ramifications of the definitions in the different pieces of legislation which deal with the same subject matter.
We have to construe the Act as it stood.
The Act has now been replaced by the West Bengal Premises Tenancy Act (Act XII), 1956.
But it is agreed at the Bar that we are concerned with the Act as it stood before it was replaced by the Act of 1956.
The definition of " premises " set out above is in very wide terms 4 26 and includes not only gardens, grounds and outhouse, if any, appertaining to a building or part of a building, but also furniture supplied by the landlord for the tenants ' use and any fittings affixed to the building, thus indicating that the legislature was providing for all kinds of letting.
The definition of " premises " and "hotel or lodging house" between them almost exhaust the whole field covered by the relationship of landlord and tenant, subject to the exceptions noted in the definition of "premises.
" It is admitted at the Bar that the tenancies in question are regulated by the terms and conditions appearing in Exhibit J, the most important of which is clause (1) in the following terms: " That the tenant shall occupy the said flat paying therefor unto the Bank a monthly rent of Rs. 100 including hire of 2 A.C. fans and extra Government duty on electric current without any reduction or abatement to be paid at the Bank on or before the 7th of succeeding month for which the rent is due and that the said rent is inclusive of charges for current for fans, lights, radio and electric stove not exceeding 600 Watts for heating meals and making tea only, use of lift, hot and cold water, the owner and occupier 's shares of Municipal Taxes.
" It is clear from the terms of the clause quoted above that the landlord was to place at the disposal of the tenants not only electric installation including fans but also electric current to be consumed in the use of those installations etc., besides radio and electric stove.
it was argued that the tenancy comprised not only buildings and structures and permanent fixtures but also.
the supply of electric power without any fresh charge for the same.
It was also pointed out that section 9 dealing with fixation of standard rent did not in terms contemplate the enhancement or reduction of rent according as the rates for electric current and Government duty thereon were enhanced or reduced.
it is true that none of the cls.
(a) to (f) of section 9 has any reference to these considerations Clause (b) makes a specific reference only to increase in municipal taxes, 27 rates or cesses.
But then there is the residuary cl.
(g) and the question whether that clause applies to the present cases will have to be discussed separately when the second point in controversy will be taken up for consideration.
It is enough to point out at this stage that the legislature was conscious that contingencies may arise which would not be covered by any of the specific cls;.
(a) to (f) of section 9 which is the operative section in the Act relating to fixation of standard rent.
Under this head the question reduces itself to.
this: whether, if by a stipulation between the landlord and the tenant the ' landlord agrees to provide for additional amenities like electric power for consumption and such other facilities, the case is taken out of the operation of the Act.
The Act is intended " to make better provision for the control of rents of premises.
" It has defined "premises" in very wide terms, as pointed out above.
Hence it is difficult, if not impossible, to accept the contention that the legislature intended the provisions of the Act to have a limited application depending upon the terms which an astute landlord may be able to impose upon his tenants.
In order fully to give effect to the provisions of the statute, the court has to give them the widest application possible within the terms of the statute.
Having those considerations in view, we do not think that the ,supply of the amenities aforesaid would make any difference to the application of the Act to the premises in question.
In this connection reference may be made to the decision of the Court of Apeal in the case of Property Holding Co .
Ltd. vs
Clark (1) and ' the case of Alliance Property Co. Ltd. V. Shaffer (2) which followed the earlier decision to the effect that if the stipulations between landlord and tenant include payment of rent for not only what may properly be characterized as premises within the ordinary acceptation of the term but also payment in respect of lighting cooking equipment, the furnishing and cleaning of hall and staircase and certain other similar amenities, the sum total of the payments in respect of the building or part of the building and other services and amenities constitute (2)[1948] 2 K. B. (1) 28 rent.
In the earlier case of Property Holding Co. Ltd. vs Clark (supra) the facts, shortly stated, were that the agreement between the landlord and the tenant in writing provided for the payment of pound 110 a year as rent and an additional payment of pound 30 a year in respect of the additional amenities and conveniences like lighting and cooking equipments, furnishing and cleaning of hall and staircase etc.
In an action for rent by the landlord at the rate of pound 140 a year the tenant contended that the rent proper was only pound 110 and not the total sum of pound 140 a year payable on all counts, as aforesaid.
The Court of Appeal allowed the landlord 's appeal and held that the standard rent was pound 140 and not only pound 110.
In the course of his judgment Asquith L.J. adopted the language of Younger L. J. in the case of Wilkes vs Goodwin (1) to the following effect: "The first of these (considerations) is that the word Arent ' in this exception surely means not rent in the strict sense but the total payment under the instrument of letting.
The exception assumes that 'rent ' so called may include, for example, 'board ', payment of which is not rent.
I am here paraphrasing the statement of Shearman J. in Nye vs Davis (2)with which I agree.
" Their Lordships of the Court of Appeal repelled the contention that the additional payment was not part of rent and held that the payment in respect of the additional amenities aforesaid was also part of rent within the meaning of the English Act which corresponds to the Bengal Act.
Those English decisions are authorities for the proposition that "rent" included not only what is ordinarily described as rent in an agreement between a landlord and a tenant but also payment in respect of special amenities provided by the landlord under the agreement between him and his tenant.
The term "rent" has not been defined in the Act.
Hence it must be taken to have been used in its ordinary dictionary meaning.
If, as already indicated, the term it, rent " is comprehensive enough to include all payment;.agreed by the tenant to be paid to his landlord for the use and occupation not only of the building and (1) (2) 29 its appurtenances but also of furnishings, electric in stallations and other amenities agreed between the parties to be provided by and at the cost of the land lord, the conclusion is irresistible that all that is included in the term "rent" is within the purview of the Act and the Rent Controller and other authorities had the power to control the same.
In view of these considerations we overrule the first contention raised on behalf of the appellant.
But the second contention raised on behalf of the appellant, in our opinion, is well founded.
"Standard rent" has been defined in el.
(10) of section 2 as follows:standard rent ' in relation to any premises means (a)the standard rent determined in accordance.
with the provisions of Schedule A; (b)where the rent has been fixed under section 9, the rent so fixed; or at which it would have been fixed if application were made under the said section;. . .
This is a definition by in corpation of the provisions of Schedule A and of section 9.
it is common ground that no standard rent had so far been determined in respect of the premises in question before the present proceedings were commenced at the instance of the respective tenants.
Schedule A to the Act in clause (1) defines "basic rent" and then cl.
(2) lays down the formulae for determination of standard rent once the basic rent has been arrived at.
The tenant in each case in the present appeals invoked the provisions of section 9 read with Schedule A of the Act for fixing the standard rent for their respective premises.
The question arises which clause or clauses apply to the terms of the tenancy as indicated above.
Clause (a) cannot apply because it cannot be said that "There is no cause for the alteration of the rate of standard rent as determined according to the schedule for any of the reasons mentioned in the following clauses, in accordance with the provisions of Schedule A." It has not been denied that electric charges and the Government duty thereon have been enhanced and that the municipal taxes also have been increased.
Clause (b) also in terms cannot apply because 30 it does not by itself entirely cover the cases in hand.
There has been increase not only.
in municipal taxes but also in electric charges, Government duty on electric consumption and in the cost of the other services and amenities specially provided for by the agreement between the parties.
Clause (c) is out of the way of the parties because there is no question of addition, alteration or improvement in the premises.
Clause(d) is similarly inapplicable because it is nobody 's case that any furniture not already provided by the landlord has been supplied to any of the premise,% for the use of the tenant.
Clause (e) also has not been claimed by either party to be applicable because the special circumstances contemplated therein are not found in these cases.
Clause (f) is clearly inapplicable because the premises had been constructed admittedly much earlier than December 31, 1949.
The only remaining clause is el.
(g) which is in these terms: " Where no provisions of this Act for fixing standard rent apply to any 'Premises, by determining the standard rent at a rate " which is fair and reasonable.
" It will appear from the terms of the contract between the landlord and the tenant in each case, particularly from clause (1) of the agreement quoted hereinbefore that the land lord has not only agreed to supply electric and other installations but also electric power and other services for which no separate payment has been stipulated It has not been denied as a matter of fact, coun ' Sol for the tenats respondents clearly admitted that the rent fixed 'in each case included payment for those additional amenities and services though the amounts in respect of them have been separately shown in the agreement.
The rent fixed was a consolidated sum for all those amenities and services, as is clearly stated in para.1 of the agreement set out above ' But even after making that concession the learned counsel for the respondents strongly relied upon the decision of a Division Bench of the Calcutta High Court given on Letters Patent Appeal from a judgment of a single Judge of that Court, in Residence, Ltd. vs Surendra It has been laid down in that case that the (1) A.I.R. 1951 Cal.
31 Act is applicable to a tenancy the terms of which included such additional conveniences and facilities as have been provided by the landlord in these cases.
We have already indicated that we agree with that conclusion.
But the case also lays down the proposition that what is paid.
as rent for the flat does not include any payment for the additional facilities and conveniences provided by the landlord for the use of the tenant.
In this connection the High Court made the following observations: " In my judgment when a flat is let, with the landlord agreeing to provide certain free services, what is let is the flat and what is paid is paid for the flat with the landlord providing certain amenities or performing certain obligation.
What is paid is rent for the flat and no part of.
it can be truly regarded as payment for the services.
" With all due deference to the views the views thus expressed by that very experienced and learned Judge, we cannot agree that those observations correctly represent the true legal position.
As a matter of fact, the learned Judge has referred to with approval the judgments of the Appeal Court and of the King 's Bench Division in the cases mentioned above to show that the term "rent" is comprehensive enough to include not only rent in the narrower sense of the term as ordinarily understood but also payment in respect of the additional conveniences and amenities.
The learned Judge goes on to make the following observations: " If he has undertaken obligations by the tenancy agreement the monthly payment or the yearly payment as the case may be would be suitably adjusted.
That, however, would not make the monthly or yearly payment any the less rent.
" The two parts of the observations quoted above cannot be reconciled unless it can be said that the learned Judge is using the word "rent" not in the same sense but in its different connotations according to the context.
If the learned Judge used the word "rent" in its comprehensive sense in which the Act must.
be construed as having used that term, this part of the 32 judgment cannot be said to be against the appellant 's contention that the standard rent must be fixed with reference to all the constituents which made up the lump sum as fixed in each case as rent.
This position emerges not only from a consideration of the legal position in contemplation of the Act, but also from the terms of the agreement between the parties, as indicated above.
The provisions of el.
(g) of a. 9 of the Act empower the Rent Controller and the other authorities under the Act to determine the standard rent after taking into consideration all the constituents which make up the total sum shown in the agreement as monthly rent.
Those authorities are authorised to determine rent which is fair and reasonable.
In thus arriving at a fair and reasonable rent they are not precluded from having recourse to such of the provisions of the Act as may be found applicable either in their entirety or in so far as they can be made applicable.
The Rent Controller gave the landlord credit only for the amount by which the municipal taxes had been increased and no more, by applying the provisions of cl.
(b) of section 9.
The Appellate Authority on the other hand, applied the provisions of el.
(g) of section 9 by determining the fair and reasonable rent after taking into consideration the fact that electric charges as also Government duty on the consumption of electric power had been increased.
So had the cost of providing for the other amenities and services.
In view of our conclusion that the residuary el.
(g) applies to the terms of the tenancy in these cases, it follows that the decision of the Appellate Authority was more in consonance with the provisions of cl.
(g) than that of the Rent Controller or of the High Court.
As the figures arrived at by the Appellate Authority have not been challenged before us, we would direct, that the orders passed by it should be restored and those of the High Court and of the Rent Controller set aside.
The appeal is accordingly allowed in part as indicated above.
But in view of the directions of this Court at the time of granting the special leave, even though the appellant is successful in this Court, he 33 must pay the costs of the respondents, one set of hearing fee to be equally divided amongst the three respondents.
Appeal allowed in part.
| IN-Abs | The appellant was the common landlord of the three premises in respect of which three analogous proceedings were started by the respective tenants for standardisation of rent under section 9 read with Sch.
A of the West Bengal Premises Rent Control (Temporary Provisions) Act of 1950.
Under the terms of the lease, which provided for a consolidated monthly rent, the landlord was to provide, besides electric installations, electric current for consumption and other special amenities.
His defence was that the special incidents of the tenancies took the tenancies out of the scope of the Act and if not, alternatively, cl.
(g) of section 9 of the Act should apply and the rent increased proportionately to the increase in the charges for electric current and enhanced Government duty payable thereon.
The Rent Controller rejected the contentions and fixed the standard rent in accordance with the rules laid down in Sch.
A of the Act.
The Chief Judge of the Small Causes Court, on appeal by the landlord, applied cl.
(g) of section 9 of the Act, gave relief in respect of the higher charges for electricity and Government duty and fixed the standard rent at a higher figure.
The tenants moved the High Court in revision and it held that cl.
(g) of section 9 did not apply and virtually, though not entirely, affirmed the decision of the Rent Controller.
The landlord appealed by special leave on the questions of law involved.
Held, that the Act applied to the premises and the standard rent must be determined, under the provisions of cl.
(g) of section 9 of the Act and the decision of the Chief judge restored.
21 The term 'Premises ' as defined in section 2(8) of_ the Act was wide enough to cover the tenancies with their special incidents and the consolidated monthly rent for the amenities provided by the landlord came within the comprehensive sense in which the word rent was used by the Act and was as such liable to be controlled under it.
The observation to the contrary made in respect of such rent in the case of Residence Ltd. vs Surendra Mokan did not correctly represent the legal position.
Property Holding Co., Ltd. vs Clark, (1948) I K. B. 63o, and Alliance Property Co. Ltd. vs Shaffer, , referred to.
Residence Ltd. vs Surendra Mohan, A.I.R. 1951 Cal.
126, considered.
The purpose which the legislature had in view in enacting the Act and the wide terms in which it defined the term 'premises ' leave no manner of doubt that its operative provisions were intended to have a wide application and the mere putting in of a term in the lease, not in terms provided for by any of the clauses of section 9, could not take the tenancy out of the scope of the Act and it would be the duty of the Court, in order that the provisions of the Act might have full effect, to give as wide an application to them as was permissible under the Act.
Where, as in the instant case, the lease provided for a consolidated monthly rent, the Rent Controller and other authorities under the Act were empowered by the provisions of cl.
(g) of section 9 to determine the standard rent on a consideration of all the payments that constitued the agreed rent and they did not prohibit a recourse to such other provisions of the Act as could be applied, either in part or as a whole, in arriving at a fair and reasonable rent.
|
Civil Appeal No. 533 of 1979.
From the judgment and order dated 2nd January, 1979 of the High Court of Kerala in original Petition No. 4935 of 1974 D. and Special Leave Petition No. 81 OF 1971.
From the judgment and order dated the 27th July, 1971 of the Kerala High Court in O.P. No. 4706 of 1969.
T.S. Krishnamoorthy Iyer, C.J. Balakrishnan, K Prabhakaran, P. Parameswaran and A.S. Nambiar for the appellant in C.A. No. 533/79.
P. Govindan Nair, Mrs. Baby Krishnan, K.R. Nambiar and K.M.K Nair for the respondent in C.A. No. 533/79.
S.B. Sahariya and V.B. Sahariya for the petitioner in S.L.P. No. 81/72.
The Judgment of the Court was delivered by SEN, J.
This appeal.
by special leave, is directed against a judgment of the Kerala High Court by which the High Court dismissed the writ petition of the appellants who are manufacturers of medicinal and toilet preparations containing alcohol and upholding the constitutional validity of sections 12A, 12B, 14(e) and (f) and 68A of the Abkari Act, 1077 (1 of 1077) (hereinafter called 'the Act '), introduced by the Abkari (Amendment) Act, 1967 (10 of 1967), and rr. 13 and 16 of the Kerala Rectified Spirit Rules, 1972.
The main question in the appeal is as to the legislative competence of the State to enact a law relating to medicinal and toilet preparations containing alcohol under Entry 8, List II of the Seventh Schedule to the Constitution.
The appellants, by virtue of a licence in Form 25 granted under the and a licence in Form Ll granted under the (hereinafter referred to as 'the Central Act ') are entitled to manufacture the drugs specified therein.
They filed a writ petition in the High Court complaining that they were entitled to the supply of alcohol free of duty for the manufacture of their medicinal and toilet 525 preparations under r. 21 of the Medicinal and Toilet Preparations A (Excise Duties) Rules, 1956 (hereinafter referred to as 'the Central Rules '), and r. 8 of the Kerala Rectified Spirit Rules, 1972, and challenged the validity of the impugned provisions mainly on the ground that the State Legislature has no power to enact the law relating to medicinal and toilet preparations as the topic of legislation is within the exclusive domain of Parliament under Entry 84, List I of the Seventh Schedule to the Constitution.
The High Court held that there was no conflict between the impugned provisions and the Central law as they dealt with different subjects.
The impugned provisions, as introduced by the Abkari Amendment) Act, 1967, in so far as they are relevant, are as follows: Section 12A reads: 12A.
No preparation to which liquor or intoxicating drug is added during the process of its manufacture or in which alcohol is self generated during such process shall be manufactured in excess of the quantity specified by the Commissioner: Provided that in specifying the quantity of a medicinal preparation, the Commissioner shall have due regard to the total requirement of that preparation for consumption or use in the State.
Section 12B provides: 12B. (1) No person shall utilise liquor or intoxicating drug in the manufacture of any preparation, in excess of the quantity specified by the Commissioner and except under and in accordance with the terms and conditions of a licence granted by the Commissioner in that behalf: G Provided that where such preparation is a medicinal preparation, Commissioner shall, in specifying the quantity of liquor or intoxicating drug have due regard to the total requirement of such medicinal preparation for consumption or use in the State.
526 Section 14 provides: 14.
The Commissioner may, with the previous approval of the Government . . . (d) prescribe the mode of supervision that may be necessary in a . manufactory where preparations containing liquor or intoxicating drugs are manufactured, to ensure the proper collection of duties, taxes and other dues payable under this Act or the proper utilisation of liquor or intoxicating drugs; (e) prescribe the size and nature of the establishment necessary for such supervision and the cost of the establishment and other incidental charges in connection with such supervision to be realised from the licensees: and (f) prescribe the allowance for wastage of alcohol that may occur in (i) . . (ii) the process of manufacture of any preparation containing alcohol; and (iii) . .
Section 68A provides that the Government shall appoint an Expert Committee consisting of the Drugs Controller, the Chemical Examiner to the Government, two representatives each one of them shall be a non official, of the Allopathic, Indigenous and Homoeopathic systems of medicine appointed by the Government, and an officer of the Excise Department not below the rank of Deputy Commissioner; and the Committee shall advise the Commissioner (a) as to whether a medicinal preparation is a bona fide medical preparation or not; and (b) as to the total requirements of medicinal preparations containing liquor or intoxicating drugs or in which alcohol is self generated during the process of their manufacture, for the whole of the State during one year.
Before this Court the constitutional validity of the impugned provisions was mainly challenged on these grounds, namely: (I) The State Legislature had no legislative competence to enact the impugned 527 provisions because the field was occupied by the provisions of the A (the Central Act) and the Medicinal and Toilet Preparations (Excise Duties ) Rules, 1956 (the Central Rules), and alternatively, the impugned provisions are violative of the fundamental right guaranteed in article 19(1) (g) of the Constitution.
(2) The Parliament having made a declaration in section 2 of the Industries (Development and Regulation) Act, 1951, declaring "Drugs and Pharmaceuticals" to be a scheduled industry, being item 22 of the First Schedule thereof, the power of the State Legislature to make a law in respect of medicinal and toilet preparations containing alcohol is taken away.
(3) The provisions made in section 14(e) of the Act for the collection of supervisory charges was clearly invalid in as much as (a) they are in conflict with r. 45 of the Central Rules, and (b) they could not be sustained as a fee as there was no quid pro quo.
(4) Rule 13 of the Kerala Rectified Spirit Rules, 1972, providing for the levy of excise duty as excess wastage of alcohol in the manufacture of medicinal and toilet preparations cannot be supported in terms of the charging provision contained in section 17 of the Act.
We cannot accept any of these contentions With regard to the first ground, it was submitted that the conferral of power on the Commissioner under section 12A of the Act to restrict the quantity of medicinal and toilet preparations to which liquor or intoxicating drug is added during the process of its manufacture with the requirement that the Commissioner shall, in specifying such quantity, have due regard to the total requirements of consumption or use in the State, the prohibition contained in section 12B of the Act that no person shall utilise liquor or intoxicating drug in the manufacture of any preparation, in excess of the quantity so specified by the Commissioner and the condition that no person shall manufacture any such preparations except under and in accordance with the terms and conditions of a licence granted by him, is clearly contrary to the general scheme of the Central law and in particular, rr. 18 and 21 of the Central Rules.
In this respect, it was said that under r. 18 of the Central Rules, rectified spirit ordinarily had to be supplied to a manufacturer from a distillery or a spirit warehouse of the State in which the manufactory is situate, and the manufacturer was not precluded from obtaining his requirements of rectified spirit from sources outside the State.
Under r. 21, rectified spirit had to be issued without previous payment of duty for the manufacture of medicinal and toilet preparations containing alcohol subject to the condition that 528 manufacturer enters into a bond in Form Bl with sufficient security as laid down in r. 96, towards due payment of duty and observance of the rules.
It is submitted that the State Legislature has no power to make any such law imposing restrictions on a person carrying on the business of manufacture and sale of medicinal and toilet preparations containing alcohol in as much as the matter relates to an occupied field.
There is no merit in these contentions.
The enactment of the by Parliament under Entry 84, List I of the Seventh Schedule of the Constitution, or the framing of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 by the Central Government in exercise of their rule making power under section 19 of the Act, for the purpose of levying duties of excise on medicinal and toilet preparations containing alcohol etc., do not prevent the State Legislature from making a law under Entry 8, List II of the Seventh Schedule to the Constitution with respect to 'intoxicating liquors ', or a law under Entry 51, List II for levying excise duties on alcoholic liquor for human consumption.
In order to appreciate the contention regarding the applicability of the doctrine of 'occupied field ', it is necessary to examine the scheme of both the enactments.
The scheme of the Act, as reflected in the preamble, is that it is an Act "to consolidate and amend the law relating to the import, export, transport, manufacture, sale and possession of intoxicating liquor and all intoxicating drugs in the State of Kerala".
It is not necessary to set out all the provisions of the Act in question, but reference may be made to the definitions of expressions 'spirit ', 'liquor ', 'country liquor ', 'foreign liquor and 'intoxicating liquor ' defined in sections 3(9), (10), (12), (13) and (14).
The expression 'liquor ' as defined in section 3(10) reads: 3(10). 'Liquor ' includes spirits of wine, methylated spirits, spirits, wine, toddy, beer, and all liquid consisting of or containing alcohol.
Section 12(1) provides: 12(1).
No liquor or intoxicating drug shall be manufactured. except under the authority and subject to the terms and conditions of licence granted by the Commissioner in that behalf, or under the provisions of section 21, 529 Section 15 provides: 15(1).
No liquor or intoxicating drug shall be sold with out a licence from the Commissioner, provided that a person having the right to the toddy drawn from any tree may sell the same without a licence to a person licensed to manufacture or sell toddy under this Act.
B Section 17 provides: 17.
A duty of excise or luxury tax or both shall, if the Government so direct, be levied on all liquor and intoxicating drugs: . . . (f) issued from a distillery, brewery, winery or other manufactory or warehouse licensed or established under section 21 or section 14; or The Act is clearly relatable to the State 's power to make a law on the topics of legislation covered by Entries 8 and 51, List II of the Seventh Schedule to the Constitution which read as under: 8.
Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors.
Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India: (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics; but not including medicinal and toilet preparations containing alcohol or any substance included in sub paragraph (b) of this entry.
The legislative history of the Central Act is well known.
Under Entry 40, List II of the Seventh Schedule to the Government of 530 India Act, 1935, medicinal and toilet preparations containing alcohol etc., were subjected to Provincial excise duties.
Under the Constitution, the entry relating to the excise duty on medicinal and toilet preparations containing alcohol was transferred to the Union List.
In the light of experience gained, there was necessity to achieve a synthesis from a vast body of existing rules and regulations in force in the States having regard to the sole object of the measure, namely, to bring about uniform treatment in excise matters.
This was a highly complicated subject because, firstly, the excise duty was to be collected and retained by the State Governments, and, secondly, a certain amount of flexibility in statutory operations was necessary if spurious medicines were not to defeat the policy of prohibition which is one of the Directive Principles of State Policy under article 47 of the Constitution.
Some of the provisions of the Central Act are so designed as to lay down only broad principles.
Matters of detail, such as classification of the preparations as capable or not capable of being used as ordinary alcoholic beverages, regulation for the purpose of the Act, of production, storage and movement, were left to be regulated by rules.
Parliament accordingly enacted the , to provide for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol.
The Act is relatable to Entry 84, List I of the Seventh Schedule to the Constitution, which reads: 84.
Duties of excise on tobacco and other goods manufactured or produced in India except (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub paragraph (b) of this entry.
The scheme of the Central Act is to provide for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol etc.
The Act is entitled as "An Act to provide for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol, opium.
Indian hemp or other narcotic drug or narcotic".
Section 2 is the definition Section and 531 the expression 'dutiable goods ' as defined in section 2(c) takes in medicinal and toilet preparations specified in the Schedule.
The expression 'medicinal preparation ' is defined in section 2(g) as: 2(g). 'medicinal preparation ' includes all drugs which are a remedy or prescription prepared for internal or external use of human beings or animals and all substances intended to be used for or in the treatment, mitigation or prevention of disease in human beings or animals; It is not necessary to refer to the definition of toilet ' preparation in section 2(k) as it is not relevant for the present purpose.
Section 3 is the charging section which levies duties of excise on all 'dutiable goods ' manufactured in India and also lays down the mode of collection of the said duties.
Section 3 (1) reads: 3(1).
There shall be levied duties of excise, at the rates specified in the Schedule, on all dutiable goods manufactured in India.
Section 6 prohibits any person from engaging in the production or manufacture of any dutiable goods etc., except under the authority and in accordance with the terms and conditions of the licence granted under the Central Act.
Section 19 (1) empowers the Central Government to make rules to carry out the purposes of the Act, and sub section
(2) thereof specifies the various matters in respect of which such rules may be made.
Section 21 provides for the repeal and savings.
The Schedule to the Act contains a description of 'dutiable goods ' and the rates of duty payable thereon.
In exercise of the powers conferred by section 19 (1) of the Central Act, the central Government framed the Central Rules which practically deal with all the facets of manufacture and production of medicinal and toilet preparations, as required in cls.
(i) to (xxi) of sub section
(2) thereof, with the ultimate object of providing a machinery for collection of duty on the said preparations.
Chapter IV of the Central Rules deals with 'Manufacture '.
Rule 18 in Chapter IV provides that rectified spirit shall ordinarily be supplied to a manufacturer from a distillery.
Of the State in which the manufactory is situated.
It further provides that the manufacturer is not precluded from obtaining his requirements of rectified spirit from sources outside the State.
Rule 21 provides that rectified spirit H shall be issued without previous payment of duty to a manufacturer of medicinal and toilet preparations containing alcohol.
Rule 33 532 provides for taking of samples of the manufactured product for analysis for determining the strength of alcohol and medicaments.
Rule 38 provides for wastage in manufacture.
Rule 45(1) enjoins that the officer in charge shall exercise such supervision as is required to ensure that alcohol issued for a certain preparation is added to the materials which go to make that preparation and that no portion of such alcohol is diverted to other purposes.
These rules are intended and meant to carry out the main object of the Central Act, i.e. to levy and collect duties of excise on medicinal and toilet preparations containing alcohol etc.
It is the charging section which gives the true index to the a real character of a tax.
The nature of the machinery by which the tax is to be assessed is not of assistance, except in so far as it may throw light on the general character of the tax.
The charging section in section 3 of the Central Act clearly shows that it does not seek to levy a duty of excise on alcoholic liquor for human consumption falling within Entry 51, List II of the Seventh Schedule, but to levy a duty of excise on medicinal and toilet preparations containing alcohol etc.
The topic of legislation under Entry 84, List I of the Seventh Schedule is not 'duties of excise on alcoholic liquors for human consumption ' but 'duties of excise on medicinal and toilet preparations containing alcohol etc '.
There can be little doubt that the Central Act must, in pith and substance, be attributed to Entry 84, List I.
In determining whether an enactment is a legislation 'with respect to ' a given power, what is relevant is not the consequences of the enactment on the subject matter or whether it affects it, but whether, in its pith and substance, it is a law upon the subject matter in question.
The Central and the State Legislations operate on two different and distinct fields.
The Central Rules, to some extent, trench upon the field reserved to the State Legislature, but that is merely incidental to the main purpose, that is, to levy duties of excise on medicinal and toilet preparations containing alcohol.
Similarly, some of the impugned provisions may be almost similar to some of the provisions of the Central Rules, but that that does not imply that the State Legislature had no competence to enact the provisions.
It is sufficient to say upon the first ground that the impugned legislation is confined to 'intoxicating liquor ', that is, to ensure proper utilisation of rectified spirit in the manufacture of medicinal and toilet preparations and, therefore, within the powers granted 533 to the State Legislature under Entry 8, List II.
It further seeks to regulate the manufacture of bona fide medicinal preparations and prevent misuse of rectified spirit in the manufacture of spurious medicinal and toilet preparations containing alcohol capable of being used as ordinary alcoholic beverages.
It was suggested that the provisions are identical with the provisions contained in the Central Rules and, in particular, to rule 45(1) and, therefore, the legislation is in the occupied field.
The answer is that the enumeration of 'intoxicating liquor ' in Entry 8, List II, confers exclusive power to the State to legislate in respect of medicinal and toilet preparations containing alcohol.
In Prafulla Kumar Mukherjee and Ors.
vs Bank of Commerce Ltd., Khulna(1) the Privy Council in dealing with the question or distribution of powers laid down the tests that in order to see whether an Act is in respect of a particular subject, one must look to "its true nature and character"; "its pith and substance".
Lord Porter, in delivering the judgment of the Judicial Committee, observed: "As Sir Maurice Gwyer, C.J. said in the Subramanyam Chettiar Case: ' 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 inter twined 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 'its true nature and character ', for the purpose of determining whether it is legislation with respect to matters in this list or in that" .
The doctrine of 'pith and substance ' evolved by the Privy Council has been followed by this Court throughout.
Thus, in State of Bombay vs F. N. Balsara(2) Fazl Ali, J., followed the decision of the Judicial Committee, reiterated: 534 "If the Act, when so viewed, substantially falls within the powers expressly conferred upon the Legislature which enacted it, then it cannot be held to be invalid, merely because it incidentally encroaches on matters which have been assigned to another Legislature.
" In such matters of seeming conflict or encroachment of jurisdictions, what is more important is the true nature and character of the legislation.
A necessary corollary of the doctrine of pith and substance is that once it is found that in pith and substance the impugned Act is a law on a permitted field, any incidental encroachment on a forbidden field does not affect the competence of the legislature to enact the law.
The main thrust of the argument is the decision of this Court in Hyderabad Chemical and Pharmaceutical Works Ltd. vs State of n Andhra Pradesh and Ors(1) which, we are afraid, is clearly distinguishable.
There the Court was concerned with the question whether r. 36 of the Medical Preparations and Spirituous Rules, 1345 Fasli, framed under the Hyderabad Abkari Act, 136 Fasli which provided that "the expenses of the establishment for the supervision of the work shall be borne by the pharmaceutical laboratory (licensee) as per the decision of the Commissioner of Excise", was still enforceable having regard to section 21 of the Central Act and r. 143 of the Central Rules.
It was held that the effect of section 21 of the Central Act was that so far as the Hyderabad Act applied to the use of alcohol in the manufacture of medicinal and toilet preparations, the Act must be deemed to have been repealed and, therefore, r. 36 could not survive.
In that case, the Court was concerned with the levy of supervisory charge at the stage of manufacture of medicinal and toilet preparations, and not with the levy of supervisory charges at the stage of the supply and utilisation of rectified spirit in the manufacture of medicinal and toilet preparations.
This is clear from an observation at p. 380 of the Report to the effect: The supervisory staff which has to be paid for under r. 36 therefore is meant for the supervision of the manufacture of medicinal preparations and it is for that purpose only that expenses have to borne by the laboratory con 535 cerned.
The purpose of the rule therefore is clearly covered by the Act and the Rules framed thereunder and it cannot survive the Act and the rules in view of section 21 of the Act and r 143 of the 1956 Rules, and the proviso to s 21 cannot be availed of by the State.
While repelling the contention that r. 36 could still be good law as it was meant to carry out the general law relating to alcohol and intoxicating drugs, the Court pointed out that the Central Rules make no provision for recovery of supervisory charges, the intention being that the duty under the Act would cover all expenses for enforcing it and observed (1) We are of opinion that there is no force hl this contention either.
In the first place, as we have already indicated, the main object of the supervisory staff mentioned in r. 36 is to supervise the manufacture of medicinal preparations.
In that connection the supervisory staff will certainly see that the alcohol supplied is used for the purpose for which it is supplied and it is not used in any other manner.
Rule 36 is only concerned with seeing that the manufacture of medicinal preparations is made properly and is done under the supervision of the establishment attached to each laboratory; and it is only incidentally that in that connection the establishment is also to see that the alcohol supplied is not used otherwise than for the purpose of manufacture.
Further, the Central Act, which the Court was considering, was a fiscal measure.
The whole object and purpose of that Act is to levy a duty of excise on medicinal and toilet preparations containing alcohol.
The Central Rules have mainly been framed to achieve this object.
Rule 45(1) on which reliance was placed, reads: 45(1).
The officer in charge shall exercise such supervision as is required to ensure that alcohol issued for a certain preparation is added to the materials which go to make that preparation and that no portion of such alcohol is diverted to other purposes.
The provision is merely incidental to the main purpose, i.e., collection of excise duty on medicinal and toilet preparations containing alcohol.
536 There can be no doubt that the impugned Act is relatable to Entry 8, List II of the Seventh Schedule.
In Balsara 's case(1) the Court held that the expression 'liquor ' in Entry 31, List II of the Seventh Schedule to the Government of India Act, 1935, took within its sweep all liquids containing alcohol.
In dealing with the question, Fazal Ali, J. Observed: The framers of the Government of India Act, 1935, could not have been entirely ignorant of the accepted sense in which the word 'liquor ' has been used in the various excise Acts of this country and, accordingly I consider the appropriate conclusion to be that the word 'liquor ' covers not only those alcoholic liquids which are generally used for beverage purposes and produce intoxication, but also all liquids containing alcohol.
It may be that the latter meaning is not the meaning which is attributed to the word 'liquor ' in common parlance especially when that word is prefixed by the qualifying word 'intoxicating ', but in my opinion having regard to the numerous statutory definitions of that word, such a meaning could not have been intended to be excluded from the scope of the term 'intoxicating liquor ' as used in entry 31 of List II.
It is not disputed by the appellants that the impugned Act does not levy a duty of excise on medicinal and toilet preparations containing alcohol, but they contend that, whatever be the intention, the State Legislature had, in fact, encroached upon an occupied field.
The contention is, in our opinion, wholly misconceived.
The main purpose of the impugned Act is to consolidate the law relating to manufacture, sale and possession of intoxicating liquor and intoxicating drugs which squarely falls under Entry 8, List II of the Seventh Schedule, while the main object of the Central Act is to provide for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol falling under Entry 84, List I of the Seventh Schedule.
When the frame work of the two enactments is examined, it would be apparent that the Central and the State Legislations operate in two different and distinct fields.
In the matter of making rules or detailed provisions to achieve the object and purpose of a legislation, there may be some provisions seemingly overlapping or encroaching upon the forbidden field, but 537 that does not warrant the striking down the impugned Act as ultra virus the State Legislature.
The alternative contention that the impugned provisions are violative of article 19(1)(g) of the Constitution, is wholly devoid of any merit.
No citizen has any fundamental right guaranteed under article 19(1)(g) of the Constitution to carry on trade in any noxious and dangerous goods like intoxicating drugs or intoxicating liquors.
The power to legislate with regard to intoxicating liquor carries with it the power to regulate the manufacture, sale aud possession of medicinal and toilet preparations containing alcohol, not for the purpose of interfering with the right of citizens in the matter of consumption or use for bona fide medicinal and toilet preparations, but for preventing intoxicating liquors from being passed on under the guise of medicinal and toilet preparations.
It was within the competence of the State Legislature to prevent the noxious use of such preparations, i.e. their use as a substitute for alcoholic beverages.
The general test for determining what medicinal preparations containing alcohol are capable of being misused and, therefore, must be considered intoxicating within the meaning of the term 'intoxicating liquor ', is the capability of the article in question tor use as a beverage.
The impugned provisions have been enacted to ensure that rectified spirit is not misused under the pretext of being used for medicinal and toilet preparations containing alcohol.
Such regulation is a necessary concomitant of the police power of the State to regulate such trade or business which is inherently dangerous to public health.
Section 12A of the Act provides that no preparation to which liquor or intoxicating drug is added during the process of its manufacture or in which alcohol is self generated during such process shall be manufactured in excess of the quantity specified by the Commissioner: Provided that in specifying the quantity of a medicinal preparation, the Commissioner shall have due regard to the total requirement of that preparation for consumption or use in the State.
Section 12 provides that no person shall utilise liquor or intoxicating drug in the manufacture of any preparation, in excess of the quantity specified by the Commissioner and except under and in accordance with the terms and conditions of a licence granted by the Commissioner in that behalf: Provided that where such preparation is a medicinal preparation, the Commissioner shall, in 538 specifying the quantity of liquor or intoxicating drug, have due regard to the total requirement of such medicinal preparation for consumption or use in the State.
Now, section 68A provides for the Government to appoint an Expert Committee to advise the Commissioner as to whether a medicinal preparation is a bona fide medicinal preparation or not and as to the total requirement of the medicinal preparations containing alcohol or intoxicating drug or in which alcohol is self generated during the process of their manufacture for the whole of the State during one year.
The challenge to the validity of sections 12A and of the Act is mainly based on the words "shall have due regard to the total requirement of such medicinal preparations for consumption or use in the State "occurring in the provisions thereof.
The submission is that the quantity of medicinal preparations manufactured by the appellants would be restricted looking to the total requirements of such preparations for consumption or use in the State.
The medicines are in demand not only in the State, but throughout the country and to limit consideration by the Commissioner in granting a licence only to the requirements of preparations for consumption or use in the State, would be an unreasonable restriction on the fundamental right guaranteed under article 19(1) (g) of the Constitution.
We do not think that the impugned provisions contained in sections 12A and 12B have that effect.
All that the provisions ordain is that the Commissioner shall 'have regard to the total requirements for use and consumption within the State '.
The expression 'shall have regard to ' had been subject to judicial interpretation in Ryots of Garabandho and other villages vs Zamindar of Parlakimidi and Anr.(1) It only means 'take into consideration '.
Understood in the light of this judicial exposition, the Commissioner only has to take into account the total requirements within the State as an element which should enter the assessment and no more.
As a necessary corollary, it follows that in fixing the quantity of medicinal and toilet preparations to which alcohol is added or in which it is self generated, normally the Commissioner shall have regard to larger requirements of the manufacturer, if the manufactured product has a market outside the State.
As a corollary, it must result in the consequence that in the case of medicinal and toilet preparations which are capable of being misused as alcoholic beverages, or which are not bona fide medicinal preparations in the opinion of the Expert Committee, the Commissioner may totally prohibit the manufacture of such pre 539 parations.
The restrictions imposed by section 12B as to the alcoholic content of medicinal and toilet preparations and the requirement that they shall not be manufactured except and in accordance with the terms and conditions of a licence granted by him, are nothing but reasonable restrictions within the meaning of article 19(6).
The impugned provisions, therefore, cannot be struck down as offending article (1) (g) of the Constitution.
As regards the second ground, the contention that Parliament having made the requisite declaration in section 2 of the Industries (Development and Regulation) Act, 1951 declaring "drugs and pharmaceuticals" to be a scheduled industry, being item 22 of Schedule I thereof, the State Legislature was denuded of its competence to enact the impugned provisions under Entry 8, List II, cannot be accepted.
In Ishwari Khetan Sugar Mills (P) Ltd. vs State of Uttar Pradesh(1), this Court held that the legislative power of the States under Entry 24, List II is eroded only to the extent of control assumed by the Union by reason of a declaration made by Parliament in respect of a 'declared industry ' as spelt out by a legislative enactment under Entry 52, List I, and the field occupied by such enactments is the measure of erosion.
But subject to such erosion, on the remainder the State Legislature will still have power to legislate in respect of a declared industry without, in any way, trenching upon the occupied field.
Now, the impugned Act, in pith and substance, is not a legislation under Entry 24, List II and, therefore, the question really does not arise.
The third ground that the levy of supervisory charges under s.14(e) of the Act and r.16(4) of the Kerala Rectified Spirit Rules, 1972 being in conflict with r. 45(1) of the Central Rules, is constitutionally impermissible, cannot be accepted.
The submission rests on a misconception as to the scope and effect of the decision of this Court in the Hyderabad Chemicals and Pharmaceutical 's case (supra).
As we have already explained, the Court in that case was concerned with the levy of supervisory charges at the stage of manufacture of medicinal and toilet preparations and not with the levy of supervisory charges at the stage of supply and utilisation of rectified spirit in the manufacture of medicinal and toilet preparations.
There can be supervision at both the stages.
Merely because the Central Rules made no provision for realisation of supervisory charges at the stage of manufacture of medicinal and toilet preparations, does not imply 540 that the State has no power to prescribe the mode of supervision in a manufactory where preparations containing intoxicating liquor or intoxicating drugs are manufactured, or to ensure proper collection of duties, taxes and other dues payable under the Act, or to the proper utilisation of liquor or intoxicating drug.
The provision contained in section 14(e) of the Act is clearly relatable to the State 's power to make a law under entry 8, read with Entry 51(a), List II of the Seventh Schedule.
It necessarily follows that section 14(e) of the Act is valid in so far as it provides that the Commissioner may prescribe the size and nature of the establishment for such supervision and the cost of establishment and other incidental charges in connection with such supervision to be realised from the licensee.
There is no f ' warrant for the submission that the framing of such an incidental provision like r. 45(1) of the Central Rules takes away the State 's power to recover supervisory charges from the licensee.
There still remains the question whether the levy of supervisory charges must be regarded as a fee and, therefore, cannot be sustained, there being no quid pro quo.
In support of the contention, reliance is placed on the decision in Indian Mica Micanite Industries vs The State of Bihar and Ors.(1) The distinction between a 'tax ' and a 'fee ' is well settled.
The question came up for consideration for the first time in this Court in the Commissioner, H.R.E. Madras vs Lakshmindra Thirtha Swamiar of Shirur Mutt.(2) Therein, the Court speaking through Mukherjee, J. quoted with approval the definition of 'tax ' given by Latham, C.J. in Matthews vs Chickoory Marketing Board(3).
In that case, the learned Chief Justice observed: A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered.
Dealing with the distinction between 'tax ' and 'fee ' the learned Judge observed :(4) It is said that the essence of taxation is compulsion, that is to say, it is imposed under statutory power without 541 the tax payer 's consent and the payment is enforced by law.
A The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax.
This is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected forms part of the public revenues of the State.
As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the tax payer and the public authority.
Another feature of taxation is that as it is a part of the common burden, the quantum of imposition upon the tax payer depends gene rally upon his capacity to pay.
Coming now to fees, 'a fee ' is generally defined to be a charge for a special service rendered to individuals by some Governmental agency.
The amount of fee levied is supposed to be based on the expenses incurred by the Government in rendering the service, though in many cases the costs are arbitrarily assessed.
Ordinarily, the fees are uniform and no account is taken of the varying abilities of different recipients to pay.
These are undoubtedly some of the general characteristics, but as there may be various kinds of fees, it is not possible to formulate a definition that would be applicable to all cases. .
If, as we hold, a fee is regarded as a sort of return or consideration for services rendered, it is absolutely necessary that the levy of fees should on the face of the legislative provision, be co related to the expenses incurred by Government in rendering the services.
The same view was reiterated by this Court in Mahant Sri Jagannath Ramanuj Das vs The State of Orissa(1) and in Ratilal Pannchand Gandhi vs The State of Bombay.
(2) 'Fees ' are the amounts paid for a privilege, and are not an obligation, but the payment is voluntary.
Fees are distinguished 542 from taxes in that the chief purpose of a tax is to raise funds for the support of the Government or for a public purpose, while a fee may be charged for the privilege or benefit conferred, or service rendered or to meet the expenses connected therewith.
Thus, fees are nothing but payment for some special privilege granted or service rendered.
Taxes and taxation are, therefore, distinguishable from various other contributions, charges, or burdens paid or imposed for particular purposes and under particular powers or functions of the Government.
It is now increasingly realised that merely because the collections for the services rendered or grant of a privilege or licence, are taken to the consolidated fund of the State and are not separately appropriated towards the expenditure for rendering the service is not by itself decisive.
That is because the Constitution did not contemplate it to be an essential element of a fee that it should be credited to J a separate fund and not to the consolidated fund.
It is also increasingly realised that the element of quid pro quo stricto senso is not always a sine qua non of a fee.
It is needless to stress that the element of quid pro quo is not necessarily absent in every tax.
We may, Din this connection, refer with profit to the observations of Seervai in his Costitutional Law, to the effect: (1) It is submitted that as recognised by Mukherjee, J. him self, the fact that the collections are not merged in the consolidated fund, is not conclusive, though that fact may enable a court to say that very important feature of a fee was present.
But the attention of the Supreme Court does not appear to have been called to article 266 which requires that all revenues of the Union of India and the States must go into their respective consolidated funds and all other public moneys must go into the respective public accounts of the Union and the States.
It is submitted that if the services rendered are not by a separate body like the Charity Com missioner, but by a government department, the character of imposition would not change because under article 266 the moneys collected for the services must be credited to the consolidated fund.
It may be mentioned that the element of quid pro quo is not necessarily absent in every tax.
(emphasis added) Our attention has been drawn to the observations in Kewal Krishan Puri & Anr vs State of Punjab and Ors.
(2) 543 The element of quid pro quo must be established A between the payer of the fee and the authority charging it.
It may not be exact equivalent of the fee by a mathematical precision, yet, by and large, or predominantly, the authority collecting the fee must show that the service which they are rendering in lieu of fee is for some special benefit of the payer of the fee.
To our mind, these observations are not intended and meant as laying down a rule of universal application.
The Court was considering the rate of a market fee, and the question was whether there was any justification for the increase in rate from Rs. 2/ per every hundred rupees to Rs. 31 .
There was no material placed to justify the increase in rate of the fee and, therefore, it partook the nature of a tax.
It seems that the Court proceeded on the assumption that the element of quid pro quo must always be present in a fee.
The traditional concept of quid pro quo is undergoing a transformation.
It seems obvious that.
in the case of a manufacturer of medicinal and toilet preparations containing alcohol in a bonded manufactory, the imposition of the cost of establishment under section 14(e) of the Act calculated in accordance with the nature and extent of that establishment could not be said to be an imposition of a duty of excise, but is a price for his franchise to carry on the business.
If an exaction is to be classed as a duty of excise, it must, of course, be a tax; its essential distinguishing feature is that it is a tax imposed "upon" or "in respect of ' or "in relation to" goods: Matthews vs Chickory Marketing Board (l).
The exaction is in truth, as it purports to be, simply a fee payable as a condition of a right to carry on a business.
No one has a fundamental right to the supply of rectified spirit which is an intoxicating liquor.
It is up to the State to control and regulate its supply from a distillery or a spirit warehouse in the State under and in accordance with terms and conditions of a licence or permit its import from outside by grant of a privilege and charge a fee for the same.
A fee may be charged for the privilege or benefit conferred, or service rendered, or to meet the expenses connected therewith.
A fee may be levided to meet the cost of supervision and maybe, something more.
It is in consideration for the privilege, licence or service.
The State is undoubtedly entitled to levy H 544 excise duty on the rectified spirit issued from a distillery under section 17(f) of the Act read with r. 13 of the Kerala Rectified Spirit Rules, 1972, but it refrained from making any such levy by reason of r. 21 of the Central Rules and has, therefore, by proviso to r. 8, allowed a manufacturer of medicinal and toilet preparations to draw rectified spirit from a distillery without payment of duty.
It is thus a privilege conferred on the licensee.
To claim the privilege he must comply with the conditions prescribed.
If one of the condition is the payment of cost of establishment under section 14(e) of the Act read with r. 16(4) of the Central Rules, the manufacturer of such preparations must necessarily bear the burden as the licensee gets services in return in lieu of such payment.
The decision in the Indian Mica Micanite Industries case (supra) on which reliance is placed furnishes a complete answer to the appellant 's contention.
The Court there was concerned with the validity of supervisory charges of the excise establishment from a consumer and not from the manufacturer under the Bihar and Orissa Excise Act, 1915.
It was clearly indicated that the burden of the cost of supervisory charges must fall on the manufacturer and not on the consumer because there was no co relationship between the levy of fee and the services rendered.
Further, though there was a double duty on the manufacturer as well as the consumer, the Court did not strike down the levy on the consumer because it was observed that the question of co relationship between the services rendered and the fee levied is essentially a question of fact.
In dealing with the question whether the impugned levy could be justified as a fee on the basis of the law as enunciated by this Court, it was observed : (1) According to the finding of the High Court the only services rendered by the Government to the appellant and to other similar licensees is that the Excise Department have to maintain an elaborate staff not only for the purposes of ensuring that denaturing is done properly by the manufacturer but also for the purpose of seeing that the subsequent possession of.
denatured spirit in the hands either of a wholesale dealer or retail seller or any other licensee or permit holder is not misused by coverting the denatured spirit into alcohol fit for human consumption and thereby 545 evade payment of heavy duty.
So far as the manufacturing A process is concerned, the appellant or other similar licensees have nothing to do with it.
They are only the purchasers of manufactured denatured spirit.
Hence the cost of super vising the manufacturing process or any assistance rendered to the manufacturers cannot be recovered from the consumers like the appellant.
Further, under Rule 9 of the Board 's rules the actual cost of supervision of the manufacturing process by the Excise Department is required to be borne by the manufacturer, There cannot be a double levy in that regard.
(emphasis added) The Court then went into the question whether there was any corelationship between the services rendered and the fee levied and whether the levy in question was not disproportionate to the value of the services rendered by the State, and observed: D In the opinion of the High Court the subsequent transfer of denatured spirit and possession of the same in the hands of various persons such as whole sale dealer, retail dealer or other manufacturers also requires close and effective supervision because of the risk of the denatured spirit being converted into palatable liquor and thus evading heavy duty.
Assuming this conclusion to be correct, by doing so, the State is rendering no service to the consumer.
It is merely protecting its own rights.
Further in this case, the State which was in a position to place material before the Court to show what services had been rendered by it to the appellant and other similar licensees, the costs or at any rate the probable costs that can be said to have been incurred for rendering those services and the amount realised as fees has failed to do so.
On the side of the appellant, it is alleged that the State is collecting huge amounts as fees and that it is rendering little or no service in return.
The co relationship between the services rendered and the fee levied is essentially a question of fact.
Prima facie, the levy appears to be excessive even if the State can be said to be rendering some service to the licensees.
The State ought to be in possession of the material from which the co relationship between the levy and the services 546 rendered can be established at least in a general way.
But the State has not chosen to place those materials before the Court.
Therefore the levy under the impugned Rule can not be justified.
Nevertheless, the Court remitted the matter to the High Court with a direction that opportunity be given to the State to place material to show that the value of the services rendered has reasonable co relationship with the fee charged.
We fail to see how the decision in the Indian Mica Micanite case (supra) can be of any help to the appellants.
The portions extracted above clearly show that the levy of service charges on the manufacturer are valid.
There is a broad co relationship between the fee collected and the cost of the establishment.
Under section 14(e) of the Act it is provided that the Commissioner, with the previous approval of the Government, may prescribe the size and nature of the establishment necessary for supervision of a manufactory and the cost of the establishment and other incidental charges in connection with such supervision be realised from the licence.
There can be no doubt that the supervisory staff is deployed in a bonded manufactory by the Government for its own protection to prevent the leakage of revenue, but there is no denying the fact that a licensee undoubtedly receives a service in return.
The cost of the establishment levied under section 14(e) of the Act is to be collected from the licensee in the manner provided by r. 16(4) of the Kerala Rectified Spirit Rules, 1972, relevant part of which reads: (4) All the transactions in the spirit store shall be conducted only in the presence of an Excise officer not below the rank of an Excise Inspector.
Such officer shall be assisted by at least two Excise Guards.
The cost of establishment of such officer and the guards shall be payable by the licensee in advance in the first week of every month as per countersigned chalan to be obtained from such officer.
The rate at which the cost of establishment is to be paid by the licensee shall be fixed by the Commissioner from time to time and intimated to the licensee in writing There is admittedly no provision made in the Central Rules for the recover of supervisor charges, perhaps because as the Court 547 Observed in the Hyderabad Chemicals and Pharmaceutical 's case A (supra) it was felt that the duty on medicinal and toilet preparations containing alcohol would be sufficient to defray the cost of such supervision.
But the absence of such a provision in the Central Rules, as we have already indicated, does not deprive the State from making a provision in that behalf.
It is true that the supervisory charges are in the nature of a compulsory exaction from a licensee and the collections are not credited to a separate fund, but are taken to the consolidated fund of the State and are not separately appropriated towards the expenditure incurred in rendering the service.
However, as observed in Government of Madras vs Zenith Lamp and Electricals Ltd. (1) followed in State of Rajasthan vs Sajjanlal Panjawat and Ors.
(2), that by itself is not decisive, by reason of article 266 of the Constitution.
lt is equally true that normally a fee is uniform and no account is taken of the paying capacity of the recipient of the service, but absence of uniformity will not make it a tax if co relationship is established (see Commissioner, H.R.E. Madras vs Lakshmindra Thirtha Swamiar of Shirur Mutt and Government of Madras vs Zenith Lamp and chemicals Ltd. supra).
The cost of supervisory charges can be sustained even if they are regarded as a fee for services rendered by the State or its instrumentalities.
The last ground on which the appellants took their stand is even less tenable.
It is urged that r. 13 of the Kerala Rectified Spirit Rules, 1972, providing for the levy of excise duty on excess wastage of alcohol in the manufacture of medicinal and toilet preparations cannot be supported in terms of the charging provision contained in section 17 of the Act.
Rule 13 reads as follows: 13(1) If the rectified spirit imported or purchased P under these rules is used for the manufacture of medicinal and toilet preparations which duty of excise is leviable under the (Central Act 16 of 1955), no duty shall be collected under the Abkari Act 1 of 1077 on so much quantity of alcohol, as is present in the finished product.
(2) The assessment of duty under the Medicinal and Toilet Preparations Excise Duties) Act, 1955 (Central Act 548 16 of 1955) being applicable only to the quantity of spirit existing in the finished product, all spirit wasted during the course of manufacture of any medicinal or toilet preparation shall be assessable to duty under the Abkari Act, 1 of 1077.
Provided that the Government may, in consultation with the Drugs Controller and the Chemical Examiner, by notification in the Gazette.
permit such allowance as they think fit for such wastages occurring during the manufacture.
No exception is taken to r. 13(1) which provides that no duty shall be collected under the Act on so much quantity of alcohol "as is present in the finished product".
The objection is to the validity of r. 13(2) in so far as it enables the levy of duty on excess wastage of alcohol.
We find it difficult to appreciate the contention that r. 13(2) cannot be supported in terms of the charging provision in section 17(f).
Rule 13(2) is nothing but a corollary of r. 13(1).
On a combined reading of section 17(f) and r. 8 read with the proviso thereof, no duty is chargeable on alcohol actually used in the manufacture of medicinal and toilet preparations.
The Government fully realised that some margin for wastage should be allowed and, therefore inserted the proviso to r. 13(1).
It provides that the Government may, in consultation with the Drugs Controller and the Chemical Examiner, by notification in the Gazette, permit such allowance as they think fit for such wastages occurring during the manufacture.
Beyond the permissible limit, the State has the right to levy a duty on excess wastage of alcohol, i.e. On alcohol not accounted for.
In the connected Special Leave Petition, the petitioner, P. Krishna Wariyar, Managing Trustee, Arya Vaidyasala, Kottakkal, who is engaged in the business of manufacture for sale of ayurvedic medicinal preparations, challenges the validity of sections 12A, 56A and 68A of the Act and rr. 5, 6 and 7 of the Kerala Spirituous Preparations Rules.
Apart from the question of legislative competence, two other grounds were raised: (1) the power to restrict the quantity of medicinal preparations to be manufactured, by the Commissioner under section 12 cannot be exercised in relation to ayurvedic preparations as alcohol is self generated in the process of manufac 549 ture; and (2) the impugned provisions offend against article 301 of the Constitution.
As regards the Rules, it was generally said that they constitute unreasonable restrictions on the fundamental right guaranteed under article 19(1) (g) of the Constitution.
None of these contentions can prevail.
It is to be observed that restriction imposed by section 12A of the Act as to the quantity of medicinal preparations to be manufactured relates not only to such preparations to which alcohol is added, but also to medicinal preparations in which alcohol is self generated.
There can be no doubt that ayurvedic asavas and aristhas which are capable of being misused as alcoholic beverages can come within the purview of the definition of 'liquor ' contained in section 3(10) of the Act being of the Spirituous Preparations (Control) Rules, 1969 liquids containing alcohol The contention that Note to r. 3(1) is an unreasonable restriction on the freedom of trade guaranteed under article 19(1) (g) of the Constitution has no substance.
It provides that unless otherwise declared by the Expert Committee, asavas and aristas and other preparations containing alcohal are deemed to be spurious if their self generated alcohol content exceeds 12% by volume.
It is a matter of common knowledge that such preparations are always likely to be misused as a substitute for alcoholic beverages and, therefore, the restriction imposed by section 12A is a reasonable restriction within the meaning of s 19(6) of the Constitution, So far as the contention based on article 301 of the constitution is concerned, it is urged that there is demand for the petitioner 's medicinal preparations not only in the State, but throughout the country and to limit the quantity to be manufactured, taking into account the requirements of the State alone, is but an abridgment on the freedom of inter State trade and commerce.
In our opinion, section 12A has no such effect.
As already stated, the expression 'shall have regard to ' as interpreted by the Judicial Committee in the Ryots of Garobandho 's case (supra), means 'shall take into consideration '.
All that the provision enjoins is that the Commissioner shall have regard to the total requirements for consumption and use in the State, while fixing the quantity of the medicinal preparations to be manufactured.
Furthermore, the challenge with regard to article 301 does not arise as, admittedly, the Bill was reserved for the assent of the President, and 550 is, therefore, protected by article 304(b) of the Constitution.
It is not disputed that the provisions are regulatory in nature and they impose reasonable restrictions on the freedom of trade.
For these reasons, both the Appeal and the Special Leave Petition must fail and are dismissed with costs.
| IN-Abs | The appellants, who were manufacturers of medicinal and toilet preparations containing alcohol challenged the constitutional validity in their writ petitions under article 226 of the Constitution of the provisions of sections 12A, 12B, 14(e) and (f ), 56A and section 68A of the Kerala Abkari Act, 1967 (Act No. X of 1967) and Rules 13 and 16 of the Kerala Rectified Spirit Rules, 1973 and rr.
5, 6 and 7 of the Kerala Spiritious Preparations Rules, 1969 on the ground that the State Legislature had no power to enact a law relating to medicinal and toilet preparations as the topic of the legislation was within the exclusive domain of Parliament under Entry 84, List I of the Seventh Schedule of the Constitution and also on the ground that they were violative of article 19(1) (g) read with article 301 of the Constitution.
The High Court dismissed the writ petition holding that there was no conflict between the impugned provisions and the Central law, i.e., the or the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 framed thereunder as they dealt with different subjects.
The High Court further held that the impugned provisions do not offend against article 19(1) (g) or article 301 of the Constitution.
In the appeal and the special leave petition to this Court it was contended on behalf of the appellants (t) The State Legislature had no legislative competence 520 to enact the impugned provisions because the field was occupied by the provisions of The (The Central Act) and the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 (the Central Rules), and alternatively, the impugned provisions are violative of the fundamental right guaranteed in article 19(1) (g) of the Constitution.
(2) "Drugs and Pharmaceuticals" having been declared by Parliament under section 2 of the Industries Development and Regulation) Act, 1951 to be a scheduled industry, being item 22 of the First Schedule thereof, the power of the State Legislature to make a law in respect of medicinal and toilet preparations containing alcohol was taken away.
(3) The provisions made in section 14(e) of the Act for the collection of supervisory charges was clearly invalid in as much as (a) they are in conflict with r. 45 of the Central Rules, and (b) they could not be sustained as a fee as there was no quid pro quo.
(4) Rule 13 of the Kerala Rectified Spirit Rules, 1972, providing for the levy of excise duty as excess wastage of alcohol in the manufacture of medicinal and toilet preparations cannot be supported in terms of the charging provision contained in section 17 of the Act.
(S) The power to restrict the quantity of ayurvedic asavas and arishtas in which alcohol is self generated in the process of manufacture having regard to the total requirement of such medicinal preparations for consumption or use in the State is an unreasonable restriction on The fundamental right to carry on trade or business guaranteed under An.
19(1) (g) and was also violative of article 301 as there was demand for such medicinal preparations not only in The Slate but throughout the country.
Dismissing The Appeal and Special Leave Petition, ^ HELD: (l) The Central and State Acts operate in two separate and distinct fields and are not in conflict with each other.
While the main purpose of the impugned Act is to consolidate the law relating to manufacture, sale and possession of intoxicating liquors and intoxicating drugs, a subject which falls under Entry 8 of List II of the Seventh Schedule, the main object of the Central Act is lo provide for the levy and collection of duties of excise on medicinal and toilet preparations containing alcohol falling under Entry 84 List I. [536 G F] 2(i).
The enactment of the by Parliament under Entry 84, List I of the Seventh Schedule of the Constitution, or the framing of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 by the Central Government in exercise of their rule making power under section 19 of the Act, for the purpose of levying duties of excise on medicinal and toilet preparations containing alcohol etc., do not pre vent the State Legislature from making a law under Entry 8, List II of the Seventh Schedule to the Constitution with respect to 'intoxicating liquors ' or a law under Entry 51 List II for levying excise duties on alcoholic requirements for human consumption.
[528 C D] (ii) It is the charging section which gives the true index to the real character of a tax.
The nature of the machinery by which the tax is to be assessed is not of assistance, except in so far as it may throw light on the general character of the tax.
The charging section in section 3 of the Central Act clearly shows that it does not seek to levy a duty of excise on alcohol liquor for human consumption falling within Entry 51 List II of the Seventh Schedule, but to levy a duty of 521 excise on medicinal and toilet preparations containing alcohol etc.
The topic of legislation under Entry 84, List I of the Seventh Schedule is 'duties of excise on medicinal and toilet preparations containing alcohol etc.
The Central Act must in pith and substance, be attributed to Entry 84, List.
[532 C E] (iii) The Central and the State Legislations operate on two different and distinct fields.
The Central Rules, to some extent, trench upon the field reserved to the State Legislature, but that is merely incidental to the main purpose, that is, to levy duties of excise on medicinal and toilet preparation containing alcohol.
Some of the impugned provisions may be almost similar to some of the provisions of the Central Rules, but that does not imply that the State Legislature had no competence to enact the provisions.
The State Legislation is confined to 'intoxicating liquor ', that is, to ensure proper utilisation of rectified spirit in the manufacture of medicinal and toilet preparations and, therefore, within the powers granted to the State Legislature under Entry 8, List II.
It further seeks to regulate the manufacture of bona fide medicinal preparations and prevent misuse of rectified spirit in the manufacture of spurious medicinal and toilet preparations containing alcohol capable of being used as ordinary alcoholic beverages.
[532 F 533 A] (iv) The enumeration of 'intoxicating liqour ' in Entry 8, List II, confers exclusive power to the State to legislate in respect of medicinal and toilet preparations containing alcohol.
[533 B] (v) In matters of seeming conflict or encroachment of jurisdictions, what is more important is the true nature and character of the legislation.
A necessary corollary of the doctrine of pith and substance is that once it is found that in pith and substance the impugned Act is a law on a permitted field, any incidental encroachment on a forbidden field does not affect the competence of the legislature to enact the law.
[534 B C] Prafulla Kumar Mukherjee and Ors.
vs Bank of Commerce Ltd. Khulna A.I.R. 1947 PC 60 at 65 and State of Bombay vs F. N. Balsara ; at 694 5 referred to.
(vi) There can be no doubt that the impugned Act is relatable to Entry 8, List II of the Seventh Schedule.
[536 A] (vii) When the frame work of the two enactments is examined, it would be apparent that the Central and the State Legislature operate in two different and distinct fields.
In the matter of making rules or detailed provisions to achieve the object and purpose of a legislation, there may be some provisions seemingly overlapping or encroaching upon the forbidden field, but that does not warrant the striking down of the impugned Act as ultra vires the State Legislature.
[536 G 537 A] Hyderabad Chemical and Pharmaceutical Works Ltd. vs State of Andhra Pradesh and Ors.
; distinguished.
(viii) No citizen has any fundamental right guaranteed under article 19(1) (g) of the Constitution to carry on trade in any noxious and dangerous goods like intoxicating drugs or intoxicating liquors, The power to legislate with regard to intoxicating liqour carries with it the power to regulate the manufacture, sale and possession of medicinal and toilet preparations containing alcohol, not for the 522 purpose of interfering with the right of citizens in the matter of consumption or use for bonafide medicinal and toilet preparations, but for preventing intoxicating liquors from being passed on under the guise of medicinal and toilet 'preparations.
It was within the competence of the State Legislature to prevent the noxious use of such preparations i.e. their use as a substitute for alcoholic beverages.
[537B D] In the instant case the provisions have been enacted to ensure that rectified spirit is not misused under the pretext of being used for medicinal and toilet preparations containing alcohol.
Such regulation is a necessary concomitant of the police power of the State to regulate such trade or business which is inherently dangerous to public health.
[537 E] (ix) All that the provisions of sections 12A and 12B ordain is that the Commissioner "shall have due regard to the total requirement of such medicinal preparations for consumption or use in the State".
The Commissioner has, therefore, only to take into account the total requirements within the State as an element which should enter the assessment and no more.
As a necessary corollary, it follows that in fixing the quantity of medicinal and toilet preparations to which alcohol is added or in which it is self generated, normally the Commissioner shall have regard to larger requirements of the manufacture, if the manufactured product has a market outside the State.
The restrictions imposed by section 12B as to the alcoholic content of medicinal and toilet preparations and the requirement that they shall not be manufactured except and in accordance with the terms and conditions of a licence granted by him, are nothing but reasonable restrictions within the meaning of article 19(6).
The impugned provisions, therefore, cannot be struck down as offending article 19(1) (g) of the Constitution.
[538 E 539 B] 3.
The State Act, in pith and substance, is not a legislation under Entry 24, List 11 and, therefore, the question does not arise.
[539 E 539 B] 4(i) (a) The provision contained in section 14(e) of the Act is clearly relatable to the State 's power to make a law under Entry read with Entry 51(a), List II of the Seventh Schedule.
section 14(e) of the Act is valid in so far as it provides that the Commissioner may prescribe the size and nature of the establishment for such supervision and the cost of establishment and other incidental charges in connection with such supervision to be realised from the licensee.
There is no warrant for the submission that the framing of such an incidental provision like r. 45(1) of the Central Rules takes away the State 's power to recover supervisory charges from the licensee.
[540 B C] (b) 'Fees ' are the amounts paid for a privilege and are not an obligation.
Fees are distinguished from taxes in that the chief purpose of a tax is to raise funds for the support of the Government or for a public purpose, while a fee may be charged for the privilege or benefit conferred, or service rendered or to meet the expenses connected therewith.
Thus, fees are nothing but payment for some special privilege granted or service rendered.
Taxes and taxation are, therefore, distinguishable from various other contributions, charges, or burdens paid or imposed for particular purposes and under particular powers or functions of the Government.
It is now increasingly realised that merely because the collections for the services rendered or grant of a privilege or licence, are taken to the Consolidated Fund of the State and are not separately appropriated towards the expenditure for rendering the service is not by itself decisive.
It is also increasingly realised that the element of quid pro quo stricto sensu is not 523 always a sine qua non of a fee.
It is needless to stress that the element of quid A pro quo is not necessarily absent in every tax, [541 G 542 D] Mahant Shri Jagannath Ramanuj Das vs The State of Orissa ; , Ratilal Panachand Gandhi vs The State of Bombay [1954] SCR 1055, Constitutional Law of India by H.M. Seervai, 2nd Edn.
Vol. 2, p. 1252, para 22.39 & Kewal Krishan Puri & Anr.
vs State of Punjab & Ors.
at 1230 referred to.
(ii) In the case of a manufacturer of medicinal and toilet preparations containing alcohol in a bonded manufactory, the imposition of the cost of establishment under section 14(e) of the Act calculated in accordance with the nature and extent of that establishment could not be said to be an imposition of a duty of excise, but is a price for his franchise to carry on the business.
[543 D E] (iii) No one has a fundamental right to the supply of rectified spirit which is an intoxicating liquor.
It is upto the State to control and regulate its supply from a distillery or a spirit warehouse in the State under and in accordance with the terms and conditions of a licence or permit its import from outside by grant of a privilege and charge a fee for the same.
A fee may be charged for the privilege or benefit conferred, or service rendered, or to meet the expenses connected therewith.
A fee may be levied to meet the cost of supervision and may be something more.
It is in consideration for the privilege, licence or service.
The State is undoubtedly entitled to levy excise duty on the rectified spirit issued from a distillery under section 17(f) of the Act read with r. 13 of the Kerala Rectified Spirit Rules, 1972 but it refrained from making any such levy by reason of rule 21 of the Central Rules and has, therefore, by proviso tc) rule 8 allowed a manufacturer of medicinal and toilet preparations to draw rectified spirit from a distillery without payment of duty.
It is thus a privilege conferred on the licensee.
To claim the privilege he must comply with the conditions prescribed If one of the conditions is the payment of cost of establishment under section 14(e) of the Act read with rule 16(4) of the Central Rules, the manufacturer of such preparations must necessarily bear the burden s the licensee gets services in return in lieu of such payment.
[543 G 544 C] 5.
Rule 13(2) is nothing but a corollary of rule 13(1).
On a combined reading of section 17(f) and rule 8 read with the proviso thereof, no duty is chargeable on alcohol actually used in the manufacture of medicinal and toilet preparations.
The Government realised that some margin for wastage should be allowed and, therefore, inserted the proviso to rule 13(2), which provides that the Government may, in consultation with the Drugs Controller and the Chemical Examiner, by notification in the Gazette, permit allowance for wastage occurring during the manufacture.
Beyond the permissible limit, the State has the right to levy a duty on excess wastage of alcohol, i.e. on alcohol not accounted for.
[548 D F] 6.
The restriction imposed by section 12A of the Act as to the quantity of medicinal preparations to be manufactured relate not only to preparations to which alcohol is added but also to medicinal preparations in which alcohol is self generated.
There can be no doubt that ayurvedic asavas and aristhas which are capable of being misused as alcoholic beverage and come within the purview of the definition of 'liquor ' contained in section 3(10) of the Act being liquid containing alcohol.
The contention that Note to rule 3(1) is an unreasonable restriction on the freedom of trade guaranteed under.
Article 19(1) (g) of the Constitution has no substance.
[549 B D] 524
|
Civil Appeal Nos. 285 89 of 1969.
(From the judgment and order dated 7th December, 1966 of the Bombay High Court in Special Civil Appeal Nos. 4 to 8 of 1965) 610 G.L. Sanghi and A.G. Ratnaparkhi for the Appellant.
M.C. Bhandare, Mrs. Sunanda Bhandare, T. Sridharan and Miss C.K Sucharita, for the Respondents.
The Judgment of the Court was delivered by DESAI, J.
In the wake of agrarian reforms initiated by the Bombay Tenancy and Agricultural Lands Act, 1948 ( 'Tenancy Act ' for short) an amendment of far reaching and revolutionary character was introduced in 1956 so as to eliminate every intermediary between the tiller of the soil and the state.
The title of the landlord to the land passes immediately to the tenant on the tillers ' day and there is a completed purchase or sale thereof as between the landlord and the tenant.
The title of the land which was vested originally in the landlord passes to the tenant on the tillers ' day or the alternative period prescribed in that behalf.
This title is defeasible only in the event of the tenant failing to appear or making a statement that he is not willing to purchase the land or committing default in payment of the price thereof as determined by the Agricultural Lands Tribunal (See Sri Ram Ram Narain Medhi vs The State of Bombay.
Section 32 provided that on April 1, 1957 styled the tillers ' day, a tenant of agricultural land covered by the Tenancy Act would become the owner of the land held by him if other conditions specified in the section were fulfilled.
A forum styled Agricultural Lands Tribunal was set up and a procedure was prescribed in the Act to determine the price payable by such tenant to the erstwhile landlord on becoming owner of the land held by him.
Accordingly five tenants of five different pieces of agricultural land made five separate applications on August 27, 1962 against a common landlord, the appellant herein before the Agricultural Lands Tribunal ( 'ALT ' for short), Raver, under section 32 of the Tenancy Act for determining the price of land held by each of them as tenant.
The land lord appeared in each proceeding and contested the right of the tenant to purchase the land, inter alia, contending that under a deed of settlement dated May 22, 1930, she acquired a right only to usufruct of land involved in the dispute and thus she is a limited owner and the settlement imposes certain disability on her precluding her from dealing with the property which would indicate that she 611 could not have leased out the land thereby creating an encumbrance which would be impermissible under the deed of settlement and consequently the tenant of each piece of land could not be said to be lawfully cultivating the land so as to become the deemed tenant under section 4 of the Tenancy Act.
It was also contended that, the applicant (respondent herein) before ALT was not a tenant within the meaning of the Tenancy Act and therefore he could not have become the owner of the land on the tillers ' day.
Alternatively, it was contended that the minor children of the landlord who being the limited owner, had acquired a vested right in the land involved in the dispute under the deed of settlement and therefore as the landlords were minors the date of compulsory purchase in the case of such minor landlord would be postponed under section 32 and therefore the ALT had no jurisdiction to determine the price under section 32 G.
The ALT held that the appellant was the landlord and the tenant in each case was a deemed tenant under section 4 of the Tenancy Act and on 1st April, 1957 by the operation of law he became the owner thereof.
It was also held that the ALT was under a statutory obligation to determine the price under section 32 G.
The ALT accordingly proceeded to determine the price in each case.
Five separate appeals were preferred by the appellant landlord in each case to the Collector of Jalgaon.
The Collector held that the present appellant landlord had a limited interest in the land and thus as her interest fell short of ownership, she could not be regarded as landlord within the meaning of the expression in the Tenancy Act, Consequently, the Collector held that the tenant in each case could not be deemed to be a tenant within the meaning of the expression in the Tenancy Act.
It was accordingly held that the tenant in each case did not become the deemed purchaser under section 32 and therefore the ALT had no jurisdiction to determine the price.
The Collector allowed all the five appeals and dismissed the five applications preferred by the tenant in each case.
The tenant in each case preferred a revision petition under section 76 of the Tenancy Act before the Maharashtra Revenue Tribunal.
The Special Bench of the Maharashtra Revenue Tribunal by a common judgment allowed five revision petitions preferred by the tenants and set aside the order of the Collector and restored the order made by the ALT holding that even though the landlord in these cases was a limited owner the instrument settling the property 612 on the landlord did not prohibit the landlord from leasing the land and lease was accordingly valid and therefore under section 4, the tenant would be a deemed tenant within the meaning of the Tenancy Act and such deemed tenant would become the owner of the land held by him on the tillers ' day.
The landlord approached the High Court under article 227 of the Constitution.
The Division Bench of the Bombay High Court by a common judgment disposed of the five special civil applications filed by the landlord.
The High Court relying on the decision of this Court in Dahya Lal and Others vs Rasul Mohammed Abdul Rahim held that the deed of settlement did not prohibit the landlord from leasing the land and if the lease is created by such a limited owner not precluded from leasing the land, it would confer on the J tenant of such landlord, the status of a deemed tenant under section 4 and such a tenant would be deemed to have purchased the land held by him on the tillers ' day.
The High Court negatived the contention that the children of the landlord had a vested interest in the land involved in the dispute during the life time of the landlord and The children being minors, the date of purchase would be postponed under section 32 F. The High Court accordingly rejected the special civil applications but remanded the case to the Collector to give an opportunity to the landlord to agitate the contention about the quantum of price which Contention was not dealt with by the Collector on merits.
The landlord by certificate under article 133 (1) (a) and (b) of the Constitution preferred these five appeals Expression 'Tenancy ' has been defined in section 2 (17) of the Act to mean "relationship of landlord and tenant". 'Tenant ' is defined in section 2 (18) as under: 'Tenant" means a person who holds land on lease and includes: (a) a person who is deemed to be a tenant under section 4; (b) a person who is a protected tenant; and 613 (c) a person who is a permanent tenant;" Section 4 which is material for the present appeal reads as under: "4.
A person lawfully cultivating any land belonging to another person shall be deemed to be a tenant if such land is not cultivated personally by the owner and if such person is not: (a) a member of the owner 's family, or (b) a servant on wages payable in cash or kind but not in crop share or a hired labourer cultivating the land under the personal supervision of the owner or any member of the owner 's family, or (c) a mortgagee in possession.
" There are two explanations appended to this section which are not material for the present purpose.
Section 32 (1) which was introduced in 1956 provided that on the 1st day of April, 1957, called the tillers ' day, every tenant, subject to the provisions of the next succeeding sections, be deemed to have purchased from his landlord, free of all encumbrances subsisting thereon on the said day, the land held by him as tenant if he satisfied the conditions set out in the section.
Section 32G provided that as soon as may be after the tillers ' day, the ALT shall publish or cause to be published a public notice in the prescribed form in each village within the jurisdiction calling upon: (a) all tenants who u/s 32 are deemed to have purchased the lands: (b) all landlords of such lands, and (c) all other persons interested therein; to appear before the ALT on the date specified in the notice.
The ALT shall then proceed to record statement of the tenant whether he is or is not willing to purchase the land held by him as a tenant If the tenant is willing to purchase, the Tribunal shall after giving an opportunity to the tenant and landlord and all the other persons 614 interested in such land to be heard and after holding an enquiry determine the purchase price of such land in accordance with the provisions of section 32 and sub section 3 of section 63A. Section 32 post pones the date of statutory purchase in the case where a landlord is a minor or a widow or a person subject to any mental or physical disability or a serving member of the armed forces to a date one year from the expiry of the period during which such landlord is entitled to terminate the tenancy under section 31.
Having noticed the relevant provisions of the Act, it is necessary first to refer to the deed of settlement under which the landlord acquired land involved in this appeal.
By the deed of settlement Exh.
2 A dated May 22, 1930 Devidas Devlal Seth father and Sheo Parshad Devidas Seth, brother of the appellant landlord settled on trust the properties more particularly described in the deed.
At the time of settlement, appellant the beneficiary under the trust was a minor and the deed provided for the consequences to ensue on her attaining majority.
The relevant portion of the deed of trust in this behalf reads as under: "After the girl completes 21 years and while she is physically and mentally in good condition, the right of carrying on the 'vahivat ' (management) of the estate and of spending the income thereof is with her alone, during her life time.
However, she has no right in any way either to purchase the aforesaid estate or to create in any way a charge (Translation is disputed and is stated that 'encumbrance ' is the appropriate rendering) thereon; nor she has a right to dispose of the said estate under a will.
" The deed provides for the disposal of the estate on the death of beneficiary, the appellant giving 2/3rd of the estate to her male issues and 113rd to the female issues.
In this behalf the recital in the deed is: that the children as many as will be alive at the time of her death are to get the estate according to the terms mentioned in the deed and if no child will be living the estate is to go to her grand children according to the terms in the deed.
The direction was given that 2/3rd and 1/3rd share shall be given to the children who will be living at the time of her death and in the event that there is no child of a particular sex the whole estate was to go to the children 615 of the other sex.
There is also a provision about disposal of the estate in the event the appellant has no child of her own.
The contention which Mr. G.L. Sanghi, the learned counsel for the appellant put in the forefront was that the appellant being a limited owner under the deed of settlement was not entitled to lease the land and therefore respondents could not be said to be said to be lawfully cultivating the land and therefore could not become deemed tenants under section 4.
Consequently, they could not have become deemed purchasers on the tillers ' day.
As a corollary it was contended that in any event as the children have a vested remainder in the estate the date of purchase would be postponed as provided in section 32 of the Act, and therefore ALT could not entertain an application under section 32 and proceed to determine the price on the footing that the tenant has become a deemed purchaser.
Under the deed of settlement appellant acquired a life interest and the reversion remainder was in her children.
During her life time she was entitled to enjoy the income of the property but she could not dispose of the property by will, gift or sale.
She was also under a disability to encumber the estate and it was urged that lease is an encumbrance.
The substantial question is whether a limited owner of agricultural land governed by the Tenancy Act during his/her life time was entitled to lease the land and if he or she did lease the land whether the tenant inducted by the holder of life estate could be said to be lawfully cultivating the land so as to acquire the status of a deemed tenant under section 4 and as a corollary would become a deemed purchaser on the tillers ' day.
Section 4 has been extracted hereinbefore.
It comprehends within its sweep any person lawfully cultivating any land belonging to another person.
If land belongs to one person and another is lawfully cultivating it, unless such person falls under any of the excepted categories; he would acquire the status of a deemed tenant.
The excepted categories are: (a) a member of the owner 's family, or (b) a servant on wages payable in cash or kind but not in crop share of a hired labourer cultivating the land under the personal supervision of the owner or any member of the owner 's family, or (c) a mortgagee in possession.
It would thus appear that if the land belonging to one person is being lawfully cultivated by another person and that such other person is not a member of the owner 's family or a servant on wages payable in cash or kind but not in crop share or a hired labourer or a mortgagee in possession then such cultivator lawfully cultivating the land would be deemed 616 to be a tenant.
The legal fiction of clothing a lawful cultivator of land belonging to other person has widened the traditional concept of expression 'tenant ' which would normally imply contractual relationship.
Under the deed of settlement appellant was given a life estate.
She was the owner of the land during her life time with a limitation that she could not will, gift or sell the property or encumber the same.
In view of these four limitations she is undoubtedly a limited owner.
But this limited owner holding the life estate has been given the right to administer the estate after she attained majority.
Administration of the estate would normally include leasing of the property except where a specific condition is prescribed precluding the administrator from leasing the property.
There is no such limiting or restrictive condition prohibiting the appellant in the course of her management from leasing the land.
The appellant beneficiary being a woman, the settlors must have thought that she may not be able to personally carry on agricultural operations and therefore when the settlors authorised her, on attaining majority, to administer the estate it would per se in the absence of a limiting or restricting condition to the contrary enable her to lease the land.
Thus, if the appellant as beneficiary after attaining majority took over the administration and as part of the administration leased the land, the person so inducted by her on the land would be lawfully cultivating the land belonging to the appellant and being not in any of the excepted categories would be deemed to be a tenant.
On a plain reading of the deed and the admitted position that she had leased the land to each of the respondents and keeping in view the requirements of section 4, the conclusion that the respondents would be deemed tenants under section 4 of the Act is inescapable.
The view which we are taking, is borne out by the observations of this Court in Dahyalal and Ors.
vs Rasul Mohammed Ahdul Rahim (supra).
In that case the tenant was inducted on the land by a mortgagee in possession and the contention was that as the mortgagee in possession would not be deemed to be a tenant because he is in the excepted categories set out in section 4, the tenant inducted by him would not acquire the status of a deemed tenant.
After analysing the provisions of the Tenancy Act, this Court held that all persons other than those mentioned in clauses (a), (b) and (c) of section 4 who lawfully cultivate land belonging to other persons whether or not their authority is derived directly from the owner of the land must be deemed tenants of the land.
The execution of 617 mortgagee in possession from the category of deemed tenant was explained on the ground of public policy in that to confer such status upon mortgagee in possession would be to invest him with rights inconsistent with his fiduciary character.
However, the tenant inducted by a mortgagee in possession in discharge of his liability of prudent management cast by section 76(a) of the Transfer of Properly Act as also under the authority derived from the mortgagor would be lawfully cultivating the land.
Accordingly the person inducted would be a deemed tenant who would be entitled to the protection of the Act even after the mortgage is redeemed.
Once such a tenant enjoys the status of a deemed tenant and holds land in that capacity, on the tillers ' day he would become the deemed purchaser.
A contention was raised that this Court overlooked in Dahyalal 's ease a vital point that a transferor cannot confer a better title on another than he himself possesses and that therefore in view of section 76(a) of the Transfer of Property Act a mortgagee in possession cannot create an interest to endure beyond redemption of mortgage to bind the mortgagor.
It was urged that if a mortgagee in possession is specifically excluded from acquiring status of a deemed tenant, ipso facto tenant inducted by him cannot acquire that status.
The court negatived the contention.
It would be advantageous in this context to refer to Prabhu vs Ramdeo and Ors.
where this Court held that a tenant of a mortgagee in possession can invoke the benefit of subsequent tenancy legislation which provided that such a tenant could not be evicted except in the circumstances set out in that legislation.
The mortgaged property in that case was land used for agricultural purposes and the mortgage was usufructory mortgage.
After redemption the original mortgagor sued for actual possession from tenant inducted by the erstwhile mortgagee alleging that on redemption of mortgage, the tenant has to surrender possession.
In the meantime, Rajasthan Tenancy Act of 1955 had been introduced and the tenant claimed protection against eviction under it.
This Court after referring to Mahabir Gope and Others vs Harbans Narain Singh and others and Harihar Prasad Singh and Another vs Must.
of Manshi Nath Prasad and Others held that rights of the tenants inducted by the mortgagee may 618 conceivably be improved by virtue of statutory provisions which may meanwhile come into operation.
Such a case would clearly be an exception to the general rule prescribed by the Transfer of Property Act that mortgagee in course of management cannot create an interest which would endure beyond the redemption of mortgage.
It was next contended that in any event the appellant having been given a life estate with the vested remainder in her children, she had no vested interest in the property during her lifetime but her interest would be contingent interest and therefore even during her lifetime, the children would be the owners and as they were minors the date of statutory purchase would be postponed under section 32 F. Looking to the terms of the deed of settlement, subject to the limitations therein prescribed the appellant had a vested interest with a right to take over management on attaining majority and to deal with the property in her own way.
Assuming without deciding that she had no right to will, gift, sell or encumber the property yet assuming she did deal with it in the manner prohibited it would nonetheless be binding during her lifetime.
The property would devolve on the heirs named in the deed and the devolution would take place on her death.
Therefore, upon a pure literal construction of deed coupled with intendment of the settlement it is difficult to accept Mr. Sanghi 's submission that her interest in the property during her life time was contingent interest.
This will further be borne out by the provision contained in section 13 of the Transfer of Property Act inasmuch as she was given life or limited interest and the remainder to her children none of whom was in existence at the time of transfer.
Even if transfer is in favour of unborn person, at the date of transfer to be valid there has to be a prior interest created by the very transfer.
This prior interest though limited would not be contingent but vested interest.
In fact the interest of future born children would be contingent till the death of the appellant.
The deed of settlement cannot be construed as a transfer in favour of unborn person, yet it settles property on trust and the unborn children, under trust, may be beneficiaries but they can claim interest only after the death of the appellant and no interest in her life time.
Under the deed of settlement an interest is created in favour of the children of the appellant and the interest would take effect on the happening of specified uncertain event uncertain as to time namely, the death of the appellant, then till the death of the appellant the interest of the children would be contingent.
It is nothing short of spes 619 successionis.
Mr. Sanghi, however, referred to Rajes Kanta Roy vs Santi Debi and urged that by a parity of reasoning we must hold that the interest of the appellant was a contingent interest.
In that case one Ramani created an endowment in respect of some of his properties in favour of his family deity and appointed his three sons as shebaits.
After the death of one of his sons, widow of the deceased son instituted a suit against other members of the family for a declaration that she as an heir of her deceased husband, was entitled to function as shebait, in place of her husband.
The suit ended in a consent decree recognising the right of the widow as a co shebait.
Subsequently the settlor Ramani and his two other sons filed a suit against widow of the pre deceased son for a declaration that the consent decree was null and void.
During the pendency of the suit the settlor Ramani executed a registered trust deed in respect of his entire property.
The eldest son was appointed trustee to hold property under trust subject to certain powers and obligations.
The second suit which was pending at the death of settlor Ramani ended in a consent decree.
One of the terms of the consent decree was that widow of the predeceased son gave up her rights under the earlier consent decree by which she obtained status of co shebait and she was paid Rs. 475/ per month as allowance.
Complaining of a default in the payment of allowance she filed an application for execution to realise the arrears and she sought attachment and sale of certain properties.
The eldest son filed an objection contending that under the settlement of trust his interest in the property was contingent till the debts are paid and as the precondition is not satisfied the contingent interest is not attachable.
Negativing this contention, it was held that the determination of the question as to whether any interest created by trust deed is vested or contingent has to be guided by the principles recognised under sections 19 and 21 of the Transfer of Property Act and the Indian Succession Act.
After referring to certain English authorities and text books by writers it was held that the question is really one of intention to be gathered from a comprehensive view of all the terms of a document.
After examining all the terms of the deed of trust, this Court held that even though the debts were not discharged the appellants, namely, the sons acquired a vested interest and not a contingent one.
Having examined the trust deed before us, we are satisfied that the appellant had the vested interest in the property during 620 her life time and the children had only contingent intermediating that period.
It was lastly contended that as the appellant was prohibited from creating an encumbrance on the property, she had no right to lease the property because in a certain way lease is also an encumbrance.
Without going into the wider question whether the expression 'encumbrance ' in the context in which it is used would comprehend lease within its fold we would dispose of the contention on the short ground that the right to administer the property confined on the appellant on her attaining majority inheres the right to lease the property.
If it be so, it is futile to contend that restraint on the right to encumber would preclude her from leasing the land.
The right to manage or administer an immovable property such as agricultural land as a prudent man, comprehends the right to lease, save where the contrary intention is indicated.
It is equally well recognised that a limited owner or a life estate holder in agricultural land, unless a clear intention to the contrary is expressed, would be entitled to lease the land during his or her life time.
Reading the deed of settlement as a whole, we do not find any such contrary intention and, therefore, we must negative the contention .
Having examined all the contentions of Mr. Sanghi, we find no merit in any of them and therefore all these appeals fail and are dismissed with costs.
Hearing fee in one set.
V.D.K .
Appeals dismissed.
| IN-Abs | Under the deed of settlement (exhibit 2A) dated May 22,1930, the appellant landlady acquired a life interest in certain agricultural lands under dispute and the reversion remainder was in her children.
During her lifetime she was entitled to enjoy the income of the property but she could not dispose of the property by will, gift or sale.
She was also under a disability to encumber the estate though she had the right of carrying on the "vahivat" (management).
By virtue of the provisions of section 32 of the Bombay Tenancy and Agricultural Lands Act, 1948, providing that on April 1, 1957 styled as tillers ' day, a tenant of Agricultural land covered by the said Act would be the owner of the land held by him, if other conditions specified therein are fulfilled, the respondents made five separate applications on August 27, 1962 against the appellant before the Agricultural Lands Tribunal, Raver under section 32G for determining the price of the land held by each of them as tenant.
The appellant contested the right of the tenant to purchase the land, inter alia contending that under the deed of settlement she acquired a right only to usufruct of land involved in the dispute and she being a limited owner and the settlement imposing certain disability on her precluding her from dealing with the property which would indicate that she could not have leased out the land thereby creating an encumbrance which would be impermissible under the deed of settlement and consequently the tenant of each piece of land could not be said to be lawfully cultivating the land so as to a become the deemed tenant under section 4 of the Tenancy Act.
The respondents not being tenants within the meaning of the Tenancy Act could not have become the owner of the land on the tillers ' day.
Alternatively it was contended that the minor children of the appellant, she being a limited owner had acquired a vested right in the land and, therefore, as they were minors the date of compulsory purchase would be postponed under section 32F ousting the jurisdiction of the tribunal to determine the price under section 32G.
The Tribunal allowed 608 the applications and negatived the appellant 's contentions.
All the five appeals preferred by the appellant were allowed by the Collector of Jalgaon.
The revision petitions filed by the tenants under section 76 of the Tenancy Act before the Maharashtra Revenue Tribunal were allowed holding that even though the landlady in these cases was a limited owner the instrument settling the property on the landlady did not preclude her from leasing the land and the lease was accordingly valid under section 4, the tenant would be a deemed tenant within the meaning of the Tenancy Act and such deemed tenant would become the owner of the land held by him on the tillers ' day.
The appellant approached the High Court under Article 227 of the Constitution.
While rejecting the special civil applications the High Court remanded the case to the Collector to give an opportunity to the appellant to agitate the contention about the quantum of price as it was not dealt with by the Collector on merits.
The appellant having obtained a certificate under Article 133(1) (a) and (b) of the Constitution preferred these five appeals.
Dismissing the appeals, the Court, ^ HELD: 1.
On a plain reading of the deed and the admitted position that the appellant had leased the land to each of the respondents and in view of the requirements of section 4 of the Tenancy Act, 1948, it is clear that the respondents would be deemed tenants under that section.
[616 E F] 1 :1.
Section 4 comprehends within its sweep any person lawfully cultivating any land belonging to another person.
If land belongs to one person and another is lawfully cultivating it, unless such person falls under any of the excepted categories; he would acquire the status of a deemed tenant.
The excepted categories are: (a) a member of the owner 's family, or (b) a servant on wages, payable in cash or kind but not in crop share or a hired labourer cultivating the land under the personal supervision of the owner or any member of the owner 's family, or (c) a mortgagee in possession.
It would thus appear that if the land belonging to one person is being lawfully cultivated by another person and that such other person is not a member of the owner 's family or a servant on wages payable in cash or kind but not in crop share or a hired labourer or a mortgagee in possession then such cultivator lawfully cultivating the land would be deemed to be a tenant.
The legal fiction of clothing a lawful cultivator of land belonging to other person has widened the traditional concept of expression "tenant" which would normally imply contractual relationship.
[615 E H, 616A] 1:2.
Under the deed of settlement appellant was given a life estate.
She was the owner of the land during her life time with a limitation that she could not will, gift or sell the property or encumber the same.
In view of these four limitations she is undoubtedly a limited owner.
But this limited owner holding the life estate has been given the right to administer the estate after she attained majority.
Administration of the estate would normally include leasing of the property except where a specific condition is prescribed precluding the administrator from leasing the property.
There is no such limiting or restrictive condition prohibiting the appellant in the course of her management from leasing the land.
The appellant beneficiary being a woman, the settlors must have thought that she may not be able to personally carry on agricultural operations and therefore when the settlors authorised her, on attaining majority, to administer the estate 609 it would per se in the absence of a limiting or restricting condition to the countrary enable her to lease the land.
Thus, if the appellant as beneficiary after attaining majority took over the administration and as part of the administration leased the land, the person so inducted by her on the land would be lawfully cultivating the land belonging to the appellant and being not in any of the excepted categories would be deemed to be a tenant.[616 B E] Dahyalal and Ors.
vs Rasul Mohammed Abdul Rahim, ; , followed.
Upon a pure literal construction of deed coupled with intendment of the settlement, the appellants ' interest in the property was a vested interest during the life lime with a right to take over management on attaining majority and to deal with the property in her own way, and the children had only contingent interest during the period.
The property would devolve on the heirs named in the deed and the devolution would take place on her death.
Section 13 of the Transfer of Property Act makes this position clear since none of her children to whom the remainder was given was in existence at the time of transfer.
Even if transfer is in favour of unborn person, at the date of transfer to be valid there has to be a prior interest created by the very transfer.
This prior interest though limited would not be contingent but vested interest.
In fact the interest of future born children would be contingent till the death of the appellant.
The deed of settlement cannot be construed as a transfer in favour of unborn person, yet it settles property on trust and the unborn children, under trust, may be beneficiaries but they can claim interest only after the death of the appellant and no interest in her life time.
Under the deed of settlement an interest is created in favour of the children of the appellant and the interest would take effect on the happening of specified uncertain event uncertain as to time namely, the death of the appellant the interest of the children would be contingent.
It is nothing short of spes successionis [618 D H, 619 A] Rajes Kanta Roy vs Santi Debi, ; , discussed and distinguished.
The right to administer the property conferred on the appellant on her attaining majority inheres the right to lease the property.
If it be so, it is futile to contend that restraint on the right to encumber would preclude her from leasing the land.
The right to manage or administer an immovable property such as agricultural land as a prudent man, comprehends the right to lease, save where the contrary intention is indicated.
It is equally well recognised that a limited owner or a life estate holder in agricultural land, unless a clear intention to the contrary is expressed, would be entitled to lease the land during his or her life time.
Reading the deed of settlement as a whole no such contrary intention could be found.
[620 B D]
|
: Criminal Appeal No. 90 of 1981.
From the Judgment and order Dated 7th August 1980 of the High Court of Punjab and Haryana at Chandigarh in Crl.
Appeal No. 909 of 1979.
Prem Malhotra for the Appellant.
K.G. Bhagat and R.N. Poddar for the Respondent.
The Judgment of the Court was delivered by BAHARUL ISLAM, J.
The question for consideration in this appeal by special leave is whether a person under 16 years of age and accused of an offence under section 302, Penal Code can get the benefit of the Haryana Children Act, 1974 (hereinafter 'the Act ').
The undisputed facts are that the appellant along with three others was convicted of the offence of murder and sentenced to imprisonment of life by the Sessions Judge.
The appeal was dismissed by the High Court.
The appellant then filed an application for special leave to appeal under Article 136 of the Constitution.
Leave was 688 granted confined to the question of the applicability of the Act to his case.
It is also not disputed that the appellant was less than 16 years at the time he first appeared before the Trial Court.
He was thus a 'child ' within the meaning of that term under clause (d) of section 2 of the Act.
Mr. Prem Malhotra, learned counsel appearing for the appellant, submitted that in view of Section 5 of Criminal Procedure Code, 1973 (hereinafter called 'the Code '), the appellant would get the benefit of the Act; while on the other hand, Mr. Bhagat appearing for the State, relying on section 27 of the Code submitted that an offence punishable with death or imprisonment for life would not be triable under the Act.
There is a decision of this Court on the point in the case of Rohtas vs State of Haryana reported in ; , that held the trial of a child under the provisions of the Act was not barred.
In that case, however, it appears, section 27 of the Code was not brought to the notice of the Court.
In that view of the matter, the Bench consisting of two members including one of us (Baharul Islam, J.) before whom this appeal came up for hearing referred it to a larger Bench, in order to avoid possible conflict of decisions.
This is how this appeal came up for hearinbefore this Bench consisting of three members.
Mr. Malhotra submits that section 5 of the Code leaves special and local laws unaffected by the provisions of the Code and that, therefore, the Act remains wholly intact.
On the other hand, Mr. Bhagat 's submission is that all offences are triable under the Act by reason of the provision of section 27 of the Code so long as they fall within the category of offences "not punishable with death or imprisonment for life.
In the Act, 'child ' has been defined as meaning a boy who has not attained the age of sixteen years or a girl who has not attained the age of eighteen years. 'Delinquent child ' has been defined as meaning a child who has been found to have committed an offence.
Apart from procedural differences in the Act and the Code, for the trial of a child for murder, the outstanding difference is that the trial of the child under the Code may end in the sentence of death or imprisonment for life while a child cannot be sentenced to death or imprisonment for life under the Act.
In order to better appre 689 ciate the differences, it is necessary to refer to some of the salient A provisions of the Act.
Sub section (1) of section 4 provides for the constitution of a children 's court.
It provides that notwithstanding anything contained in the Code of Criminal Procedure, 1898 (hereinafter the 'Old Code '), the State Government may constitute one or more children 's courts for exercising the powers and discharging the duties conferred or imposed on such court in relation to delinquent children under the Act.
Sub section (3) of section 5 provides that a person may be appointed as a member of the Board or as a magistrate in the children 's court only where he has in the opinion of the State Government, knowledge of child psychology and child welfare.
Sub section (1) of section 6 of the Act provides that where a Board or a children 's court has been constituted for any area, such Board or court shall, notwithstanding anything contained in any other law for the time being in force but save as otherwise expressly provided in the Act, have power to deal exclusively with all proceedings under the Act relating to neglected children or delinquent children, as the case may be.
Section 8 provides for establishment of children 's homes, section 9 for Special Schools, section 10 for observation Homes and section 11 for the establishment of Aftercare organisations.
Section 17 provides for the bail and custody of delinquent children.
It provides that a child accused of any non bailable offence, notwithstanding anything contained in the old Code or in any other law for the time being in force be released on bail with or without surety unless such release defeats the purpose of the Act.
Section 19 provides that the children 's court shall hold an inquiry against the child charged with an offence in accordance with the provisions of section 37 of the Act and may, subject to the provisions of the Act, make such order in relation to the child as it deems fit.
Section 20, inter alia, provides that where a children 's court is satisfied on inquiry that a child has committed an offence, then notwithstanding anything to the contrary contained in any other law for the time being in force, the children 's court may, if it thinks fit, (a) allow the child to go home after advice or admonition; (b) direct the child to be released on probation of good conduct and placed under the care of any parent, guardian, or other fit person on his 690 executing a bond with or without surety as the court may require for the good behaviour and well being of the child for any period not exceeding three years; and (c) make an order directing the child to be sent to a special school.
Section 21 is important.
It prohibits passing of certain orders against delinquent children.
It provides, inter alia, that notwithstanding anything to the contrary contained in any other law for the time being in force, no delinquent child shall be sentenced to death or imprisonment or committed to prison in default of payment of fine or in default of furnishing security.
Section 23 bars the joint trial of a delinquent child with any other person who is not a child.
Sub section (2) of section 23 enjoins separation of trials of a delinquent child and a person who is not a child, when they are sent up in the same case.
Sub section (1) of section 65 which is important is in the following terms: "The (Central Act 8 of 1897), and sections 29B and 399 of the Code of Criminal Procedure, 1898 (Central Act 5 of 1898), shall cease to apply to any area in which this Act has been brought into force.
" Section 29B of the old Code is equivalent to section 27 of the Code.
Section 399 of the old Code provided for confinement of the delinquent children in reformatories after conviction instead of sending them to prison.
It may be mentioned that there are similar provisions in the central (Act LX of 1960) which is applicable to the Union Territories only.
Section 22 of this Act is in pari materia with section 21 of the Haryana .
A perusal of the above and other provisions of the Act and those of the central shows that the procedure for trial, conviction and sentence under the Children Acts are simple, humane and by courts manned with persons with knowledge of child psychology and child welfare; but not so under the Criminal Procedure Codes of 1898 and 1973.
The intention of the State Legislature of Haryana and of the 691 Parliament in enacting the Children Acts was to make provisions for trial of delinquent children and dealing with them in accordance with such procedures, so that the delinquent children do not come in contact with accused persons who are not children and but are hardened criminals.
The purpose undoubtedly was to reclaim delinquent children and rehabilitate them in such a way that they become useful citizens later in life.
It may be mentioned at this stage that the Act came into force on March 1, 1974 while the Code of Criminal Procedure, 1973 came into force on April 1, 1974.
If there be any conflict between any provisions of the Act and the Code, in view of Article 254(1) of the Constitution, the provision of the Act repugnant to any provision of the Code will be void to the extent of repugnancy.
It was not the contention of Mr. Bhagat appearing for the State that the Act was bad for lack of legislative competence of the State Assembly or for any other reason.
The sheet anchor of his submission was section 27 of the Code of 1973.
Let us now set out the relevant provisions of the Code of Criminal Procedure Code, 1973 with which we are directly concerned.
Section 4 reads: "(1) All offences under the Indian Penal Code shall be investigated, inquired into, tried, and otherwise dealt with according to the provisions hereinafter contained.
(2) All offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences.
" Section 5 reads: "Nothing contained in this Code shall, in the absence of a special provision to the contrary, affect any special or local law for the time being in force, or any special jurisdiction or power conferred, or any special form of procedure prescribed, by any other law for the time being in force.
" 692 Section 27 reads: "Any offence not punishable with death or imprisonment for life, committed by any person who at the date when he appears or is brought before the Court is under the age of sixteen years, may be tried by the Court of a Chief Judicial Magistrate, or by any Court specially empowered under the , or any other law for the time being in force providing for the treatment, training and rehabilitation of youthful offenders." Putting emphasis on the expressions, "in the absence of any specific provisions to the contrary", occurring in section 5, Mr. Bharat submits that section 27 is the specific provision to the contrary and as such this provision shall affect the Haryana which is a local law for the time being in force.
We are unable to accept the submission.
As it has been pointed out above, the purpose of the Haryana Legislature as well as of the Parliament in enacting the Haryana and the Central (Act LX of 1960) respectively was to give separate treatment to delinquent children in trial, conviction and punishment for offences including offences punishable with death or imprisonment for life.
In our opinion, section 27 is not 'a specific provision to the contrary ' within the meaning of section 5 of the Act; the intention of the Parliament was not to exclude the trial of delinquent children for offences punishable with death or imprisonment for life, inasmuch as section 27 does not contain any expression to the effect "notwithstanding anything contained in any passed by any State Legislature".
Parliament certainly was not unaware of the existence of the Haryana coming into force a month earlier or the Central coming into force nearly fourteen years earlier.
What section 27 contemplates is that a child under the age of 16 years may be tried by a Chief Judicial Magistrate or any court specially empowered under the .
It is an enabling provision, and, hl our opinion, has not affected the Haryana in the trial of delinquent children for offences punishable with death or imprisonment for life.
Criminal Procedure appears in Item 2 of the Concurrent List of the Seventh Schedule of the Constitution.
One of the circumstances under which repugnancy between the law made by the State and the law made by the Parliament may result is whether the provisions of a Central Act and a State Act in the Concurrent List 693 are fully inconsistent and are absolutely irreconcilable.
In the A case in hand as we have shown that the relevant provisions of the Code and the Act can co exist.
Their spheres of operation are different.
Mr. Bhagat in support of his contention has relied on a Full Bench decision of the Madhya Pradesh High Court reported in The Full Bench of three judges considered the jurisdiction of the Madhya Pradesh Bal Adhiniyam, 1970 (15 of 1970) to try a juvenile offender for offences punishable with death or imprisonment for life.
There was a difference of opinion.
The view of the majority was that the juvenile courts constituted under the Madhya Pradesh Bal Adhiniyam has exclusive jurisdiction to try a delinquent child (a person under 16 years of age for all offences except those punishable with death or imprisonment for life even after the commencement of the Code of Criminal Procedure, 1973 (Act 2 of 1974), while the minority view of Verma J. was to the contrary.
With respect, the majority view is erroneous.
Verma J. has observed as follows: "The only question before us is whether the provisions of the New Code have brought about any change in this position.
There can be no doubt that if there is an irreconcilable conflict between the provisions of the New Code and those of the Bal Adhiniyam, then the New Code being the later Central enactment it will supersede Bal Adhiniyam the earlier State enactment to the extent of repugnancy by virtue of Cl.
(1) of article 254 of the Constitution.
The real question, therefore, is whether there is any such repugnancy between the two enactments so as to attract article 254.
It is equally clear that in case there is no such repugnancy and the relevant provisions of the two enactments are capable of co existence, then article 254 would not be attracted, and the provisions of the Bal Adhiniyam conferring exclusive jurisdiction on the Juvenile Courts to try all offences including those punishable with life imprisonment or death would continue to operate.
Such a conclusion is supported also by the fact that the Bal Adhiniyam is a special local Act while the New Code is a general enactment applicable throughout the country on account of which the special Local Act would apply within this State in preference to the general law on the subject.
It is in this light that the question has to be examined with a view 694 to determine whether there is any such irreconcilable conflict so as to attract article 254 of the Constitution.
This is the real question for decision." He has held: "Applying the tests indicated by the settled principles.
I have no hesitation in holding that there is no real conflict between the provisions of the New Code, particularly section 27 thereof, and the provisions of the Bal Adhiniyam.
In short, the provisions of the New Code clearly save any special or local law like the Bal Adhiniyam and section 27 of the New Code is merely an enabling provision which does not express any contrary intention to undo the saving provided in section 5 of the New Code.
There being thus no conflict or repugnancy, the question of article 254 of the Constitution being attracted does not arise.
" With respect, Verma J. has expressed the correct opinion.
As a result of the foregoing discussions, we allow the appeal, set aside the conviction and sentence imposed upon the appellant and quash the entire trial of the appellant.
We direct that the appellant shall be dealt with in accordance with the provisions of the Haryana .
It is a pity that the point urged before us was not urged in any of the Courts below.
S.R. Appeal allowed.
| IN-Abs | Allowing the appeal, the Court.
^ HELD: 1.
The trial of a chid under the provisions of the Haryana Children Act, 1974 for the offence of murder was not barred.
The appellant here was a child within the meaning of that term under clause (d) of section 2 of the Act.
[689 A, C] 2.
A perusal of section 22 of the Central (Act LX of 1960) which is in pari materia with section 21 of the Haryana and other provisions of the State and Central Children Acts shows that the procedure for trial, conviction and sentence under the Children Acts are simple humane and by Courts manned with persons with knowledge of child psychology and child welfare; but not so under the Criminal Procedure Codes of 1898 and 1973.
The intention of the State Legislature of Haryana and of the Parliament in enacting the Children Acts was to make provisions for trial of delinquent children and dealing with them in accordance with such procedure so that the delinquent children do not come in contact with accused persons who are not children and but are hardened criminals.
The purpose undoubtedly was to reclaim delinquent children and rehabilitate them in such a way that they become useful citizens later in life.
[691 G H, 692 A B] 3:1.
The purpose of the Haryana Legislature as well as of the Parliament in enacting the Haryana and the Central respectively was to give separate treatment to delinquent children in trial, conviction and punishment for offences including offences punishable with death or imprisonment for life [693 C D] 3:2.
Section 27 of the Criminal Procedure Code, 1973 is not 'a specific provision to the contrary ' within the meaning of section S of the Code the intention of the Parliament was not to exclude the trial of delinquent children for offences punishable with death or imprisonment for life, inasmuch as section 27 does not contain any expression to the effect "notwithstanding anything contained in any passed by any State Legislature".
Parliament 687 certainly was not unaware of the existence of the Haryana coming into force a month earlier or the Central coming into force nearly fourteen years earlier.
What section 27 contemplates is that a child under the age of 16 years may be tried by a Chief Judicial Magistrate or any court specially empowered under the .
It is an enabling provision and has not affected the Haryana in the trial of delinquent children for offences punishable with death or imprisonment for life.
[693 C, D G] 4:1.
If there be any conflict between any provisions of the Act and the Criminal Procedure Act, in view of Article 254(1) of the Constitution, the provision of the Haryana repugnant to any provision of the Criminal Procedure Code will be void to the extent of repugnancy [692 B C] 4:2.
Criminal Procedure appears in Item 2 of the Concurrent List of the Seventh Schedule of the Constitution.
One of the circumstances under 'which repugnancy between the law made by the State and the law made by the Parliament may result is whether the provisions of a Central Act and a State Act in the Concurrent List are fully inconsistent and are absolutely irreconcilable.
In the case in hand the relevant provisions of the Criminal Procedure Code and the Haryana can co exist.
Their spheres of operation are different.
[693 G H, 694 A] Dev Singh and 2 Ors.
vs State of Madhya Pradesh, Madhya Pradesh, overruled.
|
Civil Appeal No. 852 of 1980.
From the Assessment orders dated the 30th January, 1980 of the Commercial Tax officer, Spl.
Circle Kota, (Rajasthan) for the assessment year 1974 75.
Soli J. Sorabji, B.R. Agarwal and P. G. Gokhale for the Appellants.
section T. Desai and B. D. Sharma for the Respondents.
569 The Judgment of A.P. Sen and E. section Venkataramiah JJ.
was delivered by Venkataramiah J. P. N. Bhagwati, J. gave a dissenting opinion.
BHAGWATI, J. I have had the advantage of reading the Judgment prepared by my learned brother Venkataramiah J., but despite the great respect which I have for his learning and erudition, I find myself unable to agree with the view taken by him.
The facts giving arise to this appeal are not very material because the question which arises for consideration is essentially one of law, but the factual setting does help to see the question in its proper perspective and hence it would be useful to set out a few material facts.
The assessee is a public limited company carrying on business of manufacture and sale of cement.
It has a factory for manufacturing cement at Lakheri in the State of Rajasthan and it effects sales of cement both inside as well as outside the State of Rajasthan.
Since some of the sales effected by the assessee were inside the State of Rajasthan and some others were inter state sales, the assessee filed returns of sales for the quarters comprised in the period 1st August 1973 up to 31st July 1974 both under the Rajasthan Sales Tax Act 1954 thereinafter referred to as the Stale Act) and the (hereinafter referred to as the Central Act).
The assessee did not include in the taxable turn over shown in the returns the amount of freight paid in respect of the goods sold under the bonafide impression that the amount of freight did not form part of the sale price and was not includible in the taxable turn over of the assessee.
This impression was carried by the assessee in view of certain decisions which had been given by some High Courts as well as the Supreme Court and particularly the decision of the Supreme Court in Hyderabad Asbestos Cement Products Limited vs State of Andhra Pradesh(1).
The assessee paid up for each quarter the full amount of tax calculated on the basis of the return submitted by it and the receipt for such payment was filed along with the return.
The amount of tax paid by the assessee obviously did not include tax on the amount of freight, since according to the assessee the amount of freight did not form part of the sale price and was accordingly not shown in the returns as forming part of the taxable turn over.
Subsequently however, the question whether the amount of freight formed part of the sale price and was therefore includible in the taxable turn over of the assessee so as to be exigible to tax came up for consideration before 570 this Court in Hindustan Sugar Mills Limited vs State of Rajasthan and others(1) and it was held by this Court that by reason of the provisions of the Cement Control order 1967 which governed the transactions of sale of cement entered into by the assessee with the purchasers, the amount of freight formed part of the sale price within the meaning of the first part of the definition of that term contained in section 2 (p) of the State Act and section 2 (h) of the Central Act and was includible in the taxable turn over of the assessee.
As soon as this decision was given by the Court on 29th August 1978, the assessee immediately prepared revised returns in respect of the period 1st August 1973 up to 31st July 1974 showing the amount of freight as forming part of the taxable turn over and filed the same before the Commercial Tax officer, Special Circle, Kota on 20th October 1978.
The assessee also deposited along with the revised returns challans showing payment of the balance of the tax on the basis of the revised returns under the State Act as well as the Central Act.
Two orders of assessment were thereafter passed by the Assessing Authority, one under section 10 sub section (3) of the State Act and the other under section 9 of the Central Act.
The former order of assessment levied a penalty of Rs. 53,355 under section 7AA of the State Act and interest amounting to Rs. 85,910.50 under section 11B of the State Act for the delay in payment of the tax in respect of the amount of freight under State Act, which according to the Assessing Authority ought to have been deposited alongwith the filing of the original returns.
Similarly, the latter order of assessment also levied a penalty of Rs. 1,34,205 under section 7 AA of the State Act read with section 9 sub section (2) of the Central Act and interest amounting to Rs. 2,07,174 under section 11B of the State Act read with section 9 sub section (2) of the Central Act for the delay in depositing the tax payable in respect of the amount of freight under the Central Act.
The assessee has in the present appeal preferred with special leave challenged the validity of both these orders of assessment in so far as they levy penalty and interest on the assessee.
The first question which arises for consideration before us is whether the Assessing Authority was right in imposing penalty on the assessee under the two assessment orders for not depositing the tax in respect of the amount of freight at the time of filing of the original returns under the State Act and the Central Act.
My. 571 learned brother Venkataramiah has held, following the decision of this Court in Cement Marketing Company of India Limited vs Commissioner of Sales Tax, Indore(l) that "the levy of penalties for not including the freight charges in the taxable turn over in the original returns and for not paying the tax in respect of such freight charges, is unsustainable" and that the two orders of assessment in so far as they levy penalty on the assessee are liable to be quashed and set aside.
I entirely agree with the view taken by him and I do not think I can usefully add anything to what he has said.
The next question that arises for consideration is whether the assessee was liable under section II B of the State Act to pay interest on the tax in respect of the amount of freight for the period between the date of filing of the original return and the date when such tax was actually paid while filing the revised return.
The contention of the revenue was that the assessee was so liable and this contention was sought to be supported by relying on section 2 sub sections (1) and (2) read with section 11 of the State Act.
The same provisions with section 9 sub section (2) of the Central Act were also relied upon for the purpose of sustaining the Revenue 's claim for interest under the Central Act.
The determination of the question before us therefore really turns on the true interpretation of section 7 subsection (1) and (2) read with section II B of the State Act.
Section 7 of the State Act as it stood at the material time was in the following terms: "7.
Submission of returns: (1) Every registered dealer, and such other dealer, as may be required to do so by the assessing authority by notice served in the prescribed manner, shall furnish prescribed returns, for the prescribed periods, in the prescribed forms, in the prescribed manner and within the prescribed time to the assessing authority; Provided that the assessing authority may extend the date for the submission of such returns by any dealer or class of dealers by a period not exceeding fifteen days in the aggregate.
(2) Every such return shall is be accompanied by a Treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government, showing the 572 deposit of the full amount of tax due on the basis of return in the State Government Treasury of bank concerned.
(2A) Notwithstanding anything contained in sub section (2).
the State Government may by notification in the official Gazette require any dealer or class of dealers specified therein, to pay tax It intervals shorter than those prescribed under sub sec[ion (1).
In such cases, the proportionate tax on the basis of the last return shall be deposited at the intervals specified in the said notification in advance of the return.
The difference if any, of the tax payable according to the return and the advance tax paid shall be deposited with the return and the return shall be accompanied by the treasury receipt, or receipts, of any Bank authorised to receive money on behalf of the State Government, for the full amount of tax due shown in the return.
(3) If any dealer discovers any omission, error, or r) wrong statement in any returns furnished by him under sub section (1), he may furnish a revised return in the prescribed manner before the time prescribed for the sub mission of the next return but not later.
Section II B of the State Act during the relevant period provided inter alia as under: "11B. Interest on failure to pay tax, fee or penalty (a) If the amount of any tax payable under sub sections (2) and (2A) of section 7 is not paid within the period allowed, or (b) If the amount specified in any notice of demand, whether for tax, fee, or penalty, is not paid within the period specified in such notice, or in the absence of such specification, within 30 days from the date of service of such notice, the dealer shall be liable to pay simple interest on such amount at one per cent per month from the day commencing after the end of the said period for a period of three months and at one and a half per cent per month thereafter during the time he continues to make default in the payments; 573 Provided that, where, as a result of any order under this Act, the amount, on which interest was pay able under this section, has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded: Provided further that no interest shall be payable under this section on such amount and for such period in respect of which interest is paid under the provisions of sections 11 and 14.
These are the two sections which fall for construction but in order to arrive at their true meaning and legal effect it is necessary to refer to a few other provisions of the State Act.
Section 3 is the charging section and it creates the liability to pay tax.
That is the normal function of a charging section in a taxing statute.
But, of itself, it does not make the tax payable by an assessee.
It is only when the tax which an assessee is liable to pay is ascertained that becomes payable by the assessee.
Now the normal mode by which the tax payable by an assessee is ascertained is by the process of assessment which is provided in section 10 Sub section (I) clause (a) of section 10 says that assessment and determination of tax due for any year shall be made after the returns for all the periods of that year have become due.
Section 11 then provides for payment and recovery of tax and its provisions in so far as material read inter alia as follows: "11.
Payment and recovery of tax: (I) The tax shall be payable by a dealer on the basis of the assessments.
F (2) The tax paid by a dealer shall be adjusted against the judgment determined as a result of the assessment under section 10 and the balance of the amount shall be payable by such dealer by such date as may be specified in the notice of demand and, where no such date is specified, shall be paid within thirty days from the date of service of the notice.
Provided that the assessing authority may, subject to such conditions and restrictions as may be prescribed, in respect of any particular dealer, and for reasons to be re corded in writing, extend the date of such payment and 574 allow such dealer to pay the tax due and the penalty, if any, by instalments.
(3) In default of the payment of tax payable under sub section (1) or sub section (2), the amount of tax shall be recoverable as an arrear of land revenue.
. . . . . . . .
Provided further that where recovery of tax or any part thereof is stayed under the preceding proviso, the amount of such tax shall be recoverable with interest at the prescribed rate on the amount ultimately found due; and such interest shall be payable on such amount from the date of tax first become due. ' ' When the assessment is made and the tax payable by an assessee is determined, the tax so determined does not become payable until after a notice of demand is served by the Assessing Authority under section 11 sub section (2) read with Rule 31 of the Rajasthan Sales Tax Rules 1955 made by the Government of Rajasthan in exercise of the powers conferred under section 26 of the State Act and then the assessee is allowed time to make payment up to the date specified in the notice of demand and if no such date is specified, then within thirty days from the date of service of the notice.
So long the assessee pays up the amount of the tax assessed within the time specified in the notice of demand or within thirty days from the date of service of the notice, as the case may be, he would not be in default and hence section 11 B clause (b) provides that the assessee would be liable to pay interest on the tax assessed only if .
the amount of such tax is not paid within the period specified in the notice of demand or in the absence of such specification, within thirty days from the date of service of such notice and then too, the liability to pay interest would commence not from the date of assessment, but from "the day commencing after the end of the said period" that is, the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be.
Thus even after the assessment is made and the tax payable by an assessee is determined, the assessee is not liable to pay interest on the amount of such tax until after the period specified in the notice of demand or in the absence such specification, thirty days from the date of service of such notice, have expired.
575 Turning now to sub section (I) of section 7 it requires every A registered dealer to furnish prescribed returns for the prescribed period, in the prescribed forms, in the prescribed manner and within the prescribed time to the Assessing Authority.
It was not disputed on behalf of the Revenue that in the present case the prescribed returns in the prescribed forms were furnished by the assessee in time for the quarter comprised in the period 1st August 1973 to 31st July 1974, the only grievance in regard to those returns being that the amount of freight was not shown as forming part of the taxable turnover.
Sub section (2) of section 7 provides that every return furnished by the assessee must be accompanied by a receipt showing the deposit of the full amount of tax due on the basis of the return and the assessee accordingly deposited the full amount of tax calculated on the basis of each quarterly return and filed the receipt showing such deposit along with the return.
Since, according to the view taken by the assessee at the time of filing the original returns, the amount of freight did not form part of the sale price, it was not included in the taxable turnover shown in the original returns and hence no tax on the amount of freight was deposited by the assessee while filing the original returns.
It was only after the decision of this Court in Hindustan Sugar Mills Limited Company 's case (supra) that the assessee filed revised returns including the amount of freight in the taxable turnover and deposited the balance of the tax on the basis of the revised returns.
The argument of the Revenue was and that is the argument which has appealed to my learned brother, Venkataramiah, that the words "full amount of tax due on the basis of return" in sub section (2) of section 7 meant the full amount of tax due on the basis of a true and proper return which ought to have been filed by the assessee and not the full amount of tax due on the basis of the return actually filed and since the amount of the freight was liable to be included in the taxable turnover and hence in a true and proper return, the "full amount of tax due on the basis of return" within the meaning of sub section (2) of section 7 included the tax on the amount of freight and the assessee therefore ought to have deposited the same at the time of filing, the original returns, and since the assessee failed to do so, section 11 A clause (a) was attracted and the assessee was liable under that provision to pay interest on the tax on the amount of freight which remained unpaid until the filing of the revised returns.
This argument, plausible though it may seem, is in my opinion unsustainable.
It is plainly contrary to the language of sub section (2) of section 7 read with section 11B and is opposed to the scheme of the State Act.
It is also incon 576 sistent with the decision of a Bench of five Judges of this Court in State of Rajasthan vs Ghasi Lal(1).
Indeed I fail to see how in the face of the decision, the Court can possibly accept the argument of the Revenue.
The language used in sub section (2) of section 7 is "full amount of tax due on the basis of return".
The "return" referred to is obviously the return filed by the assessee under sub section (1) of section 7.
Now it is true that when sub section (1) of section 7 requires an assessee to file a return, the return filed must be correct and proper.
If the return is not correct and proper, the Assessing Authority may not give credence to the return and may refuse to assess the tax on basis of the return and if the Assessing Authority finds that the assessee has concealed any particulars from the return furnished by him or has deliberately furnished inadequate particulars in the return, the Assessing Authority may levy penalty on the assesssee under section 16 sub section (1) clause (e) and the assessee may also be liable to be punished for an offence under section 16, sub section (3) clause (d) for making a false statement in the return.
But, whether the return filed be correct or not, the tax payable by the assessee under sub section (2) of section 7 would be the full amount of tax due on the basis of the return.
We must look at the return actually filed by the assessee in order to see what is the full amount of tax due on the basis of such return.
It is not the assessed tax nor is it the tax due on the basis of a return which ought to have been filed by the assessee but it is the tax due according to the return actually filed that is payable under sub section (2) of section 7.
This provision is really in the nature of self assessment and what it requires is that whatever be the amount of tax due on the basis of self assessment must be paid up along with the filing of the return which constitutes self assessment.
I fail to see how the plain words of sub section (2) of section 7 can be tortured to mean full amount of tax due on the basis of return which ought to have been filed but which has not been filed.
It may also be noted that the construction contended for on behalf of the Revenue leads to a serious anomaly.
If this construction were accepted, the tax payable under sub section (2) of section 7 would be the full amount of tax due on the basis of a correct and proper return and that would necessarily be the same as the tax assessed by the Assessing Authority, because what is a correct and 577 proper return would be determinable only with reference to the A assessment ultimately made.
The assessment when made would show whether the return filed was correct and .
proper, it would be correct and proper if it accords with the assessment made; if it does not accord with the assessment, then to the extent to which it differs it would obviously have to be regarded as incorrect and improper.
The consequence of the construction suggested on behalf of the Revenue would be thus that the tax payable under sub section (2) of section 7 would be the full amount of the tax as assessed, because that would represent the tax due on the basis of a correct and proper return and the assessee would have t deposit at the time of filing the return, an amount equivalent to the amount of the tax as assessed.
If the assessee fails to do so, then apart from the liability to pay interest under section I IB clause (a), the assessee would expose himself to penalty under section 16 sub section (1) clause (n) which provides inter alia that any person who fails to comply with any requirement of the provisions of the State Act, the requirement under sub section (2) of section 7 being to deposit the full amount of tax due on the basis of return, shall be liable to D penalty in "a sum not exceeding Rs. 1,000 and in the case of continuing default, a further penalty not exceeding Rs. 50 for every day of such continuance.
" This is a consequence which it is difficult to believe could ever have been contemplated by the legislature.
The legislature could never have intended that the assessee should be liable, on pain of imposition of penalty, to deposit an amount which is yet to be ascertained through assessment.
How would the assessee know in advance what view the Assessing Authority would take in regard to the taxability of any particular category of sales or the rate of tax applicable to them and deposit the amount of tax on that basis ? And this would be all the more problematic in the case of a statute like the sales tax law which is full of complexities and where it may be difficult to assert dogmatically that a particular view is right or wrong.
Even in regard to the liability to pay interest, it does not stand to reason that the legislature should have subjected the assessee to such liability for non payment of an amount of which the liability for payment is still to be ascertained.
Moreover, on the construction of the Revenue, if the assessee has not deposited at the time of filing the return an amount equivalent to the full amount of the tax assessed, the assessee would be liable to pay interest on amount remaining unpaid from the date of filing of the return until payment.
But, as I have already pointed out above, when the assessment is made and the tax payable by the 578 assessee is determined, the assessee is given time for payment of the amount of the tax assessed upto the period specified in the notice of demand and in the absence of such specification, within thirty days from the date of service of such notice and it is only if the assessee fails to make payment within such period that he becomes liable to pay interest on the amount of the tax assessed to the extent to which it remains unpaid.
There is no liability on the assessee to pay interest on the amount of the tax assessed until after the expiration of the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be.
There would thus be a conflict between the two provisions, if the construction contended for on behalf of the Revenue were accepted.
Under sub section (2) of section 7 read with section 11 B clause (a), the assessee would be liable to pay interest on the amount of the tax assessed to the extent to which it has not been deposited at the time of filing the return and such interest would run continuously from the date of the filing of the return until payment, while under section 11 B clause (b) the assessee would not be liable to pay interest on the amount of the tax assessed during the period specified in the notice of demand or in the absence of such non specification during the period of thirty days from the date of service of such notice.
Such a conflict could never have been intended by the legislature.
It is a well settled rule of interpretation that a statute must be so construed as not to create any repugnance between the different provisions, for it is a basic assumption underlying every interpretational exercise that the legislature must be supposed not to have intended to contradict itself.
The Court must always prefer that interpretation which avoids repugnancy between two provisions of a statute and gives full meaning and effect to both.
Therefore, on this principle of interpretation also the construction canvassed on behalf of the Revenue cannot be accepted, as it would create a direct conflict between the provisions of clause (a) and (b) of section 11 B.
The only way in which clauses (a) and (b) of section 11 B can be read harmoniously and full meaning and effect can be given to them is by construing them as dealing with distinct matters or situations.
The tax payable under sub section (2) of section 7 dealt with in clause (a) of section 11 B cannot, therefore, be equated with the amount of the tax assessed forming the subject matter of clause (be of section l l and hence it must be held to be tax due on the basis of the return actually filed by the assessee and not on the basis of a correct and proper return which ought to have been filed by him.
579 There is also another angle from which the problem can be A considered.
Clause (a) of section 11 B postulates tax which, though payable under sub section (2) of section 7, is not paid by the assessee within the time allowed and hence it subjects the assessee to liability to interest for non payment of such tax.
Now if, as contended by the Revenue, the tax payable under sub section (2) of section 7 means the full amount of tax due on the basis of a correct and proper return which ought to have been filed by the assessee, and is, therefore, equivalent to the amount of the tax as assessed, it would be the amount of the tax as assessed which would be payable under sub section (2) of section 7 and this amount would be payable by the assessee at the time of filing the return, even though ex hypothesi no assessment has taken place.
Now it is difficult to appreciate how under the scheme of taxation embodied in the State Act, the amount of tax which is yet to be ascertained through the process of assessment can be said to be payable by the assessee at the time of filing the return.
If, as contended by the Revenue, it is so payable it is difficult to understand why it should have been liable to bear interest from the date of filing the return upto the date of assessment and thereafter it should have been freed from the liability of bearing interest upto the period specified in the notice of demand or thirty days from the date of service of the notice, as the case may be and the rate of interest also should have been made to vary from period to period.
Moreover, it is, to my mind, impossible to accept the proposition that the amount of the tax ultimately assessed, which would represent the tax due on the basis of a correct and proper return should be payable by the assessee at the time of filing the return under sub section (2) of section 7.
The scheme of taxation envisaged in the State Act clearly shows that it is only when the assessment is made and the period specified in the notice of demand or in the absence of such specification, thirty days from the date of service of such notice expires, that The amount of tax as assessed becomes payable by the assessee and its payment can be enforced by the Revenue.
What becomes payable by the assessee under sub section (2) of section 7 is merely the tax due on the basis of the return actually filed by the assessee that is, on the basis of self assessment.
G This position seems to be clear beyond doubt on an examination of the scheme of taxation contained in the State Act and no authority is needed in support of it, but if any authority were needed, it is to be found in the decision of a Bench of five Judges of this Court in State of Rajasthan vs Ghasi Lal (supra).
There the 580 question was whether the assessee could be said to have failed, without reasonable cause, to pay the tax due within the time allowed, when he paid the tax due on the basis of the quarterly returns at the time of filing those returns, but the returns were filed long after the due dates for filing the same had expired.
The argument of the Revenue was that tax became due from the assessee under section 3 which is the charging section and the assessee could not withhold payment of the same by delaying the filing of the quarterly returns within the time prescribed under the State Act and he was therefore liable to pay interest on the amount of the tax as assessed from the date the quarterly returns ought to have been filed and the amount of the tax paid.
This argument of the Revenue was rejected by the Court and Sikri, J. speaking on behalf of the Bench of five Judges, said: "Till the tax payable is ascertained by the Assessing Authority under section 10 or by the assessee under section 7(2), no tax can be said to be due within section 16(1) (b) of the Act for till then there is only a liability to be assessed to tax." These observations show beyond doubt that on a true construction of the provisions of the State Act tax becomes due from the assessee and is payable by him only when it is "ascertained by the Assessing Authority under section 10 or by the assessee under section 7(2)".
Until then, there is only the liability of the assessee to be assessed to tax and no tax can be said to be payable by the assessee.
The tax payable is ascertained when the assessment is made by the Assessing Authority under section 10 or when the assessee himself quantifies it through the process of self assessment under sub section (2) of section 7.
These two amounts of tax may, and in quite a number of cases would, be different because one is ascertained by the assessee himself by filing his return and the other is ascertained by the Assessing Authority through the process of assessment and that is why sub section (4) of section 7 provides that every deposit of tax made under sub section (2) shall be deemed to be provisional subject to necessary adjustments in pursuance of final assessment of tax made under section 10.
This provision clearly contemplates that the tax payable under sub section (2) of section 7 may be different from the tax assessed under section 10 and it cannot, therefore, obviously be the tax due on the basis of correct and proper return (because that would necessarily be the same as the tax ultimately assessed under section 10) but must be the tax due on the basis of the return actually filed.
Mr. Justice Venkataramiah has in his Judgment classified registered dealers into the following five different categories: 581 1.
A registered dealer who files his return showing a higher taxable turnover than the actual turnover which is ultimately found to be taxable at the time of regular assessment and who pays tax under section 7(2) of the Act on the basis of the return.
A registered dealer who files a true and proper return and pays tax on the basis of such return within the time allowed.
A registered dealer who does not file any return at all as required by section 7(1) and pays no tax under section 7(2) of the Act.
A registered dealer who files a true return but does not pay the full amount of tax as required by section 7(2); and 5.
A registered dealer who files a return but wrongly claims either the whole or any part of the turnover as not taxable and pays under section 7(2) of the Act that amount of tax, which according to him is payable, on the basis of the return.
The learned Judge has observed that if the construction contended for on behalf of the assessee were accepted, registered dealers falling within categories (3), (4) and (S) would be outside the provision enacted in sub section (2) of section 7 read with section 11B clause (a) and no interest would be payable by them under that provision and that would make clause (a) of section I I "either unworkable or meaningless".
I must, with the greatest respect, confess my inability to appropriate the line of reasoning which has prevailed with the learned Judge in making this observation.
The learned Judge has proceeded on the basis that the registered dealers falling within all the three categories, namely, (3), (4) and (S) are required by sub section (2) of section 7 to pay the tax chargeable under section 3 of the State Act and if they do not pay the same within the time allowed, that is, at the time when the returns are filed or in case the returns are not filed within the prescribed time, then before the expiration of the date when they ought to have been filed they would be liable to pay interest under section 11B clause (a).
There, is, in my opinion, a basic fallacy underlying this assumption, because it is clear from the language of sub section (2) of section 7 that it 582 is only on the filing of the return that the liability to pay the tax due on the basis of the return arises.
If no return is filed within the prescribed time, it would undoubtedly constitutes a default attracting penalty under section 16, sub section (1) clause (n), but there would be no liability on the assessee to pay interest on the amount of the tax, because the liability to pay the "tax due on the basis of the return ' ' under sub.
section (2) of section 7 can arise only when the return is filed.
There is no liability on the assessee to pay any amount by way of tax until the return is filed or the assessment is made.
This is clear from the decision of this Court in the State of Rajasthan vs Ghasi Lal (supra) where this Court held in so many terms at page 322 of the Report that since the assessee in that case did not file returns till December 19, 1959 and January and March 1960, "section 7(2) could not be attracted till then" (Emphasis supplied).
I fail to understand how in the face of these observations made by a Bench of five judges of this Court, it can ever be held that section 7 sub section (2) is attracted even when no return has been filed.
It is clear from the observations in this case observations which have been quoted here as also in an earlier paragraph that until the assessee files a return or the assessment is made, no tax is payable by the assessee, because "till then there is only a liability to be assessed to tax '.
I must therefore regretfully express my liability to accept the conclusion reached by my learned brother Venkataramiah that a registered dealer falling within category 3 who does not File any return at all as required by sub section (I) of section 7 would still be liable to pay the amount of tax and if he does not pay the same before the due date for filing the return has expired, he would be liable to pay interest under section I IB clause (a).
That would be plainly contrary to the decision in State of p Rajasthan vs Ghasi Lal (supra) which, being a decision of S Judges of this Court, is binding upon us.
So also with regard to registered dealers falling within category 4, I cannot agree with the view taken by my learned brother Venkataramiah.
He has reasoned that if a registered dealer files a return but does not pay the full amount of the tax due on the basis of the return filed by him, the Assessing Authority would be entitled to ignore the return under sub rule (4) of Rule 25 and when the return is not taken cognizance of, there would be no return on the basis of which interest can be computed.
This reasoning is, in my opinion, fallacious and if I may say so without meaning the slightest disrespect, it is based on misappreciation of the effect of sub rule (4) of Rule 25 vis a vis sub section (2) of section 7.
Rule 25 583 sub rule (4) provides that if a return is not accompanied by a receipt for the deposit of tax as required by sub section (2) of section 7, the Assessing Authority shall not be bound to take any cognizance of the return.
If the assessee does not deposit the amount of tax due on the basis of the return and files the return without making such deposit, the Assessing Authority is given the discretion to ignore the return and to proceed to assess the assessee as if no return were filed.
But, the Assessing Authority may, in a given case, if it so thinks fit, take cognizance of the return for the purpose of assessment, despite the fact That the tax due on the basis of the return has not been deposited by the assessee as required by sub section (2) of section 7.
Where the Assessing Authority chooses to take cognizance of the return, there can be no doubt, even on the reasoning of Mr. Justice Venkataramiah, that the assessee would be liable to pay the amount of tax due on the basis of the return and if he fails to do so, he would have to pay interest under section 11 clause (a).
Then merely because the Assessing Authority may, in a given case, in the exercise of its discretion, decline to take cognizance of the return, it does not mean that in such a case the assessee would be retrospectively relieved of his liability to pay the amount of tax due on the basis of the return, on the ground that the return filed by him has become 'no return '.
The liability of the assessee to deposit the amount of tax due on the basis of the return cannot depend upon a future discretionary event.
namely, whether the Assessing Authority chooses to take cognizance of the return or declines to take cognizance of it.
The only correct way of reading sub section (2) of section 7 and sub Rule (4) of Rule 25 is that whenever a return is led by the assessee, it must under sub section (2) of section 7 be accompanied by receipt showing deposit of the full amount of tax due on the basis of the return and if the assessee fails to deposit the amount of the tax due on the basis of the return actually filed, the Assessing Authority would have the option under sub rule (4) of Rule 25 either to take or not to take cognizance of the return.
If the Assessing Authority chooses not to take cognizance of the return, it would proceed to assess the assessee as if no return had been filed by him, but that would not relieve the assessee of the obligation attaching to him under sub section (2) of section 7 of depositing, at the time of filing the return, the amount of the tax due on the basis of the return actually filed nor would it condone the breach of such obligation.
If the assessee does not pay the full amount of the tax due on the basis of the return as required subsection (2) of section 7, he would be liable to pay interest under 584 section 11B clause (a), irrespective of whether the Assessing Authority chooses to act upon the return or declines to take cognizance of it.
The argument which has appealed to my learned brother Venkataramiah that if the construction put forward on behalf of the assessee were accepted, sub section (2) of section 7 would fail in its application to a registered dealer falling within category 4 is therefore in my opinion not a valid argument and with the greatest respect, I must confess my inability to accept it.
On the construction contended for on behalf of the assessee, the case of a registered dealer falling within category 4 is clearly covered by sub section (2) of section 7 and in fact, it is precisely to cover inter alia a case of this kind that the legislature enacted sub section (2) of section 7 read with section 11B clause (a).
Similarly the case of a registered dealer falling within category 5 is also covered by sub section (2) of section 7 and if he does not pay the amount of tax which according to him is payable, on the basis of the return filed by him, he would be liable to pay interest under section 11B clause (a).
So long as the assessee pays the amount of tax which according to him is due on the basis of the return filed by him, there would be no default on his part in complying with the obligation under sub section (2) of section 7 and there would be no liability on him to pay interest under section 11B clause (a), because he would have paid the amount of tax quantified by him through the process of self assessment The actual amount of tax payable by the assessee would be determined only when it is assessed by the Assessing Authority under section 10 and that would not be payable until the expiration of the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be.
I must therefore regret my inability to accept the view taken by my learned brother Venkataramiah that if the construction contended for on behalf of the assessee were accepted, section 11 clause (a) would become meaningless or unworkable.
That provision would have full meaning and effect on the construction canvassed on behalf of the assessee and in fact as pointed out above if the construction which has appealed to my learned brother Venkataramiah were accepted, the consequence would be directly contradictory to the decision of this Court in State of Rajasthan vs Ghasi Lal (supra).
My learned brother Venkataramiah has relied strongly on the decision of this Court in Gurshai Saigal vs Commissioner of Income Tax, Punjab(l) but I fail to see how this decision can 585 be of any help in the present case where section 11B clause (a) is not at all rendered meaningless or unworkable on the construction suggested on behalf of the assessee.
The assessee in that case was sought to be charged with interest under sub section (8) of section 18A of the Indian Income Tax Act 1922 which provided that "where, on making the regular assessment, the Income tax Officer finds that no payment of tax has been made in accordance with the foregoing provisions of this section, interest calculated in the manner laid in sub section (6) shall be added to The tax as determined on the basis of the regular assessment.
" The argument of the assessee was that since sub section (6) of section 18A provided that where in any year an assessee has paid tax under sub section (2) or sub section (3) on the basis of his own estimate and the tax so paid is less than 80% of the tax determined on the basis of the regular assessment, simple interest at the rate of 6% per annum from the first day of January in the financial year in which the tax WAS paid upto the date of such regular assessment shall be payable by the assessee and since no payment of tax had been made by the asses n e r, at all in that case it, was not possible to calculate interest in tile manner laid down in sub section (6) and no interest could therefore be charged to the assessee under sub section (8) of section 18A.
This argument was rejected by the Court on the ground that if the words "from the first day of January in the financial year in which the tax was paid" occurring in sub section (6) of section 18A were to be literally applied in a case falling within sub section (8) of section 18A where no tax would have been paid, sub section (8) would be rendered totally meaningless and futile.
The Court therefore with a view not to rendering sub section (8) of section 18A a dead letter construed the words in sub section (6) to mean "from the first day o, January in the financial year in which the tax ought to have been paid.
" This liberty was taken by the Court with the language of sub section (6) of section 18A, because the Court proceeded on the hypothesis that the legislature could not have intended that sub section (8) of section 18A should be meaningless and unworkable.
But here in the present case there is no compelling necessity to modify the words used in sub section (2) of section 7, because sub section (2) of section 7 read with section 11B clause (a) is not rendered meaningless or futile on a plain natural construction of the language used in that provision.
It is interesting to compare section 140A sub section (I) of the Income Tax Act, 1961 with section 7 sub section (2) of the State Act.
Sub section (I) of section 140A provides that where any tax is 586 payable on the basis of any return required to be furnished under section 139 or under sec.
148, after taking into account the amount of tax, if any, already paid under any provision of the Act, the assessee shall be liable to pay such tax before furnishing the return and the return shall be accompanied by proof of payment of such tax.
Sub section (3) of section 140A then proceeds to state that if any assessee fails to pay the tax or any part thereof in accordance with the provision of sub section (1), the Income Tax officer may direct that a sum equal to two percent of such tax or part thereof, as the case may be, shall be recovered from him by way of penalty for every month during which the default continues.
Can it possibly be contended that these two sub sections of section 140A refer to tax payable on the basis of a proper and correct return or in other words the tax assessed ? It is obvious that these two sub sections refer only to tax payable on the basis of self assessment and require such tax to be paid before the filing of the return and if that is not done, the assessee becomes liable to pay penalty for every month n during which the default continues.
So also section 21 j of Income tax Act, 1961 which provides for payment of interest on under payment of advance tax does not impose liability for payment of interest in case or every deficiency but provides for payment of interest only if the advance tax paid is less than 75 per cent of the assessed tax.
In the world of human affairs, it is hardly possible that the advance tax paid by the assessee or the tax payable on the basis of self assessment would always be equivalent to the tax ultimately assessed by the authorities.
There is no reason to interpret section 7 sub section (2) differently from similar provisions in the Income Tax Act, 1961.
I am therefore of the view that since the assessee deposited the amounts of tax which according to him were due on the basis of the returns actually filed by him and the returns were accompanied by receipts showing deposit of such amounts of tax, there was no default on the part of the assessee in paying the amounts of tax payable under sub section (2) of section 7 within the actual period allowed and in the circumstances no interest was payable by the assessee under section I IB clause (a).
I would accordingly allow the appeal and set aside the orders passed by the Assessing Authority imposing penalty and levying interest on the assessee under the Slate Act as well as the Central Act.
The Revenue will pay the costs of the appeal to the assessee.
587 VENKATARAMIAH, J.
The assessee M/s. Associated Cement Companies Limited has filed this appeal by special leave under Article 136 of the Constitution against the orders dated January 30, 1980 passed by the Commercial Tax officer, Special Circle, Kota in the State of Rajasthan imposing on it a penalty of Rs. 53,335 under section 7AA of the Rajasthan Sales Tax Act, 1954 (hereinafter referred to as 'the Act ') and levying interest under section 11B of the Act amounting to Rs. 85,910.50 and a further penalty of Rs. 1,34,205 under section 7AA of the Act read with section 9(2) of the Central Tax Act and levying interest of Rs. 2,07,174/ under section 11B of the Act read with section 9(2) of the in respect of the assessment year 1974 75.
The circumstances under which the above orders came to be passed are these: The assessee has a cement manufacturing factory in the State of Rajasthan at Lakheri.
The cement manufactured at that factory is sold partly in the State of Rajasthan and partly outside that State.
The invoices of sales are however, made and issued at Ahmedabad and other places.
The sales tax returns relating to the sales were filed under the Act and under the at Kota before the assessing authority for the period between August 1, 1973 and July 31, 1974 i e. the assessment year 1974 75.
In those returns, the assessee had not included in the taxable turnovers the freight charges paid in respect of the goods in question in the bonafide belief that the freight charges were not liable to be included in the taxable turnover in view of certain decisions which had been rendered by some of the High Courts and of the Supreme Court and in particular the decision of this Court in Hyderabad Asbestos Cement Products Ltd. vs State of Andhra Pradesh.(l) But in, Hindustan Sugar Mills etc.
vs State of Rajasthan & Ors.(2) this Court held that on a true construction of the scheme of the Cement Control order, 1967 and the relevant provisions of the Act and of the , the freight charges formed part of the sale price and that sales tax was payable thereon.
The above decision was rendered on August 22, 1978.
On coming to know of the said decision, the assessee prepared and filed the revised returns in respect of the assessment year in question i.e. 1974 75 before the Commercial Tax officer, Special Circle, Kota on October 20, 1978 including the freight charges in the taxable turnover.
The assessee also deposited alongwith the revised returns 588 the balance of the sales tax payable under the Act and under the .
Thereafter the assessing authority passed the two impugned orders of assessment one under section 10(3) of the Act and another under section 9 of the .
In the order of assessment passed under the Act, the assessing authority levied a penalty of Rs. 53,335/ under section 7AA of the Act on account of the delay in depositing a sum of Rs. 1,06,671/ towards sales tax payable in respect of the freight charges and also levied interest of Rs. 85,9l0.50 under section I IB of the Act.
Similarly in the assessment order passed under the , a penalty of Rs. 1,34,205/ was levied under section 7AA of the Act read with section 9(2) of the for the delay in depositing the tax payable in respect of the freight charges and levied interest of Rs. 2,07,174 under section 11B of the Act read with section 9(2) of the .
In this appeal, we are only concerned with the correctness of the impugned orders in so far as they levy penalty and interest.
The first question canvassed before us relates to the levy of penalties on the assessee under the assessment orders for not paying the sales tax payable under the Act and under the in respect of the freight charges which were declared as components of sale price by this Court in Hindustan Sugar Mill 's case (Supra) on August 22, 1978.
The explanation of the assessee for not including the freight charges in the taxable turnover was, as mentioned earlier, that there was a doubt about its liability to pay sales tax thereon as the very same question was pending adjudication before this Court and that on the facts and in the circumstances of the case, the assessee could not be held guilty of filing false returns before the assessing authority.
It was pleaded that since the non inclusion of the freight charges in the taxable turnover was a result of bonafide belief of the assessee that they were not liable to be included in the taxable turnover, the assessing authority should have in its discretion not imposed the penalties particularly having regard to the fact that within two months after the judgment of this Court in Hindustan Sugar Mills ' case (supra), the assessee had filed the revised returns including the freight charges in the taxable turnover and paid the sales tax payable in respect of them even before the assessing authority had passed the orders of assessment.
We are of the view that This part of the case of the assessee has got to be accepted in view of the decision of this Court in Cement Marketing Co.
Of India Ltd. vs Asstt.
Commissioner of Sales Tax, 589 Indore & Ors.(1) where under similar circumstances, this Court held A that the assessee therein which was also manufacturer and dealer in cement was not liable to pay a penalty under section 43 of the Madhya Pradesh General Sales Tax Act, 1958 read with section 9(2) of the .
For the reasons mentioned therein, we hold that the levy of penalties for not including the freight charges in the taxable turnover in the original returns and for not paying the tax in respect of such freight charges is unsustainable and that the impugned penalties are liable to be quashed.
The next question which arises for consideration relates to the liability of the assessee to pay interest under section 11B of the Act on the tax paid in respect of the freight charges for the period S between the date on which it was payable under section 7(2) of the Act and the date of payment and the liability to pay interest on the tax payable in respect of the freight charges under the in accordance with section 9(2) thereof read with section 11B of the Act.
The claim of the department is based on subsections (1) and (2) of section 7 read with section 11B of the Act in the case of interest claimed under the Act and on the aforesaid provisions of the Act read with section 9(2) of the in respect of the interest payable under the Sales Tax Act.
Section 7 of the Act at the relevant point of time read as follows: "7.
Submission of returns. (1) Every registered dealer and such other dealer, as may be required to do so by the assessing authority by notice served in the prescribed manner, shall furnish prescribed returns, for the prescribed periods, in the prescribed forms, in the prescribed manner and within the prescribed time to the assessing authority: Provided that the assessing authority may extend the date for the submission of such returns by any dealer or class of dealers by a period not exceeding fifteen days in the aggregate.
(2) Every such return shall be accompanied by a Treasury receipt or receipt of any bank authorised to receive money on behalf of the State Government, showing the deposit of the full amount of tax due on the basis of return in the State Government Treasury or bank concerned.
590 (2A) Notwithstanding anything contained in sub section (2), the State Government may by notification in the official Gazette require any dealer or class of dealers specified therein, to pay tax at intervals shorter than those prescribed under sub section (1).
In such cases, the proportionate tax on the basis of the last return shall be deposited at the intervals specified in the said notification in advance of the return.
The difference, if any, of the tax payable according to the return and the advance tax paid shall be deposited with the return and the return shall be accompanied by the treasury receipt, or receipts of any Bank authorised to receive money on behalf of the State Government, for the full amount of tax due shown in the return (3) If any dealer discovers any omission, error, or wrong statement in any returns furnished by him under sub section (1), he may furnish a revised return in the prescribed manner before the time prescribed for the submission of the next return but not later.
(4) Every deposit of tax made under sub section (2) shall be deemed to be provisional subject to necessary adjustments in pursuance of the final assessment of tax made for any year under section 10." Section 11B of the Act during the relevant, period read as under: 11 B. Interest on failure to pay tax, fee or penalty, (a) If the amount of any tax payable under subsections (2) and (2A) of section 7 is not paid within the period allowed, or (b) if the amount specified in any notice of demand, whether for tax, fee, or penalty, is not paid within the period specified in such notice, or in the absence of such specification, within 30 days from the date of service of such notice, the dealer shall be liable to pay simple interest on such amount at one percent per month from the day commencing after the end of the said period for a period of three months and at one and a half percent per month 591 thereafter during the time he continues to make default in the payments; Provided that, where, as a result of any order under this Act, the amount, on which interest was payable under this section, has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded; Provided further that no interest shall be payable under this section on such amount and for such period in respect of which interest is paid under the provisions of sections 11 and 14.
" We are principally concerned in this case with sub sections (1) and (2) of section 7 of the Act.
Sub section (1) of section 7 of the Act requires every registered dealer and such other dealer, as may be required to do so by the assessing authority in the prescribed manner to furnish returns in a prescribed form in respect of the n prescribed periods within the prescribed time furnishing necessary particulars regarding his turnover.
The proviso to sub section (1) of section 7 of the Act authorises the assessing authority to extend the date for the submission of such returns by a period not exceeding 15 days in the aggregate.
Sub section (2) of section 7 of the Act insists that every such return shall be accompanied by a 1 Treasury receipt or receipt of any bank authorised to receive money on behalf the State Government showing the deposit of the full amount of tax due on the basis of return in the State Government Treasury or bank concerned.
Sub section (4) of section 7 of the Act, it may be noticed, provides that every deposit of tax made under sub section (2) shall be deemed to be provisional subject to necessary adjustments in pursuance of the final assessment of tax made for any year under section 10.
Clause (a) of section 11B of the Act authorises the levy of interest on the amount of tax not paid in accordance with sub sections (2) and (2A) of section 7 of the Act.
The expression 'prescribed ' is defined in section 2(1) of the Act.
It states that in the Act unless the context otherwise requires "prescribed" means prescribed by rules made under the Act.
Section 26 of the Act empowers the State Government to make rules to carry out the purposes of the Act and in particular and without prejudice to the generality of the foregoing power, such rules may provide for all matters expressly required or allowed by the Act to be prescribed.
We have seen earlier that section 7(1) 592 of the Act requires the returns to be filed in the prescribed manner, in respect of the prescribed periods and within the prescribed time.
Sub section (5) of section 26 of the Act lays down that all rules made under that section shall be published in the official Gazette and upon such publication shall have effect as if enacted in the Act Chapter VII of the Rajasthan Sales Tax Rules, 1955 (hereinafter referred to as 'the Rules ') framed by the State Government in exercise of its power under the Act deals with the topic "Return of turnover and other returns and statements".
The relevant part of Rule 25 of the Rules which appears in Chapter VII reads as follows: "25.
Return of turnover. (1) The return referred to in sub section (1) of section 7 shall be in form S.T. 5 and shall be signed by the dealer himself or his agent, and shall be verified in the manner indicated therein and shall be submitted to the assessing authority concerned.
(2) The return may be presented personally or may be sent by post.
(3) The said return shall be filed for such of the quarters ending with the last day of the month of June, September, December and March of every assessment year if the 'previous year ' of the dealer ends on the 31st day of March of any year, and in other cases for each of the quarters of the year of accounts of the dealer, and shall be filed not later than 30 days after the end of the quarter to which it relates: Explanation.
The quarters of the year of accounts of a dealer shall be as follows: First quarter The period of three months commencing on the first day of the year of accounts.
Second quarter The period of three months commencing on the day next after the end of the first quarter.
Third quarter The period of three months commencing on the day next after the end of the second quarter.
Fourth quarter Rest of the year of account.
The months shall be calculated according to the usage of the dealer whose year of account is in question.
593 (4) If a return is not accompanied by a receipt for the deposit of tax as required by sub section (2) of section 7, the assessing authority shall not be bound to take any cognisance of the return.
" Sub rule (1) of Rule 25 of the Rules provides that the return referred to in sub section (1) of section 7 of the Act shall be in form S.T. 5 and sub rule (3) of Rule 25 prescribed the time within which quarterly returns should be filed by a dealer.
Sub rule (4) of Rule 25 of the Rules provides that if a return is not accompanied by a receipt for the deposit of tax as required by sub section (2) of section 7 of the Act, assessing authority shall not be bound to take any cognisance of the return.
Rule 25 of the Rules which is framed under the Act should be read as a part of the Act itself in view of the express provision contained in sub section (5) of section 26 of the Act, which declares that all rules made under section 26 shall on publication in the official Gazette have effect, as if enacted in the Act.
That should be the effect of a rule framed under statute containing a provision similar to the provision in section 26(5) of the Act can be gathered from a decision of the House of Lords in Institute of Patent Agents & Ors.
vs Joseph Lockwood in which Lord Herschell, L.C. Observed at page 360 thus: "I own I feel very great difficulty in giving to this provision, that they "shall be of the same effect as if they were contained in this Act," any other meaning than this, that you shall for all purposes of construction or obligation or otherwise treat them exactly as if they were in the Act.
No doubt there might be some conflict between a rule and a provision of the Act.
Well, there is a conflict sometimes between two sections to be found in the same Act.
You have to try and reconcile them as best you may.
If you cannot, you have to determine which is the leading provision and which the subordinate provision, and which must give way to the other.
That would be so with regard to the enactment and with regard to rules which are to be treated as if within the enactment.
" The contention of the assessee in the present case is that as it had deposited the full amount of tax due on the basis of the returns filed under sub section (1) of section 7 of the Act at the time when 594 they were filed, it had compiled with sub section (2) of section 7 of the Act and that the question of levying interest on the amount of tax which it deposited on the basis of the revised returns for the period prior to the date of the revised returns did not arise.
On behalf of the department it is urged before us that the words "on the basis of return" occurring in sub section (2) of section 7 of the Act must be read as on the basis of a true and proper return in the context in which those words appear in the statute and if they are so read, the assessee is liable to pay interest on the deficit amount of tax which was made good on October 20, 1978 for the period between the date on which such deposit or deposits had to be made under section 7(1) of the Act read with Rule 25 of the Rules and the date on which they were actually made.
We are concerned in this case with the liability of the assessee to pay interest on the amount of tax which had remained unpaid Tax, interest and penalty are three different concepts.
Tax becomes payable by an assessee by virtue of the charging provision in a taxing statute.
Penalty ordinarily becomes payable when it is found that an assessee has willfully violated any of the provisions of the taxing statute.
Interest is ordinarily claimed from an assessee who has withheld payment of any tax payable by him and it is always calculated at the prescribed rate on the basis of the actual amount of tax withheld and the extent of delay in paying it.
It may not be wrong to say that such interest is compensatory in character and not penal.
In order to understand the case of the assessee, we may classify the registered dealers into the following different classes: 1.
A registered dealer who files his return showing a higher taxable turnover than the actual turnover which is ultimately found to be taxable at the time of regular assessment and who pays tax under section 7(2) of the Act on the basis of the return.
A registered dealer who files a true and proper return and pays tax on the basis of such return within the time allowed.
A registered dealer who does not file any return at all as required by section 7(1) and pays no tax under section 7(2) of the Act.
595 4.
A registered dealer who files a true return but does not pay the full amount of tax as required by section 7(2) and 5.
A registered dealer who files a return but wrongly claims either the whole or any part of the turnover as not taxable and pays under section 7(2) of the Act that amount of tax, which according to him is payable, on the basis of the return.
In the case of a registered dealer falling under class (1) no question of payment of interest would arise as the amount of tax paid by him at the time of filing the return is much more than what is actually due and payable by him under the Act.
The extra tax paid by him becomes refundable after the regular assessment is completed in view of section 7(4) of the Act.
In the case of a registered dealer falling under class (2) also no question of payment of interest arises as there is no shortfall in payment of the tax.
If the contention of the assessee urged in this case is accepted, no interest becomes payable even by registered dealers falling under classes 3,4 and 5 because (a) in the case of a registered dealer falling under class (3) who has not filed any return at all, no occasion would arise to claim interest on any tax 'due on the basis of return ' as there is no return at all.
(b) in the case of a registered dealer falling under class (4) who files a true return but does not pay full amount of tax under section 7(2) the assessing authority is entitled to ignore it under sub rule (4) of Rule 25 of the Rules and when the return is not taken cognisance of, there will be no return on the basis of which interest can be computed and (c) in the case of a registered dealer coming within the purview of class (S) who has filed a return but has wrongly claimed either the whole or any part of the turnover as not taxable and paid under section 7(2) of the Act only that amount of tax which according to him is payable as tax as he would have paid whatever is payable on the basis of the return.
The resulting position would be that clause (a) of section 11B of the Act which clearly imposes the liability on the assessee who has not paid the tax due by him within the period allowed by law becomes either unworkable or meaningless.
A fair reading of section I IB of the Act suggests that the Act expects that all assessees who are liable to pay sales tax should file a true return within the period prescribed under sub section (I) of section 7 and should 596 produce a treasury receipt or a receipt of any bank authorised to receive money on behalf of the State Government showing that full amount of tax due from them has been paid.
The argument pressed before us on behalf of the assessee is that since section 7 of the Act does not expressly say that a registered dealer who has not filed any return or a person who has claimed that his turnover or any part thereof is not taxable and has not paid tax due in respect of such disputed turnover should also pay interest on the tax which is legitimately due to the Government but withheld by him, no interest can be claimed under section 11B of the Act in such cases.
Section 7 of the Act which deals with the submission of returns is not a charging section but a machinery section.
It is settled law that a distinction has to be made by court while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed.
While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction.
The courts are expected to cons true the machinery sections in such a manner that a charge to tax is not defeated.
The above rule of construction of a taxing statute has been adopted by this Court in India United Mills Ltd. vs Commissioner of Excess Profits Tax, Bombay in which section 15 of the Excess Profits Tax Act came up for consideration.
The Court observed in that case thus: "That section is, it should be emphasised, not a charging section, but a machinery section.
And a machinery section should be so construed as to effectuate the charging section.
" The above principle was followed by this Court in Gursahai Saigal vs Commissioner of Income tax, Punjab in which is was observed thus: "Now it is well recognised that the rule of construction on which the assessee relies applies only to a taxing provision and has no application to all provisions in a taxing statute.
It does not, for example, apply to a provision not 597 creating a charge for the tax but laying down the machinery for its calculation or procedure for its collection.
The provisions in a taxing statute dealing with machinery for assessment have to be construed by the ordinary rules of construction, that is to say, in accordance with the clear intention of the legislature which is to make a charge levied effective.
" In deciding Gursahai Saigal 's case (supra) the Court followed the observations made by the Privy Council in Commissioner of Income tax vs Mahaliram Ramjidas and by the House of Lords in Whitney vs Commissioners af Inland Revenue.
In the case of Mahaliram Ramjidas (supra) the Privy Council observed: "The section, although it is a part of a taxing Act, imposes no charge on the subject, and deals merely with the machinery of assessment.
In interpreting provisions of this kind the rule is that construction should be preferred which makes the machinery workable utres valeatpotius quam Pereat.
" In Whitney 's case (supra), Lord Dunedin made the following observations: "My Lords, I shall now permit myself a general observation.
Once that it is fixed that there is liability, it is antecedently highly improbable that the statute should not go on to make that liability effective.
A statute is designed to be workable, and the interpretation thereof by a Court should be to secure that object, unless crucial omission or clear direction makes that end unattainable.
Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable.
Next, there is the assessment.
Liability does not depend on assessment.
That, exhypothesi, has already been fixed.
But assessment particularizes 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 circumstances under which the above principle was applied by this Court in Gursahai Saigal 's case (supra) are interesting.
That 598 was a case in which an assessee who was charged with interest under sub section (8) of section 18A of the Indian Income tax Act, 1922 has questioned his liability to pay interest His contention was that interest payable under sub section (8) of section 18A of that Act had to be calculated in the manner laid down in sub section (6) thereof.
Since sub section 6 of.
section 18A of the Act provided that where in any year an assessee had paid tax under sub section (2) or sub section (3) thereof on the basis of his own estimate and the tax so paid was less than eighty per cent of the tax determined on the basis of regular assessment simple interest at the rate of six per cent per annum from the 1st day of January in the financial year in which the tax was paid upto the date of the said regular assessment should be payable by the assessee and as he had not paid any tax at all, it was urged that it was not possible to calculate interest in the manner laid down in sub section (6).
The Court rejected the contention of the assessee following the decision of the Privy Council and the House of Lords referred to above that the words "from the Ist day of January in the financial year in which the tax was paid" obviously could not literally be applied to a case where no tax had been paid but since on a true construction those words meant "from the Ist day of January in the financial year in which the tax ought to have been paid", the assessee was liable to pay interest.
This Court observed: "It would not be doing too much violence to the words used to read them in this way The tax ought to have been paid on one or other of the dates earlier mentioned.
The intention was that interest should be charged from January 1 of the financial year in which the tax ought to have been paid.
Those who paid the tax but a smaller amount and those who did not pay tax at all would then be put in the same position substantially which is obviously fair and was clearly intended.
Which is the precise financial year in any case would depend on its facts and this would make no difference in the construction of the provision.
" We are in respectful agreement with the method of approach adopted by this Court in Gursahai Saigal 's case (supra).
It is the duty of the Court while interpreting the machinery provisions of a taxing statute to give effect to its manifest purpose having a full view of it.
Wherever the intention to impose liability is clear courts ought to have no hesitation in giving what we may call a common sense interpretation to the machinery sections so that the charge does not fail.
599 In the present case if we construe the words "on the basis of return" occurring in sub section (2) of section 7 of the Act as on the basis of a true and proper return which ought to have been filed under sub section (1) of section 7 then all the three classes of persons viz. (i) those who have not filed any return at all and who are later on found to be liable to be assessed, (ii) those who have filed a true return but have not deposited the full amount of tax which they are liable to pay and (iii) those who have filed a return making a wrong claim that either the whole or any part of the turnover is nat taxable and who are subsequently found to have made a wrong claim, would be placed in the same position and they would all be liable to ply interest on the amount of tax which they are liable to pay but have not paid as required by sub section (2) of section 7 of the Act.
We are of opinion that this view is in conformity with the legislative intention in enacting section 11B of the Act.
We have carefully gone through the decision of five learned judges of this Court in State of Rajasthan and Ors.
vs Ghasi Lal and we are humbly of opinion that it is distinguishable from the present case.
In Ghasi Lal case (supra), this Court was concerned with the question of sustainability of penalties imposed under the Act and not interest leviable under section 11B. The relevant facts in that case were these: Thee respondent therein who was a dealer within the meaning of the Act filed a writ petition in the High Court of Rajasthan challenging the making of assessment 13 on his turnover for the year 1955 56 on the ground that the Rules which had been published on March 28, 1955 were invalid.
On January 9, 1958 the High Court passed an interim order stating that "the petitioner will keep proper accounts and file the prescribed returns but shall not be assessed till further orders".
While the petition was pending in the High Court, ordinance No. 5 of 1959 was promulgated on November 6, 1959 validating the Rules.
Thereupon the respondent therein withdrew the writ petition.
On December 17, 1959, the Rajasthan Sales Tax Validation Act (Rajasthan Act 43 of 1959) replaced the Ordinance.
The effect of the ordinance and the Validation Act was to validate the Rules even if any defect existed in the making of the Rules.
On December 4, 1959, the Sales Tax Officer called upon the respondent therein to pay tax due by him within a week as the writ petition had been withdrawn and dismissed.
The respondent had filed his returns earlier and also had deposited certain amounts towards tax.
On April 25, 1960, the Sales Tax 600 Officer made an assessment in respect of the accounting period November 3, 1956 to October 22, 1957 and also proceeded to impose a penalty of Rs. 400/ under section 16(1) (b) of the Act.
Justifying the imposition of penalty, he observed thus: "The assessee has not deposited tax of the quarters on the due date, the tax deposited for 4th quarter is very late, i.e., after two years the assessee was given a notice and in reply to which he referred the stay order of the Hon 'ble High Court granted to him in a writ petition filed challenging the validity of sales tax rules made under the Act.
The stay order of the Hon 'ble High Court does not say that the assessee is allowed to withhold the tax.
On the contrary, it directs that the petitioner (assessee) will keep proper accounts and file prescribed returns but shall not be assessed.
This clearly shows that the assessee should have filed returns in time and according to section 7(2) the treasury challan of the deposit should have accompanied them.
This amounts to contravention of the mandatory provisions.
The writ was dismissed on 23 4 58 sic (23 11 59), even the amount was not deposited till 17 12 59.
This shows that the assessee withheld the tax intentionally".
The Deputy Commissioner of Sales Tax (Appeal), Kota dismissed the appeal upholding the above penalty.
Similarly on December 6, 1960, the Sales Tax Officer assessed the respondent in respect of accounting period October 23, 1957 to November 10, 1958 and imposed a penalty of Rs. 1,000/ for not depositing the tax in time on the same grounds.
The respondent questioned the penalties in respect of the aforesaid two years before the High Court.
The High Court quashed them.
Against the orders of the High Court, the State of Rajasthan filed two appeals which were disposed of by this Court by the judgment rendered in the above case.
The judgment of this Court depended upon the true construction of clause (b) section 16(1) of the Act which read: "16.(1) If any Person (a) . . . . . ; or (b) has without reasonable cause failed to pay the tax due within the time allowed; or 601 (c) has without reasonable cause failed to furnish the return of his turnover, or failed to furnish it within the time allowed; or . . . . the assessing authority may direct that such person shall pay by way of penalty, in the case referred to in clause (a) in addition to the fee payable by him, a sum not exceeding Rs. 50/ and in the case referred to in clause (b), in addition to the amount payable by him, a sum not exceeding half of that amount, and that in cases referred to in clauses (c) and (d), in addition to the tax payable by him, a sum not exceeding half the amount of tax, determined; in the case referred to in clause (e), in addition to the tax payable by him, a sum not exceeding double the amount of tax, if any which would have been avoided if taxable turnover as returned by such person had been accepted as correct turn over and in the cases referred to in clauses (f), (ff) and (g), a sum not exceeding Rs 100/ ".
Sikri, J. (as he then was) who delivered the judgment of this Court observed thus : "In our opinion, there has been no breach of section 16(1) (b) of the Act, and consequently, the orders imposing the penalties cannot be sustained.
According to the terms of section 16(1) (b), there must be a tax due and there must be a failure to pay the tax due within the time allowed.
There was some discussion before us as to the meaning of the words 'time allowed ', but we need not decide in this case whether the words 'time allowed ' connote time allowed by an assessing authority or time allowed by a provision in the Rules or the Act, or all these things, as we are of the view that no tax was due within the terms of section 16(1) (b) of the Act.
Section 3, the charging section, read with section 5 makes tax payable, i.e. creates a liability to pay the tax.
That is the normal function of a charging section in a taxing statute.
But till the tax payable is ascertained by the assessing authority under section 10, or by the assessee under section 7(2), no tax can be said to be due within section 16(1) (b) of the Act, for till then there is only a liability to be assessed to tax." (underlining by us).
A careful reading of the above passage shows that this Court held that section 16(1) (b), which provided for the imposition of 602 penalty when an assessee had without reasonable cause failed to pay the tax due within the time allowed, was not attracted as no tax was due, within the terms of section 16(1) (b) even though it was payable by virtue of section 3 read with section 5 of the Act.
Now section 11B (a) which provides for levying interest on failure to pay tax, states that if the amount of any tax payable under sub sections (2) and (2A) of section 7 is not paid within the period allowed the dealer shall be liable to pay interest at the prescribed rate during the time he continues to make default in the payments Section 11B(a) of the Act does not refer to any tax due.
At this stage it is necessary to refer to certain legislative changes that have taken place since the decision in Ghasilal 's case (supra) was delivered.
Section 16(1) (c) as it stood then has been amended and section 7AA providing for levy of penalty for failure to furnish returns has been inserted in the Act by Rajasthan Act 11 of 1969.
Section 7AA reads thus: "7AA.
Penalty for failure to furnish returns If the assessing authority in the course of any proceedings under this Act is satisfied that any dealer has without reasonable cause failed to furnish the return under sub section (1) of section 7 within the time allowed, he may direct that such dealer shall pay by way of penalty, in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent of the tax, for every month during which the default continued but not exceeding in the aggregate fifty per cent of the tax." Section 16(1) as it now stands does not deal with levy of penalty for not filing the prescribed return as it is provided by section 7AA set out above.
It is also to be pointed out that sub section (2A) was inserted in section 7 by Rajasthan Act 13 of 1963 providing that notwithstanding anything contained in sub section (2) of section 7 the State Government may by notification in the official Gazette require any dealer or class of dealers specified therein to pay tax at intervals shorter than those prescribed under section 7(1).
In such cases the proportionate tax on the basis of the last return has to be deposited at the intervals specified in the said notification in advance.
These features clearly show that the tax that is payable under section 3 read with section 5 of the Act has to be paid along 603 with the return within the time allowed for that purpose and if section 7(2) applies it has to be paid in advance at stated intervals.
Section 11B with which we are concerned was added by Rajasthan Act 11 of 1969.
Clause (a) of section 11 states that if the amount of any tax payable under sub sections (2) and (2A) of section 7 is not paid within the period allowed interest at the prescribed rate has to be paid on that amount from the day commencing after the end of the said period. 'Period allowed ' means period allowed by the Act and the Rules or such extended period under the proviso to section 7(1).
It is thus clear that in cases to which section 7(2) of the Act applies interest has to be paid on the tax payable but which has not been paid from the last date on which the return has to be filed for the assessment year in question and in cases to which subsection (2A) is applicable, from the last date on which the advance tax has to be paid.
The amount of interest has no doubt to be calculated after the actual amount of tax payable is assessed and necessary adjustments are made.
We do not think that in taking the above view we have in any way disregarded the decision in Ghasilal 's case (supra) in which the question of payment of interest under section 11B did not at all arise for consideration.
Our learned Brother Bhagwati, J. in his opinion while dealing with the applicability of section 11B(a) has observed that the scheme of taxation envisaged in the Act clearly shows that it is only when the assessment is made and specified in the notice of demand or in the absence of such specification thirty days from the date of service of such notice expires that the amount of tax as assessed becomes payable by an assessee.
With great respect, we have to state that we depend upon Ghasilal 's case (supra) itself to hold that for purposes of section 11B(a) the tax becomes payable before assessment is made by virtue of section 3 read with section 5 and sub sections (2) and (2A) of section 7 of the Act and the Rules framed thereunder, even though, it becomes due when return is filed under section 7(2) or ascertained under section 10.
That a tax can become payable even before assessment is also clear from the observations of Sikri, J. (as he then was) in Ghasilal 's case (supra) to the effect that "section 3, the charging section read with section 5, makes tax payable i.e. creates a liability to pay the tax .
But, till the tax payable is ascertained by the assessing authority under section 10 or by the assessee under section 7(2), no tax can be said to be due 604 within section 16(1) (b) of the Act for till then there is only a liability to be assessed to tax".
(emphasis added) We are of opinion that either by delaying the filing of the return or not filing it all or by filing a return wrongly claiming that a certain part of the turnover is not taxable or by not disclosing a part of the taxable turnover in the return an assessee cannot escape the liability to pay interest under section 11 B(a) on the amount of tax withheld, as a consequence of his own action or inaction, from the last date on which it had to be paid as per sub section (2) or sub section (2A) of section 7, as the case may be, read with the Rules.
An assessee cannot contend that interest does not accrue under section 11B(a) on the tax payable by him where the time to file the return has elapsed until he actually files a return admitting the liability to pay such tax or until assessment is made.
We are of the view that the statutory liability under section 11B(a) arises wherever there is default in payment of the tax within the period allowed by law irrespective of any doubt which an assessee may be entertaining about the liability to pay the tax.
It is not disputed in this case that freight charges had to be included in the taxable turnover of the assessee mentioned in the returns that were filed within the prescribed time under section 7(1) of the Act and that the tax payable in respect of freight charges should have been paid as required by sub section (2) of section 7 before the returns were filed.
The fact that the question relating to the liability of the assessee to pay sales tax in respect of the freight charges was decided by the Supreme Court subsequently does not in any way affect the question which arises for consideration in this case.
The decision of this Court did not create any new liability.
It only declared that such a liability was existing at the relevant point of time.
Since it is clear that the amount of tax due in respect of the freight charges which was payable under sub section (2) of section 7 was not paid within the period allowed, section 1 IB is clearly attracted and the liability to pay interest as required by it arises.
On behalf of the State Government, an alternative contention was urged in support of the levy of interest on the tax payable in 605 respect of the freight charges relying upon the new section 11 which was substituted by the Rajasthan Sales Tax (Amendment) Act, 1979 in the place of section 11 which was in force during the relevant period.
The relevant part of the new section 11B reads thus: "11B Interest on failure to pay tax, fee or penalty .
(1) (a) Where any registered dealer or any other dealer has furnished returns but has not paid the tax as per return or within the time allowed by or under the provisions of this Act, he shall be liable to pay interest on the whole or that part of the amount of tax which was not paid as per returns within the time as aforesaid, at the rate of one and a quarter per cent per month from the date by which he was required to pay the tax by or under the provisions of this Act for a period of three months and at one and a half per cent per month thereafter until the date of payment: (b) Where any registered dealer or any other dealer has furnished a revised return as provided under sub section (3) of section 7, which revised return shows that amount of tax larger than that already paid is payable, such dealer shall be liable to pay interest on the excess amount of tax at such rate and for such period as provided in clause (a) of this sub section as if such amount of tax payable as per the revised return was the amount of tax payable according to the original return; . . . lt was contended that as clauses (a) and (b) of sub section (1) of section 11B extracted above were declaratory in character and merely explained what the Legislature meant by enacting section 11B as it stood before the substitution, the assessee was liable to pay interest on the amount of tax payable in respect of freight charges under clause (b) of sub section (1) of the new section 11B. Since we are of the view that the assessee was liable to pay interest on the tax in question under section 11B of the Act as it stood prior to tile amendment, we do not find it necessary to express any opinion on this alternative contention urged on behalf of the State Government.
In the result, we allow the appeal in part and set aside the impugned orders to the extent they direct the assessee to pay the penalties.
The appeal in so far as the levy of interest under the impugned orders is concerned is dismissed.
In view of the circumstances of the case, the parties shall pay and bear their own costs.
606 ORDER In accordance with the opinion of the majority, the appeal is allowed in part.
The penalties imposed on the assessee under the impugned orders of assessment are set aside.
The appeal in so far as the levy of interest is concerned is dismissed.
The parties shall bear their own costs.
| IN-Abs | The appellant assessee a company manufactured cement which was sold partly in the State of Rajasthan and partly outside the State.
The sales tax returns relating to the sales were filed by the assessee under the Rajasthan Sales Tax Act, 1954 and under the before the Assessing Authority for the period August 1, 1973 to July 31, 1974 i.e. for the assessment year 1974 75.
In those returns the assessee did not include in the taxable turnover the freight charges paid in respect of the goods sold under the bonafide impression that freight charges were not to be so includible in the taxable turnover in view of certain decisions rendered by the High Courts and the Supreme Court.
The Supreme Court on August 29, 1978 In Sugar Mills Limited vs State of Rajasthan and others held that freight charges formed part of the sale price and were includible in the taxable turn over of an assessee and that sales tax was payable thereon.
Coming to know of the aforesaid decision the assessee prepared and filed the revised returns in respect of the assessment year 1974 75 before the Commercial Tax officer on October 20, 1978 including freight charges in the turn over and also deposited along with the revised returns, challans showing payment of the balance of the tax payable under the State Act as well as under the Central Act.
The assessing authority passed two orders of assessment one under section 10(3) of the State Act and the other under section 9 of the Central Act.
The former order of assessment levied a penalty of Rs. 53,353 under section 7AA of the State Act on account of the delay in depositing the sales tax payable in respect of the amount of freight charges and also levied interest of Rs. 85910/under section 11B of the State Act.
In the latter order of assessment a penalty of Rs. 1,34,205/ was levied under section 7AA of the State Act read with section 9(2) of the Central Act for the delay in depositing the tax payable in respect of the freight charges, and interest of Rs. 2,07,174/ was levied under section 11 of the State Act read with section 9(2) of the Central Act, 564 In the appeals to this Court on the question whether: (A) the Assessing Authority was right in imposing penalty on the assessee under the two assessment orders for not depositing the tax in respect of the amount of freight at the time of filing of the original returns under the State Act and the Central Act, and (B) the assessee was liable under section 11B of the State Act to pay interest on the tax in respect of the amount of freight for the period between the date of filing of the original return and the date when such tax was actually paid while filing the revised return.
^ HELD: [By The Court] (A) The levy of penalties for not including the freight charges in the taxable turnover in the original returns and for not paying the tax in respect of such freight charges is unsustainable and the two orders of assessment in so far as they levy penalty are liable to be quashed and set aside.
[571 B, 589 B] Cement Marketing Company of India Limited vs Commissioner of Sales Tax Indore ; referred to.
[per Bhagwati J. dissenting] B(1) So long as the assessee pays the amount of tax which according to him is due on the basis of the return filed by him, there would be no default on his part in complying with the obligation under sub section (2) of section 7 and there would be no liability on him to pay interest under section 11B clause (a), because he would have paid the amount of tax quantified by him through the process of self assessment.
The actual amount of tax payable by the assessee would be determined only when it is assessed by the Assessing Authority under section 10 and that would not be payable until the expiration of the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be.
[584 D E] (2) Since the assessee deposited the amounts of tax which according to him were due on the basis of the returns actually filed by him and the returns were accompanied by receipts showing deposit of such amounts of tax, there was no default on the part of the assessee in paying the amounts of tax payable under sub section (2) of section 7 within the actual period allowed and in the circumstances no interest was payable by the assessee under section 11B clause (a).
[586 F G] State of Rajasthan vs Ghasi Lal ; relied on.
When the assessment, is made and the tax payable by an assessee is determined, the tax so determined does not become payable until after a notice of demand is served by the Assessing Authority under section 11 sub section (2) read with Rule 31 of the Rajasthan Sales Tax Rules 1955.
The assessee is allowed time to make payment up to the date specified in the notice of demand and if no such date is specified, then within thirty days from the date of service of the notice.
So long the assessee pays up the amount of the tax assessed within the time specified in the notice of demand or within thirty days from the date of service of the notice, as the case may be, he would not be in default and hence 565 section 11B clause (b) provides that the assessee would be liable to pay interest on the tax assessed only if the amount of such tax is not paid within the period specified in the notice of demand or in the absence of such specification, within thirty days from the date Of service of such notice and then too, the liability to pay interest would commence not from the date of the assessment, but from the day commencing after the end of the said period, that is, the period specified in the notice of demand or thirty days from the date of service of such notice, as the case may be.
Thus even after the assessment is made and the tax payable by an assessee is determined, the assessee is not liable to pay interest on the amount of such tax until after the period specified in the notice of demand or in the absence such specification, thirty days From the date of service of such notice, have expired.
[574 D H] 4.
The language used in sub section (2) of section 7 is "full amount of tax due on the basis of return".
The "return" is the return Sled by the assessee under sub section (1) of section 7.
When sub section (1) of section 7 requires an assessee to file a return, the return filed must be correct and proper.
If the return is not correct and proper, the Assessing Authority may not give credence to the return and may refuse to assess the tax on the basis of the return and if the Assessing Authority finds that the assessee has concealed any particulars from the return furnished by him or has deliberately furnished inadequate particulars in the return the Assessing Authority may levy penalty on the assessee under section 16, sub section (1) clause (e) and the assessee may also be liable to be punished for an offence under Section 16, sub section (3) clause (d) for making a false statement in the return.
Whether the return filed be correct or not, the tax payable by the assessee under sub section (2) of section 7 would be the full amount of tax due on the basis of the return.
The return actually filed by the assessee must be looked into in order to see what is the full amount of tax duo on the basis of such return.
It is not the assessed tax nor is it the tax due on the basis of a return which ought to have been filed by the assessee but it is the tax due according to the return actually filed that is payable under sub section (2) of section 7.
This provision is really in the nature of self assessment and what it requires is that whatever be the amount of tax due on the basis of self assessment must be paid up along with the filing of the return which constitutes self assessment.
The plain words of sub section (2) of section 7 cannot be tortured to mean full amount of tax due on the basis of return which ought to have been filed but which has not been filed.
[576 B F] 5.
The legislature could never have intended that the assessee should be liable on pain of imposition of penalty, to deposit an amount which is yet to be ascertained through assessment.
How would the assessee know in advance what view the Assessing Authority would take in regard to the taxability of any particular category of sales or the rate of tax applicable to them and deposit the amount of tax on that basis ? Even in regard to the liability to pay interest, it does not stand to reason that the legislature should have subjected the assessee to such liability for non payment of an amount of which the liability for payment is still to be ascertained.
[577 F G] 6.
The tax payable under sub section (2) of section 7 dealt with in clause (a) of section 11B cannot, be equated with the amount of the tax assessed forming the subject matter of clause (b) of section 11B and hence it must 566 be tax due on the basis of the return actually filed by the assessee and not on the basis of a correct and proper return which ought to have been filed by him.
[578 G H] 7.
The scheme of taxation envisaged in the State Act clearly shows that it is only when the assessment is made and the period specified in the notice of demand or in the absence of such specification, thirty days from the date of service of such notice expires, that the amount of tax as assessed becomes payable by the assessee and its payment can be enforced by the Revenue.
What becomes payable by the assessee under sub section (2) of section 7 is merely the tax due on the basis of the return actually filed by the assessee that is, on the basis of self assessment.
[579 F G] 8.
On a true construction of the provisions of the State Act tax becomes due from the assessee and is payable by him only when it is ascertained by the Assessing Authority under section 10 or by the assessee under section 7(2).
Till then there is only the liability of the assessee to be assessed to tax and no tax can be said to be payable by the assessee.
The tax payable is ascertained when the assessment is made by the Assessing Authority under section 10 or when the assessee himself quantifies it through the process of self assessment under subsection (2) of section 7.
These two amounts of tax may and in quite a number of cases would be different because one is ascertained by the Assessing Authority through the process of assessment and that is why sub section (4) of section 7 provides that every deposit of tax made under sub section (2) shall be deemed to be provisional subject to necessary adjustments in pursuance of final assessment of tax made under section 10.
This provision clearly contemplates that the tax payable under sub section (2) of section 7 may be different from the tax assessed under section 10 and it cannot, therefore, obviously be the tax due on the basis of a correct and proper return but must be the tax due on the basis of the return actually filed.
[580 D G] 9(i) it is clear from the language of subsection (2) of section 7 that it is only on the filing of the return that the liability to pay the tax due on the basis of the return arises.
If no return is filed within the prescribed time, it would undoubtedly constitute a default attracting penalty under section 16, sub section (1) clause (n) but there would be no liability on the assessee to pay interest on the amount of the tax, because the liability to pay the tax due on the basis of the return under sub section (2) of section 7 can arise only when the return is filed There is no liability on the assessee to pay any amount by way of tax until the return is filed or the assessment is made.
[581 H 582 B] (ii) It can neither be held that section 7 sub section (2) is attracted even when no return has been filed.
It is clear that until the assessee files a return or assessment is made, no tax is payable by the assessee, because till then there is only a liability to be assessed to tax.
The conclusion that a registered dealer who does not file any return at all as required by sub section (1) of section 7 would still be liable to pay the amount of tax and if he does not pay the same before the due date for filing the return, he would be liable to pay interest under section 11(b) clause (a) cannot be accepted.
This would be contrary to the decision of this Court in State of Rajasthan vs Ghasi Lal [ ; [582 C F] 567 [per A.P. Sen and Venkataramiah, JJ] B(1).
The statutory liability under section 11B arises wherever there is default in payment of the tax within the period allowed by law irrespective of any doubt which an assessee may be entertaining about the liability to pay the tax.
[604 D E] State of Rajasthan vs Ghasi Lal ; distinguished.
Tax, interest and penalty are three different concepts.
Tax becomes payable by an assessee by virtue of the charging provision in a taxing statute.
Penalty ordinarily becomes payable when it is found that an assessee has willfully violated any of the provisions of the taxing statute.
Interest is ordinarily claimed from an assessee who has withheld payment of any tax payable by him and it is always calculated at the prescribed rate on the basis of the actual amount of tax withheld and the extent of delay in paying it.
It may not be wrong to say that such interest is compensatory In character and not penal.
[594 D F] 3.
Registered dealers can be classified into the following different classes: (1) A registered dealer who files his return showing a higher taxable turnover than the actual turnover which is ultimately found to be taxable at the time of regular assessment and who pays tax under section 7(2) of the Act on the basis of the return.
(2) A registered dealer who files a true and proper return and pays tax on the basis of such return within the time allowed.
A registered dealer who does not file any return at all as required by section 7(1) and pays no tax under section 7(2) of the Act.
A registered dealer who files a true return but does not pay the full amount of tax as required by section 7(2), and; (5) A registered dealer who files a return but wrongly claims either the whole or any part of the turnover as not taxable and pays under section 7(2) of the Act that amount of tax, which according to him is payable, on the basis of the return.
In the case of a registered dealer falling under class (1) no question of payment of interest would arise as the amount of tax paid by him at the time of filing the return is much more than what is actually due and payable by him under the Act.
The extra tax paid by him becomes refundable after the regular assessment is completed in view of section 7(4) of the Act.
In the case of a registered dealer falling under clause (2) also no question of payment of interest arises as there is no shortfall in payment of the tax.
[594 F 595D] 4.
A fair reading of section 11 of the Act suggests that the Act expects that all assessees who are liable to pay sales tax should file a true return within the period prescribed under sub section (1) of section 7 and should produce a treasury receipt or a receipt of any bank authorised to receive money on behalf of the State Government showing that full amount of tax due from them has been paid.
[595 H 596 A ] 5.
It is settled law that a distinction has to be made by court while interpreting the provisions of a taxing statute between charging provisions which impose the charge to tax and machinery provisions which provide the machinery for the quantification of the tax and the levying and collection of the tax so imposed.
While charging provisions are construed strictly, machinery sections are not generally subject to a rigorous construction.
The courts are 568 expected to construe the machinery sections in such a manner that a charge to tax is not defeated.
[596 C D] India United Mills Ltd. vs Commissioner of Excess Profits Tax, Bombay ; , Gursahai Saigal vs Commissioner of Income tax Punjab ; Commissioner of Income tax vs Mahaliram Ramjidas, A.I.R. and Whitney vs Commissioners of Inland Revenue , referred to.
If the words 'on the basis of return ' occurring in sub section (2) of section 7 of the Act are construed as on The basis of a true and proper return which ought to have been filed under sub section (1) of section 7 then all the three classes of persons viz (i) those who have not filed any return at all and who are later on found to be liable to be assessed, (ii) those who have filed a true return but have not deposited the full amount of tax which they are liable to pay and (iii) those who filed a return making a wrong claim that either the whole or any part of the turnover is not taxable and who are subsequently found to have made a wrong claim, would be placed in the same position and they would all be liable to pay interest on the amount of tax which they are liable to pay but have not paid as required by sub section (2) of section 7 of the Act.
This view is in conformity with the legislative intention in enacting section 11B of the Act [599 A C] 7.
In cases to which section 7(2) of the Act applies interest has to be paid on the tax payable but which has not been paid from the last date on which the return has to be filed for the assessment year in question and in cases to which sub section (2A) is applicable, from the last date on which the advance tax has to be paid.
The amount of interest has however to be calculated after the actual amount of tax payable is assessed and necessary adjustments are made.
[609 B C] 8.
Either by delaying the filing of the return or not filing it all or by filing a return wrongly claiming that a certain part of the turnover is not taxable or by not disclosing a part of the taxable turnover in the return an assessee cannot escape the liability to pay interest under section 11B on the amount of tax with held, as a consequence of his own action or inaction, from the last date on which it had to be paid as per sub section (2) or sub section (2A) of section 7, as the case may be, read with the Rules.
An assessee cannot contend that interest does not accrue under section 11B on the tax payable by him where the time to file the return has elapsed until the actually files a return admitting the liability to pay such talc or until assessment is made.
[604 B D]
|
Civil Appeal No. 412(NT) of 1973 From the judgment and order dated the 5th July, 1972 of the Kerala High Court at Ernakulam in Writ Appeal No. 127 of 1970.
M. M. Abdul Khadher, S.K. Mehta, E.M.S. Anam, P.N.Puri and M.K Dua for the appellant.
S.T. Desai and Miss A. Subhashini for the respondent Anil B. Diwan, Dinesh Vyas, P.H. Parekh and R.N. Karanjawala for the intervener.
section Swaminathan, N. Srinivasan and Gopal Subramaniam for the intervener.
Debi Pal, Praveen Kumar and A.R. Sharma for the intervener.
K.R. Kazi and S.C. Patel for the intervener.
N.A. Palkhiwala, P.H. Parekh, J.B. Dadachanji, H. Salve and Ravinder Narain for interveners.
S.C. Patel for the intervener.
J.B. Dadachanji for the intervener.
B.K Mohanty and C.S. Rao for the intervener.
P.A. Francis and M.N. Shroff for the intervener.
The Judgment of the Court was delivered by BHAGWATI, J.
The principal question that arises for deter 636 mination in this appeal by certificate is whether understatement of consideration in a transfer of property is a necessary condition for attracting the applicability of section 52 sub section (2) of the Income Tax Act 1961 (hereinafter referred as the Act) or it is enough for the Revenue to show that the fair market value of the property as on the date of the transfer exceeds the full value of the consideration declared by the assessee in respect of the transfer by an amount of not less than 15% of the value so declared.
The facts giving rise to the appeal are not very material but since they from the backdrop against which the question arises for consideration, we may briefly state them.
The assessee was the owner of a house situated in Ernakulam, which he had purchased in 1958 for the price of Rs. 16,500.
On 25th December 1965 the assessee sold the house for the same price of Rs. 16,500 to his daughter in law and five of his children.
The assessment of the assessee for the assessment year 1966 67 for which the relevant accounting year was the calendar year 1965 was thereafter completed m the normal course and in this assessment, no amount was included by way of capital gains in respect of the transfer of the house since the house was sold by the assessee at the same price at which it was purchased and no capital gains accrued or arose to him as a result of the transfer.
On 4th April 1968 however the Income tax officer issued a notice under section 148 of the Act seeking to reopen the assessment of the assessee for the assessment year 1966 67 and requiring the assessee to submit a return of income within thirty days of the service of the notice.
The notice did not state what was the income alleged to have escaped assessment but by his subsequent letter dated 4th March 1969 the Income tax officer intimated to the assessee that he proposed to fix the fair market value of the house sold by the assessee on 25th December 1965 at Rs. 65,000 as against the consideration of Rs. 16,500 for which the house was sold and assess the difference of Rs. 48,500 as capital gains in the hands of the assessee.
The assessee raised objections against the reassessment proposed to be made by the Income tax officer but the objections were over ruled and an order of reassessment was passed by the Income tax officer including the sum of Rs. 48,500 as capital gains and bringing it to tax.
Though the sale of the house by the assessee was in favour of his daughter in law and five of his children who were persons directly connected with him, the Income tax officer could not invoke the aid of section 52 sub section (1) for bringing the sum of 637 Rs. 48,500 to tax, because there was admittedly no under statement A of consideration in respect of the transfer of the house and it was not possible to say that the transfer was effected by the assessee with the object of avoidance or reduction of his liability under section 45.
The Income tax officer therefore rested his decision to assess the sum of Rs. 48,500 to tax on sub section (2) of section 52 and taking the view that this sub section did not require as a condition precedent that there should be under statement of consideration in respect of the transfer and it was enough to attract the applicability of the sub section if the fair market value of the property as on the date of the transfer exceeded the full value of the consideration declared by the assessee by an amount of not less than 15% of the value so declared, which was indisputably the position in the present case, the Income tax officer assessed the sum of Rs. 48,500 to tax as capital gains.
The assessee thereupon preferred a writ petition in Kerala High Court challenging the validity of the order of reassessment in so far as it brought the sum of Rs. 48,500 to tax relying on section 52 sub section (2) of the Act.
D The writ petition came up for hearing before Isaacs J. sitting as a single Judge of the High Court and after hearing both parties, the learned Judge came to the conclusion that under statement of consideration in respect of the transfer was a necessary condition for attracting the applicability of section 52 sub section (2) and since in the present case there was admittedly no under statement of consideration and it was a perfectly bonafide transaction, section 52 sub section (2) had no application and the sum of Rs. 48,500 could not be brought to tax as capital gains under that provision.
The Revenue appealed against this decision to a Division Bench of the High Court and having regard to the importance and complexity of the question involved, the Division Bench referred the appeal to a Full Bench of three Judges.
The Full Bench heard the appeal but there was a division of opinion, two Judges taking one view and the third Judge taking another.
While Raghvan C.J. agreed substantially with the view taken by Isaacs J., Gopalan Nambiar J. and Vishwanath Iyer J. took a different view and held that in order to bring a case within section 52 sub section (2), it is not at all necessary that there should be under statement of consideration in respect of the transfer and once it is found that the fair market value of the property as on the date of the transfer exceeds the full value of the consideration declared by the assessee in respect of the transfer by 638 an amount of not less than 15% of the value so declared, section 52 sub section (2) is straightaway attracted and the fair market value of the property as on the date of the transfer is liable to be taken as the full value of the consideration for the transfer.
The writ petition was accordingly dismissed and the order of re assessment sustained by the majority decision reached by the Full Bench.
Hence the present appeal by the assessee with certificate obtained from the High Court.
It will be noticed from the above statement of facts that the principal question arising for determination in this appeal turns on the true interpretation of section 52 sub section (2).
But in order to arrive at its proper interpretation, it is necessary to refer to some other provisions of the Act as well.
Section 2 clause (24) defines the word 'income '.
The definition is inclusive and covers 'capital gains ' chargeable under section 45.
Section 4 is the charging section and it provides that income tax shall be charged in respect of the total income of the previous year of every person.
Section 5 defines the scope of 'total income ' by providing that the total income of the previous year of a person who is resident shall include all income from whatever source derived which is received or is deemed to be received in India in such year by him or on his behalf or accrues or arises or is deemed to accrue or arise to him in India during such year or accrues or arises to him outside India during such year.
Section 14 enumerates the heads of income under which income shall, for the purposes of charge of income tax and computation of total income, be classified and they includes capital gains".
Section 45 provides that any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income tax under the head "capital gains" and shall be deemed to be the income of the previous year in which the transfer took place.
The mode of computation of capital gains is laid down in section 48 which provides that the income chargeable under the head "capital gains" shall be computed by deducting from the full value of the consideration received or accruing as a result of the & transfer of the capital asset, two amounts, namely, (i) expenditure incurred wholly and exclusively in connection with such transfer and (ii) the cost of acquisition of the capital asset and the cost of any improvement thereto.
Then follows section 52 which is the material section requiring to be construed in the present appeal.
That section consists of two sub sections and runs as follows: 639 (1) Where the person who acquires a capital asset from an assessee is directly or indirectly connected with the assessee and the Income tax officer has reason to believe that the transfer was effected with the object of avoidance or reduction of the liability of the assessee under section 45, the full value of the consideration for the transfer shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be the fair market value of the capital asset on the date of the transfer.
(2) Without prejudice to the provisions of sub section (1), if in the opinion of the Income tax officer the fair market value of a capital asset transferred by an assessee as on the date of the transfer exceeds the full value of the consideration declared by the assessee in respect of the transfer of such capital assets by an amount of not less than fifteen per cent of the value declared, the full value of the consideration for such capital asset shall, with the previous approval of the Inspecting Assistant Commissioner, be taken to be its fair market value on the date of its transfer.
There is a marginal note to section 52 which reads: Consideration for transfer in cases of under statement".
It may be pointed out that originally when the Act came to be enacted, section 52 consisted of only one provision which is now numbered as sub section (I) and it was by section 13 of the Finance Act 1964 that sub section (2) was added in that section with effect from 1st April 1964.
Now on these provisions the question arises what is the true interpretation of section 52, sub section (2).
The argument of the Revenue was and this argument found favour with the majority Judges of the Full Bench that on a plain natural construction of the language of section 52, sub section (2), the only condition for attracting the applicability of that provision is that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared by the assessee in respect of the transfer by an amount of not less than 15% of the value so declared.
Once the Income tax officer is satisfied that this condition exists, he can proceed to 640 invoke the provision in section 52 sub section (2) and take the fair market value of the capital asset transferred by the assessee as on the date of the transfer as representing the full value of the consideration for the transfer of the capital asset and compute the capital gains on that basis.
No more is necessary to be proved, contended the Revenue.
To introduce any further condition such as understatement of consideration in respect of the transfer would be to read into the statutory provision something which is not there: indeed it would amount to rewriting the section.
This argument was based on a strictly literal reading of section 52 sub section (2 but we do not think such a construction can be accepted.
It ignores several vital considerations which must always be borne in mind when we are interpreting a statutory provision.
The task of interpretation of a statutory enactment is not a mechanical task.
It is more than a mere reading of mathematical formulae because few words possess the precision of mathematical symbols.
It is an attempt to discover the intent of the legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for the expression of human thought and as pointed out by Lord Denning, it would be idle to expect every statutory provision to be "drafted with divine prescience and perfect clarity.
" We can do no better than repeat the famous words of Judge Learned Hand when he said: " it is true that the words used, even in their literal sense, are the primary and ordinarily the most reliable, source of interpreting the meaning of any writing: be it a statute, a contract or anything else.
But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning.
" We must not adopt a strictly literal interpretation of section 52 sub section (2) but we must construe its language having regard to the object and purpose which the legislature had in view in enacting that provision and in the context of the setting in which it occurs.
We cannot ignore the context and the collocation of the provisions in which section 52 sub section (2) appears, because, as pointed out by Judge Learned Hand in most I felicitous language the meaning of a sentence may be more than that of the separate words as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create".
Keeping these observations in mind we may now approach the construction of section 52 sub section (2).
641 The primary objection against the literal constriction of section 52 sub section (2) is that it leads to manifestly unreasonable and absurd consequences.
It is true that the consequences of a suggested construction cannot alter the meaning of a statutory provision but they can certainly help to fix its meaning.
It is a well recognised rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided.
There are many situations where the construction suggested on behalf of the Revenue would lead to a wholly unreasonable result which could never have been intended by the legislature.
Take, for example, a case where A agrees to sell his property to for a certain price and before the sale is completed pursuant to the agreement and it is quite well known that sometimes the competition of the sale may take place even a couple of years after the date of the agreement the market price shoots up with the result that the market price prevailing on the date of the sale exceeds the agreed price at which the property is sold by more than 15% of such agreed price.
This is not at all an uncommon case in an economy of rising prices and in fact we would find in a large number 1 of cases where the sale is completed more than a year or two after the date of the agreement that the market price prevailing on the date of the sale is very much more than the price at which the property is sold under the agreement.
Can it be contended with any degree of fairness and justice that in such cases, where there is clearly no under statement of consideration in respect of the transfer and the transaction is perfectly honest and bonafide and, in fact, in fulfilment of a contractual obligation, the assessee who has sold the property should be liable to pay tax on capital gains which have not accrued or arisen to him.
It would indeed be most harsh and inequitable to tax the assessee on income which has neither arisen to him nor is received by him, merely because he has carried out the contractual obligation under taken by him.
It is difficult to conceive of any rational reason why the legislature should have thought it fit to impose liability to tax on an assessee who is bound by law to carry out his contractual obligation to sell the property at the agreed price and honestly carries out such contractual obligation.
It would indeed be strange if obedience to the law should attract the levy of tax on income which has neither arisen to the assessee nor has been received by him.
If we may take another illustration, let us consider a case where A sells his property to with a stipulation that after some time which may be a couple of years or more, he shall resell the property to A for the same price.
642 could it be contended in such a case that when transfers the property to A for the same price at which he originally purchased it, he should be liable to pay tax on the basis as if he has received the market value of the property as on the date of resale, if, in the meanwhile, the market price has shot up and exceeds the agreed price by more than 15% Many other similar situations can be contemplated where it would be absurd and unreasonable to apply section 52 sub section (2) according to its strict literal construction.
We must therefore eschew literalness in the interpretation of section 52 sub section (2) and try to arrive at an interpretation which avoids this absurdity and mischief and makes the provision rational and sensible, unless of course, our hands are tied and we cannot find any escape from the tyranny of the literal interpretation.
It is now a well settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the court may modify the language used by the legislature or even 'do some violence ' to it, so as to achieve the obvious intention of the legislature and produce a rational construction, Vide: Luke Inland Revenue Commissioner(1) The Court may also in such a case read into the statutory provision a condition which, though not expressed, is implicit as constituting the basic assumption underlying the statutory provision.
We think that, having regard to this well recognised rule of interpretation, a fair and reasonable construction of section 52 sub section (2) would be to read into it a condition that it would apply only where the consideration for the transfer is under stated or in other words, the assessee has actually received a larger consideration for the transfer than what is declared in the instrument of transfer and it would have no application in case of a bonafinde transaction where the full value of the consideration for the transfer is correctly declared by the assessee.
There are several important considerations which incline us to accept this construction of section 52 sub section (2).
The first consideration to which we must refer is the object and purpose of the enactment of section 52 sub section (2).
Prior to the introduction of sub section (2), section 52 consisted only of what is now sub section (1).
This sub section provides that where an assessee transfers a capital asset and in respect of the transfer two conditions are satisfied ' namely, (1) the transferee is a person directly or indirectly connected with the assessee and (ii) the 643 Income tax officer has reason to believe that the transfer was effected A with the object of avoidance or reduction of the liability of the assessee to tax on capital gains, the fair market value of the capital asset on the date of the transfer shall be taken to be the full value of consideration for the transfer and the assessee shall be taxed on capital gains on that basis.
The second condition obviously involves under statement of the consideration in respect of the transfer because it is only by showing the consideration for the transfer at a lesser figure than that actually received that the assessee can achieve the object of avoiding or reducing his liability to tax on capital gains.
And that is why the marginal note to section 52 reads: "Consideration for the transfer in cases of under statement ' '.
But, it must be noticed that for the purpose of bringing a case within sub section (1), it is not enough merely to show understatement of consideration but it must be further shown that the object of the under statement was to avoid or reduce the liability of the assessee to tax on capital gains.
Now it is necessary to bear in mind that when capital gains are computed by invoking sub section (I) it is not any fictional accrual or receipt of income which is brought to tax.
Sub section (I) does not deem income to accrue or to be received which in fact never accrued or was never received.
It seeks to bring within the net of taxation only that income which has accrued or is received by the assessee as a result of the capital asset.
But since the actual consideration received by the assessee is not declared or disclosed and in most of the cases, if not all, it would not be possible for the Income tax officer to determine precisely what is actual consideration received by the assessee or in other words how much m ore consideration is received by the assessee than that declared by him, sub section (1) provides that the fair market value of the property as on the date of the transfer shall be taken to be the full value of the consideration for the transfer which has accrued to or is received by the assessee.
Once it is found that the consideration in respect of the transfer is understated and the conditions specified in sub section (1) are fulfilled, the Income tax Officer will not be called upon to prove the precise extent of the undervaluation or in other words, the actual extent of the concealment and the full value of the consideration received for the transfer shall be computed in the manner provided in subsection (1).
The net effect of this provision is as if a statutory best judgment assessment of the actual consideration received by the assessee is made, in the absence of reliable materials.
644 But the scope of sub section (1) of section 52 is extremely restricted because it applies only where the transferee is a person directly or indirectly connected with the assessee and the object of the under statement is to avoid or reduce the income tax liability of the assessee to tax on capital gains.
There may be cases where the consideration for the transfer is shown at a lesser figure than that actually received by the assessee but the transferee is not a person directly or indirectly connected with the assessee or the object of under statement of the consideration is unconnected with tax on capital gains.
Such cases would not be within the reach of sub section (1) and the assessee, though dishonest, would escape the rigour of the provision enacted in that sub section.
Parliament therefore enacted sub section (2) with a view to extending the coverage of the provision in sub section (I) to other cases of under statement of consideration.
This becomes clear if we have regard to the object and purpose of the introduction of sub section (2) as appearing from travaux preparatoire relating to the enactment of that provision.
It is a sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon 's case(1) was decided that". for the sure and true interpretation of all statutes in general four things are to be discerned and considered: (1) What was the common law before the making of the Act, (2) What was the mischief and defect for which the common law did not provide, (3) What remedy the Parliament hath resolved and appointed to cure the disease of the Commonwealth, and (4) The true reason of the remedy, and then the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy".
In in re Mayfair Property Company(2) Lindley.
M.R. in 1898 found the rule "as necessary now as it was when Lord Coke reported Heydon 's case".
The rule was reaffirmed by Earl of Halsbury in Eastman Photographic Material Company vs Comptroller General of Patents, Designs and Trade Marks(3) in the following words.
"My Lords, it appears to me that to construe the Statute in question, it is not only legitimate but highly convenient to refer both to the former Act and to the ascertained evils to which the former Act had given rise, and to 645 the later Act which provided the remedy.
These three being A compared I cannot doubt the conclusion.
" This Rule being a Rule of construction has been repeatedly applied in India in interpreting statutory provisions.
It would therefore be legitimate in interpreting sub section (2) to consider that was the mischief and defect for which section 52 as it then stood did not provide and which was sought to be remedied by the enactment of sub section (2) or in other words, what was the object and purpose of enacting that sub section.
Now in this connection the speech made by the Finance Minister while moving the amendment introducing sub section (2) is extremely relevant, as it throws considerable light on the object and purpose of the enactment or sub section (2).
The Finance Minister explained the reason for introducing sub section (2) in the following words: "Today, particularly every transaction of the sale of property is for a much lower figure than what is actually received.
The deed of registration mentions a particular amount; the actual money that passes is considerably more.
It is to deal with these classes of sales that this amendment has been drafted It does not aim at perfectly bona fide transactions. but essentially relates to the day to day occurrences that are happening before our eyes in regard to the transfer of property.
I think, this is one of the key sections that should help us to defeat the free play of unaccounted money and cheating of the Government.
" Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred t o for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted.
This is in accord with the recent trend in juristic thought not only in Western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible.
In fact there are at least 646 three decisions of this Court, one in Loka Shikshana Trust vs Commissioner of Income Tax(1) the other in Indian Chamber of Commerce vs Commissioner of Income tax(2) and the third in Additional Commissioner of Income tax vs Surat Art Silk Cloth Manufacturers Association(3) where the speech made by the Finance Minister while introducing the exclusionary clause in section 2 clause (15) of the Act was relied upon by the Court for the purpose of ascertaining what was the reason for introducing that clause.
The speech made by the Finance Minister while moving the amendment introducing sub section (2) clearly states what were the circumstances in which sub section (2) came to be passed, what was the mischief for which section 52 as it then stood did not provide and which was sought to be remedied by the enactment of sub section (2) and why the enactment of sub section (2) was found necessary.
It is apparent from the speech of the Finance Minister that sub section(2) was enacted for the purpose of reaching those cases where there was under statement of consideration in respect of the transfer or to put it differently, the actual consideration received for the transfer was 'considerably more ' than that declared or shown by the assessee, but which were not covered by sub section (1) because the transferee was not directly or indirectly connected with the assessee.
The object and purpose of sub section (2), as explicated from the speech of the Finance Minister, was not to strike at honest and bonafide transactions where the consideration for the transfer was correctly 13: disclosed by the assessee but to bring within the net of taxation those transactions where the consideration in respect of the transfer was shown at a lesser figure than that actually received by the assessee, so that they do not escape the charge of tax on capital gains by under statement of the consideration.
This was real object and purpose of the enactment of sub section (2) and the interpretation of this sub section must fall in line with the advancement of that object and purpose.
We must therefore accept as the underlying assumption of sub section (2) that there is under statement of consideration in respect of the transfer and sub section (2) applies only where the actual consideration received by the assessee is not disclosed and the consideration declared in respect of the transfer is shown at a lesser figure than that actually received.
647 This interpretation of sub section (2) i strongly supported by A the marginal note to section 52 which reads 'Consideration for transfer in cases of under statement '.
It is undoubtedly true that the marginal note to a section cannot be referred to for the purpose of construing the section but it can certainly be relied upon as indicating the drift of the section or, to use the words of Collins MR in Bushel vs Hammond(l) to show what the section is dealing with.
It cannot control the interpretation of the words of a section particularly when the language of the section is clear and unambiguous but, being part of the statute, it prima facie furnishes some clue as to the meaning and purpose of the section.
Vide Bengal Immunty Company Limited vs State of Bihar(2) The marginal note to section 52.
as it now stands, was originally a marginal note only to what is presently sub section (I) and significantly enough, this marginal note remained unchanged even after the introduction of sub section (2) suggesting clearly that it was meant by Parliament to apply to both sub sections of section 52 and it must therefore be taken as indicating that, like sub section (1), sub section (2) is also intended to deal with cases where there is under statement of the consideration in respect of the transfer.
But apart from these considerations, the placement of subsection (2) in section 52 does indicate in some small measure that Parliament intended that sub section to apply only to cases where the consideration in respect of the transfer is under stated by the assessee.
It is not altogether without significance that the provision in sub section (2) was enacted by Parliament not as a separate section, but as part of section 52 which, as it originally stood, dealt only with cases of under statement of consideration.
If Parliament intended sub section (2) to cover all cases where the condition of 15% difference is satisfied, irrespective of whether there is understatement of consideration or not, it is reasonable to assume that Parliament would have enacted that provision as a separate section and not pitch forked it into section 52 with a total stranger under an inappropriate marginal note.
Moreover there is inherent evidence in sub section (2), which suggests that the thrust of that sub section is directed against cases of under statement of consideration.
The crucial and important words in sub section (2) are: "the full value of the consideration declared by the assessee", The word 'declared ' 648 is very eloquent and revealing.
It clearly indicates that the focus of sub section (2) is on the consideration declared or disclosed by the assessee as distinguished from the consideration actually received by him and it contemplates a case where the consideration received by the assessee in respect of the transfer is not truly declared or disclosed by him but is shown at a different figure.
This or course is a very small factor and by itself of little consequence but alongwith the other factors which we have discussed above, it assumes same significance as throwing light on the true intent of sub section (2).
There is also one other circumstance which strongly reinforces the view we are taking in regard to the construction of sub section (2).
Soon after the introduction of sub section (2), the Central Board of Direct Taxes, in exercise of the power conferred under section 119 of the Act, issued a circular dated 7th July, 1964 explaining the scope and object of sub section (2) in the following words: "Section 13 of the Finance Act has introduced a new sub section (2) in section 52 of the Income tax Act with a view to countering evasion of tax on capital gains through the device of an under statement of the full value of the consideration received or receivable on the transfer of a capital asset.
The provision existing in section 52 of the Income tax Act before the amendment (which has now been remembered as sub section (2) enables the computation of capital gains arising on transfer of a capital asset with .
reference to its fair market value as on the date of its : transfer, ignoring the amount of the consideration shown by the assessee, only if the following two conditions are satisfied: (a) the transferee is a person who is directly.
or indirectly connected with assessee, and (b) the Income tax officer has reason to believe that the transfer was effected with object of avoidance or reduction of the liability of assessee to tax of capital gains.
In view of these conditions, this provision has a limited operation and does not apply to other cases where the 649 tax liability on capital gains arising on transfer of capital A assets between parties not connected with each other, is sought to be avoided or reduced by an under statement of the consideration paid for the transfer of the asset " The circular also drew the attention of Income tax Authorities to the assurance given by the Finance Minister in his speech that sub B section (2) was not aimed at perfectly honest and bonafide transactions where the consideration in respect of the transfer was correctly disclosed or declared by the assessee, but was intended to deal only with cases where the consideration for the transfer was under stated by the assessee and was shown at a lesser figure than that actually received by him.
It appears that despite this circular, the Income tax Authorities in several cases levied tax by invoking the provision in sub section (2) even in cases where the transaction was perfectly, honest and bonafide and there was no under statement of the consideration.
This was quite contrary to the instructions issued in the circular which was binding on the Tax Department and the Central Board of Direct Taxes was, therefore, constrained to issue another circular on 14th January, 194 whereby the Central Board, after reiterating the assurance given by the Finance Minister in the course of his speech pointed out: "It has come to the notice of the Board that in some cases the Income tax officers have invoked the provisions of section 52(2) even when the transactions were bonafide.
In this context reference is invited to the decision of the Supreme Court in Navnitlal C. Jhaveri vs R K Sen(1) and Ellerman Lines Ltd. vs Commissioner of Income tax, West Bengal(2) wherein it was held that the circular issued by the Board would be binding on all officers and persons employed in the execution of the Income tax Act.
Thus, the Income tax officers are bound to follow the instructions issued by the Board." and instructed the Income tax officers that "while completing the assessments they should keep in mind the assurance given by the Minister of Finance and the provisions of section 52(2) of the Income tax Act may not be invoked in cases of bonafide trans 650 actions".
These two circulars of the Central Board of Direct Taxes are, as we shall presently point out, binding on the Tax Department in administering or executing the provision enacted in sub section (2), but quite apart from their binding character, they are clearly in the nature of contemporanea expositio furnishing legitimate aid in the construction of sub section (2).
The rule of construction by reference to contemporanea expositio is a well established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous.
This rule has been succinctly and felicitously expressed in Crawford on Statutory Construction (1940 ed) where it is stated in paragraph 219 that "administrative construction (i. e. contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although non controlling, is nevertheless entitled to considerable weight; it is highly persuasive.
" The validity of this rule was also recognised in Baleshwar Bagarti vs Bhagirathi Dass(1) where Mookerjee, J. stated the rule in these terms: "It is a well settled principle of interpretation that courts in construing a statute will give much weight to the interpretation put upon it, at the time of its enactment and since, by those whose duty it has been to construe, execute and apply it." and this statement of the rule was quoted with approval by this Court in Deshbandhu Guptu & Co. vs Delhi Stock Exchange Association Ltd.(2) It is clear from these two circulars that the Central Board of Direct Taxes, which is the highest authority entrusted with the execution of the provisions of the Act, understood sub section (2) as limited to cases where the consideration for the transfer has been under stated by the assessee and this must be regarded as a strong circumstance supporting the construction which we are placing on that sub section.
But the construction which is commending itself to us does not rest merely on the principle of contemporanea expositio.
The 651 two circulars of the Central Board of Direct Taxes to which we have just referred are legally binding on the Revenue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of subsection (2) and they depart or deviate from such construction.
It is now well settled as a result of two decisions of this Court, one in Navnitlal C. Jhaveri vs RR.
Sen(1) and the other in Ellerman Lines Ltd. vs Commissioner of Income tax, West Bengal(2) that circulars issued by the Central Board of Direct Taxes under section 119 of the Act are binding ( n all officers and persons employed in the execution of the Act even if they deviate from the provisions of the Act.
The question which arose in Navnitlal C. Jhaveri 's case (supra) was in regard to the constitutional validity of sections 2(6A) (e) and 12(1B) which were introduced in the Indian Income Tax Act 1922 by the Finance Act 1955 with effect from 1st April, 1955.
These two sections provided that any payment made by a closely held company to its shareholder by a way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend taxable under the Act and this would include any loan or advance made in any previous year relevant to any assessment year prior to the assessment year 1955 56, if such loan or advance remained outstanding on the first day of the previous year relevant to the assessment year 1955 56.
The constitutional validity of these two sections was assailed on the ground that they imposed unreasonable restrictions on the fundamental right of the assessee under Article 19(1) (f) and (g) of the Constitution by taxing outstanding loans or advances of past years as dividend.
The Revenue however relied on a circular issued by the Central Board of Revenue under section 5(8) of the Indian lncome tax Act 1922 which corresponded to section 119 of the Present Act and this circular provided that if any such outstanding loans or advances of past years were repaid on or before 30th June 1922, they would not be taken into account in determining the tax liability of the shareholders to whom such loans or advances were given.
This circular was clearly contrary to the plain language of section 2(6A)(e) and section 121(B), but even so this Court held that it was binding on the Revenue and since "past transactions which would normally have attracted the stringent provisions of section 12(1B) as it was introduced in 1955, were substantially granted exemption from the 652 operation of the said provisions by making it clear to all the companies and their shareholders that if the past loans were genuinely refunded to the companies they would not be taken into account under section 12(1B)" sections 2(6A) (e) and 12(1B) did not suffer from the vice of unconstitutionality.
This decision was followed in Ellerman Lines case (supra) where referring to another circular issued by the Central Board of Revenue under section 5(8) of the Indian Income Tax Act 1922 on which reliance was placed on behalf of the assessee, this Court observed: "Now, coming to the question as to the effect of instructions issued under section 5(8) of the Act, this J Court observed in Navnit Lal C. Jhaveri vs R. K. Shah Appellate Assistant Commissioner, Bombay.
"It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under section 5(8) of the Act.
This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a result of genuine trans actions of loans, and the idea was not to affect such transactions and not to bring them within the mischief of the new provision.
The directions given in that circular clearly deviated from the provisions of the Act, yet this Court held that circular was binding on the Income tax officers.
" The two circulars of the Central Board of Direct Taxes referred to above must therefore be held to be binding on the Revenue in the administration or implementation of sub section (2) and this sub section must be read as applicable only to cases where there is under statement of the consideration in respect of the transfer.
Thus it is not enough to attract the applicability of sub section (2) that the fair market value of the capital asset transferred by the assessee as on the date of the transfer exceeds the full value of the consideration declared in respect of the transfer by not less than 15% of the value so declared, but it is furthermore necessary that the full value of the consideration in respect of the transfer is under stated or in other words, shown at a lesser figure than that actually received by the assessee.
Sub section (2) has no application 653 in case of an honest and bonafide transaction where the consideration in respect of the transfer has been correctly declared or disclosed by the assessee, even if the condition of 15% difference between the fair market value of the capital asset as on the date of the transfer and the full value of the consideration declared by the assessee is satisfied.
If therefore the Revenue seeks to bring a case within sub section (2), it must show not only that the fair market value of the capital asset as on the date of the transfer exceeds the full value of the consideration declared by the assessee by not less than 15% of the value so declared, but also that the consideration has been under stated and the assessee has actually received more than what is declared by him.
There are two distinct conditions which have to be satisfied before sub section (2) can be invoked by the Revenue and the burden of showing that these two conditions are satisfied rests on the Revenue.
It is for the Revenue to show that each of these two conditions is satisfied and the Revenue cannot claim to have discharged this burden which lies upon it, by merely establishing that the fair market value of the capital asset as on the date of the transfer exceeds by 15% or more the full value of the consideration declared in respect of the transfer and the first condition is therefore satisfied.
The Revenue must go further and prove that the second condition is also satisfied.
Merely by showing that the first condition is satisfied, the Revenue cannot ask the Court to presume that the second condition too is fulfilled, because even in a case where the first condition of 15% difference is satisfied, the transaction may be a perfectly honest and bonafide transaction and there may be no under statement of the consideration.
The fulfilment of the second condition has therefore to be established independently of the first condition and merely because the first condition is satisfied, no inference can necessarily follow that the second condition is also fulfilled.
Each condition has got to be viewed and established independently before sub section () can be invoked and the burden of doing so is clearly on the Revenue.
It is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the Revenue and the second condition being as much a condition of taxability as the first, the burden lies on the Revenue to show that there is understatement of the consideration and the second condition is fulfilled.
Moreover, to throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible burden upon him to establish the negative, 654 namely, that he did not receive any consideration beyond that declared by him.
But the question then arises why has Parliament introduced the first condition as a pre requisite for the applicability of subsection (2) ? Why has Parliament provided that in order to attract the applicability of sub section (2) the fair market value of the capital asset as on the date of the transfer should exceed by 15% or more the full value of the consideration for the transfer declared by the assessee ? The answer is obvious.
The object of imposing the condition of difference of 15% or more between the market value of the capital asset and the consideration declared in respect of the transfer clearly is to save the assessee from the rigour of sub section (2) in marginal cases where difference in subjective valuation by different individuals may result in an apparent disparity between the fair market value and the declared consideration.
It is a well known fact borne out by practical experience that the determination of fair market value of a capital asset is generally a matter of estimate based to some extent on guess work and despite the utmost bonafides, the estimate of the fair market value is bound to vary from individual to individual.
It is obvious that if the restrictive condition of difference of 15% or more between the fair market value of the capital asset as on the date of the transfer and the consideration declared in respect of the transfer were not provided in sub section (2), many marginal cases would, having regard to the possibility of difference of opinion in subjective assessment of the fair market value, fall within the mischief of that sub section and the statutory measure enacted in that sub section for determining the consideration actually received by the assessee would be applicable in all its rigour in such cases.
This condition of 15% or more difference is merely intended to be a safeguard against under hardship which would be occasioned to the assessee if the inflexible rule of the thumb enacted in sub section (2) were applied in marginal cases and it has nothing to do with the question of burden of proof, for the burden of establishing that there is under statement of the consideration in respect of the transfer always rests on the Revenue.
The postulate underlying sub section (2) is that the difference between one honest valuation and another may range upto 15% and that constitutes the class of marginal cases which are taken out of the purview of sub section (2) in order to avoid hardship to the assessee.
655 It is therefore clear that sub section (2) cannot be invoked by A the Revenue unless there is under statement of the consideration in respect of the transfer and the burden of showing that there is such under statement is on the Revenue.
Once it is established by the Revenue that the consideration for the transfer has been understated or, to put it differently, the consideration actually received by the assessee is more than what is declared or disclosed by him, sub section (2) is immediately attracted.
subject of course to the fulfilment of the condition of 15% or more difference, and the Revenue is then not required to show what is the precise extent of the understatement or in other words, what is the consideration actually received by the assessee.
That would in most cases be difficult. .if not impossible, to show and hence sub section (2) relieves the Revenue of all burden of proof regarding the extent of understatement or concealment and provides a statutory measure of the consideration received in respect of the transfer.
It does not create any fictional receipt.
It does not deem as receipt something which is not in fact received.
It merely provides a statutory best judgment assessment of the consideration actually received by the assessee and brings to tax capital gains on the footing that the fair market value of the capital asset represents the actual consideration received by the assessee as against the consideration untruly declared or disclosed by him.
This approach in construction of sub section (2) falls in line with the scheme of the provisions relating to tax on capital gains.
It may be noted that section 52 is not a charging section but is a computation section.
It has to be read alongwith section 48 which provides the mode of computation and under which the starting point of computation is "the full value of the consideration received or accruing".
What in fact never accrued or was never received cannot be computed as capital gains under section 48.
Therefore sub section (2) cannot be construed as bringing within the computation of capital gains an amount which, by no stretch of imagination, can be said to have accrued to the assessee or been received by him and it must be confined to cases where the actual consideration received for the transfer is under stated and since in such cases it is very difficult, if not impossible, to determine and prove the exact quantum of the suppressed consideration, sub section (2) provides the statutory measure for determining the consideration actually received by the assessee and permits the Revenue to take the fair market value of the capital asset as the full value of the consideration received in respect of the transfer.
656 This construction which we are placing on sub section (2) also marches in step with the Gift Tax Act, 1958.
If a capital asset is transferred for a consideration below its market value, the difference between the market value and the full value of the consideration received in respect of the transfer would amount to a gift liable to tax under the Gift Tax Act, 1958, but if the construction of sub section (2) contended for on behalf of the Revenue were accepted, such difference would also be liable to be added as part of capital gains taxable under the provisions of the Income Tax Act, 1961.
This would be an anomalous result which could never have been contemplated by the legislature, since the Income Tax Act, 1961 and the Gift Tax Act, 1958 are parts of an integrated scheme of taxation and the same amount which is chargeable as gift could not be intended to be charged also as capital gains.
Moreover, if sub section (2) is literally construed as applying even to cases where the full value of the consideration in respect of the transfer is correctly declared or disclosed by the assessee and there is no understatement of the consideration, it would result in an amount being taxed which has neither accrued to the assessee nor been received by him and which from no view point can be rationally considered as capital gains or any other type of income.
It is a well settled rule of interpretation that the Court should as for as possible avoid that construction which attributes irrationality to the legislature.
Besides, under Entry 82 in List I of the Seventh Schedule to the Constitution which deals with "Taxes on income" and under which the Income Tax Act, 1961 has been enacted, Parliament cannot "choose to tax as income as item which in no rational sense can be regarded as a citizens income or even receipt.
Sub section (2) would, therefore, on the construction of the Revenue, go outside the legislative power of Parliament, and it would not be possible to justify it even as an incidental or ancillary provision or a provision intended to prevent evasion of tax.
Sub section (2) would also be violative of the fundamental right of the assessee under Article 19 (1) (f) which fundamental right was in existence at the time when sub section (2) came to be enacted since on the construction canvassed on behalf of the Revenue, the effect of sub section (2) would be to penalise the assessee for transferring his capital asset for a consideration lesser by 15% or more than the fair market value and that would constitute unreasonable restriction on the fundamental right of the assessee to dispose of his capital 657 asset at the price of his choice.
The Court must obviously prefer a A construction which renders the statutory provision constitutionally valid rather than that which makes it void.
We must therefore hold that sub section (2) of sec.
52 can be invoked only where the consideration for the transfer has been understated by the assessee or in other words, the consideration actually received by the assessee is more than what is declared or disclosed by him and the burden of proving such under statement or concealment is on the Revenue.
This burden may be discharged by the Revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not a correctly declared or disclosed the consideration received by him and there is understatement of concealment of the consideration in respect of the transfer.
Sub section (2) has no application in case of an honest and bonafide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, and there is no concealment or suppression of the consideration.
We find that in the present case, it was not the contention of the Revenue that the property was sold by the assesssee to his daughter in law and five of his children for a consideration which was more than the sum of Rs. 16,500 shown to be the consideration for the property in the Instrument of Transfer and there was understatement or concealment of the consideration in respect of the transfer.
It was common ground between the parties and that was a finding of fact reached by the Income tax Authorities, that the transfer of the property by the assessee was a perfectly, honest and bonafide transaction where the full value of the consideration received by the assessee was correctly disclosed at the figure of Rs. 16,500.
Therefore, on the construction placed by us, subsection (2) had no application to the present case and the Income tax officer could have no reason to believe that any part of the income of the assessee had escaped assessment so as to justify the issue of a notice under section 148.
The order of re assessment made by the Income tax officer pursuant to the notice issued under section 148 was accordingly without jurisdiction and the majority judges of the Full Bench were in error in refusing to quash it.
We accordingly allow the appeal, set aside the order passed by the Full Bench and restore the order of Issac, J. allowing the writ 658 petition and quashing the order of re assessment made by the Income tax officer.
The Revenue will pay the costs of the assessee throughout.
S.R. Appeal allowed.
| IN-Abs | The appellant assessee sold his house in Ernakulam on 25th of December, 1965 to his daughter in law and five of his children for the same price of Rs. 16,500 at which he purchased in the year 1958.
The assessment of the assessee for the assessment year 1966 67 for which the relevant accounting year was the calendar year 1965 was thereafter completed in the normal course and in this assessment, no amount was included by way of capital gains in respect of the transfer of the house, since the house was sold by the assessee at the same price at which it was purchased and no capital gains accrued or arose to him as a result of the transfer.
On 4th April 1968, however, the Income Tax officer issued a notice under section 148 of the Act seeking to reopen the assessment of the assessee for the assessment year 1966 67 and requiring the assessee to submit a return of income within thirty days of the service of the notice, without stating what was the income alleged to have escaped assessment.
However, by his subsequent letter dated 4th March, 1969, the Income Tax officer stated that he proposed to fix the fair market value of the house sold by the assessee at Rs, 65,000 as against the consideration of Rs. 16,500 for which the house was sold and assess the difference of Rs. 48,500 as capital gains in the hands of the assessee.
The objections raised by the assessee were overruled and an order of reassessment was passed by the Income Tax officer including the sum of Rs. 48,500 as capital gains and bringing it to tax under sub section (2) of section 52, taking the view that this sub section did not require as a condition precedent that there should be under statement of consideration in respect of the transfer and it was enough to attract the applicability of the sub section if the fair market value of the property as on the date of the transfer exceeded the full value of the consideration declared by the assessee by an amount of not less than 15% of the value so declared.
The assessee thereupon filed a writ petition in Kerala High Court challenging the validity of the order of re assessment insofar as it brought a sum of Rs. 48,500 to tax relying on sub section (2) of section 52 of the the Income Tax Act, 1961.
The writ petition was allowed, but in appeal the Full Bench by a majority judgment agreed with the views of the Income Tax officer and dismissed the writ petition.
Hence the assessee 's appeal by certificate.
630 Allowing the appeal, the Court ^ HELD: 1: 1.
Sub section (2) of section 52 of the Income Tax Act, 1961 can be invoked only where the consideration for the transfer has been understated by the assessee or in other words, the consideration actually received by the assessee is more than what is declared or disclosed by him.
Sub section (2) has no application in case of an honest and bonafide transaction where the consideration received by the assessee has been correctly declared or disclosed by him and there is no concealment or suppression of the consideration.
[657 B, C D] 1: 2.
The burden of proving an understatement or concealment is on the Revenue, which may be discharged by it by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is understatement or concealment of the consideration in respect of the transfer.[657 B C] 1: 3.
Sub section (4), in the instant case, had no application and the Income Tax officer could have no reason to believe that any part of the income of the assessee had escaped assessment so as to justify the issue of a notice under section 148.
It was a common ground between the parties and that was a finding of fact reached by the Revenue Authorities that the transfer of the property by the assessee was a perfectly honest and bonafide transaction where the full value of the consideration received by the assessee was correctly disclosed at the figure of Rs. 16,500.
The order of re assessment made by the Income Tax officer pursuant to the notice issued under section 148 was accordingly without jurisdiction.
[657 D G] 2: 1.
The task of interpretation of the statutory enactment is not a mechanical task.
It is more than mere reading of mathematical formula because few words possess the precision of mathematical symbols.
It is an attempt to discover the intent of the legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for the expression of human thoughts and it would be idle to expect every statutory provision to be "drafted with divine prescience and perfect clarity".
Courts, therefore, must eschew literalness in the interpretation of a statutory provision and construe the language having regard to the object and purpose which the legislature had in view in enacting that provision and in the context and the setting in which it occurs.
[640 C D, F.G, 642 B C] 2: 2.
Where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the Court may modify the language used by the legislature or even "do some violence" to it so as to achieve the obvious intention of the legislature and produce a rational construction.
The Court may also in such a case read into the statutory provision a condition which, though not expressed, is implicit as constituting the basic assumption underlying the statutory provision.
It is true that the consequences of a suggested construction cannot alter the meaning of a statutory provision but they can certainly help to fix its meaning.
631 Luke vs Revenue Commissioner, ; Headan 's case ; ; In re May Fair Property Company, LR [1898] 2 Ch.
Dn; Eastman Photographic Material Company vs Comptroller General of Patents, Designs and Trade Marks, , quoted with approval, 2:3.
The speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the Mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for The purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted.
[654 E G] Lok Shikshana Trust vs Commissioner af Income Tax, ; Indian Chamber of Commerce vs Commissioner of Income tax, ; Additional Commissioner of Income tax vs Surat Art Silk Cloth Manufacturers Association, , referred to.
Again it is undoubtedly true that the marginal note to a section cannot be referred to for the purpose of construing the section but it can certainly be relied upon as indicating the drift of the section or to show what the section dealing with.
It cannot control the interpretation of the words of a section particularly when the language of the section is clear and unambiguous but, being part of the statute, it prima facie furnishes some clue as to the meaning and purpose of the section.
[647 A B] Bushel vs Hammond, , quoted with approval.
Bengal Immunity Company Limited vs State of Bihar, , referred to.
The rule of construction by reference to contemporanea expositio is a well established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous.
[650 B C] Baleshwar Bagarti vs Bhagirathi Dass, I.L.R. 35 Calcutta 701, approved.
Deshbandhu Gupta and Co. vs Delhi Stock Exchange Association Ltd,. ; , referred to.
Having regard to the well recognised rule of interpretation, a fair and reasonable construction of section 52 sub section (2) would be to read into it a condition that it would apply only where the consideration for the transfer is understated or in other words, the assessee has actually received a larger consideration for the transfer than what is declared in the instrument of transfer and it would have no application in case of a bonafide transaction where the full value of the consideration for the transfer is correctly declared by the assessee.
[642 E F] 3.
Several considerations which lead to this conclusion are: 632 (a) The first consideration is the object and purpose of the enactment of section 52(2).
The speech made by the Finance Minister while moving the amendment introducing sub section (2) clearly states what were the circumstances in which such sub section (2) came to be passed, what was the mischief for which section 52 as it stood then did not provide and which was sought to be remedied by the enactment of sub section (2) and why the enactment of that sub section was found necessary.
The object and purpose of sub section (2), as explicated from the speech of the Finance Minister, was not to strike at honest and bonafide transactions where the consideration for the transfer was correctly disclosed by the assessee but to bring within the net of taxation those transactions where the consideration in respect of the transfer was shown at a lesser figure than that actually received by the assessee, so that they do not escape The chargeable tax on capital gain by understatement of the consideration.
This was real object and purpose of the enactment of sub section (2) and the interpretation of this sub section must fall in line with the advancement of that object and purpose.[642 F, 646 B. F] (b) Further the marginal note to section 52 as it now stands, was originally a marginal note only to what is presently sub section (1) and significantly enough, this marginal note remained unchanged even after the introduction of sub section (2) suggesting clearly that it was meant by Parliament to apply to both sub sections of section 52 and it must therefore be taken as indicating That, like sub section(l), sub section (2) is also intended to deal with cases where there is under statement of The consideration in respect of the transfer.
[647 C D] (c) The placement of sub section (2) in section 52 does indicate in some small measure that Parliament intended that sub section to apply only to cases where the consideration in respect of the transfer is under stated by the assessee.
If Parliament intended sub section (2) to cover all cases where the condition of 15% difference is satisfied, irrespective of whether there is under statement of consideration or not, it is reasonable to assume that Parliament would have enacted that provision as a separate section and rot pitch forked it into section 52 with a total stranger under an inappropriate marginal note.
Moreover there is inherent evidence in sub section (2) which suggests that the thrust of that sub section is directed against cases of under statement of consideration.
The crucial and important words in sub section (2) are: "the full value of the consideration declared by the assessee".
The word 'declared ' is very eloquent and revealing.
It clearly indicates that the focus of sub section (2) is on the consideration declared or disclosed by the assessee as distinguished from the consideration actually received by him and it contemplates a case where the consideration received by the assessee in respect of the transfer is not truly declared or disclosed by him but is shown at a different figure.
[647 D G, 648 A B] (d) The two circulars issued by the Central Board of Direct Taxes dated 7th July, 1964 and 14th January, 1974 are not only binding on the Tax Department in administering or executing the provision enacted in sub section (2), but are in nature of contemporenea expositio, furnishing legitimate aid in the construction of sub section (2).
It is clear from these two circulars that the Central Board of Direct Taxes, which is the highest authority entrusted with the execution of the provisions of the Act understood sub section (2) as limited to 633 cases where the consideration for the transfer has been under stated by the assessee.
These two circulars are legally binding on the Revenue and this legally binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of sub section (2) and they depart or deviate from such construction.
[650 A, F G] Navnitlal C. Jhaveri vs KK, Sen, 56 I.T.R. SC 198: Ellerman Lines Ltd. vs Commissioner of Income tax, West Bengal, , followed.
1 4: 1, It is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the Revenue.
To throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible burden upon him to establish the negative, namely that he did not receive any consideration beyond that declared by him.
[653 F H, 654 A] 4: 2.
If the Revenue seeks to bring a case within sub section (2), it must show not only that the fair market value of the capital asset as on the date of the transfer exceeds the full value of the consideration declared by the assessee by not less than 15% of the value so declared, but also that the consideration has been under stated and the assessee has actually received more than what is declared by him.
There are two distinct conditions which have to be satisfied before sub section (2) can be invoked by the Revenue and the burden of showing that these two conditions are satisfied rests on the Revenue.
It is for the Revenue to show that each of these two conditions is satisfied and the Revenue cannot claim to have discharged this burden which lies upon it, by merely establishing that the fair market value of the capital asset as on the date of the transfer exceeds by 15% or more the full value of the consideration declared in respect of the transfer and the first condition is therefore satisfied.
The Revenue must go further and prove that the second condition is also satisfied.
Merely by showing that the first condition is satisfied, the Revenue cannot ask the Court to presume that the second condition too is fulfilled, because even in case where the first condition of 15% difference is satisfied, the transaction may be a perfectly honest and bonafide transaction and there may be no understatement of the consideration.
The fulfillment of the second condition has therefore to be established independently of the first condition and merely because the first condition is satisfied, no inference can necessarily follow that the second condition is also fulfilled.
Each condition has got to be viewed and established independently before subsection (2) can be invoked and the burden of doing so is clearly on the Revenue.
[653 B F] 4:3.
The object of imposing the condition of difference of 15% or more between the fair market value of the capital asset and the consideration declared in respect of the transfer clearly is to save the assessee from the rigour of subsection (2) in marginal cases where difference in subjective valuation by different individuals may result in an apparent disparity between the fair market value and the declared consideration.
This condition of 15% or more difference is merely intended to be a safeguard against undue hardship which would be occasioned to the assessee if the inflexible rule of the thumb enacted in sub section (2) were applied in marginal case and it has nothing to do with the question of burden of proof, for the burden of establishing that there is understatement of the concide 534 ration in respect of The transfer always rests on the Revenue.
The postulate underlying sub section (2) is that the difference between one honest valuation and another may range upto 15% and that constitutes the class of marginal cases which are taken out of the purview of sub section (2) in order to avoid hardship to the assessee.
[654 B C, F H] 4: 4.
Once it is established by the Revenue that the consideration for the transfer has been under stated, sub section (2) is immediately attracted, subject of course to the fulfillment of the condition of 15% or more difference, and the Revenue is then not required to show what is the precise extent of the understatement or in other words, what is the consideration actually received by the asseesee.
That would in most cases be difficult, if not impossible, to show and hence sub section (2) relieves the Revenue of all burden of proof regarding the extent of under statement or concealment and provides a statutory measure of the consideration received in respect of the transfer.
It does not create any fictional receipt.
It does not deem as receipt something which is not in fact received.
It merely provides a statutory best judgment assessment of the consideration actually received by the assessee and brings to tax capital gains OD the footing that the fair market value of the capital asset represents the actual consideration received by the assessee as against the consideration untruly declared or disclosed by him.
This approach in construction of sub section (2) falls in line with the scheme of the provisions relating to tax on capital gains.
[665A E] 4: 5.
Section 52 is not a charging section but is a computation section.
It has to be read alongwith section 48 which provides the mode of computation and under which the starting point of computation is "the full value of the consideration received or accruing .
What in fact never accrued or was never received cannot be computed as capital gains under section 41.
Therefore sub section (2) cannot be construed as bringing within the computation of capital gains an amount which, by no stretch of imagination, can be said to have accrued to the assessee or been received by him.
[655 E F] 4: 6.
This construction of sub section (2) also marches in step with the Gift Tax Act, 1958.
If a capital asset is transferred for a consideration below its market value, the difference between the market value and the full value of the P consideration received in respect of the transfer would amount to a gift liable to tax under the Gift Tax Act, 1958.
Since the Income Tax Act, 1961 and the Gift Tax Act, 1958 are parts of an integrated scheme of taxation the same amount which is chargeable as gift could not be intended to be charged also as capital gains.
[656 A C] 4: 7.
Besides, under Entry 82 in List I of the Seventh Schedule to the Constitution which deals with "Taxes on income" and under which the Income Tax Act, 1961 has been enacted, Parliament cannot "choose to tax as income an item which in no rational sense can be regarded as a citizen 's income or even receipt.
Sub section (2) would, therefore, on the construction of the Revenue, go outside the legislative power of Parliament, and it would Dot be possible to justify it even as an incidental or ancillary provision or a provision intended to prevent evasion of tax.
[656 E F] 635 4: 8.
Sub section (2) would also be violative of the fundamental right of the assessee under Article 9(1) (f) which fundamental right was in existence at the time when sub section (2) came to be enacted since on the construction canvassed on behalf of the Revenue, the effect of sub section (2) would be to penalize the assessee for transferring his capital asset for a consideration lesser by 15% or more than the fair market value and that would constitute unreasonable restriction on the fundamental right of the assessee to dispose of his capital asset at the price of his choice.
The Court must obviously prefer a construction which renders the statutory provision constitutionally valid rather than that which makes it void.
[656 F H, 657 A]
|
Special Leave Petition (Civil) No. 5631 of 1981.
AND S.L.P. (Civil) No.5632 of 1981 With S.L.P. (Civil) Nos.
5698 5701 of 1981.
From the judgment and order dated the 15th July, 1981 of the Bombay High Court in Writ Petition Nos.
1814, 1965, 1966, 1913 and 1815 of 1981 respectively.
Soli J. Sorabjee, P.H. Parekh and Hemant Sharma for the petitioners in SLP No. 5631 of 1931.
D. V. Patel, P.H. Parekh and Hemant Sharma for the petitioners in SLP No. 5632 of 1981.
Anil B. Dewan, S.V. Bhat, R. Satish and E.C. Agarwala for the respondents.
The Judgment of the Court was delivered by PATHAK, J.
This and the connected petitions pray for special leave to appeal to this Court against the refusal of the Bombay High Court to grant relief under Article 227 of the Constitution in the 714 matter of the dismissal of six declaratory suits filed by the petitioners.
The first respondent, Ahmed R.V. Peer Mohamed, is the owner of a property, "Peerbhai Mansion", situate on Vithalbhai Patel Road, Bombay.
He let out the entire first floor to the second respondent, Smt.
Saraswatibai Dahyabhai Bhatt.
The first floor consisted of a hall and three rooms and an adjoining terrace.
It seems that Saraswatibai sub divided the hall into a number of cabins, and transferred them to the occupation of the petitioners in this and the connected special leave petitions.
The landlord served a notice dated July 28, 1962 on her terminating her tenancy and thereafter filed an ejectment suit No. 576/5157 of 1962.
A decree for ejectment was passed in 1966.
An appeal by Saraswatibai was dismissed in 1972.
The landlord took out execution of the decree.
Obstructionist notice was served on all the petitioners and was made absolutely in favour of the landlord on February 27, 1974.
The petitioners appealed, and on November 30, 1976 these appeals were dismissed.
The six petitioners then filed separate suits Nos. 5734 to 5739 of 1976 against the landlord for a declaration that they were lawful sub tenants or licensees entitled to the protection of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 and for a permanent injunction restraining the landlord from executing the decree for ejectment obtained against Saraswatibai.
During the trial of the suits the sole issue pressed before the trial Judge was whether the petitioners were entitled to the benefit of the Act as lawful sub tenants or as deemed tenants or as protected licensees.
The Trial Judge ruled that they were not so protected and he dismissed the suits on March 29, 1978.
The petitioners appealed.
The only point raised in appeal was whether the petitioners could be described as lawful sub tenants or protected licensees.
Affirming the findings of the trial Judge the appellate Court held that the petitioners were inducted into the premises after 1960 and, therefore, were not entitled to be regarded as lawful sub tenants.
It found that Saraswatibai had become a statutory tenant on the termination of her tenancy by the notice dated July 28, 1962, and the petitioners were her licensees and after the decree for ejectment against Saraswatibai on September 30, 1966 her rights and interest in the premises came to an end and from that date the licensees were not entitled to any statutory protection.
Accordingly, the appellate Court maintained the dismissal of the suits filed by the petitioners.
715 The petitioners filed writ petitions under Article 227 of the Constitution before the High Court, and the High Court after hearing the parties rejected the petitions by its order dated July 15, 1981.
These petitions for special leave to appeal are directed against that order.
Mr. Soli Sorabjee, appearing for the petitioner in S.L.P. No. 5631 of 1981, contends that the petitioner must be regarded as a licensee entitled to the benefit of sub section
(2) of section 14 read with sub section
(1) of section 15 A of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947.
He urges that in virtue of the definition of "licensee" set forth in sub section
(4A) of section 5 of the Act, that is to say, a person who is in occupation of the premises under a subsisting agreement for licence, the petitioner, must be regarded as a licensee in occupation on February 1, 1973, and therefore a tenant falling within the terms of sub section
(1) of section 15 A.
On that, learned counsel says, the petitioner must be deemed, pursuant to sub section
(2) of section 14, to be a tenant of the landlord, the first respondent, on the terms and conditions of the agreement.
Now, there can be no doubt that if the petitioner can be said to be a licensee in occupation on February 1, 1973 he is entitled to assert that he has become a tenant of the landlord.
But a licensee is one who is in occupation under a subsisting agreement for licence.
The agreement for licence must be subsisting on the date on which he claims to be a licensee.
In the instant case, in order to establish his claim the petitioner must be in occupation on February 1, 1973 under an agreement for licence subsisting on that date.
In our opinion, the petitioner is not entitled to the benefit claimed by him.
An agreement for licence can subsist and continue to take effect only so long as the licensor continues to enjoy a right, title or interest in the premises.
On the termination of his right, title or interest in the premises, the agreement for licence comes to an end.
If the licensor is a tenant, the agreement for licence terminates with the tenancy.
No tenant is ordinarily competent to grant a licence enduring beyond his tenancy.
On the termination of the licensor 's tenancy the licensee ceases to be a licensee.
This loss of status is the point from which sub section
(2) of section 14 begins to operate and in consequence of its operation, the erstwhile licensee becomes a tenant of the landlord on the terms and conditions of the agreement.
What have we here ? Saraswatibai ceased to be tenant of any description long before February 1, 1973.
The contractual tenancy 716 came to an end when the notice to quit dated July 28, 1962 took effect and the statutory tenancy terminated when the decree for ejectment was passed thereafter.
Before February 1, 1973 she had ceased to be a tenant.
With that, the agreement for licence stood automatically terminated.
In consequence, the petitioner cannot legitimately claim to be a licensee on February 1, 1973.
Mr. Sorabjee relies on Madhusudan A. Mahale vs P.M. Gidh and others, but we are unable to see any support for the petitioner in the judgment in that case.
In our judgment, Special Leave Petition No. 5631 of 1981 must fail.
Mr. D.V. Patel, appearing for the petitioner in Special Leave Petition No. 5632 of 1981, points out that the petitioner had been in occupation of the entire flat as a sub tenant since 1943 and that in 1960 he had merely restricted his occupation to the portion presently occupied by him.
It must be taken, he contends, that he was a lawful sub tenant since 1943, and therefore, by virtue of sub section
(1) of section 14 of the Act he must be regarded as a tenant of the landlord on the determination of Saraswatibai 's tenancy.
The contention has no force.
The courts below have found that the occupation of the petitioner in the premises presently in his possession must be treated as dating back to 1962 and not earlier.
That being so, the benefit of sub section (1) of section 14 cannot be available to the petitioner.
The benefit can be claimed by a sub tenant to whom the premises have been lawfully sub let before the commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) ordinance, 1959.
In as much as the sub tenancy of the petitioner in the premises has been found to commence from 1962, we must hold that this petitioner also has no right to continue in possession.
This Special Leave Petition must also be rejected.
As regards the remaining special leave petitions, it is admitted that they must be disposed of on the same footing as Special Leave .
Petition (Civil) No. 5631 of 1981.
In the result these special leave petitions are dismissed.
Learned counsel for the petitioners pray that the petitioners may be allowed to continue in possession for a period of eighteen 717 months in view of the great difficulty in securing alternative accommodation in Bombay.
They point out that the landlord, the first respondent, had agreed in the High Court to grant that period to the petitioners but subject to the condition that the petitioners did not move this Court in appeal.
Having regard to the circumstances of the case, it appears to us appropriate to direct that the petitioners shall not be dispossessed from the accommodation in their possession upto September 30, 1982, provided they furnish an undertaking with the Registrar of this Court within one month from today: (a) that they will hand over peaceful and vacant possession of the said premises to the landlord, the first respondent, on or before September 30, 1982.
(b) that they shall continue to pay to the first respondent by the 7th day of each month an amount on account of the use and occupation of the premises equal to the monthly amount paid by them to the licensor Saraswatibai under the agreement for licence, (c) that they will deposit within three months from today in the court executing the decree in Ejectment Suit No. 576/5157 of 1962 all arrears calculated in accordance with the condition (b) mentioned above for the period commencing with the date of the decree in that suit, and (d) that they shall not induct in the said premises any other person as sub lessee, licensee or otherwise.
| IN-Abs | Respondent No. 1 who was the landlord and had let out the petition premises to respondent No. 2, served a notice (dated July 28, 1962) terminating her tenancy and filed an ejectment suit.
A decree for ejectment was passed (in 1966) and the appeal of respondent No. 2 was dismissed (in 1972).
The landlord took out execution of the decree.
Obstructionist notice served on the petitioners who were sub tenants of respondent No. 2 was made absolute in favour of the landlord.
The pensioners ' appeal was dismissed.
Dismissing the petitioners ' suits against the landlord for a declaration that they were lawful sub tenants /licensee entitled to the protection of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 and for an injunction restraining the landlord from executing the decree for ejectment the trial Court held that they were not entitled to the benefit of the Act as lawful sub tenants or as deemed tenants or as protected licensees.
The petitioners appeals were dismissed on the ground that having been inducted into the premises after 1960 they were not entitled to be regarded as lawful sub tenants.
In the Special Leave Petitions to this Court it was contended that the petitioners: (1) must be regarded as licensees entitled to the benefit of section 14(2) read with section 15 A(1) of the Act: and (2) having been in occupation since 1943 and having in 1960 merely restricted their occupation to the portions occupied by them, they were lawful sub tenants since 1943, and, therefore, by virtue of section 14(1) they must be regarded as tenants on the determination of respondent No. 2 's tenancy.
Dismissing the Special Leave Petitions: ^ HELD: 1.
An agreement for licence can subsist and continue only so long as the licensor continues to enjoy a right, title or interest in the premises.
On the termination of his right, title or interest in the premises, the agreement for licence comes to an end.
If the licensor is a tenant, the agreement for licence terminates with the tenancy.
No tenant is ordinarily competent to grant a licence beyond his tenancy.
On the termination of the licensor 's tenancy the licensee cases to be a licensee.
This loss of status is the point 713 from which sub section (2) of section 14 of the Act begins to operate and in consequence of its operation, the erstwhile licensee becomes a tenant of the landlord on the terms and conditions of the agreement.
[715 F H] In the instant case respondent No. 2 ceased to be a tenant of any description long before February 1, 1973.
The contractual tenancy came to an end when the notice to quit took effect and the statutory tenancy terminated when the decree for ejectment was passed thereafter.
When she had ceased to be tenant, the agreement for licence stood automatically terminated by reason of which the petitioners cannot claim to be licensees on February 1, 1973.
[715 H 716 B] 2.
The benefit of section 14(1) can be claimed by a sub tenant to whom the premises had been lawfully sub let before the commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) Ordinance, 1959.
[716 E] In the instant case the sub tenancy has been found to commence from 1962 and not earlier.
The benefit of sub section (1) of section 14 cannot be available, and there can be no right to continue in possession.
[716 F] Madhusudan A Mahale vs P.M. Gidh and others, held inapplicable.
|
Civil Appeal No. 420(N) of 1971 From the Judgment and order dated 23rd October 1969 of the Bombay High Court in Special Civil Application No. 1721 of 1966.
R.N. Sachthey and Mr. R.N. Poddar for the Appellant U. R. Lalit, V. N. Ganpule and Mrs. Veena Devi Khanna for Respondents Nos. 1 to 5 section V. Tambewaker for Respondent No. 7 A.K. Sanghi for the intervener M. L. Heble, V. N. Ganpule and Mrs. Veena Devi Khanna for the intervener.
670 The Judgment of the Court was delivered by SEN, J.
In this appeal, by special leave, the question for consideration is whether there was denial of "fair and equitable treatment" within the meaning of sub section
(5) of section 115 of the (hereinafter called 'the Act ') in the matter of determination of relative seniority and equation of posts as between the Assistant Sales Tax officers (abbreviated as ASTOs) from the former States of Madhya Pradesh and Hyderabad and Sales Tax Inspectors (abbreviated as STIs) from the former State of Bombay, who were allocated to the new State of Bombay, and their right to promotion to the posts of Sales Tax officers (abbreviated as STOs) Grade III.
The High Court by its judgment, on a writ petition filed by Respondents I to S, who were STIs of the State of Bombay and passed the prescribed departmental examination for promotion as STOs Gr.
III, has struck down the various resolutions and orders passed by the State Government from time to time relating to integration of services of these officers under sub section
(7) of section 115 of the Act, in compliance with the directives of the Central Government issued under sub section
(5) of section 115 of the Act.
The main question in the appeal is whether the High Court was right in doing so.
To appreciate the points involved, it is necessary to set out a few facts.
On November 16, 1957, the State Government by its Resolution purported to direct that the ASTOs from Madhya Pradesh and Hyderabad should continue in their respective pay scales until such of them were not appointed as STOs Gr.
III under r. 7 of the Allocated Government Servants (Absorption, seniority, Pay and Allowances) Rules, 1957.
Notes 3 and 6 appended to the said Resolution provided that for purposes of promotion, their inter se seniority shall be fixed on the basis of their service as STIs being counted together with their service as ASTOs in Madhya Pradesh and service as Accountants, if any, together with their service as ASTOs in Hyderabad.
In accordance therewith, a provisional gradation list of those who were absorbed as STIs as on November 1, 1956 as also of those who continued as ASTOs in their respective posts with effect from that date was prepared and published by the State Government under r. 2 of the said Rules, on January 21, 1960 and objections thereto were invited within two months from the date of its publication.
On February 3, 1960, the State Government substantially modified r. 7 and a new r. 7 was substituted which provided that generally the seniority of an allocated Government servant in the post or cadre of absorption shall, as 671 on November 1, 1956, be determined by the length of continuous service etc.
On instructions from the Central Government and in further consultation with it.
the State Government clarified that the provisional gradation list as published would not be finalised until representations, if any, of the Government servants were decided by the Government of India in consultation with the Advisory Committee.
Since there were no comparable posts of ASTOs in the former State of Bombay, the Central Government directed that the ASTOs from Madhya Pradesh and Hyderabad should not be equated with the post of STIs, but should be continued in an isolated category and their seniority should be fixed above the persons in the next lower grade.
In accordance with the directive of the Central Government under sub section
(S) of section 115 of the Act, the State Government by its resolution dated September 10, 1960, modified Notes 3 and 6 referred to above and directed that the seniority as on November 1, 1956 of ASTOs from Madhya Pradesh and Hyderabad be fixed above all persons absorbed as STIs and that the inter se seniority of STOs from Madhya Pradesh and Hyderabad be fixed on the basis of their continuous service as ASTOs.
It was further directed that the service rendered by the ASTOs from Madhya Pradesh as Excise Inspectors or Assistant District Excise officers in the Excise Department of that State be counted as equivalent to service as STOs.
On August 17, 1962, the State Government accordingly prepared a fresh provisional gradation list of ASTOs and STIs and invited objections thereto afresh.
It appears that none of the respondents raised any objection.
To resume the narration.
Between November 1, 1956 and August 8, 1960, promotions to the post of STO, Gr.
III were made on the basis of separate departmental examinations held in accordance with the rules framed by the former State Governments concerned.
Upto and until August 8, 1960, departmental examinations for promotion to the post of STOs were conducted under the three different sets of rules applicable to the former States of Bombay, Madhya Pradesh and Hyderabad.
From August 8, 1960, the Bombay Departmental Examination Rules for STOs were made applicable to the ASTOs allocated from Madhya Pradesh and Hyderabad as well in as much as the Bombay Sales Tax Act, 1959 was made applicable to the whole of the State and the C.P. and Berar Sales Tax Act, 1947 and the Hyderabad General Sales Tax , were repealed.
The ASTOs from Vidarbha and Marathwada regions of Madhya Pradesh and Hyderabad were called upon to appear at the examination prescribed for the STOs of the old Bombay region.
Accordingly, promotions to the post of STO Gr.
III were regulated under the Bombay Departmental Examination Rules and in consequence some of the ASTOs from Madhya Pradesh and Hyderabad who had been promoted as STOs Gr.
III were reverted to the post of ASTO due to their failure to pass the said examination.
In the meanwhile, the State Government, on January 20, 1961, amended r. I(b) (ii) of the Recruitment Rules for the Sales Tax Officers Grade III by the addition of the words "and also the Departmental Examination for Sales Tax Officers" after the words "time for promotion" which had the effect of making the passing of such an examination a condition precedent to promotion as STOs Gr.
On representations made by the ex Hyderabad ASTOs, the Government by its Resolution dated June ]3, 1964, directed: Rules 2(d) of the Departmental Examination Rules of Sales Tax officers and Assistant Sales Tax officers issued by the Finance Department of the former Hyderabad Govt.
under their Notification number 1118/3 section T. dated the 24th January, 1956 lays down that Inspecting officers, Sales Tax Officers (Class I and II) and Assistant Sales Tax Officers who are not confirmed in their respective posts, should pass the examination within the period specified in clause (c) of Rule 2 of the said Rules failing which they would be reverted to their substantive post.
In accordance with this Rule Government have reverted some Sales Tax officers from the former Hyderabad State for not having passed the Departmental Examination within the prescribed time.
The Government of Andhra Pradesh has brought to the notice of this Government the instructions contained in Ex Hyderabad, Finance Department, Letter No. 7851/ Admn.
dated the 31st October 1956 according to which officers and the staff of the Sales Tax Department of the former Hyderabad State, even though they have not passed the prescribed Departmental Examination ate to be con firmed, if they are otherwise found deserving of confirmation on the basis of their confidential records, efficiency and seniority.
The said letter dated 31st October 1955 of the Hyderabad Finance Department, also laid down that such 673 confirmed personnel should not be promoted to higher A posts until such times as they complete the prescribed Departmental Examination.
The validity of the instructions issued in Ex Hyderabad Finance Department letter No. 7851/Admn.
dated the 31st October, 1956 was under the consideration of Government for some time and it has now been decided to observe the instructions contained in the Finance Department letter of the Ex Hyderabad Slate, and is, therefore, pleased to order that the officers and staff of the Sales Tax Department of the former Hyderabad State, who were otherwise found deserving of confirmation on the basis of their confi dential records, efficiency and seniority may be confirmed in their respective posts held prior to 1st November 1956 against clear vacancies in terms of General Administration Department Circular No. 97 G.A.D. 12 SR 55 dated 10th September 1956 issued by the Ex Hyderabad Government.
Such confirmed personnel should, however, not be promoted to higher posts until such times as they complete the prescribed Departmental Examination.
(emphasis supplied) Similarly, on representations made by the ex Madhya Pradesh ASTOs, the State Government by its Memorandum dated November 21 ,1964, ordered: Recruitment Rules for the Sales Tax officers prescribed for the old Bombay State appearing in Government Resolution Finance Department No. STO 1654 dated 28th July 1954 as amended by the Government Resolution, Finance Department No. STE 1159/Ol81/61 XIII dated the 29th January 1961 lays down that a Sales Tax Inspector is not eligible for promotion of Sales Tax Officers without passing the examination prescribed for the Sales Tax officers.
According to Govt.
Circular, Political and Services Department No. STI 1080 D dated the 29th April 1960 pending unification of the Recruitment Rules sanctioned by the Government of the former State of Bombay, M.P. and Hyderabad Recruitment to the post and services in the various component parts of the State is to be regulated according to the rules framed by the former Govern 674 ments concerned and not according to the Bombay Civil Service Rules.
In view of this, the recruitment rules of old M.P. and the exhibit Hyderabad State will be applicable to the allocated Government servants coming from those areas until such time as a unified set of recruitment rules is prescribed by Government.
As there is no condition in the recruitment rules of the M.P. State or the exhibit Hyderabad State to the effect that persons should pass the Sales Tax Officers Examination before he is promoted as a Sales Tax Officer it would not be correct to ask the Assistant Sales Tax Officers and Sales Tax Inspectors allocated from the old M.P. State and Hyderabad State to pass the Sales Tax Officers examination before being considered for promotion.
Government has, therefore decided that all Assistant S.T.Os and S.T.ls who have been allocated from the old M.P. and Hyderabad States should he considered eligible for promotion without passing the STOs examination if they are otherwise fit for the promotion.
Such persons will have to pass STOs examination within such period as laid down in their respective departmental examination rules or recruitment rules as the ease may be.
(emphasis added) On the representations made by the ASTOs from Madhya Pradesh and Hyderabad, the Government of India, on March 9, 1965, addressed a letter to the State Government to the effect: The specific approval of the Government of India under the proviso to section 115(7) of the S.R. Act is necessary not only for applying the amended rules to the erstwhile employees of Vidarbha and Marathwada but also for amending the rules to the disadvantage of the erstwhile Bombay employees.
The 1954 rules of Bombay only provided that preference should be given to an Inspector who had passed the Departmental Examination of Sales Tax officers before he could be considered for promotion to the post of Sales Tax officer.
But the amended rules now provide that passing this examination is a prerequisite for consideration for promotion to the post of Sales Tax officer.
The Government of India have normally been accord ing approval under the section R. Act for prescribing such departmental tests subject to the following conditions: 675 1.
Additional time which may be double that of the time that is ordinarily permissible for passing such tests be allowed to the employees from the integrating units in cases where tests of higher standard are prescribed, or where tests were not prescribed under the parent State Governments.
Employees of the integrating unit should be promoted subject to their passing the test within the additional time referred to at item (i) above in other words promotions should not be withheld merely because the employees have not passed a Departmental test, and 3.
Government Servants of the age of 45 years or more should be exempted from passing departmental test and when exempted, they should be eligible for pro motion equally with one who has passed the tests.
I am to request that the State Government may examine the matter on the above lines and forward to the Government of India for approval their reconsidered proposals together with a draft of the amendment to the rules which the State Government may desire to make.
I am also to request that relevant extract of the rules of the erstwhile Government of Hyderabad, Madhya Pradesh and Bombay which are to be affected by the proposed amendment may also be forwarded to this Ministry.
(emphasis added) As the Central Government was of the opinion that the Bombay Departmental Examination Rules should not be made applicable to the allocated ASTOs from Madhya Pradesh and Hyderabad to their disadvantage, all the ASTOs from Madhya Pradesh and Hyderabad who were compelled earlier to appear for the said examination and who had failed to pass it were reinstated as STOs.
As a direct consequence of this, the Respondents l and 2 who had been promoted to officiate as STO, Gr.
III were reverted as STls by orders dated April 28, 1965 and June 30, 1965.
Since the amendment made to rule I (b) (ii) on January 20, 1961 operated to the disadvantage of STIs from Bombay, the State Government by its orders dated October 1, 1965, suspended the said amendment to the Recruitment 676 Rules until further orders.
In view of these changes, the State Government reviewed the cases of all the ASTOs and STIs from the three regions, and those who were otherwise found suitable were according to their seniority promoted to the post of STO Gr.
III even though they had not passed the STO examination.
On January 6, 1966, the State Government published a revised gradation list of ASTOs and STIs and invited objections thereto.
None of the respondents except Respondent 4 filed any objection.
That representation, on being forwarded by the State Government, was duly considered by the Government of India, who rejected the same.
The decision of the Government of India is contained in the counter affidavit of Shri Shukla, Deputy Secretary, Ministry of Home Affairs, which reads: I say that the Government of India carefully considered the representation made inter alia by the 4th petitioner and the recommendations of the State Advisory Committee and rejected the said representations and upheld the said gradation list dated the 6th Jan. 1966 as there was no reason to alter the principles on which the same had been prepared.
As stated hereinabove the Government of India was of the opinion that the decision of the State Government to treat Assistant Sales Tax Officers as an isolated category and to place The same above Sales Tax Inspec tors was just and fair.
The Government of India also considered the alterations made by the State Government in the rules relating to the passing of a Departmental Examination before a Sales Tax Inspector could be promoted to the post of a Sales Tax officer Grade III.
I say that different rules were prevalent in the different integrating areas regulating departmental promotions.
The State Govt.
decided that until unified recruitment rules were framed promotions might be given to all without their having to pass an examination i.e. without any discrimination.
The Government of India who have examined the matter in consultation with the State Advisory Committee was of the view that the deletion of departmental examination altogether was fair and just because by doing so and discrimination between employees coming from different integrating areas was removed.
(emphasis added) 677 It would appear that till 1973 there were no unified rules by which ASTOs from Madhya Pradesh and Hyderabad and STIs from Bombay were governed.
The Maharashtra Sales Tax officers ' Rules, 1973, framed by the State Government in exercise of the powers under the Proviso to article 309 of the Constitution came into force on August 4, 1973.
Rule 2 provides that the rules shall apply to Government servants serving in the Sales Tax Department including those of the former States of Bombay, Madhya Pradesh and Hyderabad who were allocated for service to the State of Bombay and subsequently to the State of Maharashtra.
Rule 4 deals with direct recruits as well as promotees and makes the condition for passing of the departmental examination within two years from the date of promotion or two years from the date of promulgation of the Rules and by r. 4 (c) it is provided that in the event of failure to pass the examination in the prescribed time, they shall be liable to reversion to the posts held by them prior to their promotion.
Looking to the lapse of time in framing the Rules, r. 8 provides that STOs who have already attained the age of 48 years on the date of promulgation of these rules shall be exempted from passing the Departmental Examination under the rules.
It is necessary here to mention that the Maharashtra (Bombay Area) Sales Tax officers (Grade II and Grade III) Recruitment Rules, 1969 framed by the State Government under the Proviso to article 309 of the Constitution were struck down by the High Court as ultra vires being per se discriminatory and thus violative of article 14 of the Constitution.
That was because r. 2 provided that nothing therein shall govern the ASTOs from Madhya Pradesh and Hyderabad.
There is no need for us to enter into the question as to the validity or otherwise of the said Rules.
since the Maharashtra Sales Tax officers ' Rules, 1973 now hold the field.
The two questions canvassed in this appeal are: (l) whether the State Government could by an executive order without framing a rule under the Proviso to article 309 of the Constitution, alter the rules relating to departmental promotion of ASTOs from Madhya Pradesh and Hyderabad which constituted their conditions of service to the prejudice of the STIs of Bombay without the prior approval of the Central Government under the Provision to sub section (7) of section 115 of the Act, and (2) Whether the State Government while integrating the services could unilaterally alter the seniority list of the allocated ASTOs and STIs and place the ASTOs from Madhya Pradesh and Hyderabad in an isolated category over the STIs from Bombay while determining their inter se seniority.
678 Prior to the reoganisation of the States, a Conference of the Chief Secretaries of the States that were to be affected by the reorganisation was held at Delhi on May 18 and 19, 1956 for the purpose of the formulation of the principles upon which integration of services was to be effected.
The Government of India by their letter dated April 3, 1957 informed the State Government that the work of integration of services should be dealt with by them in the light of the general principles already settled at the Chief Secretaries Conference.
This has been construed to be a valid delegation of powers to prepare the preliminary and final gradation lists under the direction and with the sanction of the Central Government.
The Government of India by its Circular dated May 11, 1957 to all the State Governments stated inter alia that it agreed with the views expressed on behalf of the States ' representatives that it would not be appropriate to provide any protection in the matter of departmental promotion.
This Circular has been interpreted as a prior approval of the Central Government in terms of the proviso to sub section
(7) of section 115 of the Act in the matter of change in the conditions of service relating to departmental promotions.
The following principles had been formulated for being observed as far as may be, in the integration of Government servants Allotted to the services of the new States: "In the matter of equation of posts: (i) Where there were regularly constituted similar cadres in the different integrating units the cadres will ordinarily be integrated on that basis; but (ii) Where, however, there were no such similar cadres the following factors will be taken into consideration in determining the equation of posts: (a) nature and duties of a post; (b) powers exercised by the officers holding a post, the extent of territorial or other charge held or responsibilities discharged; (c) the minimum qualifications, if any, prescribed for recruitment to the post.
(d) the salary of the post.
679 It is well settled that these principles have a statutory force.
There is a long line of decisions of this Court starting from the Union of India and Anr.
vs P.K Roy and Ors.
(l) laying down that the Central Government has been constituted to be the final authority in the matter of integration of services under sub section
(S) of section 115 of the Act.
The matter of equation of posts is purely an administrative function.
It has been left entirely to the Central Government as to how it has to deal with these questions.
The Central Government had established an Advisory Committee for the purpose of assisting in the proper consideration of the representations made to it.
There is nothing in sections 115 to 117 of the Act prohibiting the Central Government in any way from taking the aid and assistance of the State Govt, in the matter of effecting the integration of services.
As observed by this Court in Roy 's case the usual procedure followed by the Central Government in the matter of integration of services generally, is in order.
It is not open to the Court to consider whether the equation of posts made by the Central Government is right or wrong.
This was a matter exclusively within the province of the Central Government.
Perhaps, the only question the Court can enquire into is whether the four principles agreed upon at the Chief Secretaries Conference had been properly taken into account.
This is the narrow and limited field within which the supervisory jurisdiction of the Court can operate.
But where, as here, in the matter of equation of posts, the Central Government had properly taken into account all the four principles decided upon at the Chief Secretaries Conference, the decision cannot be assailed at all.
In the present case, not only the Central Government had laid down the principles for integration, but also considered the representations and passed the final orders and the provisional gradation lists were prepared and published by the State Government under the direction and with the sanction of the Central Government.
In accordance with the principles settled at the Chief Secretaries Conference, the Government of India, in consolation with the Central Advisory Committee, directed that the posts of ASTOs in the former States of Madhya Pradesh and Hyderabad should be continued in an isolated category, there being no corresponding post in the successor State of Bombay with which they could be equated.
There were 19 ASTOs in the pay scale of Rs. l50 10 200 680 EB 15 250 from Madhya Pradesh and 23 ASTOs in the pay scale of Rs. 170 8 1/2 225 EB 13 320 from Hyderabad allocated to the new State of Bombay.
In the former State of Bombay there was no similarly constituted cadre of ASTOs, but there were posts of STIs in the pay scale of Rs. 120 8 144 EB 8 200 10/2 250.
It would have been inequitable and unfair to equate ASTOs from Madhya Pradesh and Hyderabad with STIs from Bombay, looking to the nature of their posts, the powers and responsibilities and the pay scales attached to the same.
The ASTOs from Madhya Pradesh and Hyderabad were, in the first instance, superior to STIs in their respective States and the post of ASTO in those States was a promotion post.
In addition, ASTOs in those States were assessing authorities and they enjoyed statutory powers of their own to assess tax and levy penalties, whereas the STIs in Bombay had no such powers to assess tax or levy penalty but had merely to scrutinise returns and generally act in a subordinate capacity to STOs.
Evidently, the State Government was wrong in directing by its Resolution dated November 16, 1957 that the seniority of ASTOs from Madhya 1) Pradesh and Hyderabad and STIs from Bombay be fixed in the cadre of Ss in the reorganised State of Bombay on the basis of continuous service including that in the lower grade.
The principle adopted by the State Government for determining their relative inter se seniority was obviously wrong, being contrary to the principles settled at the Chief Secretaries Conference.
As already stated, the Government of India, on representation by the affected ASTOs from Madhya Pradesh and Hyderabad, in consultation with the Central Advisory Committee, directed that the inter se seniority should be fixed taking into account continuous service in the equated grade only subject to the inter se seniority of the officers coming from the several integrating regions.
Upon that basis, the State Government by its Resolution dated September 10, 1960, rightly modified Notes 3 and 6 of its 1957 Resolution and directed that the seniority as on November l, 1966 of ASTOs from Madhya Pradesh and Hyderabad be fixed above the persons in the cadre of STIs and that the inter se seniority of ASTOs from Madhya Pradesh and Hyderabad be fixed on the basis of their continuous service as ASTOs in their respective States.
The High Court, in dealing with the question of equation of posts, observed: On merits, if the duties of Assistant Sales Tax officers of those two States and those of Inspectors are compared 681 in the light of the minutes contained in Ex.2 (Memorandum of the Government of Maharashtra, Finance Department.
dated November 21, 1964) the difference is not much.
We enquired about the nature of work they are doing today and we are told on instructions by the State 's counsel that they are doing the work that the Sales Tax Inspectors are doing.
(emphasis added) All that we need say is that the High Court, if we may say so, without meaning any disrespect, has viewed the question from a wrong perspective.
The remaining question whether the State Government by its Resolution dated June 13, 1964 and Memorandum dated November 21, 1964, effected a change of recruitment rules by an executive order, in the conditions of service of the ASTOs from Madhya Pradesh and Hyderabad, contrary to the Proviso to sub section
(5) of section 115 of the Act; and if so, whether such a change in the conditions of service could be brought about without framing a rule under the Proviso to article 309 of the Constitution.
In our opinion, the question does not really arise.
There can be no dispute with the proposition that a rule framed under the Proviso to article 309 of the Constitution cannot be modified by an executive order.
But the question is whether that principle is attracted to the facts and circumstances of the present case.
The Resolution and the Memorandum referred to above, undoubtedly do not have the status of a rule framed under the Proviso to article 309 of the Constitution.
They merely conveyed the decision of the State Government that the allocated ASTOs from Madhya Pradesh and Hyderabad should be considered eligible for promotion to the post of STO, Gr.
IlI without passing the departmental examination for STO, Gr.
The State Government had not by its Resolution dated June 13, 1964, or by its Memorandum dated Nov. 21, 1964, brought about a change in the conditions of service by an executive order.
All that was done was to rectify a mistake that had been committed in the past in subjecting the ASTOs from Madhya Pradesh and Hyderabad to the Departmental Examination Rules framed by the former State Government of Bombay i.e. to a rule which did not form part of conditions of their service and, therefore, was not applicable to them.
We find no infirmity in these two documents.
The decisions reached by the Government on the representations made by ASTos from Madhya Pradesh and 682 Hyderabad were strictly in conformity with the recruitment rules framed by the former State of Madhya Pradesh and Hyderabad under the Proviso to article 309 of the Constitution.
It is quite obvious that STIs from Bombay were not entitled to the above concession, as the passing of the STOs examination had been made a condition precedent for their promotion as STO Gr.
There was a marked distinction between the recruitment rules framed by the former State Governments of Bombay and Madhya Pradesh and Hyderabad for appointment as STOs.
In the former State of Bombay, eligibility for the promotion of STIs to the post of STO Gr.
III depended upon their passing the departmental examination for the non gazetted staff of the Sales Tax Department under r. 1(b) (ii) of the Recruitment Rules for the S.T.Os.
Under r. 3, preference was to be given to an Inspector who had passed the departmental examination prescribed for STOs over those who had not.
By the amendment of January 20, 1961 made by the State Government, the words "and also the departmental examination for STOs ' were added after the words "time for promotion".
The effect of this amendment was to make the passing of the STO examination a condition precedent for promotion of STIs as STO Gr.
Further, the amendment deleted r. 3 which laid down a rule of preference.
In the former States of Madhya Pradesh and Hyderabad, neither such condition nor any rule of preference was there.
Under r. 1 of the Rules for Departmental Examination framed by the former State Government of Madhya Pradesh, ASTOs who were promoted as STOs were required to pass the departmental examination within two years from the date of such promotion.
Rule 4 provided that they would not be confirmed till they pass the said examination and on their failure to do so, they would be reverted to the substantive post of ASTOs.
Similarly, under r. 2(c) of the Rules framed by the former Hyderabad State, ASTOs who were prompted as STOs were required to pass the departmental examination within three years from the date of commencement of the rules failing which their grade increment was to be withheld till they pass such examination.
Rule 2 (d) provided that STOs Cl. 1 and II who had not been confirmed in their respective posts, were required to pass the said examination within the said period failing which they were to be reverted to their substantive posts.
According to the general Circular issued by the State Government of the reorganised State of Bombay dated April 29, 1960, pending unification of the recruitment rules framed by the State Government of Bombay, Madhya Pradesh and Hyderabad, the 683 recruitment to the various posts and services was to be regulated A according to the rules framed by the State Governments and not according to the Bombay Civil Service (Classification and Recruitment) Rules.
It is not disputed that the Departmental Examination Rules framed by the former State Governments of Madhya Pradesh and Hyderabad for promotion to the post of STOs formed part of the conditions of service of ASTOs from Madhya Pradesh and Hyderabad.
Mere chances of promotion are not conditions of service and the fact that there was reduction in the chances of promotion did not tantamount to a change in the conditions of service.
A right to be considered for promotion is a term of service, but mere chances of promotion are not.
Under the Departmental Examination Rules for STOs, 1954, framed by the former State Government of Madhya Pradesh.
as amended on January 20, 1960, mere passing of the departmental examination conferred no right on the STIs of Bombay, to promotion.
By passing the examination, they merely became eligible for promotion.
They had to be brought on to a select list not merely on the length of service, but on the basis of merit cum seniority principle.
It was, therefore, nothing but a mere chance of promotion.
In consequence of the impugned orders of reversion, all that happened is that some of the STIs who had wrongly been promoted as STOs Gr.
III had to be reverted and thereby lost a few places.
In contrast, the conditions of service of ASTOs from Madhya Pradesh and Hyderabad, at least so far as one stage of promotion above the one held by them before the reorganisation of States, could not be altered without the previous sanction of the Central Government as laid down in the Proviso to sub section
(7) of section 115 of the Act.
We are unable to agree with the High Court in its opinion that ASTOs from Madhya Pradesh and Hyderabad on their allocation to the new State of Bombay, who had wrongly been put at par with STIs from Bombay, had to pass the departmental examination prescribed by the former State Government of Bombay, for promotion to the post of STO Gr.
III before they could be actually so promoted.
It is an incontrovertible fact that the departmental examination prescribed by the former State Governments of Madhya Pradesh and Hyderabad had not been held after August 8, 1960 i.e. for the last 20 years.
Merely because the C.P. and Berar Sales Tax Act, 1947 684 and the Hyderabad General Sales Tax Act, 1950 stood repealed with effect from January 1, 1960, that hardly furnished a ground for not holding the examination.
The State Government, in their affidavit before the High Court, tried to justify their action that the subjects under the ex Madhya Pradesh and Hyderabad Rules had become obsolete and, therefore, it was felt that no useful purpose would be served in holding these examinations.
This was no justification at all, for even after the Bombay Sales Tax Act, 1959 had been extended throughout the State with effect from January 1, 1960, all pending assessments pertaining to the Vidarbha and Marathwada regions of the former States of Madhya Pradesh and Hyderabad had to be completed in accordance with the repealed Acts.
In this context, the High Court observed that it examined the subjects prescribed for the three departmental examinations of Bombay, Madhya Pradesh and Hyderabad and found that "there was not much difference".
It went on to say that "it could hardly be suggested by any one that prescribing a subject more or less for an examination would adversely affect conditions of service.
The purpose of examination is to prepare the officer to be able to cope up with different kinds of problems that would confront him with reasonable efficiency.
" To say the least, the observations made by the High Court are unwarranted.
Be that as it may, the fact remains that the condition regarding the passing of the departmental examination became incapable of compliance in the case of ASTOs from Madhya Pradesh and Hyderabad who had been promoted as STOs Gr.
They were entitled to such promotion without passing such examination.
Under the relevant rules which regulated their conditions of service, there was only a possibility of reversion in the eventuality of their not passing the examination within the stipulated time.
Since no examinations admittedly have been held, there is no question of their reversion as ASTOs.
If the decision of the High Court were to be upheld, it would imply that many of the ASTO from Madhya Pradesh and Hyderabad who had been promoted as STOs Gr III and during the past 20 years have reached the higher echelons of service, would now have to be put back as ASTOs, for no fault of their own.
Many of them either have retired or are on the verge of retirement.
There was thus no alternative for the State Government but to suspend the operation of the amendment made on January 20, 1961 to r. 1(b) (ii) of the recruitment rules, by its order dated October 1, 685 1965, which made the passing of the STO examination a condition A precedent for promotion of STIs to STO Gr.
There can be no doubt that the State Government 's Resolution dated June 13, 1964 and its Memorandum of November 21, 1964, clarifying that the ASTOs from Madhya Pradesh and Hyderabad were entitled for promotion to the post of STO Gr.
III without passing the departmental examination, placed STIs from Bombay at a disadvantage.
To ensure 'fair and equitable treatment ', the State Government rightly dispensed with the requirement of passing the departmental examination in the case of STIs from the former State of Bombay.
In the end, reverting back to the main question.
On an overall view of things, we are satisfied that the State Government acted with the best of intentions.
It endeavoured to strike a balance between the competing claims to relative seniority.
When sub section
(5) of section 115 of the Act speaks of "fair and equitable treatment", obviously it envisages a decision which is fair and equitable to all.
The result, therefore, is that the appeal succeeds.
The judgment of the High Court of Bombay is set aside and the writ petition filed by Respondents 1 to 5 is dismissed.
There shall be no order as to costs in the facts and circumstances of the case.
N.V.K. Appeal allowed.
| IN-Abs | Assistant Sales Tax Officers serving in connection with the affairs of the former States of Madhya Pradesh and Hyderabad, on the appointed date, were allocated to the new State of Bombay under section 115 of the (Act No. XXXVII) with effect from November 1, 1956.
The Assistant Sales Tax officers from the former States of Madhya Pradesh and Hyderabad were superior to the Sales Tax Inspectors in their respective States and the posts of Assistant Sales Tax officer in those States was a promotion post.
In the former State of Bombay, there was no similarly constituted cadre of Assistant Sales Tax officers, but there were posts of Sales Tax Inspectors.
On November 16,1957, the State Government by its resolution directed that the ASTOs from Madhya Pradesh and Hyderabad should continue in their respective pay scales until such of them were not appointed as STOs Grade III, and Notes 3 and 6 appended to the Resolution provided that for purposes of promotion their inter se seniority be Fixed on the basis of their service as STOs and ASTOs.
On February 3, 1960, the State Government substantially modified rule 7 of the Allocated Government Servants (Absorption, Seniority, Pay and Allowances) Rules, 1957 and a new rule 7 was substituted which provided that the seniority of an allocated Government servant in the post or cadre of absorption shall, as on November 1, 1956 be determined by the length of continuous service etc.
Since 666 there were no comparable posts of ASTos in the former State of Bombay, the Central Government directed that the ASTos from Madhya Pradesh and Hyderabad should not be equated with the post of STIs but should be continued in an isolated category and their seniority should be fixed above the persons in the next lower grade.
The State Government by its resolution dated September 10, 1960 modified Notes 3 and 6 and directed that the seniority as on November 1, 1956 of ASTOs from Madhya Pradesh and Hyderabad be fixed above all persons absorbed as STIs and that the inter se seniority of STOs from Madhya Pradesh and Hyderabad be fixed on the basis of their continuous service as ASTOs, and that the service rendered by the ASTOs from Madhya Pradesh as Excise Inspec tors or Assistant District Excise Officers in the Excise Department be counted as equivalent service.
On August 17,1962, the State Government prepared a fresh provisional gradation list of ASTOs and STIs and invited objections.
None of the respondents raised any objection.
Upto and until August 8, 1960, departmental examinations for promotion to the post of STOs were conducted under the three different sets of rules applicable to the former States of Bombay, Madhya Pradesh and Hyderabad.
The Departmental Examination Rules for Sales Tax officers 1954 framed by the former State Government of Bombay were made applicable to the Assistant Sales Tax officers allocated from Madhya Pradesh and Hyderabad from August 8,1960, as the provisions of the Bombay Sales Tax Act, 1959 were extended to the whole of the State, the CP and Berar Sales Tax Act 1947 and the Hyderabad General Sales Tax 1950 having been repealed.
The ASTOs from Vidarbha and Marathwada regions of Madhya Pradesh and Hyderabad were called upon to appear at the examinations prescribed from the STOs of the old Bombay region, and some of the ASTOs from Madhya Pradesh and Hyderabad who had been promoted as STos Grade Ill were reverted to the post of ASTOs due to their failure to pass the said examination.
The Government by its Resolution dated June 13, 1964 directed that the ex Hyderabad ASTOs even though they had not passed the prescribed depart mental examination should be confirmed on the basis of confidential records, efficiency and seniority: and by its Memorandum dated November 21,1964 order ed that all the ASTOs and STIs who had been allocated from the old M.P. and Hyderabad States should be considered eligible for promotion without passing the STos examination if they are otherwise fit for promotion.
On representation made by the ASTos from Madhya Pradesh and Hyderabad, the Government of India, by its letter dated March 9, 1965 to the State Government directed that the Bombay Departmental Examination Rules, 1954, could not be made applicable to the allocated ASTOs from Madhya Pradesh and Hyderabad as it would amount to changing their conditions of service to their disadvantage.
It accordingly directed that all the ASTOs from Madhya Pradesh and Hyderabad who were compelled to appear for the said examination and who had failed to pass the same be reinstated as STOs.
This directive resulted in Respondents I and 2 who had been promoted to officiate as STO, Grade 111 being reverted as STIs.
The State Government in view of this change reviewed the cases of all the ASTOs, and STIs from the three regions and those who were otherwise found 667 suitable were according to their seniority promoted to the post of STO, Gr.
III even though they had not passed the STOs examination.
On January 6,1966 the State Government published a revised gradation list of ASTOs and STIs and invited objections.
Only Respondent 4 filed objections which was considered by the Government and rejected.
The writ petition filed by Respondents 1 to S who were STIs in the State of Bombay and had passed the prescribed departmental examination for promotion as STOs Gr.
III was allowed by the High Court which struck down the various resolutions and orders passed by the State Government from time to time relating to integration of service under sub section (7) of section 115 of the Act.
In the appeals by the State to this Court on the questions whether (I) the State Government could by an executive order without framing a rule under the Proviso to article 303 of the Constitution alter the rules relating to departmental promotion of ASTOs from Madhya Pradesh and Hyderabad which constituted their conditions of service to the prejudice of the STIs of Bombay without the prior approval of the Central Government under the proviso to sub section (7) of section 115 of the Act, and (2) the State Government while integrating the services could unilaterally alter the seniority list of the allocated ASTOs and place the ASTOs from Madhya Pradesh and Hyderabad in an isolated category over the STIs from Bombay while determining their inter se seniority.
Allowing the appeal, ^ HELD :1 (i).
The matter of equation of posts is purely an administrative function under section 115 of the States Re organisation Act, 1956.
Under sub section
(5) of section 115 the Central Government is the sole repository of the power to effectuate the integration of services in the new States.
It has been left entirely to the Central Government as to how it has to deal with these questions.
The Central Government established an Advisory Committee for purposes of assisting in proper consideration of the representations made to it for the work of integration of services, the Central Government could take all manner of assistance from the State Government including the preparation of provisional gradation lists, The Central Government exercises general control in regard to the integration of services, and the ultimate integration was done with the sanction and approval of the Central Government.
The provisional gradation lists prepared by the State Government were not, therefore, open to challenge.
[679 A E] Union of India and Anr.
vs P.K. Roy and Ors.
; referred to.
In the instant case, not only had the Central Government laid down the principles for integration but also considered the representation made and passed the final orders thereon.
The provisional gradation lists were prepared by the State Government under the direction and with the sanction of the Central Government.
The Assistant Sales Tax officers from the former States of Madhya Pradesh and Hyderabad allocated to the new State of Bombay, could not be equated with the Sales Tax Inspectors.
In the former State of Bombay, there was no similarly constituted cadre of Assistant Sales Tax officers, but there were 668 posts of Sales Tax Inspectors.
The Assistant Sales Tax officers from Madhya Pradesh and Hyderabad were superior to Sales Tax Inspectors in their respective States and the post of Assistant Sales Tax officer in these State was a promotion post.
It would have been inequitable and unfair to equate Assistant Sales Tax officers from Madhya Pradesh and Hyderabad with Sales Tax Inspectors from Bombay having regard to the nature of their posts, the powers and responsibilities, and the pay scales drawn by them.
In addition, Assistant Sales Tax officers in these States were assessing authorities and they enjoyed statutory powers of their own to assess tax and levy penalties, whereas the Sales Tax Inspectors in Bombay had no such powers to assess tax or levy penalty but had merely to scrutinise returns and generally act in a subordinate capacity to Sales Tax officers.
[679 F 680 C] (ii) The principle adopted by the State Government for determining the relative inter se seniority was obviously wrong, being contrary to the principles settled at the Chief Secretaries Conference.
The Government of India, on re presentation by the affected Assistant Sales Tax Officers from Madhya Pradesh and Hyderabad in consultation with the Central Advisory Committee, directed that the inter se seniority should be fixed taking into account continuous service in the equated grade only subject to the inter se seniority of the Officers, coming from the several integrating regions.
Upon that basis, the State Government by its Resolution dated September 10, 1960 rightly modified Notes 3 and 6 of its 1957 Resolution and directed that the seniority as on November 1, 1956 of ASTOs from Madhya Pradesh and Hyderabad be fixed above the persons in the cadre of STIs and that the inter se seniority of ASTOs from Madhya Pradesh and Hyderabad be fixed on the basis of their continuous service as ASTOS in their respective States.
[680 E.G] 2.
There was a difference between the Departmental Examination Rules framed by the former State Governments of Bombay, Madhya Pradesh and Hyderabad regulating the appointment of STOs.
In the former State of Bombay, eligibility for the promotion of STIs to the post of STO Gr.
Ill depended upon their passing the departmental examination for the non gazetted staff of the Sales Tax Department under rule I (b) (ii) of the Recruitment Rules for the STOs Gr.
III, i. e. it was condition precedent.
In the former States of Madhya Pradesh and Hyderabad there was no such condition attached.
Under the Rules for Departmental examination, the ASTOs who were promoted as STOs were required to pass the departmental examination within two or three years from the date of their promotion i.e. it was a condition subsequent.
The Departmental Examination Rules framed by the former State Governments of Madhya Pradesh and Hyderabad for promotion to the post of STOs formed part of the conditions of service of ASTOs from Madhya Pradesh and Hyderabad and they could not be altered to their disadvantage without the prior approval of the Central Government under section 115 (7) of the Act.
Since no examination admittedly had been held there was no question.
Of their reversion as ASTOs.
[685 B C; E G; 683 B F; 685F] 3(i) The Resolution dated June 13, 1964 and the Memorandum dated November 24,1964 do not have the status of a rule framed under the Proviso to Article 309 of the Constitution.
They merely conveyed the decision of the State Government that the allocated ASTOs from Madhya Pradesh and Hyderabad 669 should be considered eligible for promotion to the post of STO, Gr.
III without passing the departmental examination for STOs Gr.
The State Government had not by its Resolution or Memorandum brought about a change in the conditions of service by an executive order.
All that was done was to rectify a mistake that had been committed in the past in subjecting the ASTOs from Madhya Pradesh and Hyderabad to the Departmental Examination Rules framed by the former State Government of Bombay i.e. to a rule which did not form part of conditions of their service and, therefore, was not applicable to them.
There is, therefore, no infirmity in these two documents.
[681 F H] (ii) Mere chances of promotion are not conditions of service and the fact that there was reduction in the chances of promotion did not tantamount to a change in the conditions of service.
A right to be considered for promotion is a term of service, but mere chances of promotions are not.
[683 C] (iii) The State Government 's Resolution dated June 13, 1964 and its Memorandum of November 21, 1964 clarifying that the ASTOs from Madhya Pradesh and Hyderabad were entitled for promotion to the post of STO Gr.
III without passing the departmental examination.
placed STI from Bombay at a disadvantage.
To ensure 'fair and equitable treatment the State Government rightly dispensed with the requirement of passing the departmental examination in the case of STIs from the former State of Bombay.
The State Government acted with the best of intentions.
It endeavoured to strike a balance between the competing claims to relative seniority.
When sub section (5) of section 115 of the Act speaks of 'fair and equitable treatment ', it envisages a decision which is fair and equitable to all.
[686 A D]
|
Civil Appeal Nos.
1600, 1568 and 1416 of 1970.
From the judgment and order dated the 13th/14th February, 1969 of the Bombay High Court in Special Civil Application Nos. 295 of 1962, 1397166 and 1086 of 1966 respectively.
R.B. Datar, Lalit Bhardwaj and Miss Madhu Moolchandani for the appellant in C.A. No. 1600/70.
Dr. L.M. Singhvi, R.H. Dhebar, S.K Dholakia, R.C. Bhatia, Mrs. Ranjana Anand and L.K Pandey for the appellants in C.A. No. 1568/70.
V.S. Desai and Dr. Y.S. Chitaley Mrs. J. Wad for the respondent in C.A. No. 1600 and 1568.
Mrs. J. Wad for respondent in C.A. No. 1416 of 1970.
The Judgment of the Court was delivered by MISRA, J.
The present appeals by certificate are directed against a common judgment of the Bombay High Court dated 13th of February, 1969.
By the impugned order the High Court dismissed the petitions filed by the appellants under Article 226 of the Constitution challenging the demand of octroi duty by the Municipal Corporation of Poona.
The Bombay Provincial Municipal Corporation Act, 1949 (for short 'the Act ') came into operation in the City of Poona on 15th of February, 1950.
Section 127 (2) thereof authorises the Corporation to impose octroi and other taxes.
Section 149 prescribes the procedure to be followed in levying taxes.
Insofar as it is material, it reads: 732 "149 (1) In event of the Corporation deciding to levy any of the taxes specified in sub section (2) of section 127, it shall make detailed provision, in so far as such provision is not made by this Act, in the from of rules, amplifying or adding to the rules at the time in force (2) The rules shall be submitted by the Corporation Government and the provincial Government may either refuse to sanction them or refer them back to the Corporation for further consideration or sanction them either as they stand or with such modification as it thinks fit, not, however, involving an increase in the rate or rates of the levy or the extent thereof.
" It appears that sometime in the year 1957 the Corporation in order to boost industrial development and to encourage the industrialists to establish industries in the city, had decided to give certain concession in the nature of exemption from octroi duty on certain products under certain conditions.
Pursuant to this objective the Corporation made rule 62 B in Chapter VIII to the Schedule of the Raid Act in 1957.
It reads: "62 B. Industrial Estate or Area" means the area which Corporation may from time to time demarcate for the purposes of the rule as the area in which industries can be suitably located in the interest of industrialisation of the city of Poona.
In respect of any raw materials or machinery imported by any industrial manufacturing concern established or to be established in the industrial estate solely for the purpose of manufacturing finished articles in the said industrial estate, the Commissioner shall not, for a period of twelve years only, from the date on which this rule comes into force, levy octroi. " Under this rule no levy of octroi was to be made for a period of twelve years from the date on which the rule came into force.
Later on the Corporation framed extensive new octroi Rules under their resolution dated 7th of August, 1962, which received the sanction of the Government of Maharashtra on 28th of January, 733 1963.
As the entire argument on behalf of the appellants is based on rule 5 (8) of the said rules, it will be appropriate to quote the rule: "5(8).
In respect of any raw materials or machinery belonging to and imported by the industrial, manufacturing, processing or assembling concern established or to be established in the industrial estate or area for the purpose of manufacturing, processing, or assembling finished articles in the said industrial estate or area, the Commissioner shall not levy octroi for a period of 10 years from the date of demarcation of such areas as an industrial estate or area.
Provided that this exemption not be given in respect of any raw materials imported for the purpose of refilling, packing or repacking only.
Provided that no exemption from octroi shall be given or claimable unless the importer produces at the time of 1) import but not afterwards a certificate in the form prescribed in Schedule P signed by the proprietor or the manager of the said industrial concern certifying that the raw materials or machinery that are being imported are the property of the ownership of the said industrial concern and that the said materials or machinery are to be used or are intended to be used by the said industrial concern for the purpose of manufacturing, processing or assembling finished articles in the said industrial estate or area.
For the purpose of this exemption 'Industrial Estate ' or Area shall mean the area which the Corporation may from time to time demarcate for the purposes of this rule as the area in which industries can be suitably located in the interest of industrialisation of the City of Poona.
" The Corporation had been levying octroi on the materials received by the appellants.
They, however, sought to get exemption under rule 5 (8) from octroi.
As the pattern of facts in each of the appeals is similar, we shall deal with the application made by the appellant in appeal No. 1568 of 1970.
The appellant in this case applied on 17th of November, 1964 for exemption from payment of octroi duty under rule 5 (8) of the octroi Rules.
The 734 Superintendent of octroi, Poona Municipal Corporation wrote back on 5th of December, 1964 as follows: ". exemption from payment of octroi duty can only be granted if the area within which the concern is situated is declared as industrial area and is demarcated for the purpose under the Resolution of the Corporation.
As the area in question has not been demarcated as an industrial area, under the resolution of the Municipal Corporation, the question of granting exemption from the payment of octroi duty does not arise.
It is, therefore, regretted that the exemption asked for cannot be granted.
" Similar was the position of the appellants in the other two appeals.
In the circumstances the appellants filed petitions under Article 226 of the Constitution for a mandamus requiring the Municipal Corporation to define and demarcate the area where their factories were situate as industrial area within the meaning of sub rule (8) of rule S and to exempt them from payment of octroi.
It appears that during the pendency of the writ petitions rule 5 (8) of the octroi Rules was repealed by a notification with effect from 1st of September, 1968.
The appellants, therefore, applied for amendment of the petitions.
By these amendments, the appellants sought to take up two more pleas: (I) that the repeal of sub rule (8) of rule 5 was illegal and/or ultra vires and, therefore, rule 5 (8) still continues to be effective, and (2) that in any event the appellants can get the benefit of rule 62 B which has not been repealed.
The High Court repelled both the contentions and held that old rule 62 B and the new rule 5 (8) were repealed and there was no legal flaw.
It, however.
took the view that despite the repeal of rule S (8) the appellants could still get the relief under rule S (8) if other conditions were satisfied, because of the proviso attached to the repealing rule.
On merits, however, the High Court did not accept the case of the appellants.
In its opinion the area in ques was not demarcated as industrial estate or area for the purpose of rule 5 (8).
The High Court further held that in view of rule 5 (8) of the octroi Rules it was solely in the discretion of the Corporation to demarcate an area as industrial estate.
The appellants have 735 now come to challenge the order of the High Court by these A appeals.
Dr. Singhvi appearing for the appellant in one of the appeals, Civil Appeal No. 1568 of 1970, has contended that if certain area has been demarcated as an industrial area under the Bombay Town Planning Act, 1954 the same shall be taken to be an industrial area within the meaning of rule S (8) of the octroi Rules.
The argument proceeded in the first instance on the assumption that the disputed area had already been included in the development plan under Bombay Town Planning Act, 1954 before the promulgation of rule S (8) and had thus automatically become an industrial estate or area for the purposes of that rule.
But the development plan was prepared by the Corporation on 20th of November, 1958 which was sanctioned by the Government on 7th of July, 1966 and it came into fore on 15th of August, 1966.
Therefore, no area had been declared as industrial area under the development plan before 1957 and in fact it was only after the enforcement of the development plan on 15th of August, 1967 that the disputed area became an industrial area under the Bombay Town Planning Act.
Dr. Singhvi 's assumption clearly lacks any factual basis.
Now the question is whether demarcation of a particular area as an industrial estate or area in pursuance of the Bombay Town Planning Act could be taken to be a demarcation within the meaning of rule 5 (8).
On a bare perusal of rule 5 (8) it will be apparent that for the purpose of the exemption from octroi an industrial estate or area means the area which the Corporation may from time to time demarcate for the purpose of this rule as the area in which industries can be suitably located for the interest of industrialisation of the City of Poona.
Obviously, therefore, the demarcation made under the Town Planning Act will not be a demarcation for the purpose of rule S (8) and unless there is a demarcation as contemplated by rule S (8) the appellants cannot claim exemption from octroi.
The view taken by the High Court is fully warranted by rule S (8) of the octroi Rules.
It is next contended for the appellant that the Corporation has refused to grant exemption to the appellant on the arbitrary ground that the concern of the appellant was not a new one.
The learned counsel seeks to support his argument by the following expression used in sub rule (8) of rule 5: 736 ". concern established or to be established in the industrial estate or area.
" The expression obviously includes not only a concern to be established but also one already established.
But even then the appellant cannot get exemption unless he proves that there has been demarcation within the meaning of sub rule (8) of rule 5 of the octroi Rules.
While demarcating an area for the purpose of rule 5(8) the Corporation may have to take into consideration various factors and circumstances different from those which might weigh with it for making out an area as industrial under the Town Planning Act.
The purpose of that Act is to plan the town and thus to keep industrial areas away from the residential or commercial areas and no industries could be set up in an area other than the industrial area declared in pursuance of that Act, while the purpose of demarcation as industrial estate or area under rule 5(8) is the giving of incentive and impetus to industries in a particular area In so doing the Corporation has got to see whether a particular area is or is not suitably located in the interest of industrialisation irrespective of any consideration as to how the town is to be planned.
It was next contended that there has been violation of Article 14 of the Constitution in as much as some industries in similar situation have been granted exemption while the appellants have been deprived of the benefit of rule 5(8).
There is no foundation for this ground.
It has not been alleged, much less proved, that any other unit has been granted exemption even without a demarcation by the Corporation under rule 5(8).
There is absolutely no force in this contention.
For the respondent it was contended that rule 5(8) of the octroi Rules having been deleted the appellant cannot seek exemption under rule S(8).
Dr. Singhvi for the appellant in reply has contended that, for one thing, the appellant can fall back on the old rule 62 B as the same has not been repealed.
The preamble to the new octroi Rules reads: "Whereas it is found necessary to rescind Rules 26, 28 29, 33, 62 and Rules 35 and 49 (in so far as they relate to octroi) contained in Chapter VIII of the Schedule of the Bombay Provincial Municipal Corporations Act, 1949, and all other existing rules and bye laws relating to octroi enacted under the Bombay District Municipal Act, 1901, 737 and the Bombay Municipal Boroughs Act, 1925, and A whereas it is found necessary to make new rules relating to octroi under sub section (I) of section 149 of the Bombay Provincial Municipal Corporations Act, 1949, the Municipal Corporation of the City of Poona under its Resolution No. 78, dated 7.8 1962 in pursuance of the power vesting in it under clause (7) and clause (17) of section 457 read with section 454 of the said Act is pleased to rescind the rules and bye laws aforementioned and to make the new rules as follows.
" It is true that seven rules covering the subject of octroi and contained in chapter VIII of the Schedule to the Bombay Provincial Municipal Corporation Act 1949 have been specifically mentioned in the preamble as being rescinded and rule 62B is conspicuous by its absence therefrom, which fact apparently supports Dr. Singhvi 's contention.
A closer analysis of the preamble under which new rules were framed, however, makes it clear that rule 62B relating to octroi was repealed by implication.
It is noteworthy that chapter VIII above mentioned does not contain any rule relating to octroi, except rule 62B, which did not find a place in the preamble.
All rules relating to octroi and enacted under the 1901 and the 1925 Acts were also repealed without exception.
Another pointer (which is perhaps the most important in this connection) is available in the fact that octroi was made the subject matter of a new and comprehensive set of rules which not only deal with the matters covered by the rules contained in chapter VIII and specifically mentioned in the preamble but also the one covered by rule 62B, namely, the matter of exemption of goods from octroi in areas considered suitable for industralisation.
It does not stand to reason that the rule making authority framed new rules, of which rule 5(8) covers the entire field of the earlier rule 62B, and yet left the latter intact.
It could possibly not have been the intention of that authority to have two rules on the same subject and thus create confusion.
The promulgation of rule 5(8) as a part of an exhaustive set of new rules, in our opinion, has the effect of a repeal of rule 62B by necessary implication, although not in express terms.
Dr. Singhvi, however, as a second string to the bow banks upon the proviso to the resolution of the Corporation seeking to repeal rule 5(8) which is in these words: 738 "Octroi Rule 5(8) is hereby repealed.
Provided that notwithstanding such repeal the exemption already granted shall continue until the expiry of the respective periods of their grants.
" The resolution so passed was sent to the Government and, as held in Municipal Corporation for the City of Poona etc.
vs Bijlee Product (India) Ltd. etc.
,(1) the Government accepted it in full and sanctioned the repeal of rule S(8), as also the proposed proviso.
But then the appellants would not be entitled to any benefit by reason of the proviso because they were never granted any exemption under rule 5(8).
The other contention raised by Dr. Singhvi is that the Corporation while denying the benefit of exemption from octroi has taken into consideration extraneous or irrelevant considerations.
In support of his contention he referred to paragraph 7 of the counter affidavit filed by the Corporation in the writ petition, which is as follows: "7.
The respondents grant exemptions to concerns on certain policies.
The purpose of extending exemption from octroi duty is to attract new industries in the Corporation limits.
This policy is also carried out with a view to develop the city and also to secure employment to citizens and thus to have progress in the economic conditions, commerce and trade for the welfare of the people in general.
Moreover the aim of giving exemptions to new industries is to secure permanent sources of income for the respondents after a certain period, i.e, ten years.
This is the main object in granting exemption in the cases of new industries to be started that help the development of the City and secure permanent sources of income for the respondents after a definite period.
Side by side, there are certain other objects also which are kept in view while determining the question of granting exemptions.
These are whether Defence needs are satisfied, whether in the interest of public health and sanitation the grant of exemptions is beneficial, whether foreign exchange is saved, whether the problem of housing accommodation is solved, to some extent and the like.
The respondents will suffer 739 huge loss in revenue if exemptions are granted to each and every industry falling within the industrial areas under the Town Planning Scheme.
All these considerations are within the full discretion of the respondents while determining the question of grant of exemptions . ' In our opinion the considerations which have weighed with the Corporation cannot be said to be either irrelevant or extraneous.
These considerations are within the ambit of rule 5(8) of the octroi Rules.
A lot of argument was advanced on behalf of the appellant by Dr. Singhvi on the nature of relief to be granted to the appellant.
His contention was that a writ of certiorari may not be of much avail unless the Court grants a writ of mandamus directing the Corporation to demarcate the area in question under rule S(8) of the octroi Rules and grant him the exemption from octroi duty.
A number of authorities were cited that the Court can issue a writ of mandamus in suitable cases even in respect of administrative orders.
We do not think it is necessary to decide this point as in our opinion the appellants have not been able to make out a case for any relief.
In Civil Appeal No. 1600 of 1970 Shri R.B. Datar adopted the arguments advanced by Dr. Singhvi.
In the third appeal, No. 1416 of 1970 also the same questions of fact and law are h involved and, therefore, this judgment will govern the other two appeals.
For the reasons given above these appeals must fail.
They are accordingly dismissed.
The parties, however, shall bear their own costs.
N.K.A. Appeals dismissed.
| IN-Abs | The Bombay Provincial Municipal Corporations Act, 1949 came into operation in the city of Poona on 15th of February, 1950.
Section 127(2) thereof authorised the Corporation to impose octroi and other taxes, while section 149 prescribed the procedure to be allowed in levying taxes.
In the year 1957, the Corporation in order to boost industrial development and to encourage the industrialists to establish industries in the city, decided to give certain concession in the nature of exemption from octroi duty.
Pursuant to this objective the Corporation made rule 62 B in Chapter VIII to the Schedule of the said Act in 1957, which envisaged the creation of an "Industrial Estate or Area", by which was meant the area which the Corporation may from time to demarcate as the area in which industries can be suitably located in the interest of industrialisation of the city.
Under this rule no levy of octroi was to be made for a period of twelve years.
Later on, the Corporation framed extensive new octroi Rules under their resolution dated 7th of August, 1962.
Rule 5(8) of the new Rules provided for exemption in respect of levy of octroi.
The Corporation had been levying octroi on the materials received by the appellants.
The appellants sought exemption under rule S(8).
The Corporation rejected their claim for exemption of octroi on the ground that exemption can only be granted if the area within which the concern was situated was declared as industrial area and demarcated for the purpose.
Being aggrieved, the appellants filed petitions under Article 226 of tho Constitution in the High Court for the issue of a writ of Mandamus requiring the respondent Corporation to define and demarcate the area where their factories were situated as industrial area, within the meaning of rule 5(8), and to exempt them from payment of octroi.
During the pendency of these petitions rule 5(8) was repealed.
The appellants amended the writ petitions and further contended that (1) that the repeal of rule 5(8) was illegal and/or ultra vires and, therefore, rule S(8) still continues to be effective and (2) that in any event they were entitled to get the benefit of rule 62 B which had not been repealed.
The High Court repelled both the contentions and held that old rule 62B and the new rule 730 5(8) were repealed and that there was no legal flaw.
It however took the view that despite the repeal of Rule S(8) the appellant could still get the relief under rule 5(8) because if the proviso attached to the repealing rule the area in question was not demarcated as industrial estate or area for the purpose of rule S(8) and that it was solely in the discretion of the Corporation to demarcate an area as industrial estate.
It consequently dismissed the writ petitions.
In the appeals to this Court it was contended on behalf of the appellants (I) that the disputed area had been included in the development plan under the Bombay Town Planning Act, 1954 before the promulgation of rule S(8) and had thus automatically become an industrial estate or area for the purposes of that rule.
(2) The Corporation had refused to grant exemption to the appellants on the arbitrary ground that the concern of the appellants was not a new one.
(3) There had been violation of Article 14 of the Constitution in as much as some industries in similar situations have been granted exemption while the appellants have been deprived of the benefit of rule S(8) and (4) While denying the benefit of rule S(8) the Corporation had taken into consideration extraneous or irrelevant considerations.
Dismissing the appeals ^ HELD: 1 (i) No area had been declared as industrial area under the Development plan before 1957 and in fact it was only after the enforcement of the development plan on 15th of August, 1966 that the disputed area became an industrial area under the Bombay Town Planning Act.
[735 C D] (ii) A bare perusal of rule 5(8) makes it apparent that for the purpose of the exemption from octroi, an industrial estate or area means the area which the Corporation may from time to time demarcate for the purpose of the rule as the area in which industries can be suitably located for the interest of industrialisation of the City.
Therefore, the demarcation made under the Town Planning Act will not be a demarcation for the purpose of rule S(8) and unless there is a demarcation as contemplated by rule S(8) the appellants cannot claim exemption from octroi.
The view taken by the High Court is fully warranted by rule S(8) of the octroi Rules.
[735 E G] 2.
The purpose of the Town Planning Act is to plan the town and to keep industrial areas away from the residential or commercial areas and that no industries could be set up in an area other than the industrial area declared in pursuance of the Act.
The purpose of demarcation as industrial estate or area under rule S(8) is for the giving of incentive and impetus to industries in a particular area.
[736 B C] 3.
An analysis of the preamble to the new octroi Rules makes it clear that rule 62 B relating to octroi was repealed by implication.
It is noteworthy that chapter VIII does not contain any rule relating to octroi, except rule 62 B which did not find a place in the preamble.
All rules relating to octroi and enacted under the 1901 and the 1925 Acts were also repealed without exemption.
Another pointer is available in the fact that octroi was made the subject matter of a new and comprehensive set of rules which not only dealt with the matters 731 covered by the rules contained in chapter VIII and specifically mentioned in the A preamble but also the one covered by rule 62 B, namely the matter of exemption of goods from octroi in areas considered suitable for industrialisation.
The promulgation of rule 5(8) as a part of an exhaustive set of new rules, has the effect of a repeal of rule 62 B by necessary implication, although not in express terms.
[737 D G] 4.
The considerations which have weighed with the Corporation for denying the benefit of exemption from octroi to the appellants cannot be said to be either irrelevant or extraneous.
These are within the ambit of rule S(8) of the octroi Rules.
[739 B]
|
Special Leave Petition (Civil) Nos.
2081 84 of 1980.
From the judgment and order dated the 23rd November, 1979 of the High Court of Kerala at Ernakulam in W.A. Nos. 149, 167, 169 and 170 of 1979.
A.S. Nambiar and P. Parameswaran for the Petitioner.
k. Sudhakaran Adv.
Gen. of Kerala, V. J. Francis and Mustafakani Rowthor for Respondent No. 2.
M. M. Abdul Khader and K.M.K Nair for Respondent No. 4, Kerala Public Service Commission.
P. Govindan Nair and Mrs. Baby Krishnan for Respondent No. section K. Prabhakaran for the Intervener.
The Judgment of the Court was delivered by BAHARUL ISLAM, J.
In these special leave petitions, the petitioner assails the judgment and order dated 23rd November, 1979 of a Division Bench of the Kerala High Court dismissing a number of writ appeals.
The relevant facts may be stated thus: 2.
The Kerala Public Service Commission thereinafter 'KPSC ') invited applications for filling up 130 expected vacancies in the posts of Junior Engineers in the Public Works Department, as per notification published in the Kerala Gazette dated 16th May, 1978.
The qualifications specified for the posts were B.Sc.
in Civil Engineering or Mechanical Engineering of the Kerala University or its equivalent as prescribed by the special rules of the Kerala Engineering Subordinate Service (General Branch).
The applicants had to appear in the written test conducted by the KPSC and there after in an interview held by it.
There was a common question paper which contained, in category I, questions in Civil Engineering and in Category II, questions in Mechanical Engineering.
Applicants who were qualified in Civil engineering had to answer the 746 questions in Category 1, and those qualified in Mechanical Engineering the questions in Category II.
After the written test and the interview, but before a common rank list was prepared by the KPSC as was intened, 8 Writ Petitions were filed in the Kerala High Court by applicants holding Civil Engineering degrees.
By these Writ Petitions the preparation of a common rank list and also the procedure of the examination and a method of selection were challenged.
It was prayed in the Writ Petitions that the KPSC be directed to effect selection and prepare and publish separate rank lists of selected applicants holding Civil and Mechanical Engineering degrees.
It was contended in the applications that the applicants who had qualified in Civil Engineering question paper and answered the questions in Category I on the one hand and those who had qualified in Mechanical Engineering and answered questions indicated in Category II in the question paper could not rationally be included in a common rank list after the interview.
The learned Single Judge of the Kerala High Court by a common judgment dated 2nd April.
1979 allowed the Writ Petitions and directed the Government of Kerala and the KPSC to prepare "two lists, namely, one for the Civil Bench and the other for the Mechanical Branch on the basis of examination already conducted".
He proceeded: "With respect to it the Service Commission has not yet published the rank list.
On receiving information from the Government on the above lines, the Public Service Commission is directed to prepare the two separate rank lists, one for the Civil Bench and other for the Mechanical Branch.
On publication of the two lists the Government can request the Service Commission to advise the candidates for appointment to these branches on the basis of the vacancies available in these two branches.
The Kerala Government and the KPSC accepted the directions given by the learned Single Judge and proceeded to take steps for the implementation thereof.
However, some of the aggrieved respondents in the Writ Petitions filed appeals before the Division Bench of the High Court.
The appeals were ultimately dismissed, in view of the fact that the KPSC had advised 239 candidates according to the separate lists for Civil and Mechanical Engineering prepared on the basis of directions given by the learned Single Judge and that these candidates had already been appointed.
747 6.
One of the respondents, Shri section Gopa Kumar, who held a Mechanical Engineering degree, was one of the Special Leave Petitioners before us.
He challenged the judgment of the Division Bench of the Kerala High Court dated 23rd March, 1979.
This Court by an ex parte order dated 23rd April, 1980 dismissed the Special Leave Petition with the following observations .
"The prejudice that the petitioner complains of is taking care of by the High Court emphasizing the fact that the petitioner is entitled to exercise his option.
It is stated that he has come high in the Common list prepared by the Public Service Commission.
It is open to him to choose which wing, Civil or Mechanical, suits him most.
In that view, we are unable to perceive any prejudice especially because on his option being exercised for the general or mechanical wing, as the case may be, he will be chosen in terms of his willingness.
All SL.Ps dismissed.
" (Emphasis supplied) 7.
It may be mentioned that preparation of no common list was directed either by the Single judge or by the Division Bench of the Kerala High Court.
On the contrary the direction expressiy was for preparation of separate lists for Civil Engineer and Mechanical Engineer candidates as stated above.
It has also been stated above that in pursuance of the directions given by the learned Single Judge in his judgment in effect upheld by the Division Bench of the High Court, the Government and the Public Service Commission of Kerala proceeded to prepare separate lists.
But facing difficulties, in view of the observation of this Court in its order dated 23rd April 1980 quoted above, the State of Kerala filed a petition before this Court for clarifications.
This Court passed the following order dated 11th November, 1980: "We have heard learned Advocate General and Shri A.S. Nambiar on the modification or clarification sought.
The actual position has already been explained in the order by this Court dated 28.4.80.
There it has been stated clearly that the petitioner will be entitled to exercise his option and then take his turn according to his rank in the common list prepared by the Public Service Commission.
748 Therefore the petitioner will be entitled to a post, if he has exercised his option in terms of this Court 's order and he is high enough in the common list for claiming the post.
We have no idea, nor are we concerned, whether such a vacancy has arisen.
If a post has become vacant and the petitioner 's turn comes in the common list he is entitled to claim that post under the orders of this Court .
The above order, as it appears, also refers to a common list although no common list was directed to be prepared or was prepared by the KPSC.
This was obviously an inadvertent mistake.
Since there was no common list and since no option was given to the Special Leave Petitioners before us by the judgment of the Kerala High Court, the KPSC faced difficulties in giving effect to the directions given by the High Court.
The KPSC therefore has made the Misc.
Petition before us for clarifications and directions, particularly praying that the expression "the common list prepared by the Public Service Commission should be deleted.
We have heard learned counsel of the parties and perused the judgments of the Kerala High Court passed by the learned Single Judge and the Division Bench.
This Court by its order dated 28th April, 1980 dismissed all the S.L.Ps.
with observations referred to above.
This order as well as the order dated 11th November, 1980 has been subsequently recalled by this Court by its order dated 7th April, 1981, and we do not find any valid ground to reverse the judgments of the High Court.
But in view of the difficulties faced by the KPSC and the Government of Kerala, it is necessary to clarify the position and give necessary directions.
Clause 4 of the Government order No. G.O.MS.
101/79/PWD&E dated 27th September, 1979 the Government constituted the Kerala Engineering Service (Mechanical Branch) and Kerala Engineering Subordinate Service (Mechanical Branch) with posts prescribed therein.
It reads thus: "Government also order that all those who have submitted unconditional options and who possess the required qualifications prescribed in the rules will be appointed by transfer to the respective service.
In the case of any category for which the number of options is more than the 749 appointment by transfer aud the junior persons will be admitted, to the services as and when vacancies arise.
In case where the number of officers who had submitted options is less than the number of posts, the remaining vacancies will be provided by direct recruitment as provided in rule (9) of the respective special rules.
The Chief Engineer & R will implement the above orders forthwith.
" Clause 4 gave unconditional options to those in the Kerala Engineering Service (General Branch) to remain in the said branch or to choose the newly constituted Kerala Engineering subordinate Service (Mechanical Branch).
As stated earlier the Kerala Government or the KPSC was not directed to prepare a common list.
Common List was referred to in the earlier orders in this Court through certain misapprehensions.
The KPSC has stated in its counter affidavit to the S.L.P. filed by Shri section Gopa Kumar against the judgment of the High Court that there were directions to the KPSC to prepare two separate rank lists one for Civil Engineering graduates and the other for Mechanical Engineering graduate on the basis of examination already conducted.
Accordingly the KPSC prepared the two rank lirts one for Civil Engineering and other for the Mechanical Engineering graduates.
The name of Gopa Kumar appears in the latter list.
The rank list for Engineering (Civil) contains names of 152 candidates and the other (Mechanical) contains 202 candidates.
All the Civil Engineering selected have already been appointed.
Shri Gopa Kumar 's lank was 138 in the rank list of Engineers (Mechanical).
He will be appointed when his turn comes.
We think that the Division Bench of the High Court was right in dismissing the writ appeals, having regard to the developments which have taken place.
Accordingly, the special leave petitions are dismissed.
There is no order as to costs.
P.B.R. Petitions dismissed.
| IN-Abs | For selection of candidates for the post of junior engineers in the Public Works Department, the State Public Service Commission prescribed a written test in which persons qualified in Civil Engineering could answer questions in category I and those qualified in Mechanical Engineering could answer questions in category II, both of which were contained in the same question paper.
After the test and interview but before the common rank list was prepared some candidates impugned the method of selection alleging that the categories of Civil Engineering branch and Mechanical Engineering branch could not be rationally included in a common rank list.
A single Judge of the High Court directed the Service Commission to prepare separate lists in respect of each of the two branches.
A Division Bench of the High Court dismissed appeals of some of the aggrieved candidates Dismissing the petition for grant of special leave filed by one candidate this Court observed that it was open to the petitioner to choose the Civil or Mechanical Engineering from the "common list" prepared by the Service Commission.
When the State came to this Court for clarification of the earlier order, this Court again said that if the candidate 's turn came in The "common list" he was entitled to claim the post under the earlier orders of this Court.
Seeking clarification and directions, the State Government prayed that the expression 'common list ' prepared by the Public Service Commission be deleted from the earlier orders of this Court so as to enable the Commission to prepare separate lists in conformity with the High Court 's directions.
^ HELD: The words "common list" mentioned in the two earlier orders of this Court were used through inadvertance.
The High Court directed the Public Service Commission to prepare two separate rank lists: one for Civil Engineering Graduates and other for Mechanical Engineering Graduates on the basis of examination already conducted.
The Public Service Commission 745 accordingly prepared two rank lists.
The name of the petitioner herein appeared A in the list of Mechanical Engineering Graduates and he would be appointed when his turn came.
[749 C E]
|
Appeals Nos. 244 and 245 of 1954.
Appeals from the judgment and order dated August 19, 1952, of the Labour Appellate Tribunal of India (Calcutta) at Allahabad in Miscellaneous Cases Nos, C 91 and 93 of 1952.
919 N. C. Chatterji, H. J. Umrigar, J. B. Dadachanji, section N. Andley and Rameshwar Nath, for the appellant in both appeals.
Purshottam Tricumdas, R. Ganapathy Iyer and B. P. Maheshwari, for respondents in both appeals.
M. C. Setalvad, Attorney General for India, Porus A. Mehta and R. H. Dhebar, for the Intervener.
October 24.
The Judgment of the Court was delivered by BHAGWATI J.
These two appeals :by special leave arise out of an order of the Labour Appellate Tribunal of India, Lucknow Bench, by which it dismissed the application of the appellant under section 22 of the Industrial Disputes (Appellate Tribunal) Act, 1950, hereinafter referred to as the Act for permission to dismiss the respondents from its employ and allowed the application of the respondents under section 23 of the Act for reinstatement.
The respondents are 76 employees of the appellant, a limited company of Sugar Mills, situated in village Chitauni in the district of Deoria and were working in the engineering department of the mills in the mill house, boiling house and the workshop sections.
There were disputes between the appellant and its workmen and, on the date in question, i.e., May 27, 1952, there was pending before the Labour Appellate Tribunal an appeal which was registered as Cal 101/51.
It appears that one Motilal Singh, an employee of the appellant, had been dismissed by it sometime prior thereto and he had been inciting the workmen to make common cause with him, and, at a meeting held the previous night, some sort of action had been decided upon.
When the workmen of the appellant entered the mills on the morning of May 27, 1952, these 76 workmen, though they entered their respective sections of the engineering department, did not commence any work from 7 a.m. as they should have done.
The sectional engineers in charge asked these workmen as to why they did not commence their work and became a ware of their intention to resort 920 to a tools down strike.
They reported the fact to the Chief Engineer who sent a slip to the General Manager informing him that the workers had gone on a tools down strike.
The General.
Manager thereupon personally went to the workshop, mill house and the boiling house and asked these workmen not to resort to such strike but the latter did not pay any heed to his advice.
The General Manager then asked the Chief Engineer to persuade these workmen to commence the work, give them time for about 2 hours till 10 30 a.m. and report to him if, in spite of his persuasions, they did not commence work.
The persuasions of the Chief Engineer and also of the section engineers proved of no avail and the 76 workmen persisted in their attitude with the result that the section engineers made their reports to the General Manager through the Chief Engineer giving the names of the workmen belonging to their respective sections who had resorted to the tools down strike with effect from 7 a.m. that day.
These reports were endorsed by the Chief Engineer and passed on to the General Manager who,in his turn, passed an order at about 10 30 a.m. suspending these 76 workmen till further orders.
The order for suspension was communicated to these workmen through their sectional heads and was also pasted on the notice board of the mills.
There was a recess between 11 a.m. and 1 p.m. and when the gates were opened at 1 p.m. these 76 workmen, in spite of the warnings of the gatekeepers and Jemadar to the contrary, rushed into the mills, entered their respective sections and adopted a threatening attitude.
The sectional engineers made reports to the General Manager in regard to this occurrence and these reports also were endorsed by the Chief Engineer and passed on by him to the General Manager.
The situation which was created by these workmen by forcibly entering their respective sections and continuing there threatening violence was explosive and the management had to call in the police in order to avert violence and damage to the property.
The police came in at 5 p.m. and order appears to have been restored.
There was no untoward incident that day 921 but the management appears to have viewed the situation with, seriousness and approached the Regional Conciliation Officer the next day in order to ask for advice in regard to the dismissal of these workmen.
The Regional Conciliation Officer, however, pointed out to the General Manager that, in view of the pendency of the appeal before the Labour Appel, late Tribunal, he had no jurisdiction to entertain any application for such permission and referred the General Manager to the Labour Appellate Tribunal.
The workmen, on the other hand, got a letter dated May 28, 1952, addressed to the General Manager by the General Secretary of the Chini Mill Mazdoor Sangh to the effect that they had gone to the gates of 'the mills as usual at 7 a.m. that day to attend to their work but they were not allowed to enter the mill pre mises.
They charged the management with the intention to victimise them on the charge of a tools down strike and stated that they had neither struck nor intended to strike but had been prevented from attending to their work and had therefore been advised to go back to their quarters with a view to maintain peace.
The last paragraph of that letter was very significant.
The General Manager was told that if he did not mend his illegal mistakes and did not take the workmen back on duty he would be responsible for any breach of peace.
After receipt of that letter it was evident that the workmen would resort to violent measures in order to attend to their work and a breach of peace was apprehended.
The management evidently continued the police precautions and, after having waited for some time, the General Manager furnished to these 76 workmen on June 2, 1952, a charge sheet wherein he charged them with having committed misconduct within the meaning of cl.
L. I (a) and (b) and wailful insubordination within the meaning of el.
L. I (a), (b) and (w) of the Standing Orders.
He called upon them to show cause within 24 hours of the receipt of the charge sheet why disciplinary action should not be taken against them and gave them intimation that an open enquiry in connection with the said charges 120 922 would be held by him at 8 a.m. on June 6, 1952.
He also intimated that if all the workmen arranged to present themselves earlier than June 6, 1952, he would take up the said enquiry earlier provided, however, an intimation was received to that effect from them or from their Union.
The workmen were to remain suspended till the enquiry was finished.
The workmen addressed uniform letters to the General Manager denying that there was any tools down strike on May 27, 1952, and alleging that the sectional heads and the Chief Engineer bad conspired together "under some mysterious preconceived plans" and stated that no useful purpose would be served by holding an enquiry on the 1 1 th day of their suspension.
They pointed out that such indefinite period of suspension during the pendency of the appeal before the Labour Appellate Tribunal and Reconciliation Board was illegal and unjustified and was in utter disregard of the Standing Orders.
By their further letter dated June 5, 1952, similarly addressed to the General Manager, they voiced their apprehension that they would not get any justice from an enquiry held by the management itself and asked for investigation by an impartial tribunal.
The management, however, held the enquiry as intimated at 8 a.m. on June 6, 1952.
The workmen non co operated and did not present themselves at the enquiry.
The General Manager immediately addressed a letter to these workmen putting on record that in spite of the orders conveyed by him earlier the workmen had disobeyed the.
same and had not appeared at the appointed time and place for the enquiry into the tools down strike.
He pointed out that by not appearing in this manner they had made themselves liable to dismissal for insubordination, and intimated that the management was applying to the proper authorities for permission to dismiss them pending receipt of which the workmen would remain under suspension.
This letter was received by the workmen at 9 a.m. that day and they replied through the General Secretary of the Chini Mill Mazdoor Sangh repeating that a demand had been made for an 923 investigation by an impartial tribunal and in so far as no impartial tribunal had been appointed they were not agreeable to present themselves and submit their defence at the enquiry which was conducted by the management itself.
The appellant thereafter made the necessary application under section 22 of the Act before the Labour Appellate Tribunal of India, Lucknow Bench, for permission to dismiss these 76 workmen.
In the affidavit which was filed in support of that application, all the facts herein before mentioned were set out in extenso and it was pointed out that the management, after giving full consideration to the explanations and offering every possible opportunity to these workmen to explain their conduct coupled with the unreasonable attitude adopted by them, had adjudged them guilty of misconduct under cl.
L. I (a), (b) and (w) of the Standing Orders and considered that any further employment of these workmen would be extremely detrimental to discipline and dangerous in the interests of the industry.
The workmen, in their turn, filed on June 9, 1952, an application under section 23 of the Act for requisite action to be taken against the appellant for having contravened section 22(b) of the Act by inflicting on them the punishment in the shape of harassment by resorting to an illegal lookout for an indefinite period with effect from May 27, 1952, without obtaining the prior permission of the , Labour Appellate Tribunal and "thereby acting contrary to law and resorting to mala fide actions in direct violation of the provisions of the Standing Orders in continuation of the management 's anti trade (Union) activities".
Counter affidavits were made by the workmen as also the management in reply to both the above applications.
The Labour Appellate Tribunal held that the appellant did not act in strict compliance with cl.
L. 12 of the Standing Orders and was, therefore, not entitled to ask for permission to dismiss the 76 workmen.
It accordingly dismissed the appellant 's application under section 22 of the Act.
In regard to the application of the workmen under section 23 of the Act, it held 924 that the wholesale suspension of the 76 workmen and their prevention from resuming work at I p.m. after the lunch hour amounted to a lockout and that this conduct of the appellant amounted to punishment of the workers whether by dismissal or otherwise and was, therefore, in contravention of section 22(b) of the Act.
It accordingly ordered the reinstatement of the workmen if they presented themselves at the office of the General Manager during office hours on any day within 15 days of the order and also ordered payment of half the salary and allowances for the period of non payment, viz., from the date of their suspension up to the date on which they were taken back in service.
Shri N. C. Chatterjee for the appellant before us has strenuously urged that the workmen had resorted to the tools down strike which was an illegal strike and that the appellant was well within its rights in suspending the pending enquiry and also pending the application for permission to dismiss them made before the Labour Appellate Tribunal.
Even if it be held that the appellant had declared a lockout, such a lockout was in consequence of the illegal strike resorted to by the workmen and could not be deemed to be illegal.
He further urged that the management had held an enquiry into the illegal strike which had been resorted to by the workmen and found that the workmen were guilty of misconduct and insubordination within the meaning of cl.
L. I (a), (b) and (w) of the Standing Orders and the appellant rightly came to the conclusion that any further employment of these workmen would be extremely detrimental to discipline and dangerous in the interests of the indus try.
He also contended that the delay in holding the enquiry was not unreasonable and the suspension of the workmen pending enquiry for more than four days was due to sufficient reason, the atmosphere created by the non cooperation of the workers being so tense as not being appropriate for the holding of an enquiry within those four days, that there was no breach of cl.
L. 12 of the Standing Orders and that the Labour Appellate Tribunal was in error when it 925 refused to grant the application under section 22 of the Act.
Civil Appeal No. 245 of 1954 which is directed against the order of the Labour Appellate Tribunal under section 23 of the Act may be disposed of at once.
The Labour Appellate Tribunal was of opinion that the conduct of the appellant in preventing the workmen from continuing work after I p.m. on May 27, 1952, came within the definition of a lockout and the workmen being employed in a public utility concern such lockout would be illegal without a proper notice.
It was further of opinion that this conduct amounted to punishment of a worker whether by dismissal or otherwise and was, therefore, in contravention of section 22(b) of the Act.
This conclusion of the Labour Appellate Tribunal was, in our opinion, based on a misapprehension of the whole position.
The position had been summed up by the Labour Appellate Tribunal in the following words: "As a matter of fact the management never thought of a lockout.
Their idea was to suspend the suspected persons pending enquiry for which they gave a notice".
If this was the correct position, the conclusion reached by the Labour Appellate Tribunal that the conduct of the management came within the definition of a lockout was absolutely unjustifiable.
The Labour Appellate Tribunal recorded its inability to come to a definite finding as to what was the position which obtained on May 27, 1952.
It observed "We have got a number of affidavits in support of the parties ' case and there is oath against oath.
We do not find ourselves in a position to hold definitely as to what was the exact situation.
But it does appear to us that a mountain has been made of a mole hill and conclusions have been arrived at without going deep into the matter".
Even if the parties had made a mountain of a mole hill and had reached conclusions without going deep into the matter, it was certainly the business of the Labour Appellate Tribunal itself to record a finding of fact in regard to the situation as it obtained on 926 that day.
This unfortunately the Labour Appellate Tribunal did not do and it came to record its conclusion, that the conduct of the management came within the definition of a lockout without realizing that such conclusion was inconsistent with what it ' had stated a little earlier that the management as a matter of fact never thought of a lockout.
We have been taken through the whole evidence by the learned counsel for the appellant and there is clear documentary evidence to show that the 76 workmen resorted to a tools down strike from 7 a.m. on May 27, 1952.
The reports which were made by the section engineers and sent to the General Manager through the Chief Engineer were clear and categoric in regard to such tools down strike having been resorted to by the workmen in question and the list of the 76 workmen which was prepared by the General Manager ordering their suspension was based on those reports.
The further reports which were made by the section engineers again sent by them to the General Manager through the Chief Engineer in the afternoon of May 27, 1952, also were clear and categoric in regard to the said workmen having been asked not to enter the workshop, the boiling house and the mill house at 1 p.m. but their having entered the same threatening violence.
A faint attempt was made to charge the section engineers and the Chief Engineer with having conspired "under some mysterious preconceived plans" but the same rested merely on a bare allegation and was not substantiated by any tangible evidence.
Even though there was some conflict of evidence in regard to the time when the notice of suspension was given by the General Manager to these workmen and when the notice in that behalf was pasted on the notice board of the appellant, it is abundantly clear on the documentary evidence above referred to that the 76 workmen resorted to a tools down strike from 7 a.m. on the morning of May 27, 1952, that they were suspended till further orders immediately after the receipt by the General Manager of the first series of reports from the section engineers, that they were prevented from entering the premises 927 at I p.m. but entered the same threatening violence.
If this is the true position it follows that there was no lockout declared by the appellant, much less an illegal lockout.
The workmen bad resorted to an illegal strike and the General Manager rightly ordered that the workmen indulging in such strike should be suspended pending further orders which obviously meant pending enquiry into their conduct and the obtaining of the permission to.
dismiss them as a result of such enquiry if the management thought fit.
If there was thus no illegal lockout at all, the conclusion reached by the Labour Appellate Tribunal in that behalf was absolutely unjustified.
Even if there had been a lockout as concluded by the Labour Appellate Tribunal the same was in consequence of the illegal strike which had been resorted to by these workmen and could not by virtue of section 24(3) of the , be deemed to be illegal.
There is, however, a more fundamental objection that, even if the appellant be held responsible for having declared an illegal lockout, the lockout would not come within the ban of section 22 of the Act.
The Labour Appellate Tribunal had before it an earlier decision of its own in Jute Workers Federation, Calcutta vs Clive Jute Mills(1), in which the same question had beed considered with reference to section 33 of the .
In that case, a lockout had been declared which involved 4,000 workers of the company and a preliminary contention was urged that there was no contravention of the provisions of section 33 of the .
The Labour Appellate Tribunal considered the question whether the lockout had (1) in fact altered the conditions of service of the workmen to their prejudice, or (2) had the effect of discharge, or (3) amounted to punishment of the workmen.
It came to the conclusion that a lockout had not the effect of a discharge, for a lockout does not automatically terminate the services of the workmen.
It did not also amount to punishment, for punishment presup (1) [1951] II L.L.J. 344.
928 poses an offence or misconduct.
A lockout is generally adopted as a security measure and may in certain cases be used as a weapon corresponding to what the employees have in the shape of a strike and that, therefore, a. 33(b) would not be contravened by the company by.
declaring a lockout.
The Labour Appellate Tribunal then considered whether a lockout would attract the operation of section 33(a).
It was of opinion that no automatic termination of the services of the employees was brought about by a lockout and the question was whether any of the conditions of service was altered thereby to their prejudice.
The contention of the Union was that the conditions of service were altered to the prejudice of the workmen because those employees did, not in fact get their pay during the period of the lockout with the possibility of losing it.
This contention was negatived and the Labour Appellate Tribunal was of opinion that the conditions of their service would be altered by the lockout if the employees lost their right to receive their pay during the period of lockout in 'all circumstances but the question whether they would be entitled to get their pay during that period could not be postulated with certainty for that would depend on a variety of considerations.
In the opinion of the Labour Appellate Tribunal to bring a case within section 33(a), the questioned act of the employer must directly and in fact alter the conditions of service to the prejudice of the workmen concerned, that is to say, the moment the lockout was declared.
The possibility that they may or may not get their pay meant that the lockout may or may not alter the conditions of their service to their prejudice.
Section 33(a) would not, therefore, be attracted by the mere fact of a lockout.
The Labour Appellate Tribunal thus came to the conclusion that neither section 33(a) nor section 33(b) would be contravened by the company in de claring the lockout.
This decision of the Labour.
Appellate Tribunal was followed in Colliery Mazdoor Congress, Asansol, vs New Beerbhoom Coal Co. Ltd.(1) and the Labour (1) 11952] L A.C. 219.
929 Appellate Tribunal there held that a lockout did not come within the ambit of section 33 and, therefore, no permission under that section was required for declaring a lockout.
We agree with the reasoning adopted in the above cases and are of opinion that a lockout is neither an alteration to the prejudice of the workmen of the conditions of service applicable to them within the meaning of cl.
(a) nor a discharge or punishment whether by dismissal or otherwise of the workmen within the meaning of cl.
(b) of section 33 of the , or section 22 of the Industrial Disputes (Appellate Tribunal) Act, 1950, and that, therefore, no permission of the Conciliation Officer, Board or Tribunal as the case may be is necessary to be obtained before a lockout can be declared.
If the lockout is legal, no question can at all arise.
If, on the other hand,, the lockout is illegal, a remedy is provided in section 26 of the .
The employees affected by a lock out would in any event be entitled to refer the industrial dispute arising between themselves and the employer for adjudication by adopting the proper procedure in regard thereto.
The Labour Appellate Tribunal was, therefore, clearly in error when it came to the conclusion that the conduct of the appellant came within the definition of a lockout and that it amounted to punishment of the workmen whether by dismissal or otherwise and was, therefore, in contravention of s, 22(b) of the Act.
The application of the respondents under section 23 of the Act was accordingly liable to be dismissed and should have been dismissed by the Labour Appellate Tribunal.
Civil Appeal No. 245 of 1954 will, therefore, be allowed and the order of the Labour Appellate Tribunal reinstating the respondents in the service of the appellant will be set aside.
Coming now to Civil Appeal No. 244 of 1954, the first question to determine is whether the respondents had resorted to an illegal strike.
We have already pointed out the circumstances under which the 76 workmen resorted to the tools down strike from 7 a.m. on May 27, 1952, and recorded the finding 121 930 that they not only resorted to such strike but persisted in their attitude in spite of the persuasions of the Chief Engineer and the General Manager of the appellant.
The appellant having been declared a public utility concern, the workmen were not entitled to resort to such strike without giving to the appellant notice of the strike in terms of section 22(1) of the , and the tools down strike which was resorted to by them was, therefore, an illegal strike.
The fact that the strike was of a short duration viz., from 7 a.m. till 10 30 a.m. would not exculpate the respondents from the consequence" of having resorted to such illegal strike, the avowed intention of the strikers being not to resume work until their pre concerted plan conceived at, the meeting held on the previous night was carried out.
The strike resorted to by the workmen was of an indefinite duration.
and the management, having failed in its attempts to persuade the workmen to resume their work was well within its rights to suspend these workmen pending further orders.
(Vide Buckingham and Carnatic Co. Ltd. vs Workers of the Buckingham ' and Carnatic Co. Ltd.(1)).
The Labour Appellate Tribunal did not decide this issue at all but only considered the alleged non compliance by the appellant of cl.
L. 12 of the Standing Orders as determinative of the whole enquiry before it observing that "although the delay (in holding the enquiry) was not unreasonable, there was no doubt that the management did violate the letter of the rule".
It further observed that there was no sufficient reason indicated for extending the period of suspension beyond the period of four days provided in cl.
L. 12 of the Standing Orders, the tension created by the non co operation of the workers not having been considered sufficient to preclude the management from collecting materials for conducting the enquiry within the said period of 4 days, This reasoning of the Labour Appellate Tribunal was unsound.
Having once come to the conclusion that the delay was not unreasonable, there was no justification for the further (1) ; 931 conclusion reached by the Labour Appellate Tribunal that the tension created by the non co operation of the workers was not a sufficient reason for extending the period of such suspension.
The workmen had forcibly entered the premises of the mills in spite of the warnings of the watchmen and the Jemadar and had also entered the workshop, the boiling house and the mill house and continued to stay there threatening violence.
In their letter dated June 3, 1952, they had also threatened the General Manager that if he did not mend his illegal mistakes and did not take the workmen back on duty be would be responsible for any breach of peace.
This was enough evidence of their mentality and the management naturally enough apprehended breach of peace at the hands of these workmen.
If this was the tense atmosphere created by the non co operation of the workmen, the management was perfectly justified in postponing the enquiry by a few days and continuing the workmen under sus pension.
The delay which was thus caused in furnishing the charge sheets and giving notice of the enquiry to these workmen on June 2, 1952, was, therefore, sufficiently explained and if there was any one responsible for this.
delay it was the workmen and not the management.
It did not then lie in the mouth of the workmen to protest against this delay in the enquiry and trot out their suspension for a period exceeding four day 's as an excuse for abstaining from the enquiry.
As a matter of fact, the management intimated to the workmen that in spite of June 6, 1952, having been fixed as the date for the open enquiry, the management would be prepared to take up the enquiry earlier provided an intimation was received either from the workmen or from their Union to that effect.
Instead of responding to this gesture of the appellant the workmen persisted in asking for an independent enquiry and non co operated with the management in the enquiry which was ultimately held by it as notified at 8 a.m. on June 6, 1952.
We are of opinion that under the circumstances the appellant was not guilty of having contravened el.
L. 12 of the Standing Orders and the Labour Appellate 932 Tribunal was in error when it came to the contrary conclusion and dismissed the application of the appellant under section 22 merely on that ground without making any further enquiry into the circumstances of the case.
It appears that the Labour Appellate Tribunal was driven to take this step because it found itself unable to hold definitely as to what was the exact situation on May 27, 1952.
We shall only observe that if the Labour Appellate Tribunal had really ap plied its mind to the question it would have come to the conclusion that the respondents in fact did resort to the illegal strike from 7 a.m. on May 27, 1952, and that there was no contravention of cl.
L. 12 of the Standing Orders by the appellant.
The next question that falls to be determined is whether the enquiry which was held by the management on June 6, 1952, was a fair enquiry and whether the General Manager observed the principles of natural justice in the conduct of that enquiry Due notice of the enquiry was given to the respondents by the letter of the management addressed to them on June 2, 1952, and if the respondents did not avail themselves of the opportunity of presenting themselves and defending their action at the enquiry they had only themselves to blame for it.
It was within the province of the management to hold such an enquiry after giving due notice thereof to the respondents and to come to its own conclusion as a result of such enquiry whether the respondents were guilty of the charges which had been leveled against them.
If full and free opportunity was given to the respondents to present themselves at the enquiry and defend themselves it could not be said that the enquiry was anything but fair.
No principles of natural justice were violated and the management was at liberty to come to its own conclusions in regard to the culpability of the respondents and also to determine what punishment should be meted out to the respondents for the misconduct and insubordination proved against them.
If the ban which is imposed by section 22 of the Act had not been in existence, the management would have been entitled to impose the punishment on the 933 respondents and dismiss them without anything more, if it honestly came to the conclusion that dismissal of these workmen was the only punishment which should be meted out to them in all the circumstances of the case.
The respondents would no doubt then have been entitled to refer the industrial dispute which arose out of their dismissal for adjudication by adopting the proper procedure set out in the , and the Industrial Tribunal appointed by the Government for the adjudication of such dispute would have been in a position to thrash out all the circumstances and award to them the appropriate relief This course was, however, not open to the appellant by reason of the pendency of the appeal before the Labour Appellate Tribunal and the only thing which the appellant could do, therefore, was, after coming to its own conclusion as a result of such enquiry, to apply to the Labour Appellate Tribunal under s.22 of the Act for permission to dismiss the respondents and this the appellant did on June 8, 1952.
It was not open to the respondents then, having regard to the attitude which they had adopted throughout in relation to the said enquiry, to urge that the enquiry was not fair or impartial or that the principles of natural justice had been violated by the General Manager of the appellant in the conduct of the enquiry.
It was, however, urged on behalf of the respondents that the suspension for an indefinite period beyond the period of four days provided in cl.
L. 12 of the Standing Orders was a punitive measure and the appellant was not justified in imposing that punishment on them without the permission of the Labour Appellate Tribunal.
It was contended that such suspension involved loss of pay by the respondents and being of an indefinite duration inflicted such harassment on them that it could not be deemed to be anything except a punishment.
We do not accept this contention.
It has been rightly held by the Labour Appellate Tribunal that suspension without pay pending enquiry as also pending permission of the Tribunal under the relevant section could not 934 be considered a punishment as such suspension without payment would only be an interim measure and would last till the application for permission to punish the workman was made and the Tribunal bad passed orders thereupon.
If the permission was accorded the workman would not be paid during the period of suspension but if the permission was refused he would have to be paid for the whole period of suspension.
There is nothing like a contingent punishment of a workman and therefore such suspension could not be deemed to be a punishment of the workman at all.
Such suspension would of necessity be of an indefinite duration because to get a written permission of the Tribunal would mean delay and no Tribunal would likely issue any order without notice and without hearing all the parties concerned.
Orders for suspension were meant only as security measures or precau tionary ones taken in the interest of the industry itself or its employees in general.
These measures were sometimes called for immediately after an incident and any delay, however small, might defeat the purpose for which such measures were intended.
It would therefore be necessary to adopt these measures immediately and to suspend the workman pending the enquiry as also the permission to be obtained from the appropriate Tribunal for dismissing him if as a result of the enquiry the, management thought fit to inflict such punishment upon him.
The suspension.
, however, would not be a punishment by itself.
The ordinary dictionary meaning of the word "Punish" is "to cause the offender to suffer for the offence" or "to inflict penalty on the offender" or "to inflict penalty for the offence" (Concise Oxford Dictionary, 4th Ed.).
Punishment can be otherwise defined (Vide Law Lexicon by P.R. Aiyar, 1943 Ed.) as penalty for the transgression.
of law, and the word cc punish" denotes or signifies some offence committed by the person who is punished.
Any action of the employer to the detriment of the workman 's interest would not be punishment so long as no offence was found to have been committed by the workman.
The suspension under such circumstances, therefore, could 935 not be a punishment even though it may be of an indefinite duration and would not attract the operation of section 22 of the Act.
It could not be contended, therefore, that suspension without pay even for an indefinite period pending enquiry or pending the permission of the appropriate Tribunal to dismiss the workman would be a punishment which would require permission under section 22 of the Act before the same could be meted out to the workman.
(Vide Champdany Jute Mills And Certain Workmen(1); Joint Steamer Companies And Their Workmen(2); Assam Oil Co. Ltd. vs Appalswami(3); Standard Vacuum Oil Co. vs Gunaseelan, M. O.(4)).
The scope of the enquiry before the Labour Appellate Tribunal under section 22 of the Act has been the subject matter of decisions by this Court in Atherton West & Co. Ltd. vs Suti Mill Mazdoor Union and Others(5) and The Automobile Products of India Ltd. vs Rukmaji Bala & Others(6).
The Tribunal before whom an application is made under that section has not to adjudicate upon any industrial dispute arising between the employer and the workman but has only got to consider whether the ban which is imposed on the employer in the matter of altering the conditions of employment 'to the prejudice of the workman or his discharge or punishment whether by dismissal or otherwise during tile pendency of the proceedings therein referred to should be lifted.
A prima facie case has to be made out by the employer for the lifting of such ban and the only jurisdiction which the Tribunal has is either to give such permission or to refuse it provided the employer is not acting mala fide or is not resorting to any unfair practice or victimization.
It cannot impose any conditions on the employer before such permission is granted nor can it substitute another prayer for the one which the employer has set out in his application.
If the permission is granted, the ban would be lifted and the employer would be at liberty, if he so chooses thereafter, to deal out the (1) [1952] I L.L.J. 554.
(2) [1954] II L.L.J. 328. ; (4) [1951] II L.L J. 221.
(5) [1954] II L.L.J. 656.
(6) , 936 punishment to the workman.
On such action being taken by the employer the workman would be entitled to raise an industrial dispute which would have to be referred to the appropriate Tribunal for adjudication by the Government on proper steps being taken in that behalf.
When such industrial dispute comes to be adjudicated upon by the appropriate Tribunal, the workman would be entitled to have all the circumstances of the case scrutinized by the Tribu nal and would be entitled to get the appropriate relief at.
the hands of the Tribunal.
If, on the other hand, such permission is refused, the parties would be relegated to the status quo and the employer would not be able to deal out the punishment which he intends to do to the workman.
Even then an industrial dispute might arise between the employer and the workman if the workman was not paid his due wages and other benefits.
Such industrial dispute also would have to be referred to the appropriate Tribunal by the Government and the Tribunal would award to the workman the appropriate relief having regard to all the circumstances of the case.
The Tribunal before whom such an 'application for permission is made under section 22 of the Act would not be entitled to sit in judgment on the action of the employer if once it came to the conclusion that a prima facie case had been made out for dealing out the punishment to the workman.
It would not be concerned with the measure of the punishment nor with the harshness or otherwise of the action proposed to be taken by the employer except perhaps to the extent that it might bear on the question whether the action of the management was bona fide or was actuated by the motive of victimization.
If on the materials before it the Tribunal came to the conclusion that a fair enquiry was held by the management in the circumstances of the case and it bad bona fide come to the conclusion that the workman was guilty of misconduct with which he had been charged a prima facie case would be made out by the employer and the Tribunal would under these circumstances be bound to give the requisite permission to the employer to deal 937 out the punishment to the workman.
If the punishment was harsh or excessive or was not such as should be dealt out by the employer having regard to all the circumstances of the case the dealing out of such punishment by the employer to the workman after such permission was granted would be the subject matter of an industrial dispute to be raised by the workman and to be dealt with as aforesaid.
The Tribunal, however, would have no jurisdiction to go into that question and the only function of the Tribunal under section 22 of the Act would be to either grant the permission or to refuse it.
(Vide Champdani Jute Mills And Shri Alijan(1); R.B section Lachmandas Mohan Lal & Sons Ltd. And Chini Mill Karmachari Union(2) Assam Oil Companies ' case(3)).
In the circumstances of the present case, once the appellant succeeded in establishing that the workmen had resorted to an illegal strike from 7 a.m. on May 27, 1952, that a fair enquiry into the alleged misconduct and insubordination of the workmen had been held by the management without violating any principles of natural justice, that the management had as a result of such enquiry found that the workmen had been guilty of misconduct and insubordination with which they had been charged and that the management had come to the bona fide conclusion that continuing the workmen in its employ was detrimental to discipline and dangerous in the interests of the appellant, the Labour Appellate Tribunal ought to have held that a prima facie case for the dismissal of the workmen had been made out by the appellant and ought to have granted the appellant the permission to dismiss the workmen.
We are, therefore, of opinion that the Labour Appellate Tribunal was clearly in error in rejecting the application of the appellant under section 22 of the Act and refusing it the permission to discharge the respondents from its employ.
Civil Appeal go.
244 of 1954 will, therefore, be allowed and the order of (1) [1952] II L.L.J. 629.
(2) [1952] II L.L.J. 787, (8) 122 938 the Labour Appellate Tribunal dismissing the application under section 22 of the Act will be set aside.
The appellant will be granted permission under section 22 of the Act to discharge the respondents from its employ.
Under the orders of the Court, one half of their salary has been already paid by the appellant to the respondents from May 27, 1952, onwards.
As a result of this decision, the appellant would be entitled to recover the same back from them.
Shri N. C. Chatterjee appearing on behalf of the appellant has, however, stated that the appellant would forego the recovery of that amount and would also keep the respondents on the reserve list to be employed in the mills as and when there were vacancies in their permanent cadre.
We hope that the respondents will take this offer in the true spirit with, which it has been made on behalf of the appellant and behave better in the future.
Shri N. C. Chatterjee has also left the question of costs of both these appeals to us and we do order that, in all the circumstances of the case, it would be proper that each party do bear and pay its own costs of both these appeals.
Appeals allowed.
| IN-Abs | Seventy six workers of the appellant company resorted to a tools down strike in sympathy with a dismissed co worker.
Repeated attempts to persuade them to resume work having failed the General Manager suspended them until further orders.
After midday recess the Management sought to prevent the workers from entering the mills but they violently entered the mills and the Police had to be called in by the company to keep the peace.
Charges of misconduct and insubordination were thereafter framed against the workers and they were called upon to show cause in an open enquiry to be held by the General Manager why disciplinary action should not be taken against them and the order of suspension was extended pending the enquiry.
The workers took up an attitude of total non cooperation and the atmosphere was tense with the result that the enquiry could not be held within 4 days.
The Management decided to dismiss the workers as a result of the enquiry but as an appeal was then pending before the Labour Appellate Tribunal, the company applied to it under section 22 of the Industrial Disputes (Appellate Tribunal) Act of 1950 for permission to do so and extended the period of suspension pending receipt of such permission.
The workmen in their turn filed an application under a. 23 of the Act to the Appellate Tribunal for requisite action to be taken against the company for having contravened section 22(b) of the Act by resorting to an illegal lock out and thereby punishing them without its prior permission.
The Appellate Tribunal held that the company had not held the enquiry within the time specified by el.
L 12 of the Standing Orders and on that ground dismissed its application.
It allowed the application of the workers holding that the wholesale suspension of the workers and preventing them from continuing work.
after the mid day recess amounted to a lock out 917 and punishment by the company and contravened section 22(b) of the Act and directed their reinstatement.
The company appealed.
It was contended on behalf of the company that there had been neither a breach of el.
L 12 of the Standing Orders nor a contravention of section 22(b) of the Act.
Hold, that the contentions were correct and the appeals must succeed.
The conduct of the company did not come within the definition of a lock out and even if there was any lock out it was in consequence of the illegal strike resorted to by the workmen and as such could not be deemed to be illegal by virtue of section 24(3) of the Industrial Disputes.
Act, 1947.
Moreover, even assuming that the company declared an illegal lock out it was not necessary for it to obtain the permission of the Appellate Tribunal under section 22 of the Act before it could do so.
A lock out was neither an alteration of the conditions of service within the meaning of el.
(a) nor a discharge or punishment by dismissal or otherwise within the meaning of el.
(b) of section 33 of the Industrial Disputes Act, 1947 or under section 22 of the Industrial Disputes (Appellate Tribunal) Act, 1950 and no permission was, therefore, required for its declaration.
If the lock out was illegal the workmen had their remedy under section 26 of the Industrial Disputes Act and in any event they had the right to have the dispute referred for adjudication.
Jute Workers Federation, Calcutta vs Clive Jute Mills ([1951] and Colliery Mazdoor Congress, Asansol vs New Beerbhoom Coal Co. Ltd. ([1952] L.A.C. 219), approved.
The Company having been declared a public utility concern, the workers had no right to go on strike without giving a notice in terms of section 22(1) of the and the tools down strike resorted to by them was illegal and the company was within its rights in suspending them.
Buckingham and Carnatic Co. Ltd. vs Workers of the Buckingham and Carnatic Co. Ltd., ([1953] S.C.R. 219), referred to.
Mere failure to hold an enquiry within the period of four days prescribed by el.
L 12 of the Standing Orders could not determine the matter before the Appellate Tribunal and where, as in the instant case, the delay was due to the conduct of the workers it was sufficiently explained.
Where full and free opportunity was given to the workers to be present and defend themselves in a duly notified enquiry and they failed to do so, the Management was quite within its right to come to its own conclusion as to their guilt and the punishment to be meted out to them and it was not open to the workmen thereafter to urge that such enquiry was not fair or impartial or violated the principles of natural justice.
918 There could be no punishment so long as there was no offence and any action of the employer to the detriment of the workers ' interest would not amount to punishment.
The law did not contemplate anything like a contingent punishment of a worker and, consequently, where there was an interim order of suspension pending an enquiry or the grant of permission by the Appellate Tribunal, the question of pay for the period of such suspension depending on whether or not the permission would be granted, such suspension would not amount to punishment even where it was of an indefinite duration so as to attract the operation of section 22 of the In dustrial Disputes (Appellate Tribunal) Act, 1950.
Champdany Jute Mills and Certain Workmen, ([1952) 1 L.L.J. 554), Joint Steamer Companies and Their Workmen, ([1954] II L.L.J. 221), Assam Oil Co. Ltd. vs Appalswami, ([1954] , Standard Vacuum Oil Co. vs Gunaseelan, M. G. ([1954] II L.L.J. 656), relied on.
Under that section the only thing that the Appellate Tribunal had to consider was whether a prima facie case had been made out by the employer for lifting the ban imposed by the section and if, on the materials before it, it was satisfied that there bad been a fair enquiry in the circumstances of the case and the Management had bona fide come to the conclusion that the worker was guilty of misconduct with which he had been charged and it would be detrimental to discipline and dangerous in the interests of the company to continue him in its employ, a prima facie case was made out and the Tribunal would be bound to permit the employer to punish the workman.
It would be no part of its duty to judge whether the punishment was harsh or excessive, except so far it might bear on the bona fides of the Management, and could only grant the permission as sought for or refuse it and the question of the propriety of the punishment could be decided only by the appropriate Tribunal appointed by the Government for adjudicating the industrial dispute which would ensue upon the action of the management.
Atherton West & Co. Ltd. vs Suti Mills Mazdoor Union and Others, ([1953] S.C.R. 780), The Automobile Products of India Ltd. vs Bukmaji Bala & Others, ([1955] 1 S.C.R. 1241) Champdany Jute Mills and Shri Alijan, ([1952] II L.L.J. 629), R.B.S. Lachmandas Mohan Lal & Sons Ltd. and Chini Hill Karmachari Union, ([1952] II L.L.J. 787) and Assam Oil Companies ' Case, ([1954] L.A.C. 78), referred to.
|
etition (Criminal) No. 4975 of 1981.
(Under Article 32 of the Constitution) Kapil Sibal, Ramesh C. Pathak, Subhash Sharma.
R. K Khinria and R.K. Handa for the Petitioner.
O.P. Sharma and M. section Dhillon for the Respondent.
The Judgment of the Court was delivered by SEN, J.
This is a petition under article 32 of the Constitution by one Nand Lal Bajaj for the issuance of a writ of habeas corpus for the release of his son, Inderjit @ Billa, who has been detained by an order of detention passed by the District Magistrate, Ropar, under section 3 of the Prevention of Blackmarketing and Maintenance of Supplies of Essential Commodities Act, 1980 (hereinafter called 'the Act '), on being satisfied that his detention was necessary with a view to preventing him from acting in any manner prejudicial to the maintenance of supplies of commodities essential to the life of the community.
Various grounds have been taken challenging the validity of the order of detention, but it is not necessary for us to deal with them all as the view that we take on one of them is sufficient to dispose of the petition.
The main contention is that the procedure adopted by the Advisory Board in allowing legal assistance to the State and denying such assistance to the detenu was both arbitrary and unreasonable and thus violative of article 21 read with article 14 of the Constitution.
First as to the facts.
On June 1, 1981, the District Magistrate passed an order of detention under sub section
(2) of section 3 of the Act on 721 being satisfied that detention of Inderjit was necessary with a view to preventing him from acting in any manner prejudicial to the maintenance of supplies of commodities essential to the community, and as required by sub section
(3) thereof, made a report forthwith to the State Government together with the grounds on which the order of detention had been made and the State Government approved of the same.
The detenu was apprehended on June 11, 1981 and served with the order of detention together with the grounds and, in due course, the detenu submitted his representation challenging the order of detention to the State Government.
He made a request in writing that he be allowed the assistance of counsel during the hearing before the Advisory Board, but the Government did not accede to his request.
However.
it appears that the detaining authority was represented by the State counsel at the hearing.
The detenu thereupon asked the Advisory Board that he may also be afforded an opportunity for legal assistance.
What transpired before the Advisory Board can best be stated in the words of the petitioner.
The relevant averment in para 17 of the petition is as follows: Before the commencement of these proceedings the detenu requested the State Government in writing that he be allowed assistance of counsel during the course of the proceedings before the Advisory Board.
The said request was denied.
The detenu to his utter surprise found that there he had to place his case before the Advisory Board without assistance of Counsel, the order of detention was defended by State Counsel.
The lawyers representing the State, during the course of the proceedings before the Advisory Board included the District Attorney and the Additional District Attorney who were assisted by the District Legal Advisor and one legal assistant.
The detenu had also requested to Advisory Board verbally that he be allowed the assistance of counsel during the course of the proceedings. (emphasis added) In answer to the rule nisi, the District Magistrate Ropar who is the detaining authority, has filed a counter affidavit by which he ex plained the circumstances which led to the issue of the detention order.
In reply to para 17 of the petition, it is averred: In reply to para 17 of the petition it is stated that section 11(4) of the Prevention of Blackmarketing and Maintenance of Supplies of Essential Commodities Act, 722 1980 prohibited the assistance of a lawyer to the detenu before the proceedings of Advisory Board, which are confidential.
However the Advisory Board is competent to call any information from the appropriate Govt.
as laid in section 11(1) of the Act.
It is thus manifest that there was no traverse of the specific allegation made by the petitioner that while the Advisory Board allowed legal assistance to the detaining authority, there was denial of such an opportunity to the detenu.
In substance, the District Magistrate does not deal with the facts but states the law.
Despite the order of this Court for the production of the file containing the proceedings of the Advisory Board, all that was shown to us was the report of the Advisory Board.
We were in formed that the record was not with the State Government but with the Board.
It was represented that the Advisory Board does not forward its records because they are confidential.
In the absence of ) the record, there is no other alternative but to proceed on the allegations made by the petitioner.
The report of the Board does indicate that the Public Prosecutor who was present was questioned on one of the aspects of the matter.
It also records the presence of two Additional District Attorneys.
It is argued on behalf of the State that under sub section
(4) of section 11 of the Act the detenu was not entitled to any legal assistance before the Advisory Board.
The submission is that the proceedings of the Board and its report except that part of the report in which the opinion of the Board is expressed, are confidential.
Therefore, lawyers have no place in the proceedings before the Advisory Board.
It is further argued that the Advisory Board is entitled to devise its own procedure.
Our attention was drawn to sub section
(I) of section 11 of the Act, and it is urged that the Advisory Board is entitled not only to look into the record and see whether there was any material on which the order of detention could be passed under section 3 of the Act, but may also call for any such further information as it may deem necessary.
Sub sections
(I) of the Act on which reliance has been placed by the State are as follows: 11.
(1) The Advisory Board shall, after considering the materials placed before it and, after calling for such further information as it may deem necessary from the appropriate 723 Government or from any person called for the purpose through the appropriate Government or from the person concerned, and if, in any particular case, it considers it essential so to do or if the person concerned desires to be heard, after hearing him in person, submit its report to the appropriate Government within seven weeks from the date of detention of the person concerned.
(4) Nothing in this section shall entitle any person against whom a detention order has been made to appear by any legal practitioner in any matter connected with the reference to the Advisory Board, and the proceeding of the Advisory Board, and its report, excepting that part of the report in which the opinion of the Advisory Board is specified, shall be confidential.
Under article 22(3) (b) of the Constitution, the right to consult and be defended by a legal practitioner of his choice is denied to any person who is arrested or detained under any law providing for preventive detention.
Sub section
(4) of section 11 of the Act is undoubtedly in conformity with article 22(3) (b) of the Constitution.
Normally, lawyers have no place in the proceedings before the Advisory Board.
The functions of the Advisory Board are purely consultative.
It is an independent body constituted under section 9 of the Act consisting of a silting Judge as the Chairman and not less than two other members who may be sitting or retired judges of the High Court.
It is expected that the Advisory Board would act in a fair and impartial manner in making a report whether or not there is, in its opinion, sufficient cause for the detention of a person.
In coming to that conclusion, the Board has to make an objective determination on the question as to whether there was sufficient material on which the subjective satisfaction of the detaining authority could be based.
Under sub section
(I) of section 11 of the Act, the Board is not only entitled to look into the record and see whether there was any material on which the order of detention could be passed under section 3 of the Act, but may also call for such further information as it may deem necessary from the appropriate Government or from the person concerned and if, in any particular case, it considers essential to do so or if the person concerned desires to be heard, shall hear him in person.
The Board is entitled to devise its own procedure.
It is the arbitrariness of the procedure adopted by the Advisory Board that vitiates the impugned order of detention.
There is no 724 denying the fact that while the Advisory Board disallowed the detenu 's request for legal assistance, it allowed the detaining authority to be represented by counsel.
It appears that the Advisory Board blindly applied the provisions of sub section (4) of section 11 of the Act to the case of the detenu failing lo appreciate that it could not allow legal assistance to the detaining authority and deny the same to the detenu.
The Advisory Board is expected to act in a manner which is just and fair to both the parties.
The report of the Board placed before us shows that the detenu exercised his right to recall some of the witnesses for the purpose of cross examination We are informed that the hearing before the Advisory Board went on for 4 to 5 days and there were as many as 11 witnesses cross examined by the detenu.
It cannot be, as is suggested by the counsel for the State, that the lawyers representing the State Government did not participate in the proceedings.
On the contrary, the report itself shows that the Public Prosecutor was called upon to explain some aspects of the case.
If the matter was so intricate, the Advisory Board should have ensured that both the parties had equal opportunity to place their respective cases.
It appears that the dice was loaded against the detenu in that whereas he had to go without legal assistance, the State Government had the benefit of an array of lawyers.
The expression 'procedure established by law ' in the context of deprivation of life and liberty under article 21 was interpreted in Maneka Gandhi vs Union of India(l) and the interpretation so put has been treated as involving an enlargement of the right conferred by article 21 of the Constitution.
As limited to the procedure, the judges were agreed that the procedure must be reasonable and fair and not arbitrary or capricious.
For, if the procedure was arbitrary, it would violate article 14 since article 14 is not consistent with any arbitrary power.(2) In interpreting the expression 'procedure established by law ' in article 21 with reference to article 14 of the Constitution, Bhagwati, J., observed(3): We must reiterate here what was pointed out by the majority in E.P. Royappa v T.N.(4) namely, that 'from a positivistic point of view, equality is antithetic to the rule of law in a republic, while the other, to the whim and caprice 725 of an absolute monarch.
Where an act is arbitrary, it is implicit in it that it is unequal both according to political logic and constitutional law and is therefore violative of article 14 '.
Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment.
The principle of reasonableness, which legally as well as philosophically, is an essential element of equality or non arbitrariness pervades Article '4 like a brooding omnipresence and the procedure contemplated by Article 21 must answer the test of reasonableness in order to be in conformity with Article 14.
It must be 'right and just and fair ' and not arbitrary, fanciful or oppressive, otherwise, it would be no procedure at all and the requirement of Article 21 would not be satisfied.
Arbitrariness is the very antithesis of article 14.
The principle of reasonableness is an essential element of equality and the procedure contemplated by article 21 must answer the test of reasonableness in order to be in conformity with article 14.
Among the concurring opinions, Krishna Iyer, J., although he generally agreed with Bhagwati, J., goes a step forward by observing(l): Procedural safeguards are the indispensable essence of liberty.
In fact, the history of procedural safeguards and the right to a hearing has a human right ring.
In India, because of poverty and illiteracy, the people are unable to protect and defend their rights: observance of fundamental rights is not regarded as good politics and their transgression as bad politics.
In short, the history of personal liberty is largely the history of procedural safeguards.
The need for observance of procedural safeguards, particularly in cases of deprivation of life and liberty is, therefore, of prime importance to the body politic.
In Francis Coralie Mullin vs The Administrator, Union Territory of Delhi and ors.(2) the inter relation between articles 21 and 14 of the Constitution was brought out by Bhagwati, J. in these words : The right of detenu to consult a legal adviser of his choice for any purpose not necessarily limited to defence 726 in a criminal proceeding but also for securing release from preventive detention or filing a writ petition or prosecuting any claim or proceeding, civil or criminal is obviously included in the right to live with human dignity and is also part of personal liberty and the detenu cannot be deprived of this right nor can this right of the detenu be interfered with except in accordance with reasonable, fair and just procedure established by a valid law.
It is increasingly felt that in the context of 'deprivation of life and liberty ' under article 21, the 'procedure established by law ' carried with it the inherent right to legal assistance.
Apart from authority it is easy to appreciate that in overwhelming majority of cases a detenu can do nothing to help himself before the Advisory Board.
The right to be heard before the Advisory Board would be, in many cases, of little avail if it did not comprehend the right to be heard by counsel.
It is expected that Parliament while making a law to regulate the procedure before an Advisory Board under article 22 (7) (c) of the Constitution should provide the right to consult and be defended by a legal practitioner of his choice.
It is incomprehensible that a person committing a crime should have under article 22(1) of the Constitution the right to consult and be defended by a legal practitioner of his choice, but a person under preventive detention, more often than not for his political beliefs, should be deprived of this valuable right.
It cannot be denied that preventive detention is an anachronism in a democratic society like ours.
The detention of individuals without trial for any length of time, however short, is wholly inconsistent with the basic ideals of a parliamentary system of government.
In the nature of things, under the law as it exists, a person under preventive detention is not entitled to legal assistance.
However, we think it is futile for us to attempt to project our personal views in a matter which lies in the realm of decision making of Parliament.
The matter is essentially political and as such it is the concern of the statesman and, therefore, within the domain of the Legislature, and not the Judiciary.
In Smt.
Kavita vs The State of Maharashtra and Ors (1) the Court recently had an occasion to deal with section 8 of the , which is in pari materia with sub section
(4) of section 11 of Act.
The Court speaking through Chinnappa Reddy, J. Observed: 727 It is true that while section 8 (e) disentitles a detenu from claiming as of right to be represented by a lawyer, it does not disentitle him from making a request for the services of a lawyer.
The learned Judge emphasised that "as often than not adequate legal assistance may be essential for the protection of the Fundamental to Right to life and personal liberty guaranteed by Article 21 of the Constitution and the right to be heard given to a detenu by section 8 (e), COFEPOSA Act" and observed that this valuable right may be jeopardized and reduced to mere nothing with adequate legal assistance, in the light of the intricacies of the problems involved and other relevant factors.
He then went on to say whether or not legal assistance should be afforded by the Advisory Board must necessarily depend on the facts and circumstances of each individual case and observed: Therefore, where a detenu makes a request for legal assistance, his request would have to be considered on its own merit in each individual case.
In the present case, the Government merely informed the detenu that he had no statutory right to be represented by a lawyer before the Advisory Board.
Since it was for the Advisory Board and not for the Government to afford legal assistance to the detenu the latter, when he was produced before the Advisory Board, could have, if he was so minded, made a request to the Advisory Board for permission to be represented by a lawyer.
In that case, there was no denial of procedural fairness which is a part of the fundamental right guaranteed under article 21 of the Constitution, since no such request was made by the detenu before the Advisory Board.
The decision in Kavita 's case (supra) is, however, an authority for the proposition that while there is no right under section 8 (e) of the COFEPOSA Act to legal assistance to a detenu in the proceedings before the Advisory Board, he is entitled to make such a request to the Board and the Board is bound to consider such a request when so made.
In the present case, the detenu made such a request, but in the absence of the record of the Advisory Board, it is not possible to infer whether the request was considered.
Even if it was denied, as the petitioner himself alleges, there was no rational basis for a differential treatment.
There is no denial of the fact that while the detenu was not afforded legal assis 728 tance, the detaining authority was allowed to be represented by counsel.
It is quite clear upon the terms of sub section
(4) of section l l of the Act that the detenu had no right to legal assistance in the proceedings before the Advisory Board, but it did not preclude the Board to allow such assistance to detenu, when it allowed the State to be represented by an array of lawyers.
The matter can be viewed from another angle.
We were informed that the Advisory Board did not forward the record of its proceeding to the State Government.
If that be so, then procedure adopted was not in consonance with the procedure established by law.
The State Government while confirming the detention order under section 12 of the Act has not only to peruse the report of the Advisory Board, but also to apply its mind to the material on record itself was not before the State Government, it follows that the order passed by the State Government under section 12 of the Act was without due application of mind.
This is a serious infirmity in the case which makes the continued detention of the detenu illegal.
We refrain from expressing any opinion on the other grounds raised.
It appears to us prima facie that the grounds for detention set out the facts with sufficient degree of particularity and that they did furnish sufficient nexus for forming the subjective satisfaction of the detaining authority.
It seems to us that the order of detention cannot also be challenged that the grounds furnished were vague or indefinite or lacking in particulars or were not adequate or sufficient for the satisfaction of the detaining authority, or, for that matter, for the making of an effective representation.
For the reasons stated above, the order of detention passed by the District Magistrate, Ropar dated June 1, 1981 is quashed and we direct that the detenu Inderjit alias Billa be set at liberty forthwith.
V. D. K. Petition allowed.
| IN-Abs | Inderjit alias Billa has been detained by an order dated June 1, 1981 passed by the District Magistrate under sub section (2) of section 3 of the Prevention of Black marketing and Maintenance of Supplies of Essential Commodities Act, 1980 (PBMSECA).
The detenu submitted his representation challenging the order of detention on various grounds.
He had also made a request in writing that he be allowed the assistance of counsel during the hearing before the Advisory Board, but the Government did not accede to his request in view of section 11 of the Act.
On the contrary.
at the time of hearing before the Advisory Board the State was assisted by Public Prosecutor, two attorneys, a District Legal Advisor and a Legal Assistant.
Even at this stage, the detenu requested in writing for aid of a counsel but the same was rejected.
The State Government confirmed the detention under section 12 of the Act.
The father of the detenu, therefore, challenges the order of confirmation of the detention by the State.
Allowing the writ petition, the Court. ^ HELD 1:1.
Under Article 22(3)(b) of the Constitution, the right to consult and be defended by a legal practitioner of his choice is denied to any person who is arrested or detained under any law providing for preventive detention.
Subsection (3) of section 11 of the Prevention of Black marketing and Maintenance of Supplies of Essential Commodities Act, 1980 is undoubtedly in conformity with Article 22(3) (b) of the Constitution.
Normally, lawyers have no place in the proceedings before the Advisory Board.
[723 D] 1:2.
Upon the terms of sub section (4) of section 11 of the Act the detenu had no right to legal assistance in the proceedings before the Advisory Board but it did not preclude the Board to allow such assistance to the detenu when it allowed the State to be represented by an array of lawyers.
Kavita vs The State of Maharashtra & Ors., [1982] 1 SCR p. 138 is an authority for the proposition that while there is no right under section 8(e) of the COFEPOSA Act to legal 719 assistance to a detenu in the proceedings before the Advisory Board is entitled to make such a request to the Board and the Board is bound to consider such a request when so made.
[727 G H, 728 A B] Smt.
Kavita vs The State of Maharashtra & Ors., [1982] 1 SCR p. 138 distinguished.
The Advisory Board is entitled to devise its own procedure.
The functions of the Advisory Board are purely consultative.
It is an independent body constituted under section 9 of the Act consisting of a sitting judge as the Chairman and not less than two other members, who may be sitting or retired judges of the High Court.
It is expected that the Advisory Board would set in a fair and impartial manner in making a report whether or not there is, in its opinion, sufficient cause for the detention of person.
In coming to that conclusion, the Board has to make an objective determination on the question as to whether there was sufficient material on which the subjective satisfaction of the detaining authority could be based.
Under sub section (1) of section 11 of the Act, the Advisory Board may also call for such further information as it may deem necessary for the appropriate Govt.
Or from the person 'concerned and if, in any particular case, it considers essential to do so or if the person concerned desires to be heard, shall hear him in person.
Arbitrariness is the very antithesis of Article 14.
The principle of reasonableness is an essential element of equality and the procedure contemplated by Article 21 must answer the test of reasonableness in order to be in conformity with Article 14.
The history of personal liberty is largely the history of procedural safeguards.
The need for observance of procedural safeguards, particularly in cases of deprivation of life and liberty is, therefore, of prime importance to the body politic.
In the context of 'deprivation of life and liberty ' under Article 21, the 'procedure established by law ' carried with it the inherent right to legal assistance.
The right to be heard before the Advisory Board would be, in many cases, of little avail it did not comprehend the right to be heard by the counsel.
[723 D G, 725 C D, F, 726 B C] E.P. Royappa vs Tamil Nadu, [ , Maneka Gandhi vs Union of India.
[1978] 2 SCR 621; Francis Coralie Mullin vs The Administrator, Union Territory of Delhi and Ors. ; at 531; reiterated.
The State Government while confirming the detention order under section 12 of the Act has not only to peruse the report of the Advisory Board, but also to apply its mind to the material on record.
If the record itself was not before the State Government as is evident from there turns filed in reply to the writ petition before this Court, it follows that the order passed by the State Government under section 12 of the Act was without due application of mind, which is a serious infirmity in the case which makes the continued detention of the detenu illegal.
[728 B D] OBlTER: It is expected that Parliament while making a law regulate the procedure before an Advisory Board under Article 22(7) (c) of the Constitution should provide the right to consult and be defended by a legal practitioner of his choice.
It is incomprehensible that a person committing a crime should 720 have under Article 22(1) of the Constitution the right to consult and be defended by a legal practitioner of his choice, but a person under preventive detention more often than not for his political beliefs should be deprived of this valuable right.
It cannot be denied that preventive detention is an anachronism in a democratic society like ours.
The detention of individuals without trial for any length of time, however short, is wholly inconsistent with the basic ideals of a parliamentary system of government.
In the nature of things, under the law as it exists, a person under preventive detention is not entitled to legal assistance.
The matter is essentially political and as such it is the concern of the statesmen and, therefore, within the domain of the Legislature, and not Judiciary.
[726 C F]
|
N: Criminal Appeal No. 602 of 1981.
From the judgment and order dated 27th August, 1980 of the Gujarat High Court at Ahmedabad in Cr.
Revision Application No. 282 of 1979.
N.N. Keshwan and R.N. Keshwani for the Appellant.
Vimal Dave and Miss Kailash Mehta for Respondent No. 1.
S C. Patel and R.N. Poddar for Respondent No. 2 The Judgment of the Court has delivered by FAZAL ALI, J.
This appeal by special leave is directed against a judgment dated August 27, 1980 of the Gujarat High Court accepting the revision application of the Respondent and setting aside the order of the Metropolitan Magistrate, Ahmedabad.
The facts of the case lie within a very narrow compass, which may be detailed thus.
The respondent who is the wife of the appellant filed an application before the Magistrate under section 125 of the Code of Criminal Procedure, 1973 (hereinafter referred to as the 'Code of 1973 ') for grant of maintenance by the appellant on the ground that her husband appellant was guilty of wilful neglect and was unable to fulfil his primary responsibility of discharging his marital obligations.
The parties were married on May 27, 1978 according to Sunni Muslim rites.
After the marriage the respondent lived with her husband upto July 1978.
The respondent alleged that during this period she found her husband to be physically incapable of carrying on sexual relationship and that her husband frankly told her that he was impotent.
The respondent further alleged that she was maltreated and ultimately driven out of the house by her husband on July 11, 1978.
On November 17, 1978 the appellant sent a registered notice (Ext. 5) to the respondent informing her that he had no physical disability and was prepared to keep her with him and discharge his marital obligations.
On October 28, 1978 the respondent filed an application before the Magistrate for awarding maintenance against the appellant.
So far as the facts found are concerned, there is no dispute and the case will have to be decided on the point of law that arises 698 on the contentions raised by the parties before the courts below as also in this Court.
Both the High Court and the Metropolitan Magistrate clearly found that the appellant was physically incapable of having sexual relations with the respondent.
In other words, the concurrent finding of fact by the courts below is that the appellant was impotent and was, therefore, unable to discharge his marital obligations.
The respondent, however, refused to live with her husband on the ground that as he was impotent and unable to discharge his marital obligations, she could not persuade herself to live with him and thus inflict on herself a life of perpetual torture.
The Metropolitan Magistrate relying on a decision of the Allahabad High Court in Bundoo vs Smt.
Mahrul found that the mere ground that the husband was impotent was not a just cause for the refusal of the wife to live with her husband and accordingly dismissed the application filed by the respondent for maintenance.
Thereafter, the matter was taken up in revision before the High Court which differed from the view taken by the Magistrate and held that the husband having been found to be impotent, this should be a just ground for the wife to refuse to live with the husband and hence she was entitled to the grant of maintenance.
The High Court after having come to the aforesaid conclusion further held that having regard to the means of the husband he was in a position to pay Rs. 150/ per month by way of maintenance to the respondent.
Hence, this appeal by special leave by the appellant husband Mr. Keshwani, learned counsel for the appellant, vehemently contended before us that it is now well settled by a long course of decisions of various High Courts that impotency is no good ground or reason for the wife to refuse to live with her husband and hence the wife is not entitled to maintenance if she refused to live with the husband merely because her husband was impotent.
Mr. Keshwani cited a number of decisions in support of his contentions, on the other hand, Mr. Dave, appearing for the respondent, submitted that the various authorities of the High Courts seems to have overlooked the legal effect of the second proviso to sub section (3) of section 125 of the Code of 1973 under which a wife could refuse to live with her husband if there was a just ground for doing so.
The said proviso may be extracted thus: "Provided further that if such person offers to maintain his wife on condition of her living with him, and she 699 refused to live with him, such Magistrate may consider any grounds of refusal stated by her, and may make an order under this section notwithstanding such offer, if he is satisfied that there is just ground for so doing.
" We are of the opinion that if the husband was impotent and unable to discharge his marital obligations, how could he fulfil the main object of marriage, more particularly, under the Mahomedan law where marriage is a sacrosanct contract and not a purely religious ceremony as in the case of Hindu law.
This would certainly be a very just and reasonable ground on the part of the wife for refusing to live with her husband, as also in cases under the Hindu law or other Laws.
In Nanak Chand vs Shri Chandra Kishore Agarwala and Ors.
this Court held thus: "Section 488 provides a summary remedy and is applicable to all persons belonging to all religions and has no relationship with the personal law of the parties." After having heard counsel for the parties we are clearly of the opinion that the contention of the counsel ' for the respondent is sound and must prevail.
It is true that there are several decisions of the High Courts taking a contrary view but they seem to have proceeded on a totally wrong assumption and we are constrained to observe that in taking such a narrow view they have followed a most outmoded and antiquated approach.
The learned Magistrate mainly relied on a decision of the Allahabad High Court in Bundoo 's case (supra).
It is true that Bakshi, J. in that case seems to have been influenced more by the concept of neglect rather than by the reasonableness of the ground on which the refusal of the wife was based.
While dwelling on this aspect of the matter, the learned Judge observed as follows: "Assuming now for the purpose of argument that Bundoo was physically incapable of satisfying the sexual desire of his wife, it cannot be said this inability amounted intentionally to disregarding, slighting, disrespecting or carelessly and heedlessly treating his wife.
In this view of the matter, I am of the opinion that the element of neglect as envisaged under Section 488 Cr. P.C., old and under Section 125 Cr.
P.C. new, has not been established.
" 700 The attention of the learned Judge does not seem to have been drawn to the provisions of second proviso nor has the Judge come to any clear finding that the refusal of the wife could not fall within the ambit of "just ground" as contemplated by the aforesaid proviso.
Secondly, the learned Judge mainly relied on an earlier decision of Hidayatullah, J. (as he then was) in Emperor vs Daulat Raibhan and Anr.
in which it was held that a wife was not entitled to live apart from her husband and claim maintenance on the ground that her husband was impotent and unable to perform his marital obligations.
In fact, a number of decisions of the High Courts which were relied upon by the counsel for the appellant follow the decision of the Nagpur High Court as also the previous decisions of other High Courts replied upon by Hidayatullah, J. in the Nagpur case.
We shall consider the legal effect of this decision a little later.
So far as the decision of the Allahabad High Court, in which the Magistrate had relied, is concerned, the observations of Bakshi, J. were purely obiter.
It would appear that there was a clear finding cf fact by the Magistrate.
which had been accepted by the High Court, that the wife failed to prove by convincing evidence that her husband was impotent.
In view of this finding of fact, the question of law posed and decided by Bakshi, J. did not fall for decision at all because if the wife failed to prove that her husband was impotent, the question of her refusal to live with him for a just ground did not arise at all.
While adverting to this finding of fact, Bakshi, J. in the aforesaid case observed as follows: "I find from the perusal of judgment of the Magistrate that he has taken into consideration the entire evidence on the record led in connection with this question and he was of the opinion that Shrimati Mahrul Nisa failed to prove by convincing evidence that Bundoo was impotent." (Emphasis supplied) In the circumstances, we are not in a position to accept the observations of Bakshi J. which are in the nature of obiter dictum, in support of the argument of Mr. Keshwani.
This brings us now to the consideration of the authorities of other High Courts which seem to have taken ' the view that impotency is no ground for grant of maintenance to the wife.
We would first deal with the decision of Hidayatullah, J. in Daulat Raibhan 's case 701 (supra).
In the first place, the learned Judge thought that the point A raised before him was one of first impression and his decision was, therefore, greatly influenced by the fact that there was no direct decision on the point taking a contrary view.
In this connection, the learned Judge observed as follows: "No authority has been cited before me in support of the case of the wife that she is entitled to live separate from her husband on account of his impotence." Subsequently, the learned Judge mainly relied on the following observations made in Arunachala Anandayammal: "I cannot see that section 488, Criminal P.C. has anything to do with ordinary conjugal rights; it deals with maintenance only. " The learned Judge seems to have been under the impression that so far as the provisions of section 488 of the Code of 1898 were concerned they had no bearing on conjugal relations between the husband and the wife.
With great respect to the learned Judge we are unable to agree with this process of reasoning.
In fact, the fundamental basis of the ground of maintenance under section 488 is conjugal relationship and once conjugal relationship is divorced from the ambit of this special provision, then the very purpose and setting of the statutory provision vanishes.
In the matter of the Petition of Din Mohammed, Mahmood, J. very pithily and pointedly observed as follows: "The whole of Chapter XLI, Criminal Procedure Code, so far as it relates to the maintenance of wives, contemplates the existence of the conjugal relations as a condition precedent to an order of maintenance and, on general Principles, it follows that as soon as the conjugal relation ceases, the order of maintenance must also cease to have any enforceable effect." (Emphasis supplied) We find ourselves in complete agreement with the observations made by the eminent Jurist Mahmood, J. which lays down the correct law on the subject.
Thus, one of the fundamental premises on which rested the decision of Hidayatullah, J. appears to us to be 702 clearly wrong and directly opposed to the very object of the section (which at the relevant time was section 488).
In Arunchala 's case (supra) which was relied upon by Hidayatullah, J., Burn J. Observed thus: "I cannot see that section 488, Criminal P.C. has anything to do with ordinary conjugal rights; it deals with "maintenance" only and I see no reason why maintenance should be supposed to include anything more than appropriate food, clothing and lodging.
" It would be seen that here also the learned Judge proceeds on a legally wrong premise, viz., that section 481 had nothing to do with ordinary conjugal rights.
Moreover, the Madras decision as also the earlier decision seem to have followed the outmoded and antiquated view that the object of section 488 was to provide an effective and summary remedy to provide for appropriate food, clothing and lodging for a wife.
This concept has now become completely out dated and absolutely archaic.
After the International Year of Women when all the important countries of the world are trying to give the fair sex their rightful place in society and are working for the complete emancipation of women by breaking the old shackles and bondage in which they were involved, it is difficult to accept a contention that the salutary provisions of the Code are merely meant to provide a wife merely with food, clothing and lodging as if she is only a chattel and has to depend on the sweet will and mercy of the husband.
The same line of reasoning was adopted in an earlier decision of the Madras High Court in Jaggavarapu Basawama vs Jaggavarapu Seeta Reddi.
Here also, the Judge was of the opinion that food and clothing was sufficient for the maintenance of the wife and even if the husband refused to cohabit that would not provide any cause of action to the wife to claim separate maintenance.
In a recent decision in Velayudhan vs Sukmari a Single Judge observed as follows: "Learned magistrate seems to have concentrated solely on the last mentioned ground namely, failure of the husband to perform his marital duties, and has held that it is a sufficient ground entitling the wife to live away from the husband, and claim separate maintenance.
But I do not think, in the face of authorities cited before me that this 703 is a sufficient ground justifying the award of separate maintenance to the wife.
It was observed by Kumaraswami Sastri, J. in Basawamma vs Seetareddi (AIR 1922 Mad. 209) that there is nothing in the Code which compels the criminal court to award separate maintenance to a wife whom the husband agrees to protect and maintain in a manner suitable to her position in life; refusal to cohabit is no ground.
Here also, the Judge while noticing that the ground taken by the wife was that the husband has failed to perform his marital duties, found himself bound by the decisions of the Madras High Court in Jaggavarapu Basawamma 's case (supra).
Thus even in this decision though given in 1971 when the entire horizon of the position and status of women had changed, it is rather unfortunate that the Judge chose to stick to the old view.
There is however a very formidable circumstance which seems to have been completely overlooked by later decisions while following the previous decisions of the Nagpur or the Madras High Courts.
Although the second proviso to sub section (3) of section 125 of the Code of 1973, which was also a proviso to the old section 488, clearly provided that it is incumbent on the Magistrate to consider the grounds of refusal and to make an order of maintenance if he was satisfied that there was just ground for refusing to live with the husband, yet this salutary provision which was introduced with the clear object of arming the wife with a cause of action for refusing to live with the husband as the one which we have in the present case, no legal effect to the legislative will and intent appears to have been given by the aforesaid decisions.
Another important event which happened in 1949 also seems to have been completely ignored by the recent decisions while following the previous decisions of the High Courts.
It would appear that by the Code of Criminal Procedure (Amendment) Act No. 9 of 1949 an additional provision was added after the proviso which may be extracted thus: "If a husband has contracted marriage with another wife or keeps a mistress it shall be considered to be just ground for his wife 's refusal to live with him.
" The object of introducing this provision was clearly to widen the scope and ambit of the term 'just ground ' mentioned in the 704 proviso.
This provision is not exhaustive but purely illustrative and self explanatory and takes within its fold not only the two instances mentioned therein but other circumstances also of a like or similar nature which may be regarded by the Magistrate as a just ground by the wife for refusing to live with her husband.
Under the Code of 1973, this provision has been incorporated as Explanation to the second proviso to sub section (3) of section 125.
The decisions of the High Courts given prior to the Amendment of 1949 would no longer be good law after the introduction of the Amendment which gives, as it were, a completely new complexion to the intendment and colour of the second proviso to section 488 (now Explanation to the second proviso to sub section (3) of section 125) and widens its horizon.
It is, therefore, needless to refer to these decisions or to subsequent decisions which have followed the previous cases.
A clear perusal of this provision manifestly shows that it was meant to give a clear instance of circumstances which may be treated as a just ground for refusal of the wife to live with her husband.
As already indicated, by virtue of this provision, the proviso takes within its sweep all other circumstances similar to the contingencies contemplated in the Amending provision as also other instances of physical, mental or legal cruelty not excluding the impotence of the husband.
These, circumstances, therefore, clearly show that the grounds on which the wife refuses to live with her husband should be just and reasonable as contemplated by the proviso.
Similarly, where the wife has a reasonable apprehension arising from the conduct of the husband that she is likely to be physically harmed due to persistent demands of dowry from her husband 's parents or relations, such an apprehension also would be manifestly a reasonable justification for the wife 's refusal to live with her husband.
Instances of this nature may be multiplied but we have mentioned some of the circumstances to show the real scope and ambit of the proviso and the Amending provision which is, as already indicated, by no means exhaustive.
In other words, where a husband contracts a marriage with another woman or keeps a mistress this would be deemed to be a just ground within the meaning of the second proviso so as to make the refusal of the wife to live with her husband fully justified and entitled to maintenance.
If this is so, can it be said by any stretch of imagination that where a wife refuses to live with her husband if 705 he is impotent and unable to discharge his marital obligation, this would not be a just ground for refusing to live with her husband when it seems to us that the ground of impotence which had been held by a number of authorities under the civil law to be a good ground not only for restitution of conjugal rights but also for divorce.
Indeed, if this could be a ground for divorce or for an action for restitution of conjugal rights, could it be said with any show of force that it would not be a just ground for the wife to refuse to live with her husband.
The matter deserves serious attention from the point of view of the wife.
Here is a wife who is forced or compelled to live a life of celibacy while staying with her husband who is unable to have sexual relationship with her.
Such a life is one of the perpetual torture which is not only mentally or psychologically injurious but even from the medical point of view is detrimental to the health of the woman.
Surely, the concept of mental cruelty cannot be different in a civil case and in a criminal case when the attributes of such a cruelty are the same.
In Rita Nijhawan vs Balkrshaan Nijhawan (Sachar, J.) while dealing with a case of annulment of marriage under the Hindu Marriage Act on the ground of impotency very poignantly and pithily observed as follows: "Thus the law is well settled that if either of the parties to a marriage being a healthy physical capacity refuses to have sexual intercourse the same would amount to cruelty entitling the other party to a decree.
In our opinion it would not make any difference in law whether denial of sexual intercourse is the 'result of sexual weakness of the respondent disabling him from having a sexual union with the appellant, or it is because of any wilful refusal by the respondent. . .
Marriage without sex is an anathema.
Sex is the foundation of marriage and without a vigorous and harmonious sexual activity it would be impossible for any marriage to continue for long.
It cannot be denied that the sexual activity in marriage has an extremely favourable influence on a women 's mind and body.
The result being that if she does not get proper sexual satisfaction, it will lead to depression and frustration.
" 706 We find ourselves in complete agreement with the very practical and pragmatic view that the learned Judge has taken and the principles adumbrated by the Judge apply fully to proceedings for maintenances because as we have said the concept of cruelty is the same whether it is a criminal case or a civil case.
As far back as 1906, the Bombay High Court came out with the concept of cruelty which could be considered for exercising jurisdiction under section 488 of the Code of 1898.
In Bhikaji Maneekji vs Maneekji Mancherji a Division Bench of the Bombay High Court observed as follows: "Where it is proved that a husband has not refused or neglected to maintain his wife, a criminal Court, acting under the section, has no jurisdiction to make an order upon the husband for her maintenance on the ground that the husband has been guilty of cruelty to her.
But that is a very different thing from holding that no evidence of cruelty can be admitted in a proceeding under the section to prove, not indeed cruelty as a ground for separate maintenance, but the conduct and acts of the husband from which the Court may draw the inference of neglect or refusal to maintain the wife.
A neglect or refusal by the husband to maintain his wife may be by words or by conduct.
It may be express or implied.
If there is evidence of cruelty on the part of the husband towards the wife from which, with other evidence as to surrounding circumstances, the Court can presume neglect or refusal, we do not see why it should be excluded.
There is nothing in section 488 to warrant its exclusion, and such has been the practice of the Court.
But the section has been altered and now the Court can pass an order for maintenance where neglect or refusal is proved, even if the husband is willing to maintain the wife, provided the Court finds that there are "just grounds" passing such an order.
This alteration gives a wider discretion to the Court, which means that in passing such an order it is legitimate for it to take into account the relations between the husband and the wife, and the husband 's conduct towards her." This decision, given as far back as 1907, while construing the proviso appears to be both prophetic and pragmatic in its approach 707 and it is rather unfortunate that subsequent decisions have not noticed this important principle of law decided by the Bombay High Court.
We fully endorse this decision as laying down the correct law on the subject and as giving the correct interpretation of the proviso to section 488 particularly the concept of the words 'just ground '.
Another decision which had touched the question of 'cruelty ' is the case of Bai Appibai vs Khimji Cooverji where the following observations were made: "If, however, the husband by reason of his misconduct, or cruelty in the sense in which that term is used by the English Matrimonial Courts, or by his refusal to maintain her, or for any other justifying cause, makes it compulsory or necessary for her to live apart from him, he must be deemed to have deserted her, and she will be entitled to separate maintenance and residence.
" In Gunni vs Babu Lal Dixit, J. sounded a very pragmatic note on this aspect of the matter and in this connection pointing out the scope of the Amendment of 1949 observed thus: "There is nothing in the Criminal Procedure (Amendment) Act, 1949 to show that it would not be a just ground for the wife 's refusal to live with her husband if the husband has contracted marriage with another wife or taken a mistress before the amendment made in section 488.
The amendment is clearly intended to put an end to an unsatisfactory state of law, utterly inconsistent with the progressive ideas of the status and emancipation of women, in which women were subjected to a mental cruelty of living with a husband who had taken a second wife or a mistress on the pain of being deprived to any maintenance if they chose to live separately from such a husband.
If my view to hold that the amendment is intended to afford a just ground for the wife 's refusal to live with her husband only in those cases where he has after the amendment, taken a second wife or a mistress is to defeat in a large measure the very object of the amendment.
" 708 We find ourselves in complete agreement with the observations made by the learned Judge.
In Mst.
Biro vs Behari Lal, a decision to which one of us (Fazal Ali, J. as he then was a party, where the importance of the Amendment of 1949 also touched, the following observations were made: "Before the amendment, the fact of the husband 's marrying a second wife or keeping a mistress was not by some High Courts considered a just ground for the first wife 's refusal to live with him, although it was taken into account in considering whether the husband 's offer to maintain his first wife was really 'bona fide ' or not.
The amendment is clearly intended to put an end to an unsatisfactory state of law utterly inconsistent with the progressive ideas of the status and emancipation of women, in which women were subjected to a mental cruelty of living with a husband who had taken a second wife or a mistress on the pain of being deprived of any maintenance if they chose to live separately from such a husband." In Sm.
Pancho vs Ram Prasad, Roy, J. while dealing with the Hindu Married Women 's Right to Separate Residence and Maintenance Act (19 of 1946) expounded the concept of 'legal cruelty ' and observed thus: "In advancement of a remedial statute, everything is to be done that can be done consistently with a proper construction of it even though it may be necessary to extend enacting words beyond their natural import and effect. . .
Conception of legal cruelty undergoes changes according to the changes and advance of social concept and standards of living.
With the advancement our social conceptions, this feature has obtained legislative recognition that a second marriage is a sufficient ground for separate residence and separate maintenance.
Moreover, to establish legal cruelty, it is not necessary that physical violence should be used.
Continuous ill treatment, cessation of marital intercourse, studied neglect, indifference on the part of the 709 husband, and an assertion on the part of the husband that the wife is unchaste are all factors which may undermine the health of a wife.
The learned Judge has put his finger on the correct aspect and object of mental cruelty.
The fact that this case did not arise out of the proceedings under section 125 makes no difference because we have already observed that the concept of cruelty remains the same whether it is a civil case or a criminal case or a case under any other similar Act.
The general principles governing acts constituting cruelty legal or mental ill treatment or indifference cannot vary from case to case though the facts may be different.
Similarly, while dealing with a case under the , a Division Bench of the Karnataka High Court in Dr, Srikant Rangacharya Adya vs Smt.
Anuradha dwelling on the aspect of impotency and its impact on the wife observed as follows: "In these days it would be an unthinkable proposition to suggest that the wife is not an active participant in the sexual life and therefore, the sexual pleasure to the wife is of no consequence and therefore cannot amount to cruelty.
Marriage without sex is an anathema.
Sex is the foundation of marriage and without a vigorous and harmonious sexual activity it would be impossible for any marriage to continue for long.
It cannot be denied that the sexual activity in marriage has an extremely favourable influence on a woman 's mind and body.
The result being that if she does not get proper sexual satisfaction it will lead to depression and frustration.
It has been said that the sexual relations when happy and harmonious vivifies woman 's brain, develops her character and trebles her vitality.
It must be recognised that nothing is more fatal to marriage than disappointments in sexual intercourse.
" We find ourselves in entire agreement with the observations made by the learned Judges of the Karnataka High Court which seems to be the correct position in law.
Even the learned Judge who had delivered the judgment in the instant case had very rightly pointed out as follows: 710 "If the maintenance of a wife is supposed to include only food, shelter and clothing having regard to the conjugal rights and if the just cause on which wife can refuse to stay with the husband and yet claim maintenance, can have reference only to the comfort and safe of the wife then it might reduce the wife to the status of a domesticated animal.
In the context of the changing status of woman in society such a proposition would seem outdated and obsolete. .
In other words, the Courts cannot compel the wife to stay with husband on the ground that the husband though he is forcing her in a situation where her physical and mental well being might be adversely affected, as there is no intention on the part of the husband to inflict that cruelty, she should suffer that predicament without demur and be satisfied with a grab to bite and some rags to clothe her and a roof over her head.
" We fully endorse the observations made above.
Apart from the various decisions referred to above, there is a direct English decision on the point.
In Sheldon vs Sheldon, Lord Denning observed as follows: "I rest my judgment on the ground that he has persistently, without the least excuse, refused her sexual inter course for six years It has broken down her health.
I do not think that she was called on to endure it any longer.
It has been said that, if abstinence from intercourse causing ill health can be held to be cruelty, so should desertion simpliciter leading to the same result.
" Thus, from a conspectus of the various authorities discussed above and the setting, object and interpretation of the second proviso to sub section (3) of section 125 of the Code of 1973, we find ourselves in complete agreement with the view taken by the learned Judge of the High Court.
We hold that where it is proved to the satisfaction of the court that a husband is impotent and is unable to discharge his marital obligations, this would amount to both legal and mental cruelty which would undoubtedly be a just ground as contemplated by the aforesaid proviso for the wife 's refusal to live 711 with her husband and the wife would be entitled to maintenance from her husband according to his means.
In these circumstances, therefore, it would be pusillanimous to ignore such a valuable safeguard which has been provided by the legislature to a neglected wife.
For these reasons, therefore, we find no merit in the appeal which fails and we accordingly dismiss the same without any order as to costs.
In view of our decision in this case, it follows that the decisions referred to above in the judgment taking a contrary view must be held to be no longer good law and are hereby overruled.
P. B. R. Appeal dismissed.
| IN-Abs | The respondent was the appellant 's wife.
In her petition under section 125(3) Criminal Procedure Code, 1973 for grant of maintenance, the Metropolitan Magistrate, upheld her allegation that the appellant was impotent and was incapable of having sexual relations with his wife.
But the Magistrate refused to grant maintenance to her on the ground that the husband 's impotence was not a just cause for her refusal to live with the husband.
Holding that impotence of the husband was a just ground for the wife to refuse to live with the husband, the High Court granted her maintenance.
In appeal to this Court while the husband contended that impotence was not a good ground for the wife 's refusal to live with him, the wife contended that the second proviso to section 125(3) 1973 Code enabled the wife to refuse to live with the husband if there was a suit ground for doing so and in this case the husband 's impotence was a just ground for such refusal.
Dismissing the appeal, ^ HELD: Proved impotence of the husband and his inability to discharge his marital obligations amount to both legal and mental cruelty make it a just ground for the wife to refuse to live with the husband.
The wife would be entitled to maintenance from him according to his means.
[710G 711A] The second proviso to section 125(3) of the 1973 Code was a proviso to section 488 of the 1898 Code which provides that it is incumbent on the Magistrate to consider the grounds of refusal and to make an order of maintenance, if he is satisfied that there is a just ground for the wife to refuse to live with the husband.
Decision of High Courts that section 488 of the 1898 Code had nothing to do with the ordinary conjugal rights were directly opposed.
to the very object of the section.
[703 D F] Bundoo vs Smt.
Mahrul , Emperor vs Daulat Raibhan & Anr., A.I.R. 1948 Nagpur 69, Arunachala vs Anandayammal, A.I.R. 1933 Mad. 668, Jaggavarapu Basawamma vs Japgavarapu Seeta Reddi, A.l.R, & Vedayudhan vs Sukmari overruled.
696 In the Matter of the Petition of Din Muhammad ILR [1883] 5 Allahabad 226 approved.
By an amendment made in 1949 the scope and ambit of the term "just ground" had been widened by adding a second proviso to section 488 of the 1898 Code.
The object of introducing this provision was to widen the scope and ambit of the term "just ground".
This provision is not exhaustive but purely illustrative and self explanatory and takes within its fold not only the two instances mentioned Therein but other circumstances also of a like nature which may be regarded by the Magistrate as a just ground by the wife for refusing to live with her husband.
In the present Code this provision has been incorporated as explanation to the second proviso to section 125(3).
[703 G 704 B] A perusal of this provision shows that it was meant to give a clear instance of circumstances which may be treated as a just ground for refusal of the wife to live with her husband.
By virtue of this provision, the proviso takes within its sweep all other circumstances similar to the contingencies contemplated in the Amending provision as also other instances of physical, mental or legal cruelty not excluding the impotence of the husband.
These circumstances clearly show that the grounds on which the wife refuses to live with her husband should be just and reasonable as contemplated by the proviso.
Similarly, where the wife has a reasonable apprehension arising from the conduct of the husband that she is likely to be physically harmed due to persistent demands of dowry from her husband 's parents or relations, such an apprehension also would be manifestly a reasonable justification for the wife 's refusal lo live with her husband.
[704 D F] Where a husband had contracted a married with another woman or kept a mistress, it was considered to be a just ground for the wife 's refusal to live with the husband Similarly where a wife refuses to live with an impotent husband who is unable to discharge his marital obligations that would be a just ground.
Moreover when impotence under the civil law is a good ground for granting divorce or for refusing restitution of conjugal rights there is no reason to hold that it would not be a just ground under section 125.
The concept of cruelty remains the same whether it is a civil case or a criminal case or a case under similar Acts.
The general principles governing acts constituting cruelty legal or mental ill treatment or indifference cannot vary from case to case, though the facts may be different.
[704 H 705 C, 709 C] It is well recognized that sex is the foundation of marriage and without a vigorous and harmonious sexual activity it would be impossible for any marriage to continue for long.
Abstinence from intercourse effecting ill health of the wife can be held to be cruelty.
[709 E, 710 F] Rita Nijhawan vs Balkishan Nijhawan, AIR 1973 Delhi 200, Bhikaji Maneckji vs Maneckji Mancherji, , Bai Appibai vs Khimji Cooverji, AIR 1936 Bom. 138, Gunni vs Babu Lal, AIR 1952 Madnya Bharat 131, Biro vs Behari Lal, AIR 1958 J & K. 47, Smt.
Panchoo vs Ram Prasad, AIR 1956 All. 41 and Dr.
Srikant Rangacharya Adya.
vs Smt.
Anuradha, AIR 1980 Karnataka 8, approved.
Sheldon vs Sheldon referred to.
|
ivil Appeal Nos.
554 555 of 1981.
764 From the judgment and order dated the 6th November, 1980 of the High Court of Madhya Pradesh at Jabalpur in Misc.
Petition No. 510 and 613 1980.
N.M. Phadke, A M. Mathur, Advocate Genl.
M.P., S.K Gambhir and Vijay Hansarra for the Appellants.
S.N. Kackar, Vineet Kumar, Gulab Gupta, Naresh K. Sharma, S.Q. Hasan, P.N. Puri, E.M.S. Anam and M.K Dua for the respondents.
B.R. Agarwala for the Medical Council.
S.K Mehta, P.N. Puri and M.K. Dua for the interveners.
The Judgment of the Court was delivered by AMARENDRA NATH SEN, J.
The validity of the executive order dated 9th September, 1980 passed by the State Government completely relaxing the conditions relating to the minimum qualifying marks for selection of students to Medical Colleges of the State in respect of candidates belonging to Scheduled Castes and Scheduled Tribes categories forms the subject matter of these appeals by Special Leave.
The facts material for the purposes of these appeals may be stated: Kumari Nivedita Jain, one of the Respondents in the present appeals, was a candidate for admission to a Medical College in the State of Madhya Pradesh.
In the State of Madhya Pradesh there are six Medical Colleges affiliated to different Universities in the State.
The total number of seats in all these Colleges is 720.
By an order dated 2nd April, 1980 the State Government made rules for admission to Medical Colleges, the College of Dentistry Indore and Government Ayurvedic Colleges of the State and the said Rules are called "Rules for Admission into the Medical, Dentistry and Ayurvedic Colleges in Madhya Pradesh" (hereinafter referred to as the Rules).
These Rules were made in exercise of the executive power of the State and these Rules are not statutory.
By and under Rule 7 of the Rules, the State Government has reserved 15% seats for each of the categories of the Scheduled Castes and Scheduled Tribes candidates.
That means, out of 720 seats, 108 seats are reserved for the Scheduled Castes candidates; and the same number, that is, 108 seats are also reserved for the candidates belonging to 765 the category of Scheduled Tribes.
By and under the same Rules, 15% seats are reserved for women candidates and seats not exceeding 3% are reserved for the children of military personnel.
Under Rule 8, some further reservations have been made and under this Rule, seats not exceeding 3% are reserved for the nominees of the Government of India and 3 seats are reserved for the candidates nominated by the Government of Jammu and Kashmir Rule 1 (iii) provides that a Pre Medical Examination shall be held every year for selection of candidates for admission to the Medical Colleges and all admissions shall be made only from the merit list prepared on the basis of the result of this examination except in case of seats placed at the disposal of the Government of India and other States.
Rule 15 mentions the subjects of the Pre Medical Examination and C rule 20 lays down that selection of candidates from amongst those who have qualified in the examination shall be made strictly on merit as disclosed by total number of marks obtained by candidates in the Pre Medical Examination.
Rule 20 further provides that minimum qualifying marks for admission to Medical Colleges shall be 50% in the aggregate and 33% in each subject separately: but for Scheduled Castes and Scheduled Tribes candidates, the minimum qualifying marks shall be 40% in the aggregate and 30% in each subject.
Rule 20 in its note (ii) empowers the Government to grant in case of candidates belonging to the categories of Scheduled Castes and Scheduled Tribes special relaxation in the minimum qualifying marks to the extent considered necessary in the event of the required number of candidates in these two categories not being available.
For the total number of 720 seats in the Medical Colleges of the State, there were 9400 candidates in all.
Of the 9400 candidates, there were 623 candidates belonging to the category of Scheduled Castes for whom 108 seats were reserved; and for the 108 seats reserved for candidates of the Scheduled Tribes Category, there were 145 candidates belonging to that category.
On the result of the Pre Medical Examination only 18 seats in the category of the Scheduled Castes and 2 seats in the category of Scheduled Tribes could be filled up, because the other candidates of these categories did not secure qualifying marks prescribed by rule 20.
As 90 seats had remained vacant in the category reserved for Scheduled Castes after selection of the 18 candidates and 106 seats remained unfilled in the category of seats reserved for Scheduled Tribes after selection of the two candidates on the result of the examination, the Board in exercise of the power under Note (i) to Rule 20 made a relaxation of 5% in terms thereof and thereafter 7 more candidates in the category 766 gory of Scheduled Castes and one more in the category of Scheduled Tribes got admitted.
Thus oat of 108 seats reserved for each category of the Scheduled Castes and Scheduled Tribes, only 25 seats could be filled in the category of Scheduled Castes and three in the category of Scheduled Tribes.
As only a very few candidates of these two categories could get admitted into Medical Colleges and a large number of seats reserved for them could not be filled up by the candidates of these two categories on the basis of the result of the examination even after relaxation had been made in terms of the provisions contained in Note (i) to Rule 20, the State Government passed an order on the 9th September, 1980 completely relaxing the conditions relating to the minimum qualifying marks for these two categories.
the order dated 9th September, 1980, the validity of which has been questioned in the Writ Petitions filed by Nivedita Jain in the High Court, is to the following effect: "The Government has taken a decision that the candidates belonging to the Scheduled Castes and Scheduled Tribes be admitted to the Medical Colleges in the seats reserved for them in accordance with the merit to be deter mined on the basis of the marks obtained by them in the Pre Medical Examination and that for this purpose, the condition relating to the obtaining of minimum qualifying marks be removed".
Kumari Nivedita Jain, as we have earlier noticed, was a candidate for admission into a Medical College in the general seats, that is, the seats which have not been otherwise reserved.
Though she had obtained necessary qualifying marks, she could not secure her admission, as other candidates for the general seats had obtained marks higher than she had obtained in the Pre Medical Examination, for filling up the vacancies available in the general category.
It may be noted that rule 9 contains a provision to the effect that in case seats of reserved categories of Scheduled Castes and Scheduled Tribes remain vacant, these seats will be filled up by the candidates available on the combined merit list.
If the seats in the reserved categories had been thrown open to candidates in the general category on account of the failure on the part of the candidates belonging to the categories of Scheduled Castes and Scheduled Tribes to obtain minimum qualifying marks, Nivedita Jain would have been in a position to secure her admission to the medical college.
As the State Government by its order dated 9th September, 1980 decided to relax completely the conditions relating 767 to minimum qualifying marks for these two categories of Scheduled Castes and Scheduled Tribes candidates instead of filling up these seats by candidates available on the combined merit list, she was deprived of the opportunity of getting her ad mission into the medical college.
She, therefore, filed this writ petition in the High Court of Madhya Pradesh challenging the validity of the said order of the State Government dated 9th September, 1980.
It will be noticed that this order of the State Government is also an executive order.
The principal grounds on which the validity of the order has been challenged by Nivedita Jain, the respondent herein and the petitioner in the writ petition before the High Court, are (1) that the order of the Government contravenes Regulation II of the Medical Council of India and would hit section 19 of the , exposing the medical colleges to the risk of being derecognised; and (2) that the order of the Government will have the effect of allowing less qualified and less deserving candidates to fill up the seats and would, therefore, destroy equality and violate articles 14 and 15 of the Constitution.
It appears from the judgment of the High Court that another ground, namely, that the order dated 9th September, 1980 was violative of ordinance 94 of the University of Jabalpur, was also urged before the High Court, though this ground does not appear to have been taken in the petition.
The High Court accepted the contention of the writ petitioner that the order in question violated Regulations of the Council holding that "the executive power of the State under article 162 cannot be so exercised as to over ride the statutory provisions, more so when the said provision is in a field occupied by the Union List.
The executive power can be used to supplement a law but not to supplant it" The High Court further held that "the total relaxation of minimum marks for the candidates belonging to these categories cannot be supported under article ] S(4) being violative of the Regulations which have the force of law.
" Dealing with the contentions of violation of ordinance 54 of the University of Jabalpur, the High Court observed: "As the ordinance has to be read alongwith the regulations and can be given effect to only in so far it is consistent with the regulations, it cannot constitute anew 768 ground for invalidating the impugned order, We would, however, like to emphasis again that when a common entrance test for selection of candidates is held by the Government for all the medical colleges, it is very necessary that the Universities must prescribe identical conditions for admission consistent with the Regulations made by the Medical Council to avoid any confusion in the matter of admission." In the result, the High Court allowed the writ petition and struck down the order of the State Government dated 9th September, 1980.
In this appeal by special leave, the State of Madhya Pradesh and the Controller of Examinations of pre medical test have challenged the correctness of the decision of the High Court.
Before we proceed to consider the various arguments advanced on behalf of the parties, we may here note that in the writ petition filed by Nivedita Jain, she also challenged the validity of the reservation made by the State Government of 3% of the seats for the children and grand children of freedom fighters by another order passed by the State Government on the 19th September, 1980.
The validity of this order was, however, upheld by the High Court.
The matter rests there and in this appeal we are not concerned with this aspect of the matter.
Mr. Phadke, learned counsel appearing on behalf of the appellants, has submitted that the High Court struck down the order in question mainly on the ground that the order is violative of the Regulation II of the Council.
He has argued that the validity of the reservations for the members of the Scheduled Castes and Scheduled Tribes has not been questioned.
It is his argument that the seats are reserved for those communities in the interest of weaker sections of the society and the State under article 15(4) of the Constitution is competent to do everything possible for the upliftment of the Scheduled Castes and Scheduled Tribes and other backward communities and the State is entitled to make necessary reservations of seats in the matter of their admission to medical colleges.
He submits that it must be open to the State to lay down such conditions as will make such reservations effective and will enable the candidates belonging to the categories of Scheduled Castes and Scheduled Tribes to get the benefits of such reservations, 769 in discharge of the duties and obligation of the State, to the members of those communities and other backward communities.
It is his submission that in the instant case when the State found that the qualifying conditions laid down for the admission of the candidates belonging to those communities had in reality resulted in denial of the opportunities sought to be given to them, the Government considered it expedient to relax the conditions to enable the candidates of those communities to get the admission to medical colleges for prosecuting their studies to become qualified medical practitioners.
Mr. Phadke has contended that the provisions contained in Regulation II for violation of which the order in question has been struck down, are directory in nature and they are not mandatory in character, and, as such, they do not have any binding effect; and it is open to the State to make Rules which may not be in accord with the provisions contained in the said regulation for admission to the medical colleges.
Mr. Phadke has taken us to the various provisions of the (hereinafter referred to as the Act) and also to the Regulations framed by the Council.
Mr. Phadke submits that the scheme of the Act clearly suggests that the Council is essentially concerned with the standard of medical education in the country and that stage only arrives after the students have been admitted into Medical Colleges.
Mr. Phadke has drawn our attention particularly to Sections 19 and 19A of the Act and he has commented that under section 33 of the Act, the Council with the previous sanction of the Central Government can frame Regulations for carrying out the purpose of the Act.
He has submitted that the selection of candidates for admission to Medical Colleges cannot be said to constitute any purpose for which the Act has been enacted, as selection of students has no bearing on the standard of medical education and the Council is not competent to frame Regulations for admission to Medical Colleges.
Mr. Phadke in this connection has referred to the decision of this Court in the case of Arti Sapru vs State of Jammu and Kashmir and Ors.(1) and has relied on the following observations of the Court at p. 44: "Objection to the objective test and the viva voce examination is based on the ground that they fall outside .
the scheme envisaged by the Regulations made by the Indian Medical Council for admission to the M.B.B.S, Course.
The respondents, however, question the validity H 770 of the Regulations.
We are then referred by the petitioner to clauses (i) and (I) of section 33, , in support of the contention that the power of the Council to make regulations extends to making regulations prescribing the examinations and tests for admission.
It seems to us prima facie that those provisions do not authorise the Council to do so.
But we refrain from expressing any final opinion in the matter as the Council is not a party before us.
Mr. Phadke has argued that item 66 in List I of the Seventh Schedule to the Constitution does not stand in the way of the State Government to frame rules for admission to Medical Colleges in view of item 25 included in List III of the said Schedule.
It is the argument of Mr. Phadke that item 66 in List I which provides for "co ordination and determination of standards in institutions for higher education or research and scientific and technical institutions", is not intended to deal with the question of selection of candidates and item 25 in List III which provides for "education including technical education, medical education in universities subject to provisions of entries 63, 64, 65 and 66 of List I; vocational and technical training of labour", is broad enough to include all matters relating to education subject to the provisions of entries 63, 64, 65 and 66 of List I and empowers the State to frame rules relating to selection of candidates for admission.
Mr. Phadke has submitted that the Council must have been aware of the limitations of its power in the matter of selection of candidates for admission; and, the Council has, therefore, made only a recommendation in this regard and has not made any mandatory provision about it.
In this connection Mr. Phadke has referred to the language used in Regulation II and has contrasted the same with the language used in Regulation I of the Regulations.
Mr. Phadke submits that as Regulation II is only in the nature of a recommendation and directory, any rules framed by the State Government regarding selection of candidates in contravention of the said recommendation cannot be held to be invalid and illegal and cannot be struck down on that ground.
Mr. Phadke has also argued that there is no question of violation of article 15(1) and (2) of the Constitution.
It is his argument that in view of the provisions in article 15(4) of Constitution, the State Government is competent to make special provisions for the advancement of socially and educationally backward classes or for the Scheduled Castes and Scheduled Tribes.
Mr. Phadke in this connection has 771 referred to the case of Jagdish Saran and Ors.
vs Union of India and Ors.(1).
Mr. Phadke has commented that the view expressed by the High Court that the order which violates the statutory regulation of the Council must be held to be violative of article 15(1) and (2) and not protected by article 15(4) must necessarily be held to be erroneous, as Regulation II is not mandatory and has no binding effect.
Regarding violation of ordinance 54 of Jabalpur University, Mr. Phadke submits that no such ground has been taken in the l petition and further the affidavit filed on behalf of the university shows that the ordinance has not become effective.
Mr. Kacker, Learned Counsel appearing on behalf of the Respondent Nivedita Jain, the petitioner in the writ petition, his argued that Regulation II of the Medical Council is mandatory with statutory force.
He has submitted that the Indian Medical Council bas been established by the Parliament, inter alia, for the maintenance of Medical Register for India and the matters relating therewith.
He further submits that under section 33 of the Act the Council with the previous sanction of the Central Government has been authorised to make regulations generally to carry out the purposes of the Act, and without prejudice to the generality of this power, the regulation made by the council may provide for matters specifically mentioned in the said section including any matter for which under the Act provision may be made by regulations, as provided in sub section (u) of Section 33.
It is the argument of Mr. Kacker that Regulation II of the Council which relates to selection of candidates has been made for carrying out the purposes of the Act and selection of the right type of students for maintaining proper standard of medical education comes clearly within the purview and jurisdiction of the Council.
Mr. Kacker has placed us various sections of the Act in support of his submission that regulating selection of students for admission to medical colleges justly comes within the jurisdiction and function of the Council.
In this connection, Mr. Kacker has also referred to the decision of this Court in the case of State of Kerala vs Kumari T.P. Roshana and Anr.
(1) and he has relied on the following observations at p. 984: "The has constituted the Medical Council of India as an expert body to control 772 the minimum standards of medical education and to regulate their observance.
Obviously, this high powered Council has power to prescribe the minimum standards of medical education.
It has implicit power to supervise the qualifications or eligibility standards for admission into medical institutions.
Thus there is an overall invigilation by the Medical Council to prevent sub standard entrance qualifications for medical courses".
Mr. Kacker submits that in the instant case there is no dispute that the order of the Government dated 9th September 1980 in question clearly contravenes Regulation II of the Council.
Mr. Kacker has also drawn our attention to entry 66 of the Union List which has been set out earlier Mr. Kacker has contended that the State Government by an executive order cannot over ride Regulation II of the Council which has statutory force of a Parliamentary Legislation, particularly, when the said provisions are in a field occupied by the Union List.
Mr. Kacker has next contended that complete relaxation of the conditions in relation to qualifying marks for admission into Medical Colleges in case of Scheduled Castes and Scheduled Tribes candidates purported to have been made by the State Government by the impugned order dated 9th September, 1980 must also be held to be unconstitutional as the said order is clearly violative of article 15 (1) and (2) of the Constitution and cannot be said to be protected by article 15 (4).
In support of this submission Mr. Kacker has relied on the decision of the Full Bench of the Patna High Court in the case of Amalendu Kumar vs State of Bihar.
(1) In this case the Patna High Court held that where the State Government reduces the percentage of marks, marks prescribed for the Scheduled Castes and Scheduled Tribes for passing competitive examination held for the purpose of admission to medical college, by executive fiat, first from 45% to 40% and subsequenty to 35% on the ground that seats reserved for the Scheduled Castes and Tribes would remain unfilled, both reductions were invalid as violative of guarantee given under article 15 (1).
Mr. Kacker has finally submitted that the order in question is also liable to be struck down as the order is violative of ordinance 54 of University of Jabalpur.
773 In concluding Mr. Kacker has appealed to this Court that irrespective of the result of this appeal, the respondent Nivedita Jain who has already been admitted into a College on the basis of interim order passed by this Court in this appeal for prosecuting her studies in the Medical College, should be allowed to continue her studies and the fate of this appeal should not interfere with her studies and with her career.
As we have earlier noticed, the order in question has been struck down by the High Court essentially on the ground that the order which is an executive order violates Regulation II of the Council which has the force of a Statute.
It is not in dispute and it cannot be disputed that the order m question is in conflict with the provisions contained in Regulation II of the Council.
The main question that falls for determination is whether the order in question which contravenes Regulation II is liable to be struck down on the ground that the State Government by an executive order is purporting to override Regulation II of the Council.
For a proper determination of the question it is necessary to understand the true nature of the said Regulation II and to consider whether the said Regulation is of mandatory character with statutory force.
The contention of the appellants, as we have earlier noticed, is that Regulation II is only in the nature of a recommendation and is directory and has no statutory force; and the contention of the Respondent Nivedita Jain, on the other hand, has been that the said Regulation is mandatory in character with statutory force.
For a proper appreciation of these rival contentions, it becomes necessary to analyze and understand the scheme of the Act and the Regulations framed thereunder.
The Act was enacted "to provide for reconstitution of the Medical Council of India and the maintenance of Medical Register for India and for matters connected therewith".
section 2 deals with definitions and defines "Regulation" in sub sec.
(i) to mean "a Regulation under section 33".
3 to 10 of the Act are not of any material consequence and these sections deal with composition of the Council and its functions.
section 11, 12, 13 and 14 which deal with the question of recognition of medical qualifications by the Council are also not very relevant for our present purpose.
section 15 which deals with question of a person possessing qualifications for enrollment on any State Medical Register, is also not very material.
section 16 provides that every University or Medical Institution in India which grants a recognised medical qualification shall furnish such information as the Council may from time to 774 time require, as to the courses of study and examination to be undergone in order to obtain such qualification, as to the ages at which courses of study and examination are required to be undergone and such qualification is conferred and generally as to the requisites for obtaining such qualifications granted by the University or Medical Institution.
section 17 confers a right of inspection of Medical Institution, College, Hospital or other institutions where medical education is given and also to attend any examination held by any University or Medical Institution for the purpose of recommending to the Central Government recognition of medical qualifications granted by that University or medical institution.
section 18 confers a further right of appointing visitors for inspection of any medical institution, College, Hospital or other institutions where medical education is given and for attending any examination held by any University or Medical Institution for the purpose of granting recognised medical qualifications.
section 19 empowers the committee to make a representation to the Central Government for withdrawal of the recognition, if it appears to the Council on a report by the Committee or the Visitor that the Courses of study and examination to be undergone in, or the proficiency required from candidates at any examination held by any University or medical institution do not conform to the standards prescribed by the Council or that the staff, equipment, accommodation, training and other facilities for instructions and training provided in such University or Medical Institution or in any College or other institution affiliated to that University do not conform to the standards prescribed by the Council.
The said Section 19 further provides that in the event of any representation being made to the Central Government by the Council, the Central Government will forward the same to the Government of the State in which the University or medical institution is situated and the State Government shall forward it along with such remarks as it may make to the University or Medical Institution, with an intimation of the period within which, the University or medical institution may submit its explanation to the State Government; and on receipt of the explanation, if any within the stipulated period the State Government on the expiry of the period shall make its recommendations to the Central Government and the Central Government after making such further enquiries, if any, as it may think fit, proceed to act in the manner laid down in sub sec.
(4) of section 19 of the Act.
section 19A of the Act which is important for our purposes in this appeal reads as follows : 775 "(1) The Council may prescribe the minimum standards A of medical education required for granting recognised medical qualifications (other than post graduate medical qualifications) by Universities or medical institutions in India.
(2) Copies of the draft regulations and of all subsequent amendments thereof shall be furnished by the Council to all State Governments and the Council shall, before submitting the regulations or any amendment thereof, as the case may be, to the Central Government for sanction, take into consideration the comments of any State Government received within three months from the furnishing of the copies as aforesaid.
(3) The Committee shall from time to time report to the Council on the efficacy of the regulations and may recommend to the Council such amendments thereof as n it may think fit".
section 20 deals with post graduate medical studies and section 20A deals with professional conduct.
Ss. 21 to 28 make provision for the maintenance of Indian Medical Register, supply of copies of the State Medical Registers to the Council by the State Medical Council, registration in the Indian Medical Council Register, removal of any name from the Indian Medical Register, provisional registration, registration of additional qualifications, privileges of persons who are enrolled on the Indian Medical Register and the requirement of notification of change of address by every person registered in Indian Medical Register.
section 29 casts an obligation on the Council to furnish reports, copies of minutes, abstracts of its accounts and other information that the Central Government will require, to the Central Government.
section 30 empowers the Central Government to institute a commission of enquiry whenever it is made to appear to the Central Government that the Council is not complying with any provisions of the Act.
section 31 is intended to offer protection in respect of acts done in good faith under the Act, These sections do not have any material bearing on the question involved in the present proceeding.
section 32 authorizes the Central Government to make rules to carry out the purposes of this Act, and sub section (2) of section 32 makes it obligatory that such rules shall be laid before the Parliament.
section 33 of the Act provides: 776 "The Council may, with the previous sanction of the Central Government, make regulations generally to carry out the purposes of this Act, and without prejudice to the generality of this power, such regulations may provide for: (a) . . . . . . (j) the courses and period of study and of practical training to be undertaken, the subjects of examination and the standards of proficiency therein to be obtained in Universities or medical institutions for grant of recognised medical qualifications; (k) the standards of staff, equipment, accommodation, training and other facilities for medical education; (I) the conduct of professional examinations, qualifications of examiners, and the conditions of admission to such examinations; (m) the standard of professional conduct and etiquette and code of ethics to be observed by medical practitioners; and (n) any matter for which under this Act provision may be made by regulations.
section 34 of the Act which happens to be the last section repeals the earlier of 1933, providing for the usual saving clause.
An analysis of the various sections of the Act indicate that the main purpose of the Act is to establish Medical Council of India, to provide for its constitution, composition and its functions; and the main function of the Council is to maintain the medical register of India and to maintain a proper standard of medical education and medical ethics and professional conduct for medical practitioners.
The scheme of the Act appears to be that the Medical Council of India is to be set up in the manner provided 777 in the Act and the Medical Council will maintain a proper medical register, will prescribe minimum standards of medical education required for granting recognised medical qualifications, will also prescribe standards of post graduate medical education and will further regulate the standards of professional conduct and etiquette and code of ethics for medical practitioners.
The Act further envisages that if it appears to the Council that the courses of study and examination to be undergone in, or the proficiency required from candidates at any examination held by any University or Medical Institution do not conform to the standard prescribed the Council or that the staff, equipment, accommodation, training and other facilities for instructions and training provided in such University or medical institution or in any college or other institution affiliates to the University do not conform to the standards prescribed by the Council, the Council will make a representation to that effect to the Central Government and on consideration of the reorientation made by the Council, the Central Government may take action in terms of the provisions contained in section 19 of the Act.
The Act also empowers the Council to take various measures to enable the Council to judge whether proper medical standard is being maintained in any particular institution or not.
Now coming to the consideration of the question involved in this appeal, it appears from the provisions of the Act that the .
authority of the Council extends to the sphere of maintaining proper medical standards in medical colleges or institutions necessary for obtaining recognised medical qualifications.
By virtue of this authority it may be open to the Council to lay down the minimum educational qualifications required of a student who may seek admission into a medical college.
In other words, the eligibility of a candidate who may seek to get admitted into a medical college for obtaining recognised medical qualifications may be prescribed by the Council.
All the candidates who are eligible for admission into Medical Colleges or Institution for getting themselves qualified as medical practitioners are entitled to seek admission into a Medical College or Institution.
As to how the selection has to be made out of the eligible candidates for admission into the Medical College is a matter which has necessarily to depend on circumstances and conditions prevailing in particular States.
Though the question of eligibility for admission into the medical curriculum may come within the power and jurisdiction of the Council, the question of selection of candidates out of the candidates eligible to undergo 778 the medical course does not appear to come within the purview of the Council.
The observations of the Supreme Court in the case of State of Kerala vs Kumari T.P. Roshana and Ors.
(supra) quoted earlier relate to the question of qualification or eligibility of students for admission into a medical college and the said observations are not intended to apply to a case of selection of students for admission into a Medical College out of the eligible candidates.
As the number of candidates seeking admission to Medical Colleges largely exceed the number of vacancies available to such candidates for admission, some kind of procedure has to be evolved for such selection.
The process of selection of candidates for admission to a medical college out of the candidates eligible for admission for filling up the limited vacancies has no real bearing on the question of eligibility or qualification for admission or on the standard of medical education.
The standard of medical education really comes into the picture in the course of studies in the medical colleges or institutions after the selection and admission of candidates into medical colleges and institutions.
Students who satisfy the requirements of Regulation I become qualified or eligible to seek admission into the Medical Course.
Regulation I prescribes requisites which have to be satisfied to enable every student to become eligible or qualified to seek admission and the process of selection comes thereafter.
Undoubtedly, under section 33 of the Act, the Council is em powered to make regulations with the previous sanction of the Central Government generally to carry out the purposes of the Act and such regulations may also provide for any of the matters mentioned in section 33 of the Act.
We have earlier indicated what are the purposes of this Act.
Sub sections
(j), (k), (l) and (m) of the Act which we have earlier set out clearly indicate that they have no application to the process of selection of a student out of the eligible candidates for admission into the medical course.
Sub section
(j ), (k), and (I) relate to post admission stages and the period of study after admission in medical colleges.
Sub s (m) of section 33 relates to a post degree stage Sub section
(n) of section 33 which has also been quoted earlier is also of no assistance as the Act is not concerned with the question of selection of students out of the eligible candidates for admission into medical colleges.
It appears to us that the observations of this Court in the case of Arti Sapru vs State of Jammu and Kashmir and Ors.
(supra) which we have earlier quoted and which were relied on by Mr. Phadke, were made on such consideration, though the question was not very properly finally decided in the absence of the Council.
779 We shall now consider the two relevant Regulations of the A Council and they are Regulations I and II.
The said Regulations read: I. Admission to the Medical Course No candidate shall be allowed to be admitted to the Medical Curriculum proper until: (i) he has completed the age of 17 years at the time of admission or will complete the age on or before 31st December of the year of his admission to the Ist M.B.B.S. Courses.
Provided that the candidates who are admitted directly to the 5 1/2 years integrated M.B.B.S. course should have completed the age of 16 years at the time of admission or will complete this age on 31st December of the year of admission to the pre medical course.
(ii) he has passed: (a) the Intermediate examination in Science of an Indian University/Board or other recognised examining body with Physics, Chemistry and Biology, which shall include a practical test in these subjects; OR (b) the pre professional/pre medical examination with physics, chemistry and biology, after passing either the higher secondary school examination, or the pre university or an equivalent examination.
The pre professional pre medical examination shall include a practical test in these subjects: OR (c) the first year of the three years degree course of a recognised university, with physics, chemistry and biology, including a practical test in 780 these subjects provided the examination is "University Examination. '.
OR (d) "B. Sc.
examination of an Indian University.
Provided that he has passed the B. Sc examination with not less than two of the following subjects Physics, Chemistry, Biology (Botany, Zoology; and further that he has passed the earlier qualifying examination with the following subjects, Physics, Chemistry, Biology and English.
Note : A student who has passed the B. Sc. examination with one or more of the subjects mentioned earlier would be admitted to the Medical Course if he had passed the remaining subjects of the Medical group (Physics, Chemistry and Biology) in the pre professional intermediate examination.
(e) The Higher Secondary Examination or the Indian School Certificate Examination which is equivalent to 10+2 Higher Secondary Examination after a period of 12 years study, the last two years of study comprising of Physics.
Chemistry, Biology and mathematics or any other elective subject with English at a level not less than the Core Course for English as prescribed by the National Council for Education Research and Training, after the introduction of 10+2+3 years educational structure as recommended by the National Committee on Education.
Note : Where the course content is not as prescribed for 10+2 education structure of the National Committee, the candidates will have to undergo a period of one year pre professional training before admission to the medical college 781 (f) any other examination which, in scope and standard is found to be equivalent to the intermediate science examination of an Indian University Board, taking physics, chemistry and biology, including a practical test in each of these subjects and English.
Note: (a) The pre medical course may be conducted either at Medical College or a Science College.
(b) After the 10+2 course is introduced, the integrated course should be abolished.
Selection of Students.
The selection of students to a medical college should be based solely on merit of the candidate and for determination of merit, the following criteria be adopted uniformly throughout the country: (a) In States, having only one Medical College and one University/Board/Examining body conducting the qualifying examination, the marks obtained at such qualifying examination be taken into consideration.
(b) In States having more than one University/Board/ Examining Body conducting the qualifying examination (or where there are more than one medical college under the administrative control of one authority), a competitive entrance examination should be held so as to achieve a uniform evaluation due to the variation of the standard of qualifying examinations conducted by different agencies.
(c) Where there are more than one university/board con ducting the qualifying examination then a joint selection board be constituted for all the colleges.
782 (d) A competitive entrance examination is absolutely necessary in the case of institutions of All India character.
(e) To be eligible for competitive entrance examination, candidate must have passed any of the qualifying examinations as enumerated under the head note "Admission to Medical Course.
" Provided that a candidate who has appeared in a qualifying examination the result of which has not been a declared, may be provisionally allowed to take up the competitive examination and in case of his selection for admission to a medical college, he shall not be admitted thereto unless in the meanwhile he has passed the qualifying examination.
Provided also that a candidate for admission to the medical course must have obtained not less than 50% of the total marks in English and Science subjects taken together (i) at the qualifying examination (or at a higher examination) in the case of medical college where the admissions are made on the basis of marks obtained at these examinations or (ii) 50% of the total marks in English and Science subjects taken together at the competitive entrance examination where such examinations are held for selection.
Provided further that in respect of candidates belonging to Scheduled Castes/Scheduled Tribes the minimum marks required for admission shall be 40% in lieu of 50% for general candidates.
Where the seats reserved for Scheduled Castes and Scheduled Tribes students in any State cannot be filled for (1 want of requisite number of candidates fulfilling the mini mum requirements prescribed from that State then such vacant seats may be filled up on all India basis with Scheduled Castes and Scheduled Tribes candidates getting not less than the minimum prescribed pass percentage or reverted to general category.
783 The authorities (State Government and Universities) A should arrange special coaching classes for Scheduled Castes/Seheduled Tribes candidates before the qualifying/ competitive examination to enable them to come up to the appropriate standard for admission to the Medical Courses.
Regulation I prescribes the eligibility of a candidate for admission to medical courses.
For maintaining proper standards in medical colleges and institutions it comes within the competence of the Council to prescribe the necessary qualification of the candidates who make seek admission into the Medical Colleges.
As this Regulation is within the competence of the Council, the Council has framed this Regulation in a manner which leaves no doubt that this Regulation is mandatory.
The language of this Regulation, which starts with the words "no candidate shall be allowed to be admitted to the medical curriculum until. ", makes this position absolutely clear.
On the other hand the language in Regulation II which relates to selection of candidates clearly goes to indicate that the Council itself appears to have been aware of the limitation on its powers to frame any such regulation regarding the procedure or process of selection of candidates for admission to the Medical Course out of the candidates qualified or eligible to seek such admission.
As, however, the question of selection of candidates for admission into medical colleges out of the eligible candidates is a h problem more or less common to all the States, the Council might have considered it desirable to recommend certain guidelines which may be followed in the matter of selection of students out of the eligible candidates for admission into medical colleges.
It is well known that all over India candidates who aspire to get admission into medical colleges and who are otherwise eligible or qualified for admission to medical courses on the basis of the provisions contained in Regulation I of the Council, cannot all be admitted into the medical college or institution for dearth of seats.
By way of solution of this problem, the Council appears to have thought it fit to suggest the procedure which will have the effect of selecting such candidates on the basis of merit only.
The procedure suggested is intended to do away with nepotism and favouritism and any unfair practice in the matter of such admission, as the procedure recommends merit to be the criterion.
The Council itself appears to have apprehended that what is contained in Regulation II is merely in the nature of a recommendation and this is evident from the language used in Regulation II particularly when the same is con 784 trasted with the language used by the Council in Regulation I. Regulation II begins with the words "seiection of students in a medical college should be based solely on merit".
We are of the opinion that the use of the words "should be" in Regulation II is deliberate and is intended to indicate the intention of the Council that it is only in the nature of a recommendation.
Regulation I which lays down the conditions or qualifications for admission into Medical Course comes within the competence of the Council under section 33 of the Act and is mandatory and the Council has used language to manifest the mandatory character clearly, whereas Regulation II which deals with the process or procedure for selection from amongst eligible candidates for admission is merely in the nature of a recommendation and directly in nature, as laying down the process or procedure for selection for admission of candidates out of the candidates eligible or qualified for such admission under Regulation I. Regulation II recommending the process of selection is outside the authority of the Council under section 33 of the Act and the Council has advisedly and deliberately used such language in Regulation II as makes the position clear and places the matter beyond any doubt. 'There is another aspect of the matter which also goes to suggest that Regulation II is merely directory and does not have any mandatory force.
Apart from reservations of seats for Scheduled Castes Scheduled Tribes categories and other reservations, reservation of seats is commonly made for being filled up by nomination.
In the instant case before us, it appears that the seats not exceeding three per cent are reserved for the nominees of the Government of India apart from the other reservations.
These nominees of the Central Government do not have to sit for any pre medical examination to qualify themselves for selection to the medical colleges.
They must of course be eligible for admission in the sense that h ey must have the necessary qualification for admission in accordance with Regulation I.
The candidates eligible under Regulation I are selected by virtue of nomination and there is no question of any pre medical test for such candidates nominated by the Central Government.
If Regulation II could be considered to be mandatory, there could be no such nomination of candidates by the Central Government.
Entry 66 in List I (Union List) of the 7th Schedule to the Constitution relates to "co ordination and determination of standard in institutions for higher education or research and scientific and technical institutions".
This entry by itself does not have any bearing on the question of selection of candidates to the Medical 785 Colleges from amongst candidates who are eligible for such A admission.
On the other hand, entry 25 in List II (Concurrent List) of the same Schedule speaks of "education, including technical education, medical education in Universities, subject to entries 63, 64, 65 and 66 of List l . vocational and technical training of labour".
This entry is wide enough to include within its ambit the question of selection of candidates to medical colleges and there is nothing in the entries 63, 64 and 65 of List I to suggest to the contrary.
We are, therefore, of the opinion that Regulation 11 of the Council which is merely directory and in the nature of a recommendation has no such statutory force as to render the order in question which contravenes the said regulation illegal, invalid and unconstitutional.
C In the case of Slate Andhra Pradesh and Ors.
vs Lavu Narendranath and Ors., etc.(l) this Court held at page 709 "the executive have.
a power to make any regulation which should have the effect of a law so long as it does not contravene any legislation already covering the field . ".
Under article 162 of the Constitution the executive power of a State, therefore, extends to the matter with regard to which the legislature of a State has power to make laws.
As there is no legislation covering the field of selection of candidates for admission to medical colleges, the State Government would, undoubtedly be competent to pass executive orders in this regard.
We shall now proceed to consider whether the order in question is violative of article 15 (l) and (2) of the Constitution.
The High Court has held that as the order is violative of the Regulation of the Council, the order cannot be supported under article 15 (4) of the Constitution.
We have earlier held that the contravention of Regulation II which is merely directory and in the nature of a recommendation does not invalidate the order.
As the order in question is not liable to be struck down on the ground of contravention of Regulation II of the Council, the order can clearly be supported under article l5 (4) of the Constitution.
It cannot be disputed that the State must do everything possible for the upliftment of the Scheduled Castes and Scheduled Tribes and other backward communities and the State is entitled to make reservations for them in the matter of admission to medical 786 and other technical institutions.
In the absence of any law to the contrary, it must also be open to the Government to impose such conditions as would make the reservation effective and would benefit the candidates belonging to these categories for whose benefit and welfare the reservations have been made.
In any particular situation, taking into consideration the realities and circumstances prevailing in the State it will be open to the State to vary and modify the conditions regarding selection for admission, if such modification or variation becomes necessary for achieving the purpose for which reservation has been made and if there be no law to the contrary.
Note (ii) of rule 20 of the Rules for admission framed by the State Government specifically empower the Government to grant such relaxation in the minimum qualifying marks to the extent considered necessary.
In the State of Kerala and Anr.
N.M. Thomas (1) this Court by a majority had held that relaxation of the Rules which required a lower division clerk to pass a departmental test within a period of two years in the interest of the employees belonging to Scheduled Castes and Scheduled Tribes was not unconstitutional or illegal.
The relaxation made by the State Government in the rule regarding selection of candidates belonging to Scheduled Castes and Scheduled Tribes for admission into medical colleges cannot be said to be unreasonable and the said relaxation constitutes no violation of article 15 (l) and (2) of the Constitution.
The said relaxation also does not offend article 14 of the Constitution.
It has to be noticed that there is no relaxation of the condition regarding eligibility for admission into medical colleges.
The relaxation is only in the rule regarding selection of candidates belonging to Scheduled Castes and Scheduled Tribes categories who were otherwise qualified and eligible to seek admission into medical colleges only in relation to seats reserved for them.
The respondent Nivedita Jain and other deserving candidates may feel that because of the reservations they are being deprived of the opportunity of getting their admission into medical colleges.
It is.
however, to be noted that the validity of the reservations of seats for candidates belonging to Scheduled Castes and Scheduled Tribes categories has not been challenged in the writ petition and very properly as in view of article IS (4) of the Constitution.
In the case of Jagdish Saran and Ors.
vs Union of India and Ors.
,(l) relied on by Mr. Phadke, this Court has held that the Indian Constitution is wedded to equal protection and non discrimination and Arts.14, 15 and 16 are inviolable 787 and article 29 (2) strikes a similar note though it does not refer to A regional restrictions or reservations; article IS further saves State 's power to make special provisions for women and children or for advancement of socially and educationally backward classes and reservations under article IS (4) exist and are applied.
This Court further held at p. 855 as under : "Coming to brasstacks, deviation from equal marks will meet with approval only if the essential conditions set out above are fulfilled.
The class which enjoys reservation must be educationally handicapped.
The reservation must be geared to getting ever the handicap.
The rationale of reservation must be in the case of medical students, removal of regional or class inadequacy or like disadvantage.
" The view expressed by the Patna High Court in the case of Amalendu Kumar vs State of Bihar (supra) that article 15 (l) of the Constitution cannot be meaningful and will become illusory until minimum standards of proficiency are laid down and followed in the matter of admission to Medical Colleges and if undeserving candidates are admitted into medical colleges, the standard of medical education will go down, undeserving candidates admitted to medical colleges would not be able to pass out and qualify as doctors and there may be many drop outs and doctors not properly qualified will prove a danger to society, appears to be untenable.
It fails to notice that there is no relaxation in the standard of medical education or curriculum of studies in medical colleges for those candidates after their admission to the college and the standard of examination and the curriculum remains the same for all.
There may be drop outs and many of these candidates may not qualify.
There may also be such failures and drop outs in the case of other candidates than those belonging to these categories.
It is eminently desirable that some kind of minimum standard for selection for admission to medical colleges apart from eligibility should be there.
It has been represented to us by the Counsel for the State that the State has, in fact, prescribed such a minimum standard for selection of even the candidates belonging to Scheduled Castes and Scheduled Tribes into medical colleges.
The only other ground that was urged in support of the case of the writ petitioners that the order in question is illegal and invalid, is that the order violates ordiance 54 of the University of 788 Jabalpur.
No such ground has been taken in the writ petition.
Though the High Court has considered this argument, the High Court does not appear to have come to any definite finding on this question.
This question, in the instant case, cannot be said to be a question of pure law.
In the affidavit which has been filed on behalf of the University, it has been stated that the ordinance 54 has not been adhered to.
In the absence of any plea being taken in the writ petition, we are of the opinion that the respondent is not entitled to urge this point and rely on any alleged contravention of ordinance 54 of Jabalpur University.
In the result the order in question is not, therefore, liable to be struck down as being violative of Regulation Ir or of article 15 of the Constitution.
The appeal.
therefore, succeeds.
The Judgment and order passed by the High Court are hereby set aside and the writ petition is dismissed.
There will, however, be no order as to costs.
Though this appeal succeeds, yet in our opinion, justice requires that the respondent Nivedita Jain who has already been admitted to the Medical College on the basis of interim order passed by the Court and has been prosecuting her studies should be allowed to continue her studies and to continue to be student of the Medical College where she is already studying.
She is otherwise a qualified candidate and eligible for admission into the medical course which she is now undergoing and the cause of justice does not require that her studies should be interrupted and her career should not be put in jeopardy.
We, therefore, direct the authorities concerned to treat the student Nivedita Jain as a regular student of the college where she has been admitted and to allow her to continue her studies.
S.R. Appealls alllowed.
| IN-Abs | In exercise of its executive power the State Government of Madhya Pradesh made by its order dated 2nd April, 1980 the Rules for admission into the Medical, Dentistal and Ayurvedic Colleges in Madhya Pradesh.
By and under Rule 7 the State Government has reserved 15% of seats for each of the categories of Scheduled Castes and Scheduled Tribes candidates.
Rule 20 lays down that selection of candidates from amongst those who have qualified in the examination shall be made strictly on merit as disclosed by total number of marks obtained by candidates in the pre medical examination.
Rule 20 further provides that minimum qualifying marks for admission to Medical Colleges shall be 50% in the aggregate and 33% in each subject respectively; but for Scheduled Castes and Scheduled Tribes candidates the minimum qualifying marks shall be 40% in the aggregate and 30% in each subject.
Note (ii) below Rule 20 empowers the Government to grant in case of candidate belonging to the categories of Scheduled Castes and Scheduled Tribes special relaxation in the minimum qualifying marks to the extent considered necessary in the event of the required number of candidates in these two categories not being available.
Rule 9 contains a provision to the effect that in case seats reserved for categories of Scheduled Castes and Scheduled Tribes remain vacant, these seats will be filled up by candidates available on the combined merit list.
The total number of seats in all the Medical Colleges being 720 in number, 108 seats each for the Scheduled Castes and Scheduled Tribes became reserved under Rule 7. 760 For admission to The Medical Colleges for the academic year 1980 8., there were 9400 candidates in all of which 623 candidates were from Scheduled Castes and 145 candidates were from schedule Tribe.
On the result of the pre medical examination only 18 seats in the category of Schedule Casts and 2 seats in the Schedule Tribe could be filled up because the other candidates of these categories did not secure the qualifying marks prescribed by Rule 20.
The selection Board in exercise of the power under note (i) to Rule 20 made a relaxation of 5% in terms thereof and thereafter 7 more candidates in the category of Schedule Casts and one more in the category of Schedule Tribes got admitted leaving a balance of 83 seats under Schedule Casts quota, and 105 seats under the Schedule Tribes quota to be filled as provided for under Rule 9.
But the State Government, by its order dated 9th September 1980 removed the condition relating to minimum qualifying marks in favour of the candidates from amongst Schedule Castes and Schedule Tribes.
The respondent belonging to the general category who obtained the minimum qualifying marks but could not secure admission as other candidates for the general seats had obtained marks higher than she had obtained in the premedical examination for filling up the vacancies available in the general category, would have been in a position to secure admission to the Medical College but for the complete relaxation granted by the impugned order without complying with the provisions of Rule 9.
She, therefore, filed a writ petition in the High Court on the grounds, inter alia, (1) that the order of the Government contravenes Regulation II of the Medical Council of India and would hit Section 19 of the Indian medical council Act 1956 exposing the Medical colleges to the risk of being derecognised:(2) that the order of the Government will have the effect of allowing less qualified and less deserving candidates to fill up the seats and would, therefore, destroy equality and violate Articles 14 and 15 of the Constitution ; and (3) the order was violative of Ordinance 94 of the University of Jabal pur.
The High Court accepted the contentions of the writ petitioner and allowed the petition.
Hence the appeal by the State, after obtaining special leave.
Allowing the appeals, the Court, ^ HELD: 1.
The executive order dated 9th September, 1980 passed by the State cf Madhya Pradesh completely relaxing the conditions relating to the minimum qualifying marks for selection of students to Medical Colleges of the State in respect of candidates belonging to Schedule Castes and Scheduled Tribes is not violative of either Article 14, 15(1) or 15(2) or 15 (4).
[785 G, 788 C] 2.
The relaxation does not offend Article 14 of the Constitution.
There is no relaxation of the condition regarding eligibility for and admission into Medical Colleges.
The relaxation is only in the rule regarding selection of candidates belonging to Scheduled Castes and Scheduled Tribes who were otherwise qualified and eligible to seek admission into Medical Colleges only in relation to seats reserved for them.
Further the validity of the reservation of seats for candidates belonging to Schedule Castes and Scheduled Tribes have not been challenged and very properly in view of Article 15 (4) of the Constitution.
[786 E G] 3.
The relaxation cannot be said to be unreasonable and does not violate Articles 15(1), (2) and (4) of the Constitution.
The State must do everything 761 possible for the upliftment of the Schedule Castes and Scheduled Tribes and other backward communities and it is entitled to make reservations for them in the matter of admission to medical and other technical institutions.
In the absence of any law to the contrary, it must also been open to the Government to impose such conditions as would make the reservation effective and would benefit the candidates belonging to these categories for whose benefit and welfare the reservations have been made.
In any particular situation taking into consideration the realities and circumstances prevailing in the State it will be open to the State to vary and modify the condition; regarding, selection for admission if such modification or variation becomes necessary for achieving the purpose for which reservation has been made and if there be no law to the contrary.
Note (ii) of rule 20 of the Rules for admission framed by the State Government specifically empowers the Government to grant such relaxation in the minimum qualifying marks to the extent considered necessary.
The order can be supported under Article 15(4) of the Constitution.
[785 H, 786 A D] State of Kerala and Anr.
vs N.M. Thomas, ; ; Jagdish Saran and Ors.
vs Union of India and ors.
; , , followed.
Amalendu Kumar vs State of Bihar, AIR 1980 Patna 1 overruled.
Under Article 162 of the Constitution the executive power of a State, extends to the matter with regard to which the Legislature of a State has power to make laws.
As there is no legislation covering the field of selection of candidates for admission to Medical Colleges, the State Government would, undoubtedly, be competent to pass executive orders in this regard.
[785 D.E] State of Andhra Pradesh and Ors.
vs Lavu Narendranath and Ors.
; , , reiterated.
Regulation II of the Indian Medical Council is merely directory and in the nature of a recommendation and, therefore has no such statutory force as to render the executive order dated 9th September, 1980 which contravenes the said Regulation illegal, invalid and unconstitutional.
[785 B Cl Entry 66 in List I (Union List) of the Seventh Schedule to the Constitution relates to "co ordination and determination of standard in institutions for higher education or research and scientific and technical institutions".
This entry by itself does not have any bearing on the question of selection of candidates to the Medical Colleges from amongst candidates who are eligible for such admission.
On the other hand, entry 25 in List II (Concurrent List) of the same Schedule speaks of "education, including technical education, medical education in Universities, subject to entries 63, 64, 65 and 66 of List I. vocational and technical training of labour".
This entry is wide enough to include within its ambit the question of selection of candidates to Medical Colleges and there is nothing in the entries 63, 64 and 65 of List I to suggest to the contrary.
[784 G.H, 785 A C] 5:2.
Regulation I of the Medical Council prescribes the requisites which have to be satisfied to enable every student to become eligible or qualified to seek admission and the process of selection comes thereafter.
As this Regulation is 762 within the competence of the Council the Council, has framed this Regulation in a manner which leaves no doubt that this Regulation is mandatory.
[783 B C] 5:3.
Regulation II of the, Council is merely in the nature of a recommendation.
Regulation II begins with the words "selection of students in medical college should be based solely on merit".
Language used in Regulation II is deliberate and is intended to indicate the intention of the Council that it is only in the nature of a recommendation.
By way of solution to the problem of dearth of seats, the Council appears to have thought it fit to suggest the procedure which will have the effect of selecting such candidates on the basis of merit only.
The procedure suggested is intended to do away with nepotism and favoritism and any unfair practice in the matter of such admission, as the procedure recommends merit to be the criterion.
Regulation II recommending the process of selection is outside the authority of the Council under section 33 of the Act and the Council has advisedly and deliberately used such language in Regulation II as makes the position clear and places the matter beyond any doubt.
Further, apart from reservations of seats for Scheduled Castes and Scheduled Tribes and other reservations, reservation of seats is commonly made for being filled up by nomination.
In the instant case, it appears that seats not exceeding three per cent are reserved for the nominees of the Government of India apart from the other reservations.
These nominees of the Central Government do not have to sit for any premedical examination to qualify themselves for selection to the Medical Colleges, They must of course be eligible for admission in the sense that they must have the necessary qualification for admission in accordance with Regulation I.
The candidates eligible under Regulation I are selected by virtue of nomination and there is no question of any pre medical test for such candidates nominated by the Central Government.
If Regulation II could be considered to be mandatory, there could be no such nomination of candidates by the Central Government.
[783 G H, 784A C, E G] 6:1.
An analysis of the various sections of the indicates that the main purpose of the Act is to establish Medical Council of India, to provide for its constitution.
composition and functions and the main function of the Council is to maintain the medical register of India and to maintain a proper standard of medical education and medical ethics and professional conduct for medical practitioners.
The scheme of the Act appears to be that the Medical Council of India is to be set up in the manner provided in the Act and the Medical Council will maintain a proper medical register, will prescribe minimum standards of medical education required for granting recognised medical qualifications, will also prescribe standards of post graduate medical education and will further regulate the standard of professional conduct and etiquette and code of ethics for medical practitioners.
The Act further envisages that if it appears to the Council that the courses of study and examination to be undergone in, or the proficiency required from candidates at any examination held by any University or Medical Institution do not conform to the standard prescribed by the Council or that the staff, equipment, accommodation training and other facilities for instructions and training provided in such University or medical institution or in any college or other institutions affiliated to that University do not conform to the standards prescribed by the Council, the Council will make a representation to that effect to the Central Government and 763 on consideration of the representation made by the Council, the Central Government may take action in terms of the provisions contained in section 19 of the Act.
[776 G H, 777 A C] The Act also empowers the Council to take various measures to enable the Council to judge whether proper medical standard is being maintained in any particular institution or not.
[777 C D] 6:2.
The authority of the Council extends to the sphere of maintaining proper medical standard in Medical Colleges or institutions necessary for obtaining recognized medical qualifications.
By virtue of this authority it may be open to the Council to lay down the minimum educational qualifications required of a student who may seek admission into a Medical College.
In other words, the eligibility of a candidate who may seek to get admitted into a medical ( ' college for obtaining recognized medical qualifications may be prescribed by the Council.
All the candidates who are eligible for admission into Medical Colleges or institutions for getting themselves qualified as medical practitioners are entitled to seek admission into a Medical College or institution.
As to how the selection has to be made out of the eligible candidates for admission into the Medical College is a matter which has necessarily to depend on circumstances and conditions prevailing in particular States.
Though the question of eligibility for admission into the medical curriculum may come within the power and jurisdiction of the Council, the question of selection of candidates out of the candidates eligible to the medical course does not appear to come within The purview of the Council.
[777 E H, 778 A] 6:3.
The process of selection of candidates for admission to a Medical College out of the candidates eligible for admission for filling up the limited vacancies has no real bearing on the question of eligibility or qualification for admission or on the standard of medical education.
The standard of medical education really comes into the picture in the course of studies in the medical colleges or institutions after the selection and admission of candidates into Medical Colleges and institutions.
Students who satisfy the requirements of Regulation I become qualified or eligible to seek admission into the Medical Course.
Regulation I prescribes the requisites which have to be satisfied to enable every student to become eligible or qualified to seek admission and the process of selection comes thereafter.
[778 C E] Undoubtedly, under section 33 of the Act, The Council is empowered to make regulations with the previous sanction of the Central Government generally to carry out the purposes of the Act and such regulations may also provide for any of the matters mentioned in section 33 of the Act.
[778 E F] G State of Kerala vs Kumari T. P. Roshana and Ors ; Arti Sapru vs State of Jammu and Kashmir and Ors , explained and distinguished.
|
ition (Crl.) No. 5124 of 1981 (Under Article 32 of the Constitution of India) R. K. Garg, V. J. Francis and Sunil Kumar Jain for the Petitioner.
K.G. Bhagat and D. Goburdhan for the Respondents.
The Judgment of the Court was delivered by BAHARUL ISLAM, J.
This is a writ petition under Article 32 of the Constitution by the petitioner who has been detained under Section 3(2) of the (hereinafter "the Act").
The facts material for the purpose of disposal of this petition and not disputed before us may be stated thus: The order of detention was passed by the District Magistrate, Dhanbad, Bihar, on April 30, 1981.
The grounds of detention which were three in number were served on the petitioner on May 1, 1981 and the State Government approved the order of detention on May 7, 1981.
In pursuance of Section 10 of the Act, the State Government referred the matter to the Advisory Board constituted under the Act on May 19.
The petitioner submitted his represen 838 tation against this detention on May 31, 1981.
A copy of the representation was sent to the Advisory Board.
The Advisory Board by its report dated June 29, 1981 gave its opinion that there was sufficient ground for the detention of the petitioner and on receipt of the report, the State Government, in pursuance of the provisions of sub section (l) of Section 12 of the Act confirmed the detention of the petitioner and under Section 13 of the Act directed the detention of the petitioner for a period of one year.
The first contention of Mr. R.K. Garg, learned counsel appearing for the petitioner, is that the State Government did not consider the representation submitted by the petitioner and thereby violated Article 22(S) of the Constitution.
In the counter affidavit, the respondents have stated, "since the Advisory Board was going to consider this case on June 29, 1981, the comments of the District Magistrate were kept handy for use during the sitting of the Board.
The report of the Board was received by the Government after office hours on June 29, 1981.
The next morning i.e. on June 30, 1981, the report of the Advisory Board as well as the representation of the petitioner was examined by the office and the file was endorsed to the Chief Minister on July 1, 1981 by the Special Secretary of the Home (Special) Department suggesting that 'in view of the report of the Advisory Board, the detention of Shri Rahamatullah may be confirmed and be directed to be detained for a period of twelve months '" 3.
Before we consider the first submission of learned counsel, a few more facts need be stated.
In the writ petition, the petitioner alleged that he had submitted the representation on May 13, 1981 which fact was denied by the respondents in their counter aftidavit; they asserted that the representation was submitted not on May 13, but May, 31.
This has not been controverted before us by Mr. Garg.
It has further been stated in the counter affidavit and not denied by the petitioner that the petitioner submitted the representation to the Superintendent of the District Jail, Dhanbad, where he was detained; the Superintendent, District Jail, sent it by registered post on the following day, namely, June 1, and the Home (Special) Department of the Government received it on June 5.
It has been stated further in the counter affidavit that "the representation contained certain points which needed a report" from the District Magistrate.
A copy of the representation was sent on June 10, to the District Magistrate, Dhanbad, through a Special messenger, 839 for comments, which were received on June 24.
The respondents explained that since the Advisory Board was going to sit for consideration of the Petitioner 's case on June 29, they sent the representation of the petitioner to the Advisory Board for consideration and placed the comments of the District Magistrate before Advisory Board.
The Advisory Board 's report was received on June 29 and the following day, the Home Department 'examined ' the representation as well as the opinion of the Advisory Board on June 30, and endorsed the file on July 1 to the Chief Minister who approved the detention.
But the respondents have not explained their inaction during (i) the period of file days from June 5 to June 10 taken by the Home Department to send the representation to the District Magistrate for his comments; (ii) the period of fourteen days from June 10 to June 24 taken by the District Magistrate to send his comments and (iii) the period of five days from June 24 to June 29 taken by the Home Department in placing the District Magistrate 's comments before the Advisory Board and placing the matter before the Chief Minister.
Thus the total period of inaction of the respon dents is twenty four days.
The normal rule of law is that when a person commits an offence or a number of offences, he should be prosecuted and punished in accordance with the normal appropriate criminal law; but if he is sought to be detained under any of the preventive detention laws as may often be necessary to prevent further commission of such offences, then the provisions of Article 22(5) must be complied with.
Sub Article (S) of Article 22 reads: "When any person is detained in pursuance of an order made under any law providing for preventive detention, the authority making the order shall, as soon as may be, communicate to such person the grounds on which the order has been made and shall afford him the earliest opportunity of making a representation against the order." This Sub Article provides, inter alia, that the detaining authority shall as soon as may be communicate the grounds of detention and shall afford him the earliest opportunity of making a representation against the order.
The opportunity of making a representation is not for nothing.
The representation, if any, submitted by the detenu is meant for consideration by the Appropriate Authority 840 without any unreasonable delay, as it involves the liberty of a citizen guaranteed by Article 19 of the Constitution.
The non consideration or an unreasonably belated consideration of the representation tantamounts to non compliance of Sub Article (5) of Article 22 of the Constitution.
The law is well settled that in case of preventive detention of a citizen, the obligation of the appropriate government is two fold: (i) to afford the detenu the opportunity to make a representation and to consider the representation which may result in the release of the detenu, and (ii) to constitute a Board and to communicate the representation of the detenu along with other materials to the Board to enable it to form its opinion and to obtain such opinion.
The former is distinct from the latter.
As there is a two fold obligation of the appropriate government, so there is a two fold right in favour of the detenu to have his representation considered by the appropriate government and to have the representation once again considered by the Government in the light of the circumstances of the case considered by the Board for the purpose of giving its opinion [see 1979(2) SCR 315(1)] and ; 5.
In the instant case, the State Government did not discharge the first of the two fold obligation and waited till the receipt of the Advisory Board 's opinion.
There was, as pointed out above, an unexplained period of twenty four days of non consideration of the representation.
This shows there was no independent consideration of the representation by the State Government.
On the contrary they deferred its consideration till they received the report of the Advisory Board.
This is clear non compliance of Article 22(S) as interpreted by this Court.
The order of detention is, therefore liable to be quashed on this ground alone.
Mr. Garg raised two other contentions before us, namely (i) that the first two of the three grounds of detention were stale and the grounds showed no continuity of the alleged activities of the detenu; and (ii) that the documents relied on by the detaining authority in the grounds were not furnished to the detenu.
In view 841 of the fact that we are quashing the order of detention on the first ground, we need not examine these two contentions.
The petition is allowed.
The order of detention is quashed.
The detenu shall be set at liberty forthwith.
N.V.K. Petition allowed.
| IN-Abs | The petitioner was detained under section 3(2) of the .
The order of detention was passed by the District Magistrate on April 30, 1981, and the grounds of detention were served on The petitioner on May 1, 1981.
The State Government approved the order of detention on May 7, 1981, and referred the matter to the Advisory Board on May 19, 1981.
The petitioner submitted his representation against the detention on May 31, 1981 and a copy of the same was sent to the Advisory Board.
The Advisory Board by its report dated June 29, 1981 gave its opinion that there was sufficient ground for detention.
On receipt of the report, the State Government confirmed the detention and directed detention of the petitioner for a period of one year.
In the writ petition to this Court it was contended on behalf of the petitioner that the State Government did not consider the representation submitted by the petitioner and thereby violated Article 22 (S) of the Constitution.
Allowing the writ petition.
^ HELD: 1.
The law is well settled that in case of preventive detention of a citizen, the obligation of the appropriate Government is two fold: (i) to afford the detenu the opportunity to make a representation and to consider the representation which may result in the release of the detenu, and (ii) to constitute a Board and to communicate the representation of the detenu alongwith other materials to the Board lo enable it to form its opinion and to obtain such opinion.
The former is distinct from the latter.
As there is a two fold obligation of the appropriate government, so there is a two fold right in favour of the detenu to have his representation considered by the appropriate government and to have the representation once again considered by the Government in the light of the circumstances of the case considered by the Board for the purpose of giving its opinion.
[840 B D] In the instant case, the State Government did not discharge the first of the two fold obligation and waited till the receipt of the Advisory Board 's opinion.
There was an unexplained period of twenty four days of non consideration of the 837 representation.
This shows there was no independent consideration of the representation by the State Government on the contrary they deferred its consideration till they received the report of the Advisory Board.
This is clear non compliance of article 22 (S).
The order of detention is therefore, liable to be quashed.
[840E F] 2.
The normal rule of law is that when a person commits an offence or a number of offences, he should be prosecuted and punished in accordance with the normal appropriate criminal law; but if he is sought to be detained under any of the preventive detention laws as may often be necessary to prevent further commission of such offences, then the provisions of Article 22 (5) must be complied with.
This sub article provides that the detaining authority shall as soon as maybe communicate the grounds of detention and shall afford him the earliest opportunity of making a representation against the order The opportunity of making a representation is not for nothing.
The representation, if any, submitted by the detenu is meant for consideration by the Appropriate Authority with out any unreasonable delay as it involves the liberty of a citizen guaranteed by Article 19 of the Constitution [839 E 840 A] Narendra Purushotam Umrao etc.
vs B. B. Gujral and ors.
; , and Pankaj Kumar Chakraborty and ors.
vs State of West Bengal; , , referred to.
|
Civil Appeals Nos.
801 802 of 1978: From the judgment and order dated the 30th September, 1976 of the Gujarat High Court at Ahmedabad in F.A. No. 696 of 1) 1971 and 1282 of 1969.
Soli J. Sorabjee, I.N. Shroff and H.S. Parihar for the Appellant.
S.K. Dholakia and R.C. Bhatia for Respondent Nos.
The Judgment of the Court was delivered by CHANDRACHUD, C.J.
These appeals raise a question of some importance from the point of Insurance Companies which insure motor vehicles against third party risks and more so, from the point of view of the general public which, by reason of the increasing hazards of indisciplined and fast moving traffic, is driven in despair to lodge claims for injuries suffered in motor vehicle accidents.
In case of air accidents, the injured and the dependents of the deceased receive, without contest, fairly large sums by way of compensation from the Air Corporations.
We have still to awaken to the need to evolve a reasonably comparable method for compensating those who receive injuries or die in road or train accidents.
The victims of road accidents or their dependents are driven to wage a long and unequal battle against the Insurance Companies, which deny their liability on every conceivable ground and indulge in an ingenious variety of factual disputations from 'who was driving the vehicle ' to 'whose negligence was the sine qua non of the accident '.
The delay in the final disposal of motor accident compensation cases, as in all 864 other classes of litigation, takes the sting out of the laws of compensation because, an infant child who seeks compensation as a dependent of his deceased father has often to await the attainment of majority in order to see the colour of the money.
Add to that the monstrous inflation and the consequent fall in the value of the rupee: Compensation demanded say, ten years ago, is less than quarter of its value when it is received today.
We do hope that the Government will apply itself seriously and urgently to this problem and find a satisfactory method of ameliorating the woes of victims of road accidents.
We have just talked of delay and it is just as well that we begin by saying that the accident out of which these proceedings arise happened on February 1, 1966.
A collision took place between a motor car, No. GJY 4973, and a goods truck, No. GTA 4123, at about 8.30 P.M. On Naroda Road, Ahmedabad, as a result of which Ajit Sinh, who was driving the car died instantaneously and Jadavji Keshavji Modi, who was travelling in the car, sustained injuries.
The truck was insured against third party risk with the appellant, the Motor owners Insurance Co. Ltd. The appellant had then an office in Ahemdabad but it ultimately merged with the New India Assurance Co. Ltd., Bombay.
Respondents 1 (a) to I (g), who are the heirs and legal representatives of the deceased Ajit Sinh, filed an application before the Motor Accidents Claims Tribunal, Ahmedabad, under section 110 D of the , 4 of 1939, seeking compensation in the sum of Rs. 30,000 for his death.
Jadavji Modi filed a separate application asking for compensation of Rs. 10,000 for the injuries suffered by him.
The Tribunal dismissed both the applications by a common judgment dated June 2(, 1968 on the ground that respondent No. 3 could not be said to have been driving the truck rashly and negligently at the time of the accident.
Jadavji Modi and respondents I (a) to I (g) filed separate appeals in the Gujarat High Court from the Judgment of t he Tribunal, being First Appeals Nos.
1202 of 1969 and 696 of 1971 respectively.
These appeals were disposed of by the High Court by a common judgment dated September 30, 1976.
The hearing proceeded, both before the Tribunal and the High Court, on the basis that the truck was used for carrying goods.
The High Court allowed the appeals, awarding a compensation of Rs. 19,125 to 865 respondents 1 (a) to 1 (g) with 6% interest from the date of application until realisation of the amount and a compensation of Rs. 10,000 with similar interest to Jadvaji Modi.
These appeals by special leave are directed against the judgment of the High Court.
This Court by its order dated April 18, 1978 granted special leave to the appellant to appeal from the judgment of the High Court, limited to the question relating to the construction of section 95 (2) of the , ("the ").
Chapter VIII of the bears the title "Insurance of motor vehicles against third party risks".
Section 93 defines certain terms while section 94 (1) provides for the necessity to insure a vehicle against third party risks.
By that section, no person can use a Motor vehicle in a public place, except as a passenger, unless there is in force in relation to the use of the vehicle a policy of insurance complying with the requirements of the chapter.
Section 95 prescribes the requirements of the insurance policy and the "limits of liability" thereunder.
Broadly, by sub section (1) of section 95, a policy of insurance must insure the person or classes of persons specified in the policy to the extent specified in sub section (2) against any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of the vehicle in a public place.
The proviso to sub section (I) consists of three clauses by which, speaking generally, a policy is not required to cover (i) liability in respect of the death of or injuries to an employee arising out of and in the course of his employment; (ii) liability in respect of the death of or bodily injury to persons carried in the vehicle except where the vehicle is used for carrying passengers for hire or reward; and (iii) any contractual liability.
That takes us to the provisions contained in section 95 (2) of the , the interpretation of which is the sole question for our consideration in this appeal.
The , save for Chapter VIII relating to the insurance of motor vehicles against third party risks, has been in force since July 1, 1939, in what were known as Part A and Part States and since April 1, 1951 in Part States.
Chapter VIII came into force on July 1, 1946.
Section 95 (2) of the originally read thus: "95 (2) Subject to the proviso to sub section (1), a 866 policy of insurance shall cover any liability incurred in respect of any one accident upto the following limits, namely : (a) where the vehicle is a vehicle used or adapted to be used for the carriage of goods, a limit of twenty thousand rupees; (b) where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a a contract of employment, in respect of persons other than passengers carried for hire or reward, a limit of twenty thousand rupees; and in respect of passengers a limit of twenty thousand rupees in all, and four thousand rupees in respect of an individual passenger, if the vehicle is registered to carry not more than six passengers excluding the driver or two thousand rupees in respect of an individual passenger, if the vehicle is registered to carry more than six passengers excluding the driver; (c) where the vehicle is a vehicle of any other class, the amount of the liability incurred." (emphasis supplied) Clause (a) of sub section (2) was substituted by a new clause by section 74 of the Motor Vehicles (Amendment) , 100 of 1956, with effect from February 16, 1957.
The amended clause (a), which was in force on February 1, 1966 when the Incident leading to these proceedings occurred, reads thus: "95(2)(a) Where the vehicle is a goods vehicle, a limit of twenty thousand rupees in all, including the liabilities, if any, arising under the , in respect of the death of, or bodily injury to, employees (other than the driver), not 867 exceeding six in number, being carried in the vehicle." (emphasis supplied) Clauses (b) and (c) of section 95 (2) remained as they were in 1939 and were not touched by the 1956 Amendment.
Section 95 (2) underwent a further amendment by the Motor Vehicles (Amendment) , 56 of 1969, which came into force on March 2, 1970.
As a result of that amendment, the section reads thus: "95 (2) Subject to the proviso to sub section (l), a policy of insurance shall cover any liability incurred in respect of any one accident upto the following limits, namely : D (a) where the vehicle is goods vehicle, a limit of fifty thousand rupees in all, including the liabilities, f any, arising under the , in respect of the death of, or bodily injury to employees (other than the driver), not exceeding six in number, being carried in the vehicle; (b) where the vehicle is a vehicle in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment (i) in respect of persons other than passengers carried for hire or reward, a limit of fifty thousand rupees in all; (ii) in respect of passengers: (1) a limit of fifty thousand rupees in all where the vehicle is registered to carry more than thirty Passengers; 868 (2) a limit of seventy five thousand rupees in all where the vehicle is registered to carry more than thirty but not more than sixty passengers; (3) a limit of one lakh rupees in all where the vehicle is registered to carry more than sixty passengers; and (4) subject to the limits aforesaid ten thousand rupees for each individual passenger in any other case; (c) save as provided in clause (d), where the vehicle is a vehicle of any other class, the amount of liability incurred; (d) irrespective of the class of the vehicle, a limit of rupees two thousand in all in respect of damage to any property of a third party.
" (emphasis supplied) We are concerned only with clause (a) of section 95 (2) and that too, as it existed on February 1, 1966 when the collision between the car and the truck took place.
We have extracted the other clauses of section 95 (2) in order to trace the legislative history of the section and to see whether the language used by the legislature in other parts of the same section affords a comparative clue to the interpretation of the provision contained in clause (a).
Clause (a) as originally enacted in 1939, provides that the insurance policy must cover the liability in respect of third party risks upto the limit of twenty thousand rupees, where the vehicle is used or adapted to be used for the carriage of goods.
By the amendment introduced by the Amendment 100 of 1956, the words "in all" were added after the words "twenty thousand rupees".
Clause (a) thus amended read to say that where the vehicle is a goods vehicle, the policy of insurance shall cover the liability in regard to third party risks upto the limit of twenty thousand rupees in all.
Whereas clause (a) in its original form spoke of a vehicle "used or adapted to be used for the carriage of goods", under the 869 amendment of 1956, the clause was made applicable to cases where the vehicle "is a goods vehicle".
The other amendment introduced by the of 1956 was that the overall limit of twenty thousand rupees was expressed to include the liability arising under the to the extent mentioned in the amendment.
The amendment introduced by the Amendment 56 of 1969 enhanced the liability under clause (a) from twenty thousand rupees to fifty thousand rupees in all.
Clause (b) of section 95 applies to vehicles in which passengers are carried for hire or reward or by reason of or in pursuance of a contract of employment.
Under that clause as it stood originally in 1939, the liability was restricted to twenty thousand rupees in respect of persons other than passengers carried for hire or reward; and to twenty thousand rupees in all in respect of passengers.
The Amendment of 1956 did not make any change in clause (b).
But, the Amendment of 1969 enhanced the liability to the limit of fifty thousand rupees in all in respect of persons other than passengers carried for hire or reward.
In respect of passengers, the liability was enhanced from twenty thousand rupees to fifty thousand rupees in all, seventy five thousand rupees in all one lakh rupees in all, depending upon the registered capacity of the vehicle to carry passengers.
It may be recalled that the High Court awarded compensation in the sum of Rs. 19,125 to respondents 1 (a) to 1 (g) who are the heirs and legal representatives of Ajit Sinh who was driving the car, and Rs. 10,000 to Jadavji Modi who was travelling in the car.
The total amount of compensation awarded to the claimants thus comes to Rs. 29,125 that is to say, it is in excess of Rs. 20,000.
The contention of Shri Sorabjee who appears on behalf of the appellant insurance company is, that under clause (a) as it stood at the material time, the liability of the insurer under the statutory policy taken by the owner of the goods vehicle is limited to twenty thousand rupees in all and, therefore, the insurer cannot be asked to pay compensation in excess of that amount.
The liability to pay the balance, viz. Rs. 9,125 must according to the learned counsel, be fastened on the owner of the goods vehicle who would be vicariously responsible for the negligence of his employee who was driving the goods vehicle.
In support of this submission counsel relies strongly on the circumstance that the Amendment of 1956 which came into force on February 16, 1957, introduced the words 870 "in all" in clause (a).
It is urged that these words were introduced advisedly and deliberately in order to limit the overall liability of the insurer to twenty thousand rupees under the statutory policy.
These words of limitation cannot be ignored by asking the appellant to pay compensation in excess of twenty thousand rupees.
Counsel also seeks to derive support to his submission from the use of the words "in all" in clauses (b) and (d) of section 95 (2) as amended by Amendment 56 of 1969 which came into force on March ".
Having given our anxious consideration to these contentions of Shri Sorabjee, which are not without plausibility, we have come to the conclusion that the construction canvassed by the learned counsel will lead to great injustice and absurdity and must, therefore, be eschewed since, especially, the words of section 95 (2) cannot, in the context in which they occur, be regarded as plain and unambiguous.
We with first demonstrate the harsh and strange consequences which will flow out of the construction pressed upon us and we with then show why we consider That the material words of the section are of doubtful import.
for example, two or three persons die in a collision between a car and a goods vehicle and two or three others are injured as a result of the negligence of the driver of the goods vehicle, the heirs of the deceased and the injured persons will together be entitled to twenty thousand rupees in all, no matter how serious the injuries and how grave the hardship to the heirs ensuing upon the loss of lives of those who perished in the collision.
But there is a more flagrant injustice which one shall have to countenance if one were to accept the argument advanced on behalf of the appellant and it is this : If two persons of unequal economic status die in the kind of collision mentioned above, the heirs of the affluent victim will virtually monopolise the compensation by getting a lion 's share in it, thereby adding insult to the injury caused to the heirs of the indigent victim.
The purpose of law is to alleviate, not augment, the sufferings of the people.
It is well known that the award of compensation depends upon a variety of factors, including the extent of monetary deprivation to which the heirs of the deceased are subjected.
Applying that criterion as one of the many variable criteria which are applied for fixing compensation in motor accident cases, the heirs of the affluent victim may have been awarded, say, a compensation of Rs. 90,000.
The heirs of the other victim who may have been just managing to keep his body and soul together will probably have received by that standard a compensation of, say, 871 ten thousand rupees.
The compensation awarded to these two groups of heirs shall have to be reduced rateably in the proportion of 9: 1 in order to ensure it does not exceed rupees twenty thousand "in all".
The result of this will be that the insurance company will be liable to pay a sum of Rs. 18,000 to the heirs of the affluent person and Rs. 2,000 to the heirs of the other person.
The icy band of death may have fallen in one stroke on two victims of disparate economic status but then, the arithmetic of the appellants argument will perpetuate the gross inequality between the two even after their death.
We must avoid a construction which will produce such an unfair result, if we can do so without doing violence to the language of the section.
The owner of the truck will undoubtedly be liable to pay the balance but common experience shows that the woes of the injured and of the heirs of those who perish in automobile accidents begin after they embark upon the adventure of execution proceedings.
There are proverbial difficulties in proving ownership of goods vehicles, particularly if they are subject to a hire purchase agreement and truck owners are quite known for the ease with which they proclaim their insolvency.
It is therefore no consolation that the left over liability will fall on the insured.
Both by common practice and the application of recognised rules of statutory construction, harsh consequences following upon an interpretation are not considered as the governing factor in the construction of a statute, unless its language is equivocal or ambiguous.
If the language is plain and capable of one interpretation only, we will not be justified in reading into the words of the a meaning which does not follow natural from the language used by legislature.
It therefore becomes necessary to consider whether the language used by the legislature in section 95 (2) of the admits of any doubt or difficulty or is capable of one interpretation only.
If the words used by the legislature in clause (a) of section 95 (2) were the sole factor for determining the outside limit of the insurer 's liability, it may have been possible to accept the submission that the total liability of the insurer arising out of the incident or occurrence in question cannot exceed Rs. 20,000.
Clause (a) qualifies the extent of the insurer 's liability by the use of the unambiguous expression "in all" and since that expression was specially introduced by an amendment, it must be allowed its full play.
The legislature must be presumed to have intended what it has plainly said.
But, clause (a) does not stand alone and is not 872 the only provision to be considered for determining the outside limit of the insurer 's liability.
In fact, clause (a) does not even form a complete sentence and makes no meaning by itself.
Like the other clauses (b) to (d), clause (a) is governed by the opening words of section 95 (2) to the effect that "a policy of insurance shall cover any liability incurred in respect of any one accident upto the following limits", that is to say, the limits laid down in clauses (a) to (d).
We have supplied emphasis in order to focus attention on the true question which emerges for consideration: What is the meaning of the expression 'any one accident"? If that expression were plain and unambiguous, and its meaning clear and definite, effect would be required to be given to it regardless of what we think of its wisdom or policy.
But as we will presently show, the expression "any one accident ' does not disclose one meaning conclusively according to the laws of language.
It, clearly, is capable of more than one meaning, introducing thereby an ambiguity which has to be resolved by resorting to the well settled principles of statutory construction.
The expression "any one accident" is susceptible of two equally reasonable meanings or interpretations.
If a collision occurs between a car and a truck resulting in injuries to five persons, it is as much plausible to say that five persons were injured in one accident as it is to say that each of the five persons met with an accident.
A by stander looking at the occurrence objectively will be right in saying that the truck and the car met with an accident or that they were concerned in one accident.
On the other hand, a person looking at the occurrence subjectively, like the one who is injured in the collision, will say that he met with an accident.
And so will each of the five persons who were injured.
From their point of view, which is the relevant point of view, "any one accident" means "accident to any one '.
In matters involving third party risks, it is subjective considerations which must prevail and the occurrence has to be looked at from the point of view of those who are immediately affected by it.
If the matter is looked at from an objective point of view, the insurer 's liability will be limited to Rs. 20,000 in respect of injuries caused to all the five persons considered en bloc as a single entity, since they were injured as a result of one single collision.
On the other hand, if the matter is looked at subjectively as it ought to be, the insurer 's liability will extend to a sum of Rs. 20,000 in respect of the injuries suffered by each one of the five persons, since each met with an accident, though during 873 the course of the same transaction.
A consideration of preponderating importance in a matter of this nature is not whether there was any one transaction which resulted in injuries to many but whether more than one person was injured, giving rise to more than one claim or cause of action, even if the injuries were caused in the course of one single transaction.
If more than one person is injured during the course of the same transaction, each one of the persons has met with an accident.
We are, therefore, of the opinion that the ambiguity in the language used by the legislature in the opening part of section 95 (2) and the doubt arising out of the co relation of that language with the words "in all" which occur in clause (a), must be resolved by having regard to the underlying legislative purpose of the provisions contained in chapter VIII of the which deals with third party risks.
That is a sensitive process which has to accommodate the claims of the society as reflected in that purpose.
Indeed, it is in this area of legislative ambiguities, unfortunately not receding, that courts have to fill gaps, clear doubts and mitigate hardships.
In the words of Judge Learned Hand: "It is one of surest indexes of a mature and developed jurisprudence. to remember that statutes always have some purpose or object to accomplish whose sympathetic and imaginative discovery is the surest guide to their meaning".
(1) There is no table of logarithms to guide or govern statutory construction in this area, which leaves a sufficient and desirable discretion for the Judges to interpret laws in the light of their purpose, where the language used by the law makers does not yield to one and one meaning only.
Considering the matter that way, we are of the opinion that it is appropriate to hold that the word "accident" is used in the expression "any one accident" from the point of view of the various claimants, each of whom is entitled to make a separate claim for the accident suffered by him and not from the point of view of the insurer.
In The South Staffordshire Tramways Company Ltd. vs The Sickness and Accident Assurance Association Ltd., (2) the plaintiffs, a 874 tramcar company, effected with the defendants an insurance against claims for personal injury in respect of accidents caused by vehicles upto the amount of 250 "in respect of any one accident ' '.
One of the vehicles specified in the insurance policy was overturned, causing injuries to about forty persons, as a result of which the plaintiffs became liable to pay to those persons compensation to the extent of 833.
The question before the Court was whether the injuries caused to each of the said forty persons constituted a separate accident within the meaning of the policy.
The Court of Appeal answered that question in the affirmative.
Lord Esher, M.R., observed in his judgment that the claims made by the plaintiffs were in respect of personal injuries, and each person injured claimed ( ' for injuries in respect of an accident to his person by the vehicle.
"If several persons were injured", said the Master of Rolls, "upon the true construction of the policy, there were several accidents".
Bowen, L.J. took the same view of the matter by saying that the word "accident" may be used in either of two ways: An accident may be spoken of as occurring to a person.
Or as occurring to a train, or vehicle, or bridge.
In the latter case, though several persons were injured who were in the train, or vehicle, or on the bridge, it would be an accident to the train, or vehicle, or bridge.
In the former, "there might, however, be said to be several accidents, to the several persons injured".
Fry, L.J., concurred in the view taken by his Brethren, and observed that the meaning of the word "accident", as used in the policy of insurance, is "any single injury to the person or property accidentally caused.
" In Forney vs Dominion Insurance Co. Ltd. (1) the plaintiff, a solicitor, was insured under a professional indemnity policy whereby the defendants, the insurers, agreed to indemnify him in respect of loss arising from any claim or claims which may be made upon him by reason of any neglect, omission or error committed in the conduct of his business, subject to a proviso that the liability of the insurers was not to exceed a sum of 3000, "in respect of any one claim or number of claims arising out of the same occurrence ' '.
The Solicitor 's assistant gave a certain advice in a motor accident case which betrayed negligence.
The assistant had wrongly allowed a person to become administratrix of her late husband 's estate and the assistant also failed to issue writs within the six month limitation period.
A claim was made against the Solicitor for his assistant 's negligence for depriving the claimants of their right to be paid 875 damages.
The court assessed the quantum of damages differently for different claimants, which together exceeded the sum of 3000.
It was held that the Solicitor 's assistant was negligent twice and therefore there were two occurrences in the same case in respect of which the Solicitor became liable to pay damages for negligence.
Accordingly, the insurance company was held liable to indemify the Solicitor in respect of the damages awarded against him upto a limit of 3000 for each act of negligence.
In Halsbury 's Laws of England, (1) the decision in South Staffordshire Tramways company is cited in support of the proposition that the word 'accident "may fall to be construed from the point of view of each individual victim, so as to produce, in effect, as many accidents (even in a single occurrence) as there are victims" .
The provisions contained in section 95 (2) of the arose for consideration before a Full Bench of the High Court of Punjab in Northern India Transporters Insurance Co. Ltd. vs Smt.
Amrawati, (2) a Full Bench of the High Court of Madras in Jayalakshami & Ors.
vs The Ruby General Insurance Company, Madras & anr., (3) the High Court of Karnataka in Sanjiva Shetty vs Anantha & Ors., (4) and the High Court of Orissa in Sabita Pati & Ors.
vs Rameshwar Singh and anr.
(5) and M/s Construction India & Ors.
vs Mahindra Pal Singh Ahluwalia & ors.
(6) The Punjab case arose under section 95 (2) (b), while the other cases arose under section 95 (2) (a) of the .
In the case before the Madras Full Bench, a person called Krishnaswami who was driving a car died as a result of a collision between his car and a goods vehicle.
The Claims Tribunal dismissed the claim of the heirs of the deceased, but a Division Bench of the High Court took the view that compensation in the sum of Rs. 40,000 would be payable to them.
The Division Bench referred for consideration of the Full Bench the question whether on a true construction 876 of clause (a) of section 95 (2), the liability of the Insurance company was limited to rupees twenty thousand.
The Full Bench, overruling a previous decision of a Division Bench, answered this question in the affirmative.
It is important to bear in mind that the case before the Madras High Court was in a material respect different from the case before us.
The High Court had to consider the claim of one person only since, only one person had met with an accident.
In the case before us, more than one person has been injured, which raises the question as regards the construction of the words "any one accident ' ' which occur in section 95 (2).
That question did not arise in the Madras case and the decision, therefore, does not touch the question before us.
Similarly, in the case before the Orissa High Court in Sabita Pati, only one person was involved in the collision between a jeep and a goods vehicle.
Relying on the judgment of the Full Bench of the Madras High Court, the Orissa High Court held that the liability of the Insurance company was limited to rupees twenty thousand under section 95(2)(a) of the .
The n involvement of more than one person in a single occurrence raises a different question for consideration under section 95 (2) (a) than the involvement of a single person in a single occurrence.
In the latter case, it may be true to say that the liability of the insurer is limited to rupees twenty thousand under a statutory policy.
In the former, the interpretation of the words "any one accident ' ' came into play and we have already expressed our view on the meaning of those words.
In the case before the Karnataka High Court in Sanjiva Shetty, a taxi and a car met with a collision, as a result of which two persons travelling in the taxi, the driver of the car and a boy called Bharatisha sitting on the roadside were injured.
Before the High Court was the claim of the driver of the car and the boy.
A Division Bench of the High Court held that the total liability of the Insurance Company was limited to rupees twenty thousand in respect of the injuries suffered by them.
The High Court apportioned the liability by directing the insurance company to pay Rs. 18,730 to the boy and Rs. 1 ,270 to the driver of the car.
In view of our judgment in the instant case, the decision of the Karnataka High Court cannot be considered to be good law.
We may add that paragraph 22 of the judgment of the High Court says that it was "common ground" between the parties that the limit of the liability of the insurers was only rupees twenty thousand in all.
The High Court added ". indeed, no argument was addressed to the contrary by any of the 877 parties".
In the case before the Orissa High Court in M/s Construction India, two children travelling in a school bus belonging to the Orissa Government died in a collision between the bus and a goods vehicle.
Section 95 (2) (a) was held attracted and since more than one person was injured as a result of a single occurrence, the same question arose as before us.
The orissa High Court held that since the total compensation exceeded rupees twenty thousand, the liability of the insurers was limited to rupees twenty thousand in all and that the amount payable to the heirs of the deceased children was liable to be apportioned.
This decision also cannot be considered as laying down the correct law and there too, as in Sanjiva Shetty, no argument was advanced before the High Court on the construction of clause (a), particularly in reference to the words "any one accident" which occur in section 95 (2).
The case before the Punjab Full Bench in Northern India Transporters, arose under the old section 95 (2) (b) and need not really detain us.
Under that section, as it stood prior to its amendment in 1969, a policy of insurance was required to cover any liability incurred in respect of any one accident upto the limit of twenty thousand rupees in respect of persons other than passengers carried for hire or reward, where the vehicle was one in which passengers were carried for hire or for reward or by reason of or in pursuance of a contract of employment.
In respect of passengers, there was a twofold limit on the insurer 's liability: "a limit of twenty thousand rupees in all" and four thousand rupees in respect of an individual passenger if the vehicle was registered to carry not more than six passengers excluding the driver, or two thousand rupees in respect of an individual passenger if the vehicle was registered to carry more than six passengers excluding the driver.
A passenger bus was involved in an occurrence in which two passengers were killed.
The High Court held that the straightforward course was to take the language of the as it stood, which left no doubt that in the case of a bus registered for carrying more than six passengers, the limit of the liability was twenty thousand rupees in all and there was a further limit in respect of each individual passenger in the sum of two thousand rupees.
The words "any one accident ' in the opening part of section 95 (2) made no difference to this interpretation because, if more than one passenger was injured in a single occurrence, no one passenger was entitled to receive more than rupees two thousand or four thousand, depending on the registered capacity of the vehicle to carry passengers.
878 The judgment of the Punjab High Court was brought in appeal to this Court in Sheikhupura Transport Co. Ltd. vs Northern India Transport Co.(1) For reasons aforesaid, the judgment in that case is not an authority on the interpretation of clause (a) of section 95 (2).
After setting out the relevant provisions of section 95 (2) at pages 24 and 25 of the Report, Hegde J. speaking for himself and Jaganmohan Reddy, J. concluded: "In the present case we are dealing with a vehicle in which more than six passengers were allowed to be carried.
Hence the maximum liability imposed under section 95 (2) on the insurer is Rs. 2,000 per passenger though the total liability may go upto Rs. 20,000. ' ' Towards the end of the judgment, it was observed that reading the provision contained in sections 95 and 96 together, ". it is clear that the statutory liability of the insurer to indemnify the insured is as prescribed in Sec.
95,(2).
Hence the High Court was right in its conclusion that the liability of the insurer in the present case only extends upto Rs. 2,000 each, in the case of Bachan Singh and Narinder Nath".
In vies of the limit on the insurer 's liability in respect of each passenger, the argument on the construction of the words "any one accident" had no relevance and was therefore neither made nor considered by the Court.
Different considerations may arise under clause (b), as amended by 56 of 1969, but we do not propose to make any observations on that aspect of the matter, since it does not directly arise before us.
It was suggested that the interpretation which we are putting on section 95 (2) (a) will create difficulties in cases where the insured also incurs liability under the in respect of the death of, or bodily injury to, employees (other than the driver), not exceeding six in number, being carried in the vehicle.
It is true that under section 95 (2) (a), the liability of the insured and therefore the insurer 's indemnity includes the liability of the aforesaid description under the of 1923.
But that is a matter of apportionment which may require a rateable deduction to be made from the compensation payable to each victim, depending upon the quantum of compensation payable under the of 1923 to employees carried in the goods vehicle.
879 We cannot part with this case without impressing upto the A Government, once again, the urgent need to provide by law for the payment of reasonable amounts of compensation, without contest, to victims of road accidents.
We find that road accidents involving passengers travelling by rail or public buses are usually followed by an official announcement of payment of ex gratia sums to victims, varying between five hundred and two thousand rupees or so.
That is a niggardly recognition of the State 's obligation to its people particularly so when the frequency of accidents involving the public transport system has increased beyond believable limits.
The newspaper reports of August and September 1981 regarding deaths and injuries caused in such accidents have a sorry story to tell.
But we need not reproduce figures depending upon newspaper assessment because, the newspapers of September 18, 1981 carry the report of a statement made by the Union Minister of State for Shipping and Transport before the North Zone goods transport operators . that 20,000 persons were killed and 1.5 lakh were injured in highway accidents during 1980.
We wonder whether adequate compensation was paid to this large mass of suffering humanity.
In any event, the need to provide by law for the payment of adequate compensation without contest to such victims can no longer be denied or disputed.
It was four years ago that this Court sounded a warning and a reminder (1): "With the emergence of an ultra modern age which has led to strides of progress in all spheres of life, we have switched from fast to faster vehicular traffic which has come as a boon to many, though some times in the case of some it has also proved to be a misfortune The time is ripe for serious consideration of creating no fault liability.
Having regard to the directive principles of State policy, the poverty of the ordinary run of victims of automobile accidents, the compulsory nature of insurance of motor vehicles, the nationalisation of general insurance companies and the expanding trends towards nationalisation of bus transport, the law of torts based on no fault needs reform. ". it is only just and fair that the Legislature should make a suitable provision so as to pay adequate compensation by properly evaluating the precious life of a 880 citizen in its true perspective rather than devaluing human lives on the basis of an artificial mathematical formula.
It is common knowledge that where a passenger travelling by a plane dies in an accident, he gets a compensation of Rs. 1,00,000 or like large sums, and yet when death comes to him not through a plane but through a motor vehicle he is entitled only to Rs. 2,000.
Does it indicate that the life of a passenger travelling by plane becomes more precious merely because he has chosen a particular conveyance and the value of his life is considerably reduced if he happens to choose a conveyance of a lesser value like a motor vehicle.
Such an invidious distinction is absolutely shocking to any judicial or social conscience and yet section 95 (2) (d) of the seems to suggest such a distinction.
We hope and trust that our law makers will give serious attention to this aspect of the matter and remove this serious lacuna in section 95 (2) (d) of the .
We would also like to suggest that instead of limiting the liability of the Insurance Companies to a specified sum of money as representing the value of human life, the amount should be left to be determined by a Court in the special circumstances of each case.
We further hope our suggestions will be duly implemented and the observations of the highest Court of the country do not become a mere pious wish. ' (per Fazal Ali J, pp. 945, 946, 950, 951).
These observations are still languishing in the cold storage of pious wishes.
With the emergence of the General Insurance Corporation which has taken over general insurance business of all kinds, including motor vehicles insurance, it should be easy to give statutory recognition to the State 's obligation to compensate victims of road accidents promptly, adequately and without contest.
We are happy to note that the Gujarat High Court, by its judgment under appeal, took a just, correct and realistic view of the matter by holding that, under the statutory policy, the appellant insurance company is liable to pay the full amount of compensation to the heirs of the driver of the car and to the passenger who was travelling in the car, each amount being less than Rs. 20,000. 881 In the result the appeals are dismissed with costs in separate sets in favour of respondents 1 (a) to 1 (g) who are the heirs of the deceased Ajit Sinha and in favour of respondents 3 to 6 who are the heirs of Jadavji Keshavji Modi since deceased.
N.V.K. Appeals dismissed.
| IN-Abs | Section 95 of the prescribes the requirements of an insurance policy and the limits OF liability thereunder.
By sub section (1) of section 95, a policy of insurance must insure the person or classes of persons specified in the policy to the extent specified in sub section (2) against any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of the vehicle in a public place.
Section 95(2) of the Act as it originally stood read thus: "95(2): Subject to the proviso to sub section (I) a policy of insurance shall cover any liability incurred in respect of any one accident upto the following limits, namely: (a) where the vehicle is a vehicle used or adapted to be used for the carriage of goods, a limit of twenty thousand rupees. ".
This provision was substituted by a new clause by section 74 of the Motor Vehicles (Amendment) Act, 1956 with effect from February 16, 1957.
The amended clause read: "95(2) (a) : Where the vehicle is a goods vehicle, a limit of twenty thousand rupees in all, including the liabilities, if any, arising under the Work men 's Compensation Act, 1923, in respect of the death of, or bodily injury to, employees (other Than The driver), not exceeding six in number, being carried in the vehicle".
This provision underwent further amendment by the Motor Vehicles (Amendment) Act, 1969 which came into force on March 7, 1970.
A collision took place between a motor car and a goods truck in February 1966 as a result of which the driver of The car died instantaneously and the person travelling in the car sustained injuries.
The Truck was insured against third party risk with the appellant insurance company.
861 The heirs and legal representatives of the deceased field an application before the Motor Accidents Claims Tribunal, under section 110 D of the Act, claiming compensation in the sum of Rs. 30,000 for the death caused in the accident.
The person who was injured filed a separate application asking for compensation of Rs. 10,000 for the injuries suffered by him.
The Tribunal dismissed both the applications on the ground that respondent No. 3 could not be said to have been driving the truck rashly and negligently at the time of the accident.
The claimants filed separate appeals in the High Court, which awarded a compensation of Rs. 19,125 to the heirs of the deceased and Rs. 10,000 to the injured person.
In the appeals to this Court it was contended on behalf of the appellant insurance company: (i) that under clause (a) of section 95(2) as it stood at the material time, the liability of the insurer under the statutory policy taken by the owner of the goods vehicle is limited to Rs. 20,000 in all and, therefore, the insurer cannot be asked to pay compensation in excess of that amount, and that the liability to pay the balance must be fixed on the owner of the goods vehicle who would be vicariously responsible for the negligence of his employee who was driving the goods vehicle, and (ii) that the Amendment Act of 1956 which came into force on February 16, 1957 introduced the words 'in all ' in clause (a) and that these words were introduced to limit the overall liability of the insurer to twenty thousand rupees Dismissing the appeals, ^ HELD: 1.
The High Court took a just, correct and realistic view of the matter by holding that, under the statutory policy the appellant insurance company is liable to pay the full amount of compensation to the heirs of the deceased and to the passenger travelling in the car, each amount being less than Rs. 20,000.
[880 G H] The purpose of law is to alleviate, not augment, the sufferings of the people.
The award of compensation depends upon a variety of factors, including the extent of monetary deprivation to which the heirs of the deceased are subjected.
[870 G] 3.
By common practice and the application of recognised rules of statutory construction, harsh consequences following upon an interpretation are not considered as the governing factor in the construction of a statute, unless its language is equivocal and ambiguous.
[871 E] 4.
Clause (a) of section 95 (2) qualifies the extent of the insurer 's liability by the use of the unambiguous expression 'in all ' and since that expression was specially introduced by an amendment, it must be allowed its full play.
The legislature must be presumed to have intended what it has plainly said.
But, clause (a) does not stand alone and is not the only provision to be considered for determining the outside limit of the insurer 's liability.
In fact, clause (a) does not even form a complete sentence and makes no meaning by itself.
Like the other clauses (b) to (d), clause (a) is governed by the opening words of 862 section 95 (2) to the effect that "a policy of insurance shall cover any liability incurred in respect of any one accident up to the following limits", that is the limits laid down in clauses (a) to (d).
[871 H 872 B] 5 (i) The expression, 'any one accident ' is susceptible of two equally reasonable meanings or interpretations.
If a collision occurs between a car and a truck resulting in injuries to five persons, it is as much plausible to say that five persons were injured in one accident as it is to say that each of the five per sons met with an accident.
A bystander looking at the occurrence objectively will be right in saying that the truck and the car met with an accident or that they were concerned in one accident.
On the other hand, a person looking at the occurrence subjectively, like the one who was injured in the collision, will say that he met with an accident.
And so will each of the five persons who were injured.
From their point of view, which is the relevant point of view, "any one accident" means "accident to any one '.
In matters involving third party risks, it is subjective considerations which must prevail and the occurrence has to be looked at from the point of view of those who are immediately affected by it.
[872 E F] 5 (ii) A consideration of preponderating importance in a matter of this nature is not whether there was any one transaction which resulted in injuries to many but whether more than one person was injured, giving rise to more than one claim or cause of action, even if the injuries were caused in the course of one single transaction.
If more than one person is injured during the course of the same transaction, each one of the persons meets with an accident.
[873A B] 6.
The ambiguity in the language used by the legislature in the opening part of section 95 (2) and the doubt arising out of the co relation of that language with the words 'in all ' which occur in clause (a) must be resolved by having regard to the underlying legislative purpose of the provisions, contained in Chapter VIII of the Act which deals with third party risks.
That is a sensitive process which has to accommodate the claims of the society as reflected in that purpose.
[873 C] 7.
In the area of legislative ambiguities courts have to fill gaps, clear doubts and mitigate hardships.
There is no table of logarithms to guide or govern statutory construction in this area, which leaves a sufficient and desirable discretion for the Judges to interpret laws in the light of their purpose, where the language used by the law makers does not yield to one and one meaning only.
lt is, therefore, appropriate to hold that the word "accident" is used in the expression any one accident" from the point of view of the various claimants, each of whom is entitled to make a separate claim for the accident suffered by him and not from the point of view of the insurer.
[873 D, F G] 8.
With the emergence of the General Insurance Corporation which has taken over general insurance business of all kinds, including motor vehicle insurance, it should be easy to give statutory recognition to the State 's obligation to compensate victims of road accidents, promptly, adequately and without con test .
Cabell vs Markham, 737, 739 [1945]; The South Staffordshire Tramways Company Ltd. vs The Sickness and Accident Assurance Association Ltd., [1891]1 Q.B.D. 402; Forney vs Dominion Insurance Co. Ltd., [1969] 1 Weekly Law Reports, 928; Manjusri Raha and Ors.
vs B.L. Gupta and Ors. ; , referred to.
Northern India Transporters Insurance Co. Ltd. vs Smt.
Amrawati, AIR 1966 Punjab 288, Jayalakshmi and Ors.
vs The Ruby General Insurance Company, Madras and Anr. ; Sabita Pati and Ors.
vs Rameshwar Singh and Anr. ; Sheikhupura Transport Co. Ltd. vs Northern India Transport Co., distinguished.
Sanjiva Shetty vs Anantha and Ors. , M/s. Construction India and Ors.
vs Mahindra Pal Singh Ahluwalia and Ors , disapproved.
|
Civil Appeal No. 2060 of 1970.
From the judgment and order dated the 26th August, 1969 of the Madhya Pradesh High Court in First Appeal No. 100 of 1965 Harbans Singh for the Appellant.
Gopal Subramaniam, D.P. Mohanty and R.A. Shroff for the Respondent.
The Judgment of the Court was delivered by BALARRISHNA ERADI, J.
This appeal by certificate granted by the High Court of Madhya Pradesh under Article 133 (1) (a) arises out of a suit Regular Civil Suit No. 7 A of 1963 on the file of the First Additional District Judge, Bhopal instituted by the appellant herein against the State of Madhya Pradesh, for recovery of a sum of Rs. 29,500 from the defendant by way of refund of the first instalment of the sale price deposited by the plaintiff with the Forest Department of the defendant State pursuant to an auction of two forest coupes held on August 17, 1960, together with damages alleged to have been sustained by the plaintiff on account of alleged breach of contract by the defendant.
The plaint contained a further prayer that the defendant should be restrained by a permanent injunction from taking any steps to recover from the plaintiff the second and third instalments of the sale price for which the two coupes had been knocked down in favour of the plaintiff at the auction sale.
The trial court held that the plaintiff is entitled to recover from the defendant Rs. 17, 500 by way of refund of the first instalment of the sale price of the two coupes, but rejected the plaintiff 's claim for recovery of damages.
Accordingly, a decree was passed in the plaintiff 's favour for recovery of Rs. 17,500 with proportionate costs.
The plaintiff 's prayer for the relief of permanent injunction was also granted by the trial court.
897 The State (defendant) carried the matter in appeal before the High Court of Madhya Pradesh.
The High Court took the view that the plaintiff 's claim for refund of the first instalment of the sale price was unsustainable inasmuch as he had not proved that the number of trees which were actually available for extraction in the two coupes, according to the proper markings, was less than the number of trees which was covered by the assurance given to the contractor at the time of the auction.
As regards the relief of permanent injunction, the High Court held that from the notice (Exh.
P 7) issued by the concerned Divisional Forest officer to the plaintiff on April 17, 1961, it was seen that the Government had indicated to the plaintiff its intention to terminate the contract before the second instalment had become due and hence the only right which the Government thereafter had was to realise from the plaintiff the deficiency, if any, occasioned by a resale of the two coupes.
In this view, the High Court held that the Government had no longer the right to claim from the plaintiff the balance of the sale consideration represented by the second and third instalments and that the decree for permanent injunction granted by the trial court did not, therefore, call for any interference.
Accordingly, the appeal filed by the defendant was allowed in part by the High Court and the decree granted to the plaintiff by the trial court for recovery of Rs. 17,500 was set aside.
Hence, this appeal by the plaintiff.
The facts of the case on which there is no dispute are as follows.
On July 22, 1960, the Forest Department of the State Government of Madhya Pradesh published in the State Gazette a notice notifying for general information that forest contracts of East Bhopal, Forest Division will be settled by public auction to be held by the Divisional Forest officer at Sader Manjil, Bhopal on August 17, 1960.
The plaintiff attended the said auction after having deposited the requisite earnest money.
At the time o the auction, the respective Range officers announced the details of the quantities of the forest produce available in each coupe.
In the said announcement, the total number of trees of each species available in each coupe as also their girth etc., were announced by the concerned Range officers and the bids were invited on the basis of the said information given out to the intended bidders.
The plaintiff was the highest bidder in respect of two coupes, namely, Searmau Coupe C/2 "A" and "B".
The plaintiff 's bid of Rs. 69,000 for those two coupes was accepted by the Auctioning officer and pursuant thereto, the plaintiff deposited on August 22, 1960 Rs. 16, 250 being the balance of the first instalment of Rs. 17,250 after adjustment of the 898 earnest money already deposited.
The plaintiff also produced a solvency certificate and executed the requisite Security Bonds.
On October 27, 1960, the plaintiff was informed by the concerned Divisional Forest officer that the security bonds furnished by the plaintiff were accepted and that the contract in respect of the two coupes was sanctioned in his favour by the Chief Conservative officer of Forests.
By the said communication, the plaintiff was directed to proceed to the site and sign the 'coupe boundary certificate ' before the Range officer for getting possession of the two coupes.
The plaintiff 's case is that when, in pursuance of the aforesaid intimation, he visited the two coupes and conducted a detailed inspection of the trees available for extraction, he found that the coupes did Dot contain the forest produce as announced at time of auction, that a very large number of big trees which had been marked for felling and given serial numbers did not bear hammer marks either at the breast height or at the bottom, with the result that the contractor was debarred under the rules from felling those trees, that similarly a large number of trees which were hammer marked had not, however, been given serial numbers and that a large number of trees situated along the bank of a Nala in Coupe No. 2 "B" which had been marked for felling and had been serially numbered were found to have been subsequently "reserved" with the result that it was no longer open to the contractor to cut any of those trees.
The plaintiff states that the aforesaid vital discrepancies and irregularities were pointed out by him to the Range officer and inasmuch as the number of trees available for cutting in the two coupes was found to be very much short of the quantity and quality of the forest produce given out at the time of auction as being available in the two coupes, he refused to sign the boundary certificate.
Thereafter, correspondence concerning the matter passed between the plaintiff and the Department, but notwithstanding joint inspections of the site and deliberations the parties could not reach any agreement.
The plaintiff took the stand that unless the Department was ready and (; willing to put him in possession of the forest produce conforming to the quantity and quality of timber announced at the time of the auction, he was entitled to repudiate the contract and claim a refund of the amount remitted by him by way of first instalment of the sale price.
The Forest Department issued a notice to the plaintiff on April 17, 1961, calling upon him to show cause why the contract should not be terminated and the two coupes reauctioned at the 899 plaintiff 's risk.
In the meantime, on January, 19, 1961, the plaintiff had been served with a notice requiring him to deposit the second instalment of Rs. 17,250 and threatening that in the event of failure to comply with the said demand, the amount will be recovered as arrears of land revenue.
Subsequently, the Forest authorities of the State initiated action for recovering from the plaintiff the sum of Rs. 34,500 purporting to be the second and third instalments of the sale price, and a notice of demand under Section 146 of the Madhya Pradesh, Land Revenue Code was issued to the plaintiff by the Tehsildar, Bhopal.
Thereupon, the plaintiff instituted the present suit praying for the relief aforementioned, after Serving on the defendant a due notice under Section 80, Code of Civil Procedure.
Admittedly, the auction sale was of the right to cut the trees which had been marked and numbered in the entire area covered by the two coupes in question.
Details regarding the quantity and quality of timber available for cutting in the respective coupes were announced by the concerned Range officers at the time of auction and it was on the basis of the said information that the participants in the auction were invited to bid.
The trial Court as well as the High Court have concurrently found that an assurance had been given by the Department at the time of the auction that the two coupes contained the specified quantity of timber of different varieties and girth and that the details then given were as set out in the tabular statement appended to paragraph 3 of the written statement of the defendant.
The plaintiff (examined as P.W. 2) and P.Ws. 3 to 6 all of whom had inspected the coupes subsequent to the auction sale have sworn that the quantity of the timber that was actually available for cutting in the two coupes was considerably less than the quantity announced at the time of the auction.
The oral testimony given by them is corroborated by the statements contained in Exhibits p 1, P 3, P 5, P 6 and P 8, which are copies of the various representations made by the plaintiff to the offices of the Forest Department after he found out on inspection of the coupes that there was vast divergence between what was announced at the time of the auction as the quantity of the timber available for cutting from the two coupes in question and the quantity that was actually found to be available.
Even though the then Sub Divisional Forest officer, who was examined as D.W. 2, has stated in the evidence that after receipt of the plaintiff 's complaint, he inspected the coupes and submitted a detailed inspection report to the Divisional Forest officer, the defendant did not produce the said report in Court, it has also 900 come out in the evidence of D.W. 3, who was the Forest Guard in the area concerned at the relevant time, that he had submitted to the Range officer a report containing details of the timber available for cutting in the two coupes.
The aforementioned two reports would have been of valuable assistance in determining the extent of shortfall, if any, in the quantity of timber actually available for cutting in the coupes when compared with the particulars given out at the auction.
The non production of the two reports by the dependant, who alone was in possession of the documentary evidence capable of throwing light on the subject matter of this crucial issue, assumes significance in view of the admission made by D.W. 3 that during his inspection of the coupes pursuant to the complaint received from the plaintiff he had found that there were some trees which had been numbered for cutting but had not been hammer marked, that there were some other trees which contained hammer marks only at one place instead of at the base as well as at breast height, as required under the rules, and that there were still some other trees which had been marked by hammer but had not been assigned any number.
The inspection report prepared by this witness which has been suppressed is a very material document since the witness has sworn that he had actually counted and noted the precise number of trees in respect of which such irregularities were found to have been committed.
Another important admission made by this witness is that there was some truth in the complaint of the plaintiff with respect to the 'reservation ' of the Nala.
The evidence clearly shows that there was a large number of trees of different varieties situated on the bank of a Nalla in Coupe No. 2 "B" and they had been hammer marked and serially numbered for cutting and removal.
At the time of the auction sale, the Department had treated these trees as being available for extraction by the contractor and it was on that basis that the particulars regarding the total quantity of timber belonging to different species available for cutting in the two coupes were announced to the bidders.
However, subsequently, the area comprising the bank of the said Nalla was declared as "reserved", with the result that there was a prohibition against cutting of the trees from the said 'reserved ' area.
The plaintiff in his evidence, as P.W.2, has stated that there were about 300 teak trees in the area forming the bank of the Nalla and that the value of those trees would amount to between Rs. 10,000 and Rs. 12,000.
Though three officers of the Forest Department were examined on the side of the defendant, the aforesaid testimony given by the plaintiff has not been controverted by them, 901 Notwithstanding the aforesaid facts brought out in the A evidence, the High Court summarily rejected the plaintiff 's contention based on the factum of reservation of the trees standing on the bank of Nalla by stating as follows: "But there is nothing in the plaintiff 's complaints to the Department at any stage alleging that this reservation had been made after the auction had taken place.
The idea appears to be an after thought.
The mere oral statement of the plaintiff and his witnesses that this marking for reservation had taken place after the auction, on the basis that they did not see these markings about reservation of the trees near the Nalla when they had gone to that forest on earlier occasions, are wholly insufficient to come to the conclusion that the Nalla area had been reserved after the auction. ' ' The aforesaid reasoning is based entirely on the assumption that in one of the complaints preferred by the plaintiff before the Department officers, it had been alleged by him, that the reservation of the trees on the bank of Nalla had been made after the auction had taken place.
A mere reference to Exh.
P l is sufficient to show that the aforesaid assumption made by the High Court is wholly erroneous.
P l is a copy of the representation dated December 28, 1960 submitted by the plaintiff to the Divisional Forest officer (East), Bhopal.
In paragraph 4 thereof, the plaintiff had stated as follows: "That the applicant inspected the coupe in or about the first week of November 1960 to give the coupe boundary certificate as is required under Clause 2 of the draft agreement deed.
During this inspection the applicant was surprised to know that there were numerous irregularities committed in the marking of trees and huge area containing the Forest Produce marked for sale in the said coupe was subsequently reserved." (underlining supplied) Thus, the correct factual position is that the plaintiff had categorically complained to the Department that a substantial area containing the forest produce, which had all been originally marked for sale, had been subsequently 'reserved ', with the result that the quan 902 tity of timber available for extraction had become substantially reduced, The criticism made by the High Court that the argument advanced by the plaintiff was the result of an after thought, was therefore not justified.
We may at this stage refer to Condition No. 3 in the sale notice (Exn. D/l) on which strong reliance was placed on behalf of the respondent.
That condition reads: "The details of quantities of forest produce announced at the time of auction are correct to the best of the knowledge of the Divisional Forest officer but are not guaranteed to any extent The intending bidders are, therefore, advised to inspect on the spot the contract area and the produce they intend to bid for with a view to satisfy themselves about its correctness.
No claim shall lie against the State Government for compensation or any other relief, if the details of the quantities are subsequently found to be incorrect".
In our opinion, the trial court was perfectly right in its view that, while the said condition will operate to prevent the Contractor from claiming any damages or compensation from the State Government on the ground that the details of the quantity of the forest produce were subsequently found to be incorrect, it will not preclude him from repudiating the contract on its being found that there was substantial variance between the particulars furnished at the time of the auction regarding the quantity and quality of timber that will be available for extraction in the concerned coupes and the quantity etc.
Of tree growth actually found to be available on the site.
It has been clearly established by the evidence in this case that a very substantial quantity of timber standing on the bank of Nalla had been marked for extraction and numbered and the auction sale had been held on the basis that the highest bidder would be entitled to fell and remove all those trees.
But by the time the coupes were allowed to be inspected by the auction purchaser, that area was declared to be "reserved", with the result that there was a complete prohibition against the felling of any timber therefrom.
This has substantially altered the very foundation of the contract and hence it was perfectly open to the plaintiff to repudiate the contract and claim a refund of the amount deposited by him as a part payment of the purchase price.
903 We are unable to agree with the view expressed by the High A Court that "the plaintiff cannot succeed unless he proved that, even after excluding the trees standing on the reserved area, the rest of the forest did not have sufficient number of trees which would satisfy the assurance given at the time of the auction".
The subject matter of the auction sale was the totality of the trees which were marked for cutting in the two coupes.
Since a substantial number of the marked trees was contained in the area which was subsequently declared as "reserved", it is inevitable that there was a corresponding diminution in the total quantity of timber which was announced as available for cutting at the time of the auction sale.
We do not, therefore, find it possible to agree with the reasons stated by the High Court for refusing the plaintiff 's prayer for refund of the amount paid by him by way of the first instalment of the sale price.
The conclusion recorded by the trial court on this issue was perfectly correct and the High Court was in error in interfering with the said finding.
We notice, however, that a slight mistake has crept into the judgment and decree of the trial court, inasmuch as the amount of the first instalment refund has been wrongly mentioned therein as Rs. 17,500, whereas the amount actually paid by the plaintiff by way of the first instalment was only Rs. l7,250.
A modification to this extent is, therefore, called for in the decree passed by the trial court.
This appeal is accordingly allowed, the judgment and decree passed by the High Court are set aside and those of the trial court are restored subject to the modification that the amount recoverable by the plaintiff from the defendant shall be only Rs. 17,250 and not Rs. 17,500 as stated in the trial court decree.
In all other respects, the decree passed by the trial court will remain in tact.
The respondent (defendant) will pay the costs of the piaintiff in this Court as well as in the High Court.
| IN-Abs | Pursuant to the notice dated July 22, 1960, notifying that forest contracts will be settled by public auction, the appellant plaintiff attended the said auction on August 17, 1960 after having deposited the requisite earnest money of Rs. 1,000 and furnished the solvency certificate for the sum of Rs. 1.5 lakh.
At the time of auction, the details of the forest produce available in each coupe was announced.
In the said announcement the total number of trees of each species available in each coupe as also their girth etc were furnished and the bids were invited on the basis of the said information given to the intended bidders.
The appellant as the highest bidder in respect of two coupes, namely, Searmau Coupe C/2 "A" and "B" with a bid of Rs 69,000 for these two coupes.
Pursuant thereto, the appellant deposited on August 22,1960, Rs. 16,250 being the balance of the first instalment of Rs. 17,250, after adjustment of the earnest money in deposit.
On executing the requisite security bonds, the appellant was directed, on October 27, 1960, to proceed to the site and sign the "coupe boundary certificate", before the Range officer for getting possession of the two coupes.
When the appellant visited the two coupes and conducted a detailed inspection of the trees available for extraction, he found that the coupes did not contain the forest produce as announced at the time of the auction.
Inasmuch as the number of trees available for cutting in the two coupes were found to be very much short of the quantity and quality of the forest produce given out at the time of auction as being available in the two coupes, the appellant refused to sign the boundary certificate.
The forest authorities, on January 19,1961 served a notice calling upon the appellant to deposit the second and third instalments of the bid amount and threatening that in the event of default, the amount would be recovered as arrears of land revenue.
Subsequently a distraint notice was also issues under section 146 of the Madhya Pradesh Land Revenue Code by the Tehsildar.
On April 17,1961, the forest authorities issued a notice calling upon the appellant to show cause why the contract be not terminated and the two 895 coupes re auctioned at his risk.
Thereupon the appellant, after serving on the, respondent a due notice under section 80 Civil Procedure Code, filed a suit tor recovery of the amount deposited by way of first instalment plus damages arising out of the breach of contract.
The appellant also prayed for a permanent injunction restraining the State for taking coercive step to recover further instalments.
The Trial Court decreed the suit as prayed for.
In appeal by the respondent.
State the High Court set aside the decree on the ground that the appellant did not prove that the number of trees which were actually available for extraction in the two coupes, according to proper marking was less than the number of trees which was covered by the assurance given to the contractor at the time of the auction.
Allowing the appeal by certificate under Article 133 (1) (a) of the Constitution, the Court, ^ HELD: 1.
While condition number 3 in the Sale Notice (exhibit D/D) will operate to prevent the Contractor from claiming any damages or compensation from the State Government on the ground that the details of the quantity of the forest produce were subsequently found to be incorrect, it will not preclude him from repudiating the contract on its being found that there was substantial variance between the particulars furnished at the time of the auction regarding the quantity and quality of timber that will be available for extraction in the concerned coupes and the quantity etc.
Of tree growth actually found to be available on the site.
[902 D F] 2: 1.
It has been clearly established by the evidence in this case that a very substantial quantity of timber standing on the bank of Nalla had been marked for extraction and numbered and the auction sale had been held on the basis that the highest bidder would be entitled to fell and remove all those trees.
But by the time the coupes were allowed to be inspected by the auction purchaser, that area was declared to be "reserved", with the result that there was a complete prohibition against the felling of any timber therefrom.
This has substantially altered the very foundation of the contract and hence it was perfectly open to the plaintiff to repudiate the contract and claim a refund of the amount deposited by him as a part payment of the purchase price.
[902 F H] 2: 2.
The subject matter of the auction sale was the totality of the trees which were marked for cutting in the two coupes.
Since a substantial number of the marked trees was contained in the area which was subsequently declared as "reserved", it is inevitable that there was a corresponding diminution in the total quantity of timber which was announced as available for cutting at the time of the auction sale.
[903 A C] 2: 3.
The appellant has fully proved his claim for the refund of the amount paid by him by way of the first instalment of the sale price by examining himself as P.W. 2 and also through P.Ws. 3 to 6, all of whom had inspected the coupes subsequent to the auction sale.
The oral testimony given by them is further corroborated by the statements contained in exhibit P l, P 3, P 5, P 6 and P 8.
Further the sworn evidence of respondent 's own witnesses (D.W. 2 and D.W. 3) and the suppression of their two inspection reports from the court confirmed the right to repudiate the contract and ask for a refund.
[899 H, 900 A E] 896 2: 4.
That the criticism made by the High Court that the argument by the appellant plaintiff was the result of an after thought is wholly unjustified and erroneous is clear from a mere reference to exhibit P 1.
The correct factual position is that the plaintiff had categorically complained to the department that a substantial area containing the forest produce.
which had all been originally marked for sale, had been subsequently "reserved" with the result that the quantity of timber available for extraction had become substantially reduced.
[901D E, H, 902A]
|
Civil Appeal No. 860 of 1973.
From the judgment and order dated the 1st September, 1972 of the Andhra Pradesh High Court at Hyderabad in R.C. No. 10 of 1971.
AND Civil Appeal No. 1614 (NT) of 1978.
Appeal by Special Leave from the judgment and order dated the 26th July, 1976 of the Calcutta High Court in l.
T. Reference No.454 of 1974.
AND Review Petition No. 57 of 1980.
795 IN Special Leave Petition (Civil) No. 4602 of 1977 From the judgment and order dated the 11th June, 1974 of the Calcutta High Court in I.T. Reference No. 195 of 1969.
AND Tax Reference Case Nos. 2 and 3 of 1977.
Income tax Reference under section 257 of the Income tax Act, 1961 drawn up by the Income tax Appellate Tribunal, Bombay Bench 'B ' in R.A. Nos. 1223 and 1224 (Bom.) of 1972 73 (I.T. A. Nos. 24 and 25 (Bom.) of 1971 72.
AND Tax Reference Case No. S of 1978.
Income Tax Reference under section 257 of the Income Tax Act, 1961 made by the Income Tax Appellate Tribunal, Bombay Bench "D" in R.A. No. 225 (Bom.) of 1977 78 arising out of S.T.A.No. 36 (Bombay) 1 1976 77.
A. Subbarao and Y.V. Anjaneyulu for the appellant in Civil Appeal No. 860/73.
E V.S. Desai, Dr. Debi Pal, Praveen Kumar and Anil Kumar Sharma for the Appellant in C.A. 1614 of 1978 and for the Petitioner in Review Petition No. 57/80.
K.G. Haji and R.J. John for the Appellant in Tax Reference Case Nos. 2 and 3 of 1977.
S.E. Dastur, S.N. Talwar and R.J. John for the Appellant in Tax Reference Case No. 5 of 1978.
S.T. Desai, J. Ramamurthi and Miss A. Subhashini for the Respondent in Civil Appeal No. 860/73.
Miss A. Subhashini for the Respondent in Civil Appeal No.1614 of 1978 S.C. Manehanda and Miss A. Subhashini for the Respondent in Tax Reference Nos. 2 and 3 of 1977.
796 S.C. Manchanda, Anil Dev Singh and Miss A. Subhashini for the Respondent in Tax Reference Case No. 5/1978.
S P. Mehta and K.J. John for the Intervener.
Dr. Debi Paul and K.J. John for the Intervener in Tax Reference Case No. 5/1978.
The following Judgments were delivered: TULZAPUKKAR, J.
In these Civil Appeals and Tax Reference Cases certain common questions of law arise for our determination and hence all these are disposed of by this common judgment.
The common questions raised are whether amounts retained or appropriated or set apart by the concerned assessee company by way of making provision (a) for taxation, (b) for retirement gratuity and (c) for proposed dividends from out of profits and other surpluses could be considered as "other reserves" within the meaning of Rule I of the Second Schedule to the (or Rule 1 of the Second Schedule to the Company 's (Profits) Sur tax Act, 1964) for inclusion in capital computation of the Company for the purpose of levying super profit tax ? The first three matters concerning Vazir Sultan Tobacco Co. Ltd; Hyderabad, Ballarpur lndustries, Ltd; and M/s. Bengal Paper Mills Co. Ltd; Calcutta arise under the while the the Tax Reference Cases concerning M/s. Echjay Industries Pvt. Ltd. and Hyco Products Pvt.
Ltd. Bombay arise under the Companies (Profits) Sur tax Act.1 964.
Since Civil Appeal No. 860 of 1973 (Vazir Sultan Tobacco Company 's case) is comprehensive and comprises all the three items of appropriation it will be sufficient if the facts in this case are set out in detail so as to understand how the questions for determination arise in these matters.
Vazir Sultan Tobacco Co. Ltd. was an assessee under the Super (Profits) Tax Act, 1963.
For the assess ment year 1963 64, for which the relevant accounting period was the year which ended 30th September, 1962, for computing the chargeable profits of that year for the purpose of levy of super profits tax under the Act, the assessee company claimed that the appropriations of a) Rs. 33,68,360 for taxation, (b) Rs. 9,08,106 for retirement gratuity and (c) Rs. 18,41,820 for dividends (all of which items were shown under the heading 'current liabilities and provisions ' in the concerned balance sheet as at 30th Sept. 1962) should be regar 797 ded as "other reserves" within the meaning of Rule 1 of Second A Schedule to the Act and be included while determining its capital.
The Super Profits Tax officer rejected the assessee 's contention as in his opinion all these items were "provisions ' and not "reserves" and as such these had to be ignored or excluded from the capital computation of the assessee company and on that basis he determined the capital, and the standard deduction and levied super profits tax on that portion of the chargeable profits of the previous year which exceeded the standard deduction.
In the appeal preferred by the assessee company against the assessment, the Appellate Commissioner upheld the assessee 's contentions and held that those items were "reserves" and took them into account while computing the capital of the assessee company.
In the further appeal prefer red by the Super Tax officer, the Income Tax Appellate Tribunal accepted the Department 's contention and held that these were not "reserves" within the meaning of Rule I of the Second Schedule to the Act and as such these could not enter into capital computation of the assessee company.
In the Reference that was made under section 256(1) of the Income Tax Act, 1961 read with section 10 of the at the instance of the assessee company the following question of law was referred to the Andhra Pradesh High Court for its opinion: "Whether on the facts and in the circumstances of the case the provisions (a) for taxation Rs. 33,68,360, (b) for retirement gratuity Rs. 9,08,106 and (c) for dividends Rs. 18,41,820, could be treated as 'reserves ' for computing the capital for the purpose of super profits tax under Second Schedule to the for the assessment year 1963 64 ?" F The High Court on a consideration of several authorities answered the question in respect of the three items in favour of the Revenue and against the assessee company and held that the three sums so set apart by the assessee company in its balance sheet were not "reserves" and had to be excluded in the computation of its capital for the purpose of levying super profits tax payable on the chargeable profits tor the relevant accounting year.
It is this view of the High Court that is being challenged by the assessee company in the Civil Appeal No. 86() of 1973 before us.
In Civil Appeal No. 1614/1978 (Ballarpur Industries Ltd ) and Review Petition No. 57 of 1980 (M/s. Bengal Paper Mills Co. Ltd.) 798 We are concerned with only two items of appropriation being (a) provision for taxation and (b) provision for proposed dividend and in each one of these cases the Calcutta High Court had taken the view that these two items do not constitute "reserves" and as such have to be ignored while computing the capital of the assessee company.
In Tax Reference Case Nos. 2 and 3 of 1977 (M/s Echjay Industries Pvt.
Ltd.) a case under , we are concerned with two items of appropriation being (a) provision for taxation (b) provision for proposed dividend for the two assessment years 1969 70 and 1970 71 and in each of the years the Taxing Authorities as also the Income Tax Appellate Tribunal Bombay have taken the view that these appropriations did not constitute "other reserves" within the meaning of Rule I of the Second Schedule to the Companies (Profit) Surtax Act, 1954 and as such were not includible in the capital computation of the assessee company but in view of a divergence of opinion between the different High Courts on the point, the Tribunal has at the instance of the assessee company made a direct Reference to this Court under section 257 of the Income Tax Act, 1961 read with section 18 of the .
In Tax Reference Case No. 5 of 1978 (Hyco Products Pvt.
Ltd.) also a case under the same question pertaining to dividend alone but in a different form arose for consideration before the Taxing Authorities and the Income Tax Appellate Tribunal.
It was not a case of 'proposed dividend ' but the assessee company after transferring Rs. 29,77,000 out of the current year 's profit amounting to Rs. 61,03,382 to General Reserves, paid out of Rs. 3,10,450 as dividend to its share holders from such augmented General Reserves and the question was whether while computing the capital of the assessee company for the purpose of levy of surtax the General Reserves should or should not be reduced by the aforesaid sum of Rs. 3,10,450 ? In other words, the question was whether the amount of Rs. 3,10,450 could not form part of the General Reserves on the relevant date (being 1.1.
1973) for the computation of the capital ? The Taxing Authorities as well as the Appellate Tribunal Bombay held that the said amount of Rs. 3,10,450 had to be ignored for the purpose of computation of capital for surtax purposes because it was not a reserve.
The assessee company has challenged this view of the Tribunal before us in this direct Reference made to this Court under section 257 of the 799 Income Tax Act, 1961 read with section 18 of the Companies ' (Profits) A Surtax Act, 1964.
It may be stated that the scheme and the main provisions of the two concerned enactments are almost identical, the object of both these enactments being the imposition of a special tax on excess profits earned by companies.
Under Section 4 of the 1963 Act, which is the charging provision, there shall be charged on every company for every assessment year commencing on and from 1st April, 1963, a tax, called the super profits tax, in respect of so much of its "chargeable profits" of the previous year as exceed the "standard deduction" at the rate or rates specified in the Third Schedule.
Section 2(5) defines the expression "chargeable profits" to mean the total income of an assessee computed under the Income Tax Act, 1961, for any previous year and adjusted in accordance with the provisions of First Schedule, while Section 2(9) defines the expression "standard deduction" to mean an amount equal to six per cent of the capital of company as computed in accordance with the provisions of the Second Schedule, or an amount of Rs. 50,000 whichever is greater.
In order to D determine "standard deduction" it becomes necessary to compute capital of the company in accordance with the rules laid down in the Second Schedule and rule 1 is relevant for our purposes, the material portion whereof runs as follows: "1.
Subject to the other provisions contained in this Schedule, the capital of a company shall be the sum of the amounts, as on the first day of the previous year relevant to the assessment year, of its paid up share capital and of its reserve, if any, credited under the proviso (b) to Clause (vi b) of sub section (2! of sec.
10 of the Indian Income Tax Act, 1922 or under sub section (3) of sec.
34 of the Income Tax Act, 1961, and of its other reserves in so far as the amounts credited to such other reserves have not been allowed in computing its profits for the purposes of the Indian Income Tax Act, 1922 or the Income Tax Act, 1961 . " It will be clear from the aforesaid provision of rule 1 that before any amount or sum qualifies for inclusion in capital computation of a company two conditions are required to be fulfilled (a) that the amount or sum must be a "reserve" and (b) the same must not have been allowed in computing the company 's profits for the purposes of the 1922 Act or the 1961 Act.
That none of the items 800 of appropriation either for taxation or for retirement gratuity, or for proposed dividend in the concerned assessees ' case had been allowed in computing the assessee 's profits under the 1961 Act has not been disputed; in other words the second condition indicated above has been satisfied.
The question is whether any of these items could be treated as or falls within the expression "other reserves" occurring in the said rule.
The expression 'reserve ' has not been defined in the Act and therefore one would be inclined to resort to its ordinary natural meaning as given in the dictionary but it seems to us that the dictionary meaning, though useful in itself, may not be sufficient, for, the dictionaries do not make any distinction between the two concepts 'reserve ' and 'provision ' while giving their primary meanings whereas in the context of the legislation with which we are concerned in the case a clear distinction between the two is implied.
According to the dictionaries (both oxford and Webster) the applicable primary meaning of the word 'reserve ' is: "tc, keep for future use or enjoyment; to set apart for some purpose or end in view; to keep in store for future or special use; to keep in reserve", while 'provision ' according to Webster means: "something provided for future." In other words according to the dictionary meanings both the words are more or less synonymous and connote the same idea.
Since the rules for computation of capital contained in the Second Schedule to the Act proceed on the basis of the formula of capital plus reserves a formula well known in commercial accountancy, it becomes essential to know the exact connotation of the two concepts 'reserve ' and 'provision ' and the distinction between the two as known in commercial accountancy.
Besides, though the expression 'reserve ' is not defined in the Act, it cannot be forgotten that it occurs in a taxing statute which is applicable to companies only and to no other assessable entities and as such the expression will have to be understood in its ordinary popular sense, that is to say, the sense or meaning that is attributed to it by men of business, trade and commerce and by persons interested in or dealing with companies.
Therefore, the meanings attached to these two words in the provisions of the dealing with preparation of balance sheet and profit and loss account would govern their construction for the purposes of the two taxing enactments.
We might mention here that in C.l.
T. vs Century Spinning and Manufacturing Company (1) this Court after referring to the dictionary 801 meaning of the expression 'reserve ' observed: "what is the true A nature and character of the disputed sum (sum allegedly set apart) must be determined with reference to the substance of the matter" and went on to determine the true nature and character of the disputed sum by relying upon the provisions of the Indian Companies Act 1913, the form and the contents of the balance sheets required to be drawn up and Regulation 99 in Table A of the 1st Schedule.
The distinction between the two concepts of 'reserve ' and 'provision ' is fairly well known in commercial accountancy and the same has been explained by this Court in Metal Box Company of India Ltd. vs Their Workmen (1) thus: "The distinction between a provision and a reserve is in commercial accountancy fairly well known.
Provi sions made against anticipated losses and contingencies are charges against profits and therefore, to be taken into account against gross receipts in the P. and L. account and the balance sheet.
On the other hand, reserves are appropriations of profits, the assets by which they are represented being retained to form part of the capital employed in the business.
Provisions are usually shown in the balance sheet by way of deductions from the assets in respect of which they are made whereas general reserves and reserve funds are shown as part of the proprietor 's interest.
(See Spicer and Pegler 's Book keeping and Accounts, 15th Edition, page 42)".
In other words the broad distinction between the two is that whereas a provision is a charge against the profits to be taken into account against gross receipts in the P and L account, a reserve is an appropriation of profits, the asset or assets by which it is represented being retained to form part of the capital employed in the business.
Bearing in mind the aforesaid broad distinction we will briefly indicate how the two concepts are defined and dealt with by the .
Under section 210 of the it is incumbent upon the Board of Directors of every company to lay before the annual general meeting of its share holders (a) the annual balancesheet and (b) the profits and loss account pertaining to the previous 802 financial year.
Section 211(1) provides that every balance sheet of a company shall give a true and fair view of the state of affairs of the company as at the end of the financial year and shall, subject to the provisions of this section, be in the form set out in of Schedule VI, or near thereto as circumstances admit or in such other from as may be approved by the Central Government either generally or in any particular case, while section 211(2) provides that every profit and loss account of a company shall give a true and fair view of the profit or loss of the company for the financial year and shall, subject as aforesaid, comply with the requirements of of r Schedule VI, so far as they are applicable thereto.
In other words the preparation of balance sheet as well as profit and loss account in the prescribed forms and laying the same before the share holders at the annual general meeting are statutory requirements which the company has to observe.
The Form of balance sheet as given in of Schedule VI contains separate heads of 'reserves and Surpluses ' and 'current liabilities and provisions ' and under the sub head 'reserves ' different kinds of reserves are indicated and under sub head 'provisions ' different types of provisions are indicated; is the interpretation clause setting out the definitions of various expressions occurring in and Il and the expressions 'reserve ', 'provision ' and 'liability ' have been defined in cl. 7 thereof.
Material portion of cl.
(7) of runs as under: "(1) For the purposes of and II of this Sche dule, unless the context otherwise requires: (a) the expression "provision" shall, subject to sub.
(2) of this clause mean any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets, or retained by way of providing for any known liability of which the amount cannot be determined with substantial accuracy: (b) the expression "reserve" shall not, subject as aforesaid, include any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets or retained by way of providing for any known liability; (c) x x x x x x x x x 803 and in this sub clause the expression "liability" shall include A all liabilities in respect of expenditure contracted for and all disputed or contingent liabilities.
(2) Where (a) any amount written off or retained by way of providing for depreciation, renewals or diminution in value of assets, not being an amount written off in relation to fixed assets before the commencement of this Act; or (b) any amount retained by way of providing for any known liability, is in excess of the amount which, in the opinion of the directors, is reasonably necessary for the purpose, the excess shall be treated for the purposes of this Schedule as a 'reserve ' and not a 'provision '.
" On a plain reading of cl.
7(1) (a) and (b) and cl.
7(2) above it will appear clear that though the term 'provision ' is defined positively by specifying what it means the definition of 'reserve ' is negative in form and not exhaustive in the sense that it only specifies certain amounts which are not to be included in the term 'reserve '.
In other words the effect of reading the two definitions together is that if any retention or appropriation of a sum falls within the definition of 'provision ' it can never be a reserve but it does not follow that if the retention or appropriation is not a provision it is automatically a reserve and the question will have to be decided having regard to the true nature and character of the sum so retained or appropriated depending on several factors including the intention with which and the purpose for which such retention or appropriation has been made because the substance of the matter is to be regarded and in this context the primary dictionary meaning of the term 'reserve ' may have to be availed of.
But it is clear beyond doubt that if any retention or appreciation of a sum is not a provision, that is to say, if it is not designated to meet depreciation, renewals or diminution in value of assets or any known liability the same is not necessarily a reserve.
We are emphasising this aspect of the matter because during the hearing almost all counsel for the assessees strenuously contended before us that once it was shown or became clear that the retention or appreciation of a sum out of 804 profits and surpluses was for an unknown liability or for a liability which did not exist on the relevant date it must be regarded as a reserve.
The fallacy underlying the contention becomes apparent if the negative and non exhaustive aspects of the definition of reserve are borne in mind.
Having regard to type of definitions of the two concepts which are to be found in cl. 7 of Part.
III the proper approach in our view, would be first to ascertain whether the particular retention or appropriation of a sum falls within the expression 'provision ' and if it does then clearly the concerned sum will have to be excluded from the computation of a capital, but in case the retention or appropriation of the sum is not a provision as defined the question will have to be decided by reference to the true nature and character of the sum so retained or appropriated having regard to several factors as mentioned above and if the concerned sum is in fact a reserve then it will be taken into account for the computation of capital.
Having thus indicated the proper approach to be adopted, we shall proceed to deal with the three items of appropriation being (a) provision for taxation, (b) provision for retirement gratuity and (c) provision for proposed dividends in the case of concerned assessee companies in these Appeals and Tax Reference Cases.
Dealing first with the item of appropriation by way of provision for taxation, which arises in Civil Appeal No. 860/1973 (Vazir Sultan Tobacco Company), Civil Appeal No. 1614 (NT)/ 1978 (Ballarpur Industries Ltd;) Review Petition No. 50/1980 (M/s. Bengal Paper Mills Co. Ltd.) and Tax Reference Cases Nos. 2 & 3/1977 (M/s Echjay Industries Pvt.
Ltd;) the common question is whether the concerned amounts appropriated or set apart by these assessee companies from out of the profits and other surpluses by way of making provision for taxation constitute a provision or a reserve on the relevant date, being the first day of the previous year relevant to the assessment year in question ? Taking Vazir Sultan Tobacco Company 's case as an illustration, for the assessment year 1963 64 the relevant accounting period was the year which ended on September 30, 1962; under Rule I of the Second Schedule to the , the first day of the previous year would be october 1, 1961 and.
therefore, the balance sheet of that company as on September 30, 1961 and the profits and loss account which ended on September 30, 1961 would be relevant.
It cannot be disputed that on the expiry of September 30, 1961, the assessee company incurred the taxation liability in respect of the profits 805 which it had earned during that year, though the exact amount of such liability could not be determined with substantial accuracy at that time and the same would have to be ascertained by reference to rate of taxes applicable to that year.
The liability for taxation having thus arisen on the expiry of the last day of the year, the setting apart of the sum of Rs. 33,68,360 by the Board of Directors will have to be regarded as a provision for a known and existing liability, the quantification whereof bad to be done later.
On principle, therefore, it seems to us clear that the item of Rs. 33,68,360 which had been set apart by the Board of Directors for taxation must be regarded as a provision and cannot be regarded as a reserve.
Similar would be the position in regard to the appropriations for taxation made by the other assessee companies mentioned earlier.
In this context a reference to this Court 's decision in the case of Kesoram Industries and Cotton Mills Ltd. vs Commissioner of Wealth Tax (Central) Calcutta( ') would be useful.
In that case the question was whether a certain amount which had been set apart as provision for payment of income tax and super tax was a "debt owed" within the meaning of section 2(m) of the , as on March 31, 1957 which was the valuation date and as such was deductible in computing the net wealth of the appellant company.
In its balance sheet for the year ending March 31, 1957 the appellant company had shown a certain amount as provision for payment of income tax and super tax in respect of that year of account and this Court took the view that the expression "debt owed" within the meaning of section 2(m) of the could be defined as the liability to pay in presenti or in futuro an ascertainable sum of money and that the liability to pay income tax was a present liability though the tax became payable after it was quantified in accordance with ascertainable data; that there was a perfected debt on the last date of the accounting year and not a contingent liability.
The Court further observed that the rate was always easily ascertainable; that if the Finance Act was passed, it was the rate fixed by that Act; if the Finance Act was not yet passed, it was the rate proposed in the Finance Bill pending before the Parliament or the rate in force in the preceding year whichever was more favourable to the assessee and that all the ingredients of a "debt" were present and it was a present liability of an ascertainable amount and that, therefore, the amount of provision for payment of income tax and super tax in respect of the year of account ending March 31, 1957 was a "debt H 806 owed" within the meaning of section 2(m) on the valuation date, namely March 31, 1957 and was as such deductible in computing the net wealth.
The ratio of this decision clearly suggests that the appropriation of the amounts set apart by the assessee companies before us for taxation would constitute a provision made by them to meet a known and existing liability and as such the concerned amounts would not be includible i n capital computation.
Counsel for the assessee company in Vazir Sultan Tobacco Company 's case, however, attempted to raise a further plea that the provision for taxation in the sum of Rs. 33,68,360 was an excess provision in the sense it was in excess of the amount which was reasonably necessary for the purpose of taxation and, there ore, the excess should be treated as a reserve and not a provision and in this behalf reliance was placed on cl.
(7) (2) of Part III of Schedule VT and three decisions of the Madras High Court Commissioner of Income tax Madras vs Indian Steel Rolling Mills Ltd.(l) of the Himachal Pradesh High Court in Hotz Hotels Pvt. Ltd. vs Commissioner of Income Tax, Haryana, H.P. and Delhi(2) and of Allahabad High Court in Commissioner of Income Tax, Delhi vs Modi Spinning and Weaving Mills(3).
There could be no dispute about the principle that if provision for a known or existing liability is made in excess of the amount that would be reasonably necessary for the purpose 13: the excess shall have to be treated as a reserve and, therefore, would be includible in the capital computation but no such case was made out by the assessee company at any stage of the assessment proceedings either before the Taxing Authorities or even before the Tribunal or the High Court and in the absence of any such plea having been raised at any stage of the proceedings it will not be proper for this Court to allow the assessee company to raise such a plea, which will need investigation into facts, for the first time in its appeal before this Court.
The contention is, therefore, rejected.
Dealing next with the item of appropriation made for retirement gratuity, which arises only in Civil Appeal No. 860/1973 (Vazir Sultan Tobacco Co.) the question is whether the sum of Rs. 9,O8,106 appropriated or set apart by the assessee company from out of its profits and other surpluses by way of providing for retirement gratuity is a provision or a reserve on the relevant date, 807 viz. 1.10.1961 ? Counsel for the assessee compaoy vehemently urged before us that this appropriation had not been allowed as a deduction in the income tax assessment proceedings of the company for the relevant assessment year on the ground that it was in the nature of a reserve and the entire sum, minus the actual payments, was added back to the income and profits of the assessee company and if that be so, in the super profit tax assessment it cannot be treated as a provision and excluded from capital computation.
According to him there could not be two different treatments for the same item in income tax assessment and super profit tax assessment.
He pointed out that this contention was specifically urged in the appeal before the Appellate Assistant Commissioner but was wrongly rejected.
He further submitted that no actuarial valuation had been undertaking but ad hoc amount was appropriate or transferred to gratuity reserve and as such the same should have been treated as a reserve and included in capital computation.
On the other hand, counsel for the Revenue seriously disputed the last submission and contended that it was never the case of the assessee company either before the Taxing Authorities or before the Tribunal or before the High Court that the appropriation was or an ad hoc sum without undertaking any actuarial valuation.
It must be observed that whereas the assessee company did urge a contention before the lower authorities that different treatments for the same item could not be given for purpose of income tax assessment and super profit tax assessment, the assessee company did not clarify by placing material on record as to whether the appropriation of the amount was based on any actuarial valuation or whether it was an appropriation of an ad hoc amount an aspect which, as we shall presently point out, has a vital bearing on the question whether the appropriation could be treated as a provision or a reserve.
In the absence of proper material touching this vital aspect, we are afraid, the issue in question will have to be remanded to the Taxing Authorities through the Tribunal for disposal in the light of the well settled principles in that behalf, which we shall presently indicate.
Ordinarily an appropriation to gratuity reserve will have to be regarded as a provision made for a contingent liability, for, under a scheme framed by a company the liability to pay gratuity to its employees on determination of employment arises only when the employment.
Of the employee is determined by death, incapacity, retirement or resignation an event (cessation of employment) Certain to happen in the service career of every employee; moreover, the amount of gratuity payable is usually dependent on the emp 808 loyee 's wages at the time of determination of his employment and the number of years of service put in by him and the liability accrues and enhances with completion of every year of service; but the company can work out on an actuarial valuation its estimated liability (i.e. discounted present value of the liability under the scheme on a scientific basis) and make a provision for such liability not all at once but spread over a number of years.
It is clear that if by adopting such scientific method any appropriation is made such appropriation will constitute a provision representing fairly accurately a known and existing liability for the year in question; if, however, an ad hoc sum is appropriated without resorting to any scientific basis such appropriation would also be a provision intended to meet a known liability, though a contingent one, for, the expression 'liability ' occurring in cl.
(7) (1) (a) of Part III of the Sixth Schedule to the includes any expenditure contracted for and arising under a contingent liability; but if the sum so appropriated is shown to be in excess of the sum required to meet the estimated liability (discounted present value on a scientific basis) it is only the excess that will have to be regarded as a reserve under cl.
(7) (2) of to the Sixth Schedule.
In the above context we might refer to one English case decided by the House of Lords and two or three decisions of this Court, which seem to lead to aforesaid propositions.
In Southern Railway of Peru Ltd. vs Owen(1) an English Company operating a railway in Peru was, under the laws of that country, liable to pay its employees conpensation on the termination of their services either by dismissal or by notice or on such termination by death or efflux of contractual time.
The compensation so paid was an amount equivalent to one month 's salary at the rate in force at the date of determination for every year of service.
In the computation of taxable income under the Income tax Act 1918, the company claimed to be entitled to charge against each year 's receipts the cost of making provision for the retirement payments which would ultimately be thrown on it, calculating the sum required to be paid to each employee if he retired without forfeiture at the close of the year and (; setting aside the aggregate of what was required in so far as the year had contributed to the aggregate.
The House of Lords rejected the deductions on the ground that in calculating the deductions the company had ignored the factor of discount.
But, their Lordships recognised the principle that the company was entitled to charge, against each year 's receipts, the cost of making the 809 provision for the retirement which would ultimately be payable as the company had the benefit of the employee 's services during that year provided the present value of the future payments could be fairly estimated.
Lord MacDermott observed at page 345 as follows: ". as a general proposition it is, I think right to say that, in computing his taxable profits for a particular year, B a trader, who is under a definite obligation to pay his employees for their services in that year an immediate payment and also a future payment in some subsequent year, may properly deduct, not only the immediate payment but the present value of the future payment, provided such present value can be satisfactorily determined or fairly estimated." In Standard Mills Co. Ltd. vs Commissioner of Wealth Tax, Bombay (1) the question for decision was whether an estimated liability under gratuity schemes framed under industrial awards amounted to 'debts ' and could be deducted while computing the net wealth of the assessee company under the Wealth Tax Act.
This Court held in view of the terms of section 2 (m) of that Act, that as the liability lo pay gratuity was not in praesenti but would arise in future on determination of the service, i. e.
On the retirement, death or termination, the estimated liability under the schemes would not be a 'debt ' and, therefore, could not be deducted while computing the net wealth.
The House of Lords decision in the case of Southern Rly.
Of Peru Ltd. (supra) was distinguished by this Court as having no relevance to the question before it on the ground that the House of Lords in that decision was concerned in determining the deductibility of the present value of a liability which may arise in future in the computation of taxable income for the relevant year under the income tax laws.
It will thus appear that this Court was of the view that though such a liability is a contingent liability and, therefore, not a 'debt ' under section 2(m) of the it would be deductible under the Income Tax Act while computing the taxable profits; in other words different considerations would apply to cases arising under the and the Income Tax Act.
In Matal Box Co 's case (supra) this Court was concerned with the nature of liability under a scheme of gratuity in the context of the and the question related to a sum 810 of Rs. 18.38 lakhs being the estimated liability under the two gratuity schemes framed by the company, which was deducted from the gross receipts in the P & L Account, it being contended on behalf of the workmen that such deduction was not justified while determining the 'available surplus ' and the 'allocable surplus ' for payment of bonus to them under the .
The Court rejected the contention and adverting to the decision of House of Lords in the case of Southern Rly.
Of Peru Ltd. (supra) held that an estimated liability under gratuity schemes even if it amounted to a contingent liability and was not a 'debt ' under the Wealth Tax Act, if properly ascertainable and its present value was fairly discounted was deductible from the gross receipts while preparing the P & L Account.
The material portion of the head note appearing at page 54 of the report runs thus: "Contingent liabilities discounted and valued as necessary, can be taken into account as trading expenses if they are sufficiently certain to be capable of valuation and if profits cannot be properly estimated without taking them into consideration.
An estimated liability under a scheme of gratuity if properly ascertainable and its present value is discounted, is deductible from the gross receipts while pre paring the P & L account.
This is recognised in trade circles and there is nothing in the Bonus Act which prohibits such a practice.
Such a provision provides for a known liability of which the amount can be determined with substantial accuracy.
It cannot, therefore, be termed a "reserve".
Therefore, the estimated liability for the year on account of a scheme of gratuity should be allowed to be deducted from the gross profits.
The allowance is not restricted to the actual payment of gratuity during the year.
" At page 62 of the Report this Court observed thus: "Two questions, therefore, arise: (I) whether it is legitimate in such a scheme of gratuity to estimate the liability on an actuarial valuation and deduct such estimated liability in the P & L Alc while working out its net profits; (2) if it is, b whether such appropriation amounts to a reserve or a provision?.
In the case of an assessee maintaining his accounts on mercantile system, a liability already accrued, though to be discharged at a future date, would be a proper deduction while working out the profits and gains of his business, re 811 gard being had to the accepted principle of commercial A practice and accountancy .
It is not as if such deduction is permissible only in case of amounts actually expended or paid.
Just as receipts, though not actual receipts but accrued due, are brought in for income tax assessment, so also liabilities accrued due would be taken into account while working out the profits and gains of the business".
Again at page 64 of the Report this Court observed thus: "In the instant case the question is not whether such estimated liability arising under the gratuity schemes amounts to a debt or not.
The question that concerns us is whether while working out the net profits, a trader can pro vide from his gross receipts his liability to pay a certain sum for every additional year of service which he receives from his employees.
This, in our view, he can do if such liability is properly ascertainable and it is possible to arrive at a proper discounted present value.
Even if the n liability is a contingent liability, provided its discounted present value is ascertainable, it can be taken into account.
Contingent liabilities discounted and valued as necessary can be taken into account as trading expenses if they are sufficiently certain to be capable of valuation and if profits cannot be properly estimated without taking them into account.
" In the case of Workmen of William Jacks .
Co. Ltd. vs Management of Jacks & Co. Ltd. Madras (1) another decision under the Payments of Bonus Act, 1965, this Court, after referring to the distinction pointed out in Metal Box Co 's case between the two concepts 'provision ' and 'reserve ' has observed on page 547 as follows: "The provision for gratuity, furlough salary, passage, service and commission, in the present case was all made in respect of existing and known liabilities though in some cases the amount could not be ascertained with accuracy.
It was not a case where it was an anticipated loss or anticipated expenditure which would arise in future.
Such provision is therefore not a reserve at all and cannot be added back under item 2 (c) of the Second Schedule." 812 In the above case also the Court was concerned with the question whether particular provision made for gratuity, furlough salary, passage, etc.
was a reserve or a provision for the purpose of Second Schedule to the .
At page 546 of the report the Court has categorically observed that all these items, namely, gratuity furlough salary, passage, service, commission, etc.
were clearly in respect of liabilities which had already accrued in the years in which the provision was made and were not in respect of anticipated liabilities which might arise in future and, therefore, the Court held that the said provision was not a reserve but a provision.
From the aforesaid discussion of the case law it seems to us clear that the propositions indicated by us earlier clearly emerge.
Since in the instant case sufficient material throwing light on the above aspects of the question has not been made available, we think, it will be in the interest of justice to remand the case through the Tribunal to the taxing authority to decide the issue whether the con cerned amount (Rs. 9,O8,1061 ) set apart and transferred to gratuity reserve by the assessee company was either a provision or a reserve and if the latter to what extent? The taxing authority will decide the issue in light of the above principles after giving an opportunity to the assessee company to place additional relevant materials before Turning to the last item of appropriation by way of provision for proposed dividends, which arises in all these matters (except in Tax Reference Case No. 511978 of Hyco Products Pvt. Ltd.) the common question is whether the concerned amount appropriated or set apart by the assessee companies from out of the profits and other surpluses by way of making provision for 'proposed dividends ' constituted a provision or a reserve on the relevant date ? It is true that under section 27 of the the Directors can merely recommend that a certain sum be paid as dividend but such recommendation does not result in any obligation or liability; the obligation or liability to pay the dividend arises only when the share holders at the annual general meeting of the company decide to accept the recommendation and pass a resolution for declaration of the dividend.
It is therefore open to the directors to withdraw or modify their recommendation at any time before the shareholders accept the same and it is equally open to the shareholders not to accept the recommendation at all or to declare a dividend of an amount lesser than that recommended by directors.
In Kesoram 813 Industries case (supra) this Court has clarified the aforesaid legal A position by observing at page 772 of the report, thus: "The directors cannot distribute dividends but they can only recommend to the general body of the company the quantum of dividend to be distributed.
Under section 217 of the Indian , there shall be attached to every balance sheet laid before a company in general meeting a report by its board of directors with respect to, interalia, the amount, if any, which it recommends to be paid by way of dividend.
Till the company in its general body meeting accepts the recommendation and declares the dividend, the report of the directors in that regard is only a recommendation which may be withdrawn or modified as the case may be.
As on the valuation date (under the Wealth Tax Act) nothing further happened than a mere recommendation by the directors as to the amount that might be distributed as dividend, it is not possible to hold that there was any debt owed by the assessee to the share holders on the valuation date.
" All that follows from above is that in the instant cases the appropriations of the concerned amounts by the Board of Directors by way of providing for proposed dividend would not constitute 'provisions ' for, the appropriations cannot be said to be by way of providing for any known or existing liability, none having arisen on the date when the directors made the recommendation much less on the relevant date being the first day of the previous year relevant to the assessment year in question.
But as stated earlier this by itself would not automatically convert the appropriation into 'reserves ', regard being had to the negative and non exhaustive character of the definition of 'reserve ' given in cl. 7 (I)(b) of Part III of the Sixth Schedule to the Companies A ct.
The question whether the concerned amounts in fact constituted 'reserves ' or not will have to be decided by having regard to the true nature and character of the sums so appropriated depending on the surrounding circumstances particularly the intention with which and the purpose for which such appropriations had been made.
We have already indicated that according to the dictionaries (both oxford and Webster) the applicable meaning of the word 'reserve ' is: "to keep for future use or enjoyment; to set apart for some purpose or end in view; to keep in store for future or special 814 use; to keep in reserve.
" In other words, the word 'reserve ' as a noun in ordinary parlance would mean "something which is kept for future use or stored up for something or set apart for some purpose".
It cannot be disputed that a reserve may be a general reserve or specific reserve and all that is required is that an amount should be kept apart for some purpose, either general or specific.
Eeven so the question is whether the earmarking of a portion of pro fits by the board of directors of a company avowedly for the purpose of distributing dividend would fall within the expression 'reserve ' occurring in rule T of the Second Schedule to the ? For this purpose certain tests indicated in some decisions of this Court will have to be considered: The first decision of this Court in that behalf is the decision in Century Spinning and Manufacturing Company 's ease (supra).
In that case the material facts were these: For the year ending 31st December, 1946, the profit of the assessee company, whose accounting year was the calendar year, was a certain sum according to the profit and loss account.
After making provision for depreciation and taxation, the balance of Rs. 5,08,637 was carried to the balance sheet.
This sum was not allowed in computing the profits of the assessee for the purposes of income tax.
On 28th February, 1946, the Board of directors recommended out of that amount the sum of Rs. 4,92,426 should be distributed as dividend and the balance of Rs. 16,211 was to be carried forward to the next year 's account.
This recommendation was accepted by the share holders in their meeting on 3rd April, 1946, and the amount was shortly afterwards distributed as dividend.
In computing the capital of the assessee company on 1st April, 1946, under the Business Profits Tax Act, 1947, the assessee claimed that the sum of Rs. 5,08,637 and the profit earned by it during the period 1st January, 1946 to 1st April, 1946, should be treated as "reserves" for the purpose of rule 2(1) of Schedule IT.
The High Court held that the sum of Rs. 5,08,637 must be treated as a reserve for the purpose of rule 2, but the profit made by the assessees during the period 1st January, 1946 to 1st April, 1946 could not be included in the reserves.
On appeal to this Court, it was held that the sum of Rs. 5,08,637 as well as the profits earned by the assessee during the period 1st January, 1946 to 1st April, 1946 did not constitute "reserves" within the meaning of rule 2 (1) of Schedule II.
After noting that the expression 'reserve ' had not been defined in the Business Profits Tax Act, 1947 and after noting dictionary meanings of that expression the Court observed: 815 " What is the true nature and character of the disputed A sum must be determined with reference to the substance of the matter and when this is borne in mind, it follows that the 1st of April, 1946 which is the crucial date, the sum of Rs. 5,08,637 could not be called a reserve for nobody possessed of the requisite authority had indicated on that date the manner of disposal or distination.
On the other hand, B on the 28th February, 1946 the directors clearly earmarked it for distribution as dividend and did not make it a reserve.
Nor did the company in its meeting of 3rd April, 1946 decide that it was a reserve.
It remained on the 1st of April, as a mass of undistributed profits which were available for distribution and not earmarked as "reserve".
On the 1st of January, 1946 the amount was simply brought from the profit and loss account to the next year and nobody with any authority on that date made or declared a reserve.
The reserve may be a general reserve or a specific reserve, but there must be a clear indication to show whether it was a reserve either of the one or the other kind.
The fact that it constituted a mass of undistributed profits on the 1st Jan. 1946 cannot automatically make it a reserve.
On the 1st April, 1946 which is the commencement of the chargeable accounting year, there was merely a recommendation by the directors that the amount in question should be distributed as dividend.
Far from showing that the directors have made the amount in question a reserve it shows that they had decided to earmark it for distribution as dividend.
" The decision clearly lays down that the true nature and character of the appropriation must be determined with reference to the substance of the matter; obviously this means that one must have regard to the intention with which and the purpose for which appropriation has been made, such intention and purpose being gathered from the surrounding circumstances.
In that behalf the following aspects mentioned in the judgment provide some guidelines: (a) a mass of undistributed profits cannot automatically become a reserve and that somebody possessing the requisite authority must clearly indicate that a portion thereof has been earmarked or separated from the general mass of profits with a view to constituting it either a general reserve or a specific reserve, (b) the surrounding circumstances should make it apparent that the amount so ear marked or set apart is in fact a reserve to be utilised in future for a specific purpose and on a specific occasion, and (c) a clear conduct on the 816 part of the directors in setting apart a sum from out of the mass of undistributed profits avowedly for the purpose of distribution as dividend in the same year would run counter to any intention of making that amount a reserve.
It was because these aspects obtained in the case that this Court took the view that neither the sum of Rs. 5,08,637 nor the profits earned by the assessee during the period 1st January, 1946 to 1st April 1946 constituted "reserve" within the meaning of Rule 2(1) of Second Schedule of the Business Profits Tax Act, 1947.
Two more decisions of this Court one in First National City Bank vs Commissioner of Income Tax (1) and the other in Commissioner of Income Tax (Central), Calcutta vs Standard Vacuum oil Co.(2) which provide two more guidelines, may now be considered.
In both these cases the Court was concerned with the question whether the amount set apart as "undivided profit" or set apart as "earned surplus" in accordance with the system of accountancy which obtained in the United States amounted to a reserve liable to be included in the capital computation under rule 2 of Schedule II of the Business Profits Tax Act, 1947.
In both the cases the assessees were non resident companies and followed the system of accounting that obtained in the American commercial world.
In the first case Justice Kapur, speaking for the court, pointed out the difference between the two system of accounting at Page 23 of the Report thus: "In India at the end of an year of account the unallocated profit or loss is carried forward to the account of the next year, and such unallocated amount gets merged in the account of that year.
In the system of accounting in the USA each year 's account is self contained and nothing is carried forward.
If afteral locating the profits to diverse heads mentioned above any balance remains, it is credited to the "undivided profits" which become part of the capital fund.
If in any year as a result of the allocation there is loss the accumulated undivided profits of the previous years are drawn upon and if that fund is exhausted the banking company draws upon the surplus.
In its very nature the undivided profits are accumulation of amounts of residue on hand at the end of the year of successive periods of accounting and these amounts are by the prevailing accounting practice and the Treasury directions regarded as a part of the capital fund of the banking company. ' 817 After quoting with approval the above observations, Mr. A Justice Shah in Standard Vacuum Oil Co. 's case went on to observe at page 695 of the report as follows: "It is true that the court in that case was dealing with a case of a banking company but the characteristics noted are not peculiar to the accounts of a banking company; they are applicable with appropriate variations to the accounts of all companies in which different nomenclatures are used in the accounts to designate the residue on hand as 'surplus ', ' undivided profits ' or 'earned surplus '.
Where the balance of net profits after allocation to specific reserves and payment of dividend are entered in the account under the caption 'earned surplus ', it is intended thereby to designate the fund which is to be utilised for the purpose of the business of the assessee.
Such a fund may be regarded according to the Indian practice as 'general reserve") This Court in the first case held that the amount designated as "undivided profits" which was available for continuous future use of the business for the bank was a part of the reserve and had to be taken into account while computing the capital under rule 2(1) of Schedule II of the Business Profits Tax Act; similarly, in the second case the Court held that the amount which had been allocated to "earned surplus" which was intended for the purpose of the business of the assessee company and was used in subsequent years in business, represented ' 'reserves" within the meaning of rule 2 of Schedule II of the Business Profits: Tax.
From these two decisions two aspects emerge very clearly.
In the first place, the nomenclature accorded to any particular fund which is set apart from out of the profits would not be material or decisive of the matter and secondly, having regard to the purpose of rule of 2 of Schedule II of the Business Profits Tax Act, 1947, if any amount set apart from out of the profits is going to make up capital fund of the assessee and would be available to the assessee for its business purposes, it would become a reserve liable to be included in the capital computation of the assessee under that Act.
The provisions of the also lend support to the proposition that an appropriation for proposed dividend would not amount to a reserve.
Section 217(1) runs thus: 818 "217(1) There shall be attached to every balance sheet laid before a company in general meeting, a report by its Board of directors, with respect to (a) the state of the company 's affairs, (b) the amounts, if any which it proposes to carry to any reserves in such balance sheet, (c) the amounts, if any, which it recommends should be paid by way of dividend; (d) . . . . . . " Regulation 87 of Table A in the First Schedule runs thus: "87(1) The Board may, before recommending any dividend, set aside out of the profits of the company such sums as it thinks proper as a reserve or reserves which shall, at the discretion of the Board, be applicable for any purpose to which the profits of the company may be properly applied, including provision for meeting contingencies or for equalising dividends; and pending such application may at the like discretion, either be employed in the business of the company or be invested in such investments (other than shares of the company) as the Board may, from time to time, think fit.
(2) The Board may also carry forward any profits which it may think prudent not to divide, without setting them aside as a reserve.
" The aforesaid provisions read together clearly show that creating re serves out of the profits is a stage distinct in point of fact and anterior in point of time to the stage of making recommendation for payment of dividend and the scheme of the provisions suggests that appropriation made by the Board of Directors by way of recommending a payment of dividend cannot in the nature of things be a reserve.
If regard be had to the guide lines indicated above as well as the provisions of the specified above we are clearly of the opinion that the appropiations made by the directors for proposed dividend in the case of the concerned assessee companies do not constitute 'reserves ' and the concerned amounts so set apart would have to be ignored or excluded from capital computation.
819 Since we have reached the aforesaid conclusion on first principles and on the basis of the guidelines discussed above it is unnecessary for us to go into or discuss the scope and effect of the Explanation to Rule 1 in Second Schedule to The though it seems to us prime facie that the Explanation, being clarifacatory in nature is declaratory of the existing legal position.
Dealing with the last case of Hyco Products Pvt.
Ltd. Bombay (Tax Reference Case No. 5 of 1978), where the question pertaining to dividend but in a different form arises for consideration, the admitted facts may briefly be stated.
The question relates to the Assessment Year 1974 75, the relevant previous year being calendar year 1973 and the material date being 1.1.1973.
After the accounts of the calendar year 1972 were finalised the directors transferred out of the profits of Rs. 61,03,382 of that year a sum of Rs. 29,77,000 to the General Reserve.
With such tranfer the General Reserve of the assessee company as on 1.1.1973 stood at Rs. 86,07,712.
At the end of the calendar year, 1973 admittedly the directors did not make any provision for 'proposed dividend ' in its accounts but there was note on the Balance Sheets to the following effect: "The directors have recommended dividend for the year 1972 at the rate of Rs. 10/ per share free of tax.
The dividend, if approved by the share holders at the forth coming Annual General Meeting, will be paid out of General Reserve and no separate provision has been made therefor in the accounts.
" At the Annual General Meeting held on June 30, 1973 dividend of Rs. 3,10,450 was declared by the share holders and the same was soon thereafter paid out of the said General Reserve.
In the surtax assessment proceedings under the 1964 Act the assessee claimed that the entire general reserve which stood as Rs. 86,07,712 as on 1.1.1973 should be taken into account while computing the capital of the assessee company.
But the taxing officer reduced the general reserves by the aforesaid sum of Rs. 3,10,450 and only the balance of Rs. 82,97,262 was added in computing the capital.
The Appellate Assistant Commissioner as well as the Income Tax Appellate Tribunal, Bombay confirmed the order of the Taxing officer.
The Tribunal took the view that though it was not a case of 'pro posed dividend ' since the amount actually paid out as dividend was a smaller sum than the amount transferred from out of profits to 820 the General Reserve that amount could not form part of the reserve and therefore the General Reserve as reduced by Rs. 3,10,450 was properly taken into account for the purpose of computation of the capital as on the relevant date.
At the instance of the assessee the Tribunal has referred the following question of law directly to this Court for its opinion under section 257 of the Income Tax Act 1961 read with section 18 of the : "Whether on the facts and in the circumstances of the case the Tribunal was justified in excluding a sum of Rs. 3,10,450 representing the dividends declared for the calendar year 1972 from the General Reserves on the opening date of the previous year while computing the capital under the Second Schedule of the for the assessment year 1974 75?" Counsel for the assessee company contended that after con ceding that this was not a case of "proposed dividend" the Tribunal erred in holding that the sum of Rs 3,10,450 representing the dividends paid out from the General Reserve was liable to be excluded while computing the capital of the company as on 1.1.1973 for purposes of sur tax assessment under the 1964 Act.
According to him under section 205(1) of the dividend can be paid from out of the current year 's profits or profits of any previous financial year or years and there is no presumption in law or in commercial accounting that a dividend has to be paid either from the current year 's profits or from the past year ' s profits.
He further urged that once from out of the current year 's profit a certain sum is transferred to the General Reserve it merges into the latter and the General Reserve so augmented becomes a conglomerate fund and if out of such conglomerate fund any sum is recommended or paid out as dividend it will be difficult to say that such payment has come out of the portion of current year 's profits that has been transferred and merged and there is no reason why the principle 'Last in, First out ' should be invoked for drawing the inference that the payment has been made out of the current year 's profits.
He pointed out that such a principle was applied by the Bombay High Court in two decisions, namely, Commissioner of Income Tax, Bombay City l vs Bharat Bijlee Ltd.(1) and Commissioner of Income Tax, Bombay City ll vs Marrior (India) Ltd.(2) but urged that there 821 was no warrant for it.
In support of his contention that the entire A General Reserve of Rs. 86,07,712 without any deduction should have been taken into account while computing the capital of the assessee company, counsel relied upon a decision of the Andhra Pradesh High Court in Super Spinning Mills Ltd. vs Commissioner of Income Tax, Hyderabad(l).
Alternatively counsel pointed out that as far as stock valuation is concerned a question often arises whether the stock on hand at the end of the year is to be valued at the closing price or at the initial purchase price and in 'Advanced Accounting ' by R. Keith Yorston and E. Bryan Smyth (a treatise on the principles and practice of accounting in Australia) three methods of valuing the closing stock have been indicated at pages 441 and 442 of Vol.
II (5th Edn.) of the treatise, namely, (a) First in First out, (b) Last in First out and (c) Average Cost.
In regard to these three methods the authors have stated thus .
(a) First in First out The assumption underlying this method is that the oldest stock is used or issued first or that sales are made in the order in which the goods are purchased or produced.
If there are several lots of goods at different prices, they are regarded as being exhausted in the order of purchase.
On a rising market this would write off the lower priced lots first, and on a falling market the higher priced lots would go first." (b) "Last in First out.
This method assumes that the items of stock purchased are the first to be issued or sold and thus the stock remaining is valued at the cost of the earlier purchase." (c) Average Cost.
On this basis issues of stocks are valued at the weighted average cost of the stock on hand at the beginning and of the purchases, less any issues already made.
" 822 Counsel for the assessee urged that for determining whether the entire General Reserve of Rs. 86,07,712 or reduced General Reserve of Rs. 82,97,262 should be taken into account for capital computation either the 'First in First out ' principle should be adopted; if not, only a proportionate deduction should be made and the balance should be held to be includible in capital computation, particularly because the payment of dividend has been from a conglomerate fund.
It is not possible to accept either of these contentions urged by counsel for the assessee company.
It is true that under section 205(1) a of the it is open to the directors to recommend and the share holders to approve payment of dividends either from the current year 's profits or from the past year 's profits.
It is also true that on transfer of a portion of current year 's profits to the General Reserve the augmented General Reserve becomes a conglomerate fund but having regard to the natural course of human conduct of hard headed men of business and commerce it is not difficult to predicate that the dividends would ordinarily be paid out from the current income rather than from the past savings unless the directors in their report expressly or specifically state that payment of dividends would be made from the past savings.
From the commercial point of view if any amount is required for incurring any expenditure or making any disbursement like distribution of dividends in a current year, then ordinarily the same will come out of the current income of the company if it is available and only if the same is insufficient then the past savings will be resorted to for the purpose of incurring that expenditure or making that disbursement; such a course would be in accord with the common sense point of view.
We may point out that this aspect of the matter was not considered by the Andhra Pradesh High Court in Super Spinning Mills Ltd. case (supra) and the view of the Bombay High Court in the case of Bharat Bijlee Ltd. (supra) and Marrior (India) Ltd. (supra) commends itself to us.
Even in regard to the question of valuing the closing stock the learned authors of the treatise referred to by the counsel for the assessee company merely indicate three methods for such valuation and it will be open to a commercial concern to avail of any one method.
In our view in the context of the question whether while incurring any expenditure or making any disbursement a commercial concern will resort to current income or past savings, the normal rule, in the absence of express indication to the contrary, would be to resort to the current income rather than past savings.
823 In our view, therefore, the Tribunal was right in excluding the sum of Rs. 3,10,450 from the General Reserves while computing the capital of the assessee company for the assessment year ]974 75, in the absence of express indication to the contrary.
In the result Civil Appeal No. 1614(NT) of 1978 and Review Petition No. 57 of 1980 are dismissed.
Civil Appeal No. 860 of g 1973 is partly allowed and the issue whether the appropriation for retirement gratuity is a reserve or not is remanded to the Taxing Authority and the rest of the appeal is dismissed.
In Tax Reference Cases Nos. 2 and 3 of 1977 and No. S of 1978 the questions referred to us are answered in favour of the Department and against the assessee companies.
Each party will bear its own costs in all the matters.
AMARENDRA NATH SEN, J.
At the outset I wish to observe that I have been somewhat diffident in hearing these matters.
I felt a little embarrassed as I found that as a Judge of the High Court at Calcutta, I had an occasion to consider some of the questions in the case of Braithwaite and Co. (India) Ltd. vs Commissioner of.
Income Tax, West Bengal, (I) (Income Tax Reference No. 262 of 1969).
As I have already considered some of the questions and have expressed my views on the same in the judgment delivered by me in the said reference, I was wondering whether I should hear these appeals.
The members of the Bar, however, represented to me that they had not only no objection to my hearing these appeals but they also wanted me to hear these appeals.
They further represented that most of the Judges of this Court had on some occasion or other considered these questions.
They further stated that if I would decline to take up these matters not only the members of the Bar who had come from various parts of the country for these appeals would be seriously inconvenienced; but also the litigant public who had been waiting for years for the hearing of these matters would be prejudiced.
It was further pointed out to me that the judgment which was delivered by me was not under appeal and further it would appear from the judgment which I had earlier delivered in Braithwaite matter, there was in fact a concession made by the learned counsel appearing on behalf of the assessee that the said case was covered by the decision of the Supreme Court in the case of Commissioner of Income tax Bombay City vs Century Spinning and Manufacturing Co. Ltd. ( ') The learned counsel appearing on behalf 824 of the parties further represented to me that the earlier judgment was delivered by me as a Judge of the High Court and it was always open to me to reconsider ' my view, particularly as a Judge of this Court after hearing the submissions to be made by the learned counsel appearing on behalf of the parties.
In view of the aforesaid representations and submissions made by the learned lawyers, I was persuaded to hear these appeals with my learned brothers to avoid inconvenience not only to the lawyers but to the litigant public.
I have also had no doubt in my mind that if I felt after hearing the submissions made by the learned counsel appearing on behalf of the parties in these appeals, that the earlier judgment delivered by me was wrong and incorrect, I would have no hesitation in reconsidering my earlier decision.
I do not propose to set out the facts of this case at any length in this judgment.
The facts have been fully and correctly set out in the judgment of my learned brother Tulzapurkar, J. My learned brother in his judgment has also dealt with the various arguments which were advanced from the Bar and has also considered the decisions which were cited.
I propose to notice only some of the decisions which, to my mind, are particularly important for decision of the question whether the provision made in the balance sheet for payment of dividend to the share holders recommended by the Board of Directors constituted a 'reserve ' and the amount, so set apart, should be taken into account, in computing the capital of the company for the purpose of Super Profits Tax Act, 1963.
It may be noted that in the Act itself the expression 'reserve ' has not been defined.
In the case of Commissioner of Income tax, Bombay City vs Century Spinning and Manufacturing Co. Ltd. (supra), this Court had the occasion to consider the meaning of the word 'reserve ' while dealing with a case under Business Profits Tax Act (XXI of 1947).
In this Act also, there were similar provisions with regard to computation of the capital of the Company and the assessee had claimed that the amount recommended by the Board of Directors and earmarked for payment of the dividend to the share holders should be treated as 'reserve ' and should be taken into consideration in computing the capital of the assessee.
The Supreme Court observed at pp.
503 504 as follows : "The term 'reserve ' is not defined in the Act and we must resort to the ordinary natural meaning as understood 825 in common parlance.
The dictionary meaning of the word 'reserve ' is : "1 (a) To keep for future use or enjoyment; to store up for some time or occasion; to refrain from using or for enjoying at once.
(b) To keep back or hold over to a later time or place or for further treatment.
To set apart for some purpose or with some end in view; to keep for some use.
To retain or preserve for certain purposes (oxford Dictionary, Vol .
VIII, P. 513.) In Webster 's New International Dictionary Second Edition, page 2118 'reserve ' is defined as follows: 1.
To keep in store for future or special use; to keep in reserve; to retain, to keep, as for oneself.
To keep back; to retain or hold over to a future time or place.
To preserve.
" The Supreme Court further observed at p. 504: "What is the true nature and character of the disputed sum, must be determined, with reference to the substance of the matter?" The Supreme Court held at p. 504 505 as follows : "A reserve in the sense in which it is used in rule 2 can only mean profit earned by a company and not distributed as dividend to the shareholders but kept back by the directors for any purpose to which it may be put in future.
Therefore, giving to the 'reserve ' its plain natural meaning it is clear that the sum of Rs. 5,08,637 was kept in reserve by the company and not distributed as profits and subjected to taxation.
Therefore, it satisfied all the requirements of rule 2.
The Directors had no power to distribute the sum as dividend.
They could only recommend as indeed they did, and it was upto the shareholders of the company to accept that recommendation in which case alone the 826 distribution could take place.
The recommendation was accepted and the dividend was actually distributed.
It is, therefore, not correct to say that the amount was kept back.
The nature of the amount which was nothing more than the undistributed profits of the Company, remained unaltered.
Thus the profits Lying unutilised and not specially set apart for any purpose on the crucial date did not constitute reserves within the meaning of Schedule II, rule 2(1).
" The Supreme Court also referred to S.l31 (a) and 132 of the Indian .
Referring to these sections the Supreme Court observed at p. 505 as follows: "Section 131 (a) enjoins upon the directors to attach to every balance sheet a report with respect to the state of company 's affairs and the amount if any which they recommend to be paid by way of dividend and the amount, if any, which they propose to carry to the reserve fund, general reserve or reserve account.
The latter section refers to the contents of the balance sheet which is to be drawn up in the Form marked in Schedule III.
This Form contains a separate head of reserves.
Regulation 99 of the Ist Schedule.
Table A, lays down 'that the directors may, before recommending any dividend set aside out of the profits of the company such sums as they think proper as a reserve or reserves which shall, at the discretion of the directors, be applicable for meeting contingencies, or for equalising dividends, or for any other purpose to which the profits of the company may be properly applied. ' The Regulation suggests that any sum out of the profits of the company which is to be made asa reserve or reserves must be set aside before the directors recommend any dividend.
In this case the directors while recommending dividend took no action to set aside any portion of this sum as a reserve or reserves.
Indeed, they never applied their mind to this aspect of the matter.
The balance sheet drawn up by the assessee as showing the profits was prepared in accordance with the provisions of the Indian .
These provisions also support the conclusion as to what is the true nature of a reserve shown in a balance sheet.
" In the case of Commissioner of Income Tax vs Standard Vacuum oil Co. (1) this Court had occasion to consider the decision in 827 the case of Commissioner of Income tax vs Century Spinning and A Manufacturing Co. Ltd. (supra).
Dealing with the said decision of this Court held at p. 697 98 as follows : "The Court was dealing in this case with the accounts of an Indian Company, the balance sheet of which was prepared according to the provisions of the Indian Companies Act, 1913.
Regulation 99 of the First Schedule, Table A, required that reserves must be set apart before the directors recommended any dividend but out of the profits of the company no amount was set apart towards reserves before the directors recommended payment of dividend to the shareholders.
The identity of the amount remaining on hand at the foot of the profit and loss account was not preserved.
rt is on these facts that the court held that there was no allocation of the amount to reserve and from the mere fact that it was carried forward in the account of the next year and ultimately applied in payment of dividend, it could not be said to be specifically set apart for any purpose at the relevant date, i. e. the end of the year of account." This Court then proceeded to hold at p. 697 98 as follows : "We are in this case dealing with a foreign company and the system of accounting followed by the company is different in important respects from the system which obtains in India.
Companies in India maintain diverse types of reserves: such as capital reserve, reserve for redemption of debentures, reserve for replacement of plant and machinery, reserve for buying new plant to be added to the existing ones, reserve for bad and doubtful debts? reserve for payment of dividend and general reserve.
Depreciation reserves within the limit prescribed by the Income tax Act or the Rules thereunder is the only reserve which is a permissible allowance in the computation of taxable profits.
In its ordinary meaning the expression 'reserve ' means something specifically kept apart for future use or for a specific occasion.
" In the case of Metal Box Company of India Ltd. vs Their Workmen, (1) this Court while dealing with a case under the pay 828 ment of Bonus Act, 1965 had occasion to consider the expression 'reserve ' and its meaning for the purpose of the said Act.
This Court held at p. 67 68 as follows : " The next question is whether the amount so provided is a provision or a reserve.
This distinction between a provision and a reserve is in commercial accountancy fairly well known.
Provisions made against anticipated losses and contingencies are charges against profits and therefore, to be taken into account against gross receipts in the P & L account and the balance sheet.
On the other hand reserves are appropriations of profits, the asset by which they are represented being retained in form part of the capital employed in the business.
Provisions are usually shown in the balance sheet by way of deductions from the assets in respect of which they are made whereas general reserves and reserve funds are shown as part of the proprietor 's interest (see Spicer and Pegler 's Book keeping and Accounts, 15th Edn. page 42).
An amount set aside out of profits and other surpluses, not designed to meet a liability, contingency, commitment or diminution in value of assets known to exist at the date of the balance sheet is a reserve but an amount set aside out of profits and other surpluses to provide for any known liability of which the amount cannot be determined with substantial accuracy is a provision; (see William Pickles Accountancy, Second Edn.
p. 192; Part III, clause 7, Schedule VI to the Companies Act, 1958, which derives provision and reserve." In the case of Commissioner of Income tax vs Mysore Electrical Industries Ltd.(1) the facts were briefly as follows: Out of the profits of the company for the accounting period ending March 31, 1963.
the Directors of the company appropriated the following amounts towards reserves on August 8, 1963: (i) Rs. 2,56,000 as plant modernisation and rehabilitation reserve: (ii) Rs. 89,557 as development rebate reserve.
The question was whether these amounts could be included in computing the capital of the respondent as on April 1, 1963 under rule 1 of Schedule II to the .
for the purpose of the statutory deduction for the assessment year 1961 65, The contention of the department was that since the appropriations were made on 8th August, 1963 they could not be treated as components of capital as on the first day of the previous year i.e. 1st April, 1963.
Negativ 829 ing the contention of the department, this Court held that the determination of the Directors to appropriate the amounts of the three items of reserve on 8th August, 1963 had to be related to first April, 1963, viz., the beginning of the accounts for the new year, and had to be treated as effective from that day and the said three items had to be added to the other items for computation of the capital of the company as on first April, 1963 under rule 1 of Schedule II to the .
It may be noted that in this case before the trial court a claim had been made by the company that a sum of Rs. 3,15,000 representing dividend reserve was to be considered in computing the assessee 's capital for the purpose of and the High Court had rejected this claim.
As against the rejection of this claim by the High Court, no appeal had been preferred by the assessee to the Supreme Court.
The Supreme Court while considering the three items which came up for consideration before it held, as already noted, that the decision of the directors to appropriate the amounts to these three items of reserve on 8th August, 1963 had to be related to 1st April, 1963 and this Court observed at pp.
560 570 as follows: "It is well known that the accounts of the company have to be made up for a year up to a particular day.
In this case that day was the 31st March, 1963.
If it was reasonably practicable to make up the accounts up to the 31st March, 1963, and present the same to the directors of the respondent on April 1, 1963, they could have made up their minds on that day and declared their intention of appropriating the said and other sums to reserves of different kinds.
But the fact that they could not do so for the simple reason that the calculation and collection of figures of all the items of income and expenditure of the company for the year ending March 31, 1962, was bound to take some time cannot make any difference to the nature or quality of the appropriation of the profits to reserves as determined by the directors after the first of April, 1963.
Their determination to appropriate the sums mentioned to the three separate classes of reserves on the 8th August, 1963, must be related to the 1st of April, 1963, i.e., the beginning of the accounts for the new year and must be treated as effective from that day".
830 Relying on the aforesaid decisions and also many other decisions of the various High Courts which have been considered by my learned brother Tulzapurkar, J. in his judgment, the learned counsel for the assessee has argued that the word 'reserve ' which has not been defined in the Act, has to be understood in its ordinary meaning as laid down by the Supreme Court in the case of Century Spinning Mills Ltd. The further argument is that the recommendation for dividend by the directors of the Company does not create any kind of liability, immediate or future.
It is argued that the obligation to pay the dividend only arises when the shareholders at the Annual General Meeting of the Company decided to accept the recommendation of the Directors and pass a resolution for declaration of dividend.
It is submitted that it is open to the Directors to withdraw or modify the recommendations made by them any time before the shareholders accept the recommendations and in support of this contention reference is made to the decision of this Court in the case of Keshoram Industries and Cotton Mills Ltd. vs Commissioner of Wealth Tax (Central), Calcutta (I) and n reliance is placed on the following observations at p. 772 : "The directors cannot distribute dividends but they can only recommend to the general body of the company the quantum of dividend to be distributed.
Under section 217 of the Indian Companies Act, there shall be attached to every balance sheet laid before a company in general meeting a report by its board of directors with respect to, inter alia, the amount.
if any, which it recommends to be paid by way of dividend.
Till the company in its general body meeting accepts the recommendations and declares the dividend, the report of the directors in that regard is only a recommendation which may be withdrawn or modified as the case may be.
As on the valuation date nothing further happened than a mere recommendation by the directors as to the amount that might be distributed as dividend, it is not possible to hold that there was any debt owed by the assessee to the share holders on the valuation date.
" It is further argued that it is open to the share holders to accept the i recommendations in its entirety or to modify the same by 831 deciding to declare dividend at a rate lower than the one recommended by the directors.
It is, therefore, contended that the recommendation of the directors for payment of dividend does not have the effect of creating any kind of liability and there is no debt owed by the company by virtue of the said recommendations.
It has been submitted that the decision of this Court in the case of Mysore Electrical Industries Ltd. (supra) is of no assistance and the said decision does not lay down that in the event of the share holders ' acceptance of recommendation made by the directors for the distribution of dividend to the share holders of the company, the liability for payment of the dividend will also relate back; and the doctrine of relation back applies only in respect of items which the directors are competent to decide for themselves, in view of the process involved in the preparation of accounts of the company.
The main argument advanced on behalf of the Revenue is that any amount which may be set apart for payment of dividend r recommended to be paid by the Directors cannot constitute 'reserve ' within the meaning of the Act.
The argument advanced on behalf of the assessee appears to be sound; but to my mind the said arguments are not sufficiently convincing to lead the Court to the conclusion that the amount set apart for payment of dividend recommended by the Board of Directors can constitute 'reserve ' within the meaning of the Act for the purpose of computation of the capital of the Company.
The word 'reserve ' has not been defined in the ACT.
In the absence of any such definition the word has to be understood in its ordinary sense.
It is, however, to be remembered that the word 'reserve ' in the instant case occurs in a taxing statute specially applicable to Companies only.
The word 'reserve ' should be so construed as to give the said word the meaning in which it is ordinarily understood by persons interested in Companies or in dealing with Companies.
In other words, the word 'reserve ' for the purpose of this Act should be understood in the sense in which it is understood in company circles and by persons interested in Companies and in dealing with Companies.
It may be noticed that while considering the true meaning and true nature of 'reserve ', the Supreme Court in the case of Commissioner of Income Tax vs Century Spinning and Manufacturing Co. Ltd. (supra) has referred 832 to section 131 (a) and 132 of the Indian Companies Act, to the Form marked in Schedule III in which balance sheet of the Company has to be prepared and also to Regulation 99 of the First Schedule, Table A. I have earlier quoted the relevant observations of the Supreme Court.
It is, no doubt, true that the re commendations of the Directors for payment of any dividend does not create any kind of liability for the payment of the said amount.
The liability for payment of any amount by way of dividend only arises when the share holders accept the recommendations and a dividend is declared at the annual general meeting of the Company.
It is open to the Directors to modify or withdraw the recommendation with regard to the payment of dividend before the said recommendation is accepted by the share holders.
It is also open to the share holders not to accept the recommendation of the Directors in its entirety and to modify the same.
The legal liability for the payment of any dividend only arises after the share holders at the annual general meeting have decided to declare a dividend on the basis of the recommendations of the Directors or on the basis of any modification thereof.
The liability for the payment of dividend only arises after the dividend has been declared by the share holders at the annual general meeting and this liability does not relate back to 3 any earlier date on the basis of the recommendations of the directors.
as the directors do not enjoy any power of declaring the b dividend.
The amount that may be set apart for payment of any dividend on the basis of the recommendations made by the Directors, cannot be considered to be an amount set apart for meeting a known or existing liability.
Though the amount which is set apart for payment of any dividend recommended by the Board of Directors is not an amount set apart for meeting any known or existing liability, yet the said amount so set apart cannot be considered to be a 'reserve ' within the meaning of the Act for the purpose of computation of the capital of the Company.
section 210 of the specifically provides that at every annual general meeting of a Company the Board of Directors of a Company shall lay before the Company the balance sheet of the Company and also the Profits and Loss account.
section 211 833 further provides that every balance sheet of a Company shall give a A true and fair view of the state of affairs of the Company as at the end of the Financial Year and shall, subject to the provisions of the section, be in the form set out in of Schedule VI, or as near thereto as circumstances admit or in such other form as may be approved by the Central Government either generally or in a parti cular case.
The preparation of a balance sheet in the prescribed form and laying the same before the share holders at the annual meeting are statutory requirements which the Company has to observe.
Regulation 87 of Table A in Schedule I provides: "(1) The Board may, before recommending any dividend, set aside out of the profits of the Company such sums as it thinks proper as a reserve or reserves which shall, at the discretion of the Board, be applicable for any purpose to which the profits of the Company may be properly applied, including provisions for meeting contingencies or for equalising dividends; and pending such application, may at the like discretion, either be employed in the business of the company or be invested in such investments (other than shares of the Company) as the Board may from time to time, think fit.
(2) The Board may also carry forward any profits which it may think prudent not to divide.
without setting them aside as a reserve".
This Regulation contemplates that the Board may set aside out of the profits of the Company such sums, as it thinks proper, as a reserve or reserves which shall, at the discretion of the Board, be applicable for any purpose to which the profits of the Company may be properly applied including the provisions for meeting contingencies or for equalising the dividends, before recommending any dividend.
In other words, the sums out of the profits of the Company have to be set apart as reserve before any dividend is recommended by the Board; and the recommendation of the Board for payment of dividend comes only after the creation of reserve.
The amount that may, therefore, be set apart for payment of dividend recommended by the Board is an amount which is set apart 834 after the Board had created the reserve.
The form of balance sheet referred to in section 211 of the is appended in of Schedule VI of the Statute.
In the statutory form there are various heads including heads of various kinds of reserves and also of provisions.
In the balance sheet of the Company which has necessarily been prepared in accordance with the provisions of the statute and in the form prescribed, the amount recommended by the Board for payment of dividend has been shown under the head provisions and not under any head of reserves.
It is, no doubt, true that the true nature and character of the sum so set apart must be determined with regard lo the substance of the matter.
The substance of the matter clearly appears to be that the amount is set apart for payment of dividend recommended by the Board to be paid to the share holders and the said amount is never intended to constitute a reserve of the Company.
Indeed a provision is made for payment of the said amount to the share holders by way of dividend on the basis of the recommendation made by the Directors.
Though in law the recommendation made by the Directors for payment of dividend to share holders does not create any liability for the payment of dividend and liability only arises when the shareholders accept the said recommendation, and though in law it may be open to the Board to modify or withdraw the recommendation with regard to the payment of dividend before the acceptance by the share holders and it may also be open to the share holders not to accept the said recommendation in its entirety and to modify the same, yet, for business purposes, when the directors make any recommendation for payment of dividend and set apart any amount for the payment of dividend so recommended, the directors intended to make a provision for the payment of dividend recommended by them and not to create any reserve, as the Directors very well know that the recommendation made by them with regard to the payment of dividend is not normally up set by the share holders and it is generally accepted by the share holders, as a matter of course.
Any amount set apart by the Directors for payment of dividend to the share holders recommended by them, is understood by persons interested in company and in dealing with companies to mean a provision for the payment of dividend to the share holders and is not understood to constitute a reserve.
In my opinion, this true nature and character of the sum so set apart are reflected in the provisions of the and more particularly in the manner of preparation of the balance sheet of the Company.
I am, therefore, of the opinion that the amount set apart for the payment 835 of any proposed dividend on the basis of the recommendation of A the Directors cannot constitute reserve for the purpose of computation of the capital of the Company.
The view that I have taken, to my mind, appears to be in accord with the view earlier expressed by this Court in the decisions to which I have already referred.
On the other questions, I entirely agree with the view expressed by my learned brother Tulzapurkar, J. and I agree with the order proposed by him.
C.A. No. 1614(NT)/78, Review Petition No. 57180 and Tax Reference Cases Nos 2&3/77 and 5/1978 dismissed.
P.B.R. C.A. No. 860/73 partly allowed.
| IN-Abs | The Super (Profits Tax) Act, 1963 and the Company 's (Profits) Sur tax Act, 1964 (the scheme and main provisions of both of which are almost identical) impose a special tax on excess profits earned by companies.
The special tax is imposed in respect of so much of a company 's "chargeable profits" of the previous year as exceeded the "standard deduction" The term "chargeable profit" is defined to mean the total income of an assessee computed under the Income Tax Act, 1961 for any previous year and adjusted in accordance with the provisions of that Act.
"Standard deduction" is determined by computing the capital of a company in accordance with the rules laid down in the schedule.
The material part of rule I provides that before any amount or sum qualifies for inclusion in capital computation of a company two conditions are required to be fulfilled namely: (i) that the amount or sum must be a "reserve" and (b) that it must not have been allowed in computing the company 's profit for the purposes of Income Tax Acts, 1922 or 1961.
ln their respective balance sheets, the assessees had shown under the heading "current liabilities and provisions" appropriations of large sums of money for taxation, retirement gratuity and dividends and claimed that for the purposes of super profits tax these sums should be regarded as "other reserves" within the meaning of Rule 1 of Second Schedule to the Act and that for the computation of capital they should be taken into account.
Treating these sums as "provisions" and not as "reserves", the Super Profits Tax officer determined the capital and the standard deduction by excluding them from the computation of the capital.
He then levied super profits tax on that portion of the chargeable profits of the previous year as exceeded the standard deduction.
While the Appellate Assistant Commissioner upheld the assessee 's contention that these sums were "reserves" which should be taken into account for computing their capital, the Appellate Tribunal held that these were not "reserves" within 790 the meaning of Rule l of the Second Schedule to the Act and as such could not enter into capital computation.
On reference the High Court held that the sums set apart were not "reserves and so should be excluded in the computation of the capital for the purposes of levying the super profits tax.
In Tax Reference No. 5 (a case under the ) the assessee transferred from out of its current profits a large sum of money to the general reserves and paid dividend to its shareholders from out of the augmented general reserves.
On the question whether for computing the capital for the purpose of sur tax the general reserves should or should not be reduced by the sum of dividend paid, the taxing authorities and the appellate tribunal ignored this amount holding that it was not a "reserve".
None of the items of appropriation either for taxation or for retirement gratuity or for proposed dividend in the assessees ' cases had been allowed in computing their profits under the Income Tax Act, 1961.
^ HELD: [per Tulzapurkar & Venkataramiah, JJ] The expressions "reserve" and "provision" have not been defined in the Act.
Standard dictionaries, without making any distinction between the two concepts, use them more or less synonymously connoting the same idea.
But since in the context of the legislation a clear distinction between the two is implied it is essential to know the exact connotation of the two concepts and the distinction as known in commercial accountancy.
The rules for computation of capital contained in the Second Schedule to the Act proceed on the basis of the formula of capital plus reserve, a formula well known in commercial accountancy.
But since they occur in a taxing statute applicable to companies only these expressions will have to be understood in the sense or meaning attributed to them by men of business, trade and commerce and by persons interested in or dealing with companies.
Therefore, the meaning attached to these words in the would govern their construction for the purpose of these two enactments [800 C H] The broad distinction between the two expressions as judicially evolved by this Court is that, while a "provision" is a charge against the profits to be taken into account against gross receipts in the profit and loss account, a "reserve" is an appropriation of profits, the asset or assets by which it is represented being retained to form part of the capital employed in the business.
[801 F] C.l.
T. vs Ccntury Spinning & Manufacturiag Co., and Metal Box Company of India Ltd. vs Their Workmen, 73 lTR 67 followed.
The , which enjoins upon the Board of Directors of every company to lay before the annual general meeting of its shareholders an annual balance sheet and a profit and loss account, enumerates the separate heads that should be shown in the balance sheet, two of these items being "reserve ' and "provision".
The definitions of these two expressions given in the Act show 791 that if any retention or appropriation of a sum falls within the definition of A "provision" it can never be a "reserve".
But the converse is not true.
If the retention or appropriation is not a "provision" that is, if it is not designated to meet depreciation, renewals or diminution in value of assets or any known liability it is not automatically a "reserve" and the question will have to be decided having regard to the true nature and character of the sum so retained or appropriated depending on several factors, including the intention with which and the purposes for which such retention or appropriation had been made.
[803 E Fl Having regard to the type of definitions of the two concepts, if a particular retention or appropriation of a sum falls within the expression "provision" then that sum will have to be excluded from the computation of capital.
If the sum is in fact a "reserve" then it would be taken into account for the computation of capital.
[804 B C] Where the assessee had set apart a sum of money to meet tax liability in respect of profits earned during an accounting year, which liability was not quantified, such setting apart for a known and existing liability, would be a "provision" and could not be regarded as a "reserve".
[806 A C] Kesoram Industries and Cotton Mills Ltd.v.
Commissioner of Wealth Tax (central) Calcutta, ; followed.
But if provision for a known or existing liability is made in excess of the amount reasonably necessary for the purpose, such excess should be treated as reserve" and, therefore, would be includible in capital computation.
[806 E] Since the assessee (in C.A. No. 860/73) had at no stage of the proceedings before the Taxing Authorities or Appellate Tribunal or the High Court raised a plea that the provision made by it for taxation was in excess of the amount reasonably necesssary for the purpose and that such excess should be treated as a "reserve", the plea which needs investigation into facts, could not be allowed to be raised for the first time in appeal before this Court.
[807 F] Ordinarily an appropriation to gratuity reserve will have to be regarded as a provision made for a contingent liability, for, under a scheme framed by a company the liability to pay gratuity to its employee on determination of employment arises only when the employment of the employee is determined by death, incapacity, retirement or resignation an event (cessation of employment) certain to happen in the service career of every employee.
Moreover, the amount of gratuity payable is usually dependent on the employee 's wages at the time of G, determination of his employment and the number of years of service put in by him and the liability accrues and enhances with completion of every year of service; but the company can work out on an acturial valuation its estimated liability (i.e. discounted present value of the liability under the scheme on a scientific basis) and make a provision for such liability not all at once but spread over a number of years.
If by adopting such scientific method any appropriation is made such appropriation will constitute a provision representing fairly accurately a known and existing liability for the year in question; if however, an ad hoc sum 792 is appropriated without resorting to any scientific basis such appropriation would also be a provision intended to meet a known liability, though a contingent one, for, the expression 'liability ' occurring in cl.
(7)(1)(a) of Part III of Sixth Schedule to the includes any expenditure contracted for and arising under a contingent liability: but if the sum so appropriated is shown to be in excess of the sum required to meet the estimated liability (discounted present value on a scientific basis) it is only the excess that will have to be regarded as a reserve under clause (7) (2) of to the Sixth Schedule.
[807 G.H; 808 A D] In the instant case although the assessee had urged before the authorities below that different treatment for the same item could not be given for purposes of income tax assessment and super profits tax assessment the assessee did not clarify by placing material on record as to whether appropriation was based on any acturial valuation or whether it was an appropriation of an ad hoc amount a which has a vital bearing on the question, whether the appropriation could be treated as a provision or reserve.
In the absence of proper material the question should be decided by the taxing authorities whether the amount set apart and transferred to gratuity reserve by the assessee company was either a provision or a reserve and if the latter to what extent.
[812 C E] Standard Mills Co. Ltd. vs Commissioner of Wealth Tax, Bombay, 63, I.T.R.470 & Workmen of William Jacks & Co. Ltd. vs Management of Jacks & Co.Ltd; Madras.
[1971] Supp.
S.C.R. 450 followed.
Southern Railway of Peru Ltd. vs Owen ; referred to.
The appropriations of an amount by the Board of Directors by way of providing for proposed dividend would not constitute 'provision ', for, the appropriations cannot be said to be by way of providing for any known or existing liability, none having arisen on the date when the Directors made recommendation much less on the relevant date after the first day of the previous year relevant to the assessment year in question.
This by itself would not convert the appropriations into "reserves".
[813 E F] The tests and guidelines laid down by this Court in this respect are: (1) the true nature and character of the appropriation must be determined with reference to the substance in the matter, which means that one must have regard to the intention with which and the purpose for which appropriation has been made such intention and purpose being gathered from the surrounding circumstances.
A mass of undistributed profits cannot automatically become a reserve.
Some body possessing the requisite authority must clearly indicate that a portion thereof has been earmarked or separated from the general mass of profits with a view to constituting it either a general reserve or a specific reserve; (2) the surrounding circumstances should make it apparent that the amount so earmark ed or set apart is in fact a reserve to be utilised in future for a specific purpose on a specific occasion; (3) a clear conduct on the part of the Directors in setting apart a sum from out of the mass of undistributed profits avowedly for the purpose of distribution of dividend in the same year would run counter to any intention of making that amount a reserve, (4) the nomenclature accorded to any particular fund which is set apart from out of the profits would not be material 793 Or decisive of the matter; and (5) if any amount set apart from out of the profits A is going to make up capital fund of the assessee and would be available to the assessee for its business purposes it would become a reserve liable to be included in the capital computation of the assessee under that Act.
[815 F H, 817 G] The relevant provisions of the clearly show that creating reserves out of the profits is a stage distinct in point of fact and anterior in point of time to the stage of making recommendation for payment of dividend and the scheme of the provisions suggests that appropriation made by the Board of Directors by way of recommending a payment of dividend cannot in the nature of things be a reserve.
[818 F G] Judged in the light of the above guidelines the appropriations made by the Directors for proposed dividend in the case of the concerned assessee companies did not constitute 'reserves ' and the concerned amounts so set apart would have to be ignored or excluded from capital computation.
[818 H] Standard Mills Co. Ltd. vs Commissioner of Wealth tax Bombay, 63 I.T.R.470, Metal Box Co.
Of India Ltd. vs Their Workmen, , First National City Bank vs Commissioner of Income Tax, & Commissioner of Income tax (Central), Calcutta vs Standard Vacuum oil Co., followed.
Although under the it is open to the Directors to recommend and the share holders to approve payment of dividend from the current year 's profits or from the past year 's profits and on transfer of a portion of the current year 's profit to the general reserve the augmented general reserve becomes a congolmerate fund, having regard to the natural course of human conduct it is not difficult to predicate that dividends would ordinarily be paid out from the current income rather than from the past savings, unless the directors in their report expressly or specifically state that payment of dividends would be made from the past savings.
From the commercial point of view, if any amount is required for incurring any expenditure or making any disbursement like distribution of dividends in a current year, ordinarily the same will come out of the current income of the company if it is available and only if the sum is insufficient then the past savings will be resorted to for the purpose of incurring that expenditure or making that disbursement.
Such a course would be in accord with the common sense point of view.
[822 C F] In the absense of express indication to the contrary the normal rule for a commercial concern would be to resort to current income rather than past savings while incurring any expenditure or making any disbursement.
[822 H] Commissioner of Income Tax, Bombay City l vs Bharat Bijlee Ltd. ; & Commissioner of Income Tax, Bombay City ll vs Marrior (India) Ltd. 120 ITR Sl 2 approved.
[per A.N. Sen, J.] The amount set apart for payment of any dividend recommended by the Board of Directors is not an amount set apart for meeting a known or existing 794 liability and cannot be considered to be a "reserve" within the meaning of the Act for the purposes of computation of the capital of the company.
[832 F] The provides for the preparation of annual balance sheet in the prescribed form and laying it before the shareholders at the annual general meeting.
Regulation 87, Table A in Schedule I contemplates that the Board may set aside out of the profits of the company certain sum as "reserve" before dividend is recommended by it.
The amount recommended by the Board for payment of dividend is shown in the balance sheet under the head "provision" and not under any head of "reserve".
The true nature and character of the sum so set apart must be determined with regard to the substance of the matter which in this case is that the sum set apart was never intended to constitute a "reserve ' of the company.
In law the liability for payment of dividend arises only when the share holders accept the recommendations made by the Directors.
Till then it is open to the Directors to modify or withdraw their recommendation before it is accepted by the shareholders and it is equally open to the share holders not to accept the recommendation in its entirety.
Even so, for business purposes when the Directors make any recommendation for payment of dividend and set apart any amount for this purpose the Directors intend to make a provision and do not create any reserve, as Directors know that their recomendation is generally accepted by the shareholders as a matter of course.
Therefore any amount set apart for this purpose is understood by persons interested in company matters and in dealing with companies to mean a provision for the payment of dividend to the shareholders and is not understood to constitute a "reserve".
[832 C F] Commissioner of lncome tax Bombay City vs Century Spinning and Manufacturing Co. Ltd. , Commissioner of Income Tax vs Standard Vaccum oil Co., , Metal Box Co. Of Ltd. vs Their Workmen, , Commissioner of Income tax vs Mysore Electrical Industries Ltd., [1971] 80 l.
T.R. 567 and Kesho Ram Industries and Cotton Mills Ltd vs
Commissioner of Wealth Tax (Central), Calcutta; , referred to.
|
Appeal No. 515 of 1970.
Appeal by special leave from the judgment and order dated the 19th February, 1970 of the Allahabad High Court (Lucknow) Bench) Lucknow in Second Appeal No. 362 of 1966.
G.L. Sanghi and R.P. Gupta for the Appellant.
G.C. Mathur and C.P. Lal for Respondent Nos. 2 & 3.
The Judgment of Court was delivered by KOSHAL.
J. This is an appeal by special leave against a judgment of a learned Single Judge of the High Court of Allahabad dated 19th February, 1970 reversing in a second appeal the first appellate decree passed on 1st June, 1966 by the District Judge, Rae Bareli in confirmation of the decree of the trial Court.
The prayer made by the plaintiffs in the suit, which was dismissed by the first two Courts, was to the effect that a sale deed executed on 14th February, 1964 (Exhibit A 1) by defendant No. 2 in favour of defendant No. 1 in respect of a portion of a block of houses situated in Rae Bareli, be cancelled, and that possession of that portion be delivered to the plaintiffs who should also be awarded mesne profits.
While accepting the second appeal, the High Court decreed the suit except in regard to mesne profits.
Most of the facts giving rise to this appeal are undisputed and may be briefly stated with reference to the following pedigree table: Sheo Dularey Misra Radhika Devi (Plaintiff No. 1) Parmeshwar Din Mishra (Defendant No. 2) Gajendra Narain Sunil (Plaintiff No. 2) (Plaintiff No. 3) In the years 1916 and 1918 Sheo Dulary Misra (S.D. Mishra for short), who was a leading lawyer at Rae Bareli, purchased a block of Houses in that town by means of two sale deeds (Exhibits 2 and 3), both executed by one Shambhu Dayal.
In the year 1931 S.D.Mishra filed a suit against his father and brothers for a declaration 911 that he was the absolute owner of the Rae Bareli houses above A mentioned as also of a 4 annas and 9 pies share in proprietory Zamindari situated in Mohal Badri Prasad of village Tera Baraula in Pargana and District Rae Bareli.
On the 29th August 1931 a decree based on a compromise (Exhibit 5) was passed in that suit to the effect that S.D. Mishra was the exclusive owner of the Rae Bareli houses and also of a half of the salid 4 annas and 9 pies share in the Zamindari .
On the death of S.D. Misra in l951, his entire property was mutated in the name of defendant No. 2, both in the revenue records as well as in the registers maintained by the Rae Bareli Municipal Committee.
From then onwards till the date of the disputed sale deed (Exhibit A I) defendant No. 2 was in possession of the entire property left by his father and also acted as its exclusive manager.
He received compensation for some of the Zamindari property, a part of which was also sold by him on the 12th January 1959 to one Imam Ali for a consideration of Rs, 800 (vide Exhibit A 19).
In the years 1960 and 1961 defendant No. 2 constructed a one storey building on a plot of land in Khurshid Bagh, Lucknow, where he was employed as a clerk in the Department of Health of the Government of Uttar Pradesh and where he was residing with his wife and children.
The disputed sale deed (Exhibit A 1) was executed by defendant No. 2 on the 14th February 1964 in respect of the western portion of the said block of houses for Rs. 6500 in favour of K.C. Kapoor, defendant No. 1 who is the sole appellant before us.
In that sale deed defendant No. 2 described himself as "exclusive and complete owner" of the Rae Bareli property and claimed that he was "in possession and occupation thereof with powers of transfer of all kinds. ".
The necessity for the sale was thus described by him: "I am constructing a house in Mohalla Khurshed Bagh City Lucknow, the lower portion whereof has already been constructed and for the construction of the upper portion whereof funds are required.
This litigation started on the 17th September 1964 with the institution of a suit by the three plaintiffs.
It was claimed therein that on the death of section D. Misra, plaintiff No. 1 succeded to a half share in his property, being his widow, while the other half 912 was inherited by defendant No.2 so, however, that his sons (plaintiffs Nos. 2 and 3) had an interest therein by birth.
In other words, while half of the property left by S.D. Mishra was claimed to belong exclusively to Radhika Devi, Plaintiff No. 1, in respect of the other half the assertion was that it belonged to a coparcenary consisting of defendant No. 2 and his two sons.
The relief of a possession of the property sold by virtue of sale deed Exhibit A l was prayed for in consequence of the cancellation of that document which was sought to be set aside for the reason that the transaction covered by it was not for any necessity of the said family.
In the written statement the stand taken by defendant No. 1 was that defendant No 2 was the sole owner of the entire block of houses above mentioned and had full power to alienate the same, but that even if it was proved to be coparcenary property as alleged, the sale would still be good as it was made for legal necessity.
In this connection the contents of paragraph 15 of the written statement may be quoted here with advantage: "That defendant No. 2 sold the house in suit for the purpose of building a more profitable and advantageous house at Lucknow and with a view to dispose of a construction which was old and in perilous condition and which was of no persent utility.
Even if the house in suit is proved to be joint family property the transfer is for legal necessity by the Karta and is binding on the joint family and the plaintiffs.
" Two other material pleas were put forward in paragraph 14 and 16 of the written statement and are extracted below: "14.
That defendant No. 2 represented to the answering defendant No. 1 that defendant No. 2 was the sole owner of house, a portion of which is the subject matter of dispute, and in fact he has all along been acting as sole owner of the properties left by his father.
The answering defendant No. I also made diligent and reasonable enquiries about the right, title and interest of defendant No. 2 and his sole power to transfer it, and as such the answering defendant is a transferee in good faith for consideration and without notice." 16.
That defendant No. 2 executed the sale deed in favour of the answering defendant with the active consent and 913 approval of plaintiff No. I and plaintiff No. 1 is estopped from asserting her right against it.
" Statements of counsel for parties were recorded by the trial court on the 27th April, 1965 when it framed 8 issues, of which issues nos.
I to 3, S and 7 were: "1.
Whether plaintiffs and defendant No. 2 formed a joint family ? If so, who was the Karta of the family ? 2.
Whether plaintiffs Nos. 2 and 3 have interest in the house in suit by birth ? 3.
Whether defendant No. 2 had a legal necessity to sell the house ? If so, its effect ? 5.
Whether defendant No. I is a transferee for value in good faith and is entitled to protection of Section 41 of the Transfer of Property Act ? 7.
Whether the suit by plaintiff No. 1 is barred by estoppel ?" Statements of learned counsel for the parties were again re corded on 28th May 1965 and 31st May, 1965.
On behalf of defendant No. 1 a part of his case was stated like this: E "Defendant is a purchaser for value in good faith and without notice.
In any view of the case the disputed portion is not more than the share of Parmeshwar Din and the .
alienation is valid and can not be impeached by the plain tiffs.
Disputed portion was sold with the active consent and approval of plaintiff No. l and she is estopped from challenging the transaction," 5.
In its jugment the trial court held that all the three plaintiffs and defendant No. 2 formed a joint Hindu family of which defendant No. 2 was the Karta and that plaintiffs Nos. 2 and 3 acquired an interest by birth in the property left by their grand father.
In deciding issue No. 3 the trial court took note of the following facts: (a) The joint Hindu family consisting of the three plaintiffs and defendant No. 2 received Compensation for the Zamindari, 914 (b) The family had income from the Zamindari.
(c) The family derived rent from the said block of houses.
(d) S.D. Misra was a successful lawyer, which circums tance made it probable that he had left behind some cash in addition to other property.
(e) on 12th January 1959 defendant No. 2 received Rs. 800 as consideration for the sale covered by Exhibit A 19.
(f) Sanction for plan of the building of the Lucknow house (Exhibit A 21) was accorded by the Lucknow Municipality on 28th June 1960 and the building was completed in 1961.
(g) There is no evidence to show that defendant No. 2 had income of his own from which he could save enough money to be spent on the said building (h) Plalntiff No. 1, who was actively conducting the case on behalf of the plaintiffs, and defendant No. 2, had both stayed away from the witness box.
Taking all these facts into consideration the trial court concluded that the Lucknow house was the property of the said joint Hindu family.
It went on to point out that the disputed sale was an act of good management in view of the following circumstances: (i) The portion of the block of houses sold through exhibit A I was in a dilapidated condition and on 14th July 1964, i.e., less than 5 months after the sale, the municipal authorities isssued a notice to defendant No.l pointing out that the building purchased by him was in a dangerous condition and requiring him to demolish it within 3 days, so that defendant No. 2 was under & an obligation to pull down the building and either leave the site underneath un built (which would have meant a loss of some income to the family) or to construct a new building thereon.
(ii) Construction of a building in Lucknow would have been more rewarding income wise than erecting one at Rae Bareli.
915 (iii)Defendant No. 2 was employed at Lucknow and it was A in the interest of the family to put on a second storey in the house there The trial court concluded that the sale was, in the circumtances above mentioned, for the benefit of the family and, therefore, for legal necessity.
13 Issue No. 5 was decided by the trial court against defendant No. I for the following reasons: (a) Defendant No. I knew that the property sold to him had descended from S.D. Misra who had left behind a widow and a son, so that defendant No. I could not be regarded as a purchaser without notice of the fact that the plaintiffs had an interest in the house.
(b) Defendant No. 1 did not consult any lawyer to make sure that defendant No. 2 was the sole owner of the property sold as asserted by the latter.
The trial court, therefore, held that defendant No. I was not entitled to any protection under section 41 of the Transfer of Property Act.
In relation to issue No. 7 the trial court remarked that it was the duty of defendant No. I to give the details of the mis representation constituting estoppel in the written statement, which was not done so that the evidence on the point could not be looked into Issue No. 7 was thus decided against defendant No. 1.
Legal necessity for the disputed sale having been found by the trial court to be established, it dismissed the suit with costs.
It is also necessary to recount at some length the findings arrived at by the learned District Judge in appeal.
The conclusions reached by the trial court that the plaintiffs and defendant No. 2 (; formed a joint Hindu family and that the said block of houses belonged to that family were not challenged before him and the main contest in the course of the first appeal embraced points of legal necessity and estoppel as also the applicability of section 41 of the Transfer of Property Act to the facts of the case.
Taking up the last point first, the learned District Judge decided it against defendant No. I for the following two reasons; 916 (a) Defendant No. I had had notice that the building in dispute originally belonged to S.D. Misra and that the latter died leaving behind a widow, a son and a grand son.
Thus defendant No. 2 was posted with the know ledge that at the time of the sale in his favour persons other than defendant No. 2 had interest in the property in dispute.
(b) Plaintiffs Nos.
2 and 3 were minors on the date of the sale and even at the time of the institution of the suit and could not, by reason of their minority, be deemed to have consented to the ostensible ownership of the property vesting in their father.
On the question of sextuple, the learned District Judge discussed in detail the evidence produced before the trial court and concluded that on 22nd January, 1964, when a sum of Rs. 1000 was paid by defendant No. I to defendant No. 2 as earnest money through receipts Exhibit A. 26, plaintiff No. I gave her consent to her transaction of sale in the presence of defendant No. I as well as that of Radha Krishan D.W. S and Gopal Nath Chopra, D.W. 6, both of whom were attesting witnesses to that receipt.
He went on to hold that the trial court was in error when it refused to look into the evidence on the point with the observation that the particulars of the consent of plaintiff No. I were not given in the pleadings.
The learned District Judge was firmly of the opinion that the statement in para 16 of the written statement to the effect that the sale had taken place with the active consent and approval of plaintiff No. I was enough to raise the question of estoppel and that it was not necessary for defendant No. I to further mention in his peladings the particulars of such consent or the details of the evidence by which the same was to be proved.
The learned District Judge concluded that by reason of the consent given by plaintiff No. I to the sale, she was estopped from attacking disputed sale deed.
On the question of legal necessity, the District Judge took note of all those facts which the trial court had taken into consideration, as also of the following additional circumstances: (a) Defendant No. 2 was the only adult male member of the family at the time of the sale.
He had throughout 917 been managing the property of his father and was the Karta of the joint Hindu family aforesaid.
(b) The sale had come about with the consent of plaintiff No. 1 who was the only other adult member of the family.
B In the result, the learned District Judge upheld the finding of the trial court that the Lucknow house belonged to the joint Hindu family.
He further held, for more or less the same reasons as had weighed with the trial court in that behalf, that the sale was an act of prudence on the part of defendant No. 2 who had wisely sold a dilapidated building, and instead of pulling it down and incurring expense over its re construction, had raised money for the purpose of building the first floor of the new house at Lucknow which was a big city as compared to the "small and sleepy town" of Rae Bareli.
On the above findings, the first appeal was dismissed with costs.
Before the High Court it was conceded on behalf of defendant No. I that the widow of S.D. Misra had inherited half of his property by reason of the provisions of section 3 of the Hindu Women 's Right to Property Act, 1937 (for short the 1937 Act), that she had become the full owner of that half share on the commencement of the Hindu Succession Act in 1956 (hereinafter referred to as the 1956 Act) and that she was, therefore, not bound by any sale of her share effected by her son unless she was estopped from challenging it.
The learned Single Judge, therefore, at once took up the question of estoppel, reliance in support of which was placed on behalf of defendant No. l on a portion of his own testimony as W 3 which when freely translated, would read thus: "Parmeshwar Din told his mother that a portion of the Rae Bareli house was in ruins and yielded low rent, that the family (ham log) were residing at Lucknow and that he wanted to sell a portion of the Rae Bareli house and make the Lucknow house two storeyed which would result in a better rent yield and would also provide comfort for residence (of the family).
Then Parmeshwar Din 's mother said: 'It is your thing; do as you wish.
" 918 The learned Single Judge was of the opinion that this statement could not estop plaintiff No. I from challenging the sale in so far as her share in the disputed house was concerned.
His reasons were: "The above cited statement of respondent No. 1 (defendant No. I) does not indicate if the portion which was being actually sold was then specified to appellant No. I (plaintiff No. 1) by respondent No. 2 (defendant No. 2).
So if in these circumstances she did not resist the proposal saying that Parmeshwar Din was at liberty to do as he chose since it was his property, it can by no means be construed to mean that she thereby readily agreed even for the sale of her share by her son.
" The question of legal necessity was also determined by the learned Single Judge against defendant No. 1 with the following findings: (a) There was no pleading by defendant No. 1 in his written statement to the effect that the house at Lucknow was the property of the said joint Hindu family.
Besides, in his deposition as DW 3, defendant No. 1 had himself stated that to his knowledge Parmeshwar Din was the sole owner of that house.
(b) Merely because S.D. Misra possessed property and cash at the time of his death and that property continued to yield some income thereafter did not furnish reasons enough for the Court to presume that the Lucknow house belonged to the joint Hindu family.
A presumption to that effect could only be raised if it was shown that there was sufficient nucleus for the acquisition of that house.
In view of the above findings the learned Single Judge cancelled sale deed Exhibit A l and, accepting the appeal, passed a decree for possession of the disputed property in favour of the plaintiffs.
After hearing learned counsel for the parties at great length we have no hesitation in recording our disagreement with the High Court on the findings reached by it in relation to both the 919 points canvassed before it, namely, those of estoppel and legal A necessity, and are fully satisfied that it stepped outside the limits of its jurisdiction when it interfered with the conclusions of the fact arrived at by the learned District Judge on the basis of fully acceptable evidence and a correct appreciation thereof.
Before we proceed to detail our reasons for differing with the view expressed by the High Court we would like to advert to that aspect of the case which concerns the rights of plaintiff No. I in the property inherited by her husband.
The trial Court acted on the assumption that the entire property left by S.D. Misra on his death vested in the joint Hindu family consisting of his widow, son and grand sons.
No challenge to this assumption was made before the learned District Judge and the case proceeded on the basis that it was correct.
B. fore the High Court, however, the assumption was assailed and, as already stated, it was conceded on behalf of defendant No. I that plaintiff No. I succeeded to a life estate in a half share in the property of her husband in pursuance of the provisions of section 3 of the 1937 Act and that such an estate ripened into absolute ownership on the enforcement of the 1956 Act.
This concession, in our opinion, could be said to have been correctly made only on the assumptions (I) that S.D. Misra died intestate or that if he left a will, he devised a half share in the disputed house to plaintiff No. I and (2) that the share to which plaintiff No. I succeeded was not relinquished in favour of defendant No. 2 or otherwise transferred to him by her right up to the time when the disputed sale took place.
We shall now take up the question of estoppel.
Plaintiffs Nos. 2 and 3 being minors that question does not arise in their case and it is only in relation to the half share of plaintiff No. I in the disputed property that it calls for a decision.
In this connection the following facts which are undisputed may be taken note of: (a) on S.D.Misra s death his entire property was mutated in the name of his son (defendant No. 2) to the exclusion of the former 's widow (Plaintiff No. 1).
(b) Right up to the date of the disputed sale that property was managed exclusively by defendant No. 2.
(c) No objection to the exclusion of her name from the records of the revenue department or of the municipal 920 committee or from the management was ever preferred by plaintiff No. 1 who fully acquiesced in such exclusion all through.
(d) Defendant No. 2 alone received compensation for the Zamindari and sold a portion thereof as sole owner (vide exhibit A 19) again without any objection on the part of plaintiff No. 1.
(e) When negotiations for the disputed sale were initiated, defendant No. I enquired from defendant No. 2 as to how the latter had acquired full ownership of the . property in dispute.
The reply of defendant No. 2 as contained in his letter from Lucknow dated 14th January 1964 (exhibit A 25) was: "Regarding our talks about the sale of my house at Station Road, Rae Bareli and regarding your enquiry about the title to the said house, I have to inform you that I am the absolute owner of the portion of house proposed to be sold." "I own all responsibility and give you word of honour that there is absolutely no dispute about my title to the portion proposed to be sold and you should have no hesitation on that score. "Further I may add that I realize the rent of the shops which you can enquire from the tenants." Presumably defendant No. 1 was quite satisfied with this reply and asked defendant No. 2 to furnish copies of the municipal records which were shown to defendant No. 1 on the 22nd January 1964 at the Lucknow residence of defendant No. 2.
(f) According to the testimony of defendant No. 1 as DW 3 and of the two witnesses (Radha Krishan DW 5 and Gopal Nath Chopra DW 6) who attested receipt exhibit A 26, it was at that stage that defendant No I told his mother about the proposed sale and she consented thereto.
In the words of defendant No. 2 921 she declared: "It is your thing; do as you wish." The A evidence of these three witnesses was not challenged during the course of their cross examination.
These facts would conclusively show that by declaring in the presence of defendant No. 1 that the property belonged to the defendant No. 2 and that he was at liberty to deal with it as he wished, plaintiff No. I represented to defendant No. I that her son was the sole owner of the property and that she had nothing to do with it.
Her declaration is, therefore, a clincher on the point of estoppel and we find it impossible to agree with the learned Single Judge when he says that the declaration did not mean that defendant No. 2 had the permission of plaintiff No. I to deal with the latter 's share of the property.
In our opinion the declaration does not suffer from any such ambiguity as the learned Single Judge has read into.
In giving the details of the proposed sale the son had not told the mother that he was selling only his own half share in that part of the block of houses situated in Rae Bareli which was proposed to l? be sold.
He said in clear terms that a portion of the Rae Bareli house was to be sold and his mother declared that he was the sole arbiter in the matter of the disposal of the property.
There was no proposal to sell only defendant No. 2 's undivided half share nor did any question arise of either defendant No. I purchasing it or plaintiff No. I being consulted about it.
In the absence of any qualifying words limiting the proposed sale to such a share, the lady must be taken to have understood the statement made to her by her son as carrying its plain meaning, i.e., that the sale was to be of the entire portion chosen for the purpose and her consent must be construed accordingly.
Learned counsel for the plaintiff vehemently argued that even if the declaration made by plaintiff No. 1 be interpreted as we have done, it would create no estoppel against her inasmuch as defendant No. 1 had not acted on it but had purchased the property on the strength of the representations made to him by defendant No. 1.
G Now it is true that defendant No. I had made enquiries regarding the title of defendant No. 2 to the property in dispute and the latter had made an unequivocal representation that he alone was the owner thereof, but then it was only after the lady had been consulted and had told her son to go ahead with what he thought proper as he was the owner of the property that receipt exhibit A 26 was executed.
Till then defendant No. I was not fully satisfied about 922 the title of defendant No. 2 and had not only raised the question with defendant No. I at Lucknow but even after the assurance given by the latter in communication exhibit A 25 insisted on the municipal records being produced for his inspection.
The inquiry into the title was, therefore, very much in progress when defendant No. 2 consulted his mother in the presence of defendant No. 1.
This was presumably done to ally the lurking suspicion in the mind of defendant No. 2 as to the title to the entire property vesting in defendant No. 2 It was contended on behalf of the plaintiffs that the representation made by the lady could not have been taken at its face value by any prudent purchaser in view of the fact that one half of the property left by S.D. Misra had admittedly devolved on plaintiff No. 1.
This contention suffers from two important infirmities.
Under section 3 of the 1937 Act, plaintiff No. I would have succeeded to a half share only if S.D. Misra had died intestate.
So the question would be whether or not S.D. Misra left a will.
The concession made before the High Court on the point of inheritence of a half share by plaintiff No, I was obviously based not on any facts within the knowledge of defendant No. 1 but on the circumstance that nobody had talked of any will by S.D. Misra.
Whether or not such a will was made was a fact specially within the knowledge of plaintiff No. I and, as stated earlier, that she remained absent from the witness box so that the Court is left in the dark as to what was the actual state of affairs.
The onus of proof of the allegation that she was the owner of a half share in the property at the time of the sale was on her and she was duty bound to depose to facts which would make section 3 aforesaid applicable to her case.
Her failure to depose to the existence thereof must result in a finding that she has failed to prove the issue.
Again, even if it be assumed that plaintiff No. I succeeded to a half share in the property of S.D. Misra, there was no impediment in the way of her relinquishing that share in favour of her son either immediately after her husband 's death or at any other point of time prior to the disputed sale.
This aspect of the matter cannot be lost sight of in view of the fact that on section D. Misra 's death all his property was mutated in favour of his son to the exclusion of plaintiff No. 1 and was all along being dealt with by him as its sole and absolute owner without any objection whatsover having been raised by her at any point of time to such exclusion or dealing.
923 In the above situation defendant No. I was fully justified in A accepting her word on the point of ownership, the said section 3 not withstanding.
The above discussion of the evidence has been entered into by us merely to show that the finding given by the learned District Judge on the point of estoppel was eminently reasonable and that the short ground on which the High Court turned the tables on defendant No. I was untenable.
That finding of the District Judge being a finding of fact and being based on good evidence, it was not open to the High Court to interfere with it in a second appeal.
Before parting with the question of estoppel, we may briefly notice another contention put forward on behalf of the plaintiffs whose learned counsel urged that no plea of estoppel could be countenanced for the reason that no proper foundation was laid for it in the pleadings.
A combined reading of paragraphs 14 and 16 of the written statement, hower, furnishes a complete answer to the contention.
The representation said to have been made by plaintiff No. I is set out in paragraph 14 while the plea that she was estopped from contesting the sale is taken in paragraph 16.
It is true that the plea last mentioned is linked with "the active consent and approval of plaintiff No. I ' ' and not in so many words with the said representation.
It can also not be disputed that defendant No. I did not specifically state that he purchased the disputed property in the belief that the representation was true and that he would not have entered into the transaction but for that belief.
Thus undoubtedly the written statement is inartistically drafted and leaves much to be desired, but then pleadings are not to be construed in such a hypertechnical manner and what is to be seen is whether the allegations made in paragraphs 14 and 16 gave sufficient notice to the plaintiffs of what case they had to meet.
In this connection we may refer to the significant fact that no objection to the lack of particulars was taken at the stage when issues were framed or later when statements of parties ' counsel were recorded on a subsequent occasion or during the course of arguments addressed to the trial Court, the District Judge and the High Court.
even though the issue of estoppel was hotly contested before all three of them.
All these circumstances unmistakably indicate that the case put forward by defendant No. I was throughout understood by the plaintiffs to be that it was the belief induced in him by the representation of plaintiff No. l which made him accept the title of defendant No. 2 as bein exclusive.
In this view of the matter it is too late in the day for the plaintiffs 924 to raise the contention under consideration and we have no hesitation in rejecting it as untenable.
We may now attend to the controversy about the legal necessity for the disputed sale.
The contest on the point is restricted to that half share of the property sold which belonged to the coparcenary consisting of the son and grand sons of section D. Misra.
In this connection the High Court observed that not only defendant No. I did not plead in his written statement that the Lucknow house was the property of the coparcenary but that he also stated in the witness box as DW 3 that to his knowledge defendant No. I was the sole owner of that house.
We are clearly of the opinion that the High Court erred in taking either of these circumstances as a minus point for defendant No. 1.
In so far as the written statement is concerned it contains a definite plea in para 15 to the effect that if the disputed property is proved to joint be Hindu family property, its transfer was made by the Karta for legal necessity so that it was binding on the family.
Was it then incumbent on defendant No. I to further plead how he propsed to prove the legal necessity? This question was pointedly posed to learned counsel for the plaintiffs during the course of arguments and although his answer was in the affirmative, he could quote neither law nor precedent in support of the same.
It may also be pointed out that no objection by the plaintiffs was ever taken at any stage of the trial to any lack of particulars of the legal necessity set up by defendant No. I in paragraph 15 of the written statement.
On the other hand they were fully posted about what case they have to meet on the point by reason of the contents of that paragraph itself in which it was specifically asserted that the disputed house was sold by defendant No. 2 "for the purpose of building a more profitable and advantageous house at Lucknow and with a view to dispose of a construction which was old and in perilous condition and which was of no present utility." In view of this averment it was fully open to defendant No. 1 to prove by evidence that putting up a second storey in the Lucknow house constituted legal necessity and, in the process, to establish that the Lucknow house was owned by the said coparcenary.
Again, no objection was taken at the evidence stage to the right of defendant No. I to show that the Lucknow house was so owned and thereby to prove the existence of legal necessity for the sale.
No fault can thus be found with the case of defendant No. l on the ground of his failure to take a specific plea in the written statement abount the ownership of that house vesting in the coparcenary.
925 Nor was the High Court right in putting the construction that A it did on the testimony of defendant No. I as DW 3 to the effect that to his knowledge defendant No. 2 was the sole owner of the Lucknow house.
Obviously all that he meant was that according to such knowledge as he had, the Lucknow house vested in the exclusive ownership of defendant No. 2; and that knowledge, in the circumstances of the case, could be no more than a belief arising from what he was told by defendant No. 2 who had been at pains to stake his claim to the exclusive ownership of all the property under his control, including the property left by his father.
In this connection we cannot lose sight of the fact that defendant No. 1 was a total stranger to the family of the plaintiffs and in the very nature of things could not have had any personal knowledge referable to the actual manner in and the precise source from which either the Lucknow house or, for that matter, the Rae Bareli property was acquired, such manner and source being within the special knowledge of plaintiff No. I and defendant No. 2 only.
That part of the deposition of defendant No. I which the High Court has pressed into service against him, cannot, therefore, form the basis of solution to the question of the ownership of the property.
In the present case both plaintiff No. l and defendant No. 2 have stayed away from the witness box and have thus deprived the Court of the only real evidence which could throw light on the source of the consideration paid for the purchase of the Luck now house.
There may be some force in the argument that no duty was cast upon defendant No. 2 to appear as a witness in as much as he was not a contesting party, but than such an excuse is not open to plaintiff No. 1 who was actively contesting the case in the trial Court on behalf of herself and her two grand children.
It is in the light of this significant circumstance that the Court must decide whether or not defendant No. l has been able to discharge the burden of proving that the Lucknow house was purchased with joint Hindu family funds.
This important aspect of the matter was completely lost on the High Court although it was an unassailable ground when it formulated the proposition that before a presumption could be raised that a property acquired by a member of a joint Hindu family could be regarded as the property of the family, it must be shown that the family owned other property which could be regarded as a nucleus providing a sufficient source for the later acquisition.
Furthermore, in assessing the evidence on that point, the High Court referred only to two facts, namely, that S.D. Misra left immovable property and cash at the time of his death and that 926 property continued to yield some income thereafter, but paid no heed to at least three other important circumstances which had been listed by the trial court in support of the finding that a sufficient nucleus for the purchase had been proved.
Those circumstances are: (a) The family received compensation for the Zamindari.
(b) on 12th January 1959, defendant No. 2 received Rs. 800/ as consideration for the sale covered by exhibit A l9.
(c) No evidence had been produced to show that defendant No. 2 had income of his own from which he could have saved enough money to be spent on the Lucknow building.
We may add that there is definite evidence in the form of exhibit A 99 to the effect that in 1965 the family of defendant No. 2 consisted of nine souls and that he was then holding a subordinate position in the office of the Director of Health Service, U P., at Lucknow with a salary of no more than Rs. 240 per mensem.
It goes without saying that his salary was to meagre to have sufficed for the maintenance of the family and that any savings therefrom were out of question.
Although each of the facts just above taken note of, when considered in isolation, may not enable the Court to raise a presumption of the sufficiency of the requisite nucleus, collectively they constitute a formidable array and practically a clincher in favour of such a presumption, especially in the absence of any attempt on the part of the plaintiffs to produce evidence showing that defendant No. 2 had any source of income of his own other then his salary.
And then the failure (referred to above) of plaintiff No. I to step into the witness box is enough for the Court to raise another presumption, namely, that her deposition would not have supported the plaintiffs ' case.
The onus of proof of the issue on the defendant was, therefore, very light and stood amply discharged by the facts noted in that behalf by the trial court, with whose finding on the point the first appellate court concurred.
No case at all was thus made out for interference by the High Court with that finding.
The High Court did not express any dissent from the conclusion concurrently reached by the trial court and the learned 927 District Judge that the disputed sale constituted an act of prudence A on the part of defendant No. 2 and was on that account for the benefit of the family.
We find ourselves in full agreement with that conclusion which too is based on fully reliable evidence and follows logically therefrom, as also with the reasons given by the two courts in support thereof.
However, we may point to another significant factor which lends strength to that conclusion, the same being that defendant No. 2 was not only the Karta of the family and its sole adult male member at the time of the sale but was also the father of the only other two coparceners for whom he must naturally be having great affection and whose interests he would surely protect and promote, rather than jeopardise, there being no allegation by the plaintiffs that he was a profligate or had other reason to act to their detriment.
The Lucknow house being the property of the joint Hindu family consisting of defendant No. 2 and his sons and the disputed sale being an act of good management, the latter must be held to be justified by legal necessity, which expression, as pointed out in Nagindas Maneklal and others vs Mahomed Yusuf Mitchella,(1) is not to be strictly construed.
In that case the facts were very similar to those obtaining here and may be briefly recapitulated.
The joint Hindu family had serveral houses, one of which was in such a dilapidated condition that the Municipality required it to be pulled down.
The adult coparceners contracted to sell it to a third person.
The joint family was in fairly good circumstances and it was not necessary to sell the house which, however, could not be used by the family for residence and would not have fetched any rent.
In a suit for specific performance of the contract to sell instituted by the purchaser, the minor coparceners contended that the contract did not affect their interest in the absence of "necessity" for the sale.
In repelling the contention, Shah, J., who delivered the leading judgment of the Division Bench, referred to the manner in which the expression kutumbarthe had been construed by Vijnanesvara in the Mitakshara and observed: "The expression used must be interpreted with due regard to the conditions of modern life.
I am not at all sure that Vijnanesvara intended to curtail the scope of the word kutumbarthe while explaining it.
I do not see any reason why a restricted interpretation should be placed upon the word 'necessity ' so as to exclude a case like the present in 928 which defendants Nos.
I and 2, on all the facts proved, properly and wisely decided to get rid of the property which was in such a state as to be a burden to the family.
I think that the facts of the case fairly satisfy the test." Fawcett., J., who agreed with these observations added a separate short note of his own and relied upon the following passage in Hunoomanpersaud Pandey vs Mussumat Babooee Munraj Koonweree,(1) "But where, in the particular instance, the charge is one that a prudent owner would make, in order to benefit the estate, the bona fide lender is No. affected by the precedent mismanagement of the estate.
The actual pressure on the estate, the danger to be averted, or the benefit to be conferred upon it, in the particular instance, is the thing to be rearded." (Emphasis supplied) Although these remarks were made in relation to a charge created on the estate of an infant heir by its manager under the Hindu law, it is well settled that the principles governing an alienation of property property of a joint Hindu family by its Karta are identical.
The perimeters of the expression kutumbarthe, as interpreted in Nagindas 's case (supra) which meets with our unqualified, approval, fully embrace the facts of the present case in so far as legal necessity for the disputed sale is concerned.
In the result, the appeal succeeds and is accepted.
The judgment impuged before us is set aside and that of the District Judge restored.
There will be no order as to costs of the pro ccedings in this Court.
S.R. Appeal allowed.
| IN-Abs | Estoppel by conduct and construction or pleadings in the absence of an application under order Xl C.P.C. Sale for legal necessity of joint Hindu family property "Kutumbarthe" explained.
Sheo Dularey Misra, in terms of a compromise decree dated 29th August, 1931 was declared the exclusive owner of a block of houses situated in Rae Bareli and also one half of 4 annas and 9 pies share in a Zamindari.
He died in 1951 leaving his widow, his son Parmeshwar Din Misra and grand sons Gajendra Narain and Sunil.
His entire property was then mutated in the name of his son Parmeshwar Din Misra both in the revenue records as well as in the registers maintained by the Rae Bareli Municipal Committee.
From then onwards, Parmeshwar Din Misra was in possession of the entire property left by his father and also acted as its exclusive manager.
He received compensation for some of the zamindari property, a part of which was also sold by him on 12th January, 1959 for a consideration of Rs. 800.
In the year 1960 and 1961, he constructed a one storey building on a plot of land in Khurshid Bagh, Lucknow, where he was employed and residing with his wife and children.
On 14th February, 1964, he sold the western portion of the block of houses purchased by his late father, to the appellant vide sale deed Exhibit A l.
In that sale deed he described himself, as "exclusive and complete owner" of the Rae Bareli property and claimed that he was "in possession and occupation thereof with powers of transfer of all kinds. ".
The necessity for the sale was thus described by him: "I am constructing a house in Mohalla Khurshed Bagh, City Lucknow, the lower portion whereof has already been constructed and for the construction of the upper portion whereof funds are required.
" On 17 9 1964 his mother (Plaintiff No. 1) and his two sons (Plaintiff Nos. 2 & 3) instituted a suit claiming the share in the said property and to have the 908 sale covered by Exhibit A l set aside on the ground that the transaction was not for any necessity of the family.
The trial court dismissed the suit holding: (i) all the three plaintiffs and defendant No. 2 formed a joint Hindu family of which defendant No. 2 was the karta and his two sons (Plaintiffs 2 & 3) acquired an interest by birth in the property left by their grand father; (ii) the Lucknow house was the property of the said joint Hindu family; (iii) the disputed sale was and act of good management and was in the circumstances for the benefit of the family and, therefore, for legal necessity; (iv) the vendee (appellant) was not entitled to any protection under section 41 of the Transfer of Property Act; and (v) it was the duty of defendant No. I to give the details of misrepresentation constituting estoppel in the written statement, which was not done so that the evidence on the point could not be looked into.
The first appeal before the District Judge failed.
But the High Court, accepting a second appeal cancelled sale deed Exhibit A l and passed a decree for possession of the disputed property in favour of the plaintiffs.
Hence the appeal after obtaining spccial leave.
Allowing the appeal, the Court, ^ HELD :1 :1 The findings given by the first appellate court on the point of estoppel was eminently reasonable and the short ground on which the High Court turned the tables on the appellant was untenable.
That finding being a finding of fact and being based on good evidence, it was not open to the High Court to interfere with it in a second appeal.
[923 B C] 1: 2.
Proper foundation was laid for the plea of estoppel in the pleadings.
A combined reading of paragraphs 14 and 16 of the written statement gave sufficient notice to the plaintiffs of what case they had to meet.
The representation said to have been made by plaintiff No. 1 is set out in paragraph 14, while the plea that she was estopped from contesting the sale is taken in paragraph 16.
Undoubtedly, the written statement is inartistically drafted and leaves much to be desired, but then pleadings are not to be construed in a hypertechnical manner.
In fact, no objection to the lack of particulars was taken at the stage when issues were framed or later when statements of parties ' counsel were recorded on a subsequent occasion or during the course of arguments addressed to the trial court, the District Judge and the High Court, even though the issue of estoppel was hotly contested before all three of them.
All these circumstances unmistakably indicate that the case put forward by defendant No. 1 was throughout understood by the plaintiff to be that it was the belief induced in him by the representation of plaintiff No. I which made him accept the title of defendant No. 2 as being exclusive.
[923 C H] l: 3.
The declaration of plaintiff No. 1, in the presence of the appellant, that the property belonged to her son and that he was at liberty to deal with it as he liked, does not suffer from any ambiguity and makes it clear that she had nothing to do with the property.
[921 A B] 1: 4.
The onus of proof of the allegation that she was the owner of a half share in the property at the time of the sale was on her and she was duty bound to depose to facts which would make section 3 of the Hindu Women 's Right to Property Act, 1937 applicable to her case.
Her failure to depose to the existence thereof must result in a finding that she has failed to prove the issue.
[922 E F] 909 1: 5.
In view of the fact that on Shiv Dularey Misra 's death all his property was mutated in favour of his son to the exclusion of plaintiff No. I and was all along being dealt with by him as its sole and absolute owner without any objection whatsoever having been raised by her at any point of time to such conclusion or dealing leads to the presumption that plaintiff No. I had relinquished her share in favour r of her son either immediately after her husband s death or at any other point of time prior to the disputed sale.
In the above situation the appellant was fully justified in accepting her word on the point of ownership, the said section 3 notwithstanding.
[922 G H, 923 A] 2: 1.
That the disputed sale was for legal necessity is clear from the following: (a) The written statement of the appellant contains a definite plea in para 15 to the effect that if the disputed house is proved to be joint Hindu family property, its transfer was made by the karta for legal necessity so that it was binding on the family, (b) no objection by the plaintiffs was taken at any stage of the trial to any lack of particulars of the legal necessity in the plea so set up; (c) in the said para it was specifically asserted that the disputed house was sold by defendant No. 2, "for the purpose of building a more profitable and advantageous house at Lucknow with a view to dispose of a construction which was old and in perilous condition and which was of no present utility.
" The appellant was, therefore, had the right to let in evidence that putting up a second storey in 1) the Lucknow house constituted legal necessity.
Nor was any on objection taken at the evidence stage to such right; (d) the appellant was a total stranger to the family of the plaintiffs and in the very nature of things could not have had any personal knowledge referable to the actual manner in and the precise source from which either the Lucknow house or, for that matter, the Rae Bareli property was acquired, such manner and source being within the special knowledge of plaintiff No. 1 and her son, defendant No. 2, both of whom had stayed away from the witness box and had thus deprived the Court of the only real evidence which could throw light on the source of the consideration paid for the purchase of Lucknow house; (e) the salary of defendant No, 2 which was no more than Rs. 240 per mensem was too meagre to have sufficed for the maintenance of his family and any savings therefrom were out of question and (f) defendant No. 2 was not only the karta of the family and its sole adult male member at the time of the sale but was also the father of the only other two copartners for whom he must naturally be having great affection and whose interests he would surely protect and promote, rather than jeopardise, there being no allegation by the plaintiffs that he was a profligate or had other reason to act to their detriment.
[924 C H, 925 A E, G H, 926 A, D E, 927 B C] 2: 2.
The Lucknow house being the property of the joint Hindu family consisting of defendant No. 2 and his sons and the disputed sale being an act 'G of good management, the sale is "Kutumbarthe" and justified by legal necessity.
[927 C D] Nagindas Maneklal and others vs Mohomed Yusuf Mitchella, ILR (1922) 46 Bombay 312, approved and applied.
Hunoomanpersaud Pandey vs Mussumat Babooee Munraj Koonweree, (1856) 6 Moo.
I.A. 393, referred to. 910
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Civil Appeal No. 1484 of 1971.
Appeal by special leave from the Award dated the 1971 of the Industrial Tribunal Masharashtra, Bombay in Reference No. I.T. 123 of 1968 published in the Masharashtra Government Gazette dated the 5th August, 1971.
M.C. Bhandare and Dr. Y.S. Chitale, O.C. Mathur, K.J. John and J.S. Sinha, for the Appellant.
Jitendra Sharma and Janardan Sharma for Respondent No. 1.
K. Rajendra Choudhary for Respondent No. 2.
The Judgment of the Court was delivered by KOSHAL, J.
This is an appeal by special leave against an award dated 30th April, 1971 of the Industrial Tribunal, Masharashtra (the Tribunal, for short), deciding a reference made to it under clause (d) of sub section I of section 10 of the Industrial Disputes Act (hereinafter called the Act) requiring adjudication of demands raised by the workmen of the Tata Engineering and Locomotive Company Limited (Machine Tools Division), Chinchwad (hereinafter referred to as the company).
The facts leading to this appeal may be briefly set out.
The Company came into existence under an order passed by the High Court of Masharashtra on the 27th June, 1966 directing amalgamation of two pre existing concerns, one having the same name as the Company and another known as the Investa Machine 931 Tools and Engineering Company.
After the amalgmation a section A of the workers of the Compay formed a union known as Telco Kamgar Union (for short, the Telco Union) which was registered as such on the 2nd June, 1967, but which, even before that, submitted a charter of demands to the Company on the I st May, 1967.
Subsequently other workers of the Company established another union named the Telco Kamgar Sanghatana (hereinafter called the Sanghatana) which presented another set of demands to the Company on the 29th September, 1967.
A settlement was reached in conciliation proceedings in relation to the demand last mentioned on the 3rd october, 1967.
Being dissatisfied with the attitude of the Assistant Labour Commissioner, Poona who acted as the Conciliation officer, the Telco Union approached the State Government who made the reference culminating in the impugned award.
The reference was received by the Tribunal on the 22nd March, 1968 and was pending adjudication when, on the 18th February, 1970, the Company filed in application (Exhibit C 10) stating that a settlement (Exhibit C 10A) had been reached between it and the Sanghatana on the 7th February 1973, that the same had been assented to by 564 out of 635 daily rated workmen, that the dispute pending adjudication before the Tribunal related only to that category of workmen and that it did not survive by reason of the settlement.
Settlement Exhibit C 10A was challenged by the Telco Union through an application (Exhibit U 1) made to the Tribunal on the 14th April, 1970 and signed by 400 daily rated workmen who professed to be members of that Union with the allegation that it had been brought about by coercion, duress and false promises.
In these circumstances, the Tribunal addressed itself to the controversy regarding the legality and binding nature of the settlement.
In that behalf its findings were: (a) There was no evidence of the settlement being vitiated by any duress, coercion or false promises.
It was, therefore, both legal and fully binding on the parties, thereto under sub section (I) of section 18 read with clause (p) of section 2 of the Act.
(b) No attempt had been made by either party to the reference to prove as to how many of the 564 workmen 932 who had assented to the settlement were members of the Sanghatana.
(c) Those of the 564 workmen aforesaid who were not members of the Sanghatana were not bound by the settlement in as much as they were not parties thereto but had ratified or accepted the settlement only after it had been reached; and such ratification and acceptance does not make them parties to the settlement for the purposes of the Act.
The Tribunal, therefore, proceeded to find out whether the settlement was just and fair and although it found it to be so in most aspects, it was of the opinion that an increase in the additional daily wage was called for in respect of each of the 7 grades of daily rated workmen.
That increase was calculated by it separately for each grade and varies from Rs. 7.80 to Rs. 12.90 per month.
By the impugned award it declared accordingly, refusing to act upon the settlement although the same had been held by it to be legal and binding on the parties to it.
After hearing learned counsel for the parties, we have come to the conclusion that finding (b) above set out cannot be sustained.
It is not disputed before us that the settlement dated 7th February, 1970 was arrived at between the Company on the one hand and the Sanghatana on the other and also that it was assented to by the said 564 workmen by means of a document (Exhibit S 8) bearing their signatures underneath a declaration which reads: "We, the following workers, who are members of the Telco Kamgar Sanghatana, hereby sign individually on the settlement, which has been agreed upon and signed under Section 2 (p) of the .
The terms and conditions of the settlement are acceptable to me and are binding on me." (emphasis supplied).
It is no body 's case that any of the signatories to this declaration was not one of the said 635 workers or that any of the signatures appearing underneath the declaration was forged or fictitious.
And if that be so, the assertion by each signatory to the declaration that he was a member of the Sanghatana has to be taken at its face value and presumed to be correct until it is shown to be false.
The Onus 933 to prove the falsity of the assertion in the case of any particular A workman thus rested heavily on the Telco Union but it made no attempt to discharge the same.
It has been urged on its behalf that the very fact that 400 workmen had challenged the settlement claiming to be members of the Telco Union showed that the declaration made earlier was not correct.
Now it is true that out of a total of 635 workmen, 564 signed the declaration and later on 400 challenged the settlement.
The only reasonable inference to be drawn from that circumstance would, however, be that at least 329 workers changed sides in between the 18th of February 1970 and the 14th of April, 1970.
lt cannot be further interpreted to mean, in the absence of any other evidence on the point, that the declaration, when made, was false.
In this view of the matter we must hold that the declaration constitutes presumptive proof of the fact that the signatories to it were all members of the Sanghatana when they signed it.
The correctness of finding (a) has not been assailed before us on behalf of either party and in view of the provisions of sub L) section (1) of section 18 of the Act that finding must be upheld so that settlement dated the 7th February 1970 would be binding on all workers who were members of the Sanghatana as on that date including the 564 workers who signed the declaration.
Consequently finding (c) which is unexceptionable in so far as it goes, loses all its relevance and we need take no further notice of it.
The conclusion reached by the Tribunal that the settlement was not just and fair is again unsustainable.
As earlier pointed out, the Tribunal itself found that there was nothing wrong with the settlement in most of its aspects and all that was necessary was to marginally increase the additional daily wage.
We are clearly of the opinion that the approach adopted by the Tribunal in dealing with the matter was erroneous.
If the settlement had been arrived at by a vast majority of the concerned workers with their eyes open and was also aecepted by them in its totality, it must be presumed to be just and fair and not liable to be ignored while deciding the reference merely because a small number of workers (in this case 71, i.e., 11.18 per cent) were not parties to it or refused to accept it, or because the Tribunal was of the opinion that the workers deserved marginally higher emoluments than they themselves thought they did.
A settlement cannot be weighed in any golden scales and the question whether it is just and fair has to be answered on the basis of principles different from those which come into play when an 934 industrial dispute is under adjudication.
In this connection we cannot do better than quote extensively from Herbertson Limited vs Workmen of Herbertson Limited and Others,(1) wherein Goswami, J., speaking for the Court observed.
"Besides, the settlement has to be considered in the light of the conditions that were in force at the time of the reference.
It will not be correct to judge the settlement merely in the light of the award which was pending appeal before this Court.
So far as the parties are concerned there will always be uncertainty with regard to the result of the litigation in a Court proceeding.
When, therefore, negotiations take place which have to be encouraged, particularly between labour and employer, in the interest of general peace and well being there is always give and take.
Having regard to the nature of the dispute, which was raised as far back as 1968, the very fact of the existence of a litigation with regard to the same matter which was bound to take some time must have influenced both the parties to come to some settlement.
The settlement has to be taken as a package deal and when labour has gained in the matter of wages and if there is some reduction in the matter of dearness allowance so far as the award is concerned, it cannot be said that the settlement as a whole is unfair and unjust. . . . . .
We should point out that there is some misconception about this aspect of the case.
The question of adjudication has to be distinguished from a voluntary settlement.
It is true that this Court has laid down certain principles with regard to the fixation of dearness allowance and it may be even shown that if the appeal is heard the said principles have been correctly followed in the award.
That, however, will be no answer to the parties agreeing to a lesser amount under certain given circumstances.
By the settlement, labour has scored in some other aspects and will save all unnecessary expenses in uncertain litigation.
The settlement, therefore, cannot be judged on the touch stone of the principles which are laid down by this Court for adjudication.
935 There may be several factors that may influence parties to a settlement as a phased endeavour in the course of collective bargaining.
Once cordiality is established between the employer and labour in arriving at a settlement which operates well for the period that is in force, there is always a likelihood of further advances in the shape of improved emoluments by voluntary settlement avoiding friction and unhealthy litigation.
This is the quintessence of settlement which courts and tribunals should endeavour to encourage.
It is in that spirit the settlement has to be judged and not by the yardstick adopted in scrutinising an award in adjudication.
The Tribunal fell into an error in invoking the principles that should govern in adjudicating a dispute regarding dearness allowance in judging whether the settlement was just and fair. . . . . . . .
It is not possible to scan the settlement in bits and pieces and hold some parts good and acceptable and others bad.
Unless it can be demonstrated that the objectionable portion is such that it completely outweighs all the other advantages gained the Court will be slow to hold a settlement as unfair and unjust.
The settlement has to be accepted or rejected as a whole and we are unable to reject it as a whole as unfair or unjust.
Even before this Court the 3rd respondent representing admittedly the large majority of the workmen has stood by this settlement and that is a strong factor which it is difficult to ignore.
As stated elsewhere in the judgment, we cannot also be oblivious of the fact that all workmen of the company have accepted the settlement.
Besides, the period of settlement has since expired and we are informed that the employer and the 3rd respondent are negotiating another settlement with further improvements.
These factors, apart from what has been stated above, and the need for industrial peace and harmony when a union backed by a large majority of workmen has accepted a settlement in the course of collective bargaining have impelled us not to interfere with this settlement.
" The principles thus enunciated fully govern the facts of the case in hand, and, respectfully following them, we hold that the 936 settlement dated the 7th February 1970 as a whole was just and fair.
There is no quarrel with the argument addressed to us on behalf of the workers that mere acquiescence in a settlement or its acceptance by a worker would not make him a party to the settlement for the purpose of section 18 of the Act (vide Jhagrakhan Collieries (P) Ltd. vs Shri G.o.
Agarwal, Presiding officer, Central Government Industrial Tribunal cum Labour Court, Jabalpur and others, (I) It is further unquestionable that a minority union of workers may raise an industrial dispute even if another union which consists of the majority of them enters into a settlement with the employer (vide Tata Chemicals Ltd. vs Its Workmen, (o), But then here the Company is not raising a plea that the 564 workers became parties to the settlement by reason of their acquiescence in or acceptance of a settlement already arrived at or a plea that the reference is not maintainable because the Telco Union represents only a minority of workers.
On the other hand the only two contentions raised by the Company are: (i) that the settlement is binding on all members of the Sanghatana including the 564 mentioned above because the Sanghatana was a party to it, and (ii) that the reference is liable to be answered in accordance with the settlement because the same is just and fair.
And both these are contentions which we find fully acceptable for reasons already stated.
In the result the appeal succeeds and is accepted.
The impugned award is set aside and is substituted by one in conformity with the settlement.
There will be no order as to costs.
P.B.R. Appeal allowed.
| IN-Abs | In conciliation proceedings in relation to the demands of one of the two unions (known as Sanghatana) of workers of the appellant company a settlement wat reached.
At the instance of the second union (Telco Union) which was dissatisfied with the settlement, the Government referred the dispute to the tribunal.
Before the tribunal the company contended that since 564 out of 635 daily rated workers to whom the settlement reached by the Sanghatana related, had assented to it, the dispute no longer survived.
Rejecting the Telco Union 's is contention that the settlement was vitiated by duress, coercion or false promises, the tribunal held that it was binding on the parties under section 18 (1) read with section 2 (p) of the Industrial Disputes Act.
The tribunal, however, held that it had not been proved by either party as to how many of the 564 workmen, who had assented to the settlement, were members of the Sanghatana.
Although the tribunal found that the settlement was just and fair in most aspects it held that an increase in the additional daily wages was called for in respect of certain categories and calculated the increase separately for each grade.
The tribunal refused to act upon the settlement.
Allowing the appeal, ^ HELD: The declaration signed by 564 workers of the company constituted presumptive proof of the fact that the signatories to it were all members of the Sanghatana when they signed it.
In the absence of any evidence that any of the signatories to the declaration was not one of the 635 workers or that any signature appearing in the declaration was forged or fictitious the assertion of each signatory that he was a member of the Sanghatana is to be presumed to be correct until it is shown to be false.
The onus to prove the falsity of the assertion in the case of any particular workman rested on the Telco Union which made no attempt to discharge the burden.
Out of 635 workmen, 564 signed the declaration.
The fact that 400 workmen later on challenged the settlement only leads to the inference that at least 329 workmen changed sides afterwards.
[932 H; 933A C] 930 The conclusion of the tribunal that the settlement was not just and fair is unsustainable.
The settlement as a whole was just and fair.
If the settlement had been arrived at by a vast majority of the concerned workmen with their eyes open and was accepted by them in its totality, it must be presumed to be just and fair and not liable to be ignored while deciding the reference merely because a small number of workers were not parties to it or refused to accept it or because the tribunal was of the opinion that the workers deserved marginally higher emoluments than they themselves thought they did.
The question whether a settlement is just and fair has to be answered on the basis of principles different from those which come into play when an industrial dispute is under adjudication.
[933 G H] Herbertsons Limited vs Workmen of Hetbertsons Limited & others, [197 /] 2 S.C.R. 15 followed.
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