MUNICIPAL COMMITTEE, AMRITSAR & ANR.

STATE OF PUNJAB & ORS.

January 30, 1969

[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]

Punjab Cattle Fairs (Regulation) Act (6 of 1968) as amended by Amending Act 18 of 1968, ss. 2(bb), 4, 15 and 23-0riginal Act without definition in s. 2(bb) of cattle fair, if vague-Whether Act can be struck down on.rhe ground of vagueness and eOect of striking down-If Act ceases to have existence in law-Decision before amendment if res judicata be- [l1:een parties aft, er amendment-Act creating monopoly in State if violates Art. !9(l)(b), (d), (/) and (g) of the Constitution-Scope of s. 4--S.

15 if violative of Art. 19(1)(/)-Municipal Committee if citizen-If can con1plain of violation of Art. 19-Direction regarding property of Municipal Com1nittee aniounting to requisition-JJ violative of Art. 32-Directions regarding atnenities-lf authorised by Act.

Jn the State of Punjab .local authorities and individual owners c:lf land were holding cattle fairs.

The Punjab Cattle Fairs (Regulation) Act, 1967, was passed by the State Legislature in exercise of pawers under entry 28 of List II of VII Schedule to the Constitution, declaring a monapoly in the State ta hold cattle fairs and prohibiting all local authorities and individuals from holding cattle fairs at 'any place in the State'.

There was no definition of the expression 'cattle 'fair' in the Act.

The validity of the Act was challenged on the ground that the provisions of the Act were 'vague and ambiguous\ and the High Court, in Mohinder Singh Sawhney v. State of Punjab, A.I.R. 1968 Punj. 391, accepted the conten tion. The State Legislature thereupon, by Amendment Act 18 of 1968 introduced s. 2(bb) defining the expression 'cattle fair' to mean 'a gathering of more than 25 persons for the purpose of general sale or purchase of cattle'.

Fair Officers were appointed under s. 4(1) of the Act, and under s. 4(2) they declared certain areas as fair areas. Some of the areas so declared belonged to a Municipal Committee in the State. The Municipal Committee, a lessee from the Municipal Committee and some residents in the State, challenged the Act in this Court on the following grounds :-

(I) Since the Act was struck down in Mohinder Singh Sawlmey's case, the Act ceased to have any existence in law and could not therefore be amended;

(2) The order of the High Court in that case operated as res judicata bet\\1een the parties and could not be enforced without a re-enactment of the Act:

(3) The Act violated Arts. !9(l)(b), (d), (f) and (g); and

(4) Section 15 c:lf the Act, which authorises the State to call upon a Panchayat Samiti or a Municipal Committee within whose jurisdiction the fair is held to deposit a prescribed amount in the Cattle Fair Fund to cover the initial expenses of the fair and compels the local authority to abide by the directions, was invalid.

H The Municipal Committee also challenged the demand by the Fair Officer, asking the Municipal Committee to supply water, electricity and to make sanitary arrangements and to make the staff articles and offices of the Municipal Committee available to the Fair Officer.

HELD : ( i) The Act as originally enacted was not vague.

When the A Legislature did not furnish a definition of 'cattle fair' it must be deemed to have used the expression in its ordinary signification, as meaning a periodical concourse of buyers and sellers in a place, generally for sale and purchase of cattle, at times or on occasions ordained by custom.

(454 C-EJ

But even if it was vague it could not have been struck down on that ground. The High Court in Mohinder Singh Sawhney's case struck down B the Act on the ground of vagueness on the assumption that. the validity of the Act was liable to be adjudged by the test of 'due process of law'. But this Court, in A. K. Gopalan v. State of Madras, [1950] S.C.R. 88, held that the doctrine of due process has no place in our Constitution. Superior Courts in India may declare a law invalid, if the Legislature has no power to enact the law or if the law violates any elf the fundamental rights guaranteed in Part III of the Constitution or is inconsistent with any constitutional ptovision, but not on the ground that it is vague. There..

C fore, as a result of the judgment of the High Court the Act did not cease to have existence in law.

[453 C-D, G; 454 A-BJ

Kehar Singh v. The State of Punjab, (1969) 71 P.'L.R. 24, approved.

(2) The decision in Mohinder Singh Sawhney's case does not operate

a~ res judicata even in favour of the petitioners in that case.

Its effect was only that the Act was in law non-existent so long as there was no defi D nition of the expression 'cattle 'fair' in the Act.

But that defect has been remedied by the Amending Act. [454 B-C]

( 3) (a) The Act does not impose unreasonable restrictions upon the fundamental rights guaranteed under Art. 19(l)(b) and (d). It prohibits an individual or local authority from arranging a gathering of more than 25 persons for the purpose specified in the definition. The restriction was E only for the purpose of making the monopoly effective, and must be regarded as a reasonable restriction within the meaning of els. 19(3) and

(5) upon the freedom of assembly an.cl of free movement. [456 C-E]

(b) The Act is restricted in its scope and the freedoms guaranteed by Art. 19( I )(f) and (g) are also not infringed.

(D A law which is 'basically and essentially necessary' for creating a F State .monopoly arul thereby deprives the citizens of the right to carry on the same business is not, by virtue of Art. 19(6), open to challenge on the ground that it infringes the fundamental right guaranteed by Art. 19(1) (g). In the present case, the primary object elf the Act is to give a monopoly to the State to hold cattle fairs and as a necessary concomitant of that monopoly,, holding of cattle fairs by local authorities and individua!S is prchibited.

The law will not also be exposed to attack on the ground that the right to carry on business is property, for, the validity of G restrictions on the right to carry on occupation, trade or business, or to practice any profession must be adjudged only in the light of Art. 19(6).

Moreover, the presumption of reasonableness df a statute creating a mono .. poly in the State applies not only in respect of the right under Art. 19(1)(g) but also under Art. 19(l)(f). [456 E--0; 457 A-CJ

Akadasi Padhan v. State of Orissa, [1963] Supp. 2 S.C.R. 691, followed.

H State of Bihar'v. Rameshwar Pratap Narain, [1962] 2 S.C:R. 382 and M. V. P. Ramunni Kurup v. Panchayat Board, Badagara, A.l.R. 1954 Mad. 754, referred to.

MUNIC. COMMITTEE V. PUNJAB 449

(ii) The prohibition imposed upon all person• and authorities is in reopect of only cattle fairs and not in respect elf cattle markets, that is, places where the business of sale or plirchase is regularly conducted by private parties and not ao a fair. The Act does not prohibit anyone from carrying on the business of cattle market on his own land:

[455 E-F; 461 El

When the business is in the nature of a market for saie of sheep and goats brought by intending sellorli 'for slaughter, such a place cannot be called a fair.

A person carrying on his business in a cattle market on his own land need not take out a licence under s. 9 of the Act even though he was collecting brokerage and was carrying on the business elf a broker, because, it is only a person carrying on his business within a fair area, lJ1wfully declared, that is required to obtain the licence.

[460 F-HJ

(iii) Though the words used in s. 4 .are wide and are capable of the interpretation that the State could hold a ca!Ue fair at any place, it is implicit in ss. 3 and 4 that the monopoly acquired by the State to hold and manage cattle fairs is confined to property belonging to the State and does not extend t0 the property of local authorities or private owners.

[456 A-CJ

A Municipal Committee is not a 'citizen' within the meaning Of Art 19 and therefore, is not entitled to claim protection of any of the fundamental rights under Art. 19. But a direction to make municipal property available for holding a cattle fair by the State is a threat to requisition municipal property without authority of law, d is. not a mere direction to regulate the fair held on behalf of the Municipal Committee. Such a taking possession of property without payment of compensation as required by Art. 3i(l) must be deemed unauthorised ands. 23, giving the provisions of the Act a paramount operation. notwithstanding anything inconsistent in any other law, will not supersede the constitutional gu:trantee.

[458 E-G]

(4) Under s. 17(d), out of the Cattle Fair Fund, the amount recovered from a local authority may be reimbursed but the provision in s. 15, authorising the State to call upon a local authority to pay a sum of money towards the Cattle Fair Fund is an unreasonable deprivation of propect:T and violates the right under Art. 19(1) (f) and hence is inva)id. [457

C-E)

Also the demand made by the Fair Officer for assistance of the tall. articles and offices of the Municipality for holding a fair, and the deo1and for supi)ly of water and electricity and making suitable sanitary arrangements are not warranted by any provision of the Act, and must be declared invalid. [459 A-CJ

ORIGINAL JURISDICTION : Writ Petitions Nos. 295, 362, 365, 443 and 444 of 1968.

Petitions under Art. 3 2 of the Constitution of India for the enforcement of the fundamlltal rights.

H. R. Gokhale and Naunit Lal, for the petitioners (in W. P.

No. 295 of 1968).

H. R. Gokhale, Jagjit Singh Chawla, S. K. Mehta and K. L.

Mehta, for the petitioner (in W.P. No. 362 of 1968).

R. K. P. Shankar Dass, Bishambar Lal and H. K. Puri, for th~ petitioners (in W.P. No. 365 of 1968).

Jagjit Singh Chawla, S. K. Mehta l\llld K. L. Mehta, for tlle A petitioners (in W.P. Nos. 443 and 444 of 1968).

Niren De, Attorney-General, V. C. Mahajan and R. N. Sachthey, tor the respondents (in W.P. Nos. 295 and 362 of 1968).

V. C. Mahajan and R. N. Sachthey, for the responde.nts (in W.P. No. 365 of 1968).

R. N. Sachthey, for the respondents (in W.P. Nos. 443 and 444 of 1968).

The Judgment of the Court was delivered by Shah, J.

Cattle fairs are held for the last many decades in different parts of the territory of the State of Punjab, by local authorities and individual owners of land. The person or authority holding the cattle fair provides facilities to cattle owners for board and lodging and for stabling their cattle generally in consideration of charges including a percentage on the price realised by sale or purchase of cattle.

The Governor of Punjab with a view to control and regulate cattle fairs promulgated Ordinance No. 14 of 1967 on November 4, 1967, declaring a monopoly in the State of Punjab to hold cattle fairs and prohibiting all local authorities and individuals from holding cattle fairs "at any place in the State". This Ordinance was replaced by the Punjab Cattle Fairs (Regulation) Act 6 of 1968. Bys. 3 of the Act it is provided :

"(1) The right to hold a cattle fair at any place in the State of Punjab and to control, manage, and regulate such fair shall vest exclusively in the State Government and shall be exercisable by it, in accordance with the provisions of this Act and the rules made thereunder, through such persons or authorities as it may deem fit.

(2) ; Notwithstanding anything contained in any other law for the time being in force and save as provided by sub-section ( 1), it shall be unlawful for any person or local authority to hold, control, manage or regulate a cattle fair at any place in the State of Punjab." The expression "cattle" is defined by s. 2(b) as including a buffalo, camel, cow, donkey, elephant, goat, horse mule, sheep and their young-ones and such other animals as the State Government may by notification specify. By s. 4(1) authority is vested in the State Government io appoint Fair Officers for holding, controlling, managing nnd regulating cattle fairs in a district.

By sub-s. (2) the Fair Officer is made responsible for making arrangements in respect of all matters connected with the holding of a cattle fair and its proper control, management and regulation '

and has also the power of-(i) defining the fair area; (ii) rescrva tion of sites or places for latrines, urina}s, baths, shops, exhibitions, shows, demonstrations, foot-baths for animals, water supply for drinking purposes, shelters, green and dry fodder, entertainment and similar other purposes necessary in connection with the cattle fair; (iii) allotment of sites temporarily for commercial or other purposes in connection with the cattle fair, authorisation of raising of structures on such sites, and fixation of rents for such sites in the prescribed manner; (iv) arrangements for watch and ward, lighting, medical first aid, veterinary aid, sanitation, tentage and other facilities as may be necessary in connection with the cattle fair; and ( v) construction of temporary offices for the purpose of collecting taxes and fees imposed and levied in connection with the cattle fair. The expression "fair area" is defined iin s .. 2 ( d) as meaning "such area within a district as may be specified by a fair officer for the purpose of holding a cattle fair". By s. 5 power is conferred upon the State Government to impose in a fair area during the continuance of a cattle fair, tolls on vehicles entering such area for business purposes and octroi duty on goods brought for sale within such area.

Jurisdiction of the local authorities to levy taxes and fees in any fair area in connection with the fair is excluded by s. 6. By s. 8 it is provided that no person shall sell cattle at a. cattle fair unless the has obtained a registration certificate in respect of cattle to be sold. Section 9 provides for licensing of brokers. By s. 15 the State Government is authorised to direct the Panchayat Samiti or Municipal Committee, in whose jurisdiction the fair is to be held, to deposit in the Cattle Fair Fund the prescribed amount, not exceeding one thousand rupees, to cover the initial expenses of the fair and the locai authority so directed is enjoined to comply with tlte direction. Section 16 provides for the setting up of a Cattle Fair Fund in which all fees, rent or other sums of money (not being tolls and taxes) received or realized under the provisions of the Act or the rules made thereunder, and all donations or grants made to the Fund by the State Government, a local authoritR_ or any other person are to be credited. By s. 18 penalties are prescribed for contravention of the provisions of sub-s. (2) of s. 3. Power is conferred by s. 21 to make regulations to provide against the outbreak or spread of fire and for certain other matters. By s. 22 the State Government is authorised to make rules for carrying out the purposes of the Act. The Act, however, as originally enacted contained no definition of the expression "cattle fair".

Validity of the Punjab Cattle Fairs (Regulation) Act, 1967 was challenged in a group of petitions moved before the High Court of Punjab by persons interested in holding cattle fairs:

Mohinder Singh Sawhney v.

State of Punjab and Others(').

Before the High Court one of the contentions raised by the

(I) A.I.R. [1968] Punjab 391.

petitioners was that the provisions of the Act were "vague and ambiguous'', and on that account the Act was u/t; a vires. The Court accepted that contention.

The Court observed that there was a distinction between a "cattle market" and a "cattle fair" and since no definition of "cattle fair" was supplied by the Act it was left to the executive authorities to determine what a "cattle fair" was and on that account "the infirmity went to the root of the matter, and the Act was liable to be struck down in its entirely on the ground of vagueness, even if some of its provisions were unexceptionable in themselves".

The State Legislature then enacted the Punjab Cattle Fairs (Regulation) Amendment Act 18 of 1968 which introduced by s. 2(bb) a definition of the expression "cattle fair" as meaning "a gathering of more than twenty-five persons for the purpose of general sale or purchase of cattle". Fair Officers were appointed by the State Government and they issued notifications declaring certain areas as "fair areas".

A number of petitions were again moved in the High Court of Punjab for an order declaring invalid the Act as amended. The High Court of Punjab dismissed the petitions, upholding the validity of the Act: Kehar Singh v.

The State of Punjab & Another('). The Court in that case held that the definition of "cattle fair" was not intended to bring within its compass sales by private individuals outside fair areas: it was intended only to apply where in general, people assemble at some place for the purpose of buying and selling cattle and the number of persons exceeds

twenty-five, and that Act 6 of 1968 as amended by Act 18 of 1968 "does not contravene the provisions of Arts. 19 ( l )( f) & ( g) of the Constitution".

Certain persons interested in conducting cattle fairs have filed writ petitions in this Court.

Arguments which are common in all the petitions may first be considered.

We are unable to accept the argument that since the High Court of Punjab by their judgment in Mohinder Singh Sawhney's case(') struck down the Act, Act 6 of 1968 had ceased to have any existence in law, and that, in any event, assuming that the judgment of the Punjab High Court in Mohinder Singh Sawhne.v's case(') did not make the Act non-existent, as between the parties in whose favour the order was passed in the earlier writ petitions, the order operated as res i.udicata, and on that account the Act could not be enforced without re-enactment.

The High Court of Punjab in Mohinder Singh Sawhney's case(') observed at p. 396 :

(I) (1969) 71 P.L.R. 24.

(2) A.J.R. (19681Punjab391.

MUNIC. COMMITTEE V. PUNJAB (Shah, /,) 453

" . . . . in our opinion the petitions must succeed on the ground that the legislation is vague, uncertain and ambiguous.",

and also (at p. 394) that-. ". . . . as the infirmity of vagueness goes to the root of the matter, legislative enactment has to be struck down as a whole even if some of its provisions are unexceptionable in themselves."

But the rule that an Act of a competent legislature may be "struck down" by the Courts on the ground of vagueness is alien to our Constitutional system.

The Legislature of the State of Punjab was competent to enact legislation in respect of "fairs" vide entry 28 of List II of the Seventh Schedule to the Constitution.

A law may be declared invalid by the superior Courts in India if the Legislature has no power to enact the law or that the law violates any of the fundamental rights guaranteed in Part Ill of the Constitution or is inconsistent with any constitutional provision, but not on the ground that it is vague.

It is true that in Claude C. Connally v. General Construction Company(') it was held by the Supreme Court of the United States of America that :

"A statute which either forbids or requires the doing of an act in terms so vague that men oi common inteHigence must necessarily guess at its meaning and differ as to its application violates the first essential of due process of law."

But the rule enunciated by the American Courts has no application under our Constitutional set up.

The rule is regarded as an essential of the "due process clauses" incorporated in the American Constitution by the 5th & the 14th Amendments. The Courts in India have no authority to declare a statute invalid on the ground that it violates the "due process of law". Under our Constitution, the test of due process of law cannot be applied to statutes enacted by the Parliament or the State legislatures. This Court has definitely ruled that the doctrine of "due process or law" has no place in our Constitutional system: A. K. Gopailitl

v. The State of Madras('). Kania, C.J., observed (at p. 120J.

"There is considerable authority for the statement that the Courts are not at liberty to declare an Act void because in their opinion it is opposed to a spirit supposed to pervade the Constitution but not expressed in words. . . . . it is only in express constitutional provisions limiting legislative power and controlling the temporary will of a majority by a permanent and paramoupt law settled by the deliberate wisdom of the nation that one

(!) 70 L. Etln. 322.

(2) [1950] S.C.R. 88.

can find a safe and solid ground for the authority of A Courts of Justice to declare void any legislative enactment." The order made by the High Court in Mohinder Singh Sawhney's case(') striking down the Act was passed on the assumption that the validity of the Act was liable to be adjudged by the test of "due process of law''.

The Court was plainly in error in so B assuming. We are also unable to hold that the previous decision

op:rtes as res judicata even in favour of the petitioners in whose peht1ons an order was made by the High Court in the first group of p:titions. The c:ffect of that decision was only that the Act was m law, non-existent, so long as there was no definition of the expression "cattle fair" in the Act.

That defect has been c

1 remedied by the Punjab Act 18 of 1968.

We may hasten to observe, that we are unable to agree that the Act as originally enacted was unenforceable even on the ground of vagueness. It is true that the expression "cattle fair" was noi defined in the Act.

The Legislature, when it did not furnish the definition of the expression "cattle fair" must be deem- D ed to have used the expression in its ordinary signification, as meaning, a periodical concourse of buyers and sellers in a place generally for sale and purchase of cattle at times or on occasions ordained by custom.

We agree with the High Court that by enacting the Act the State was not attempting to prevent all transactions for sale and purchase of cattle. The State took upon itself by the Act a monopoly of conducting fairs, but it did not thereby seek to monopolise all transactions of sale and purchase in cattle. This is now made clear by the definition of "cattle fair" ins. 2(bb).

A law which vests in the State a monopoly to carry on a certain trade or business to the extent that it has direct relation to the creation of the monopoly, is not open to challenge on the ground of violation of the freedom guaranteed by Art. 19 (1) (g). As pointed out by this Court in Akadasi Padhan v. State .of Orissa( 2 ) (at p. 707) :

" 'A law relating to' a State monopoly cannot, in the context [of Art. 19(l)(g)] include all the provisions contained in the said Jaw whether they have direct relation with the creation of the monopoly or not. expression should be construed to mean the law relating to the monopoly in its absolutely essential features. If a law is passed creating a State monopoly, the Court should enquire what are the provisions of the said law which are basically and essentially necessary for creating the

(I) A.l.R. (1968] Punjab 391

(2) [l 963] Supp. 2 S.C.R. 691.

MUNIC. COMMITTEE v. PUNJAB (Shah,/.) 455

State monopoly.

It is only those esoential and basic provisions which are protected by the latter part of Art. 19 ( 6). If there are other provisions made by the Act which are subsidiary, incidental or helpful to the operation of the monopoly, they do not fall under the said part and their validity must be judged under the first part of Art. 19 ( 6) . In other words, the effect of the amendment made in Art. 19 ( 6) is to protect the law relating to the creation of monopoly and that means that it is only the provisions of the law which are integrally and essentially connected with the creation of the monopoly that are protected.

The rest of the provisions which may be incidental do not fall under the lattet part of Art. 19(6) and would inevitably have to satisfy the test of the first part of Art. 19(6)." The provisions of the Act which seek to monopolise for the State the right to carry on cattle fairs are protected against the challenge that they put an unreasonable restriction upon persons carrying on the occupation of holding cattle fairs.

What is implicit in the grant of a monopoly to the State is expressly enacted in s. 3 (2) that no other person or authority may conduct a cattle fair at any place in the State of Punjab.

But the restriction operates only in respect of cattle fairs and not other trades or occupations relating to dealings in cattle.

The Act is restricted in its scope: the prohibition imposed upon all persons and authorities restraining them from holding, controlling managing and regulating cattle fairs at any place in the State of Punjab extend only to cattle fairs strictlv so-called, and not to cattle markets.

The monopoly declared by the Act does not invest the State with the monopoly to conduct cattle markets, i.e. places where the business of sale or purchase is regularly conC:ucted by private parties and not as a fair.

Any attempt made by the Officers of the State claiming to exercise authority under the Act to prohibit cattle markets is without authority of law.

The Act also does not invest the State with authority to declare private property of an individual or of a local authority, a fair area.

Section 4 (2) enables the Fair Officer to define a fair area, to reserve sites or places for certain facilities, to make temporary allotment for commercial and other purposes and to arrange for watch and ward and for construction of temporary

offics. The Cattle Fair Officer is not thereby authorised to hold fairs on lands not belonging to the State.

In defining a "fair area" and in making reservation, allotment, construction and arrangements of the nature mentioned in els.

(i) to (v) of sub-s.

(2) of s. 4 the Cattle Fair Officer cannot trespass upon private property. It is implicit in the provisions of the Act that the State will hold cattle fairs on its own lands and not on private lands.

The words used in s. 4 are wide and may be capable of the interpretation that the right to hold, control, manage and regulate a cattle fair at any place in the State of Punjab under s. 3 ( 1) authorises the State to hold, control, manage and regulate fairs ir. all places including private lands. But it would be reasonable to interpret the Act, so as not to authorise violation of the fundamental rights guaranteed by Arts. 19 and 31 of the Constitution. It is implicit in the provisions of ss. 3 & 4 of the Act that the monopoly acquired by the State to hold and manage cattle fairs may be held on property belonging to the State and does not extend to the property of local authorities or private owners.

The contention that the provisions of the Act, and especially the definition of "cattle fair" in s. 2(bb), impose unreasonable restrictions upon the fundamental rights guaranteed under Art. 19(1) (b) & (d) has, in our judgment, no substance. The definition of cattle fair in s. (bb) does not infringe the right of citizens under Art. 19(1) (b) to assemble peaceably and witho.ut arms, and the right under Ar.t. 19 (!) ( d) to move freely throughout the territory of India. By the definition clause concourse of twentyfive persons is not prohibited: the Act does not place restrictions upon the freedom 0f assembly or of free movement either under

cl. (b) or cl. ( d) of Art. 19 (1 ) . The Act only prohibits an individual or local authority from arranging a gathering of more than twenty-five persons for the purpose specified in the definition of "cattle fair".

The restriction for the purpose of making the monopoly effective must be regarded as reasonable within the meaning of els. (3) & (5) of Art. 19.

By imposing restrictions upon the right to hold a fair, the citizens are not deprived of their property, and the freedom guaranteed by Art. 19 ( 1 )( f) is not infringed. The primary object of the Act is to give a monopoly to the State to hold cattle fairs.

As a necessary concomitant of that monopoly, holding of cattle fairs by local authorities and individuals is prohibited. The prohibition flows directly from the assumption of monopoly by the State and falls within the terms of Art. 19(6) of the Constitution. It is a provision of the law creating monopoly "basically

and essentially necessary" for creating . the State monopoly to prevent other persons from conducting the same business.

Our attention was invited to the decision of this Court in State of Bihar v. Rameshwar Pratap Narain Singh and Others(') and to a decision of the Madras High Court in Mandivil Vania Pudukudi Ramunni Kurup and Others v. PaT?Chayat Board, Badagara and Others(') in support of the plea that a right to hold a fair is property.

But .those cases have no bearing on the question arising in these petitions.

A law which creates a monopoly to

(1) [1962] 2 S.C.R. 382.

(2) A.LR. [1954] Mad, 754.

\, G

A carry on a business in the State and thereby deprives the citizens of the right to carry on that business by virtue of Art. 19(6) is not open to challenge on the ground that it infringes the Fundamental right guaranteed by Art. 19 (1 )(g) : The law will not also be exposed to attack on the ground that the right to carry on business is property, for the validity of restrictions on the right B to carry on occupation, trade or business, or to practise any profession must be adjudged only in the light of Art. 19(6). In any event the presumption of reasonableness of a statute creating a monopoly in the State may come to aid not only in respect of the claim to enforce the right under Art. 19 (1 ) ( g) but unuer Art. 19( I )(f) as well.

C Section 15 which authorises the State to call upon a Panchayat Samiti or a Municipal Committee, within whose juiisdiction the fair is to be held to deposit in the Cattle Fair Fund the prescribed amount, not exceeding one thousand rupees to cover the initial expenses of the fair and compelling the local authority to abide by the directions, is invalid.

It is clearly a provision for D deprivation of property. Reasonableness of such a provision was not set up either in the affidavit or in the arguments before us. It is true that under s. 17 ( d) out of the Cattle Fair Fund the amount which has been recovered from a local authority may be reimbursed, but the provision authorising the State to call upon a local authority to pay a sum of money towards the Cattle Fair Fund is, in our judgment, unreasonable and must be declared in- E _ valid. The learned Attorney-General appearing on behalf of the

State of Punjab did not seek to support the provision.

To sum up, the power which the State Government may exercise. to declare a fair area and to make provision for reservation of sites, allotment of sites temporarily for commercial or other purposes, and to arrange for watch and ward and to construct temporary offices may be exercised only on lands belonging to the State. No such power may be exercised in respect of lands owned by local authorities or individuals. The monopoly which is acquired by the State by s. 3 is a monopoly to hold, control, manage and regulate a fair and not a cattle market business. An attempt to prevent persons from conducting the business of cattle markets and from holding, controlling, managing and regulating cattle markets is unauthorised, for by s. 3 private individuals, local authorities and associations incorporated or not are prohibited only from holding cattle fairs and not cattle markets.

In the light of these principles we proceed to examine the H .claims1made in the five petitions.

The Fair Officers have not made any declaration of fair areas which include the lands of the petitioners in Writ Petitions Nos.

362, 443 & 444 of 1968. In respect of the lands of the petitioners in Writ Petitions Nos. 295 and 365 of 1968 a notification defining a fair area has been made.

Writ Petition No. 295 of 1968 This petition is filed by the Municipal Committee, Amritsar.

By letter dated August 26, 1968, the Deputy Commissioner, Amritsar, informed the Municipal Committee that a cattle fair was intended to be held as scheduled on the "Cattle Fair Ground (Mal Mandi)", under the management of the District Fair Officer, and the Municipal Committee was required to arrange to supply water and electricity, to make suitable sanitary arrange ments, to deposit the income from Baisakhi Cattle Fair in Government Treasury in Cattle Fair Fund and to deliver the record in that behalf to the Fair Officer.

The Sectjon Officer, District Amritsar, also served an order, purported to be made under s. 4(2)(i) read with s. 2(d) of the Punjab Cattle Fairs (Regulation) ct, 1967, specifying the fair area, for the purpose of controlling, managing, regulating and holding the Cattle Fair from October 16, 1968 to October 27, 1968, at Ram Ttilui Ki Mandi described as "2 Kilometres from the main building situated in Cattle Fair Ground at Ramtabi (Mal Mandi) Amritsar".

A Municipal Committee is not, according to the decisions of this Court, a "citizen" within the meaning of Art. 19. The Municipal Committee is, therefore. not entitled to claim protection of any of the fundamental rights under Art. 19. But the State is incompetent to declare land belonging to the Municipal Committee as falling within the fair area, and to take possession of that land in exercise of the power conferred by the Act, without providing for payment of compensation guaranteed by Art. 31(2).

The Municipal Committee is by order of the Fair Officer deprived of its property for the duration of the fair.

The Act does not authorise the holding of cattle fairs on the land of local authorities, individuals or .associations. A direction to make Municipal property available for holding a cattle fair by the State is a threat to requisition municipal property without authority of law and without payment of compensation, and must be deemed unauthorised.

Section 23 of the Act which gives the provisions of the Act a paramount operation, notwithstanding anything inconsistent therewith contained in any other Jaw for the time being in force wiH not supersede a constitutional guarantee.

It was argued on behalf of the State that by the order only directions to control, manage and regulate the fair held on behalf of the Municipal Committee were intended to be given. But that is not the effect of the order passed by the Deputy Commissioner.

The Deputy Commissioner informed the Municipal Committee that possession of its land should be handed over so that the State

may be able to hold the fair under the provisions of the Punjab Cattle Fairs (Regulation) Act, 1967. Section 3(1) is intended only to provide for a monopoly in the State to hold cattle fairs and to control, manage and regulate such fairs.

The demand made by the Fair Officer asking the Municipal Committee to sup ply water, electricity and to make sanitary arrangements and make the staff, articles and offices of the Municipal Committee avail.able to the Fair Officer is not warranted by any provision of the Act.

The notification issued by the Fair Officer defining the fair area inclusive of the land of Mal Mandi is, therefore, unauthorised.

The demand made by the Fair Officer for assistance of the "staff,

articles and offices of the Municipality" for holding the fair and the demand for supply of water and electricity and making suitable sanitary arrangements is also uncalled for and unauthorised.

The directions must, therefore, be declared invalid.

Writ Petition No. 362 of 1968

The petitioner is Sardara Singh. He claims that he is in lawful possession of a piece of land situated in village Hussainpur, Tahsil and District Rupar (Punjab), and that for the last ten years he holds a cattle market on that piece of land from the first to the fourth of every month. He also asserted that he has been holding cattle markets on the lands in his lawful possession at Kurali, Anandpur Saheb, Marunda (District Rupar) within the State of Punjab.

According to the petitioner, for the purpose of holding cattk markets on the lands in his occupation at Hussain pur, the petitioner had constructed a well for providing water to the cattle, with sheds, and mangers. He further claimed that he provides chaff cutters, tents, charpais and all other amenities which are essential for the cattle and the merchants.

It appears from the averments made by the petitioner that he is holdin~ cattle fairs.

No declaration was made defining any fair area which included the lands of the petitioner. The State, for reasons already set out, is not entitled to hold a cattle fair on the land in the occupation of the petitioner without providing for compensation as guaranteed under Art. 31 (2). But on that account the petitioner is not entitled to hold a cattle fair even on his own lands.

Writ Petition No. 365 of 1968

The petitioner is Jagtar Singh.

He claims that he has obtained for the period April 1, 1968 to March 31, 1969, from the Municipal Committee, Amritsar, a piece of land on lease called the Ahata near the "Butcher Khana" known as "Adda Bakar Mandi". The land is used for an enclosure for sheep and goats brought for sale.

The petitioner states that he has constructed near the Butcher-Khana ten kothas around a vacant piece of land for enclosure of goats and sheep brought by prospective seJ.Jers and

. has also constructed some rooms where he provides board and lodging to the merchants who come to Adda Bakar Mandi in connection with their business. He has set out in his petition the manner in which the business is carried on and the charges made . by him. It may be sufficient to mention that the petitioner claims that he conducts a cattle market and not a cattle fair.

The Fair Officer issued a declaration under s. 4(2) (i) read withs. 2(d) of the Punjab Cattle Fairs (Regulation) Act, 1967, specifying "2 Kilometres from the main building situated in the Cattle Fair Ground at Bakar Mandi outside Lahori Gate" as a fair area for the purpose of controlling, managing, regulating and holding the Cattle Fair, Amritsar, at Bakar Mandi outside Lahori Gate.

The Fair Officer also address.ed a letter to the petitioner dated October 25, 1968, informing him that the Punjab Government had exclusively undertaken the work of holding, managing, controlling and supervising the Cattle Fairs under s. 3 of the Punjab Cattle Fairs (Regulation) Act, 1967, and that the petitioner who was carrying on the business of holding a cattle fair should stop running the Bakar Mandi. The Fair Officer informed the petitioner that the ground of the Bakar Mandi had already been specified as fair area by him and on. that account the petitioner was prohibited to work as commission agent, unless he got a broker's licence under the Act.

The land in respect of which the declaration has been made as fair area is the land of the Municipal Committee, of which under a licence or a lease the petitioner is in possession.

For reasons which we have already set out, the Government of Punjab is not competent to declare the land of the Bakar Mandi a fair area. The notification declaring the Bakar Mandi as fair area is, therefore, invalid.

By s. 3 of the Act the cattle fairs can be held in the State of Punjab only by the State and by no other person.

But prima fade the business , carried on by the petitioner is in the nature of a market for sale of sheep and goats brought by intending sellers for slaughter. Such a place cannot be called a fair.

It was urged on behalf of the State that since the petitioner was cqllecting brokerage and carrying on the business of a broker, he was bound to take out a licence under s. 9 of the Act. But a person carrying on his business within the fair area lawfully declared is required to obtain a licence, but not in respect of his business in a cattle market.

The petition filed by Jagtar Singh must, therefore, be allowed and the ord.er declaring the petitioner's land as fair area and the intimation calling upon him to stop his business of cattle market '.is unauthorised.

Writ Petition Nos. 443 & 444 of 1968

The petitioners in these petitions are Narain Singh and another. They claim that they are in "legal possession" of different pieces of land taken on lease within the State of Punjab at Khanna, Doraha (District Ludhiana), Sunarn (District Sangrur) and also 1 in other Districts where they have been holding cattle markets for the last many years. They claimed that they provide the prospective sellers and purchasers facilities like cots for resting, drinking water, sheds, mangers, chaff-cutters, tents, light, chowkidars, dry fodder and all other essential amenities. They further claimed that the intending vendors come to their lands with cattle and sell the cattle, bargains being struck through brokers in the rnarket C arranged by the petitioners on those pieces of land.

. It is not clear from the aveiments made in the petitions whether the so-called market is of the nature of a fair. The petitioners are prohibited from holding or conducting a cattle fair, since the enactment of Punjab Act 6 of 1968. The lands belonging to the petitioners have not been included in a cattle fair area under the notification issued by the Fair Officer.

Without deciding the question whether the business carried on by the petitioners is in the nature of a fair or a market, we declare that the petitioners are not entitled to carry on the business of a cattle fair and the relief claimed by !hem in Paragraph-21 (b) cannot be granted.

We deem it necessary to add that the petitioners are not prohibited from carrying on the business of cattle market on their own lands.

There will be no order as to costs in these pc.titians.

V.P.S.

8 Sup Cl/69-11

MUNICIPAL COMMITTEE, AMRITSAR & ANR

STATE OF PUNJAB & ORS

January 30, 1969

C. SHAH

V. RAMASWAMI

A. N. GROVER, JJ.

ss. 2(bb), 4, 15 and 23

s. 2(bb)

s. 4

S.

15

Art. 19(1)(/)

Art. 19

Art. 32

State of Punjab

s. 2(bb)

s. 4(1)

s. 4(2)

Mohinder Singh Sawlmey

Section 15

Mohinder Singh Sawhney

India

Art. 19(l)(b)

Art. 19( I )(f)

Art. 19(6)

Art. 19(1)

Art. 19(6)

Art. 19(1)(g)

Art. 19(l)(f)

s. 9

s. 4

ss. 3 and 4

Art 19

Art. 19

Art. 3

s. 17(d)

s. 15

Art. 19(1)

Art. 3

Constitution of India

H. R. Gokhale

Naunit Lal

Jagjit Singh Chawla

S. K. Mehta

K. L.

Mehta

R. K. P. Shankar Dass

Bishambar Lal

H. K. Puri

K. L. Mehta

Niren De

V. C. Mahajan

R. N. Sachthey

V. C. Mahajan

R. N. Sachthey

Shah

Punjab

November 4, 1967

s. 2(b)

s. 4(1)

s. 5

s. 6

s. 8

Section 9

s. 15

Section 16

s. 18

s. 3

s. 21

s. 22

High Court of Punjab

s. 2(bb)

Arts. 19

Punjab High Court

Mohinder Singh Sawhne.v's

Legislature of the State of Punjab

Seventh Schedule

Parliament

Kania

Art. 19

Art. 19(l)(g)

State monopoly

Art. 19

Art. 19

Art. 19

Art. 19(6)

Art. 19(6)

s. 3

Section 4

s. 4

s. 4

s. 3

Arts. 19 and 31

ss. 3 & 4

s. 2(bb)

Art. 19(1)

Art. 19(1)

Art. 19

Art. 19

Art. 19

Art. 19(6)

Madras High Court

[1962] 2 S.C.R. 382

Art. 19(6)

Art. 19

Art. 19(6)

Art. 19

Art. 19( I )(f)

Section 15

s. 17

State of Punjab

s. 3

s. 3

Municipal Committee, Amritsar

August 26, 1968

Amritsar

s. 4(2)(i)

s. 2(d)

October 16, 1968

October 27, 1968

Art. 19

Art. 19

Art. 31(2)

Section 23

Section 3(1)

Sardara Singh

Hussainpur

Rupar

Kurali

Anandpur Saheb

Marunda

Hussain pur

Art. 31

Jagtar Singh

March 31, 1969

s. 4(2)

Punjab Government

s. 3

Government of Punjab

s. 3

s. 9

Narain Singh

Khanna

Doraha

Ludhiana

Sunarn

Sangrur

hem

S.

8


i>i.JRGA DAS kHANNA

COMMISSIONER OF INCOME-TAX, CALCUTTA

January 30, 1969

[J.C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]

lncome•tax--CapitaL or Revenue-Thirty years lease of cine1na- Lessee contributing part of 1noney for construction of cinema-No stipulation that it wt:t.· to be trea1ed as advance rent or salami-Nature of re .. ceipt-Whether taxable.

On July 19, 1945 the asscssee took on lease certain premises in Cal-,, cutta on a monthly rentaJ.

He made some alterations in the premises so as to convert it into a cinema house but found himself shore of money.

As permitted by the terms of his lease he leased the premises on February 23, 1946 to certain parties.

According to the terms of the indenlure the lessees agreed to pay him Rs. 55,200 towards construction of the cinema house which would on completion be let to them , at a monthly renLal of Rs. 2,100 payable with effect from June I, 1946. The Income-tax authorities treated the sum of !ls. 55,200 thus received as taxable and the High Court on reference held '!1e same.

In .appeal by the. assessee this Court had to consider whether the receipt was taxable.

HELD : (i) The departmental authorities as well as the High Court were in error in treating the amount of Rs. 55,200 as advance payment of rent.

The lease by which the cinema house was demised did not contain any condition or stipulation from whi'ch it could be inferred that the aforesaid amount had been paid by way of advance rent. The transaction embodied in the indenture o! lease was clearly business-like. The lessees wanted the building for running it as a cinema house and the lessor agreed to give it to them but apparently represented that he did not have enough money to complete it in accordance with the suggestions and re quirement of the lessees.

The lessees agreed to pay him the aforesaid amount by way of a lump :$Um without making any provision 1for its ad~ justment towards the rent or repayment by the lessor. 10n the terms of the lease and in the absence of any other material or evidence it could not be held that the sum of Rs. 55,200 was paid by way of advance rental. [465 G-466 BJ

(ii) The question whethe1 premium is a capital or a revenue receipt cannot be decided as a pure question of law.

Its decision necessarily depends upon the facts and circumstances of each case.

It would not however be wrong to say that prima fac:ie premium or salami is not income and it would be for the income-tax authorities to show that facts exist which would make it a revenue receipt.

{467 B]

According to the terms of the lease, in the present case, the payment of rent was to commence not from the date of the lease which was February 23, 1946 but with effect from June I, 1946.

The lessees entered into possession after the cinema house had been completed which was subsequent to the date of the lease.

These facts coupled with the payment of ; t. lump sum which was of a non-recurring nature showed that "the etmoun.t

in question had all the char<.icteristics of a capital payment and was not revenue.

[467 C-D]

Jienriks." v. G1u}lvfi /fo1d Ltd., 24 T.C. 453, Commissioner of Income-tax, Bihar & Orissa v. Visweshwar, [1939] 7 I.T.R. 536 and

A Member for the Board of Agricultural Income-tax v. Sindhurani Chaudhurani & Ors., [1957] 32 l.T.R. 169, applied.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 873 of 1966.

Appeal by special leave from the judgment and order dated

8 March 26, 1 \165 of the Calcutta High Court in I. T. Ref. No. 107 of 1960.

Sukumar Mitra and D. N. Mukherjee, for the appellant.

Niren De, Attorney-General, S. C. Manchanda and R. N.

Sac ht hey, for the respondent.

The Judgment of the Court was delivered by Grover, J, This is an appeal by special leave from the judgment of the Calcutta High Court in an Income tax Reference in which the question that had to be answered by the High Court was "whether on the facts and circumstance of the case the sum oi Rs. 55,200/- was a revenue receipt being rent received in advance thus liable to be taxed ?"

On July 19, 1945, the assessee took on lease premises No. 157 Upper Circular Road, Calcutta for a term of 99 years on a monthly rental of Rs. 750/-. It was stipulated inter-alia that the lessee could assign the lease with the consent of the lessor.

He could after the structures on the premises so as to convert them into a cinema if necessary.

After expending Rs. 35.000/- on some alterations to the premises the assessee felt the ne1..essity of having some more money in order to convert the building into a cinema.

He entered into a lease on February 23, 1946 with three persoplll, namely, Nani Gopal Dutt, Makhan Lal Dutt and Shiv Kumar Khanna.

By this lease, t\J.e building which was called 'Khanna F Cinema house' at 157, Upper Circular Road, Calcutta was demised to the lessees for a period of 30 years.

The lessees agreed to pay under the indenture of lease Rs. 55,200/- to the lessor towards the cost of erecting the said cinema.

The rent which was agreed to be paid was Rs. 2, 100 I - per month.

It was payable With effect from June 1, 1946. It is necessary to set out the

relevant portion of the lease :

"And whereas the lessor obtained sanction from the Corporation of Calcutta and other necessary authorities and commenced the erection of a Cinema House the estimated total cost of which is about Rs. 1,00,000/-

(Rupees one lac). And whereas the lessees agreed to pay to the lessor a sum of Rs. 55,200/- (Rupees Fifty five thousand and two hundred) towards the cost of the erection of the said cinema house according to their suggestion '&lld other charges and expenses

SUPREME COURT REPORTS

[1969] 3 S.C.R.

incurred therefor by the lessor.

And whereas the construction of the said Cinema: House is almost complete and is expected to be completed by the end of March, One Thousand Nine Hundred and Forty six and whereas the lessee have called upon the lessor to grant to them a lease of the said Cinema House which the lessor lras agreed to do upon payment by the lessees of the said agreed sum of Rs. 55,200/- (Rupees fifty five thousand and two hundred), towards the costs of building the said Cilllema House and whereas the lessees have paid to the lessor the said sum of Rs. 55,200 (Rupees Fifty five thousand and two hundred) for which separate receipt has been granted by the lessor."

After the Cinema House had been completed the lessees entered into possession and started exhibiting shows there.

For the assessment year 194 7-48 the corresponding accounting year being the financial year ending March 31, 194 7, the Income tax Officer sought to treat the sum of Rs. 55,200/ received by the assessee as his income.

The contention of the assessee was that the aforesaid amount should be treated as capital receipt.

Alternatively if it was to be treated as salami (premium) and was to be taxed as a revenue receipt it should be distributed evenly over the entire term of the lease i.e. 30 years. The Income tax Officer did not accept either of the contentions of the assessee.

It was held by him that the lease was i!!Ot permanent but was temporary and that the salami had been fixed as an advance payment of rent and not as payment for transfer of the lease-hold interest.

According to him the system of accountancy for this source of income being QT) cash basis the whole of the receipt of salami was liable to be taxed as one year's income in the year of the receipt.

The assessee appealed to the Appellate Assistant Commissioner who agreed with the Income tax Officer.

In his view the lessees were under no legal obligation to contribute towards the cost of construction of the cinema house and the sum of Rs. 55,200/- constituted payment of advance rent.

The assessee appealed to the Tribunal which held that the receipt of the aforesaid amount was in the nature of advance payment of rent since the assessee was short of fonds at the time the lease was entered into and that the lease was for a short term and that the amount in question repl"!sented consolidated rent for thirty years paid in advance.

The High Court answered the question which was referred in the affirmative and against the assessee.

According to the High Court the only ob_ject of the payment of the sum of Rs. 55.200 1:ould bo lo advance the 1:ost of cunstruction or to meet the existing liabilities of the asses; cc for completing the cinema house.

It was observed :-

"Further it should be 1wtcd that the period of ]ease is only for 30 years and the assessee's investment on the Cinema is about Rs. 60.000/-, Rs. 35,000/- being the costs e>f constructi<>n and Rs. 25,000/- being costs of machinery with a liability to pay Rs. 750/- rent to the owner of the plot.

As a result of this ]ease he has got a rent of Rs. 2, 100/- for a term of 30 years.

Thus there is no question of payment of any salami as no further inducement for grant of the lease was necessary.

It is obvious that if the cost of construction of the Cirrema House would have been met in its entirety by the assessee and thereafter if the assessee would have granted the lease to the lessee, the rent would certainly have been much higher.

Thus. the said sum of Rs. 55.200/- in the absence of a different recital can only be deemed to have been paid as an advance rent in respect of the said Cinema House."

On. behalf of the appellant-assessee it has been urged that the sum of Rs. 55,200/ was paid to the lessor in lump for completing the cinema house without which the lessee could not have used the building for the purpose of exhibiting cinematograph films.

According to the recitals in the deed which must be given due effect the lessees agreed to give this amount towards the cost al erection of the cinema house according to their suggestion and for defraying other charges and expenses.

The payment of rent was expressly stipulated at the rate of Rs. 2,100/- per month and there was no indication whatsoever that any different or higher rate of rent was agreed to. It is further submitted that there was no material or evidence on which it could be found that the cinema would have fetched any higher rent, the admitted cost of construction beinl! about Rs. (00,000/-.

Alternatively the sum of Rs. 55.200/- could be re1?arded iinly as payment of salami

(peemium) and could not be treated as revenue receipt, the payment being of a non-recurrinq nature.

It seems to us that the departmental authorities as well as the High Court were in error in treating the amount of Rs. 55,200./-

as advance payment e>f rent.

The lease by which the cinema house was demised did not contain anv condition or stipulation from which it could be inferred that the aforesaid amount had been paid bv wav of advance rent.

The transaction embodied in the indenture of lease was clearly business-like. The lessees wanted the building for running it as a cinema house and the lessor agreed to give it to them but apparentlv represented that he did not have enough money to complete it in accordance with' the

<; Ugestions and requirememt of the lessees.

The lessees agreed to pav hill! the aforesaid amount pv way of µ lump sum without

SUPRBMB COURT REPORTS

makin.g any provision for its adjustment towards the rent or repayment by the lessor. The essential question, however, is whether on the terms of the lease and in the absence of any other material or evidence could it be held that the sum of Rs. 55,200/- was paid by way o{ advance rental ? The view which has been expressed by the Tribunal as also the High Court that the lease was for a comparatively short period of thirty years and that the aforesaid amount had to be spread over that period by way of rent in addition to a rental of Rs. 2,100/- per month cannot be sustained as no foundation was laid for it by any cogent evidence.

The departmental authorities can well be said to have based their decision on mere conjectures as there was nothing whatsoever to substantiate the suggestion that the real rental value of the cinema house was in the region of Rs. 2,250/ - per mQnth and not Rs. 2, 100/ - which Was the agreed rent.

It can equally well be said that the payment of the amount in question to the appellant was in the nature of a premium

(salami) . In the words of Lord Greene M. R. in Henriksen v.

Grafton Hotel Ltd.(') "A payment of this character appears to me to fall into the same class as the payment of a premium of a lease, which is admittedly not deductible. In the case of such a premium it is nothing to the point to say that the parties if they had chosen, might have suppressed the premium and made a corresponding increase in the rent.

No doubt they might have done so, but they did not do so iin fact." Fazl Ali t, (as he then was) in Commissioner of Income tax, Bihar & Orissa v. Visweshwar Singh( 2 ) referred to the distinction between a single payment made at the time of the settlement of the demised property and recurring payments made during the period of its einiovment by the lessee. 'fhis distinction. according to the learned Judge. is clearly recognised in s. 105 of the Trans4'er of Property Act which defines both premium and rent.

This is what was observed at pa~ 545: ''It is obvious that if the premium represents the whole or part of the price of the land it caninot be income.

As pointed out by Sir George Lowndes in the Commissioner of Income tax. Ben{!al v. Messrs. Shaw Wallace & Companv. income in the Indian Income-tax Act connotes a periodical monetary return, coming in with some sort of rewlaritv or expected rewlaritv from definite sources. The premium of salami which is paid once for all and is not recurring payment. hardly satisfies this test. I concede that in some cases where the rent is ridiculously low and the premium abnormally hil?h, it may be possible to argue that the premium includes advance rent ........ "

(I) 241T.C. 4S3,

(2) [19391 7 J.T.R. S~6.

It has not beon even remotely suggested in the present case that the rent of Rs. 2100 per month was ridiculously low as compared with the amount of Rs. 55,200 paid in lump sum. It is true that the question whether premium is a capital or a revenue receipt cannot be decided as a pure question of law.

Its decision necessarily depends upon the facts and circumstances oi each case. It would not. however. be wrong to say that prima facie premium or salami is not income and it would be for the income tax authorities to show that facts exist which would make it a revenue receipt.

There is another factor which is of substantial !importance in the present case.

According to the terms of the lease the payment of rent was to commence not from the date of the lease which was February 23, 1946, but with effect from June 1, 1946. It is also )!iot disputed that the lessees entered into possession after the cinema house hacl been completed which was subsequent to the date of the lease. These facts coupled with the payment of a lump sum which was of a non-recurring nature showed that the amount in question had all the characteristics of a capital payment and was not reveinue.

This would be in accord with the principles laid down by this Court in Member for the Board of Agricultural Income tax v. Sindhurani Chaudhurani & Others(') which was a case of settlement of agricultural land but in which the principles governing the payment of premium or salami have been fully discussed.

For the reasons given above we hold that the question which was referred to the High Court ought to have been answered in the negative and in favour of the assessee. The appeal is accordingly allowed with costs in this Court and the High Court and the answer returned by the High Court is hereby discharged.

G.C.

Appeal allowd.

(1) [19571 321.T.R. 169,

COMMISSIONER OF INCOME-TAX, CALCUTTA

January 30, 1969

C. SHAH

V. RAMASWAMI

A. N. GROVER, JJ.

February 23, 1946

Calcutta High Court

Sukumar Mitra

D. N. Mukherjee

Niren De

S. C. Manchanda

R. N.

Grover

July 19, 1945

Calcutta

Nani Gopal Dutt

Makhan Lal Dutt

Shiv Kumar Khanna

June 1, 1946

March 31, 194 7

Fazl Ali

s. 105

George Lowndes

Income-tax Act


PADRAUNA RAJKRISHNA SUGAR WORKS LTD. & ORS.

LAND REFORMS COMMISSIONER, U.P. & . ORS.

January 31, 1969

(J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.J B

U.P. Zamindari Abolition & Land Reforms Act (U.P, I of 1951), ss. 279 and 286---Dues under other statutes recoverable as arrears of land revenue-Whether restrictions under ss. 279 and 286(1) applicable.

The amount of dues under the Indian Income-tax Act, 1922 the U.P.

Sugar Factories Control Act. 1938 and the. Co-operative Societies Act, 1912 were 'fecoverab!e as arrears of land revenue.

Section 286( 1) of the U.P. Zamindari Abolition & Land Reforms Act provides that if any arrears of ]and revenue could not be recovered by any of the processes mentioned in els. (a) to (e) of s. 279, the Collector may realise the same by attachment and sale of the interests o'f the defaulter in any other immovable property of the defaulter, and s. 286(2) provided that money recoverable as arrears of land revenue, may be recovered by process "under this section" from any immovable property of the defaulter.

As the appellant-company was unable to meet its liabilities in respect of income.tax dues, sugar cess and the amount due for cane supplied to it, the immovable property o'f the company were sold to meet the dues. The appellant challenged the sale contending that (i) the immovable property of the company could be attached and sold only after the processes prescribed in els. (a) to (e) of s. 279 i.e. by the sale of movable properties y.ere resorted to; (ii} the sale was illegal or irregular as the CoUector

ignored the intimation of the Income-tax Officer staying the sale for recovery of income-tax; and (iii) the appellant, was prevented from raising funds 'for making the deposit os provided by r. 285H (of the rules framed under the Act) for .setting aside the sale as the purchaser was appointed as the Authorised Controller and put in possession of all the properties of the appellant. Dismissing the appeal this Court,

HELD : (i) Power to recover arrears of land revenue from a defaulter is governed by the processes mentioned in els. (a) to (e) of s. 279 of the Act and s. 286( I) places certain restrictions upon the power o'f the Collector to recover land revenue by attachment and sale of lands other than the holdin~ in respect of which the land revenue is due. But the restrictions on the power of the Collector operated only when land revenue is in arrears.

Retrictions, if any, upon the power of the Collector to re cover dues under statutes, as a'rrears of land revenue arise. from the statute \\•hich is the source of the liabi1ity and not from the U.P. Zamindari Abolition & Tand Re'forms Act, which merely sets out the processes for recovery of the dues.

To hold that sub-s. (2) of s. 2R6 requires the CoJiector in the first instance to recover out of the movable property or by arrest and detention of the defaulter before immovable property of the defaulter is attached and sold is to amend the substantive provisions 0[ the Acts under which the liability for money due is recoverable as land revenue.

For instance. under s. 46 of the Income-tax Act. 1922. the powers exercisable by the CoIIecto'r in recovering arrears of income-tax, which are recover1bie a" arrears of land revenue are not re!'tricted to the Land Revenue Code; the Collector is entitled to exercise all the powers of a Civil Court for the purpose of recovery of an amount due under a decree under the Code o'f (:ivil PrQl'eC:ure, and the Code of CiVJl Proctdure imc

PAI>MUNA V, COMMISSIONER (Shah, 1.) 469

A . poses no obligations to recover the dues by sale of movables or by arrest

and detention of the defaulter before immovable property may be attach ed. The provisions of the Act, which authorise recovery of sums of money as arrears of land revenue, do not require the Collector to follow any sequence df the processes for recovery; it is competent to the Collector to resort to any process prescribed by s. 279 in aid of recovery of the .dues which are recoverable as arrears of land revenue. [473 H-474 B

D; 475 HJ

(ii) The sale was not illegal or irregular for the reason that the Collector isnored the intimation of the Income-tax Officer staying the sale for recovery of income-tax dues. The immovable property could have been put up for sale for recovery df sugar cane cess and the cane price which were many times more than the income-tax dues.

[476 G]

(iii) There was no force in the contention. that the appellant was \Jn- C able to raise funds and make the deposit under r. 28SH because the purchaser was appointed the Authorised Controller, who took possession of all the properties of the Comnany. The appellant could not comply with the provision of r. 285H for having the sale set aside as the movables were not sufficient to enable the aopellant to raise the amount required for deposit under r. 28SH. [476 HJ

CIVIL APPBLLATB JUIUSDICTION: Civil Appeal No. 130 of D 1966.

Appeal from the judgment and decree dated December 13, 1961 of the Allahabad High Court in Special Appeal No. 217 of 1958.

C. K. Daphtary, B. Sen, 1. P. Goyal and A. Banerjee, tor the appellants.

C. B. Agarwala and 0. P. Rana, for respqrldents Nos. 1, 2, 3 and 8.

T. A. Ramachandran and R. N. Sllchthey, for respondent No. 4.

M. C. Chagla, G. D. Srivastava, B. Datta and 1. B. Dada. chanji, for respondents Nos. 5 and 6.

The Judgment of the Court was delivered by

Shah, J. The Padrauna Rajkrishna Sugar Works Ltd.- hereinafter called 'the Company'-carried on the business of manufacture and sale of sugar and supply of electricity.

The Companv was in financial difficulties in 1954 and was unable to meet its obligations.

The principal liabilities of the Comp~.nv in July 1955 were Rs. 81,821-2-0 due as income-tax provisionally assessed for the assessment year 1952·53 in respect of which an order for recovery was made under s. 46(2) of the Income-tax Act. 1922; Rs. 5,64,301-14-9 due as sugarcane cess under s. 29 of the Suizar Factories Control Act, 1938, for the years 1952-53 to 1954-55: and Rs. 1,92,053-12-3 due by the Company to the Co-operative Development Union Ltd. as arrears of cane price for the year 1954-55.

470 SUPllEME COURT 11.EPOR TS

(1969] 3 S.C.R.

By order dated July 14, 1954, issued under the Fsseritial Supplies (Temporary Powers) Act, the Government of U.P. appointed the Collector, Deoria as the Authorised Controller of the Company.

On August 8, 1955 the La, nd Reforms Commis sioner sanctioned the proposal submitted by the Collector, Deoria, to sell the holdings and the property of the Company for realizing Rs. 8,38,176-13-0.

Sardar Jagjit Singh, Chief Engineer, Indian Institute of Sugar Technology, Ka, npur, valued the movables belonging to the Company i.e. tools and workshop plant, mill stores, spare parts and furniture at Rs. 7 ,64,817 /. and the lands and the factory at Rs. 23, 75,000/ ·· Thereafter a sale proclama tion was issued on October 4, 1955, for recove.ry of the total amount of Rs. 8,38,17Q13-0.

The sale was fixed for November 8, 1955. In the first iinstance only the movables were put up for sale by the Collector, Deoria, but the highest bid offered was Rs. 2, 75,000/ •.

The Collector then put up for sale the immov able property for which a bid of Rs. 23,50,000/ • was made. and accepted.

The movables were then put up for sale and the highest bid for Rs. 2,75,000/· was accepted. The purchasers of both the lots were the Cawnpore Sugar Works Ltd., through their managing agent Tulsidas Mundra-respondent No. 7 in this appeal. On December 6, 1955, the Company moved an application before the Commissioner, Gorakhpur Division, under r. 285·1 of the U.P. Zarnindari Abolition and Land Reforms Rules praying that the sale be set aside.

The Commissioner rejected the peti tion, observing that an application u.nder r. 285-1 of the U.P.

Zarnindari Abolition and Land Reforms Rules, 1952, to set aside a sale on the ground cl material irregularity or mistake in publishing or conducting a sale may be granted only if the appli c!llllt proves to the satisfaction of the Commissioner that he has sustained substantial injury by reason of such irregularity or mistake, and that no material irregularity or mistake was proved to be committed in publishing or conducting the sale, far less, a mistake or irregularity which could have caused substantial injury to the applicant.

The sale was confirmed by order dated July

2. 1956. by the Land Reforms Commissioner.

Otn July 30, a petition was moved by the Company in the High Court of Allahabad for a writ in the nature of certiorari q11ashing the order dated June 25, 1956, of the Commissioner, Gorakhpur Division.

The petition was dismissed by Oak, J. In appeal under the Letters Patent the order was confirm~ by the High Court.

Mukherji, J., was of the view that s. 286 of the U.P. Zarnindari Abolition and Land Reforms Act did not oblige the Collector to exhaust the processes prescribed by els. (a) to ( e) in s. 279 cl that Act before resorting to the sale of immovable property of the Company and that it was not proved that

PAD!lAUNA V. COMMISSIONER (Shah, J.) 4'1

A there was any material in:egularity or mismke in publishing or conducting the sale o.r that any substantial injury had resulted to the Company. Jagadish Sahai, J., was of the view thats. 286(2) of the U.P. Zamindari Abolition and Land Reforms Act provides that where an amount is recoverable as arrears of land revenue, the Collector has first to attempt under els. (a) to ( e) of s. 279 II to recover the amount due, and if he is unable to recover the amount he may proceed to sell the immovable property of. the defaulter.

But the learned Judge was of the opinion that the provision was merely directory and not mandatory.

He observed:

c " ...... the provision relating to the exhaustion of

the processes contemplated by clauses (a) to ( e) of section 279 of the Act is merely directory.

In view of the provisions of the various Acts which make the realization of sums becoming due under those Acts as arrears of land revenue and in view of the provisions of the Act the Collector has got a duty and a statutory obligation to realise those sums. He has no discretion in the matter.

Consequently I read the words "may realise the same from the interest of the defaulter in any immovable property" in sub-section (1) or "may be recovered from any immovable property of the defaulter" in sub-section (2) as meaning that if the Collector does nat succeed in recovering the amount by '- having recourse to the processes mentioned in clauses

(a) to ( e) of sectioo 279 of the Act he shall sell immovable property of the defaulter."

The learned Judge also observed that the Collector acted ih violation of the statutory provision contained in s. 286(2) of the Act in selling the immovable property before selling the movable property, but the sale could rot'be set aside, because substantial injury was not shown to have been caused.

The Compamy has appealed to this Court against the order passed by the High Court confirming the order passed by Oak, J.

In this appeal, it is urged in the first instance, that the Company possessed stocks of sugar of value exceeding the liability for payment of Rs. 8,38,000/- odd.

But the stocks of sugar were not menti~ n the Collector's repo!'t to the Land Reforms Commissioner : they were not included in the sale proclamation as property put up for sale, nor were they valued in the report of Sardar Jagjit Singh.

The Company asserted in the petition before the High Court that it possessed stocks of sugar worth Rs. 9 lalchs which had not been attached earlier, but no such

contontion was advanced in support of the application for setting

SUPREME COURT REPORTS

[1969] 3 5.C.R. -~·-

aside the sale before the Commissioner, nor was any argument advanced before the High Court.

It appears that the stocks of sugar were mortgaged separately a1rtd the amount for which they were mortgaged was not included in the claims made for which the property of the Company was to be put up for sale.

It was then urged that under s. 286(2) of Act 1 of 1951, the Collector, was bound in the first instance to exhaust the processes for recovery of arrears prescribed by els. (a) to ( e) of s. 279 of the Act and he could not attach and sell immovable property of the Company until those processes were exhausted.

It was urged that s. 286(2) of the Act was mandatory and the Collector not having sold the movables in the first instance, the sale must be declared void.

The amount for the recovery of which the sale of the assets of the Company was held, included income-ta:ic dues, sugarcane cess' and the amount due for cane supplied to the Company. This amount was. recoverable as arrears of land revenue because of the provisions of the Indian Income-tax Act. 1922, the U.P. Sugar Factories Control Act. 1938. and the Co-operative Societies Act

I 912.

Section 286(2) of the U.P. Zamindari Abolition and Land Reforms Act provides :

"Sums of money recoverable as arrears of ]and revenue. but not due in respect of anv specific ]and. may be recovered by process under this section from any immovable property of the defaulter."

Though the amount for which the property was put up for sale was recoverable as arrears of land revenue. mo part of it was due in respect of anv specific land.

The amount could nrima facie be recovered from the immovable propertv of the defoulter. But relyill!! uoon the expression "under this section" in s. 286 (2) of Act 1 of 195 I it was contended that the immovable pronerty of the Comnanv could be attached and sold only after the proce, se' prescribed in s. 279 els. (a) to ( e) were resorted to and the Collector was unable to recover the dues.

It was urned that this fa the tn1e effect of s. 286 ( 1 ) and s. 279 of Act 1 of 1951.

Section 286 ( l ) provides :

, "r.t any arrears of land revenue cannot be recovered . by anv of the processes mentioned in dames (a) to ( e) of Section 279. the Collector may realize the same bv rittachment and sale of the interest of the defaulter in any other immovable propertv of the defaulter."

Section 279 of the Act sets out the procedure fnr recovery of arrears of )and revenue.

The section as it stood at the date of sale provided :

PADRAUNA V, COMMISSIONER (::1/Jah, J.)

"An arrear of land revenu.:: 0ma:,- be recovered by any one or morn o.f the following processes :

(a) by serving a writ of dema, nd or a citation to appear on any defaulter, ( b) by arrest and detention of his person,

(c) by attachment and sale of his movable properly

including produce, ( d) by attachment of the holding in respect of which the arrear is due, ( e) by sale of the holding in respect of which the arrear is due.

(f) by attachmeint and sale of other immovable property of the defaulter."

Section 280 deals with the mode of recovery prescribed by cl. (a) of s. 279; s. 281 with the mode prescribed by cL

(b) i.e. by arrest and detention; and s. 282 with the mode prescribed by cl.

( c) i.e. by attachment and sale of the movable property including produce.

Section 284 sets out the procedure for sale of the holding in respect of which the arrear was due and s. 286(1) deals with the power to proceed against the interest of the defaulter in other immovable property.

For recoverv of arrears of la.rid revenue, the Collector is bound to resort to one or more of the processes mentioned in s. 279 read with ss. 280, 282, 284 & 285 of the Act, before he attaches and sells the immovable property of the defaulter, other than the holding in respect o.f which the land revenue is due.

That clearly follows from the terms of sub-s. ( 1) of s. 286. Subsection (2) of s. 286 makes the same process applicable for recovery of sums of money which are recoverable as arrears of land revenue. But the liability to pay the amount so recoverable arises by virtue of the provisions of other Acts and is not due in respect of any holding of the defaulter. It is only recoverable as arrears of land revenue by virtue of the provisions of the Act under which the liability has arisen. Since U.P. Act 1 of 1951 provides bys. 286(2) that sums of money recoverable as arrears of land revenue may be recovered from any immovable property of the defaulter, the procedure prescribed b.y the Act applies to such recovery.

Because of the use of the expression "under . this section" iJll sub-s. (2) of s. 286 it is not intended that the Collector must resort in the first instance to the processes prescribed by els. (a) to (e) before he resorts to cl. (f} of s. 279. Cls. (d) & (e) of s. 279 have no application, where income-tax dues and sugarcane ccss or cane price arc recoverable from the defaulter : and cl. (b) is inapplicable where the defaulter is an artificial person like a Company.

Power to recover am>ars of land reve- •

474 SUPlUIME GOURT Rl!PORTS [196Yj :i S.C.R.

111ue from defaulter is governed by_ the processes mentioned in A s. 279 els. (a) to (e), and s. 286(1) places certain restrictions upon the power of the Collector to r(\cover land revenue by attachment and sale of lands other than the holding in respect of which the land revenue is due.

But the restrictions on the power of the Collector operate Oll)ly when land revenue is in arrears.

Restrictions if any upon the power of the Collector to recover B dues under other statutes, as arrears of land revenue arise rrom the statute which is the source of the liability and not from Act 1 of 1951 which merely sets out the processes for recovery of the dues.

To hold that sub-s. ( 2) of s. 286 requires the Collector in the first instance to recover out of the movable property or by arrest c and detention of the defaulter before immovable property of the defaulter is attached and sold is to amend the substantive provi sions of the Acts under which the liability for money due. is recoverable as land revenue.

For instance, under s. 46 (2) of the Indian Income-tax Act, 1922, it is provided :

"The Income-tax Officer may forward to the Collec- D tor a certificate under his signature specifyilllg the amount of arrears due from an assessee, and the Collector, on receipt of such certificate, shall. proceed to recover from such assessee the amount specified therein as if it were an arrear of land revenue : Provided that without prejudice to any other powers E of the Collector in this behalf, he shall for the purpose of recovering the said amount have the powers which <Under the Code of Civil Procedure, 1908 (V of 1908), a Civil Court has for the purpose of the recovery of ain

amount due under a decree." The power exercisable by the Collector in recovering arrears of F income-tax which are recoverable as arrears of land revenue are, it is clear, not restricted to the Land Revenue Code: the Collector is eintitled to exercise all the powers of a Civil Court for the purpose of recovery of an amount due under a decree under the Code of Civil Procedure, and the Code of Civil Procedure imposes no obligation to recover the dues by sale of movables or by arrest G and detention of the defaulter before immovable property may be attached.

Section 51 of the Code of Civil Procedure provides: "Subject to such conditions and limitations as may be prescribed, the Court may, on the applicatiqn of the decree-holder, order execution of the decree--

(a) by delivery of any property specifically decreed; H

(b) by attachment and sale or by sale without attachment of any pronett}';

PADRAUNA v. COMMISSIONER (Shah, ).) 475

( c) by arrest and detention in prison;

(d) in such other manner as the nature of the relief granted may require :

Provided " By virtue of 0. 21 r. 30(e) of the Code of Civil Procedure simultaneous execution both against the property and person of the judgment-debtor is allowed.

To hold, therefore, that in seeking to recover income-tax dues the Collector is in the first instance, by virtue of sub-s. (2) of s. 286, restricted io the recovery of arrears by attachment sale of movables or by arrest and detention in prison of the defaulter, and 1f he cannot recover the amount then and then only to have recourse to the immovable property of the judgment-debtor is to seek to amend both the come-tax Act, 1922~ as well as the Code of Civil Procedure.

The U .P. Legislature is incompetent to alter the provisions of the Income-tax Act.

We are, therefore, unable to agree with the opinion expressed by Jagadish Sahai, J., that the use of the words "under this section" points to the applicability of the whole section i.e. subsection ( 1) in the recovery dues recoverable under sub-section

(2) of section 286, and "that the two sub-sections have got to be

rea~ together and the effect of sub-section ( 2) is that even in connection with the recovery of miscellaneous dues as arrears of land revenue it is permissible to sell immovable property of the defaulter but subject to what is provided for in sub-section ( 1) ".

We are also unable to agree with the observations made by the learned Judge that -

" ..... .if sub-section (2) of section 286 of the Act were to be read in isolation and detached from subsection (I) it would become impossible to administer the same. Sub-section (2) only provides that the arrears of miscellaneous dues may be recovered from any immovable property of the defaulter without specifying the manner in which they are to be recovered, that is to say, without indicating whether it would be recovered from the usufruct of the property or by jts sale or by mortgage or lease."

The provisions of the Act which authorise recovery of sums of money as arrears of land revenue do not require the Collector to follow any sequence of the processes for recovery: it is competent to the Collector to resort to any process prescribed by s. 279 in aid of recovery of the dues which are recoverable as arrears of l!Uld revenue. It is unnecessary in the circumstanoes to

476 SUPi.EME COURT REPORTS

[1969] 3 S.C.R.

consider whether the provisions of s. 28 6 (1 ) are mandatory or directory.

It was urged in the alternative that after selling the immovable property which realized more than Rs. 23,50,000/- the Collector should not have sold the movable property, for the claim for which the properties of tile Company were put up for sale was only Rs. 8,30,176-13-0.

At first bl_ush there is torce in this argument.

Why the Collector thought it necessary to sell the movables after the immovable property was knocked down to the Cawnpore Sugar Works Ltd. for Rs. 23,50,000/- was never explained.

After the immovable property belonging to the Company was knocked down to the purchasers for an amount of Rs. 23,50,000/- it was apparently not necessary to hold the auction for sale of movables valued at Rs. '/,64,817/- and to accept a bid of only Rs. 2,75,000/-.

The argument that the movables were of no use to any person other tnan the purchaser of immovable property is w1tl1out substance.

The movables sold were the tools and workshup p.ant, mill stores, spare palls and furniture, and it is difficult to accept the contention that these movables were of no value except to the purchaser. But the Company raised no contention in this behalf before the Commissioner, nor in the petition before the High Court. The question was also not argued before the High

Court in that form. We cannot at this stage investigate the reasons why movables valued at Rs. 7 ,64,817 /- were put up for sale and sold when it was not necessary to sell them to realise the dues.

It was then urged that the Income-tax Officer had, by intimaticin dated December 11, 1954, asked the Collector to stay the sale proceeding for recovery of income-tax dues amounting to Rs. 81,821-2-0.

For some reason, which is not clear from the record, the Collector ignored the intimation given by the Incometax Officer and proceeded to put the property to sale. He included the amount in the sale proclamation, overruling the protests of the Company, and sold the properties for recovery of a consolidated amount which Included Rs. 81,821-2-0 due as income-tax. But on that account the sale is not illegal or irregular.

An amount exceeding Rs. 7 lakhs was recoverable for the sugarcane cess and the cane price and the immovable property of the Company could have been put up for sale for recovery of those dues. The sale is not proved to be vitiated on the ground of any material irregularity or mistake in publishing or cQ!lducting it, and it is therefore not liable to be set aside.

It was finally contemded that the Company was prevented from exercising its right under r. 285-H of the rules framed under U.P. Act 1 of 1951, because ilie purchaser at the sale was appointed, by order of the Central Government, Authorised Con-

PADRAUNA v, COMMISSIONER (Shah, /,) 477

.,. troller' of the factory of the Company, and all the properties bf the Company were put in the possession of the purchaser, and that the Company was unable to raise the requisite amount to be deposited under r. 285-H.

Under r. 285-H any person whose holding or other immovable property has been sold under the Act may, at any time within thirty days from the date of sale, B apply to have the sale set aside on his depositing in the Collector's office--

(a) for payment to the purchaser, a sum equal to 5 per cent. of the purchase money; and

(b) for paymqnt on account of the arrer, the amount specified in the proclamation in Z.A.

Form 74 as that for the recovery of which the sale was ordered, Jess any amount which may, since the date of such proclamation of sale, have been paid on that account; and ( c) the cost of the sale.

D H the deposit is made, the Collector shall pass an order setting aside the sale. It was open to the Company under r. 285-H eve; n after the bids were accepted to deposit 5 per cent. of the sum realised by sale of the immovable property and to pay the amount due for the recovery of which the sale was ordered and the C06t of the sale.

But no attempt was made to deposit the amounts E mentioned in els. (a), (b) & (c) of r. 285-H. '.The contention that the Company was wiable to make the deposit under Rlile

285-H because the purchaser was appointed Authorised Controller

aS also not raised before the Commissioner and the High Court.

The argument that if the movable property had not been sold, the Company may have raised the amount liable to be deposited under els. (a), (b) & (c), but by sale of those properties and purchase of the same by a person who was shortly after the pur- F

chase appointed the Aiuthorised Controller prevented the Comp~ from exercising the right under r. 285-H is hypothetical.

Again even that argument was not raised before the Commissioner, nor in the petition, nor in the arguments before the High Court.

Evidently, the Company was required to comply with the G provis.ions of r. 285-H for having the sale set aside to deposit a_n amount of Rs. 9,50,000/, besides the cost of the sale. Even if the movables had not been sold, and assuming that they were of the value of Rs. 7,64,817/- the movables wer~ not sufficient to enable the Company to raise the amount required for deposit under r. 285-H.

H The contentions raised by the Company fail and the appeal is dismissed.

We are, however, of the view, especially because of the action of the Collector in putting the movables to sale even L8 Sup Cf/69-12

[1969) 3 S.C.R.

after the immovable property realised an amount very much in A excess of the dues, and ignoring the intimation sent by the Incometax Officer to stay the sale proceeding, which has involved the Company in loss of property of substantial value, that the parties should bear their OW\ll costs throughout.

Y.P.

Appeal dismissed.

LAND REFORMS COMMISSIONER, U.P. & . ORS

January 31, 1969

C. SHAH

V. RAMASWAMI

A. N. GROVER, JJ

Land Reforms Act

ss. 279 and 286

ss. 279 and 286(1)

Sugar Factories Control Act

Co-operative Societies Act, 1912

Section 286( 1)

Land Reforms Act

s. 279

s. 286(2)

s. 279

s. 279

s. 286( I)

s. 2R

s. 46

Income-tax Act

PAI>MUNA V

s. 279

CIVIL APPBLLATB JUIUSDICTION

December 13, 1961

Allahabad High Court

C. K. Daphtary

B. Sen

P. Goyal

A. Banerjee

C. B. Agarwala

P. Rana

T. A. Ramachandran

R. N. Sllchthey

M. C. Chagla

G. D. Srivastava

B. Datta

B. Dada. chanji

Shah

Padrauna Rajkrishna Sugar Works Ltd.-

s. 46(2)

Income-tax Act

s. 29

Suizar Factories Control Act, 1938

Government of U.P.

Deoria

August 8, 1955

Sardar Jagjit Singh

November 8, 1955

Cawnpore Sugar Works Ltd.

Tulsidas Mundra

December 6, 1955

Commissioner, Gorakhpur Division

July

2. 1956

High Court of Allahabad

Gorakhpur Division

Oak

Mukherji

s. 286

s. 279

PAD!lAUNA V. COMMISSIONER

Jagadish Sahai

s. 279

section 279

s. 286(2)

s. 286(2)

s. 279

s. 286(2)

Income-tax Act

Sugar Factories Control Act

Section 286(2)

s. 286

s. 279

s. 286

s. 279

Section 286

Section 279

Section 279

PADRAUNA V

Section 280

s. 279

s. 281

s. 282

Section 284

s. 286(1)

s. 279

ss. 280, 282, 284 & 285

s. 286

s. 286

s. 286

s. 279

s. 279

s. 279

s. 286(1)

s. 286

s. 46

Indian Income-tax Act, 1922

Code of Civil Procedure, 1908

the Code of Civil Procedure

the Code of Civil Procedure

Section 51

the Code of Civil Procedure

the Code of Civil Procedure

s. 286

the Code of Civil Procedure

section 286

section 286

s. 279

s. 28

December 11, 1954

Central Government