BASAPPA RUDRAPPA BETGERI & ORS.

BUBLI DHARWAR MUNICIPAL CORPORATION

April 27, 1971

[J. M. SHBLAT, I. D. DUA AND V. BHAR.GAVA, JJ.] Bombay Municipal Boroughs A.ct, 1925, ss. 73, 85-Levy of house tax by municipality on lessees of buildings owned by municipality-Validity of levy.

The respondent Corporation was originally constituted as a Borough under the Bombay Municipal Boroughs Act, 1925 having been converted into a Corporation in 1962. The Borough owned several buildings in the area of its jurisdiction and some of these were given on lease to the ap-- pellants in 1953. The leases were renewed in 1955. Neither in the original leases nor in the fresh leases was there any mention of the liability of tho tenants to pay the house tax.

Subsequent to the execution of the fresh leases hills were received from the responden~ by the appellants calling upon them to pay the house tax imposed in respect of the buildings belonging to the respondent which were on lease with the appellants. The appellants filed a suit challenging the legality of the imposition of this house tax.

The main ground taken was that the Municipality could not impose a house tax on buildings owned by itself. The trial court held that the respondent was not competent to levy from the tenants any sum in excess of the agreed rents and that in the circumstances of this case notice under s. 206-A of the Act was not necessary. The Additional District Judge in appeal agreed that the levy was not valid but held the suit not to be maintainable for want of a notice under s. 206-A. The High Court in second appeal held that the levy was valid and that a notice under s. 206A was necessary. In appeal by special leave to this Court,

HELD: There is nothing in the scheme of the Act to indicate that buildings belonging to the municipality itself cannot be subjected to tho house-tax which can be imposed under s. 73 of the Act. The language of s. 85 specifically envisages imposition of such a tax on buildings belonging to tho municipality. It clearly lays down that such a tax shall be loviable primarily from the actual occupier of tho property oli -which the tax is assessed, even if he holds it on a lease from tho municipality. The fixation of such respon&ibility primarily on the occupier holding a building on lease from the municipality could only be laid down on the basis that tho buildings owned by tho municipality can be subjected to the tax. Once the tax is imposed on such a buildins it would be payable by the occupier if he holds it as a lessee of tho municipality, There is nothing anomalous in such taxation because tho tax is not levied by the municipality on itself but OL the lessee.

[On tho above view the court did not find it necessary to decide whetbtr before tho filing of tho suit by the appellants a notice undeJ ._ 206-A of the Act was necessary.]

Crvn. APPBLLATE JUKJSDICTION : Civil Appeal No. 2206 of 1966 ..

Appea.I by ~_leave frOIJI !he iudPlent and order dated February 23, 1966 of lhe Mysore High Court in Second Appeal

No. 888 of 1961.

536 SUPl\EME COURT REPOJ.TS

(197!) SUPP. S.C.R.

A S. V. Gupte, Naunit Lal S. S. Khanduja and Swar1111jit Sodhi for the appellants.

K. R. Chaudhuri, for the respondent

The Judgment of the Court was delivered by

Bhargan, J.-This appeal by special leave arises out of a suit challenging the validity of imposition of house-tax and notices issued for realisation of that tax from the appellants. The respondent, the Hubli Dharwar Municipal Corpor&tion. was originally constituted as a Borough under the Bombay Municipal Boroughs Act, 1925 (hereinafter referred to as "the Act"). At the relevant time, when the disputes leading to the suit arose, it was still a Borough, but it became a Corporation subsequently in the year

1962. The Borough owned several buildings in Dharwar. Some of these buildings were given on leases, to the appellants. These leases were executed in favour of the appellants by the Borough some time in March and April, 1953. Thereafter, by a General Committee Resolution No. 36 dated 29th June, 1953, the Borough decided to recover house-tax and other municipal taxes from the private individuals who were telllllnts of the municipal buildings leased out to them. In pursuance of this Resolution, a notice was issued by the President of the Borough that all the citizens in occupation of the buildings owned by the Municipality must pay the taxes assessed on them in respect of the premises under their occupation.

On 9th September, 1953, the appel!a.nts preferred joint objections against the levy of the house-tax and its realisa .. tion from them.

On 9th September, 1954, the Government of Bombay sanctioned the amendment to the then existing Housetax Rules framed under the Act in respect of this Borough, and the General Committee p315sed a Resolution on the 19th February. 1955 sanctioning the levy of taxes on Municipal owned buildings, adopting the sanctioned taxes, and bringing them into force with effect from !st April, 1955 by giving necessary public notice as required by law. Notice under section 77 was published on 25th February, 1955 and then the taxes came into forct on !st April,

1955. Thereafter, fresh lease-deeds were executed by the respondent in favour of the appellants on 11th May, 1955. It may be mentioned that, neither in the original leases of 1953, nor in the fresh leases of 1955, was there &ny mention about liability of the tenants to pay the house-tax. Subsequent to the execution of these fresh leases, bills were received from the respondent by the appellants calling upon them to pay the house-tax imposed in respect of the buildings belonging to the respondent which were on lease with the appellants. The appellants, thereafter, filed the suit, out of which the present appeal has arisen, challenging the legality of the imposition of the tax. The main ground taken was that the

B. R. BBTOBRI v. KUNIC. CORP. (Bluzrgava, J.)

Municipality could not impose 81 house-tax on buildings owned by itself, so that the imposition of this house-tax was invalid in law.

The suit was resisted on the plea that it was a valid taxation. A further defence was taken that the suit waa bad for failure on the

part of the appellants to give notice to the respondent under section 206-A of the Act. "The trial Court decreed the suit, holding that the respondent was not legally competent to levy from the tenants, any sum in excess of the agreed rents, and the bills issued for recovery of excess were not valid and that, in the circumillbnces of this case, notice under s. 206-A of the Act was not necessary. On appeal, the Ilnd Additional District Judge agreed with the trial Court that the levy of the tax was not justified, but held that the suit without 81 proper notice under section 206; A of the Act was not maintainable. He, therefore, allowed the appeal and dismissed the suit with costs.

On second appeal, the High Court of Mxsore upheld the dismissal of the suit, but on both the grounds, viz., that the tax was validly levied, and that the suit wa~ not maintainable for want of proper notice under section 206-A of the Act. It is against this decision that the appellants have come up to this Court. It may be mentioned that the appellants sued the Borough in a representative capacity as representing all the tenants of buildings belonging to the Borough.

Learned counsel for the appellants took us through the various provisions of the Act and relied on the scheme of the Act to urge that a Municipality could not tax its own buildings. The power to impose a tax on buildings is contained in section 73 of the Act, the relevant portion of which is as follows :-

"73. (I) Subject to any genera.I or special orders which the State Government may make in this behalf and to the provisions of sections 75 and 76 a. municipality may impose f<!r the purposes of this Act any of the following

tax~. namely:-

(I) a rate on building or lands or both situate within the municipal borough;"

A proviso to this provision, which is relevant, may also be quoted :

"Provided further that :

(a) no tax imposed as aforesaid, other than a special miinitary cess, a drainage tax or a water-rate, shall, without-the express consent of the Government, be leviable in respect of any building or part of any building or of any vehicle, animal or other property, belonging to Government and used solely for public purposes and not used or intended to be used for porposes of profit; and no toll shall be Ieviable in respect of any animal or vehicle

SIJP&EMll .COU&T l\IU'OB.l'S [1971] SUPP. s.c.&.

• used for the passage of 1-oop~ or the cmve~ of Gov ernment stores or of any other Go~~ property, oc for the passage of military or poli.cftkers on . duty or the passage or conve~ of any po; rSOJ! or property in their custody; • • • . ..

Section 74 t!ien provides for p11nt of an .ad hoc sum ascer

tailned in the manner provided hi that section by the Government or district local board in lieu of a rate on buildings vesting in the Government or in the distrit local boards which are exempt ed under clause (a) of the proviso quoted above. Section 75 then lays down the procedure for imposition of the tax 11nd s. 75(c)

gies the right of filing objections to the inhabitants of the borough. It ma.y be noted that the right of filing objections is not confined only to owners of buildings, but is granted to inhabitants of the borough which will not excjude the Government or the district local board in respect of their buildings which may not satisfy the requirements of the proviso to section 73 inasmuch as they may not be actually used for public purposes and, hence. may be liable to be taxed.

Section 78 makes provision for preparation of an assessment list and requires that that list should contain the names of the owner as well as occupier, if known.

Section 79 deals with cases where the person primaaily liable for payment of this tax cannot be ascertained, and makes it sufficient to designate him in the assessment book/as "the holder" of such premises without further description. Section 80 lays down the manner in which the completed assessment list is fo be published a.nd gives a right to every person claiming to be either the owner or occupier of property included in the list, and 11ny :Lgent of such tierson, to inspect the list and to lll'ake exttaets tfierefrom without charge. Finally, attention was drawn to he provisions of section 85, which lays down who is to be primarily responsible for payment of the tax, in the following language :-

"85. A tax imposed in the form of a rate on buildings or land or bod!. shall be levi!ble primarily from the actual occupier of the property upon which the tax assessed if he is the owner of the property; or bolds it on a building, or other lease from .Govjl!lllDellt ot from the municipa.lity. or on a building lease from any person.

Othttwise the tax shaD be primtirily Jeviabte as follows. namely:-

(a) if the property Is tet from t~ lessor;

(b) if the ptDperty Is subla, from the superior lessor,

(c) if th\' pro.POf!Y i$. l!llkt. fmm the In whom the right to let 11).e same vi:sta.'"

B. R. BBTGl!RI v. MUNIC. CORP. (Bhargava, J.)

We are Unab\e \<> aaree with learned. counsel for the appellants

 A that this scheme of the Act contams any indication that buildings belonging to the municipality itself cannot be subjected to the house-tax which can be imposed under section 73 of the Act. In fact, the language of section 85 specifically envisages imposition of such a tax on buildings belonging to the municipality. It clearly lays down tha.t such a tax shall be leviable primarily from the actual occupier of the property on which the tax is assessed, even if he holds it on. a lease from the municipality. The fixation of such responsibility primarily on the occupier holding a building on lease from the municipality could only be laid down on the

bais that the buildings owned by the municipality can be subjected to the tax. Once the tax is imposed on such a building, it would be p:iyable by the cscupier if he holds it as a lessee of the municipality. The same principle applies in the case of buildings held on a lease from the Government. It may be noted that all Government buildings are not exempted from the tax. Only those buildings are exempted which are used solely for public purposes and are not used or intended to be used for purposes of profit.

Learned counsel urged that it is anomalous that 81 municipality should be permitted to impose tax on buildings owned by itself.

But this argument loses sight of the fact that the tax is primarily payable by the occupier and not by the owner. The purpose of imposition of tax by 81 municipality on its own buildings is to ensure that it is paid by the lessees of those buildings. Of course, if the building is not on lease, the. imposition of the tax would •erve no purpose at all. That, however, wilI not make the imposition of tax _by the municipality on its own buildings invalid which imposition will be really effective whenever that building is given out on lease to any other person. In these circumstances, we fully agree with the High Court that the tax was validly imposed and the suit challenging its realisation from the appellants had tq fail. .

In view of our decision on the validity of the ~. the question whether a notice under section 206-A of the Act wlis necessary or not becomes immaterial. The appeal fails and is dismissed with costs.

G.C.

Appeal dismissed.

BASAPPA RUDRAPPA BETGERI & ORS

BUBLI DHARWAR MUNICIPAL CORPORATION

I. D. DUA

ss. 73, 85

s. 206

s. 206

s. 206A

s. 73

s. 85

section 77

section 206

s. 206

section 206

section 206

section 73

sections 75 and 76

Section 74

Section 75

s. 75(c)

section 73

Section 78

Section 79

Section 80

section 85

section 73

section 85

section 206


BABU LAL HARGOVINDAS

STATE OF GUJARAT

March 18, 1971.

1G. K. MITTER, K. S. HEGDE AND P. JAGANMOHAN REDDY, JJ.]

Food Adulteration A.ct, 1954-Panch wit1u•ss adr11itting signatur<s b111 denying pre.rence at tinJe of recovery ()/ st111iple-Evidence of Food /uspeftor carr be relied upofJ and s. 10(7) of A.ct niust be taken as compJ!ed wUh -Resolution of Mu.nicipal Corporation under s. 20(1) of Act authorising

Medical Officer of Health to give written consent for p>'osecution under A.ct-1\'ot necessary that authorisation should be by Co1n111issioner-J::.'fject of ss. 67(3) and 68(l}-Coniplai11t need not be in the 11a1ne of Corporatio11-R11/c 7(2) does not contravene ss. 13(1) and 23(1) (e) of Act anti is not ultra vires.

1'he appellant was a dealer in milk. The Food Inspector purchased milk fron1 him for analysis and sealed it in three bottles one of whih was lclt with the dealer and one sent for analysis, the third being kept by the Inspector for production in court. The Public Analyst's report sho, ved that he had caused the sample to be analysed and that there was a deficiency of non-fatty solids in the san1ple. With the written consent of the I\.1edical Officer of Health the Inspector filed a complaint under s. 16 of the Food Adulteration Act, 1954. Before the Magistrate the witness of the recovery of the sample admitted his signatures on the receipt fu. 5 and on the wrappers and labels of the bottles in \vhich the sample was "lealed but denied that he was present when the sample was obtained. He claimed that be had signed Ex 5 without reading it. The Magistrate relying oa the testimony of the Food Inspector convicted the appellant. The High -Court confirmed the conviction. Witb certificate under Art. 134(1) (c) of the Constitution appeal was filed in this Court.

HELD: (I) Tho fact that tho panch witness refused lo support tho prosecution in regard to the recovery of milk from the appellant could not mean that s. 10(7) of the FoO<I Adulteration Act had not 1, een com plied with.

The evidence of tho Food Inspector alone if believed can be relied on for proving that the samples were taken as required liy law.

At the most courts of fact may find it difficult in any particular case to rely on the testimony of the Food Inspector alone though this result does .not necessarily follow. The circumstances of each case will determine the

., xtent of the weight to be given to tho evidence of tho Food Inspector and what in tho opinion of !ho Court is tho value of his testimony.

In the present case the courts were justified in concluding on the evidence of the Food Inspector that he had complied with the requirements and that the samples were seized in the presence. of the Pan ch witnes~ whose 11ignaturcs

were taken in the presence of the accused. [57E-58C)

Mank~ Hari v. State of Gujarat, 8 G.L.R. 588, referred to.

(ii) The appellant bad made no application to the Court for sending the sample in his custody to tho Director, Central Food Laboratory under 'S. 13(2). It did not therefore avail him to say that over four montho 'had elapsed from tho time tho samples were taken to the time when the

.:omplaint was filed and consequently tho sample had deteriorated and

SUPREME COURT REPORTS

[1971) SUPP. S.O.L.

A could not be analysed. The food Inspector hd added a preservative to the appellant's sample and therefore the decision of this Court in G l1isa Ram's case was distinguishable. [580, G]

Municipal Corporation of Delhi v. Ghisa Ram, [1967] 2 S.C.R. 1\6, distinguished.

(iii) The contention that the Medical Officer of Health was n.1t duly authorised under s. 20(1) of the Act to give hi• consent for the appellant's prosecution could not be accepted. The authority had been conferred by a resolution of the Municipal Corporation in this regard. The Corporation did not for this purpose have to act through the Commissioner. A combined reading of ss. 67(3) and 68(1) of the Act clearly indicatea that the Commissioner cannot exercise his functions without any fetters as if. he is the Coporation. The Corporation is the controlling authority and can restrict; limit or impose conditions on the Commissioner in the exer .. cise of any of the powers under s. 67(3) or under s. 68(1). The Corpora tion has the final voice in determining whether the Coinmig., ioner or any other person will discharge the function envisaged therein. That apart s. 20{1) of the Act places no restriction on the Corporation to circums ... cribe the powers of ths Commissioner.

The Corporation was therefore free to authorise the Medical Officer of Health to give his written consent in appropriate cases to institute prosecution.

[61H-62C]

(iv) All that the Medical Officer of Health is required to do is to give his written consent to institute the prosecution. There is no. validity in the contention that the complaint should be in the name of the Corporation. (610]

State of Bombay v. Parshottam Kanai)•ala/, [1961] S.C.R. 458, relied' on.

(v) Rule 7(2) of the Act which permits the Public Analyst to cause the samples to be analysed by persons under him is not ultra vire.f. Tbel'O' is no inconsistency between the provisions of r. 7 and those of s. 13(1) ii to hold that the rule is in excess of what is prescribed by the section nor is. there any justification for holding that the rule is beyond the rule matins" powers under s. 23(1) (e) which empowers the Central Government after consultation with the committee to define the qualifications power and duties.

of the Food Inspectors and Public Analysts. [61G62D]

CRIMINAi. Al'ELLATE JURISDICTION : Criminal Appeal No. 133' of 1969.

Appeal from the judgment and order dated April 15, 16, 17 and 18, 1969 of the Gujarat High Court in Criminal Appeal Ne. 850 of 1966.

Ravinder Narain, P. C. Bhartari for the appellant.

P. K. Chatterjee, B. D. Sharma and S. P. Nayar, for the respondent.

The Judgment of the Court was delivered by P. Jagamohan Reddy, J.-The Appellant Babu Lal Hargovindas carries on business of selling mili: in the City of Ahmedabad.

On 2-12-1965 at about 8 a.m. the Food Inspector Mangulal C.

BABU LAL HARGOVINDASY. GUJARAT (Reddy. J.)

Mehta visited the Appellant's shop, ilisclosed his identity and intimated to him that he was purchasing the milk for analysis. Thereafter 700 ML. milk which was being sold as cow's milk was purchased from him.

It was divided into 3 parts and poured into three bottles in each of which he added sixteen drops of fonnalin as preservative.

The bottles were then corked, sealed and Y.Tapped and signatures of the Panch one Adambhai Rasulbhai were taken on the seals and wrappers.

Of the threP. bottles that were then sealed one was given to the Appellant, one was kept by the Food Inspector to be produced in the Court as required by the provision of Food Adulteration Act, 1954 (hereinafter referred to as it contained total non-fat solids of 7 '. 4 % instead of 8 : S % l l 30 am. to the Chemist Laxmansingh Vaghela who being authorised by the Public Analyst Dr. Vyas analysed it.

The analysis of the sample by Vaghela revealed that the milk was adulterated as it contained total non-fat solids of 7:4% instead of 8:5% which was the minimum prescribed.

After the receipt of the report of the Public Analyst the Food Inspector filed a complaint on 6-4-1966 with the written consent of the Medical Officer of Health of the Ahmedabad Municipal Corporation.

After examining the F:ood Inspector Mehta, the Chemist Vaghela and the Panch Adambhai Rasulbhai, the City Magistrate, 6th Court, Ahmedabad convicted the Appellant under Section 16(l)(a)(i) read with Sectiorr 7 of the Act for selling adulterated milk and sentenced him to undergo Rigorous imprisonment for one month an( a fine of Rs. 1,000 in default to undergo a further period of 3 months rigorous imprisonment.

Against this conviction and sentence the Appellant appealed to the. High Court of Gujarat which confirmed the conviction.

This Appeal against that Judgment is .by Certificate under Article 134(l)(c) of the Constiution of India.

It is contended before us :-Firstly tha.t the requirements of Section 10(7) of the Act have not been complied with under this provision when the Food Inspector takes any action as specified in sub-sections !(a), 2, 4 or 6 he shall call one or more persons to be present at the time such action is taken and take his or their signatures. The Panch witness however did not support the case of the complainant that he was either present at the time when the sample was obtained from the Appellant or that his signatures were taken when the bottles were said to have been sealed.

In these circumstances, it is submitted, the conviction cannot be SU&- tained.

Secondly the Appellant was not afforded an opportunity to send the sample of the milk left with him to the Director of Central Food Laboratory for a certificate inasmuch as the complaint itself was lodged after a lapse of over 4 months from the dates of taking the samples.

In these circumstances the milk e<>uld not have been preserved for the Appellant to have taken the opportunity afforded to him by sub-section: (2) of Section 13 by

Sit

SUPREME COURT RllPOR TS

(1971J SUPP. S.C.R.

sending it to the Director, Central Food Laboratory for a certificate.

Thirdly the Food Inspector who filed this complaint was not competent to file it because the Mical Officer of Health who gave written consent to file it was not validly authorised 3S required under Section 20(1) of the Act inasmuch as under the relevant provisions of the Bombay Provincial Municipal Corporation Act LIX of 1949 (hereinafter referred to as the 'Corporation Act') as applied to the State of Gujarat it was the Municipal Commissioner and not the Municipal Corporation that should have authorised the giving of written consent to prosecute.

Fourthly even if the Medical Officer of Health can be said to be validly authorised by resolution of the Municipal Corporation dated 17-10-55 the complaint is not in accordance with that resolution since the resolution authorised the filing of the complaint in the name of the Municipal Corporation but the complaint filed does not disclose that it is filed on behalf of the Corporation.

Lastly rule 7('}) of the Prevention of Food Adulteration Rules (hereinafter called the 'Rules') which permits the Public Analyst to cause the sample to be analysed is ultra-vires because it is beyond the scope of s.xxion ..!3(e) of the Adulteration Act Most of these contentions were urged before the learned Single Judge of the Gujarat High Court who in a lengthy Judgment held them to be untenable.

In our view also the submission of the learned Advocate for the Appel !ant are without force and must be rejected.

It may be observed that Section 10(7) of the Act originally required that the Food Inspector, when he takes action either under the provisions of sub-sections (!), (2), (4) or (6), to call as far as possible not less than two persons to be present at the time when' such action is taken and take their signatures but that provision was amended by Act 49 of 1964 and instead it was provided that the Food Inspector shall call one or more persons at the time when such action is taken and take his or their signatures.

It appears that the person who witnessed the taking and sealing of the sample did not support the Food Inspector's version that the signatures of this Panch witness were taken on the receipt Ex. 5 and on the label and wrappers of the bottles at the time when the samples were obtained.

The witness Rasulbhai who was serving in a Mill and also sits in the cycle shop of his brother which is adjoining to the milk shop of the Appellant, after he returns from his duty .stated that on the date in question at about 8 a.m. he was called by the Food Inspector as a Panch witness and that he signed on the two bottles of milk and wrappers also.

When he was confronted with the signature on Ex. 5 he said that he had signed it without reading it The Food Inspector on the other hand asserted that he had in the presence of Panch witness corked, sealed, labelled and wrapped the bottles which were signed by the Panch twice on each

BABU LAL HARGOVINDAS r. GUJARAT (Reddy J.)

of the bottles one on the label and the other on the wrapper and thereafter the accused had passed a receipt to that effect which was attested by the Panch witness in the presence of the accused. The Trying Magistrate was not prepared to take the word of the Panch witne.ss that he had signed Ex. 5 without reading it or without

•eeing the accused signlt\.g the same and preferred the evidence of the Food Inspector, Before the High Court, none of the contentions raised before the Trial Magistrate namely that inasmuch as the Panch witness did not support .the prosecution that all the re- <1uirements of Section 10(7) of the Act were not complied with or that the paper sljps bearing signature of the Panch ought to .have been affixed on the bottles and in the absence of such paper

seals there could have been tampering of the seals before they were .analysed. though raised were not pressed having regard w u decision of that Court in Man/ca Hari v. State of G11jarar,(').

The learned Advocate for the Appellant contends that though these point' were not pressed before the Gujarat High Court he is free to urge it before us. In the first place we do not think that having regard to the findings based on an appreciation of cviJence Of the Panch witness and the Food Inspector that the milk was bottled and sealed, signed and attested by the Panch witness in the presence of the accused as spoken to by the Food lnspecror can be challenged before us as those are findings of facts. ln the second place there is nothing to indicate that the provisions of sub-section (7) of Section 10 have not been complied with. Even otherwise in our view no question of the trial being vitiated for non-compliance of these provisions can arise.

It is I•Ot a rule of law that the evidence of the Food Inspector cannot he accept- .ed without corroboration.

He is not an accomplice nor is it similar to the one as in the case of Wills where the Jaw makes it imperative to examine an attesting witness under Section 68 of the Evidence Act to prove the execution of the Will.

The evidence of the Food Inspector alone if believed can be relied on for proving that the samples were taken as required by law.

At the most Courts of fact may find it difficult in any particular case to rely on the testilpony of , the Food Inspector alone though we do not say that this result generally follows.

The circumstances of each case will determine the extent of the weight to be given to the

vidence of the Food Inspector and what in the opinion of the Court is the value of his testimony.

The provisions of Section l0(7)- are akin to those under Section I 03 of the Criminal Procedure Code when the premises of a citizen are searched by the Police. These provisions are enacted to safeguard against any possible allegations of excesses or resort to unfair n\eans either by the Police Officers or by the Food Inspectors under the Act. This

(I) 8 G. L. R. 588.

SUPREMB COU&T l\EPOllTS [1971] SUPP. s.c.&._

being the object it is in the interests of the prosecuting authorities concerned to comply with the .provisions of the Act, the Ii.on compliance of which may in some cases result in their testimony being rejected. While this is so we are not to be understood as in any way minimising the need to comply with the aforesaid salutary provisions.

In this case however there is no jusuncation in the allegation that the provisions have not been complied with because the Panch witne8s had been called and his signatures taken which he admits.

In these circumstances the Courts werojustified in holding on the evidence of the Food Inspector that he had complied with the requirements and that the samples were seized in the presence of the Panch witness whose signatures Were taken in the presence of the accused.

There is also in our view no justification for holding that theaccused had no opportunity for sending the sample in his custody to the Director, Central Food Laboratory under Section 13(2) because be made no application to the Court for sending it. It does not avail him at this stage to say that over four months had elapsed from the time the samples were taken to the time when the complaint was filed and consequently the. sample had det~ riorated and could not be analysed.

The decision of this Court in Municipal Corporatio!I of Delhi v. Ghisa Ram(') has no appli cation to the facts of this case.

In that case the sample of the vendor had in fact been sent to the Director of the Central Food Laboratory on his.application but the Director had reported that the sample had become highly decomposed and could not analysed.

It is also evident from that case that the Food Inspector had not taken the precaution of adding the preservative. 1t appears from page 120 of the report that the elementary precau tion of adding preservative to the sample which was given to the.

Respondent should necessarily have been taken by the Food Inspector, that if such precaution had been taken, the sample with the Respondent would have bee11 available for anlaysis bY the Director of the Central Food Laboratory and. since the valuable right given to the vendor by Section 13(2) could not~ availed of, the conviction was bad.

No such defence is available to the Appellant in this case beca~ not only is there evidence that the preservative formalin was added but the Appellant had not even made an application to send the sample to the Director of Central Food Laboratory. . ·

The competence of the Food Inspector to file the complaint has been challenged oil the ground that the Medical Officer of Health who gave his written consent for filing it was not validlyauthorised by the Municipal Commissioner and that in any case. the complaint is not in accordance with the resolution of the Munit [1967] 2 S. C. R. 1(6.

BABU LAL HAllOOVINDAS v. OUJAllAT (Reddy J.)

cipal Corporation (hereinafter referred to as the 'Corporation') which authorised the filing of it in its name and not in the name of the Food Inspector. It appears the olution of the Corporatien of 17th October 1955 is in Gujarati but before the High Court the Advocates of the parties seem to have broadly agreed on the following translation : -

"Municipal Corporation Resolution No. 639 1955-S6 A. D., Shri Ramniklal Inamdac proposed seconded by Shri Shantilal Manila! that, in pursuance of the recommendation of the Standing Committee Resolution No. 1124, dated 13-10-1955 the Medical Officer of Health is authorised to accord written consent for filing complaints for the Municipal Corporation in accordance with Section 20 of the Prevention of Food Adulteration Act, 1954 (Central Act). On votes being taken the proposal was carried".

It was however pointed out by the lawyer of the Corporation that the translation should read slightly differently to replace that part, after the words "the Standing O:immittee resolution No. 1124 dated i3-10-1955" by the words "the authority of the Municipal Corporation to give written consent to file complaints under Section 20 of the Prevention of Food Adulteration Act is given to the Medical Officer".

In whatever manner the resolution may be read it is clear that what it purports to do is to authorise the Medical Officer of Health persuant to the powers vested in the Corporation as a local authority under Section 20(1) of the Act to have his written consent.

The provisions of Section 201 II are as follows : -

"20(1)-No prosecution for an offence under this Act shall be instituted except by, or with the written consent of the Central Government or the State Government :>r a local authority or a person authorised in this behalf, by general or special order, by the Central Government or the State Government or a local authority".

19.

I).

On a reading of the above provision it is manifest that a prosecution can be instituted either by the local authority or by a G person authorised by it in that behalf by general or special order.

The resolution therefore was in accord with the power vested by Section 20(1) of the Act by which the Corporation authorised the Medical Officer of Health to institute a prosecution. It is however stated that under the Corporation Act it is the Municipal Commissioner who is.the authority empowered to Act for the Cor-

. H poration and authorise any person to institute proseclltion under the Act, and since the Medical Officer of Health was not so authorised by the Commi8Sioner, the prosecution against the Appellant

SUPREME COURT REPORTS [1971) SUPP. s.c.R.

is invalid.

This contention is based on the provisions of Sections 67 & 68 of the Corporation Act under which it is claimed that it is the Commissioner who is empowered to exercise the functions of the Corporation, as such it is his authorisation that is required to satisfy the conditions prescribed in Section 20(1) of the Act for the institution of a prosecution under that Act.

We do not however read the provisions of the Corporation Act referred to as pressed upon us.

It is undisputed that under subsection (2) of Section 67 the Municipal Government rests in the Corporation unless of course lliere is any express provision which provides otherwise.

There is no doubt that the Corporation Act specifically prescribes the respective functions of the several Munidpal authorities as constituted under Section 4 but it no-where relegates the Corporation to a subordinate position or makes it subservient to the Commissioner.

In Section 67(3) upon which reliance is placed, the duties and powers of the Commissioner are made expressly subject to the approval and sanction of the Cocporation as also subject to all other restrictions limitations and conditions imposed by the Corporation Act or any other Act for the time being in force.

The duties and powers of the Commissioner. be it noted, are in respect of the carrying out of the provisions of the Corporation Act and of any other Act for the time being in force which imposes any duty or confers any power on the Corporation.

This sub-section is dealing with the exercise of the executive power by the Commissioner which is subject tQ limitations.

On no interpretation is it possible to hold that the Municipal administration vests solely in the Commissioner or that any function to be discharged by the Corporation can only be discjmrged by the Commissioner and no one else.

The scheme of the Corporation Act leaves no doubt that there 1re many instances where Corporation alone has to discharge the functions such as the appointment of certain officers under Sections 45. 53 and 58 or the discharging by it of the obligatory and discretionary duties under Sections 63 to 66.

Section 68(1) empowers the Commissioner to perform or exercise any powers', duties and functions conferred or imposed upon or vested in the Corporation by any other law for the time being in force subject to the provisions of such law and to such restrictions limitations and conditions as the Corporation may impose.

A combined reading of these two provisions clearly indicates that the Commissioner cannot exercise these functions withoot any fetters as if he is the Corporation.

The Corporation is the controlling authority and can restrict limit or impose conditio1111 on the Commissioner in the exercise of any of the powers envisaged in either under Section 67(3) or under Section 68(1).

Thero

BABU LAL HARGOVINDAS v. GUJARAT (Reddy J.)

is no gainsaying that the Commissioner can. function under ec tion 68(1) subject to the control of the Corporation as also sub1ect to the provisions of the law under which the powers are conferred.

The power to restrict limit or impose conditions being vested in the Corporation, it has the final voice in determining whether the Commissioner' or any other person will discharge those functions envisaged therein.

That apart Section 20(11 of the Act itself places no restrictions on the Corporation to circumscribe the powers of the Commissioner. It therefore follows that if a discretion is vested in the Corporation either to give its written consent in which case the Commissioner could subject to such limitation as may be imposed by the Corporation under sction 68(1) exercise the function or to authorise any other person by general or special order to give his written consent to institute prosecution under the Act.

The Corporation in either view is not fettered to em power the Medical Officer of Health to give his written consent in appropriate cases to institute prosecutions under the Act, which in fact is what he did.

All that the Medical Officer of Health is required to do is to give his written consent to institute the prosecution. There is no validity in the contention that the complaint should be in the name of the Corporation. As pointed out by this Court in the State of Bombay v. Parshottam Kanaiyalal,(') Section 20(1) does not in terms prescribe that the complainant shall he named in the written consent.

It merely provides that the complaint should be filed either, by a named or specified authority, or with the wiitten consent of such authority.

While the implication that before. granting a written consent the autho.rity competent to initiate a prosecution should apply its mind to the facts of the case and satisfy itself that prima fade case exists for the alleged offender being put up before a Court, is reasonable, the further implication that the complainant must be named in the written consent or that the name of the Municipal Corporation should appear in the complaint, has no basis.

In our view, therefore, there is no defect in the procedure followed while lodging the complaint against the appellant.

Lastly, it was faintly urged that Rule 7(2) of the Rules is ultra vires the Act.

It is contended that this Rule gives scope for the Public Analyst to cause the samples to be analysed by persons under him, viz., the Chemical Examiner, instead of himself analysing them, which is contrary to the express mandate of sub-section (!) of Section 13 and is beyond the scope of Section 23(l)(e) of the Act.

This provision, according to the learned Advocate, requires the Public Analyst to analyse the sample of any article of food submitted to him for analysis, while :he rule

(l) [1961! I S. C.R. 45R.

SUPRl!ME COUil T llEPOll TS [1971] SUPP. s.c.ll.

gives scope to him to cause it to be analysed by others which is beyond the scope of Section 23(1)(e). It is apparent from 1 reading of Section 13(1) that what is requires is that the repon. by the Public Analyst shall be in the prescribed form and that the same should be delivered to the Food Inspector. There is nothing to warrant the submission that the Public Analyst should himself ana.tyse the samples. Sub-rule (3) of Rule 7 is in conformity with

lhis provision when it requires the Public Analyst. after the analysis has been completed, to send to the person concerned two copies of the report of such analysis in Form Ill within a period of sixty days of the receipt of the sample.

All that the Public Analyst is reqnired under sub-rule 1 of Rule 7 on receipt of a package containing a sample for analysis from a Food Inspector or any other pesron is to compare the seals on the container and the outer cover with specimen impression received separately and shall note the condition of the seals thereon, or authorise someone else to do it.

We can find no inconsistency between !he provisions of Rule 7, and those of Section 13(1) as to hold that the Rule is in excess of what is prescribed by the Section, nor is there any justification for holding that the rule is beyond the scope of the rule-making power under Section 23(1) (e), which .empowers the Central Government, after consultation with the Committee to define the qualifications, powers and duties of the Food Inspectors and Public Analysts. Rule 7 does no more than prescribe the duties of the Public Analyst, in which will fall the duty to have the sampels analysed. The qualifications of the Public Analyst are, however, prescribed jn Rule 6, which shows that he is a person duly qualified, so that he is competent to have the samples analysed in his laboratory by qualified subordinates and under his supervision, which is what is implied in the requirement that he should give a report in the form prescribed.

Rule 7 (2) does not preclude the Public Analyst from himself analysing the samples, as indeed a perusal of Form III would show that he certifies as follows : "I further certify that I have/have caused to be analysed the aforementioned sample, and declare the result of the analysis to be as follows" : Whether the Public Analyst analyses the sample himself or causes it to be analysed, there is no doubt that he had to >'Ub&."Tibe to a declaration in respect of the result of the analysis and has further to give his opinion thereon which can only be done, if at some stage or other he takes part in the analysis either by himself analysing or checking the results of the analysis with the assistance of his subordinates.

In the light of the views expressed by us on the several contention raised before us, the appeal fails and is accordingly dismissed.

G. C.

Appeal dimilsMd.

BABU LAL HARGOVINDAS

STATE OF GUJARAT

1G. K. MITTER

K. S. HEGDE

P. JAGANMOHAN REDDY, JJ.

s. 10(7)

s. 20(1)

ss. 13(1) and 23(1)

s. 16

Food Adulteration Act, 1954

Art. 134(1)

s. 10(7)

S. 13(2)

[1967] 2 S.C.R. 1

s. 20(1)

ss. 67(3) and 68(1)

s. 67(3)

s. 68(1)

s. 20

s. 13(1)

s. 23(1)

Section 16(l)(a)(i)

Article 134(l)(c)

Section 10(7)

Section 13

Section 20(1)

Corporation Act LIX of 1949

Section 10(7)

Section 10(7)

Section 10

Section 68

Section 13(2)

Section 13(2)

[1967] 2 S. C. R. 1

Section 20

Section 20

Section 20(1)

Section 201

Section 20(1)

Sections 67 & 68

Section 20(1)

Section 67

is no doubt that the Corporation Act

Section 4

Section 67(3)

Sections 45

Sections 63 to 66

Section 68(1)

Section 67(3)

Section 68(1)

Section 20(1)

Section 13

Section 23(l)(e)

Section 23(1)(e)

Section 13(1)

Section 13(1)

Section 23(1)


W(}RKMEN OF WILLIAM .JACKS .& CO. LTD.,

MADRAS

11.

MANAGEMENT OF WILLIAM JACKS & CO. LID.,

MADRAS

April 28, 1971

(J. M. SHELAT, I. D. DUA AND V. BHARGAVA, JJ.J

The Payment of Bonus Act (21 of 1965), s. 23, Second Schedule, item 2(c) and Third Schedule, item (1)-A.dvance made by head office to branch office-Interest paid by branch offiu-lf deductible expenditure in calculating profit and loss of branch office-Provision for gratuity etc.-Diffe renee between provision and reserve-Provision when deductible-Deduc tible income tax calculated without taking into occoHnt bonus payable-If correct-Payment of Bonus (Amendment) Act (8 of 1969)-Effect of.

The appellant! workmen of the respondent claimed that for the two yean 196-4 and 1965 they were entitled to bonus at the maximum rate of 20% of their annual wages while the respondent contended that there was no available surplm and consequently the liability to pay bonus for these

two years could not exceed the minimum of. 4% of the wages. The management, inter alia, claimed deductions: (1) with respect to interest charged by the London office on advances made by the London office to the respondent-branch during those two years; (2) provision for gratuity and other contingencies; and (3) income tax calculated without taking into account the bonus which would be payable to the workmen.

The Tribunal allowed the claim_s.

In appeal to this Court,

HELD: (1) (a) The amounts claimed as interest are really payments by the 'branch of the company to its head office.

A payment of interest could be justified only on the basis that the head office was a creditor and the branch office a debtor. But a company could not be a creditor and its own debtor simultaneously. The interest paid really represented

amount! of money transferred by the respondent-branch to the head office, and similarly, the advances made by London office to the respondent-branch were amounts which continue to be used by the company for its own business at a different place.

[544F]

(b) This is also made manifest by the proviso to item 1 of the Third Schedule to the Act. In the deduction of the current liabilities any amount shown as payable by a company to its head-office whether towards any advance made. by the bead-office or otherwise, or any interest paid by the company to its head-office is not to be treated as a deductible liability, because, the advance made by the head office is also treated as a part of the

investment by the company. [5450]

(c) Under s. 23 of the Payment of Bonus Act, 1965, there is a presumption as to the correctness of the statements and particulars contained in the balance-sheet and the profit and loss account of a company, if the accounts had been properly audited by qualified auditors. The presumption, however, is confined to the accuracy of the statements and particulars contained in the balance sheet and the profit and loss account.

If any item in the accounts is wrongly shown aS' expenditure, when on the face

WOI.I:MEN l'. WILWW 1ACD .& CO. (B/targava, J.)

of it it is not ao, the. court is not bound to hold that th~ method adoptee in preparing the accounta is correct simply beCause tho auditors raisc>d no

objection. [S44H-S4SCJ .

Therefore, in the calculation of Jl'Oii pcofitl for purpoaes of bonus the sums deducted as interest for the two years must be added back since they were wrongly shown as deductible expenditure in calculating the profit and loa.

(2) The provision for gratuity, and other contingencies such as furlough salary, passage, service and com.mission, in the present case, was made in respect of existing ond known liabilities, though, in some cases the exact amount could not be ascertained. It was not a case where it was an anticipated loss or anticipated expenditure which would arise in the future.

Suob provision is, not a reserve at all and it could not be added back under item 2(c) of 'the Second Schedule to the Act. It was therefore rightly shown by the respondent as a deductible expenditure in calculating profit and loss. [5470]

Metal Box Co. v. The Workmen, [1969] 1 S.C.R. 750, followed.

(3) The calculation of the amount of income-tax shown as expenditure, without taking into account the bonus which would be payable to the workmen under the Act, was correctly done in accordance with the decision of D this Court in the Metal Bx Company ctJSe. In that case, the question was determined on the interpretation of 89, 6(c) and 7 of the Act, and the amendmentJ made by the Payment of Bonus (Amendment) Act, 1969 do not make any change in the law bearing on the question, as laid down by this Court. [547G]

CML ~PBLLATE 1umsoicnoN : Civil Appeal No. 1700 of 1968.

Appeal by special leave from the Award dated March 9, 1968 of the Industrial Tribunal. Madras in Industrial Dispute No. 11 of

19~7.

M. K. Ramamurthi, I. RQJtUJmurthy, Vineet Kumar and Shyamola Pappu, for the appellanti.

M. C. Chagla and D. N. GupttJ for the respondent.

The Judgment of the Court was delivered by

Bbargava, J.--This appeal by special leave is directed against an Award of the Industrial Tribunal, Madras, in a dispute relating to payment of bonus under the Payment of Bonus Act. 1965 (No. 21 of 1965) (hereinafter referred to as "the Act"). The respondent in the appeal is the employer, William Jacks & Co. Ltd .• Madras, while the appellant is the William Jacks & Co. Employees' Union, Madras. representing the workmen employed by the respondent. The appellant claimed that, for the two ca.lendar years 1964 and 1965, the workmen were entitled to bonus at the maximum rate of 20 per cent of their annual wages, while the respondent Co. put forward the case that there was no available

SUPREME COURT RBPORT~;

[1971] SUPP. S.C.R.

surplus and, consequently, the liability to pay bonus for these two years could not exceed the minimum of 4 per cent of the wages.

It may be mentioned that the respondent Co. is a Bench of Wi1liam Jacks & Co. Ltd. registered in England with its Head Office in London. It appears that in India this Company has three offices. One is in Calcutta which also functions at the Regional Head Office for aU the three Branches in India. The other two Branches are in Bombay and in Madras, the latter being the branch to which the dispute about bonUs 'elated. The Company is carrying business as engineers, manufadurers, representatives and general merchants. The business of the Company includes the buying of locally manufactred machinery and other products and selling them to both private and public sector industries. The income of the Company is derived primarily from the sa.le of imported and indigenous goods at a profit. In addition, the Branch at Madras earns commission credited by London Office on direct shipments from London to customers within the areas served by the Madras Bmnch, as well as commission on sale of indigenous products, repairs and servicing of equipment sold and by local purchase and sale. These features of the .business have been enu merated by us as they may have bea.ring on some of the questions raised in this appeal.

During the hearing of the reference before the Tribunal, the Company filed its balance-sheets, profits, and loss account, and calculations of available sur:plus in accordance with the provisions of the Act and its schedules showing that there was no a.vailable surplus, so that bonus in excess of 4 per cent was not payable by it.

These. calculations were challenged on varioUs grounds before the Tribunal, but none of them was accepted and the Award was based on the calculations filed on behalf of the Company.

In this appea.l before us, learned counsel appearing on behalf of the appellant has challenged the calculations in respect of seven different items, and we proceed to deal with them in the order in which they were argued by him.

The first claim on behalf of the appellant was tha.t there should be an add back of an estimated sum of Rs. 40.000/-, which was received as direct commission paid by the manufacturers to the London Office for the benefit of the Bra.nch at Madras. in calculating the gross profits on the basis of which available surplus is to be worked out. On this point, the Tribunal tn tts award did not give any specific finding, though, after mentioning this argument raised before it, the Tribuna.l still proceeded to accept the Company's account disregarding this objection.

The only evidence on this point is found in the statement of the Company's witness, M. W. 1, Thiru S. S. Mani, who stated tha•t the direct commission received by this Company relating to this

WORKMEN V. WILLIAM JACICS & CO. (Bhargava, J.)

Branch is credited in the accounts of this Branch. The amount of commission received by the Company is included under the head "Commission" in the Profit <~nd Loss Account.

In 1964, the sum of Rs. 8,80,504/- and, in 1965, the sum of Rs. 7,46,391/- include the direct commission. According to his evidence, therefore, the direct commission has already been taken into :account in calculating the gross profits, and no question can :arise of ; my add back.

There is no cross-examination on this point on behalf of the appellent, nor has any evidence been led .by the appellant to show that the statement of this witness is incorrect. In the circumstances, this claim has to be rejected.

The second item cl&imed is add back in respect of handling charges which were included by the London Head Office in the 'invoices for goods sent to Madras.

The argument was that a proportionate amount of administrative (overhead) expenses of the Head Office in London allocable to the Madras Branch have :already been deducted as expenditure in accordance with item 6(e) of the secoRd Schedule to the Act, and the further debit of the handling charges amounted to double deduction. This argument proceeds on the basis th&t handling charges, which are in eluded by the London Head Office in the various invoices, form part of the administrative (overhead) expenses of that office.

There is no justification for such an assumption. The only evi- , dence on this point is again that of M. W. 1, Mani. He clea-rly

stated that, in the accooots, no sum is shown for handling charges .-as an expenditure as such. The handling charges are only men-

; tioned in the invoices received from the London Office for goods sent to Indi&. These refer to the amount of handling charges •incurred by the London Commercial Departments and all these amounts are recoverable from the customers in India along with the sale price. He added that the administrative (overhead) ex penses of the Hea<i Office do not include any portion of the London Commercial Departments expenses. Thus, it is clear that

these handling charges have no connection with the administrative (overhead) expenses of the Head office which are taken into %\Ccount under item 6(e) of the Second Schedule.

The actuaJ .expenses incurred by various C<lJilmercial Departments of the Company in England in handling the particular goods are added in the invoices to the cost of those goods and are realised as pad of the sale price. There is no separate entry of handling charges as an expenditure in the accounts of the Company. Consequently, there can Mise no question of making any addition in respect of these handling charges while calculating gross profit.

The third item is in respect of the Director's and General Manager's Office expenses in Calcutta amounting to Rs. 44,768/- .-for the year 1964 and Rs. 50,848/- for the year 1965. The Office

! 543

SUPI.l!:W:!! COUI.T Ul'OltTS r1971 1 SUPP. S.C.Il~

in Calcutta, as we have indicated above, is a sort of commoD> office supervising the business of the Company at the three places in Calcutta, Bombay and Madras.

The expenditure of this Regional Office is of the same nature as the administr&tive

(overhead) expenses of the Company in London.

TheSe sums which have been shown as expenses in tb~ accounts in the Madras Branch are amounts allocable to that .Branch. This has been again proved by the same witness, M. W. l, Mani. There is no cross-examination and no evidence to show that the case put forward by him is incorrect. In the circumstances, this objection also fa.ils.

The fourth objection, on which greatest emphasis was laid by learned counsel for the parties, relates to the question of interest charged by the London Office in the sum of Rs. 1,00,657/- for 1964 and Rs. 1,65,255/- for 1965 on advances made by the London Office to this Branch a, t Madras during_ these years. It was urged that, having regard to the proviso to item l(iii) of thtt Third Schedule to the Act, this interest should be disallowed.

It, however, appears to us that the question ot this interest should be examined from a different aspect and that is whether this iaterest ca.n be held to be a legitimate item of expenditure in calculating the profit and loss of the Company at Madras. It i6 clear that these amounts have been paid by the Branch at Madr~ to Head Office in London and represem. interest which the Londo• Office demanded from the Madras Branch on the advances made by the former to the latter.

These payments are, thus. by a Branch of the Company to its Head Office.

The Head Office and the Branch Office both belong to the same Company. sue•

a payment of interest could be justified only on the basis that the London Office was . the creditor and the Madra.s Branch tie debtor in respect of the advances on which the interest has bee• claimed by the London Office. On the face of it, a Company cannot be a creditor and its own debtor simultaneously.

No relationship of creditor and debtor can exist between two diffew rent Offices of the same Company. The interest paid merely amounts to money transferred by the Madras Branch to the Ht!ad Office and, similarly, advances made by the London Office to the Madras Branch are amounts which continue to be used by the Company for its business at a different place.

Lea.rned counsel appearing for the Company drew our attention to section 23 of the Act, under which there is a presumption as to the correctness of statements and particulars contained in the bala.J.ce-sheet and profit and loss account of a Company if they had been properly audited by qualified auditors, and urged that, since the interest charged by the Head Office to the Branch

WORKMEN v. WILLIAM JACL<t, & CO. (Bhargava, J.) 545

office at Madras was accepted as a proper expenditure for calculation of profit and loss account by the auditors.' the Court under section 23 must accept that it was correctly shown as an expenditure.

The presumption under section 23 is confined to the accuracy of the statements and pa.rticulars contained in the

balance-sheet and the profit and loss account. n any item in the accounts is wrongly shown as expenditure when, on the face of it, it is not so, the Court is not bound to hold that the method adopted in prepn.ring the accounts is correct simply because the auditors raised no objection.

While the interest was paid on advances not made by a creditor to a debtor, but by the Company's one office to another, the money purported to be transferred as interest cannot be held to be a.n expenditure incurred by the Branch paying it to the other. In fact, there are indications in the Act itself to support the view that such advances made to one office by another of the same Company cannot be treated as liabilities. This is made manifest by the proviso to

item 1 of the Third Schedule .. Under this item, every Company, other than a banking company, is allowed a return on paid up equity share capital and on reserves shown in its balance-sheet.

The proviso then deals with the case of a foreign Company and permits a deduction of 8.5 per cent on the aggregate of the value of the not fixed assets and the current assets of the company in India after deducting the amount of the current liabilities. In deduction of the current liabilities, however. any a.mount shown as payable by the Company to its Head Office, whether towards any advance made by the Head Office or otherwise. or any interest paid by the Compa.ny to its Head Office, is not be treated as a li_ability. The reason very clearly is that the object of the

deduction under item 1 of the Third Schedule is to permit a Company a return on money invested by it for its business a6 a prior charge when a.\culating the surplus for purposes of bonus. In the case of an Indtan Company, this object is achieved by givina a return of 8·5 per cent on the equity share capital and 6 per cent on reserves. 1!1 the ca-se of~ foreign Company, the same object is served by workmg out the <Liffcrence between the total of fixed assets and current assets, and the current liabilities, which will represent the actual value of the net holdings of the Company as its investment. The advances made by the Head Office to a Branch Offi are not deductibl~ as liabilities, because that amount is also treat~~ as a part of the mvestment by the Company on which th C pany should be given the return of &5 e omtherefore, partake of the natur f

1. per cen~ I.t does not, be charged b th H . d Offi e 0 a oan on whtch mterest can principle of Y e . ca . ce from the Branch Office The dule th ca.Jcul.atton latd down in item 1 of the Th'trd. S h ' u~. rccogms tb . . c e- ranch Office d es e sttion that the Head Office and the tnterest could b o lot. unc!ion as creditor and debtor when only

35-t s.a. lndiaf7~ egtl.mately charged by the Head Office from

~ .

SUPREMB COURT REPORTS

(1971] SUPP. S.C.R..

the Branch Office. In calculation of the gross profit for purposes of bonus. therefore. the two sums of Rs. 1,00,657/- for 1964 and Rs. 1,65,255 Ifor 1965 must be added back on the basis that they are wrongly shown as expenditure deductible in calculating profit and loss.

The fifth objection relates to a sum of Rs. 11,747/- in 1964 and Rs. 7,251 Iin 1965 shown as expenses incurred in the J ax Board Factory on the ground that the Jax Board Factory had ceased to function for these two years. It is, no doubt, true that M. W. 1, Mani, admits that the Jax Board Factory had no production in those two years; but there is nothing to show that the Factory had completely ceased to function.

The expenses are actual expenses in the factory during those two years as certified by the Auditors and there is no material on the basis of which it can be held that these expenses were not incurred. This objection, therefore, fails.

The sixth claam on behalf of the appellant is that the provision for gratuity and other contingencies should also be added back as representing "other reserves" under item 2(c) of the

Second Schedule to the Act.

The other contingencies referred to relate to provision made for furlough salary, passage, service and commission. All these items are clearly in respect of liabilities which had already accrued in the years in which the provision was made. They are not in respect of anticipated liabilities which may arise in future. The principles on which these have been calculated were explained by the same witness M. W. 1, Mani. In the case of gra.tuity, for example, provision has been made in respect of the employees on the basis of the amount of service put in by them up to the years to which the accounts relate. Ln some cases, of course, where the exact liability was not ascertainable, provision hM been made on the basis of the estimated existing liability. Such provision is quite different and distinct from a reserve. This Court in Metal Box Co. of India Ltd. v. Their Workmen(') held:

"The distinction between a provision and a reserve is in commercial accountancy fa.irly well-known. Provisions made against anticipa.ted losses and contingencies are charges against profits and, therefore, to be taken into account against gross receipts in the Profit and Loss account and the balancesheet. On the other hand, reserves are appropriations of profits, the assets by which f!tey are represented being retained to form part of the capital employed in the business. Provisions are usually

(l) [1969] 1 S. c. R. 750.

WORKMBN v. WILLIAM lACKS, & CO. (Bhargava, J,)

shown in the balance-sheet by way of deductions from the MSets in respect of which they are made whereas general reserves and reserve funds are shown as part of the proprietor's interest : (See Spicer and Peglar's Book~ keeping and Accounts, 15th ed. p. 42). An amount set aside out of profit and other surpluses, not designed to meet a liability contingency commitment or diminution in value of assets known to exist a.t the date of the balance-sheet is a reserve but an amount set aside out of profits and other surpluses to provide for any known liability of which the amount cannot be determined with substantial accuracy is a provision. (See William Pickles Accountancy, Second Edn., 192, Part III, cl. 7. Sch.

VI to the Companies Act, 1956 which defines provision and reserve.)" The provision for gratuity, furlough salary, passage, service and commission in the present case was all made in respect of existing and known liabilities, though, in some cases, the amount could not be ascertained with accuracy. It was not a case where it was a.n anticipated loss or anticipated expenditure which would arise in future. Such provision is, therefore, not a reserve at all and cannot be added back under item 2(c) of the Second Schedule.

The last ground for challenge of the award relates to the deduction for income-ta•x.

In the present case, the amount of income-tax shown as expenditure has been calculated without taking into account the bonus which would be payable to the workmen under the award. The point raised that it should be calculated after taking into account the bonQ.s is fully met by the decision of this Court in the case of Metal Box Co. of lndia( 1).

That case clearly lays down that, in calculating the income-tax deductible in working out the gross profit, the bonus which would be payable under the Act is not to be taken into account and the tax must be worked out ignoring that bonus at the rates applicable in the relevant years.

Learned counsel for the appellant, however, drew out attention to the amendment made subsequently by Parliament in the Act by the Payment of Bonus (Amendment) A.ct 8 of 1969, and urged that this amendment should be treted as the parliamentary exposition of the law which was interpreted by this Court in the case of Metal Box Co. of India('). In that case, the question was detennined by interpretation of only sections 6(c) and 7 of the Act. The Amendment Act 8 of 1969 makes no substantial changes in either of

these two sections. In fact, section 6 remains unamended and in section 7, the only amendment is that the principles laid down in that section are to be &pplied not only in respect of section 6(c), but also other sections of the Act. This change became

(1) [1969]1 S.CR. 750.

54S SUPRBMil COURT REPORTS

[1971] SUPP. S.C.R.

necessary, because amendment was made in section 5 of the • Act by making certain additions which referred to direct tatX, including income-tax. That amendment in section 5 has no bearing at all on the question whether income-tax to be taken int~ account in cailculation should be worked out fter taking into account the bonus payable under the Act or without having regard to it. Consequently. there is no r.eason for us to differ from the view expressed by this Court in Metal Box caseO. This ground of challenge also, therefore, fails.

As a result, we hold that the Tribunal was right in accepting the calculations made by the Company, except in respect of the interest paid on advances made by the Head Office to the Branch at Madras.

The interest shown as expenditure in the accounts has to be added back, as indicated by us above, and the available surplus for purposes of calculation of the bonus payable as well as 'for purposes of set on or set off must be amended a.ccordingy.

We leave this calculation to the Tribunal.

With this partial amendment in the award, the a.ppeal is dismissed .. In the circum stances of this case, we make no order as to costs.

V.P.S.

Appeal dismissed.

co [tt69l 1 s.c.R. . .

WORKMEN OF WILLIAM JACKS & CO. LID., MADRAS

M. SHELAT

I. D. DUA

V. BHARGAVA, JJ

Payment of Bonus Act

s. 23

Second Schedule

Third Schedule

Third Schedule

s. 23

Payment of Bonus Act, 1965

Second Schedule

[1969] 1 S.C.R. 750

Payment of Bonus Act

Rd Schedule to the Act

Second Schedule

Third Schedule to the Act

section 23

section 23

section 23

Third Schedule

Third Schedule

Second Schedule

cl. 7

VI to the Companies Act, 1956

Second Schedule

sections 6(c) and 7

section 6

section 7

section 6(c)

section 5

section 5


MD. USMAN & ORS.

STATE OF ANDHRA PRADESH & ORS.

Aprit 29, 1971.

[K. S. HEGDE AND A. N. GROVER, JJ.J A.ndhra Pradesh Registration Subordinate Service Special Rules, r. 5- U.D.Cs. and L.D.Cs. put together for recruitment to post of Grade-II Sub registrars-If violative of Art. 14 of l'onstitution.

Recruitment on seniority-cum-merit basis-Preferential qualifications considered-Validity of recruitment.

The validity of the recruitment of the appellants as Grade-II Sub Te&istrars as well as the vires of r. 5 of the Andhra Pradesh Registration Subordinate Service Special Rules under which the recruitment was made, were challenged by some of the respondents. The rule deals with the qualifications for being recruited as Grade II sub-registrars.

It put in one class for the purpose of recruitment, both U.D.Cs. as well as L.D.Cs. It was therefore contended that the rule violated Art. 14 of the -Constitution by treating unequals as equals. The High Court held that the recruitment was in accordance with the rule, but struck down the rvle as violative of Art. 14.

In appeal to this Court,

HELD: (!) (a) U.D.Cs. and LO.Cs. belong to a districtwise cadre, that is, promotion from L.D.C. to U.D.C. is made districtwise. Since the chances of promotion from L.D.C. to U.D.C. in one district differ materially from that of another, a L.D.C. in one district may be promot- .ed as a U.D.C. much earlier than a L.D.C. in another district who may be his senior, more efficient or may possess the same or better qualifications.

But Grade-II sub-registrars are in a statewise cadre.

Though the position of a U.D.C. is superior to a L.D.C, if the State treated U.D.Cs. as superior to L.D.Cs. while recruiting for a statewise cadre, it would result in great injustice to a large section of the clerks, because of the fortuitous circumstance of a L.D.C. in a particular district becoming a. U.D.C. in that district. Therefore. the State "-'a.~ justified in not classifying the U.D.Cs. and L.D.Cs. separately.

(b) Though there was an anomaly in the case of L.D.Cs. and U.D.Cs. serving in the same district, the anomaly could not have been 3.Voided.

The validity of the rule has to be judged by assessing its overall effect and not by picking up exceptional cases~ Further, the rule provides for giving preference to the U.0.Cs. who had put in service of 5 years or more. [552H-553F]

(2) The selction in the present case was made on the basis of senio~ rity-cum-merit.

A list of all the clerks, U.D.Cs. as well as L.D.Co., was prepared in the order of seniority as L.D.Cs. and tncss of eac~ person was considered.

Also, those persons who were entitled to be given pre~ ference under the rules were considered separately and recruited in the first instance. The method adopted was the most reasonable one :ind was

in accordance with the mle. [553H-554B]

CML APPELLATE JURISDICTION : Civil Appeal No. 153 of 1971.

SUPREME COURT RBPORTS [1971) SUPP. s.c.a.

A Appeal from the judgment and order dated October 21, 1970 of the Andhra Pradesh High Court in Writ Appea.l No. 240 of 1968.

B. V. Subrahamanyam and G.

Narayana Rao, for the appellants.

B P. Ram Reddy and P. P. Rao, for respondents Nos. 1 and 2.

M. Natesan, Venkataramhiah and K. Jayaram, for respondents Nos. 3 to 21.

The Judgment of the Court was delivered by

Hegde, J.-The principal question that arises for decision lin this appeal by certificate is as to the vires of Rule 5 of the Andhra Pradesh Registration Subordinate Service Special Rules. to be hereinafter referred as "the rules". The High Court has struck down this rule on the ground that it is violative of Art. 14 of the Constitution.

As a result of thait conclusion, it has also quashed the recruitment of some of the respondents made in March, 1965 for being J!OSted as Sub-Registrars Grade-II.

The petitioners as well as respondents No. 3 onwards in the Writ Petition were serving as clerks, either in the upper division or in the lower division, in the Registration and Stamps Department including the office of the Registrar Generail of Births, Deaths and Marriages and the Office of the Registrar of the Firms.

Some of the respondents had been recruited by the Inspector General of Registration and Stamps, Andhra Pradesh for being appointed as Sub-Registrars.

The petitioners challenged the validity of their recruitment on various grounds, by means of a Writ Petition under Art. 226 of the Constitution. But that petition was summarily dismissed by a single Judge of the Andhra Pradesh High Court. 1 Thereafter, the matter was. taken up in appeal to a Division Bench of that Court. The Division Bench rejected all the contentions of the petitioners except one viz. that rule 5 of the rules is ultra vires Art. 14 of the Constitution. As a result of that conclusion it struck down the impugned recruitments. Only two questions were presented before us for decision viz:

(i) whether rule 5 of the rules is ultra vires Art. 14 of the Constitution; and

(ii) whether the recruitments maide are not in accordance with the rules.

At this stage, it may be mentioned that the High Court has held that the impugned recruitments were made in accordance with

MD. USMAN v. A. p, STA'11! (Hegde, J.)

the rules. In other words, the second question was decided against the petitioners.

We shall first take up the question ais to tlie vires of rule 5.

The rules provide for the promotion to the posts of Sub-Registra£ as weJI as for recruitment to those posts. Rule 2 provides that a post of Grade-I Sub-Registrar should be fiJled by promotion from Grade-II Sub Registrar. So far . as Grade II Sub-Registrars a.re concerned, they are to be appointed either by promotion from reserve Sub-Registrars or by ."recruitment by transfer from the clerks of the Registration and Stamps Department including the Office of the Registrar General of Births, Deaths and Marriages and the Office of the Registrar of the Firms." Rule S deails with qualifications for being recruited as Grade-II Sub-Registrars.

That rule reads :

"Qualifications : --No person shaJI be eligible for appointment to the category mentioned below unless he possesses the qua.Jification shown.

Category and qualifications

I. Sub-Registrars, II Grade :-(i) Must be a permanent clerk and must have served for a period of not less than seven years on duty as clerk in the Registration a, nd Stamps Department including the office of the Registrar-General of Births, Deaths and Marriages and the Office of the Registrar of Firms;

(ii) Must have passed the Registration Test; and

(iii)(!) Must have taken at the finail examination at the end of his school or college course, one of the following languages, namely :- F

Telugu, Hindi, Oriya, Kannada, Tamil, Urdu or Marathi, or

(2) Must have passed the Government Translation Test or the Second Class Language Test-Full Test.

"(iv) Must have passed the second class language Test-Full Test-in a language other than that taken for S. S. L. C. or University."

Preference shall be given to persons who, in addition to the qualifications specified in items (i) to (iii) possess a degree in Law of University in the State or any other equivalent qualification or a Pleadership Certificate in the First Grade or who have put in five years service in

.---.--.

.: SUPRI!MB COURT REPORTS

(1971) SUPP. S.C.ll.

A ' the category 'of Upper Division Clerks in the Registration Department." · . . :

. ~- · It was uiged that this rule is violative Art. 14 of the Const't tion because though among the clerks there are U.D.Cs., as lVe!I . L.D.<; s., yet all of them had e:n pt in one. class for the purpose 0~

recruttment. . As per the Mtmstertal , Servtce Rules the U.D.cs. had to be selected from the L. D. Cs. _after the L. D. Cs. had put in certain number of years of servtce and after they had passed the Accounts Test as well as the Registration Test. A.

U. D. C. hols supeir post to !at of a L. D. C. His salary is higher and hts condtttons of service are better than that of a L. D. C . . Hence it was urged that as rule 5 treats U. D. Cs. as well as L. D. Cs. as equal for the purpose of recruitment for the post of a Grade II Sub-Registrar, the rule violates the doctrine of equality. According to the petitioners the equality doctrine i! attracted not only when equals are treated a, s unequals but also where uncquals are treated as equals. It was contended on behalf of the petitioners that a statutory provision ma.y offend Art. 14 of the Constitution both by finding differences where there are none and by making no difference where there is one. The proposition of law advanced on behalf of the petitioners is unexceptionable. This Court ruled in Kunnathat Thathunni Moopil Nair v. The State of Kerala another(') that when the statute obliged every person who held land to pay tax at the at rate

prescribed, whether or not he made any income out of the pro pcrty, or whether or not the property was capable of yieldin~

any income, there being no attempt at classification in the provlions of the statute, the Statute denied equality before law because of lack of classification. Similar views have been expressed by this Court in other decisions. It is not necessary to refer to those decisions. .

On the other hand it wa-s argued on behalf of the contesting respondents. that before considering the vires of rule 5, we mU; St

first ascertatn the reason behind the rule to find out whether 10

fact there is discri":li!lation.

The contesting respondents do not deny that the posJ!ton of a U. D. C. i~ superior to tl1at of a L. D. C. But accordmg to them it became necessary for the State to pool together the U. D. Cs. a-s well as the L. D. Cs. for the purpose of recruitment in question for the following reasons:-

The Grade If Sub-Registrars are in a statcise cadre whereas the ~- D. Cs. and L. D. Cs. belong to a district-wise cadre. Pro- "hohon from . L. I?· C to U. D. C. is made district-wise. The c ances of pr?mot10n from L 0. c. to u. D. c. in one distrtct

(I) [1961]~3 S.C.R. 77.

MD. USMAN v. A. P. STA11l (Hegde, J.)

materially difiers from ooother district. It depends on the number of posts available in a particular district. In one district a L. D. C. may be promoted as a U. D. C. as soon as he puts ia a service of 5 yeacs, whereas in another district a L. D. C. 'POi sessing the same or better qualifications as well as efficiency may not be promoted as a U. D. C. for 15 years or more. That being so while making recruitment to a state-wis~ cadre it W86 not possible for the State to make distinction between the L. D. Cs. and the U. D. Cs. The on, Jy reasonable basis that could have been adopted was to .treat the U. D.1 Cs. aind L. D. Cs. as one class for the purpose of recruitment. But. at, the same time the rule provides for giving preference to the U. D. Cs. who had put in a service of 5 years or more.

There is force in these contentions though there may be some anomaly in the ca.se of L. D. Cs. and U. D~ Cs. serving in the saime district. But that anomaly cannot be avoided. The validity of a rule has to be judged by assessi.ng its over-all effect and not by picki'ng up exceptional cases.

What. the court hrui to see is whether the cla.ssification inade is a just one taking all aspects into consideration. ' · /

On the facts before us we are unable to agree tha! for the gl!r pose of recruitment with which we are concerned herein -tile State should have classified the U. D. Cs. and L. D. Cs. separately.

If the State had treated the U. D. Cs. a6 being superior to the L. D. Cs. for the pUrpose of that recruitment it ould have resul- ted in a great deal of injustice to a large section of the clerks.

The fortuitous circumstance of an officer in a particulac district becoming a U. D. C. would have given him an undue advantage over his seniors who might have been as efficient or even more e!licient than himself, merely because they chainced to serve in some other district.

For the reasons mentioned above, we do not think that in the present case the State can be said to have treated unequals as equals. The rule of equaility is intended to advance justice by avoiding discrimination.

In our opinion the High Court lfy overlooking the reason behind Rule 5 came to the erroneous conclusion that the said rule violated Art. 14 of the Constitution.

We agree with the High Court thait there is no substance in the petitioners' contention that the impugned recruitments were not made in accordance with Rule 5. It is clear from 'the affidavit filed on behalf of the State and the Registrar that the Registra.r had considered the case of all the qualified clerks, but the Registrar thought that the best basL for recruitment was to preparn a list '

0 1; the clerks. U. D. Csas well as L. D. Cs. -arrangi:.g the cs in the order of seniority as L. D. Cs. and thereaifter con. ., each name and. reject the unfit.

In other

SUPREME COURT REPORTS (1971] SUPP. s.c.R..

words, the selection was made on the basis of seniority-cum-merit --the seniors among the clerks were selected subject to suitability.

Those persons who were entitled to be given preference under the rules were considered separately and recruited at the first instance. Only thereafter the other recruitments were ma.de.

The rules do not prescribe that the recruitment should be made on the basis of merit and merit alone. Bearing in mind the fact that the recruitment with which we are concerned in this case is a recruitment by transfer which means recruitment from among the ministerial offieial$, the method adopted by the Registrar appears to us to be the most reasonable one.

In the result this appeal is allowed, the order of the Division Bench of the High Court is set aside and tha.t of the single judge restored. In the circumstances of the case, we direct the parties to bear their own costs in all the courts.

V.P.S.

Appeal allowed.

MD. USMAN & ORS

STATE OF ANDHRA PRADESH & ORS

K. S. HEGDE

A. N. GROVER, JJ

Art. 14

Art. 14

Art. 14

Art. 14

Art. 226

Art. 14

Art. 14

Art. 14

Art. 14

Art. 14


T. C. M. Pll.LAI

INDIAN INSTITUTE OF TECHNOLOGY, GUINDY,

MADRAS

Apr~1 29, 1971

[K. s. HEGDE AND A. N. GlOVER, JJ.]

Institutes of Techno-logy Act, 1961-8tatute 13, cl. (9) framed under s. 21-Probationer-Termination of Service-Attitude or tendency displayed by employee valid consideration-Termination based on such considera tions not punishment.

The appellant, a scientist, was appointed to the staff of the respondent institute on probation.

He had executed a bond to serve the Kerala University but this fact was never disclosed by him. He adopted an at titude questioning the Rules and Regulations of the Institute as well as every order made by the superior authorities, he even threatened legal proceedings at every stage. He had barely been in the serv1~ of the Institute for a short time when he wanted to take up service elsewbeN.

When the question of his confirmation came up before the Board of Governors it was recorded that the Board had come to know for the first time that while the appellant bad executed a bond to serve the Kerala University he did not disclose that fact when he applied to the Institute.

This, in the opinion of the Board was "serious transgression of well known convention and etiquette". The Board, after considering all the aspects and perusing the confidential reports came to the conclusion that it would not be desirable in the interest of the Institute to retain the services of

the appellant. It was therefore resolved that his services be terminated with a month's notice in terms of the order of appointment. The appellant filed a petition under Art. 226 of the Constitution challenging the order of termination. He relied on cl. 9 of Statute 13 framed under s. 27 of the Institutes of Technology Act, 1!161 which provided that no order imposing any penalty shall be passed without giving a reasonable opportunity of showing cause against the action proposed to be taken in regard to a member of the staff. The High Court held that !i.lthough the Board of Gq_vernors took note of the fac; t that the appellant had committed a breach of a Covenant with the Keiala Government and that he had insisted on certain benefits which he was not entitled to it could not be said that his services bad been terminated by way of punishment.

Dismissing the appeal to this Court,

HELD : A probationer or a temporary servant can be discharged if it is found that he is not suitable for the post which he is holding.

Suitability does not depend merely on the excellence or proficiency in work. A particular attitude or tendency displayed by an employee can well influence the decision of the confirming authority while judging his suitability or fitness for confirmation. In the present case, if the Institute thought that a person of the appellant's type would not be suitable for being confirmed as a member of the staff of the Institute the order dis

pensing with his services could not be regarded as penal action taken with the object of inflicting punishment. [559H-560B]

CIVIL APPELLATE IURISDICI10N : Civil Appeal No. 2263 of 1968.

5 55'

.55&

SUPREME COURT REPORTS

(1971] SUPP. S.C.R.

Appeal from the judgment and order da'ted August 4, 1964

of the Madrat; High <; ourt in Writ Appeal No. 337 of 1963.

M. C. Chagla and R. Gopalakrishnan, for the appellant.

' S. T. Desai, C. N. S. Chengalverayan and A. V. Rangam, for the respondent.

The Judgment of the Court was delivered by

Grover, J.--Th~'> is an appeal by certificate from a judgement of a division bench. of the Madras High Court affirming the decision of a learned single judge rejecting the petition filed by the appellant under Art. 226 of the Constitution to quash an order passed by the respondent Instituffi on April 26, 1963 which had the effect of terminating his serVices.

The appellant had a distinguished academic career.

After P.assing the Master's degree in Organic Chemistry from the Luck~ now University he obtained a Doctorate from the Royal School of Mining of the lJniversity of London. He got a Post Graduate Diploma from the , Imperial College of Science and Technology, London. He worked for' sometime a, nd was employed successively in some of the Universities in the United States Qf America.

Since the year 1960 the appellant had been making efforts to get employment in the respondent Institute.

This Institute is one of the four Institutes of Science and Technology which have .been declared to be institutions of national importance, It ha-s

a Board of Governors, the Chairman and Members of which are distinguished edu<!ationistsf scientists and teachers.

By a Iett<(r dated fanuary 8, 1962 the appellant was offered the post of the Assistant Professot of Extractive Metallurgy at the Institute.

Condition No. 2 was as followS,:_

"The post is permanent. Your ppointment how~ ever is made on proba.tion for a period of one year. Subject to satisfactory completion of probation,· you will be confirmed in the post. Dt1Png the period of probation your services may be terminated by one month's notice on either side." '

This offer was accepted by the appellant. By a resolution of the Board of Governors dated March 1. 1962 the action of the Chairman in according a.pproval to the appointment of th~ appel lant was confirmed. The appellant joined the !ttaff o! the Institute on May 23. 1962.

It is somewhat unfornate that .. a distinguished scientist of the calibre of the a, ppellant did not commence his career in a happy manner. It appears that he had executed a bond to serve

T. c. M. PILLA! v. I.I.T. (Grover, J.)

the Kerala University.

According to the Institute this fact was never disclosed by him. It has been noticed ,.u the judgment of the High Court that according to the staten~ ·- ~~~ of the Director of the Institute in his affidavit to which no exception was taken by the appellant in his reply the latter adopted an attitude questioning the Rules and Regulations of the Institute as well M

every order made by the superior authorities~ he even threatened legal proceedings at every stage. In spite of that, on January 31, 1963 the Director gave an assurance to the appellant that he did not want members of the staff to quit the Institute on differences of opinir}n on matters which were completely non-academic.

On March 21, 1963 a report on the work done by the appellant was called for with a view to placing it before the Board of Governors.

That report was submitted by the appellant. A meeting of the Board of Governors was held on April 15, 1963. Item 27 of the agenda of that meeting related to the consideration of certain representa-tions made by the appellant. The Board rejected the appeal against the decision of the Director in the matter of allotment of a C type quarter. It also confirmed the Director's decision that the application submitted by the appella•nt for a post in the Benaras Hindu Uni.versity be withheld. The Board made a note of the fact that there was no provision in the Institute Medical Attendance Rules for charges of X-r<'JY done in a private Radiological Institute and reimbursement of charges relating to taxi hire incurred by the appellant in taking his wife to and from the hospital in the a.bsence of a certificate from the authorised medical attendant. Item 28 related to the question of the satisfactory completion of probation of Assistant Professors and their confirmation. It was recorded that the Board had come to know for the first time that while the appellant had executed a bond to serve the Kerala University he did not disclose that fact when he applied to the Institute. This, in the opinion of the Bord, was "serious transgression of well known convention and official etiquette". The Board, after considering aU the aspects and persuing the confidential reports by the Head of the Department in respect of the work of the appellant, came to the conclusion that it would not be desirable in the interest of the Institute to retain the services of the appellant. It was, therefore, resglved that his services be terminated with a month's notice.

The Secretary of the Board of Governors thereafter sent a letter to the appel1ant dated April 23, 1963 informing him that the Board had decided to terminate his services and a month's notice was being given to him in view of clause 2 of the order of appointment.

The appelloot filed a petition under Art. 226 of the Constitution. His main plea was that no reasonable opportunity had been afforded to him to show cause against the order tenninating his services and therefore the same was illegal and invalic.t The

:558

(1971] SUPP. S.C.R.

A allegations made by the appellant were controverted on behalf of the Institute.

The learned single judge, who heard the writ petition, con sidered the question of the applicability of Art. 311 of the Consti tution to the case of the appellant. It was held by him that the appellant was not in the civil service of the Union and could not claim the benefit of the aforesaid Article.

Even otherwise the learned judge was not inclined to agree that the circumsta.nces in which the services of the appellant were terminated warranted the conclusion that he had been discharged by way of punish ment. The appella.nt filed an appeal under clause 15 of the Let ters Patent of the High Court.

Before the division bench the correctness of the decision of the learned single judge with regard to the applicability of Art. 311 was not contested. Reliance was sought to be placed on the provisions of Statute 13 framed under s. 27 of the Institutes of Technology Act, 1961 under which the respondent Institute had been incorporated a.g a body corporate.

Clause 5 of that Statute confem:d power on the appointing autho rity to terminate the services of any member of the staff without notice and without any cause being assigned during the period of proba.tion. Clause 9 gave the penalties which could be imposed on a member of the staff. Removal and dismissal from service were included among those penalties. It was provided that no order imposing any penalty shall be passed without giving reasonable opportunity of showing cause against the action proposed to be taken in regard to a member of the staff. The division bench was satisfied that Statute 13 prescribed the terms and conditions of permanent employees of the Institute. Statute 14 related to the conditions of service of temporary employees.

Although probationers could noi be termed a•S permanent emp loyees the conditions of their tenure were also governed by Statute

13. If the services of a probationer were, therefore, terminated by way of punishment without following the procedure prescribed by clause 9 of Statute 13 it would be competent for the High Court to issue an appropriate writ.

The division bench proceeded to examine the circumstances which led to the resolution of the Board by which his services were terminated.

The conclusion which was arrived at was that although the Board of Governors took note of the fact that the appetla.nt had committed a breach of a covenant with the Kerala Government and that he had insisted on certain benefits to which he was not entitled it could not be said that his services had been terminated by way of punishment.

It was possible that the dissatisfaction of the Board with the con duct of the appellant formed the motive for the ultimate order passed by it but that was quite different from termina, ting his

services as a measure of IJUnishment. •

T. C. M. PILLA! v. I.I.T. (Grover, J.)

Mr. M. C. Chagla for the appellant has forcefully empha sised the background &nd the circumstances which prompted the making of the order terminating the services of the appellant.

According to him the appellant was a distinguished and promi sing scientist whose services would have been of immense advantage to the Institute and merely because he insisted on certain benefits which he conceived to be his just dues and wanted to advance and further his prospects in the Benaras Hindu Univer sity by getting an assignment there, his services were dispensed with without his being told what the charges against him were and without his having any opportunity of giving an explanation or satisfying the Board that whaotever he had done was fully justified and did not merit any action being taken against him. Mr. Chagla pointed out that it is such treatment meted out to our scientists and technologists that there was so much brain drain from this country. Indeed the appellant has now taken up a highly remunerative and important assignment in the United States. It is true that every one who has good of the country at heart should endeavour to retain the services of scientists and technologists of high repute so that the institutions in this country could take advantage of their scholarship and research.

At the same time the scientists or schola, rs who have distinguished themselves in foreign countries should also consider it a part of their duty and obligation to contribute to the imparting of education and ad vancement of research in their own country even though it be at a sacrifice of monetary and other benefits which foreign countries can offer but which it is not possible to obtain here. The present case is a typical one of a scientist who started making complaints about reimbursement charges of x-ray and taxi fare and other small matters as soon as he joined the Institute and even though he had entered into a bond with the Kerala Government to serve the Kerala University he did not appa.rently take the permission of the Kerala Government or University for working elsewhere.

He had barely been in the service of the Institute for a short time when he wanted to take up service with the Banaras Hindu Uni- .versity when a vacancy arose there. No one can blame the appellant for his natural desire to improve his prospects but if the Institute thought that a gentleman of his type would not be suitabie for being confirmed as a member of the staff of the Institute the letter dispensing with his services could not be regarded as a penaJ action taken with the object of inflicting punishment on him.

It is well settled that a probationer or a temporary servant can be discharged if it is found that he is not suitable for the post which he is holding. This can be done without complying with the provisions of Art. 311(2) unless the services are terminated by way of punishment. Suitability does not depend merely on the

SUPRBMB COURT REPORTS

(1971] SUPP, S.C.L

excellence or proficiency in work. There are many factors which enter into consideration for confirming a person who is on probation. A particular attitude or tendency displayed by an employee can well influence the decision of the confirming authority while judging his suitability or fitness for confinnation.

In the present case the Board of Governors consisted of a number of distinguished and well known academicians and teachers. Although there is a mention in the resolution about the confidential reports by the head of the department a, nd the Director but they have not been placed on the record.

Even assuming that those reports were favourable so far as the acade mic work of the appella.nt was concerned the Board was entitled to take into consideration the other matters which have already been mentioned for the purpose of deciding whether he should be confirmed or whether he should be given a notice of one month as per the terms of the letter of appointment. The Board decided to adopt the latter course. By no stretch of reasoning ca.n it be said that the appellant had been punished and that his services had been dispensed with as a penal measure.

It has been pointed out to us by Mr. Chagla. that subsequently also wherever an inquiry has been made from the Institute about the work and conduct of the a.ppellant the certificate which has been sent is in such terms that the appellant cannot expect to get any gainful employment in this country. This, it is submitted, shows what the approach of the Institute was. We are not directly concerned with this m31tter in the present appeal but we have no doubt that the Institute will not adopt any such attitude which may stand in the way of the appellant getting any other employment in this country or in any other country.

The appeal fails a-nd it is dismissed. There will, however. be no order as to costs throughout.

K.B.N.

Appeal dismisJed.

T. C. M. Pll

INDIAN INSTITIJTE OF TECIINOLOGY, GUINDY, MADRAS

K. s. HEGDE

Institutes of Techno-logy Act, 1961

s. 21

Art. 226

cl. 9

s. 27

Institutes of Technology Act

Art. 226

clause 2

Art. 226

Art. 311

clause 15

Art. 311

s. 27

Institutes of Technology Act, 1961

Clause 5

Clause 9

clause 9

Art. 311(2)