KRISHNA BIHARILAL v.

GULABCHAND AND ORS.

March 16, 1971

[K. S. HEGDB AND P. JAGANMOHAN REDDY, JJ.]

Hindu Law-Widow entitled to life estate-Entering into compro1nise with reversioners giving up rights over portion of property in return for recognition of her absolute ownership of patt of property-Revt!rsioners are estopped from challenging alienations by widow of properties recognised as absolutely hers in compromise-'Malik Mustakal' means absolute estate-Document must be read to give efJect to plain and natural meaning to words employed-Plea of .stoppel when may be considered though not specifically raised in pleadings.

B filed a suit for the possession of ancestral property against the descendants of his father's brother and &ister. D.uring the pendency of the suit B died and bis widow P was impleaded as his legal representative.

Some of the defendants also died; those who left legal representatives were substituted by them. On June 7. 1941 the parties to the suit compromised their disputes. Before compromisin& the suit the parties had obtained the leave of the court as the minor defendants had joined the compromise.

Under the compromise a portion of the suit properties was aiven to P and the remaining portion to the defendants in that suit. P alienated the properties given to her under three different sale deeds.

The appellant was the alienee under all these sale deeds. The alienations were challenged by the defendants in the earlier suit and their descendants in three suits wherein declarations were sought that the aforesaid alienations by P were not valid and binding on the plaintiffs who were the _presumptive reversioners to the estate of B. During the pendency of the -Suits P died and thereafter the suits were contested only by the appellant as the alience. The trial court dismissed two of the suits holding that in view of the compromise in the earlier suit the parties were cstopped from challenging the validity of the sale deeds as under that compromise the estate given to P wa-s an absolute one. After various stages of litigation the Division Bench of the High Court held that the compromise of 1941 was illegal and as such could not be used to non-suit the plain.tiffs. It also, held that the compro111ise did not ameunt to a family arrangement.

HELD : (i) The ordinary rule of construction of a document is to give effect to the normal and natural meaning of the words employed in the document. The compromise deed specifically said that the properties given to P were to be enjoyed by her as 'Malik Mustakal'. These words have been interpreted to mean an absolute estate. The circumstances in which the compromise was entered into as welt as the languaae used in the deed did not in any manner go to indicate that the estate given to P was anything other than an absolute estate. [31E-F]

Dhyan Singh and Anr. v. /uga/ Kislwre & Anr .• (1952] S.C.R. 478 and Bishunath Prasad Singh v. Chandika Prasad Kumar, 60 I.A. 56, relied on.

(ii) In holding that the compromise in question was illegal the Division Bench overlooked the fact that this was not a compromise entered into fWith third parties. It was a compromise entered into with presumptive revefsioners. Further, since at no stage had the plaintiffs pleaded that the compromise was illegal. the High Court was not justified in going into the validity of the compromise. [31H-32B]

(iii) Even if the compromise was illegal the parties to the compro1nisewere cstopped from challenging the impugned alienation.

It is well settled that a Hindu widow cannot enlarge her estate by entering into a compromise with third parties to the prejudice of the ultimate reversioners.

But the same will not be true if the compromise is entered into with persons who ultimately become the reversioners. P was entitled to enjoy the entire properties included in the earlier suit during her life time; but under the compromise a fraction of those properties was given to her absolutely. She gave up her rights in a substantial portion of the properties on the representation of the defendants that she could take a portion of the suit properties absolutely. This was a representation of fact and not law.

[32B-33AJ

T.V.R. Subbu Chetty's Family Charities v. M. Raghava Mudily<1r and ors., [1961] 3 S.C.R. 624, relied on.

When the nearest presumptive reversioners who were parties to the compromise were estopped from challenging it, they could not advance their case by impleadin& their sons who could only claim throuah then1. as co-plaintiffs. [33E-F]

The issue whether tho plaintiffs I & 2 were bound by the term• of the compromise was broad enough to cover the defendant's plea of estoppel even though it was not specifically raised in the pleadinas but considererl by all the courts. [34A]

(iv) The nearest reversioners who were parties to the compromise were the grand-children of B's aunt. The parties to the earlier suit were near relations.

The dispute was in respect of property originally owned by their common ancestar. To consider a settlement as a family arrangement it is not necessary that the parties to the compromise should all belong to one family.

The courts lean trongly in favour of family arrangements to bring about harmony in a family and do justice to its various members and avoid in anticipation future disputes which might ruin them all. [34B-EJ

{The suits being held to be not maintainable the Court did 11ot consider the question whether the impugned alinations were effected for valid necessity.]

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 74 and 75 of 1967.

Appeals by special leave from the judgment and decree dated May 3, 1966 of the Madhya Pradesh.High Court in LP.A .. Nos. 3 and 4 of 1964.

S. V. Gupte, Rameshwar Nath, Ra; endar Nath and Manik Chand Jain, for the appellants (in both the appeals).

S. T. Desai, Motila/ Gupta, B. M. Agarwal, P. N. Tiwari. J.B.

Dadachanji. O. C. Mathur and Ravinder Narain, for the respon- '

dents (in both the appeals).

I l

KRISllNA BIHARILAL v. GULABCllAND (Hegde, J.)

The Judgment of the Court was delivered by

Hegde J.-In these appeals by special leave identical questions of fact and law arise for decision. It would be convenient to set out the material facts before formulating the questions arising for decision.

In the State of Gwalior there was a firm known as Chhedilal Chaturbhuj.

Chhedilal, the owner of the firm had two sons and one daughter.

The genealogy of the family of Chhedilal is as follows :

Chhedilal

Baldv rasad I Chhaturbhuj I Parvati (daughter) married to Manorthilal I I Bulak chand I I Jwalaprasad I I Rajabe11 Mst. Pat1obai

Su ta (daughler)

I Kanialal I

(widow) died in 19~3.

I . l Kamtma alias Kannimal

I Hirabl@

Hariji

I Raggamal

I .

Ganeshtlal

I Pannalal

I Lakshmichand Sarswatibai (widow)

Balklishan Krisanlal Phoolhand Poonmchand j

(minor) (Res. 7) (Res. 9) (Res. 8) ____ ~.------------- 1 I I I Gulabchand Jagdish Chandra.

Mahavir Karola @Rambabu (Res. 2) (minor) (daughter) (Res. I) IRes. 3) Minor, Res. 4

After the death of Chhedilal, it appears the firm in question came into the possession of some of the children of Parvati. In

1926. Bulakichand, grandson of Chhedilal filed a suit against J wala prasad (his first cousin), Karnimal, Raggamal and Pannalal seeking possession of the firm. Therein he appears to have alleged that Jwalaprasad who had a half share in the suit properties had been colluding with the other defendants. Bulakichand died during the pendency of the suit. Thereafter his widow Pattobai was impleaded as his legal representative. During the pendency of the suit Jwalaprasad, Karnimal, R3ggamal and Pannalal also died. Neither Jwalaprasad nor Karnimal left a.ny successors .. Raggamal was succeeded by his son Ganeshilal a.nd

Pannalal by his son Lakshmichand.

They were duly impleaded in the suit. On June 7, 1941, the parties to the suit compromised their disputes. It may be noted that to tha.t compromise the minor

ons of Lakshmichand as well as of Ganeshilal were also parties.

SUPll!lME COURT REPORTS [1971] SUPP. s.c.R.

Before compromising the suit the parties had obtained the leave of the court as the minor defendM1ts had joined the compromise.

Under the compromise, a portion of the suit properties was given to Pattobai and the remaining portion to the defendants in that suit.

Pattobai alienated the properties given to her under, three different sale deeds i.e. one on July 15, 1941 and the other two on July 24.

1941. The first sal.e deed was for a sum of Rs. 1,000/- and the other two for Rs. 9,000/- and Rs. 20,500/- respectively. The appellant is the alienee under all these sale deeds. In 1953, Lakshmichand and his sons and Ganeshilal and his sons instituted three suits seeking declarations tha.t the alienations referred to above are not valid arid binding al!lllinst them, the presumptive reversioners to the estate of Bulakichand. One of those suits is still pending trial. These appeals arise from the other two suits. During the pendency of those suits Pattobai died. Therea.fter the suits were contested only by the appellallt, the alienee !he will be hereinafter referred to as the defendant). The trial court dismissed the two suits holding that in view of the compromise in the earlier suit, the parties are estopped from challenging the validity of the sale deeds as under that compromise the estate given to Pattobai is an absolute one. In appeal the first appellate court confirmed the _judgment of the trial court on the ground that as the pla.intiffs

had not amended the plaint seeking possession of the suit properties after the death of Pattobai. the suits were not maintainable.

On further appeals being taken by the plaintiffs, the .High Court set aside the first appellate court's judgment. It came to the conclusion that the first appellate court should have taken into consideration the change in the circumstances that had taken place pending the trial of the suits and moulded the relief aiccording to law. It, accordingly remanded the cases to the first appellate court for disposal of the same on merits. After remand the first appellate coill't again affirmed the decision of the trial court on two grounds viz. (!) that the plaiirtiffs were estopped from claiming any right in.the suit properties as an absolute estate had been given to Pattobai in respect of those properties and (2) thM under any circumstance the compromise in question should be considered as a family arrangement and as such is not liable to be reopened. This decision was affirmed by a single judge . of the High Court in second appeal. Thereafter the plaintiffs took up the matter in appeal to the Letters Patent Bench. The Letters Patent Bench reversed the judgment of the courts below. It held that the compromise entered into in 1941 was an illegal compromise and as such the same cannot be used to non-suit the plaintiffs. It also disagreed with the conclusion of the learned sin)e judge that the compromise recorded amounted to a family settlement. These appeals are directed a!lllinst tbal. judgment.

KRISHNA BIHARILAL Y. GULABCHAND (Hegde, J.)

3 J

The first question that falls for consideration is whether on A a true construction of the compromise decree it can be held that

Pattobai had been given an absolute estate ? According to the plaintiffs Pattobai having been impleaded to the suit as a legal representative of her husband, in law she could not take an absolute estate; she could only have a widow's estate and therefore in construing the compromise decree, we must bear in mind the B principles of Hindu Law and if we do so, the only possible conclusion is that the intention of the parties was only to give her a life estate. On the other hand it is contended on behalf of the defendant that under law Pattobai was entitled to enjoy all the properties included in the plaint in the earlier suit during her life time but she agreed to give up her right in bulk of the properties in consideration of her getting an absolute estate in a C small portion of the properties involved in that suit. It was further urged on his behalf that the compromise deed specifically says that the properties given to Pattobai are to be enjoyed by her as "MaJik Mustikal" which means absolutely and hence there is no basis for the contention that she took a widow's estate.

The ordinary rule of construction of a document is to give effect to the normal and natural meaning of the words employed in the document. The compromise deed specifically says that the properties given to Pattobai were to be enjoyed by her as "Malik Mustakil''. The meaning of the expression "Malik Mustakil" an urdu word, has come up for consideration before this Court in some cases. In Dhyan Singh and anr. v. Jugal Kishore & anr(') this Court ruled that the words "Malik Mustakil" were strong, clear and unambiguous and if those words are not qualified by other words and circumstances appearing in the same document, the courts must hold that the estate given is an absolute one. A similar view was taken by the Judicial Committee in Blshunath

Prasad Singh v. Chandika Prasad Kumari('). The circumstances under which. the compromise was entered into as well as the Ian guage used in the deed do not in any manner go to indicate that the estate given to Pattobai was anything other than an absolute estate.

The Letters Patent Bench of the High Court held that the compromise entered into was illegal compromise. It came to that conclusion on the basis that a Hindu widow cannot enlarge

her own rights by entering into a compromise in a suit. But the High Court overlooked the fact that this was not a compromise entered H into with third parties. It was a compromise entered into with the

(!l [1952] S. c. R. 478.

(2) 60 I. A. S6.

presumptive reversioners. Further at no stage the plaintiffs had

pleaded that the compromise entered into in 1941 was an illegal compromise. The plaintiffs took no such plea in the plaint. There was no issue relating to the validity of the compromise. Hence the High Court was not justified in going into the validity of the compromise. Further even if the compromise was an invalid one, the parties to the compromise are estopped from challenging the

impugne<I alienations-see Dhyan Singh's case(').

This takes us to the question of estoppel.

As seen earlier, the trial court, the first appellate court as well as the learned single judge of the High Court have concurrently come to the conclusion that the plaintiffs are estopped from challenging the impugned alienations. But the Letters Patent Bench took a different view. Its conclusion, a.s mentioned earlier, proceeded on the basis that a Hindu widow cannot enlarge her own estate by entering into a compromise with. others. It is well settled that a Hindu widow cannot enlarge her estate by entering into a compromise with third parties to the prejudice to the ultimate reversioners. But the same will not be true if the compromise is entered into with persons who ultimately become the reversioners.

It was urged on behalf of the respondents that Pattobai was impleaded in the earl'ier suit only as a legal representative of her deceased husband; therefore she could only represent his estate and not carve out an estate for herself. But this argument over: looks the fact that according to Pattobai she was entitled to enjoy the entire properties included in the earlier suit during her life time; but under the compromise a fraction of those properties were given to her absolutely; that being so the plaintiffs are estopp; d from backing out of that compromise. It was urged on behalf of the plaintiffs that the representation made by the defendants in the earlier suit is at best a representation as regards the true legal position and such a representation cannot estop them; before there can be an estoppel, the representation must be about some fact, the opposite side must rely on that representation and' must suffer some detriment by acting on the basis of. that representation. It was urged on their behalf that in this case -Ole only representation that the plaintiffs are said to have made in that Pattobai had an absolute estate in a portion of the suit properties; this cannot be said to be a representation of a fact and therefore the same cannot form any basis for invoicing the rule of estoppeL We are unable to accept this contention. From the facts set out earlier. it is clear that Bulakichand claimed the entire estate for himself after the death of Jwalaprasad. If lhe contention of Bulakichand is correct, as we must assume for the purpose of this case, then Paltobai would have been entitled to enjoy the entire properties during her life time. But she gave up her rigt in a substantial portion of those properties on the repre8C'ltat1on by

(I) [l!>S2] S. C. R. 478. '

KRISHNA BIHARILAL •. GU'.ABCHAND (Hegde, J.)

the defendants that she can take a portion of the suit properties absolutely.

This is a representation of a fact and not of Jaw.

The representation is that the defendants were willing to confer on Pattobai an absolute right in a portion of the suit properties if she gave up her right in the remaining properties.

Pattobai relied on that representation and gave up her claim in respect of a substantial portion of the properties included in the earlier suit.

Hence the plaintiffs particularly Lakshmichand and Ganeshilal who alone were tee reversioners to the estate of Bulakichand on the d?.te of the death of Pattobai, are estopped from contending

th1t they are entitled to succeed to the properties given to Pattobai.

The other plaintiffs have no independent right of their own <n the properties with which we are concerned. In Dhyan Singh's case(') this Court ruled that even if an award made is Invalid, the persons who were parties to that award are estopped from challenging the validity of the award or from going behind the award in a subsequent litigation. In T. V. R. Subbu Chetty's Family Charities v. M. Raghava Mudaliar and ors.,(') this Court ruled that if a person having full knowledge of his rights as a possible reversioner enters into a transaction which settles his claim as well as the claim of the opponent at the relevant time, he cannot be permitted to go back on that arrangement when reversion actually opens.

At the time of the compromise Lakshmichand and Ganesh'1al were the nearest presumptive revers'ioners. They must be deemed to have known their rights under law. Under the compromise they purported to give a portion of the suit properties absolutely to Pattobai, evidently in consideration ofher giving up her claim in respect of the other properties. They cannot be now

permitted to resile from the compromise and claim a right inconsistent with the one embodied in the compromise. They cannot advance tr.eir case by impleading their sons as co-plaintiffs. Their sons can only claim through them.

For the first time in this Cciurt it was urged tha.t the plea of estoppel was not available to the defendant as no such plea had been taken in the pleadings. It is true that no specific plea of estoppel had been taken in the written statement filed by the defendant.

But he had definitely stated in paragraph 14 of his written statement that the plaintiffs are bound by the compromise and have no right to deny the right of Pattobai over the whole of the properties sold to him. One of the issue raised in the suit (Issue No. 4) is :

"Are the plaintiffs Nos. 1 and 2 bound by the terms of compromise filed in Qvil Original Suit No. 3 of S. Y.

19~ I of the High Court? If so. what is it~ effect?"

(ll (1952] S. C.R. 478. 3-1 s. a. Ind; a/71

(21 [1961] 3 S. C. R. 624.

This issue is broad enough to covr the plea of estoppel. The plea of estoppel had been urged and considered by all the courts without any objection from the plaintiffs. They cannot be now permitted to contend that the defendant had not t>ken any specific plea of estoppel.

The next question that we have to consider is whether the compromise in question can be considered as a settlement of family disputes. It may be noted that Lakshmichand and Ganeshilal who alongwith Pattobai were the principal parties to the compromise were the grand-children of Parvati who was the aunt of Bulakichand. The parties to the earlier suit were near relations. The dispute between the parties was in respect of a certain property which was originally owned by their common ancestor namely Chhedilal. To consider a settlement as a family arrangement, it is not necessary that the parties to the compromise should all belong to one family.

As observed by this Court in Ram Charan Das

v. Girjanandini Devi and ors.(') the word "family'" in the context of a family arrangement is not to be understood in a narrow sense of being a group of persons who are recognised in Taw as having a right of succession or having a claim to a share in the property in dispute. If the dispute which is settled is one between near re lations then the settlement of such a dispute can be considered as a family arrangement-see Ramcharan Das's case(')

The courts lean strongly in favour of the family arrangements to bring about harmony in a family and do justice to its various members and avoid in anticipation future disputes which might ruin them all-see Sahu Madho Das and ors. v. Pandit M11ka11d Ram and anr.(')

For the reasons mentioned above we are of the opinion that in view of the compromise entered into between the parties in 1941, the suits from which these appeals arise are not maintainable. In that view, it is not necessary to go into the question whether the alienations were effected for valid necessity, a question that has not been gone into finaJ!y.

In the result these appeals are allowed and the suits from which these appeals arise dismissed with costs throughout.

G.C.

(!) [1965] 3 S. C.R. 841 at p, 850 & 851. (2)

Appeals allowed.

KRISHNA BIHARILAL

GULABCHAND AND ORS

P. JAGANMOHAN REDDY, JJ.

[1961] 3 S.C.R. 624

[1961] 3 S. C. R. 624

[1965] 3 S. C.R. 841


STATE OF MYSORE

SWAMY SATYANAND SARASWATI, RELIGIOUS

PREACHER, RAICHUR March 31, 1971

(G. K. MITTER, K. S. HEGDE AND P. JAGANMOHAN REDDY, JJ.J

Grant by Jagirdar-1/ includes right to minerals in favour of grante11 -Burden of proof.

The Nizam of Hyderabad granted a jagir to his prime minister. The successor of the jagirdar granted an island in one of the villages, comprising a hillock of granite, to the predecessor-ininterest of the respondent.

The area covered by the grant was acquired by the State Government for purposes of an irrigation project.

On the question whether the respondent was entitled to sub-soil rights, and as a consequence, became entitled to compensation for the granitt:' and quarries as minerals, HELD: It was for the respondent to establish his claim to minerals or quarry rights by putting forward proof of the grant thereof by the Nizam to the jagirdar and by the jagirdar to his predecessor. But ssum ing that the Nizam conferred the right on the jagirdar, the patta granted by the jagirdar and the connected documents showed that what was in con templation of the jagirdar and his grantee at the time of the grant. was either the cultivation of the land or the grazing of cattle on it.

Nobody at that time had any thought or idea of the land being put to any other use or any mining or quarrying rights being exercised therein. When the granter was careful to exclude even the fruit bearing trees, it would be wrong to hold that he must have parted with the sub-soil rights by implication. Therefore, the right to minerals was not granted to the respondent'i predecessor. [287B-C ; 289B; 2920-E]

What has to be considered in each case is the purpose for which the lands are leased or an interest created therein with all the clauses which throw any light on the question as to whether the granter pur?l"lrted to include his rights to the sub-soil in the grant when there was no express mention of it.

If the grant shows that the purpose of the grant y.-a5 tu allow the user of the surface only it would be wrong to presume that subsoil rights were also covered thereby.

[292C-D]

The test of what is a mineral is, what at the date of the instrument, the word n1eant in the vernacular of the mining world, the commercial world. and among landowners: and in case of conflict that meaning mut prevail over the purely scientific meaning. Since granite is a mineral according to this test the respondent had no right to the granite or qu1rries.

[:.93B-CJ

State of Andhra Pradesh v. Duvvuru Balara1ni Reddy, [1963] 1 S.C.K. 173, followed.

Hari Narayan Singh v. Sriram Chakravarti, 37 I.A. 136, Durga Prasad Singh v. Braja Nath Bose, 39 I.A. 133, Girdhari Singh v. Megh Lal Pandey. 44 I.A. 246. Sashi Bhusan Misra v. Jyoti Prasad Singh Dea, 44 I.A. '16,

Govinda Narayan Singh v. Sham Lal Singh, 58 I.A. 125, Bejoy Singh Dudhoria v. Surendra Narayan Singh, l.L.R. 61 Cal. I (P.C.) and Attorney General v. Welsh Granite Co. I The Law Times Reports 549, applied.

GVIL APPELLATE JURISDICTION : Civil Appeal No. 496 of A 1966.

Appeal by special leave from the judgment. and order dated August 10, 1964 of the Mysore High Court in Regular Appeal (fl) No. 75 of 1956.

S. T. Desai, B. D. Sharma, Shyama/a Pappu and S. P. Nayar, for the appellant.

M. Natesan, B. Parthasarathy, /. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for respondent Nos. 1 and 3.

The Judgment of the Court was delivered by

Mitter, J.-The main question involved in this appeal is, whether the respondent was entitled to sub-soil rights by virtue of the pattas granted.in favour of his predecessor-in-interest by Nawab Salar Jung III of Hyderabad and as a consequence thereof became entitled to compensation claimed by him for acquisition of a large block of land containing a hillock of granite which was required for the Tungabhadra Project and was notified for acquisition under the Hyderabad Land Acquisition Act on February 3, 1946.

The relevant facts are as follows. In 1820 the Nizam of Hyderabad granted a jagir, the terms whereof do not appear from the record before us, to bis Prime Minister known as Nawab Salar Jung r. This jagir consisted of many villages in the district of Raichur one of them being Madlapur on the bank of the river Tungabhadra.

In the year 1930 the successor of the original grantee of the jagir, Nawab Salar Jung III made a grant of an island in that village comprising S. Nos. 154, 312 and 313 with a hillock rising to a height of 250 ft. and measuring Ac. 290-00 in favour of one Swami Nijananda, the predecessor-in-interest of the respondent.

In February 1946 the entire area covered by the grant to Swami Nijananda was proposed to be acquired for an irrigation and hydroelectric project known as the Tungabhadra Project which had been embarked upon by the Governments of Hyderabad and Madras States.

The purpose of acquisition was the gathering of granite stone .for the construction of a dam across the river Tungabhadra. The acquisition proceedings were completed pursuant to a final notification made on June 16, 1947 followed by an award by the Land Acquisition Officer on July 24, 1950.

Before the Land Acquisition Officer two claims were put forward, one on behalf of the respondent Swami Satyananda and the other by Nawab Salar Jung III.

But as all jagirs including that of Nawab Salar Jung were abolished during the pendency o( the acquisition proceedings, the claim for compensation by Nawab

286 SUPRBllE COURT l\EPOl\11 [1971) SUPP. s.c.R.

Salar Jung III also disappeared.

The claim of Swami Satyanan.da was for Rs. 29,91,600.

The Land Acquisition Officer awarded Rs. 31,260.8-0 as the total compensation disallowing the claim in respect of the granite hillock on the ground that it was not covered by the grant to Swami Njjananda.

The District Judge to whom reference was made under the Land Acquisition Act enhanced the compensation to Rs. 48,892 exclusive of statutory allowance and interest.

Two of the issues framed by the District Judge related to the respondent's claim to a right in the quarry and also to the situs thereof i.e. as to whether it was within the patta land belonging to the claimant He found that the rock was situated within the patta land of the claimant but with regard to the quarry rights he took the view on the basis of two Farmans of the Nizam Bxs. A-21 and A-22 and Section 2(d) of the Mines Act and Section 3 of the Hyderabad Land Revenue Act that the claimant had no right to the minerals and quarries. He did not record any finding as to whether the jagir granted by the Nizam included the mining rights and whether the patta granted by the jagirdar conferred the same rights on the claimant in view of his conclusion on the points of law urged that mining rights were in the exclusive ownership of the Nizam.

The High Court took the view that the District Judge had proceded on the assumption that there was a grant to Nawab Salar Jung I with all the mineral products in the land by the jagir ot 1820.

It however held, differing from the District Judge, that the Farmans Bxs. A-21 and A-22 did no more than explain the provisions of Section 63 of the Land Revenue Act and did not affect any subsisting rights in the minerals if they belonged to the jagi.rdar.

According to the High Court the question as to whether the grant to Nawab Salar Jung did or did not include the granite in the hillock was never rl}ised at any stage and it was assumed by every one that the gran\ to Nawab Salar Jung included the right to granite and. that right was a subsisting right even while the Hyderabad Lam! Revenue Act 1907 was enacted.

The High Court was not willing to entertain the contention raised by the Advocate-General for the first time that the grant did not include the right to granite in the hillock.

The High Court apparently fortified its conclusion placing reliance on the fact that copies of all the grants of jagirs should have been available with the State authorities and as the original grant to Nawab Salar Jung or an authenticated copy thereof was not produced, the necessary inference would be that the same would not support the contention of the Advocate-General.

The High Court further took the view that the granite in respect of which compensation was claimed in the case was not a mineral and that being so neither Section 63 of the Hyderabad

MYSORB v. SWAMY SAlYANAND (Miller, J.)

Land Revenue Act nor the Farmans referred to in Exs. A-21 and A-22 were relevant to the issue before it and it would not be possible to hold that the minerals and mineral products in the hillock vested in the Government under Section 63 of the Hyderabad Land Revenue Act.

In our view it is not necessary to consider the effect of the Farmans or of Section 63 of the Hyderabad Land Revenue Act. It was for the respondent to establish his claim to minerals or quarry rights by putting forward proof of tlie grant thereof by the Nizam to Salar Jung I and to show that his rights in the land held by him were co-extensive with those of Nawab Salar Jung III.

There is no scope for any presumption that the Nizam had parted with the mineral rights to the jagirdar or that the jagirdar had done so in his turn.

Even assuming that the Nizam conferred the right of minerals in the land or to quarry fot granite therein to Nawab

Salar Jung I, the question still remains, what right did the patta of the Salar Jung estate confer on the predecessor-in-interest of the claimant.

The patta for S. Nos. 312 and 313 was marked as Ex. 49 in this case.

It contains various columns including those for the name of "Khatedar", 'any increase or decrease in the land on account of cultivation or left uncultivated', 'remarks of the village officers', "opinion of the Tahsildar" and "the approval of the 'Nizam' of settlement".

Under the column headed "opinion of the Tahsildar" is to be found the following : -

"The land bearing S. No. 254 Paramboke known as 'Bolurguddi' is situated in Madlapur village, the area of which is Ac. 290-00 and it has not been surveyed. Narasimha Bharati Swamy has filed an application wherein he has approved/accepted land the extent of Ac. 89-00 area in Tahsil office.

As the village was under survey the Tahsil office &ent the file to the Settlement Department ...

According to the profit accruing to the State as pointed out by the applicant, the survey No. 312 measuring 109 acres and 13 guntas, having an assessment of Rs. 27 and Survey No. 313 measuring 13 acres 13 guntas having an assessment of Rs. 19 in all 183 acres 33 guntas and with a total assessment of Rs. 46 were given into the possession of the applicant and the remaining 109 acres 20 guntas have been included in the Paramboke the survey number of which is 154, the Government has got the right over the trees bearing fruit.

The patta bearing S. Nos. 312-313 may be made in the name of the applicant Narsimha Bharati Swamy from 1331 Fasli. The letter received from the Settlement is worthy of perusal.

According to the remarks of Settlement Department, the entry of uncultivated land has been made since 1330 F. because it was

SUPREME COURT REPORTS [1971] SUPP. s.c.ll

approved in 1330 F. The file of the Thasil has also been submitted. The acceptor has filed an application in the District office stating that the entry of the patta be made in the year 1330 Fasli and that he is willing to pay the amount."

bA. 50 is a copy of the proforma No. 8 (Takavi) statement ol village Madlapur and is for Paramboke (pattal granted on 7th Mehar 13 36 F. The remarks of the Tahsil office in this case read :

"An assessment of Rs. 28-4-9 of the unsurveyed Paramboke No. 154 measuring 106 acres 20 guntas at the Bolguddi is approved as per the District Office Order.

Nijanand Narasimha Bharati Swamy of Dolurguddi is granted the excess of 'Lawani' in accordance with Rs. 04-0 agreement from 'Dhara' to 'Rev-Sharan'."

Reference may also be made lo the letter issued by the Superintendent, Settlement Department, Salar Jung Estate where the petition for grant of patta of land of Bolur Gedda by Narasimha Bharati Swamy mentioned as one for the purpose of grazing cattle.

According to this letter :

"The land once bearing survey No. 244 measuring 209 acres and known as Bolur Gedda has been lying as a waste since a long time.

The land in the said survey number is not fit for cultivation.

On all the occasions water of the stream will be surrounded on all the four sides.

It would be useful only for grazing the cattle.

Near about the said survey land there are two tamarind trees.

But the product of the trees has not been auctioned at any time. . .

Now regarding the rent received by the Government of the State as indicated by the petitioner in regard to the aforesaid land of the land measuring 109 acres 13 guntas and assessed at Rs. 27 and survey land No. 313 measuring 74 acres and 20 guntas assessed at Rs. 19, thus a total of 183 acres and 33 guntas assessed at Rs. 46 has been given in possession of the petitioner and the rest of the land 106 acres and 20 guntas has been included in this 'purpose' land only and its survey number is 154.

The tamarind trees standing on the said survey land would belong to the Government only.

In case a petition is presented in future the lands may be included in the patta as per rules. The patta of the survey lands bearing S. Nos. 312, 313 may be madt-. in the name of the petitioner Sri Nijanand Narasimha Bharati Swamy from the year 1331 F." It is amply clear from the above that what was in contempla.tion of the grantor and gantee at the time of the grant was either the cultivation of the land or the grazing of cattle on it.

Nobody at that time had any thought or idea of the land being put to any other use or any mining or quarrying rights being exercised therein.

The grantor was careful to exclude even the fruitbearing trees. It would be wholly unrealistic to construe the grant as conferring mining rights by implication simply because of the fact that there was no mention of it.

A long line of decisions of the Judicial Committee of Privy Council relating mainly to the grants of land and leases by the Zamindars in Bengal makes it amply clear that sub-soil rights are not to be treated as having been conveyed by implication in grantio

of surface rights to tenure-holders pattidars (lessees) etc.

In this connection it may be noted that by the Permanent Settlement of 1793 the zamindars with whom the lands were settled were held to be owners of all mines and minerals in their zamindaries. The decisions of the Privy Council relate principally to grants of land in coal-bearing areas before the discovery of any coal therein. One of the early cases of this type was that of Hari Narayan Singh v.

Sriram Chakraval'ti('). There the dispute was as to the right to minerals lying under a village called Petena situate within the zamindari of the first appellant. The appellant's predecessor had conveyed some sort of interest in the village to a set of persons called Goswamis who were shebaits or priests of an idol.

The Goswamis had purported to grant to the respondents two leases by virtue of which the latter claimed to have exercised rights with respect to minerals.

There was no evidence whatever that the zamindar Raja had ever granted mineral rights to the Goswamis or any other person.

The courts in India concurrently found that no prescriptive rights had been proved by the respondents to any underground rights in the village.

The High Court took the view that the Goswamis being tenure-holders had permanent heritable and transferable rights, from which it was inferred that the underground rights also belonged to them.

The Subordinate 1 udge had however inferred from the smallness of the jumma (rent) that only the surface rights and not the underground rights were intended to be let out to the Goswamis. The Board held that (p. 146) :

••. . . . the title of the zamindar raja to the village Pctena as part of his zamindari before the arrival of the Goswamis on the scene being established as it has been.

(I) 37 I. A. 136.

19-1 S.C. India/71

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

be must be presumed to be the owner of the underground rights thereto appertaining in the absence of evidence that he ever parted with them, and no such evidence has been produced."

Durga Prasad Singh v. Braja Nath Bose (') was a case where the zamindar of a permanently settled estate who asked for a declaration of his right to minerals as against a lessee from a dig war tenure bolder.

The digwar tenure was originally granted in consideration of the perfonnance of military servic; e to which police duties were attached.

The tenure was hereditary and inalienable, the digwar being appointed by Government and being liable to be dismissed by Government for misconduct.' On such dismissal the next male heir if fit to be appointed had the right

to be appointed.

The digwar of Tasra granted a perpetual lease of the coal mines underlying two villages to Tasra Coal Company in 1892. On the question as to whether the digwar had a proprietary right in the underground minerals the Board took the view that the permanent settlement having been made between the Government and the zamindar of Jharia and no attempt having been made to prove that the mineral rights were vested in the digwar before or at the time of the permanent settlement and there being no evidence to show that the zamindar had ever parted with mineral rights to the digwar, the latter could not be held to have any proprietary right in the minerals.

In Girdhari Singh v. Megh Lal Pandey (') the question before the Board was whether a mokarari lease of land with all rights carried a right to the subjecent minerals in a permanently settled estate.

According to the Board (see page 248) :

"It is unavailing to urge that the right granted by the mokrari pottah 'to the lessee is of a permanent, heritable, and transferable character, as, even although this be the case, it does not advance the question whether tbe lease itself embraced within its scope the mineral rights. On the contrary, unless there be by the terms of the lease an express or plainly implied grant of those rights, they remain reserved to the zamindar as part of the zamindari."

Their Lordships referred to the decisions mentioned above as also to that of Sash# BhushQfl Misra v. Jyoti l'rasahad Singh Deo(") and adopted the principle (p. 249) :

" ...... when a grant is made by a zamindar of a tenure at a fixed rent, although the tenure may be permanent, heritable, and. transferable, minerals will not be

(I} 39 1 •. A. 133.

(3) 44 J, A. 46.

(2) 44 I. A. 246.

MY'SORE v. SWAMY SAlYANAND (Mitter, J.) 291

held to have formed part of the gi:ant in the absence of A express evidence to that effect."

According to the Board :

"On the assumption that the expression (mai hak hakuk) means 'with all rights', or may be properly am plified as 'with all right, title and interest', such expres.. sions ... did not increase the -actual corpus of the subject affected by the pottah.

They only give expressly what might otherwise quite well be implied, namely, that that corpus being once ascertained, there will be carried with it all rights appurtenant thereto, including not only possession of the subject itself, but it may be of rights of passage, water or the like which. enure to the subject of the potta and may even be derivable from outside properties . . It must be borne in mind also that the essential characteristics of a lease is that the subject is one which is occupied and enjoyed and the corpus of which does not in the nature of things and by reason of the user disappear.

In order to cause the latter specially to arise, minerals must be expressly denominated, so as thus to permit of the idea of partial consumption of the subject leased."

Accordingly it was held that the words founded on did not add to the true scope ol' the grant nor cause mineral rights to be included within it

It should be noted here that there was a reference to the trees on the land in the pottas it being expressly provided that the lessee would be entitled to take the price of the trees by cutting and selling them and the zamindar would not have any right thereto.

This was held by the Board to negative the idea that mokarari pottah could be comprehensively viewed to include mineral rights.

According to the Board :

"Such a lease is a lessee of the surface only. This is the general case to which in the present case there is alone superadded a right to the trees. The minerals are not included."

Most of the above cases were referred to again by the Board in Govinda Narayan Singh v. Sham Lal Singh (') where after noting tlte earlier cases the Board concluded that in the case of any claim against the zamindar to the lands which were included at the permanent settlement the burden of proof is upon 4ke

(l) SS J. A. 12S.

SUPPREME COURT REPORTS [1971] SUPP. s.c.a.

claimant. Reference may also be made to Bejoy Singh Dudhoria

v. Surendra Narayan Singh (') where . the Board held that the grant of a patni lease by a zamindar of his zamindari lands "in

eluding all interest therein. and jalkar, banker, falkar, bcels and jhils at an annual jama containing a stipulation that the grantee should not cut trees or excavate a tank was onl:ii consistent with the theory that the lessee and those claiming under him were not entitled to excavate the soil for the purpose of making bricks and that there was no transfer of the property in the soil".

In our view the principle which is to be deduced from these cases is not one which is to be confined to the case of zamindars in permanently settled estates.

What has to be considered in each case is the purpose for which the lands are leased or an interest created therein with all the clauses which throw any light on the question as to whether the grantor purported to include his rights to the subsoil in the grant when there was no express mention of it. If the lease shows that the purpose of the grant was to allow the user of the surface only it would be wrong to presume that sub-soil rights were also covered thereby.

The patta Ex. 49 in this case amply demonstrates that what was in contemplation of the parties ait the time of the grant in 1930 was. the cultivation thereof or grazing cattle thereon. The grantor was even careful to reserve the right to fruit-baring trees.

It would be a strange construction to hold that although the grantor expressly excluded such trees from his grant he must be taken to have parted with. his sub-soil rights by implication.

We may also note that in State of Andhra Pradesh v. Duv vuru Balarami Reddy (') where the respondents had obtained mining leases for mining mica from the owners of a certain shor triem village it was held that shortriemdars had no rights in the minerals and the leases granted by them to the respondent had no legal effect.

It is true that this Court was there dealing with rights of a different class of persons and it was claimed on behalf of the respondent that inasmuch as the grant included poram

boke if followed that mere surface rights were not the subject matter of the grant.

Rejecting this contention the Court observed (p. 183) :

"So far as the sub-soil rights are concerned, they can only pass to the grantee if they are conferred as such by the grant or if it can be inferred from the grant that subsoil rights were also included therein. w

(1) I. L.R.. 61 Calcutta I. (2,) [1963l1 S. C.R.. 173'.

It is not in our view possible to hold otherwise than that granite A is a mineral. According to Halsbury's Laws of England :

"There is no generad definition of the word 'mineral'.

The word is susceptible of expansion or limitation in meaning according to the intention with which it is used ...

It is a question of fact whether in a particular case a substance is a mineral or not. ..

The test of what is a mineral is what, at the date of the instrument in question, the word meant in the verna cular of the mining world, the commercial world, and among landowners, and in case of i::onfiict this meaning must prevail over the purely scientific meaning". (See Vol. 26, 3rd edition, Art. 674 page 320).

In Article 675 at page 322 the learned authors summarise the case law on the subject as to whether particular substances are minerals or not. Reference is there made to the case of Attorney General v. Welsh Granite Co.(') where granite was held to be included under the reservation of "minerals" in the Enclosure Act which reserved all mines, minerals, ores, coal, limestone, and slate to the Crown.

According to Lord Coleridge, the word "minerals" was large enough to include granite. ·

In the view we have taken, it is not necessary to consider the effect of the Farmans or Section 63 of the Hyderabad Land Revenue Act.

In our view the pattas only indicating that the grant was for the purpose of cultivation or grazing IX cattle with the express reservation of the trees on the land to the grantor, the question of grant of sub-soil rights by implication does not arise.

It is therefore not necessary to consider the effect of the Farmans Exs. A-21 and A-22 or of Section 63 of the Hyderabad Land Revenue Act.

The claim to compensation on the basis of the sub-soil rights to the hillock must therefore be negatived and the appeal allowed.

In the result the decree of the High Court regarding the minerals in the land or quarry rights will be set aside and the judgement and order of the District Judge on that point restored. The respondent will be entitled to the costs of the appeal in pursuance of the order of this Court made as a condition for setting aside the abatement of the appeal.

V.P.S.

Appeal allowed.

(I) I The Law Times Reports S49.

STATE OF MYSORE

SWAMY SATYANAND SARASWATI, RELIGIOUS PREACHER,RAICHUR

G. K. MITTER

K. S. HEGDE

P. JAGANMOHAN REDDY, JJ

Section 2(d)

Mines Act

Section 3

Section 63

Revenue Act 1907

Section 63

Land Revenue Act

Section 63

Section 63

Art. 674

Article 675

Section 63

Section 63


• F

PARSHOTfAM JADAVJI JANI

STATE OF GUJARAT & ORS.

April l, 1971

IS. M. SIKRI, c. J., G. K. MITTER, K. s. HEGDE, A. N. GROVER

AND P. JAGANMOHAN REDDY, JJ.J

Land Acquisition Act (I of 1894), ss. SA and 55-Rules framed regc,. lating enquiry under s. SA-Complied with-Acquisition for Corporatio:i

-Right to cross examine ofjicers of Corporation.

By a notification issued under s. 4 of the Land Acquisition Act, 1894, the State Government declared that the appellant's lands were needed for the public purpose of constructron of ap Industrial Estate by the Gujarat Industrial Development Corporation. The officer on special duty inforn1ed the appellant that if he had any objection to the acquisition he might file objections on or before a particular date and. that he or his counsel would be heard at the time of filing the objections. The appellant filed his objections and prayed that the officers of the Corporation may be summoned for the purpose of cross-examination to show that the proposed acquisition was not for a public purpose and that there was no need to acquire his land, and that a personal hearing may be granted to him. The hearing was fixed for a particular date and the date was extended from time to time but the appellant did not appear on those dates nor did he apply for any, further extension of time. His written objection were considered by the officer and included in his report to the Government under s. SA.

On the question whether the report was vitiated because the officer had not granted an opportunity to the appellant to cross-examine the offi cers of the Corporation,

HELD: The question whether the inquiry was administrative or quasi judicial did not arise. Rules had been framed under s. 55 of the Act for the guidance of officers dealing with objections under s. SA, and the rules had been complied with in the present case. The appellant was given an opportunity to be heard personally but he did not choose to avail himself of that opportunity. He could not, under the rules, claim to cross-examine officers of the Corporation when they had not given any evidence before the officer on special duty and there was no principle which entitled the appellant to claim such right [297H; 298A-B] Gonda/al v. State, (1963) Guj. LR. 326, referred to.

G CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1990 of 1970.

Appeal from the judgment and order dated July 31, 1970 of the Gujarat High Court in Special Civil Application No. 464 of 1970.

H P. M. Raval and M. V. Goswami, for the appellant.

B. D. Sharma, for the respondents Nos. 1 and 2.

B. Sen and K. L. Hathi, for respondent No. 3.

PARSHOTTAM v. GUJARAT (Sil<ri, C.J.)

The Judgment of the Court was delivered by

Sikri, C. J.-This appeal, by certificate granted by the High Court of Gujarat under Art. 132 and Article 133 (!) (c) of the Constitution of India, is directed against its judgment and order dismissing the present appellant's petition under Article 226 of th~ Constitution.

The appellant is the owner of Survey Nos. 219 /I and 121 situated on the outskirts of Mahuva in Bhavnagar District. By notification dated April 25, 1969, issued under Section 4 of the Land Acquisition Act, 1894, the State Government declared that the above-mentioned lands were needed for the public purpose of construction of an Industrial Estate by the Gujarat Industrial Development Corporation or were likely to be needed for that purpose. On May 3, 1969 a notice was issued to the appellant by S. 0. Collector, Officer on Special Duty, Land Acquisition, informing the appellant that if he had any objection to the acquisition of the lands, he might file objections on or before August 16, 1969.

He was further informed that the Officer will hear him or his Counsel at the time of filing the objections. The appellant filed his objections. He took various points, but we are only concerned with one. He pointed out that the Gujarat Industrial Development Corporation has come out with ambitious projects for the establishment of the Industrial estate though, in fact, the land already acquired by the Corporation is in excess of the requirement of the Corporation. I say that the corporation is not in possession of such material as would establish genuineness for the establishment of an industrial estate of Mahuva. I, therefore, claim that the responsible officer should be cross-examined by me for the purpose of showing that the proposed acquisition is not for public purpose and that there is no need to acquire the present lands.

The other suitable lands are available and the Corporation has not availed of the same and that the acquisition needs to be dropped.

I say that the contiguous lands to the lands under the first notification are available and it would be more suitable than the present land.

I, therefore, submit that the proposed acquisition is ma/a fide inasmuch as my lands are preferred to the other land owners available immediately near the lands required under the first notification.

He accordingly prayed :

295 A

"(a) That the officers of the said Corporation which have sought the acquisition and I or such Officer I name hereafter be summoned for the purpose of cross-examina- H tion.

(bl That personal hearing be granted."

A It appears that hearing was fixed for September 18, 1969; this

date was extended from time to time till November 18, 1969. The appellant did not appear on these dates nor did he apply for any extension of time.

His written objection dated August 12/18, 1969 and dated September 18, 1969 were considered and included in the report, under Section SA to the Government.

Three points were pressed by the appellant before L'1e High Court. The principal point that the Gujarat Industrial Development Corporation Act, 1962 was beyond the legislative competence of the State legislature no longer survives as this Court has held this Act to be valid in the case of Ramtanu C. H. Society v. State of Maharashtra ('). The second ground pressed before the High Court was that the establishment of Industrial Area by the Corporation was not a public purpose but a private purpose.

In our view the High Court was right in holding that this was a public purpose.

The third ground raised before the High Court was strongly pressed before us.

According to the learned Counsel the report under Section S.A of the Land Acquisition Act was vitiated because the Collector had not granted an opportunity to the appellant to cross-examine the officers of the Corporation for the purpose of showing that the purpose for which the Corporation sought to acquire the lands was not a public purpose and there was no need to acquire the apellant's land.

The High Court relying on its earlier decision in Ganddla/ v. State(') held that "the inquiry under Section 5A(2) is an administrative inquiry and objector is not entitled to cross-examine any officers or members of the acquiring body."

Under Section 55 of the Land Acquisition Act certain rules have been made for the guidance of officers in dealing with objections lodged under Section 5-A of the Act.

These rules are as follows :

"I. Whenever any notification under Section 4 of the Act has been published but the provisions of Section 11 have not been applied and the Collector has under the provision of Section 4(1) issued notice to the parties interested ; and on or before the last day fixed by the Collector in those notices in this behalf any objection is lodged under section 5-A(2), firstly. the Collector shall record the objection in his proceedings, secondly, the Collector shall consider whether the objection is admissible according to these rules.

(1) A. I. R. 1970 S. C.1771.

(2) (1963) 4 Gujarat Law Reporter 326

PARSHOTIAM V. GUJARAT (Sikri, C.J.)

2. To be admissible (a) an objection must be presented in writing by a party interested in the notified land and must be presented within thirty days after the date of publication of the notification under Section 4 or within mch period as may be fixed by the Collector; (b) it must allege some specific objections, such as these ;

(i) the notified purpose is not genuinely or properly a public purpose ;

(ii) the land notified is not suitable for the purpose for which it is notified ;

(iii) the land is not so well suited as other land;

(iv) the area proposed is excessive ; c

(v) the objector's land has been selected maliciously or vexatiously;

vi) the acquisition will destroy or impair the amenity of historical or artistic monuments and places of public resort; will take away important public rights of way or other conveniences or will D descecrate religious buildinl!IS. graveyard and the like.

3. After admitting an objection and after having given the objector an opportunity of being heard either in person or by pleader, the Collector shall decide whether it is desirable to hear oral or documentary evidence, E which under Section 14 or Section 40 of the Act, he has power to call for. If evidence tendered by the objector is admitted, the Collector shall also afford the other party an opportunity of rebutting it by other evidence or of crossexamining the witnesses : If he admits evidence, he will fix a time and P place of bearing it ; and will hear and record it in his proceedings.

4. Agents, other than pleaders, will not be allowed to appear mr behalf of persons interested in any enquiry under Section 5-A of the Act.

S. After completing the record of evidence, the Col-. lector shall submit his report and recommendations as to each objection, whether inadmissible or admissible for the orders of Government under Section 5A(2) of the Act."

It seems to us that the rules have been complied with. The appellant was given an opportunity to be heard personally.

He chose not to avail himself of that opportunity. The appellant

cannot under these rules claim to cross-examine officers of the Corporation, and in our opinion the prayer to cross-examine offir..ers

was rightly rejected.

Indeed it was a strange request.

The officers had not given any evidence before the Collector and we are unable to see what principle entitles the appellant to claim this right.

When rules have been framed regulating the enquiry under Section SA of the Land Acquisition Act, it is not necessary to consider whether the enquiry is administrative or quasijudicial and whether rules of natural justice have been complied with, and accordingly we say nothing on this point.

In the result the appeal fails and is dismissed with costs.

V.P.S.

Appeal dismissed.

F

PARSHOTfAM JADAVJI JANI

STATE OF GUJARAT & ORS

IS. M. SIKRI

G. K. MITTER

K. s. HEGDE

A. N. GROVER

P. JAGANMOHAN REDDY, JJ

Land Acquisition Act

s. 4

Land Acquisition Act, 1894

s. 55

Art. 132

Article 133

Constitution of India

Article 226

Section 4

Land Acquisition Act, 1894

S. 0

Section 5A(2)

Section 55

Section 5

Section 4

Section 11

Section 4(1)

section 5

Section 4

Section 14

Section 40

Section 5

Section 5A(2)


BANK OF BIHAR

STATE OF BIHAR & ORS.

April 1, 1971

(K. S. HEGDE AND A. N. GROVER, JJ,)

Contract Act, 1872, ss. 172, 173, 176, 180 and ISi-Pledge-Special prope1ty of pawnor-Pawnee's rights whether can be extinguished by lawful seizure of pawned goods by Government to satisfy its claims against pawnor.

Certain sugar was pledged with the plaintiff bank (appellant herein) by Defendant No. 2 under a cash credit agreement. Part of the said sugar was seized under the Public Demands Recovery Act in connection with a demand of sugar cess by the Cane Commissioner. The sugar was sold_ and the sale proceeds were attached towards the payment of cess.

No payment was made to the plaintiff bank, which thereupon filed the present suit to enforce its claim. The trial court granted a decree against the State of Bihar for the price of the sugar. The High Court however held thd.t no decree could be granted against the State as the seizure Y.'as lawful.

HELD: The pawnee had special property and a lien which was not of ordinary nature on the goods and so long as his claim was not satisfied no other creditor of the pa\\nor had any right to take away the goods or its price. After the goods had been seized by the Government it was bound to pay the amount due to the plaintiff and the balance could have been made available to satisfy the claim of other creditor of the pawnor.

But by a mere act of lawful seizure the Government could not deprive the plaintiff of the amount which was secured by the pledge of the good< to it. As the act of the Government resulted in deprivation of the amount to which the plaintiff was entitled it was bound to reimburse the plaintiff for such atnount which the plaintiff in ordinary course would have realized by sale of the goods pledged with it on the pawnor making a default in

the payment of debt. [303E-G]

The trial court was right in holding that the plaintiff's right as a pawnee could not be extinguished by the seizure of the---goods in its possession inas~ much as the pledge of the goods was not meant to replace the liability under the cash credit agreement.

It was intended to give the plaintiff a primary right to sell the goods in satisfaction of the liability of the pawnor. The Cane Commissioner who was an unsecured creditor could not have any higher rights than the pawnor and was entitled only to the surplus money after satisfaction of the plaintiff's dues. [303G-304B]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1942 of 1966.

Appeal from the judgment and decree dated April 23, 1963 of the Patna High Court in First Appeal No. 420 of 1955.

Sarjoo Prasad and R. C. Prasad, for the appellant.

U. P. Singh, for respondent No. 8.

29~

ff;

SUPREMB COURT RERORTS (1971] SUPP. s.c.R

The Judgment of the Court was delivered by

Grover, J.-This is an appeal by certifica.te from a decree of the Patna High Court in a suit instituted by the appellant against the State of Bihar which was impleaded as defendant No. l, the other defendants being the Jagdishpur Zamindari Co. Ltd. (defendant No. 2) and some of its directors defendants 3 to 5.

According to the allegations in the plaint one of the methods of making advances followed by the plaintiff Bank was that the constituents pledged their merchandise on a cash credit system with the Bank and took advances on the pledged goods. The Bank held the goods as security for the advances made and the consituents either provided the Bank with godown or the Bank kept the pledged goods in godowns of its own and charged rents from the constituents.

The defendant No. 2 entered into a cash credit system agreement with the plaintiff's Arrah Branch, the arrangement being that the sugar would be pledged under the cash credit system. On December 16, 1946 the advance made to defen dant No. 2 stood at Rs. 3,20,486-2-0 and the Bank held 6239 bags of different varieties of sugar as security.

These bags were kept in godowns provided by defendant No. 2.

The .key of the lock of each godown was in the custody of the Bank.

It was alleged that in December 1949 under cover of an illegal seizure order issued by defendant No. I the Rationing Officer and the District Magistrate, Patna, got the locks of the godown broken open and forcibly and illegally removed 1818 bags of 27D quality of sugar. They total quantity removed weighed about 5,000 maunds. No payment was made to the plaintiff Bank which held the bags of sugar as pledgee under the cash credit agreement. It is unnecessary to refer to other facts stated in the plaint except to mention that according to the plaintiff it was entitled to recover the sugar which had been seized illegally or to recover the price of that sugar as per schedule 2 of the plaint which the plaintiff would have got if the quantity of sugar which had been seized had been sold in the market on on the material, day.

The plaintiff prayed for a decree for the retum of 1818 bags of 27D quality sugar and, alternatively for recovery ot Rs. 1.81.7()().9-3 with interest by way of damages for illegal removal and detention of sugar or price thereof.

Alterna tively a decree for Rs. 93.910-10-9 was claimed against defendant No. 2 and the other defendants.

The suit was resisted by defendant No. 1 on the ground that the seizure bad been effected pursuant to lawful orders which bad been made and that the sale proceeds of about 5000 mds. of sugar were included in the sum of Rs. 1,50,039-10-9 which was depo<it ed in the treasury but which was later on attached under the orders of Certificate Officer, Patna, under the Public Demands

BANK OF Bl!VJt v. BIHAI\ (Grover, J.) 301

Recovery Act on account of arrears of sugar cess amounting to Rs. 2 lakhs due from the Bhita Sugar Factory with which defendant No. 2 had entered into an arrangement pursuant to which the entire quantity of sugar including 5000 maunds which had been seized had come into possession of defendant No. 2. The other defendant also resisted the suit on various grounds.

A number of issues were framed on the pleadings of the parties. We may only mention issue No. 6(a) which will be material for determination of the points which we have been called upon to decide : -

"Was the sugar seized by the government in possession of the Bank as a pledgee at the time of the seizure and have the rights of the Bank as such pledgee been d1>-

termined by the seizure in question?"

The trial court held that the order of seizure in respect of the stock of sugar was valid.

It was further held that the plaintiff's right as a pledgee could not be extinguished by seizure of the sugar in its possession and though the attachment order of the Certificate Officer was legal and binding on defendant No. 2 it was not binding on the Bank (plaintiff) and it could be effective only in respect of that portion of the price which was not necessary for the liquidation of the dues of the plaintilf from defen dant No. 2. A decree was passed in favour of the plaintiff against defendant No. I only for Rs. 93,910-10-9 with interest at 6% per annum from the date of the suit till realisation.

Defendant No. 1 (State of Bihar) filed an appeal to the High Court. The High Court was of the view that in the presence of the finding that the plaintiff had not been wrongfully deprived of the sugar on account of the lawful seizure or its price owing to the certificate proceedings started by the Cane Commissioner the plaintiff was not entitled to any decree against the State.

But it was entitled to a decree against defendant No. 2 and the other defendants.

Consequently a decree against defendant No. I was set aside and instead of decree was granted against the other defendants.

Now it is common ground that the plaintiff (which is the appellant before us) held the sugar which was seized from its custody as security for payment of the debts or advances made to defe.ndant No. 2 in its cash credit account.

There were arrears of certain cess due from defendant No. 2.

As stated before, the Cane Commissioner took proceedings under the Public Demands Recovery Act and attached the price of the sugar which had been deposited by the appropriate authorities in the Government Treasury instead of being paid to the plaintiff.

The Cane Commissioner indisputably did not have any right of priority over the other creditors of defendant No. 2 and, in particular, the secured creditors.

Section 172 of the Contract Act defines a pledge to mean the bailment of goods as security for payment of debt or

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

.A perfonnance of a promise.

The bailor is called the "pawnor" and the bailee is called the "pawnee". Section 173 of that Act provides that the pawnee may retain the goods pledged not only for the payment of the debt or perfonnance of the promise but also for the interest of the debt etc. Section 176 is in the following terms : B

"If the pawnor makes default in payment of the debt, or performance, at the stipulated time of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawner upon the debt or promise, and retain the goods pledged as a collateral security ; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale."

If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the surplus to the pawnor."

Section 180 is to the effect that if a third person wrongfully de prives the bailee of the use of the possession of the goods bailed or does him any injury the bailee is entitled to use such remedies as the owner might have used in the like case if no bailment had been made and either the bailor or the bailee may bring a suit against a third person for such deprivation or injury. According to Section 181 whatever is obtained by way of relief or compensation in any such suit shall, as between the bailor and bailee, be dealt with according to their respective interests. Relying on the above two sections the High Court came to the conclusion that a pawnee has merely the possession of the goods coupled with a power to sell them on default by the pawnor but the latter retains the ownership subject to a lien to the extent of the debt enforcible by exercise of the power of sale.

In the present case the sugar had been seized and then sold.

The sale proceeds would have been available to defendants 2 to 5 subject to the claim of the plaintiff against them but it ceased to have any lien on the pledged property or the sale proceeds against any third party including the State as soon as it was legally deprivell of the possession of the pledged goods.

According to the Statement in Halsbury's Laws of England "pawn" has been described as a security where by contract a deposit of goods is made a security for a debt and the right to tb.e property vests in the pledgee so far as is necessary to secure the debt ; in this sense it is intermediate between a simple lien anti a

BANK OP BIHAR •• BIHAR (Grover, J.) 303'

mortgage which wholy passed the property in the thing conveyed('). "The pawnee has a special property or special interest in the thing pledged, while the general property therein continues in the owner.

That special property or interest exists so that the pawnee can compel payment of the debt or can sell the goods when the right todo so arises. This special property or interest is to be distinguished from the mere right of detention whiCh the holder of a lien possesses, in that it is transferable in the sense that a pawnee may assign or pledge his special property or interest in the goods". (') "Where judgment has been obtained against the pawnor of goods and execution has issued thereon, the sheriff cannot seize the go\Jds pawned unless he satisfied the claim of the pawnee". (based mainly on Rogers v. Kennay('). "On the bankruptcy of the pawnor the pawnee is a secured creditor in the bankruptcy with respect to things pledged before the date of the receiving order and without notice of a prior available act of bankruptcy.(') It has not been shown bow the law in India is in any way different from the English law relating to the rights of the pawnee vis-a-vis other unsecured creditors of the pawnor.

In our judgment the High Court is in error in considering that the rights of the pawnee who had parted with money in favour of the pawnor on the security of the goods can be defeated by the goods being lawfully seized by the Government and the money being made available to other creditors of the pawnor without the claim of the pawnee being fully satisfied.

The pawnee bas special property and a lien which is not of ordinary nature on the goods and so long as his claim is not satisfied no other creditor of the pawnor has any right to take away the goods or its price'. After the goods had been seized by the Government it was bound to pay !he amount due to the plaintiff and the balance could have been made available to satisfy the claim of other creditors of the pawner. But by a mere act of lawful seizure the Government could not deprive the plaintiff-of the amount which was secured by the pledge of the goods to it. As the act of the Government resulted in deprivation of the amount to which the plaintiff was entitled it was bound to reimburse the plaintiff for such amount which the plaintiff in ordinary course would have realized by sale of the goods pledged with it on the pawnor making a default in payment of debt.

The approach of the trial court was unexceptionable. The plaintiff's right as a pawnee could not be extinguished by the seizure of the go<ids in its possession inasmuch as the pledge of the

(I) Jd Edn. Vol. 29 page 211.

(2) Halsbury's Laws of England 3rd Ed. Vol. 29 p. 218-219.

(3} [ 1846) 9 Q. B. 592.

(4) Halsbury's L.:ws of England Jrd Ed. Vol. 29 p. 222.

SUPRBMB COuRT REPORTS [1971] ~UPP.'S.c.&

goods was not meant to replace the liability under the cash credit agreement.

It was intended to give the plaintiff a primary right to sell the goods in satisfaction of the liability of the pawnor. The Cane Commissioner who was an unsecured creditor could not have any higher rights than the pawnor and was entitled only to the surplus money after satisfaction of the plaintiff's dues.

Defendants 3 to S did not file any appeal against the judgment of the High Court.

The decree passed by the High Court against them would, therefore, stand.

In the view that we have taken the appeal is allowed, the Judgment and decree of the High Court dismissing the suit against the State of Bihar is hereby set aside and a decree is granted against the State of Bihar in the same terms as was granted by the trial court.

The appellant will be entitled to costs throughout.

G.C. .Appeal allowed.

BANK OF BIHAR

STATE OF BIHAR & ORS

K. S. HEGDE

A. N. GROVER, JJ

Contract Act, 1872

ss. 172, 173, 176, 180

Section 172

Section 173

Section 176

Section 180

Section 181


REGIONAL PROVIDENT FUND COMMWIONER, A

ANDBRA PRADFSH

SHRI T. S. HARIBARAN

April I, 1971

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

E>npluytti Provident Fund A.ct, 1957, s. 1(3)(a) & (b)-Employmenl of more than 20 person9--Casual labour whether to be included for dtttrmining number of employees-Minimum period of employment whether <an be laid down.

The respondent ran a lloteJ. Due to failure of water supply be had to employ some persons to brina water from the tank for a short period.

The Provident Fund Commis,, ioner sou&ht to enforce the provisions of the Employees' Provident Funds Act, 1957 and the Provident Fund Scheme. 1952, against him. The respondent thereupon filed a writ petition in the High Court. It was held by the High Court that employment of more than twenty persons for a short period did not bring an establishment within the proviso of s. 1(3)· (a) & (b) of the Act. It was also held that only those employees should be taken into consideration who were in employment for the full period of one year. While thus laying down the leaal

position the Hiab Court left it to the authorities under the Act to apply the law to the facts of each case and dismissed the respondent's petition. The Provident Fund Commissioner appealed to this Coun for further clarification.

HELD: Considering the language of s. 1(3)(b) in the light of the provisions of s. 16 and s. I (S) as well as the aeneral scheme and object of the Act it would appear that employment of a few persons on account ,, f somr emergency or for a very short period necessitated by some abnormal contingency which is not a reauJar feature of the business of the <Stablisb- 111ent and which does not reflect its business prosperity or its financial capacity or stability from which it can reasonably be concluded that the establishment can in the normal way bear the burden of the contribution towards the provident fund under the Act, would not be covered by the definition. The word 'employment' must therefore be construed as employrnent in the regular course of business of the establishment, such employ mcnt obviously would not include. employment of a few persons for a short period on account of some passing necessecity or some temporary emer gency beyond the control of the company. The Hiah Court was riaht in holdioa •o.

But it went wrona in holdina that the sub-section contemplated the required number of persons to work in the establishment con tinuously for one year. It was difficult to impute to the Leaislature an intention to exclude from the application of the Act an establishment whic~ regularly employs for its aeneral business the required number of persons for a major pert of the year, say for 360 days every year, merely becau!IO the employmeili of the required number does not extend to full one year Therefore -the question must be determined in. each case on its own peculiar

facts.

[313C-O]

CIVIL APPELLATE JUJUSDICTION : Civil Appeal No. 1128 of 1967.

20-1 S.C. India/71

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

A Appeal from the1udgment and order dated September J, 1964 of the Andhra PradeSh High. Court itt, :Writ Petition No. 907 of 1963.

L. M. Singhvi and S; P. Nayar, fpr, !he. appellant.

The respondent did not appear.

The Judgment of the Court was delivered by

DUI, J.-Tbe appellant in this appeal by certificate granted by the Andhra Pradesh High Court on February 25, 1965 undor Art. 133 (I) (b) of the Constitution is the Regional Provident Fund Commissioner, Andhra Pradesh.

A Jare 11umber of writ petitions by various parties were filed in the Htgh Court praying for writs in the nature of mandamus directin~ the appellant to forbear from enforcing or taking other proceedmgs under the provisions of the Employees' Provident Funds Act, 1957 (hereinafter called the AcO and the Provident Fund Scheme, 1952.

With the exception of perhaps one writ petition, all the rest, including W. P. 907 of 1963 presented by T. S. Haribaran, Proprietor, New Cochin Cafe, Ongole, respondent in this Court were dismissed. Certificates under Article 133 (!) (b) of the Constitution were secured by the appellant in almost all the cases but the present is the. only appeal which now survives, all the rest having been dismissed for nonprosecution.

The writ petition of the respondent was dismissed which means that the final order made by the High Court was in favour of the appellant.

The only grievance raised by the appellant's learned counsel in this Court was that the High Court bad in the course of its judgment expressed the view that Clause (a) and

(b) of sub-section (3) of Section I of the Act do not cover casual labour and since this expression of opinion which be considers to be legally erroneous would be binding on the appellant in administering the Act, it was necessary to have the correct legal position enunciated by this Court.

According to the appellant's learnoo counsel the following passages in the judgment of the High Court clearly bring out the arents both for . and against the legal position canvassed by him : - "We have next to consider whether clauses (a) and

(b) of Section 1(3) are wide enough to cover casual labour. it is maintained by the learned Government PIOlider that requirement as to the numerical strength is satisfied if twenty persons are engaged in connection with the work of an establishment even for a day or a fraction thereof.

This argument is souht to be reinforced by the unreported judgment of a DivtSion Bench of the Madras High

P. F. COMMR. v. HARIHARAN (Dua, J.)

Courtin Writ Appeal No. 193 (183 ?) of 1962. It is true that this ruling .vouchers. the proposition advanced by the learned GovenmlenfPleader.

The learned Judges there observed :

"It )s adqlitted oil behalf of the applicant that fifty people .worked at least for one day in each year.

Tl!is •. in our opinion. will be sufficient to bring the case. within the purview of. section 1 (3) of the Act.

The Act is an ameliorative measure extended to benefit tiie permancl)t workers of an establishment.

What is necessary for those permanent workers to get

the benefit is that there. should be fifty workers in that factory.

In our view, it would be sufficient if that .condition is 8atisficcl' at least for one day."

With great respect, we are unable to subscribe to the rule stated therein. It is true , that this legislative measure is an' ameliorative one. All the S8111e, it cannot be over looked that benefits are intended to be conferred on workmen iii. establismnents that are in. a position to employ twerity' 'i>r m0re pers0ns; It may be incidentally mentioned here. that originally, i.e., prior to the Amendment Act, 46 of 1960 the number of employees in the establishment that would be brought witliin the scope of SCction 1(3) was fixed at fifty. ·

We find it difficu1t to .11gree with the view that twenty or more persons can be. Said to be employed or that an establishment employs tweri~ or more persons merely because on one day or two 'days:· the services of twenty or more persons were engaged:(Oni particillar plltpose. To accept this Contention wouJd be' tO unduly erilarge the content of the Section. To attract the applicability of Section 1 (3) ihe numbe(of persons should come upto minimum of !WeD, ty. The underlying idea seems to be that' th!' establishment should have ty persons on its mustenolls and working regularly.

Could it be asserted that a factory gives employment to twty persons merdy . because twenty . persons are ellgllged by that factory on a particular day for some special job.

In our opinion, the answer must be in the negative. The•· sub-section contemplates the required number of people working continuously in the factory or other establishment in a year.

SUPREME COURT REPOR11' [1971] SUPP. s.c.1..

The other passage occurs a little lower down in that judgment : -

"Section 19-A also seems to strengthen our view. A doubt as to the number of persons employed in an establishment could arise only if the employment of twenty persons in the establishment were a nonnal feature.

A legitimate doubt cannot be said to arise if the condition as to the number is satisfied if twenty persons work in the establishment even for a day or two.

It is not necessary for us to Jabour this point any further as we feel that the provisions of the Act are inapplicable to establishments which do not employ twenty or more persons to work therein for a period of one year.

It follows that 'casual labour' falls outside the scope of section 1(3).

The fact that the casual labour is engaged by or through a contractor docs not make any different for the decision of the question, the only criterion being whether they were casual labourers or not.

On this discussion, it follows that the establishments whose employees do not come upto twenty, excluding casual labourers, do not fall within the purview of Section 1(3' and so the provisions of the Scheme cannot be applied to them.

The respondents will, therefore, examine this question in the light of these observations and decide whether the Scheme should be applied to any of these establishments excluding casual labour."

The appellant's learned counsel had at one stage of his arguments stated that his client was anxious merely to steer clear of the observations made by the High Court that "the provisions of the Act are inapplicable to establishments which do not employ 20 or more persons to work therein for a period of one year." But while citing certain decided cases he did appear to canvas for the wide proposition that employment of a person for however short a period would be employment for the purpose of determining the number of persons employed as contemplated by Section 1 (3) (a) and (b) of the Act.

He relied on the Bench decision of the Madras High Court reported as Messrs East India .Industries (Madras) v. Regional P. F. Commissioner(') (this decision was also cited in the High Court as an unrep1>rted judgment) and pressed us to uphold the reasoning adopted therein.

The question requiring our detennination is a very short one.

As there is no representation on behalf of the respondent in this Court and, therefore, we do not have the benefit of the respondent's point of view we propose to confine ourselves strictly to the

(I) [1964) I L. L. 1. 441

P. F. COMMA. f. HARIHARAN (Dua, J.)

limited question of the scope of clauses (a) and (b) of sub-section

(3) of Section 1 and this judgment is not intended to be considered as expressing any opinion on other controversial aspects. Before considering the relevant provisions of the Act it may be pointed out that according to the respondent's writ petition presented in the High Court in August, 1963, the New Cochin Cafe (treated as a hotel) was started in Ongole town on November 20, 1956 and the respondent usually employed only 18 or 19 persons.

In 1961 there was total failure of rains in the Ongole region and that town was particularly hard hit.

The respondent had to employ two or three persons on contract basis for supplying water to the hotel.

Those persons were engaged from June to September, 1961. The appellant has not questioned the correctness of these assertions for the purpose of this appeal.

Let us now examine the relevant provisions of the Act.

The Act was brought on the statute book for providing for the institution of provident fund for the employees in factories and other estliblisliments.

The basic purpose of providing for provident funds appears to be to make provision for the future of the industrial worker after his retirement or for his dependants in case of his early death.

To achieve this ultimate object the Act is designed to cultivate among the workers a spirit of saving something regularly, and also to encourage stabilisation of a steady labour force in the industrial centres.

This Act has since its initial enactment been amended several times to extend its scope for the benefit of industrial workers.

We are, however, concerned with the Act as it stood in 1962 when notice was sent by the appellant to the respondent stating that the provisions of the Act had been made applicable to his establishment.

Sections l (3) (a) and (b). 4 and S may now be reproduced :

"Section 1

(3) Subject to the provisions contained in section 16, it applies.

(a) to every establishment which is a factory engaged in any industry specified in Schedule I and in whiCh twenty or more persons arc employed. and

(b) to any other establishment employing twenty or more persons or class of such establishments which the Central Government may, by notification in the Official Gaz.cttc, specify in this behalf :

Provided that the Central Government may, after giving not less than two months' notice of its intention so to do, by notification in the Official Gaz.cttc, apply the provisions of this Act to any

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

establishment employing such number.of persons less than fifty as may be specified in the notification."

Sub-Section 4

"Notwithstanding anything contained in sub-section

(3) of this section or sub-section (I) of section 16, where it appears to the Central Government, whether on an application made to it in this behalf or otherwise, that the employer and the majority of employees in relation to any establishment have agreed that the provisions of this Act should be made applicable to the establishment it may by notification in the Official Gazette, apply the pro"isions o.f this Act to that establishment."

Sub-Section 5

"An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty ; Provided that where, for a continuous period of not 111$S than one year the number of persons employed therein has been less than fifteen, the employer in relation to such establishment may cease to give effect to the provisions of this Act and any scheme framed thereunder; with effect from the beginning of the month following the expiry of the said period of one year, but he shall, within one month of the date of such cessation, intimate, by registered post, the fact thereof to such authority as may be specified by appropriate Government in this behalf."

The original Act was applicable to establishments which . were factories engaged in the ix industries specified in Schedule I but as a result of persistent demands for extension of provident fund benefits to all industrial workers, the Act was amended in 1956 by Act 94 of 1956 so as .to enabl, e its extension to other establishments as well. Earlier,. it may be pointed out, it was amended in 1953.

It is unnecessary to give the details of the various amendments.

We now turn to the relevant definition clauses contained in Section 2. These definitions are subject to the context providing otherwise.

In Clause (f) "employee" is defined to mean any person who is employed for wages it! any kind of work manual or otherwise . in or in connection with the work of an establishment and whci gets his wages .. directly or indirectly from the employer and includes any person employed by or through a contractor in or in connection with the work of the establishment. Clause

P. F. coMMR. V. l!Allll!AllAN (Dua, J.)

(h) defines "Fund" to mean the provident fund established under a Scheme. "Member" is defined in Clau, se (j) to mean a member of the Fund and "Scheme" is defined in Ciause (I) to mean a scheme framed under the Act. Section 5 provides for the framing of a scheme called the Employes' Provident Fund Scheme by the Central Government. Section 6 makes provision for contribution by the employer and the employee to the Fund. Section 14 provides penalties for evasion of payments under the Act or the Scheme.

Section 16 which excliJdes from the applicability of , the Act establishments belonging to Government or local authority and also infant factories, reads : "16 .. Act not to apply to establishments belonging to Governmimt or local authority and also to infant industries,:

This Act shall not apply.-:.

(a) to any establishment registered under the Cooperative Societies Act, 1912, or under any other law for the time being in force in any Stte relating to cooperative societies, employing less than fifty persons and working without the aid of powers; or

(bfto any other establishmentemploying fifty or inort persons or twenty or more; but Jess than fifty,

prSons until the expiry of three years in' the case of the former and five Years in the case of the latter, frmri the date on' which the establishment is, or has been. stt up.

ExplaliatiOn.-For the removal of doubts, it is hereby declared that an establishment shall not be deemed to be newly' set up merely by reason of a change in its location.

(2)1f the Central Government is of opinion that having regard to the financial position of any class of establishment or other circumstances of the case, it. is necessary or expedient so to do, it may, by notification .in the Official Gazette, and subject to such conditions as may be specified in the notification, exempt that class of establishments from the operation of this. Act for such period as may be specified in the notification.''

Section 17. invests in tile appropriat~ Government power to exempt certain establ.ishments f; I;<>m the opt; rati.on of all .or any of. the provisions of any scheme. Section 19-A .vests in the Central Gov ernment power to remove .difficulties by making necessary. provision or giving directions not inconsistent with the provisions of

SUPRIME COURT RIPORTS

(1971] SUPP. S.C.R.

the Act.

The order of the Central Government made under Section 19-A for removing doubts and difficulties is clothed with finality.

The narrow question which directly arises for our consideration is whether Clause (b) of sution (3) of Section I when it speaks of the establishment employing 20 or more persons means that the person so employed may be employed by the establishment for any purpose whatsoever and for however short a duration or that the employment must be for some minimum period in the establishment.

The language used in the clause does not give any clear indication.

We have, therefore, to construe this word in the light of the legislative scheme, the object and purpose of enacting this clause and the ultimate effect of adopting one or the other construction.

The relevant sections of the statute have already been reproduced.

Section 16 which has already been set out in extenso seems lo us to throw considerable light on the point raised.

It may be recalled that this section excludes from the applicability of the Act establishments belonging to the Government and to local authorities and infant establishments.

It is, therefore, obvious that this Act is intended to apply only where an establishment has attained sufficient financial stability and is prosperous enough to

be able to afford regular contribution provided by the Act. Contribution by the employer is an essential part of the statutory scheme for effectuating the object of inducing the workmen to save something regularly.

The establishment, therefore, must possess stable financi~I capacity to bear the burden of regular contribution to the Fund under the Act.

In this connection it may be recalled that by virtue of Section 1 (5) an establishment to which the Act is applied continues to be governed by the Act notwithstanding that the number of persons employed by it at any time falls below the required number.

This liability to be governed by the Act ceases only if the terms of the Proviso to Section 1(5) are complied with.

The financial capacity of the establishment to bear the burden must, therefore, have some semblance of a reasonably Jong term stability.

In other words, the employment of requisite number of persons must be dictated by the normal regular requirement of the establishment reflecting its financial capacity and stability.

It, therefore, follows from this that the number of persons to be considered to have been employed by an establishment for the purpose of this Act has to be determined by taking into ac!l:ount the general requirements of the establishment for its regulai work which should also have a commercial noxus with its general financial capacity and stability.

This seems to us to be the correct approach under the statutory scheme.

P. P. coMMR. v. HARltlARAN (Dua, J.)

To ad:e<le to the appellant's argument would lead to some startling consequences.

By way of illustration, if for the purpose of extinguishing accidental fire an establishment is compelled to employ a few persons for about a couple of hours, even then, however weak and 1U1stable its general financial capacity, the establishment would be covered by the Act and would have to contribute towards the provident fund for the benefit of its regular employees, of course, excluding those whose services were utilised for a short while for extinguishing the tire.

In this illustration we are assuming that the employees would have no objection to being governed by the Act.

This, in our opinion, could never have been the intention of the legislature. Similarly, we find it difijcult to impute to.the legislature an intention to exclude from the application of the Act an establishment which regularly employs for

its general business the required number of persons for a major part of the year, say, for 360 days every year, merelyi because the employment of the required number does not extend to full one year.

Both the xtreme views, the one canvassed on behalf of the appellant and the other postulated in the observation of the mgh Court that the required number of persons must continuously work in the establishment for one year, do not conform to the scheme and object of the Act and are, therefore, unacceptable.

Considering the language of Section I (3) (b) in the light of the foregoing discussion it appears to us that employment of a few persons on account of some emergency or for a very short period necessitated by some abnormal contingency which is not a Tegular feature of the business of the establishment and which does not reflect its business prosperity or its financial capacity and stability from which it can reasonably be concluded that the establish- ment can in the normal way bear the burden of contribution to- . wards the provident fund under the Act would not be covered by this definition.

The word "employment" must, therefore, be construed as employment in the regular course of business of the establishmen&; such employment obviously would not include employment of a few persons for a short period on account of some passing necessity or some temporary emergency beyond the control of the company.

This must necessarily require determination of the question in each case on its own peculiar facts. The approach pointed out by us must be kept in view when determining the question of employment in a given case.

The appellant's learned counsel argued that in the present case the respondent bas to employ a few persons every year regularly from June to September for supplying water ti> the hotel because of failure of rains.

This, according to him, would be a regular employment and the High C'.ourt was wrong in holding to the <contrary. . There is no finding of the High Court to this effect and

SUPREME C\)URT REPORTS

(1971) SUPP. S.c;.R.

indeed no attempt was made. before us also to substantiate this bald assertion.

We are, therefore, iinable to accept this conten tion on the pri:sent record.

The general approach of the High Court to the problem raised in this case seems to us to be, broadly speaking, correct ; so is its final conclusion.

The only ohserva ti on of the High Court which required consideration is that the sub-section in question contemplates the rcqujred number. of per sons to work in the establishment continuously for one year. On this point we have clarified .the legal position.

As the High Court has dismissed the writ petition after clarifying the pofuts of law raised leaving it to the appropriate authority to• finally decide the controversy on a consideration of all the facts and .cU:cumstances we do not propose to say anything more in. this appeal which ha& been heard ex parte.

With the; aforesaid. clarification of the legal position we dismis~ this ap~I, As .there iS nh representation on behalf of the respondent there will . be no order a~ to costs.

G.C.

Appeal dismissed.

REGIONAL PROVIDENT FUND COMMISSIONER, ANDHRA PRADESH

T. S. HARIBARAN

M. SHELAT

I. D. DUA

V. BHARGAVA, JJ

s. 1(3)(a)

Provident Funds Act, 1957

s. 1(3)

s. 1(3)(b)

s. 16

Art. 133

Provident Funds Act, 1957

Article 133

Section 1(3)

section 1

Section 1

Section 19

section 1(3)

Section 1

Section 1

section 16

Schedule I

Section 4

section 16

Section 5

Schedule I

Section 2

Section 5

Section 6

Section 14

Section 16

Cooperative Societies Act, 1912

Section 17

Section 19

Section 19

Section 16

Section 1

Section 1(5)