, I,'

G. MARULASIDDAIAH v.

T. G. SIDDAPPARADHYA & ORS.

February 1, 1971

[G. K. MITTER AND A. N. RAY, JJ.]

M, vsoro University Act, 1956-Rule S of Supplementary Rules-Board Appointments-Reasons to be recorded by Board-Failure to record rea- IOns for disrogarding gr<attr lengt, h of service of candidate does not vitiate appolmment.

Rule S of the Supplementary Rules promul1ated under the Mysore Unlveralty Act, 1956, provide• tbat "the Board of Appointment• shall aive In writina the reasons for the 11lectlon of any candidate and also the basis on which the aelection has been made and always 1ive in writin1 the

reasons for overlooking the claims of thote who are seniors (I.e.. total service as a teacher) and/or have higher qualifications." The first respon-, dent whose total service as teacher exceeded that of the appellant was.considered along with the appellant and two others by the Board of Appointments for the post of a professor. The Board made its written recommendation that it took into consideration the academic qualification, research, teaching experience and the performance during the interview of the four candidates who appeared at the interview and resolved to appoint the appellant in the post. The appointment was later approved by the Chancellor of the Umversity. The first respondent filed a writ petition in the High Court challenging the appointment C)f the appellant as being in violation of r. 5. The High Court quashed the appointment. It took the view that the rule was a mandatory provision and it was incumbent on the Board of Appointments to state in writing why the first respondent, although he had longer teaching experience, was passed over in favour of the appellant.

Allowing the appeal,

HELD : The proper construction of r. 5 is to regard the length 9f teaching expelrience 'as one of the important factors to be tak.:n into consideration by the Board of Appointments. However much may be the im- F portance of the length of teaching experience the rule did not provide that

as the determining factor. The rule did not lay down all the factors which are to be C<''ISidered by the Board in making the selection. [ 625 HJ

In the present case the academic qualifications of the appellant and the first respondenl were of the same standard. In mere length of service the first respondent certainly was superior to the appellant. But that by itself would not tip the scale in his favour. The recommendation of the Board clearly showed that one of the factors which the Board had taken into considerati_on was teachil)g experience. It would be giving preference to the letter of the rule than to its spirit if it were to be held that the recommendation of the Board was to be !teated as invalid merely because they had failed to state in C'lear words that the appellant was preferred to the first respondent although the latter had a lon11er period of service as a, teacher.

Rule S was substantially complied with by the Board and the failure to record expressly the reasons for disregarding the greater length, of service of the first respondent did not vitiate the appointment per se At best it was an irregularity which was cured by the approval of the

Chancellor. [626 Cl

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2241 of A 1970.

~ ppeal by special leave from tlie judgment and order dated Apnl 15, 1969 of the Mysore High Court in Writ Petition No. 2071 of 1967.

M. C. Setalvad and R. V. Pillai, for the appellant,

B. R. L. Iyengar and A. G. Ratnaparkhi, f.or respondent No. ],

The Judgmellt of the Court was delivered by

Mitter, J. In this appeal by special leave the appellant C 'Challenges the decision of the Mysore High Court quashing his .appointment as a University Grants Professor in Sanskrit by the Board of Appointments on the sole ground of non-compliance with Rule 5 of the Supplementary Rules promulgated under the Mysore Uruversity Act, 1956. That rule provides :

"The Board of Appointments shall give in writing D the reasons for the selection of any candidate and also the basis on which the selection has been made and always give in writing the reasons for overlooking the daims of those who are seniors (i.e. total service as teacher) and/or have higher qualifications."

E The facts are as follows.

The appellant and the main contesting respondent have the same academic qualifications.

The appellant joined the University as a lecturer in 1945 and he was appointed a temporary Reader in Sanskrit under the University Grants Commission Scheme which was distinct from ot)ler Umversity appointments. He was appointed a permanent Reader in :the University under the said Scheme in April 1960. The first F respondent had joined the University as a lecturer in 1938 i.e.

seven years before the appellant . He was appointed a Reader under 1:he University Grants Scheme in January 1961 i.e. £everal months after the appellant. In December. 1965 the appellant was placed as the Heiad of the Department'of Sanskrit.

It appears that in 196 7 an appointment had to be made as Professor in the G

University Grants Scheme, the top position in the department, The claims of the appellant, the first respondent d two other persons were considered by the .Board of Appoiniments. They were also interviewed by the Board and on June 9,1967 the appellant was given the said appointment.

This was later approved of by the -Chancellor of the University on June 29, 1967.

The first respondent filed a Writ Petition in the High Court challenging the appointment of the appellant under Art. 226 of

MAllULASIDDAIAH v. SIDDAPPARADHYA (Mitter, J.) 623

the Constitution on various grounds but the infraction of rule 5 set forth above was not one of them. The High Court, however, on an application made for the purpose allowed the ground to be raised but the learned single Judge dismissed the writ petition. The first responde; nt filed an appeal which was heard by a Division Bench of the High Court. The High Court turned down all but the contention based on rule 5 above and took the view that the said rule was a mandatory provision and it was incumbent on the Board of Appointments to state in writing why the first respondent although he had longer teaching experience was passed over in favour of the appellant before us.

According to the Division Bouch the appointment of the appellant became invalid for this non-compliance of rule 5 by the Board of Appointments. The order of appointment was quashed by the High Court with a direction that the University should make an appointment iµ accordance with law. This judgment was rendered on April 15, 1969.

The appellant's application for a certificate being turned down by the High Court, hel filed an application for special leave before this Court on 9th September 1969 along with a petition for stay of the order of the High Court. , on the application being moved on September 22, 1969 the respondents were directed to show cause why special leave should not be granted but an interim stay was granted to the effect that the matter of a fresh appointment as a result of the quashing of the order of the appellant's appointment was not to be placed before the Chancellor for his approval under s. 26 ( 4) of the Mysore University Act. This was occasiQned by the fact that the University had taken steps to make another appointment necessitated by the order of the Division Bench of the High Court and had asked the appellant to apt>Car at .an interview for the purpose fixed on September 21, 1969. On affidavits being filed this Court after hearing the parties passed an order on November 14, 1969 modifying the earlier order of stay to the effect that the order of the High Court was to remain suspended till the disposal of the special leave petition and as soon as the Chancellor had decided the case, the parties were to be at liberty to mention the matter to this Court and in the meanwhile the' appellant was to continue as Professor. On a clarification of the Court's order being sought for, an order was passed on August 26.

1970 to the effect that the Chancellor was free to deal with the matter notWithstanding that the application for special leave was pending in this Court. It appears that the Board of Appointments re-constituted after the decision of the High Court had advised the appointment of the first respondent as Professor and the Chancellor in the circumstances of the case felt that he should not come to any decision during the pendency of the matter before this Court.

The Chancellor's order was made on November 11, 1970. On December 11, 1970 this Court granted special leave to the appel-

!ant and directed the stay to CQntinue till the disposal .of the appeal.

Although we have set out what transpired after the presentation of the special leave petition to this Court in September 1969 to give

a complete picture of the events concerning the appointment of a Professor under the University Grants Scheme, we do not propose B to take any notice of what the Second Board of Appointments did.

In our view, if the action of the Board of Appointments taken on June 9, 1967 and approved of by the Chancellor on June 26, l 967 was valid, the Board would have no jurisdiction to consider the matter for a second time.

The position in law ai>pears to be as follows. The Mysore University Act, 1956 came mto force on October 3, 1956. s. 13 of the Act sets out the authorities .of the University which include inter a/ia the Senate, the Syndicate, the Academic Council and the

Board of Appointments.

Different sections following the above prescribe the powers and functions of the Senate, the Syndicate and their authorities. Section 26 concerns the Board of Appointments. Sub-s. ( 1) of this section provides :

"Appointments to the staff of the University shall be made in accordance with the rules made by the Chan. cdlor in consultation with the Syndicate."

Sub-s.(2) shows how the Board of Appointments is to be constituted for the purpose of making appointments of Professors, Readers and Lecturers. The Board is to consist of ( 1) the Vice- Chancellor who was to be the ex-officio Chairman, (2) the Head of the University Department in the subject concerned, except where the appointment to be made was the post of the Head of the concerned Department, (3) one member who was to be an expert in the subject concerned selected from outside the University by the Syndicate and ( 4) another person who was to be an expert in the subject concerned selected from outside. the Univer- <iity by the Chancelor. Under sub-s. ( 4) :

"The decisions of the Board and in such cases as may be prescribed by the Chancellor, the decision of the Vice- Chancellor shall not have effect unless approved by the Chancellor; thereafter, every such decision shall be final and shall not be called in question in any manner."

The Mysore University Staff (Appointment) Rules came into froce on OCtober 24, 1964.

Some supplementary Rules of recruitment governing the appointment of University teachers were -approved by the Governor under s. 26 of the Act on 8th April 1967 and these were published on May 25, 1967. Rule 5 menc

MARULASIDDAIAH v. S!DDAPPARADHYA (Mitter, J.) 625

tioned above is one of these rules. Rule 3 _of the Supplementary Rules shows that the Board of Appointment was to be provided at the meeting with all relevant information about every candidate regarding his qualification, seniority, teaching experience and research work and under rule 4 the Dean and the Head of the Department wh9 were to be associated with the Board were to prepare a note regarding qualification, work etc. of the candidate who had served in the department under them and give their opinion in writing to the Board of Appointment. This rule further prescribed that the claims of the "senior (most)" teachers with approved service who acted in that vacancy for a long time shall be given due consideration.

After interviewing the candidates the Board ot Appointments made its written recommendation as follows :-

"The Board took into consideration the academic qualifications, research and teaching experience and the performance during the interview of the four candidates who appeared !'or the i, nterview.

The Board in consultation with the Dean of the Faculty of Arts, unanimously resolved that Dr. G. Narulasiddrah be appointed Professor of Sanskrit on a starting salary of Rs. 1,000/- p.m. in the scale of Rs. 1000-50-1500 subject to the usual period probation for two years."

If rule 5 is to be observed in its latter and not according to its true intent it must be said that the Board of Appotments failed to give in writing expressing the reasons for overlooking the claims of the first respondent whose total service as a teacher undeniably exceeded that of the appellant.

According to the High Court :

F " ... the clear intendmeint of rule 5 is that a superior claim to an appointment flows out of the seniority to which it refers and that that claim should not be overlooked except for reasons to be stated in writing and since the resolution of the Board of Appointmeints with which we are concerned does not state any reason for the supersession of such claim with which the petitioner became clothes under the rule, we are inclined to the view G that the appointment becomes invalid for that reason."

We find ourselves unable to accept the above dictum of the High Court. In our view the rule was not intended to load the dice in favour of someone merely because of longer experience as a teacher.

The proper construction of that rule is to regard the length H of teaching experience as one of the important factors to be taken into consideration by the Board of Appointments. However much may be the importance of the length of teaching experience the

626 SUPREME COURT REPOaTS [1971J:i S.C.R.

rule did not provide that as the determining factor. The riile did not lay down all the factors which were to be considered by the Board in making their selection. Of necessrty they had to consider: the academic qualifications of othe respective candidates including that of the quality of their teaching and of the research work if dny to their credit, their past experience and the impression which they crted the minds of the persons constituting the Board. Rule S hud particular stress to the total length of teaching experience of the candidates bwt it was not meant to outweigh other consideration ..

In this case it appears that the academic c; ualifications of the appellant and the first respondent were of the same standard.

In. mere length of service the first respondent certainly was superior to the appellant.

But that by itself would not tip the scale in his favour.

The reeommendation of the Board clearly shows that one of the factors which they had taken into consideration was "teaching

experience" a, t1d in 1967 when the appointment was made the appellant had to his credit a period of 22 years of teac!Jiing experience while the first respondent had 29 years of service to his credit.

It is not as if the appellant was a man very much junior in age to the first respondent with a career in teaching far shorter than or negligible compared to that of the first respondent.

It must also be noted that when there was a question of appointing a temporary Reader under the University Grants Scheme in 1958 it was the appellant who was given preference to the first respondent and even as a permanent Reader he secured the appointment some months ahead of the first respondent.

The preference given to him in the past was certaiin!y one of the factors to be taken into consideration.

In our view it :woµld b3 giving preference 1o the letter of the rule than to its spirit if we were to hold that the recommendation ofthe Board of Appointments was to be treated as invalid merely because they had failed to state, in clear words, that the appellant was preferred to the first respondent although the latter had a Jonger period of service as a teacher.

Mr. Setalvad appearing for the appellant drew our attention to Seniority Rules which were framed witb the approval ?f the Chan- cellor and came into force on 30th March 1969 dm:mg the pen-. dency of the matter before the Division. Bench of the Mysore High Court.

Rule 7 of these rules provides that : ·

 "Teachers. appointed to a class of pst in the U!1iversity <;; rants Commission scale shali be eemed seuor .to tea..chers holding the same class of posts m the University

scale." H

Relerece was made to thi~ rule for the purpose of showing that the appellant who had been a Reader under the University Grants

MARULASIDDAIAH v. SIDDAPPARADHYA (Mitter, J.) 627

A Scheme nearly three years before the first respondent wou.td be senior to him UJ. terms of the rule if it had been in force and even otherwise counsel contended that the mere fact that the appellant had preceded the first resp0ndent in -app0intment under the said scheme showed that his preference over the first resp0ndent was not IJIIl((eserved. We do not think that we can take into account B rule 7 for the purpose of our decision in this case.

Mr. Setalvad's second contention was that it was apparent from the recommendation of the Board that rule 5 was substantially complied with and as such the High Court should not have set aside the appointment of the appellant. He aJsoplaced reliance on sub-s,

( 4) of s. 26 as giving a finality to th~ approval of the Ch'ancell6r to the app0intment made by the Board.

Mr. Ayyangar appearing for the first respondent contended, first, that rule 5 was divided into two parts and that the provisicm for a statement in writing giving reasons for ignoring a person's total length of service as a teacher had to be complied with by the D Board and any disregard of this rule rendered the app0intmont

invalid. Counsel argued that the rules had statutory force and the mere approval of the Chancellor under sub-s. (4) of s. 26 of the Act did not put a seal on the case so as to prevent from scrutiny the disregard of any mandatory ptovisioo of the rules framed under s. 26 (1 ) and approval of the Chancellor would not E cure such illegality. In our view, rule 5 was substantially com plied with by the Board and the failure to record expressly the reason for disregarding the greater length of service of the first respondent did inot vitiate the-app0intment per se.

Ati best it was an .irregularity which was c,11red by the approval of the Chancellor.

f . Mr. Setalvad's last contention was that the High court had gone wron11 in quashing the appointment but should have relegated the matter back to the Board of Appointments to comply with the requiremeints of' r. 5 and for this he relied on tWo English decisions in lveagh ceatl) .v. Minister of Housing etc.( I) and Brayhead Ltd. v. Berkshire County Coiinci/(•). In the view we have taken it is unnecessary to consider the last point raised by G counsel or the effect of these two decisions. . The Board of Appotment was constituted of fO!ft persons who were eminently fitted to as8ess the relative merits of the candid-ates before them at the interview and their recommendation shows that although they had .not expressly recorded any reason in terms of the rule, they had taken the teaching experience of the candidates into H considerati~. Our conclusion might have been otherwise if it were shown that the Board had not considered the length of teach-

(!) r1963]-3 All. E.R. 817 '21 rl964] l All. E.R. 149.

mg experience of the candidates as one of the factors for comfug A .to their decision.

In the result we allow the appeal and set aside the drder of the High Court holding that the appellant was validly llPPOinted as a Professor under the University Grants Scheme. In the circumstances of the case, we leave the parties to bear their own costs.

Before parting with this case we cannot but express our dis- .approval in noting that the canker of litigiou11DoCss has spread even to a sphere of life where dis.cipline ould checld ambition con- •Cerning personal preferment. A teacher is justified ID taking legal action when he feels that a stipla or pUjllishment Is undeserved c :but he is expected to bear with fortitude and reconcile himself to his lot suppressing disappointment when he finds a co-worker raised to a position which he himself aspired after.

X.B.N.

Appeal allowed.

G. MARULASIDDAIAH

T. G. SIDDAPPARADHYA & ORS

G. K. MITTER

A. N. RAY, JJ.

University Act, 1956

Rule S of Supplementary Rules

Rule S of the Supplementary Rules

Mysore Unlveralty Act, 1956

M. C. Setalvad

R. V. Pillai

B. R. L. Iyengar

A. G. Ratnaparkhi

Mitter

Mysore High Court

June 9,1967 the

June 29, 1967

Art. 226

April 15, 1969

9th September 1969

September 22, 1969

s. 26

September 21, 1969

November 14, 1969

August 26.

1970

November 11, 1970

December 11, 1970

June 9, 1967

June 26, l 967

Mysore University Act, 1956

October 3, 1956

s. 13

Senate

Section 26

OCtober 24, 1964

s. 26

8th April 1967

May 25, 1967

G. Narulasiddrah

SUPREME COURT REPOaTS [1971J:i S.C.R.

s. 26

Ayyangar

s. 26

s. 26


• - A

ALLOY STEEL PROJECT

v.

THE WORKMEN

February 2, 1971

(J. M. SHELAT, V. BHARGAVA C.A. VAIDIAL!NGAM, J.J.]

Payment of Bonus Ac~ 21 of 1965-Exemption under s. 16(1) to new estabUshmenu-Al/oy Steel Project conl(olled and managed by Hinduslan Steel fad. whether an 'estab/ishment'-Word 'establishment whether synonymous with compa]!y'-A department or undertaking of an establishment is separate establishment for computation of bonus under the

proviso to s. 3 if separate accoullls are maintained as in case of Alloy Steel -Section 16(2) comes in way only if bonus is distributed on basis of consolidared accounts which was never done in the case of Hindustan Steel.

The Alloy Steel Project was an undertaking controlled and managed by a government company, namely, the Hindustan Steel Ltd. Alloy Steel was started in 1961 and went into production in 1964-65. No profit was earned up to 1967-68. The workmen claimed bonus at the minimum rate prescribed under the Payment of Bonus Act, 21 of 1965 in respect of the year 1965-66. On behalf of the Alloy Steel Project exemption from payment of bonus was claimed under s. 16( 1) of the Act on the ground that it was a new establishment and had not made profits. The Industrial Tribunal to which reference was made held that Alloy Steel could not be treated as a separate establishment because under the Act a company is itself an establishment so that all units of a company like Hindustan Steel Ltd. will constitute one establishment. However, since Alloy Steel had not been earning profits the Tribunal dircted payment of bonus at the minimum rate of 4% of wages as prescribed by the Act. Aggrieved by this Award of the Tribunal the company appealed.

HELD : The Tribunal erred in holding the word 'establishment' to be synonymous with 'company'. Jn doing so it ignored the indications which are manifest from the language of the Act. The significant words are those containei! in s. 2(16) which show that an establishment in a public secto'r has to be owned, controlled or managed by a Government company or by a corporation of the nature described in the clause.

Obviously therefore an 'establishment in private sector'--Oefined in s. 2(15) to mean an establishment not in the public se9tor-would be one which is owned, controlled or managed by a person or body other than a Gove'rnment company or a corporation of the nature described in s. 2(16). Jn this view an establishment cannot be identified with a company. It would be absurd to say that a company is owned, controlled or managed by a Government company or co'rporation.

Obviously, the word 'establishment' is intended to indicate something different from a company as defined in the Com panies Act. [631 F-632 DJ

(ii) Alloy Steel was a separate establiShment by virtue of the proviso to s. 3 of the Act because for eacli of the undertakings of Hindmtan Steel Ltd. including Alloy Steel separate accounts were kept though for the purpose of compliance with the provisions of the Companies Act a consolidated balance-11heet and profit and loss. account were also prepared. There was no substance in the contention that the proviso to s. 3 applies only to departments undertaking or branches controlled and managed by persons

other than companies.

It would be a stcange method of construction of Janguage to hold that the establishment referred to in the main part of s. 3 will include all different departments undertakings and branches of a company, while it will not do so in the proviso to the same section. There is no reason for interpreting the proviso to s. 3 in this manner simply because in the case of separate departments, undertakings or branches of the establishment of a company, it may not be possible to make a deduction

(ti) 8.5% of the paid up equity share capital. [635 C-D; 633 G-634 HJ

(iii) Sub-Section (!) of s. 16 grants exemption from payment of bonus to establishments newly set up for a period of six years following the accounting year in which the goods produced or manufactured are . sold

for the first time and, .in the alternative; upto the year when the new establisjtment results in profit, whichever is earlier. If the Alloy Steel Project was treated as an establishment newly set ui> for the purposes of s. 16(1) the exemption claimed would be fully justified. Section 16(2) of C the Act makes it clear that the provisions of sub-s. (!) are to apply even . to new departments, undertakings. or branches set up by existing establishment.

Consequently, even if Alloy Steel Project was treated as a new undertaking set up by the existjng establishments of Hindustan Steel Ltd. the exemption under s. 16(1) would be available to it. [637 D-E]

The proviso to Sub-s. (2) of s. 16 only comes in the way if bonus is paid in any year to the employees of all the units on the basis of the consolidated accounts. That had never been done in the case of the Hindustan Steel Ltd. Consequently the Alloy Steel Project should have been treated as a separate establishment newly set up in the year 1961. It went into production in 1964-65 and did not earn any profits at all till 1967-68.

Therefore no bonus was payable to the workmen of this undertaking Jor the year 1965-66 in view of the provisions of s. 16(1) of the Act. [638 A-BJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2128 of 1969.

Appeal by special leave from the Award dated July 19, 1969 ol. the. Ninth Industrial Tribunal, West Bengal, Calcutta in case No. VllI-396 of 1968.

C. K. Daphtary, Santosh Chatterjee and D. N. Mukherjee, for the appellant.

S. C. Gupta, Manju Gupta and S. C. Agarwala, for the respondents,

The Judgment of the Court was delivered by

Bhargava, 1.

The appellant, Messrs Alloy Steel Project, is an undertaking owned, controlled and managed by a Government Company,. viz., Messrs Hindustan Steel Ltd. Alloy Steel Projec't was started in the year 1961 and it went into production in the yeir 1964-65. No profit was earned at Jeast right up to the year 1967-68: The workmen, however, claimed bonus at the minimum rate prescribed uni:ler the Payment of Bonus Act No. 21 of 1965

(hereinafter referred to as "the Act") in respect of the year 1965-

...

A l 966 on the plea that this Alloy Steel Project was a part of the

:Hindwtan Steel Ltd. and could not be treated as a new establishment for purposes of section 16 of the Act. Hindustan Steel Ltd. was itself an establiShment which had been in existence fo~ a long period and had'been even earning profits, so that exemption could not . be granted to this Company in respect of payment of bonus under s. 16 of the Act. This claim of the workmen was resisted. by the Company on the plea that Alloy Steel Project was a sepa- B

rate establishment in respect of which separate balanoo-sheets and profit and loss accounts were maintained, so that no bonus was payable until either this Project rtself ear.tied profits, or from the sixth accounting year following the year 1964-65 when this Pro- . c iect 'l\lellt into production. The dispute between the wor!."lllen and the Company could not be resolved amicably and, consequently, a reference was made under the Industrial Disputes Act, 1947 which came up before the Ninth Industrial Tribunal, West Benal. The Tribunal held that Alloy Steel Project could not be treated as a separate establishment because, under the Act, a Com-

D pany is itself an establishment, so that all units of a Company like Hindustan Steel Ltd. will constitute one establishment. Since this Project had not been earning any profits the Tribunal directed pay.. ment of bonus at the minimum rate of 4 per cent of wages prescribed by the Act. Aggrieved by this award of the Tribunal, the Company has come up in this appeal to this Court by special leave,

though the name of 1lhe appellant is showa as Alloy Steel Project, because it was under this name that the reference was dealt with by the Tribunal.

The main basis of the decision of the Tribunal is that "the word 'establishmcmt' has been used in thit Act to indicate a

"Company" as called in common parlance.". It was on this view that the Tribunal further proceeded to eonsider wh•r this Alloy ·. :r Steel Project could be lield to be .an establisbmerit separate.frolli · lfmdustan Steel Ltd., or it had to be treated 8s a part of the parent establishment, viz., Hindustan Steel Ud. In this approach, it . is clear that the Tn"bunal committed. an obvious. error, a8 it ignored tile indications which are manifest from the language used in the Act.

Jn section 2, sub-section (15) and (16), establisbm• G . have been divided into two classes and their meaning has been

defined. In clause ( 16) , "establishment in public sector" is defined as meaning an establishment owned, controlled or managed by- ( a) a Government company as defined in section 617

of the Companies Act, 1956;

 II

(b) a corporation in which not less than forty per

cent of its capital is held (whether singly or taken together) by-

632 SUPREME COURT REPORtS

(1971] 3 S.C.R.

(i) the Goveljlllllent; or

(ii) the Reserve Banlc of India; or

(iii) a corporation owned by the Government or the Reserve Bank of India. ln clause ( 15) of s. 2, "establishment in private sector" is defined to mean any establi.shment other thain an establishment in public sector.

Thus, between these two clauses, all establishments are covered. If an establishment is in public sector, it is covered by the definition in clause ( 16). If the establishment is not in public sector, it will be covered by the definition of "establishment in private sector" in clause ( 15). The significant words are those contained in clause ( 16) which shGw that an establishment in a public sector has to be owned, controlled or managed by a Government compainy, or by a corporation of the nature described in that c1ause.

Obviously, therefore, an establishment in a private sector would be one which is owned, controlled or managed by a person or body other than a Government company or a corporation of the nature described iin clause ( 16) . In this view, an establishment cannot be identified with a company. It would 'be absurd to say that a company is owned, controlled or managed by a Government company or a corporation. Obviously; the word "establishment" is intended to indicate something. different from a company as d.efined in the Companies .Act.

This is further clarified by the provisions of sub-s. ( 3) of section 1 which lays down the applicability of the Act.

The Act has beeu made applicable to every factory and every other establishment in which twenty or more persons are employed on any day dming an accounting year.

Supposing a company has a factory in one premises and has another workshop entirely distinct and separate from that factory, 1in which the number of persons employed 's Jess than 20. The Act itseli will apply to the factory, but will not apply to the-0ther estl!blishment in which the number of employees is Jess than 20.

This applicability of the Act will be independent of the other provisions of the Act.

Learned counsel for the respondent-workmen relied on section 3 of the Act to urge that . even the estabishment employing less than 20 persons will be a part of the parent establishment consisting of the factory.

Section 3 is as follows :-

"3. Where an establishment consists of different departments or unclertakings or has branches, whether situated in the .same place or in different places, all such clepartments or undertakings or branches shall be treated H as parts of the same establishment for the purpose of computation of bonus under this Act :

A Provided that where for any accounting year a separate balance-sheet and profit and Joss account are prepared and maintained in respect of any such department or undertaking or branch, then, such department or undertaking or branch shall be treated as a separate establishment for the purpose of computation of bonus B under this Act for that year, unless such department or undertaking or branch was, immediately before the commencement of that accounting year treated as part of the establishment for the purpose o( computation of bonus." It is to be noted that the principal J?llrt of section 3 Jays down that different departments or undertakings or branches of an estab- C Iishment are to be treated as part of the same establishment only for the purpose of computation of bonus under the Act. They cannot be treated as part of one establishment for purposes of subsection ( 3) of section 1 of the Act.

In fact, section 3 cannot be resorted to at all when the Act itself is inapplicable in view of the provision contained in section 1, sub-s. ( 3). It D is, thus, quite clear that the Tribunal went entirely wrong in holding tllat simply because Alloy S!P...el Project is owned, controlled and managed by Hindustan Steel Ltd., it has to re treated as a part of Hindustan Steel Ltd. which is itself an establishment.

Hindustan Steel Ltd. cannot be descnlx:d as an establishment. The facts appearing on the record show that Hindustan Steel Ltd. has a number of establishments. These include Alloy Steel Project E besides the Head Office, Rourkela Steel Plant, Bhilai Steel Plant,

Durgapur Steel Plant, Coal Washeries Project and Bokaro Steel Project. The Company, Hindustan Steel Ltd., cannot be equated with any one of these units. They are all separll_te undertakings, departments or branches owned, controlled and managed by one single Compaiiy and, consequently, the point raised has to be F decided on the basis whether, under the proviso to section the

AIJoy Sl Project is to be treated as a separate establishment, or is to be treated as part of the main establishment owned by Hindustan Steel Ltd.

Learned counsel for the respondent-workmen, however, G advanced a new argument which was not put forward before the

Tribunal.

His submission was that, if an establishment . of a Company consists of a number of departments, undertakings or branches, the prinipal part of section 3 will apply and all such departments, undertakings or branches must be treated as parts of one single establishment for purposes of computation of bonus H under the Act, but the proviso to section 3 will not apply in such

a case. According to him, the proviso to section 3 will apply to establishments consisting of different departments, undertakings or branches which are owned, controlled or managed by persons other!

t.han companies. This argument was based on the reasoning that, A in order to calculate available surplus for distribution of bonus in the case of a company, the Act Jays down in section 6(d) read with the Third Schedule that the deductions to be made from net profits will also include dividends payable on preference share capital, and 8.5 per cent of its paid u)J equity share capital as at the commencement of the accounting year.

This provision can- B not be given effect to in respect of separate units of a Company, because the paid up capltal or the preference share capital is not allocated between different unit§.

In the case of the present Company, viz., Hindustan Steel Ltd., the entire paid up capital is §hown in the accounts of the Head Office.

The money needed for working of the various units, including the Alloy Steel Project, is.shown C as remittance received from the Head Office and not as paid up capital of the Alloy Steel Project etc. The result is that, if Alloy Steel Project or other' units of the Hindustan Steel Ltd. are treated as separate establishments and available surplus is calculated separately for each unit, there will be no deduction @8.5 per cent of the paid up equity share capital as envisaged by section 6 ( 4) and the Third Schedule of the Act.

We do not think that there is any force in this argument.

First, it would be a strange method of construction of language to hold that the establishment referred to in the main part of section 3 will include all di£' erent departments, undertakings and branches of a company, while it will not do so in the proviso to E the same section.

Such different meanings in the same section in respect of the same words or expression cannot be accepted.

Secondly, it seems to us that no difficulty of the nature pointed out by learned counsel can arise in calculating available surplus.

Wherever the Act lays down that certain deductions are to be -made, It is obvious that those deductions will only be effective if, in fact, circumstances do exist justifying such deductions.

In the F Third Schedule itself, the first deduction envisaged is dividend payable on preference share capital. A number of companies do not have preference share capital. In such cases, clearly, no occasion would arise for" making such a deduction.

Very similar is the position with regard to certian other deductions which are permissible under the Second Schedule which principally Jays down G the method of calculation of available surplus.

There is, therefore, no reason for interpreting the proviso to section 3 in the manner urged by learned counsel simply because, in the case of separate departments, undertakings or branches of the establishment of a company, it may not be possible to make a deduction @8.5 per cent of the paid up equity share capital.

H In the present case, there is very clewevidence that, though the Company, Hindustan Steel Ltd., has a number of undertakings,

A Separate accounts are kept for each separate undertaking.

The annual reports for three years were produced before the Tribunal.

They clearly indicate that separate balance-sheet was prepared for

each unit and separate profit and loss account was worked out for each unit, except that, for the Head Office, though a separate palance-sheet was prepared, the profit and loss w:, s worked out on B the basis of the consolidated accou, nts.

The Tribunal, in support of its view that Alloy Steel Project is a part of the establishment constituted by the Company, Hindustan Steel Ltd., relied on the circumstance that a consolidated balance-sheet is prepared for the .• Company in respect of all its units and after such consolidati~. profit nd loss is also worked out for all the establishments together c so as to find out the actual profit and loss earned or incurred by the Company itself. From this, the tribunal sought to infer that there ere no separate accounts in respect of each unit as are required to be maintained before they can be treated as separate establishments under the proviso to section 3. The Tribunal has obviously gone wrong in ignoring the fact that separate balancesheets and profit and loss accounts are in fact maintained for each D separate unit and the consolidated accounts are prepared only for the purpose of complying with the requirements of the Companies Act.

The Companies Act does lay down the requirement that a consolidated balance-sheet and profit and loss account for all the units of the Company must be prepared and, for that purpose, quarterly statements of accounts have to be sent by each unit to E the Head Office.

There is, however, no provision even in the Companies Act containing a prohibition to mainte_nance of separate balance-sheets and separate profit and loss statements for each unit for purposes of the Act.

That accounts are separately maintained for each unit is not only established from the various annual reports filed before the Tribunal a.nd the evidence of the Com- F pany's witness Umapada Chakraborty, but is also admitted by Suprakash Kanjilal, the only witness examined on behalf of the workmen.

The latter also admitted that separate bonus calcula, tion is made in respect of each unit and bonus was declared separatejy in each unit.

No bonus was, however, declared in respect of the Alloy Steel Project.

That declaration was not made G because of the claim that Alloy Steel Project was exempt from payment of bonus under section 16 of the Act. Section 16 runs as follows :-

"16. (1) Where an establishment is newly set up, whether before or aftr the commenceme11t of this Act, the employees of such establishment shall be entitled to H be paid bonus under this Act only-

(a) from the accounting year in which the employer derives profit from such establishment; or ll-918Sup CI/71

( b) from the sixth accounting year following the accounting year in which the employer selis the goods produced or manufacturecl by .him or renders services, as the case, may be, from such establishment,

whichever is earlier :

Provided that in the case of any such establishment the employees thereof shall not, save as otherwise provided in. section 33, be entitled to be paid bonus under this Act in respect of any accounting year prior to the accounting year commencing on any day in the year 1964.

Explanation !.-For the purpose of this section, an establishment shall not be deemed to be newly set uir merely by reason of a change in its location, manageme.nt, name or ownership.

Explanation H.-For the purpose of clause (a), an employer shall not be deemed to have derived profit in any accounting year unless-

( a) he has made provision for that year's depreciation to which he is entitled under the Income-tax Act or, as the case may be, under the agricultural income-tax law; and

(b) the arrears of such depreciation and losses incurred by him in respect of the establishment for the previous accounting years have been fully set off against his profits.

. Explanation III.-For the purpose of clause (b), sale of the goods produced or manufactured during the course of the trial run of any factory or of the prospecting stilge of any mine or an oil-field shall not be taken

into consideration and where any question arises with G regard to such production or manufacture, the decision of the appropriate Government, made after giving the parties. a reasonable opportunity of representing the cas\l, shall be final and shall not be called in question by any court or other authority.

( 2) The provisions of sub-section (1 ) shall, so far as may be, apply to new departments or undertakings or branches set up by existing establishments :

Provided that if an employer in relation to an exist ing establishment consisting of different departments or undertakings or branches (whether or not in the same industry) set up at different periods has, before the 29th May, 1965, been paying bonus_to the employees of all such departments or underta:kings or branc, hes irrespective of the date on which such departments or undertakings or branches were set up, on the basis of the consolidated profits computed in respect of all such departments or undertakings or branches, then, such employer shall be liable to pay bonus in accordance

with the provisions of this Act to the employees of all such departments or undertakings or branches (whether set up before or after that date) on the basis of consolidated proits computed as aforesaid."

Sub-section (1) of section 16 grants exemption from payment of bonus to establishments newly set up for a period of six years. following the accounting year in which the goods produced . or D manufactured are sold for the first time and, in the alternative; up to the year when the new establishment results in profit, whichever is earlier. If the Alloy Steel Project is treated as an establishment newly set up for purposes of s. 16 (1), the exemption claimed would be fully justified.

Section 16(2) of the Act mak~ it clear that the provisions of sub-section (1) are to apply even to new E departments, undertakings or branches set up by existing establishments.

Consequently, even if Alloy Steel Project is treated 1as a new undertaking set up by the existing establishments of Hindustan Steel Ltd., the exemption under section 16(1) would be available .to it.

The proviso to sub-s, (2) of section 16 also does. not stand in the way of this claim, because there is no evidence at all that F in any year, after Alloy Steel Project was set up, bonus was pald'- to the employees of all the units on the basis of consolidated profits of all such uiiits.

The only exception has been in Tue case of workmen of the Head Offie where no separate profit and loss was worked out and the bonus was paid on the basis of the consolidated profits of all the units belonging to Hindustan Steel Ltd.

G That, of course~ was fully justified, because the Head Office was working for all the units, thQugh as a separate unit. It was in the accounts of the Head Office that the entire paid up capital wa~

credited and advances were made by the Head Office to the various units out of this capital or out of loans taken by the Head Office.

In the case of the Head Office, therefore, the calculation of bOnus

on the basis of consolidated acCOU; llts was iustified; but that does H not affect the principle to be applied to the separate 'llllits for which separate accounts, separate balance-sheets and sep11, rate profit and loss statements are maintained. The proviso to sub-

A section ( 2) of section 16 only comes i, n the way if bonus is paid in any year to the employees of all the units on the basis of consolidated accounts.

That has never been done in the case of the Hindustan Steel Ltd. Co, nsequently, the Alloy Steel Project should have been treated as a separate establishment newly set up in the year 1961. It went into production in 1964-65 and did not earn any profits at all till 1967-68. Therefore, no bonus was payable, B to the workmen of this undertaking for the year 1965-66 in view of the provisions of section 16 ( 1) of the Act.

The appeal is allowed, the order of the Tribunal is set aside, . and the reference of the dispute , is answered accordingly. In the

circumtances of this case, we direct parti.es to bear their own costs of the appeal.

G.C.

Appeal allowed.

• ..

A

ALLOY STEEL PROJECT

February 2, 1971

M. SHELAT

V. BHARGAVA

s. 16(1)

s. 3

Section 16(2)

Hindustan Steel

Alloy Steel Project

Hindustan Steel Ltd.

The workmen

Payment of Bonus Act

s. 16( 1)

Alloy Steel

s. 2(16)

s. 2(15)

s. 2(16)

s. 3

Hindmtan Steel Ltd.

Companies Act

s. 3

s. 3

s. 3

s. 16

s. 16(1)

Section 16(2)

s. 16(1)

s. 16

s. 16(1)

C. K. Daphtary

Santosh Chatterjee

D. N. Mukherjee

S. C. Gupta

Manju Gupta

S. C. Agarwala

Bhargava

Messrs Alloy Steel Project

Payment of Bonus Act

Hindwtan Steel Ltd.

section 16

s. 16

Industrial Disputes Act, 1947

Ninth Industrial Tribunal, West Benal

Hindustan Steel Ud

section 2

section 617

Companies Act, 1956

Reserve Bank of India

s. 2

section 1

section 3

Section 3

section 3

section 1

section 3

section 1

Rourkela Steel Plant

Bhilai Steel Plant

Durgapur Steel Plant

Coal Washeries Project

Bokaro Steel Project

AIJoy Sl Project

section 3

section 3

section 3

section 6(d)

Third Schedule

section 6

Third Schedule

section 3

Third Schedule

Second Schedule

section 3

section 3

Companies Act

Companies Act

Companies Act

Umapada Chakraborty

Suprakash Kanjilal

section 16

Section 16

section 33

Income-tax Act

29th May, 1965

section 16

s. 16

Section 16(2)

section 16(1)

section 16

section 16

Hindustan Steel Ltd. Co

section 16


63~

BHUBANESHWAR PRASAD NARAIN SINGH & ORS.

SIDHESWAR MUKHERJEE & ORS.

B February 2, 1971

[G. K. MITTER AND A. N. RAY, JJ.]

Bilu1r Land Rcfonns Act, 1950, r. 6--Scope of-Effect on co-sharer'i posJ't:Jston.

In a suit for partition of bakasht land a preliminary decNe was passc ed.

The defendants-appellants, claiming to be in actuar possession of the bakasht land, filecl a petition contending that the consequence of s. 6 of the Bihar Land Reforms Act, 19'50 (which came into force in the meanwhile) was to put an end to the proprietor's possession of the b.akasht land by causing them to vest in the State and simultaneously creating a tenancy in favour of the person in khas possession. thereof, and therefore, no final decree could be passed. The trial court accepted the contention and dismissed the plaintiff's application for pass- D ing final decree. In appeal, the High Court set aside the order.

In appeal to this Court,

HELD : Even if the appellants were in actual khas possession within the meaning of s. 2 (kl of the Act, it must be held that the plaintiff respondent, who was a co-sharer, was in constructive possession through the appellants, as, under the law, posslssion of one co-sharer is posses- E sion of all co-shares. The appellants did not claim to be trespassers on the property neither did they claim any title to the lands adversely to "the respondent. . The deeming provision of s. ll inust, therefore, enure for the benefit of all. who in the eye of land would be regarded .as in actual possession. Therefore, the respondent had not Jost his •hare , in the bakasht lands and had a right to his share in them; though not <J as tenure-holcler or proprietor, but as a raiyat under the provisions of t the Act. [645 E-GJ F P. L. Reddy v. L. L. Reddy, [!957) S .. C.R. 195. 202, followed.

Surajnath Ahir v. Prithitnath Singh, [1963] 3 S.C.R. 290, Ram Ran Baijal Singh v. Behari Singh alias Bagandha Singh, [1964] 3 S.C.R .. 363, S. P. Shah v., B. N. Singh, [1969) 3 S.C.R. 9'08 and Mahant Sukhdeo Das

v. Kashi Prasad, Tewari & Shrideo Misra v. Ramsewok Singh A.L.R. 37 G Pat. 918, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2588 of 1966.

Appeal from the judgment and decree dated January 14, 1964 of the Patna High Court in First Appeal No. 572 of 1958.

H D. Goburdhun and R. Goburdhun, for the appellants.

A. N. Sirlha and P. K. Mukhejee, for respondent No.- 1.

. '

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

The only question involved in this appeal is, whether the direction of the Jligh Court that the partition suit launched in 1943 should be allowed to proceed in view of the provisions Of s. 6 of the Bihar Land Reforms Act, 1950 which came into force on 25th September, 1950, is correct.

The suit had a chequered creer. It was nstituted against a number of persons the main relief asked for being partition of four annas Milkiat interest in Touzi No. 702, Tappa Haveli, Pargana Maheshi, District Champaran, Bihar.

The Subordinate Judge of Motihari made a preliminary decree for partition declaring the first respondent's share in the property as claimed by him.

The High Court in appeal modified the decree reducing the plaintiff's share to Rs. 0-1-4 interest only.

In further appeal to this Court the trial court's preliminary decree was upheld on 5th October 1953.

In the meanwhile the Bihar Land Reforms Act of 1950 effecting far-reaching changes in the incidents of land tenure and land holdings had been passed.

The first appellant made an application to the trial court in June 1958 praying that the proceedings for final decree be treated as having abated in view of the vesting of aH estates m land in tbi State of Bihar. 'This was accepted by the Subordinate Judge by an order dated July 12, 1958. The High Court allowed the appeal with the direction above mentioned which the appellant~ now seek to have -set aside.

The bone of contentiQn between the parties is the extensive 'bakasht' lands in the aforesaid Mquza. The appellants cOifitend

that under s. 6 (1) of the Act all hs~ lands vested }n the State and came to be held by the persons m. "khas possession" thereof as raiyats u, nder the State.

To appreciate the plea it is necessary to make a brief reference to some of the provisions of the Act.

As is well known the object pf the Act was to cause transfer- -ence to the State of the interest of proprietors and tenure-holders in land as also of rthe mortgagees and bssees of such interests including interests in trees, forests, fisheries, jalkars, ferries, hats, bazars, mines and minerals and to provide for certain consequences following there.from and connected therewith.

S. 3 of the Act enabled the State Gover#ment to declare by notification that the -estates or tenures of a proprietor or tenure-holder specified therein would pass to and become vested in the State.

The consequences of such vesting are setforth in s. 4. Under cl. (a) :

"Such estaJe or tenure including the interests of the proprietor or tenure-holder in any building or part of a building comprised in such estate or tenure and used

BHUBANESHWAR V. SIDHESWAR (Mitter, J.) 641

primarily as office or cutcb, ery for the collection of rent ot such estate or tenure, and his interest in trees, forests, fisheries, jalkars, sairati interest as also his interest in all sub-soil including any rights in mines a!ld minerals whether discovered or undiscovered, or whether being worked or not, inclusive of such rights of a lessee of mines and minerals, comprised in such estate or tenure (other than the interests of raiyats or under-raiyats) shall, with effect from the date of vesting, vest absolutely in the State free from all incumbrances and such proprietor or tenure-holder shall cease to have any interest in such estate or tenure, other than the interests expressly saved by or under the provisions of the Act." S. 6 of the Act provides for such saving and the relevant portion thereof runs as fol!ows :-

" ( 1) On and from the date of vesting all lands used for agricultural or horticultural purposes, which were in khas possession of an intermediary on the date of such vesting, including-

( a) (i)_ proprietor's private }ands let out under a lease for a term of years or under a ]ease from year to year, .............. .

(ii) landlords privileged lands let out under a registered lease for a term exceeding one year or under a lease, written or oral, fo~ a period of one year or Jess, referred to in section 43 of the Chota Nagpur Tenancy Act, 1908,

(b) lands used for agricultural or horticultural purposes and held in the direct possessio, n of a temporary lessee of an estate or tenure and cultivated by himself with his own stock or by his own servants or by hired labour or with hired s:ock, and ( c) lands used for agricultural or horticultural purposes forming the subject matter of a subsisting mortgage on the redemption of which the intermediary is entitled to recover khas possession thereof; shall . . . . . . . . . . ... be deemed to be settled by the State with such intermediary and he shall be entitled to retain possession thereof and hold them as a raiyat under the State having occupying rights in respect of such lands subject to the payment of such fair and equitable rent as may be determined by the Collector in the prescribed manner. ..

The broad proposition which was advanced before the High Court and rejected by it nd reiterated before us is that thei consequence of s. 6' was to put an end to the character of the possession of the bakasht lands to the malik by causing them to vest in the State and simultaneously creating a tenancy in favour of the person in khas possession thereof.

There is no dispute that bakasht lands fall under categories (b) and ( c).

We are not here concerned with category ( c) and have quoted it to appreciate some decisions relied on where there are references to that category.

This question has engaged the attention of the Patna High Court more than once and it would appear that the views expressed in different cases have not been uniform.

So far as the said High Court h concerned the point was settled by a decision of the Full Bench in Mahanth Sukhdeo Das. v. Kashi Prasad Tewcri and Shrideo Misra v. Ramsewak Singh(1).

The main questions before the Full Bench were whether on the vesting of an estate which was mortgaged at the material time the bakaslrt 'lands therein which are deemed to be settled with the ex-proprietor in khas possession would form substituted security for the purpose of the mortgage, and whether a co-sharer proprietor not in actual possessio.n of such lands had any claim thereto on the basis of his constructive possession.

The High Court answered both the above in the affirmative.

One of the earliest cases in which this Court had to interpret s. 6 of the Act Wds that of Surajnath Ahir v. Prithinath Sinigh(2 ).

There the question which engaged the attention of this Court was whether the appellants who had originally gone into possession on the strength of a mortgage lost their right to continue in possession even i~ they claimed to be trespassers after the redemption of their mortgage by reason of the estate vesting in the State on the passing of the Act.

Although the case is not directly in point, it bears upon the \dentical provisions of law which have to be applied to the facts of the case before us.

The facts in that case were that the appellants had entered into possession of kasht lands of the mortgag\)rs on the strength of a mortgage deed.

The mortgagors thereafter executed another mortgage with respect to their milkiat

(proprietary) interest in favour of certain persons. The plaintiffrespondents bought the milkiat. rights together with "kasht" lands from the mortgagors and entered into possession of the milkiat property and subsequently redeemed the mortgage deeds in 1943.

The appellants however did .not make over possession of the lands ill dispute even after the redemption of the mort2ae. It was held by this Court that the respondents could not take advantae of section 6(1) (c) of the Act as no mortgage subsisted on the date of vesting and the llll!re fact that the proprietor had a subsisting

(I) J.L.R. 37 Patna 918.

(2) [1963)-3 S.C.R. 290

JIHUBANBSHWAR v. SIDHESWU (Mitter, J.) 643

title to possession over certain land on the date of vesting could n<Jt amount to Ihat land being treated as under his "khas possession" for the purposes of the Aot.

Referring to the definition of "Khas possession" in s. 2(k) of tht Act as meaning "the possession of such proprietor or te.nure-ho!der by cultivating such land or carrying on horticultural operations thereon himself with his own stock or by his own servants or by hired labour or with hired stock". it was held that in order that the respondents could take advantage of the provision of s. 6 (1 )( c) of the Act they had to establish a subsisting ll}Ortgage on the date of vesting which was inclusive of the land subject to their right of redemption.

On the question of possession of the lands it was observed :

"On the date of vesting, the appellants were not in possession as mortgagees.

The mortgages had been redeemed in 1943.

Thereafer, the possession of the appellants was not as mortgagees.

It may be as trespassers or in any other capacity.

The land in suit, therefore, did , not come within cl. ( c) of s. 6 of the Act.!.'

Rejecting the construction put on the expression 'khas possession' by the High Court in Brijnandan Singh v. Jamima Prasad(1) it was said:

"The mere fact that a proprietor has a subsisting title to possession over certain land on the date of vesting woqld not make that land under his 'khas possession'." The Full Bench decision of the Patna High Court came up for consideration by this Court in Ram Ran Bijai Singh v.

Behari Singh alias Bagandlia Singh("). There the appellants before this.

Court were Jhe plaintiffs who had filed a suit for a declaration that a certain plot of land was their zeraiti land and that the persons impleaded as the defendants 1st and 2nd parties had no right or title thereto and for rcovery of possession of the said land by dispossessing them therefro'Il.

It was argued that in view of the concurrent findings of the courts below that the lands were the zeraiti lands of the plaintiffs they would not vest in the State because of the saving i.n s. 6 of the Act and the appe1!ant should be deemed to have been in khas possession of th¢ land .under s. 6 (1 )( c). The respondents contended that it was not a case of a mortgagee remaining in possession after payment of the debt without anything more but of tenants who claimed to remain in possession by asserting a title which was as much against the mortj!; a!!ors as against the mortgagees.

Reference was made in the m A.Lil. t9~R Patna ss•.

12) [1964] 3 s.c.R. 363.

(3) I.L.R.37Pat. 918.

SUPREME COURT REPORT$

[1971]3 S.C.R.

•course of arguments to the Full Bench decision in Sukhdeo Das's case ( ") and it 'll'as submitted that a mortgagee continuing in possession of the mortgaged property a.fter payment of the mortgage amount mu3t hold the same on behalf of the mortgagor and in trust for hiiil.

Counsel further relied on certain observation&. in the judgment of the Full Bench in aid of his proposition and submitted on the basis thereof that even the possession of a trespasser who had not perfected his title by adverse possession for the requisite period. uf time under the Limitation Act should be considered as in khas possession o.f the true own, er. Turning down

this submission it was observed by this Court (p. 378) :

"We cqnsider that this equation of the right to possession with 'khas possession' is not justified by principle or authority. Besides this is also inconsistent with the reasoning of the Full Bench by which constructive possession is treated as within the concept of khas possessiEln." The Court went on to add that :

"The possession of the contesting defendants in the present case was in their own right and adverse to the plaintiffs, even on the case with which the appellants them>dves came to court." Noting the statement of-the plaintiffs in their plaint that the mortgagees had fulfilled their obligations and the obstruction to possession was put forward only by persons :-vho claimed occupancy rights this Court co, ncluded that, in the circumstances of the case, it was not possible for the appellants to contend that these tenants (defendants 1st and 2nd parties) wer" in possession of the property on behalf of the mortgagor or by virtue -<if any right through the mortgagor.

The case is not therefore an authortiy _for the proposition that a co-sharer's constructive possession is to be ignored under s. 6(1) (c) of the Act.

Counsel for the appellants also referred us to a recent decision of this Court in S. P. Slzah v. B. N. Singh(1) in aid ofhis contention that the true effect of s. 6 of the Act was to create a ilew right of tenancy in favour of the person in khas possession and consequently even i.f the plaintiff in the partition suit had a right to ask for demarcation of his Rs. 0-4-0 share of the bakasht lands before the passing of the Land Reforms Act, he couk! qot pursue his claim by a prayer that he be considered a: tenant along with those who were in_ actual khas possession.

Jn our view the above decision is no authority. for this broad proposition.

In that case the appellants who were mortgagees' of an estate including bakasht lands and other lands filed a suit on

(I) [1969] 3 S C.R. 908.

BHUBANESHWAR v. SIDHESvl:, AR (Mitter, J.) 645

their mortgage and tried to follow up the preliminary decree which was obtained before the Act came into force by a petition for passing a fi.nal decree.

One of the questions before tli.is Court was whether the mortgage decree had become unexecutable in view of the provisions of the Act.

It was held that the net effect of ss. 3, 4 and 6 was that although on the vesting of the lands in the State. a settlement was deemed to be effected with the person in khas possession in law, there were two diffen; nt transactions and the deemed settlement was in effect a separate transaction creating new rights.

The Court came to the conclusion that the only remedy open to the decree-holders was that provided in Chapter IV of the Act i.e. a claim under s. 14 before the Claims Officer for determinng the amount of debt legally and justly payable to each creditor in respect of his claim.

The Court was there dealing with the rights of the mortgage creditors after the Act had come into force.

Chapter IV of the Act made special provisions for dealing with the rights of secured creditors and s. 4 (1 )(d) expressly provided for the abatement of D - all suits and proceedings for the recovery of any money through proceedings which might be pending on the date of vesting arising out of securities created by mortgage or a charge on an estate or tenure.

Here howeven we are not dealing with the claims of mortgagees under Chapter IV. In this case we have to consider whether the appellants had laid a claim which a co-sharer could not put forward except by pleading ouster or a.ny other independent ground.

Even if they were in actual khas possession within the meaning of s. 2 (k) of the Act it must Le held that the plaintiff who was a co-sharer was in constructive possession thrqugh the appellants as "und, er the Jaw possession_ of one co-sharer is lposes sion of all the co-sharers".

We see no reason to hold that the observations of this Court to the above effect in P. L. Reddy v.

L. L. Reddy('1) are not applicable to the case before us. The appellants do not claim to be trespassers on the property : neither did they claim any title to the lands adversely to the plantiff respondent.

The deeming provision of s. 6 must therefore enure for the benefit of all who in the eye of law would be regarded as in actual possession. It follows that the plaintiff had not lost his share in the bakasht lands and had a right to them though not as tenure-holder or proprietor but certainly as a raiyat under the provisions of the Land Refomi.s Act.

The appeal, mus-t therefore be dismissed with costs.

V.P.S.

Appeal dismissed.

(!) [19571 S.C.R. 195, 201.

BHUBANESHWAR PRASAD NARAIN SINGH & ORS

SIDHESWAR MUKHERJEE & ORS

G. K. MITTER

A. N. RAY, JJ.

Land Rcfonns Act, 1950

s. 6

s. 2

[1963] 3 S.C.R. 290

[1969) 3 S.C.R. 9

Patna High Court

H D. Goburdhun

R. Goburdhun

A. N. Sirlha

P. K. Mukhejee

Mitter

s. 6

Bihar Land Reforms Act, 1950

25th September, 1950

Pargana Maheshi

Champaran

Bihar

Subordinate Judge of Motihari

5th October 1953

July 12, 1958

s. 6

S. 3

s. 4

BHUBANESHWAR V. SIDHESWAR

S. 6

section 43

Chota Nagpur Tenancy Act, 1908

s. 6

s. 6

section 6(1)

s. 2(k)

s. 6

s. 6

s. 6

s. 6

Sukhdeo Das

Limitation Act

s. 6(1)

s. 6

[1969] 3 S C.R. 908

ss. 3, 4 and 6

s. 14

Chapter IV of the Act

s. 4

s. 2

s. 6