I "

UNION OF INDIA

JYOTI CHIT FUND & FINANCE & ORS.

March 22, 1976

[Y. V. CHANDRACHUD AND V. R. KRISHNA IYER, JJ.J

Provident Funds Act, 1925, Ss. 3 and 4-Provident fund and allied a1nounts ff/ll due, whether exclusion from attachability continues-Objection to attachnzent taken pro bono publico by Union of India, if valid-'Locus standi', scope of.

The appellant Union of India objected to the attachment of certain provid_nt fund and pension dues held by it (on behalf of the Rajya Sabha Secretariat) in trust for the fourth respondent, an exemployee of the Rajya Sabha Secretariat.

The attachment was sought in satisfaction of a moneydecree held by the first C respondent.

The High Court dismissed the appellant's Civil Revision petition upholding the decision of the executing court.

In appeal by special leave, the appellant contended before this Court that <11though a third party to the suit, the state had acted pro bono publico, by objccing to the illegality of the proposed attachment, and that it was a question of principle, afiecting a wide circle of government servants.

The respondent contended that the amounts having already fallen due, had lost the character of provident fund or pension under Ss. 3 and 4, and had become attachable, and also that the government had no (ocus standi to object to the attachmen.

Allowing the appeal, the Court

HELD : ( 1) So long as the amounts are Provident Fund dues then, till they are actually paid to the government servant who is entitled to it on retirement or otherwise, the nature of the dues is not altered. The government is a trustee for those sums and has an interest in maintaining the objection in court, to attachment. f767D-EJ

Union of India v. Radha Kissen Aganvalla & Anr. [1969] 3 S.C.R. 28, followed.

(2) Cases where public policy is involved and the court has a certain duty to observe statutory prohibitions, a wider concept of locus standi has to be taken . . Any public authority interested in the matter, and not behaving as an officious busy-body may bring to the notice of the court the illegality of the steps it proposes to take. When the court's jurisdiction is so invoked, it may be exercised \>."ithout insisting on some other directly affected party appearing to defend himself. [767F-GJ

(3) The argument that the Rajya Sabha Secretariat is different from the Union of India, has the merit of novelty, little else. [767 G & 768HJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2179 of

19m G

Appeal by Special Leave from the Judgment and Order dated the 1st May, 1970 of the Delhi High Court in Civil Revision No. 26 of 1970.

G. L. Sanghi, Girish Chandra a1U/ S. P. Nayar for the Appellants.

K. B. Rohtagi, M. K. Garg, V. K. Jain and M .. K. Rastogi for H Respondent No. 1.

The Judgment of the Court was delivered by

KRISHNA IYER, J.-The moral of this case is that a short cut may often be a wrong cut-in law, as in life.

The ratio of this appeal is that technicality will not triumph in courts of law and justice, where substantial public policy is involved and it is such public policy which humanistically protects provident fund and pensionary dues of government servants from claims of judgment-creditors to attach in satisfaction of decrees.

The appellant, the Union of India, has come up in appeal, by special leave, challenging a laconic order of dismissal in Civil Revision made by the Delhi High Court, thus upholding the view of tlhe executing court over-ruling the contention of the State, objecting to the attachment of certain provident fund and pension dues held by Union of India (on behalf of the Rajya Sabha Secretariat) in trust for the judgment-debtor who had been employed in the Rajya Sabha Secretariat.

The first court had held that the Union of India had no locus standi to object to the attachment by the decree-holder on the score that an outsider to the snit without 'interest in the attached money' has standing to intervene to dispute the attachability even if the sum was clearly innnune to attachment in law.

The relevnt reasoning is in these terms :

"It is not the case of the Union of India that Union of India has any interest in the attached property so as to enc title Union of India to make an application under Order 21, r. 58 CPC.

In my opinion, if the attachment has been wrongly made it is for the judgment-debtor to make an application to the court for releasing the provident fund or the compulsory deposits from attachment."

The Court also expressed the view that it was premature to hbld :

"that attached money will fall within the definition oj' provident fund or compulsory deposit."

In fairness to the Subordinate Judge it must be said he did feel 'inclined to agree that provident fund and compulsory deposits are not liable to any attachment under any decree or order of the. civil court.

The ground which weighed with the trial court and has 'Won the approval of the High Court is that "the Government has no interest in the attached money and therefore no standing to come to •court.

The judgment-debtor may file objections for release of the attched money.

The objections, if made, will be decided afresh on 'nwrits." It is apparent from this statement of facts that the courts below' took the narrow view, with an escapist flavour which led to long litigation and large expense, that only the judgment-debtor and not the Govemment could raise objections regarding non-attachability of pJ; qllident fund and pension amounts, as if Government were an officious intruder, bereft of any concern in the insultion of the amounts agairlst execution of decrees of court.

The amount involved is small, but Shri Sanghi, for the appellant, contends that the question is one of principle and affects a wid.fi circle of government servants.

We agree and indeed appreciftte the State's

\ '

,.· I

!'"

UNION v. JYOTI CHIT FUND (Krishna Iyer, J.) 765

anxiety to fulfil the policy of the statute on behalf of the weaker- A sections by taldng up the burden on itself.

May be, it is like a test case ventilating a cause in which a large number of employees ' may be vitally involved.

We may make it clear here that the stand taken by Shri Rohatgi, counsel for the respondent, is two-fold.

He argues firstly that this amount in the hands of Govermnent is admittedly being held on behalf of the Rajya Sabha Secretariat servant who has just retired a, nd, therefore, has lost the character of provident fund or pension. The inhibition of attachment of provident fund and like amounts, even if valid, cannot apply to this class of sums which have suffered a metamorphesis.

Secondly, the Govermnent has no right to move the court raising objection to the attachment since the judgment-debtor is the only appropriate person who can do so.

We disagree.

Processual law is neither petrified nor purblind but has simple mission-the promotion of justice.

The court cannot content itself with playing umpire in a technical game of legal skills but must be activist in the cause of deciding the real issues between the parties.

And one guiding principle is not to exaggerate the efficacy of procedural defects where issues of public concern are involved and a public authority vitally interested in the correct principle alerts the attention of the court to the problem.

A broadened view of locus standi loads to the futility of technical flaws where larger issnes are involved --and that is the trend of modern processual jurisprudence. These general considerations were trite, yet too often ignored, and so need reiteration.

Further, the consumers of justice can have scant respect for a procedural policy which is obsessed more with who sparks the plugs of the court system than with what the merits of the rights or wrongs of the relief are.

A shift on the emphasis, away from technical legalistics, is overdue if the Juc!icature is not to aid its grave diggers.

We express the view strongly so that hopefuls may be dissuaded from taking up court time by playing up technicalities.

We may now move on to a consideration of the basic contentions

and, before that, the basic facts may be briefly set down.

On March F 31, 1967 a money decree for a little over Rs. 2,000/- was passed in Suit No. 516 of 1966 in favour of respondent No. 1 and against respondents 2 to 4 (who are ex parte).

A warrant or attachment of the 'funds' of respondent No. 4, in the hands of the Rajya Sabha Secretariat, was songht and ordered. It reads :

"To G

The Pay & Acounts Officer, Rajya Sabha Secretariat, New Delhi.

Whereas judgment-debtor No. 3, Shri S. Krishnaswamy, an ex-reporter has failed to satisfy a decree passed against him on the 31st day of March, 1967 in suit No. 516/66 in favonr of M/s Jyoti Chit Fund and Finance P.

Ltd., for Rs. 2193-50. It is ordered that 11he defendant judgmentdebtor is hereby prohibited and restrained until the furthr.r

order of this Court from receiving from the Pay and Accounts Officer the following property in possession of the said Pay and Accounts Officer that is to say Rs. 2193-50 to which the defendant judgment-debtor is entitled, subject to any claim of the said J. D. and the said Pay and Accounts Officer is hereby prohibited and restrained; until the further order of this court from delivering of the said property to any person.

Given under my hand and seal of the Court on 12th day of September 1968.

Sd/- Sub-Judge 1st Class, Delhi."

On service of the attachment order, objection was raised by the appellant, Union of India, on January 30, 1969 on the score that provident fund amounts and pensionary benefits were not 'liable to attachment and therefore the order may be rescinded.

The decreeholder (respondent 1) successfully contested in the trial court and on the objection being over-ruled, the appellant moved the High Court. It may be stated, at tltis stage, that the trial Court did not actually investigate the claim of the appellant as to whether the whole, or part of the amount sought to be attached, represented provident fund or pensionary benefits nor did the High Court go into the question.

This means that even if we uphold the contention of the appellant, the case will have to go back for investigation on the merits

We may formulate what has been indicated-the actual points urged before us by Shri Sanghi and vigorously controverted by Shri Rohtagi.

(1) Is it permissible in law for amounts representing provident fund contributions and pensionary benefits to be attached, having due regard to ss. 3 and 4 of the Provident Funds Act, s. 11 of the Pensions Act and s. 60(1), provisos (g) and (k) of C.P.C.?

(2) Is the Union of India entitled to move the Court and request it to investigate the question tl\at the whole or part of the sum in its hands on account of the judgment-debtor as provident fund, compulsory deposits and pensionary benefits and,. therefore, not liable to be attached, or is it out of bounds for a third party to the suit, like the Union of India, even if the step be taken pro bona publico by a relevant public authority, to invoke the jurisdiction of the Court in this behalf?

(3) Is the Rajya Sabha Secretariat staff so totally separated from the Union of India that the latter cannot urge, in these proceedings, the claims belonging to employees of the said Secretariat in the civil court even if the attachment of the sums involved is contrary to law? We are inclined to hold,, without hesitation that on all the points the appellant is bound to succeed.

A bare reading of ss. 3 and 4 of the Provident Funds Act, 1925, read with s. 2(a) of that Act, will convince anyone that attachment of amounts bearing their description are prohibited. It will be a gross violation of legal mandates involving public interest if, in the teeth of such injunction, an attachment should still be ordered by a court.

The finer distinction sought to be made by Shri Rohatgi that because the appellant has already retired, therefore, the provident fund

UNION v. JYOTI CHIT FUND (Krishna Tyer, J.) 767

and allied amounts have already fallen due and have ceased to pos- A sess the complexion of sums 'by way of provident fund under ss. 3 and 4', is fallacious.

On first principles and on precedent, we are clear in our minds that these sums, if they are of the character set up by the Union of India, are beyond the reach of the court's power to attach.

Section 2(a) of the Provident Funds Act has also to be read in this connection to remove possible doubts because this deli- B nitional clause is of wide amplitude.

Moreover, s-60( I), provides

(g) and (kl. leave no doubt on the point o' non-attachability.

The matter is so plain that discussion is uncalled for.

We may state without fear of contradiction that provident fund amounts, pensions and other compulsory deposits covered by the provisions we have referred to, retain their character until they reach the hands of the employee.

The reality of the protection is reduced to illusory formality if we accept the interpretation sought.

We take a contrary view which means that attachment is possible and lawful only after such amounts are recevied by the employee. If doubts may possible be entertained on this question, the decision in Union of l ndia

v. Radha Kissen Agarwala & Anr.( 1) erases them. Indeed, cur case is au aforriori one, on the facts. A bare reading of Radha Kissen makes

th~ proposition fool-proof that so long as the amounts are Provident Fund dues them, till they are actually paid to the government servant who is entitled to it on retirement or otherwise the nature of the dues is not altered. What is more, that case is also authority for the benignant view that the government is a trustee for those sums and has an interest in maintaining the objection in court to attachment. We follow that ruling and over-rule the contention.

lt is possible to take a broad view that cases where public policy is involved and the court has a certain duty to observe statutory prohibitions, a wider concept of locus standi has to be taken.

Any public authority interested in the matter and not behaving partially as an officious busy-body may bring to the notice of the court the illegality of • .. the steps it proposes to take.

When the court's jurisdiction is so invoked, it may be exercised without insisting on some other directly affected party, like the judgment-dehtor in the instant case, appearing to defend himself.

The argument that the Rajya Sabha Secretariat is different from the Union of India is a new gloss which Shri Rohatgi has put upon his contention of locus standi.

He has pressed into service Articles 300 and 98 (2) of the Constitution of India, neither of which is helpful or

(I) (1969) 3 SCR 28.

applicable.

This point has the merit of nov"1ty, little else. quentially, we set aside the decision of the High Court and executing court, but this is not the end of the matter.

Conseof the

We direct the court of the Subordinate Judge to go into the merits of the objection raised by the Union of India as to whether B the entire amount or any portion thereof held by it on behalf of the Rajya Sabha Secretariat staff, so far as the judgment-debtor in this case is concerned, represents provident fund and compulsory deposits or pensionary benefits, excluded from attachability in execution of civil decrees under the provisions already adverted to. If it is feasible to effect service of notice on the judgment-debtor, well and good, C but if it is not, the court cannot absolve itself of the duty to investigate into the merits of the claim or character of the amounts, so long as the U uion of India is ready to mak<;_ good its contention.

The appeal is allowed with costs in this Court.

M.R.

Appeal allowed.

) ,

JYOTI CHIT FUND & FINANCE & ORS

March 22, 1976

Y. V. CHANDRACHUD

V. R. KRISHNA IYER, JJ

Provident Funds Act, 1925

Ss. 3 and 4

Union of India

Ss. 3 and 4

[1969] 3 S.C.R. 28

Rajya Sabha Secretariat

G. L. Sanghi

Girish Chandra

S. P. Nayar

K. B. Rohtagi

M. K. Garg

V. K. Jain

M .. K. Rastogi

KRISHNA IYER

Union of India

Delhi High Court

Union of India

CPC

Sanghi

JYOTI CHIT FUND

Krishna Iyer

Rohatgi

March F 31, 1967

S. Krishnaswamy

Jyoti Chit Fund and Finance P.

Ltd.

12th day of September 1968

January 30, 1969

Rohtagi

ss. 3 and 4

Provident Funds Act

s. 11

s. 60(1)

C.P.C

ss. 3 and 4

Provident Funds Act, 1925

s. 2(a)

Krishna Tyer

ss. 3 and 4

Section 2(a)

Provident Funds Act

Radha Kissen

Articles 300 and 98

Constitution of India

(1969) 3 SCR 28

India


MAHESHWAR PRASAD SRIVASTAVA & ANR.

SURESH SINGH AND ORS.

March 22, 1976

[Y. V. CHANDRACHUD AND V. R. KRISHNA IYER, JJ.]

Drugs (and Cosmetics) Rules 1945--Section 49-Prescribing qualifications of Inspectors-"has at/east one Year"s post graduate training in a laboratory tinder a Govcrn111ent Analyst appointed under the Act or a Clien1ical Exatniner-Meaning of "Post graduate training" occurring in Rule 49(c)-Difference between "post {(raduate training" and post graduate course qualification."

The appellants, all science fJ'aduates, with laboratory training were the successful candidates for twelve vacancies of Drug Inspectors advertised by the Bihar Public Service Commission.

Respondent No. 1, a Pharmacy graduate \Vhose application was rejected on the ground of his unsuitability for being ap pointed to the post challenged the selection by a writ on the ground that that the appellants were unqualifid under Rule 49(c) of the Drugs (arid Cosmetics) Rules 1945 in as m•ch as they did not have a systematic training in a post graduate instituion. The High Court accepted the contention and set aside the selection.

, On appeal by special leave he Court,

l-IELD: (1) The expression "post graduate training" is used in Rule 49(c) in the sense of training received by a person holding a degree in medicine or science and not in the sense that such training ought to be received in or through a post graduate institution imparting instruction or education in the particular discipline. The object of clause ( c) is to ensure that to be eligible for the ROSt

of a Drugs Inspector the person concerned_ must have received training under any E of the authorities mentioned therein after graduation in medicine or science. Pre graduation training is often not as efficacious as post graduate training, for a person holding a higher educational qualifications is in a better position to imbibe the training v.:hich he receives. The expression "post graduate training" is used in order to signify the point of time after which the training ought to be received and not to limit the eligibility to those who have received training after enrol ment in an institution imparting post graduate training. [772D-F]

(ii) Clause (c) of Rule 49 specifies that the training has to be received in a laboratory under a Government Analyst or a Chemical Examiner amongst others. It is difficult to conceive in the present educational set up that a student v:ho has enrolled himself in a post.graduate institution would receive training in a laboratory under a Government Analyst or a Chemical Examiner. A fair indi cation of the true intendment of Rule 49 ( c) is also furnished by the requirement that one year's post graduate training is enough to confer eligibility on a candidate applying for the post of a Drugs Inspector. It could not have been inten <led that it would be enough to make a candidate eligible for the post of a Drugs

In:::.pector if, after graduation in medlcine or science he enrolled himself for a post graduate course and just took one years' training as part of that course.

If enrolment in an institution imparting postgraduate instruction was the object of rule ( c), the minimum qualification prescribed would at least have been the successful completion of the post graduate course.

[772F-H]

Rule 44(a) throws useful light on the interpretation of Rule 49. Post gra duate experience stipulated in Rule 44(a) and "post graduate training" cannot basically and for practical purposes identical qualifications. For both posts, what is required in addition to other qualifications mentioned in the respective rules is post graduate experience or training in the sense, namely that the experience or training has to be gained or received after obtaining graduation.

(773-B~C]

I11 matters involving considerations of questions. regarding adequacy or sufficiency of "training" the Public Service Commission having the benefit of expert opinion, is better situated to judge '.Vhether the particular candidate is qaulified for a particular post and courts should hesitate to interfere with the discretion of the appointin:~ attthority so long as it is exercised bona fide. [773 G-l-l]

[Their Lordships considered that, in view of the conclusion that the appellants were duly qualified it was unnecessary to go into the question of "Locus Standi"

of respondent No. 1 a rejected candidate on the ground of his unsuitability to file the writ petition.l

CIVIL APrELLATE JURISDICTION : Civil Appeals Nos. 602 and 603 of 1975.

Appeal by Special Leave from the Judgment and Order/decree dated the 30-1-1975 of the Patna High Court in C. W. J. C. No 502 c of 1973.

V. S. Desai and S. N. Prasad for Appellants in C.A. 602/75.

Bishan Narain, S. N. Misra, S. S. Jauhar and A. K. Sinha for Appellants in C. A. 603/75.

S. C. Misra and U. S. Prasad for. respondent No. 1 (In both D appeals).

B. P. Singh and U. P. Singh for Respondent No. 2 (In C. A. 603) and Respondents 2 and 3 (In C. A. 602).

The Judgment of the Court was delivered by

CHANDRACHUD, J.-These appeals by special leave arise out of a judgment of the Patna High Court in a writ petition filed by the 1st respondent under articles 226 and 227 of the Constitution challenging the appointment of the appellants as Drugs Inspectors. Civil Appeal No. 602 of 197 5 is filed by original respondent 7 w'hile Civil Appeal 603 of 197 5 is filed by original respondents 4 to 6 to the Writ Petition.

The High Court allowed the writ petition and quashed the appointme,; ts of the appellants on the ground that they did not have the requisite qualification for appointment as Drugs Inspectors.

The Government of Bihar in its Health Department advertised through the Bihar Public Service Commission 12 vacancies of Inspectors of' Drugs.

Twenty candidates applied for the posts out of whom 13, including respondent 1, were Pharmacy Graduates while 7 including the appellans, were Science Graduates.

The Public Service Commission held interviews in April, 1972 and selected the appellants amongst others.

Respondent 1 was rejected on the ground that he was not suitable for the post.

The appointments of the appellants were challenged by respondent 1 on the sole ground that they were not qualified to be appointed as Drugs Inspectors.

Rule 49 of the Drugs (and Cosmetics) Rules, 1945 framed by the Government of India in the Ministry of Health, prescribes qualifications for the post of a Drugs Inspector. It reads as follows :-

"49. Qualifications of Inspectors.-A person who is

appointed an Inspector under the Act shall be a person who-

(a)

(aa)

has a degree in Pharmacy or Pharmaceutical Chemistry or a post-graduate degree in Chemistry with Pharmaceutics as a speical subject of a University recognised for this purpose by the appointing authority or the associateship Diploma of the Institution of Chemists (India) obtained by passing the examination with 'Analysis of Drugs and Pharmaceuticals' as one of the subjects; or

holds the Pharmaceutical Chemists Diploma granted by the Pharmaceutical Society of Great Britain; or

(b) x x x

(c) is a graduate in medicine or science of a University recognised for this purpose by the appointnig authority and has at least one year's post-graduate training in a laboratory under (i) a Government Analyst

appointed under the Act or (ii) a Chemical Exam- D iner, or (iii) a Fellow of the Royal Institute of Chemistry of Great Britain (Branch E), or (iv) the head of an institution specially approved for the purpose by the appoining authority;

Provided that only those inspectors who have not less than three years' experience in the manufacture and testing of substances specified in Schedule C in a laboratory approved for this purpose by the licensing authority, shall be authorised to inspect the manufacture of items mentioned in Schedule C;

Provided further that only Inspectors who are graduates in veterinary science or medicine or general science or pharmacy and have had not Jess than three years' experience in the manufacture or testing of biological products shall be authorised to inspect the manufacture of veterinary biological products;

Provided further that for a period of four years from the date on Which Chapter IV of the Act takes effect in the States, persons whose qualifications, training and experience are regarded by the appointing authority as affording subject to such further training, if any, as may be considered necessary, a reasonable guarantee of adequate knowledge and competence may be appointed as Inspectors and authorised under the preceding proviso :

Provided further that for the purposes of inspection of shops in any specified area any officer of the medical or Public Health Department who is a registered medical practitioner or a graduate in >ciencc may be appointed as an ex officio Inspector.

Appellants do not fall within the class described in clause (a) above but respondent 1 who is a Pharmacy Graduate does.

The fact that respondent 1 is qualified to hold the post of a Drugs Inspector is undisputed and his application was rejected by the Public Service Commission not on the ground that he did not hold the necessary qualification for the post but on the ground that he was unsuitable for being appointed to the post.

The appellants being Science graduates fall within clause (c) of Rule 49 and there can be no doubt that in addition to being Science graduates of a recognised University, they have to possess at least "one year's post-graduate training" in a laboratory under the authorities mentioned in clause ( c). It is not disputed that the appellants and worked for a fairly large number of years in laboratories under one or the other authorities mentioned in clause ( c), but the question for decision is whether they had received any "training" and if so, the training which they had received was "post-graduate training" within the meaning of clause ( c).

The contention of respondent 1 which found favour with the High Court is that "post-graduate training" means systematic training in a post-graduate institution and since the appellants had not received such training through any post-graduate institution, they were not qualified to hold the particular post.

The High Court, in our opinion, erred in accepting this contention.

The expression 'post-graduate training" is used in rule 49 ( c) in the sense of training received by a person holding a degree in medicine or science and not in the sense that such training ought to be received in or through a post-graduate institution imparting instruction or education in the particular discipline.

The object of clause ( c) is to ensure that to be eligible for the post of a Drugs Inspector the person concerned must have received training under any of the authorities mentioned therein after graduation in medicine or science.

Pre-graduation training is often not as efficacious as post-graduate training, for a person holding a higher educatoinal qualification is in a better position to imbibe the training which he receives.

Thus, the expression ''post-graduate training ought to be received and not to limit the elgibility to those who have received training after enrolment in an institution imparting post-graduate training.

Clause ( c) specifies that the training has to he received in a laboratory under a Government Analyst or a Chemical Examiner amongst others.

IL is difficult to conceive in the present educational set-up that a student who has enrolled himself in a post-graduate institution would receive training in a laboratory under a Government Analyst or a Chemical Examiner.

A fair indication of the true intendment of Rule 49(c) is also furnished by the requirement that one year's post-graduate training is enough to confer eligibility on a candidate applying for the post of a Drugs Inspector.

Post-graduate courses normally extend over a period exceeding one year aftergraduation.

It could not have been intended that it would be enough to make a candidate eligible for the post of a Drugs Inspector if, after graduation in medicine or science he enrolled himself for a post-graduate course and just took one year's training as part of that course. If enrolment in an institution imparting post-graduate instrnction .was the object of rule (c), the minimum qualification prescribed would at least have been the successful completion of the post-graduate course.

\ )

- ..,

Rule 44 which prescribed qualifications for the post of Govern- A ment Analyst throws useful light on the interpretation of rule 49.

Rule 44 provides that only those persons can be appointed as Government Analysts who are Graduates in medicine or science or pharmacy or pharmaceutical chemistry and who have had "not less than three years' post-graduate experience" in the analysis of drugs in a laboratory under the control of designated authorities. If a post-graduate course extends over a period of 2 years only, as it normally does, it is B odd that in order that in order to qualify for the post of a Government Analyst a graduate in the specified discipline should be required to spend 3 years as a post-graduate student.

Post-graduate experience stipulated in rule 44( a) and post-graduate training stipualted in rule 49 ( c) connote basically and for practical purposes an identical qualification.

For both posts,, what is required in addition to other qualifications mentioned in fue respective rules is post-graduate expe- C rience or training in the sense described above, namely, that the experience or training has to be gained or received after obtaining graduation.

Maheshwar Prasad Srivastava the appellant in Civil Appeal No. 602 of 1975, passed his B.Sc. examniation in 1960 and worked as a Demonstrator in the Pharmacy School, Patna under the Health Department, Government of Bihar from October, 1961 to December, D 1966.

He was appointed as a Senior Scientific Assistant in the Bihar Drugs Control Laboratory on December 23, 1966 where he worked under Dr. Sheo Bihari Lal, who was the Government Analyst in charge of the Bihar Drugs Control Laboratory. It appears that the Government of Bihar through the Health Department used to send science graduates for training under the Government Analyst.

The certificate issued by Dr. S. B. Lal shows that Srivastava worked under him E and had been "trained" for more than three years in the Bihar Drugs Control Laboratory. A letter written by Dr. Lal to the Deputy Director of the Health Services, Bihar, on December 22, 1970 shows that during his absence on leave, Srivastava was to hold charge of the Bihar Drugs Control Laboratory.

These facts make it impossible to accept the contention that the appellant had not received any sysetmatic training.

In the ultimate analysis, the usefulness of any F training depends as mnch on the ability and willingness of the student or trainee as on the academic specifications of the training itself. The appellants in Civil Appeal No. 603 of 1975 had worked as Demonstrators in Pharmacy School, Patna for a large number of years and in regard to them also it is difficult to accept the contention that the training which, they had received was not systematic.

Dr. J. K. P.

Sinha who was then ihe Deputy Director of Health Services, Bihar G and who assisted the Public Service Commission as a Technical Expert when the interviews for the particular posts were held, obviously took the view that the appellants who were science graduates satisfied the further test of post-graduate training for not less than one year.

In matters involving consideration of questions regarding adeqnacy or sufficiency of "training", the Public Service Commission, having the benefit of expert opinion, is better situated to judge whether the parti- H cnlar candidate is qualified for a particular post and courts should hesitated to interfere with the direction of the appointing authority, so long as it is exercised bona fide.

A Learned counsel for the appellant in Civil Appeal No. 602 of 1975 contended that resopndent No. 1 had no locus standi to challenge the appointment of the appellant since he himself, as , disclosed \ by the affidavit filed on behalf of the Public Service Commission in the High Court, was rejected on the ground that he "was not found suitable for appointment to the post" of Drugs Inspector.

In view of our conclusion that the appellants were duly qualified for the post, B it is unnecessary to go into this question.

For these reasons we allow the appeals, set aside the judgment of the High Court and hold that the appointments of the appellants as Drugs Inspectors were lawful and valid.

The State of Bihar will pay the costs of these appeals to the appellants.

SR Appeal allowed

MAHESHWAR PRASAD SRIVASTAVA & ANR

SURESH SINGH AND ORS

March 22, 1976

Y. V. CHANDRACHUD

V. R. KRISHNA IYER, JJ.

Section 49

V. S. Desai

S. N. Prasad

Bishan Narain

S. N. Misra

S. S. Jauhar

A. K. Sinha

S. C. Misra

U. S. Prasad

B. P. Singh

U. P. Singh

CHANDRACHUD

articles 226 and 227

Government of Bihar

Pharmaceutical Society of Great Britain

appointed under the Act

Schedule C

Schedule C

Maheshwar Prasad Srivastava

Bihar Drugs Control Laboratory

December 23, 1966

Sheo Bihari Lal

S. B. Lal

Srivastava

Lal

Bihar

December 22, 1970

J. K. P.

Sinha

Public Service Commission

State of Bihar


SRI VIJA YLAKSHMI RICE MILLS, NEW CONTRACTORS A

COMPANY ETC.

STATE OF ANDHRA PRADESH

March 22, 1976

[A. N. RAY, C.J., M. H. BEG AND JASWANT SINGH, JJ.]

Rici' (Andhra Pradesh) Price Control (3rd A111e11d111e111) Order 1964, clause 2-Whether refrospecti\ity of substitution inferred i11 (lbsence of express pral'ision.

Under s. 3 of the Essential Commodities Act 1955, the respondent passed the Andhra Pradesh Procurement (Levy) Order 1959, requiring every miller and

Uealer of rice (including the appellants) to sell to the respondent certain C specified varieties and quantities of rice at controlled price on requisition being served on him.

Clause 2(a) of the Order defined "controlled price" ns the maximum price fixed by the Central Government from time to time under s. 3 of the Act for the sale of rice.

On December 19, 1963, the Central Government passed the Rice (Andhra Pradesh) Price Control Order 1963, fixing the maximum price of akkulu rice at Rs. 46.89 per q;.1inta1.

The appellants sold several Quantities of akkulu rice to the respondent from January 26, 1964, to February 21, 1964, and were paid at the controlled rate.

On March 23, 1964, the Central Government issued the Rice (Andhra Pradesh) Price Control. (3rd D amendment) Order 1964, and substituted Rs. 52.28 for Rs. 46.89 3.s the maximum price per quintal, of akkulu rice.

The appellant's claim for the -benefit of the enhanced price for the earlier _sales was rejected by the Government of Andhra Pradesh. The appellants succeed_ed before the Subordinate Judge, Machilipatnam, in their suits for recovery of the difference between the two controlled prices but lost before the High Court, in appeals preferred by the State of Andhra Pradesh. It was contended before this Court that the prices fixed by the Government are for the entire season, and the appellants are entitled payment E at the amended rates, regardless of the dates when the supplies were made, and that the word .. substitute" infers retrospective e.ffect.

Dismissing the appeals, the Court;

HELD : Jn the absence of express words or appropriate language from \Vhich retrospectivity may be inferred. a notification takes effect from the date it is issued and not from any prior date.

Statutes should not be construed so as to create new disabilities or obligations or impose new duties in respect of tran- F sections which were complete at the time the Amending Act came into force.

[778B--C}

(2) The property in the goods having passed to the Government of Andhra Pradesh on the dates the supplies were made, the appellants had to be paid only at the controlled prices obtaining on the dates the sales were effected and not at the increased price which came into operation subsequently. [778-0]

K.· Ap.payya Shanbhague & Co. v. The State of Mysore and Anr. (Unreported decision S.C. dated 20-4-19~2); The Union of lndia, rpresented by !he G Secretary, Ministry of Food & ARnculture, Gov:rnn1er1t of lndta, New Dellu v.

Kan11ri Dan1odariah & Co. Alluri Venkatanaras1ah (1968} 1 An. W.R. 81 and Mani (; opal Mitra v. The State of Bihar (1969) 2 S.C.R. 411, followed.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 805, 806 and 972~977 of 1~73

From the judgment and decree dated the 8th June 1971 and 23rd H November 1971 respectively of the IJ:igh Court of Andhra Pradesh

at Hyderabad in Appeal Suit Nos. 766 of 1968, 18 of 1969, 779,

780, 792 to 785 of 1968 respectively .

F. S. Nariman, J. V. K. Gurunathan, T. V. Narasimhan Murty and A. Subha Rao, for the appellants.

P. Ram Reddy and P. P. Rao, for the respondents.

The Judgment of the Court was delivered by

JASWANT SINGH, J.

This batch of Appeals Nos. 805, 806 and 972 to 977 of 1973 by certificate from the judf!IIlents and decrees of the High Court of Andhra Pradesh in Appeals Nos. 766 ot 1968, 18 of 1969, 779 of 1968, 780 of 1968, 782 of 1968 783 of 1971 ~84 of 1968 and 785 of 1968 raise a simple but an.futeresting ques~ hon namely, whether for the supplies of rice made by the appellants m January and February, 1964, they are to be paid price according to t!1e rate specified m the. Rice (Andhra Pradesl!) Price Control

(Third Amendme.nt) Order, 1964 dated March 23, 1964 or according to the rate specified m the Rice (Andhra Pradesh) Price Control <?rder as it stood in 1963.

The question arises in the following circumstances :

The appellants are millers and carry on the business of paddy and rice in the State of Andhra Pradesh.

On July 31, 1959, the Governor of Andhra Pradesh in exercise of the powers conferred on him by section 3 of the Essential Commodities Ac\, 19 5 5 (Central Act X of 19 5 5) hereinafter referred to as 'the Act' made an order called the Andhra Pradesh Rice Procurement (Levy) Order, 1959. clause 3 of the order required every dealer and every miller to sell to the State Government on requisition served on him by the requisitioning authority at the controlled price (a) 40 per cent of the quantity of rice held in stock by him at the commencement of the order and

(b) 40 per cent of the total quantity of rice purchased by him every day beginning with the commencement of the order.

Clause 2(a) of the order defined "controlled price" as meaning the maximum price fixed under section 3 of the Act for the sale of rice by the Central Government from time to time (emphasis supplied).

On December 19, 1963, the Central Government in exercise of the pov.:er.conferred on it by section 3 of the Act made an orer called the Rice (nd?ra Pradesh) Price Control Order, 1963, which extended to the distncts of Krishna, West Godavari, East Godavari, GUJ1tur, Nizarnabad, Warangal and Nellore in the State of Andhra Pradesh.

Clause (2) of the order provided that the maximum prices at which the varieties of rice specified in column. \ 1) of the Schedule f? tha'. Order were -to be s?ld in wholesale quantities would be as specified m the correspondmg entries in column (2) of the said Schedule.

The said Schedule inter alia provided that Akkulu rice would be sold at Rs. 46.89 , per quintal.

Jn compliance with the requisitions served on them by the requisitioning authority of the State of Andhra Pradesh, the appellants sold various quantities of that variety of rice to the Government 'of that State from January 26, 1964, to February 21, 1964, and were paid at the aforesaid rate of Rs. 46.89 per quintal. By meansof the Rice (Andhra Pradesh) Price Control (Second Amendment) .Qrder, 1964. dated March 20, 1964, the Central Government amended. sub-clause

(1) of clause 2 of the Rice (Andhra Pradesh) Price Cqntrol Order, 1963 and ordained that in th¢. said. sub-clause for the )Voids "the Schedule',· the words and figures. schedule I shall be s11b§tit].i!d. On

_:; .. :,,

\ \.

~ I

SRl VIJAYLAKSHMI RICE MILLS v. A.P. STATE (Jaswant Singh, 1.) 777

March 23, 1964, the Central Government issued the Rice (Andhra Pradesh) Price Control (Third Amendment) Order, 1964.

Clause 2 of the Order ran thus :-

2. In the Rice (Andhra Pradesh) Price Control Order, 1963, in Schedule I, 10r the varieties of rice and che maximum prices thereafter, the following shall be substituted namely :-

Varieties or rice

1. Districts other than Nellore

Akulu

Maximum price per quintal.

52-25

On the issue of this order, the appellants made representations to the Government of Andhra Pradesh requesting that for the aforesaid supplies of Akkulu rice made by them from January 26 to February

~ 21, 1964, they should also be paid at the enhanced price of Rs. 52.25 per qumtal.

As the representations made by them did not evoke a favourable response, they filed suits in the Court of the Subordinate Judge, Machilipatnam for recovery of the difference between the controlled prices specified in the Rice (Andhra Pradesh) Price Control Order, 1963, dated December 19, 1963 and Rice (Andhra Pradesh) , Price Control (Third Amendment) Order, 1964.

The suits filed by them were decreed by that Court. Aggrieved by these judgments and decrees, the State of Andhra Pradesh preferred appeals to the High Court at Hyderabad which were allowed on the ground that as the supplies ot rice were made by the appellants before the Rice (Andhra Pradesh) Price Control (Third Amendment) Order, 1964, they were entitled only to the price specified in the Schedule to the Rice ( Anhdra Pradesh) Price Control Order, 1963. Dissatisfied with these judgments and decrees, the appellants applied for certificate under Article 133(1) (a) of the Constitution which was granted to them.

The sole question for determination in these appeals, as already indicated, is whether the appellants were to be paid price for the supplies to rice made by them from January 26, 1964, to February 21, 1964, at the rate of Rs. 46.89 per quintal-the rate specified in the Rice (Andhra Pradesh) Price Control Order, 1963, dated December

19, 1963 or at the enhanced rate of Rs. 52.25 per quintal as fixed by the Rice (Andhra Pradesh) Price Control (Third Amendment) Order, G 1964 dated March 23, 1964.

Mr. Narirnan appearing on behalf of the appellants has laid great emphasis on the word "substituted" occurring in clnase 2 of the Rice (Andhra Pradesh) Price Control (Third Amendment) Order. 1964 and has nrged that the claim of the appellants carrot be validity ignored.

Elaborating his submission. counsel has contended that as the nrices fixed by the Government are meant for the entire season, the appellants have to be paid at the controlled price as fixed vide the Rice ( Andhra Pradesh) Price Control (Third Amendment) Order, 1964, regardless

17-608SCI/76

of the dates on which the supplies were made.

We cannot accede to this contention. It is no doubt true that the literal meaning of the word "substitute" is "to replace' but the question before us is trom which date the substitution or replacement of the new Schedule took effect. There is no deeming clause or some such provision in the Rice (Andhra Pradesh) Price Control (Third Amednment) Order, 1964 to indicate that it was intended to have a retrospective effect.

It is a well recognized rule of interpreation that in the absence of express words or appropriate language from which retrospectivity may be inferred, a notification takes effect from the date it is issued and not from any prior date.

The principle is also well settled that statutes should not be construed so as to create new disability or obligations or impose new duties in respect of transactions which were complete at the time the Amending Act came into force. (See Mani Gopa/ Mitra v. The State of Bihar (1).

The aforesaid sales in the instant cases having been made by the appellants before the coming into force of the Rice (Andhra Pradesh) Pnce Control (Third Amendment) Order, 1964, and the property in the goods having passed to the Government of Andhra Pradesh on the dates the supplies were made, the appellants had to be paid only at the controlled price obtaining on the dates the sales were effected and not at the increased price which came into operation subsequently.

This view is in consonance with the provisions of section 3 of the Act and the Andhra Pradesh Rice Procurement (Levy) Order, 1959 which clearly indicate that the price payable to the dealers and Millers for the supplies of rice made by them is the control price obtaining on the date when the sale is made. Similar view is taken in the unreported decision dated Apr;! 20, 1962 of this Court in K. Appayya Shambhague and Co. v. The State of Mysore & Anr.(') where it was laid down that the order made under section 3 (2) (f) of the Act are offers of sale which the person on whom a requisition is served has no option but to accept and that the price that has to be paid is the controlled price fixed by the Government under section 3(2) (c) of the Act on the date when he goods are ascertained or when the property in the goods passes to the buyer.

This decision was followed by the High Court of Andhra Pradesh in The Union of lndia, represented by the Secretary, Ministry of Food and Aericulture.

Government of lndia, New Delhi v. Kanuri Damodariah & Co. Alluri Venkatanarasiah

("J where it was held that an order nnder section 3(2) (f) am01mts to an agreement for sale and the price oavable for the quantities of rice supplied is a price payable in accordance with the price notified under the provisions of section 3 (3) of the Act.

In the instant cases, the sale having been made before the coming into force of the Rice I Andhra Pradesh) Pr're r'nntrol (Third Amendment) Order, 1964, the appellants cannot iustifiablv claim the benefit of the increased price specified in the Rice (Andhra Pradesh) Price Control (Third Amednment) Order, 1964.

The acceptance of the

(1) [1969! 2 S.C.R. 411.

(2) Unreported case(S.C.) dt. 20-4-1962. (J) [1968J 1 An. W.R. 81.

...

SHI VIJAYLAKSHMI RICE MILLS v. A.P. SIAIE (Jaswant Singh, J.)779

contention raised on behalf of the appellants will lead to i:; rave con- A sequences. It will have the effect of reopening the transactions past

I and closed and would thus give rise to lots of difficulties.

,.i Mr. Nariman has, in support of his contention, relied on the follow- ; ing passage occurring at p. 394 in Craies on Statute Law (Sixth Edition) :-

.)'

"Explanatory and declaratory Acts retrospective

Where a Statute is passed for the purpose of supplying an obvious omission in a former statute, or, as Parke J. (afterwards Baron Parke) said in R. V. Dursley (1832) 3 B. & Ad. 465, 469 "to 'explain a former statute," the subsequent statute has relation back to the time when the prior Act was passed.

Thus in Att.-Gen v. Poughtt (1816) 2 Price 381, 392, it appeared that by a Customs Act of 1873 (53 Geo. 3, c.33) a duty was imposed upon hides of 9s. 4d., but the Act omitted to state that it was to be 9s. 4d. per cwt., and to remedy this omission another Customs Act 53 Geo. c. 105) was passed later in the same year. Between the passing of these two Acts some hides were exported, and it was contended that they were not liable to pay the duty 9s. 4d. per cwt., but Thomson C. B., in giving judgment for the Attorney-General, said : "The duty in this instant was in fact imposed by the first Act, but the gross mistaks of the omission of the weight for which the sum expressed was to have been payable occasioned the amendment made by the subsequent Act. but that had reference to the former statute as soon as it pas, ed, and they must be taken together as if they were one and the same Act."

Where an Act is in its nature declaratory, the presumption against construing it retrospectively is inapplicable.'

This passage has, in our opinion. no bearing on the question before us in view of the fact that the Rice (Andhra Pradesh) Price Control (Third Amendment) Order, 1964 is neither explanatory nor declaratory, as sought to be interpreted by the counsel.

The contention of Mr. Nariman that the controlled prices fixed by the Central Government for sale of rice are seasonal prices not being based upon any cogent material cannot also be accepted.

The High Court was, therefore, right in allowing the aforesaid appeals preferred by the respondent and reversing the .iudgment and decrees passed by the Subordinate Judge, Machilipatnam.

Jn the result, the appeal, fail and are dismissed with cost, limited to one set.

M.R.

Appeals dismissed .

SRI VIJAYLAKSHMI RICE MILLS, NEW CONTRACTORS COMPANY, ETC

STATE OF ANDHRA PRADESH

A. N. RAY, C.J.

M. H. BEG

JASWANT SINGH, JJ.

clause 2

s. 3

Essential Commodities Act 1955

Clause 2(a)

Central Government

s. 3

December 19, 1963

January 26, 1964

February 21, 1964

March 23, 1964

Government of Andhra Pradesh

The appellant's claim for the -benefit of the enhanced price for the earlier sales was rejected by the Government of Andhra Pradesh.

Subordinate Judge, Machilipatnam

The appellants succeeded before the Subordinate Judge, Machilipatnam, in their suits for recovery of the difference between the two controlled prices but lost before the High Court, in appeals preferred by the State of Andhra Pradesh.

State of Andhra Pradesh

Union of lndia

(1969) 2 S.C.R. 411

CIVIL APPELLATE JURISDICTION

F. S. Nariman

V. K. Gurunathan

T. V. Narasimhan Murty

A. Subha Rao

P. Ram Reddy

P. P. Rao

Andhra Pradesh

July 31, 1959

section 3

clause 3

Clause 2(a)

section 3

section 3

Krishna

Godavari

Nizarnabad

Warangal

Nellore

clause 2

Clause 2

Schedule I

Nellore

Akulu

Government of Andhra Pradesh

High Court at Hyderabad

Article 133(1)

Narirnan

section 3

Apr;! 20, 1962

section 3

section 3(2)

High Court of Andhra Pradesh

Union of lndia

Ministry of Food and Aericulture

section 3(2)

section 3

Nariman

Parke

Customs Act

Customs Act

Thomson C. B.


• 780

A. DAMODARAN & ANR. v.

STATE OF KERALA & ORS.

March 23, 1976

[A. N. RAY, C.J., M. H. BEG AND JASWANT SINGH, JJ.]

Kerala Abkari Act (1 of 1967), Ss. 18A and 28-'Grantee', who is-Right of Government to recover dues from persons who were permitted to carry on business of selling liquor even though no agreements were executed or licences granted.

Section 18A(l) of the Kerala Abkari Act, 1967, shows that the exclusive or other privilege of selling liquor by retail may be granted on payment of rental in consideration of the grant. The amount af. rental may be settled by auction, ne2otiation or by any other method. Section 28 provides that all amounts due to the Government, by any grantee of a privilege may be recovered from the person primarily liable to pay as if they were arrears of land revenue.

The appellants bid at auction sales of some toddy shops. The conditions of the sales, notified in pursuance, of the statutory provisions, were : (a) It was incumbent upon the bidder to pay imm-ediately 10% of the amount due; (b) The successful bidder had to deposit 30% of the amount payable, on demand by the Assistant Commissioner, and to execute agreeme!lts before getting the necessary licences; and (c) If the contract could not be executed, the whole amount was to be forfeited and the shop itself was to be resold. The appellants deposited the necessary amounts on demand and were allowed to start business even before agreements were executed or licences were issued. But the appellants failed to pay the balance due to the State. The amounts were sought to be recovered under s. 28, and the proceedings were challenged, but the High Court held against the appellants.

In appeal to this Court, the appellants contended that as no agreement was executed between the appellants and the Government in the manner prescribed by Art. 299 of the Constitution, the appellants had not become the 'grantees' of any privilege and hence were not liable to pay the amounts sought to be recovered.

Dismissing the appeal, F HELD : The Government had to perform its duty of granting licences as soon as the appellants fulfilled the conditions by paying up the remainder of the amounts due. In the present case, Government had performed its part by allowing the appellants to start selling liquor even before execution of the agreements and the grant of licences. The appellants, therefore, became liable and bound to perform their corresponding obligations.

This reciprocity of obligations, quite apart from its basis in agreement, had thu~ acquired an operative force resting on statutory sanction and equity. [784G-785Bl

G ( 1) It is not a condition precedent to recovery of an amount due and

recoverable under the Act that it should be due under a formally drawn up and executed contract. Under the notification. in the event of the non-execution of a contract, even if due to the unwillingness or inability of a bidder_ to pay, the whole amount due could be forfeited. [782C; 783E-F]

2(a) The acquisition of the status of a grantee for the purpose of s. 18A, does not depend on the actual receipt of a licence. Section 18A(2) lays down that no grantee of any privilege under sub-s. (1) shall exercise it until he has received a licence. This provision contemplates the statutory status of a 'grantee' even before the successful bidder becomes entitled, as of right, to exercise the privileges of a grantee on receipt of a licence Even before he receives his licence he is described as a grantee. [783F-G, H-784AJ

"'

' !' /

(b) The word 'grantee' used ins. 28 carries this wider connotation of persons A who have been permitted by the excise authorities, in recognition of their rights to receive and in anticipation of the receipt of licences, to exercise the privileges of grantees, and not necessarily only those who have executed the written contracts nd received licences. f784A-C1

Madhavan v. Assistant Excise Conunissioner, Palghat l.L.R. [1969] 2 Kerala 71, approved.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1464 of 1971.

From the Judgment and Order dated 18-3-71 of the Kerala High Court in Writ Appeal No. 126 of 1971.

K. K. Sudhakaran . and N. Sudhakaran and P. K. Pillai for the Appellants.

K. T. Harindranath and K. M. K. Nair for Respondent.

The Judgment of the Court was delivered by

BEG, J.-The appellants before us, by certification of the case, had filed a petition to quash revenue recovery proceedings started against them for realisation of the remainder of the amounts due on account of their bids at auction sales of some toddy shops for the period 1st April, 1967, to 31st March, 1969, by the Government of Kerala. The amounts at which the shops were knocked down were :

l. Shop No. 1 = 84,000/-

2. Shop No. 4 46,500 /-

3. Shop No. 8 = 56,100/-

4. Shop No. 11 1,50,000/-.

The notified conditions of the auction sales made it incumbent up0n the bidder to pay immediately 10% of the amount due and to provide personal security for the rest. There was no assurance or guarantee given there that prohibition will not be removed in future by the Government in any area in the State or about any other matter of future policy of the Government relating to intoxicants. According to notified conditions, the successful bidders had to deposit 30% of the total amount payable on demand by the Assistant Commissioner and also to execute agreements before getting the necessary licences. The petitioners had deposited the necessary amounts on demand.

They were also allowed to start the business of running their toddy shops .even before the licences were issued in their favour.

The petitioners' case is that, at the time of bidding, there was an understanding that the respondent State will not remove prohibition so that they expected adequate profits. As observed above, there is nothing in the notified conditions to indicate this. It appears that in April, 1967, the respondent State announced removal of prohibition from lst May. 1967. The appellants allege that they suffered heavy losses due to this policy of the State and were unable to make the remainder of the payments which were sought to be recovered under section 28 of the Abkari Act (hereinafter referred to as 'the Act'). It is difficult to see what the removal of prohibition had to do with alleged

losses to the appellants.

Abandonment of Prohibition either totally or partially, should, ordinarily, not diminish sales of liquor. One should expect such a development to increase sales of liquor.

The appellants contend that, as no agreement was executed between them and the Govt. in the manner prescribed by Article 299 of the Constitution, they are not liable to pay the amounts sought to be recovered. This is their main contention.

A learned Judge of the Kerala High Court who heard the petition heki that the notification in persuance of which the shops in question were auctioned provided that, if the contract could not be executed, the whole amount was to be forfeited and the shop itself was to be res0ld. Thus, non-execution of the contract due to the unwillingness or inability of a bidder to pay was not a contingency outside the notification for auction the validity of whidh is not challenged.

The notification did not lay down that, in that case, the payment of the remainder will be remitted.

On the other hand, the condition was that the whole amount due could, in such an event, be "forfeited".

The Kerala High Court held that, despite the absence of a contract executed in accordance with the provisions of Article 299 of the Constitution, the amounts due could be recovered under Section 28 of the Act which reads as follows :

"28 Recovery of duties.-All duties, taxes, fines and fees payable to the Government direct under any of the foregoing provisions of this Act or of any licence or permit issued under it. and all amounts due to the Government by any grantee of a privilege or by any farmer under this Act or by any person on account of any contract relating to the Abkari Revenue may be recovered from the person primarily liable 10 pay the same or from his surety (if any) as if they were arrears of Land Revenue, and, in case of default made by a grantee of a privilege or by a farmer the Commissioner may take grant or farm under management at the risk of the defaulter or may declare the grant or farm forfeited, and re-sell it at the risk and loss of the defaulter. When a grant or farm is under management under this section, the Commissioner may recover any moneys due to the defaulter by any lessee or assignee as if they were arrears of Land Revenue."

The appellants submit that they had not become "grantee" of any privilege withont the execution of contracts complying with the requiremeals of Article 299 of the Constitution. The learned Judge of the Kerala Hioh Court relied on Madhavan v. Assista.nt Excise Commissioner. Prilghat( 1 ), affirmed by a Division Broch in Dllrnnrloran v.

State of Kerala( 2). It appears that, although the Division Bench did not specifically consider whether a bidder at an auction of the kind before us was the "grantee" of a privilege within the meaning of Sectio;, 26 of the Act, yet, it held that the liability to satisfv the dues arising out of a bid was enforceable under Section 28 of the Act quite

·-- ~------- (!) T.L. R. [1969] (2) Kerala 71.

(2) (1969) Kera la Law Times 587.

' -,)

apart from any contractual liability. Reference was also made, in this connection, to the decision of this Court in Union of India v. A. L.

Ralia Ram ('), for contending that the absence of a formal contract is not fatal in all cases so as to make the whole transaction null and void ab initio.

Statutory duties and liabilities may be enforced in accordance with statutory provisions.

Equitable obligations may also arise and be enforced by decrees of Courts quite apart from the requirements of article 299 of the Constitution.

Mulamchand v. State of Madhya Pradesh(') affords an instance where on " claim for compensation or restitution under Section 70 of the Contract Act, this Court relied upon the principle sMed. in Nelson v. Harbolt( 3 ) as follows (at p.

222) :

"It is no longer appropriate to draw a distinction between law and equity. Principles have now to be stated in the light of their combined effect.

Nor is it necessary to canvass the niceties of the old forms of action.

Remedies now depend on the substance of the right, not on whether they can be fitted into a particular framework.

The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases .where the Court orders restitution if the justice of the case so requires".

In the case before us, we are concerned really with the legality of proceedings under Section 28 quoted above of the Act. It is evident that these proceedings can be taken in respect of "all amounts due to the Government by any grantee of a privilege or by any farmer under this Act or by any person on account of any contract relating to the Abkari Revenue". It is clear that dues may also be "recovered from the person primarily liable to pay the same or from his surety (if any)". It is not a condition precedent to recovery of an amount due and recoverable that it should be due under a formally drawn up and execute<i contract.

Section 18 of the Act shows that the exclusive or other privilege of selling liquor by retail may be granted on payment of rental in in consideration of the grant.

The appellants made all the initial payments of rent.

We do not think that acquisition of the status of a grantee, for the purposes of Section 18A, need await the actual receipt of a licence. The conditions of the grant are to he laid down by the Government.

The amount of rental "may be settled by auction. negotiation or by any other method as may be determined by by the Government, from time to time". The amounts due "may be collected to the exclusion of, or in addition to, the duty or t3x leviable under Sections 17 and 18.

Section 18A(2) lays down that "no grantee of any privilege made sub-section (1) shall exercise the same until he has received a licence

in that behalf from the Commissioner".

It will be seen t1iot this nro- H vision contemplates the statutory status of a "grantee" even before ------------ -

(1) A.l.R. [1963] S.C. 1685.

(2) [1968] J S.C.R. 214.

(3) [1948] 1 K.B. 30 .

he becomes entitled, as of right, to exercise the privileges of a grantee on the receipt of a licence. What is noticeable is that even before he receives his licence he is described as a "grantee". The successful bidders, in tl1e case before us, had been permitted by the excise authorities .. in recognition of their rights to receive and in anticipation of receipt of licences, to exercise the privileges of grantees.

They were thus treated as grantees in anticipation of execution of contracts and grants of licences. Grantees nnder Section 29 of the Act are those who have received the privilege and not necessarily only the who have received the written contracts and licences.

The word "grantee" used there seems to us to carry this wider connotation with it.

In Madhavan's case (supra) K. K. Mathew, J., repelled the contention that the execution of an agreement in accordance with the provisions of Article 299 of the Constitution was a condition precedent to the creation of a liability to be proceeded against under Section 28 of the Act for recovery of the balance of the rentals due.

He said (at p. 94):

"It was contended on behalf of the petitioners in some of these cases that no agreements were executed by them, and therefore, the Government are not entitled to recover any amount by way of rental.

Reliance was placed upon the decisions of the Supreme Court in H. P. Chowdhry v. State of M.P. (AIR 1967 SC 203) and Mulamchand v. State of M.P. (1969(1I)

S.C.W.R. 397), for the proposition that unless there is an agreement executed in accordance with the provisions of Article 299 of the Constitution, the petitioners in the case where no agreements have been executed, would not be liable to pay rental.

The argument was that the liability to pay rental arises only out of the agreement, and if there is no agreement, then there is no liability to be enforced .• As I have indicated the liability to pay the rental arises not only by virtue of the agreement but also by the provisions of section 28 of the Act. The decision of the Supreme Court in H. P.

Chowdhry v. State of M.P. would make it clear that if there are provisions in the Act, the liability to pay the rental can be enforced.

I think that even if no agreement has been executed, there was the liability under section 28 of the Act, and that the liability could be enforced under the provisions of the Revenue Recovery Act. (See Sections 6 and 62 of the T.C.Act) ''.

The appellants became entitled to get licences from the Government which had to perform its duty to execute written agreements and grant licences as soon as the appellants fulfilled required conditions by paying up the remainder of the amounts due. The Government had performed its part of the bargain and even allowed the appellants to start selling liquor.

The appellants also became liable and bound to perform their corresponding obligations under the

conditions of the auctions imposed in pursuance of statutory provi- A sions.

This reciprocity of obligations, quite apart from its basis in agreement, had thus acquired an operative force resting on statutory sanction and equity.

Consequently, we affirm the view of the Kerala High Court and dismiss this appeal.

Parties will bear their own costs throughout.

V.P.S.

Appeal dismissed.

780

A. DAMODARAN & ANR

STATE OF KERALA & ORS

March 23, 1976

A. N. RAY, C.J.

M. H. BEG

JASWANT SINGH, JJ.

Kerala Abkari Act

Ss. 18A and 28

Section 18A(l)

Kerala Abkari Act, 1967

Section 28

s. 28

Art. 299

s. 18A

Section 18A(2)

CIVIL APPELLATE JURISDICTION

N. Sudhakaran

P. K. Pillai

K. T. Harindranath

K. M. K. Nair

BEG

31st March, 1969

Government of Kerala

section 28

Article 299

Kerala High Court

Article 299

Section 28

Article 299

Kerala Hioh Court

Section 28

article 299

Section 70

Section 28

Section 18

Section 18A

Sections 17 and 18

Section 18A(2)

Section 29

Madhavan

K. K. Mathew

Article 299

Section 28

Supreme Court

AIR 1967 SC 203

Article 299

section 28

section 28

Revenue Recovery Act

Sections 6 and 62


CHHAGANBHAI NORSH!NBHAI

SONI CHANDUBHAI GORDHANBHAI & ORS.

March 23, 1976

[A. N. RAY, C.J., M. H. "BEG AND JASWANT SINGH, JJ.J

C onternpt of Courts A ct, 1971, s. 19 ( 1) (b )-Order of High Court obtained by giving express undertakings-Deliberate breach-Plea of 'consent order'- Misconducl amountin; z to contempt of court.

The defendant-aµpellant obtained an order of the High Court by giving an express undertaking to vacate the suit-premises within a month and a half of receiving a notice from the plaintiff-respondents that they required the same.

The undertakings were deliberately flouted, and the appellant did not tender an apology at any stage. The High Court convicted him under the contempt of courts Act, 1971, s. 19(1)(b) for misconduct amounting to contempt. The appellant contended before this court that there had been no breach of any undertaking, and that he had only entered into an agreement to \vhich an order of the court had been appended.

Dismissing the appeal, the Court, HELO : This is a case of a perverse and deliberate flouting of undertakings given by a litigant who, evidently had no intention tO abide by them. The undertakings seem to have been taken very lightly by him as mere cloaks for obtaining an order which would not have been passed but for the undertakings.

[787F-GJ

(2) The case before us being a case of a deliberate violation of an undertaking to the court, the effect was the same as that of breach of an injunction.

[788-CJ Halsbury's Laws of England 4th Edn. Vol. 9 page 42 (para 71) and page E 44 (para 75) Dashwood v. Dashwood (1927) (71 Sol. Jo 911) referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 88 of 1975.

From the Judgment and Order dated the 10-1-75 of the Gujarat High Court iu N.C.A. 576/74 in C.R.A. No. 1020 of 1971.

M. F. Thakkar and S. S. Khanduja for the Appellant.

M. C. Shah and M. V. Goswami for Respondents.

The Judgment of the Court was delivered by

BEG, J .-This is an appeal under Section 19 (I) (b) of the contempt of Conrts' Act, 1971. The defendant-appellant was convicted by the Division Bench of the High Court of Gujarat for having deliberately violated an order secured from the High Court on 22 J anuary, 1973, upon undertakings given to it.

The very first term of the order is :

"The defendant gives solemn undertaking to this Hon'blc High Court that he will vacate suit premises by banding over the key of the premises to the Court of the Civil Judge, Junior Division, Anand, in pursuance of the decree within one and a half months after receipt of the notice from the Plaintiffs that the plaintiff Dr. L C. Boni has returned from abroad and intends to start medical practice in the suit premises".

CHHAGANBHAI v. SONI CHANDUBHAI (Beg,' J.) 7 87

He also undertook to clear the arrears of mesne profits and to continue to pay them regularly as and when due.

Furthermore, he undertook not to part with possession in favour of any person other than the landlord decree-holder until he received the notice contemplated ' by the first condition. It is not disputed that the appellant received -..( that notice on 10 October, 1974. There is nothing in the conditions , of the undertaking to imply that it was merely a consent order passed upon an agreement between the parties to which the order of the Court had been superadded.

The order incorporated express under- ., takings to the Court although these may have induced the plaintiff to agree to the passing of the order in the form in which it was passed instead of pressing for an order of dismissal of the revision application before the High Court after which he could have executed his decree immediately. This feature, in itself, could not convert the order actually passed upon the undertakings given into a mere consent order.

It was clearly a case of express undertakings to the court incorporated in the order.

The order passed on 22 January, 1973, ended as follows :

"In view of the respective undertakings given by the parties to this proceeding which undertakings are on record. the petitioner does not wish to proceed with this CRA and does not, therefore survive.

The application is dismissed.

No order as to costs in this circumstance of the case."

The defendant-appellant not only did not abide by the undertakings given to the High Court but his Counsel took up the impossible position that it was a mere agreement between the parties to which an order of the Court had been appended. On this flimsy and unsustainable ground, an argument put forward before us was thal there was no breach of any undertaking. The High Court found that express undertakings had been violated.

We have no hesitation whatsoever in holding that the High Court's finding is correct upon the recorded admissions on behalf of the defendant-appellant. It is true that the defendant appellant surrendered possession after the initiation of contempt proceedings in 1974.

But, that made no difference to the initial wrong committed.

Another feature of the case is that the appellant gave no sign of even regret at any stage not to mention an apology of any kind. Even in this Court, learned Counsel for the appellant took up the impossible position that there had been no breach of any undertaking. We agree with the High Court that this is a case of a perverse and deliberate flouting of undertakings given by a litigant who, evidently, had no intention to abide by them.

The undertakings seemed to have been taken very lightly by him as mere cloaks for obtaining an order which would not have been passed but for the undertakings. The High Court rightly observed that it had no option except to convict the appellant and to sentence him to three months imprisonment in civil jail.

Before parting with this case we may refer to Halsbury's Laws of England-Fourth Edn. ol. 9, page 42 (paragraph 71) where, after citing Dashwood v. Dashwood(1) for the proposition that, when a

(I) (!927) (71 sol. Jo 911)

SUPREME COURT REPORTS

[1976] 3 S.C.R.

party fails to comply mereJywith the terms of a consent order, ''Lhe remedy of the injured party is to apply, not for committal, but for an order for specific performance or an in junction, and then to base pro-" ceedings for contempt on any subsequent breach", the observation is \ made : "Where, however, there is an express direction or undertaking

 L in the body of the order, a breach will enable an immediate applica- 'f lion for committal to be made". In the same volume, at page 44 ' (para 75) we find the law thus stated :

"An undertaking given to the court by a person or corporation in pending proceedings, on the faith of which the court sanctions a particular course of action or inaction, has the same force as an injunction made by the court and a breach of the undertaking in misconduct amounting to contempt".

The case before us being a case of a deliberate violation of an undertakings to the Court the effect was the same as that of breach of an injunction. •

Consequently, finding ourselves in agreement with the High Court, D we affirm the judgment and order of the High Court and dismiss this appeal with costs.

M.R.

Appeal dismissed.

CHHAGANBHAI NORSH!NBHAI

SONI CHANDUBHAI GORDHANBHAI & ORS

March 23, 1976

A. N. RAY, C.J.

M. H. "BEG

JASWANT SINGH, JJ

s. 19

s. 19(1)(b)

CIVIL APPELLATE JURISDICTION

Gujarat High Court iu N.C.A. 576/74

M. F. Thakkar

S. S. Khanduja

M. C. Shah

M. V. Goswami

BEG

Section 19

L C. Boni

10 October, 1974

22 January, 1973


) .. , I

l •

SHAH MATHURADAS MAGANLAL & CO.

NAGAPPA SHANKARAPPA MALAGE & ORS.

March 23, 1976

[A. N. RAY, C.J. AND JASWANT SINGH, JJ.)

Mortgage-Tenant in occupation taking a Possessory mortgage of the building '.4:ith powers to sublet w.e.f. 7-11-1953 by a Deed of mortgage Jr. May 21st. 1953-Whether the tenancy revives on redemption of mortgage-Interpretation of-The Transfer of Property Act, 1882 Ss. 62, ll(d)(e) and (/}-Doctrine of surrender and Doctrine of Merger distinguished.

In the suit, for redemption of mortgage and recovery of possession, the appellant mortgagee in possession of the suit house w.ei. 7-11-1953 by virtue of the Deed of Possessory mortgage dt. 21-5-1953 contested on the ground that, in view of the fact that he was a tenant prior to the mortgage, he was entitled to retain the possession even after the redemption. The trial court accepting the contention decreed only symbolical possession. On appeal by respondent No. 1 the mortgagor, the first appellate court reversed. the decree and ordered recovery of possession of the property on deposit of the expenses towards repairs being a "clog on redemption''. The High Court on Second Appeal confirmed the said orders holding that the Deed of Mortgage shows that the relationship between the appellant and the respondent was that of a mortgagee and mortgagor. ·

Affirmin~ the judgment of the High Court and dismissing the appeal by special leave, the court

HELD : (i) Ordinarily the doctrine of merger applies to extinction of mortgage security occuring by the merger of a lower in a higher security and by the merger of a lesser estate in a greater estate. \Vhere the capacity in which a person in posse, sion of the mortgagee's rights is something quite different from the capacity in which he is in pcssession of the equity of redemption. the mere fact that thC two capacities are united iii the same physical person cannot result in a merger. For a merger to arise it is necessary that a lesser estate and a higher estate should merge in one person at one and the same time and in the same right, and no interest in the property should remain outside. In the case of a lease the estate that is in the lessor is the reversion. In the case of a mortgage the estate that is outstanding being the equity of redemption of the mortgagor, there cannot be a merger of lease and . mortgage in respect of the same property since neither of them is a

higher or lesser estate.

[793B-D] Narayan v. Ramchandra 65 Born. L.R. p. 449 (approved)

(ii) A surrender under Clauses (e) and (f) of the Transfer of PropertyAct is an yielding up of the term of the lessee's interest to him who bas the immediate reversion or the lessor's interest. Implied surrender by operation of law occurs by the creation of a new relationship or relinquishment of possession, if the lessee accepts a new lease that in itself is a surrender. Surrender can also be implied from the consent of the parties or from such facts as the relinQuishment of possession by the lessee and taking over possession by the lessor. Relinquish ment. of possession operates as an implied surrender. There must be taking of possession, not necessarily a physical taking, but something amounting to a Tirtual taking of possession. Whether this bas occurred is a question of tact.

[793H, 794A-B]

(iii) (a) In the inst3.nt case, on the redemptiOn of the mortgage the respondent bad a right to record possession both on the terms of the mortgago deed and u/s 62 of the Transfer of Property Act (b) The provision for subletting in the Mortgage Deed, contrary to section 15 of the Bombay, Rents, Hotel and Lodging House. Rates Control Acfy 1957 as it stood in 1953 shows that the character of tenant is lost; (c) Continuing the tenancy till 7-ll-19S3

and confirming the. possession of the appellant as mortgagee w.e.f. that date is an unequiv5Jcal onduct showing that no tenancy \'\'as to exist from 7-11-1953, but the relatlonsh1~ was that of a mortgagor and mortgagee and {d) there

wo~J~ be no questt_on . of the tenancy being kept in abeyance or the tenancy rev1v1ng on the explfabon of the period of mortgage.

[792F G 793A-H &

794D] ' • '

CIVIL APPELATE JURISDICTION : Civil Appeal No. 450 of 1970 Appeal by Special Leave from the Judgment and Order dated the 6th February, 1970 of the Bombay High Court in Second Appeal No. 634 of 1966.

S. T. Desai, K. Raj Choudhary and Veena Sharma (Mrs.) for the Appellant.

C M. V. Tarkunde, V. N. Ganpule for the Respondents.

The Judgment of the Court was delivered by

RAY, C.J.-This appeal by special leave is from the judgment dated 6 February, 1970 of the High Court at Bombay.

The Respondent No. 1 obtained a decree for redemption of mortgage dated 21 May, 1953 for possession of mortgaged property consisting of o shop and D house premises at Sangli.

The appellant was mortgagee in possession o! the property by a Deed of Mortgage dated 21 May, 1953. The property was mortgaged for Rs. 10,000/-. No interest was to be paid.

Instead possession of the property was agreed to remain with the mortgagee. The period for redeeming the mortgage was fixed for 10 years from 7 E November, 1953.

The respondent mortgagor by notice dated 1 October, 1963 infor- \. med the appellant that he was ready and willing to redeem the mortgage.

The appellant replied that he should be paid Rs. 30,000/- bein!( the expenses for repairs and other incidental expenses.

The appellant also claimed that even after the redemption he was entitled F to retain possession because his previous tenancy right subsisted.

The Trial Court held that the tenancy of the appellant would revive on redemption of the mortgage. The Trial Court further decreed that the respondent was entitled to get only symbolical possession from the appellant and thereafter get rent of the suit propertv from the appellant.

On appeal the District Judge came to the conclusion that under the Mortgage Deed the appellant ceased to be a tenant with effect from 7 November, 1963 possession of the appellant thereafter was only as a possessory mortgagee and not as a tenant. On redemption of the mortgage the respondent was entitled to recover possession of the propertv f0rthwith. The District Judge passed a decree for the principal mortgage amount and a sum of Rs. 4458.24 on account of'repair~ in favour of the appellant. The Ditrict Judge further gave the respondent a decree for actual possession of the property from the appellant after the respondent deposited the amount in the Court. •

The High Court on second appeal held that the Deed of Mortgage A shows that the relationship between the appellant and the respondent was that of a mortgagee and mortgagor and confirmed the decree in favour of the respondent.

Counsel for the appellant contended that in case of a tenant in possession who takes a possessory mortgage the effect of such mortgage is that the tenant's rights remain in abeyance during the term of mart- B gage and the parties revert to their former position on redemption.

It was also said that the mortgagor respondent could not take possession from the appellant without actual eviction. The mortgage according to the appellant was usufructuary mortgage with the rernlt that at the end of 10 years being the period of mortgage possession the mortgagee acquires the statutory protection given to the tenants.

The mortgage Deed is described as a Possessory Mortgage Deed of the house-site and was for a sum of Rs. I0,0001-.

The r•espondent mortgagor stated, inter alia, as follows :-

"I have given you the house-site in possessory mortgage in consideration of the aforesaid amount. The said property

is in your possesion as the last tenant by the date 6 Novem- D ber, 1953. The possession thenceforth is confirmed by this Deed of Possessory Mortgage. Hence you are to either use the house-site and shop premises for home (personal) purpose or let it to anybody. The income that may be received by giving the property on rent is to be appropriated by you towards the interest on the said amount.

I shall not pay you any interest separately. I shall not ask for the accounts in respect of the income of the house-site from you.

I am to pay all the Government dues.

I am also to carry out repairs of all sorts to the house premises, and I shall do so.

If I fail to pay Government dues and if I do not defray the costs of the repairs you are to pay all the said Government dues and defray the costs of the repairs.

The afore, aid amounts which you may have to pay and spend will be paid p by me to yon together with interest at the rate of Rs. 0-12-0

annas twelve per cent per month.

The above mortgaged property is charged with the liability of repaying the aforesaid amounts.

The period of this document is 1 O years from 7 November, 1953. I shall pay you the aforesaid amount within the said period and redeem the housesite from the mortgage. If I fail to do so you are to carry on the 'vahiwat' of • the housesite under the above agreement. If you do not wish to keep the amount with me beyond the abvoe period, vou are to sell the said mortgaged property through Court and recover the entire amount due and payable to you."

The appellant's contentions were these : First, the defendant WM a tenant of the suit building prior to the execution of the mortgage • on 21 May, 1953 and the tenancy could either exist concurrently with the usufrnctuary mortgage or be in abseyance during t11e currency of the mortgage but could never be extinguished as a result of the

mongage.

Second, once the tenancy of the appellant continued after the execution of the mortgage deed then there would be no question of either express or impliea surrender of his tenancy rights during the subsJStence of the mortgage. Third, the fact of a tenant taking a mortgage from his landlord ooes not itself extinguish the tenancy and the effect of such a mortgage on the tenant's nghts is merely that they

are in abeyance and when the landlord redeems the mortgage, the parties revert to their former position, and the landlord is not entitled to get actual possession.Fourth, that the existence of possessory mortgage does not necessarily terminate the tenancy.

The respondent contended as follows :- First, the conduct of the mortgagee along with the terms made it clear that the appellant mortgagee surrendered his tenancy rights at the time C of execution of Mortgage Deed. Second, on the expiry of the period of 10 years the appellants mortgagee could not insist upon retaining possession on the ground of the previous right of lessee, and the lease could not be revived on the expiration of the period of the mortgage, Third, on the terms of the Deed of Mortgage, there was an express or implied surrender of the lease.

Fourth, the tenancy in question was to be continued till 6 November, 1953 though the mortgage was exe- D cuted on 21 May, 1953. The possession of the mortgage was confirmed . from 7 November, 1963 amounting to unequivocable conduct showing that the relationship became that of. a mortgagor and mortgagee only.

The Deed of Mortgage shows these features indicating that there was surrender of tenancy and the appellant was only a mortgagee.

The High Court found that there was a surrender of tenancy right.

No particular form of words is essential to make a valid surrender.

A surrender may be oral.

A surrender may be express although delivery of possession is necessary for surrender in the facts and circumstances of a given case.

In the present case, deliwry of possession was immediately followed by a redelivery of possession of the appellant as mortgagee.

The Mortgage Deed establishes beyond doubt that the effect of the Deed was inconsistent with the continuance F or subsistence of the lease because the parties themselves stipulated that the lease was to exist only upto 6 November, 1953.

On the redemption of the mortgage the respondent had a right to recover possession both on the terms of the mortgage deed and under section 62 of the transfer of Property Act.

G The second feature in the Mortgage Deed is that the appellant was given power to sub-let. Section 15 of the Bombay, Rents, Hotel 8.nd Lodging House Rates Control Act, 1947 as it stood in 1953 forbade any sub-letting. In 1959 the words 'bnt subject to any contract to the contrary' were introduced into the said section 15, with the result that in the absence of the contract to the contrary, the tenant is not to sub-let or transfer.

Before 1959 there conld be no subletting. In the Mortgage Deed, there is provision for sub-let!ing. The provision for sub-letting shows that the character of tenant is lost.

Third. the mortgagor is to do repair works and is also to undertake repairs.

' \

Fourth, the possession was to be under the agreement.

Though the Mortgage Deed was made on 21 May, 1953, the tenancy was continued till about 7 November, 1953. The possession

of the appellant as mortgagee was confirmed from 7 November, 1953.

This is rightly held to be uneqmvocal conduct show.mg that no tenancy was to exist from 7 November, 1953 but the relationship was that of mortgagor and mortgagee. If the intention of the parties was to revive the tenancy there was no necessity of a term that the appellant might let out the property to any one.

The contention of the appellant was that there was no surrender and there was marger of the interest of the mortgagee and the tenant.

Ordinarily, the doctrine of marger applies to extinction of mortgage security. This occurs by the marger of a lower in a higher security and by the merger of a lesser estate in greater estate.

Where the capacity in which a person in possession of the mortgagee's rights is something quite different from the capacity in which he is in possession of the equity of redemption, the mere fact that the two capacities are united in the same physical person cannot result in a marger.

For a marger to arise, it is necessary that a lesser estate and a higher estate should merge in one person at one and the same time and in the same right, and no interest in the property should remain ontside. In the case of a lease the estate that is in the lessor is a reversion. In the case of a mortgage the estate that is outstanding is the

equit.v of redemption of the mortgagtor.

Therefore, there cannot be a merger of lease and mortgage in respect of the same property since neither of them is a higher or leaser estate. than the other. The view expressed in Narayan v. Ramchandra (I) is correct.

Section 111 of the Transfer of Property Act is clauses ( e) and

(f) deal with surrender, and in clause (d) with merger. Clause (d) states that lease in movable properties determines in case the interest of the lessee or the lessor in the whole of the property becomes vested at the same time in one person in the same right. When a leasehold and a reversion coincide there is a merger of a lesser estate in the greater. The leasehold is the lesser estate. for it is carved out of the estate of the owner, which is the reversion.

The lesser estate is merged in the greater.

The lease determines and merges in the

revrs1n. If the lessor purchases the lessee's interest, the lease is extmgmshed, as the same man cannot be at the same time both landlord and tenant. The interests of the lessor and of the lessee must be m the whole of the property, otherwise there is no merger.

The mterest of the lessor and the. less.ee in the whole of the property should become .vested at he same time m one person in the same right. Thus a lease 1s not extmgmshed because the lessee purchases a part of the reversion.

A surrender under clauses (e) and (f) of section 111 of the Transfer of roperty Act, is a~ yieldng up of the term of the lessee's mterest to him who has the immediate reversion or the lessor's (I) 65 Born. L. R. 449

A interest.

It takes effect like a contract by mutual consent on the lessor's acceptance of the act of the lessee. The lessee cannot, therefore, surrender unless the term is vested in him; and the surrender must ·, be to a person in whom the immediate reversion expectant on the term is vested.

Implied surrender by operation of law occurs by the creation of a new relationship, or by relinquishment of possession. It the lessee accepts a new lease that in itself is a surrender. Surrender '3 can also be implied from the consent of the parties or from such facts .,. as the relinquishment of possession by the lessee and taking over possession by the lessor.

Relinquishment of possession operates as an implied surrender.

There must be a taking of possession, not necessarily a physical taking, but something amounting to a virtual taking of possession.

Whether this has occurred is a question of fact.

In the present case if the mortgagor was not able to redeem the appellant mortgagee was to enjoy the property in accordance with the terms of the mortgage and also to sell the property for recovery of debts.

This feature shows that appellant surrendered the tenancy [rom 7 November, 1953.

In the present ca5e the terms of the deed show that the mortgagee undertook to deliver possession of the property to the mortgagor on D the expiry of a period of 10 years.

The Mortgage Deed shows that the tenancy was surrendered on 7 November, 1963 and thereafter the , A possession was only that of mortgagor.

There would be no question of the tenancy being kept in abeyance or the tenancy reviving on the expiration of the pe?od of mortgage.

For these reasons the judgment of the High Court is affirmed and the E appeal is dismissed with costs. .

s. R.

Appeal dismissed.

SHAH MATHURADAS MAGANLAL & CO

NAGAPPA SHANKARAPPA MALAGE & ORS

A. N. RAY, C.J.

JASWANT SINGH, JJ.

Transfer of Property Act, 1882

Ss. 62

s 62

Transfer of Property Act

section 15

S. T. Desai

K. Raj Choudhary

Veena Sharma

M. V. Tarkunde

V. N. Ganpule

RAY

Sangli

1 October, 1963

7 November, 1963

7 November, 1953

21 May, 1953

6 November, 1953

section 62

transfer of Property Act

Section 15

Lodging House Rates Control Act, 1947

section 15

Section 111

Transfer of Property Act

section 111