MAHENDRA SINGH DHANTW AL A

" ..

HINDUSTAN MOTORS LTD. & ORS.

May 7, 1976

[H. R. KHANNA, V. R. KRISHNA IYER AND P. K. GOSWAMI, JJ.] B

Industrial Disputes Act, 1947-Ss. 33(2)(b) and 33A-Scope of .

. Misconduct not n1entioned in Standing Orders-Standing Ordr!rs, if rxfiaustive of ,; II kinds of 111isconduct.

Co11stit11tio11 of India, Art. 226-Scope of jurisdiction in industrial disputes.

The respondent terminated the appellant's services on the ground -of habitual C absence which is a misconduct under the company's standing orders. Although tbe1e was a dispute pending before the Tribunal, the respondent did not make

an application under s. 33 (2) (b) of the Industrial Disputes Act for its approval.

On -an application by the appellant under s. 33A of the Act, the Tribunal ordered his reinstatement. A few months after the appellant rejoined duty the respondent terminated hi~ services purporting to act under the agreemept of service with him.

On a complaint by the appellant under s. 33A, the Tribunal ordered his reinstatement.

A single Judge of the High Court dismissed the writ petition of the respondent holding that the di•charge was nothing but dismissal for mi•- D' conduct. On appeal, the Division Bench held that since the employer invoked thtr terms of the agreement, it was not a case of discharge for misconduct and :as such the Tribunal had no jurisdiction to entertain the complaint under

' 3JA.

1;,,.

Allo\ving the appeal,

HELD : The Tribunal has not committed any error of law or of jurisdictio• E in entertaining the application under s. 33A and the Single Judge was right it\ not interferini; i; with the award under Article 226 of the Constitution and the Divi'.'lion Bench V.', ilS wronf! in d.oing so.

[641H; 641E]

\a) The Tribunal bas found as a fact that the termination was on account of misconduct of the employee. It is, therefore, difficult to hold that there wa~ any manifest error of law committed by the Tribunal in reaching that conclusion only because the misconduct, as found, was nOt within the four corners of the various misconducts mentioned in the standing orders. [64 lH] F

(b) Standing orders only describe certain cases of misconduct and they canttot he exhaustive of all the species of misconduct. Even though a given conduct may not come within the SJ'etific terms of misconduct described in the standing orders. it may still be a mise-0nduct in the special facts of a case, which it may not be possible to condone and for which the employer may tale appropriate action. [641FJ

(c) Termination sin1pliciter under the conditions of service or under the standin$; orders is outc; ide the scope of s. 33 of the Act. This does not mean that the employer has the last word about the termination of service of an employee. It is also not a correct proposition of law that in case of a complaint under s. 33A, the Tribunal would be debarred from going into the question \vhether notwithstandin~ the form of the order. in substance, it is an action of dismissal for misconduct and not termination si111pUciter. [642-A-Il]

Manar:t>n1ent of MurRan Mills Ltcl. v.

Industrial Tribunal, Madrcu and Another [1965] 2 SCR 148, held inapplicable.

Air India Corporation, Bombay v. V. A. Rebtllow & Anr. [1972] 3 S.C.R. 6tll, referred to.

A Shyanzala Studios v. Kannu Devar (S.S.) and Others, [1966] 2 LLJ 428 and

Sri Raina Machinery Corporation (P) Lilnited, Madras v. Murtlii (1V.J?.) and

Others, [1966] 2 LLJ 899, partly approved.

(d) Section 33(2) (b) makes it obligatory upon the employer to make an npplication to the Tribunal under the proviso when he discharges or di)n1isses 1he workman for misconduct. From the provisions of s. 33, it is manife-st that punitive action of the employer in whatever form it n1ay be pas:;.ed. is permissible against an ordinary workman as distinguished from a protected \vorkman

even during the pendency of proceedings before the Tribunal provided that the employer pays one month's \vages and also applies to the concerned Tribunal for approval of his action.

Since the action is pullitivc, namely, dismjssal or discharge for misconduct, the l'ribunal has to oversee the action to guarantee that no unfair labour practice or \-ictimisation h<ls been practised.

If the proce~ dure of fair hearing has been observed, the Tribun:il has to find in <lll <ipplication under s. 33 that a pri111a facie case is made out for 'dismissl. If, on the other hand, there is violation of the principles of natural justice in the enquiry. the Tribunal can go into the \vhole question rel<lting to the misconduct and

con1e to its own conclusion whether the same is established.

[641E; 640HJ

(e) In the instant case even though the ernployer invoked the agreement for terminating the service of the employee it was open to the Tribur.1! 'to pierce the veil of the order and have a close look nt the circumstances and come to a decision whether the order \\'as passed on account of certain misconduct.

This is a finding of fact which could not be interfered with under Art. 226 of the Constitution unless the conclusion is perverse. [643Fj

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2574 of 19'.l:l.

Appeal from the Judgment and Order dated the 2nd June, 1965 of the Calcutta High Court in Appeal from Original Order No. 287 of 1964.

Naunit Lal and (Miss) Lalita Kohli for the Appellant.

B. Sen, M. Mookherjee, Sardar Bahadur Saharya and Vifhnu I Bahadur Saharya for Respondent No. !.

The Judgment of the Court was delivered by

F GoswAMJ, J.

This is an appeal at the instance of the workman on certificate of the Calcutta High Court from the decision of the Division Bench reversing the earlier judgment and order of the learned single Judge in an application under article 226 of the Constitution directed against the award of the First Industrial 'J; ribunal, West Bengal, made

under section 33A of the Industrial Dispntes Act. ·

The appellant (hereinafter to be described as the workman) was employed by M/s Hindustan Motors Ltd. (hereinafter to be described as the company) since August 3, 1949. On Angust 3, 1956, the workman entered into an agreement of service with the company wherein the first clause reads as follows :-

"The Employer agrees to and does hereby engage the . services of the employee for a period of 5 years beginning with 1-6-56 and thereafter until this agreement shall be determined by either party hereto giving to the other 3 months' noticP. in writing of such intended termination .

--4

Provided that in case Employer finds the employee's A work satisfactory, Employer shall have the option to extend the period of service by a further term of 3 years';.

The workman went on two months' leave to Banaras for a change some time in 1960.

He requested for extension of leave for one month on medical grounds.

He actually sent _an application on August 8, 1960, along with a medical certificate praying for extension of his B leave.

The company asked the workman to get himself examined by the company's medical officer within ten days.

As the workman was lying flI at Banaras, he could not comply with the directions of the )._. company.

On September 5, 1960, he sent another telegram followed

by a formal application enclosing a medical certificate for extension of his leave.

On September 15, 1960, the company sent a letter to him terminating his services on the ground of habitual absence which is a C misconduct under the company's standing orders

At the time of this termination there was an industrial dispute pending between the company and its workmen.

Since the company did not ask for approval of its order from the Industrial Tribunal the workman made a complaint to the Tribunal under section 33A of the

lndu, trial Disputes Act (briefly the Act). The company contested the D application.

The Tribunal made its award on September 27, 1962, ordering reinstatement of the workman with 50% of his back wages for the period of his forced unemployment as compensation.

The Tribunal directed that the award should be given effect to not later than one month of the publication of the award which was on October

26, 1962.

After a little over two months of the publication of the award, to be precise. on February 4, 1963, the company intimated to the workman to rc_join his service.

The workman reported for duty the following day on February 5, 1963.

On February 16, 1963, the company invoked clause (1) of the agreement which we have set out earlier and terminated the services of the workman by paying three months' salary in lieu of notice.

This is the second round of litigation with which we are concerned in this appeal.

Since an industrial dispute was pending even on this date of termination of his service and the company did not apply to the Tribunal for approval of the order, the workman made a complaint to the Tribunal, as on the previous occasion, under section 33A of the

Act.

The Tribunal accepted the complaint and held as follows :- G

"In my opinion, the company has really dismissed the petitioner for a piece of conduct which must have appeared as misconduct in the eye of the company".

The Tribunal observed that the company in substance dismissed the w01; kman for misconduct since the workman became "odious to the company" on account of his earlier success before the Tribunal in his H application under section 33A of the Act.

The Tribunal, therefore, ordered his reinstatement with full back wages for the period bf his forced unemployment as compensation.

This time the company did

not accept the award although on the earlier occasion the company did

not choose to litigate and reinstated him as ordered by the Tribunal.

The company moved the Calcutta High Court under article 226 of the Constitution to quash the award.

The learned single Judge ref~ ed to interfere with the award holding that "the reason might have been the old reason of dismissal .... ".

The learned Judge further observed that "the circumstances relied on by the Tribunal are not wholly irrelevant and the inference drawn by the Tribunal cannot be characterised as unreasonable".

The company appealed to the Division Bench of the High Co1Irt and the appeal was accepted.

The Division Bench helu as follows :-

"lt may be that having regard to the sequence of events that took place in this case the termination of service of the respondent No. 1 by the letter of 16th February 1963 may be regarded as a colourable exercise of the power under the contract of employment or may even be regarded as one of unfair labour practice or mala /We, but the discharge cannot be said to be for any misconduct.

There is no evidence for discharge on any specific misconduct.

The definite case of the respondent No. 1 has been that it was by way of retaliatory measure that his services were terminated.

This may be true .and may show that the action on the part of the appellant company was mala fide.

But until it is established that there has been a contravention of section 33 of the Act which would create jurisdiction in the Industrial Tribunal to entertain an application under section 33A, or in other words, unless it is established that there has been discharge for misconduct, the Tribunal had no jurisdiction to set aside the order of termination in an application under section

33A".

On the application of the workman the High Court granted a ce.rtificate to him under article 133(1)(c) of the Constitution.

That is how this matter has come before us for a decision.

We should at the outset observe that this is not an appeal against the award of the Industrial Tribunal but is only directed against the judgment of the High Court under article 226 of the Constitution. In an application under article 226 of the Constitution the High Court was concerned only with the question of jurisdiction of the Tribunal in entertaining the application under section 33A of the Act.

The <juestion o~ jurisdiction again was intimately connected wicli the question whether the termination of service was for misconduct of the workmen.

The learned single Judge accepted the finding of the Tribunal when it helu that the discharge was nothing but dismissal for misconduct and in that view of the matter did not find any justification' for interfering with the award.

According to the learned Judge, therefore, no question of lack of .inrisdiction of the Tribunal arose to merit

interference with the award under article 226 of the Constitution.

The Division Bench, however, looked at the matter from a ,{fifferent viewpoint.

It assumed that the action of the management 't was even ma/a fide and so it could be wrongful and in an appropriate reference under section 10 of the Act the workman might be able to get proper relief.

The High Court, however, came to the conclusion that since clause ( 1) of the agreement was invoked by the employer it was not a case of discharge for miscondnct and that being the position the Tribunal had no jurisdiction to entertain the ' complaint under section 33A even though the action of the company , might be as a result of unfair labour practice.

Mr. Naunit Lal on behalf of the workman has assailed the cone, du>ion of the Division Bench while Mr. Sen submits that the decision is legally unquestionable.

The question that arises for consideration in this appeal relates to the applicability of the proviso to section. 33 (2) (b) of the Act as amended in 1956. Section 33 (2) (b) at the material timel reads as follows:-

"33(2): During the pendency of any such proceeding in respect of an industrial dispute, the employer • may, in accordance with the standing orders applicable to a workman concerned in such dispute,

(b) for any misconduct not connected with the dispute, discharge or punish, whether by dismissal or otherwise, that workman : E

• ,.

Provided that no such workman shall be discharged or dismissed, unless he has been paid wages for one month and an application has been made by the employer to the authority before which the proceeding is pending for approval of the action taken by the employer".

We may also read section 33A of the Act as that is the section under which the complaint was originally made by the workman to the Industrial Tribunal.

33A : "Where an employer contravenes the provisions of section 33 during, the pendency of proceedings before a Labour Court, Tribunal or Naional Tribunal, any employee aggrieved by such contravention, may make a complaint in writing, in the prescribed manner to such Labour Court Tlibunal or National Tribunal and on receipt of such com'. plaint that Labour Court, Tribunal or National Tribunal shall adjudicate upon the complaint as if it were a dispute

rfrred to or pending before it, in ccordance with the prov1s10ns of this Act and shall submit its award •to the appropriate Government and the provisions of this Act shall apply accordingly".

A It is clear that the fouudation of jurisdiction of the Tribunal to entertain a complaint under section 33A is the contravention of section 33 of the Act

Section 33 may be contravened in a variety of ways.

We are concerned in this appeal only with one type of contravention, namely, that the employer did not make any application to the Tribunal for approval of the order of termination of service of the workman.

There is no dispute between the parties in this appeal that there was an industrial dispute pending before the Tribunal in which the workman was concerned and that the particular termination had nothing to do with that dispute. The only point on which the parties differ is as to the nature of the order of termination of service. The employer claims it to be a termination simpliciter in exercise of its right under a written contract of service entered between the parties in August 1956.

The workman on the other hand contends that termination of his service was meted out as a punishment for avenging the defeat of the employer in an earlier litigation under section 33A at the instance of the workmen.

In other words the workman contends that the order although purported, ex facie, to be a termination under the terms of the agreemem, is ir.. truth and reality an c1ruer of dismissal for misconduct.

Originally when the Act was passed in 1947 (Acto 14 of 194>7) section 33 imposed a ban on the employer against discharge, dismissal . or punishment of a workman during the pendency of proceedings before the Tribunal and other specified authorities "except for misconduct not connected with the dispute." The section underwent a vital change for the employer when the Industrial Disputes (Appellate Tribunal) Act 1950 (Act 48 of 1950) was passed and section 33 was substituted and a total ban imposed against discharge, dismissal or any punishment of a workman during the pendency of proceedings before the Tribunal and other specified authorities.

The reservation of the right to the employer to take action even in case of misconduct, which was there in the original Act, was withdrawn.

As time passed, in view of representations from employers, tne Parliament became alive to the question of discipline in the industry and reintroduced in an altered form the said right of the employer .to take action during the pendency of proceedings before the Tribunal when the Act was amended by the Industrial Disputes (Amendment and Miscellaneous Provisions) Act 1956 (Act 36 of 1956).

We have already set out the material provision of section 33(7.) (bl at the outset which has since restored to the employer the right to take punitive action under specified conditions.

To complete the picture we may note in passing that the section was further amended by the Industrial Disputes (Amendment) Act (Act 36 of 1964) with effect from December 19, 1964, whereby some words were inserted in sub-section (2) of section 33 with which we

are not concerned in this appeal.

II From the.provisions of section 33 it is manifest that punitive action by the employer in whatever form it may be passed is permissible against an ordinary workman, as distinguished from a protected workman even during the pendency of proceedings before the Tribunal

' .. '

provided that the employer pays one month's wages and also applies to the concerned Tribunal for approval of his action.

Since the action is punitive, namely, dismissal or discharge for misconduct, the Trbunal has to oversee the action to guarantee that no unfair labour practice or victimisation has been practised thereby.

If the procedure of fair hearing has been observed the Tribunal has to find in an application under section 33 that a prima facie case is made out for dismissal.

If, on the other hand, there is violation of the principles of natural justice in the enquiry, the Tribuna1 can go into the whole question relating to the misconduct and come to its own conclusion whether the same is established.

The submission of the employer is that since the termination of the workman is in exercise of the right under the written agreement it

was not a case, of discharge or .dismissal for misconduct and there C was. therefore, no obligation on the employer to make an application under section 33 of the Act and hence section 33 has not been contravened and , the application under section 33A is not maintainable.

The question that arises for decision in this appeal is whether if a particular order of termination of service is not on account of misconduct and is merely a termination simpliciter the employer is still D required to make an application under section 33 of the Act.

We have no doubt in our mind that section 33(2l(b) makes it obligatory upon the employer to make an application to the Tribunal under the• proviso only when he discharges or dismisses a workman for misconduct.

It is submitted by Mr. Sen that misconduct contemplated in section 33(2)(b) must be a misconduct enumerated in the standin~ orders of the company.

We are unable to accept this submission.

Standing orders of a company only describe certain cases of misconduct and the same cannot be exhaustive of all the species of misconduct which a workman may commit.

Even though a given conduct may not come within the specific terms of misconduct described in th'- standing orders,, it may still be a misconduct, in the special facts of a case, which it may not be possible to condone and for which the employer may take appropriate action.

Ordinarily, the standing orders may limit the concept but not invariably so.

When, therefore, the Tribunal has found as a fact after takinv note of the history and the entire circumstances of the case that the termination was on account of misconduct of the employee it is difficult to hold that there is any manifest error of law committed by lhe Tribunal in reaching that conclusion only because the misconduct, as

found, is not within the four corners of the description of the various misconducts mentioned in the company's standing orders. It is r; ot possible, therefore, to accept the submission that the Tribunal com-- milted an error of law or of jurisdiction in entertaining the application under section 33A.

43-~33SCI/76

Termination simpliciter or automatic termination of service under the conditions of , service or under the standing orders is outside the scope of section 33 of the Act.

This does not mean that the employer has the last word about the termination of service of an employee and can get away with it by describing it to be a simple termination in his letter of discharge addressed to the employee.

It is also not a correct proposition of law that in case of a complaint under section 33A the Tribunal would be debarred from going into the question whether, notwithstanding the form of the order,, in sub stance, it is an action of dismissal for misconduct and not termina'ion simp/iciter.

The possibility that in an appeal against the award of the Tribunal this Court may have taken a different view about the termination does not affect the present issue. ·

Mr. Naunit Lal relies upon a decision of this Court in the _Management of Murugan Mills Ltd. v. Industrial Tribunal Madras and Another(') in 'support of his contention that even termination simpliciter is within the sweep of section 33.

That was a case where the workman's services were terminated "because he deliberately adopted go-slow and was negligent in the discharge of his duty".

The Supreme Court in that case observed thus :

"His services were therefore , terminated for dereliction of duty [!nd go-slow in his work.

This clearly amounted to punishment for misconduct and therefore to pass an Older under cl. 17 (a) of the Standing Orders in such circumstances was clearly a colourable exercise of the power to terminate the services of a workman under the provision of the Standing Orders".

The Supreme Court further observed :

"Jn these circumstances the case was clearly covered by cl. (b) of s. 33(3) of the Act as the services of the F respondent were dispensed with during the pendency of a

dispute by meeting out the punishment of discharge to him for misconduct".

The decision is, therefore, not au. authority for the extreme proposi tion advanced by Mr. Naunit Lal.

Mr. N aunit Lal also drew our attention to two decisions of the Madras High Court in Shyamala Studios v.

Kannu Devar (S.S.) and others(') and Sri Rama Machinery Corporatio11 (Private) Limited, Madras v. Murthi ( N.R.) and Others(") in support of the above submission.

Although the decision of the Supreme Court in Murugan Mills' case (supra) was noticed by the Madras High Court' it does not appear to have correctly appreciated the ratio decidend{ of that judgment.

We are unable to hold that the Supreme Court in

11) [1%512 S.CR. !4R.

(21 (1%6]2 L.L. J. 42R.

(3) (1966] 2 L.L. J. 899.

---·

' '

J!Ri

Murugan Mills' case (supra) went to the extent of re-writing section 33 by completely obliterating-the concept of misconduct of a workman for which alone in a limited way the right of action for the employer is preserved during the span of pendency of proceedings before the Tribunal in the interest of discipline.

To the extent the Madras decisions state that termination of servk:es need not be for misconduct of the workman in order to attract section 33(2)(b), we cannot agree.

If the Tribunal finds that a particular termination of service of a workman is in truth and substance innocuous or in exercise of a bona

fide right under the contract, section 33 (2 )(b) will not be applicable and necessarily there will be no contravention of section 3 3A of the Act.

In Air India Corporation, Bombay v. V. A. Rebe/low & Anl'.(1) this Court had to deal witih the validity of an award made under section 33A although the Labour Court in that case had held that the workman was guilty of misconduct and that his services were terminated for that reason.

This Court did not agree with the aforesaid conclusion anc~ dismissed the workman's petition under section 33A

<lf the Act.

In doing so this Court observed as follows :- D

"It is noteworthy that the ban is imposed only in regard to action taken for misconduct whether connected or unconnected with the dispute.

The employer is, therefore,, free -. to take action against his workmen if it is not based on any misconduct on their part".

We are, therefore, clearly of op1mon that the single Judge is right in not interfering with the award under article 226 of the Constitution and the Division Bench is wrong in doing so.

It is true that on the face of the order of termination the company invoked clause ( 1 ) of the agreemen.t and even so it was open to the Tribunal to pierce the veil of the order aud have a close Jock at all the circumstances and come to a decision whether the order was passed on account of certain misconduct.

This is a finding of fact which could not be interfered with under article 226 of the Constitution unless the conclusion is perverse,' that is to say, based on no evidence whatsoever.

We are, however, unable to say so having regard to the facts and circumstances described by the Tribunal in its order.

It is, however, unexceptionable that if an employer passes an order <if termination of service iu exercise of his right under a contract or in accordance with the provision of the standing orders and the Tribunal finds that the order is not on account of any misconduct, the quetion

of violation of section 33 would not arise.

There remains, however,, another aspect to which the Tribunal did not properly address.

The workman in this case had a contract of employment only for 8 years at the most.

The reinstatement in his

case, therefore, cannot extend beyond a period of eight years from June 1, 1956 and the contract of employment would have automatically terminated on May 31, 1964. The Tribunal awarded reinstatement on March 24, 1964, when even the employer did not bring it to its notice that the contract of employment would terminate in May 1964.

Mr. Sen, however, during; the course of the argument,, hinted at another round of litigation under section 33C of the Act to, contest the claim to reinstatement ordered by the Tribunal.

We cannot be oblivious to the plight of this workman in his unequal fight with a big company.

He was serving the company since 1949 for about eleven years when he was first dismissed in 1960. He has been involved in litigation since 1960 uptill today except for a lull for eleven days on his reinstatement after the first award.

Eleven years in actual service and sixteen years in litigation is a doleful tale by itself.

We, therefore, feel that, in the interest of industrial peace and above all to draw a final curtain to this unhappy litigation, we would be justified in quantifying the compensation payable to the workman in this case to a sum of Rs. 20,000/- only in lieu of reinstatement with full back wages as ordered by the Tribunal, wjrich we accordingly order.

We may also observe that Mr. Sen, fairly enough, had made it clear before us in the course of hearing that even if the company succeeded in this Court it would be prepared to pay to the workman a sum of Rs. 10,000/- on compassionate grounds.

In the result the judgment of the Division Bench of the High Court is set aside.

The award of the Tribunal is varied as stated above.

The appeal is allowed accordingly with no order as to costs.

CMP. No. 6664 of 1976 on behalf of the company for urging additional grounds is dismissed as not pressed.

P.B.R.

Appeal AIU.wed.

MAHENDRA SINGH DHANTW AL

HINDUSTAN MOTORS LTD. & ORS

H. R. KHANNA

V. R. KRISHNA IYER

P. K. GOSWAMI, JJ.

Industrial Disputes Act, 1947

Ss. 33(2)(b) and 33A

Art. 226

s. 33

Industrial Disputes Act

s. 33A

s. 33A

s. 33A

Article 226

s. 33

s. 33A

[1965] 2 SCR 148

[1972] 3 S.C.R. 6

Section 33(2)

s. 33

s. 33

Art. 226

article 226

section 33A

section 33A

section 33A

section 33A

article 226

section 33

section 33A

section

33A

article 133(1)(c)

article 226

article 226

section 33A

article 226

section 10

section 33A

Section 33

section 33A

section 33

section 33A

section 33

Section 33

section 33A

section 33

section 33

section 33(7.)

section 33

section 33

section 33

section 33

section 33

section 33A

section 33

section 33(2l(b)

section 33(2)(b)

section 33A

section 33

section 33A

section 33

cl. 17

s. 33(3)

section 33

section 33(2)(b)

section 33

section 3

section 33A

section 33A

article 226

article 226

section 33

section 33C


DA.t\1ADILAL AND OTHERS

PARASHRAM AND OTHERS

May 7, 1976

[Y. V. CHANDRACHUD, R. S. SARKARIA AND A. C. GUPTA, JJ.] B

Madhya Pradesh Accommodation Control Act, 1961-S. 12(1y(a) and (f) -Scope of-Death of tenant-Heritable interest in the premises-Legal repre~ sentatives-lf could clai1n statutory tenancy-If concept applicable in lndia- Statutory tenant-If could sub-let the premises.

Rent-Payrnent-1/ could be n1ade by cheque.

.Procedure-Lower appellate court overlooked 1naterial evidence-Finding, if bad in law-High Court-If could reverse.

Section 12(1) of the Madhya Pradesh Accommodation Contrnl Act, 1961, enacts that notwithstanding anything to the contrary contained in any other law or contract no suit shall be filed in any civil court against a tenant for his eviction from any accommodation except on one or more of the grounds giVen in the section. The ground given in cl. (a) is that the tenant has neither paid nor tendered the whole of the arrears of the rent legally recoverable from him within two months of the date on which the notice had been served on him by the landlord and the ground in cl. (f) is that the accommodation let for non.residential purpose is required bona fide by the landlord for the purpose of continuing or starting his business.

The appellants brought a suit under s. 12(1 )(a) and (f) of the Act for ejectment of their tenants. The suit was dismissed by the trial court on the ground (i) that since the dispute as to the amount of rent payable by the tenants had not been determined during the pendency of the suit Under s. 13(2) no order for eviction could be made; (ii) that there was no bona fide require ment of the premises by the appellants for their own business and (iii) that the refusal by the appellant to accept the arrears of rent by cheque was valid because tendering by cheque was not valid tender in the absence of an agree ment to that effect.

The first appellate court decreed the suit. During the pendency of the second appeal in the High Court the tenants died. The High Court allowed substitution of their legal representatives overruling the appellants' objection that the deceased tenants were mere statutory tenants and that the right to resist eiectment on the basis of the Rent Control Act was merely a personal right which was not heritable.

On merits, the High Court held that (i) offer of rent by cheque amounted to valid tender by the Jenant and (ii) the appel lants had failed to prove their case of bona fide requirement of the premises for their own use.

Dismissing the appeal,

HELD : There is no force in the contention that the defendants who v.'ere statutory tenants had no heritable interest in the demised premisesand on their death the right to prosecute the appeal in the High Court had not survived to their heirs and legal representatives. The preQecessorsin-interest of the respondents had a heritable interest in the premises and consequently the resPondents had the right to prosecute the appeal in the High Court. [655AJ

(I) (a) The concept of statutory tenancy under the Eglish Rent Acts and under the Indian statutes rests on different foundations.

The term statutory tenancy which is used for referring to a tenant whose tenancy has been tenninated and who would be liable to be evicted but for the protecting statute, is

borro\Ved from the English Rent Acts.

Courts in England have held that a statutory tenant h~ no esta.te or property in the premises" he occupies becalliie

he retains possession by virtue of the Rent Acts and not as being entitled to a tenancy.

But in this country it is not possible to proceed on the basis that a tenant whose contractual tenancy has determined but who is protected

aainst evictin ~Y the staute, as no right f. property b, ut only a person •. 'll right to remain m occupation \VIthout ascerta1n1ng what his rights are under the statute.

[654H: 653A-C]

Anand /ilivas (Private) Litnited v. Anandji Kalyanji Ped/ii & Ors. [1964] 4 SCR 892; Jagdish Chander Chatter{ee and Ors. v. Sri Kishan & Anr., [1973] 1 S.C.R. 850; Roe v. Russel. f!928l 2 K.B. 117: Haskins v. Lewis [1931] 2 K.B_ 1(9); Keeves v. Dean [1923] (93) L.J.K.B. 203 (207) and Boyer v. Warbe~· [1953] 2 Q.B. 234, referred to.

(b) Tenancy has its origin in contract. A contractual tenant had an estate or property in the subje_ct tnatter of the tenancy and heritability is an incident of tenancy.

It cannot be assumed that with the determination of the tenancy, the estate must necessarily disappear and the statute can only preserve his status of irremovability and not the estate he had in the premises in his. occupation.

[653D]

{c) The definition of a tenant contained in s. 2(i) makes a person continu ing in possession of a premises after the determination of his tenancy a tenant, unless a decree or order for eviction had been made. against him, thus, putting D him on par with a person whose contractual tenancy still subsists.

[653G]

(d) Section 14 which deals v.ith restrictions on sub-letting read with the

lefinition contained in s. 2(i) makes it clear that the so-called_ statutory tenant has the right to sub-let in commo!ll with contractual tenant and this is because he also has an interest in the prerrtises occupied by him.

(654D]

(2)(a) The High Court rightly held that the cheques sent to the appellants amounted to valid tender of rent. It is well-established that a cheque sent in payment of a debt on the request of the creditor, unless dishonoured. operates as a valid discharge of the debt a, nd if the cheque was sent by post and \Vas met on presentaiion, the date of payment is the date when the cheque was posted. [655B-Dl

(b) Rent is payable in the sa1ne manner as any other debt and the debtor has to pay his creditor in cash or other legal tender, but there can be no dispute that the mode of payrrtent can be altered by agreement. In the contemporary society it is reasonable to suppose payment by cheque as implied unless the circumstances of a case indicate otherwise.

[655C]

( 3) The High Court was within its jurisdiction in setting flSide the finding of the lower appellate court and restoring that of the trial court on the question of bona fide requirement of the premises by the appeilants.

The lower appellate cou_rt overlooked a very material part of the evide!).ce bearing on the question. It is well-established that if a finding of fact is arrived at ignoring important and relevant evidence the finding is bad in law.

[6518-C]

Radha Nath Seal v. Haripada Jana & Ors. AIR 1971 S.C. 1049, followed.

.Madan Lal Puri v. Sain Das Berry AIR 1973 S.C. 585; Mattulal v. Rad!iey Lal AIR 1974 S.C. 1596; and Sarvate T. B. v. Nemi Chand 1966 M.P.L.J. 26, referred to .

CIVIL APPELLATE JURISDICTION; Civil Appeal 88511968.

(From the judgment and order dated 6-11-1967 of the Madhya Pradesh High Court in Second Appeal No. 913 of 1965).

1 '

S. V. Gupte, R. P. Pandey and S. S. Khanduja, for the appellants.

F. S. Nariman, J. B. Dadachanji, P. C. Bhartari, K. L. John for tile respondents.

The Judgment of the Court was delivered by

GUPTA, J. Damadi Lal, Sheo Prasad and Tirath Prasad who were members of a Hindu Joint Family brought a suit for ejectment on July 31, 1962 against their tenants Begamal and Budharmal on the grounds mentioned in clauses (a) and (f) of section 12(1) of the Madhya Pradesh Accommodation Control Act, 1961. The relevant .provisions are in these terms :

"Sec. 12. Restriction on eviction of tenants.-( 1) Notwithstanding anything to the contrary contained in any other law or contract, no suit shall be tiled in any Civil Court against a tenant for his eviction from any accommodation except on one or more of the following grounds only, namely-

( a) That the tenant has neither paid nor tendered the

whole of the arrears of the rent legally recoverable from him D within two months of the date on which a notice of demand for the arrears of rent has been served on him by the landlord in the prescribed manner;

x x x x x

x x x x x E

(f) tl1at the accommodation Jet for non-residei1tial purposes is required bona fide by the landlord for the purpose of continuing or starting his business or that of any of his major sons or unmarried daughters if he is the owner thereof or for any person for whose benefit the accommodation is held and that the landlord or such person has no other reasonably suitable non-residential accommodation of his F own in his occupation in the city or town concerned."

Plaintiffs' case under section 12 ( 1) (a) was that the defendant tenants had defaulted in paying rent for the period October 1, 1961 to May 31, 1962 and did not also pay or tender the amount in arrears withi• two months of the service of the notice of demand.

Clause (f) of section 12(1) was invoked on the allegation that the accommodation G let was required bona fide by the plaintiffs for the purpose of starting their own business. Before the suit was instituted the plaintiffs had determined the tenancy from May 31, 1962 by a notice dated May 7,

1962. The house in dispute which is in Bazar Chowk in District Satna was Jet out to the defendants at a monthly rent of Rs. 2751for the purpose of their business.

The plaintiffs reside in village Nadan, Tahsil Maihar, where they carry on their business.

The trial court by its judgment and decree dakd November 11. 1964 dismissed the snit for eviction. There was some disoute hetween

SCPREME COURT REPORTS

(1976] SUPPLEMENTARY

the parties as to the rate of rent; ultimately the plaintiffs admitted that the rent was fixed at Rs. 1751per month with effect from August 1, 1961 by the Rent Control Authority and a sum of Rs. 1200/-, which was the amount in arrears, had been tendered to the plaintiffs by cheque on May 26, 1962 which the plaintiffs refused to accept. The trial court was of opinion that the refusal was valid because "tendering by cheque is no valid tender" unless there was an agreement that payment by cheque would be acceptable and that the defendants were therefore defaulters within the meaning of section 12(1)(a). However, in view of the dispute as to the amonnt of rent payable by the tenants, which was not determined during the pendency of the suit as required by section 13 ( 2), the trial court held that no order for eviction under section 12(1)(a) could be made in this case and passed'"a decree for Rs. 1200 1-- in favour of the plaintiffs.

On the question of the plaintiffs' requirement of the premises for their own business, the trial court found itself unable to accept the evidence adduced on behalf of the plaintiffs. Of the _witnesses examined by the plaintiffs on the point, the evidence of P.Ws. 1, 3 and 4 was not relied on because none of them was considered to be an independent witness and, further, becansc it was apparent from their evidence that what they said was what they were tutored to say by the plaintiffs.

The other three witnesses were plaintiffs Damadi Lal and Tirath Prasad (P.W. 2 and P.W. 6 respectively) and Radhcy Sham (P.W. 5), a son of plaintiff She6 Prasad. They were also disbelieved because of the following reasons. Damadi Lal tried to give the impression that plaintiffs had no business except the cloth business and the grocery shop at Nadan. He tried to conceal that they had a moneylending business and also agricultural lands. Tirath Prasad stated that the main source of income of the family was from the moneylending business. Tirath Prasad also disclosed t!J.at the , plaintiffs had already a partnership business in cloth at Satna though Damadi Lal and P.W. 5 Radhcy Sham did not admit this. It also appears in evidence that the ; plaintiffs had yet another cloth business at a place called Ramnagar which was managed by Radhey Sham.

The plaintiffs claimed that they would start a business at Satna, but Damadi Lal's evidence is that they had no income or saving. Tirath Prasad also said that their income was not even sufficient for their maintenance.

Admittedly, plaintiffs had in their possession one room in the house which was let out to the defendants. The plaintiffs did not adduce any evidence to show how the said accommodation was unsuitable or insufficient for them to start their own business. It was also admitted that the plaintiffs had filed a suit for ejectment on an earlier occasion, but the defendants having agreed to pay increased rent the suit was not proceeded with.

According to the defendants the present suit was instituted on the defendants' refusal to increase the rent further to Rs. 500/- a month.

For the above reasons the trial court did not accept the case of bona fide requirement holdnig that P.W. 2, P.W. 5 andP.W. 6 were in the habit of suppressing the truth to snit their own purpose.

'- •

On appeal by the plaintiffs, the first appellate court reversed the decision of the trial court and decreed the suit. The appellate court agreed with the trial court that sending a cheque did not amount t? a valid tender of rent and, as the tenants did not apply under section 13(2), they were not entitled to protection against eviction on the ground of default As regards the plaintiffs' case of requirement, the court found, that the criticism of the plaintiffs' witnesses was net justified.

The appellate court thought that the fact that Tirath Prasad was carrying on a cloth business at Satna which Damadi Lal had kept back froin court was irrelevant in view of the plaintiffs' claim that some members of the family wanted to start a new business at Satna.

According to the appellate court the further fact that P.W. 5 Radhcy

Sham was running a cloth business at Ramnagar was indicative of the growing need of the plaintiffs' family.

The room in the plaintiffs' possession in the disputed house was not found suitable or sufficient for a wholesale business that the plaintiffs intended to start.

Referring to the trial court's finding that the plaintiffs had no money to start a new business at Satna, the court found that the evidene did not support this. The appellate court therefore held that the plaintiffs required the premises for their own business.

Dissatisfied with this decision, the defendants preferred a second !appeal to t11e High Court. During the pendency of the second appeal in High Court both the defendants died. Budharmal died on or about January 27, 1966 and his legal representatives were brought on record and substituted iu his place without objection.

Begamal died on March 2, 1967 and his heirs applied for being brought on record in his place as appellants. The plaintiffs made an application praying for an order that the appeal had abated as a consequence of the death of both the defendants. In this application the plaintiffs contended that Budharmal and Begamal were "merely statutory tenants and their right to resist ejeetment on the basis of Madhya Pradesh Accommodation Control Act was merely a personal right" which was not heritable and had "not devolved upon their heirs". By its order dated July 26, 1967 the High Court allowed the application for substitution made by Begamal's heirs overruling the plaintiffs' objection.

Ultimately on November 6, 1967 the High Court allowed the appeal setting aside the decree of the lower appellate court and restoring that of the trial court dismissing the suit.- The High Court found that the defendants were not in arrears of rent. Differing from both the courts below the High Court held that the cheque which the defen- {lants had sent to the plaintiffs in payment of the amount in arrears within a month of the service of the writ of summons on him amounted to a valid tender of rent as required by section 13, and in view of section 12(3) no order for eviction could be made.

Section 12(3) provides that no order for eviction of a tenant shall be made on the

ground of default if the tenant makes payment or deposits rent as required by section 13. This. is what the High Court held on the validity of tender of rent by cheque :

"The question is as to whether, instead of presenting the cash, if a cheque is sent to the landlord, that is sufficient tender of the arrears of rent or not ...... In the highly developed society, payment by cheque has bec_ome more convenient mode of discharging one's obligation. If a cheque is an instrument which represents and produces cash and is treated as such by businessmen, there is no reason .why .the archaic principle of the common law should be followed in deciding the question as to whether the handing . over of the cheque is not a sufficient tender of the arrears of rent if .the chequ~ is drawn for that amount. It is no doubt true that the issuance of the cheque does not operate as a discharge of the obligation unless it is encashed, and it is

treted as a conditional payment, yet, in my view, this is a sufficient tender of the arrears if the cheque is not dishonoured.

In the present day society, I am of the view. an implied agreement should be inferred that if the payment is made by a cheque, that mode of payment would be accepted."

On the ground of bona fide requirement, the High Court found that there was no evidence to show that the plaintiffs had sufficient funds to start the wholesale business for which they sought to get possession of the disputed premises.

This is a point which has a bearing on •he genuineness of the plaintiffs' claim.

The High rourt took note of the fact that the plaintiffs made an attempt to keep back from the Court that they were carrying on business at two more places. one at Satna, and another at Ramnagar.

In this connection the High Court also referred to the defendants' case that the plaintiffs sought to increase the rent from Rs. 275/- to Rs. 500/- a month and that when the defendants had the rent reduced by the Rent Controller to Rs. I 75/- per month, the present suit was filed.

The High Court fouud that these circumstances which the trial court took into consideration were ignored by the lower appellate court.

The High Court accordingly held that the plairitiffs had failed to prove their case of bona fide requirement, set aside the decree of the appellate court, and restored that of the trial court dismissing the suit.

Before us, Mr. Gupte for the plaintiff-appellants raised three conttntio1JS : (I) Begamal and Budharmal both of whom were statutory tenants had no heritable interest in the demised premises and, on their death, the right to prosecute the appeal in the High Court did not survive to their heirs and legal representatives; (2) payment by cheque was not a valid tender of rent and accordingly the suit should have been decreed on the ground of default; and (3) the High Court had no jurisdiction in second appeal to reverse the finding of the first appellate court on the question of reasonable requirement which was a finding of fact.

In support of his first contention Mr. Gupte relied on two decisions of this Court, Anand Nivas (Private) Ltd. v. Anandji Kalyanii Pedhi & Ors.(') and Jagdish Chander Chatterjee and Ors: v. Sri Kishan & A nr. (') The statute considered in Anand Nivas' case was Bombay

(l) [l964]4S.C.R.892.

(2) [1973] IS. C.R. 850.

Rems, U .. <otel and Lodg. i11_g Rates Con. trol Ac.t,. 1947 as amended in 195\i. The question there was, whether a tenant whose tena9cy had been terminated had any right to mblet the premises.

Of the three learned Judges composing the Bench that heard the appeal, Hidayatullah .and Shah JJ .. held that a statutory tenant, meaning a tenant whose tenancy has determined but who continues in possession, has no power of subletting.

Sarkar J .. delivered a dissenting opinion. Shah J. who spoke for himself and Hidayatullah J. observed in the course of their Judgment :

"A statutory tenant has no interest in the premises occupied by him, and he has no estate to assign or transfer.

A statutory tenant is, as we have already observed, a person who on determination of his contractual right, is permitted to remain in occupation so long as he observes and performs th.e conditions of the tenancy and pays the standard rent and permitted increases.

His personal right of occupation is incapable of being transferred or assigned, and he having no interest in the property there is no estate on which subletting may operate."

It appears from the Judgment of Shah J. that "the Bombay Act merely grants conditional protection to a statutory tenant and dues not invest him with the right to enforce the benefit of any of the terms and conditions the original tenancy".

Sarkar J. dissenting heid that word 'tenant' as defined in the Act included both a contractual tenant-, a tenant whose lease is subsisting as also a statutory tenant, and the latter has the same power to sublet as the former.

According to Sarkar J. even if a statutory tenant had no estate or property in the demised premises, the Act had undoubtedly created a right in such a tenant in respect of the property which he could transfer.

Jagdish Chander Chatterjee's case dealt with the Rajasthan Premises (Control of Rent and Eyiction) Act, 1950, and the question for decision was whether on the death of a statutory tenant his heirs succeed to the tenancy so as to claim protection of the Act.

In this case it was held by Grover and Palekar JJ., relying on Anand Nivas' cas~, that after the termination of contractual tenancy, a statutory tenant enjoys only a personal right to continue in possession and on his death his heirs do not 'inherit any estate or interest in the original tenancy.

Both these cases, Anand Nivas and Jagdish Chander Chatterjee, procee<! on the basis that a tenant whose tenancy has been terminated, described as statutory tenant, has no estate or interest in the premises but only a personal right to remain in occupation. It would seem as if there is a distinct category of tenants called statutory tenants having separate and fixed incidents of tenancy.

The term 'statutory tenancy' is borrowed from the English Rent Acts.

This may be a convenient expression for referring to a tenant whose tenancy has been terminated and who would be liable to be evicted but for the protecting statute, but courts in this country have sometimes borrowed along with the expression certain notions regarding such tenancy from the

decisions of the English courts. In our opinion it ha_s. to be ascertained how far these notions are reconcilable with the provisions of the statute under consideration in any particular case.

The expression 'statutory tenancy' was used in England in several judgments under the Increase of Rent and Mortgage Interest (War Restrictions) Act, 1915, to refer to a tenant protected under that Act, but the term. got currency from the marginal note to section 15 of the Rent and Mortgage Interest (Restrictions) Act, 1920. That section which provided inter alia that a tenant who by virtue of that Act retained possession of any dwelling house to which the Act applied, so Jong as he retained possession, must observe and would be entitled to the enefit of all the terms and conditions of the original contract of tenancy which were consistent with the provisions of the Act, carried the .description in the margin "conditions of statutory tenancy".

Since then the term has been used in England to describe a tenant protected under the subsequent statutes until section 49(1) of the Housing Repairs and Rent Act, 1954 for the first time define 'statutory tenant' and 'statutory tenancy'. 'Statutory tenant' was defined as a tenant "who retains possession by virtue of the Rent Acts and not as being entitled to a tenancy, and it was added. " 'statutory tenancy' shall be construed accordingly".

This definition of 'statutory tenancy' has been incorporated in the Rent Acts of 1957 and 1965. In England "statutory tenancy" does not appear to have had any clear and fixed incidents; the concept was developed over the years from the provisions of the successive Rent Restrictions Acts which did not contain a clear indication as to the character of sm; h tenancy.

That a statutory tenant is entitled to the benefit of the terms and conditions of the original contract of tenancy so far as they were consistent with the provisions of the statute did not, as Scrutton L. J. observed in Roe v. Ru"<ell, C) "help very much when one came to the practical facts of life". according to him "citizens are entitled to complain that their legislators did not address their minds to the probable events that might happen in cases of statutory tenancy, and consider how the legal interest they were granting was affected by those probable events".

He added, " .... it is pretty evident that the Legislature never coµsidered as a whole the effect on the statutory tenancy of such ordinary incidents as death, bankruptcy, voluntary assignment, either inter vivos or by will, a total or partial subletting; but from time to time put into one of the series of Acts a.provision as to one of the incidents without considering how it fitted in with the general nature of the tenancy which those incidents might affect". On the provisions which gave no clear and comprehensive idea of the nature of a statutory tenancy, the courts in England had been slowly "trying to frame a consistent theory"".(') "making bricks with very insufficient statutory straw".(3 ) Evershed M. R. in Boyer v. Warbey(4) said : "The character of the statutory tenancy, I

(I) f]928]2K.B.117.

(2) Scrutton L. J. in Has!cinsv. Lewis[I93I] 2 K.B. I (9)

(3) Scrutton L.J. in Keeves v. Dean [1923] (93) L.J.K.B. 203 (207).

(4) [1953]2 Q.B. 234.

have already said, is a very special one.

It has earn~ many epithets, including •monstrum horrendum", and perhaps it has never been fully thought out by Parliament". Courts in England have held that a statutory tenant has no estate or property in the premises he occupies because he retains possession by virtue of the Rent Acts and not as being entitled to a tenancy; it has been said that he has only a personal right to remain in occupation, the statutory right of "irremovability",

and nothing more.

We find it difficult to appreciate how in this country we can proceed on the basis that a tenant whose contractual tenancy has determined but who is protected against eviction by the statute, has no right of property but only a personal right to remain in occupation, without ascertaining what his rights are under the statute.

The concept of a statutory tenanr having no estate or property in the premises which he occupies is derived from the provisions of the English Rent Acts. But it is not clear how it can be assumed that the position is the same in this country without any reference to the provisions of the relevant statute.

Tenancy has its origin in contract. There is no dispute that a contractual tenant has an estate or property in the subject matter of the tenancy, and heritability is an incident of the tenancy.

It cannot be assnmed, however, that with the determination of the tenancy the estate must necessarily disappear and the statute can only preserve his status of irremovability and not the estate he had in the premises in his occupation.

It is not possible to claim that the "sanctity" of contract cannot be touched by legislation.

It is therefore necessary to examine the provisions of the Madhya Pradesh Accommodation Control Act, 1961 to find out whether the respondents' predecessorsin-interest retained a heritable interest in the disputed premises even after the termination of their tenancy.

Section 2(i) of the Madhya Pradesh Accommodation Control Act, l961 defines 'tenant' to mean, unless the context otherwise requires :

"a person by whom or on whose account or behalf the rent of any accommodation is, or, but for a contract express or implied, would be payable for any accommodation and includes any person occupying the accommodation as a subtenant and also any person continuing in possession after the termination of his tenancy whether before or after the commencement of this Act; bnt shall not include any person against whom any order or decree for eviction has been made".

The definition makes a person continuing in possession after the determination of his tenancy a tenant unless a decree or order for eviction has been made against him, thus putting him on par with a person whose contractual tenancy still subsists.

The incidents of such tenancy and a contractual tenancy must therefore be the same unless any provision of the Act conveyed a contrary intention. That nuder this Act such a tenant retains an interest in the premises, and not merely a personal right of occupation, will also appear from section 14 which contains provisions restricting the tenant's power of subletting.

Section 14 is in these terms :

A "Sec. 14 Restrictions on sub-letting.-(!) No tenant shall;

without the previous consent in writing of the landlord-

( a) sublet the whole or any part of the accommodation held \JY him as a tenant; or

{b) transfer or assign his rights in the tenancy or in any part thereof.

(2) No landlord shall claim or receive the payment ot any sum as premium or pugree or claim or receive any con·

sideration whatsoever in cash or in kind for giving hjs con sent to the sub-letting of the whole or any part of the 2:com modation held by the tenant.'"

There is nothing to suggest that this section does not apply to all tenants as defined in section 2(i). A contractual tenant has an estate 01 interest in premises from which he carves out what he gives to the sub-tenant.

Section 14 read with section 2(i) makes it clear that the so-called statutory tenant has the right to sub-let in common with a contractual tenant and this is because he also has an interest in the premises occupied by him.

Considering the position of the sub-tenant of a statutory tenant in England, Lord De_nning said in Solomon v.

Orwell.(') "When a statutory tenant sub-lets a part of the premises he does not thereby confer any estate or interest in the sub-tenant.

A statutory tenant has no estate or interest in himself and he cannot carve something out of nothing.

The sub-tenant, like the statutory tenant, has only a personal right or privilege." In Englanc! the statutory tenant's right to sub-let is derived from specific provisions of the Acts conceding this right to him; in the Act we are concerned with in this appeal, the right flows from his status as a tenant. This is the basic difference between the English Rent Restrictions Acts and the Act under consideration and similar other Indian statutes.

In a Special Bench decision of the Calcutta High Court, Krishna Prasad Bose v. Sm. Saraiubala Dasi,( 2 ) Bachawat J. considering the question whether a statutory tenant continuing in occupation by virtue of the West Bengal Premises Rent Control (Temporary Provisions)' Act, 1950 could sub-let the premises let to him, said :

"The Rent Control and Tenancy Acts create a special world of their own.

They speak of life after death.

The statutory tenancy arises phoenix-like out of the ashes of the contractual tenancy.

The contractl\lll tenant may die hut the statutory tenant may live lone thereafter.

The statutorv tenant is an ex-tenant and yet h~ is a tenant." ·

The concept of statutory tenancy under the English Rent Acts and under the Indian statutes like the one we arc concerned with in this appeal rests on different foundations. It n; ust therefore be held that

(1) [1954] l All l".R. 874.

(2) 65 Cal. W.N. 293 (297-298).

l . , .

the predecessors-in-interest of the present respondents had a heritable A interest in the premises and consequently the respondents had the right to prosecute the appeal in the High Court.

Mr. Gupte's first submission thus fails.

On the grouod of default, it is not disputed that the defendants tendered the amount in arrears by cheque within the prescribed time.

The question is whether this was a lawful tender. It is well-established B that a cheque sent in payment of a debt on the request of th" creditor, unless dishonoured, operates as valid discharge of the debt and, if the cheque was sent by post and was met on presentation, the date of payment is the date when the cheque was posted.

The question however still remains whether in the absence of an agreement between the parties, the tender of rent by cheque amounts to a valid discharge of the obligation.

Earlier, we have extracted a passage from the High C Court's Judgment on this aspect of the case.

We agree with the view taken by tha High Court on the point.

Rent is payable iii the same manner as any other debt and the debtor has to pay his creditor in cash or other legal tender, but there can be no dispute that the mode of payment can be altered by agreement.

In the contemporary society it is reasonable to suppose such agreement as implied unless the circumstances of a case indicate otherwise.

In the circumstance of this D case, the High Court, in our opinion, rightly held that the cheque sent to the plaintiffs amounted to valid tender of rent.

The second contention urged on behalf of the appellants must also be rejected.

Mr. Gupte's last contention relates to the plaintiffs' bona tldc requirement of the premises.

The trial court found on the evidence that the plaintiffs' claim was unjustifi.ed.

The first court of appeal reversed that finding and held that the plaintiffs' requirement was bona fide.

The High Court in second appeal agreed wi\IJ.. the trial court in holding that the landlord had no bona fide requirement.

Mr. Gupte contended that the High Court had no jurisdiction in second appeal to upset the finding of the lower appellate court on this issue which, according to him, was a finding of fact.

Mr. Nariman for the respondent relied on the decision of this Court in Madan Lal Puri v.

Sain Das Berry(') to argue that the question was a mixed question

of law and fact and that it was within the jurisdiction of the High Court in second appeal to examine the correctness of the finding. In answer Mr. Gupte referred to another decision of this Court Mattu/al

v. Radhey Lal(') which, relying on an earlier decision of this Court in Sarvate T. B. v. Nemi Chand, (3) held that such a finding was one of fact and not a finding on a mixed question of law and fact.

We do not think that for the purpose of this case we need express any opinion on the apparent conflict between these two decisions.

Plaintiffs' case was that they had cloth and grocery business at village Nadan and that they desired to start a wholesale cloth and grocery business

at Satna. The trial court's finding was based inter alia on the evidenoe

(I) AIR !973S.C.R.585.

(2) A.LR. 1974 S.C.1596.

(3) 19661\1.P.L.l. 26.

F •

that the plaintiffs had not adequate funds to start a new wholesale business.

The lower appellate court reversed the finding of the trial court on the ground that there was no evidence that the plaintiff had no money to start a new business; the lower appellate court's finding rests maillly on this consideration.

The High Court pointed out that plaintiff Damadidas alias Damadi Lal (P. W. 2) stated in his evidence that their income from the business at Nadan was sufficient "only for meeting the expenses of livelihood"; plaintiff Tirath Prasad (P.W. 6) also admitted that "our present income is not sufficient even for our maintenance because there are many members in the family".

It thus appears that the lower appellate court overlooked a very material part of the evidence bearing on the question. It is well established that if a finding of fact is arrived at ignoring important and relevant evidence, the finding is bad in law. (see Radha Nath Seal v.

Haripada Jana & Ors.(1).

We therefore think that the High Court was within its jurisdiction in setting aside the finding of the lower appellate court and restoring that of the trial court on this poinL

In the result the appeal fails and is dismissed but in the circumstances of the case we make no order as to costs.

P.B.R.

Appeal dismissed.

(1) A.LR. 1971 S.C. 1049.

PARASHRAM AND OTHERS

Y. V. CHANDRACHUD

R. S. SARKARIA

A. C. GUPTA, JJ.

S. 12(1y(a)

Section 12(1)

s. 12(1 )(a)

s. 13(2)

Ved from the English Rent Act

[1964] 4 SCR 892

[1973] 1 S.C.R. 850

s. 2(i)

Section 14

s. 2(i)

section 12(1)

Sec. 12

section 12

section 12(1)

section 12(1)(a)

section 13

section 12(1)(a)

section 13(2)

section 13

section 12(3)

Section 12(3)

section 13

section 15

section 49(1)

Housing Repairs and Rent Act, 1954

Rent Restrictions Act

Section 2(i)

section 14

Section 14

Sec. 14

section 2(i)

Section 14

section 2(i)


coMMisstONER bF AGRICuLTURAL iNcoME TAX, A

TRIVANDRUM

Sl\H. LUCY KOCHUVAREED • May 7, 1976 B • "

[A. C. GUPTA AND JASWANT SINGH, JJ, J ,, " Kera/a Agricultural Income Tax Act, 1950, ss. 34 and 35-Rt1'isio1111l power of Con1n1issioner and assessi11g 'escaped assessn1en1', scope of.

The asscssee made a full disclosure of his income and claimed expenses incurred for the maintenance of his immature rubber plantations as deductions.

The Agricultul)ll Income Tax Officer, after considering the maUer, allowed such deductions as he thought proper. The appellant-Commissiouer, in exercise of c

his revisional powers under s. 34, Kerala Agricultural Income Tax Act, 1950, issued notice to the respondent (widow of the asoessee) proposing to revise the assessment on the ground that the deductions allowed were excessive. The appellant, after considering the rcspondenfs objections, held that the deductions allowed were excessive and remanded the matter to the Agricultural Income Tax Officer for fresh disposal according to Jaw. At the in.ranee of the respon dent, tho question whether the appellant had jurisdiction to pass the order D under s. 34 was referred to the High Court, and the High Court, on the view that it was a case of re-opening escaped assessment held, relying on Ma/raraja. dhiraj Sir Kamesltwar Singh v. State of Bi/tar, (1959) 37 I.T.R. 388 (SC),

that the ower of revision vested in the Commissioner under s. 34 could not be invoked for the purpose of assessing income that had escaped ........, ent,

and that such income could be assessed only by resorting to the procedure prescribed by s. 35, \\ithin the time limit presttibed therein.

A!lowin11 the appeal to this Court, E

HELD : ( !) Every case of under-assessment is not a case of escaped assess ment. The Agricultural Income Tax Officer may have commiUcd nn error in allowing the deduetiOtlS to the extent he did, but he did so after applying his miiid to th~ claims. This is not a case where tho officer omitted to ...... any item of income disclosed in the assessee's return as in the case relied on by the High Court and as in Kamal Slngf1 v. C./.T, (1959) 35 J.T.R. I (SC) • . Therefore, it is not a ease of reopenlng escaped assessment. [662FHl F Deputy Commisdoner Qf Agricultural /n<:ome-tax arrd Sales Tax, Quilo" and another v.

Dharraloksltmi Vilas Casfrew Co.,

(1969) 24 S.T.C. 491, followed.

(2) Since it fa not a case of escaped assessment, tho appellant had jurisdic !ion to make the order under s. 34. [663BJ ·

CIVIL APPELLATE JURISDICT!O).f : Civil Appeal Nos. 793 to 794 G • of 1971.

Appeal by Special Leave from the Judgment and order dated the 7th August, 1970 of the Kerala High Court at Ernakulam in ~

Income Tax Reference No. 9 of 1968.

T. S. Krishnamoorthy Iyer, N. Sudhakara11 and K. M. K. Nair; for the Appellant (ln CA 793/71) H

K. M. K. Nair; for the appellant (In C.A. 794/71). 44-833 Sup. CT/76

658 SUPREiE coiJRi: REPORTS [i976} SUPPLEMENTARY

A D. V. Patel and A. S. Nambiar; for the Respondent.

The Judgment of the Court was delivered by

. GUPTA, J.-One T. V. Kochuvarced who owned rubber planta lions m Tnchur was assessed by the Agricultural Income-tax olhccr,

incrnu, on a net agr1cu1tura1 mcome ot Ks. 31"00.t/- and B !<.s. Ju,~Jb/- respectively tor the assessment years l\IJ9-60 and 1\160-ol.

Jhe assessee nad in his possession immature rubber p1antat10n covering 193 acres during the assessment year 1959-60 and 2\13 acres durmg tne assessment year 1960-61. In compu:ing the income for the saiu two years, the Agricultural Income-tax Otnccr had dis al.Jawed om of the expenses claimed for the upkeep and maintenance

of the immature area Rs. 2500/- for the year 1959-60 and C Rs.3500/- for the year 1960-61. T. V. Kochuvareed died in 1961 leaving behind him as his heir and legal representative his wife who is , the respondent before us.

On March 13, 1963 the Commissioner of AgricuJtural Income-tax issued a notice under section 34 of the Kerala Agricultural Income-tax Act, 1960 to the respondent, which was served on her on March 15, 1963, proposing to revise s1.10 motu the assessment for the said two years on the ground that D the deductions allowed were excessive and without any prOper basis as a result of which Rs. 16,800/- for the year 1959-60, and Rs. 25,800/- for 1960..61 had "escaped assessment".

The responldent was asked to me objections, if any,. within fifteen days of the. receipt of the notice. The respondent in her objection contended that the proposed revision of her husband's income which was said to have "escaped assessment" was outside the scope of section 34.

E On this objection another notice was served on her on September 26, 1966 stating that , the expression "escaped assessment'' used in the earlier notice was inadvertent and asking the respondent to file further' objections, if she liked, after this eradication.

The respondent filed further objections on October 12, 1966 which the Commissioner re jected by his order dated August 23, 1967 and remanded the cases to the Agricultural Income-tax Officer for fresh disposal. The rele F vnnt part of this order is as follows : .·

"In these circumstances I find that the disallowance of Rs. 2500/- for 1959-60 and Rs. 3500/- for 1960-61

owards upkeep and maintenance of immature area is irregular as it is not based on any rational method.

The orders of assessment for these years arc therefore set aside and the cases arc remanded' to the Agricultural Income-tax Officer, Trichur, for fresh disposal according to Jaw after examining each item of expenditure individually and the general charges by applying the principles laid down by the Kerala High Court in its judgment reported in (1964) 58 IT~ 629."

At the fosiance of the respondent tJ\e Commissioner of Agricultural Income-tax referred t!1e following ques'.ion of Jaw to the High Court of Kerala under section 60(2) of the Kernla Agricultural Income-Ta" Act, 1950:

,. •

"Whether on the facts and in the circumstances of the A case the Commissioner has jurisdiction to pass an order in this case under section 34 of ,!he Agricultural Income-Tax Act, 1950."

The High Court by a majority held that the power of revision vested in the Commissioner under section 34 of the Act could not B be invoked for the purpose of assessing income that had "escaped assessmen'." and that such income could be assessed only by resorting to the p.rocedure under section 35 of the Act. In these appeals by special leave the appellant questions the correctness of this decision.

It is necessary to refer to the relevant provisions of the Act before proceeding to consider the contentions of the partie~. Section 3 provides that agricultural income-tax shall be charged for each financial year on the total agricultural income of the previous year at the rate or rates specified in the Schedule to the Act. Total agricultural income is defined in section 2( s) as the aggregate of all agricultural income mentioned in section 4 computed in accordance with the provisions of section 5 including all income of the description specified in section 9 and all receipts of the description specified in section lO(a), ( c) and ( d). Section 5 enumerates the deductions from the .total income which have to be made in computing the agricultural income.

Section 17 ( 1) of the Act requires every person whose total agricultural income during the previous year exceeded the limit which is not chargeable to agricultural income-tax, to furnish to the Agricultural Incometax Officer a return stating his total agricultural income in that year and the expenditure incurred by him out of that income. Section 18 deals with the powers of the Agricultural Income-tax Officer to assess the total agricultural income of the assessee and determine the sum payable by him. Section 19 authorises the Agricultural Income•tax Officer

to cancel the assessment in certain cases at the instance of the assessee and to make a fresh assessment in accordance with the provisions of section 18. Section 31 provides an appeal to the Assistant Com1nissi0ner against any order of assessment with which the assessee is dissatisfied. Sub-section (7) of the section requires the Assistant Commissioner to communicate the orders passed bv him disoosing of the appeal to the assessee and the Commissioner. Under section 32 an assessee obiecting to an order passed by a11 Assistant Commissioner may appeal to the aopellate Tribunal.. Sub-section (2) of the section oermits the Cnmmissioner. if he obierts to any order passed bv the Assistant C', nmmissioner under section 11, to d.irect the Al!ricultnral lnC<'mec

tax Officer to appeal to the appellate Tribunal against such order. Subsection (5) of section 32" provides that the apoellate Tribunal after giving both parties an opportunitv of being heard may pass sud1 order thereon as he thinks fit. The tribunal' is reciufred to communicate the 1mler tn the 11.~ssee and to the CnmmiSsfoner. Section 34 and section

~~ "'e th<> tw-' niost.imoortant sectinnsfor the puronse of these anneals.

_-H Sectk>n 34 which confers on Commfssk>ner rvi'sional power8 is in these terms ; .

660 suPREMll COURl' .!UlPORTS (197.6] SUPPLEMENTARY

"34. Revision.-(1) The Commissioner may, of bis own motion or on application by an assessce, call for the record of any proceeding under this Act which has been taken by any authority subordinate to him and may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such orders therecn as he thinks fit :

Provided that he shall not pass any order prejudicial to an assesscc without hearing him or givmg him a reasonable opportunity of being heard :

Provided further that an order passed declining to interfere shall not be deemed to be an order prejudicial to the assessee.

(2) Any .order passed under sulr&eetion (1) shall be

final subject to any reference that may be made to the High Court under section 60."

Section 35 which deals with incoJllt1 escaping assessment reads :

"35. Income escaping assessment.-( I) If for any reason agricultural income chargeable to tax under this Act has escaped assessment in any financial year or has been assessed at too low a rate, the Agricultural Income-tax Officer may, at any time within three years, of that end of that year serve on the person liable to pay the tax or in the case of a company on the principal officer thereof a notice containing ull or any of the requirements which may be included in a notice under sub-5ection (2) of section 17 and may proceed to assess or re-assess such income and the provisions of this Act shall so far as may be, apply accordingly as if the notice were a notice issued under that sub-section;

Provided that the tax shall be charged at the rate at which it would have been charg~ if such lnccime had not escaped nsscssment or full Rs5essment, as tho case may be;

Provided further that the Agricultural Incomo-tax Officer shall not issue a notice under this sub-section unless he has recorded his reasons for doing so.

(2) No order of assessment under section 18 or of assessment or reassessment under sub-section ( 1) of this section shall be. made after the expiry of three years from the end of the year in which the a\; ricultural income was lirst assessable;

Provided that where a notice under sub-section ( 1) has been issued within the time therein limited, the assessment or H reassessment to be made in pursuanee of such notice may be made before the expiry of one yew; from the date of .t.he ser~ vice of the notice even If at tho titrul of the assessment or missessment the three rears aforesaid have already elapsed;

c. A. I. T. v. LUC'/ (Gupta, J.) 661

Provided further that nothing contained in this section A " limiting the time within which any nction may be taken or any order, assessment or reassessment may be made shall apply to a reassessment made under section 19 or to an assessment or reassessment made in consequence 'of, or to give effect to any finding or direction contained in, an order under section 31, section 32, section 34 or section 60. •

(3) In computing the period of limitation for the pur- B poses of this section, any period during which the assessment proceeding is stayed by an order or injunction of any

court or other competent authority shall be excluded." Section 35 as it originnlly stood contained only the provision now contained in sub-section ( 1) including the first proviso. The second proviso to sub-section (1), and sub-sections (2) and (3) were introducc ed , and the ori~ provision was renumbered as sub-section ( 1) by an amending Act m 1964, but the newly avisions were given effect ,

/ from April 1, 1958. Section 35 as extr above was, therefore, applicable in a proper case during the two assessment years we are concerned with. It would appear that sub-section (2) prescribes a time limit of three years for reassessment under sub-section ( 1) of this section from the end of the year in which the agricultural income was first D assessed though the first proviso to sub-section (2) extends the time for reassessment in a: case where notice under sub-section ( 1 ) had been issued within the time prescribed by the sub-section, till the expiry of one year from the date of service of the notice even if at the tune of ... 'reassessment the prescribed period of three years had elafted. The second proviso to sub-section (2) states that the limitation o time prescribed by section 35 will not apply to an assessment or reassessment E

~ made in consequence of any direction c:cntained in an order under section 31, section 32, section 34 or section 60. Section 36 empowers the authority which passed an order on appeal or revision, within three years from the date of such order, and the Agricultural Inc:cme-tax Officer within three years from the date of any assessment made by him, to rectify any mistake apparent from the record of the appeal. revision, assessment or refund as the case may be. Sub-section (1) of F section 60 provides that the nsscssce or the Commissioner may require the appellate tribunal to refer to the Hiff, Court any question of law arising out of an order under section 32( ). Sub-section (2) of section 60 permits an ass= who is served with a noticq of an order under section 34 which is prejudicial to him to require the Commissioner to refer to the High Court any question of law arising out of such order.

G • The majority decision of the Hif Court took the view that this was a case of escaped assessment and t the power of revision conferred on the Commissioner by section 34 of the Act could not be utilised for the purpose of reassessment . of income that e'Scaped assessment disregarding the provisions of section 35. Sub-s"tion (1) of section 34

l makes it clear that the power of revision Is exercisable "rubject to the provisions of this Act". It was pointed out in the majority judgment H that section 3 5 contains a specific provision for reassessment of income that had escaped nssetmlCnt and It was held that revlsiooal powers under

s~![op 34 eould be vailed of to reopen C11Ses of escapM assessment

SUPREME COURT REPORTS (1976] SUPPLEMENTARY

only within the time limit and in accordance with the procedure prescribed by section 35. Before us, Mr. Patel, learned counsel for the respondent, reiterated the same contention. Mr. Krishnamurthy Iyer appearing for the appellant challenged the decision of the High Court on two grounds : ( 1) the income sought to be reassessed was not income that bad "escaped" assessment and, as such, the provisions of section 35 are not relevant for the present purpose, and (2) assuming this was a case of income escaping assessment, even then the second proviso to sub-section (2) of section 35 r.emoves the bar of time for any assessment or reassessment made to give effect toa direction under section

34. On the first question the High Court found, relying on the decision of this Court in Maharajadhiraj Sir Kameshwar Singh v.

State of Bihar, (') that this was a case of escaped income. In Kameshwar Sihgh's case one of the provisions that came up for interpretation was section 26 of the Bibar Agricultural Income-Tax Act, 1938 which is similar in many respects to section 35(1) of the Act we are concerned with in this appeal.

It was held in Kameshwar Singh's case that under section 26 of the Bihar Act, the Agricultural Income-tax Officer was competent to "assess any item of income which he had omitted to tax earlier, even though in tbc return that income was included and the Agricultural Income-tax Officer then thought that it was exempt". The same view was taken in an earlier decision of this Court, Kamal Singh v. Commissioner of Income-tax;(') that : "even if tl1e assessee has submitted a return of bis income, cases may well occur where tl1c whole of the income has not been assessed and such part of the income as has not been assessed can well be regarded as having escaped assessment". But the question that arises in the case before us is not covered by either of these decisions. This is not a case where the Agricultural facome-tax Officer omitted to assess any item of income disclosed in the assessee's return. Here the assessee made a full disclosure of his income and claimed certain deductions. It is not disputed that he was entitled to claim some deductions for the maintenance of the immature rubber plantation. The Agricultural Income-tax Officer allowed such deductions as he thought proper after considerin!! the matter. The Commissioner in remanding the 'cases to the A)U"icultnral Income-tax Officer "for fresh disposal accordinl! to Jaw" thou11ht that the deductions allowed were excessive. The Agricultural Income-tax Officer mav have committed an error in allowing deductions to the extent he did. but he did so after applying his mind to the claim. Every case of under assessment is not a case of escaped assessment.

The view we tnke finds suooort from the decision 0f this Court in Deputv Con11nisslo11Pr nf Aer; rulturnl lnronze-tux anrl Sales Tax, Qullon and another v. Dhanalakshmi Vilas Cashew Co.(')

On the other question. the Hil'h Court held that the order r>f the Commissioner directing.the Agricultural' Income-tax Officer to reassess the income for the two vears was bad, having been made after the expiry of the period prescribed bv section 35 for the reassessment of income that bad escaped assessment. For the appellant it was contended

(!) (IO<Q1'7 TLR. 388,

(2) (1959) 35 l.T.R.1. m n969l 24 s.T; C.49t.

• "

that the second proviso to section 35 removed the limitation of time in A the case of a reassessment made in consequence of a direction or order under section 34. As we have held that this was not a case of escaped assessment, this other question does not arise for consideration.

111 our opinion the Commissioner in this case had jurisdiction to make the order he did under section 34, and the question referred to the High Court under section 60(2) should therefore be answered in B the atfirmative. The appeals ara allowed, but in the circumstances of the case we make no order as to costs.

V.P.S.

Appeals allowed.

COMMISSIONER OF AGRICULTURAL INCOME TAX, TRIVANDRUM

LUCY KOCHUVAREED

A. C. GUPTA

JASWANT SINGH, JJ

Agricultural Income Tax Act, 1950

ss. 34 and 35

s. 34

s. 34

s. 34

s. 35

s. 34

section 34

section 34

section 60(2)

section 34

Agricultural Income-Tax Act, 1950

section 34

section 35

Section 3

section 2( s)

section 4

section 5

section 9

Section 5

Section 17

Section 18

Section 19

section 18

Section 31

section 32

section 11

section 32

Section 34

section 60

Section 35

section 17

section 18

section 19

section 31

section 32

section 34

section 60

Section 35

Section 35

section 35

section 31

section 32

section 34

section 60

Section 36

section 60

section 32( )

section 60

section 34

section 34

section 35

section 34

section 3

section 35

section 35

section 35

section

34

section 26

Bibar Agricultural Income-Tax Act, 1938

section 35(1)

section 26

section 35

section 35

section 34

section 34

section 60(2)