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VISHWA VIJAI BHARTI

FAKHRUL HASAN & ORS.

May 4, 1976

[Y. V. CHANDRACHUD AND P. N. SHINGHAL, JJ.]

Civil Procedure Code-Secs. 100-103-Powers of HiRh Court to set aside finding of facts in a second appeal-If High Court must discuss evidence while going into questions of facts.

Entries in record of rights-Presumptive value of-Presumption if applies ta fdrged or fraudulent entries--Efject of -fraud or forgery on a document.

Mahant Bharati of temple of Shankarji Maharaj gave lands belonging to the temple_ on lbeka to one Sukai for a period of 10 years. The Mabant obtained a decree for eviction against Sukai but it could not be executed because of the objectionc; raised by the respondents on the ground that they have been cultivating the lands for several years and they were entitled to continue in po..§_session as Sirdars in spite of the decree against Sukai. The lessor, therefore, instituted two separate suits under Order 21 Rule 103, C.P.C. Respondents contended

inter a/ia, that they had become hereditary tenants and they must be deemed D to have become Adhivasis of the land. The trial court dismissed the suit. Tho district court reversed the finding of the trial court in appeal and held that the appellant being the Bhumidar of the lands was entitled to recover possession thereof from the respondents. The district Judge held that the entries in the record of rights showing the occupation of the respondents were fraudulent.

The Hi$h Court in second appeal upset the decree of the district court .

Allowing the appeal,

HELD : (I) The only question before the High Court was whether the entries on which the respondents relied were genuine or fraudulent.

This is a question of fact and the High Court had no jurisdiction to set aside the finding on that question in second appeal. The High Court erroneously assumed that 1he district Court had not given any finding on the question of fraud. The district Court had given at least half a dozen reasons for holding that the entries were fictitious and were made surreptitiously and fraudulently. [521H; 522A-H]

(2) If the High Court thought that the district court had not recorded a clear finding on that issue and if the High Court were to determine under section

103 C.P.C. the issue under whether the entries were fraudulent or not i• was noc.essary for it to di6cuss the evidence. But, the High Court instead placed blind and easy reliance on the entries which are utterly uninspiring.

[523A-B]

(3) Entries in the revenue record ought generally to be accepted at their

face value and courts should not embark upon an appellate enquiry into their G correctness. But the presumption of correctness can apply only to genuine, not forged or fraudulent entries. The distinction may be fine but it is real. Fraud

and forgery rob a document of all its legal effect and cannot found a claim to possessory title. [523B-CJ

ClvIL APPELLATE JURISDICTION : Civil Appeal Nos. 1122 and 1123 of 1970.

Appeals by special leave from the Judgment and order dated the 13th February 1970 of the Allahabad High Court in S.A. Nos. 267 and 268 of 1962.

SUPREME COURT REPORTS [1976] SUPPLl!J.ll!NTARY

S. C. Manchanda, S. K. Bagga, (Mrs.) Sureshta Bagga and (Ml.is) Y ash Bagga; for the Appellant.

R. N. Sharma and C. P. Lal; for Respondent.

The Judgment of the Court was delivered by

B CHANDRACHUD, J .-These appeals by special leave arise ou• .cf

the judgment rendered by the High Court of Allahabad on February 13, 1970 in Second Appeals 267 and 268 of 1962. ··

Mahan! Vishwa Nath Bharthi, the sarbrahkar of the temple of Shankarji Maharaj, Khowja, gave lands belonging to the temple, admeasuring about 44 acres, on Theka to one Snkai. The Thekanama was executed on June 5, 1942 to be effective from July 1, 1942. The lease was to enure for a period of 10 years and was due to expire on June 30, 1952. The Thekanama contained an express term that the Thekadar will not sub-let the leasehold property and that on the expiry of the period of lease he shall hand over the possession of the propert-,. to the lessor.

D In spite of this term against sub-letting, on July 27, 1942 the lesaee executed a power of attorney in favour of his nephews Haqiqullah and Ghani, apparently authorising them to c.ultivate the lands on his behalf. On the expiry of the period of lease the Mahan! instituted a suit for ejectment of the lessee which was decreed on November 25, 1952.

The Mahant then filed an application for executing the decree but an objection was raised thereto by the respondents, Sanaullah and Fakhrul Hasan who are respectively the brother and cousin of Haqiqullah. They filed two separate applications objecting to the execution of the decree on the ground that they had been cultivating lhe lands tor several years and that they were entitled to continue in possession as Sirdars. On June 2, 1954 the objection raised by tl1e respondents was allowed by the executing court which passed an order that the possession of the lands which on March 13, 1953 was given to the decree-holder in execution of the decree should be re-delivered to the respondents.

Accordingly, the respondents were put back in possession in July, 1954.

The lessor then instituted two separate suits under Order XXI, Rule 103 of the Civil Procedure Code, the suit filed against Fakhrul Hasan being No. 17 of 1954 and the one against SanauUah being No. 20 of 1954. His case was that the lands were given on lease to Sukai on condition that he shall not sublet them, that a decree for possession was accordingly passed against Snkai on the expiry of the lease and that the respondents had got their names entered fraudulently in the revenue record as the cultivators of the lands.

Respondents took np various inconsistent pleas in answer to the suits. They contended that they were in possession of the lands with the consent of the original lessor, that they liad become hereditllry

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V, V. BHARTI v. F. HASAN'(Chandrachud, J.) 5 21

tenants and that they must be deemed to Jrn ve become Adbivasis of A the lands.

The learned Munsiff who tried the suits framed six issues, issue No. 2 being whether the respondents were Sirdars of the lands as

alleged in paragraphs 17 and 18 of their written statements. This

isue was referred to the revenue court for decision.

The lessor hav- B ing died during the pendency of those suits, the appellant was substituted in his placed as the Mahant of the Math.

The revenue court found in favour of the respondents and accepting that finding the ' trial court dismissed the suits.

In appeal, the District Court took < ' the view that there was no justification for referring the particular , issue to the revenue court and that the trial court ought to have decided all the issues for itself.

The District Court accordingly rec manded the suit with a direction that the Munsiff should decide the suit afresh uninfluenced by the finding given by the revenue court.

The trial court then assessed the evidence, held in favour of the respendents and dismissed both the suits by its judgment dated Kovember

17, 1961.

The District Court reversed the findings of the trial court in n appeal and held that the appellant, being the Bhumidar of the lands,

wa~ entitled to recover possession thereof from the respondents.

The appeals were accordingly allowed by the District Court by its judgment dated April 18, 1962.

The respondents filed Second Appeals Nos. 267 and 268 of 1962 against the decrees passed by the District Court. The High Court E having allowed those appeals the Mahan! of the Math has filed these appeals by special leave.

The decision of these appeals involves a very narrow question as regards the power of the High Court in second appeal.

Section l 00 of the Code of Civil Procedure provides to the cxtci1t material that an appeal can lie to the High Court from a decree passed in appeal by any court subordinate to it if the decision is contrary to law or to F .. some usage having the force of law.

The only question for decision before the High Court was whether the respondents were entitled to

the protection of section ZO(b) (ii) of the U.P. Zamindari Abolition '

and Land Reforms Act, 1 of 1951.

That section provides, in so far

A as material, that every person who was recorded as an occupant of any land in the Khasra or Khatauui of 1356 Fasli but who was not G in possession in the year 1359 Fasli shall be called an 'Adhivasi' of • the land and shall be entitled to retain possession thereof. The names of the respondents were entered as occupants in the revenue record of 1356 Fasli but after considering the entire evidence, the District t ,,

Court rejected those entries on the ground that they were fraudulent.

Thus, the only qnestion before the High Court was whether the entries on which the respondents relied were genuine or fraudulent.

That H is a question of fact and the High Court had no jurisdiction to set aside in second appeal the finding recorded on that question by the District Court.

SUPREME COURT REPORTS

(1976] SUPPLEMENTARY

The High Court assumed erroneously that the District Court had not given any finding on the question of fraud and on that assumption, it accepted mechanically the entries in the revenue record showing that the respondents were in possession of the lands as occupants.

The learned District Judge, by his judgment dated April 18, 1962 had gone in great details mto the question whether the particular entries showing that the respondents were occupants of the land were genuine or fraudulent.

Those entries are Bxs. A-5 to A-12.

As pointed out by the learned Judge, the original lessee Sukai had migrated to Bombay after handing over the charge of the lands to his nephews who got the names of the respondents entered in the revenue record "surreptitiously". The learned Judge points out that Fakhrul Hasan, who alone was examined on behalf of the respondents, was just a lad of 10 at the time when he is alleged to have entered into adverse possession of the lands.

Neither Sukai, who was the original lessee, nor Haqiqullah and Ghani who were said to be cultivating the lands under a power of attorney executed by Sukai, were examined by the respondents. The other respondent Sanaullah was not living in the village at all and is said to have been doing business in second-hand spares in Bombay.

Haqiqullah was summoned by the appellant for producing the power of attorney dated July 27, 1942 and taking advantage of that opportunity the respondents cross-examined him. Haqiqullah, being a close relation of the respondents was only too willing to oblige them by giving pre-conceived answers in the so-called cross-examination.

But the learned trial Judge overlooked that Haqiqullah was only summoned to produce a document and by reason of section 139 of the Evidence Act, he could not become a witness in the case and could not therefore have been cross-examined on the merits of the case. But, even after considering the evidence of Haqiqullah the learned District Judge recorded a finding that "The entries were all fictitious".

He then proceeded to examine the documentary evidence in the case and held:

"After a careful consideration of the pros and cons of the whole case I am of opinion that the Thekedar Sukai had cultivated the Sir and Khudkashi of the temple land which was given to him on Theka through his brother and his cousin, namely Haqiqullah and Ghani and these two persons in order to create permanent rights in the Theka property, had fraudulently got the names of their boys entered in the revenue records right from the inception.

I am also of the opinion that these boys of the house-hold never cultivated the land and they acquired no right, title or interest in the Theka land."

We find it quite difficult to understand how the High Court could hold that the District Court had not recorded any "clear finding" that the entries in the revenue record for the year 1356 Fasli were H fraudulent. Evidently, the attention of the High Court was not drawn to at least half a dozen reasons given by the District Court for holding that the entries were "fictitious" and wem made "surreptitiously" and "fraudulently''.

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v. v. BHARTI v. F. HASAN (Chandrachud, !.) 5 2 3

We could have even appreciated if, under section 103 of the Code of Civil Procedure, the High Court were to determine the issue whether the entries were fraudulent, if it thought, wrongly though, that the District Court had not recorded a clear finding on that issue.

But the High Court did not discuss the evidence at all and chose instead to place a blind and easy reliance on the entries which are utterly uninspiring.

It is true that the entries in the revenue record ought, generally, to be accepted at their face value and courts should not embark upon an appellate inquiry in to their correctness. But the presumption of correctness can apply only to genuine, not forged or fraudulent, entries. The distinction may be fine but it is real. The distinction is that one cannot challenge the correctness of what the entry in the revenue record states but the entry is open to the attack that it was made fraudulently or surreptitiously. 'Fraud and forgery rob a document of all its legal effect and cannot found a claim to possessory title.

In Amba Prasad v. Abdul Noor Khan and Ors.('), it was held by this Court that section 20 of the U.P. Act 1 of 1951 does not require proof of actual possession and that its purpose is to eliminate inquiries into disputed possession by acceptance of the entries in the Khasra or Khatauni of 1356 Fasli. While commenting on this decision, this Court observed in Sonawati and Ors., v. Sri Ram and Anr. ( 2 ) that "the Civil Court in ad judging a claim of a person to the rights of an adhivasi is not called upon to make an enquiry whether the claimant was actually in possession of the land or held the right as an occupant : cases of fraud apart, the entry in the record alone is relevant". We have supplied the emphasis in order to show that the normal presumption of corectness attaching to entries in the revenue record, which by law COJ!Stitutc evidence of a legal title, is displaced by proof of fraud.

For these masons we allow these appeals, set aside the judgment of the High Court and restore that of the District Court.

The suits filed by the appellant shall stand decreed. Respondents shall pay to the appellant the costs of these appeals in one set.

P.H.P.

Appeals allowed.

(I) [1964]7 S.C.R. 800.

(2) [1968] I S.C.R. 617, 620.

VISHWA VIJAI BHARTI

FAKHRUL HASAN & ORS

Y. V. CHANDRACHUD

Civil Procedure Code

Order 21 Rule 103

C.P.C

section

103

C.P.C

the Code of Civil Procedure

Land Reforms Act

section 139

section 103

the Code of Civil Procedure

section 20


f / .. ,. , . . , ;: il

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DEVARAPALLI LAKSHMINARAYAN~ REDDY & ORS .

V. NARAYANA REDDY & ORS.

May 4, 1976

[R. S. SARKAillA, P. N. SHINGIIAL ANI> JASWANT SINGH, JJ.]

Code of Criminal Procedure, 1973, Ss. 156(3) anti 20lnresligati?n.t under-Difference bNWU/1 objcts of-Sec. 190(l){a) ''takillg cogni:wnd', meanillf o(.

On receiving a complaint :1gain;, t the appellants, for allegedly ~:ommiuin~ offences under ss. 147, 148, 307, 395, 448, 378 and 342, J.P.C., the Judicial Mngistiate, F.C. _Dhrmavaram, forwarded it to the . po!icc. under ~- 156(]) Cr.P.C. for investumtton. l11e appellants filed an npphcnlton 111 the Htgh Court under s. 482 Cc.P.C. 1973, R!r..ttDSt the 1\f:lgi.trnte's order, but the same wa.• dismis!>ed.

It was contended befOre this Court that the complaint include.l offence$ triable exclusively by the sessions Court, and under s. 202( l) Proviso

l(a), Cr.P.C. 1973, the Magitrate was prohibited from directing the police to investigate it, that be was bound to proceed with it himclf before issuing pro cess to the accused. The liPpeal was; Inter :tlia, cOntC'ltcd on the ground thJt the powers conferred on the Magistr.Jte under ~. 156(3) of the Codo nre independent of his powr to send the ca e for in vctig.1tion under s. 202 of tho Code.

Section I ~60) can be invoked before the :'-la~:i strn te ttkt'5 COAnizance o! the case but s. 202 comes into operation only after he tart.; dc;1line: with the c:t'm rl<tint in ueiordnce with the pro¥iions of C:h:lpter XV.

DismC,, iog the appeal of the Court,

HELD: (I l The pov..., r to orJcr police invc, lig:•tion un, kr .~. 156(3) ;, diiTcrcnt from the power to direct invc, tigt \un conferred by s. ~(12 (I). 1 he two opcrnte in distinct spheres at different s lug.:.~.

The fir, t i~ cx~:rci!.llblc at the precopnizance stage, the second nt the post-co;:niz.am:e tage when the Magi:; trutc is in sei5in of the case. An investigation under s. 202 is ''for the pue of deciding wethcr or not there i~ ufficicnt ground for proceeding". 11.:1 obje.:t in.ot to inlti:1te a fresh c:.'C on rolicc report, but to ns, ist the M~S.i5:ru:e in completing procceJin~, already in,; titutd upon ; t cotnpl:<int before him. The stafo'e nt which \. 202 couiJ hl:utn.; opcn.tivc wu~ !lever rcacheJ in thi,

~:~-.e. [DOB-H; 53 I Jjj

(2} When on recivina a Nmpbint, tb~ Magitratc upplie~ his mind for th~ purpose' of proceedtng under s. 201) o.ud the sueeding cction5 in cbopter XV of lh<! Code or 1973, he is said to have taken cogni:wnce of the otfo:nce within the men in~ of s. 90(1)(~). _lf i!'s<ed or proceedin~ under Chap:er xv. he ha• 10 the utrctse or h11 <lt•creuon, taken uctlon of ome other k.ind, he cnnnot be •:.id to h:ve taken co~:n.it.ance or any olfc:nce. i'26D-G)

G Nlrmaliit Sinlt /loon\'. 1/1t Stutt: vi H'rll /Jo•IIJ; al am( llnr. [197JJ 3 S.C'.C. 753, referred to.

CRIMI.'\AL Al'l'flLATr. JL'J<rSDlCTI0:-1: Criminnl Ap(Xnl No. 219 or 197.5.

_ ( Appc<tl by bpl!cial leave from the judgment nnd orJtr dalt:d. th.: 20th October, 1975. of the Andhra Pradesh High Court <tt Hydcrahad

in Criminal Misc. Petition No. 1890 of 197.5).

1'. Ba.1i Reddy, and A. V. V. Na1r, for the appellants .

. OJ. R. K. Clwudlwry and B. Kania R11o, for rcpondnt No. l.

P. Ram Reddy, and P. Parameslzwara Rao, for respondent Nos. 2 and 3.

A ,. 'The Judgment of the Court was delivered by

J.-Whether in view of Clause (a) of the first Proviso to s. 202( U of the Code of Criminal Procedure, 1973, a Magistrate ' who receives a complaint, disclosing an offence exclusively triable by =<

the Court of Session, is debarred from sending the same to the police for investigation under s. 156(3) of the Code, is the short question B:

~ that falls to be determined in this appeal by special leave.

The queitioo arises in these circumstances : !- Reipondent 1 herein made a complaint on July 26 .. 1975 before -( •

... the Judicial Magistrate, First Class, Dharamavaram against the appel-

Ian~ herein alleging that on account of factions existing in village Thippapalli the appellants formed themselves into an unlawful assembly, c armed with deadly weapons, such as axes, spears and sticks, on the night of June 20, 1975 and entered the houses of several persons ....._ belonging to the opposite party, attacked the inmates and forcibly took

away jewels, paddy, ground-nuts and other valuables of the total value of two lakhs of rupees. It was furthyr alleged that the miscreants thereafter went to the fields and removed parts of machinery worth

- ov.:r Rs. 40,000/-, installed at the wells of their enemies. On these D -~ facls it was alleged that the accused had committed offences under Si. 147, 148, 149, 307, 395, 448, 378 and 342 of the Penal Code.

The otl'ences under ss. 307 and 395 are exclusively triable by the Court of Session.

The Magistrate on receiving the complaint for- " warded j.~ to the Police for investigation with tbis endorsement :

~ "Forwarded under s. 156(3), Cr. Procedure Code to the Inspector of Police, Dharmavaram for investigation and E .. report on or before 5-8-197 5." '

The appellants moved the High Court of Andhra Pradesh by a petition unckr s. 482 of the Code of Criminal Procedure, 1973 (which correip<>nds to s. 561-A of the old Code) praying that the order passed by the Magistrate be quashed inasmuch as "it was illegal, unjust and gravely prejudicial to the petitioners". The learned Judge F

r of the High Court, who heard the petition,. dismissed it by an order dated October 20, 1975.

Hence this appeal. ; Mr. Basi Reddy, appearing for the appellants contends that the

joo High Court has failed to appreciate the true effect of the changes brought by the Code of 1973. According to the Counsel, under the G

1 new Code. if a complaint discloses an offence triable exclusively by a court of Session, the Magistrate is bound to proceed with that complaint himself before issuing process to the accused. The point pressed into argument is that clause (a) of the first Proviso to s. 202(1), of the new Code peremptorily prohibits the Magistrate o direct investigation of such a complaint by the Police or any other person. The - cases. Gopal Das v. State of AssamC); Jamuna Singh v. Bhadai u Shah(2), referred to by the High Court are sought to be distinguished

(1) {1961) A.T.R. 1961 S.C. 986.

(2) {19641 s s.c.R. 37.

SUPREME COURT REPORTS

(1976] SUPPLEMENTARY

on the ground that they were decided under the old Code, s. 202 of which did not provide for any such ban as has been expressly enacted in the 1st Proviso to s. 202 of the new Code.

As against this, Mr. Ram Reddy, whose arguments have been adopted by Mr. Chaudahry, submits that the powers conferred on the Magistrate under s. 156(3) of the Cod~ are independent of his power to send the case for investigation under s. 202 of the Code; that the power under s. 156 (3) can be invoked at a stage when the Magistrate has no: taken cognizance of the case while s. 202 comes into operation after the Magistrate starts dealing with •the complaint in accordance with the Provisions of Chapter XV. It is urged that since in the instant case, the Magisrate had sent the complaint for police investigation withou.~ taking such cognizance s. 202 including the bar enacted therein, was not attracted. In the alternative, it is submitted that the ban in the 1st Proviso to s. 202, becomes operative only when the Magistrate after applying his mind to th~ allegations in the complaint and the other material,, including the statement of the complainant and his witnesses, if any, recorded under s. 200, is prima facie satisfied that the offence complained of ls triable exclusively by the Court of Session.

The point sough! to be made out is that a mere allegation in the complaint that the offence committed is one exclusively triable by the Court of Session, does not oust the jurisdiction of he Magistrate to get the case investigated by the police or other person.

The word "appears" according to Counsel, imports a prereauisite or condition precedent, the existence of which must be objectively and judicially established before the prohibition in the 1st Proviso to s. 202 becomes operative. It is added that in the instant case,, the existance of this condition precedent was not, and indeed could not be established.

It appears to us that this appeal can be disposed of on the firs-t ground canvassed by Mr. Ram Reddy.

Before dealing with the contention raised before us, it will be F appropriate to notice the relevant provisions of the old and the new Code.

Section 156 of the Code of 1973 reads thus :

"156(1). Any officer in charge of a police station may, without the order of a Magistrate, investigae any cognizable case which a Court having jurisdiction over the local area within the limits of such station would have power to inquire into or try under the revisions of Chapter XIII.

(2) No proceeding of a police officer in any such case shall at any stage be caUed in question on the ground that the case was one which such o!lker was not empowered under this section to investigate.

(3) Any Magistrate empowered under section 190 may order such an investigation as above-mentioned."

- ...

This provision is substantially the same as s. 156 of the Code of A 1898, excepting that in sub-s. (1) for the words "Chapter XV relating to the place of inquiry or trial," the words "Chapter xur have been substituted.

Sections 200 and 202 of the 1898 Code and the 1973 Code,. placed in juxtaposition, read as follows :

1898 Code s. 200 : A Magistrate taking cognizance of an offence on complaint shall at once examine the complaint and the witnesses present, if any, upon

oath and the substance of the examination shill! be reduced to writing and shall be signed by the complainant and the witnesses, and also

by the Magistrate ;

Provided as follows :-

(a} when the complaint is made in writing, nothing herein contained shall

b~ deemed to require a Magistrate to examine the complainant before transferring the case under section 192;

(aa) when the cpmphint is made in writing, nothing herein contained shall be deemed to require the examination of a complainant in any case in which the complaint has been made

by a Court or by a public servant acting or purporting to act in the discharge of his official duties;

(b) where the Magistrate is a Presidency Magistrate, such examination may be on oath or not as the Magistrate in each case thinks fit, and where the complaint is made in writing need not be reduced to writing; but the Magistrate may, if he thinks fit,

before the matter of the complaint is brought before him, require it to be reduced to. writing ;

1973 Code s. 200 : A Magistrate taking cognizance of an offence on complaint shall exmine upon oath the complainant and the witnesses present, if any, and the substance of such examination shall be reduced to \\>riting and shall be signed by the cmplai nant and the witness~, and also by the Magistrate.

Provided that, when the complaint is

made in writing, the Magistrate need not examine the complainant and the witnesses -

(a) if a public servant acting or purporting to act in the discharge of his official dutie~ or a Court has made the complaint; or

(b) if the Magistrate makes over the

case for enquiry or trial to another

Magistrate under section 192 ;

Providej further that if the Magistrate

make~ over the case to another Magistrate under section 192 after examining the complainant and the

witnesses, the latter Magistrate need not re-:!xamine them.

(c) when the case has been transferred

under section 192 and the Magistrate so transferring it has already examined the complainant, the Magistrate to whom it is so transferred shall not be bound to re-examine the complainant.

Stc. 202

Postponement of issue of Process :~

(l) Any Magistrate, on receipt of a complaint of an offence of which he is authorised to take cognizance, or

Sec. 202

Postponement of Issue of process :-

(1) Any Magistrate, on receipt of a complaint of a:n offence which he is authorised to take cognizance or

528 SUPREi\iE COURT REPORTS

[1976] SUPPLEMENTARY

which bas been made over to him under sec. 192, may if he thinks fit, which has been transferred to him under section 192, may, if he thinks fit, for reasons to be recorded in writing, postpone the issue of process for compelling the attendance ofthe person complained against, and either inquire into the case himself or, if he is a Magistrate other than a

Magistrate of the third class, direct an inquiry or investigation to be made by any Magistrate subordinate to him, or by a police officer, or by such other person as he thinks fit. for the purpose of ascertaining the truth or falsehood of the complaint;

postpone the issue of process against • the accused, and either inquire into the case himself or direct an inleStigation to be made by a police office£ or by such other person as he thinks fit, for the purpose of decidinl

whether or not there is 11ufficient ground for proceeding :

Provided that, save where the complaint Provided that no such.direction for investigation shall be made :- has been made by a Court, no such direction shall be made unless the (a) complainant has been examined on oath under the provisions of section

where it appears to the Magistrate that the offence complained of is triable exclusively by the Court of Session; or 200.

(2) If any inquiry or investigation under this section is made by a person not being a Magistrate or a Police officer. such person shall exercise all the powers conferred by this Code on an officer in-charge of a Police-station. except that be shall not have tbe power to arrest without warrant.

(b) where the complaint has not beC1l

made by a Court, unless the complaint and the witnesses present (if any) have been examined on oatil under Section 200.

(2) H any inquiry under sub-section (1), the Magistrate may, if he thinkii fit, take evidence ofwitnesse~. on oath :

(2A) Any Magistrate inquiring into a Provided that if it appears 'to the Magis- Case under this section may, if he trate that the offence complained of thinks fit, take evidence of witnesses is triable exclusively by the Court of on oath.

Session, he shall call upon the COIIlplainants to produce all his witnesses and examine them on oath.

(3) This section applies also to the police (3) in the towns of Calcutta and Bombay.

If an investigation under sub-section

(1) is made by a person not being a police officer, he shall have for that investigation all the powers conferred by this Code on an officer incharge of a police station e~Ccept the power to arrest without warrant.

Before proceeding further, we may have a look at s. 190 of the new Code. This section is captioned "Cognizance of offences by Magistrates".

This section so far as it is material for our purpose, provides:

"Subject to the provisions of this Chapter, any Magistrate of the First Class and any Magistrate of the second class specially empowered in tp'i~ behalf may take cognizance of any offence-

(a) upon receiving a complaint of facts which constitute such offence;

(2)

(b) upon a pollee report o~ such facts;

(c) upon information received from any person other than a police officer, or upon his own knowledge, that suck offence has been committed. .. ·

It is well settled that when a Magistrate receives a complaint, he is not bound to take cognizance if the facts alleged in the complaint, disclose the/ commission of an offence. This is clear from the use of the words "may take cognizance" which in the context in which they

occwr cannot be equated with must take cognizance".

The word "'may" gives. a discretion to the Magistrate in the matter. If on a reading of the complaint he finds that the allegations therein disclose a cognizable offence and the forwarding of the complaint to the police for investigation under s. 156(3) will be conducive to j"ustioe

and save the valuable time of the Magistrate from being wasted in enquiring into a matter which was primarily the duty of the police to investigate, he will be justified in adopting that course as an alternative to takin~ cognizance of the offence, himself.

Thjs raises the incidental question : What is meant by "taking cognizan<:e of an offence'' by a Magistrate within the contemplation of s. 190 ?

This expression has not been defined in the Code.

But from the scheme of the Code, the content and marginal heading of s. 190 and the caption of Chapter XIV under which ss. 190 to 199 occur, it is clear that a case can be said to be instituted in a Court only when the Gourt takes cognizance of the offence alleged therein.

The ways in which such cognizance can be taken are set out in clauses (a), (b) and (c) of Section 190(1). Whether the Magistrate has or has not taken cognizance of the offence will depend on the circumstance~. of the particular case including the mode in which the case is sought to be instituted and the nature of the preliminary action, if any, taken by the Magistrate.

Broadly speaking, when on receiving a complaint, the Magistrate applies his mind for the purposes of proceeding under s. 200 and the succeeding sections in Chapter XV of the Code of 1973, he is said to have taken cognizance of the offence within the meaning of s. 190 ( 1 )(a). If, instead of proceeding under Chapter XV. he has in the judicial exercise of his discretion, taken action of some other kind, such as issuing a search warrant for the purpose of investigation, or ordering investigation by the police

under s. 156(3), he cannot be said to have taken cognizance of any offence.

" This position of law has been explained in several cases by this Court..., the latest being Nirmaljit Singh Hoon v. The State of West Bengal: and anrC).

- t

The position under the Code of 1898 with regard .to th.e pc_>wers of a Magistrate having jurisdiction, t? send a c?mplatnt d!sclosmg a H cognizable offence-whether or not tnable excluswely by the Court of

(1) [1973} 3 s.c.c. 753.

36-83~SCI/76

53()

SUPRE:\1E COURT REPORTS

[1976] SUPPLE:1IENTARY

Session-to the Police for invesigation under s. 156(3}~ rer..ains unhangd nder the Code of 1973. The distinction between a police

mvesngatron ordered under s. 156(3) and the one directed under s. 202, has also been maintained under the new Code; bU! a rider has been clamped by the 1st Proviso to s. 202(1) that if it appears to the Magistrate that an offence triable exclusively by the Court of

Session has been committed, he shall not make any directio:t for inve&tigation.

Section 156(3) occurs in Chapter XII, under the caption : "Information to the Police and their powers to investigate"; "rhile s. 202 is in Chapter XV which bears the heading "Of complaints to Magistrates".

The power , to order police investigation under s. 156(3) is different from the power to direct investigation conferred by s. 202(1). The two operate in distinct spheres at different stages.

The first is exercisable at , the pre-cognizance stage, the second at the post-cognizance stage when the Magistrate is in seisin of the case.

That is to say in the case of a complaint regarding the commission of a cognizable offence, the power under s. 156(3) can be invoked by

the Magistrate before he ttakes cognizance of the offence under s. 190(1) (a). But if he once takes such cognizance and embarks upon the procedure embodied in Chapter XV, he is not competent to

switch back to the pre-cognizance stage and avail of s. 156(3). It may be noted further that an order made under sub-section (3) of s. 156, is in the nature of a peremptory reminder or intimation to the police to exercise their plenary powers of investigation under s. 156(1 )_.

Such an investigation embraces the entire continuous pr~ cess which begins wi, th the collection of evidence under s. 156 and ends with a report or chargesheet under s. 173.

On the other hand s. 202 comes in at a stage when some evidence has been collected by the Magistrate in proceedings under Chapter XV, but the same is deemed insufficient to take a decision as to the next step in the prescribed procedure.

In such a situation, the Magistrate is empowered under s. 202 to direct within the limits circumscribed by that section,

an investigadon "for the purpose of deciding whether or not here is sufficient ground for proceeding".

Thus the obiect of an investia, ation under s. 202 is not to initiate a freah case on police report but to assist the Magistrate in completing proceedings already nstituted upon a complaint before him.

In the instant case the Magistrate did not apply his. mind to the complaint for deciding whether or not there is sufficient ground for proceeding; but only for ordering an investigation under s. 156(3).

He did not bring into motion the machinery of Chapter XV. He did not examine the complaint or his witnesses under s. 200, Cr.P.C., which is the first step in the procedure prescribed under that Chapter.

H The question of taking the next step o~ that procedure em-isaged in s. 202 did not arise. Instead of takiJlg cognizance of the offence. he has,, in the exercise of his discretion, sent the complaint f<:"r investigation by police under s. 156.

+ -

This being the position, s. 202(1), 1st Proviso was not attracted.

A Indeed, it is not necessary for the decision of this case to express any final opinion on the ambit and scope of the 1st Proviso to s. 202(1) cf the Codei of 1973, Suffice it to say, the stage at which s. 202 -could become~ operative was never reached in this case. We have therefore in keeping with the well-established practice cf the Court, <lecided only that much which was essential for the disposal of this appeal, and no more.

B For the foregoing reasons, we answer the question posed,, in the negative, and dismiss this appeal.

M.R.

Ap.peal dismissed.

V. NARAYANA REDDY & ORS

P. N. SHINGIIAL ANI> JASWANT SINGH, JJ.

Code of Criminal Procedure, 1973

Ss. 156(3)

Sec. 190(l)

Cr.P.C

s. 482

s. 202( l)

Cr.P.C

s. 202

s. 202

s. 202

s. 201

s. 90(1)(~)

Code of Criminal Procedure, 1973

Penal Code

ss. 307 and 395

s. 156(3)

s. 482

Code of Criminal Procedure, 1973

s. 561

s. 202(1)

s. 202

s. 202

s. 156(3)

s. 202

s. 156

s. 202

s. 202

s. 202

s. 200

s. 202

Section 156

section 190

s. 156

Sections 200 and 202

s. 200

section 192

s. 200

section 192

section 192

section 192

Sec. 202

sec. 192

section 192

Section 200

s. 190

s. 156(3)

s. 190

s. 190

ss. 190 to 199

Section 190(1)

s. 200

Chapter XV of the Code

s. 190

s. 156(3)

s. 202

s. 202(1)

Section 156(3)

s. 202

s. 156(3)

s. 202(1)

s. 156(3)

s. 190(1)

s. 156(3)

s. 156

s. 156(1 )

s. 156

s. 173

s. 202

s. 202

s. 202

s. 156(3)

s. 200

Cr.P.C

s. 202

s. 156

s. 202(1), 1

s. 202(1)

s. 202


EXCISE COMMISSIONER, U.P., ALLAHABAD

RAM KUMAR

May 5, 1976

[A. N. RAY, C.J., R. S. SARKARIA, P. N. SHINGHAL

AND JASWANT SINGH, JJ.J

Evidence Act-Estoppe/ against Government in exercise of legislative, sovereign or executive powers-U.P. Excil"e Act 1910-Sec. 24, 28, 31, 33, 40 fllld 41- Whet!zer excise duty can be levied on unlifted stock of liquor.

C U.P. Sales Tax Act 1948, Sec. 3A and 4-Whether exemption fronl payme11t

of sales tax can be withdrawn-Estoppel.

The State of Uttar Pradesh bas under the U.P. Excise Act, 1910, the exclusive right or privilegoe of manufacturing and selling liquor in that State.

Section 24 of the Act provides that subject to the provisions of s. 31 the Excise Commissioner may grant to any persOn a licence for the exclU5ive privilege of manufacturing or of supplying any country liquor etc.

Section 31 provides for the conditions for the grant of licence. Section 33 invests the authority granting a licene to require the grantee to execute a counterpart agreement in conformity with the tenor of the licence.

Section 28 authorises imposition of an excise duty or a countervailing duty by the local Government on any excisable article. Sections 40 and 41of the Act empower the State Government and the Excise Commissioner subject to the previous sanction of the Government tomake rules.

Para 38 of the Excisei Manual which contains the rules made under the Act shows that there are 4 licence fee systems in vogue. One of such sySterns is the auction fee system uRder which the amount of licence fee is determined by competition amongst bidders at an auction. The respondents were the highest bidders at various auctions. Before holding the auctions, the rates of excise duty and prices of different varieties of country liquor and also the conditions of licence were announced. No announcement was made as to whether the exemption from sales tax in respect of sale of country liquor granted by the notification dated 6-4-1959 was or was not likely to be withdrawn.

One of the conditions of the licences was that the licensee shall lift each month certain quota of liquor and on the failure to lift the monthly quota the licensee shall be liable, to pay compensation to the State Government calculatffi at the rate of duty per litre on the uhlifted quota. On the day following the day when the licences were granted, the Government of U.P. issued a notification under s. 3A and 4 of the U.P. Sales Tax Act, 1948, superseding the earlier notification exempting the: payment of sales tax and imposing sales tax on the turnover in respect of country spirit at the rate~ of 10 P. per rupee. The respondents having failed to lift and sell the minimum quotas of liquor the appellant called upon them to pay by way of compensation the amounts of excise duty on the shortfalls.

Aggrieved by the. demand, the -respondents mo\'ed the High Court under Art. 226 of the Constitution for issue of appropriate writ or direction restraiaing the appellants from recovering the aforesaid amounts. The respondents in

pecial appeals also challenged the notification issued under the Sates Tax Act on the Q'round that the State Government did not announce at the time of the auction that the earlier notification was likely to be withdrawn and that the appellant informed the respondents at the time of the auction that there was no sales tax on the sale of country liquor. The appe11allts were, therefore, estopped from making the demand in respect of the sales tax and recoverihg the same from them.

The High Court allowed all the petitions in toto.

On appeal by scial leave,

' • -

< I •

EXCISE COMMR. V. RAM KUMAR 533

HELD : (I) Neither s. 28 nor s. 29 nor any other provisions of the Act A authorise the levy_ of the, amounts SQUght to be recovered from the tespoIL".lents.

The demand made by the appellant though disguised .,. compensatton is in reality a demand for excise du, ty on unlift<d quantity of liqu<ir which is not authorised by the provisions of the /'Ct. [538A-E]

Bimal Chandra Banerjee v. State of Madhya Pradesh, [1971] I S.C.R. 844, followed.

Panna Lal and Ors. etc. v. State of Rajasthan and others, [1976] 1 S.C.R. 219, distinguished.

Appeals dismissed.

(2) Sections 3A and 4 of the U.P. Sales Tax Act clearly authorise the State Government to impOSe sales tax. The fact that sales of country liquors had been exempted from sales tax by the earlier notification could not operate as estoppel against the State Government and preclude it from subjecting the sales

to ta.~ if it felt impeiled to do so iu. the il).terest of' the revenues of dre State.

There can be no question of estOppel against the Government in exercise of its legislative, sovereign or executive powers (case Jaw reviewed). The Government cannot divest itself of the right incidental to its office by conduct which in the case of a private pefS'On would amount to estoppel. The six appeals therefore, are partly allowed.

CIVIL APPELLATE JURISDiCTION : CIVIL APPEALS Nos : 276-395

AND 397-404 OF 1975 Appeals by Special Leave from the Judgments and Orders dated 21.2.72., 8.3.72., 21.2.72., 10.3.72., 21.3.72, 16.12.71., 24.3.72.,

21.3.72., 21.3.72., 22.3.72., 25.2.72., 8.3.72., 21.2.72., J0.3.72., 8.3.72.,

J0.3.72., J0.3.72., 18.2.72., 16.12.71., 9.3.73., 8.3.72.,25.2.72., 16.12.71., 25.3.72., 15.3.72., 25.3.72., 25.2.72., 25.3.72., 25.2.72., 14.3.72., 14.3.72., 21.3.72., 14.3.72., 14.3.72. 21.3.72., 21·3.72.,14.3.72., 25.3. 72., 25.3.72., 21.3.72., 21.3.72., 21.3.72, 21.3.72.,24.3.72, 24.3.72, 24 3.72., 24.3.72., 25.3.72., 213.72, 3.4.72., 21.3 72., 3.4.70. 24.3.72., 24.3.72 24.3.72, 24.3.72., 24.3.72., 24.3.72, 25.3.72., 25.3.72., 25.3.72 25.3.72 25.3.72., 25.3.72., 3.4.72., 3.4.72., 3.4.72., 3.4.72., 3.472' 14-3.72. 3.9.71., 3.9.71., 16.7.71., 14.3.71., 29.3.72., 14.3.72., 14.3.72, 14.3.72., 5.4.72., 5.4.72., 5.1.72., 5.4. 72., 18-2-72., 23.2. 72., 10.3.72., 20.1.72., 9.1.72., 31.1.72., 31.1.72., 31.1.72., 31.1.72., 8.3.72., 2.2.72 3.2.72., 25.2.72., 2.2.72., 10.3.72., 4.2.72., 25.9.72., 25.9.72., 6.10.72., 1.2 73., 13.2.73., 30.1.73., 9.4.73., 13.2.73, 14.2.72., 13.3.72., 13.3.72., 243 72., 18.7.72., 4 9.73 ' 25.2.72, 17.5.71., 21.3.72., 3.4172., 21.3.72., 16.7.71., 5.4.72, In Special Appeal Nos. 616, 643, 617, 644/74 and Civil Misc Writ Nos 2268, 448, 2280, 2254, 2255/69 and Special Appeal Nos. 730, 752, 647, 615, 611, 648, 645605. 610/71 and Civil Misc. Writ No. 449/68 and Special Appeal No. 86, 796, 775/71 an~ W.P. No. 450,169 and C Misc. Writ No. 451, 2183, 5706, 2915/69, S. A. No. 690/71 C. Misc Writ No.3037/69 and S. A. No. 613171 and-C. Misc. Writ No. 2090/ 69 and Civil Misc. Writ Noo. 2094, 2119, 2122, 2172, 2188, 2189 -92, 2180-2182, 2187, 2256, 2273, 2274,2276-2279, 2282-2284, 2334 2347, 2576, 2608-2611, 2649 2690, 2742-2743, 2759, 2760, 2811, 2850,

2916, 2918, 2919, 3075, 3400/69 and 543-546, 786, 1039, 1246, 1248, 2169, 3881, 4035, 4428, 4563, 4821, 211, 250, 256, 7253, 607, 614, 618, 628, 7655, 691-694, 729, 732, 751, 776, 787, 799, 805/71 and Civil Misc . .Writ No. 1525, 1529,3387, 7051, 7253, 7588, 7575, 7980

and Special Appeal Nos. 6, 102, 115, 166, 309/72 and 1902/73 and Special Appeal No. 774/71 and Civil Misc. Writ No. 2121}69, 2194/69 547 /70, 3375/69 and writ Petition No. 3627 /70, 260/71 respectively.

B •

B. Sen and 0. P. Rana for the Appellant.

Yogeswar Prasad, S. K. Bagga and (Mrs.) S. Bagga, for the Respondent in CA 399/75 and 400-405/15.

(Miss) Kamlesh Bansal, for Respondent in CAs. 310 312 238 403, 357 and 313/75. ' '

L. C. Goyal, for Respondent in CA No. 396/75.

The Judgment of the Court was delivered by

_JASWAN1: SINGH, J.-This batch of 127 appeals by special leave which are directed against various judgments rendered by the High Court of Judicature at Allahabad in writ petitions and special appeals and rela:e to enforcement of certain obligations of licensees for retail vend of country liquor shall be disposed of by this judgment.

The facts leading to these appeals are : The State of Uttar Pradesh has,. under the U.P. Excise Act 1910 (Act No. IV 0£ 1910) (hereinafter referred to as 'the Act') which contains provisions relating to all aspects and manifestations of intoxicating liquors and intoxicating drugs, that is to say, their import, export, .transport, manufactw:e, sale and possession, the exclusive right or privilege of manufacturing and selling liquor in that State.

Section 24 of the Act Jays down that subject to the provisions of section 31, the Excise Commissioner may grant to any person a licence for the exclusive privilege-

( I) of manufacturing or of supplying by wholesale, or of both, or

(2) of selling by wholesale or by retail, or

(3) of manufacturing or of supplying by wholesale, or of both and or selling by retail any country liquor or intoxicating drug within any local area.

Section 31 provides that every licence, permit or pass granted under the Act shall be granted- ( a) on payment of such fees (if any);

(b) subject to such _restrictions and on such conditions; (cl shall be in such form and contain such particulars,, as te

Excise Commissioner may direct either generally or m any particular instance in this behalf; and ( d) shall be granted for such period as the State Government may, in like_ manner, direct.

Section 33 of .the Act invests the authority granting a licence undr the Act to require the grantee to execute a counterpart agreeent 1n conformity with the tenor of his licence and to give such se:ur.1ty or the performance of such. agreemen.t or to make such deposit m lteu of security as such authonty may thmk fit.

Section 28 of the Act which deals with imposition of excise duty or countervailing duty reads :-

"28. ( 1) Duty on excisable article.-An excise duty or a countervailing duty, as the case may be at such rate or rates as

l • '

EXCISE COMMR v. RAM KUMAR (Jaswant Singh, !.) 535

the Local Government shall direct, may be imposed, either generally or for specified local area, on any excisable article-

(a) imported in accordance with the provisions of section 12(1); or

(b) exported in accordance with the provisions of section 13; or ·

( c) transported; or

(d) manufactured, cultivated or collected under any licence granted under section 1 7; or

(e) manufactured in any distillery established, or any distillery or brewery licensed, under section 18 .... "

Section 29', of the Act lays down the manner in which the duty "· may be levied.

One of the ways provided in the section for levy of the duty is by payment upon issue for sale from a warehouse established or licensed nnder section 18 ( d) of the Act.

I Sectiol1S 40 and 41 of the Act empower. the State Government and the Excise Commissioner (subject to the previous sanction of the Government) to make rules for the purposes set out therein.

These rules are con, tained in the Excise Macual, Uttar Pradesh (Volume I).

• Paragraph 3 8 of the Excise Manual shows that there are four t licence-fee systems in vogue in the State of Uttar Pradesh. One of such symems is 'The auction fee system' under which the amount of licence fees inter alia for the retail sale of country spirit under the • distillery system and for the manufacture and retail sale of country spirit under the outstill system is determined by competition among bidders. According to paragraph 332 licences for the wholesale and retail ".en"d of intoxicants are usually granted for the excise year which commences from April 1 and lasts upto March 31.

In accordance with the requirements of the auction system, auctions were held throughout Uttar Pradesh during the months of February and March, 1969 on various dates and at various places for the grant of licences to sell country spirit by retail at the specified shops during the excise year 1969-70.

Bfore holding the auctions, rates of excise duty and prices of different varieties of country liquor as also the conditions of licences for sale of country spirit for 1969-70 were announced.

No announcement was, however, made as to whether the exemption from sales tax in respect of sale of country liquor granted vi de Notification No. ST 1149/X-802(33)-51 dated April 6,, 1959, issued under section 4. of the U.P. Sales Tax Act, 1948 was or was not likely to be withdrawn.

The respondents herein 1participated in the aforesaid auctions and being the highest bidders were granted licences 'for retail sale of country spirit for the period beginning from April I, 1969 to the end of March,, 1970.

Each one of these licence!; contained inter alia the following coudition :- ·

"3. (a) The licensee shall lift each month the proportionate quota for the n; ionth, if any, fixed for his vend and deposit still,.. head dty rea!JSable th.ereon. On his failure to lift the monthly

proportionte quota m any month, he shall be liable to pay compensation. to the State Government at the rate equal to the rate of s!11lhead duty per litre of spiced spirit and stillhead dutx per litre of plain spirit as may be in the area in which the shop is situated on the quantity falling short of such monthly proportionate quota and such compenstion shall be paid by the 7th of the month following

the month to which such shortfall relates.

(b) He shall be bound to sell the whole quantity of country spirit obtained for the shop from the warehouse.

On his failure to do so, he shall be liable to pay to the State Government compensation at the rate equal to the rate of stillhead duty per litre of spiced spirit and stillhead duty per litre of plain spirit as may be in force in the area in which the shop is situ<>'.ed on the unsold quantity of country spirit during. the period of the contract to which. the licence relates.

( c) In the evmc of the licensee being required to pay compensation to State Government under the aforesaid coodition due to the short lifting of the quota or non-deposit of < such compensation, the amount of said compensation may be realised from the amount of security deposited by him. The resultant deficiency in the amount of security shall be made gocd by the licensee within seven days of such adjustment.

In case the short Ji£ting oC proportionate monthly quota or short deposit of compensation continues for two conseeutive months or the licensee fails to make up the deficiency in the amount of security within the prescribed period of seven days his Jicenc"_ may be cancelled in addition to the recovery of the deficiency in payment of compensation as arrears of I and revenue."

On the day following the commencement of the aforesaid licences i.e. on April 2, 1969, the Government of Uttar P'.adesh issued Noti- \c fication No. ST-1603/X-900 (12)/67 under section 3-A and 4 of - the U.P. Sales Tax Act, l 948, superseding the earlier Notification No. ST 1149/X•802(33)-51 dated April 6, 1959, issued under section 4 of the U.P. Sales Tax Act, 1948, and imposing sales tax on the turnover in respect of country spirit at the rate of ten paise per rupee a'. the point of retail sale with immediate effect.

The respondents herein having failed to lift and se'.l the minimum quotas of liquor prescribed in their licences were reqmrcd by the excise authorities of the State to -pay, by way of compe_nsation, te amounts of excise duty leviable on .the short-falls. Aggneve<; l by this demand, the respondents moved the High Court under Articles 226

< f •

EXCISE COMMR. v. RAM KUMAR (Jaswanl Singh, J.) 537

of the Constitution for issue of apporpriate writ or directions rei$- A training the• appellants herein from recovering the aforesaid amounts contending inter alia that the condition of their licences on the basis of which the demand was made was invalid, unconstitutional and u.nenforceable.

The respondents in six appeals Nos. 399 to 404 of 1975 also challenged Notification No. ST-1608/X-900( 12)/67 (dated April 2, 1969) (supra) which superseded the earlier Notification No. ST 1149/X-802(33)51 dated April 6, 1959 and imposed B sales tax on the turnover in respect of the country liquor at the rate of ten paise per rupee at the point of retail sale by the vendor with effect from April 2, 1969 on the ground that since the state Government did not announce at the time of the aforesaid auction that Notification No. ST l 149/X-802t33)51 dated April 6, 1959, was likely to be withdrawn and the sales of country liquor were likely to he subjected to the levy of sales tax during the excise year and in reply C to the query made by them at the time of the auction they were told by the authorities that there was no sales tax on the sale of country liquor, the appellants herein were estopped from making the demand in respect of sales tax and recovering the same from them.

TI1e High Court allowed all these petitions in toto. Having failed to secure certificates of fitness from the High Court, the appellants applied for and obtained special leave to appeal from this Court.

The common question of law that arises for determination in all these appeals is whether the condition incorporated in the licences of the respondents that they would lift the fixed minimum quantity of liquor and sell the same at their allotted shops and in cse of their default or failure to do so, they would be liable to pay compensation E eq:ic! to t!cc mccou!lt of the excise duty leviable on the lll1lifted quantity is valid and enforceable. This point is no longer res integra. In Bimal Chandra Banerjee v. State of Madhya Pradesh(') this Court held that :

"No tax can be imposed by any bye-law or rule or regulation unlegs the statute under which the subordinate legislation is made specially authorises the imposition. In the pre":nt case, the legislature has levied excise duty or countenailing duty on the excisable articles which have been either imported. exported, transported, manufactured, cultivated or collected under any licence granted under section 13, or manufactured in any distillery or brewery established or licensed under the Act; and the State Government has not been empowered to le\'Y any duty on liquor which the contractors failed to lift Therefore. the State Government was exercising a power which it did not possess and hence the rule imposing the condition in the licences and the demand notices are invalid."

Thus the aforesaid question arising for determinatio.n by us stands already settled by the ratio of the decision of this Court in Bimal H Chandra Banerjee's case (supra.)

0) [1971] I S.C.R. 844.

A It will also be noticed that neither section 28 nor section 29 nor aay other provision of the Act authorises the levy of the amounts sought to be recovered from the respondents.

The decision of this Court in Panna Lal and Ors. etc. etc. v. State of Rajasthan and Ors.(') which is sought to be relied upon on behalf of the appellants is clearly distinguishable.

In that case, the contractual obligation of the appellants to pay the guaranteed sum or the stipulated sum mentioned in the licences was not dependent on the quantum of liquor sold by them and no excise duty was charged or chargeable on undrawn liquor under the licences. The excise duty there was collected only in relation to the quantity and quality of the country liquor whiah was drawn. -

C We have, therefore, not the lightest hesitation in holding that the

deaiand made by the appellants though disguised as compensation, is in reality a demand for excise duty on the unlifted quantity of liquor which is not authorised by the pcovisions of tho Act.

This being the sole point involved in appeals other than Appeals Nos. 399 to 404 of 1975, the former Appeals cannot succeed.

In the result they are dismissed with costs.

Appeals Nos. 399 to 404 of 1975 which raise another point as well viz. the validity of the appellants' demand from the respondents in respect of sales tax at the rate of ten paise per rupee on the retail sales of country spirit made by the latter with effect from April 2, 1969 stand on a slightly different footing.

Section 3-A and 4 of the U.P. Sales Tax Act, 1948 clearly authorise the State Government to impose sales tax.

The fact that sales of country liquor had been exempted from sales tax vide Notification No. ST 1149/X-802(33)- 51 dated April 6, 1959 could not operate as an estoppel against the State Government and preclude it from subjecting the sales to tax if it felt impelled to do so in the interest of the Revenues of the State which are required for execution of the plans designed to meet !he ever ir.creasing pressing needs of the developing society.

It is now well settled by a catena of decision that there can be on question of estoppel against the Government in the exercise of its legislative, sovereign or executive po\vers.

While speaking for the Court in M. Ramanathan Pillai v. State of Kera/a(') the learned Chief justice quoted with approval the following statement contained in American Jurisprudence 2d. at page 783 paragraph 123 :-

"In American Jurisprudence 2d at page 783 paragraph 123 it is stated "Generally, a state is not subject to an estoppel to the same extent as an individual or a private corporation." Otherwise, it might be rendered helpless to assert its powers in government.

Therefore as a general rule the doctrine of estoppel will not be applied against the State in its governmentat public or sovereign cattacity."

(I) [1976] l S.C.R. 219.

(2) [1973! 2 s.c.c. 650.

' • < •

.. '

EXCISE COMMR. v. RAM KUMAR (laswan! Singh, l.) 539

In State of Kerala and Anr. v. The Gawalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. Ltd.(') where the respondent company established itself in the State of Kerala for production of rayon cloth pulp on an understanding that the Government would bind itself to supply raw J1Jaterial and later the Government on finding that it was not able to supply the material undertook not to legislate for the acquisition of the pi:ivate forests for a period of 60 years if the company purchas<; d forest lands for the purpose of its supply of raw material and accordingly, the company did purchase 30,00 acres of private forests from an estate for Rs. 75 lakhs for the afores11id purpose but the Government enacted Act 26 of 1971 expropriating vast forest areas without paying compensation as a measure of agrarian reform whereupon the respondent company sought to invoke the doctrine of equitable estoppel against the Government, Palekar, J. delivering the majority judgment observed :-

"We do not see how an agreement of the Government can preclude legislation on the subject.

The High Court !has rightly pointed out that the surrender by the Government of its legislative powers to be used for public good cannot avail the company or operate against the Government as equitable estoppel." Approving the decision of the House of Lords in Howell v.

Falmouth Boat Construction Co. Ltd.(') where the observations of Lord Denning in Robertson v. Minister of Pensions (') that the action of the War Office which was an agent of the Crown in assuming authority over the matter and assuring the appellant who had been • <- serving in the army that his disability had been accepted as attributable to military service bound the Crown and through the Crown the Minister of Pensions, who while administering he Royal warrant issued by the Crown has to honou~ all assurances given by or on behalf of the Crown were unequivocally disapproved by observing that the character of an act done by an officer of a Government, however high or low in the hierarchy in face of a statutory prohibition, is not affected by the fact that it had been induced by a misleading assumption of authority and neither a Minister nor any subordinate officer of the Crown can, by conduct or representation, bar the Crown from enforcing a statutory prohibition.

It was held by Bench of this Court in Assistant Ciistodian Exacuee Property and Ors. v. Brij Kishore A garwala and Ors.(') that the Evacuee Department was not bound ' • by the reply given by the Assistant Custodian to the first respondent's enqniry that the property in question was not an evacuee property .

Following the above decision, the High Court of Jammu & Kashmir has in Malhotra and Sons and Ors. v. Union of India and Ors('). rightly held that :-

"The courts will only bind the Government by its promises to prevent manifest injnstice or frand and will not make the Government a slave of its policy for all times to come when

(1) [1971]2 s.c.c. 713.

(2) (1951] A.C. 817.

(3) [1949]1K.B.227.

(4) [1975] I S.C.C. 21.

(5) A.LR. 1976 J. & K. 41.

540 SUpREME COURT REPORTS

[1976] SUPPLEMENTARY

the Government acts in its Governmental, public or sovereign capacity." We may as well refer here to the celebrated decision of tbe Supreme Court of th, e. United States in Federal Crop Insurance Corporation v. Morrill('). In that case where the agents 6f the petitioner a wholly Government owned Corporation, created by the Federal Crop Insurance Act to insure producers of wheat against Joss in yields due to unavoidable causes including drought, advised the respo.:idents in ignorance of and contrary to the duly promulgated controlling reula tion which expressly precluded insurance cmerage of sprir.g wheat re-seeded on winter Wheat acreage that their entire 460 acres of spring wheat crop including the spring wheat which had been reseeded on winter wheat acreage in ihe 1945 crop year was insurable by the Corporation and recommended to the Corporation'-; branch office acceptance of the respondent's formal applicatio1 which, however, did not disclose that any part of the insured CrD? was reseeded and the Corporation accepted the application and a few months later, most of the responden.l'S' crop was destroyed by drought, and the Corporation on the loss being notified to them rdu'; ed to pay the loss on the ground that the wheat crop insurance regulations

expressly prohibited the insurance of spring wheat which was re-seeded on winter wheat acreage, fhe Court by majority held thac though a private insurance Corporation would be bound on similar '.oc'.s, the same was not true of a Government Corporation engaged in the insurance field and the latter was not estopped from repudiating the liability.

The following observations made by the court in Federal Crop Insurance Corporation v. Marrill (supra) are worth quotin.g :-

"It is too late in the day to urge that the Govemmnt is just another private litigant, for purposes of charging it with liability, whenever it takes over a business theutofore conducted by private enterprise or engages in competition

with private ventures. . . . . . Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority.

Anet this is so even though, as here, the agent himself may have been unaware of the limitations upon his authority .... "Men mnst turn sqnare corners when they deal with the Government", does not reflect a callous outlook. It merely expresses the duty of all courts to observe the conditions defined by Congress for charging the public treasury." In his Treatise on the Law of Estoppel, Melville M. Bigelow has stated that in State v. Williams,( 2 ) State v. Bevars,(') and Wallace v.

Maxwell( 4 ) it has been held that estoppel does not operate against the Government or its assignee. ·-------- (!) 332 U.S. 380-92 Led. 10.

12) 94 N. Car. 891. (J) 86 N. Car. 588.

(4) 10 !rd. 110.

....!.... -{

EXCISE COMMR. v. RAM KUMAR (lasivant Singh, J.) 541

The High Court was, therefore, clearly in error in ignoring that the A Go.vernment cannot divest itself of the right incidental to its office by conduct which, in the case of a private person, would amount to estoppel and in characterizing the demand for sales tax made by the

aJ'pel!ants as illegal. Accordingly Appeals Nos. 399 to 404 of 1975 are partly allowed, and it is held that the demand made by the appellants from the respondents in these appeals in respect of sales tax on the turnover of sales of country spirit made by them between April B 2, 1969 and March 31, 1970 was valid and could not be struck down.

The parties in these six appeals shall pay and bear their own costs.

P.H.P.

Appeals partly aJlowed .

EXCISE COMMISSIONER, U.P., ALLAHABAD

RAM KUMAR

A. N. RAY, C.J.

R. S. SARKARIA

JASWANT SINGH, JJ

Sec. 24, 28, 31, 33, 40

Sales Tax Act 1948

Sec. 3A and 4

Excise Act, 1910

Section 24

s. 31

Section 31

Section 33

Section 28

Sections 40 and 41

s. 3A and 4

Sales Tax Act, 1948

Art. 226

s. 28

s. 29

[1976] 1 S.C.R. 219

Sections 3A and 4

Sales Tax Act

Excise Act 1910

Section 24

section 31

Section 31

Section 33

Section 28

section 12(1)

section 13

section 1

section 18

Section 29

section 18

section 4

Sales Tax Act, 1948

section 3

Sales Tax Act

section 4

Sales Tax Act, 1948

Articles 226

section 13

section 28

section 29

Section 3

Sales Tax Act, 1948

Insurance Act

S. 380


DHARAM CHAND JAIN A

THE STATE OF BIHAR

April 14, 1976

IP. N. BHAGWATI, A. C. GUPTA AND S. MURTAZA FAZAL ALI, JJ.] B

Miner.al Concession Rules 1960--r .. 54-Scope of.

On September 12, 1958, the appellant made an application to the State Government under the Mineral Concession Rules, 1960 for the grant of a

mining lease.

HavinQJ had no reply from the State Government be filed a revision application on June 21, 1961 before the Central Government which directed the State Government to dispose of the application.

Since, there was no reply from the1 State Government, the appellant! filed a second rev1s1on .appfication before the Central Government, which by its order dated November, 21, 1964, allowed it.

Even so, 'the State Government refused to implement that order. A third revision application was filed on January 27, 1961 before the Central Government which, after obtaining the views of the State Government, rejected it.

Allo\ving the appeal against the order of the Central Governn1ent,

HELD :

(1) The State Government being a subordinate authority in the matter of grant of a mining lease, was obliged under the lav..' to carry out the orders of the Central Governmerit. It was not open to the Stat-e to decline

to carry out the orders of the Central Governn1ent particularly because the Central Government was a Tribunal superior to the State Government. In vie\v of Government's order dated November 21, 1964, it \vas not open to the State Government to reject the application on any ground whatsoever.

If the State Government found itself unable to implement the order, a reference could have been made to the Central Goyernment for obtaining necessary directions.

If any ground came into existence subsequent to the making of the order of the Central Government, the State Government could have brought it to the notice of the Central Governn1ent.

In any case, the State Gov- -ernment could not have refused to implement the order of the Central Government unless that Government itself chose to revise it either on a reference 'Or suo n1oto. f57 C-E1

(2) l!nder r. 54 of the Miheral Concessions Rule, 1960 the C'entral Government acts as a revisional tribunal against MY order passed by the State Gov.:::i.11ment.

When the State Governme11t refused to can-y out the order, the Central Governn1ent should have proceeded to set aside the State Clovernment's order and directed it to grant the application. The Central Government has not disposed of the revision application in accordance with taw.

[55 B, 56 F]

(3) Assuming that the Central Government could revise its earlier order, 1hat could be done only if some fresh ground came into existence. There was absolutely no legal justification for the Central Government to go "back upon its earlier aider which stood unvaried and unvacated.

[58 A]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1414 of 1968.

Appeal by Special Leave from the Judgment and Order dated the 17th February 1968 of the Govt. of India, Ministry of Steel, Mines and Minerals.

A A. K. Sen, B. D. Khanna, Bishambar Lal and H. K. Puri, for the

Appellant.

D. Goburdhan for Respondent.

The Judgment of the Court was delivered by

FAZAL ALI, J.

This is an appeal by special leave against the order of the Central Government dated February 17, 1968, reiecting the revision application filed by the appellant before the Central Government under r. 54 of the Mineral Concession Rules, 1960. This appeal reveals a wavering and vacillating attitude of the State Government of Bihar taking inconsistent stands in refusing to implement a quasi-judicial order passed by the Central Government in favour of the appellant on one pretext or another spreading over several years.

This has naturally resulted in a substantial miscarriage of justice to the appellant who, was compelled to toss like a shuttle-cock from State Government to Central Government by filing revisions after revisions against the orders of the State Government which shows a somewhat extraordinary and curious conduct of the State Government.

The facts of the case lie within a very narrow compass.

The appellant applied on September 12, 1958, for grant of a mining licence in an area of 66. 77 acres in tehsil Ramgarh and deposited the prescribed fees of Rs. 700/-. The State Government was unable to make up its mind and passed no order at all on the application filed by the appellant. The appellant thereupon filed a revision application before the Central Government on the basis that his application was deemed to have been rejected by the State Government as it was not disposed of during the statutory period. This revision was filed on June 22, 1961 and gives a detailed history of the case of the appellant. The Central Government in its revisional capacity passed an order dated March 24, 1962 directing the State Government to dispose of the application of the appellant on or before September

30, 1962.

In spite of this direction, the State Government failed to pass any order on the application of the appellant. Failing to get any redress from the State Government in spite of the direction of the Central Government, the appellant was compelled to prefer a second revision application before the Central Government on October 15, 1963. Thereafter the Central Government invited the comments of the State Government on the second revision application.

The State Government, however, appears to have taken the stand that as the area in question was the subject-matter of a litigation the State Government was legally advised to defer grant of a mining licence particularly in view of certain injunction orders passed by the Alipore Civil Court and the Calcutta High Court.

These comments were forwarded to the appellant for his explanation.

The appellant informed the Central Government that the injunction orders relating to Ramgarh litigation had since been vacated and the State Government may be directed to dispose of the application filed by the appellant for grant of the mining lease. It appears that by a subsequent correspondence the State Government informed the Central Government thatfinal orders on the application of the appellant could only be made if he decided to. select. one' compact block for: the mining lease.

On receiving, this co=ent; the Central.Government: allowed the revision application again. and: directed the, Staie Government to grant.the mining lease to the.appellant inrespect.of.a compact block to be selected by him.:·, Thisiorder was.passed.on:November. 21; 1964, We might mention.here that under. r. 54 of the-MineralConcession Rules, 1960, the; Central Government acts:as 'a" reVisional tribunal against any order'. passed hr the State Government and has obviously, therefore;. the sai:ne powers as.the State Government. r.This matter is no longer res integra and is settled by an authority of this Court in State of Assam and others v. Om:Prakash Mehta & others('). where this Cout observed a~ follows;;.'; i ·, C ·:: . ' ' :· ., ; : •· __ " . . "Under .Rule '55 the Central' Government can ca!Lfor ·: -~' the records from the State' Government and-after considering ·. : any co=ents made on . the petition by the State Govern-· . . . ment or. other. authority,. may confirm, mooify or. 'set aside . the order:or .. pass such other order in.relation.thereto as the Central Government may deem. just and proper;;· .It also "' . . . provides for an opportunity to the applicant to make his . . representation against the comments', if,' any, received. from the. State Government or. other authority. .Thus the fact . . that the. application for renewal is deemed to have. been ·

refused as a result of Rule 24(2) does not prohibit the Central Government from passing. any order it may deem; just and proper inchiding an order granting renewal." · ; ; . ' , In' these circumstances,· therefore, when the Central Government allowed the revision application and directed the State Government to grant the licence to the appellant; the. order must be deemed to be an order passed by the Central Government granting the prayer of the appellant for issue of the 'mining lease; As, however, the application had been made to the State Government by the appellant, the form of the order of the Central Government was to give a clear direction. to the State Government to grant the .formal lease. The order of the Central Govermnent dated November21, 1964, there~ fore, left no discretion to the State Government to refuse to grant the mining lease to the appellant.

It. seems to Us that the State Government does not appear to have appreciated . the rear content of the order of the Central Government and was labouring under a misconception.that in spite of a clear direction'given by the superior Tribunal, namely, the' Central Government, it was still open: to the State Government to. r.eject the application'.' : . · · :,, ,_.

It appears that the State Governet, after rceiving. the, odr of the Central Government, refused to implement it on . the ground · that the State Government had. formulated a policy that the area in dispute should be conserved for building cement factories and licences should be given only to those applicants who are prepared to !et up a cement factory: The, State' Government rejected the appjication of

(lj (1973] l.S. C.R. 584. . .

. , -, .. . ·- ~· /•" : )

the appellant on December 17, 1966, as the appellant had not indicated anywhere in the application that he was prepared to set up a cement plant. In fact the appellant on coming to know of the stand taken by the Government did file an application before the Centrar Government on January 27, 1967 that he could put up a cement plant if it was economical to do so. The appellant consequently filed a third revision application before the Central Government against the order of the State Government dated December I 7, 1966 rejecting the application of the appellant for grant of mining lease. This application was filed on January 27, 1967 and in his comments the appellant pointed out that by the time the Central Government was seized of the matter the policy of the State Government of Bihar, due to the change in the Minitry, had changed and that it may be asked to re-examine the matter.

The Central Government accordingly invited further comments of the State Government in the matter and this time the State Gernment again took the stand that as the area in dispute which wail" comprised in Tauzi No. 28 was the subject matter of title suit in the Court of Hazaribagh, the State Government was not willing to grant the licence to the appellant and involve itself into an endless litigation.

This comment appears to have found favour with the Central Government which rejected the revision application of the appellant by the impugned order dated February 17, 1968 against which the present appeal by special leave has been preferred before us.

The facts mentioned above arc proved from the various annexures filed by the appellant along with the special leave and printed in the Paper Book and consist of various orders passed by the Central and State Governments, the correspondence between the State Government and the Central Government, the note-sheets and summary of facts made by the concerned Ministry etc.

The learned counsel for the respondent has not at all disputed the correctness of the contents of these documents.

It seems to us 'hat the Central Government has not disposed of the revision application in accordance with law.

To begin with, the Central Government had expressly directed the State Govermnent to dispose of the application of the appellant by its order dated March 24, 1962, on the first revision application filed by the appellant. Due to the continued inaction of the State Government, the second revision application was filed before the Central Government which was also allowed on November 21, 1964 and the State Government was given clear directiOils to grant the lease to the appellant.

In view of this order it was not open to the State Government to reject the application of the appellant on , any ground whatsoever. If the State Government found itself unable to implement the order of the Central Government a reference could have been made to the Central Government for obtaining necessary directions. Ultimately the order of the Central Government culminated into the grant of a licence in favour of the appellant after he had selected a compact block.

Thereafter the State Government instead of implementing this order took the stand that they had devised a policy to grant leases only to those

persons who were prepared to set up a cement plant. Subsequently this policy was also given a go by and the State Government rejected the application of the appellant on the ground that the land was the subject-matter of a litigation.

This led to the last revision filed by the appellant before the Central Government.

The Central Government, after calling for the comments of the State Government, appears to have upheld the order of the State Government rejecting the appli- <:ation.

In doing so, the Central Government overlooked the fact that it had already directed by its order dated November 21, 1964 that the State Government should grant the. mining lease to the appellant in respect of a compact block selected by the appellant.

The State Government, being a subordinate authority in the matter of grant of mining lease, was obligated under the law to carry out the orders of the Central Government as indicated above. But the State Government declined to do so on the ground that .it had laid down a policy that the mining leases in respect. of the area :ihould be given only to those who were prepared to set up a cement factory. It was clearly not open to the State Government to decline to carry out the orders of the Central Government on this ground, particularly because the Central Govermnent was a tribunal superior to the State Government. If a ground came into existence subsequent to the making of the order of the Central Government which warranted a reconsidera- . tion of the order of the Central Qovernment as indicated above, the

State Government could have brought this ground to the notice of the Central Government. However, one t\ling is manifestly clear that the State Government could not have refused to implement the order of the Central Govermnent unless the Central Government itself chose to revise it either on a reference by the State Government or suo motu.

In fact to take the view that the State Government could decline to carry out the order of the Central Government on some ground, which it thinks proper would be subversive of judicial discipline.

Therefore, when the appellant preferred a revision application to the Central Government against the refusaf the State Government to carry out the order of the Central Government by rejecting his application, the Central Government should have proceeded to set aside the order of the State Government and directed the State Government to grant the application of the appellant. Instead of doing

this, the Central Government again appears to have entered into the merits of the question as if its earlier order was not in existence at all and sustained the rejection of the application of the appellant on the ground that the area in question was the subject-matter of the title suit in the Court of Hazaribagh, even though the appellant had pointed out to the Central Government that the injm:ction issued by the Court regarding the premises in dispute had been vacated. Even assuming for the sake of argument that the Central Government could revise its earlier order,-and putting the case of the Central Government at its highest,-this could be done only if some fresh ground came into existence which warranted reconsideration of the earlier order. The fact that there was a litigation pending in the Hazaribagh Court in respect of the area in question was neither a new or a fresh fact which came into existence for the first time after the order was made by the Central Government directing the State Government to

grant the licence to the appellant. The litigation was pending since 1954 and the Central Government was aware of this fact even when it passed its order dated November 21, 1964. In these circumstances, therefore, there was absolutely no legal justification at all for the Central Government to go back upon its earlier order.

The earlier order of the Central Government stood unvaried and unvacated and the State Government was bound to implement it and, therefore, the Central Government was in error in upholding the action of the State Government rejecting the revision application filed by the appellant and thus silently condoned the lapse committed by the State Government.

For the reasons "given above, we are satisfied that the order impugned passed by the Central Government cannot be allowed to stand and must be set aside.

We accordingly allow the appeal, set aside the order of the Central Government dated February 17, 1968 rejecting the revision application of the appellant and direct the State Government to implement the order of the Central Government dated November 21, 1964 for granting the mining lease to the appellant.

The appellant will be entitled to his costs throughout.

[1976] SUPPLEMENTARY

f-·

DHARAM CHAND JAIN

A

THE STATE OF BIHAR

IP. N. BHAGWATI

A. C. GUPTA

S. MURTAZA FAZAL ALI, JJ.

Concession Rules 1960

Miheral Concessions Rule, 1960

Mineral Concession Rules, 1960

MineralConcession Rules, 1960