'~ -··· JJL.

MANJUSRI RAHA & ORS ETC. v.

B. L. GUl'TA & ORS. ETC.

February 9, 1977

[V. R. KRISHNA IYER AND S. MURTAZA ALI, JJ.]

Motor Vehicles Act 1939-Sec. 95(2)(d)--Sec. l IOA:..__Principles to determine compensation payable for death in a bus accident-Increments and pensionary benefits, whether to be taken into account.

Satindra Nath Raha and Uma Shankar Shastri were travelling by a bus owned by Gupta of M. P. Speedways Company. They were travelling from Bhind to Gwalior. On the' high way, a bus owned by Bhuta came from the opposite direction. On account of negligence of drivers of both the buses. there was a head-on collision of the two buses, as a consequence of which Raha and Shastri sustained fatal injuries to which they succumbed on the same day in the hospital. Widow of Rahal claimed a compensation of Rs. 3,00,000/- under s. llOA of the Motor Vehicles Act and Mrs. Shastri claimed a sum of Rs. 1,20,000 /- as compensation.

The Claims Tribunal decreed the claim of Mrs. Raha to the extent of Rs. 60,000/- and of Mrs. Shastri to the extent of Rs. 40,000/-. The compensation awarded to Mrs. Raha is on the basis of the salary _which Mr. Raha would have earned upto the age of 55 yars after dednctmg half the salary. The quantum awarded by the Tribunal was upheld by the High Conrt.

Gupta and Mrs. Raha field the present appeals in this Court.

Gupta contended that the compensatim1 awarded -was very excessive and Mrs. Raha contended that the compensation granted was grossly inadequate and should be enhanced.

Allowing the appeal filed by Mrs. Raha and dismissing the appeal filed by Gupta,

HELD : l. The contention of Gupta that he should not be made liable to pay the compensation since no negligence was alleged against the driver Ram

Swa.rup negatived. Although the plaint is loosely_ drafted but it clearly contains the relief of compensation against Gupta and Ram Swamp, the driver.

Pleadings• have to be interpreted not with formalistic rigour but with latitude or awareness of low legal literacy of poor people. The Claims Tribunal and the High Court overlooked two important and vital considerations.

Firstly the increments which Mr. Raha would have earned while reaching the maximum of his grade long before his retirement and secondly the pensionary benefits which he would have obtained had he retired. It wonld be reasonable to expect that if the deceased had not died due to the accident he would have lived at least upto the age of 65 years. The Court, therefore, enhanced the compensation of Rs. 60,000/- to Rs. 1.00,000/-. [948 F, G, 949 A-B, 950 A-BJ

2. It is unfortunate that section: 95(2) (d) of the Motor Vehicles Act restricts the liability of the Insurance Companies to Rs. 2,000/- only in case of a third party. The court suggested that the Legislature should increase the li:1hility of the Jnsnrance company. The court observed that it was anamolous that if a passenger dies in a pl:>ne accident he gets the compensation of Rs. l lac and a person who dies in the road accident should get only Rs. 2,000/-.

[946 D-E]

3. Expressing its concern for the need for creating no fa\Jlt liability by a suitable legisl:>tion, the Conrt observed :

The time is ripe for serious consideration of creating no-fault liability.

Having regard to the directive princioles of State policy, the 1JOVerty of the ordinary run of victims of automobile accidents, the compulsory nature .of insurance of motor vehicles, the nationalisation of general insurance comparnes and the expanding trend towards nationalisation of bus transport, the law of

' "

torts based on no-fault needs reforms. Where the social need of the hour re- 11.uires that precious human lives lost in motor accidents leaving a trial of .economic disaster in the shape of their unprovided for families caU for special attention of the law makers to meet this social need by providing for heavY

and adequate compensation particularly through Insurance Companies.

Our country can ill-afford the loss of a precious life when we are building a progressive society and if a-ny person engaged in industry, office, business or any other occupation dies, a void is created which is bound to result in a serious set back to the industry or occupation concerned. Apart from that the death of a worker creates a serious economic problem for the family which he leaves behind.

In these circumstances it is only just and fair tha-t the Legislature should make a suitable provision so as to pay adequate compensation by property eva.Juating the precious life of a citizen in its true perspective rather than devaluating human lives on the basis of an artificial mathematical formula. [916 C-950 D-F]

C1v1L APPELLATE JURISDICTION : Civil Appeal Nos. 2310 & 1826 of 1968.

(From the Judgment and Decree dated the 30th August, 1967 of the Madhya Pradesh High Court in Misc. First Appeals Nos. 219 and 220 of 1965) and

Civil Appeal No. 132 of 1969

- (From the Judgment and Decree dated the 30th August, 1967 of the Madhya Pradesh High Court in Misc. First Appeal No. 203 of 1965).

G. L. Sanghi, Talat! Ansari, R. K. Sanghi and K. J. John.-Irn E CAs. Nos. 132/69 & 1826168 for the Appellant in 132 & in 1826/ 68.

G. S. Chatterjee & D. P. Mukherjee.-for Respondents 1-3.

I. N. Shroff & H. S. Parihar-for Respondent No. 8.

H. K. Puri and A. G. Ratnaparkhi.-for Respondent No. 6 for Respondents 9 to 11. ·

G. S. Chatterjee & D. P. Mukherjee, in CA No. 2310 of 1968 :for the appellants. ·

G. S. Sanghi, Talat Ansari, R. K. Sanghi and K. J. Joh11 fur respoµdent No. 1.

H. S. Parihar & I. N. Shroff for respondent No. 3.

H. K. Puri for respondent No. 4.

The Judgment of the Court was delivered by

. FAZAL ALI, J.-'-ith the emergence of an ultra-modern age wh_1ch has led to stndes of progress in all spheres of iife; we have H switched from fast to faster vehicular traffic which has come as a boon to many, though some times in the case of some it has also

946 SUP}lEME COURT REPORTS [1977] 2 s.c.R.

A proved to be a misfortune.

Such are the cases of the victims of motor accidents resulting from rash and negligent driving which take away quite a number of precious lives of the people of our country.

At a time when we are on the way to progress and prosperity, our country can ill-afford to lose so many precious lives every year, for though the percentage of deaths caused by motor accidents in other countries is high, in our own country the ame is not by B any means negligible, but is a factor to be reckor.ed with.

Our lawmakers being fully conscious of the expanding needs of our nation have passed laws and statutes to minimise motor accidents and to provide for adequate compensation to the families who face serious socio-economic problems if the main bread-earner los..s:s his life in the motor accident.

The time is ripe for serious consideration of creating no-fault liability.

Having regard to the directive principles C of State policy, the poverty of the ordinary run of victims of automobile accidents, the compulsory nature of insurance of motor vehicles, the nationalisation of general insurance companies and the ex-· panding trend toward's nationalisation of bus transport, the law of torts based on no-fault needs reform.

While s. 110 of rhe Motor Vehicles Act provides for the constitution of Claims Tribunals for determining the compensation payable, s. 110-A provides for the D procedure and circumstances under which the family of a victim of a.

motor accident can get compensation and lays down the various norms, though not as exhau'stively as it should have. The Courts, however, have spelt out and enunciated valuable principles from time to time which guide the determination of compensation in a particular situation.

Unfortunately, however, s. 95(2) (d) of the Motor Vehicles Act limits the compensation to be paid by an Insurance Com- E pany to Rs. 2,000/- only in respect of death to any third party and this is one disconcerting aspect on which we shall have to say something in a later part of our judgment. ,

With this little preface we now take up the facts in the appeals by certificate filed by B. L. Gupta and Smt. Manjushri Raha in this Court, and which after being consolidated have been disposed of by one common judgment both by the Claims Tribunal as also by the High Court.

Manjushri Raha, the main appellant in Civil Appeal No. 2310 of 1968 will, in short, be referred to hereafter as "Raha",

whereas respondentS Oriental Fire & General Insurance Company would be referred to as "Oriental Company" and the New India Insurance Company as "New India Company".

Smt. Manjula Devi Bhuta representing the owner of vehicle No. MPG-4515 will be referred to as "Bhuta", whereas B. L. Gupta the owner of vehicle No.

MPG-4307 belonging to the M. P. Speedways Company would be referred to as "Gupta". Padmavati Shastri, the respondent in one of the appeals, would be referred to as "Shastri". The appeals arise in the following circumstances.

H Claim Case No. 6 of 1962 was filed by Raha along with her two minor children against Bhuta, Sushil Kumar driver of vehicle No.

MPG-4615, Orienfal Company, New India Company, Gupta owner of the M. P. Speedways Company and Ram Swaroop driver of vehicle No. MPG-4307.

The applicant Raha claimed compenation for a

sum of Rs. 3,00,000/- against the respondents under s. 110-A of the Motor Vehicles Act.

Similarly Shastri filed Claim Case No. 5 of 1962 against the respondents mentioned above claiming Rs. 1,20,0001as compensation from the aforesaid respondents.

Both these claims were consolidated and heard and decided by one common judgment by the Claims Tribunal, Gwalior.

Th~ acts giving rise to the claims of Raha and Shastri were that on Apnl 10, 19_62 Satyendra Nath Raha the husband of Raha and Uma Shanker Shastri the husband of Shastri were travelling in vehicle No.

MPG-4307 (owned by Gupta of the M. P. Speedways Company) from Bhind to Gwalior.

When the bus travelled a distance of about 26 miles on the Bhind-Gwalior road another bus bearing No. MPG-4615 belonging to Bhuta was seen coming from the opposite direction.

The driver of the M.P. Speedways Company was Ram Swaroop while that of the bus belonging to Bhuta was Sushi! Kumar.

When the two buses were approaching in opposite directions, both the driver's being negligent and having failed to take the necessary precautions of keeping to theii; left led to a head-on collision of the two buses as a consequence of which the two persons, namely, Satyendra Nath Raha and L'ma Shanker Shastri sustained fatal injuries to which they succumbed on the same day in the Gohad Hospital. _ The facts and circumstances under which the accident took place have not been disputed by counsel for the parties, nor have the essential findings of fact given by the Claims Tribunal and the High Cour! been challenged before us.

The appeal, therefore, lies within a very narrow compass.

But before dealing with the appeals, it m_ay be necessary to indicate the reliefs granted by the Claims Tribunal to the parties concerned.

The Claims Tribunal decreed the claim of Raha to the extent of R'§. 60,0001only against all the respondents holding that the drivers of both the buses were negligent.

The claim of Shastri was decreed only to the extent of Rs. 40,000/- against Bhuta, Sushi!

Kumar driver and Oriental Company.

No decree was passed against Ram Swaroop driver of the M.P. Speedways Company and New India Company because there was no allegation of negligence against these persons in the claim filed by Shastri.

Against the decision of the Claims Tribunal, Gupta field Miscellaneous First Appeal No. 203 of 1965 against Bhuta, Raha and others which was dismissed by the High Court.

Civil Appeals Nos. 1826 of 1968 and 132 of 1969 in this Court arise out of the aforesaid appeal before the High Court.

Miscellaneous First Appeal No. 219 of 1965 was filed by Bhuta against Raha, Gupta and others which was also dismissed by the High Court, but Bhuta has not filed any appeal to this Court against the decision of the Tribunal and the High Court in that appeal. But Bhuta had filed an appeal in the High Court being Miscellaneous First Appeal No. 220 of 1965 against Shastri which was allowed by the High Court to this extent that the decree against Gupta and Ram Swaroop was made joint and several along with the appellant Bhuta.

Miscellaneous First Appeal No. 222 of 19'65 was filed before the High Court by Oriental Company against Shastri but that was also dismissed.

Similarly Miscellaneous First . .App€al No. 223 of 1965 was filed before the High Court by Oriental Company against Raha which was also dismissed along with the cross objection

A which was filed by Raha for enhancement of the compensation. The High Court, however, held in Miscellaneous First Appeal No. 223 of 1965 that Oriental Company was to pay a total compensation of Rs. 20,000/- out of which Rs. 8,0001was to be paid to Shastri and Rs. 12,0001to Raha.

The present appeals in this Court have been filed by Gupta and B Raha.

Neither Shastri, nor Bhuta, nor any of the Insurance Companies have filed any appeal before this Court.

The short point raised by Mr. Sanghi appearing for Gupta was that in the c; ircumstances the compensation awarded by the Claims Tribunal to Raha was too high and at any rate the High Court ought not to hve made the appellant Gupta liable jointly and severally with others. In the appeal filed by Raha it is claimed that the compensation granted by C the Claims Tribunal was grossly inadequate and shoulq be enhanced.

It has been stated before us by Mr. Sanghi, though not admitted by the other 'side, that Gupta and the Insurance Companies have paid a total amount of Rs. 29,000/- (Rs. 15,0001by Gupta and Rs. 14,000 by Insurance Companies) in full and final settlement of the claim of Raha and, therefore, the appeal should be decreed in terms of the compromise.

It was further contended that even if the amount D awarded by the Claims Tribunal to Raha is enhanced that should be payable by Bhuta alone and not by the appellant Gupta, who has

settled the claim with the appellant Raha.

There can be no doubt that if really a settlement has been reached between Gupta and Raha then no further decree can be passed as against Gupta. The appellant further undertook to pay Rs. 10,000 /- to Shastri in fulfilment of her claim.

As Rs. 10,000/- has already been paid to Shastri with the B result that Bhuta has yet to pay Rs. 20,000 /- being her share to Shastri.

Ftnally, it was contended that as there was no allegation of negligence agains! Ram Swaroop the driver of the M. P. Speedways Company the High Court ought not to have decreed the claim of Raha against the appellant Gupta.

We have perused the plaint before the Claims Tribunal, which is rather loosely drafted, but it clearly contains the relief of compensation even against Gupta and Ram Swaroop driver.

The High Court has pointed out that even though there is no clear plea of negligence in the claim of Raha, the facts alleged and proved in the case clearly show that Ram Swaroop the driver of the M.P. Speedways Company was both rash and negligent. Pleadings have to be interpreted not with formalistic rigour but with latitude or awareness of low legal .literacy of poor people.

We fully agree with the finding of the High Court and see no reason to disturb it.

We also agree with the order of the High Court by which it makes Gupta and Bhuta jointly and se'-:erally liable.

That was the only decree which could have been pas'sed in the circumstances.

Coming now to the appeal filed by Raha, counsel for the appellant submitted that the compensation awarded by the Claims Tribunal is grossly inadequate and certain important factors have not been taken into consideration.

On a perusal of the judgment of the Claims Tribunal it would appear that the only basis on which the compensation has been awarded is the total salary which the deceased Saty, en-

<Ira Nath Raha would have got upto the age of 55 years which has been taken at Rs. 1,20,000/- and after deducting half which would normally have been spent, the actual income lost to the family was Rs. 60,0001-. It seems to us, however, that in makiug the calculation,. the Claims Tribunal and the High Court overlooked two important and vital considerations.

In the first place, while tpe admitted position was that the deceased Satyendra Nath Raha was workiRg in the grade of Rs 590-30-830-35-900 and was getting a salary of Rs. 620/- p.m. at the time of his death, the Courts below have not taken into account the salary which he would have earned while reaching the maximum of his grade long before his retirement.

It is admitted that the deceas\!d Satyendra Nath Raha was 37 years of age at the time of the accident and at this rate he •.vould. have reached the maximum of the grade of Rs. 900/- at the age of 46 years i.e. full 9 years before his superannulltion.

The claimant ha~ produced a certificate Ext. P-4 from the office of the Accountaut General, Madhya Pradesh, Gwalior, which shows that from April 11. 1962 (i.e. the date next to the date of the death of Satyendn! Nath Raha) to October 15, 1980 which would be the last working day of the deceased Raha, the deceased Raha would have drawn Rs. 1,89,402/- including the increments earned and the maximum grade drawn.

This figure may be rounded off to Rs. 1,88,000/-. Even if half of this be deducted as being rightly taken to have been spent by the deceased to cover day to day domestic expenses, payment of income.. tax and other charges, the actual income lost to the family including the value of the estate and the loss to the dependents would be Rs. 94,000/-. This will be a fair estimate which does not take into account the economic value of the deprivation to the wife of her husband's company fon ever and the shock felt by the children.

It was suggested by the High Court that as the deceased Raha was not a permanent employ~, the amount taken into account by the Compensation Tribunal was correct.

This is, however, not a consideration which could have weighed with the Claims Tribunal in making the assessment because it was purely contingent.

On the other hand with the rise in price index it could well have been expected that there would be several revisions in the grade by the time the deceased Raha had attained the age of superannuation, which, if taken into account, would further enhance the amount.

In these circumstances, therefore, we think that the amount of Rs. 90,000/- would represent the correct compensation so far as the salary part of the deceased Raha is concerned. . ·

The Courts below have also not considered the effect of the pensionary benefits which the deceased Raha would u-ridoubtedly have got after retirement, and in fact the Claims Tribunal has restricted the span of the life of the deceased only to the age of 55 years i.e. the age of superannuation, whereas in the present economic conditions the life of an average Indian has increased more than two-fold. It is, therefore, reasonable to expect that if the deceased had not died due to accident, he would have lived up at least upto the age of 65 years, if not more, so a's to earn the pensionary benefits for 10 years after retirement. According to the certificate Ext. P-4 the deceased Raha would have been entitled to a monthly pension of Rs. 337c50 which

-:~

would mea~ about Rs. 4,050/- per year. There can be no doubt that whole of this amount wouldi have to be spent, there being no other source of income and, therefore, this amount cannot be said to be lost to the estate. The certificate Ext. P-4 further shows that the deceased Raha would have got death-cum-retirement gratuity to the extent of Rs. 13,500/- calculated on the basis of the presumptive average emoluments and presumptive last emoluments.

If the deceased had lived after superannuation, he might probably have got this amount. After adding this amount of Rs. 13,500/- to Rs. 90,000 the total amount would come to Rs. 1,03,500/- which mav be rounded off to roughly Rs. 1,00,000/-. In any view of the matter, therefore, the appellant Raha was entitled to a compensation of Rs. 1,00,000/-, and the Courts below erred in completely overlooking these two important aspects which we hav~ discussed.

It appears that the appellants Raha as also Padmavati Shastri could have got heavier compensation from the Insurance Companies, but unfortunately the Motor Vehicles Act has taken~ very narrew view by limiting the liability of the Insurance Companies under s. 95

(2) ( d) to Rs. 2,000/- only in case of a third party.

While our Legislature has made laws to cover every possible situation, yet it is well nigh impossible to make provisions for all kinds of situations.

Nevertheless where the social need of the hour re-· quires that precious human lives lost in motor accidents leaving a trail of economic disaster in the shape of their unprovided for families call for special attention of the law makers to meet this social need by providing for heavy am! adequate compensation particularly through Insurance Companies. It is true that while our law makers are the best judges of the requirements of the society, yet it is indeed surprising that such an important aspect of the matter has missed their attention. Oui country can ill-afford the loss of a precious life when we are building a progressive society and if any person engaged in industry, office, business or any othet occupation dies, a void is created which is bound to result in a serious set back to the industry or occupation concerned. Apart from that the death of a worker creates a serious economic problem for the family which he leaves behind. In these circumstances it is only just and fair that the Legislature should make a suitable provision so as to pay adequate compensation by properly evaluating the previous life 0£ a citizen in its true perspective rather than devaluing human lives on the basis of an artificial mathematical formula.

It is common knowledge that where a passenger travelling by a plane: dies in an accident, he gets a compensation of Rs. 1,00,000/- or like large sums, and yet when death comes to him not through a plane but through a motor vehicle he is entitled only to Rs. 2,000 /-. Does it indicate that the life of. a passenger travellin.g by plane becomes more precious merely because he has chosen a particular conveyance and the value of his life is consi<lerably reduced if he happens to choose a conveyance of a lesser value like a motor vehicle ? Such an invidious distinction is absolutely shocking to any judicial or social conscience - and yet S: .95(2) (d) of the Motor Vehicles Act seems to suggest such a d1stmctton. We hope and trust that our law-makers will give serious attention to this aspect of the matter and remove this serious lacuna in s. 95(2) (d) of the Motor

< ...

-~--4-{

Vehicles Act. We would also like to suggest that instead of limiting the liability of the Insurance Companies to a specified sum of money as representing the value of human life, the amount should be left to be determined by a Court in the special circumstances of each case.

We further hope our suggestions will be duly implemented and the observations of the highe_st Court of the country do not become a mere pious wish.

In M/s. Sheikhupura Transport Co. Ltd. v. Northern India Transponers Insurance Co. Ltd.('1) this Court has clearly held that an Insurance Company is not liable to pay any sum exceeding Rs. 2,000/- upto a maximum of Rs. 20,000/- on the plain words of s. 95 (2) (d) of the Motor Vehicles Act and the only remedy to provide for adequate compensation for a precious life of a human life is for the Legislature to take a practical view of the loss of human life in motor accidents.

In P. B.' Kader & Ors. v. Thatchamma and Ors.(2 ) a Division Bench of the Kerala High Court, while dwelling on this aspect observed as follows :

"It is sad that an; Indian life should be so devalued by an Indian law as to cost only Rs. 2,000/-, apart from the fact that the value of the Indian rupee has been eroded and Indian life has become dearer since the time the statute was enacted, and the consciousness of the comforts and amenities of life in

the Indian community has arisen, it would have been quite appropriate to revise this fossil figure of Rs. 2,000/- per individual, involved in an accident, to make 'it more realistic and humane, but that is a matter for the legislature; and the observation that I have made is calculated to remind the lawmakers that humanism is the basis of law and justice." We find ourselves in complete agreement with the observations made by the Kerala High Court in the aforesaid case and we would like to remind the law-makers that the time has come to take a more humane and practical view of things while passing statute like the Motor Vehicles Act in regulating compensation payable by Insurance Companies to victims of motor accidents.

We have not the slightest doubt that if the attention of the Government is drawn, the lacuna will be covered up in good time.

The result is that Civil Appeals Nos. 1826 of 1968 and 132 of 1969 are dismissed and Civil Appeal No. 2310 of 1968 is allowed to this extent that the claim preferred by Raha is enhanced from Rs. 60,000/- to Rs. 1,00,000/-. As no authentic proof of any settlement between Gupta and Raha has been produced before us, the decree passed by us will be jointly and severally recoverable from Gupta and Bhuta after giving credit for the amounts received by Raha.

It will, however, be open to the executing court on proof of any full and final settlement of the claims of Raha with Gupta or any other Judgment debtor to adjust the claims accordingly under 0.23 r. 3 of the Code of Civil Procedure. In the circumstances of the case, the parties will bear their own costs in this Court.

P.H.P.

C.A. 1826 of 1968 and 132 of 1969 dismissed.

(I) A.J.R. 1971 S.C. 1624.

(2) A.LR. 1970 Kera]a 241.

C.A. No. 2310 of 1968 allowed.

MANJUSRI RAHA & ORS ETC

B. L. GUl'TA & ORS. ETC

February 9, 1977

V. R. KRISHNA IYER

S. MURTAZA ALI, JJ.

Motor Vehicles Act 1939

Sec. 95(2)(d)

Satindra Nath Raha

Uma Shankar Shastri

Gupta

M. P. Speedways Company

Bhind

Gwalior

Bhuta

Raha

Shastri

Rahal

OA of the Motor Vehicles Act

Ram

Swa.rup negatived

Ram Swamp

Motor Vehicles Act

G. L. Sanghi

Talat! Ansari

R. K. Sanghi

K. J. John.-Irn

G. S. Chatterjee

D. P. Mukherjee.-for

I. N. Shroff

H. S. Parihar

H. K. Puri

A. G. Ratnaparkhi.-for

D. P. Mukherjee

G. S. Sanghi

Talat Ansari

R. K. Sanghi

K. J. Joh11

FAZAL ALI

s. 110

Motor Vehicles Act

s. 110

s. 95(2)

Motor Vehicles Act

B. L. Gupta

Manjushri Raha

Manjushri Raha

New India Insurance Company

Manjula Devi Bhuta

Padmavati Shastri

Sushil Kumar

Orienfal Company

New India Company

Gupta

Ram Swaroop

Raha

s. 110

Motor Vehicles Act

Claims Tribunal, Gwalior

Apnl 10, 19_62

Satyendra Nath Raha

Uma Shanker Shastri

M.P. Speedways Company

Sushi! Kumar

L'ma Shanker Shastri

Gohad Hospital

Claims Tribunal, Gupta

Bhuta

Shastri

Oriental Company

Sanghi

Saty

Nath Raha

Satyendn! Nath Raha

Padmavati Shastri

Motor Vehicles Act

s. 95

Motor Vehicles Act

s. 95(2)

s. 95

Motor Vehicles Act

Kerala High Court

Motor Vehicles Act

the Code of Civil Procedure


UNION OF INDIA AND ANOTHER

VIJA Y CHAND JAIN

February 9, 1977

[V. R. KRISHNA IYER AND A. c. GUPTA, JJ.]

. Foreign Exchange Regulation Act, 1947-s. 23(18)-Foreign Currency-- Sale proceeds in Indian c11rrency seized and confiscated-Government. if competent to confiscate.

Words a'nd Phrases-"in respect of"-Meaning of.

Under s. 2(d) of the Foreign Exchange Regulation Act, 1947 foreign exchange means foreign currency.

Section 4(1) prohibits the sale or purchase of foreign exchange by a person other than an authorised dealer except with the Permission of the Reserve Bank. Section 23(1)(a) prescribes a penalty for contravention of s. 4. Section 23 (lB) provides that, in addition to the penalty which may be imposed for such contravention, a court may direct that any curren.cy or any ot!J, er money or. property in respect of which the contravention has taken place shall be confiscated to the Central Government. The explanation to this sub-section provides that for the purpose of the sub-section property in respect of which contravention has taken place shall include deposits in a bank where the said property is converted into such deposits.

A large sum of Indian currency, _which was the sale proceeds of foreign currency, was recovered from the respondent. . In addition to imposing a penalty, the Director of Enforcement confiscated the Indian currency seized from the respondent. In . a petition under art. 226 of the Constitution, the High .Court held that the Director of Enforcement had no competence to order confiscation of Indian currency because the contravention had taken place in respect of some foreign currency and not in respect of the Indian currency seized.

Al)owing the a.ppeal,

HELD : The currency in respect of which there has been contravention covers the sale proceeds of foreign currency, sale of which is prohibited under s. 4(1). [954HJ

The High Court was wrong in quashing the order of confiscation.

The intention of the legislature is clear from the Explanation to s. 23(1B). If, for F this sub-section any property in respect of which a contravention has taken pl, ilce includes deposits into which the property may be converted and can be reached, even where the deposits are in a bank, it is not reasonable to hold that the sale proceeds in Indian currency of foreign exchange would be outside the scope of s. 23(1B) and, therefore not liable to be confiscated. [955 A]

The words "in respect of" admit of a wide connotation. In the context of s. 23(1B) "in respect of" has been used in the sense of being "connected with". [954 GJ

Cuperd's Trustees v. Inland Revenue Commissioners 174 L.T. Rep. 133 and S. S. Li ii ht Railway Co. Ltd. v. Upper Doab Sugar Mills Ltd. & A nr fl960) 2 S.C.R. 926 referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2081 of 1968.

Appeal from the Judgment and Order dated the 30-3-1967 of the Delhi High Court in Civil Appl. No. 112 .of 1966.

G. L. Sa11ghi and Girish Chandra for the Appellant.

Y. S. Chitley and Ashok Grover for Respondent.

The Judgment of the Court was delivered by

GuPTA, J.-This appeal on certificate of fitness turns on the meaning of the words "in respect of" occurring in section 23(1B) of_ he Fmeign Exchange Regulation Act, 1947. For a proper appreciatton ;1 of the question, it is necessary to refer to two other sections of he

Act, section 4(1) and section 23(1) (a), before we turn to section

23(1B).

Section 4(1) lays down :

"Exliept with the previous general or special permision of the Reserve Bank, no person other than an atithonsed dealer shall in India and no pers'on resident in India other than an authorised dealer shall outside India, puy or otberwise acquire m borrow from, or sell or otherwise transfer or lend to, or exchange with, any person not being an authorised dealer, any foreign exchange."

Section 23(1) (a) provides:

"If any person contravenes the provisions of section 4, section 5, section 9, section 10, sub-section (2) of section 12, section 17, section 18A or section 18B or any rule, direction or order made thereunder, he shall -

(a) be liable to such penalty not exceeding thi; ee times the value of the foreign exchange in respect of which . the contravention has taken place, or five thousand rupees, whichever is more, as may be adjudged by the Director of Enforcement in the manner hereinafter provided, or

(b) x x x"

The part of section 23 (1 B) material for the present purpose reads :

"Any Court trying a contravention under sub-section (1) or sub-sction ( lA) and the authority adjudging any contravention under clause (a) of sub-section (1) may, if it thinks fit, and in addition to any sentence or penalty which it may impose for such contravention, direct that any currency, security, gold or silver, or goods or any other money or property, in. respect of which the contravention has taken place, shall be confiscated to the Central Government .... "

There is an explanation to this sub-section which says : "Explanation.-For the purposes of this sub-section, property in respect of which contravention has taken place shall include deposits in a bank, where the said property is converted into such deposits."

These are the facts on which the question of construction or sec tion 23(1B) arises.

On the morning of January 28, 1966 the respondent who resides and carries on business in Delhi arrived at Palam Aifport by I.A.C. Flight No. 181.

A customs officer recoverc

SUPREME COURT REPORTS [1977] 2 s.C.R.

ed from his possession Indian currency amounting to Rs. 78,481/- which sum, the respondent admitted, was the sale proceeds of the foreign currency entrusted to him for sale by someone else.

On February 14, 1966 the second appellant, Director, Enforcement Directorate, Ministry of Finance, asked the respondent to show cause why the Indian currency recovered from his possession, which admittedly was the sale proceeds of foreign currency, should not be confiscated.

The second appellant was the authority adjudging under section 23(1) (a) an alleged contravention of the provisions of cction 4.

On October 14, 1966 the second appellant held on the evidence before him that the respondent was guiliy of contravening the pro.visions of section 4(1) apd imposed a penalty of Rs. 50,000/- under section 23(1)(a). He further directed the sum of 78,481/- seized from the ," respondent to be confiscated under section 23 (lB). The respondent moved the High Court of Delhi under Article 226 of the Constitution 5eeking an appropriate writ quashing the order of confiscation.

The High Court viewed the matter as follows :

"What has happened is that foreign currency had been sold for Indian currency.

In other words, a contravention under section 23 (1 )(a) had taken place in respect of some foreign currency and not in respect of the Indian currency seized."

Accordingly, the High Court held that the Director of Enforcement "had no competence to order the confiscation of the Indian currency in question" and quashed the impugned order.

The contravention alleged is of section 4 ( 1) which prohibits, inter alia, sale of any foreign exchange.

Foreign exchange as defined in section 2(d) means foreign currency.

Under section 23(1B) any currency, security, gold or silver, or goods or any other money or property "in respect of which" the contravention has taken place is liable to be confiscated to the Central Government. The currency .confiscated in this case was Indian currency.

The question is whether the Indian currency constituting the sale proceeds of foreign exchange seized from the respondent was currency in respect of which the contravention had taken place.

The words "ill respect of" admit of a wide connotation; Lord Greene M.R. in Cuperd's Trustees v. Ill/and Revenue Commissioner, C) calls them colourless words. This Court in S. S. Light Railway Co. Ltd. v. Upper Doab Sugar Mills Ltd. & Anr.( 2), construction these words in section 3(14) of the Indian Railways Act, 1890 has held that they are very wide. It seems to us that in the context of section 23 ( lB) in respect of has been used in the sense of being "connected with' and we have no difficulty in holding that the currency in respect of which there has been contravention covers the sale proceeds of foreign currency, sale of which is prohibited under section 4 ( 1). The intention of the legislature is clear from the explanation to sub-section (lB) of section 23 which provides that "for

(1) 174 L.T. Rep. 133.

(2) (1960] 2 S.C.R. 926.

the purpo.ses of the sub-section property 'in respect of which contra vention has taken place shall include deposits in a bank, where such property is converted into such deposits." If for this sub-section any pro- . perty in respct of which a c_ontravention has taken place includes deposits into which the property may be converted and can reached even where the deposits are in a bank, it is not reasonable to think that the sale proceeds in Indian currency of any forign exchange would be outside. the scope of section 23 ( 1B) and therefore not liable to be confiscated. In our opinion the High Court was wrong in quashing the order of confiscation which we consider valid and lawful.

The appeal is accordingly allowed with costs.

P.B.R.

Appeal allowed.

13-206SCI/77

UNION OF INDIA AND ANOTHER

VIJA Y CHAND JAIN

February 9, 1977

V. R. KRISHNA IYER

A. c. GUPTA, JJ.

Foreign Exchange Regulation Act, 1947

s. 23(18)

s. 2(d)

Foreign Exchange Regulation Act, 1947

Section 4(1)

Section 23(1)(a)

s. 4

Section 23

Central Government

art. 226

s. 4(1)

s. 23(1B)

s. 23(1B)

s. 23(1B)

Cuperd

Girish Chandra

Y. S. Chitley

Ashok Grover

GuPTA

section 23(1B)

Fmeign Exchange Regulation Act, 1947

section 4(1)

section 23(1)

section

23(1B)

Section 4(1)

India

Section 23(1)

section 4

section 5

section 9

section 10

section 12

section 17

section 18A

section 18B

section 23

January 28, 1966

Delhi

February 14, 1966

section 23(1)

October 14, 1966

section 4(1)

section 23(1)(a)

section 23

High Court of Delhi

Article 226

section 23

section 4

section 2(d)

section 23(1B)

Greene

section 3(14)

Indian Railways Act, 1890

section 23

section 4

section 23

(1960] 2 S.C.R. 926

section 23


KRISHAN MURARI LAL SEHGAL

STATE OF Pl.JNJAB

February 9, 1977

[P. K. GOSWAMI AND P. N. SHINGHAL, JJ.]

Constitutio11 of 111dia-A rticle 311 (1), dismissal by a person subordinate to appointing authority-States Reorganisation Act, 1956-Sec. 115(7), 116(1) -Varying conditions of service of an allocated Gol'emmelll servaiit to llis disadvantage-Effect of reorganisation-Different a111hority i11 state before and after reorganisation-Patiala & East Puniab States Unio11 Civil Serl'ices (P1111ish- 111ent & Appeals) Rules, 1953-Pepsu General Clauses Act-Sec. 2(41 )- Meaning of State r.ovemment-Punjab Financial Commissioner's Office (State Service Class Ill) Rules, 1957-Central Government Circular dated 11-5-1957 issued under States Reorga11isatio11 A ct, 1956.

The appellant was appointed as a clerk in the Patiala State in 1948.

On the formation of the new State of Punjab in 1956, the appellant was integrated in the service of the new State of Punjab as permanent Assistant.

The appellant overstayed leave and, therefore, after holding an enquiry the Financial Commissioner. Punjab dismissed him from service in October, 1959.

Appellant filed two suits. one for a declaration that his dismissal order was void and illegal second for arrears of salary on the basis that the dismissal was illegal.

The trial Court decreed both the suits.

The High Court in appeal reversed the decrees of the trial Court and dismissed the suits.

In the appeals by certificate the appellant contended that the aopellant was confirmed in the State of Patiala bv the order of the Raj Pram1ikh.

Before its integraiion he was governed by the Patiala and East Punjab States Union Civil Services (Punishment and Appeal) Rules 1953 which were made in exercise of powers conferred by proviso to Art. 309 of the Constitution.

By a notification of the Punjab Government dated 9-2-1957 the said 1953 Rules were made applicable to the corresponding services from !st November, 1956 onwards till further orders in the new State of Punjab.

Under the 1953 Rules, the State Government was tlie appropriate authority for dismissing members of Class III and IV.

Under section 2(46) of the Pepsu General Clauses Act,

1953. state Government means the Rai Pramukh. The appellant. therefore, contended that he cannot he removed from service by any authority subordinate to the Governor of Punjab and since the Financial Commissioner is an authority subordinate to the Governor. he was not competent to pass the order of dismissal.

The respondent contended that the appointing authority for the post held by the appellant in the State of Punjab is the Financial Commissioner and, therefore. he is the appropriate authority under s. 116 (I) of the States Reorganisation Act, 1956 to impose the penalty of dismissal.

Secondly, in the present case the Punjab Financial Commissioner's Office (State Services Class Ill) Rnles. 1957. applv.

Although the said rules are more disadvantageous to the appellant since they have received the approval of the Central Government by the General Circular dated 11-5-1957, the appellant was rightly dismissed bv the Financial Commissioner.

Allowing the apDeals,

HELD: I. Section 116(1) merely provides that the appellant shall continue to hold the same post in the new State of Punjab and shall be d.eemed to have been duly appointed to such post by the Government of Pun1ab.

The

fct that in the new State of Punjab the Financial Comm!ssioner is the appropriate authority for appointing Assistants is abs?]utely meleyant. 1:, Jnder s. 115(7) of the States Reorganisation Act the cond1hons of service apphcaole to

• •

-KRrSHAN ~MURARILAL v. PUNJA_B (Goswami., !.) 957

.a civil servant immediately before the appointed day cannot be varied to his A disadvantage except with the previous approval of the Central Government. One of the condition of service of the apellant on the appointed day was tha-t since he was appointed by 1'.he State Government of Pepsu he could only be

.. dismissed by the State Go\!ernment of Pepsu if he had contin.ued there.

[961 H, 962 A]

2. The Memorandum of 11-5-1957 cannot be called in aid as previous approval :because the Punjab Financial Commissioner's Office Rules 1957 were . B promulgated on "28'2C1957 before the Circular dated 11-5-1957 was issued. No approval of the Central Government has been produced.

Therefore, authority subordinate to the Governor of Punjab was not competent'to pass an order of ·dismissed of the apellant. T962 D-El

~' The Court set aside the judgment and decrees of the High Court and res- ' -tored those of the trial Court. (963 El

Takhatray Shivdatray Mankad v. Stale of Gujarat [1970] (1) SCR 244 a0nd C 8/10/anath J. Thaker v. The State of Snurashtra AIR 1'.l54 SC 680, followed.

N. Raghavendra Rao v. Deputy Commissioner, South Kamara, Mnngalore ·(1964] (7) SCR 549 and Mohammad Shujat Ali & Ors. etc. v. Union of Ti1dia .& Ors. etc. f19751 (1) SCR 449, distinguished. ·

Raji-i Amar Singh v. The State of Rajasthan, [1958] SCR 1013, distinguished.

Mysore State and Road Transport Corporation etc. v. Miria Khasim Ali, D Beg & Anr., C. As. 'Nos. 1601-1609 and 2402-2405 of 1968 dt. 1-12-1976 •followed.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1298 and 1299 of 1969.

Appeal from the Judgment and Decree dated the 9th August, 1966 of the Punjab and Haryana High Court in Regular First Appeals Nos. 134 and 120 of 1963.

N. H. Hingorani for the Appellant.

0. P. Sharma for Respondent.

The Judgment of the Court was delivered

GoswAMI, J.-These appeals are by certificate of the High Court F -of Punjab and Haryana. Civil Appeal No. 1299 of 1969 is concerned with the appellant's suit for declaration of his dismissal order dated October 21, 1959, as void and illegal.

Civil Appeal No. 1298 of 1969 arises out of his suit for arrears of salary.

Both the matters were heard together in the High Court and the judgment out of which Civil Appeal No. 1299 of 1969 arises is the principal judgment following which a short order was passed by the High Court dismissing the G other suit of the appellant for arrears of salary.

The High Court granted certificates in both the appeals.

It will be sufficient to deal with Civil Appeal No. 1299 of 1969 in this judgment as the decision therein will govern the other appeal.

The facts may now be briefly stated :

The appellant who was the plaintiff in the court below was appoint- H ed as a Clerk in the Pa ti ala State some time in July 1948. On the formation of the new State of Punjab on November 1, 1956, with the

SUPREME EOURT REPORTS [1977] 2 s.c.R.

merger of the erstwhile Pepsu and Punjab States the appellant was integrated in the service of the new State of Punjab as permanent Assistant in the grade of Rs. 150-10-300/- and was actually getting Rs. 170/- per month on October 21, 1959, the date of his dismissal in the office of the Financial Commissioner, Punjab.

The appe.llnt instituted a suit in March 1962 challenging his order of dismissal dated October 21, 1959, as VIQid and unconstitutional praying for a declaration that he continued to be in service of the Punjab St(lt~.

In June 1962 he instituted a second suit .as pauper claiming a decree for about Rs. 8,689/- as arrears of his salary and allowances and also a further decree for Rs. 278/12/- per mensem from 5.6.1962 to 4.7.1962 and Rs. 290/- per mensem from -

5. 7.1962 upto the date of the decree.

Both the suits were decreed by the trial court.

According to the plaint, the appellant, due to rious illness of .his mother, proceeded from Simla where he was working to Patiala on casual leave on 8th July, 1958, with the sanction of the competent authority.

He obtained extension of leave on account of illness of his mother, wife and daughter.

Meanwhile the appellant himself became seriously ill and prayed for leave from 1.11.1958 to 28.2.1959 on the basis of a medical certificate granted by Dr. lnder Singh Sodhi, Retired Civil Surgeon, Pepsu, Patiala.

The authoriti, es declined to sanction the leave.

The appellant also continued to be seriously ill and was unable to attend his duties.

When he recovered he reported for duty at Simla on March 2, 1959 and he was permited to resume his duty on furnishing a certificate. of fitness granted by the aforesaid Retired Civil Surgeon.

On January 27, 1959, the appellant was served with a chargesheet by the Financial Commissioner (Development) Punjab asking him to show cause why he should not be dismissed from Government service for his wilfol absence from duty after the expiry of the earned

leave sanctioned to him upto October 31, 1958, which was described F as "misbehaviour". The chargesheet, inter alia, stated :

"(1) ...... You deliberately deed the orders and again applied for extension of leave upto he 31st December, 1958 feigning yourself to be ill, and also threatened that iii case leave was not allowed, you might be granted interview with the Rev\!nue Minister .... "

x x x x

(2) That on the one hand you have bf:en applying for grant of extension of leave on account of your own illness and on the other, you have requested that you may be allowed to appear in B.A. Examination to be held in April, 1959.

This, therefore, clearly shows that you are not actually ill but are malingering;. and have knowingly defi11d Government orders..

(3) That your wilful absence from duty after the expiry of earned leave sanctioned to you upto the 31st October, 1958, is a misbehaviour".

The appellant submitted his explanation on March 11, 1959. There was an enquiry by the Deputy Secretary (Development) in May 1959.

He was served with a second show cause notice on August 14, 1959, enclosing the report of the Enquiry Officer. The appellant submitted his representation to the said notice on October 6, 1959.

On October 21, 1959, the Financial Commissioner (Revenue) passed the order of dismissal. As already stated, two suits were filed by the appellant in 1962. The Subordinate Judge, First Class, Patiala, decreed bot.h the suits on January 15, 1963. The State Government appealed to the High Court and the same was allowed on August 9, 1966 and both the suits were dismissed.

That is how these appeals came before us on certificates. ·

We are concerned in these appeals with oHly one point which, if it is held in favour of the appellant, will conclude the matter and it will not be necessary to deal with the other questions with reference to the illegalities in the course of the departmental enquiry alleged by the appellant.

It is submitted on behalf of the appellant that the order of dismissal is invalid on account of violation of Article 311 ( l) of the Constitution. The following facts are relied upon by the appellant in order to mstain his submission.

It is admitted by the respondent that the appellant initially joined i; ervice in the State of Pafiala in 1948 as a Clerk and he was confirmed as an Assistant in the Pepsu Civil Secretariat by an order dated October 31, 1956, of His Highness the Rajpramukh, which is the previous day of the 'appointed day' under the State Reorganisation Act, 1956.

Thus he was integrated in _the new State of Punjab as a confim1ed Assistant. Before hfs integration in Punjab he was governed by the Patiala and East Punjab States Union Civil Services (Pui;;_hment and

Appeal) Rules, 195} (brifly th~ Pepsu Rules) which were made in exercise of the powers conferred by tM prov:~~ t0 Artie!~ 399 of !he Constitution. By a Notification of the Punjab Government No. 916'°: GII-00 /2499; dated February 9, 1957, these Pepsu Rules continue to apply asrfrom 1st Noyember, 1956, to the corresponding services, posts and personnel of the new State of Punjab till further orders .. . Rule 6 of the Pepsu Rules provides as follows :- ··

"6. Authority to impose punishment-Subject to the provisions of clause (1) of Article 311 of the Constitution

of India, the authorities competent to impose any of the penalties specified in rule 4 upon the persons to whom these rules apply, shall be such as may be prescribed by Government in the rules regulating the 2ppoiritment and conditions of service of such persons". , H

Dismissal is one of the penalties provided under rufo 4 (see rule 4 (vii). As provided under Rule 6 above me1itioned, ti1e Rajpramukh

under Article 309 of the Constitution by a notification in the Pepsu Gazette of June 27, 1954, made appropriate rules on 14th June, 1954, determining the authorities competent to impose penalties on. members of certain services and holders of certain posts in connection with the affairs of the State. Item No. 14 in the Schedule to these rules mentions "Members of Class III and IV Services in Sectt." and. the punishing authority for dismissal of such employees is the State Government. It is, therefore, clear that under the Pepsu Rules which governed his conditions of service the State Government alone was competent to impose the punishment of dismissal.

Under the Pepsu General Clauses Act, 1953, "State Government shall mean, in relation to anything done or to be done after the commencement of the Con-- stitution, the Rajpramukh". (See section 2 ( 46).

As noted earlier, factually, the appellant was confirmed and neces-- sarily appointed by the Rajpramukh. Under the Pepsu Rules the Rajpramukh alone was the appointing authority.

The appellant therefore, cannot be removed from service by any authority subordinate to the Governor in Punjab. The coordinate authority in Punjab is the State Government. The Governor of Punjab alone, therefore, was competent to pass the order of dismissal of the appellant.

The Financial Commissioner (Revenue) is an authority subordinate to the Governor. He was, therefore, not competent to pass the order of dismissal.

The order of dismissal is violative of Article 311 ( 1) of the Constitution and is, therefore, invalid and is liable to be struck down.

E Mr. Sharma, on behalf of the respondent, submits that there is no violation of Article 311 ( 1) of the Constitution.

The appointing authority for a post heldi by the appellant in the State of Punjab is the Financial Commissioner (Revenue).

He submits that the appointing authority of the appellant before his integration into the State of Punjab does not come into the picture. He adds that this submision of his is in consonance with the provisions of section 116 of the States F Reorganisation Act, 1956 (briefly the Act). We may, therefore, read' section 116 of the Act :

"116 (1) Every person who immediately beforo the appointed day is holding or discharging the duties of ariy post or office in connection with the affairs of the Union or of an existing State in any area which on that day falls with- G in another existing State or a new Part A State or a Part C State shall, except where by virtue or in consequence of the provisions of this Act such post or office ceases to exist on that day, continue to hold the same post or office in the other existing State or new Part A State or Part C State in which such area is included on that day, and shall be deemed as from that day to have been duly appointed to such post or H office by the Government of, or other appropriate authority in, such State, or by the Central Government or other appropriate authority in such Part C State, as the case may be

(2) Nothing in this section shall be deemed to prevent a competent authority, after the appointed day, from passing in relation to any such person any order affecting his co_!ltinuance in such post or office".

Mr. Sharma submits, relying upon the provisions of section 116(1), that since the appointing authority for an Assistant in the State of Punjab is the Financial Commissioner (Revenue) it follows that he is the appropriate authority under section 116 ( 1) to impose the penalty of dismissal.

This submission follows from what the High Court accepted in the impugned judgment in the following words :

"Our attention has not been drawn on behalf of the learned counsel for the respondent to any rule according to which the Governor of Punjab, as is contended, is the proper authority for the appointment of Assistants.

Indeed, it is not disputed that if the plaintiff had been appointed as Assistant in the State of Punjab, then the Financial Commissioner (Revenue) would have been the appropriate authority competent to enquire into the petitioner's conduct and impose the penalty _of dismissal; in other words, in that case, the appointing authority could not have been higher in rank than the Financial Commissioner (Revenue). It is certainly not the plaintiff's-respondent's case that appropriate authority for appointing Assistants in the State of Punjab is the Governor".

We are unable to appreciate the above line of reasoning of the High Court. Section 116 (1) is very clear. To concretise the appellant's case in terms of section 116(1), it is sufficient to state1 that the appellant who, immediately before the appointed day, was holding the post of an Assistant in the former State of Pepsu, shall continue to hold the same post in the new State of Punjab and shall be deemed as from that day to have been: duly appointed to such post by the Government of Punjab.

We are not concerned in the instant case about the appointment being deemed to be made by "other appropriate authority" in the State of Punjab since the appellant had been appointed by the Rajpramukh of Pepsu which is equivalent to the State Government of Pepsu and the coordinate authority in the new State of Punjab is the Governor of Punjab.

The argument that in the new State of Punjab the Financial Commissioneu (Revenue) is the appropriate authority for appointing Assistants is absolutely irrelevant in the context of section 116 (1) which enables the status quo ante to continue except where the post ceases to exist under the provisions of the Act.

It is also important to bear in mind the provisions of se'ction 115 ( 7) of the Act where under the proviso thereto "the conditions of service applicable immediately before the appointed day to the case of any person referred to in sub-section ( 1) or sub-section (2) shall not be varied to his disadvantage except with the previous approval of the Central Government".

One of the conditions of service of the appellant was that having been appointed by the State Government of Pepsu he cold be only dismissed by the State Government of Pepsu if he had contmued there.

Under section 116 when he is integrated in the new State of Punjab he carries with him 'that condition of service with regard to his termi~ nation of employment and it cannot be varied to his disadvantage under section 115 (7) of the Act except with the previous approval of the Central Govermrient. (See Takhatray Shivdatray Mankad v.

State of Gu; arat(') and Bholanath J.

Thakar v.

The State of Saurashtra('). .No such approval of the Central Government in the instant case is produced before us. It is, therefore, clear that an authority subordinate to the Governor of Punjab was not competent to pass the order of dismissal of the appellant.

Mr. Sharma submits that the Punjab Financial Commissioner's Office (State Service Class Ill) Rules, 1957, are ap'plicable in the instant case.

Therefore, under rule 4 thereof the Financial Commissioner is the appointing authority for Assistants, the category to which the appellant belongs. He add; i that even though these Rules may be disadvantageous to the appella1 t he cannot complain on account of the approval of these Rules by the Central Government under section 115 (7) of the Act. Mr. Sharma submits that these Rules received the approval of the Central Government as will appear from the general circular dated May 11, 1957, to all the State Governments. He further submits that in N. Rag'1avendra Rao v. Deputy Commissioner, South Kanara, Mangalore( 3) ahd in a recent decision in Mohammad

Shujat Ali & Ors. etc. v. Union of India & Ors. etc.,(4 ) this Court referred to that circular of May 11, 1957, and held that that circular amounted to general approval under the proviso to section 115(7) of the Act.

We are, however, unable to see how this memorandum o~ May 11, 1957, can be called ip. aid as 'previous approval' under section 115(7) of the Act when tpe Punjab Financial Commissioner's Office (State Service, Class III) Rules, 1957 were already promulgated on February 28, 1957.

Approval under section 115(7) is previous approval and not subsequent ratification.

The above decisions, therefore, do not come to the aid of the respondent.

Mr. Sharma also drew our !attention to a decision of this Court in Rajvi Amar Singh v. The State of Rajasthan(5 ) which is clearly di'stinguishable on facts. This Court was not called upon in that case to consider the provisions of the State Reorganisation Act.

Our attention has been dra, wn by the appellant to an unreported judgment of this Court in Mysre State and Road Transport Corporation, etc. v. Mirja KhaS<im Ali Beg & Anr. etc. (6) pronounced on December 1, 1976. This Court had to deal with a similar question although appertaining to the "competent authority" under section 116(2) of the Act in the background of Article 311 (1) of the Constitution. The following passage from that decision will make the point clear :

(1) [1970] 1 S.C.R. 244.

(2) A.I.R. 1954 S.C. 680.

(4) [1975] l S.C.R. 449.

(5) [1958) S.C.R. ion.

(6) C. A.S. Nos. 1601-1609 & 2402-2405 of 1968 dated 1-12-1976.

\ ..

"In the instant cases, the first respondents were undeniably appointed by the Superintendent of the Traffic Department of the erstwhile State of Hyderabad who was the head of the Road Transport Department of that State.

On the coming into force of the States Reorganisation Act, 1956, on November 1, 1956, they were to he deemed by virtue of sub-section (1) of section 116 of the States Reorganisation Act to have been appointed with effect from that date to the posts held by them on that date by the appropriate authority in the new State of Mysore which could not in the context mean an authority other than the one equivalent to or coordinate in rank with the aforesaid authority in the erstwhile State of Hyderabad. The authority equivalent to or coordinate in rank with the aforesaid authority on the . relevant date being the General Manager of the Mysore G(wemment Road Transport Department aq::ording to the appellants' own admission as contained in answer to the aforesaid interrogatories served on them by the first respondents, he alone could be considered to be the 'competent authority' in terms of sub-section (2) of section 116 of the States Reorganisation Act, 1956. The fact that there was :no post of Superintendent of the Traffic in the Mysore Government Road Transport Department in the State of Mysore is of 110 consequence. Such being the position, the first respondent could not have been dismissed from service by an authority lower or subordinate in rank to the General Manager of the Transport Department as it would tantamount to deprivation of the guarantee enshrined in Artile 311 of the Constitution read with section 115 ( 7) of the States Reorganisation Act, 1956 ...... ".

Jn the result both the judgments 0£ the High Court are set aside

~ and the judgments and decrees of the Subordinate Judge, First Class, ., Patiala, stand restored. The appeals are allowed with costs. We are thankful to Mr. Hingorani for his assistance as amicus curiae in these appeals.

P.H.P .

Appeals allowed.

KRISHAN MURARI LAL SEHGAL

February 9, 1977

P. K. GOSWAMI

States Reorganisation Act, 1956

Sec. 115(7), 116(1)

Pepsu General Clauses Act

Sec. 2(41 )

new State of Punjab

Patiala

Raj Pram1ikh

Art. 309

Punjab Government

Punjab

section 2(46)

Pepsu General Clauses Act

s. 116

States Reorganisation Act, 1956

Central Government

Section 116(1)

s. 115(7)

States Reorganisation Act

Office Rules 1957

N. H. Hingorani

P. Sharma

GoswAMI

Simla

8th July, 1958

lnder Singh Sodhi

March 2, 1959

January 27, 1959

31st October, 1958

March 11, 1959

August 14, 1959

October 6, 1959

October 21, 1959

Subordinate Judge, First Class, Patiala

January 15, 1963

August 9, 1966

Article 311

Pafiala

Pepsu Civil Secretariat

State Reorganisation Act, 1956

Article 311

Constitution

Article 309

June 27, 1954

14th June, 1954

Pepsu General Clauses Act, 1953

section 2

Rajpramukh

Article 311

Sharma

Article 311

State of Punjab

section 116

States F Reorganisation Act, 1956

section 116

section 116(1)

section 116

Section 116

section 116(1)

Government of Punjab

Pepsu

section 116

section 116

section 115

Central Govermrient

Bholanath

section 115

May 11, 1957

section 115(7)

section 115(7)

February 28, 1957

section 115(7)

December 1, 1976

section 116(2)

Article 311

[1970] 1 S.C.R. 244

section 116

States Reorganisation Act

Mysore

Hyderabad

section 116

States Reorganisation Act, 1956

section 115

States Reorganisation Act, 1956

Hingorani


_._

OFFICllL LIQUIDATOR

DHARTI DHAN (P) LTD.

February 10, 1977

(M. H. BEG, C.J. AND P. S. KAILASAM, J.]

I CO!.npan!es Act, 1956-:-Sections 442, 446-Power to stay proceedings whether d1scret10nary-Meamng of the word "may" occurring in s. 442. '

Constitution of India, 1950-Article 136-Appeal bv special leave-Interference by Supreme Court-:-Scope of. ·

. The Company .Juqge in tl, ie .~(>mbay High Court directed on 3-1-1970 adverllsement of the ':"mdmg up petitmn filed by the Registrar of Companies in Maharashtra agarnst the respond t company, one of the d'ebtors of the Gotcha conwany to th~ .extent of Rs. 11 69,043/-.

The respondent company appealed agamst the dec1s10n of the Company Judge and obtained an order dated 3rd Febru1!ry, 1970, from a Division Bench staying the operation of the order of advertisement of the winding up petition. As the respondent company defaulted in the payment of two of its instalments, as agreed to between the Golcha company and the respondent company by agreements dated 25th June 1966 and 17th January 1967, the Official Liquidator of the Golcha company made a claim under s. 446(2) of the Companies Act for the. recovery of a sum of Rs. 5 lac before the Company Judge of the High Court of Rajasthan.

The respondent company after obtaining an ordr of stay of the proceedings against it in the Bombay High Court made. another application under s. 442(b) of the Companies Act in the Rajasthan High Court for staying of proceeding against it under s 446

(2) made by the appellant on the groilnd that a compulsory wiriaing up petition was perlding against it in the Bombay High Court. The Company Judge rejected the application under s. 442(b) of the Act on 9-5-1974.

But, the Division Bench of the Rajasthan fligh Ct; mrt allowed the appeal against the stay order and. ordered a conditional stay of iproceedings u/s. 446 (2) of the Act against the respondent company.

On appeal by special leave, the Court,

HELD : (I) The clear object of s. 442 is that claims in suits and proceedings pending elsewhere which have a bearing on the company's liabilities may be stayed only until the winding up order is made, because, after the winding up order has been passed, s. 446 begins to operate so as to automatically transfer with certain exceptions, proceediqgs against the company being wound up to the court exercising the jurisdiction Ito wind it up. [968 B-C]

(2) Sections 442 and 446 of the Act have to be read together.

It is only where the object of the two sections, when read .together, is served by a stay order that the stay order could be justified. That object 1s to exped1t10usly decide and dispose of pending claims in the winding up proceedings.

A stay is not. to. be granted if the object of applying for it al'pea_rs to be merely to delay adjudication on a claim, and, thereby, to defeat 1usllce.

In other words, a stay orer under s. 442 cannot be made me1hanically or, as a matter of course, on sho-:vm.g fulfilment of some fixed and pr scribed c.onditions. It-can <;>nly be made Judiciously upon an examination of the totality of the facts which vary from case to case It follows that the order to be passed must be discretionary and the powe'r to pass it must, therefore, be directory and not mandatory. [969 B-D]

(3) The word "may" used before stay u/s. 442 of the Companies ct .really means "may" and not "must" or "shall" in such a context. In fact, 1t _1s not quite accurate to say that the word "may" by itself acquire~ te meanmg of "must" or "shall" sometimes.

This word, however, always stgmfies. a co.nfer,- ment of that power. That power may, having rgard to he context m which !t occurs and the requirements contemplated for its exercise have annexed to 1t

' .>

an obligation which compels its exercise in a certain way on facts and circum A stances from which the obligation to exercise it in that way arises.

In other words, it is the context which can attach the obligation to the power compelling its exercise in a certain way. The context both legal and factual may impart to the power that obligatoriness. [969 DF]

( 4) Thus, the question to be determined in such cases always is whether the power conferred by -the use of the word "may" has annexed to it an obligation, that, on the fulfilment of certain legally prescribed conditions to be shown by "' evidence, a particular kind of order must be made. In such a case, it is always D' the purpose of the power which has to. be examined in order to determine the scope of the discretion conferred t1pon the donee of the power. If the conditions in which the power is to be exercised in particular cases are also specified by a statute, then, on the fulfilment of those conditions, the power conferred becomes annexed with a duty to exercise it in that manner. [969 F-970 G-H] - • '- Frederic Guilder Julius v. Tl1e Right Rev. The Lord Bishop of Oxford : The

Rev. Thomas Thelusson Carder 5 A.C. 214, quoted with approval.

Bhaiya Punja/al Bhagwandin v. Dave Blwgwatprasad Prabhuprasad [1963] 3 SCR 312 : State of Uttar Pradesh v. Jogendra Singh [1964] 2 SCR 197; Sardar Govindrao & Ors. v. State of M. P. [1965] 1 SCR 678; Shri A. C. Aggarwal, Sub- Divisional Magistrate, Delhi & Anr. v. Smt. Ram Kali etc. [1968] 1 SCR 205; Bashira ·,, State of U.P. [1969] 1 SCR 32 and Prakash Chand Agarwal & Ors. v.

M/s. Hindustan Steel Ltd. [1972] 1 SCR 405, applied. ( 5) In s. 442 of the Companies Act the power to stay a proceeding is not'

annexed with the obligation to nec; essarily stay on proof of certain conditions Dl although there are conditions prescribed for the making of the application for stay and the period during which the power to stay can be exercised.

The question whether it should, on the facts of a particular case, be exercised or not will have to be examined and then decided by the court to which the application is made. If the applicant can make out, on facts, that the objects of the power conferred by ss. 442 and 446 of the Act can only be carried out by a stay order, it could perhaps be urged that an obligation to do so becomes annexed to it by proof of those facts. .That would be the position in case the word "may" itself must be equated with "shall", but because judicial power has necessarily to be

E'. exercised justly, properly and reasonably to enforce. the principle that rights created must be enforced. [971 B-Dl

(6) In such ;:ases, the only right which could be said to have been created is the right to get speedier adjudication from the court where the winding up proceeding is taking_place. That is the object of the provisions. / On facts_ disclosed, if it' be found tli.at the application has been made with the objeQ: of delaying decisions on claims made, the application should be rejected outright. [971 D-El p

(7) In the instant case the object of the respondent company appears to be to obtain an indefinite stay of proceedings against it in both High Courts.

This being a correct inference, the stay application under s. 442(b) of the Companies Act could not be a bona fide one, but an abuse of tlie processes of the court.

[966 F-G]

(8) It is true that the Supreme Court does not, as a rule interfere with interlocutory orders. The powers of interference under Art. 136 of the Constitution by the Supreme Court are not confined to those in respect of final orders, although finality of an order is a test which the Supreme Court generaJly applies in considering whether .it shonld interfere under Art. 136 of the Constitution with it. [972 B-D]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 126 of 1976.

(Appeal by Special leave from the Judgment and Order dated the 11th October, 1974 of the Rajasthan High Court in D.B. Special Appeal No. 111 of 1974) L. N. Sinha, Sol. Gen. and Suresh Sethi, for the appellant.

C. K. Garg, S. S. Khanduja and C. L. Sahu, for respondent.

966 SUPREME COURT RllPORTS

The Judgment of the Court was delivered by

[1977] 2 s.c.R.

BEG, C.J.-The Official Liquidator attached to the High Court of Rajasthan, in-charge of the

1 liquidation of Golcha Properties (Pvt.) Ltd., (hereinafter referred to as 'Golcha Company'), has come up in appeal to this Court by special leave against a judgment and order of a Division Bench of that High Court, passed on a Special Appeal from the judgment and order: of a single Judge of that Court.

On petitions presented on 4th

1July 1966 and 30th July 1966 by the creditors of Golcha Company, the High Court had made a compulsory winding up order on 10th May 1968; and, on that very date, the appellant was appointed liqtlidator of the Golcha company.

The Dharti Dhan (Pvt.) Ltd., (hereinafter referred to as the 'Dhan Company'), with its registered ofjice at Bombay, was said to be one of the debtors of the Golcha Company to the extent of Rs. 11,69 ,043 /- together with interest and commission which was said to be still due on 1st August 1969.

Agreements dated 25.6.66 and 17.1.67 between the two companies regulated the method of repayment by annual instalments of Rs. 2,50,0oq;- according to the appellant.

As the respondent, Dhan Company, is said to have defaulted in the payment of two of its instalments, a claim under section 446(2) of the Companies Act (hereinafter referred to as 'the Act') for the recovery of a sum of Rs. 5,00,000/- was made before the Company Judge of the High Court of Rajasthan b)! the appel!lmt.

On 20th September 1969, the Registrar of Companies in Maharashtra had to file a w1nding up petition against the respondent T)han Company in the Bombay High Court.

The Company Judge in the Bombay High Court on 3rd January, 1970, directed advertisement of the winding up petition. IThe respondent Dhan Company appealed against the decision of the Company Judge and obtained an order, dated 3rd February, 1970, from a Division Bench staying the operation of the order for advertisement of the winding up petition.

An appeal against that order is. said be still pending so that a stay of those proceedings operates. 1

After obtaining an orde~ of stay of the proceedings against it in the Bombay High Court, tne Dhan Company made an application under s. 442(b) of the Act in the Rajasthan High Court for stay of proceedings against it u/s. 446(2) on the ground that a compulsory winding up petition was pending against it in the Bombay High Court.

The object of the respondent Dhan Company appeared to be to obtain an indefinite stay of proceedings againsts it in both. High Courts.

H this is a correct inference, as it appears to us to be, the stay application under s. 442(b) of tpe Companies Act would not be a _bona fide one.

It looks more like an abuse of the process of the Court.

It is, therefore, not surprising that the learned Company Judge of the Rajasthan High Court rejected the Dhan Company's application: under s. 442 (b) of the Act on 9th May 1974. It is, however, somewhat surprising that a Division Bench of that High Court should haw allowed an appeal from the judgment of the Company Judge and ordered stay of proceedings under s. 446(2) of the Act against the respondent Dhan Company, even though this was subjected to the

--~-

condition that "the appellant Company produces the entire docu- A; mentary evidence inclusive of account-books, vouchers, files and other documents and papers in its possession or power relatin~ to he .claim in question, as it may desire to produce or the Official _L1qut.datr

desires to summon or as the learned Company Judge may direct m his discretion and also produces a list of witnesses that the appellant company may desire, to examine in its defence in respect of the claim in question along with an affidavit of what each witness is likely to de- B: pose".

Thus, the Division Bench had, while making the stay order, attempted to safeguard the interests of the Golcha Company by making an order which, in the opinion of the Division Bench, would prevent valuable evidence from being lost due to either the death or the fading memory of a witness or other causes.

Learned Solicitor-General, appearing for the appellant, Official C Liquidator of the Golcha Company, gave up the objection, taken in the special leave petition, to the maintainability of an appeal to a Division Bench from the order of the Companyi Judge in view of the provision of section 483 of the Act, which lays down :

"483. Appeals from any order made or decision given in the matter of the winding up of a company by the Court shall lie to the same Court to which, in the same manner in which and subject to the same conditions under whici1, appeals lie from any order or decision of the (::ourt in cases within its ordinary jurisdiction".

The Solicitor-General, however, submits that, on merits, the order of

the learned Company Judge, dismissing the application of the Dhan E Company for stay of proceedings under s. 442(b) of the' Act, deserves to be restored as no grounds for interference with the proper exercise of his discretion by the learned Company Judge existed at all.

We highly appreciate the brevity of this submission, after the Solicitor-General had, very rightly and properly, conceded that he could not urge that the . Division Bench had not jurisdiction to hear the appeal before it.

No effective answer could be given to the F Solicitor-General's submission by the learned counsel for the respondent.

We will, however, deal with the strenuous arguments advanced on behalf of the respondent even if it be to disclose how untenable they are.

Firstly, learned counsel for the respondent contends that the power to stay proceedings, contained in s. 442 (b) of the Act, is G bound to be exercised when certain conditions, said to be found in the case before us, are fulfilled.

This submission rests on a misapprehension of the object of s. 442 which lays down :

"442. At any time after the presentation of a, winding up petition and before a winding up order has been made, the col!lpany, or: any creditor or contributory, may-

 (a) where any suit or proceeding against the company is pending in the Supreme Court or in any High Court, apply

SUPREME COURT REPORTS

(1977) 2 S.C.R.

A to _!he Court in which the suit or proceeding is pending for a stay of proceedings therein; and

(b) where any suit or proceeding is pending against the company in any other court, apply to the Court having jurisdiction to wind up the company, to restrain further proceedings in the suit .or proceeding;

and the Court to which application is so made may stay or restrain the proceedings accordingly on such terms as it thinks fit".

The clear object of the section is that claims in suits in and proceeding pending elsewhere which have a bearing on the company's •C liabilities, may be stayed only until the winding up order is made, because, after the winding up order has been passed, section 446 begins to operate so as to automatically transfer with certain exceptions proceedings against the company being wound up to the Court exercising the jurisdiction to , wind it up.

Section 446 reads :

"446.(1) When a winding up order has been made or _D the Official Liquidator has been appointed as provisional lici, uidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with against the company, except by leave of the Court and subject to such terms as the Court may impose.

(2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of-

(a) any suit or proceeding by or against the company;

(b) any claim made by or against the company (including claims by or against any of its branches in Jndi'a);

(c) any application made under section 391 by or in respect of the company;

(d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company;

whether such suit or proceeding has been instituted or is instituted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960.

()FFICIAL LIQUIDATOR V. DHARTI DHAN (Beg, C.J.) 96 9

(3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is P._roceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court.

(4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court".

Sections 442 and 446 of the Act have to be read together. It :is only where the object of the two sections, when read together, is served by a stay order that the stay order could be justified.

That object is to expeditiously decide and dispose of pending claims in the course of winding up proceedings.

A stay is not to be granted if the object of applying for it appears to be, as it does in the cae before us, merely to delay adjudication on a claim, and, thereby to defeat justice.

Jn other words, a stay order, under section 442, -cannot be made mechanically, or, as a matter of course, on showing fulfilment of some fixed and prescribed conditions. It can only be made judid.:msly upon an examination of the totality of the facts which very from case to case.

It follows that the order to be passed. must be discretionary and the power to pass it must, therefore, be directory and not mandatory.

Jn other words, the word "may", used before "stay" in section 442 of the Act really means "may" and not "must" or "shall"· in such a context.

In fact, it is not quite accurate to say that the word "may", by itself, acquires the meaning of "must" or "shall" sometimes.

This word, however, always signifies a conferment of power.

That power may, having regard to the context in which it occurs, and the requirements contemplated for its exercise, have annexed to it an obligation which compels its exercise in a certain way on facts and circumstances from which the obligation to exercise it in that way arises.

In other words, it is the context which can attach the obligation to the power compelling its exercise in a certain way.

The. context, both legal and factual, may impart to the power that obligatoriness.

Thus, the question to be determined in such cases always is, whether the power conferred by the use of the word "may" has, annexed to it, an obligation that, on the fulfilment of cretai'Il legally prescribed conditions, to be shown by evidence, a particular kind of order must be made.

If the statute leaves no room for discretion the power has to be exercised in the manner indicated by the~ other legal provisions which provide the legal context.

Even . then the facts must establish that the legal conditions are fulfilled.

A power is exercised even when the Court rejects an application to exercise it. in the particular way in which the applicant desires it to be exercised.

Where the power is wide enough to cover both an acceptance and a refusal of an applicati'on for its exercise, depending upon facts, it is directory or discretionary.

It is not the conferment of a power whic~ the word "may" indicates that annexe~ any ?bligatiOJ] to its exercise but the legal and factual context of 1t.

This, as we

97 0 SUPREME COURT REPO]l.TS [1977] 2 s.c.R.

understand it, was the principal laid down in the case cited before us ~

Frederic Guilder Julius v. 'fhe Right Rev. The Lord Bishop oj Oxford; The Rev. Thomas Thellusson Carter.(')

Dr. . Julius, in the case mentioned above, had made an application to the Bishop of Oxford against the Rector of a parish, asking the Bishop to issue a commission under the Church Discipline Act to enquire against certain unauthorised deviations from the ritual in a Church by the Rector.

The relevant statute merely conferred a power by laying down that "it shall be lawful" to issue a commission.

The Courts of Queens Bench and of Appeal in England had differed on the question whether a mandamus from the Court could go to the Bishop commanding him to issue a commission for !he purpose of maki•ng the enquiry.

The House of Lords held that the power to issue the commission was not ccmpled with a duty to exercise it in every case although there may be cases where duties towards members of the public to exercise a power may also be coupled with a duty to. exercise it in a particular way on fulfilment of certain specified conditions. The statute consi'clered there had not specified those conditions. Hence, it was a bare power to issue or not to issue the commission.

Lord Blackburn said: (at p. 241) :

"I do not think the words 'it shall be lawful' are in themselves ambiguous at all.

They are apt words to express that a power is given ; and as, prima f acie, the donee of a power may either exerdse it or leave it unused, it is not inaccurate to say that, prima facie, they are equivalent to saying that the donee may do it; but if the object for which the power is conferred is for the purpose of enforcing a right, there may be a duty cast on the donee of the power, to exercise it for the benefit of those who have that right, when required on their behalf.

Where there is such a duty, it is not inaccurate to say that the words conferring the power are equivalent to saying that the donee must exercise it. It by no means follows that because there is a duty cast on the donee of a power to exercise it, that mandamus lies to enforce it : that depends on the nature of the duty and the position of the donee".

The principl~ laid down above has been followed consistently by this Court whenever it has been contended that the word "may" carries with it the obligation to exercise a power in a particular manner or direction.

In such a case, it is always the purpose of the power which has to be examined in order to determine the scope of the discretion conferred upon the donee of the power. If the conditions in which the power is to be exercised in particular cases are also specified by a statute then, on the fulfilment of those conditions, the power conferred becomes annexed with a duty to exercise it in that manner.

This is the prjnciple we deduce from the cases of this Court cited before us : Bhaiya Punjalal Bhagwandin v.

(1) 5 A.C. 214.

' ' ·-., ._

~ .>

OFFICIAL LIQUIDATOR v. DHARTI OHAN (Beg, C.J.) 97 f

Dave Bhagwatprasad Prabhuprasad,(') State of Uttar Pradesh v.

A Jogendra Singh,(2) Sardar Govindrao & Ors. v. State of M.P.,( 8 ) Shri A. C. Aggarwal, Sub-Divisional Magistrate, Delhi & Anr. v.

Smt. Ram Kali etc.,(") Bashira v. State of U.P.,(•) and Prakash

Chand Agarwal & Ors. v. M/s. Hindustan Steel Ltd.( 6)

In the statutory provision under consideration now before us the power to stay a proceeding is not annexed with the obligation to necessarily stay on proof of certain conditions although there are conditions prescribed for the making of the application for stay and the period during which the power to stay can be exercised.

The question whether it should, on the facts of a praticular case, be exercised or not will have to be examined and then decided by the Court to which the application is made. If the applicant can make out, on facts, that the objects of the power conferred by ss. 442 and 446 of the Act, can only be carried out by a stay order, it could perhaps be urged that an obligation to do so has become . annexed to it by proof of those facts.

That would be the position not because the word "may" itself must be equated with "shall" but because judicial power has necessarily to be exercised justly, properly, and reasonably to enforce the principle that rights created must b!l enforced.

In the case before us, the only right which could be said to have been created is the right to get speedier adjudication from the Court where the winding up proceeding is taking place.

That is the object of the provisions. On facts disclosed in this case, we find that the application seems to have been made with the object of delaying decisions on claims made. In such a case, there could be no doubt that the application should be rejected outright as the learned Company Judge did.

Secondly, an attempt was made to urge that the power to grant or not to grant or to grant a stay upon certain conditions, assuming the power to be discretionary, is to be exercised by the Courts in which that discretion is vested, this Court should not interfere with the exercise of discretion by the Division Bench to which an appeal from the order of the Company Judge lay.

The effective answer to this contention is that, where the learned Company Judge had himself exercised his discretion on a correct appreciation of the object of the provisions of ss. 442 and 446 of the Act, even though he didnot state the obJect or refer to all the facts, the Appellate Court should not have interfered by granting a conditional stay without giving sufficient reasons to over-ride the discretion of the learned Company Judge to refuse stay.

We think that a question of general

(1) [.1963] 3 S.C.R. 312.

(2) [1964] 2 S.C.R. 197.

14-206SCI/77

972 SUPREME COUJlT REPORTS [1977] 2 §, C.'t.

principle arises in this case which has to be clarifiled so that an interference by this Court under Article 136 of the Constitution, in order to vindicate a correct principle and to meet the. ends of justice, is called for.

Thirdly, learned counsel for the respondent submitted that the order under appeal before us i's not final so that we need not interfere under Art. 136 of the Constitution for this reason. It is true that, this Court does not, as a rule, interfere with interlocutory orders.

It is not necessary for us to embark on this occasion on a discussion of the meaning of a "final" order.

That is certainly a question fraught with difficulti+es.

It is sufficient for us to observe that our powers of interference under Art. 136 of the Constitution are not confined to those in respect of final orders, although finality of an order is a test which this Court generally applies in considering whether it should interfere under Art. 136 of the Constitution with

t.

We think that we have indicated sufficiently why, despite the fact that an order staying proceedings under s. 442(b) of the Act may not, strictly speaking, be final, yet, a question of general principle of wide application, as to the circumstances in which (In app:; irently discretionary power may become annexed with a duty to exercise it in a particular way, having arisen here, we consider this to be a fit case for interference under Article' 136 of the Constitution. .

Consequently, .we allow this appeal and set aside the judgment and order of the Division Bench and restore that of the learned Company Judge.

The parties will bear their own costs.

S.R.

Appeal allowed.

• '

DHARTI DHAN (P) LTD

P. S. KAILASAM, J.

Sections 442, 446

s. 442

Constitution of India

Article 136

3rd Febru1!ry, 1970

Golcha company

the Official Liquidator

s. 446(2)

Companies Act

High Court of Rajasthan

Bombay High Court

s. 442(b)

Companies Act

Rajasthan High Court

s 446

s. 442(b)

s. 446

s. 442

s. 446

Sections 442 and 446

s. 442

s. 442

[1963] 3 SCR 312

[1964] 2 SCR 197

[1965] 1 SCR 678

A. C. Aggarwal

[1968] 1 SCR 205

[1969] 1 SCR 32

[1972] 1 SCR 405

s. 442

Companies Act

ss. 442 and 446

s. 442(b)

Companies Act

Supreme Court

Art. 136

Art. 136

CIVIL APPELLATE JURISDICTION

Suresh Sethi

C. K. Garg

S. S. Khanduja

C. L. Sahu

BEG

Golcha Properties (Pvt.) Ltd.

4th

1July 1966

Golcha Company

Dharti Dhan (Pvt.) Ltd.

Bombay

1st August 1969

Dhan Company

section 446(2)

Companies Act

20th September 1969

Maharashtra

T)han Company

3rd January, 1970

Dhan Company

s. 442(b)

s. 446(2)

Dhan Company

s. 442(b)

Companies Act

s. 442

9th May 1974

s. 446(2)

section 483

Dhan E Company

s. 442(b)

s. 442

s. 442

SUPREME COURT REPORTS

(1977) 2 S.C.R.

section 446

Section 446

section 391

()FFICIAL LIQUIDATOR V. DHARTI DHAN

Sections 442 and 446

section 442

section 442

SUPREME COURT REPO]l.TS [1977] 2 s.c.

Thomas Thellusson Carter

Julius

England

Blackburn

Dave Bhagwatprasad Prabhuprasad

Ram Kali

ss. 442 and 446

ss. 442 and 446

1963] 3 S.C.R. 312

[1964] 2 S.C.R. 197

Article 136

Art. 136

Art. 136

Art. 136

s. 442(b)