STATE OF MAHARASHTRA

HANS RAJ DEPAR ETC.

February 25, 1977

(Y. V. CHANDRACHUD, P. K. GOSWAMI AND P. N. SHINGHAL, JJ.]

Maharashtra Scheduled Articles (Display and 1Vlarking of Prices) Order, 1966, Clauses 3(a) and (4)-Meaninf intendment of.

Cluse 3(a) of the Maharashtra Scheduled Articles (Display and Marking of Pnces) Order, 1966 issued by the Maharashtra Government in exercise of the powers conferred by s. 3 read vvith s. 5 of the &scntial Commodities ,.\ct

(Act 10 of. 1955) provides that "every dealer shall in respect of the articles specified in Schedule I display a list of prices in the form prescribed in the Schedule", Schedule f lists under items 15 and 16 "Vanaspati tinned'' .and

"Vanaspati loose" respectively.

Clause ( 4) of the Order provides that no dealer shail (a) sell or agree or offer for sale any article at a price higher than the price displayed or (b) refuse to sell or withhold from sale of such articles to any person at the Price displayed or marked. Section 7 of the Essential Com modities Act provides for punishment for contravention of the order made under s. 3.

The four respondents, shopkeepers in Bombay-some run grocery shops, while some deal only in oils of different varieties-were charged for the offence of failure to display prices of vanaspati which they were selling in their shops in tinned and loose form. The defence of the respondents to the charge is that they were selling hydrogenated oils or vegetable ghee or vegetable oils and not "vanaspati".

The learned Magistrate acquitted the respondents and held that the charge was unsustainable because ( 1) Even if the word 'vanaspati' may have acquired a local meaning, it could not be said that the order used the word 'vanaspati' to include hydrogenated oils.

(2) Since hydrogenated o'.ls were not included in Schedule J, the respondents could not be expected to know that they were bound to disclose the prices of hydrogenated oil.

Dismi<>sing the States' appeal, the High Court held. on a different reasoning that the prosecution was not maintainable since noncompLiance of clause (3) of the Order 1966, cannot he an offence punishable as contravention unless there is a contravention of clause 4, inasmuch as the intention of the Legislature which always made a distinct.ion between contravention of law and failure to comply or non-compliance with ; t, \Vas to punish contravention of clause 4 and not of clause 3 sin1p!iciter.

Dismissing the State's appeal, the Court,

HELD : ( 1) Clauses 3 rul, d 4 of the Maharashtra Scheduled (Display ar.d Marking of Prices) Order, 1966 deal with different malters because where-as clause 3 imposes an obligation on a dealer to display the prices of articles specified in Schedule I clause 4 prohibits him from selling an article at a price higher than the one displayed or from refusing to sell it at the price displayed.

A contravention of clause 3 (a) is full and complete by mere reason of the fact that the dealer has failed to display the prices of articles specified in Schedule J.

That contravention does not depend on the consideration wl1ere he has charged a higher price than the price marked or whether he has refused to sell an article at the price displayed.

In other words, the first step which a dealer has to take is to d:splay the prices of articles specified in Schedule I; if he fails to do that. he is gu; lty of contravention of clause 3(a) which is punishable under s. 7( l) of the Essential Commodities Act, 1955. The additional obligation which the dealer has to discharge is to be ready and willing to sell articles at the prices displayed.

Failure to do so is a different and distinct contravention which also attracts the application of s. 7(1). The view that clauses 3 and 4 of the Order

1966 are so interlinked that the Legislature did not intend to punish 'the contra-

• ,

vention of the fonner unless such contravention was accompanied by a contravention of the latter provision is not correct. The wedding of the two clauses in this f<lsion is entirely UTI\.\'arranted.

[81 E-H 82-A]

(2) The orders of acquittal, in the instant case, must be confirmed on the ground of total lack of evidence showing that the re5pondents are dealers in vanaspati and that they had kept vanaspati for sale in their shops.

In view of the challenge that what was being sold \vas not vanaspa1 i and that the tins did not contain vanaspati within the meaning of items 15 and 16 of Schedule I, the prosecution should have led evidence to :; ho\v that the tins in fact contained vanaspati in the sense in which that expre~:iio11 is used in the Sche dule.

The mere ipe dixit of the Sub-Inspector who had merely assisted the Rationing Inspector in effecting the raid. \Vithout any inventory of the articles of which prices v; rere not displayed, v; rithout exami"'.1ing the Panchas and \Vithout any sample of the "Vanaspati" alleged to h,1ve been sold b=ing taken, cannot establish the charge which involves a punishtnent of as long a term as seven years and normally of not less than three 1noath<J, as provided ins. 7(1)(a)

(iii) of the Essential Commodities Act, 1955.

[82 F-H, 84 CJ

(3) Neither the Essential Commodities 1\ct, 1955 nor the Maharashlra Scheduled ArticJes (Display and Marking of Prices) Order 1966 defines the expression "Vanaspati" and it was beside the p.:>int to say that "Vanaspali" is defined in the Bombay Sales Tax Act and the Prevention of Food Adulteration Rules. 1965 to include hydrogenated oil <Jince the purposes of these three Acts are quite differenl The prosecution has failed to establish as tn what is the true meaning and connotation of the expression "Vanaspati" and what kinds of articles are comprehended within the scope of that expression.

[83 B-HJ

( 4) According to the fundamental principle of criminal jurisprudence 1vhich reflects f.a!r play, a dealer must know 1vith reasorwble certainty and must have a fair warning as to what his obligation is, and 1vhat act of commission or omission on his part would constitute a criminal offence.

The State Government oug-ht to have expressed its intention clearly and unambiguou<::.ly by including hydrogenated oil within item'l 1 nnd 1 fi which refer

to "Vanaspati". If that were done, a tyne of preJicament v;.'hich arises in E this case could easily have. been avoided with profit to the community.

[84 A-BJ

State oj Bihar v. Bhagirath Sharma, (1973) 3 S.C.R. 937, referred to;

[The Court expressed its hooe that the !acuna in the Schedule J items 15 and 16 of the Maharashtra Scheduled Articles (Display and 1'.farking of Prices) Order, 1966 would be rectified expeditiously.J

CIVIL APPELLATE JURISDICTION : Criminal Appeals Nos. 156- 159 of 1973.

( Aupeals by special leave from the Judgment and Order dated 3-3-1971 of the Bombay High Court in Criminal Appeals Nos. 1475/ 69 and 370-37.2 of 70).

M. N. Phadke, and M. N. Shroff, for the appellant in all appeals.

G Y. S. Chitale, M. Mudgal and Rameshwar Nath, for respondent in Cr!. A. No. 158/73.

Rameshwar Nath, for respondent in Crl. A. No. 159/73).

The Judgment of the Court was delivered by

CHANDRACHUD, J.-These four appeals arise out of four prose- H cutions which were disposed of by a common judgment by the learned Presidence Magistrate, 25th Court, Mazgaon, B?mha.v. !he facts leading to the prosecution are not in all respect's 1dent1cal m the four

cases but it is obvious from the judgments under consideration that the cases were heard and disposed of on the basis that the variation in the facts would not make difference to the result.

The four respondents in these appeals are shopkeepers in Bombay-some run grocery shops while some deal only in oils of different varieties.

The charge against the respondents is that they failed to display prices of 'vanaspati' which they were selling in their shops in tinned and loose form.

Section 3 of the Essential Commodities Act, 10 of 1955, empowers the Central Government, by order, to provide for regulating or prohibiting the production, supply and distribution or trade and commerce in any essential commodity for the purposes mmtioned in sub-s. (1) thereof.

Sub-section (2) of s.3 specifies various matters iu regard to which the Central Government may pass orders contemplated by sub-'s. (1). The power conferred by s. 3 was delegated by the Central Government to the State Governments in pursua nee of the provision contained in s. 5.

Section 7 provides for punishment for contravention of an ordt; r made under s. 3.

In exercise of the powers conferred by s. 3 read with s. 5 of the Essential Commodities Act, 1955 the Government of Maharashtra issued the Maharashtra Scheduled Article's (Display and Marking of

Prices) Order, 1966".

Clause 3(a) of that order provides that every dealer shall, in respect of the articles specified in Schedule L display a list of prices in the form prescribed in that schedule.

We are concerned with items 15 and 16 of the Schedule which read: "15.

Vanaspati, Tinned" and "16. Vanaspati, Loose." •

Stated broadly, the defence of the respondents to the charge is that they were selling hydrogenated oils or vegetable ghee or vegetable oils and not 'vanaspati'.

The. learned Magistrate acquitted the respondents in all the four cases holding that even if the \Vord 'vanaspati' may have acquired a Inca! meaning, it could net be said that the order used the word 'vanaspati' to include hydrogenated oils. Since the respondents, according to the learned Magistrate, could not be expected to know that they were bound to disclose the price's of hydrogented oils also and since hydrogenated oils were not included in Schedule I. the charge was unsustainable.

The appeals filed by the State of Maharashtra against the orders of acquittal were heard and disposed of by a common judgment dated March 3, 1971 by a learned Single Judge of the High Court. Observing that there was considerable force .in the contention of the State

Government that 'vanaspati' would include hydrogenated oils also, the learned Judge fel• that it was unnecessary to go into that question s; nce the prosecution was not maintainable for another reason.

That reason, according to the learned Judge, was that legislative draftsmen always made a distinction between 'contravention' of law and 'failure to comply or non-compliance' witb it.

If the Court is called upon to decide, says the learned Judge, whether a particular contravenfiim is

- '

an offence, it was bound to enquire whether mere no~-c?mpliance A was also intended to be punished.

Guided by that pnnc1ple, . the learned Judge came to the conclusion that the duty to display_ pncs was "a subsidiary matter to the prohibition which is. contained. m clause 4 which prohibits a dealer from selling an arttcle at a p:1cc higher than the price displayed or from refusing to sell or from with:

holding from sale such articles at the price displayed or marked.' The sustance of the order was thus thought to be contained in clause B 4 and accordingly, the judgment proceeds; "Mere non-compliance of clanse 3 cannot be an offence punishable as contravention unles there is a contravention of clause 4." Since the intention was said to be to punish contravention of clause 4 and not of clause 3 imp_li citer, the learned Judge held that the prosecution was not mamtamable and the accused were entitled to an acquittal.

These appeals by special leave are directed against the correctness of the High Court's C judgment.

It is necessary in the larger public interest to dispel the misunderstanding regarding the true meaning and intendment of clauses 3 and 4 of the 1966 Order. We will therefore deal first with the reasoning of the High Court that a mere contravention of clause 3 without the D contravention of clause 4 is not contravention within the meaning of s. 7 of the Essential Commodities Act 1955 and cannot therefore be punished. As stated earlier, clause 3(a) of the Order of 1966 imposes an obligation on every dealer to display a list of prices of the article 'specified in Schedule I. Clause 4 of the Order provides that no dealer shall (a) sell or agree or offer for sale any article at a price higher than the price displayed or (b) refuse to sell or withhold from E sale such article§ _to any person at the price displayed or marked. We find ourselves totally unable to appreciate that there can he no contravention of clause 3(a) unless there is a contravention of clause 4 also.

The two clauses deal with different matters because whereas clause 3. imposes an obligation on a dealer to display the prices of articles specified in Schedule I, clause 4 prohibits h; m from selling an article at a price higher than the one displaved or from refusing to F sell it at the price displayed.

A contravention of clause 3(a) is.full and complete by mere reason of the fact that the dealer has failed to display the prices of articles specified in Schedule I. That contravention does not depend on the consideration whether he has charged a higher price than the price marked or whether he has refused to sell an article at the price displayed.

In other words, the first step which a dealer has to take is to display the prices of articles specified in G Schedule I; if he fails to do that, he is >!Ui!ty uf contravention of clause 3 (a) which is punishable under s. 7 (I) of the Essential Commodities Act, 1955.

The additional obligation which the dealer has to discharge is to be ready and willing to sell the articles at the prices displaved; failure to do so is a different and distinct contravention which also attracts the application of s. 7(1).

We find it impossible to subscribe to the view that clauses 3 and 4 of the Order of H 1966 are so interlinked that the legislature did not intend to punish the contravention of the former unless such contravention was accompanied by a contravention of the latter provision.

The wedding of

the two clauses in this fashion is entirely unwarranted.

The ground on which the High Court has acquitted the respondents is therefore untenable and we reject the reasoning in that behalf as unsustainble.

Were we satisfied that the respondents were selling 'vanaspati', tinned or loose, we would have had no hesitation in setting aside the order of acquittal and in convicting the respondents, since the non-display of prices is admitted.

That raises the question whether there . is evidence to hold that the respondents were dealing in 'vanaspati'.

The evidence on this question is woefully inadequate and we regret to notice !_hat no serious attempt was made by the prosecution to establi'sh the charge.

The articles of which the prices were not displayed were not properly inventoried, which makes it difficult to predicate that the articles bore any particular description.

Panchanamas were made of the articles but except in one case, where the panchanama was exhibited by consent, the panchas were not examined with the result that the panchanama:s remained unproved and therefore unexhibited.

In none of the cases was even a sample taken of the articles displayed for sale.

If that were done, the nature, quality and components of the goods could easily .have been proved by analysing the sample chemically.

One could then have said with easy facility that what was being sold was 'vanaspati'.

Instead of doing what was easy and necessary to do, the prosecution offered, 11s a substitute for its plain duty, the vague recollections of a Rationing Inspector and a Sub Inspector of Police as to what was being sold by the respondents in their shops.

For illustrating how cavalierly the prosecution approached its task, we will take the facts of appeal No. 156 of 1973 in which the respondent is one Hansraj Depar.

The charge framed by the learned Magistrate affeges that the respondent had faiied to display the price list of 'vanaspati ghee'.

The charge should have' been not in respect of any type of ghee but in respect of 'vanaspati' which is the item mentioned in Schedule I. The Rationing Impector, K. N. Joshi (P.W. 1), "stated in his evidence that the respondent had not exhibited the price of 'vanaspati ghee' which again is beside the point. Nothing at all, not even a sample of the articles alleged as vanaspati, was taken charge of from the shop and the witness admitted that he did not remember what variety of articles were sold in the shop and as to how many tins of what is said to be va naspati ghee were found therein.

The other witness, Sub Inspector Kurdur (P.W. 2) does say that the respondent was selling vanaspati as also oil and that there were in .his shop "3 K. O. tins of Ravi Vanaspati, 2 K. 0. t.:ns of prabhat Vanaspati and one loose tin of Malali Vanaspati". In view of the challenge that what was being sold was not •; anaspati and that the tin's did not contain vanaspati within the meaning of items l 5 and

16 of Schedule I, the prosecution should have led evidence to show that the tins in fact contained vanaspati in the sense in which that expression is used in the Scheduled. The fpse dixit of the Sub Inspector who had. merely assisted the Rationing Inspector in effecting the raid cannot establish the charge which involves a punishment ot as long

l r

a term as seven years and normally of not less than three months, as A provided in s. 7(1) (a) (ii) of the Essential Commodities Act, 1955.

The prosecution did n_ot make any attempt to establish as to what is the true meaning and connotation of the expression 'vanaspati' and what kind of articles or goods are comprehended within the scope of that expression.

The witnesses did not even say in their evidence, perfu_nctory as it is, that the word had acquired a popular meaning and was understood locally in a certain sense.

Neither the Act of 1955 nor the Order of 1966 defines the expression 'vanaspati' and it was beside the point to say that 'vanaspati' is defined in the Bombay Sales Tax Act and the Prevention of Food Adulteration Rules, 1965 to include hydrogenated oil.

The purpose of the Sales Tax Act is to bring within the tax not as large a number of articles as possible, that of the Prevention of Food Adulteration Act and the Rules thereunder is to ensure that the health of the community is not endangered by adulterated or spurious articles of food while that of the Essential Commodities Act with which we are concerned in the instant case is to ensure the availability of essential goods to the community at a proper price.

This last Act was passed in order "to provide, in the interests of the general public, for the control of the production, supply and distribution of, and trade and commerce in, certain commodities". Sub Inspector Kurdur is no expert for the purposes of this Act and we cannot, without more, accept the dogmatic assertion made by him in one of these cases that vanaspati and , l1ydrogenated oil "mean the same thing." Hydrogenation is a specialised process and is described in Encyclopaedia Britannica (1951 ed., Vol 11, p. 978) as "the treatment of a substance with hydrogen so that this combines directly with the substance treated. The term has, however,. developed a more technical and restricted sense. It is now generally used to mean the treatmen~ of an "unsaturated" organic compound with hydrogen, so as to convert it by direct addition to a "saturated" compound." The witness, excusably, seems unaware of this scientific sidelight and greater the ignorance, greater the dogma. If the witness were right, it is diflicult to understand why 'groundnut oil, Safflower oil, Sesamen oil and Mustard seed oil" and "coconut oil" find a separate and distinct place in Schedule I at items 5 and 6.1, Perhaps what thel witness guessed, science may sl1ow to be true but that has to be shown, not guessed.

In State of Bihar v. Bhagirath Sharma(') a question arose whether motor car tyres were included within the meaning of the expression 'component parts and accessories of automobiles' used in a 'similar order issued in 1967 by the Bihar Government under the Essential Commodities Act.

It was held by this Court that it was not enough that fro':'1 a broad point of view the tyre~ and tubes of motor cars may be considered to be covered by the partlcular expres'sion.

After considering and comparing the various items in the particular schedule it was held by this Court that motor car tyres were not comprehended within the expression. It is apposite for our purpose to call at-

(1) [19731 3 S.C.R. 937.

tention to what the Court said in that case, namely, that according to the fundamental principle of criminal jurisprudence which reflects fair play, a dealer must know with reasonable certainty and must hme a fair warning as to what his obligation is, and what act of commission or omission on his part would constitute a criminal offence.

Bearing in mind this principle the State Government ought to have expressed its intention clearly and unambiguously by including hydrogenated oils within items 15 and 16 which refer to 'vanaspati'. If that were done, a type of predicament which arises in this case could easily have been avoided, and with profit to the community.

We hope this lacu.na in the schedule will be rectified expeditiously.

It is to be regretted but we are left with no option save to confirm the acqu.ittal, though for entirely different reasons.

Therefore, while setting aside the reasoning of the liigh Court that there can be no contravention of clause 3 unless there i's also a contravention of clause 4 of the order of 1966, we dismiss the appeals and confirm the orders of acquittal on the ground of total lack of evidence showing that the respondents are dealers in 'vanaspati' and tha! they had kept 'vanaspati' for sale in their shops.

S.R.

Appeals dismissed.

STATE OF MAHARASHTRA

HANS RAJ DEPAR ETC

February 25, 1977

Y. V. CHANDRACHUD

P. K. GOSWAMI

s. 3

s. 5

Schedule I

Section 7

s. 3

Bombay

clause 4

clause 4

clause 3

clause 3

Schedule I

clause 4

clause 3

Schedule I

clause 3(a)

s. 7( l)

Essential Commodities Act, 1955

s. 7(1)

Schedule I

Essential Commodities Act, 1955

(1973) 3 S.C.R. 937

M. N. Phadke

M. N. Shroff

G Y. S. Chitale

M. Mudgal

Rameshwar Nath

CHANDRACHUD

s 1

Section 3

Essential Commodities Act

Central Government

s. 3

s. 5

Section 7

s. 3

s. 3

s. 5

Essential Commodities Act, 1955

Clause 3(a)

Schedule L

Schedule I

Maharashtra

March 3, 1971

clause 4

clause 4

clause 4

clause 3

clause 3

clause 4

s. 7

Essential Commodities Act 1955

clause 3(a)

Schedule I

Clause 4

clause 3(a)

clause 4

clause 3

Schedule I

clause 4

clause 3(a)

Schedule I

Schedule I

clause 3

s. 7

Essential Commodities Act, 1955

s. 7(1)

Hansraj Depar

Schedule I

K. N. Joshi

Kurdur

Ravi Vanaspati

Schedule I

s. 7(1)

Essential Commodities Act, 1955

Essential Commodities Act

Schedule I

Bihar Government

Essential Commodities Act

clause 3

clause 4


GOVT. OF ANDHRA PRADESH & ANR. ETC. v.

ANNE VENKATESWARE ETC. ETC.

February 17, 1977

[P. N. BHAGWATI AND A. C. GUPTA, JJ.]

Code of Criminal Procedure, 1973, ss. 428 & 418-S. 428 whether equates undertrial detention or remand detention with 11nvrisonn11Jn.t on conviction for re111ission purposes.-Whether allows period of preventive detention to. be set off against tern1 of imprisonment on conviction-S. 418 whether 111cludes serl'ice of warrant on accused alrea<tv in detention.

The cross appeals arose from two writ petitions filed by A. V. Rao and N. V. Krishnaiahin the High Court.

A. V. Rao's case \vas that while he was already in oreventive detention. on December 18. 1969. a First Information Report was lodged against him in connection with so1nc Sessions cases. Some of the coaccused in these cases were produced before the Magistrate on December 19, 1969 for remand, but Rao was produced before him only in mid-April, 1970 after his release from preventive detention. The accused in the Sessions cases were thereafter convicted and sentenced, and Rao filed a writ petition asking for an order on the State (i-overnmcnt to set off u/s 428 Cr.P.C. 1973, the time between December 19, 1969 and April 13, 1970, against his term of imprisonment, treating the said period a~ the period of detention undergone by him as an undertrial prisoner, and also to take the same into

accotmt, for the purpose of remission of his sentence under the Prisons Act.

Rao contended that he could have been produced before the Magistrate for remand on December 19, 1969. The State Government contended that Rao

could not be prcxluced before the Magistrate for remand until the period of pre ventive detention was over.

In the case of Krishnaiah, he was in detention under the MISA, when his appeal against conviction in a criminal case was dismissed by the High Court, and a warrant was issued against him on December 1, 1975, but was served on him only on December 30, 1975, when the order against him under the MISA was revoked.

The High Court rejected the petitioners' contention regarding set off under section 428 Cr.P.C. but accepted their contention regarding the benefit of remission.

Allowing the appeals by the State, and partly allowing the appeals by the original writ petitioners, the Court, HELD: (1) Section 428 of the Cr. P.C., 1973 only provides that the period of detention of an accused as undertrial prisoner shall be set off against the term of imprisonment imposed on him on conviction. It does not equate an ''undertrial detention or remand detention with imprisonment on convicti'on" or do away with the difference in the two kinds of detention and put them on the .same footing for all purposes.

[11 B-C] G. V. Godse v. State of Maharashra, [1961] 3 SCR 440; 446, referred to.

(2) S. 428 expressly says that the "period of detention" mentioned refers to the detentio~ .durin¥ the investigation, enquiry or trial in connectin with the. same .case tn wp1ch ~e accused prson has been convicted.

The period dunng which the writ petitioners were in preventive detention cnn11ri-t br> set off under section 428 against the term of imprisonment imposed on them [llG

12-A-EJ . '

(3) SectiOf! 418 does not exclude a case \Vhere the \varra, nt concerns an

accue.d wo 1s. already in detention.

We have not been referred to anv prov1s1on etthcr 1n the Cr. P.~. or in the MTSA which requires the service 0f the Wa!fant to be delayed unttl. after the pr!od of preventive detention is over.

H There 1s no bar to the preventive and punitive detention continuing simultaneously. [13A-B, CJ

2~240SCI/77

Harad!zan Saha & Anr. v. State of West Bengal & Ors. [1975] 1 SCH .. 778, referred to.

CRIMINAL APPELLATE JURISDICTION : Criminal Appeals Nos. 418-419 and 484-485/76.

(From the Judgment and Order dated 6-7-1976 of the Andhra Pradesh High Court in Writ Petition Nos. 1865, 1870 of 1976 respectively.)

P. Parn:eswara Rao, G. Narayana Rao and A. K. Ganguli, for the appellants m Cr!. Appeals Nos. 418-419/76 and respondents in Crl.

Appeals Nos. 484-485/76.

R. K. Jain, for the appellant in Cr!. A. No. 484/76 and respondent in Cr!. A. No. 418/76.

S. L.aks!111; inarasu, for the appellant in Cr!. A. Ne. 485/76 and for respondent in Cr!. A. No. 419/76.

The Judgment of the Court was delivered by

GUPTA, J.-These are a group of four appeals from a common Judgment of the Andhra Pradesh High Court partly allO\ving two writ petitions, writ petition No. 1865 of 1976 filed by A. V. Rao, and writ petition No. 1870 of 1976 made by N. V. Krishnaiah.

The High Court rejected the petitioners' prayer for setting off under section 428 of the Code of Criminal Procedure, 1973 the periods during whk:h they \\"ere in preventive detention against the tcrn1 of ilnprisonn1ent imposed on thein on their conviction in a sessions trial, but accepted their contention that they were entitled to the benefit of the remission system under the Prisons Act, 1894 for the period during which they were in jail as undertrial prisoners before their conviction : Criminal Appeals Nos. 418 and 419 of 1976 by State of Andhra Pradesh are di, rected against the part of the High Court's Judgment granting the writ petitioners the benefit of the remission system under the Prisons Act treating for this purpose the period of undertrial detention on the same footing as a term of imprisonment on conviction.

Appeal No. 418 arises out of writ petition No. 1865 of 1976 filed by A. V. Rao and Appeal No. 419 is from writ petition No. 1870 of 1976 made by N. V. Krishnaiah.

The writ petitioners have also filed appeals against the part of the Judgment disallowing their prayer for set off under section 428 of the Code of Criminal Procedure.

Criminal Appeals Nos. 484 and 485 of 1976 are by A. V. Rao and N. V. Krishnaiah respectively.

All the four appeals are on certJficate G of fitness granted by the High Court.

The relevant facts are as follows.

A. V. Rao, appellant in appeal 484 of 1976 and respondent in appeal 418 of 1976, was in detention under the Preventive Detention Act when on December 18, 1969 a first information report was filed naming him among others as an accused in a case involving H offences under section 121A and 120B read with section 395, and section 120B read with section 44 7 of the Indian Penal Code, which gave rise to sessions cases Nos. 106 of 1970 and 6 of 1_971 on the file of the Additional Sessions Judge, Hyderabad. The detention order under

; the preventive detention law was revoked by the State Government A •On April 11, 1970 and Rao was released on the next day, April 12.

He was then produced before the magistrate in connection with the sessions cases on April 13, 1970; there is some doubt about this date .because the record at some plru:es mentions !he date as April 18, but •lhe discrepency is not of any significance on the questions arising for .decision in these appeals.

On April 10, 1972 Rao was convicted .along with .others and sentenced to various terms of imprisonment for B the offences charged against him; the maximum sentence was rigorousimprisonment for four years. . The sentences were directed to run .concurrently. His appeal against the order of conviction was dismissed by the High Court on November 28, 1975.

He filed writ petition 1865 of 1976 asking for an order on the Government of Andhra Pradesh to set off under section 428 of the Code of Criminal Procedure, 1973 the time between December 19, 1969 and April 13, C l 970 against his term of imprisonment treating the said period as the period of detention undergone by him as undertrial prisoner, and to take into account the entire 'period during which he was in detention

for the purpose of remission of his sentence under the Prisons Act.

The petitioner further claimed that had he been free at the time when the F.I.R. was lodged on December 18, 1969, he would have surrendered inunediately and would have been produced before he D <Court for remand on the next day as some of the co-accused in the case had been it was submitted that if the "concerned authority" who could but did not "take immediate and necessary steps to produce the petitioner" before the magistrate, the petitioner should not be made to suffer.

The facts of N. V. Krishnaiah's case am similar. Krishnaiah, E appe\lant in appeal No. 485 and respondent in appeal No. 419, was also an accused in the sessions cases l 06 of 1970 and 6 of 1971 with A. V. Rao and othero.

He however was not in detention when the F. I. R. was lodged.

He was arrested in connection with the sessions cases on December 19, 1969 and was in detention on remand from December 21, 1969 to April 9, 1972.

He was also convicted by the Additional Sessions Judge on April 10, 1972 and the maximum F sentence in his case too was rigorous imprisonment for four years.

He also preferred an appeal to the High Court against the order of conviction.

The High Court granted him bail and he was released on bail on April 29, 1972., He was arrested under the Maintenance of Internal Security Act, 1971 on June 26 197 5.

The High Court dismissed the appeal on November 28, 197'.s.

A warrant of arrest issued by the Additional Sessions Judge on December l 1975 was G served on him on December 30, 1975, on which date the detention order under the Maintenance of Internal Security Act wais also revoked.

On these Krishnaiah in •his writ petition sought an order on the State of Andhra Pradesh to treat the "period from June 26, 1975 to November 28, 1975 as remand period" and to set off under section 428 of the Coe of Crim!nal Proedure this period during which ]1e was under .Prevenlive etnlio!1, agamst '.he term of imprisonment H llllposed on him on conv1ction m the sessions cases. It was also contended that the; warrant issued by the Additional Sessions Judge <lll December 1, 1975 should have been served on him immediately,

that it was no fault of his that "the concerned authority" .chose to. serve the warrant on December 30, 1975, and that during this peliod of one month he should be deemed to have been serving the sentence imposed on him.

A further prayer was made that the entire period during which he was under detention be taken into account for remission of his sentence nnder the Prisons Act, The question for consideration in appeals 418 and 419 of 1976 preferred by the State of Andhra Pradesn 1s, whether the period of detention nndergone by the two writ petitioners in connection with the sessions cases before their conviction could be treated as a part of the period of imprisonment on conviction so as to entitle them to remission of their sentences under the Prisons Act.

The Prisons Act, as its preamble shows, is an Act to "amend the law relating to prisons" and to "provide rnles for the regulation of such prisons".

Section 3(5) of the Act defines "remission system" as the "rules for the time being in force regulating the award of marks to, and the consequent shortening of sentences of, prisoners in jail". Section 59 of the Prisons Act provides that the State Government may make rules consistent with the Act in respect of the various matters specified in clauses (1) to (28) of the section; under clause (5) of section 59 the State Government is authorised to make rules "for the award of marks and the shortening of sentences". In their writ petitions both the petitioners speak of remission under the "prison rules" without specifying any rule nnder which relief is sought.

The High Court viewed the question in this way : Sec. 428 Cr!. P. C. clearly ordains that the remand detention shall be set off against the term of imprisonment imposed on the accused person on conviction. The section further clarifies that the liability of such person to undergo imprisonment on such conviction shall be restricted to the remainder, if any, of the term of imprisonment imposed on him.

In other words, the statute equates the nnder trial detention or remand detention with imprisonment on conviction.

The provision, in so many words, treats the remand detention as part of the period of imprisonment after conviction. If remission.s are given for imprisonment after conviction, there is no plausible or understandable reason why it should be denied to the remand period when the statute equates both of them." The High Court accordingly held that all the remissions that are available or permissible to the two petitioners in regard to imprisonment on conviction are available to them even in respect of the remand period and directed the authorities "to work out these remission and give the benefit to the petitioners".

We do not consider the view taken by the High Court on 1his point cs correct.

Section 428 of the Code of Criminal Procedure, 1973 is in these terms :

Period of detention undergone by the accused to be set off against the sentence of imprisonment.

"428. Where an accused person has, on conviction, been sentenced to imprisonment for a term, the period of detention, if any, undergone by him during the investigation, inquiry or trial of the same case and before the date of such conviction, shall be set off against the term of imprisonment imposed on hirtl on such conviction, and the liability of such person to undergo imprisonment on such conviction shall be restricted to the remainder, if any, of the term of imprisonment im_posed on him."

:Section 428 provides that the period of detention of an accused as an nndertrial prisoner shall be set off against the term of imprisonment imposed on him on conviction.

The section only provides for a "set -0ff", it does not equate an "undertria! detention or remand detention with imprisonment on conviction".

The provision as to set off expresses a legislative policy, this does not mean that it does away with the difference in the two kinds of detention and puts them on the .same footing for all purposes.

The basis of the High Court's decision does not, therefore, seem to be right.

Apart from that, the Prisons Act does not cofer any right upon the prisoner to claim remission.

It was pointed out in G. V. Godse

v. State of Maharashtra(') that " .... the Prisons Act does not confor on any authority a power to commute or remit sentences, it pro- -vides only for the regulation of prisons and for the treatment of prisoners confined therein.

Section 59 of the Prisons Act confers a power on the State Government to make rules, inter alia., for rewards for good conduct.

Therefore, the rules made under the Act should be construed within the scope of the ambit of the Act." It was explained that the rules under the Prisons Act do not substitute a lesser sentence for a sentence awarded by the court. The rules enable a prisoner to earn remissions but, as held in G. V. Godse's case, the question of remission is exclusively within the province of the appropriate Government. If the Government decides to remit the punishment to which a person has been sentenced, the remission may be worked out according to the rules framed under the Prisons Act.

This being the position, appeals 418 and 419 of 1976 must succeed.

The remaining two appeals, 484 and 485 of 1976, preferred respectively by Rao and Krishnaah, may now be taken up for consideration.

The claim in both these appeals is that the period of detention undergone by each appellant under the preventive detention Jaw should be set off under section 428 of the Code Criminal Procedure against the term of imprisonment imposed on them on their convi'Ction in the aforesaid sessions cases. The argnment is that the expression "period of detention" in section 428 includes detention under the Preventive Detention Act or the Maintenance of Internal Security Act. It is true that the section speaks of the "period of , detention'' undergone by an accused person, but it expressly says that the detention mentioned refers to the detention during the investigation, enquiry or trial of the case in which the accused person has been convicted.

The section makes it clear that the period of detention which it allows to be set off against-the term of imprisonment

(1) \1961] 3 S.C.R. 440, 446.

G •

SUPREME COUR"E REPORTS:

[1977] 3 S.C.R ..

A imposed on the accused on conviction must be: during the investigation, enquiry or trial in connection with. the "same case" in which he has been convicted. We therefore agree with. the High Court that the period during which the writ petitioners were. "in preventive detention cannot be set_ off under section 428 against the term of imprisonment imposed on them.

There is however substance in the other point raised by the writ petitioners regarding the computation of the period during which the writ petitioner in each case should be held to have suffered imprisonment on conviction.

In A. V. Rao's case (W.P. 1865/76), he was. already in detention under the Preventive Detention Act when the First Information Report was lodged on December 18, 1969 in connection with the sessions cases.

Some of the co-accused ;•n these cases were arrested and produced before the magistrate for remand on December 19, 1969, but Rao was produced before the magistrate sometime in April, 1970 after he was released from preventive detention. n was argued that he also could have been produced before the magistrate for remand on December 19, 197U.

On behalf of the respondent, State of Andhra Pradesh, it was contended tfiat as Rao was already in detention under the Preventive Detention Act, it was not possible to produce him before the magistrate for remand until the period of preventiveJ detention was over; we do not find any justification in law for the position taken up by the !State.

Rao being already in custody, the authorities could have easily produced him• before the magistrate when the flrst Tnformatfon Report was lodged.

Nothing has been pointed out to ns either fn the preventive detention law or the Code of Criminal Procedure which can be said to be a bar to snch a course.

That being so we think that the claim that the entire period from December 19, 1969, when many of (he co-accused were produced before the magistrate to Aprif 18; 1970 should be treated as part of the period during which Rao was under detention" as an under trial prisoner, must be :accepted as valid.

A. V. Rao's Appeal No. 484 of 1976 is allowed to this extent.

In the case of N. V. Krishnaiah, the Additional Sessions Jiidge, Hyderabad, issued a warrant on December 1, 1975 after his appear against conviction was dismissed by the High Court on November 28, 1975.

The: warrant, however, was served on him only on December 30, 1975 on which date the order under maintenance of Internal' Security Act was revoked.

It is claimed that the warrant could' have been served immediately on that dismissal of the appeal on November 28, 1975 ancl the accused was not responsible if the authority concerned chose to serve the warrant on him Off December 30, 1975.

In this case also, the argument on behalf of the State of Andhra Pradesh is that it was not possible to forward Krislmaiah to jail consequent on his conviction in the session cases until the period of his detention under the Maintenance of Internal' Security Act was over. We do not see why that should be so. Section 418 requires the court passing the sentence to forthwith forward a warrant to the jail or other place in which he (accused) is, or is to be, con-· fined, and, unless the , accused is already confined in such jail or other

place, shall forward h:•m to such jail or other place, with the warrant".

Section 418 thus does not exclude a case where the warrant concerns an accused who is already in detentionc On behalf of the State it was sought to be argued that if the warrant wa~ served on Krishnaiah immediately after his conviction was upheld by the High Court in appeal, the position would have been anomalous, because then he would have been in detention both under the preventive detention law and as a convicted accused in a criminal case. We have not been referred to any provision either in the Code of Criminal Procedure or in the Maintenance of Internal Security Act which requires the service of the warrant to be delayed until after the period of preventive detention is over.

As regards the alleged anomaly of ru man having to suffer two kinds of detention at the same time, one preventive and the other pnnitive, we do not find this to be a valid objection.

The position is not different from the case where a man is sentenced , on different counts to a term of rigorous imprisonment and another term of simple imprisonment, and the sentences are directed to run concurrently.

Counsel for the State referred us to the decision in Haradhan Saha and another v. The State of West Bengal & others,(') in support of his contentil'.m.

In our opinion this case does not help him at all.

What was held in this case was, inter alia that the nature of preventive detention is entirely different from punitive detention, and there is no bar to a man being detained under the preventive detention Jaw when a criminal proceeding for the offences on which the preventive detention is based is pending.

If that be so, there can be no bar to the preventive and punitve detentions continuing simultaneously. We therefore allow appeal No. 485 of 1976 to the extent tbat Krishnaiah should be taken to have serving the sentence imposed on hi~ from December 1, 1975.

In the result the criminal appeals Nos. 418 and 419 of 1976 5y the State of Andhra Pradesh are allowed, and the appeals Nos. 484 ; md 485 of 1976 preferred respectively by A. V. Rao and N. V.

Krishnaiah are allowed to the extent indicated aove.

M. R.

A]'Jpeals allowed.

(I) [1975] I S.C.R. 778.

GOVT. OF ANDHRA PRADESH & ANR. ETC

ANNE VENKATESWARE ETC. ETC

February 17, 1977

P. N. BHAGWATI

A. C. GUPTA, JJ.

Code of Criminal Procedure, 1973

ss. 428 & 418

S. 428

S. 418

A. V. Rao

N. V. Krishnaiahin

December 18. 1969

December 19, 1969

Rao

s 428

Cr.P.C

April 13, 1970

Prisons Act

Krishnaiah

December 1, 1975

December 30, 1975

section 428

Cr.P.C

Section 428

[1961] 3 SCR 440

S. 428

section 428

P. Parn:eswara Rao

G. Narayana Rao

A. K. Ganguli

R. K. Jain

GUPTA

A. V. Rao

N. V. Krishnaiah

section 428

Code of Criminal Procedure, 1973

Prisons Act, 1894

State of Andhra Pradesh

section 428

Code of Criminal Procedure

section 121A and 120B

section 395

section 120B

section 44

Indian Penal Code

April 11, 1970

April 10, 1972

November 28, 1975

Government of Andhra Pradesh

section 428

Code of Criminal Procedure, 1973

April 13, C l 970

Prisons Act

December 18, 1969

December 21, 1969

April 9, 1972

June 26 197 5

November 28, 197'.s

section 428

Prisons Act

State of Andhra Pradesn

Prisons Act

Prisons Act

Section 3(5)

Section 59

Prisons Act

section 59

Sec. 428

Section 428

Code of Criminal Procedure, 1973

Section 428

Prisons Act

Prisons Act

Section 59

Prisons Act

Prisons Act

G. V. Godse

Prisons Act

Krishnaah

section 428

section 428

1961] 3 S.C.R. 440

section 428

December 19, 197U.

Code of Criminal Procedure

Additional Sessions Jiidge, Hyderabad

Krislmaiah

Section 418

Section 418

Code of Criminal Procedure

N. V.

Krishnaiah


ASSESSING AUTHORITY, PATIALA DISTRICT PATIALA AND A

ORS.

M/S. PATIALA BISCUITS MFG. CO. NOW AS DALMIA

BISCUIT PVT. LTD.

March 1, 1977

[P. N. BHAGWAT!, R. S. SARKARIA AND S. MURTAZA FAZAL Au, JJ.]

Punjab General Sales Tax Act, 1948-Assessee entitled to certain deductions if seller and buyer are negisflered dealers-Both applied for registration-('crtificates issued later ttdth retrospective effect-Dealers-If sl1011/d be in physical possession of registration certificate at the ti1ne of sale to claini deduction.

According to s. 5(2) (a) (ii) of the Punjab General Sales Tax Act, 1948, tnxable turnover means the part of a dealer's gross turnover during any period which remains after deducting therefron1 the turnover <luting that period, on sales to a registered .dealer of goods declared by him in a prescribed form as being intended for re-sale in the State. Section 7 ( 1) provides that no dealer shall carry on business as a dealer unless he has been registered and possesses a registration certificate. Rule 5 of the Punjab Geti.eral Sales Tax Rules, 1949'

as amended in October 1966 provids that the certificate of registration issued D by the Assessing Authority shall be valid from the date of receipt by him of the application for registration or from the date of commencement of the liability to pay tax whichever is later.

Rule 26 provides that a dealer claiming deduction under s. 5(2) (a) (ii) shall produce on demand the cash memos or bill and

a declaration in writing. by the purchasing dealer that the goods specified in the certificate of registration are for use by him. ·

The assessee (respondent) and the purchasing dealer, the sole selling agent of the assessee, made applications on January 1, 1966 for registration as dealers.

E The registration certificates were issued to them on March 27, 1966 with retro

spective effect from January 1, 1966.

The Assessing Authority rejected the assessee's claim for deduction under s. 5(2)(a)(ii) of sales made by them to the purchasing dealer on the ground that during the period between January 1 and March 31, 1966, the purchasing dealer was not in possession of the registration certificate.

In a petition under Art. 226 of the Constitution the High Court held that F since t?e certificate of regitraion ?ad been granted :with effect from January 1, 1966, 1.e. the date of application, it could not be said that the sales during the quarter were to an unregistered dealer.

On appeal it was contended that to be entitled to deduction under the Act both the purchasing and .selling dealers should be in physical possession of the registration certificate at the time of sale.

Dismissing the appeal, G

HELD: The assessees were entitled to deduction under s. 5(2) (a) (ii) in respect of sales made by them to the purchasing dealer during the quarter.

[90 0]

(a) At te re!evant tme, the registering auhority was fully competent to issue the !eg1stration cer~1ficte to the dealer with retrospective effect fron1 the date of filinc: of the application. The amendment of r. 5 made in October 1966 did not c_onfe.r any new or additional power on the registering authority but V.'as H -Only clarrficatory of the law. .The language of s. 7 is clear that the registering authority had the power to give effect to the registration from the date of making the application. [90 F; A]

(b) The \Vords "has been registered and possesses a registration certificate"

i:._1 s. ,7 ( 1) should be construed in accord \Vith the general tenor of the section as a \Vhole, and in a manner which would avoid oppressive, unreasonable and nnomalous results.

So construed it could never be the intention of the legislature that a dealer liable to pay tax, who has in compliance with the requirements of s. 7(2) and (3) done all which lay in his power to obtain the registration certificate, should pull down his shutters and keep his business closed under pain of being punished and await indefinitely the pleasure and leisure of the prescribed authority in issuing the registration certificate.

Adoption of such a construction '"'ould be to make an applicant liable to punishment for the laches and delays of the authority and its office.

[90 BCJ

Chandra Industries v. The Punjab State & Ors. 29, S.T.O. 558, approved.

( c) The requirement ofr. 26 will be substantia1ly satisfied if the number of the registration certificate is supplied by the claimant alongwith the dec1aration oi the purchasing dealer at the time of assessment to the Assessing Authority.

[90 El

C!v1L APPELLATE JURISDICTION: Civil Appeal No. 721 of 1972.

(From the Judgment and Order dated 13.10.1970 of the Punjab & Haryana High Court in Civil Writ No. 1831of1968).

K. S. Suri, for the appellants.

R. S. Sharma and A. D. Mathur, for the respondent.

The Judgment of the Court was delivered by

SARKARIA, J.-The short question involved in this appeal on certificate, directed against a judgment of the High Court of Punjab and Haryana is : Whether the sales made to a dealer who has applied for registrat10n under the Punjab General Sales Tax Act 1948, before his application is allowed, are to be treated as sales to an unregistered dealer or registered dealer, when the registration is effected from the date of the application ?

M/s. Paliala Biscuits Manufacturers Pvt. Ltd. (hereinafter referred to as the assessees) appointed M/s. Rajpura Biscuit Company as their F sole selling agents.

The agents made an application on 1.1.1966 in the appropriate form for regis!ration as a dealer under the Punjab General Sales Tax Act, 1948 (hereinafter called the Act).

On the same day. the agents (referred hereafter as the purchasing dealer) made a im1lar application for obtaining registration certificate under the Central Sales T.ax Act.

The appropriate Assessing Authority accepted both these applications and on March 27, 1966 issued the G registration Certificate with effect from 1.1.1966.

The assessees filed their return for the quarter ending March 31, 1966 in April, 1966 and claimed deductions under s. 5(2) (a) (ii) in respect of sales of the value of Rs. 32,56,267.35 made by them between 1-1-1966 to 31-3-1966 to the purchasing dealer. The Assessing Authority, Patiala rejected this claim and assessed tax, amounting to Rs. 1,99,558.94. on the proceeds of the sales made by the assessees to the purchasing dealer between 1.1.1966 and 27.3.1966.

The reason eiven by the Assessing Authority for refusing this relief to the assessees

\as that during this period, the purchasing dealer was not in possession

of the registration certificate, the same having been issued only on A March 27, 1966 .

. The asse, sccs impugned the validity of this order of the Assessing Authority by a writ petition in the High Court, under Articles 226/227 of the Constitution.

The High Court held that since the certificate of registration had been granted with effect from 1-1-1966, which was the date of the application, it could not be said that the sales during B this period commencing from 1.1.1966, were made to an unregistered dealer.

It further noted that apart from the a>sessees, the purchasing dealer had also, been taxed with regard to the same transactions resulting in double taxation which was against the basic scheme of the Act, the Rules and the notifications issued thereunder.

On these premises, the High Court allowed the writ petition and quashed the impugned order to the extent to which it was contrary to s.5(2) (a) (ii) c of the Act m respect of sales made between 1.1.1966 and 27.3.1966.

The High Court however granted a certificate under Art. 133(1) (a) and ( c) of the Constitution, on the basis of which the Revenue has come in appeal to this Court.

It would be appropriate to have, at the outset, a look at the relernnt prm 1sions of the Act and the Rules.

The material provision is in s. 5 (2) (a) (ii) which reads as under:

"In this Act the expression "taxable turnover" means the part of a dealer's gross turnover during any period which remains after deducting therefrom :

(a) his turnover during that period on-

(i)

(ii) oaks to a registered dealer of goods .... declared ty him in a prescribed form as being intended' for re-sale in the Slate of Punjab ....... .

Provided that in case of such sales, a declaration duly filled up and signed by the register dealer to whom the goods are sold and containing prescribed particulars on a prescribed form (obtained from the vrescribed authority) is furnished by the dealer who sells the goods."

Seetion 7 provides for the registration of dealers. It says :

" ( l ) No dealer shall, while being liable to pay tax under this Act, carry on business as a dealer unless he has been registered and possesses a registration certificate.

(2) Every dealer required by sub-section (1) to be reRistered dealer shall make application in this behalf in the prescribed manner to the prescribed authority.

(3) If the said authority is satisfied that an application for registration is in order, he shall, in accordance with 7--240SCll77

( .+)

such rules and on payment of such fees as may be prescribed, register the application and grant him a certificate of registration in the prescribed forms which may specify the class or classes of goods for lhe purpose of sub-<:lause (ii) of clause (a) of subsection (2) of section 5.

(5) When any dealer has paid the amount of penalty imposed under s. 23 in respect of any contravention of sub-section (I) of this section, the Commissioner shall register such dealer and grant him a certificate of registration, and such registration shall take effect as it had been made under sub-section (3) of this section on the dealer's application.

(6)

In case a dealer commits default is not getting himself registered as required by Sec. 7, certain consequences follow.

Under s.11 (6) such a defaulting dealer is liable to be assessed on the basis of best judgment and the Assessing Auihority may, in addition to the tax so assessed, impose on him by way of penalty a sum not exce('ding one and half times that amount.

Such a defaulter is further liable to prosecution under s. 23 (1) for carrying on business as a dealer in contravention of the provisions of s. 7 ( 1), and on conviction, he can be sentenced to fine not exceeding Rs. 1,000/-.

The application for registration has to be made to the appropriae 't-· Authority in the prescribed Form.

The. manner in which such an ,;. application 1s to be. dealt with by the Authority is provided in Rule 5 of the Punjab General Sales Tax Rules, 1949 framed under the Act.

This Rule as it stood before the amendment of October 10, 1966 was as follows :

"Wlien the appropriate Assessing Authority, after making any enquiry that he may think necessary, is satisfied that the applicant is a bona fide dealer and has correctly given all the. requisite information that he has deposited the registration fee into the appropriate Government treasury and that the application is in order, he shall register the dealer and shall bsue a certificate of registration in Form S.T.TTI or S.T.

IV according as the dealer has one or more than one place of business in Punjab."

Rule 5 was amended by Punjab Government Notification No. GSR- 237 /PA 46/48/S-27 / Amd(5) /66 dated 10th October, 1966, and in place of the last sentence commencing with the words "in Form H S.T .... " of the old Rule, the following was substituted :

"_ ... in Form S.T. IV which shall be valid from the date of receipt of application for registration by the Assessing Authority m from the date of commencement of the liability to pay tax, whichever is later."

y Rule 26 provides :

"A dealer, who wishes to deduct from his gross turnover the amount in respect of a sale on the ground that he is entitled to make such deduction under the provisions of subclause (i.i) of clause (a) of sub-section (2) of section 5 of the Act, shall, on demand, produce in respect of such a sale the copy of the relevant cash memo or bill, according as the sale is a cash sale or a sale on credit, and a declaration in writing in Form S.T. XXII by the purchasing dealer or by his agent, that the goods in question are intended for re--saJe, in the State of Punjab or such goods are specified in his certificate uf registration for use by him in the manufacture in the State of Punjab of any goods for sale."

Rule 26 was also amended later. The amended Rule is, in substance, the same, excepting that it was clarified that the dealer claiming deduction has to produce the declaration of the purchasing dealer, in the prescribed form, at the time of assessment.

The main contention of Shri K. S. Snri, learned Counsel for the appellant is that the declaration form prescribed nuder the old Rule 26, as it stood at the material time, required the purchasing dealer to specify at the time of the sale, in the prescribed Form S.T. XXII, the number of the registration certificate.

Strer.s has also been placed on the words "registered and possesses" used in snb-section (! r of Sec.

E 7, which according to Counsel, indicate that a dealer having a taxable turnover, cannot validly carry on his business, unless he is actually registered and is in physical possession of the registration certificate issued under Sec. 7.

A compliance with the aforesaid mandatory requirement of s. 7 ( 1) and Rule 26, Form XXII-proceeds the argument--could be possible only if at the time of the s;:tles in question, the purcha, ing dealer as well as the selling dealer, both, were in F actual possessioll of the requisite registration certificates.

Shri Suri lias adopted tl1e reasoning of the Sales-Tax Tribunal in Appeal No. 109 of 1967-68 (M/s. Darshan Soap Mills, Batala Road, Amritsar v.

The State) decided on 12-2-1968.

It is contended that Rule 5, as it stood at the material time, did not empower the registering Authority to grant the registration Certifiate rtroypectively1 with effect from the date of the application.

It G 1s mamtamed such a power was conferred on the Authority, only by !he Punjab Government Notification No. GSR-237 /PA 46/48/S-27 Amd. (5) /16 with prospective effect from October 10, 1966.

Taking the last point first, we are of opinion that the amendment 'Of Rule 5 by the Punjab Government Notification, dated October 10

1966, did not confer any new or additional power on the registering H Authority.

The power to grant the registration Certificate with effect from the date of the. application was already there.

The amendment was only clarificatory of the law as it stood prior to it.

It only

made explicit which was formerly implicit.

A definite indication is available m the language of sub-section (5) read with sub-sections (2) and (3) of s. 7, itself, that the registering Authority had the power to give effect to the registration from the date of making the application. -

Be that at it may, the words "has been registered and possesses a registration certificate" used in sub-s. ( 1) of s. 7 have to be construed in accord with the general tenor of the Section as a whole, and in a manner which would avoid oppressive, unreasonable and anomalous results.

As rightly pointed out in Chandra Industries v. The Pun; ab State and ors.( 1), it could never be the intentionof the Legislature that a dealer liable to pay tax who has in compliance with the requirements of sub-sections (2) and (3) of s. 7, "done all which lay in his power to obtain the registration certificate, should pull down his shutters and keep his business closed under pain of being punished under s. 23 ( 1) and await indefinitely the pleasure and leisure of the prescribed authonty in issuing the registration certificate.

Adoption of such a construction would be to make the applicant liable to punishment for the !aches and delays of the authority and its office."

As regards the requirement enjoined by the Form prescribed under Rule 26, o enter the number of the registration certificate in the deciaration of the purchasing dealer at the time of sale., the same has to be viewed with reasonable flexibility and reconciled with Rule 5 as clarified by the Notification, dated October 10, 1966.

Thus construed harmoniously with the related statutory provisions, the requirement of Rl!ie 26 will be substantially satisfied, if the number of the registration certificate-granted subsequent!.¥, but covering retrospectively the period of the sales in respect of which deduction is claimedis supplied by the claimant along with the declaration of the purchasing dealer al the time of assessment to the Assessing Authority.

It is thus clear as daylight that at the relevant time, also, the registering Authority was fully competent to issue the registration certificate to the dealer with retrospective effect from the date of filing the application.

A perusal of the regi'stration certificate would show that it was, in terms, made effective from January 1, 1966. This is manifest from the words "the dealer is liable to pay tax w.e.f. 1.1.1966" used by the Authority, prominently, in the heading of the Certificate.

It necessarily follows, therefore, that during the period from 1.1.1966 to 27.3.1966, also, the purchasing dealer was a registered dealer possessing a registration Certificate within the contemplation of s. 7 ( 1) of the Act.

This being the correct position, the assessees were entitled to the deduction under s. 5(2) (a) (ii) of the Act in respect of ti:e sales made by them to the purchasing dea.ler durlng the whole of the quarter ending 31st March 1966.

The High Court was therefore, right in determining the question posed, in favour of the assessees and against the Revenue.

Tbe appeal fails and is dismissed with costs.

P.B.R.

Appeal dismissed.

(I) 29, S.T.O. 558.

' •

ASSESSING AUTHORITY, PATIALA DISTRICT PATIALA AND ORS

R. S. SARKARIA

Punjab General Sales Tax Act, 1948

s. 5(2)

Punjab General Sales Tax Act, 1948

Section 7

Sales Tax Rules, 1949

s. 5(2)

January 1, 1966

s. 5(2)(a)(ii)

March 31, 1966

Art. 226

s. 5(2)

s. 7

s. 7(2)

K. S. Suri

R. S. Sharma

A. D. Mathur

SARKARIA

High Court of Punjab and Haryana

Punjab General Sales Tax Act 1948

Rajpura Biscuit Company

Punjab General Sales Tax Act, 1948

March 27, 1966

s. 5(2)

Assessing Authority, Patiala

Articles 226

Art. 133(1)

s. 5

Punjab

section 5

s. 23

Sec. 7

s. 23

s. 7

Punjab General Sales Tax Rules, 1949

October 10, 1966

section 5

K. S. Snri

Sec. 7

s. 7

Suri lias

Sales-Tax Tribunal

October 10

1966

s. 7

s. 7

s. 7

s. 23

s. 7

s. 5(2)

31st March 1966


_;,.--.

STRAW BOARD MFG. CO LTD. v.

THE WORKMEN

March 1, 1977

[V. R. KRISHNA IYER AND JASWANT SINGH, JJ.]

GratHity-Qualifying period of service and calculation of amounts-Tests for determination.

Jn an industrial dispute between the appellant mill and its workmen relating 1o the payment of gratuity, the Industrial Tribunal framed a gratuity scheme and gave th~ necessary guidelines for its implementation. Special leave \Vas granted to the appellant by this Court on the limited question whether the correct principles on which gratuity should be payable had been followed in this case .or not. Since the making of th:! award, the Payment of Gratuity Act, 1972 \vas passed, which, by s. 4(5) gave an option to the workers to choose behveen the gratnity scheme under the award and the one under the statute. The \\'Ork.::1 s, however, did not put in their appearance in this Court.

It was contended on behalf of the appellant that the qualifying period of 'Service for earning gratuity was ten years and for calculadng the amount of gratuity basic wages withot adding dearness allowance should be the basis as

laid down by some decisions of this Court and the tribunal was wrOng in hold- D ing 5 years as the qualifying service and basic wages and dearness allowance as the basis for calculating the amount of gratuity.

HELD : There is nothing fundamentally flawsome in the 5-year period being fixed as the qualifying service. The Tribunal was realistic in fixing the period of eligible qualifying service as continuous service counted with reference to the completed years as defined in s. 2(c) of the Act.

[100 C&F]

( 1) Jn some cases, this Court higlilighted the view that the determination of gratuity is not based on any definite' rules and each case must depend upon the prosperity l1f the concern, the needs of the workmen and the prevailing economic conditions examined in the light of the auxiliary benefits which the workn1en may get on determination of employment. It was also held. that stability of the concern, profits made in the past, the future prospects and capacity should be the relevant circumstances which the Tribunal should take into account in

giving its award. Awards are given on circumstances peculiar to each dispute and the 'T'ribunals are, to a large extent, free from the restrictions of 1echnica1 considerations imposed on courts. In short, the approach of the Tribunal should be what may be described as its legal hunch or horse-sense. Cases like Gaziabad Engineering Co. accept .the position that while gratuity is usually related to the basic wage, a departure may be made by relating it to the consolidated wage if there be some strong evidence or exceptional circumstances justifying that course. The real reason why some cases Jike British Paints required a qualifying period of 10 years was that a longer minimum period for earning gratuity in the case of voluntary retirement or resignation would ensure that workmen did not leave one concern for another after putting in the short minimum service qualifying for gratuity.

But current conditions must control the Tribunal's conscience in finalizing the terms of the gratuity schen1e. Colossal unemployment at all levels of workers in the country today means that a \Vorker \Vilt not Te2ve his employment merely because he has qualified himself for gratuity Jn an economic situation where there is a glut of labour in the market and un~ employment stares the working class in the face it is theoretical to centend that employees will hop from industry to industry unless the qualifying period for earning gratuity is raised to 10 years. [98 H; 99 D; 100 A, D, E, F.]

(2) Wages will mean and include basic wages and dearness allowance and nothing else.

This corresponds to s. 2(s) of the Act. Some of the decisions refer to basic wages and others to consolidated wages as the foundation for

A computation of gratuity.

These are matters of discretion and the "feel" of the circumstances prevalent in the industry by the Tribunal and, unless it has gone wrong in the exercise of its discretion the award should sand. In the Payment

of Gratuity Act also it is not basic wages but 'gross wages inclusive of dearness 1----... allowance which had been taken as the basis. [101 B; 100 G-Hl

Delhi Cloth & General Mills Co. v. Workmen & Ors. [1969] 2 SCR 307, British Paints [19691 2 SCR 523, Hydro-Engineers [1969] 1 SCR 156, Hindustan Antibiotics, [1967] 1 SCR 672, Bengal Chemical & Pharlln1aceutical Works Ltd .. [1959] Suppl. 2 SCR 136, Gaziabad Engineering Co., [1970] 2 SCR 622 ancl l'alcutta fnsurance Co. Ltd. [1967] 2 SCR 596 referred to.

CIVIL APPELLATE JURISO!CTION : Civil Appeal No. 1539 of 1970.

(Appeal by Special Leave from the Award dated 1/31-10-69 of C the Industrial Tribunal Allahabad in Ref. No. 20/58 'published in the

U.P. Gazette dated the 10th Jan. 1970).

I. N. Shroff, for the appellant.

P. H. Parekh, for the respondent.

The Judgment of the Court was delivered by.

KRISHNA IYER, J.-A dispute between the appellant mill (the Strawboard Manufacturing Company Ltd) a1id its workmen, regarding a scheme of gratuity, was referred to the Industrial Tribunal, way back in February 1958, and, long 19 years later, this Court is pronouncing on the validity of the award made by the Tribunal in favour of the workmen~: Small wonder the respondent workmen, after this tiring and traumfic tantalization, have not turned i.p to argue their cause, although SIIri Parekh, as amicus curiae, has filled the gap.

Such an unhaP.PY and not infrequent phenomenon as considerable delay in adjudication and implementation is destructive of industrial peace and productive of disenchantment with labour jurisprudence.

Naturally, even constitutional provisions and governmental decisions about labour and concern for its welfare cease to achieve the desired goals when theiegal process limps and lingers and rights turn illusory when remedies prove elusive.

The life of rights is remedies and a jurisprudence of ready reliefs alone can inhibit the weaker numbers of our lnd asking the disturbing que5tion : 'Is Law Dead ?'. Dicey wrote long air2 :

"The saw ubi jus ibi remedium, becomes from this

point of view something much more important than a mere • ' tautological proposition.

In its bearing upon constitutional • law, it means that the Englishmen whose labors gradually ·- formed the complicated set of laws and institutions which we call the Constitution, fixed their minds far more intently • on providing remedies for the enforcement of particular rights or for averting definite wrongs, than upon any declarations of the Rights of Man or Englishmen." (Jurisprudence of Remedies: University of Pennsylvania Law Review, Vol. 117, Nov. 1968. p. 1, 16).

It is more than rhetoric to say that courts belong to the people.

~ I

'Judges occupy the public's bench of justice.

They implement the public's sense of justice'. If the Courts are the fulcrum of the justice-system, there is a strong case for the reform of Court methodology and bestowal of attention on efficient management of judicial administration.

Otherwise, the courts may be so overloaded or so mismanaged that they grind to a halt and citizens' exercise of their rights discouraged or frustrated.

The vital aspects of the jurisprudence of remedies include speeding the pace of litigation 'from the cradle to the grave'.

We are reluctant to make these self-critical observation's about putting our house in order, but when the consumers of justice like workmen lose interest in the judicial process and are absent, legislative unawareness of research and development as to the needs of courts and simplification and acceleration of the judicative apparatus become matters of national concern.

Law's delays are in some measure, caused by legislative inaction in making competent, radical change in the procedural laws and sufficient_ financing and modernising of the justice system as a high priority programme.

The chequered career of tliis lis and its zigzag climb up the precipice of justice contextually deserves brief narration.

The order of reference was made early in 1958, the usual processual exercise before the Tribunal resulted in an award on May 1, 1958 where the tribunal refused the relief bearing on gratuity.

The. disappointed workers challenged the award before the High Court which set it aside in November 1963-too long a hibernation in the High Court for a labour dispute where prompt adjudication is the essence of industrial peace.

Anyway, when the case came back to the tribunal, its decision took another six inscrutable years and, on October31, 1969, a fresh award was made whereunder the tribunal framed a gratuity scheme and gave the guidelines thereof.

This time the appellant mill straight came to the Supreme Court with the present appeal for which special leave was granted in a limited way, in the sense that it was confined to t)le question 'whether the correct principles on which gratuity should be payable have been followed in this case or not'. It is a fact, though unfortunate, lhf!t this labour litigation arrived in this Court in 1970 but its final chapter is being written by this judgment only in 1977.

And it is noteworthy that the facts are brief, the legal issues small, the arguments brief and this judgment, but for general observations and traditional reference to rulings cited at the bar, could have been judiciously abbreviated .

The main battle at the bar has been over the correct principles in a scheme of gratuity for factory workers and further whether those principles have been departed from under tht award as>ailed by the appellant.

We may mention. at this stage, that •he Parliament has enacted the Payment of Gtdtuity Act, 1972, which has come into force with effect from September 16, 1972.

Section 4(5) of the said Act gives an option to the workers to choose between the gratuity scheme under the award and the one under the statute. Had the workers been represented before this Court it might have been possible for us finally to close this controversy or even produce a reasonable solution by discussion and negotiation and persuade them to opt for

1:

one or the other scheme.

Early finality, credible certainty and mutually assented solutions, are the fiuer processes of conflict-resolutioua pursuit which baffles us here because of labour's absence.

All that we can do, therefore, is to adjudicate upon the correctness or otherwise of the principles which have gone into the gratuity scheme prepared by the tribunal in the light of the rulings of this Court and the canons of industrial law.

We now proceed to itemise the grounds of attack levelled by Shri I. N. Shroff' for the appellant and assay their worth in the light of the submissions in defence of the award made by Shri P. H. Parekh appearing as amicus curiae.

Even here we may place on record our appreciation of Shri Parekh's services to the Court and the fairness of Shri Shroff in making his points on behalf of the appelant.

The only dispute, which has ramified into a few issues, relates to the gratuity scheme ihe tribunal has framed.

Shri Parekh. is right in drawing our attention in limine to the financial insignificance, for the appellant, of the subject matter of this /is and the consequential disinclination we must display to disturb the award.

He has urged that the total annual impact on the industry by the implementation of the award is of _the order of Rs. 3,000 /- to a substan.tial part of which the management has no objection.

What is more, the appell" ant is prosperous enough to distribute dividends aroun<l ?0% over the years. Further, since 1972 an obligatory statutory gratuity scheme has come into force with the result that the economic C<'nsequences of this litigation, even if the appellant loses are marginal or nil.

This makes us ponder whether, in matters of less than grave moment, this conrt should, as .Part of high judicial policy to arrest the tidal flow of unsubstan.tial litigation, turn away at the portals those who invoke our jurisdiction to examine every case where some legal principle has been wrongly decided, regardless of a sense of 'summit court' perspective and the rare use of its reserve power so as to preempt a docket explosion and the injustice of delayed justice and invest the High Courts and high tribunals with final leal wisdom. The amplitude of Art. 136 is meant more for exceptional situations than to serve as hospitable basket to receive all challenges to seemingly erroneous judgments in the country.

As stated earlier, we are confronted by an industrial dispute and are called upon to apply the principles of industrial jurisorudence with its primary concern for peace among the parties. contentment of the workers, the end product being increased production informed by distributive jus.tice.

Law, especially Labour Law, is the art of economic order sustained by social justice. It aims at pra)\Jllatic success, but is guided by value-realities.

It believes in relativity and rejects absolutes.

The recent constitutional amendment (Art. 43A) which empha"sizes the workers' role in production as oartners in the process, read in the light of the earlier accent on workers' riohts and social justice, gives a new status and sensitivity to inrlustrial jurisprudence in our 'socialist republic'.

This social ph; Josoohv must inform interpretation and adjudication, a caveat needed because precedents become time-barred when societal ethos progresses.

arc not called upon to interpret an Act since, in this area of law, the Payment of Gratuity Act came in on a later date. Judge-made l;>w rules the roost.

Even so, are we fattered by inflexible norms hallowed by dated decisions ? Not in this jurisdiction. 'The golden rule' 1n a rapidly changing system, 'is that there are no golden rules'. We should \le guided by realistic judicial responses to societal problems. against the back drop of the new, radical values implied in 'social justice' to labour, the production backbone of the nation, adjusted to the environs of the particular industry and its economics and kindered circumstances.

The dynamics of labour law, rather than the bonded of old-time case-law answers questions of current justice. Cardozo had cautioned in his 'The Nature of the Judicial Process' :

"That court best serves the law which recognizes that the rules of law which grew up on a remote generation may, in the fullness of experience, by found to serve another generation badly, and which discards the old rule when it finds that another rule of law represents what should be according to the established and settled judgment of society, and no considerable property rights have become .\ested >n reliance upon the old rule. It is thus great writers upon the common law have discovered the source and method of its growth. and in its growth found its health and life.

It is not and i• should not be stationary. Change of this charac. ter should not be left to the legislature. If judges have woefullv misinterpreted the mores of their day, or if the mores of their day are no longer those of ours, they ought not to tie, in helpless submission, the hands of their successors."

(Cardozo : The Nature of the Judicial Process : Yale University Press: pp. 151-152).

Indeed, we are stating no new proposition since the. profusion of decisions assiduously presented before us states, in 'sum, that each

case has to be decided on the updated justice of the fact-situations F therein and the only law that we can reasonably discern from the ruling's we have read is that there is no law but only iustice, dependent on a variety of socio-economic variables, that the tribunal's award, if his performance is not perverse in the process or the end product. must be left well alone by this Court even if some juristic failing or factual peccadillo can be discovered.

A quest for error and an inclination for correction, frequently exercised by higher Courts will G do donble injury. It will take awy the necessary initiative oE the tribunal to nrnrlnce sati'sfactory results.

It will delay the finalitv of industrial adiudicafon and thereby defeat the paramount 'jluroose of early re-adiustment.

Judicial decentralizati<m claims its price and it mnst be naid by ignoring errors less than orave.

Once this pers-· pective is clear, our non-interference with this award is just. Moreover, an inr111strial tribunal must act on a legal horse 'sense; rather H than on inr; suc abstractions, on rugged fairness rather than on refined Jega1; 0ms. It is shop-floor ius•ice. not five-star lovel; ness.

The weaker qualify for protective order, in the over-al! view of the matter.

Gratuity for workers is no longer a gift but a right.

It is a vague, humanitarian exprcssiqp of distributive justice to partners in production for long, meritorious service.

We have, therefore, to adopt a broad and generou~ approach to the problems posed before us by Shri Shroff without being mechanistically precedent-bound or finically looked into evidence.

Speaking_ geaerally, Shri Shroff focussed his fire-power firstly on the qualifying period of five years for earning gratuity as against ten years sanctified in some earlier rulings and, secondly, on the basic wage, as contrasted with the 'consolidted' wage being treated as the base for the computation of gratuity.

He did cite half-a-dozen of more cases of this court in support which, on closer scrutiny and studied in the light of other citations Shri Parekh emphasized, stand neutralized.

The Tribunal has itself referred to many rulings of this Court, noted the features of the industry in question, the hillh dividends and the low wages and reached a via media which we may regard as a prudent judicial resolution of the simple conflict.

The flavour of the social milleu, the raw realities of industrial conditions and. the locale

and life-style out there, are sensed by the tribunal better than a distant court of last resort primarily specialising in declaration of law.

So we are loathe to upset the scheme unless the tribun!ll is grievously or egregiously in error.

Shri Shroff staked his case on case-law alone and culled passaes which upheld basic wages as basi~ and ten-year service for eligibility.

Even here, we must mention that the basic wage at the relevant time (revised subsequently) was in the miserable range of Rs. 20/- per mcnsem and to calculate jlrafuity on this pitiful rate, when after 'long and meritorious service' the worker bids farewell to his labour life in the industry, is to be callous to basic justice.

The Human Today cannot be held captive by the less-than-human Yesterday in a crucial area of social justice.

So viewed, we are constrained to negative the two preliminary contentions urned bv Shri Sl1roff while agreeing with him on the smaller points of clarification sought. ·

We reproduce, at this stage, the decrcta! part of the award :

"The award, therefore, is that the employers should be required to frame a scheme of gratuity for t]Jeir workmen.

The details of the gratuity 'scheme are as under :-

(a) On death of a work1nan while in

contini.:ous service or on attainment of the age of superannuation or on retiren1ent or resignation dve to continued ill health or on being incapicitated,

15 days wages for each con1pleted year of service subject io a maximu111of15 n1onths.

(b) On voluntary abandoment of ser: vice by a workn1an in case not fall: ing under (a) or termination of service by e1nployers.

J 5 days wages for each completed year of continous service subject to the condition that no gratuity will be payable on a total service of less than 5 years, But this con- Cition will not apply in case of resignation or discharge on the g1ounds of physical disablement or incapacity,

(i) For the purposes of gratuity of a period of six months or over shall be reckoned as 'one year' while a period less than 6 months will be ignored.

(ii) Gratuity shall be payable to the nominee of the workman in case of his death or to his legal heirs, if no one has been nominated by the workman in this behalf.

(iii) 'Wages' shall mean and include ba'sic wages and dear food allowance but shall not include bonus.

(iv) Gratuity will not be allowed to a workman in case of a serious misconduct committed by him such as insubordination, acts involving moral turpitude, etc.

In case of damage to the property of employers or financial loss, the amount to the extent of loss shall be liable to be deducted from the amount of the gratuity.

(v) The basis of payment of gratuity shall be average earnings of a workman during the last three years." One. of the leading cases both sides referred to is the Delhi Cloth & General Mills Co .. v. Workmen & Ors.(') Jn this de_cision the court did make the point :

"That gratuity is not in its present day concept merely a gift made by the employer in his own discretion.

The workmen have in course of time acquired a right to gratuity on determination of employment provided the employer can afford, having regard to his financial conditions to pay it."

Shah, J, speaking for the Court, also emphasized what we have already adverted to : G

"We consider it right to observe that in adjudication of industrial disputes settled legal principles have little play; the awards made by industrial tribunals are often the result of ad hoc determination of diputed questions, and each determination for.ms a precedent for determination of other dispute. An attempt to search for principle from the H law built up on those precedents is a futile exercise.

To the

(I) fl 969\ 2 S.C.R. 307.

Courts accustomed to apply settled principles to facts determined by the application of the judicial process, an essay into the unsurveyed expenses of the law of industrial relations with neither a compass nor a guide, but only the pillars of precedents is a disheartening experience.

The Constitution has however invested this Court with the power to sit in aP.peal over the awards of Industrial Tribunals which are, it is said, founded on the somewhat hazy background of maintenance of industrial peace, which secures the pros- perity of the industry and the improvement of the crnditions of workmen employed in the industry, "nd in the absence of principles, precedents mav have to be adopted as guides-somewhat reluctantly to secure some reasonable degree of uniformity of harmony in the process."

Several decisions which were referred to at the bar have been touched upon in the above case.

At the end of the consideration of these cases, the Court made two pregnant observations which we extract :

"We may repeat that in matters relating to the grant of gratuity and even generally in the settlement of disputes arising out of indutrial relations, there are no fixed principles, on the application of which the problems arising before the Tribunal or the Courts may be determined and often precedents of cases determined ad hoc are utilised to build up claims or to resist them.

It would in the circumstances be futile to attempt to reduce the grounds of the decisions given by the Industrial Tribunals, the Labour Appellate Tribunals and the High Courts to the dimensions of any recognised principle."

x x x x

"It is not easy to extract any principle from these cases;

111 as precedents _!hey are conflicting."

These cautionary signals guide us too in the instant case.

It is true that on account of the peculiar circumstances affecting the textile industry in the whole country the Court felt that the Tribunal was in error in relating gratuity to the consolidated wage instead of the basic wage.

The emphasis in the ruling is on the facts and circumstances affecting the particular industry and the promotion of industrial peace in that field.

Rightly, if we may say so with respect, did the Court high-liht the view that determination of gra-

•tuity is bot based 011 any definite rules and each case must depend upon the prosperity of the concern, needs of the ·.vork.men and the prevailing economic conditions, examined in the light of the auxiliary benefits which the workmen may get on determination of employment.

In short, the core of the matter is the totally of the '.circumstances and the stage of evolution of industrial relations at a given time.

What hefd good a decade ago may be given the go by years later. '

' ' r I I , r - I ~·

Another leading case on the question of gratuity is the British Paints(') where, after referring to the special features of the particular industry and the other benefit schemes enjoyed by the employees, the Court referred to May & Baker whei; e basic wages were treated as the basis and British India Corporation where 'gross salary i.e. basic wages plus dearness allowance' was held to be !ht> basis.

It ay be noted that in this case the minimum qualifying service for gratuity was held to be S years except in cases where termination resulted from resignation by the employee.

In Hydro-Engineers(') this Court apparen!ly upheld the contentions now urged before us by Shri Shroff but stressed that no bard and fast rule could be laid down and each case must be decided on its own C circumstances.

In Hindustan Antibiotics('), again, this Court highlighted the relevant circumstances upon which the discretion of the Tribunal could play, viz., the stability of the concern, the profits made in the past, the futur~ prospects and capadty etc.

This Court declined to disturb the gratuity scheme in that case even though the wages which D formed the basis of the gratuity included dearness allowance.

In Bengal Chemical & Pharmaceutical Works Ltd., Calcutta('} a Bench of this Court entered the caveat which we have underscored in the earlier part of this judgment that :

''a free and liberal exercise of the power under Art. 136 may materially affect the fundamental basis of such decisions, namely, quick solution to such disputes to achieve industrial peace.

Though Art. 136 is couched in widest terms, it is necessary for this Court to exercise ifs discretionary jurisdiction only in cases where awards are made in violation. of the principles of natural justice, causing substantial and grave injustice to parties or raises an important principle of industrial law requiring elucidation and final decision by this Court and discloses such other exceptional or special circumstances which merit the consideration of this Court.n

It was also mentioned, what is not oft remembered when interfering with awards, that the Industrial Disputes Act is

"intended to be a self-contained one and it seeks to achieve social justice on the basis of collective ba1gaining, conciliation and arbitration.

Awards are given on circumstances peculiar to each dispute and the tribunals are, to a large extent, free from the restrictions of technical considerations imposed on courts."

(1) [1969] 2 S.C.R. 523.

(3) (1967] 1 S.C.R. 672.

(4) [1959] Suppl. 2. S.C.R. 136.

.A This approach is what we earlier de"scribed as the Iribunal"s legal hunch or horse sense.

Even Gqziabad Engineering Co.,(') on which Shri Shroff heavily relied, accepts the position that while gratuity is usually related to the basic wage, a departure by relating it to the consolidated wage may be made if there be some strong evidence or exceptional circumstance justifying that course.

Calcutta lllsurance Co. Ltd. (') also placed accent on the practical approach in industrial adjudication and did not interfere with the qualifying service of 5 years except in the case of resignation by the employee where the qualifying period was raised to I 0 years.

This survey of the cosmos of case-Jaw can expand, but no service will be rendered by that exercise.

All that we need say is that there is nothing fundamentally fiawsome in the 5-year period being fixd as qualifying service.

The real reason why some case:s like British Pints required a qualifying period of 10 years was that a longer minimum period for earning gratuity in the case of voluntary retirement or resignation would ensure that workmen do not leave one concern for another after putting in the short minimum service qualifying for gratuity.

We think that current conditions must control the tribunal's conscience in finalizing the terms of the gratuity scheme. Taking things as they are, in our country presently there is unemployment at the level of workers-that being the category we are conoernecl with. Colossal unemployment means that the worker will not leave his employment merely because he has qualified himself for 1, Cratuity.

In an economic situation where there is a glut of labour in the market and unemployment stares the working class in the face it is theoretical to contend that employees will hop from industry to industry unless the qualifying period for earning gratuity is raised to 10 years.

The tribunal was realistic in fixing 5 years as the period of eligibility.

Our industrial realities do not provide for easy mobility of labour.

What is more, the sense of national consciousness in this field is reflected in the Payment of Gratuity Act which fixes a period of 5 years as the qualifying period for earning gratuity.

Decisions have been brought to our notice some of which refer to basic wages and others to consolidated wages as the foundation for computation of gratuity.

These are matters of discretion and the "feel" of the circumstances prevalent in the industry by the Tribunal and, unless it has gone haywire in the exercise of its discretion the award should stand. We see that in the Payment of Gratuity Act also, not basic wages hut 'gross wages inclusive of dearness allowance' have been taken as the basis. This, incidentally, reflects the industrial sense in the country which has been crystallised into legislation.

(1) 11970] I S.C.R. 622.

(2) I 1967] 2 S.C.R. 596.

' ' I

\ ...

All things considered, we are disinclineJ to alter tb" award on the two critical issues on which it was challenged.

However, there arc certain minor clarifications which will eliminate ambiguity and, on that, both sides are agreed.

We clarify that wages will mean and include basic wages and dearness allowance and nothing else. This corresponds to Sec. 2 ( s) of the B Act. Likewise, we declare that qualifying service is continuous service (counted with reference to completed years) as defined in Sec. 2 ( c).

We hold that the award will operate as d'rected therein i.e. from the date of reference of the dispute. Both sides agree, in their statement of the case, that in clause (a) of the award the expression 'due to continued ill-health or on being incapacitated' governs only resignation although we feel on compassionate grounds it shou.Jd govern both situations. The C ambiguity must be resolved in favour of the workers. In regard to the other conflicts of construction possible, as set out in grounds 7 and 8 of the appellant's statement of case, we resolve them in favour of the workmen, abandonment of service being too recondite and the amount involved too trivial for variation by this Court.

Shri I. N. Shroff fairly stated that the Court may make an order regarding costs.

We direct that the appellant do pay the respondents costs which we quantify at Rs. 2000/-. Out of this sum Rs. 1000/- will be paid direct to Shri Parekh who has assisted the Court on behalf of the workers and the balance of Rs. 1000/- shall be drawn by the present President of the Respondent Union.

Our parting thought is that negotiating settlements should be vigorously and systematically pursued even by tribunals since litigation, escalating from deck to deck upto this Court, defeats both, whoever wins or loses.

This must be a sobering influence on Labour and Management and agencies of confiictresolutions.

That is a legal beacon that can brighten the dark tunnel of industrial conflict and promote national production cheered by shared wealth.

P.B.R.

STRAW BOARD MFG. CO LTD

THE WORKMEN

V. R. KRISHNA IYER

JASWANT SINGH, JJ.

Payment of Gratuity Act, 1972

s. 4(5)

s. 2(c)

Gaziabad Engineering Co.

Jike British Paints

s. 2(s)

[1969] 2 SCR 307

[1969] 1 SCR 156

[1967] 1 SCR 672

[1970] 2 SCR 622

[1967] 2 SCR 596

CIVIL APPELLATE JURISO!CTION

I. N. Shroff

P. H. Parekh

KRISHNA IYER

Parekh

October31, 1969

Supreme Court

September 16, 1972

Section 4(5)

I. N. Shroff

Shroff

Art. 136

Art. 43A

Payment of Gratuity Act

Cardozo

Shah

British India Corporation

Hindustan Antibiotics

Art. 136

Art. 136

Industrial Disputes Act

[1969] 2 S.C.R. 523

(1967] 1 S.C.R. 672

Gqziabad Engineering Co.

Calcutta lllsurance Co. Ltd.

Payment of Gratuity Act

see that in the Payment of Gratuity Act

1967] 2 S.C.R. 596

Sec. 2

Sec. 2