) .I

DADO YOGENDRENATH SINGH & ORS.

THE COLLECTOR, SEONI

January 25, 19.77

[H. R. KHANNA, R. S. SARKARIA AND JASWANT SINGH, JJ.]

The Land Acquisiton Act, 1894, S. 23(1)--Considerations for determination of compensation, scope of.

Responding to a notice under s. !I of the Land Acquisiton Act, 1894, the appellants filed a claim for Rs. 1500/- per acre at which .rate the adjoining lands were sold.

The Collector awarded compensation at the rate of Rs. 450/- per acre.

At the instance of the appellants under s. 18 of the Act, the matter was referred to the District Judge who enhanc_ed the compensation to Rs. 11,000/- per acre.

An appeal by the Collector was allowed by the High Court on the ground that the District Judge had acted -contrary to the mandate contained in

~. 25(1) of the Act, by awarding compensation in excess of tl)e amount claimed.

The appellants contended that their land had building potentiality and its value was substantially more than Rs. 500 /- per acre, which had ben paid by them to the Government as diversion charges for permission to use 'the adjoining land for building houses.

Allowing the appeal by certificate, the Court,

HELD : The circumstance that the appellants had voluntarily paid Rs. 500/- per acre as diversion charges, for laying out __ the adjQinjp.g land into_ plots as building sites, taken in , conjunction with tne oflier facts, namely, that the land in question is within the municipal limits and is located just .on the edge of an inhabited locality of the town, 'having other buildings in the immediate vicinity, - show that its potential value as building sites is much more than the rate of RB. 450/- per acre, awarded by the Collector and t)le J:Iigh Court [760 C-D, 761 A-Bl

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2128 of 1969.

From the Judment and Order dated 4th May, 1968 of the Madhya Pradesh ; High Court .in First Appal No. 88/67.

M. S. Gupta for the Appellants.

Ram Panjwanii and H. S. Parihar for Respondent.

The Judgment of the Court was delivered by

SARKARIA, J.

This appeal on certificate is directed against a judgment, dated May 4, 1968, of the High Court of Madhya Pradesh.

It arises out of these facts :

The appellants were owners of 7.35 acres of land being a part of Khasra No. 47 /1 ·.in the area of village Manglipeth District Seoni, Madhya Pradesh.

On November 4, 1963, a notification under s. 4 readwith Sub-s. (1) of s. 17 of the Land Acquisition Act, 1894 (to be hereinafter referred to as the Act) was published in the Government Gazette stating that this land was needed by the State Government for implementation of Seoni Water Supply Scheme. The declaration under s. 6 of the Act was published on December 18, 1963, and

notices under s. 9 of the Act were issued by the Collector on December :28, 1963.

In response to that notice, the appellants filed a claim

SUPREME COURT REPORTS

[1977] 2 S.C.R.

that they were willing to accept compensation in respect of this land at the rate of Rs. 1500 /- per acre, "as the lands adjoining this land and situated in a lesser advantageous position are sold at this rate".

The Collector made his award on August 17, 1964, whereby he awarded compensation for this land at the rate of Rs. 450/- per acre.

The total amount awarded for this piece of land after adding solatium at the rate of 15%, was Rs. 2,904/-. He also awarded interest at the rate ot 4% from September 19, 1964, on which date, the Collector had taken over possession of the land.

D1ssafo, fied with the Collector's award, the appellants made an applic3tion under s. 18 of the Act for reference to the District Court

for enhancement of the compensation.

The Collector accordingly made a reference.

The Additional District Judge, Seoni, who heard the reference, enhanced the compenstion to Rs. 11,000/- per acre.

In this way, after adding solatium, he awarded to the appellants, herein, a total amount of Rs. 80,850/- together with interest at the rate of 6%.

Against that judgment, dated May 2, 1967, of the Additional Dist.net Judge, an appeal was preferred by the Collector, to the High Court.

The High Court accepted the appeal, set aside the award of the Additional District Judge and restored that of the Collector. The High Court however, granted a certificate under Art 133 of the Constitution. ·

The first contention of Shri M. S. Gupta, appearing for the appellants, is that the appeal filed in the Wgh Court against the award of the Additional District Judge w.as not an appeal in the eye of law inasmuch as the Collector, who filed it, was not competent to do so.

It is stressed that no appeal was filed by the State as such, and consequently, the incompetent appeal filed by the Collector should have been dismissed summarily on this preliminary ground without entering upon the merits.

This objection was raised before the High Court, also.

The High Court fully considered it against the background of this case, and found no substance in it.

In the interests of justice we are not disposed to interfere with that finding.

On merits, we find, in agreement with the High Court, that the District Judge was palpably wrong inasmuch as he awarded compensation at a rate far higher than what had been claimed by the appellants themselves, pursuant to the notice under s. 9 of the Act.

The learned Additional District Judge acted contrary to the legislative mandate contained in s. 25 ( 1) of the Act, according to which, the Court "shall not award" compensation to an applicant in excess of the amount claimed by him pursuant to any notice under s. 9.

The only question that remains for our decision. is, whether the High Court was right in scaling down the compensation to Rs. 450/- per acre?

~,.

' ,

UNION v. :BHANUDAS K'. GAWDE (Jaswant Singh, J.) 7 59

Mr. Gupta contends . that the High Court was no~ right i.n hold- .ing that there was no ex1dence to show that the land m question had . potential value as building sites.

It is submitted that the High Court has simply ignored that evidence.

In this connection Counsel has referred to the evidence on record showing that the appellants had before the acquisition, paid diversion charges to the Government, at the rate of Rs. 500/- per acre in respect of the adjoining land, for bringing it into use as building sites.

Counsel has further rcferrd to the evidence showing that the land in question is close to a built .up quarter of the town, and is within the Municipal limits.

Shri Ram Pahjwani, appearing for the Respondent, submits that this evidence was much too insufficient to establish the potential value d the land as building sites, because the existing buildings in the vicinity of this land are old buildings, and the deposit of Rs. 500/- .as diversion charges for the adjacent land made by the appellants, was only a speculative investment with an eye on the distant future In support of his contention, Shri Panjwani has referred to the decision of this Court in R. N. Singh v. U.P. Government(').

ln our opinion, there is evidence on the record which unmistakably shows that from the view-point of a willing purchaser, at the relevant time, this land had potential value as building sites.

Firstly, it was admitted even by Gokul Prasad who was examined by the Respondents as their Witness No. 1, that in front of the land in question there are buildings which are being used as the office of the Range Officer and as residential quarters for the employees of that Department.

Adjoining the Range Office is the house or Dewan Najaf Ali 1n which the Additional District Judge was residing.

The witness further admitted that the land in dispute abutt~ on Seoni-Chhindwara Road. . . · ·

; Dadu Yogendra Nath Singh, appellant, testified in the witnessstand that" apart from the office and the quarters of the Forest Department, there were other buildings also, near this land.

At a short distance .was the bun&alow of Sh!i Bhargava, Barrister.

The Municipal Octro1 Post was ad1acent to this land.

The land in question is within the Municipal limits of Seoni.

The appellant further stated that he intended to parcel out this land into plots and sell the same as build-' in1 sites and that was why for the adjacent land, he had obtained for

t~t purpOlo, the permission of the Government by depositing diverilon charges at the rate of Rs. 500(- per acre.

He added that negotiations for tho sale of two plots had already been completed at the rate of 12 annas per foot.

He also cited other instances of sales of la11.d in the vicinity at rates ranging from 4 annas per foot to 6 annas per foot.

The oral evigence of Dadu Yogendra Nath Singh with regard to !he fact that the adjoining Jang had been laid out into plots for buildmg purpose~, receives full corroboration from unimpeachable docu- .H ., mentary evidence on record,. which shows that the . appellants had

J1)[19tl'TJ J .S.C; R. 4R9.

SUPREME CO~RT REPORTS

b.efore this acquisition, in 1963, made an application to the Sub-Divisional Officer, Seoni, for permission to bring 6.16 acres of agricultural land out of Kh. No. 47 /1, "in non-agricultural use viz., for construction of houses".

The order of the officer concerned was that

uch permission was granted to him on depositing diversion charges m respect of that area at the rate of Rs. 500/- per acre. It is significant to note that this piece of 6.16 acres was also a part of Khasra No. 47 /1, out of which Khasra, the land, admeasuring 7.35 acres, is in question.

This circumstance unerringly indicates that the land in question was suitable for being used as building sites, and had for that purpose, a potential value substantially in excess of Rs. 500/- per acre.

The High Court has not at all discussed this evidence.

It is difficult to accept the argument advanced on behalf of the respondent that the appellant had paid Rs. 500/- per acre as diversion charges for the adjacent land, merely as speculative business in the hope of making money in the remote future.

No prudent person would make such an investment if there was no reasonable chance of a good return over that investment in the present, or immediate future.

In our opinion this circumstance coupled with the other .facts, namely, that the land-in question is within the Municipal limits and is located just on the edge of an inhabited locality of the town, having other buildings in the immediate vicinity, was sufficient to establish its potential value as building sites.

The observations made by this Court in R. N.

Singh v.

U.P.

Government (supra) do not advance the case of the respondent. In that case, Shelat J. quoted these observations from an earlier decision,. in N. B. Jeejabhoy v. The District Collector, Thana (C.A. Nos. 313 to 315 of 1965 decided on August 30, 1965) :

"A vendor willing to sell his land at the market value will take into consideration a particular potentiality or special adaptability of the land in fixing the price.

It. is not the lincy or the obsession of the vendor that enters the market

ia]ue, but the objective factor namely, whether the said potentiality can be turned to account within a reasonably near future.

The question therefore turns upon the facts of each case.

In the context of building potentiality many questions will have to be asked and answered, whether there is pressure on the land for building activity, whether the acquired land is suitable for building purposes, whether the extension of the said activity is towards the land acquired, what is the pace of the progress and how far the said activity has extended and within what time, whether buildings have been put up on lands purchased for building purposes, what is the distance between the built-in-land and the land acquired and similar other questions will have to be answered. It is the over-all picture drawn on the said relevant circumstances that affords the solution."

What has been extracted above are broad guidelines and not immutable absolutes.

The essence of the whole thing is in tl1e sentence which has been underlined. It shows that in the ultimate

.......... _

DADU YOGENDRENATH v. COLLECTOR (Sarkaria, !.) 161

analysis, the question, whether or not a land has potential value as building site, 1s primarily one of fact.

In the present case, the circumstance that the appellants had voluntarily paid Rs. 500/- per acre as diversion charges, for laying out the adjoining land into plots as building sites, was of a clinching character, and taken in conjunction with the oher facts, noticed above, conclusively showed that its potential value as building sites was much more than the rate of Rs. 450/- per acre awarded by the Collector and the High Court.

In their application dated 17-10-1964, under s. 18 of the Act, the appellants sta, ed that similar land in the immediate vicinity had been sold at the rate of Rs. 1,250 /- per acre and another plot at the rate of Rs. 1,350/- per acre.

These lands are close to the area for which they had paid the diversion charges at the rate of Rs. 500/- pc,-r acre.

They filed a map also, showing the location of those lands.

On an over-all view, after taking into account the potential value of the land, we think it will be reasonable to award compensation to the appellants at the ra'..e of Rs. 1,250/- per acre with interest at 6% per annum till payment, from the date on which the possession was taken ewer by the Collector.

The appellants shall also be entitled to solatium at 15% on the compensation amount awarded for the land.

Accordingly, we allow the appeal with proportionate costs and modify the decree of the High Court to the extent indicated above.

M.R.

Appeal allowed.

I

DADO YOGENDRENATH SINGH & ORS

THE COLLECTOR, SEONI

January 25, 19.77

H. R. KHANNA

R. S. SARKARIA

Land Acquisiton Act, 1894

S. 23(1)

Land Acquisiton Act, 1894

s. 18

CIVIL APPELLATE JURISDICTION

M. S. Gupta

Ram Panjwanii

H. S. Parihar

SARKARIA

High Court of Madhya Pradesh

s. 4

s. 17

Land Acquisition Act, 1894

s. 6

s. 9

SUPREME COURT REPORTS

[1977] 2 S.C.R.

August 17, 1964

September 19, 1964

s. 18

Additional District Judge, Seoni

May 2, 1967

Art 133

M. S. Gupta

s. 9

s. 25

s. 9

BHANUDAS K'. GAWDE

Jaswant Singh

Gupta

Ram Pahjwani

Panjwani

Gokul Prasad

Dadu Yogendra Nath Singh

Seoni

Dadu Yogendra Nath Singh

Shelat

August 30, 1965

s. 18


:::TILE MAllNERY CORPORATION UMITED, CALCUTTA\ "II

THE COMJ.\USSIONER OF INCOME-TAX, WEST BENGAL,

CALCUTTA

January 25, 1977

(H. R. KHANNA, P. K. GOSWAMI AND P. S. KAILASAM, JJ.]

, Indian Income-tax Act, 1922-S. 15C(2) (i)-Scope of Tests for determining when benefit of the section available-Reconstruction-Tests for determination.

Section I 5C of the Indian Income-tax Act 1922, which deals with exemption from tax of newly established industrial undertakings, provides in sub-s. 2(i) that tl)e sect10n apphes, among others, to any industrial undertaking which is not formed by the splitting up, or the reconstruction of business already in existence.

The assessee (appellant) was a heavy engineering concern manufacturing boilers, machinery parts and wagons. In addition, it had started a Steel Foundry Division and a Jute Mill Division. The bulk of the goods produced in both the divisions was used in the varic; ms divisions of the assessee company. The assessee's claim for exemption from tax under s. 15C in respect of profits derived from both the companies was rejected by the Income-tax Officer and its appeal was rejected by the App_ellate Assistant Commissioner on the ground that the J.mdertakings were an expansion and reconstruction of the existing business.

On appeal, the Appellate Tribunal held that although the products manufactured in the two divisions were used in the assessee's business, the Steel Foundry and the Jute Mill Division were new industrial undertakings, in that the machinery used in them was new, they were housed in separate buildings, were established under separate licences and that both the new divisions were maintaining separate books of account. ·

, On reference, the High Court held that it was a case of reconstruction of the existing business because the goods produced in the two divisions were primarily used in the assessee's engineering concern.

Allowing the appeal,

HELD : The Tribunal was right in holding in favour of the assessee. Section !SC is applicable to an absolutely new undertaking for the first time started and in order to deny benefit of the section, the new undertaking must be formed

~ reconstruction of the old bminess.

[768 B-C]

!. (a) In order to 1'• o•titled to the bene11t of s. 15C, the assessee has to I eitaltlish : .

(I)

(2) (3) (4) (5)

the investmut of substantial fresh eapital in the industrial udertaking; employment of th• requisite labour therein; manufadure or production of articles in the undertaking; earning or profits 'Clearfy attrioutable to the new undertaking; and separate and distinct indentity of the industrial unit set up.

(b) Once the new industrial undertakin¥s. are separate and independent. production units in the sense that the commod1hes produce? or the results ash1eved

are commercially tangible produc~ and the .undertak1!1gs an. be earned O!l

11eparately without complete absorpl!on and losmg thelf identity m the old business, they are not to be treated as being formed by reconstruction of the old business. [772 H, 773 A]

TEXTIL:& llACFL CORP. v. COMM. OP I.T. (Gosw11mi; J.) 763

( c) The object of tit• eection is to encourage the setting up of new industrial undertakings by offeri.!li tu incentives within a certain period. Sub-section (2) has a negative as well as a positive aspect. Negatiyely, a new undertakings should not be. formed by splitting up of the business already in existence and by the reconstruction of business already in existence; and positively, a new undertaking must produce results, that is to say, it has to manufacture or porduce .articles at any time within the stipulated period. Thd new und.ertaking must not be substantially the same as the existing business. The words "the capital employed" are significant, for, fresh capital must be employed in the undertaking Claiming exemption.

Manufacture or production of articles yielding additional profits aftributa.ble to the new outlay of capital in a separate and distinct unit is the heart of the matter to earn the benefit from the. exemption of tax liability under s. ! 5C.

The fact that by establishing a new industrial undertaking the assessee expands its existing business would not deprive it of the benefit under s. 15C. If an industrial undertaking produces certain machines or parts which are identifiable units being marketable commodities and the undertaking. can exist even after the cessation of the principal business of the assessee, it cannot be anything but a new and separate industrial undertaking to qualify for appropriate exemption under s. 15C.

[769 E-H, 770A]

In the instant case, the principal business of the assessee can be carried _on even if the two additional undertakings cease to function. The fact that a por!lon

of the articles produced in the new undertakings had been sold in the open market to others is a circumstance in favour of the assessee that the new industrial units can function on their own. Use of the articles by the assessee is not

decisive to deny the benefit of s. 15C. There was no formation of any industrial D undertaking out of the existing business since that can take place only when the assets of the old business are transferred substantially to the new undertaking.

Also, there was no difficulty about ascertainment o fthe exempted profit as separate books of accounts were kept and the undertakings were at senarnte places. mo B D. G-Hl

The High Court was not right in holding that the two undertakings were formed by reconstruction of the existing business of the assesseec

[773 B-C]

2. Reconstruction involves that substantially the saine business shall be carried on and substantially the same persons shall carry it on. But it does not Involve that all the assets shall pass to the new company .or resuscitated compan, y,

or that, all the shareholders of the old company shall be shareholders in the new company. Substantially the business and the person frtterested must be the.same.

 [771 C-Dl

South African Supply and Cold Storage Company Wild v. Same Con.ipany, [1904].2 Cb. 268, followed.

Commissioner of Income-tax Bombay City-I v. Gackwar Foam and Rubber Co. Ltd. 35 ITR 662, Commi.sioner of Income-tax v. Ganga Sugar Corpora- • tion Ltd. 92 ITR 17~, Rajowari Mill" Ltd. v. Commissioner of Income-tax "-1- Mairas, 50 ITR 2,, N11.garda.T Becharda" & Brother" P. Ltd. v. Commissioner

1 -of Income-tax Gujarat, 10.ol ITR 255, Commi.., ioner of Income-tax, West I Bengal-I v. Electric C•n•trttction 11.nd Equipment .company Ltd. 104 ITR 101 1 and Commi"•ioner nf Income-tax v. Hindustan Motor.T Limited, [1976] Taxa- / tio• Law Reporu 821, approved.

Commissioner •f Income-tax T. Naya Sahitya 84 ITR 567, not approTed.

CIVIL An•ELLATE JURISDICTION: Civil Appeal Nos. 772-773 of 1972. . .

From the Judgment and Order dated .9th/10th July, 1970 of. the Calcutta High Court in I. T .. R. No. 158 of 1966. . .. . .

N. A. Palkhival11, Dr. D.. Pal, U. K. Khaitan, S. R. Agarwal and H :Par.v.een Kumar for the Appellant. . ' ' V. P: Rama11, Addi. Sol: Gnual; T. A. Ramachandran and R. fl: Sachthey for ihe llcepondente. . , . , , .. ,

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

The Judgment of the Court was delivered by

GoswAMI, J.

These two appeals by certificate are from the Judgment of the Calcutta High Court since reported in Commi.1sioner of Income-tax, West Bengal-I v. Textile Machinery Corporation(').

The two appeals relate respectively to two assessment years 1958-59 (calendar year 1957) and 1959-60 (calendar year 1958). The matter relaes to the claim by the assessee for exemption of tax under section 15C of the Indian Income-tax Act, 1922 (briefly the Act).

The matter came up before the High Court on a reference under section 66 (1) of the Act.

The two questions referred to were as follows:-

"(l) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Steel Foundry Division was an industrial undertaking to whkh section 15C of the Indian Income-tax Act, 1922, applied?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Jute Mill Division set up by the assessee-company was an industrial 1, mdertaking to which section 15C of the Indian Incometax Act, 1922, applied?

The facts may briefly be stated :

The assessee (the appellant herein) is a heavy engineering concern manufacturing boilers, machinery parts, wagons, etc.

For the assess- B ment years 1958-59 and 1959-60 the assessee cl11imed exemption of tax under section 15C of the Act in respect of the profits and gains derived from its Steel Foundry Division and a similar claim for relief under section l 5C in respect of i's profits and gains derived from its Jute Mill Division for the year 1959-60.

The assessee had previously in the earlier years bought from outside the castings manufactured in the Steel Foundry Division which was started in the assessment year 1958-59 and continued thereafter.

Again, similarly in the year 1959-60. in addition to the manufactur- ' ing of castings in the Steel Foundry Division the assessee started the Jute Mill Division where the parts made out of the raw material supplied by the Boiler Division by machining and forging them were given to the Boiler Division of the assessee.

It was found that out of a total sale of Rs. 28,23.127 /- of steel castings good~ worth Rs. 18,39,433/- were used in connection with the various Divisions of the company.

In respect of the Jute Mill Division. the Incomctax Officer found that out of the total ale~ of Rs. 13,03,509/- sales to the Boiler Division totalled Rs. 11,89,812/- and sale~ to outside the Jute Mill Division totalled only a sum of Rs. 1,13.697/-. The Income-tax Officer and the Anpellate Assistant Commissioner, on the above facts, held the under'.akings as expansion and reconstruction of the business already existing and hence the assessee was not entitled

(1) 80 I.T.R. 428.

to exemption under section l SC of the Act. The Incometax Appellate Tribunal, however, allowed the appeal of the assessee and accepted the claim for exemption under section 1 SC.

According to the Tribunal both the Steel Foundry and the Jute Mill Division of the assessee were new industrial undertakings.

The above conclusion was reached on the basis of several facts found by the Tribunal. These are that the machinery was new, was housed in a separate building and that industrial licences had to be obtained, for manufacturing the parts in question.

According to the Tribunal the existing business of the assessee consisted of manufacturing boilers, wagons, etc. and for that purpose the assessee was purchasing the spare parts, forgings and castings from outside.

The Tribunal came to the conclusion that the business of the new industrial undertakings was to manufacture those very spare parts: Hence the Tribunal concluded that it could not be said that the undertakings were formed out of the existing business to come within the mischief of the exclusion clause in section 15C(2) (i).

The Tribunal rightly relying upon the Tata Iron and Steel Co.

Ltd. and Others v. State of Bihar(') also held that even though the manufactured products of the new industrial undertakings were mostly used in the assessee's other business of manufacturing boilers, wagons, etc. the element of profit was there and the extent of the same could be ascertained as the assessee was maintaining separate books of account.

In the reference at the instance of the Department the High Court answered both the questions in the negative and against the assessee.

The High Court held as follows:-

"The goods which the steel foundry division and the jute mill division began producing for the assessee were also previously used by the assessee in its business, .but they were purchased from outside and this purchase from outside was :replaced by production or manufacture from within the assessee's own business.

This change of producing one's own goods systematically used in the existing business instead of buying them from outside would only be a reconstruction of a business already in existence. . . . . . In so far as they started producing and manufacturing themselves, the assessee was doing something which was only a reconstruction of the business already in existence. . . . . . . . ·

The newness of the machinery of the steel foundry division and thejute mjll 1livision could not by itself make _them new industrial undertakings.

Separate housing of, and separate accounts for, the steel foundry division and jute mill division may be only parts of reconstruction of the same business and did not necessarily indicate a new industrial undertaking.

The grant of a special licence for the steel foundry division did not make it an industrial undertaking to qualify for exemption from tax under section 1 SC, because the licence was for expansion of the existing industrial undertaking and the licence did not cover the jute mill division".

(1) 48 I.T.R. 123.

766 SUPRi:MI COUAT lllPORTS [1977] 2 s.c.R.

It is, however, admitted before us that both the units were covered by licence8. ... ' '

The controversy in these appeals centres round the true contruc tion of section 15C(2) (i) of the Act and in particular with regard to the scope and ambit of the expression therein, namely, the reconstruction of business already in existence.

Is the High Court right in holding that the two industrial undertakings, namely, the Steel Foundry and the Jute Mill Division, are formed by reconstruction of the business already in existence differing from the contrary conclusion reached by the Tribunal ?

Before we proceed further, we will read section 15C as it stood during the material time :

•..

~-···

"15C. Exemption from tax of newly established industrial undertakings.

( 1) Save as otherwise hereinafter provided, the tax shall not be payable by an assessee on so much of the profits or gains derived from any indsutrial undertaking to which this section applies as do not exceed six per cent per annum on the capital employed in the undertaking computed in accordance with such rules as may be made in this behalf by the Central Board of Revenue.

(2) This section applies to any industrial whichundertaking

(i) is not formed by the splitting up, or the reconstruction of, business already in existence or by the transfer to a new business of building, machinery or plant, previously used in any other business;

(ii) has begun or begin~ to manufacture or producs

article~ in any part of taxable territories at any time within a period of thirteen years from tht

1st day of April 1948, or uch further period

a~ the Central Government may, by notificatioa in the Oflicial Gazetto, ity with reference any particular indutrial undertaking;

(iii) employs ten or more worker~ in a manufacturing proce~~ carried on with the aid of power, or employ~ twenty or more workers ill a manufacturin1 proeces carried on without the aid of power;

..... J

I .

Provided that the Central Government may, by !!.otiea~ tion in the Official Gazette, direct that the exemption collferred by thi~ section shall not apply to any particular iDdustrial lilndortaking.

-.. /

0 TEXTIL~ MACH. OOR;. v. COMM .. OF~-~·· (Goswami,/.) 767

(3)

(4)

The profits or gains of an industrial undertakig .to which this section applies shall be computed . in accordance with the provisions of section 10.

The tax shall not be payable by a shareholder in respect of so much of any dividend paid or. deemed to be paid to him by an industrial undertaking as is attributable to that part of the profits or gains on which the tax is not payable under this section.

(5) Nothing in this section shall affect the application of

section 23A iri relation to the profits or gains of an industrial undertaking to which this section_ applies.

(6) The provisions of this section shall apply to the assessment for the financial year next following the previous year in which the assessee begins to manufacture or produce articles and for the four asessments immediately succeeding''.. ·

We are principally concerned in these appeals with clause (i) of sub-section (2) of section 1 SC and that also only with one part of it, namely, whether the industrial undertakings, Steel Foundry and the Jute Mill Division, are not formed by the reconstruction of the business already in existence.

The learned Additional Solicitor General submits that these two undertakings are not entitled to exemption under section 15C(2) as rightly so held by the High Court since they were formed by the reconstruction of the assessee's business already in existence, namely, the business of heavy engineering.

He submits that setting up of a separate unit to do something in the course of pre-existing manufacturing process to aid the production of the same article as was being produced by the pre-existing industrial undertaking would not amount to starting of a new industrial undertaking.

He further emphasises i that production of the articles in the S:eel Foundry and in the Jute '------ Mill Division is only ancillary activity to the main business of the assessee and since the articles produced in these two supplemental undertakings help in producing the identical article which has been the end-product of the assessee's main business, section 15C(2) (i) cannot come to the aid of the assessee.

According to Mr. Raman these two industrial undertakings cannot be said to be not formed out of the reconstruction of the business already in existence.

Section 15C(2) (i) only excludes three categories of indutrial undertakings from the benefit of the section without referring to clauses

(ii) and (iii) of that sub-section and other limiting provisions of the section which are not applicable in the instant case.

It is contended by Mr. Palkhivala that acceptance of the Additional Solicitor General's submission will amount to adding a fourth category of cases in sub-section (2) (i), namely, an industrial under-

E .

SUPREME COURT REPORTS (1977] 2 S.C.ll.

taking which is an ancillary undertaking manufacturing certain articles to supplement the principal industrial activity.

This, says Mr.

Palkhivala, will be adding something to the section.

Section 15C is an exemption section.

The benefit granted under this section is a partial benefit so far as the quantum of the exempted profi, s of the new industrial undertaking as also for a limited period or periods as specified in the section. If the two industrial undertakings, about the existence of which there can be no controversy as found by the Tribunal, cannot be held to be formed by the reconstuction of the business already in existence, the benefit of section 15C will be available to the assessee.

The principal object of section 15C is to encourage setting up of new industrial undertakings by offering tax incentive within a period of 13 years from April 1, 1948. Section 15C provides for a fractional. exemption from tax of profits of a newly established undertaking for five assessment years as specified therein.

This section was inserted in the Act in 1949 by section 13 of the Taxation Laws (Extensio11 to Merged States and Amndment) Act, 1949 (Act 67 of 1949) extending the benefit to the actual manufacture or production of articles commencing from a prior date, namely, April 1, 1948. After the country had gained independence in 1947 it was most essential to give fillip to trade and industry from all quarters. That seems to be the background for insertion of section 15C.

It is also significant that the limit of the number of years for the purpose of claiming exemption has been progressively raised from the initial 3 years in 1949 to 6 years in 1953, 7 years in 1954, 13 years in 1956 and 18 years in 1960. The incentive introduced in 1949 has been thus stepped up ever since and the only object is that which we have already mentioned.

Under sub-section (1) of section 15C the tax shall not be payable by an assessee on profits not exceeding six per cent per annum on the capital employed in the new industrial undertaking from the profits of which alone exemption is claimed.

Sub-section (2) of section _ __) 15C has a negative as well as a positive aspect.

Negatively, the new industrial undertaking of the assessee should not be formed-

( 1) by the splitting up of the business already in existence,

(2) by the reconstruction of business already in existence, or

(3) by the transfer to a new business of building, machinery or plant used in a business which was being carried on before April 1, 1948.

We agree that it is not possible to exclude any new industrial undertaking other than the three categories mentioned above.

We are concerned in these appeals with the type No. (2) mentioned above. Positively, the new industrial undertaking must pro- .duce result, that is to say, it has to manufacture or produce articles .at any time within a period of 13 years from April 1, 1948.

The further requirement under sub-section (2) is with regard to the per- .sonnel in the undertaking, namely, that ten or .more workers have to work in the manufacturing process carired on wich the aid of power or twenty or more workers have to carry on work without the aid of , power.

The above element with regard to the number of workers engaged in the undertaking would go to show that even small industrial undertakings, newly started, are within the exemption clause, where, for example, twenty workers may complete the industrial pro- cess without the aid of power.

There is no controversy about the positive aspects in these appeals.

Again, the new undertaking must not be substantially the same old existing business.

The third excluded category mentioned above is significant.

Even if a new business is carried on but by piercing the veil of the new business it is found that there is employment of the '.assets of the old business, the benefit will be not available.

From this it clearly follows that substantial investment of new capital is imperative.

The words "the capital employed" in the principal clause of section rsc are significant, for fresh capital must be employed in the new undertaking claiming exemption.

There must be a new under- taking where substantial investment of fresh capital must be made in order to enable earning of profits attributable to that new capital.

The assessee continues to be the same for the purpose of assessment. It has its existing business already liable to tax.

It produced in the two concerned undertakings commodities different from those -which it has been manufacturing or producing in its existing business.

Manufacture of production of articles yielding additional profit attributable to the new outlay of capital in a separateand distinct unit is the heart of the matter, to earn benefit from the exemption of tax ; liability under section 15C. Sub-section (6) of the section also points to the same effect, namely, production of articles.

The answer, in i every particular case depends upon the peculiar faets and conditions '- . of the new industrial undertaking on account of which the assessee

; ,

' claims exemption under section 15C.

No hard and fast rule can be laid down.

Trade and industry do not run in earmarked channels and particularly so in view of manifold scientific and technological developments.

There is great scope for expansion of trade and industry.

The fact that an assessee by establishment of a new industrial undertaking expands his existing business, which he certainly does, would not, on that score, deprive him of the benefit under section 15C.

Every new creation in business is some kind of expansion and advancement.

The true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business.. No particular decision in one case can iay down an inexorable test to deterffiine whether a given case comes under section 15C or not .. In order that the new undertaking ; can be said to be not formed out of the already existing business, there

770 SUPREM~ toURT 1rnPO!tTS [1977]' 2•s.C.R.

must be a new emergence of a physically separate industrial unit i>hich

may exist on its own as a viable unit.

An undertakings is formed out of the existing business if the physical identity with the old unit is preserved.

This has not happened here in the case of the two under;. takings which are separate and distinct.

It is clear that the principal business of the assessee is heavy engineering in the course of which it manufactures boilers, wagons, etc. If an industrial undertaking produce certain machines or parts which are, by themselves, identifiable m:::s being marketable commodities and the undertaking can exist even after the cessation of the principal business of the assessee, it cannot be anything but a new and separate industrial un.dertaking to qualify for appropriate exemption under section 1 SC.

The principal business of the assessee can be carried on even if the said two additional undertakings cease to function.

Again, the converse is also true.

The fact that the articles produced by the two undertakings are used by the Boiler Division of the assessee will not weigh against holding that these are new and separate undertakings.

On the other hand the fact that a portion of the articles produced in these two new industrial undertakings had been sold in the open market to others is a circumstance in favour of the assessee that the new industrial units can function on their own.

Use of the articles by the assessee is not decisive to deny the benefit of section 1 SC. .• Section 15C partially exempts from tax a new industrial unit which is separate physically from the old one, the capital of which and the profits thereon are ascertainable.

There is no difficulty to hold that .section l SC is app_licable to an absolutely new undertaking for the first time started by an assessee.

The cases which give rise to controversy are those where the old business is being carried on by the assessee and a new activity is launched by him by establishing new plants and machinery by investing . substantial funds.

The new activity may produce the same commodities of the old business or it may produce some ether distinct marketable products, even commodities which may feed the old business.

These products may be con- ..i.. ,,, sumed by the assessee in his old business or may be sold in the open ,. market.

One thing is certain that the new undertaking must be an _) integrated unit by itself wherein articles are produced and at least a ; minimum of ten persons with the aid of power and a minimum of twenty persons without the aid -of power have been employed.

Such a new industrially recognisable unit of an assessee cannot be said to be reconstruction of his old business since there is no transfer of any assets of the old business to the new undertaking which takes place when there is reconstruction of the .old business.

For the purpose of section 1 SC the industrial units set up must be new in the ense that new plants and machinery are erected for producing either the same commodities or some distinct commodities. In order to deny the benefit of section 1 SC the new undertaking must be formed by reconstruc'ion of the old business.

Now in the instant case there is no formation of any industrial undertaking out of the existing business since that can take place only when the assets of the old business are tnmsferred substantially to the new undertaking.

There is no such transfer of assets in the two cases with which we are concerned.

TEXTILE MACH. CORP. v. COMM. OF I.T. (Goswumi, J.) 771

We will now deal with the question whether the two undertakings A of the assessee are formed by reconstruction of the existing business.

The word 'reconstruction' is not defined in the Act but has received judicial interpretation. In re South African Supply and Cold Storage Company, Wild v. Sarne Company('), Buckley, J. dealing with the meaning of the word 'reconstruction' in a company matter observed as follows:-

"What does 'reconstruction' mean?

To my mind it means this.

An undertaking of some deffnite kind is being carried on, and the conclusion is arrived at that it is not clesirnble to kill that undertaking, but that it is desirable to preserve. it in some form, and to do so, not by selling it to an outsider who shall carry it on-that would be a mere sale-but in some altered form to continue the undertaking in such a manner as that the persons now carrying it on will substantially continue to carry it on.

It involves, I think, that substantially the same business shall be carried on and substantially the same persons shall carry it on.

But it docs not involve that all the assets shall pass to the new company or resuscitated company, or that all the shareholders of the old company shall be shareholders in the new company or resuscitated company.

Substantially the business and the persons interested must be the. same".

This concept of reconstruction was accepted by the Bombay High Court in the Commissioner of Income-tax, Bombay City-I v. Gaekwar.

Foam aiul Rubber Co. Ltd.('), dealing with section l SC of the Act.

While adverting to the passage which we have just quoted the Bombay High Court observed as follows in the above decision :

"Now fully appreciating the distinction which counsel for the Revenue has sought to make between the case of a reconstruction of a company and the case of reconstruction of a business, these observations, as we read them, a're equally illuminating in the context of reconstruction of business already in existence in the case of a newly established industrial undertaking" .

. The Delhi Higµ Court also in Commissioner of Income-tax v.

Ganga Sugar Corporation Ltd. (3), accepted the above concept of 'reconstruction' in the following passage:- ·

"We have given the matter our earnest consideration and are of the view that in the reconstruction of business, as in the reconstruction of a company, there is an element of transfer of assets and of some change, however Dartial or restricted it may be, of ownership of the assets. - The transfer, however, need not. be of all the assets, It is none the less imperative that there should be continuity and preservation of the old undertaking though in an altered form, -o)r19041 2 ch, 26s.

(2) 35 T.T.R. 662.

(3) 92 T.T.R. 173.

SUPREME COURT REPORTS

[1977) 2 S.C.R.

The concept of reconstruction of business would not be attracted when a company which is already running one industrial unit sets up another industrial unit.

The new industrial unit would not los~ its separate and independent identity even though it has been set up by a company which is already running an industrial unit before the setting up of the new unit".

We endorse the above views with regard to reconstruction of business.

Reconstruction of business involves the idea of substantially the same persons carrying on substantially the saine business.

It is stated on behalf of the Revenue that the same company in the instant case

..JI continues to do the same business of heavy engineering-no matter '1111111111 C certain spare parts neccssaty as components to completion of the cndproduct are now manufactured in the business itself.

The fact that the assessee is carrying on the general business of heavy engineering will not prevent him from setting up new industrial undertakings and from claiming benefit under section 15C if that section is otherwise applicable.

However, in order to be entitled to the benefit under section 15C, the following facts have to be established by the assesscc, D subject always to the time-schedule in the section :-

( 1) investment of substantial fresh capital in the industrial undertaking set up, -

( 2) employment of requisite labour therein,

(3) manufacture or production of articles in the said undertaking,

( 4) earning of profits clearly attributable to the said new undertaking, and

( 5) above all, a separate and distinct identity of the industrial unit set up.

We may add that there is no bar to an assessee carrying on a particular business to set up a new industrial undertaking on account of ·...,.., which exemption of tax under section 15C may be claimed.

The legislature has advisedly refrained from inserting a definition of the word 'reconstruction' in the Act.

Indeed, in the infinite variety of instances of restructuring of industry in the course of strides in technology and of other developments, the question has to be left for decision on the peculiar facts of each case.

If any undertaking is not formed by reconstruction of the old business that ungertaking will not be denied the benefit of section

15C simply because it goes to expand the general business of the assessee on some directions.

As in the instant case, once the new industrial undertakings are separate and independent production units in the sense that the commodities produced or the results achieved are commercially tangible products and the undertakings can be carried on

"' I

:separately without complete absorption and l?sing their identity in the old business, they are not to be treated as bemg formed by reconstruction of the old business.

The business of the assessee is of heavy engineering. The two ; new undertakings are independently producing articles which ruay be of aid to the principal business but yet the undertakings are distinct and not reconstruction out of the existing business of the assessee. -Use by the assessee of the articles produced in its existing business or the concept of expansion are not decisive tests in construing section lSC. The High Court is--not right in holding the two undertakings .as formed by reconstructiori of the existing business of the assessee.

Several decisions have been cited at the bar before us.

We -approve of the conclusions in Commissioner of Income-tax v. Ganga .Sugar Corporation Ltd. ·(supra); Rajeswari Mills Ltd. v.

Commissioner of income-tax, Madras('); Nagardas Bechardas & Brothers P Ltd. v. Commissioner of Income-tax Gujarat (2); Commissioner of Income-tax, West Bengal-I v. Electric Construction and Equipment Company Ltd. (3); Commissioner of Income-tax v.

Hindusthan Motors Limited ( 4). The decision in Commissioner of Income-tax

v. Naya Sahitya(') does not represent the correct legal position and, hence, cannot be approved.

We may observe that we are not required to consider in these .appeals how profit will be actually _ calculated in order to determine the quant\Uil of exemption of six per cent of the profit on the capital

mployed. If difficulties are insurmountable and; therefore, profit -cannot be ascertained, that wiH -be a different question in the course -of -practical application of the section.

That kind of a possible difficulty should not weigh in the true construction of section lSC. In ihe present case the assessee claimed profit and there Was no difficulty -about ascertainment of the exempted profit as separate books of accounts were kept and the undertakings were at separate places.

In view of the foregoing discussion, we are clearly of opinion that the igh Court i~ not right in answering the two questions in the -negative and agamst the assessee_.

On the other hand the Tribunal was right in answering the two questions in the affirmative and against the Department.

The two questions referred stand answred in the -affirmative.

The judgment of-the High Court, is, therefore set aside and the appeals are allowedwith costs. - . . , ' •

- . -

:P.B.R.

Appeals allowed.

(1) 50 lT.R. 29.

(2) 104 lT.R. 255. ·(3) 104 :1'r:R. 101.

(4) (1976] Taxation Law Reports. 821.

(5) 84 I.T.R. :67.

TEXTILE MACHINERY CORPORATION LIMITED, CALCUTTA

THE COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA

H. R. KHANNA

P. K. GOSWAMI

P. S. KAILASAM, JJ.

Indian Income-tax Act, 1922

S. 15C(2)

Indian Income-tax Act 1922

s. 2(i)

s. 15C

s. 15C

s. 15C

s. 15C

s. 15C

N. A. Palkhival11

D.. Pal

U. K. Khaitan

S. R. Agarwal

H :Par.v.een Kumar

T. A. Ramachandran

GoswAMI

Calcutta High Court

section 15C

Indian Income-tax Act, 1922

section 66

section 15C

Indian Income-tax Act, 1922

section 15C

Indian Incometax Act, 1922

section 15C

Incometax Appellate Tribunal

section 1

section 15C(2)

section 1

section 15C(2)

section 15C

1st day of April 1948

Central Government

section 10

section 23A

section 1

section 15C(2)

section 15C(2)

Raman

Section 15C(2)

Palkhivala

Palkhivala

Section 15C

section 15C

section 15C

April 1, 1948

Section 15C

section 13

section 15C

section 15C

section 15C

section 15C

section 15C

section 15C

section 1

section 1

Section 15C

section 1

section 1

Buckley

Bombay High Court

Foam aiul Rubber Co. Ltd.

Delhi Higµ Court

SUPREME COURT REPORTS

[1977) 2 S.C.R.

section 15C

section 15C

section 15C

section

15C


STATE OF ORISSA & ANR. v.

N. N. SWAMY & ORS. ETC.

January 27, 1977

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

Constitution of India, Article 16-Private college taken over by State Governmem-Absorption of stafj--Consideration of eligibility for appointmelll as Readers-Differentiation betwun similarly situated Readers on ground of drawing salary of Rs. 600/- or more on date of take over, whether a111011111s to denial of equal opporllmity for employmelll under Art. 16.

The respondents were working as Readers in Khallikote College, a private: institution which was taken over by the Orissa Government on March 9, 1971.

A Government circular containing conditions governing taking over the services of the teaching staff of Khallikote College, was issued on March 23, 1971, whereby the respondents were appointed as. lecturers in class II temporarily on ad hoc basis for a period of six months. At the end of this period, the names of those. Readers who were drawing a salary of Rs. 600/- or more per month on the date of take-over, were recommended to the Public Service Commission for the determination of their suitability for appointment as Readers.

The respondents and others who were drawing less than Rs. 600/- were not considered eligible for such recommendation.

Their writ petition against the deniat of equal opportunity under Art. 16 was accepted by the High Court.

Dismissing the appeals by special leave the Court,

HELD:-The condition of drawing of Rs. 600/- or more on the date of takinii over, wlaich has been laid down in the circular as a particular qualification for eligibility for appointment as Reader and later for consideration of their suitability by the Public Service Commission for appointment as Reader, is arbitrary and discriminatory.

It has no nexus with the object underlying the qualification test in an educational institution having regard to the most essential cendition of intrinsic quality and efficiency of the teachers, and results in denial of equal opportunity to the respondents in the, matter of employment' under the Government under Art. 16 of the Constitution. [719 C-D, F-G]

The General Manager Southern Railway v. Rangachari [1962] 2 SCR 586;. referred.

Smt. Juthika Bhattacharya v. The State of Madhya Pradesh and Otiiers: [1976] sec 96, distinguished.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1357-58 of 1975.

(Appeals by special leave from the judgment and order dated 4-2-1974 of the Orissa High Court in 9.J.C. No. 410/1971).

M. K. Ramamurthi and B. Parthasarathi, for the appellants.

Gobind Das, N. V. Rama Das and G. Narayana Rao, for respondents 1-8 in CA 1357/75.

The Judgment of the Court was delivered by

GoswAMI, J.-These appeals by special leave are directed against the judgment of the Orissa High Court of February 4, 1974.

There was a private college known by the name of Khallkotei College. This is an institution which grew out of a school establtshed

• t-

' .,.

.... ,.

/ ......

• .•·

'in 1856.

Thei management had to meet with financial cns1s 111 the A past and obtained financial help iri the shape of liberal endowment under a trust deed froni the then zamindar of Khallikote. The institu- .tion, it is stated, became one of .the premier colleges in the town of . Behrampur, Ganjam District, Orissa. The College was at first affiiiated to the Andhra- University at Waltair and thereafter to the Utkal University, and since 1967 it has been affiliated to the Behrampur University.

The Government of Orissa took over the management of the College on and from March 9, 1971, and a formal agreement was executed between the managing committee of the College and the Governor of the State.

The College was taken over by the Government in pursuance of the unanimous resolution of the nianaging committee of February 18, 1970, and the transfer to the Government was C of all the assets of the College but without any liability. The managing committee continued to be liable for the outstanding liabilities, if any, of the College for which Government was not liable, The College after the take over was ."administered as a Government College. ·

The eight writ petitioners in the High Court (Respondents' herein) were working as Readers in different faculties in the said College .on the date of the aforesaid transfer in the scale of pay Rs. 510-· 860/- whereas the Government scale for Reaaets was Rs. 600- 1000/-. On the date of take over, namely, March 9, 1971, each of the respondents was drawing a salary somewhere less than Rs. 600/-; three of them less by only Rs. 30/-.

The material particulars of the ten Readers of the College who were all earlier in private employment, including the eight Respon- <dents, are as follows (Annexure I, Volume II of the Paper Book) :

:SI.

Name Date of Date of Date of Col)firmed Pay as on No.

Birth Ist promoas 9-3-1971 appoint ti on (date of ment take over)

l. Sri N. N. Swamy 18-3-34 21-7-58 1-12-68 Reader Rs. 570/-

2. Sri N. Satapathy 6-9-33 July'59 27-1-70 Reader Rs. 540/_

3. Sri P. Haridas 10-3-36 25-10-61 25-10-69 Lecturer Rs. 540/- :4. Sri J.J. Rao 16-3-36 7-7-59 1-7-68 Reader Rs . 540/-

5. Sri K.C. Samantra 5-7-70 Lecturer All the posts are permanent '6. Sri G.J. hineswar .

Rao 30-9-31 3-9-57 1-10-67 Reader Rs. 570/-

7. Sri Ch. Chandra Sekhar Patro . 1-7-35 1-8-58 1-1-57 Reader Rs. 570/-

8. Sri Narayana Behera 1-10-37 2-8-62 13-9-70 Lecturer Rs. 510/.

9. Sri T.K. Satyanmurty 1~-9-27 1-7-49 4-5-59 Reader Rs. 660/-

10. Sri V.S.R. Gupta 28-12-30 1-7-52 4-9-69 Lecturer Rs. 600/-

D -

It will appear that five Respondents out of eight were confirme~ as Readers prior to the take over. Three Respondents were confirme~ as Lecturers but were promoted as Readers prior to the transfer of the College.

The last two Readers in the list who were lucky to draw salary of the amount of Rs. 660/- and Rs. 600/- respectively as on the date of take over, were treated differently by the Government from the eight Respondents on the sole ground that they were drawing as Reader salary of more than Rs. 600/-. It is rather poignant that the tenth Reader in the list was only a confirmed Lecturer \\hereas, as. already shown, five of the Respondents were confirmed Readers al-· though drawing salary less than Rs. 600/-.

On July 36, 1970, the Government prescribed qualifications for appointment as a Reader by a Circular of that date addrcs, ed to the Director of Public Instructions (Higher Education) Orissa, which appears to supersede the earlier circulars on the subject. It was stated in that circular that the "Government have been pleased to order that following principles shall henceforward be followed in the appointment of Readers, namely,

(a) no officer who has not had at least 8 years of teaching experience as a Lecturer would be eligible for consideration; and

(b) the post of Reader shall originally be filled. up by promotion subject to the satisfactory performance and conduct of the officer as a lecturer" .

On March 23, 1971, the Government issued a circular containing conditions governing taking over the services of the teaching staff of the College.

Paras 4 and 5 of that circular, which are material for our purpose, may be quoted :

"4. Tlie State Government shall offer ad hoc appointment to all staff inposition on the date of take over subject to para 5, and sub-para (d) of this paragraph for a period not exceeding six months in each case, treating all such staff as fresh entrants to Government service. The final absorption of such staff in Government service shall be subject to the following conditions:

x x x x x

(b) That after termination of services of surplus personnel, the cases of staff retained in Class I and Class II shall be referred to the Orissa Public service Commission! for determination of their suitability to hold posts in Class I or II as the case.!fiay be.

The services of those who are not found suitable by the P.S.C. (Public Service Commission) shall also be terminated by giving one month's notice in each case. Those found suitable by the Commission shall be finally absorbed in respective Trade of the O.E.S.

(Orissa Education Service) for which they are found

I. ..

suitable. It is hereby clarified that at the time of reference to the P.S.C. for determination of suitability for appointment as Readers, cases of .Lecturers of Government College, eligible for. appointment as Reader.s shall .also be simultaneously referred to the P.S.C. for consideration against those posts.

x x x x x

(c) While making reference to the P.s.C ....... cases

of those ad hoc Readers who would have been normally entitled to pay of less than Rs. 600/- per month on 9-3-71 by. application of the formula "minimum of the scale of pay of Readers in force in the Colleges .on the date of their appointment as such by the Ex-Managing Committee plus one. increment in that scale for every completed year of service upto 9-3-71" would be referred for determination of their suitability for absorption as Lecturers only.

x x x x x '

5. Ad hoc appointment shall be issued to all P.rofessors and such of the Readers in position, who on the date of take-over were in receipt of pay of Rs. 600/- per .month or more, in the scale of pay Rs. 600-1000/- against posts of Readers. Readers who on the date of take over were in receipt of pay of less titan Rs .. 600/7 per month and all lecturers in position on that date shall be given ad hoc appointment against the post of lecturers in the scale of Rs. 260-780/- with effect from the date of .take over".

x x x x x

Basing on the aforesaid provisions of the above circular the Director of Public Instructions sent .on April 20, 1971, to each of the Respondents appointment. letters wherel:iy they were. appointed as Lecturers in Class II temporarily on ad hoc_ basis for a period of six months with effect from the forenoon of. March 9, 1971, or till the appointment is made in consultation with the Orissa Public Service Commission, whichever is earlier, subject to verification of character and antecediw.ts and production of medical fitness certificate. Appointments were, thus, offered to the Respondents under the terms and conditions of take over which have been already extracted.

The grievance of the Respondents is that although they had all the requisite qualifications for the appointment as Reader and they were all holding the. posts of Reader before the take over and five qf them were even confirmed Readers but since under the aforesaid terms of H the take over they were drawing .a salary of less than Rs. 600/- on the date of take over, their names were not referred to the Public

Service Commission for consideration of their suitability for appointment as Readers in the Government College. It is not disputed that they are otherwise educationally and by experience qualified for the post of Reader. The High Court found that the requirement of eight years of teaching experience, as mentioned above, which is needed for appointment as a Reader is more than amply fulfilled by each of the Respondents.

The High Court accepted the Writ Petitions and held that the Respondents were entitled to consideration by the Public Service Commission for appointment as Readers and hence these appeals by the State which are confined only to the above question.

It is submitted by Mr. Ramamurthi on behalf of the appellants that the High Court erred in directing the Government to take into account, as exerience, the service oil the Respondents while they were in the pnvate college since, according to him, the necessary qualification is eight years experience in Class II, Orissa Education Service (0.E.S.). This submission is based on the Orissa Education Service Class I (Recruitment to the College Branch) Rules, 1971, issued on July 19, 1971, produced for the first time in this Court. It is submitted ihat since the Respondents have not completed eight years of service in the O.E.s. Class II (Lecturer's grade) in Government service, they are not entitled to be considered by the Public Service Commission for appointment as Readers.

We are unable to accept this submission. based on these Rules. These Rules of July 19, 1971, were not produced in the High Court and the reason is obvious that tliese were not relied upon by the State in connection with the appointment of the Respondents as Readers after the College had been taken over by the Government on Mar.::h 9, 1971.

The argument has, therefore, to be supported on the intrinsic "strength of the circular of March 23, 1971.

Apart from this, there is a stronger reason not to entertain this submission at this stage.

Even in the Special Leave Petition filed by the State on July 15, 1974, there was no mention whatsoever about the aforesaid Rules and necessarily no ground was taken in the F Petition on the basis of these Rules. Being conscious of this position Mr. Ramamurthi filed a Civil Miscellaneous Petition No. 4069 of 1976 before this_Court on April 30, 1976, to urge this additional ground.

After' hearing Mr. Ramamurthi we rejected this prayer for urging the additional ground by such a belated application when the High Court had no opportunity to consider the question.

The only question, therefore, which requires decision ih these appeals is_whether the Respondents were denied equal opportunity under Article 16 of the Constitution in the matter of appointment as Readers under the Government in the manner laid down in t11e circular of March 23, 1971.

TI; e following facts are admitted : The Respondents and two others, namely, T. K.

Satyanmurty (No. 9) and V. S. R. Gupta (No. 10) in the list (Annexure I) were all Readers in the private College, each having put in more than eight

_... ...

ORJSSA v. N. N. SWAMY (Goswami, J.) 779

years of service there as a Lecturer. T. K. Satyanmurty was promoted A as Reader on 4-5-1969 and was drawing Rs. 660/- on the date of taking over.

V. S. R. Gupta was promoted as Reader on 4-9-1969 and was drawing Rs. 600/-, the minimum according to the aforesaid Government circular, on the date of taking over.

He was not even confirmed as a Reader . but was .only confirmed as a Lecturer.

Amongst the Respondents, N. N.

Swamy (No. 1), N. Satapathy (No. 2), J. J. Rao (Nn. 4), G. J. Chineswar Rao (No. 6) and Ch.

B Chandra Sekhar Patro (No. 7) in the list ( Annexure 1) were confinned as Readers and four of them were promoted even earlier than No. 9 and No. 10. It is .thus clear that the conditiun o[ drawing of Rs. 600/- or more on the date of taking over, which has been laid down in the said circular as a particular qualification for eligibility for appointment as Reader and later for consideration o[ their suitability by the Public Service Commission for appointment as Reader, is arbi- C trary and discriminatory.

This condition has no nexus, whatever, with the object underlying the qualification test in an educational institution having regard to the most essential condition of intrinsic quality and efficiency of the teachers. It is not unknown that private institutions generally have great handicaps in the matter of finance and oftener the teaching staff in a private college has not the same scales of pay and sometimes even has much lower scales than that of D the Government colleges.

It is one thing to lay down appropriate educational and intelligibly relevant qualifications for certain posts in a college and also teaching experience of a specified duration but complete ignoration, without valid reason, of the teaching experience of a lecturer in a private college, otherwise qualified, on the sole ground of drawing a particular amount of salary on a particular date cannot be countenanced. T. K. Satyanmurty (No. 9) was promoted as a E Reader while in the private college much later than the four of the Respondents (Nos. 1, 4, 6 and 7 in Annexure I). He happened to draw Rs. 660/- on the date of take over, while the Responde_nts were drawing a little lower pay.

The former was preferred and given the ad hoc appointment of a Reader and was held as eligible for consideration by the Public Service Commission fer appointment. as Reader and the claims of the Respondents were igncred.

Thus even F amongst the Readers in the private college, similarly situated, the only ground for ignoring the claims of the said Respondents was drawing of a lesser pay, even though it may be less by Rs. 30/-, on March 9, 1971. This ground for a most unreasonable differentiation in picking anrl choosing from among~ the employees similiirly situated <Jn an absolutely artificial and irrevant consideration results in denial of equal opportunity to the Respondents in the matter of employment G under the Government under Article 16 of the Constitution.

It is well-settled that under Article 16(1) of the Constitution matters relating to employment not only mean the initial appointment but also include all matters relating to employment, whether prior or subsequent to the employment and also include promotion, (See The General Manager, Southern Railway v. Rangachari(').

(1)

[1962] 2 SCR 586

2-206SCI /77

Our attention was drawn to a decision of this Court in Smt. luthika Bhattacharya v. The State of Madhya Pradesh and Others('), on behalf ojf the appellants, wherefrom it was pointed out that Government could validly impose comparatively stringent qualifications for posts in schools taken over from private management, since persons there may be appointed without the requisite experience as needed in Government schools.

That case is entirely different from the present case. There may be no difficulty in accepting the position that Government can screen the teachers at the time of fresh appointment in Government service after taking over any institution from private management.

The educational qualifications and teaching experience which ma}' be insisted upon may be appropriately stringent having regard to the quality of education which Government intends to impart in the college after taking over the same .from the private management.

If the quondam private employees in the College did not fulfil the qualifications, experience and other requisite conditions, they may not be eligible for appointment since Government may not undertake to take over all the employees by maintaining the billabong of a status quo a;; te. Such a, position, if taken by the Govern.."Uent, is consistent with implementation of a correct edm; ation3l policy and will not incur the frown of Article 16 of the Constitution. The question is entirely different when, as in the present case, the Respondents answering the test of educational qualifications, as well as, experience of teaching in a recognised private college are discriminated amongst the very category of Readers on an irrational and illusory consideration.

Denial of an opportunity to these Respondents even for being considered for the post of Reader is clearly violative of Article 16 of the Constitution.

When a fairly wall-recognised institution, as in this case, run for more than a century, is completely taken over by the Government for management, it is not merely, taking over the land and buildings, tables and chairs. It has !o tackle, at the same time, a human problem, that is to say, the fate of the teachers and the staff serving that institution.

The institution, with which we are concerned, was taken over, by consent: -aS a going educational concern and it goes without saying that it must be administered on sound lines having regard to quality, efficiency and progress in all respects. It is understandable that the employees had to join the new service under the Government, for the first time, and so could be, in that sense, fresh entrants. But to say that the teaching experience of the Readers in the pnvate institution is completely effaced to the extent that they will not be even eligible, on the plea of absence of teaching experience in Guvernment service, for consideration for appointment as Readers is a seriously grim issue.

We feel assured that such an argument had not been c:mvassed by the State it!_ the High1 Court on the basis of the Rules of July 19, 1971, since these Rules came into force after the take over for which a separate circular had already been issued to take care of the special exigency.

Action under the Government circular of March 23, 1971, alone, was in controversy in the High Court. The said circular took recognition of the service in the private college in the case of two

0) [1976J 4 sec 96.

.. f-

. ''*:.

.. 'f

Readers (Nos. 9 and 10 in Annexure I). The only differentia was, therefore, the salary drawn by the Readers on the date of take over.

A That action pased on the salary aspect under the said circular had to stand the test of Article 16 i!lthe High Court, as well as, before us . the argument in favour of complete erasion of the past teaching .experience in the private college, first time presented before us, fails

to take note of the distinction between eligibility and suitability. Eight years' teaching experience in a college and the fulfilment of other

equisite qualifications make a person eligible for appointment as a B Reader, but whether he is suitable for selection for the post is an entirely different matter.

We are, therefore, clearly of opinion that all the Respondents arc eligible tobe referred to the Public Service Commission for the post of Reader. Their names shall be referred to the Commission, accordingly.

Whether they will be suitable for appointment as Readers will C be a matter entirely for due and proper consideration of the Public 'Senice Commission whose recommendations will be considered by tl; e Government in the matter of final absorption.

The High Court was right in allowing the above claim in the writ applications. The appeals fail and are dismissed with costs.

M.R.

Appeals dismissed.

STATE OF ORISSA & ANR

N. N. SWAMY & ORS. ETC

January 27, 1977

P. K. GOSWAMI

Constitution of India

Article 16

Art. 16

Khallikote College

March 23, 1971

Art. 16

Art. 16

[1962] 2 SCR 586

sec 96

CIVIL APPELLATE JURISDICTION

M. K. Ramamurthi

B. Parthasarathi

Gobind Das

N. V. Rama Das

G. Narayana Rao

GoswAMI

Khallikote

Ganjam District

Orissa

Andhra- University at Waltair

Utkal University

Behrampur University

Government of Orissa

March 9, 1971

February 18, 1970

N. N. Swamy

N. Satapathy

P. Haridas

J.J. Rao

K.C. Samantra

G.J. hineswar

Ch. Chandra Sekhar Patro

Narayana Behera

T.K. Satyanmurty

V.S.R. Gupta

July 36, 1970

Orissa Public service Commission

P.S.C. (Public Service Commission)

April 20, 1971

Orissa Public Service Commission

Ramamurthi

July 19, 1971

Public Service Commission

Mar.::h 9, 1971

April 30, 1976

Article 16

T. K.

Satyanmurty

V. S. R. Gupta

Goswami

T. K. Satyanmurty

V. S. R. Gupta

N. N.

Swamy

J. J. Rao

G. J. Chineswar Rao

B Chandra Sekhar Patro

Article 16

Article 16(1)

[1962] 2 SCR 586

Article 16

Article 16

sec 96

Article 16

Public 'Senice Commission


STATE OF MAHARASHTRA

BHALCHANDRA KHANDERAO JOSHI & ANR.

January 27, 1977

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

Maharashtra Educational Se1Tice Class II-Amalgamation of History and' Political Science lecturers-Proof of amalgamatio11--Grant of optio11 to teacher to join History or Political Science se1Ticc.

After the reorganisation of the States a separate seniority Est was prepared by the State of Bombay for History and Political Science teachers. On 20.8.1963. the Director of Education issued a letter conveying the decision oi Government to amalgamate the list of lecturers in History and Lecturers in Political Science

and to prepare a single seniority list for both the subjects. It was express!} stc.ted in the letter that it was issued in pursuance of the decision of the State Government.

Thereafter a revised seniority list was prepared.

One Nanekar filed a writ petition in the High Court challenging the said order on the ground that when two separate seniority lists had been prepared for the departments

of History & Politicai Science in accordance with the earlier Government Order of 1960, the new list was invalid.

The High Court took the view that the existence of the Gocernment resolution dated 27.2.1963, which was said to be the authority for the issue of Di rcctors letter dated 20.8.1963, had not been proved. It therefore held that there was no such resolution or order requiring the preparation of n combined seniority list.

It decided that the earlier order of 1960 requiring the preparation of separate list of History and Political Science

continued to be operati, e. It however dismissed the writ petition filed by Nanekar on the ground that he could not claim to be the seniormost person in his department.

In the present writ petition filed by B. K. Joshi and P. S. Kane the High Court followed its decision in Nanekar's case and held that there was JH' order or decisiot1 dated 27.2.1963 so that the action of amalgamating the list of History and Political Science departments was invalid.

A resolution was taken on 15.1.1970 in which it was mentioned that the earlier decision to amalgamate the two categories ws given UP' on account of the difficulties which were experienced and an option was given by the 1970 resolution in order to obviate those difficulties.

That resolution was challenged in the present proceedings.

The High Court examined the effect of the Government . Resolution dated 15.1.1970 and held that in the absence of the earlier resolution dated 27.2.1963 the Director of Education was not competent to combine or amalgamate the seniority lists of History and Political Science Departments. lt assumed that legally there was no amalgamation at aU and any action taken on the basis of the amalgamation would also consequently have to fall on that ground.

The High Court held that the option given by the 1970 resolution had the effect of perpetuating the effect of the working of the invalid list and amounted to viollttion of ATt. 16 of the Constitution.

The High Court held that in Nanekar"s case no attempt was made to produce the resolution of 27.2.1963.

Allowing the appeals.

Held: 1 : The High Court erred in observing that the resolution of 27.2.1963 did not exist.

The High Court lost sight of the intrinsic evidence which was available on the record to prove beyond doubt that Government had passed the resolution on 27.2.1963 to amalgamate the two lists.

In the 1970 resoiution, the Government itself reiterated the act that a decision was tken by Government in the year 1963 to amalgamate the lists of Lecturers in Hi.>tory and the Lecturers in Political Science into one common list.

The reason for taking that decision to amalgamate the two .lists was also stated in that re.solution. in fact the 1970 resolution made a mention of the difficulties experienced in working the 1963 resolution and that was why it was decided to revert to the decision to split up the combined seniority list which formed the l:>asis of prom10tio11 of some of the teachers.

As the genuineness of the resolution of 1970 was

... f

MAHARASHTRA V. B. K. JOSHI (Shin.g/za[, J.) 783

mot challenged, the High Court ought to have taken notice of its intrinsic evi- A , dentiary value fo.r the purpose of proving the earlier resolution of 1963.

Jn fact the Director in his order specifically stated that the decision of the Government to amalgamate the two lists had to be brought' to the notice of all concerned.

The combined seniority list, was therefore fully authorised and there was nothing wrong if it formed the basis of the subsequent promotions. [787 G-H, 788 A-El

2. No exception could be taken to the decision of the Government to 2ive option to the Lectures to e!ect either of the two departments.

The decision B to amalgamate the semonty hsts of the two departments was not taken in consultation with them and if they were required to teach History or Political Science and were promoted as Professor of History or Political Science on the basis .-0f combined seniority list for which they themselves were not responsible, it would have been unfair if they had been required to serve in another dcpartn1ent by n uni1aterri1 executive fiat.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1173 to c Tl 75 of 1976.

Appeals by Special Leave from the Judgment and Order doted the 11-3-1975 of the Bombay High Court (Nagpur Bench) in Special 'Civil Application No. 695 of 1971. ·

L. N. Sinha, Sol Genl., M. N. Shroff for the Appellants in 'CA 1173/76 for R. 3 in C.A. 1174/76 and 1175/76.

M: N. Phadke, V. M. Phadke and A.G. Ratnaparkhi for-RR. and 2 in CA 1173/76 and CAs. 1174-75/76.

Nilofer (Mrs.) Bhagwat, S. C. Agrawal :mcl V. .f.

Francis for '.R .. 5 in C.A. 1174 and 1175/76.

Y. J. Francis for' RR. No. 6 in CA 11'75/76.

The Judgment of the Court was delivered by

SHTNGHAL J.-These appeals arise out o( a judgment of the Bombay High Court dated March 11, 1975, by which the High Court qu:1shed that part of Government resolution dated January 15, 1970,

"which holds that the respondents Nos. 3 to 5 should not be com- F pell.eel to go back to their respective lists and which gives a further option to these three respondents to indicate whether tlley \vanted 'to go back to the; department of History." The High Col1rt has further held that the writ petitioners will be en.titled to be considered for promotion to Class I posts in the department of Political Science and the seniority of respondents Nos. 3 to 5 "will be considered in the .seniority list relating to the Department of History.".

The controversy arose because 0if a writ petition filed by Bhalchandra Khanderao Joshi and Padniakar Siddhanath Kane.

Both of .them were members of the Maharashtra Educational Service, Class II (Collegiate Branch).

Bhalchandra Khanderao Jo5hi was M.A. in Poiitical Science as well as in History.

He was appointed Lecturer in Political Science in 1958, and was confirmed in that capacity.

Padmal:ar Siddhanath Kane passed M.A.

Examination in Political Science in 1956 and was appointed Lecturer in Political Science in

J 9.58.

He was also .confirmed on that post. Both of them filed a writ.

petition and challenged the resolution of the State Government, iIT the Education and Social Welfare Department, No. SCP No. 1064-D dated January 15, 1970, in pursuance of which respondents Smt. K. A.

Parekh, S. A. Bari and Smt. R. S. Dossal were promoted as Professors of Political Science and were given theoption to opt for the History or the Political Science department. ·

It may be mentioned that after the reorganisation of Stales, a. combined seniority list was prepared on November 1, 1956, for History and Political Science teachers.

In that list respondent No. 3 was shown at serial No. 3, and respondent No. 4 at serial No. 5. One S. R. Nanekar was appoint~ as Lecturer in Political Science on June

26. 1954.

Respondents Nos. 3 and 5 were M.A. in History. It was not disputed in the High Court that Political Science was not a separate subject until 1956, in Bombay, because out of the eight papers for post graduation in History, four were in Political Science.

Smt.

K. A. Parekh was M. A. in History and was recruited as Lecturer on August 5, 1946. She however taught both History and Political Science upto 1963, when she was appointed officiating Professor of Political Science on February 27. 1963. Dr. S. A. Bari was recruited'. as Lecturer in History on October 1; 194 7.

He was thereafter promoted as Professor in that subject. Smt. M. G. Sonnal, who was M.A .. in History, was appointed as Professor ol] Political Science. Smt. R. S.

Dossal was. recruited as Assistant Lecturer in Hisory on August 5, 1946, and taught both History and Political Science upto 1956 ..

Thereafter she taught only Political Science, and was promoted as Professor in that subject in 1968. She was confirmed in that capacity in 1972.

These facts are quite sufficient for purposes •)f the present appeals.

The controversy relates to the question whether the Director of Education, Maharashtra State, had the authority to issue the letter dated August 20, 1963, which was addressed to all the Psh1cipals of the Government Colleges. It was stated by the Director in that letter as follows,-

"It has been decided to amalgamate the two lists of lecturers in 'History' and 'Political Science' and to combine the two lists under the common subject of 'History' and 'Political Science'.

The revised seniority list so prepared is enclosed herewith.

Please bring this decision of Gov"ernment to the notice of the officers concerned."

The Director thus conveyed_ the decision to amalgamate the lists of Lecturers in History and Political Science and to prepare a single seniority list fonboth the subjects. It was expressly stated in the letter that it had been issued in pursuance of the decision of the State Government.

A revised seniority list was therefore prepared in which respondent No. 3 was placed at serial No. 4, respondent No. 4 at serial No. 5, and S. R. Nanekar at serial No. 7.

Nanekar challenged that order in the High Court by Special Civil Application No. 120 of 1964, mainly on the ground that when two separate seniority lists had been prepared for the_ departments of History and Political Scien..:e,

... f '

in accordance with the earlier Government Order of 1960, the new list was invalid.

The High Court however took the view that the existence of the Government resolution dated February 27, 1963, which was said to be the authority for the issue of the Director's letter dated August 20, 1963, had not been proved. It therefore held that there. was no . suh i:esolution o~ order requiring the _preparation of a combmed semonty lit. It decided that the earlier order of 1960, requiring the preparation of separate lists for History and Political Science, continued to be operative and that as Nanekar could not claim to be the seniormost person in his department, he had no cause of ::iction. It therefore dismissed the writ petition.

The High Court, in the present case, went by the decision in Nanekar's case, and held that there was no order or decision dated February 27, 1963, so that the actio_n of amalgamating the lists of History and Political Science departments was invalid.

The High Court made a reference to the Director's letter dated July 27, 1967 asking the Principals to forviard information in the prescribed proforma in respect of those Professors and Lecturers of History in their respective colleges who were qualified to teach Political Science :md had been recognised tJierefor. It also made a reference to the impugned resolution dated January 15, 1970 which reads as follows,-

"A decision was taken by Goermnent in the year 1963 to amalgamate the lists of Lecturers_ in 'History' and Le, cturers in 'Political Science' into one common list of Lecturers in 'History and Political Science'.

Accordingly, a combined seniority list was prepared with reference to the date of appointment of the officer concerned in the M.E.S.

Cliiss II, irrespective of the fact as to whether the Lecturers are qualified in both the subjects of "History" and "Political Science" or in any one of the two.

The decision to amalgamate the two lists into one was taken because' it was noticed that some of the Lecturers in the senioritv list of the subject "History" also possessed the qualifications in the subject "Political Science".

Similarly, some of -the Lecturers in "Political Science" possessed the qualifications in

"Hitory". But they were not considered eligible for ip pointment to a post of Professor in a subject other than the subject under which their names were included in the seniority list of their subject.

In order to remove this anomaly, deCJision to amalgamate the seniority lists of Lecturers in "History" and "Political Science" and to make appointment to the posts of Professors on the basis of the combined seniority list in the subjects of "History" and "Political Science" was taken by Government.

However, in view of the difficulties experienced with regard to the implementation of the deeision of Govemmellt referred to above, Government on reconsideration decided in the year 1967 to revert to the old practice of having separate seniority lists of Lecturers for the two subjects., 'History' and 'Political Science'.

. 2. Some of the teaching members of the Departmnt of History brought to the notice of Government that m the western Maharashtra formerly there were no separate _posts for Political Science as "Political Science" did not ey.1st as distinct subject.

All teachers were designated as Lecturers/ Professors in History, but they used to teach the subject "Political Science" also.

The question of giving option to those Lecturers/Professors, who were qualified to teach both, the subjects, viz., "History" and "Political Science" and recognised as such, to elect either of the two subjects, was under consideration of Government for some time past.

While reverting to the decision to split up the •:on1bined seniority list of "History and Political Science", Gm; ernment considers that those who were promoted to the posts of professors on the basis of the combined seniority list should not be compelled to go back to their respective lists.

Government bas now decided that an option should be given to those Lecturers/Professors of the Old Bombay State, who were recruited as Lecturers/Professors of Historv but have been recognised as teachers of Political Science' and also those who have been promoted to the posts of Professors in M.E.S. C. II (Collegiate Branch) on the basis of the combined seniority list, to elect either of the two Departments, viz. 'History' or 'Political Science'.

Accordinly the concerned Lecturers/Professors were asked to exercise their option. The following officers have opteu for their being treated as belonging to the Department of Political Science:-

( i) Smt. K. A. Parekh, Officiating Professor of Political

Science, 1. Y. College, Jogeshwari.

(ii) Shri S. A. Bari, Officiating Professor of History, Government Arts and Science College, Aurangabad.

(iii) Smt. R. S. Dossal, Officiating Professor of Political

Science, Elphistone College, Bombay.

The option exercised by these officers have been accepted by _qovernent and their seniority in the Department of Political Science should be as shown in the accompanying statement." (Emphasis added). .

It therefore gave option to respondents Nos. 3 to 5 to go back to the department of History or not, and stated further that the option had been accepted and their seniority finalised in the Political Science department. It is this resolution of the Government dated January 15, 19~0 whlc? has been challenged in the present petition.

The reason 1s that 1f respondents Nos. 3 to 5 had not been given the option to continue in the Political Science department. thepetitioners would have been promoted to a Class I Post.

Thev have stated that they _would then not have been deprived of that chance in viobtion of article 16 of the Constitution.

'!" r

I •

MAF!ARASHTRA v . .II. K. JOSHI (Shins:hal, /.) 787

Respondents Nos. 4 and 5 did not enter app, arnnce in the High Court, but it was urged on behalf of respondent No. 3 that in view of the curriculam for the Master's degree in History, upto 1956, a person -obtaining the Master's degree in History w_as equally '.qualified to teach Political Science. It was also urged that the respondent taught Politi- .cal Science and had been recognised by the University as a teacher of Political Science. The High Court examined the effect of the Government resolution dated January 15, 1970, and held that in the absence of the earlier resolution dated February 27, 1963, the Director of Education was not competent to combine or amalgamate the &eniority

lists of the History and Political Science departments. lt assumed that "legally there was no amalgamation at all and any action taken .on the basis of such amalgamation would also consequently have to fall on the ground:" In that view of the matter, the High Court held _that promotions were not permissible on the basis of the combined list. It accordingly held tfiat the Government n::solution dated Jnnu- :ary 15, 1970 proceeded on a "misapprehension" that the icspondent>.

had peen promoted as Professors on the basis of the combined :seniority list, which was itself invalid.

The High Court 11eld that there was "no valid reason why persons who were qualified in the Department of Political Science itself could be prevented from having their names considered for the post of Professor in Class I." That led

the High Court to hold-further' that the option which was given by the resolution dated January 15, 1970 had the effect or perpetuating the effect of the working of the invalid list, and amounted to violation of article 16 of the Constitution.

This is why the State of Jvlaharashtra, Smt. K. A. Parekh and Smt. R. S. Dossal have come up in appeal by special leave to this Couti.

The controversy therefore is whether the State government passed the aforesaid resolution dated February 27, 1963, to amalgamate the lists of Lecturers in History and Political Science, as stated in the Director's aforesaid letter dated August 20, 1963, or whether there was no such resolution and the Director's order was unauthorised ?

The High Court has taken the view that as no attempt was made to F produce the resolution dated February 27, 1963 in Nanekar's case, there was no such resolutiuu t all.

On that basis, it held that the Director had no authority to take the decision to amalgamate the lists.

We find however that in taking that view the High -Court lost sight of the intrinsic evidence which was available on the record, to prove G beyond doubt that Governmen~ had passed the aforesaid' resolution dated February 27, 1963, to amalgamate the two lists.

We have extracted the Government resolution dated January 15, 1970 and the underlined portions thereof clearly show that the Government itself reiterated the fact that "a decision _was taken by Government in the year 1963 to amalgamate the lists of Lectur.;; rs in "History" m:d Lect'urers in "Political Science" into one common list oE Lecturers m H "History and Political Science". " It has further been stated: in th<it resolution of the Government that "accordingly, a combined seniority list was prepared with reference to the date of appointment of the

oflicer concerned in the M.E.S. Class II, irrespective of the fact as to whether the Lecturers are qualified in both the subjects of 'History' '.ind 'Political Science' or in any one of the two''. The reason for takmg that "decision, to amalgamate the two lists" has also been stated in the resolution. Then it has been stated that in "view of the difficulties experienced with regard to the implementation of the decision of Government referred to above," the Government "on reconsideration'• had decided to nevert to the old practice of having separate seniority lists of Lectnrers of History and Political Science. It has also been stated that the decision had been taken for "reverting to the decision to i>plit up" the combined seniority list which formed the basis of promotion of some of the teachers. It would thus appear that the resolution dated January 15, 1970, repeatedly refers to the earlier decision of the State Government of 1963 for amalgamating the lists, states the reason for the amalgamation, makes a mention of the ditticulties experienced in the implementation of that decision, and gives the reasons for the government's decision to revert to the old practice of having separate seniority lists.

As it was not challenged in the High Court that the resolution dated January 15, 1970 was genuine, the High Court should have taken notice of its intrinsic evidentiary value for the purpose of proving the earlier resolution dated February 2 7, 1963.

If it had done so, it would have inevitably reached the conclusion that the Governm.ent had really decided in 1963 to amalgamate the lists, and that the Director had rightly conveyed that decision in his order dated August 20, 1963, and it was therefore an authorised communication.

In fac~ the Director specifically stated in that order that the "decision of Government" to amalgamate the two lists had to be brought to the notice of all concerned.

The combined seniority list was therefore fully authorised, and there was nothing wrong if it formed the basis of the promotions which were given to the persons

mentioned above.

We have no doubt that the High Court did not read the relevant document carefully and that was why it arrived at a contrary conclusion.

The resolution dated January 15, 1970 shows that as the (iovernment had decided to split up the seniority list for the lfopartment of History and Political Science, it thought it desirable to give an "option" to those Lecturers/Professors of the old Bomb'.ly State, who were recruited as Lecturers/Professors of History, but were recognised by the University as teachers of Political Science, to dect for either of the two departmc'lts. No exception can be taken to tl1at ck:ision to give the option to the Lecturers/Professors concerned for, in the absence o.f such an option, they would have been deprived of the opportunity of expressing their desire to serve in the one or the other department on the basis cf their experience and prospects of promotion.

It was to be appreciated that the decision to amalgamate the seniority lists of the two departments was not taken in consultation with them, and if they were required fo teach History, or Political Science, and were promoted as Professors of History or Political St:icnce, on the lJasis of a combined seniority list for which they themselves \were not responsible, it would have been unfair if they had been required to serv, e in :mother department by a unilateral executive fiat.

.. l

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" J

It may' be mentioned that Mr. Phadke tried to argue that even if the resolution dated January'. 15, 1970 were held to be valid, it would not be permissible for the teachers concerned to take advantage of it because they did not fulfill its requirements.

We do not find any merit in this argument. As has been stated, thoe tea.chers were promoted to posts of Pro.fessors on the basis of the combined list, they were recognised as such teachers by the University, and were recruited initially as Lecturers in History. They were therefore entitled to take the benefit of the resolution dated January 15, 1970, as there is nothing wrong with it.

We have no doubt that in the facts and circumstances mentioned above, there could be no justification for the view • taken by the High Court that there was violation of article 16 of the Constitution.

The appeals are allowed, the impugned judgrnenL of the High Ccurt dated March 11, 1975 is set aside and the writ petition is dismissed.

The State _of Maharashtra will pay the costs of respondents Nos. l and 2 (Bhalchandra K. Joshi and Padmkar Sidharath R:rn) in Special Leave Petition No. 915 of 1976, as directcJ by this Court on October 8, 1976.

P.H.P.

A p[Jeals allowed ..

STATE OF MAHARASHTRA

BHALCHANDRA KHANDERAO JOSHI & ANR

January 27, 1977

P. K. GOSWAMI

Nanekar

B. K. Joshi

P. S. Kane

Nanekar"s

MAHARASHTRA V. B. K. JOSHI

L. N. Sinha

M. N. Shroff

N. Phadke

V. M. Phadke

A.G. Ratnaparkhi

Nilofer

Bhagwat

S. C. Agrawal

Francis

Y. J. Francis

SHTNGHAL

Bhalchandra Khanderao Joshi

Padniakar Siddhanath Kane

Bhalchandra Khanderao Jo5hi

Padmal:ar Siddhanath Kane

K. A.

Parekh

S. A. Bari

R. S. Dossal

November 1, 1956

S. R. Nanekar

June

26. 1954

Bombay

K. A. Parekh

February 27. 1963

S. A. Bari

M. G. Sonnal

R. S.

Dossal

Maharashtra State

August 20, 1963

S. R. Nanekar

February 27, 1963

Goermnent

K. A. Parekh

S. A. Bari

R. S. Dossal

January 15, 19~0

article 16

January 15, 1970

article 16

State of Jvlaharashtra

K. A. Parekh

R. S. Dossal

February 2 7, 1963

Phadke

January'. 15, 1970

article 16

March 11, 1975

State _of Maharashtra

Bhalchandra K. Joshi

Padmkar Sidharath

October 8, 1976