RAINBOW STEELS LTD. AND ANR.

COMMISSIONER OF SALES TAX, UTTAR PRADESH AND ANR.

January 30, 1981

[V. D. TULZAPURKAR AND R. S. PATHAK, JJ]

Uttar Prlldcsh Sales Tax Act 1948 S. 3A-State Government nptifying "Sale of old discarded, unserviceable or obsolete machinery" as liable to tax--Sale vf ti/Ci 111al power plant in running condition-Whether exigible to .tax.

InterpretatiOI/ of Statutc:c.-Principle of noscitur a sociis-When can be invoked.

Jn exercise of the power under section 3A of the U.P. Sales Tax Act, 1948 the State Government, issued a notification datd May 30, 1975 which provided that the tu1nover in respect of "old, discarded, unserviceable or obsolete machinery, stores or vehicles etc." shall be liable to tax at the point of sale at the rate of five per cent.

A Thermal Power Plant together with its associate auxiliaries, components and accessories belonging to the State Electricity Board was sold in a working condition to the Appellant No. 1, who paid sales tax on the sale under protest The power plant was used by Appellant No. l and as the power position in the State improved, Appellant No. 1 discontinued the generation of electricity through this power plant and negotiated its sale to Appellant No. 2.

Since there was dilTerence of opinion between the parties as to the pa•yment of sales tax on the machinery the question was referred for clarification to the Commissioner of Sales Tax under section 35 of the Act. The Commissioner was of the view that the four words, "old, discarded, unserviceable or obsolete" had been used disjunctively and each adjective had its own meanin& and seme and that since the power plant had been used before its sale it was "old" machinery and the sale was liable to tax under the said Entry.

The order of thP. Comn1issioner was confirmed by the High Court.

In the appeal to this Court, on behalf of the Appe1lants it was submitted invoking the principle of no"Seitur a sociis that th~ expression 'old' which is G more general should be restricted to a sense analogous to that of the less general expressions. namely "discardedi unserviceable or obsolete,, and read in this manner the sale of the power plant could not be re.i.; arded as sale of "old" m:ichinerv falling within the Entry.

On behalf of the Respondents it was contended that the four adjectives occurring in the Entry have been used disjunctively and each must be given H its own separate meaning, 3nd 'that the principle of noscitur a sociis would nm: apply to the construction of the expression

1old'.

A Allowing the appeal,

HELD : 1. The thermal power plant was in perlect running condition and was 1:iold as such.

Jt would not faII within Entry No. 15 of the Notification.

[733D]

2. The four adjectives "old, discarded, unserviceable or obsolete" which are susceptible to analogous meaning are clubbed together while qualifying machinery in the Entry. The first adjectiv~ 'old' is clearly more. general than the other three and as such all the four would take their colour from each othc.:r. the meaning of the more general adjective 'old' being restriicted to a sense analogous to that of the less general namely "disca•rded, unserviceable or obsolete".

All the four adjectives which qualify the word "machinery" have been used disjunctively. The adjective 'old' by itself is vague, imprecise and ambiguous for there is no indication as to how n1uch old the machinery should be before it could be described as 'old machinery'--one day old, one month old, one yea.r old, five years old or even ten years old (the degree of oldness being a relative concept). l732F-733A]

3. In the absence of any indication that the adjective 'old' has been deliberately used in a wider sense ¥.1hcn the expression 'old' is by itself vague, imp1ecise and ambiguous, being too general, the principle of noscitur a sociia will have to be applied i.e. all the associated words will take colour from each other. [733Bj

4. (i) The principle of noscitur a sociis is clearly applicable to the cons~ truction of the expression old' occurring in Entry No. 15, and that expression will have to be given a restricted 1neaning-a sense analogous to that of the less gene!al \.Vottls clubbed \.Vith it.

[732A]

(ii) ]f the \:vider words used are in themselves va.gue imprecise or ambiguou~ and there is no indication that thesei have been deliberately used to

infue \vider n1eaning then the rule of noscitur a sociis can be invoked.

[732E]

State of Bombay & Ors. v. The Hospital Mazdoor Sabha & Ors. [1960] 2 S.C.ll. 866 and l'he Corporation of the City of Nagpur v.

Its En1ployee3 [1960] 2 S.C.R. 942 referred to.

Letang v. Cooper [1965] I Q.B. 232 distinguished.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 337 of 1981.

Appeal by Special Leave from 18-4-1979 of the Allahabad High F.A.F.O. No. 39/77.

the Judgment and Court (Lucknow

Order dated Bench) in

V. M. Tarkunde and B. R. Sabharwal for the Appellant.

S. Markandey for the Respondent.

The Judgment of the Court was delivered by

TULZAPURKAR, J. This appeal by special leave raises the question whether on true construction of Entry No. 15 of the Notification No.

ST-II-4949/X-10(2)-74 dated May 30, 1975 issued under S.3A of A U.P. Sales Tax Act 1948, the negotiated sale of a Thermal Power

Plant by appellant No. 1 to aiwellant No. 2 is exigible to sales tax thereunder?

The short facts giving rise to the question may be stated : A Thermal Power Plant at Rampur comprising seven boilers, five tur- 8 bines together with its associate auxiliaries components and accessories originally belonged to the U.P. State Electricity Board. The Board, after selling it in working condition to appellant No. 1 on May 29, 1974 for Rs. 41.31 lakhs called upon the fatter to pay sales tax thereon which was paid under protest.

Appellant No. 1 used it for generating electricity from May 29, 1974 to September 30, 1975.

C As the power position improved in the State of U.P. appellant No. 1 discontinued the generation of electricity through this power plant and finding it expedient to realise its investment negotiated a sale thereof in perfect working condition to appellant No. 2.

Appellant No. 1 desired to charge sales tax on the said negotiated sale but appellant Ne. 2 informed appellant No. 1 that it had obtained considered D opinion that no sales tax on such a transaction was leviable inasmuch as the sale was not of "old, discarded, unserviceable or obsolete machinery," falling within Entry No. 15 of the concerned Notification dated May 30, 1975.

Both the appellants thereupon referred the question for clarification to the Commissioner of Sales Tax

U.P., Lucknow under Section 35 of the U.P. Sales Tax Act 1948. It was E contended on their behalf that the word (adjective) "old" occurring in the Entry would take colour from the other words (adjectives) that follow it and the cumulative effect of all the words taken together showed that those words were either synonymous or near synonymous suggesting that the machinery in order to fall within the Entry should become non functional or non usable and that since the power plant in question had not become "old" in that sense and was in perfect working condition it would not fall within the Entry and the sale thereof by ajppellant No. 1 to appellant No. 2 was not exigible to tax.

The Commissioner by his order dated February 19, 1977 negatived the contention holding that the four words "old, discarded, unserviceable or obsolete" had been used disjunctively and each adjective had its own meaning and sense and that since the power plant had been used before its sale by appellant No. 1 to appellant No. 2 it was cild machlnery and the sale thereof was liable to tax under the said Entry.

Feeling aggrieved by that order the aP1Pellants preferred an appeal H to the Allahabad High Court being F.A.F.O. No. 39 of 1977 and a learned single judge of the Lucknow Bench on April 18, 1979 dismissed the appeal and confirmed the Commissioner's view that since the concerned power plant had been purchased by appellant No. 1 long ago and had been put to use it was "old machinery" within the meaning of the Entry, observing that "the degree of oldness has to be greater than recently manufactured machinery used only for the some time".

The Commissioner's view as confirmed by the High Court is challenged by the appellants before us in this appeal.

Section 3A of tbe U.P. Sales Tax Act, 1948 empowers the State Government to specify the rates of taxes and the point at which the tax can be imposed, subject to a maximum of 12 per cent, on the turn over in respect of the goods specified in the First Schedule to the Act and clause (b) empowers the State Government to amend the entries in the Schedule. In exercise of the aforesaid power the State Government issued tbe Notification No.

ST-II-4949/X-10(2)-74 dated May 30, 1975 which provided that witb effect from June 1, 1975 the turn over in respect of the goods specified in column II of the Schedule to this Notification shall be liable to tax at the point of sale and at the rate specified respectively in columns III and IV thereof :

SI.

No.

Schedule

'M' Stands for sale by manufacturer in Uttar Pradesh. 'I' stands for sale by the importer in Uttar Pradesh.

Description of goods Point at which Rate of tax tax shall be levied.

III IV

15.

Old, discarded, unserviceable or obso- Sale to consu- 5 per cent Iete machinery, stores or vehicles inmer eluding waste products except cinder, coal ash and such items as are included in any other notification issued under the Act.

The question is whether the negotiated sale of tbe Thermal Power -O Plant at Rampur by appellant No. 1 to appellant No. 2 falls within tbe aforesaid Entry so as to attract sales tax at 5 per cent on the sale price charged by appellant No. 1 to appellant No. 2? In other words the qnestion is whether it is a sale of "old machinery" within the meaning of the Entry and what is the true meaning of the expression "old machinery". It is undisputed that the Thermal Power Plant 11 in question when it was sold by U.P.

State Electricity Board to appellant No. 1 on May 29, 1974 was in perfect running condition and tbe Sales tax on that transaction was paid under protest. It is

.... (

further undisputed tlmt awellaut No. 1 used that power plant for generating electricity for about a year and four months and because the power position improved in the State of U.P. the appellant No. 1 negotiated the sale thereof to appellant No. 2 with the view to realise back its investment and the power plant had been kept in !Perfect running condition with periodical checks by the Inspector of Factories as also by the Inspector of Boilers and when sold it was in perfect working and running condition.

Question is whether such power plant could be regarded as "old machinery" within the meaning of Entry 15.

Counsel for the appellants contended that it could not be regarded as old machinery in the sense that it had become non-functional or non-usable whic)l meaning should be given to the expression 'old' occurring in the Entry.

In other words, he sought to invoke the principle of noscitur a sociis for constrning expression 'old' because of its association with the other expressions like "discarded, unserviceable or obsolete" occurring in the Entry.

According to the counsel the expression 'old' which is more general should be restricted to a sense analogous to that of the less general expressions, namely,

"discarded, unserviceable or obsolete" and read in this manner the sale of the power plant in question could not be regarded as sale of old machinery falling within the Entry.

On the other hand counsel for the respondents supported the view taken by the Commissioner of Sales Tax as well as by the High Court, for, according to him the principle of noscitur a sociis would not apply to the construction of the eXjpression 'old' occurring in the Entry. He urged that the four adjectives have been used disjunctively and each must be given its own separate meaning and pointed out that in two decisions, namely, State of Bomhy & Ors. v. The Hospital Mazdoor Sabha & Ors.(')

and The Corporation of the City of Nagpur v.

Its Employees(') this Court refused to apply the said principle while construing the definition of 'industry' given in s.2(j) of Industrial Disputes Act, 1947 and in s.2(14) of the C.P. and Berar Industrial Disputes Settlement Act, 1947 respectively, and that in Letang v. Cooper(')

Diplock, L. J., has observed thus : "The maxim noscitur a sociis is always a treacherous one unless you know the societas to which the socii belong." According to 1rim further the ejusdem generis principle would be clearly inapplicable inasmuch as it was not a case where some general words follow any particular, generic or specific words.

(1) [1960] 2 SCR 866.

(2) [1960] 2 SCR 942.

(3) [l 965] l Q.B. 232.

Having given our anxious consideration to the rival contentions urged before us, we are clearly of the view that the principle of noscitur a sociis is clearly applicable to the construction of the expression 'old' occurring in Entry No. 15, and that eXJPression will have to be give a restricted meaning-a sense analogous to that of the less general words clubbed with it. The principle is explained in MaxweN on the Interpretation of Statutes (12th Edn.) at page 289 thus :

"Where (Wo or more words which are susceptible of analogous meaning are coupled together, noscitur a socfis, they are understood to be used in their cognate sense.

They take, as it were, their colour from each other, the meaning of the more general being restricted to a sense analogous to that of the less general."

Moreover, even in the two decisions relied upon by counsel for the respondents where this Court refused to apply the principle of noscitur a sociis while construing the definition of 'industry' in the two concerned enactments because the Legislature bad deliberately used wider words in order to make the scope of defined word correspondingly wider, the Court has observed that "it is only when the intention of the Legislature in associating wider words with words of narrower significance is doubtful or is otherwise not clear that the present rule of construction can be usefully applied." In other words, if the wider words used are in themselves vague, imprecise or ambiguous and there is no indication that these have been deliberately used to infuse wider meaning then this rule of construction can be invoked.

Dealing with the Entry in question, in the first place it cannot be disputed that the four adjectives which are susceptible to analogous

meaning are clubbed together while qualifying 'machinery' in the Entry. Secondly, it cannot be disputed that the first adjective 'old' is clearly more general than the other three and as such all the four G would take their colour from each other, the meaning of the more general adjective 'old' being restricted to a sense analogous to that of the less general, namely, "discarded, unserviceable or obsolete".

Thirdly, it is true that all the four adjectives which qualify the word 'machinery' have been used disjunctively but it is precisely for that reason that the adjective 'old' becomes vague, imprecise and ambig- B nous, being too general.

The adjective 'old' by itself i~ certainly vague, imprecise and ambiguous, for there is no indication as to how much old the maahinery should be before it could be described as

• •

old machinery. A machinery could be one day old, one month old,

on~ year old, five years old or even ten years old, (the degree of oldness being a relative concept) and which one is intended to be ill.eluded in the Entry has not been made clear at all. And, lastly, there is nothing in the Entry to indicate that the adjective 'old' has been deliberately used in a wider sense. In the absence of any indication to that effect and when the expression 'old' is by itself vague, impse, and ambiguous, being too general, the principle of noscitur a sociis will have to be applied i.e. all the associated words will take colour from each other, the meaning of the more general, adjective viz. 'old' being restricted to a sense analogous to the less general adjectives "discarded, unserviceable or obsolete". In other words in order to fall within th~ expression 'old machinery' occurring in the Entry, the machinery mnst be old machinery in the sense that it has become non•

functional or non-usable. In our view, therefore, on true construction the sale of the Thermal Power Plant which at the time of sale by appellant No. l to appellant No. 2 was in perfect running condition and which was sold as such would not fall within the aforesaid Entry No. 15 of the concerned Notification dated May 30, 1975.

The English decision of the Court of Appeal in Letang v. Cooper

(supra) relied upon by counsel for the respondents is clearly distinguishable inasmuch as it dealt with a statute which referred to "negligence, nuisance or breach of duty (whether the duty exists by virtue E of a contract or of provision made by or under a statute or independently of any contract or any such provision)," and when it was argued that because the cause of action in both nuisance and negligence included the infliction of actual damage as an essential element, "breach of duty" should also be understood as confined to causes of

ation in which actual damage was likewise essential the said conten- F tion was rejected by Diplock, L.J., by observing thus :

"It is clear, however, that 'breach of duty' cannot be restricted to those giving rise to causes of action in which the infliction of actual damage is an essential element, for the words in parentheses expressly extend to a duty which exists by virtue of a contract and the infliction of actu_al damage is not an essential element in an actfon for breach of contractual duty."

In other words, it was a case of a statute where the parentheticel portion occurring therein expressly indicated the contrary intention-con- H trary to the contention urged and, therefore, the principle of noscitur a sociis was not applied.

14-152SCl/81

In the result the appeal is allowed and the view of the lower anthorities is set aside and the sale in question is declared to be not exigible to tax under Entry No. 15 of the concerned Notification dated May

30, 1975 .. In the circumstance, there will be no order as to costs.

N.V.K.

Appeal allowed.

RAINBOW STEELS LTD. AND ANR

January 30, 1981

V. D. TULZAPURKAR

R. S. PATHAK, JJ

Uttar Prlldcsh Sales Tax Act 1948

S. 3A

section 3A

Sales Tax Act, 1948

May 30, 1975

section 35

[1960] 2 S.C.R. 942

V. M. Tarkunde

B. R. Sabharwal

S. Markandey

TULZAPURKAR

Sales Tax Act 1948

Rampur

U.P. State Electricity Board

May 29, 1974

September 30, 1975

U.P.

Lucknow

Section 35

Sales Tax Act 1948

February 19, 1977

Allahabad High Court

Lucknow Bench

April 18, 1979

Section 3A

Sales Tax Act, 1948

First Schedule

Uttar Pradesh

U.P.

State Electricity Board

Industrial Disputes Act, 1947

Diplock

[1960] 2 SCR 866

[1960] 2 SCR 942

May

30, 1975


STATE OF MAHARASHTRA A v.

KAPUR CHAND KESARIMAL JAIN

January 30, 1981

[A. D. KosHAL, v. BALAKRISHNA BRAD! AND R. B. MISRA, JJ.] B

Probation of Offenders Act-Section 4--Criteria for application of section.

The respondent was convicted for offences under section 135 of the Customs Act and the Defence of India Rules for smuggling contraband gold into the country and was variously sentenced. When his appeal came to this Court, the C case was remanded to the High Court for a fresh decision.

On remand the High Court accepted the prayer of the respondent that he be given the benefit of section 4 of the Probation of Offenders Act on the grounds that the contraband golCI recovered from him had been confiscated; that he had been facing criminal litigation for a period of sen years which resulted in a lot of monetary expense and mental agony on his part; that he ¥/as behind the bars for a period of five months, that no other case D on the criminal side was pending against him and that he was not in a position to pay any fine.

In appeal to this Court it was contended on behalf of' the State that in giving the benefit of section 4 of the Act, the High Court did not exercise its discretion properly.

Allowing the appeal,

HELD : Recourse to section 4 was not at all called for, the time Jag between the commencement of the trial and the pronouncement of the impugned judgn1ent notwithstanding.

[737F-G]

One of the major criteria in determining whether the benefit of the provisions of section 4 of the Act should be given to the offender or not is the nature of the offence.

The other relevant factors are the age of the offender and the circumstances in which the offence was committed. [737B-C]

In the instant case none of these factors goes to help the respondent because he was not a immature youth at the time of the commission of the offences; he was not less than 24 years of age then. The offences involved possession of a large quantity of contraband gold.

That he was apparently a regular smuggler is evident from the fact that a large quantity of gold with foreign marking and a number of empty jackets meant for storage of the gold were found in his possession. The fact that such offence had become rampant and had already endangered the economy of the nation is part of current history and a Court cannot look upon the present state of affairs with equanimity and deal with such offences leniently. [7370.E]

There is nothing on the record to show that the respondent was_ not in a H position to pay any fine.

[737F]

SUPREME COURT REPORTS

[1981] 2 S.C.R.

CRIMINAL APPELLATE JURISDICTION' : Criminal Appeal No. 365 of 1975.

Appeal by Special Leave from the Judgment and Order dated • 26-6-1973 of the Bombay High Court in Criminal Appeal No. 504/72.

B V. S. Desai and M. N. Shroff for the Appellant.

Anil Kumar Gupta for the Respondent.

The Judgment of the Court was delivered by

KosHAL, J .-The respondent in this case was convicted by the Additional Chief Presidency Magistrate, 19th Court, Esplanade, Bombay for an offem:e under clause (a) read with clause (i) of section 135 of the Customs Act, another under clause (b) read with clause (i) of that section and still another under Rule 126(H) (IA) read with Rule 126-P(ii) & (iv) of the Defence of India Rules.

He was sentenced to rigorous imprisonment for two years and a fine of Rs. 20,000/- and in default of payment of fine to rigorous imprisonment for 4-1 /2 months on each of the first two counts, and to rigorous imprisonment for six months and a fine of Rs. 10,000 /- on the third count, the sentence in default of payment of fine being rigorous imprisonment for 3 months.

The conviction recorded against and the sentence imposed upon the respondent were challenged by him right upto this Ccrurt which remanded the case to the Bombay High Court for a fresh decision. Before the High Court, no challenge was made after remand to the conviction and the only prayer made was that the respondent be given the benefit of Section 4 of the Probation of , Offenders Act (hereinafter referred to as the Act). That prayer was accepted by the High Court on the following five grounds :-

(a) The contraband gold recovered from the respondent (which amounted to 2015 tolas) bas been confiscated by the Customs autho-- ties.

(b) By the time the High Court pronounced its judgment after remand, the respondent had been facing criminal litigation for a period of 7 years which resulted in a lot of monetary expense and mental agony on his part. ( c) The respondent had already been behind the bars for a period of 5 months.

H ( d) No other case on the criminal side was pending against the respondent. ( e) The respondent was not in a position to pay any fine.

MAHARASHTRA v. KAPUR CHAND (Koshal, I.) 737

It has been vehemently argued on behalf of the State by Mr. Desai that in giving the benefit of Section 4 of the Act to the respondent, the High Court did not exercise its discretion properly and we find ourselves in agreeqient with him in spite of the learned arguments advanced by Mr. Gupta appearing as amicus curiae in support of the impugned judgment.

We may mention at the very outset that under Section 4 of the Act, the nature of the offence is one of the major ctifilria for determining whether benefit of its provion§ is to be given to the concerned offender or not.

His age would be another relevant factor.

The circumstances in which the offence was co=itted may be a third important consideration. None of these factors, as appearing in the present case, goes (o help !lie respondent.

The respondent was not an innnature youth at the time of the commission of !he 3 offences brought home to him, being no Jess than 24 years of age.

The offence committed by him, as already pointed out, in'."olved possession of no !es~ than 2015 tola.s of contraband gold and it may w_ell be that the respondent was a regular smuggler, for had that not been the case, there is no reason why he should have been found in possession of such a huge quantity of gold with foreign markings and a number of empty jackets meant for storage of the precious metal. From one point of view the offence may not be considered heinous as it merely contravenes a Jaw prohibiting illegal gain simpliciter, there being no clement of detriment to the life and liberty of others, but then the fact that such offences have become rampant and have already endangered the economy of the nation is part of current history and this Court cannot look upon the present state of affairs with equanimity and deal with the commission of such offences leniently. Nor do we find that there was any material whatsoever on the record to justify the observation by the High Court that the respondent was not in a position to pay any fine.

In this view of the matter, we think that recourse to section 4 of the Act was not at all called, for the time-lag between the commencement of the trial and the pronouncement of the impugned judgment notwithstanding. Consequently, we set aside that judgment in so far as it concerns the use of that section and restore instead the conviction recorded against and the sentence imposed upon the respondent by the trial Court on each of the three counts. He shall be taken into custody forthwith.

The appeal is disposed of accordingly.

N.K.A.

Appeal allowed.

15-152 SCI/81

STATE OF MAHARASHTRA

KAPUR CHAND KESARIMAL JAIN

January 30, 1981

A. D. KosHAL

R. B. MISRA, JJ.

Probation of Offenders Act

Section 4

section 135

Customs Act

section 4

Probation of Offenders Act

section 4

section 4

section 4

B V. S. Desai

M. N. Shroff

Anil Kumar Gupta

KosHAL

section 135

Customs Act

Bombay High Court

Section 4

Desai

Section 4

Gupta

Section 4

section 4


A MANAGING DIRECTOR, CHALTHAN VIBHAG SAHAKARl

KHAND UDYOG, CHALTHAN, DIST. SURAT

GOVERNMENT LABOUR OFFICER & ORS.

B February 4, 1981

[A P. SEN AND E. S. VENKATARAMIAH, JJ.]

Paynient of Bonus Act, 1965-Section 2(21)-}Vhether the exprcsion 'salary or wage• in s.2(21) of the Act covers retaining allowance during tfte off season granted to the 1vorkn1en in the seasonal estahlislunent of the sugar C factory of the Udyog.

The appellant whkh runs a sugar factory, treated the retaining allowance paid to the workmen during the off-season as part of their wages for the purpose of the Employe_es' Provident Fund Act, 1972, but not for the purpose of the Payment of Bonus Act, 1965.

On a reference of an industrial dispute, the Industrial Court, Gujarat made an award holding that the allowance cannot D be included in wages or remuneration for the purpose of calculation of bonu">.

]<'

The Gujarat High Court set aside the a\vard in writ petition and held that the allo\vance fell within the definition of the expression 'salary or wage' in s. 2(21) of the Act. The appellant sought special leave to appeal under Art. 136 of the Constitution.

Dis1nissing the special leave petition, the Court.

lJELD : The retaining allowance paid to the employees during the off-season 1n the sugar industry partakes the nature of deferred wages on a lo\Yer scale and falls within the definition of the expression 'salary or wage' within the meaning of s.2(21) of the Payn1ent of Bonus Act, 1965 and, therefore, must be taken into account for the purpose of calculation of bonus payable under s.-10 of the Act.

The definition of the expression 'salary or wage' as given in s.2(21) of the Act is wide enough to cover the retaining allowance granted to the workmen during the off-season.

The retaining allowance is nothing l:a.lt remuneration correlated to service and it would be a misnomer to call it an allowance. It does not fall within the purview of clause (i) of the exclt¥ionary clause of s.2(21) but comes within the substantive part of the definlion uE 'salary or wage' ins. 2(21) of the Act.

[741A-D]

CIVIL APPELLATE JURISDICTION : Special Leave Petition (Civil) No. 1122 of 1981.

From the Judgment and Order dated 28-11-1980 of the Gujarat High Court in Special Application No. 2003 /80.

F. S. Nariman, TI. K. Puri and Arnn B. Desai for the Petitioner.

Charan/al Salm for Respondent No. 3.

The Order of the Court was delivered by

SEN, J.-The controversy in this case is whether for the purpose of bonus to the workmen employed in the Chalthan Vibhag Sahakari Khand Udyog, Chalthan, which is a seasonal establishment, retaining allowance paid to such workmen should be regarded as remuneration or wages under the Payment of Bonus Act, 1965. The question arises under the following circumstances :

The Industrial Court, Gujarat, by its Award dated July 11, 1980 held that the retaining allowance pairt to the. workmen could not be included for the purpose of calculation of bonus and, therefore. the demand of the workmen was not justified. Thereupon, the workmen challenged the Award by a Writ Petition in the Gujarat High Court.

The High Court by its judgment dated December 15, 1980 set aside the Award of the Industrial Court and held that the. retaining allowance falls within the definition of the expression 'salary or wage' given in s. 2(21) of the Payment of Barrus Act, 1965 so as to attract the payment of bonus in the context thereof under s. 10 of the Act.

For a proper understanding of the question involved, it is necessary •to state a few facts. Chalthan Vibhag Sahakari Khand Udyog runs a seasonal factory which crushes sugarcane and produces sugar.

It does not work for all the 12 months in year.

There is an offseason during the year during which the factory remains closed. Fnr this off-season during which the workmen suffer forced idleness, full wages are not paid. There are several categories of workmen employed by the management. There are unskilled workmn who are paid 10% of the basic wages and dearness allowance as retaining allowance during the off-season. There are also semi-skilled workmen who get 25 % of the basic wages and dearness allowance as retaining allowance. The rest, i.e., skilled 'C' to supervisory class of workmen, are paid at the rate of 50% of basic wages and dearness allowance as retaining aUowance during the off-season. The retaining allowance is paid to these workmen after 40 days of work in the next crushing season. Workmen in sngar factories in the State of Gujarat usually come from the State of Uttar Pradesh.

During the off-season, they engage themselves in different occupation. Retaining allowance is a sort of incentive which is offered to the workmen to attract them to return to the factory after the expiry of the off-season.

The retaining allowance is paid in pursuance of the Report of thel Second Central Industrial Wage Board on the Sugar Industry and

subsequently in implementation of the Award of the Tndustrial ronrt.

H Gujarat, based on the adoption of the U.P. Pattern Scales of Wages :md Dearness Allowance for workmen employed in all sugar factories

SUPREME COURT REPORTS

[1981] 2 S.C.R.

working by vacuum Pan Manufacturing Process. Jn the Management of Shri Cha/than Vighab Khand Udyog Sahakari Mandali Ltd. etc. v. B. S. Barot and Anr. etc.(•) the Management challenged the Award on other grounds but did not question its liability to pay retaining allowance to the seasonal workmen. The payment of the retaining allowance by the Management to the workmen during the off-season is obligatory.

The Management treated the retaining allowanc to be part of wages for purposes of the Employees' Provident Funds Ae, t, l 952 but not for purposes of the Payment of Bonus Act, 1965.

The obligation to pay bonus to the workmen is creted by ' 10 of the Act.

Under s. 8 thereof, every employee is eligible for payment of bonus.

The question is whether retaining allowance should be regarded as remuneration or wages for purposes of computation of bonus.

The decision whether the retaining allowance forms '""t of 'salary or wage' must tum on the construction of the definition of that expression contained in s. 2(2.ll of the Act which. in so far as it is relevant. reads :

2(1). "salary or wage" means all remuneration (other than remuneration in respect of overtime work) capable of . being expressed in terms of money which would, if the terms of employment, express or implied, were fulfilled, be payable to any employee in respect of his employment or of work done in such employment and includes dearness allowance (that is to say, aII cash payments, by whatever name called, paid to an employeR on account of a rise in the cost of livin.11). but does not include-

(i) any other allowance which the employee is for the time being entitled to;

xx xx xx

There can be no donbt that the retaining allowance paid to thP- ~- workmen dnring the off-season falls within the substantive part of the ifeflnition of the expression 'salary or wage'.

It nndoubtedlv is remuneration which would, if the terms of employment, express or G imolied, were fulfilfod, be payable to any employee in respect of his employment.

The retaining allowance is a remuneration on a lower scale which is paid to the workmen by the management during tl1e off-season for their forced idleness.

The pavment of such allowance b; v the management to its workmen during the off-season when there is no work and when the factory is not working, is indicative of t]1e ( H fact that it wants to retain their services for thPnext crushing season.

The very fact that retaining allowance is paid to the workmen dearlv

(!) [1980] I SCR 509,

shows that their services are retained and, therefore, the jural relationship of employer and the employee continues.

It is true that a workman may "not return to work and may take up some other job or employment. In that event, be forfeits the right of payme"nt of the retaining allowance.

But when the workmeh returns to work when !he next crushing s•oason starts, the payment of retaini11g allowa11ce during the off-season, partakes the nature of basic wag•2 on a diminished scale.

The definition of the expression 'salary or wage' given in s. 2 (21) of the Act is wide enough to cover the payment of retaining allowance to the workmen.

It is nothing but remuneration correlated to service and it would be a misnomer to call it an allowance.

The retaining allowance does not fall witjl.in the purview of clause

(i) of the exclusionary clause of s. 2(21), but comes within the substantive part of the definition of 'salary or wage' in s. 2(21) of the Act.

Tue retaining allowance cannot be construed to be any O\her allowance which the employee is, for the time being, entitled.

The High Court was, therefore, justified in holding that the retaining allowance paid to the seasonal employees was a part of iheir 'salary or wage' within the meaning of s. 2(21) of the Act and, therefore, must be taken into account for the purpose of calculation of bonus payable under the Payment of Bonus Act, 1965.

For these reasons, the judgment of the High Court is upheld.

s. R.

Petition dismissed.

MANAGING DIRECTOR, CHALTHAN VIBHAG SAHAKAR KHAND UDYOG, CHALTHAN, DIST. SURAT

GOVERNMENT LABOUR OFFICER & ORS

A P. SEN

E. S. VENKATARAMIAH, JJ.

Paynient of Bonus Act, 1965

Section 2(21)

Provident Fund Act, 1972

Payment of Bonus Act, 1965

Industrial Court, Gujarat

Gujarat High Court

s. 2(21)

Art. 136

Bonus Act, 1965

CIVIL APPELLATE JURISDICTION

F. S. Nariman

K. Puri

Arnn B. Desai

SEN

Payment of Bonus Act, 1965

July 11, 1980

December 15, 1980

s. 2(21)

Payment of Barrus Act, 1965

s. 10

Chalthan Vibhag Sahakari Khand Udyog

Gujarat

Uttar Pradesh

Payment of Bonus Act, 1965

s. 8

s. 2

s. 2(21)

s. 2(21)

s. 2(21)

Payment of Bonus Act, 1965


STATE OF TAMIL NADU

11.

HIND STONE ETC.

February 5, 1981

[R. S. PATHAK AND 0. CHINNAPPA REDDY, JJ.J

Mines and Minerals (Regulation and Development) Act, 1951-Section 15-Rule 8-C of Tamil Nadu Minor Mineral Concession Rules, 1959-Scope of-Rule, if ultra vires the rule making power of the State Government- Whether l'iolative of Articles 301 and 303 of the Constitution.

C lnJerpretation-"Regulation" whether includes ''prohibition".

The Mines and Minerals (Regulation & Development) Act, 1957 (Central Act) 'vas enacted in the public interest to enable the Union to take under its contro1 the regulation of mines and the development of minerals. Exercising its power u'.lder this Act, the Central Government declared by a notification that b?ack granite was a minor mineral.

Exercising power vested in it by section 15 of the Act, the State Government made the Tamil Nadu Minor Mineral Concession Rules, 1959. Rule 8 of the Rules pre.scribes the procedure for lease of quarries to private persons.

Bv rule 8C, introduced in 1977. leases for quarrying black granite in favour of private persons were banned.

Subrule (2) of this rule enacts that the Statt" Government themselves may engage in quarrying black granite or grant leases for quarrying black granite in favour of any corporation v,, holly O"Wned by the State Government.

Several applications for the grant of fresh leases as well as for the rene\Val of leases for quarrying black granite belonging to the State Government were submitted to the State Government. sOme prior to the introduction of rule 8C and some after the rule came into force. The State Government considered all the applications and rejected all of them in view of nlle SC.

The respondents filed writ petition questioning the vircs of Rule SC on various grounds.

The High Court stn1ck do\vn Rule 8C on the ground fhat it exceeded the rule making power given to the State Government and held that it was not open to the appellant Government to keep the applic~1tions pending for a long time and then to dispose them of on the basis of n rule \vhich had come into force later.

As a result all the aprlications were disposed G of without reference to rule 8C.

The appellant contended that : (T) The approach of the High Court was vitiated by its failure to notice the crucial circumstance thnt the minerals belonged to the Government, (TI) The respondents had no vested or indefe<lsible right to obtain a lease or :i renewal to Quarry the minerals, (TIT) There \Vere good reasons for banning the grant of lease to quarry black granite to private parties and (IV) The Government could not be compelled to grant leases \~1hich would result in the destn1ction of the mineral resources of th~ or;:nntry.

On behalf of the respondent it was submitted that (l) the ouestion of ownership of the minerals was irrelevant, (TI) It was not open to the appe11ant

··~

TAMIL NADU V. HIND STONE 743

to exercise its subordinate legislative function in a manner to benefit itself as owner of the minerals, nor was it open to the appellant to create monopoly by such means, (Ill) There was violation of articles 301 and 303 of the Constitution, (IV) Rule 8-C had no application to renewals and (V) That in any event it would not have the effect Qf affecting applications made more

than 60 days before it can1e into force.

Accepting the appeals, it was

l-lliLD ; llule 8-C was 111ade in bonafi<le exercise 0£ the rule making power of the Appellant Government and not in its misuse to advance its own self interest. Making a rule which is perfectly in order is not to be considered a n1isuse of the rule making power, if it advances the interest of State, which really 111eans the people of the State.

Rivers, forests, minerals and as such other resojJrces constitute a nation's natural wealth.

These resources are not to be frittered away and exhausted by any one generation.

Every generation owes a duty to all succeeding generations to develop & conserve the natural resources qf the nation in th~ best possible way.

It is in the interest of mankind. It is in the interest of the Nation. It is recognised by Parliament.

Parliament bas declared that it is expedient in the public interest that the Union should take under its control the regulation of. mines and the development of minerals. [751C-D, 753G-H]

2. The Public interest which induced Parliament to make the declaration contained in S.2 of the Mines & Minerals (Regulation and Development) Act,

i 957 has naturally to be the pnramount consideration in all matters concerning the regulation of Mines & Minerals. Parliament's Policy is clearly discernible froln the provisions of the Act. It is the conservation and the prudent an<l discriminating exploitation of minerals, with a view to secure maximum

benefit to the community. There are clear sign posts to lead and guide the E subordinate legislating authority in the matter of the making of rules.

[751G-H]

3. The ether proyisions of the Act, particularly sections 4A, 17 and 18, indicate that the rule making authority under S.15 has not exceeded its powers in banning leases for carrying black granite in favour of private parties and in stipulating that the State Government themselves may engage in quarrying black granite or grant leases for quarrying black granite in favour of any corporation wholly owned by the State Government.

To view such a rule made by the Subordinate legislating body as a rule made to benefit itself merely l)ecause the State Government happens to be the subordinate legislating body is, but, to take too narrow a view of the functions of that body.

[751H, 752A-BJ

If. C. Naraya11appa & Ors. v. Stale of Mysore & Ors. [ 1960] 3 SCR 742 G @ 745, 752-753 referred to.

5. 'Vbenever there is a switch over from 'private sector' to 'public sector• it does not necessarily follow that a change of policy requiring express legislative sanction is involved.

It depends on the subject and the statute.

But if a decision is taken to ban private mining of a single minor mineral for the purpose of conserving it, such a ban, if it is otherwise within the bounds of the authority given to the Government by the Statute, cannot be said to B involve any change of policy. The policy of the Act rem&ins the same and

it is, the conservation and the prudent and discriminating exploitation of

SUPREME COURT REPORTS [1981] 2 s.c.il.

minerals, with a view to secure maximum benefit to the community, E.'Xploitation of minerals by the private and/ or the public sector is contemplated.

If in the pursuit of the avowed policy of the Act, it is thought exploitation by the public sector is best and wisest in the case of a particular mineral and1 in consequence, the authority competent to make the subordinate iegislation makes a rule banning private exploitation of such mineral, which was hitherto permitted. There is no chaJlSC of policy merely because that was previously permitted is no longer permitted. [756A-D]

AJunicipal Corporation of the City of Toronto v. Virgo [1896] A.C 88, AtJorney General for Ontario v. Attorney General fol' the Dominion and the Ditillers and Brewers Association, [1896] A.C. 348, State of Uttar Ptadcsh and Others v. Hindustan Alunzinium Corporation Ltd. and Ors., [19i9] 3 SCR 709, G. K. Krishnan etc. v. The State of Tamil Nadu ilnd .1i11r. t:tc. [1975] 2 SCR 7 115 @ 721, Co1n1nonwealth of Australia v ..

Bank of New South Wales [1950) A.C. 235 referred to.

6. The restrictions, freedom from which is guaranteed by Art. 301 would be such restrictions as directly and immediately restrict or impede the free How or movement of trade. The At and the rules properly made thereunder are, therefore, outside the purview of Art. 301.

Even otherwise Art. 302 which enables Parliament, by law, to impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest also furnishes an answer to the claim based on the alleged contravention of Art. 301.

[757F-H, 758A-B]

7. The Mines and Minerals (Regulation and Development) Act is a law enacted by Parliament and declared by Parliament to be expedient m the public interest. Rule 8-C has been made by the appellant Govt. by notification in the official Gazette, pursuant to the poWer conferred upon it by sec. 15 of the Act. A statutory rule, while ever subordinate to the parent statute, is, otherwise, to be treated as part of the statute and as effective. "Rules made under the Statute must be treated for all purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the act and are to be judicially noticed for all purposes of construction or obligation. [758B-G]

Atiabari Tea Co. Ltd. v.

State of Assam & Ors. [1961] 1 SCR 809 The Automobile Transport Rajasthan Ltd., v. State of Rajasthan & Ors. [1963] 1 SCR 491 and State of U.P. & Ors. v. Babu Ram Upadhya [1961] 2 SCR 679, referred to.

8. Rule 9 makes it clear that a renewal is not to be obtained automatically, for the mere asking.

The applicant for the renewal has, particularly, to satisfy the Government that the renewal is in the interests of mineral development and that the lease amount is reasonable in the circumstances of the case.

These conditions have to be fulfilled in addition to whatever criteria is applicable at the time of the grant of lease in the first instance, suitably adapted, of. course, to grant of renewal.

Not to apply the criteria applicable in the first instance may lead to absurd results. Therefore rule 8-C is attracted in considering applications for renewal of leases also.

[759A-D]

9. While the applications should be dealt with within a reasonable time, it cannot on that account be said that the right to have an application disposed

of in a reasonable time clothes an applicant for a lease with a right to have the application disposed of on the basis of the rules in force at the time of the making of the application. No one has a vested right to the grant or rene\val of a lease and none can claiin a vested right to have an application for the grant or renewal of a lease dealt with in a particular way, by applying particular provisions.

In the absence of any vested rights in any one, an application for a lease has necessarily to be dealt with according to the rules in force on the date of the dJsposal of the application despite the fat_ that there is a long delay since the making of the application.

[759G-H, 760!.~

10. The language of Rule 8-C is clear that it can not have any application to lands in which the right to minerals belongs to the applicants themselves.

In the case of lands in which the right to minerals belongs to private owners and those owners seek permission to quarry black granite the applications will have to be dealt with under the relevant rules in Sec. III of the Tamil Nadu Minor Mineral concession Rules.

Rule 8-C does not impose a general ban on quarrying black granite but only imposes a bar on the grant of leases for quarrying black grnnite.

[760D-F]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2602-2604 of 1980.

A\ppeals by special leave from the Judgment and Order dated 20-6-1980 of the Madras High Conrt in Writ Petition Nos. 4467 of 1977, 2933 and 4793 of 1978 .

Lal Narain Sinha Att. Genl. of India for the Appellant in CA

2602/80.

Soll l. Sorabjee for the Appellant in CA 2603/80.

R. Krishnamurthy Adv. Genl. for the appellant in CA 2604/80.

A. V. Rangam and K. Venkatawani for the Appellant in all the matters.

Y. S. Chitale (Dr.), Mrs. S. Ramachandran and Mukul Mudgal for Respondent Nos. 11 and 42.

P. Chidambaram and A. S. Nambiyar for the Respondents.

F. S. Nariman, A. V. Rangam and R. N. Sachthey for the interveners.

V. Srinivasan, A. Venkatarayana and P. N. Ramalingam for Respondent No. 45.

The Judgment of the Court was delivered by

CHINNAPPA REDDY, J.-Entry 23 of List II of the Seventh Schedule to the Constitution is, "Regulation of mines and mineral R development subject to the proviJ; ions of List I with respect to regulation and development under the control .of the Union".

Entry 54

of List I of the Seventh Schedule is "Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest". Thus while 'regulation of mines and mineral development' is ordinarily a subject for State legislation.

Parliament may, by law, declare the extent to which control of such regulation and development by the Union is expedient in the public interest, and, to that extent, it becomes a subject for Parliamentary legislation.

Parliament has accordingly enacted the Mines and Minerals (Regulation and Development) Act, 1957. By S. 2 of the Act it is declared that it is expedient in the public interest that! the Union should take under its control the regulation of mines and the development of minerals to the extent thereafter provided. It is now common ground between the parties that as a result of the declaration made by Parliament, by S. 2 of the Act, the State legislatures are denuded of the whole of their legislative power with resp_ect to regulation of mines and mineral development and that the entire legislative . field has been taken over by Parliament. That this is the true position in law is clear from the pronouncements of this Court in The Hingir Rampur Coal Co. Ltd. & Ors. v. The State of Orissa & Ors.( 1) State of Orissa v. M.A., Tulloch & Co.(2) and Baijnath Kedia v. State of Bihar & Ors.(') S. 3 of the Mines and Minerals (Regulation and Development) Act, 1957, defines various expressions occurring in the Act. S. 3 (a) defines 'minor minerals' and it includes any mineral declared to be a minor =era! by the Central Government by a notifica tion in the Official Gazette. 'Black granite' has been so notified by the Central Government as a minor mineral. Section 4 to 9A are grouped under the heading 'General Restrictions on undertaking prospecting and mining operations'. These provisions as well as Sections 10 to 13 are made inapplicable to 'minor minerals' by S. 14. S. 4 prohibits all prospecting or mining qperations except under a licence or a lease granted under the Act and the rules made thereunder.

S.4A(l) enables the State Government on a request made by the Central Government in the interest of regulation of mines and mineral develdpment to terminate a mining lease pre-maturely and grant a fresh mining lease in favour of a Government Company or Corporation owned or controlled by Government.

Perhaps because s.4A(l) is inapplicable to minor minerals because of the provisions of S.14, S.4A(2) has been expressly enacted making somewhat similar provision, as in S.4A(l), in of 'minor minerals' also. S.4A(2)

(I) [1961] 2 SCR 537

(2) (1964) 4 SCil 461.

(3) [1970) 2 SCil 100.

J enables the State Government, after consultation with the Central Government, if it is of opinion that it is expedient in the interest of .) regulation of mines and mineral development so to do, to prematurely terminate a mining lease in respect of any minor mineral and grant a fresh lease in respect of such mineral in favour of a Government Company or Corporation owned or controlled by Government. S.5 imposes certain restrictions on the grant of prospecting licences and mining leases. S.6 prescribes the maximum area for which a prospecting licence or mining lease may be granted.

S. 7 prescribes the period for which prospecting licences may be granted or renewed.

S.8 prescribes the period for which mining leases may be granted or , renewed. S.9 provides for the payment of royalty and S.9A for the payment of dead rent.

Sections 10, 11 and 12 constitute a group of sections under the title 'Procedure for obtaining prospecting licences or mining leases in respect of land in which the minerals vest in the Government'.

S.10 provides for making applications for prOSiP<:cting licences or mining leases in respect of any land in which the minerals vest in the Government. S.11 provides for certain preferential rights in favour of certain persons in the matter of grant of mining leases.

S. 12 prescribes the Register of prospecting licences and mining leases to be maintained by the State Government.

S.13 empowers the Central Government to make rules for regulating the grant of prospecting licences and mining leases.

In particular we may mention that S.13(2) (a) empowers the Central Government to make rules providing for 'the persons by whom, and the manner in which, applications for prospecting licences or mining leases in respect of J:oand in which the minerals vest in the Government may be made and the fees to be paid therefor". S.13(2) (f), we may add, empowers the Central Government to make rules providing for 'the procedure for obtaining a prospecting licence or a mining lease in respect of any J:oand in which the minerals vest in a person other than the Government and the terms on which, and the conditions subject to which, such

~. licence or lease may be granted or renewed'.

S. I 4 makes the pro-- visions of Sections 4 to 13 inapplicable to minor minerals. S.15 empowers the State Government to make rules for regulating the grant of quarry leases, mining leases and other mineral concessions in respect of minor minerals and purposes connected therewith.

S.15(3) provides for the payment of royalty in respect of minor

J minerals at the rate prescribed by the rules framed by the State Government. S.16 provides for the modification of mining leases \ granted before October 25, 1949. S.17 enables the Central Government, after consultation with the State Government to undertake prospecting or mining operations in any area not already held under any prospecting licence or mining lease, in which event the Central

A Government shall publish a notification in the official Gazette giving the prescribed particulars. The Central Government may also declare .that no prospecting licence or mining lease shall be granted in respect pf any land specified in the notification. S. l S casts a special duty on the Centra; I. Government to take all necessary steps for the conservation and development of minerals in India.

Sections 19 to 33 are B various miscellaneous provisions with which we are not now concerned.

Pursuant to the power vested in it under S.15 of the Mines and Minerals (Regulation and Development) Act, 1957, the Government

of Tamil Nadu has made the Tamil Nadu Minor Mineral Concession 1

Rules, 1959. Section II of the rules consisting of rules 3 to 16is_ entitled "Government lands in which the minerals belong to the Government".

Rule 8 prescribes the procedure for the kase of

quarries to private persons.

The ordinary procedure is to publish a notice in the District Gazette inviting applications, thereafter to hold

n auction and finally to grant a lease to the highest bidder. Rule SA which was introduced by way of an amendment in 1972, provides for a special procedure for the sanctioning of leases in favour of applicants who require the minerals for their existing industries or who have an industrial programme for the utilisation of the mineral in their own industry.

Rule SB was introduced in 1975 making special provision for the grant of leases for quarrying b1'ack granite.

The rule is as follows :

"S-B. Lease of quarries in respect of black granite to private persons (1) Notwithstanding anything to the contrary contained in rules 8 and SA, the authority competent to grant leases in respect of quarrying black granite shall be the State Government.

(2) An application for the grant of a quarrying lease in respect of any land shall be made to the Collector of thf.

District concerned in the prescribed form in triplicate and shall be accompanied by a fee of Rs. 1001-. The Collector shall after scrutiny, forward the application along with his remarks to the Director of Industries & Commerce who shall technically scrutinise the industrial programme given by the applicant and forward the application with his remarks to the Govetnment."

"(G. o. Ms. No. 993 Industries dt. 25-S-1975". Rnle 8-C was introduced by G. 0. Ms.

No. 1312 Industries dated December 2,

1977. By this rule leases for qaurrying black granite

TAMii, NADIJ v. HIND STONE (Chinnappa Reddy,!.) 749

ln favour of private persons are banned. Leases can only be granted in favour of a Corporation wholly owned by the State Government.

It is the vires of this rule which was nnder challenge before the High Court and is also under challenge now. It will be useful to extract the same. It is as follows :

"8-C Lease of quarries in respect of black granite to Government Corporation, etc.

( 1) Notwithstanding anything to the contrary contained in these rules, on and from 7th December, 1977 no lease for quarrying black granite shall be granted to private persons.

(2) The State Government themselves may engage in quarrying blaek granite or gmnt leases for quarrying black granite in favour of any corporation wholly owned by the State Government.

Provided that in respect of any land belonging to any private person, the consent of such person shall be obtained for

such quarrying or lease".

Rule 9 provides for renewal of leases and it is in the following terms :

"9. Renewal of lease.-{1) The Collector may on application renew for a further period not exceeding the period for which the lease was originally granted in each case if he is E satisfied that-

(i) such renewal is in the interests of mineral development, and

(ii) the lease amo)lnt is reasonable in the circumstances of the case.

(2) Every application for renewal shall be made to Col- 4 lector, sixty days prior to the date of expiry of the lease :

Provided that a lease, the period of which exceeds ten years shall not be renewed except with the sanction of the Director of Industries and Commerce".

A proviso was added to rule 9(2) in 1975 'Ind it said :

"provided also that the renewal for quarrying black granite shall be made by the Government".

) ~veral persons who held leases for quarrying black granite belonging to the State Government and whose leases were about to H expire, applied to the Government of Tamil Nadu for renewal of their leases.

In some of the cases applications were made long prior

to the date of G. 0. Ms. No. 1312 by which Rule SC was introduced.

Some applicatious were made after Rule S C came into force. There were also some applications for the grant of fresh leases for quarrying ( black granite. All the applications were dealt with after Rule S C came into force a.nd all of them were rejected in view of Rule

SC.

Several Writ Petitions were filed in the High Court questioning the vires of Rule SC on various grounds. Apart from canvassing the vires of Rule SC, it was contended that Rule SC did not aipply to grant of renewals of lease at all. It was also argued that in any event, in those cases in which the applications for renewal bad been made prior to the coming into force of Rule SC, their applications ....... should have been dealt with without reference to Rule

SC.

The---· -.....

Madras High Court while not accepting some of the contentions raised

on behalf of the aplicants, struck down Rule SC on the ground that it exceeded the rule making power given to the State Government under S.15 which, it was said, was only to regulate and not to prohibit the grant of mining leases. As a consequence all the applications were directed to be di!\JlOSed of without reference to Rule SC.

It was also observed that even if Rule SC was valid it applied only to the grant of fresh leases and not to renewals.

It was also held that it was not open to the Government to keep the applications pending for a long time and then to dispose them of on the basis of a rule which had come into force later. The State Government has come in appeal against the judgment of the Madras High Court while the respondent-applicants have tried to sustain the judgment of the Madras High Court on grounds which were decided against them by the Madras High Court.

The learned Attorney General who appeared for the Government F of Tamil Nadu submitted that the approach of the High Court was vitiated by its failure to notice the crndal circumstance that the minerals belonged to the Government and the applicants had no vested or indefeasihle right to obtain a lease or a renewal to quarry the mine-.

rals. There were good reasons for banning the grant of leases to quarry black granite to private parties and in the light of those reasons G the Government could not be compelled to grant leases which would result in the destruction of the mineral resources of the country. Shri

K. K. Venugopal, learned counsel who led the argument for the respondents submitted that the question of o_wnership of the minerals was irrelevant. In making the rules the State Government was acting as a delete and not as the owner of the minerals. He submitted that it was H not open to the State Government to exercise its subordinate legislative function in a manner to benefit itself as owner of the minerals, nor was it open to the State Government to create a monopoly by such means.

Accordin~ to Shri Venugopal creation of a monopoly in the State was essentially a legislative function and was incapable of delegation. It was claimed that there was violation of Articles 301 and 303 of the Constitution. It was further claimed that S. 15 of the Mines and Minerals (Regulation and Development) Act 1957, enabled the State Government to make rules to regulate the grant of leases and not to prohibit them. In any case it was said that Rule 8G had no application to renewals and tbat in any event it would not have the effect of affecting applications made more than 60 days befc:o it came into force.

Rivers, Forests, Minerals and such other resources constitute a nation's natural wealth.

These resources are not to be frittered away and exhausted by any one generation.

Every generation owes a duty to all succeeding generations to develop and conserve the natural resources of the nation in the best possible way. It is in the interest of mankind. It is in the interest of the Nation. It is recognised by Parliament. Parliament has declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals. It has enacted the Mines and Minerals (Regulation and Development) Act, 1957. We have already referred to its salient provisions. S. 18, we have noticed, casts a special duty on the Central Government to take necessary steps for the conservation and development of minerals in India.

S. 17 authorises the Central Government itself to undertake prospecting or mining operations in any area not already held under any prospecting licence or mining lease. S. 4A empowers the State Government on the request of the Central Government, in the case of minerals other than minor mineral,, to prematurely terminate existing mining leases and grant fresh leases in favour of a Government Company or Corporation owned or controlled by Government, if it is expedient in the interest of regulation of mines and mineral development to do so. In the case of minor minerals, the State Government is similarly empowered, after consultaticm with the Central Government. The public interest which induced Parliament to make the declaration contained in S. 2 of the Mines & Minerals (Regulation and Development) Act, 1957. has naturally to be the paramount consideration in all matters concerning the regulation of mines and the development of minerals. Parliament's policy is clearly discernible from the provisions of the Act. It is the conservation and the prudent and discriminating exploitation of minerals, with a view to secure maximum benefit to the community. There are clear sign posts to lead and guide the subordinate legislating authority in the matter of the making of roles. Viewed in the light shed by the other provisions of the Act, particularly sections 4A, 17 and 18

'I!'

it cannot be said that the rule making authority under S. 15 has exceeded its powers in banning leases for quaiTying black granite in favcur of private parties and in stipulating that the State Government themselves may engage in quarrying black granite or grant leases for quarrying black granite in favour of any corporation wholly owned by the State Government.

To view such a rule made by the Subordinate legislating body as a rule made to benefit itself merely because the State Government happens to be the subordinate legislatitng body, is, but, to take too narrow a view of the functions of that body.

The reasons that prompted the State Government to make Rule 8-C were explained at great length in the common counter affidavit filed on behalf of the State Government before the High Court. We find no good reason for not accepting the statements made in the counter affidavit.

It was said there :

"I submit that the leases for black granite are governed by the Tamil Nadu Minor Mineral Concession Rules 1959 under which ori14nally there was scope for auctioning of quarries of minor minerals.

In amendment i'5ned in the G.O. dated 6-12-1972. under Rule 8-A it was indicated that the Collector may sanction leases in favour of applicants who are having an industrial programme to utilise the minerals in their own industry.

This provision is applicable to all minerals including black granite..

However, it was found that there were several cases where lessees who obtained the black granite areas on lease by auction were not quarrying in a systematic and planned manner taking into consideration the welfare and safety measures of the workers as well as the conservation of minerals.

Even after the introduction of the amendment under Rule 8-A in most cases, the industry set up was of a flimsy nature more to circumvent the rule than to really introduce industry including mechanised cutting and polishing. The lessees were also interested only in obtaining the maximum profit in the shortest period of time without taking into consideration the proper mining and development of the mineral.

There was also considerable wastage of new materials due to wasteful mmmg.

Therefore, -Government issued a further amendment as Rule 8-B wherein the competent authority to grant leases in respect of the quarrying black granite was transferred from the Collector to the State Govenunent level.

H They also prescribed a standard form and an application fee to be paid with the application. The amendment states that l he Director of Industries and Commerce shall technically

scrutinise the industrial programme given by the applicant while forwarding the same to Government.

At the same time, in the G.O. issued along with amendment, it was stated that if any of the State Government Organisations like Tamil Nadu Small Industries Corporation Limited, Tamil Nadu Small Industries Development Corporation Limited, famil Nadu Industrial Development Corporation Limited is interested to obtain a lease ior black granite in a particular area, preference will be given to Government undertaking over other private entrepreneurs for granting the leases applied for by them.

However, in spite of these amendments to re.- gulate the grant of mining lease, there were a large number of lessees (exceeding 140), who were engaged in mining without proper technical guidance or safety measures etc. for the workers. These lessees made a strong representation to the then Government in 19 7 6 expressing that though they had given assurance to set up industries to use the granites they were not able to do so far various reasons. They also represented that they should be allowed to export the raw blocks of black granites. Therefore, Government had issued

a. Government Order dated 15-2-1977 relating to relaxation of the ban of export of raw blocks and provision for setting up a polishing or finishing unit was not made a pre-requisite.

They have also stated that the terms and conditions for the existing losses would remain in force. However, on an examination of the performance of the lessees over the pat several years, it h.as been found that excepting in a very few cases, none of the lessees had set up proper industries or developed systematic mining of the quarries.

The exports continue to be mainly on the raw b:ack granite materials and not cut and polished slabs. A large number of the leases were not operating ither due to speculation or lack of finance from the lessees.

Therefore, Government decided that there should be no further grant of ]ease to private entrepreneurs for black granite.

This was mentioned in G.0.Ms. No. 1312 Industries dated 2-12-1977.

We are satisfied that Rule 8C was made in bonafide exercise of the rule making power of the State Government and not in its misuse to advance its own self-interest. We however guard ourselves against being understood that we h&ve accepted the position that making a rnle which is perfectly in order to be considered a misuse of the rule making power, if it advances the interest of a State, which really means the people of the State.

One of the submissions on behalf of the respondents "'as that monopoly was a distinct legislative subject under entry 21 of List Ill of the Seventh Schedule to the Constitution and therefore monopoly, even in favour of a State Government can only be created by plenari and not subordinate legislation.

Parliament not having chosen to exercise its plenary power it was not open to the subordinate legislating body to create a monopoly by making a rule.

Our attention was invited to H. C. Narayanappa & Ors. v. Stare of Mysore & Ors.( 1) where it was held that the expression 'Commercial and industrial monopolies' in entry 21 of List Ill of the Seventh Schedule to the Constitution was not confined to legislation to control of monopolies _ .... but was wide enough to include grant or creation of commercial or - ..,. industrial m, onopolics in favour of the State Government, also.

We are unable to agree with Shri Venugopal's submission.

The very decision cited by him furnishes the answer. The validity of a scheme for nationalisation of certain routes made pursuant to the powers conferred by Chapter IV A of the Motor Vehicles Act was under attack in that case. One of the grounds of attack was that "by Chapter IVA of the Motor Vehicles Act, 1939,

"Parliament had merely attempted to regulate the procedure for entry by the States into the business of motor transport in the State, and in the absence of legislation expressly undertuken by the State of Mysore in that behalf, that State was E incompetent to enter into the arena of motor transport business to the exclusion of private operators;" Sustenance for the submission was sought to be drawn from the language of Art. 19 ( 6) (ii) which provides that nothing in Art. 19 ( l )

(g) shall 'prevent the State from making any law rel'ating to' 'the carrying on by the State, or by a Corporation owned or controlled by the State, of any trade, business, industry or service. whether to the exclusion, complete or partial, of citizens or otherwise'.

The argument was that the State or a Corporation owned or controlled by the State could carry on a trade, business, industry or senice to the exclusion. complete or partial, of citizens, only if the State made a Jaw relating to it.

The argument was repelled by the Court in these words :

"The plea sought to be founded on the phraseology used in Art. 19 ( 6) that the State intending to carry on trade or business must itself enact the law authorising it to carry on trade or business is equally devoid of force.

The exnression 'the State' as defined in Art. 12 is inclusive of the Government and Parliament of India and the Government and the Legisla-

,,_

(I) [1960] J SCR 742@ 745, 752-753.

ture of each of the States. Under entry No. 21 of the Concurrent List, the Parliament being competent to legislate for creating commercial or trading monopolies, there is nothing in the Constitution which deprives it of the power to create a co=erial or trading monopoly in the constituent States.

Article 19(6) is a mere saving provision : its function is not to create a [power but to immunise from attack the exercise of legislative power falling within its ambit. The right of the State to carry on trade or busine; s to the exclusion of others does not arise by virtue of Art. 19(6). The right of the State to carry on trade or business is recognised by Art. 29R: authority to exclude COID[petitors in the field of such trade or business is conferred on the State by entrusting power to enact laws under entry 21 of List III of the Seventh Schedule, and the exercise of that power in the context of fundamental rights is secured from attack by Art. 19(6).

In any event; the expression 'law' as defined in Art. 13(3)

(a) includes any ordinance, order, bye-law, rule, regulation, notification, custom, etc., and the scheme framed under s.68C may properly be regarded as 'law' within the meaning of Art. 19 ( 6) made by the State excluding private operators from notified routes or notified areas, and immune from the attack that it infringes the fundamental right guaranteed by Art. 19(1){g)".

Earlier in Rai Sahib Ram Jawaya Kapur & Ors. v. The State of Punjab('), before the Seventh Amendment of the Constitution by which the present Article 298 was substituted for the old Article, the question arose whether it was beyond the competence of the executive Government to carry on a business without specific Jegislatuve sanction. The answer was that it was not. What was said by the Court in that case was incorporated in the Seventh Amendment of the Constitution. In that case the facts were that the State of Punjab. by a series of executive orders had established for itself a monopoly in the business of printing and celling textbooks for use in schools.

The argument that legislative sanction was necessary to enable the State Government to carry on the business of printing and publishing text books was repelled and it was held that no fundamental right of

the petitioners who had invoked the jurisdiction of the Court had been infringed.

Another of the submissions of the learned counsel was that G.0.Ms.

No. 1312 dated December 2, 1977 involved a major change of policy. which was a legislative function and therefore beyond the competence

(1) [1955]2 SCR 225.

of a subordinate legislating body.

We do not agree with the submission.

Whenever there is a switch over from 'private sector' to 'public sector' it does not necessarily follow that a change of policy requiring express legislative sanction is involved.

It depends on the subject and the statute.

For example, if a decision is taken to impose a general and complete ban on private mining of all minor minerals, such a ban may involve the reversal of a major policy and so it may require Legislative sanction. But if a decision is taken to ban private mining of a single minor mineral for the purpose of conserving it, such a ban, if it is ctherw:se within the bounds of the authority given to the Government by the Statute, cannot be said to involve any change of policy. The policy of the Act remains the same and it is, as we said, the conservation and the prudent and discriminating exploitation of minerals, with a view to secure maximum benefit to the community.

Exploitation of minerals by the private and/ or the public sector is contempleted. If in the pursuit of the avowed policy of the Act, it is thought exploitation by the public sector is best and wisest in the case of a particular mineral and, in consequence, the authority competent to make the subordinate legislation makes a rule banning private exploitation of such mineral, which was hitherto permitted we are unable to see any change of policy merely because what was previously permitted is no longer permitted.

One of the arguments pressed before us was that Sec. 15 of the Mines and Minerals (Regulation and Development) Act authorised the making of rules for regulating the grant of mining leases and not for prohibiting them as Rule 8-C sought to do, a.nd. therefore, Rule 8-C was ultra vires Act, S. 15.

Well known cases on the subject right from Municipal Corporation of the City of Toronto v. Virgo('), and Attorney General for Ontario v. Attorney General for the Dominion and the Distillers and Brewers Association of Ontario (2) upto State of Uttar Pradesh & Ors. v. Hindustan Aluminium Corporation Ltd. & Ors.,(") were brought to our attention.

We do not think that 'Regulation has the rigidity of meaning as never to take in Prohibition'. Much df1Pends on the context in which the expression is used in the Statute aµd the object sought to be achieved by the contemplated regulation. It was observed by Mathew J. in G. K. Krishnan etc. etc. v. The State of Tamil Nadu & Anr. etc.,(') "the word 'regulation' has no fixed connotation.

Its meaning differs according to the nature of the thing to which it is applied".

Tn modern statutes concerned as they are with economic and social activities, 'regulation'

(!) [1896] A.C. 88. (2)

[1896] A.C. 348. (3)

[1979] 3 SCR 709. (4)

[1975] 2 SCR 715@ 711

must. of necessity, receive so wide an interpretation that in certain A situations, it must exclude competition to the public sector from the private sector.

More so in a welfare State. It was pointed out by the Privy Council in Commonwealth of Australia v. Bank of New South Wales(' )-and we agree with what was stated therein-that the problem whether an enactment was regulatory or something more or whether a restriction was direct or only remote or only incidental It. involved, not so much legal as political, social or economic consideration and tha.t it could not be laid down in no circumstances could the exclusion of competition so as to create a monopoly, either in a State or Commonwealth agency, to be justified.

Each case, it was said, must be judged on its own facts and in its own setting of time and circumstances and it might be that in regard to some economic activities and at some stage of social development, prohibition with a view to State monopoly was the only practical and reasonable manner of regulation.

The statute with which we are concerned, the Mines and Minerals (Development and Regulation) Act, is aimed, as we have already said more than once, at the conservation and the prudent and discriminating exploitation of minemls.

Surely, in the case of a scarce mineral, to permit exploitation by the State or its agency and to prohibt exploitation by private agencies is the most effective method of conservation and prudent exploitation.

If you want to conserve for the future, you must prohibit in the present. We have no doubt that the prohibiting of leases in certain cases is part of the regulation contemplated by Sec. 15 of the Act.

The submission of the learned counsel that the impugned rule contravened Articles 301 and 303 of the Constitution is equally without force.

Now, 'the restrictions freedom from which is guaranteed by Art. 301 would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade" (Atiabari Tea Co. Ltd. v. State of Asam & Ors.).(') And, "regulatory measures or measures imposing compensatory !'axes for the use of trading facilities do not come within the purview of restrictions contemplated by Art. 301". "They are excluded from the purview of the provisions of Part XIII of the Constitution for the simple reason that they do not hamper, trade, commerce or inter-course but rather facilitate them" The Automobile Transport Rajasthan Ltd. v. State of Rajasthan & Ors. (3).

The Mines and Minerals (Regulation and Development) Act is, without doubt a regulatory measure, Parliament having enacted it for the express purpose of "the regulation of mines :.nd the development of minerals".

The Act and the rules

(1) [1950) A.C. 235.

. (2) [1961] 1 SCR 809.

(3) [1963] I SCR 491.

properly made thereunder are, therefore, outside the purview of Art. 301.

Even otherwise Art. 302 which enables Parliament, by Jaw, to impose such restrictions on the freedom of trade, commerce or intercourse between one State l!_nd another or within any pmt of the territory of India as may be required in the public interest also furnishes an answer to the claim based on the alleged contravention of Art. 301. The Mines and Minerals (Regulation and Development) Act is a low enacted by Parliament and declared by Parliament to be expedient in the public interest.

Rule SC has been made by the State Government by notification in the official Gazette, pursuant to the power conferred upon it by Sec. 15 of the Act. A statutory rule. while ever subordinate to the parent statute, is, otherwise, to be treated as part of the statute and as effective. "Rules made under the Statute must be treated for 11ll purposes of construction or obligation exactly as if they were in the Act and are to be of the same effect as if contained in the Act and are to be judicially noticed for al! purposes of construction or obligation. . (State of U.P. & Ors. v. Babu Ram Upadhya)('); (See also Maxwell : Interpretation of Statutes, 1 lth Edn. pp. 49-50).

So, Statutory rules made pursuant to the power entrusted by Parliament are law made by Parliament within the meaning of Art. 302 of the Constitution. To hold otherwise would be to ignore the complex demands made upon modern legislation which necessitate the plenary legislating body to discharge its legislative function by laying down broad guidelines and standards, to lead and guide as it were, leaving it to the subordinate legislating body to fill up the details by making necessary rules and to amended the rules from time to time to meet unforeseen and unpredictable situations, all within the framework of the power entrusted to it by the plenary legislating body.

State of Mysore v. H. Sanjeeviah(') was cited to us to show that rules did not become part of the statute. This was a case where by reference to Sec. 77 of the Mysore Forest Act which declared the effect of the rules, it was held that the rules when made did not become part of the Act.

That was apparently because of the specific provisions of Sec. 77 which while declaring that the rules wonld have the force of lllw stopped short of declaring that they would become part of the Act. In the absence of any express provision, as now, the ordinary rule as enunciated in Maxwell and State of Uttar Pradesh & Ors. v. Babu Ram Upadhya (supra) would perforce apply.

The next question for consideration is whether Rule SC is attracted when applications for renewal of leases are dealt with. The argument JI was that Rule 9 itself lllid down the criteria for grant of renewal of leases and therefore rule SC should be confined, in its application, to

(I) [1961] 2 SCR 679 @ 702.

(2) [1967] 2 SCR 361.

'JAMIL NADU v. lllNDSTONE (Chinnappa Reddy, J.) 759

grant of leases in the first instance. We are unable to see the force of the submission. Rule 9 makes it clear that a renewal is not to be

obtained automatically, for thl' mere asking.

The applicant for the renewal has, particularly, to satisfy the Government that the renewal is in the interests of mineral develqpment and that the lease amount is reasonable in the circumstances of the case.

These conditions have to be fulfilled in addition to whatever criteria is applicable at the time of the grant of lease in the first instance, suitably adapted, of course, to grant of renewal. Not to apply the criteria applicable in the first instance may lead to absurd results. If as a result of experience gained after watching the performance of private entrepreneurs in the mining of minor minerals it is decided to stop grant of leases in the private sector in the interest of conservation of the particular mineral resource, attainment of the object sought will be frnstrated if renewal is to be granted to private entrepreneurs without regard to the changed outlook. In fact, some of the applicants for renewal of leases may themselves be the persons who are responsible for the changed outlook. To renew leases in favour of such persons would make the making of Rule SC a mere exercise in futility.

It must be remembered that an application for the renewal of a lease is, in essence an application for the grant of a lease for a fresh period. We are, therefore, of the view that Rule BC is attracted in considering applications for renewal of leases also.

Another submission of the learned counsel in connection with the consideration of applications for renewal was that applications made sixty days or more before the date of G.O.Ms. No. 1312 (2-12-1977) should be dealt with as if Rule BC had not come into force. It was also contended that even applications for grant of leases made long

before the date of G.0.Ms. No. 1312 should be dealt with as if Rule BC had not come into force.

The submission was that it was not open to the Government to keep applications for the grant of leases and applications for renewal !Pending for a long time and then to reject them on the basis of Rule BC notwithstanding the fact that the applications had been made long prior to the date on which Rule 8C came into force.

While it is true that such applications should be dealt with within a reasonable time, it cannot on that account be said that the right to have an application disposed of in a reasonable time clothes an applicant for a lease with a right to have the 11PPlication disposed of on the basis of the rules in force at the time of the making of the application. None has a vested right to the grant or renewal of a lease and none can claim a vested right to have an application for the grant or renewal of a lease dealt with in a particular way, by applying particular provisions. In the absence

of any vested rights in anyone, an application for a lease has necessarily to be dealt with according to the rules in force on the date of the disposal of the 8JPplication despite the fact that there is a long delay since the making of the application. We are, therefore, unable to accept the submission of the learned counsel that applications for the grant of renewal of lses !llade long prior to the date of G.0.Ms.

No. 1312 should be dealt with as if Rule SC did not exist.

In the view that we have taken on the several questions argued before us all the appeals arising out of applications for the grant or renewal!

of leases for quarrying black granite in Government lands are allowed and the Writ Petitions filed in the Higb Court are dismissed. Special leave is granted in cases in which leave had not been previously granted. The appeals are allowed and disposed of in the same manner.

There are, however, a few appeals in which the applications were not for the grant or renewal of leases to quarry black granite in Government lands but were for permission to quarry black granite in Patta lands in which the right to minerals belonged to the applicantsprivate owners themselves. Apart from the fact that Rule 8C occurs in a group of Rules in Section II, which bears the head "Government

lands in which the minerals belong to the Government" while the rules relating to lands in which the right to minerals belongs to private owners are dealt with in Section III.

The language of Rule 8C is clear that it cannot have any application to lands in which the right to minerals belongs to the uppficants themselves. Rule SC is only concerned with leases for quarrying black granite and it cannot, therefore, have any application to cases where no lease is sought from the Government.

In the case of lands in which the right to minerals belongs to private owners and those owners seek permission to quarry black granite the applications will have to be dealt with under the relevant rules in Sec. III of the Tamil Nadu Minor Mineral Concession Rnles. Rule 8C, it may be noted, does uot impose a general ban on quarrying black gmnite but only imposes a bar on the grant of leases of quarrying black granite. Appeals and Special Leave Petitions which arise out of applications for the grant of permission to quarry bJoack granite in the Patta lands belonging to the applicants themselves, have therefore, to be dismissed.

The result is, Special Leave Petition Nos. 9257, 9259, 9260, 9271, 9273 to 9282 and 9284 of 1980 are dismissed and Special Leave Petition Nos. 9234 to

9248. 9250 to 9256, 9258, 9261 to 9270, 9272, 9283, 9285, 9286, 9288, 9289 and 9290 of 1980 are granted and Appeals allowed.

H Civil Apeal Nos. 2602 to 2604 of 1980 -are allowed.

There will be no order as to costs.

N.K.A.

Ordered accordingly.

MGIPF-152 SCI/81-2.500-24-8·81

STATE OF TAMIL NADU

11.

HIND STONE ETC

February 5, 1981

R. S. PATHAK

0. CHINNAPPA REDDY, JJ

Section 15

Articles 301 and 303

Central Government

section 15

articles 301 and 303

Parliament

sections 4A, 17 and 18

1960] 3 SCR 742

[1975] 2 SCR 7

Art. 301

Art. 301

Art. 302

India

Art. 301

sec. 15

[1961] 1 SCR 809

[1963] 1 SCR 491

[1961] 2 SCR 679

CIVIL APPELLATE JURISDICTION

Lal Narain Sinha

Soll l. Sorabjee

R. Krishnamurthy

A. V. Rangam

K. Venkatawani

Y. S. Chitale

S. Ramachandran

Mukul Mudgal

P. Chidambaram

A. S. Nambiyar

F. S. Nariman

R. N. Sachthey

V. Srinivasan

A. Venkatarayana

P. N. Ramalingam

Seventh Schedule

Seventh Schedule

S. 2

S. 2

S. 3

S. 3

Section 4 to 9A

Sections 10 to 13

S. 14

S. 4

[1961] 2 SCR 537

S. 7

Sections 10, 11 and 12

S. 12

Sections 4 to 13

October 25, 1949

Central

A Government

Sections 19 to 33

Government

of Tamil Nadu

2,

1977

1312 Industries dated December 2,

1977.

7th December, 1977

Government of Tamil Nadu

Madras High Court

Government F of Tamil Nadu

K. K. Venugopal

Venugopal

Articles 301 and 303

S. 15

S. 18

S. 17

S. 4A

S. 2

sections 4A, 17 and 18

S. 15

Seventh Schedule

Seventh Schedule

Motor Vehicles Act

State of Mysore

Art. 19

Art. 19

Art. 19

Art. 12

Parliament of India

Article 19(6)

Art. 19(6)

Art. 29R

Seventh Schedule

Art. 19(6)

Art. 13(3)

Art. 19

Art. 19(1)

Article 298

State of Punjab

December 2, 1977

Sec. 15

S. 15

Mathew

[1979] 3 SCR 709

[1975] 2 SCR 715

Sec. 15

Articles 301 and 303

Art. 301

Art. 301

[1961] 1 SCR 809

Art. 301

Art. 302

Art. 301

Sec. 15

Art. 302

Sec. 77

Sec. 77

[1961] 2 SCR 679

[1967] 2 SCR 361

Patta


CHHANGANLAL MANSUKHLAL & ANR.

K. K. BHATT & ANR.

February 5, 1981

[A. D. KOSHAL, V. BALAKRISHNA ERADI AND R. B. MISRA, JJ.) B

Guiarat Agricultural Produce Markets Rules 1965-Rules 48 and 49- .Scope of.

The parties are agreed that the provisions of Rule 49 are not attracted and no fee1 are payable under it at the stage of entry into a market area if the

agricultural produce in question is covered by sub-rule(2) of Rule 48, i.e., when inch produce fulfils either of the following conditions :-

(i) It is brought from outside the market area thereinto for use therein by the industrial concerns situated therein or for export and in respect thereof a declaration has been made and a certificate has been obtained in Form V.

(ii) The sale or purchase of such produce comes within the purview of sub-section (3) of section 6 of the Gujarat Agricultural Produce Markets Act.

Th.it interpretation of Rules 48 and 49 which flows directly from the language employed therein is correct. Rule 49 will have no a, pplication to any case which

falls within the ambit of sub-rule (2) of Rule 48. [763 D-E] E

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1967 of 1975.

Appeal by Special Leave from the Judgment and Order dated 30-10-74/1-11-1974 of the Gujarat High Court in Special Civil Application No. 766/71.

Soli !. Sorabji, Vimal Dave, Subhash Parikh and Gopal Subhariimaniyan for the Appellants.

S. H. Sheth, M. V. Go, rwami, Ambrish Kumar and Mukesh -Goswami for Respondent No. 1.

!. L. Nain, M. N. Shroff and S. C. Patel for Respondent No. 2.

The Judgment of the Court was delivered by

KosHAL, J.-Rule 49 of the Gujarat Agricultural Produce Marketi Rules, 1965, the vires and the reasonableness of which have

been the main points of challenge in this appeal, runs thus : H

"49. ( 1) The fees on agricultural produce shall be payable as soon as it is brought into the principal market

SUPREME COURT REPORTS

(1981] 2 5.C.R.

yard or sub-market yard or market proper or market area as may be specified in the bye-laws :

Provided that the fees so paid shall be refunded-

{i) on production of sufficient proof that such pr6duce was not sold within the limits of the market area; or

(ii) if such produce is brought from outside the market area into the market area for use therein by the industrial concerns situated in the market area or for export and in respect of which a declaration has been made and a certificate has been obtained in Form V subject to the proviso to sub-rule (2) of rule 48.

(2) The licence fes payable under rule 56 or 57 shall be paid alongwith the application for licence but in case the market committee refuses the grant or renewal of a licence the fees recovered shall. be refunded to the applicant."

In order to interpret this Rule it is also necessary to set ont the provisions of Rule 48. They are : ·

"48. ( 1) The market committee shall levy and collect fees on agricultural produce bought or sold in the llllliket

area at such rate as may be specified in the byelaws subject to the following minima and maxima viz.

(1) rates when levied ad valorem shall not be less than 10 paise and shall not exceed 40 paise per hundred rupees.

( 2) rates when levied in respect of cattle, sheep or goat shall not be less than 10 paise per animal and shall not exceed Rs. 2 per animal.

Explanation :-For the purposes of this rule a sale of agricultural produce shall be deemed to have taken place in a market area if it has been weighed or measured or surveyed or delivered in case of cattle in the market area far the purpose of sale, notwithstanding the fact that the property in the agricultural produce has by reason of such sale passed to a person in a place outside the market area.

( 2) No fees shall be levied on agricultural produce brought from outside the market area into the market area for use therein by the industrial concerns situated in the market area or for export and in respect of which declaration has been made and a certificate has been obtained in Form V:

' ' \ i ' ;,

. iJ.

CHHANGANLAL v. K. K. BHATT (Koshal, !.)

Provided that if such agricultural produce brought into the market area for export is not exported or removed therefrom before the expiry of twenty days from the date on which it was so brought, the market committee shall levy and collect fees on such agricultural produce from the person bringing the produce into the market area at such rates as may be specified in the bye-laws subject to the maxima and minima specified in sub-rule (i):

Provided that no fee shall be payable on a sale or purchase to which sub-section (3) oe section 6 applies."

Learned counsel for the parties are agreed thilt the provisions of Rule 49 are not attracted and no fees are payable under it at the stage of entry into a market area if the agricultural produce In question is covered by sub-rule 2 of Rule 48, i.e. when such produce fulfils either of the following conditions :

(1) It is brought from outside the market area thereinto for use therein by the industrial concerns situat- J) ed therein or for export and in respect thereof a declaration has been made and a crtificate has been obtained in Form V.

(2) The sale or purchase of such produce comes within the purview of .sub-section (3) of section 6 of E the Gujarat Agricultural Pro<luce Markets Act.

After hearing learned counsel for the parties, we accept this interpretation of Rules 48 & 49 which flows directly from the language employed therein, and hold that Rule 49 will have no application to any case which falls within the ambit of sub-rule (2) of Rule 48 .

Mr. Sorabjee does not press any other point in support of the appeal which is accepted to the extent of the above interpretation of Rules 48 & 49 but is otherwise dismissed with no order as to costs.

P.B.R.

Appeal partly allowed.

CHHANGANLAL MANSUKHLAL & ANR

K. K. BHATT & ANR

February 5, 1981

A. D. KOSHAL

V. BALAKRISHNA ERADI

R. B. MISRA, JJ.

section 6

Soli !. Sorabji

Vimal Dave

Subhash Parikh

Gopal Subhariimaniyan

S. H. Sheth

M. V. Go

rwami

Ambrish Kumar

Mukesh -Goswami

L. Nain

M. N. Shroff

S. C. Patel

KosHAL

section 6

section 6

Sorabjee