HINDUSTAN BROWN BOVERI LTD. ETC.

STATE OF GUJARAT

April 7, 1981

[R. S. PATHAK AND E. S. VENKATARAMIAH, JJ.]

Gujarat Sales Tax Act, 1969-Sections 16 and 49(2)-Scope of.

Exercising power under section 49(2) of the Gujarat Sales Tax Act, 1969, the State Government exempted the entire tax payable on sale of goods (other than prohibited goods) by a registered dealer to an electrical undertaking, certified for the purposes by the Commissioner; if the electrical undertaking, furnished to the selling dealer a certificate in the requisite form that the goods purchased were required for the generation or distribution of electricity by the undertaking.

But according to section 16 or the Act where a dealer has purchased any taxable goods under a certificate given by him under section 13 and has used the goods for a purpose contrary to such certificate, such dealer becomes liable to pay tax on the purchase price of the goods.

The appellants who were recognised dealers purchased raw materials of E taxable goods from registered dealers by furnishing a certificate in Form 19 by reason of which no sales tax had been paid by them. After manufacturing the goods with raw materials, they sold part of the manufactured goods to an electrical undertaking in the State against 'C' forms to claim exemption from tax on them by virtue of a notification issued under section 49(2) of the Act. No tax had been paid on sales effected by them in favour of the electrical undertaking.

On the ground that the undertaking furnished in Form 19 had been violated, the Sales Tax Officer levied purchase tax under section 16 on the raw-materials purchased by the appeilants.

The appellants were unsuccessful in their appeals before the Assistant Commissioner as well as before the Sales Tax Tribunal. The High Court answered the references against the assessees and in favour of the Revenue.

It was contended on behall of the appellants (1) that the goods manufactured by them not having been goods the sale or purchase of which had been exempted from tax by inclusion in Schedule I they could not be treated as

having infringed the terms of Form No. 19 notwithstanding the fact that partiff cular sales made by them to the electrical undertaking were exempted from payment of tax (2) the condition in Form 19 became satisfied immediately on the

A goods being manufactured by the appellants as at that stage the goods were really taxable and that a subsequent event of sale to the electrical undertaking could not be considered as a violation of the said condition and (3) in a transaction of sale if the sale was exempted from lax it could not be said that the purchase was also exempted.

Dismissing the appeal,

HELD : (I) The expression "taxable goods'" defined in section 2(3~) of the Act means goods other than those on the sales or purchase of which no tax is payable under section 5 and section 49 or a notification issued thereunder.

By this definition the dichotomy that existed between "taxable goods" and "lax.

able events" in the now repealed Act (The Bombay Sales Tax Act, 1959 which was in force in the State before the present Act) had been given a go by.

It may be that section 5 and Schedule I refer 10 goods only but section 49 deals with only taxable events which result in the exemption from payment of tax on the happening of the conditions mentioned therin or in the notification even though the goods in question do not come under Schedule 1. [ 446 F-H]

(2) To find out whether the goods are taxable goods or not one has to wait till the disposal of the goods by the dealer in view of the definition of the said expression which takes away goods sold under circumstances attracting section 49 from the scope of the meaning of that expression. [ 447 A]

(3) If the sale is exempt from tax under section 49 the goods sold would not be taxable goods. [ 447 BJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1185 of 1979,

Appeal by Special Leave from the Judgment and Order dated 15.12.1978 of the Gujarat High Court in Sales Tax Reference No. 24 of 1978.

AND

Civil Appeal No. 1187 of 1979.

Appeal by Special Leave from the Judgment and Order dated 27.11.1978 of the Gujarat High Court in Sales Tax Reference No.

I I of 1977.

K. H. Kaji, T. Sridharan, R. D. Pathak, Miss C. K. Sucharita and Mrs. S. Bhandue for the Appellant in both the Appeals.

S. T. Desai and M. N. Shroff for the Respondent in both the Appeals.

HINDUSTAN BROWN BOYER! v. GUJARAT. (Venkataramiah, J.) 437

The Judgment of the Court was delivered by

VENKATARAMIAH, J.

Since a common question of law is involved in these two appeals by special leave, they are disposed of by this common judgment.

The appellant in Civil Appeal No. 1185 of 1979 is M/s. Hindustan Brown Boveri Ltd., a company engaged in the business of manufacturing certain goods which are used in electrical undertakings for the purpose of generating and distributing electrical energy. It is registered as dealer under the provisions of the Gujarat Sales Tax Act, 1969 (Gujarat Act No. I of 1970) (hereinafter referred to as 'the Act').

For the purpose of manufacturing the goods, the appellant which was also a recognised dealer under the Act purchased raw materials during the period between May 6, 1970 and March 31, 1971 after furnishing a certificate in Form No. 19 as provided under section 13(l)(B) of the Act read with Rule 24(4) of the Gujarat Sales Tax Rules, 1970 (hereinafter referred to as 'the Rules') framed under the Act stating that the raw materials purchased by it would be used in manufacturing taxable goods which would be sold by it in the State of Gujarat. Some part of the goods manufactured by the appellant were sold to a certain electrical undertaking in the State of Gujarat against 'C' forms in order to claim exemption from payment of tax on the said sales under the Act by virtue of a notification issued under section 49(2) of the Act exempting the goods sold to electrical undertakings for being used in generation and distribution of electrical energy. On coming to know of the said sales, the Sales Tax Officer, who was the assessing authority under the Act levied purchase tax under section 16 of the Act on the raw materials purchased by the appellant on the ground that the undertaking given in Form No. 19 had been violated. The appeals filed by the appellant before the Assistant Commissioner of Sales Tax and the Gujarat Sales Tax Tribunal against the said levy were unsuccessful.

Thereafter at the instance of the appellant the Tribunal referred the following question of law to the High Court of Gujarat under section 69 of the Act :-

"Whether on the facts and in the circumstances of the case, a11 j Jn a correct interpretation of sub-section (33) of section 2 of the Gujarat Sales Tax Act, 1969 the Tribunal was right in deciding that the applicant was liable to pay

purchase tax under section 16 of the Gujarat Sales Tax Act, H 1969 on the ground that certain electric goods manufactured

out of raw materials etc. purchased against declaration in Form 19 were sold to Gujarat State Electricity Board against declarations in Form C prescribed in Entry 5 of the Government Notification issued under section 49 of the Gujarat Sales Tax Act, 1969 ?"

B .

The appellant in Civil Appeal No. 1187 of 1979 is M/s.

Elecon Engineering Co. Ltd. which is engaged in manufacturing heavy machinery and gear conveyers. It is also a recognied dealer under the Act.

Like the appellant in Civil Appeal 118 5 of 1979, this appellant also purchased raw materials by furnishing certificates in Form No. 19 and later on sold a part of the goods manufactured C by it to a certain electrical undertaking against Form No. 'C' and . ., claimed exemption under the notification issued under section 49(2) I of the Act. In this case also the Sales Tax Officer levied purchase tax under section 16 of the Act for violation of the undertaking given in Form No. 19. The appeals to the Assistant Commissioner of Sales Tax and the Gujarat Sales Tax Tribunal failed. Thereafter D at the instance of the appellant, the Gujarat Sales Tax Tribunal referred the following question for the opinion of the High Court of Gujarat:-

. Whether on the facts and in the circumstances of the case, the Tribunal is justified in holding that the sales of machineries and conveyers manufactured by the applicant to an electrical undertaking against Form 'C' under Entry 5 of the Government Notification issued under section 49 of the Gujarat Sales Tax Act, 1969 resulted in the breach of the declarations in Form 19 as the goods so nianufactured and sold did not amount to manufacture of taxable goods?"

It is seen from the two questions referred to above that they are substantially the same. The High Court answered the said questions in favour of the Revenue and against the assessees by two G separate orders following its earlier decision in M/s. Nciwroji N.

Vakil & Co. v. State of Gujarat(1). The appellants have filed these appeals against the decision of the High Court by special leave under Article 136 of the Constitution.

We shall now briefly refer to the relevant provisions of the ff Act.

Section 2(10) of the Act defines a 'dealer' as any person who

(I) Sales Tax Reference No. 1 of 1977 decided on November 24/27, 1978.

HINDUSTAN llROWN BOVERI v. GUJARAT (Venkataramiah, J.) 439

buys or sells goods in connection with his business and when he obtains a certificate of registration he becomes a registered dealer.

Section 32 of the Act provides for the recognition of a registered dealer.

It says that where during the previous or current year, the value of all taxable goods manufactured for sale by "a dealer registered under section 29 or by a dealer registered under section 30,

whose turnover of sales or purchases has subsequently, exceeded the limits specified in sub-section (4) of section 3, exceeds Rs. 3,000/- such dealer on application by him may be granted recognition by the Commissioner and on such recognition being granted, he becomes a recognised dealer.

Section 5 of the Act says that subject to the conditions or exceptions (if any) set out against each of the goods specified in column 3 of the Schedule I to the Act, no tax shall be payable on the sales or purchases of any goods specified in that Schedule. Section 6 of the Act provides that subject to the provisions of the Act and to any rules made thereunder there shall be paid by every dealer who is liable to pay tax under the Act, the tax or taxes leviable in accordance with the provisions of Chapter II of the Act.

In order to en sure that as far as possible the incidence of tax under the Act is not felt at more than one' point in the series of transactions of sales and purchases of goods other than declared good in the State of Gujarat, sections 7, 8 and 10 of the Act are enacted as follows :

"7. Levy of sales tax on goods in Schedule II, Part A.-There shall be levied a sales tax on the turnover of sales of goods specified in Part A of Schedule II at the rate set out against each of them in column 3 thereof, but after deducting from such turnover,-

(i) resale of goods on the purchase of which the dealer is liable to pay purchase tax under sec. 16.

(ii) resales of goods purchased by him from a Registered dealer.

(iii) sales of goods, of resales of goods to which clauses

(i) and (ii) do not apply, to a Recognised dealer or to a Commission agent holding a permit who purchases on behalf of a principal who is a Recognised dealer, upon such dealer or Commission agent, as the case may be, furnishing in the circumstances and subject to the conditions specified in sub-clause (B) and item (ii) of sub-clause (C) of

sub-sec. (I) of sec. 13, a certificate as provided therein, and

(iv) sales of goods or resales of goods to which clauses

(i) and (ii) do not apply, to a Licensed dealer or to a Commission agent holding a permit who purchases on behalf of a principal who is a Licensed dealer, upon such dealer or Commission agent, as the case may be; furnishing in the circumstances and subject to the conditions specified in item (i) of sub-clause (A) and item (i) (a) of sub-clause (C) of sub-sec. (1) of sec. 13, a certificate as provided

therein."

"8. Levy of general sales tax on goods in Schedule II Part B-There shall be levied a general sales tax on the turnover of sales of goods specified in Part B of Schedule II at the rate set out against each of them in column 3 thereof, but after deducting from such turnover,-

(i)

Al resales of goods on the purchase of which the dealer is liable to pay purchase tax under sec. 16;

(ii) resales of goods purchased from a Registered dealer by a dealer who is not a Licensed dealer at the time of such purchase; and

(iii) sales of goods, or resales of goods to which clauses (i) and (ii) do not apply, to a Licensed dealer, Recognised dealer or to a Commission agent holding a permit, who purchases on behalf of a principal who is a Licensed dealer or a Recognised dealer, upon such dealer or Commission agent as the case may be furnishing, in the circumstances and subject to the conditions specified in sec. 13, a certificate as provided therein."

"IO.

Levy of sales tax and general sales tax on goods specified in Schedule III.-(!) There shall be levied a sales tax on the turnover of sales of goods specified in Schedule III at the rate set out against each of such goods in column 3 thereof, but after deducting from such turnover,-

(i) resales of goods on the purchase of which the dealer is liable to pay purchase tax under sec. 16,

HINDUSTAN BROWN BOVERI v GUJARAT (Venkataramiah, J.) 441

(ii) resales of goods purchased by him from a Regis- A tered dealer,

(iii) sales of goods, or resales of goods to which clauses

(i) and (ii) do not apply, to a Recognised dealer or to a Commission agent holding a permit who purchases on behalf of a principal who is a Recognised dealer, upon such dealer or Commission agent, as the case may be, furnishing in the circumstances and subject to the conditions specified in sub-clause (B) and item (ii) of sub-clause (C) of sub-sec. (I) of sec 13, a certificate as provided therein, and

(iv) sales of goods or resales of goods to which clauses

(i) and (ii) do not apply, to a Licensed dealer or to a Commission agent holdinga permit who purchases on behalf of a principal who is a Licensed dealer, upon such dealer or Commission agent as the case may be, furnishing in the circumstances and subject to the conditions specified in item (i) of sub-clause (A) and item (i) (a) of sub-clause (C) of sub-sec. (I) of sec. J 3, a certificate a~ provided therein.

(2) There sl; all be levied a general sales tax on the turnover of sales of goods specified in Schedule III at the rate set out against each of such goods in column 4 thereof, but after deducting from such turnover-

(i) resales. of goods purchased from a Registered dealer, -by a dealer who 1s not a Licensed dealer at the time of such purchase; and

(ii) sales of goods, or resales of goods which clause

(i) does not apply to a Licensed dealer, or Recognised dealer or a Commission . agent holding a

Permit who purchases on behalf of a principal who is a Licensed dealer or a Recognised dealer upon such dealer or Commission agent, as the case may be, furnishing in the circumstances and subject to the conditions specified in sec. 13 a certificate as provided therein."

SUPREME COURT REPORTS

(1981) 3.S.C.R.

A It may be noted that in the above provisions that from the turnover of sales of goods of a dealer which are otherwise taxable, the turnover of goods sold to a Recognised dealer, upon such Recognised dealer furnishing in the circumstances and subject to the conditions specified in sub-clause (B) of sub-section(!) of section 13 of the Act a certificate as provided therein becomes deductible and B no tax is payable on such sales in favour of the Recognised dealer.

The relevant part of section 13 of the Act reads thus :-

"13.

No deduction from turnover except on a certificate.--(!) There shall not be deducted from the turnover of sales, sales of goods to a Licensed dealer, Recognised dealer or to a Commission agent holding a permit purchasing on behalf of his principal, as provided in sections 7, 8 and IO unless-

(A) .......... ..

(B) The Recognised dealer certifies in the prescribed form, that the goods other than prohibited goods sold to him are goods purchased by him for use by him as raw or processing materials or as consumable stores in the manufacture of taxable goods for sale by him; or ...... "

Rule 24(4) of the Rules prescribes that the certificate issued by a Recognised dealer shall be in Form No. 19. The relevant part of Form No. 19 reads :-

" ............ and that the goods purchased by me/the said .. : ........ and specified in bill/cash memo/invoice No ...... dated ......... of M/s .......... address ............ wi// be used by me/the said ............ as raw/or processing materials or con sumable stores in the manufacture of taxable goods viz.

: ....... .for sale by me/the said .. ,._, ..... and that such sale shall not take place outside the State of Gujarat.

 (Emphasis supplied)"

The expression 'taxable goods' . is defined by section 3(33) of the Act thus:-·

. "2(33). "taxable goods" means goods other than

thoe on the sale or purchase of whiCh no tax is payable under sec. 5 or sec. 49 or a notification issued thereunder."

HINDUSTAN BROWN BOVERI v. GUJABAT (Venkataramiah, J.) 443

Sub-section (I) of section 49 provides that subject to the conditions or exemptions, if any, specified in relation to them, the classes of sales or purchases referred in clauses (i) to (vii) of section 49(1) shall be exempt from the payment of the whole of tax payable under the provisions of the Act. Sub-section 2 of section 49 of the Act authorises the State Government to exempt any other specified class of sales by a notification published in the Official Gazette.

Section 49(2) reads :-

"49. Exemptions-(!) ........... .

(2) Subject to such conditions as it may impose, the State Government may, if it considers it necessary so to do in the public interest, by notification in the Official Ga:i; ette, exempt any specified class of sales or purchases from payment of the whole or any tax payable under the provisions of this Act.'

By a notification dated April 29, 1970 issued under section 49(2) of the Act the State Government exempted the entire tax payable on sales of goods (other than prohibited goods) by a registered dealer to an electrical undertaking, certified for the purpose by the Commissioner, if the electrical undertaking furnished to the selling dealer a certificate in Form appended to the notification stating inter alia that the goods purchased were required for the use of the generation or distribution of electrical energy by the undertaking.

In view of the above notification the sales made to the electrical undertaking become exempt from payment of sales tax under the Act on the undertaking furnishing the required certificate and no tax was paid by the appellants in these two appeals on sales of goods effected by them in favour of the electrical undertaking. It is now necessary to refer to section 16 of the Act, the relevant part of which.reads:-

"16. Liability to purchase tax for contravention of terms of certificate etc.-(1) Where any dealer or Commission agent has purchased any taxable goods under a certificate given by him under section 12 or 13, and

(a) contrary to such certificate, the goods are used for another purpose, or are not resold or despatched in the manner: and within t, he period certified, or ·

(b) on the resales in the course of inter-State trade or commerce, of the goods so purchased, no tax under the Central Sales Tax Act 1956 (LXXIV of 1956), is actually payable by him on account of any deduction admissible under any of the provisions of the said Act.

then such dealer or Commission agent shall be liable to pay tax on the purchase price of the goods purchased under such certificate; and accordingly, he shall include the purchase price thereof in his turnover of purchases in his declaration or return under section 40 which he is to furnish next thereafter.

(2) ........ .

(3) the purchase tax leviable under this section in respect of any goods specified in Schedule II or III shall be the aggregate of all taxes which would have been leviable thereon but for the certificate given under section 12 or 13.

( 4) If any question arises whether the purchase price of goods purchased under a certificate given under section 12 or 13 is not liable to be included in the turnover of purchases of a dealer or Commission agent under this section, the burden of so proving shall be upon such dealer, or as the case may be, the Commission agent."

Section 16 of the Act provides that where a dealer has purchased any taxable goods under a certificate given by him under section 13 and has used the goods for a different purpose contrary to such certificate, then such dealer shall be liable to pay tax on the purchase price of the goods purchased under such certificate and his liability has to be computed in the manner stated in that sect ion.

It is this liability of the appellants that .is in dispute in these appeals.

It is not disputed that the appellants are recognised dealers; that they had purchased raw materials which were taxable goods (other than prohibited goods) from registered dealers against certi ficates issued by them in Form No. 19; that no sales tax had been paid on sales in their favour; that they had manufactured goods by using the said raw materials that they had sold a part of the goods to an electrical undertaking notified under section 49(2) of the Act and that no tax had been paid Ol) sales effected by them in

HINDUSTAN BROWN ROVERJ v. GUJARAT (Venkataramiah, J.) 445

favour of the electrical undertaking.

It is also not disputed that in Form No. 19 the appellants had stated that the raw materials purchased by them would be used to manufacture taxable goods which would be sold inside the State of Gujarat. The question for consideration is whether the appellants had used the raw materials for another purpose contrary to the terms of Form No. 19.

The contention of the Department is that tbe appellants had contravened Form No. 19 by manufacturing goods which were not 'taxable goods' and hence were liable to pay purchase tax on the purchase of raw materials under section 16 of the Act and the contention of the appellants is that the goods manufactured and sold by them to the electrical undertakin_gs were 'taxable goods' and merely because they were sold to an electrical undertaking under transactions exempted by section 49(2) of the Act, the goods did . not cease to be taxable goods.

The solution to the question, therefore, lies on the true meaning of the expression 'taxable goods'.

Relying upon the decision of this Court in the State tJf Tamil Nadu v. M. K. Kandaswami and Ors.(1) it is urged on behalf of the appellants thaHhe expressions 'taxable persons', 'taxable goods' and 'taxable events' are entirely different concepts in sales tax law; that the goods in question were taxable goods as any sale of those goods not covered by section 49(1) and (2) would make such sale taxable and that section 49( I) and (2) of the Act referred to only events which resulted in the exemption from payment of sales tax. It is further argued that all goods the sale or purchase of which is liable to tax under the Act are taxable goods and that goods would not be taxable goods only when their sales are exempted generally from payment of tax as provided in section 5 of the Act.

It is, therefore, contended that the goods manufactured by the appellants not having been goods, the sale or purchase of which had been exempted from tax by inclusion in Schedule I to the Act, the appellants could not be treated as having infringed the terms of Form No. 19, notwithstanding the existence of the circumstance that the particular sales made by them to the electrical undertakings were exempt from pay- ment of tax.

The second ground urged on behalf of the appellants is that the condition under Form No. 19 became satisfied immediately on the goods being manufactured by the appellants as at that stage the goods were really taxable and that a subsequent event of sale to the electrical undertaking cannot be considered as having violated the said condition. The third ground urged by the appel-

(!) 36 STC I 91

!ants is that a transaction of sale involved two facetsa sale and a . purchase and if a sale is exempted from tax, it cannot be said the purchase is also exempted. On the above footing 'it is contended that since under section 49(2) only the tax on sale is exempted and nothing is said about the liability of the purchaser to tax, it cannot be said that the goods which were otherwise taxable had become non-taxable on being sold under a transaction which attracted section 49(2) of the Act. ,

We find no substance in any of the three grounds urged on behalf of the appellants for the reason that the present case is governed by the definition of the expression 'taxable goods' in sectio11 2(33) of the Act. It is interesting to note that the Bombay Sales Tax Act, 1959 (Bombay Act No. I of 1959) which was in force in the State of Gujarat before the Act came into force and which was repealed by section 88 of the Act contained the definition of the expression 'taxable goods' in section 2(33) thereof.

The expression 'taxable goods' was defined in the Bombay Act as 'goods other than . those on the sale or purchase of which no fax is payable under section 5'. In the Bombay Act there was also a provision corresponding to section 49 of the Act in section 41 thereof which empowered the State Government subject to such conditions as it may impose to exempt by a notification published in the Official Gazette any specified class of sales or purchases from payment of the whole or any part of any tax payable thereunder if the State Government was satisfied that it was necessary so to do in the public interest. Still the definition of 'taxable goods' in that Act did not refer to sales exempted under section 41 thereof.

But in the Act which repealed and replaced the Bombay Act the meaning of the expression 'taxable goods' has been narrowed down as section 2(33) of the Act reads- 'taxable goods' means goods other than those on the sale or purchase o( which no tax is payable under section 5 (which corresponds to section 5 of the Bombay Act) and section 49 of the Act (which corresponds to section 41 of the Bombay Act) or a notification issued thereunder. By this definition, the dichotomy that is stated to exist between 'taxable goods' and 'taxable events' has been given a go by. It may be that section 5 and Schedule I refer to goods only but section 49 deals with only taxable events which result in the exemption[from payment of tax on the conditions mentioned . therein or in the notification issued thereunder being satisfied even though the goods in question do not come under Schedule I. Secondly one has to wait till the disposal of the goods by the dealer to find out whthr tre gcods are taxable goods or not in view of the

·."'<' ..

HINDUSTAN BROWN! BOYER! v. GUJARAT (Venkataramiah, J.) 447

definition of the said expression which takes away goods sold under circumstances attracting section 49 from the scope of the meaning of that expression.

Nor does the third ground survive for the very same reil8on. If the sale is exempt from 'tax under section 49 of the Act, the goods sold would not be taxable goods.

We need not go into the question whether the purchaser in a sale under section 49 of the Act has to pay tax in these cases.

This reason also disposes of an allied argument of the appellants that the possibility of any Iia- / bility arising under section 50 of the Act on the breach of any condition imposed by section 49 or the notification issued thereunder would absolve the appellants of their liability to pay the tax under section 16 of the Act.

Any such levy made under section 501has not been shown to have any effect in law on the liability of the appellants under section 16.

The scheme of the Act appears to be that sales tax should be levied on goods which are not included in Schedule I at least once inside the State in the series of sales and purchases even though they may have been converted into manufactured goods and that is why Form No. 19 requires the purchaser to state that the goods will be used by him as raw or processing materials or as consumable stores in the manufacture of taxable goods for sale by hiin inside the State and section 16 of the Acf provides that where any dealer ha~ pu.rchased any taxable goods under a certificate given by him under section 12 or section 13 of the Act and contrary to such certificate the goods are used for another purpose or are not resold or despatched in the manner and within the period certified or on the resales in the course of inter-State trade or commerce, of the goods so purchased no tax under the Central Sales Tax Act is actually payable by him on account of any deductions admissible under any of the provisions of that Act, then such dealer shall be liable to pay tax on the purchase price of the goods purchased under such certificate. The deliberate alteration of the definition of 'tax• able goods' in the Act also is attributable to the said intention of the State Legislature.

The appeliants also cannot derive any assistance from the decision of this Court in Polestar Electronic (Pvt.) Ltd. v. Additional Commission°r, Sales Tax and Anr.(1) as these cases are governed by

(1) 41 S.T.C. 409.

A the provisions of the Act and as there appears to be no similarity between the facts of these appeals and the facts involved in that case.

For the foregoing reasons, we do not find any merit in these appeals. The appeals are dismissed with costs. Hearing fee one set.

P.B.R.

Appeals dismissed

,, ..

• •

HINDUSTAN BROWN BOVERI LTD. ETC

STATE OF GUJARAT

April 7, 1981

R. S. PATHAK

E. S. VENKATARAMIAH, JJ.

Gujarat Sales Tax Act, 1969

Sections 16 and 49(2)

section 49(2)

Gujarat Sales Tax Act, 1969

section 16

section 13

section 49(2)

section 16

Sales Tax Tribunal

Schedule I

section 2(3~)

section 5

section 49

Bombay Sales Tax Act, 1959

section 5

Schedule I

section 49

Schedule 1

section 49

section 49

K. H. Kaji

T. Sridharan

R. D. Pathak

C. K. Sucharita

S. Bhandue

S. T. Desai

M. N. Shroff

HINDUSTAN BROWN BOYER

Venkataramiah

VENKATARAMIAH

Hindustan Brown Boveri Ltd.

May 6, 1970

March 31, 1971

section 13(l)(B)

Gujarat Sales Tax Rules, 1970

Gujarat

section 49(2)

section 16

Gujarat Sales Tax Tribunal

High Court of Gujarat

section 69

section 2

Gujarat Sales Tax Act, 1969

section 16

Gujarat State Electricity Board

section 49

Gujarat Sales Tax Act, 1969

Elecon Engineering Co. Ltd.

section 49(2)

section 16

High Court of Gujarat:-

section 49

Gujarat Sales Tax Act, 1969

Article 136

Section 2(10)

November 24/27, 1978

Section 32

section 29

section 30

section 3

Section 5

Schedule I

Section 6

Chapter II of the Act

sections 7, 8 and 10

Schedule II

Schedule II

sec. 16

sec. 13

sec. 13

Schedule II

Schedule II

sec. 16

sec. 13

Schedule III

Schedule III

sec. 16

sec 13

Schedule III

sec. 13

section 13

section 13

sections 7, 8

section 3(33)

sec. 5

sec. 49

section 49

section 49(1)

section 2

section 49

Section 49(2)

April 29, 1970

section 49(2)

section 16

section 12

Central Sales Tax Act 1956

section 40

Schedule II

section 12

section 12

Section 16

section 13

section 49(2)

section 16

section 49(2)

section 49(1)

section 49( I)

section 5

Schedule I to the Act

section 49(2)

section 49(2)

section 88

section 2(33)

section 5

section 49

section 41

section 41

section 2(33)

section 5

section 5

section 49

section 41

section 5

Schedule I

section 49

Schedule I

section 49

section 49

section 49

section 50

section 49

section 16

section 501

section 16

Schedule I

section 16

section 12

section 13

Central Sales Tax Act


JETHABHAI KHATAU & CO.

LUXMI NARAYAN COTTON MILLS LTD. & ORS.

April JO, 1981

[A.C. GUPTA AND D.A. DESAI, JJ.]

Constitution of India 1950, Art, 136-lnterim orders by the High Courtlnterference by Supreme Court-When arises.

The appellant filed a suit for recovery of certain amounts due from the first respondent company. By the time the suit came up for hearing the first respondent company was superseded and an Administrator was appointed. The suit was compromised and a consent decree was passed, the company being held liable and directed to make payment of Rs. 2.85 lakhs with interest at 6% from the date of the decree. The first respondent company received a sum of about Rs. 15 lakhs from the Custodian of Enemy Property as compensation in respect of certain cotton mills owned by it. The third respondent was appointed a receiver in respect of this amount and he desosited a sum of Rs. 8 lakhs of the compensation amount into a fixed deposit account with a Bank. The decretal amount having become due and payable the appellant by an order dated April 12, 1978 obtained an interim attachment of the money in the fixed deposit account of the hank, which was confirmed by order dated April 24, 1978. On May 4, 1978 upon a petition by the appellant, the Court directed the receiver, 3rd respondent to pay the decretal amount to the appellant out of the amount in the fixed deposit account of the judgment-debtor with the Bank. As this order was not implemented, the appellant again moved the Court and by its order dated the May 24. 1978 the Court directed the receiver to pay the amount to the decree holder and the Bank, the keeper of the fixed deposit account of the receiver was also put under an obligation not to raise any objection on the receiver withdrawing the money and paying the same to the decree holder. These directions not being obeyed, the appellant moved the Court for holding the third respondent receiver and the fourth respondent Bank in contempt and for passing appropriate orders for punishing them for contempt. Respondents 5 and 6 were in the meanwhile appointed as joint receivers.

A solemn undertaking was given by the Bank to the Court that the decretal amount would be paid. In view of the undertaking the Court did not pass any orders on the contempt application. On March 7, 1980 the Court declined to grant the prayer for discharge of the receiver 3rd respondent and directed that the balance after payment of the dcretal amount in the fixed deposit account will be held by the receiver. The Court however at the instance of the joint receivers-Respondents 5 and 6 stayed the order for a fortnight.

A Three appeals were filed against the order dated March 7, 1980. Two

appeals were preferred by the 1st respondent company and one appeal was preferred by 2nd respondent, State of West Bengal. In the appeals preferred by the Jst respondent company the High Court by its order dated March 27, 1980 granted ad interim stay in the matter, by directing that the Bank would not dis burse any amount in respect of the fixed deposit account and by issuing an injunction restraining the appellant from obtaining any payment.

Allowing the appeals to this Court,

HELD: The order made by the Division Bench on March 27, 1980 and continued on September 9, 1980 are set aside. The order dated May 4, 1978 and May 24, 1979 as also the undertaking given by the Manager of the 4th respondent Bank through its Counsel on June 7, 1979 would be revived and would be effective and will have to be implemented.

The 4th Respondent Bank will pay the decretal amount to the appellant, the appellant shall pass a receipt acknowledging receipt and the liability of the 4th Respondent company to the 3rd Respondent receiver shall thereupon stand discharged. Before the amount is paid, the appellant shall give security to the satisfection of the High Court and also an undertaking on affidavit that in the event of the appeals being allowed, the appellant shall deposit the said amount with the High Court within one month from the date of the order of the appellate Bench.

[ 459 C-F]

2. This Court ordinarily does not interfere with interim orders unless and until manifest injustice convulsively shakes it. [ 455 E]

In the instant case the interim order made by the Division Bench on September 9, 1980 confirming the ad interim order dated March 7, 1980 has to be interfered to a limited extent to avoid the impression that the Court's process can be lightly trifled with. [458 HJ

3. Failure to comply with the Court's mandatory directions led the appellant to file a petition for contempt. The alleged contemners impleaded were 1st respondent company and the 4th respondent Bank. At the hearing, counsel for the 4th respondent unreservedly agreed to comply with the order of the Court. It was because the Bank unreservedly and unconditionally agreed and undertook to pay up the amount that the motion for taking action in contempt was discharged by the Court. [ 457 E, HJ

4. The order Jated June 7, 1979 is not a fresh order on merits. lt was merely an implementation of tlie order dated May 24, 1979 which appears to have become final and binding. [ 458 A]

5. The three appeals were preferred against the order dated March 7, 1980.

That order had nothing to do with the order dated May 24, 1979 or the order dated June 7, 1979. At any rate, the order dated May 24, 1979 appears to have become final. [ 458 DJ '

CivrL APPELLATE JURISDICTION : Civil Appeal Nos. 1256-1258 of 1981.

Appeals by Special Leave from the Judgment and Order dated A 9.9.1980 of the Calcutta High Court in Appeal Nos. 94, 122 & 95 of 1980 respectively.

S.N. Kacker and H.R. Puri for the Appellant.

Shankar Ghosh, B.P. Maheshwari and Miss Asha Jain for B Respondent No.I.

Dalip Sinha, G.S. Chatterjee and P.K. Chatterjee for Respondent No.2.

The Judgment of the Court was delivered by

DESAI, J.

M/s Jethabhai Khatu & Co., a partnership firm, is the appellant in all the three appeals. The respondents in all the three appeals are : (I) Luxmi Narayan Cotton Mills Ltd., an incorporated Company ('company' for short), (2) State of West Bengal, (3) S.K. Dutta, who was for some time a receiver appointed by the High Court; (4} Grindlays Bank, ('Bank' for short), having a fixed deposit account in the name of Receiver. S.K. Dutta on behalf of Luxmi Narayan Cotton Mills Ltd., (5) A.K. Dutta, and (6) R.C.

Deb, who claim to have been appointed as joint receivers after removal of Sh. S.K. Dutta.

Appellant filed suit No. 1194/66 against the company on the original side of the Calcutta High Court to recover a certain amount due under two separate heads.

By the time the suit came up for hearing the board of Directors of the 1st respondent company was superseded and one Gurudas Sharma was appointed as an Administrator. The Administrator on behalf of the !st respondent company entered into a compromise with the appellant in respect of the claim in suit of the appellant and after obtaining leave of the Court to settle the matter, invited a consent decree by .which the company was held liable and directed to pay Rs. 2,85,000 with interest thereon at 6% per annum from January 6, 1970, the date of the decree, till realisation.

The 1st respondent company was given an option to pay the decretal amount by monthly instalments of Rs. 5,000, the first instalment becoming due and payable on March 15, 1970, and each subsequent instalment to-bepaid by 15th day of the next succeeding month. The default clause in the consent decree provided that if the company comitted default in payment of any two instalments within the time stipulated in the decree, the whole of the decretal amount and the interest on the balance of the decretal

amount will become due and payable at once. It appears that the !st respondent company received Rs. 15,00,000 from the Custodian of Enemy Property in respect of its cotton Mills situated in Narayanganj, Bangladesh. The 3rd respondent S.K. Dutta appears to have been appointed a receiver in respect of this compensation amount and he appears to have deposited Rs. 8,40,000 out of the compensation amount in fixed deposit account evidenced by receipt No.

J 002-2539 with the Bank at its Netaji Subhash Road Branch, Calcutta. The appellant, by an order dated April 5, 1978, of the Calcutta High Court, obtained leave to execute the decree by attachment of funds lying in tl1e hands of the 3rd respondent receiver S.K.

Dutta (Annexure 'D'). By the date of the order Rs. 4,20,702. 94 p. had become due and payable under the decree.

Pursuant to this order an interim attachment was levied under Order 21 Rule.52 C.P.C. on the amount covered by the aforementioned fixed deposit receipt, and accordingly the Master of the Court, Shri S. K. Ghosh informed the 3rd respondent receiver by the writ of the Court dated . April 12, 1978, that the receiver shall hold the money under the fixed deposit account subject to such order as may be made respecting the same in the suit in which he had been appointed a receiver and subject to further orders of tbe Court (Annexure 'E'). The Master confirmed the interim attachment by his order dated April 24, 1978 (Annexure 'F'). On May 4, 1978 upon a petition by the appellant the Court directed the receiver 3rd respondent to pay the sum of Rs. 4,20;702. 94 to the appellant decree-holder out of the amount in the fixed deposit account of the judgment-debtor with the Bank in fixed deposit receipt No. 1002-2539 standing in the name of the receiver which was attached in terms of order dated April 12, 1978, as confirmed by the order dated April 24, 1978. Presumably neither the 3rd respondent receiver nor the Bank effectively implemented the order dated May 4, 1978, whereup:>n the appellant moved the Court during the vacation on May 24, l 979, for an appropriate direction and a learned single Judge of the Calcutta High Court working as vacation judge gave the directions prayed for.

As this order has some legal consequences in. this matter, it would be advantageous to extract it. It reads as under :

"There will be an order in terms of prayers (a) & (b) of the petition.

Prayer (a) : That the receiver Sudhir Kumar Dutta be forthwith directed to instruct and intimate to the Grindlays Bank Ltd., Netaji Subhash Road Branch, Calcutta, to pay

a sum of Rs. 4,29,702.94 p. to the petitioner decree-holder A in terms of the payment order dated 4th May, 1978 out of the amount of the Fixed Deposit of the judgment-debtor with Grindlays Bank Ltd., in Fixed Deposit Receipt No. 1002 2539 which has been lying attached in terms of the order dated 12th April, 1978 and is confirmed by the order dated 24th April, 1978 and the said Grindlays Bank Ltd., B Netaji Subhash Road, Branch, Calcutta, be directed to pay the said sum of Rs. 4,20,702.94 p. to the petitioner decreeholder;

Prayer (b) : That Grindlays Bank Ltd., Netaji Subhash Road Branch, Calcutta, be directed to pay the said sum of Rs. 4,20, 702.94 p. to the petitioner decree-holder in terms of the payment order dated 4th May, 1978, out of the said fixed deposit receipt No. 1002-2539."

Effectively this order of the Court directed the receiver to pay the amount therein mentioned to the decree-holder and the Bank, the keeper of the fixed deposit account of the receiver was also put under an obligation not to raise any objection on receiver withdrawing the money and paying the same to the decree-holder. In fact upon its true construction, the Bank was also under an obligation to take effective steps to pay the amount mentioned in the order to the decree-holder.

It appears that these directions were not obeyed.

Consequently, the appellant moved the Court for holding the 3rd respondent receiver S.K. Dutta and the 4th respondent Bank in contempt and for passing appropriate order for punishing them for contempt unless they purged themselves of the contempt.

On June 7, 1979, when the petition for taking action against the alleged contemners came up before the Court, respondents 5 and 6 appear to have been appointed as joint receivers. The Bank appeared through its counsel Mr. Majumdar and the joint receivers appeared forth emselves as well as for theii respective clients, namely, 1st respondent company and the 2nd respondent State of West Bengal. Mr. Majumder; learned advocate for the Bank undertook to the Court to comply with the order dated May 24, 1979, to pay the amount therein mentioned to M/ s Maharia & Co. Advocate-on-record for the appellant. The court directed that on such payment being made the Bank shall be absolved from all the liabilty in respect of the said amount. The Court specifically noted that in view of the undertaking given by the learned advocate on behalf of the

'r.Ianager of the Bank, the Court was not inclined to pass any order in respect of the contempt application and the application for taking action in contempt was accordingly disposed of.

At this stage.

Mr. A.K. Dutta appearing for the 1st respondent company prayed for stay of a portion of the order of the Court which prayer was specifically refused observing that as no fresh orders have been passed on that day affecting the interests of the said Company, no question of granting stay of a portion of the order arises. The Court specifically directed that all the parties and particularly the Manager of the Bank should act on the signed copy of the minutes. It appears that the solemn undertaking given by the Bank was not acted upon . . Probably soon thereafter some interim orders were obtained as would transpire from the order of Mrs. Padma Khastgir, J. dated March 7, 1980.

When the matter came up on March 7, 1980, the court observed that there will by no order on the applications before it save and except that the receiver will hold the balance sum of Rs. 4,19,697.06p till further order of the Court. The Court also declined to grant prayer for discharge of the receiver S.K. Dutta, the 3rd respondent, because notice of the application was not served upon him. This observation would, however, establish that till March 7, 1980, the 3rd respondent was not discharged as a receiver though from the recitals in the order dated June 7, 1979, it appears that by that date A.K. Dutta and R.C. Deb were functioning as joint receivers.

In this order it was distinctly made clear that except what is stated specifically in the order all interim orders were vacated. However, the Court at the instance of join(receivers stayed the portion of the order dated March 7, 1980, for a period of a fortnight. To clarify the position it may be mentioned that when the Court directed that balance of Rs. 4,19,697.06 will be held by the receiver it would imply that that would be the balance after payment of the amount directed to be paid to the appellant. Specifically this order has the effect of confirming the earlier order dated May 24, 1970, to pay the decretal amount to the appellant.

If appears that thereafter three appeals came to be filed before the Division Bench of the Calcutta High Court. Appeal No. 95/80 and Appeal No. 94/80 were preferred by the 1st respondent company. Appeal No. 122/80 was preferred by the 2nd respondent State of West Bengal. These three appeals were preferred against the order dated March 7, 1980, made by Mrs. Padma Khastgir, J.

In the two appeals preferred by the Ist respondent company a Division Bench of the Calcutta High Court by its order dated

._,,

March 27, 1980,' granted ad interim stay as under :

"The Joint Receivers, R.C. Deb and A.K. Dutta are directed not to part with any money lying deposited under the fixed deposit receipt No. 1002/2529 in the Grindlays Bank.

B There will be an order directing the Grindlays Bank Ltd., of 29, Netaji Subhash Road not to disburse any amount in respect of fixed deposit No. 1002-2539 standing in the name of S.K. Dutta, the fixed deposit receipt whereof is lying deposited with the present joint receivers R.C. Deb and A.K. Dutta......

Order of injunction restraining Jethabhai Khatau and Co. from obtaining any payment out of the moneys lying in the Grindlays Bank and held by the joint receivers or receiver."

This interim order was confirmed by the Division Bench by its order dated September, 9, 1980.

Hence these three appeals by special leave.

Frankly, this Court ordinarily does not interfere with interim orders unless and until manifest-injustice convulsively shakes it. Even then, with our usual response of reluctance to undertake to examine interim orders, only a notice to show cause why special leave should not be granted and the interim stay application not be considered, was issued to the respondents. After notices were served and counter-affidavits and rejoinder affidavits were filed, this matter came before us about four weeks back, our hands off attitude to interim orders manifested itself when we adjourned the matter for four weeks indicating to the parties, especially the respondents who are appellants before the High Court, to take effective steps to get their appeals placed on the cause list for hearing and to move for expeditious disposal of the same.

We also declined to grant any interim relief.

We so adjourned the matter in the fond hope that we may hang on to our tenuous view that ordinarily we would not undertake to deal with interim orders.

Our hope has pro\_'.ed a mirage.

When this matter was listed before us on April 3, 1981, Mr.

H Kackkar, learned counsel for the Appellant stated that almost within the dying embers of the time granted by this Court an attempt was

made by the respondents to get their matter listed in 'the High Court and the only order that the court has made is that the appeals be added to the cause list of the Division Bench and it would be anybody's guess when this last added matter would reach hearing.

Having no a!ternative left open to us, we have heard the matter.

As the appeals are pending before the Division Bench of the Calcutta High Court and are to be heard on merits, we would make every manageable human effort to avoid any expression of opinion which may even remo(ely interfere with judicious adjudication of the issues before the Division Bench. However, we make it clear that even if there is any express or implied opinion discernible in this order, the same has to be wholly ignored by the High Court whiledisposing of the appeals on merits. With this extra caution we proceed to dispose of these appeals. As every. stage of the proceeding has been neatly delineated by us with the orders of t.he Court referred to in details, the j permissible inferences may alone be set out.

What is the injudicious situation which may bring disrepute to judicial process, stares in the face.

The consent decree under which appellant was entitled to recover Rs. 2,85,000 with interest, at the rate of 6% per annum from the date of the decree till realisation was made by the Court on January 6, 1970. The decree without being satisfied in its minutest part has collected dust for 11 years. And at present who is impeding the execution of the decree ?

It is the l st respondent company which has been a party to the consent decree and which decree has become final and unassailable There is no proceeding at precent questioning the correctness, validity or legality of the decree or its binding character on the l st respondent company.

It is again incontrovertible that the judgment-debtor 1st respondent company has in its fixed deposit with the 4th respondent Bank a sum of Rs. 8,40,000.

That his amount is of the ownership of the judgment-debtor is not in dispute. 3rd respondent S.K. Dutta was once a receiver.

Respondents say that he has been re@]Ved and respondents 5 and 6 who are respectively the Advocates of the 1st respondent company and the 2nd respondent State of West Bengal claim to be appointed as joint receivers. The date of appointment is not made clear but the order dated March 7, 1980 (Annexure 'J') by Mrs. Padma Khastgir, J. leaves no room for doubt that till that date 3rd respondent S.K. Dutta was not discharged as receiver.

The High Court on a petition of the appellant levied attachment A under order 21 Rule 52 C.P.C. on the amount lying in fixed deposit account with 4th respondent Bank in the name of 3rd respondent S.K.Dutta as receiver of the first respondent company by order dated April 5, 1978. This attachment order wa!t levied by the Master of the Court and the interim attachment was confirmed. Admittedly these orders were not challenged.

Sabyasachi Muk"1rjee, J. by his order dated M'.ly 4, 1978, directed 3rd respondent S.K. Dutta to pay the amount of Rs. 4 ,20, 702.94 P. out of the amount lying in fixed deposit receipt No. 1002-2539 with the fourth respondent Bank to the appellant in saTisfaction of the decree. This order may appear to have become final as not having been questioned by any one. Manoj Kumar Mukherjee, J. by his order dated May 24, 1979, directed 3rd respondent S.K. Dutta, receiver of the Ist respondent company to pay Rs. 4,20,702.94 p. out of the fixed deposit account held by him as rece'1ver of the Ist respondent company to the appellant and a com; equential order was made directing the Bank to pay the amount set out in the order tothe appellant. This order dated May 24, 1979, may appear to have become final as it appears not to have been questioned, challenged or appealed by any one.

Failure to comply with the court's mandatory direction led the appellant to file a petition for contempt. The alleged contemners im:pleaded were Ist respondent company and the 4th respondent Bank. When this petition for taking action in contempt came up before Manoj Kumar Mukherjee, J. there appeared on the scene one Mr. Majumdar, learned counsel for the 4th respondent Bank as we:ll as the two joint receivers functioning in dual capacity as joint re1; eivers as well as learned counsel for the respective clients,. namely, 1st respondent company and the 2nd respondent State of West Bengal. At the hearing of this motion for taking action for contempt, Mr. Majumdar learned counsel for the 4th resp:rndent unreservedly agreed to comply with the order of the Court on May 24, 1979, which means that he agreed and undertook to pay the amount of Rs. 4,20,702.94 out of the fixed deposit account in the name of 3rd respondent S.K. Dutta, receiver of the l>t respondent comany. It is because the Bank agreed unreservedly and unconditionally to pay up the amount that the motion for taking action in contempt was discharged by the Court.

No action was sought to be taken against the joint receivers who had interposed themselves in the meantime.

Therefore, the court declined to accede to their request to stay a

portion of the order.

The order dated June 7, 1979, is not a fresh order on merits. It was merely an implementation of the order dated May 24, 1979, which may appear to have become final and binding.

Yet the 1st respondent company and the 2nd respondent State of West Bengal took no further action and surprisingly the Bank also joined hands with them by not paying the amount till March 7, 1980.

Maybe, there may be some interim orders.

We are not made knowledgeable about the nature and character of those interim orders save and except what has been recited in the order dated March 7,1980, of Mrs. Padma Khastgir, J. However, there seems to be some apparent collusion between the company on one hand and the joint receivers in not complying with the court's order dated May 24, 1979, even though. action for contempt was avoided by giving an unconditional undertaking to carry out that order.

The three appeals were preferred against the order dated March 7, 1980. That order has nothing to do with order dated May 24,1979, or the order dated June 7, 1979. At any rate, the order dated May 24,1979, may appear to have become final.

Would it be appropriate in such circumstances to grant an interim stay of the portion of an order which may appear to have become final in an appal against an altogether different order?

Mr. Shankar Ghose, lear.1ed counsel for the respondent wanted us to take note of various allegations against the 3rd respondent, the receiver, the fact that he was removed, the fact that he was colluding with the appellant and that he was negligent as also that he was discharged at some stage of the proceedings. At this stage, these contentions in our opinion are not very relevent. Maybe, there is merit in these contentions.

Maybe, the Division Bench hearing the appeals by the 1st and 2nd respondent will examine these contentions on merits. The only live issue is whether would it be fair while granting stay of the order dated March 7, J 980 to effectively stay the order dated March 24,1979, which appears not to be under appeal though its validity may be questioned in the course of hearing of the appeal? lf that be so, could the Court overlook attempt of the Jst and 2nd respondents to circumvent the order by obtaining an interim stay in such manner that an order not under appeal gets frozen ? It is, therefor.:, that we propose to interfere with the interim order made by the Division Benc:1 of the Calcutta High Court on September 9, 1980, confirming the ad interim order dated March 7, J 980, to a limited extent so that an impression that the court's process can be lightly trifled with, may be avoided.

~··

'.,

J. KHATAU & co. v. LUXMJ NARAYAN COTTON MILLS (Desai, J.) 459

Under the circumstances the proper thing to do would be to set aside the interim stay order dated March 27, 1980, as also the order dated September 9, 1980, confirming the interim order but in order to ensure the resultant justiee as we are interfering with an interim order, we consider it proper to give certain directions, while restoring status quo ante in the event the appeals filed by respon• dents 1 and 2 are allowed or any specific positive direction is given by the court in this behalf.

We accordingly allow these appeals and set aside the orders made by the Division Bench on March 27, 1980 and September 9, 1980. The result would be that the order dated May 4, 1978, by Sabyasachi Mukherjee, J. and order dated May 24, 1978, made by Manoj Kumar Mukherjee, J. as also the undertaking given by the manager of the 4th respondent Bank through his learned counsel Shri Majumdar before Manoj Kumar Mukherjee, J. on June 7, 1979, would be revived and would be effective and will have to be implemented. In pursuance to the aforementioned two orders, the 4th respondent Bank will have to pay Rs. 4,20,702.94 p. to the decree-holder appellant towards the decretal amount.

On receipt of the amount the appellant shall pass a receipt acknowledging receipt of the amount and to the extent of the payment of the amount herein indicated the liability of the 4th respondent Bank to the 1st respondent company or anyone claiming on its behalf or the 3rd respondent receiver shall stand discharged.

Before the amount is paid, the appellant shall give security to the satisfaction of the High

Court and also an undertaking on affidavit to the Division Bench of the Calcutt!! High Court before which the appeals preferred by the 1st and 2nd respondents are pending that in the event the appeals are allowed which makes it consequently necessary for the appellant to repay the amount received from the 4th respondent Bank in payment of the decretal amount, the appellant shall deposit the said amount with the Calcutta High Court within one month from the date of the order of the appellate Bench.

The appeals will stand disposed of as herein indicated with no orderas to cost.

N.V.K.

Appeals allowed.

- I A

JETHABHAI KHATAU & CO

LUXMI NARAYAN COTTON MILLS LTD. & ORS

April JO, 1981

A.C. GUPTA

D.A. DESAI, JJ.

Constitution of India

Supreme Court

April 12, 1978

April 24, 1978

May 4, 1978

May 24. 1978

March 7, 1980

State of West Bengal

March 27, 1980

September 9, 1980

May 24, 1979

June 7, 1979

S.N. Kacker

H.R. Puri

Shankar Ghosh

B.P. Maheshwari

Asha Jain

Dalip Sinha

G.S. Chatterjee

P.K. Chatterjee

DESAI

Jethabhai Khatu & Co.

Luxmi Narayan Cotton Mills Ltd.

S.K. Dutta

Grindlays Bank

S.K. Dutta

Luxmi Narayan Cotton Mills Ltd.

A.K. Dutta

R.C.

Calcutta High Court

Gurudas Sharma

January 6, 1970

Narayanganj

Bangladesh

Calcutta

April 5, 1978

S.K.

Dutta

C.P.C

S. K. Ghosh

May 24, l 979

Sudhir Kumar Dutta

Majumdar

Majumder

Maharia & Co.

Padma Khastgir

7, 1980

R.C. Deb

May 24, 1970

Grindlays Bank Ltd.

Jethabhai Khatau and Co.

September, 9, 1980

April 3, 1981

H Kackkar

order 21 Rule 52

C.P.C

S.K.Dutta

Sabyasachi Muk"1rjee

Manoj Kumar Mukherjee

March 7,1980

May 24,1979,

Shankar Ghose

March 7, J 980

March 24,1979,

Sabyasachi Mukherjee

May 24, 1978

Calcutt!! High Court


STATE OF U.P. AND ANOTHER

RAM GOPAL SHUKLA

April JO, 1981

(A.D. KOSHAL AND R.B. MISRA, JJ.J

Uttar Pradesh Promotion by Selection in Consultation with Public Service Commission (Procedure) Rules, 1970, Rules 7A and 7B-Whether the rules are discriminatory and violative of Articles 14 and 16 of the Constitution.

New plea-New plea cannot be allowed at the time of hearing of the appeal in the Supreme Court.

The selection for the posts of Tehsildars in the State of U.P. was to be made by promotion from amongst various sources such as Naib Tehsildars, Peshkars of the Kumaon Division, Kanungos, Kanungo Inspectors or Instructors and Sadar Kanungos as per the procedure laid down in rules known as Uttar Pradesh Adheenasth Rajaswa Karyakari (Tehsildar) Sewa Niyamavali, 1966. The procedure for selection is regulated by Rule 9 and under sub-section (6) of this Rule a E select list will be drawn in order of merit separately for substantive vacancies and temporary vacancies and officials will be offered officiating or temporary vacancies in the order in which their names have been arranged in the "select list" as and when the vacancies occur during the course of the year.

This "select list" will hold good only for one year or until such time a review is made at the following selections.

F Subsequently, the State Government made the Uttar Pradesh Promotion by Selection in Consultation with Public Service Commission (Procedure) Rules, 1970, which governed various services, to be more specific 29 Uttar Pradesh services including the services of Tehsi!dars. The purpose of these rules was to standardise the procedure for promotion and make it uniform in respect of such services. The procedure laid down in the 1970 Rules for promotion as Tehsildars was not substantially different from that laid down in the Tehsildars Rules, 1966. By a G Notification No. 42/4/196:-Appointment, 3 dated 4th July, 1972 two new rules were introduced, namely, Rules 7A and 7B, in the 1970 Rules. -As per these newly added rules candidates in the Select List made under the 1966 Rules were to be appointed against substantive vacancies in preference to any candidates selected in accordance with the provisions of the 1970 Rules and nnless the candidates in the list were exhausted, other eligible candidates were not to be considered for H promotion so that thei.r chances of promotion would be deferred to an undated future.

U.P. STATE V. RAMGOPAL 461

The respondent who started his service as Kanungo in 1949, was promoted as Naib Tehsildar and in 1962 he was confirmed as such. In 1963, he was appointed as Tehsildar in an officiating capacity. In accordance with the 1966 Rules the

Uttar Pradesh, Public Service Commission selected 148 persons for substantive appointment as Tehsildars and their names were shown in a list known as Li st-A. The Commission also selected 300 other persons for temporary or officiating appointment as Tehsildars during the coming years and their names figured in what was called List-B. The respondent was, however, not selected and his name could not be included in either of the aforesaid two lists because he had an adverse entry forming part of the remarks recorded on his work and conduct and had also been shown down below at serial 557 in the seniority list of Naib Tehsildars in the year 1966. Though the adverse entry was expunged in the year 1969 and his seniority was also re-fixed at serial number 216 on 6th October, 1970, since there was no selection after 1966, his name could not be included in either of the two lists even thereafter.

The respondent challenged the vires of Rules 7A and 7B by filing a petition uuder Article 226 of the Constitution in the High Court of Allahabad. That petition was allowed in part and Rules 7 A and 7B were declared ultra vi res Articles 14 and 16 of the Constitution, in the impugned judgment. Hence the - appeal by special leave by the State.

Dismissing the appeal, the Court,

HELD: 1:1. Rules 7A and 7B of the Uttar Pradesh Promotion by Selection in O; msultation with Public Service Commission (Procedure) Rules, 1970 .. are

ultra rires Articles 14 and 16 of the Constitution. (466 E, 473 A-BJ

1 :2.

The grievance of the respondent, namely, that he had a fundamental E right of being considered for promotion when others similarly situated were so condsidered and teat if he was not considered in a situation like that, he was discriminated against and was denied equality of opportunity is not only factually correct but well founded. [ 467 B-C]

2:1. It is true that the rules regulating the conditions of service are within the executive power of the State or its legislative power under the proviso to Articles 309 of the Constitution, but even so, such rules have to be reasonable, fair and not grossly unjust if they are to survive the test of Articles 14 and 16 of the Constitution. A rn le, which contemplates tl1at unless the list of 300 persons is exhausted no other person can be selected obviously, is unjust and it deprives other persons in the same situation of the opportunity of being considered for promotion. [ 4 70 F-H]

G 2:2. The classification in this case cannot be said to be a reasonable classification based on the intelligible differentia having a nexus to the object sought to be achieved. The only basis of grouping the 300 persons in one category is that they were included in the select list of 1966 and that ihey were officiating. The respondent, in the instant case, could not be selected in the selection of 1966 on account of an adverse entry which was subsequently expunged. His position in the H seniority list was also corrected but because no selection took place after 1966.

The respondent could not be included in the list for no fault of his. If 1her1 hfld

been a selection and the list had been revised every year, as is the requirement of the rules, the responde/lf, and like him many others, would have been included in the list. For example, some candidates who had not completed seven years could not be eligible for promotion and could not be included in the Select List of 1966 but after a lapse of time they became eligible and they might have been selected if selection had taken place. But, the door for promotion had been foreclosed for the respondent and many others like him by Rules 7 A and 7B for no fault of theirs. The objection taken by the Public Service Commission and the letter of the Secretary of the Board of Revenue addressed to the Government indicating that it would take about 24 years to absorb 300 persons included in List-B and, therefore, recommending that the list may not be enforced would point out unmistakably that the selection was unnecessarily postponed only to accommodate the 300 persons included in the Select List of 1966. There is no rational basis for such a departure from the ordinary operation of the 1970 Rules which envisaged the preparation of a new list every year and for singling out one particular list for according preferential treatment to others in the similar situtations.

[ 469 B-F, 470 A-C]

Stale of Jammu and Kashmir v. Triloki Nath Khosa and others [1974] 1 S.C.R. 771 ; Ramesh Prasad Singh v. State of Bihar and others, [1978] I S.C.R. 787 and Ganga Ram and others v. Union of India and others, [1973] 3 S.C.R. 481, applied.

Reserve Bank of India v. C.S. Rajappan Nair and others, I.L.R. 1977 (1) Kerala 398, approved.

3. In a case where the vires of certain rules were challenged as being vioMive of the Articles 14 and 16 of the Constitution, only State is a necessary party. The other persons likely to be affected by the declaration of the rules as ultra vires are E only proper parties. [471 E-F]

4. A party cannot be prmittd to take up a new plea in the appeal for the first time before this Court which was not taken before the High Court in writ petition. [ 472 E-F]

General Manager, South Central Railway, Secundrabad and Anr. v. A. V.R.

B. Gopalaiah v. Govern nent of Andhra Pradesh, A.LR. 1969 A.P. 204 and J.S. Sachdev and Ors. v. Reserve Bank of India and Anr., I.L.R. (1973) II Delhi 392, approved.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 282 of 1980.

Appeal by special leave from the judgment and order dated the 29th March, 1980 of the Allahabad High Court (Lucknow Bench) Lucknow in Writ Petition No. 524 of 1979.

AND

CIVL MISCELLANEOUS PETITION Nos. 4905 and 11949 of 1980. ..

G.N. Dixit, Mrs. Shobha Dikshit and H.R. Bhardwaj for the A Appellants.

S.N. Kackar, K.K. Mohan, Rajiv Datta and A.S. Pandit for the Respondent.

A.N. Pareek and S.K. Jain for the Intervener.

The Judgment of the Court was delivered by

MISRA, J. The present appeal by special leave is directed against the judgment dated 29th March 1979 of the Allahabad High Court

allowing a petition under Article 226 of the Constitution.

In the State of Uttar Pradesh, there is a Service commonly known as Naib Tehsildars. They have always formed the backbone of the revenue administration in that State. Sixty per cent of the posts of Naib Tehsildars are filled through a competitive examination held by the State Public Service Commission. The remaining posts are filled by promotion. There is another Service in that State known as the Service of Tehsildars.

Cent per cent of the posts of Tehsildars are filled by promotion from amongst various sources such as Naib Tehsildars,. Peshkars of the Kumaon Division, Kanungos, Kanungo Inspectors or Instructors and Sadar Kanungos.

Ram Gopal Shukla, the respondent, started his service as Kanungo in 1949.

In due course, he was promoted as Naib Tehsildar. In 1962, he was confirmed as such, and in 1963 he was appointed as Tehsildi:ir in an officiating capacity.

It appears that a regular selection for the posts of Tehsildars was held in 1966 in accordance with the Uttar Pradesh Adheenasth Rajaswa Karyakari (Tehsildar) Sewa Niyamavali, 1966 (hereinafter referred to as 'the Tehsildar Rules 1966'). Rule 5 of these Rules provides the sources of recruitment to the post of Tehsildar. Rule 6 thereof lays down conditions for eligibility and provides,--

"For the purposes of recruitment to the Service a selection strictly on merit shall be made from amongst all the permanent Naib Tehsildars, Tehsildars, Peshkars of the Kumaon Division, Kanungo Inspectors or Instructors and Sadar Kanungos, who have put in not less than seven years' service in the aggregate as such or in an equivalent or higher

post in a substantive or officiating capacity on the first day of January of the year in which the selection is made."

Rule 7 enjoins upon the Parish ad to report by i st of March every year to the Government the number of vacancies in the Service expected during the following calendar year, and then provides that the Governor shall fix the number of appointments to be made.

Rule 8 lays down the criterion for selection.

Rule 9 prescribes the procedure for selection.

As this rule is important for the purpose of the present case, it is reproduced in so far as it is relevant,-

"9. The procedure for selection shall be as follows :

(J) The Parish ad shall draw up, in order of merit, a list of most suitable candidates from amongst those who are eligible for promotion to the posts of Tehsildars. The names in the list shall ordinarily be double the number of substantive vacancies to be filled during the course of the year.

(2) The Parishad shall also draw up, in order of merit, a supplementary list containing names of officials considered suitable for officiating or temporary vacancies expected to occur during the course of the year.

/ (3) The two lists drawn up under clauses (J) & (2) above together with a gradation list prepared under clause (b) of Rule 10, indicating therein the reasons for passing over the seniors, if any and the character rolls of all the eligible officials shall be forwarded by the Parishad to the Commission "

(4) The Parishad shall thereafter, in consultation with the Commission, fix date, on which a Selection Committee consisting ofshall consider the cases of the eligible candidates whose names are contained in the final lists drawn up by the Commission and interview such of them as are indicated by the

Commission under clause (3) above.

(5) The lists of the names selected by the Committee shall be taken with him by the representative of the Commission

for placing them before the Commission, and the Commis- A sion, shall thereafter send their final recommendations to the Parishad.

( 6) The Parishad shall draw from the first list received from the Commission under clause (5) above, as many candidates as there are permanent vacancies and will thereafter re-arrange their names in accordance with their seniority in the present service and they will be appointed against the substantive vacancies. The remaining names of the first list and those of the second list will be regarded as forming the 'Select List' to be drawn up in order of merit. The officials will be offered officiating or temporary vacancies in the order in which their names have been arranged in the aforesaid 'Select List' as and when the vacancies occur during the course of the year.

This 'Select List' will hold good only for one year or until such time a review ; s made at the following selection. (Emphasis supplied)

(7) In case permanent vacancies do not occur for two consecutive years and it becomes necessary to make a selection for temporary or officiating vacancies only, then also the procedure prescribed above will be followed."

In accordance with the aforesaid rules, the Uttar Pradesh Publice Service Commission selected 148 persons for substantive appointment as Tehsildars and their names were shown in a list known as List A.

The Commission also selected 300 other persons for temporary and officiating appointment as Tehsildars during the coming years and their names figuured in what was called List B.

The respondent was, however, not selected and consequently his name could not be included in either of the aforesaid two lists, presumably because he had . an adverse entry forming part of the remarks recorded on his work and conduct and had also been shown down below at serial No. 557 in the seniority list of Naib Tehsildars in the year 1956. Thoug;1 the adverse entry was expunged in the year 1969 and his seniority was also re-fixed at serial No. 216 on 6th of October 1970, as there was no selection after 1966, his name could not be included in either of the two lists.

He has, however, no grievance on that account.

Subsequently, the State Government made the Uttar Pradesh H Promotion by Selection in Consultatioa with Public Service Commission (Procedure) Rules, 1970 (hereinafter referred to as 'the

A 1970 Rules'). These rules govern various Services, to be more specific 29 U.P. Services including the Service of Tehsildars. The purpose of these rules obviously was to standardise the procedure for promotion and make it uniform in respect of all such Services.

The procedure laid down in the 1970 Rules for promotion as Tehsildar was not substantially different from that laid down in the B Tehsildar Rules 1966.

The respondent, therefore, did not feel aggrieved even by the introduction of the 1970 Rules.

His grievance started only with the introduction of rules 7-A and 7-B to the 1970 Rules by notification No.42/4/1966-Apptt. 3 dated 4th of July 1972.

As the question to be decided in this case is about the vires of rules 7-A and 7-B, it willbe appropriate to read them at this stage,- c

"7-A. Notwithstanding anything contained in these rules, but subject to the proviso to rule 18, the names of candidates on the Select List appointed in temporary or officiating vacancies prior to the date of issue of this notification, shall be rearranged in order of seniority."

"7-B. The candidates of of the Select List as rearranged in accordance with rule 7-A shall be appointed against substantive vacancies in preference to any candidate selected in accordance with the provisions of these rules."

The complaint of the respond_ent was foat the aforesaid new rules 7-A and 7-B were discriminatory and violative of Article 14 and 16 of the Constitution, in as much as the candidate in the Select List of 1966 were to be appointed against substantive vacancies in preference to any candidate selected in accordanc~ with the provisions of the 1970 Rules and unless the candidates in the list were exhausted, other eligible candidates were not to be considered for promotion so that their chances of promotion would be deferred to an undated future.

The further grievance of the respondent was to the following effect.

The Select List was to hold good only for one year or until such time a review was mlde at the following selection. Thus, the life of the Select List of 1966 was for one year only on the expiry of which it died its natural death. In this view of the legal position, the appointment of Tehsildars from the Select List of 1966 after the expiry of a year from the date of its operation was illegal on the face of it.

On the strength of Rule 7-A and rule 7B, no selection was to be held unless 300 persons included in List B were absorbed.

The respondent challenged the vires of rules 7-A and 7-B by filing a petition under Article 226 of the Constitution in the High

Court of Allahabad. That petition was allowed in part and rules 7-A and 7-B were declared ultra vires Articles 14 and 16 of the Constitution in the impugned judgment.

Shri Dixit, appearing for the State has contended that a mere chance of promotion is not a conition of service giving rise to a fundamental right. We are afraid this contention is irrelevant • to the decision of this case.

The precise grievance of the respondent has been that he had a fundamental right of being considered for promotion when others similarly situated were so considered and that if he was not considered in a situation like that, he was oiscriminated against and was denied equality of opportunity. This grievance, if factually correct, must be held to be well-founded.

It was next contended by Shri Dixit that the candidates covered by rule 7-A are a class by themselves, that the classification is a reasonable classification and that as the respondent does not satisfy the requirements of rule 7-A, he cannot claim that any infraction of Article 14 or 16 bas taken place.

According to Shri Dixit, two conditions are necessary to bring a person within the fold of that rule: : (!) the candidate's name must have been included in the Select List; and (2) he must have been appointed in a temporary or officiating vacancy prior to the date of issue of the notification of 4th July 1972. The respondent did not satisfy these requirements and therefore did not fall within the purview of rule 7-A.

Rule 7-B gives perference to the candidates in the Select List as rearranged in accordance with rule 7-A, which, according to Shri Dixit, was based on a reasonable cla11sification and therefore the respondent can have no grievance. In support of this contention, reliance has been placed on Reserve Bank of India v.

C.S. Rajoppan Nair and others,(1) State of Jammu & Kashmir v. Triloki Nath Khosa and others,(') Ramesh Prasad Singh v. State of Bihar and others,(3) and Ganga Ram and others v. Union of India and others.(4 ) In C.S. Rajappan Nair (supra), the classification of a group of employess who had officiated in a particular capacity as a different class, treating them differently from others who had not the opportunity to function as such, was held to be an intelligible differentia which can stand the test of equality provided by Article 16 of the

(1) I.L.R. 1977 (I) Kere la 398.

Constitution. In Triloki Nath Khosa (supra), persons appointed directly and by promotion had integrated into a common class of Assistant Engineers. The question arose whether for the purpose of promotion to the cadre of Executive Engineers, they could be classified on the basis of educational qualification. It was held by this Court that the rule providing that graduates shall be eligible for such promotion to the exclusion of diploma holders did not violate Articles 14 and 16 of the Constitution. ln Ramesh Prasad 9' Singh (supra), this Court, dealing with principle of equality under Articles 14 and 16, observed,-

"The doctrine of equality before law and equal protection of laws and equality of opportunity in the matter of employment and promotion enshrined in Articles 14 and 16 of the Constitution which is intended to advance justice by avoiding discrimination is attracted only when equals are treated as unequals or where unequals are treated as equals. The guarantee of equality does not imply that the same rules should be made applicable in spite of differences in their circumstances and conditions. Although Articles 14 and 16 of the Constitution forbid hositle discrimination, they do not forbid reasonable classification and equality of opportunity in matters of promotion -means equality as between members of the same class of employees and not equality between members of separate independent classes.

Equality is for equals, that is, who are similarly circumstanced are entitled to an equal treatment but the guarantee enshrined in Articles 14 and 16 of the Constitution cannot be carried beyond the point which is well-settled by a catena of decisions of this Court."

In Ganga Ram (supra), dealing with Articles 14 and 16 of the Constitution, this Court again held,-

"Mere production of inequality is not enough to attract the constitutional inhibition because every classification is likely in some degree to produce some inequality.

The classification need not be scientifically perfect or logically H complete. The matter has to be considered in a practical way without whittling down the equality clause. The classification must however be founded on intelligible differentia

which on rational grounds distinguishes persons grouped together from those left out, and it must bear a just and reasonable relation to the object sought to be achieved."

There is no dispute with the principles of law laid down in the aforesaid cases.

By now, the principles of classification are wellsettled and need not be repeated. The question is of application of those principles to the facts of the present case.

The only basis for grouping the 300 persons in one category is that they were included in the Select List of 1966 and that they were officiating.

The respondent in the instant case could not be selected in the selection of 1966 on account of an adverse entry which, as stated earlier, was subsequently expunged.

His position in the seniority list was also corrected but because no selection took place after 1966 the respondent could not be included in the list for no fault of his.

If there had bfen a selection and the list had been revised ewry year as is the 1equireme11t of the rules, the respondent, and like him many others, would have been included in the list.

For example, some candidates who had not completed seven years could not be eligible for promotion and could not be included in the Select List of 1966 but after a lapse of time they became eligible and they might have been selected if selection had taken place.

But, the door for promotion had been fo reclosed for the respondent and many others like him by rules 7-A and 7-B for no fault of theirs.

In this connection reference may be made to the objection of the Public Service Commission and the letter of the Secretary of the Board of Revenue, to show that it would take about 24 years to absorb 300 persons included in List B.

The Secretary, Board of Revenue, vide his letter No. 14708/T.N.T.-59-A/70 dated 30th of January J 973, to the Secretary, Government Revenue Department (filed as Annexure II to the counter-affidavit), recommended that the List B may not be enforced.

In so far as it is pertrnent for the present purpose, it reads,--

"On the basis of the selection in the year 1966, the

List 'B' was prepared for 300 names. During this period all G the candidates of list 'B' are working. So long as all these candidates are not absorbed in the regular vacancies, the question of second selection does not arise till then.

Only 56 vacancies have occurred after the selection of 1966.

According to this the average vacancies in a year are at H I 0, with the result, it will take 24 years to exhaust the above list. Till then no selection is possible."

In the circumstances, the Secretary requested the Government to take steps to recommend to the Public Service Commission to make the next selection of Tehsildars without any further delay.

The objections of the Secretary, Board of Revenue, were similar to the objections raised by the Public Service Commission.

These letters and objections poiat out unmistakably that the selection was unnecessarily postponed only to accommodate the 300 persons included in the Select List of 1966. There appears to be no rational basis for such a departure from the ordinary operation of the 1970 Rules which envisaged the preparation of a new li£every year and for singling out one particular list for according preferential treatment to the persons whose names were contained therein.

The classification in this case therefore cannot be said to be a reasonable classification based on intelligible differentia having a nexus to the object sought to be achieved.

It is, however, contended for the State that the selection could not take place for all these long years because of a stay order passed by the High Court in petitions filed by some candidates challenging the Tehsildar Rules 1966.

This has been refuted by Shri S.N.

Kacker and a finding recorded by the High Court makes out that there was no order staying the holding of selection.

All that was stayed was the confirmation of the officers promoted to the posts of Tehsildars. It is therefore not correct that selection could no, take place because of a stay order from the High Court.

As a second limb of this argument, it was contended on behalf of the State that the Government was the sole judge of the administrative necessities and there being no rule to the contrary, the Government could hold selection according to the need and no exception can be taken to the power of the State.

There is no denying the fact that the rules regulating the conditions of service are within the executive"'power of the State or its legislative power under the proviso to Article 309 but even so, such rules have to be reasonable, fair and not grossly unjust, if they are to survive the test of Articles 14 ati.d 16 of the Constitution. A rule which contemplates that unless the list of 300 persons is exhausted no other person can be selected, obviously is unjust and it deprives other persons in the same situation of the opportunity of being considered for promotion.

"""1

It was next contended for the State that the declaration of rules 7-A and 7-B as ultra vires the Constitution would affect not only the incumbents of one Service but of 29 Services and a fairly large number of persons would be affected in that situation, that the respondent did not implead any of those persons likely to be affected in the various Services, that in any case, at least the Naib Tehsildars or other persons who have been promoted as Tehsildars and who are likely to be affected by the declaration of rules 7-A and 7-B as ultra vires should have been impleaded as parties and that in the absence of those parties, the writ petition was not maintainable and should have been dismissed by High Court on that score.

Shri S.N. Kacker appearing for the respondent, on the other hand, has contended that no such plea was taken on behalf of the State before the High Court and that, therefore, it cannot be permitted to take up a new plea for the first time before this Court.

Elaborating the point, Shri Kacker urged that if such a plea had been taken before the -High Court, the respondent would have impleaded all those persons as parties and filled up the lacuna, if any, and that if the State is permitted to take up such a plea for the first time before this Court, it would seriously prejudice the case of the respondent.

Alternatively, it was contended that the respondent is aggrieved by the ameildment of the 1970 Rlues by the 1972 notification which introduced rules 7-A and 7-B, that the respondent has challenged the vires of rules 7-A and 7-B and only the State is .a necessary party who has already been impleaded, and that at the most, those pusons who are likely to be affected in case the said rules are declared ultra vires, may be proper parties but are not necessary parties.

He sought to take support for his contention from B. Gopalaiah v.

Government of Andhra Pradesh,(1) J.S.

Sachdev & Ors. v. Reserve Bank of India & Anr.,(') and General Manager, South Central Railway, Secundrabad & Anr. v. A. V.R.

Siddhanti and Ors.(3) In Gopalaiah' s case dealing with a situation as in the present case, the Andhra Pradesh High Court held,-

"This is not a case of discrimination of individual against individual.

This is a case where a whole class of citizens have been discriminated against and the court cannot refuse to give relief to them on the ground that the

(!) A.LR. 1969 A.P. 204.

(2) l.L.R. (1973) II Delhi 392.

class of persons who will be benefited as a result of the discrimination are not before the Court.

The person who complains of discrimination cannot be expected to search the country for all persons who are likely to be benefited by its discriminatory policy. Of course, if the discrimination is in favour of an individual against an individual different considerations might arise. But this is not such a case.

In my opinion, where a scheme formulated by the Government is attacked on the ground of its being discriminatory the position is precisely the same as if a statute is attacked as being discriminatory and it can never be an answer to such an attack that persons likely to be benefited by a discriminatory statute should be brought before the Court before the statute is struck down."

In J.S. Sachdev' s case (supra), a Division Bench of the Delhi High Court endorsed the view taken in Goplaiah's case (supra). In South Central Railway's case (supra), a similar objection taken before the Supreme Court was repelled on two grounds, firstly, because this point was not canvassed in the lower courts, and secondly, because the employees who were likely to be affected as a result of the re-adjustment of the petitioner's seniority were at the most proper parties and not necessary parties and their non-joinder could not be fatal to the writ petition.

In view of the law laid down in South Central Railway's cave (supra), the State cannot be permitted to take up a new plea which was not taken before the High Court.

Shri B.P. Sharma had moved an application (C.M.P. No.4905/

80) for permission to intervene in the appeal on the ground that he was vitally interested in the outcome of the instant appeal which would have a great bearing upon the claim petition pending before the Service Tribunal, Lucknow. This application was ordered to be listed at th.: time of the hearing of thisa ppeal.

He also moved an application (C.M.P.No. 11949/80) for modification of the stay order dated 23rd of April 1980 in the appeal filed by the State, so as to govern other cases:affected by rules 7-A and 7-B of the 1970 Rules, as amended by the 1972 notification. Later on, he realised that such an application could not be moved on behalf of an intervener, anc! the'refore, instead of pursuing this application, he

filed Writ Petition No. 3806 of 1980, which has been dealt with A separately. Both these applications are, therefore, dismissed.

For the reasons given above, we find no error in the impugned judgment. We accordingly dismiss the appeal. Parties shall, however, bear their own costs.

S.R.

Appeal dismissed.

STATE OF U.P. AND ANOTHER

RAM GOPAL SHUKLA

April JO, 1981

A.D. KOSHAL

R.B. MISRA, JJ

Articles 14 and 16

Supreme Court

Sadar Kanungos

Sewa Niyamavali, 1966

4th July, 1972

6th October, 1970

Article 226

High Court of Allahabad

Articles 14 and 16

Articles 14 and 16

Articles 309

Articles 14 and 16

Public Service Commission

[1974] 1 S.C.R. 771

[1973] 3 S.C.R. 481

Articles 14 and 16

CIVIL APPELLATE JURISDICTION

CIVL MISCELLANEOUS

G.N. Dixit

Shobha Dikshit

H.R. Bhardwaj

S.N. Kackar

K.K. Mohan

Rajiv Datta

A.S. Pandit

A.N. Pareek

S.K. Jain

MISRA

Article 226

Uttar Pradesh

State Public Service Commission

Kumaon Division

Ram Gopal Shukla

Sewa Niyamavali

Tehsildar Rules 1966

6th of October 1970

4th of July 1972

Article 14 and 16

Article 226

High

Court of Allahabad

Articles 14 and 16

Dixit

Article 14

4th July 1972

C.S. Rajappan Nair

Article 16

Triloki Nath Khosa

Articles 14 and 16

Ramesh Prasad 9' Singh

Articles 14 and 16

Articles 14 and 16

Articles 14 and 16

Articles 14 and 16

Ganga Ram

Articles 14 and 16

30th of January J 973

S.N.

Kacker

Article 309

Articles 14

S.N. Kacker

Kacker

Gopalaiah

Andhra Pradesh High Court

J.S. Sachdev

Delhi High Court

Goplaiah

South Central Railway

South Central Railway's cave

B.P. Sharma

Service Tribunal, Lucknow

23rd of April 1980