NIRANKAR NATH WAHI AND OTHERS

FIFTH ADDL. DISTRICT JUDGE,

MORADABAD AND ORS.

Jwie 7, 1984

[A.P. SEN AND M.P. THAKKAR, JJ.]

Code of Civil Procedure 1908 Order 17 and Order 20-Adjournment,..-Request for further adjournment to engage Senior Counsel refused-District. Judge keeping judgment ready and pronouncing judgment dismissing appeal-Procedure whether just, fair and reasonable.

Practice and Procedure : Adjourment-Request for by appellant to engage Senior Counsel~Refused of-District Judge keeping judgtnent ready and deiivering judgment-Whether there is denial of reasonable opportunity of hearing- Whether procedure adopted by District Judge in preparation Of!.d pronounce~ ment of judgment vitiated.

The appellant in the appeal was the landlord. He sought an adjournment of the hearing of his appeal that was pending before the Additional District Judge on the ground of indisposition of his senior . counsel. The respondent tenant was a leading member of the local bar. The Additional District Judge refused the prayer, but granted three days' time for making alternative arrangements and directed that the appeal be posted for hearing of further arguments and that on fail'; lre to urge arguments, the judgment would be pronounced. On the adjourned date, the appellant again sought adjournment on the ground that he could not secure the services of his out!.station

senior counsel and that his counsel wolfld not be able to appear fo.r at least a month and that he ffiay be granted further time to engage another senior counsel.

The Additional District Judge refused the adjourment on the ground that more than sufficient time had been garnted for additional arguments, and added : "The judgment is ready which is delivered".

The appeal was dismissed by pronouncing the judgment which had been kept 'ready for being delivered'.

A writ petition to the High Court by the apellant uJllier Art. !27 was rejected in limine. ·

In the appeal to this Court, it was contended on behelf of the appellant that: (!) as the respondent was-a leading and influential member of the local bar, members of the local bar were not willing to appearin41fp.e matter .and that the

appellant was genuinely handicapped in securing the services of an out-station senior counsel and (2) that even though the appeal was fixed for making further oral submissions on the adjourned date, the Additional District Judge kept the judgment rady and pronounced it w"'n the appellant appeared and requested for further time to engage a senior counsel. · .. '' ' : ' ' ' \

SUPREME COURT REPORTS

[1984] 3 S.C.R.

Al1owing the appeal,

HELD: The judgn1ent rendered by the District Judge is vitiated by reason of the failure to grant reasona_ble opportunity of hearing to the appellant and by reason of the procedure adopted in connection with the preparation and pronounce1ncnt of the judgment. The High Court also erred in rejecting the 'vrit petition sumn1arily. The judg1ncnt and order passed by the High Court as well as those passed by the Additional District Judge are set aside and the matter remitted to the Court of the District Judge for being disposed of, after affording a reasonable opportnity of hearing tu both the parties.

(924-G-925 B]

In the eyes of Jiiigant a senior member of the bar when shed personaliy, n1ight enjoy certain amount of syn1pathy with the members of the judiciary before whom he is practising day in and day out. This aspect cannot be overlooked having regard to the realities of life.

[922 D}

The learned Judge should have shown awareness of this dimension of the matter and bearing in 1nind the adage that ijustice must also arpear to have been done', ought to have dealt with the request for a short adjournment with a degree of understanding. [922 E]

It is common knowledge that when a leading men1ber of the Bar is sued • or sues in a personal capacity, the members of the Bar \vhere he is practising are more than reluctant to accept a brief against the colleague and friend on account of personal relations Of' on account of likelihood -of embarrassment.

In a matter like this, the litigant pitted against a leading member of the Bar, inay also want to engage a cou_isel of his choice and confidence for it n1ay well appear tO hin1 that not every member of the Bar might present his case with the degree of zeal, enthusiasn1 sincerity and conviction which ordinarily a litigant c::xpects fron1 his advocate. {922 H; 923 A]

The learned Judge could not have armed himself with a readymade ,.._ judg1nent dismissing the appeal when further arguments on behalf "f. of the appellant were yet to be heard. And apparently there was no timecompulsion to pronounce the 'judgment on that very day. The Judgment rendered by the learned Judge is thus vitiated by reason of the failure to grant reasonable opportunity of hearing to the appeallant and by reason of the procedure adopted in connection \vith the preparation and pronouncement of the judgment. [924 F-G]

It was also not difficult to realise that a landlord is the last person intercSted in prolonging the eviction proceedings or the appeal arising from the order passed in such proceedings. The Additional District Judge should have shown awareness of this dimension of the matter, and under the circumstances, might wel.1 have granted a short adjournment to enable the appellant to engage a senior counsel of his choice and confidence. [922 F-Gj

CIVIL APPBLLAT1i JURISDICTION : Civil Appeal No. 2562 of 1984.

From the Judgment and Order dated 21.7.1983 of the Allahabad High Court in WP No. 8933 of 1983. ·

R.B Mehrotra Advocate for the appellants.

K.P. Gupta Advocate for the respondents.

N.N. WAHi v. DiSTT. JUDGE (Thakkar, J.) 919

The Judgment of the Court wa~ delivered by

THAKKAR, J. "Justice", we do not tire of saying, "must not only be done", but "must be seen to done". And yet at times some Courts suffer from temporary amnesia and forget these words of wisdom. In the result, a Court occasionally adopts a procedure which does not meet the high standards set for itself by the judicia; y, The present matter falls in that unfortunate category of cases. That is the reason why, though we do not feel very happy in doing so, we have had to grant special leave for disposing of the appeal not on merits, but only for the purpose of setting aside the impugned judgment rendered by the learned Additional District Judge, Moradabad. To set it aside on the ground that the prOcedure adopted by the learned Judge at the hearing of the appeal was not just and fair. And in order to consequently remand the matter for hearing the appeal afresh with a view to dispose it of on merits in accordance with law.

The ordersheet of May 20, 1983 of the record of the appeal in the .Court of the learned District Judge shows tha.t the appellant sought adjournment on the ground of indisposition of his senior eounsel from Saharanpur with a request that the appeal be adjourned to some date in July. The learned Additional District Judge refused the prayer but granted three days' time for making alternative arrangement and directed that the appeal be posted for hearing of further arguments on May 23, 1983. He further directed that in the event of failure to urge arguments on May 23, 1983, 'the judgment will be pronounced." Even so, the appellant again sought an adjournment on the ground that he could not secure the services of his senior counsel from Sharanpur as he was not able to appear till the month of July, and prayed for some time to engage a senior counsel from Moradabad. The learned Additional District Judge refused the adjournment on the ground thc, t more than sufficient time had been granted for additional arguments, rejected the prayer for adjournment, and then added : • "The judgment is ready which is delivered."

The appeal was dismissed by the learned Additional District , Judge by pronouncing the judgment which the learned Judge had kept ready • for being delivered. As the Act does not provide for any further appeal or revision •. the High Court was approached llnder Art. 227 of the Constitution of India, but the High Court rejected the Writ Petition in limine. Hence the present appeal by special leave.

[1984] 3 S.C.R

The following facts emerge from the order-sheet :

(I) On May 1 ~. 1983 the learned Additional District Judge had felt that the request made by the appellant for further arguments was justlfied and had granted it.

(2) On May 20, 1983 the Court granted only three days' ·

time to make alternative arrangement in view of the fact that the senior counsel from Saharanpur engaged by the appellant was not in a position to appear on account of illness.

 (3) On 23rd May, 1983, the arguments were to be heard. c Notwithstanding that the arguments were yet to be heard on this date, the learned Judge had kept the judgment ready for pronouncing, which he pronounced forthwith wilst refusing the prayer for adjournment made by the appellant with a view to engage a senior advocate from the local bar since the Advocate from Saharanpur D already engaged by him was not available.

Two infirmities have been pointed out to us in support of the plea that the procedure adopted was not just and fair :

(i) Even though the appellant was genuinely handicapped in securing the services of a senior advocate to appear for , him In the matter having regard to the fact that respon- dent No, 3 Kailash Sahai Mathur was a leading and foffuential member of the Moradabad Bar and members, of the local Bar were not willing to appear against him In his personal matter, the learned Additional District Judge did not afford him a reasonable opportunity for engaging an Advocate ;

(ii) Even though the appeal was fixed for making further oral submissions, on the day fixed for this purpose, the learned Additional District Judge hd kept his judgment ready and prononced it when the appellant applied for further time to engage a senior ll)ember of the Bar to represent him.

We do not consider it necessary to delve deep into the facts.

It is sufficient for our purposes to say that the said Respondent, on >- ', his own showing, is a leading and influential member of the H Moradabad Bar as is evident from the following passage extracted from the written objections filed by the said Respondent himself at thoi'.trlalj;

N.N. WAHi v. PISTT. JUPGE (Thakkar, J.) 921

"He has been a member of the State Bar Council for a number of years and also been Vice President of the U.P. Lawyers Conference .. The opposite party has been Secretary, Vice-President and President of the Bar Association, Morada bad. He is also manager of S.R.A.N.

Intermediate College, Moradabad. He is a founder lifemember of the Moradabad Civil Courts Club. He has been President of the Moradabad Rotary Club and is its member for the last about 33 years. He has also been Worshipful Master of the Masonic Lodge."

"He has been member of the Senate, Law Faculty and Board of studies of the Agra University. He is also connected with other Clubs and social and educational institutions. The opposite party was also the founder Secretary of the Moradabad Branch of the Indian Law I, nstitute. In his various capacities, the opposite party has to meet a variety of persons, junior lawyers, teachers, rotarians, social worker, clients etc. each day. He has also a huge library and so stated above a fairJy good number of family members staying with him, all this makes even the space at the disposal of the opposite party such too cramped." ·

It has also been established that the appellant was finding it extremely difficult to engage a lawyer to represent him as he was pitted against a senior and influential member of the Bar personally, and was seeking his eviction from premises in his personal occupation for use as his residence-cum-office. A leading member of the Bar had already returned the brief, and a senior member of the Bar from Saharanpur Bar engaged by the appellant had been repeatedly asking him to seek adjournments instead of appearing in the Court to argue the matter on the appointed day. The ·

adjournments were sought presumably because of his understandable reluctance to appear against a professional brother in a matter where he was personally concerned.

We have no hesitation in assuming that no Court would ever be influenced by the fact that the Respondent was a leading member of the Bar and influential person inasmuch as in the eye of law all citizens are entitled to equal treatment having regard to the doctrine of equality before law. If a case for eviction was made out under the relevant statute, the Court would not hesitate to

-' B

D t!

G "

922 SUPJtEME COURT REPORTS

U984] 3 S.C.R.

release the accommodation by ordering eviction against the respondent notwithstanding his status in the legal world or in the society.

If on merits, the application under Sec. 21 (I) (a) and/or under

Sec. 21 (IA) of the Act deserved to be disallowed, the appeal would be dismissed just as it would be dismissed against any other tenant by reason of the fact that it was wanting in merits, not because the respondent enjoyed a particular status in the profession or in the society. This is what everyone associated with the world oflaw is doubtless expected to know. But a litigant who is pitted against such an influential member of the Bar having such a high status in the society, who himself mentions in his affidavit these facts, can be excused for not being aware of the doctrine of equality before law, not only in theory but also in practice.

So also the learned Judge might well have realised that the appellant was fighting a litigation in which a very senior member of the bar was personally impleaded. as a defendent (respondent) apd that it was understandable if he was labouring under a psychological complex. The complex is understandable because in the eyes of a litigant a senior member of the bar when sued personally, might en'joy certain amount or sympathy with the members of the judiciary before whom he is practising day in and day out. This aspect cannot be overlooked having regard to the realities of life.

The learned judge should have shown awareness of this dimen sion of the matter and bearing in mind the adage that .'justice must also appear to have been done', ought to have dealt with the request for a short adjourment with a degree of understanding.

More particuiarly as it was not difficult to realise that a landlord .is the last person intersted in prolonging the eviction proceedings or the appeal arising from the order passed in such proceedings. The learned Additional District Judge, under the circumstances, might well have granted a short adjounrment to enable the appellant to engage a senior counsel of his choice and confidence. For this reason: It is common knowledge that when a leading member of the Bar is sued or sues in a personal capacity, the members of the Bar where he is practising are more than reluctant to accept a brief against their colleague and friend on account of personal relations or on account of likelihood of embarrassment. In a matter like this, the litigant pitted against a leading member of the Bar may also want to engage a counsel of h'is choice and confidence for it may well appear to him that not every member of the Bar might .

... ,

·-

N.N. WAHi v. DiS'IT. JUDGE (Thakkar, J.) 923

present his case with the degree of zeal, enthusiasm, sincerity and conviction which ordinarily a litigant expects from his advocate.

We are afraid that these vital aspects were overlooked by the learned Judge when ihe granted only three days' time to make atternative arrangement for engaging a local senior counsel by reason of the fact that the Saharanpur Advocate engaged by _the appellant was not in a position to appear on . the ground of illness.

This short adjournment for three days was granted vide order dated May 20, 1983. But 011 May 23, 1983, the learned Judge refused to grant further time to the appellant who had not been able to make suitable arrangement for e_ngaging a counsel on that .date.

We are of the opinion that the appellant has been denied a reasonable opportunity of hearing, and that the grievance made by the appellant, as regards the procedure adopted by the learned Judge on this score, is not unfounded. This is one of the two reasons which has impe!led us to set aside the order passed by the learned Additional District Judge and to remand the matter for a fresh decision in accor.dance with law after affording reasonable opp<Jr tunity of hearing to the parties.

The second ground has also been substantiated in the sense . that the appellant cannot be faulted for entertaining the misgiving that the procedure adopted was not in tune with one's sense of justice .. The grievance this time arises on account of the fact that even though May 23, 1983 was fixed for hearing of further oral arguments, the learned Judge had kept a judgment ready for being . pronounced and he proceeded to pronounce it forthwith whilst refusing the prayer for adjournment made by the appellant. It is not in dispute that on May.23,)983 the. learned Additional District Judge had granted three days' time to the appellant to enable him to engage an advocate to make furthev oral submissions. Since the matter was posted on 23rd May, 1983, for further oral arguments, the learned Judge could not have commenced writing his judgment till further arguments were heard on that , day or the request for adJonrnment, if any, was refused. No objection could have been'!aken if on turning down the request for adjournment on May 23, 1983, the learned Judge had commenced writing or dictating his judgment in the Court. But he had kept his judgment (dismissing the appeal) ready for being pronounced. When the appellant made a request for an . adjournment for engaging an advocate, thereqi•cst was turned down and the judgment prepared

A •'

924 SUPllEME COURT REPORTS [1984] 3 s.c.R.

in advance, dismissing the appeal, y<as straightaway pronounced.

As we pointed out earlier, the learned Judge could be expected to. be aware of the fact that the appellant being a landlord seeking an eviction order was not interested in unnecessarily prolonging the hearing of.the appeal. He also could not h'ave been unaware of the

fact that the respondent was a leading member of the local Bar and an influential person and that under the circumstances a citizen who was pitted against him in a personal litigation was likely to feelthat he was not getting just and fair treatment if the judgment was kept ready in anticipation that the request for adjournment was going to be made and. was. going to be refused. Supposing no request for adjournment was made and a senior advocate had appeared on behalf of the appellant what would have happened ? Before hearing his arguments, the learned Judge had already made up his mind and kept ready a judgment wherein he had reached the conclusion that there was no substance in the appeal. These embarrassing facts star'e one in the eye. We do not think that fault can be found with the appellant if he felt, as any other litigant. would have perhaps felt, that.the procedure adopted was lacking in fairness.

In fairness to th-. learned Judge; we must mention that in his order dated May 20, 1983, he had observed as under:--,- '

"Appeal adjourned to 23-5-83 for additional arguments falling which judgment would be pronunced."

But the fact remains that the learned Judge could not have armed himself with a ready-made judgment dismissing the appeal when further arguments on behalf of th"'appellant were yet to be heard.

And apparently there was no time-compulsion to pronounce the judgment on that very day. . The judgment rendered by the learned Judge is thus vitiated by reason of the failure to g.ant reasonable opportunity of hearing to the aP, pellant and by reason of the procedure adopted in connection with the preparation and pronouncement of the judgment. We may incidentally observe that we are also distressed that the High Court rejected the petition summarily in the face of thesefeatures and obliged the appellant to apprnach this Court.

Under the circumstances the appeal must be allowed. The judgment and order passed by the Allahabad High Court as well as those passed by the learned Additional District Judge are set aside 11nd -the matter is •emitted to the- Court of the District Je,

N:N. WAHi v. DISTT. JUDGE (7 hakkar, J.) 925

Moradabad for being disposed of in accordance with law. In view of what has transpired, we direct that the learned District Judge . himself shall hear the appeal, and after affording reasonable opportunity of haring to both the parties to make their submls sions, dipose it of in accordance with law uninfluenced by anything that might have been stated in the judgment. which is being set aside. The learned District Judge sha!! dispose of the appeal as expeditiously as possible, and, in any event, not later tha.n within four months fFom the date of receipt of a copy of this judgment,. which we hereby direct the Ofll.ce to send to the learned DitriCt Judge 'l>rthwith'. '

There sha!! 'be no order a1 to coill.

N.V.K ..

Appe1J/ a/lowed .

NIRANKAR NATH WAHI AND OTHERS

A.P. SEN

M.P. THAKKAR, JJ.

Code of Civil Procedure 1908

Jiiigant

CIVIL APPBLLAT1i JURISDICTION

Allahabad High Court

R.B Mehrotra

K.P. Gupta

THAKKAR

Moradabad

May 20, 1983

Saharanpur

May 23, 1983

Sharanpur

Art. 227

Constitution of India

23rd May, 1983

Kailash Sahai Mathur

Moradabad Bar

Thakkar

Bar Association, Morada

Moradabad Civil Courts Club

Moradabad Rotary Club

Agra University

Saharanpur Bar

Sec. 21

Sec. 21


RAM JETHMALANI, ETC

UNION OF INDIA, ETC.

June 19, 1984

[E.S. VENKATARAMIAH, J.]

Constitution of India_ i950, Article 32. National Security Act, 1980, Sectioh 3 and The Supreme Court Rules 1966, O.rder II rule 6 and Order, VII rule 4 (5).

Writ petitions assailing detention of de(enu ·.under National Security Act.-.

Vacatio11 Judge hearing petitions-Itnportant questions touching security of nation and personal /jberty involved-Larger Bench hearing matter-Necessity of.

The petition_ers in their writ petitions to this Court assailed the detention of a member of the Sikh Community under the National Security Act, 1980.

HELD: 1. These are not ordinary criminal cases involving'a few individuals. coming from a smalt loca1ity. These ae extraordinary cases involving serious questions of great public importance touching the security of the nation as well as personal liberty of a s, izeable section of the community.

These cases hitve to be dealt v.ith differently from the usual cases which come up before this Court. [927 C-D]

2. In handling these cases the highest judicial talent and statesmanship are needed and hence. these cases cannot just be rejected reserving liberty to the applicants to approach a Judicial Magistrate, a Sessions Judge or even the High Court. Every step taken in these cases should serve as a healing touch bringing solace .to all concerned and lessening by some degree the , pain and suffering through which the country and its peace-loving people have passed and are passing. These procedings should "have the effect of assuaging the outraged feelings of many who till now may not be aware of.what has actually happened. [927 F-G]

3. The questions involved are too large and complex for the shoulders of a Single Judge to bear. These and other cases of like nature should be heard by at least seven learned Judges of this Court whose unquestioned judicial authority, erudition and acumen would be, of great assistance in 'the restoration of peace in one of the States known for valour, devotion, spirit of sacrifice and sense of duty towards the country of the people residing in it.

[927 H ; 928 A]

4. Even ir' alle°'gations of serious offences against the Stat~ may_ 'be forthcoming against the arrested persons, the Court n1ay stilt consider whether it is not possible -enlarge at least some of them, who may be in 'a repentant mood, on bail to facilitate early restoration of normalcy in the State. There may be many other things which may be done and they are within the domain of the Judges, who may .hear these cases. Jf this Court in the end can succetd in establishing peace and , harmony in ihe country, it would be its finest !tour. {9280-H ; 929 A[ •

(Cases reffene~ to Larscr Jlnch.)

Ii.AM JETH MALANi v. UNION ( Venkataramiah, i.) 921

ORIGINAL JURISDICTION : Writ Petition (Criminal) Nos. 920 A and 934 of 1984. (Under article 32 of the Constitution of India)

P.R. Mri1ul, R.D. Agarwala and R.N. Poddar for the Applicant/Respondent.

Miss 'Rani Jethma/ani, G.S. Cheema and Shailendra Bhardwaj for the Opp. side/petitioners.

The 01der of the Court was delivered by

VENKATARAMIAH, J; These cases are just two in number.

There may be many other cases of this nature which bave , not yet

reached this Court but may be filed shortly. These are not ordinary c criminal cases irtvolving a few individuals . coming from a small locality. These are extraordinary cases involving serious questions of great public importance touching the security of the nation as well as pers'onal liberty of a sizeable section or the community, many of whom may have been made to believe by a dominant section of sopiety, may be wrongly, that what they were doing was D right and for that reason may not have been free agents. Hence these cases have to be dealt with differently from the usual cases which come up before this Court.

First a word of caution. In the course of these proceedings every word uttered on either side of the Bar should be weighed before it is used. There is no room for heat and passion ; logic and reason alone .should rule the debates. There should be an all round sympathy in dealing with the complex issues which may arise for determination. In handling' these cases the highest judicial talen~ and statesmanship are. needed and hence these cases cannot just be rejected reserving liberty to the applicants to approach a Judicial Magistrate, a Sessions Judge or even the High Court. Every step taken in these cses should serve as a healing touch bringing solace to all concerned and lessening by some degree the pain and suffering through which the country and its peace-loving people have passed and are passing. These proceedings should have the effect . of assuaging the outraged feelings of1nany who till now may not be aware of what has actually happened. Any amount of time spent by the highest Court of this land on these cases would not go in vain. There is no. duty more. sacred than this.

I, however, feel that the questions involved are too.large and complex for the shoulders of. a Single Judge to bear. It is my humble view that these and other cases of like nature should be heard by at least seven learned Judges of this Court whose unques-. tioned judicial authority, erudition and acumen would be of great

92S SUPi.EME COURT REPOJ.TS \.19\\4) 3 s.C. R..

assistance in the restoration of peace in one of our great States known for the valour, the devotion, the spirit of sacrifice and the sense of duty towards the country or' the people residing in it

May I say that thr¢ can be no compromise on the following matters, namely, unity and integrity Of India, lhe secular and democratic form of the Indian Government arid the supremay of the Indian Constitution ? They must be uppeld in any event. There cannot be.any doubt abonnhe right of the established Government to run the administration of the country. We should remember, that India is no doubt a Union of States, but the boundarie,. of the States are not unalterable. There is only one citizenship in India and that all.of us.:. Indian citizens-belong to the whole oflndia and the whole of India belongs to all of us, Man-made boundaries , cannot divide us.

Language, religion, caste and other factors can not be allowed to drive a wedge between one section and another.

Ir is good to 'remembeF here what Abrahaip. Lincoln said though in another context in 1858, 'A house divided againt itself cannot stand'.· The issue now before . the Court involves more than the future of India .. Again to quote Lincoln from what he said in the American context :

"It presents to tl'l.e whole family of man, the ~111estion wnether a constitutional republic or a democracy-a govern- . ment of the people, by the same people-can or cannot maintain its territorial integrity, agai.nst its own domestic foes''..(')

Tue above words appear to be relevant in the present Indian conteiot.too. ·

 The unfolding of facU in these cases may make those who may have erred to realise where they hav; erred and how they have erred. It may help the Court to suggest solutions for rectilying the undesirable effects of such errors, , Even if allegations of serious offences against the State may be forthcoming against the arrested persons, the Court may still consider whether it is not possible to enlarge at least some of them, who may be in a repentant mood, on bail to facilitate early restoration of normalcy in the State. The Court may at some stage have occasion to consider whether it •

(1) (Vide; The first message to the Congress after the fall of Fort Sumter r during the American civil \Var). ·

ll.AM JETHMALANI v. UNION (Venkataramiah, J.) 929

should recommend to Parliament to pass an Act of Indemnity which may be an act of great sagacity, thus drawing the curtain on this un happy page of the. history of tb!indian Republic. These may be many other things which may be done and they are within the domain of my learned Brothers who may hear these cases. - If this Court.in the end.cah succeed in establishing peace and harmony in the country, it would be its finest hour.

I, therefore, refer these cases to a larger. Bench with the fond hope that our country would have no occasion .in the future to face a similar situation.

These papers may be placed before the Hon'ble the Chief C Justice of India fot appropriate directions.

N.V.K .

Cases referred to larger bench.

ETC

UNION OF INDIA, ETC

June 19, 1984

E.S. VENKATARAMIAH, J.

Constitution of India

Article 32

National Security Act, 1980

Supreme Court Rules 1966

National Security Act

article 32

Constitution of India

P.R. Mri1ul

R.D. Agarwala

R.N. Poddar

Rani Jethma

G.S. Cheema

Shailendra Bhardwaj

VENKATARAMIAH

India

Abrahaip. Lincoln

Parliament


UNION OF INDIA AND OTHERS

ATIC INDUSTRIES LIMITED

• Jwte 22, 1984 . . .

[P.N. BHAGWATI, R.S. PATHAK AND

!\MARENJ?RA NATH SEN, JJ.J

Central Excise. and Salt Act, 1944-Clause (c) of sub-section (4) of section 4 as i( stood after its amendmentby sec. 2 of the Central Act 22 of 1973~ >-- ConsitUtationaJ validity of. ·

Central Excise and Salt Act, 1944-The words "related person" occurriflC in claitse (c) of subSection (4) of sec. 4 as it stood after it~ amendment by sec. 2 of the Central A.ct 22 of 1973-Dejinitton and applicability of.

' Bank Guarntee-Whether the High Court was right in directing the costs of /urilishing bank guarantee to be paid by the Revenue to (he assessee in cases wh.ere the demand for duty is quashed a~ unjustified.

The reSpondent-assessee, a limited company, was engaged in the business of manufacturing dyes. Its 50 per cent share capital was held by Atul • products Ltd. and the remaining 50 per cent by Imperial Chemical Industries Ltd. London wHich also had a subsidiary company fully owned by it,"called

mperial Chemical Industries (India) Pvt. Ltd. The Impenal Chemical Industries (India) pvt. Ltd, ceased to be a subsidiary company wholly owned_ by the Imperial Chemical Industries Ltd. London on 13th March 1978, since 60 per

cent of the share capital of Imperial Cheniical Industries (India) Pvt. Ltd, was offered to the pub.lie in pursuance of the policy of the Government of India requiring ihat not more !ha~ 40o/oof the share Capital of an ltdian copany should be held by a forign sharehplder. ConSequent up<in this dilutiQn e forcii&'n Shareholding, the name of Imperial Chemical Industries (lnQJa) Pvt. Ltd, was changed to Crescent Dyes and Chemicals Ltd.

The assessee at all material times sold the large hulk of dyes rnanufac~ tured by it in wholesale to Atul Products Ltd. and Imperial Chemical Illdus~ tries (India) Pvt. Limited which subsequently came to be known as Crescent Dyes and chemicals Ltd. at a uniform price applicable alike to both these wholesale buyers and these wholesale _buyers sold these dyes to dealers and consumers at a higller price which inter. alia. included the expenses incurred by

UNION v. ATIC INDUSTRIES 931

them as also their profit. The traCsactions between the assessee on the one A hand and Atul Products Ltd. and Crescent Dyes and Chemicals Limited on the other were as principal to principal and the wholesale price charged by the assessee to Atul Products Ltd and Crescent Dyes and. Chemicals Ltd. was the sole consideration for the sale and no ex:tra-crimmercial considerations entered in the detrmination of such price.

The aSsessee went on clearing the dyes manufactlired by it after payment of excise duty as per the price 1ist submitted by it on the basis of the wholesale price charged to Atul Products Ltd. and Crescent Dyes and Chemicals Ltd. as the same was approved by the Asst. Collector on 29th October, 1975.

The Superintendent Of Central Excise, however, isued a notice to the assessee on 31st July: 1976 calling upon the assessee to show cause why the earlier decision approving the price list should not b"° reviewed and.the differential duty worked out on the basis of selling price charged by Atul Products Ltd. and Cresceat Dyes & Cheinicals Ltd. should not be recovered w.e.f. 1st October 1975 on the ground . that the assessee on the one hand and Atul

Product~ Ltd. ~-nd Crescent Dyes and Chernicals Ltd. on the other 'vere "related pesons" and the assessable value .of *'he dyes manufactured by the assessee was therefore liable to be calculated on the basjs of the price at which Atul Products L1d. and Crescent Dyes and Chemicals- Ltd. sold the Dyes to the dealers and the consumers. The assessee in its reply dated 31st . August 1976 pointed out that the assessee on the one hand and Atul Products ""' Ltd. and Crescent Dyes and Chemicals Ltd. on the other Were not "related

persons" within the meaning of the definition of that term contained in clause

(c) of subsection (4) of section 4 of the amended Central Excise and Salt Act

1944. The Asstt. Collector was however not satisfied with the explanation offered by the assessee and viewed, his earlier order of approval of the price list and confirmed the demand Of differentia 1 duty which came to an aggregate amount of Rs 1, 17, 77, 737,65 with retrospective effect from 1st October, 1975 and directed th<:> asscssee to file a fresh price list on the basis of the selling price cllarged by Atul Products Ltd. and Crescent Dyes and Chemicals Ltd.

The assessee thereupon fl.ld a \vrit p ctition in the High Court of Gujarat challenging the validity of the demand made by the Asstt.

Collector on two grounds namely, (i) that the concept of "related .per- . son" occuring in , clause (c) of sub-section (4) of section 4 of the amended Central Excise and Salt Act, 1944. was outside the legislative competence Of Parliament under Art. 226 read with Efltry 84 in the Union List and was therefore u.nconstitutional and void ; &

(ii) that the assessee .on the one hand and A tu l Products Ltd. and Crescent Dyes & Chemicals Ltd. on the other were not ''related persons" and the wholesle cash price charged by the assessee to .A tul Products Ltd. and Cres-· cept Dyes and Chemicals Ltd., and not the price at which the latter sold the dyes to the dealrs or the consumers represented the true measure of the value of the yes for the purpose of Chargeabiiity to excise duty. The High Court llowed the writ petition dn these two grounds and also gave direction 'to the Revenue for paying the costs incurred by, the assesse:e in

SUPREME COURT REPORTS [1984] 3 S.C.Ii.., •. cJnneCtion with the bank guarantee furnished by it.

Hence the apJ, eal to this Court by certificate granted under Art. 132 and 133 (1) of the Constitution.

Allowing the appeal in par~,· !he Court.

HELD : (1) On a proper interpretation of the definition of "related person" in subsec'tion (4) (c) of sec. 4, the words "relative and a distributor of the assessee" do not refer to any distributor but they are li.rnited only to a_ diStributor who is a relat_ive of, the assessee within the meaning of thi! Companies Act, 1956. The definition of •irelated person" is not und_uly wide and does a( suffei' from any constitutional infirmity. It is within the legislative compe, ence of Parliament. The decision of the High Court holding that "the concept of related person occurring in

arnendd section 4 is ultra vires the. legislative corn petence of Parliament under Article 256 read \vith Entry 84 in the Union List and striking down clause (c) 'or sub-section

(4) of sec. 4 as also. the ex.Pression "the buyer -is P_ot arelated perSon nd'' in clause '(a) of sub-section (1) of sec.

and proviso

(lii) to that clause mllst ccnsequently be set aside and it must :be -held that these provisioi:ts are .constitutionally valid.

[937 E-H]

Union of Iµdia v. 467 applied,

High Court judgment in 21F ebruary 1979 reversed.

Bombay. Tyres International Ltd. [1984] I SCC

Special: Civil Appln. No. 119.of 1976 decided on 20 ·

(2) , The first part-of the definition of "related person" in clause ( c) of sub-section (4) of sec. 4 defines 'related persbn' to mean "a t:erson who is so assoicated with the assessee that they have.interest directly or indirectly in the business of each other" It is not enough that the .asses.see has an .interest, direct or iodi'rect _ in, the business of the person a11eged to, be a related person nor is it ertough that the person allehged to be a related pesson

as an. inte:est, direct or indirect in the business of the assessee.

To attract the applicability of the first part .of the definitiorl, the assessee and the person alleged to be a related 11erson must b3.ve interest, direct of indirect in the bu_siness of each other. Each of them must ba('e a diiect or indirect interest in the business of the other. The quality 'and degree of interest which .each -has in the business of the other m'ay be di°lferent ; the interest of one in the business of the other may be direct while the interest of the latter in th~ business of the former may be indirect.

That would nOt make . any difference so long as each has got some interest, direct Of indirect in the business of the other.

(93~ G-H; 939 A-BJ

(3) (i) Jn the present case Atul Products J., td. has undoubtedly interest in the business of the assessee Since it holds 50% of the share c'!pital

of the assessee and has interest as shareholder in the business carried on by the a.sessec.

B_ut, it connot be said that tfte assessee, a Ltd. company, has any interest, d, irect or indirect in the business carried on by one of its shareholders,

• •

IJNION v. ATIC INDUSTRIES. 933

namely Atul , Products Ltd., even though the share-holding of such shareholder may be 50 per cent. Secondly, Atul Products Ltd. is a wholtsale buyer of the dyes manufactured by the assessee but even then, since the transactions between them are .as principal to principal~ it is difficult to appreciate howl:he assessee could be said by virtue of that Circumstan_ce to have any interest, direct or indirect, in the business of Atul Products Ltd.

The assessee is not concerned whether Atul Products Ltd. sells or does not sell the dyes purchased by it from the asscssee nor is it concerned whether Atul Products Ltd. sells such dy<s at a profit or at a loss.

[939 C-F]

(ii) Perhapsthe position in regard to Crescent Dyes and Chemicclls Ltd. is much stronger than that in regard to Atul Pro!=lucts Ltd.

Crescent Dyes and Chernjpals Ltd. is not even a shareholder of the assessee and it has therefore no interest direct or indirect in the business of' the assessee.

Equally, the assessee has .no interest, direct or indirect in the business of Crescent Dyes . and Chemicals Ltd., Which i:; just a , wh0Iesalc dealer purchasing dyes from the asscssee in wholesale on principal to principal basi&.

[939 G-H]

(iii) The first pat of the definition of related persons inclause

(c) of Sub-section

(4) of section 4 of the amended Act is therefore clearly not satisfif; d both in. relations to Atul Products Ltd. as also in relation to Crescent Dyes and Chemicals Ltd. and neither of them can be said to be a "related person" vis-a-vis the assesseee within 'the 1neaning of the definition of that term in clause. (c) of subsection (4) ·of sec. 4 of _the amended Act. Therefore, the assessable value of the dyes: manufactured by the assessee cannot be determined with reference to the. selling price charged b)'.

Atul Products Lid. and Crescent Dyes and Chemicals Ltd. to their \)ruchases but must be determined on the basis of the wholesale cash price charged by. the ass0sset;' to Atul Products Ltd. and Crescent Dyes and Chemicals Ltcl. The demand made by the Asstt. Collector for differential duty mu;:; t therefore be held to be i; ightly quashed by the High Court. [940 D-F]

(4) Th~ High Court was not right in giving direction to the Revenue to pay costs inCurred by thS assessee in conneCtion with the bank. guarantee furnished by the assessee. The bank guarantee was required to be furnished by the assessee as a condition of"grant of' interim !tay of enforcement of the demand for differential duty and if it is u.ltimately found i:hat the demand for differential duty was not justified, 'the bank guarantee would certainly have to be discharged. But, it is difficult to see how the costs of furnishing the bank guarantee could be directed to be paid by the Revenue to the as.sessee. This direction of the High Court which directs the revenue to pay to the assessee the costs in conn'ection with the bank guarantee furnished by "it in pursuance of the.interim order of the High Court is set aside.

[940 H; 941 A-BJ

934 '

SUPREME COURT REPORTS (1984] 3 s.c.!l..

CIVIL APPELLATE JURISDICTION; Civil Appeal No. 3.260 df 1979

From the Judgment and Order dated the 22/23rd day of February, 1972 of the Grjarat High Court in Sp!. Civil Appln. No. 52/77. .

R.N. Poddar for the Appellants.

• N.A. Palkhivala, Atul Setalved, F.H.J.

Talyar Khan,

Ravindar Narain, Kamal Mehta, A. Manjra, T, M. Ansari and Miss Rainu Walia for the Respondc; nts ..

The Judgment of of the Court was delivered by

BHAGWATI, J.

This appeal by certificate granted under Articles 132 and 133 (I) of the Constitution raises a short question relating to the applicability of the definition of "related person" contained in clause (c) of sub-section (4) of section 4 of the Central Exeise and Salt Act, I 944 as it stood after its amendment by section 2 of Ceniral Act 22 Of 1973 which came into force with effect from !st O_ctober, 1975. The facts giving rise to t4is appeal are few and may be briefly stated as follows :

The assessee is a limited company engaged in.the business of manufacturing dyes and it has its factory situate in Atul near Bulsar in the State of Gujarat. The share capital of the assessee is held by two limited companies ; Atul products Limited holds 50 per cent of the share capital while the remaining 50 pe~ cent of the share capital is held by Imperial Chemical Industries Limited, London. The assessee at all material tin'les sold the large bulk of dyes manufactured by it in wholesale to Atul products . Limited and Imperial Chemical Industries (India) Private Limited at a uniform price applic.able alike to both these wholesale buyes and these wliolesale buyers in their turn sold the dyes purchased by them from the assessee to dealers as well as consumers. Now, until 13th March 1978, Imperial Chemical Industries (India) Private Limited was a subsidiary company wholly owned by Imperial _Chemical Industries Limited, London. But, in pursuance of the policy of the .

Government of India requiring that not more than 40 per cent of the share capital o, f an Indian company should be held by a foreign share-holder, 60 pr cent of the share capital of Imperil Chemical .

Industries (India) Priv'ate Limited was offered to the upblic, with

_,.•

UNiON v. Alic INDUSTRIES (Bhagwati, J.) 935

.the result that since 13th March, 1978 ouly 40 per cent of the share capital of Imperial Chemical Industries (India) Private Limited was held by Imperial Chemical Industries Limited, Londqn and

60 per cent came to be held by Indian citizens and. Imperial Chemical Industries <India) Private Limited ceased to be a subsidiary 'company wholly owned by the Imperial Chemical Industries Limited, London. Consequent upon this dilution of freign share holding, the name of Imperial Chemkal Industries (India) Private Limited was changed to Crescent Dyes and Chemicals Limited. Atul

Products Limited and Crescent Dyes ati.d Chemicals . Limited contjnued'to he the wholesale dealers of the dyesmanufactured by the assessee throughout the relevant period with which we are concerned in this appeal. It was common ground between the parties that the transactions between the assessee on the one hand and Atul Products Umited. and Crescent Dyes and Chemicals Limited o.n the other were as principal to principal and the wholesale price charged by the assessee to. Atul Products Limited and Crescent Dyes and Chemicals Limited was the sole consideration for the sale and no extracommerciai considerations entered in the deterimation of such price. Atul Products Limited and Crescent Dyes and Chemicals Limited, of course, sold the dyes purchased by them from the assessee at a higher price which inter alia included the .expenses incurred by them as also their profit.

. On 15th Sept;:mber, 1975 the assessee submitted a price list s)lowing the assessable value of the dyes manufactured by it on the basis of the wholesale price charged by it to Atul Products

Limited and Crescent Dyes and Chemicals Limited. The Superin tendent of Central Excise demanded certain information from the assessee with a view to satisfying himself as regardi the correctness of the price list submitted by the assessee and the requisite in formation was furnished by the assessee by its letter >dated 23rd September, 1975. Thereafter correspondence ensued between the assessee on the one hand alld the Superinteudent of Central Excise on the other and ultimately on 29th October, 1975 the Assistant Collector of Central Excise approved the price list submitted by the assessee. The assessee thereafter went on clearing the dyes manufacthred by it after payment of excise duty OJ} the basis of the price list submitted by the assessee and appr.oved by the Assistant Collector. Then again some further correspondence took place between the assessee an.d the Central Excise Authorities by which c; erta, in information dmanded by the Central Excise Authoritie~

SUPREME COURT REPORTS

(1984] 3 S.C.R.

was supplied by the assessee.

Tl:ie Superintendent of Central Excise, however, issued a no' ice to the asscc.see an 3bt July, 1976 calling upon the '!lssessee to show eause why the .earlier descision of the Assistant Cllector approving the price list should not be reviewed on the ground that the assessee on the one hand and Autal Products Limited and Crescent Dyes and Chemicals Limited on the other were '.'related persons" and the assessable value of the dyes manufactured by the assessee was, therefore, liable to be calculated on the basis of the price at which Atul Products Limited and Cre.scent Dyes and Chemicals Limited sold th~ dyes to the ' dealers and the 7onsunters. The assessee was required to show cause why the differential duty worke<I out on the basis of the selling price charged by Atul Products Limited and Crescent Dyes and Chemicals Lhrited should not be recovered from the assessee with .effect from ·!st October, 1975. The assessee in its reply dated 31st August 1976 raised several contentions in answer to the show cause notice and pointed out inter alia that the assesseeon the one band and Atul Products Limited and Crescent Dyes and Chemicals Limited on the other were noi "related persons" within the meaning of the definition of that term contained i'n sub-clause

(c) of sub-secfon (4) of section 4 of the amended Central Excise 'and Sait Act, 1944 .. The Assistant Collector was, however, not satisfied with the explanation offered by the assesee and be ultimately by an order dated !Otb December, 1976 reviewed his earlier.order of approval of the price list and confirmed the demand differentjal duty with retrospectlve effect from !st October, 1975. and directed the assessee to file a fresh price list on the basis of the selling price charged oy Atul Products Limited and ere.scent Dyes and Chemicals Limited. The demand for differential duty computed by the Superintendent of Central Excise for the period from !st October, 1975 to 31st December, 1976 came to an .aggregate amount of _ Rs. 1, 17)7 ,737,65. The asses see thereupon filed a writ petition in the High Court of Gujarat challenging the validity of the demand made by the Assistant Collector and in the meanwhile also perferred an appeal before the Appellate Collector. The Appellate Collector rejected the appeal of the assessee withol)t ex?mining ihe merits of the grounds raised by the assessee since be took the view that all these grounds would be decided in the writ petition pending before the High Court and no useful purpose would be served by bis consideri'nll the self-same 'grounds.

UNiON v. ATIIC INDUSTRIES (Bhagwati, J.) 937

The assessee urged several grounds in support or the writ petition before the. High. Court but it is not ecessary to refer to them in detail, because the High Court ultimately <; lecided the writ . petition in favom of the assessee only on two grounds and it will, therefore, be enough if we refer to those two.grounds alone and consider whether the decision of the High Court is correct in so for as it decided those two grounds in favour of the assessee. The first ground was that the concept of "related person" occurring in clause (cl of sub-section (4) of section 4 of the amended Central Excise and Salt Act, 1944 was outside the legislative compe•ence

of Parliament under Article 246 read with Entry 84 in the Union List and was, therefore, unconstitutional and' void. This .ground

found favour with the High Court in view of the earlier \lecision given by the same Bench on 20/21 February, 1979 in Special Civil Appjication No. 1.19 of 1976. But, this decision of the High Court striking down clause (c). of sub-section (4) of section 4 of the amended Act cannot stand in view of the decision of the Court in Union of India v. Bombay Tyres International Limited(') where an Identical challenge to the consiitutional validity of the definition of the term "related person" was negatived by this Court. The definition of the term "relatedperson'' was read down and it was held by this Court that "On a proper interpretation of the definition of "related person" in s.ub-section (4) (c) of section 4 the words • "ralative and a distributor of the asssesee" do not refer to any distributor but they ate limited only to a distributor who is .. a selative of the assessee within the meaning of the Companies Act,

1956. So read, the definition of"related person" .is. not unduly wide and does not suffer from any constitntional infirmity. It is within the legislative· competence of Parliaent. The decision of the High Court holding that "the concept of. related person occurring in amende<j section 4 is v/tra vires the legislative competence of P.arliament under Ariicle 246. read with Entry 84 in the Union List" and striking down clause (c) of sub-section (4) of section 4 as also the expression "the buyer is not a related person and"· in clause (a) of sub-section (I) of section 4 and proviso

(iii) to that clause must consequently be set aside and it must be held that these provisions are constitutionally valid.

• The second ground on which the assessee assailed the validity of the demand made by the Assistant Collector for difrerential duty

{I) [1984) I S.C.C. 467,

, .G

SUPREME COURT' RH ORTS [19841 3 s.c.R.

related to applicability of the definition of "rel.ated person" in clause

(c) of sub-section (4) of section 4 of the amended Act. The Assistant Collector took th c 'icw tht tbe acselsee on the one hand and Atul Products Limited and Crescent Dyes and Chemicals lirrited on the other were.related persons whhhin the meanirg of the first .Part of the definition of the term "related person" and the assessable vlue

of the dyes manufactured by the assessee for the purpose of excise duty was, therefore, liable to be determined with reference to the . price' at which the dyes were ordinarily sold by Attul Products

Limited and Crescent Dyes and Chemicals limited. This veiw taken by the Assistant Collector was set aside by the High Court on the ground that the . assessee on the one hand and Atul Products Limited and Crescent Dves and Chemicals limited on the other were not "related person~·· and the wholesale cash price charged by the assessee to Atul Products Limited and Crescent Dyes and Chemicals .limited and not the price at which the latter sold the dyes to the dealers or the consumers, represented the true measure of the value of the dyes for the purpose of chargeability to excise duty. This conclusion reached by the High Coµrt was assailed . before us by the learned Attorney General appearing on behalf of the Revenue. }le fairly conceded that the only part of the definition of "relited person" in clause (c) of sub-section (4) o section 4 on which h; could rely was the first part which defines "related person" to mean "a person who is, so associated with the

assesse~ that they have interest directly or indirectly in the business of each other." The secoi; d part of the dejlnition which adds an inclusive clause wrs admittedly not applicable, because neither Atul Products Limited nor Crescent Dyes and Chemicals limited . was a holding companyor a subsidiary company nor was either of them a relative of the assessee, so as to fall within the second part of the definition. But we do not ibink that even the limited contention urged by be learned Attorney General on behalf of the Revenue based on the first pa•t of the definition can suceed.

What .the firi; t part of the definition requires is that the person who is sought to be branded as a '"related persqn" must be a person who is so associated with the assessee that they have interest, directly or indirectly, in the business of each other. It is not enough that the assesse bas an. interest, direct, or indirect in the business of the gerson alieged to be a related person nor. is it eno11£h that the person alleged to b.e a related person has an interest, direct or indirect, in the business of the assesee. It is esential to attract the applicability of the first part of the definition that the .asswee

and the person alleged to be a rdated person must haw interest,

, ' .

ljNION v. AllG lNDUSlRIES (Bhagwati, J.) 939

direct or .indirect, in the business of each other. Each of them miist have a direct or inciirect interest in the business of the other, The equality and degree of interest which each has. in the bussiness of the other may be different: the interest of one in the business of !he other may be direet, while the interest of the latter ii) the business of the formel' may be indirect. That would not make any difference, so long as each has got some interest, direct or indirect, in the business of the other. Now, in the present case, Atul. Products Limited ha.s undoubtedly interest in the busine'8 of the assessee, since Atul Products Limited holds 50 per .cent of the share capital of the .assesse and has .interest as shareholder in the biisiness carried on by the assessee .. But it is not possible to say that the . assessee has any interest in the business of. Atul Products Limited. 'J; here are two points of view from which the relationship between the assessee and Atul Products Limited may be considered. First, it may be noted that Atul Products Limited is a shareholder of the '

assessee to the exterit of 50 per. cent of the share capital. But we : fail to see how it can be said that a limited company has any \intere!; t, direct or indirect, in. the business carried on by one of its . shareholders, even though the shareholding of such shareholder may be 50 per cent. Secondly, Atul Products Limited is a wholesale buyer of the dyes manufactured by the assessee but even. then, • since the transactions between them are principal to principal, it is difficult to appreciate how the assessee could be said by virtue of th.at cricumstance to 'have any interest, direc' .Or indirect, in the.

business of Atul Products Limited. Atul Produets Limited buys dyes from the assessee in wholesale on principal to principal basis and then sells such dyes in the market. The. assessee is not concerned whether Atul Products Limited 'ells or does not sell the .. dyes purchased by i.t from th~ assess.ee nor is. it concerned whether_

Atul Pr.oducts .Limited sells such dyes at a loss. It is impossible to contend that the ass.ess.ee has any direct or indirect interest in th.e business of a wholesale dealer who purchases dyes from .it on principalto principal basis. The same position obtains iri regard to Crescent Dyes and Chemicals Limited. Perhaps the position in regard to Crescent Dyes and Chemicals Limited is much stronger ·

then that in regard fo Atul Products Limited. Crescent Dyes and Chemicals Limited is not even a shareholder of the assessee and it hl!S, therefore, no interest dfrect or indirect in the bussiness of the assessee. It is Imperial Chemical . Industries Limited, Londo!) which holds 50 rer cent qf the sh?Je capitel of the assessee and this foreign company aim holds 40 per cent of the. share capital of

' . :;,_.-, G

.ff

• •

. a

[1984] 3 S.C.R. .

Crescent . Chemicals and Dyes Limited. Imperial . Chemicals .· ..

Industries Limited, London would admittedly have an interest in tl)e business of the assessee in its capacity as a shareholder, but how. can Crescent Dyes and Chemicals Limited of which 40 per cent of the shares are held by Imperial Chemical Industries Limite<l; London which in_ its turn is a shareholder of the assessee, can not.be ' said to have any interest, direct or indirect, in' the business of the

assessye. Equally the assessee has no. interest diiect or indirect in the business of Crescent Dyes and Chemicals Limited, which is just a wholesale dealer purchasing ayes from the asses see in wholesale on principal t.o principal basis. It is obvfous that fr the same . 'reason's which have prevailed with tis while discussing _the case of

Atul. Products Limited, the assessce has no _direct ot indirect interest in the business of' Crescent Dyes and Chemicals Liniited. The first , part of the definiiion of. related person in clause (c) of sub-section . (4) of section 4 Of the ame11ded Act is, therefore, clearly not

satisfied both in relation to Atul Products Limited as . also in relation to Crescet;1t - Dyes and Chemicals Limited and neither of them can be said i:o be a "related person" vis-a-vis the assessee within the meaning of the definition of that term in clause (c) of iub-scction (4). of section 4 of the amended Act. We, therefore, affirm the view iaken. by the High Court and hold that the assessable value of the dyes manufactured by tb, e assessee cannot be determined with reference to the selling price charged by . Atul Products.

Limited and CresQ'ent Dyes and Chemicals Limited to thei~ purchasers but must be determined.on.the basis of the wholesable

ca.sh price cllarged by the assessee to Atul Products Limited and Crescent Dyes aud Chemicals Limited. 'Th.e demand made by the .

Assistant Collector for differential duty must, therefore, l)e held to be rightly quashed by the High Court.. ·

But there is one small matter on which the High Curt. has, in our. view, erred in giving .direction and iti.s in regard to payment of de costs incurred by . the assessee in connection with the bank guarantee furnished by it in pursuance of the interim order made by the High Court. We do not think the High Court was Fight in giving this direction. The bank. guarantee was required to be fitrnished by the assessee as a condltlon of grant .of interim stay of enforcement of the . demand. for differential duty and if it .is ultimately foun<; I that the 4emand for differntial duty was not

' .·.

• • .. . . . . . .

UNION v. ATIC INDUSTRIES (Bhagwati, J.) 941

justified, the bank guaraniee would certainly have to be dfacharged, A • but it is difficulty to see .how the costs of furnishing the bank , guarantee could be directed to be paid by. the Revenue. to the assessee. We would, therefore, set aside that part of the otder made by the High Court which directs the Revenue to pay 'to the

~ l\ssessee the costs incurred in conection with the bank guarantee furnishid by it in pursuance of the interrn order of the High

. B Court.·

The appeal, therefore, fails except in"regard to the direction •for payment of costs of the bank guarantee. The Revenue will pay the costs of the appeal to the assessee.

S.R.

A]Jpeal dismissed

'·

UNION OF INDIA AND OTHERS

ATIC INDUSTRIES LIMITED

P.N. BHAGWATI

R.S. PATHAK

MARENJ?RA NATH SEN, JJ

Salt Act, 1944

section 4

sec. 2

Central Excise and Salt Act, 1944

sec. 4

sec. 2

Atul • products Ltd.

Imperial Chemical Industries Ltd. London

13th March 1978

Government of India

Crescent Dyes and Chemicals Ltd.

Atul Products Ltd.

Crescent Dyes and chemicals Ltd.

Crescent Dyes and Chemicals Limited

Atul Products Ltd

Crescent Dyes and. Chemicals Ltd.

29th October, 1975

Superintendent Of Central Excise

31st July: 1976

Cresceat Dyes & Cheinicals Ltd.

Atul Products L1d.

Crescent Dyes and Chemicals- Ltd.

31st . August 1976

Atul Products ""' Ltd.

section 4

Central Excise and Salt Act

1st October, 1975

Dyes and Chemicals Ltd.

High Court of Gujarat

section 4

Central Excise and Salt Act, 1944

Parliament

Art. 226

A tu l Products Ltd.

Crescent Dyes & Chemicals Ltd.

Art. 132 and 133

sec. 4

Companies Act, 1956

section 4

Article 256

sec. 4

Union of Iµdia v. 467

sec. 4

Atul Products

Atul , Products Ltd.

Crescent Dyes and Chemicclls Ltd.

Atul Pro!=lucts Ltd.

Crescent Dyes and Chernjpals Ltd.

Crescent Dyes . and Chemicals Ltd.

section 4

sec. 4

Atul Products Lid.

Crescent Dyes and Chemicals Ltcl

R.N. Poddar

Atul Setalved

Talyar Khan

Ravindar Narain

Kamal Mehta

A. Manjra

T,

M. Ansari

Rainu Walia

BHAGWATI

Articles 132 and 133

section 4

section 2

st O_ctober, 1975

Bulsar

Gujarat

Atul products Limited

Imperial Chemical Industries Limited

London

Atul products . Limited

Imperial _Chemical Industries Limited

Government of India

Imperil Chemical

13th March, 1978

Imperial Chemical Industries Limited, Londqn

Atul

Products Limited

Crescent Dyes ati.d Chemicals . Limited

Atul Products Umited

Atul Products Limited

15th Sept;:mber, 1975

Atul Products

Limited

23rd September, 1975

Autal Products Limited

Cre.scent Dyes and Chemicals Limited

Crescent Dyes and Chemicals Lhrited

st October, 1975

31st August 1976

section 4

Sait Act, 1944

31st December, 1976

section 4

Central Excise and Salt Act, 1944

Article 246

20/21 February, 1979

section 4

section 4

Companies Act

section 4

section 4

section 4

section 4

Crescent Dyes and Chemicals

Crescent Dyes and Chemicals

Crescent Dves and Chemicals

section 4

Crescent Dyes and Chemicals limited

Atul. Products Limited

Atul Produets Limited

Imperial Chemical . Industries Limited

Atul. Products Limited

Crescent Dyes and Chemicals Liniited

section 4

section 4

Atul Products

CresQ'ent Dyes and Chemicals Limited

Crescent Dyes aud Chemicals Limited

S.R.

A]Jpeal dismissed


·"

VJNODCHATURVEDI ETC. EJ'C. •

STATE OF MADHYA PRADESH ' .

March S, 1984

(S. MURTAZA FAZAL ALI AND RANGANATH MISRA, JJ.]

• Appeal against acquittal under section 386 of the Criminal Procedure "Code, 1973-Convictio11 by re:versal.of th; verdict of acquittal relying on the

evidence of the same wltnesfes; who are .clo_se relatives of the de.ceased and who in the earlier trial categqrical/y implicated someother five persons-Appreciation of evidence-Whether the High_ Co_uri was correct in relying on the said eye witnesses-Evidence Act, -section J...,...AdmissihilitY of Ex. P. ]'and E; v. P. 9, the tWo letters as corroborative evidence-Penal Code, sectionJ 148, 300, 362 and 367-Conviction Under Applicability of section !48 when the state coUnQel conceded tliat the charge u/J 148 cf id nOt relate to charge of bduction, but to murder taking place /ater.

On the basis or the investigation made on "a First Information Report that one Brindaban the. deceased son of PW 1 was kidnapped in a jeep fr6m village Budba to the village Rarnpura whee h~ was _done to death, five person_s were put on trial in. Sessions Trial No. 107 of 1973, but they were acquitted by Judgment date.d 29.1.1974. The trial court held that the investigation was defective and the real accused had not been brought ori trial. After a lapse of three years in 1977 a fresh investigati0:n was undertaken and it resulted _in the prosecution of the present appell.., ts in the Court of Sessions as killers of Bfinda.ban. Prosecution examined seven eye-witneSes. The Trial Court assessedthe' evidence in a fair way and was not prepared to rely. on ii and therefore directed acquittal of the appellants. In the State appeal againot acquittal, the High Court heavily relying upon two documents-The first being Ex. l>. 1 a lettersent by PW I Sunderlal (9 the Superintendent of Police on 29.4.1973 nd the second being Ex. P 9 a confidential letter of the Superintendent of olice to the Deputy Inspector• General of the Department-found support 1 or the prosecutioJl case as corroborative evidence with the ocular evidence and reversed the acquittal, by convicting the appellants under section 148 and l6~ IPC. Hence the; appeals by special leave. ·

Allowing the appeals, the Court

HELD : I. When in the first trial on the charge of murder and abduction the prosecution had alleged that the deceased had been murdered by

r .

a •et of five persons different from the present appellants and let in evidence of H • three eye-'-witnesses bloing. PWs. 1, 3 and 24 of the Second Trial and who aro iiamittedly close relations of decesed t6 the ~ect that tho~ fiv~ . ~CC¥~ .

SUPREME.COURT REPORTS

(1984) 3 S.C.R.

persons.and no thers incIding the appellants were responsible for the death . of the deceased. acceptance of the evidence of the vey same three eye witnesse1

in tbe second trial conducted after a lapse: of. three years implicating the present appellants as murderers will be higl\ly imp; oper. . The fact that these alleged eye-witnesses were pi:epared to implicate the five persons who were acquitted on the earlier occasion and the present appellants on the subsequent occasions in a serious charge like murder is indicative of the fact that no credence can be given to the evidence of these witnesses and they were willing< to lend their. oath to any story. that the prosecution. advanced.

Therefore, in an appeal against .acquittal the High Court in whose hands there has been a revirsal of the acquit tat ollght not to have found the remaining evidence to be good basis for conviction ofihe appellants. [96H; 97A-D]

2. The High Co(irt fell into error in relying on the Jetter of PW I Sunaerlal to the Superintendent of Police dated 29.4.1973 which ii subsequent tO the commencement of the 'investigation of the basis on the First Information Report. Such a letter written by PW I who stood in the place of the posecutor would. not ai alt'be admissible inevidence. [97E-F) . '

Kali Ram v. State of Himachal Pradesh.

[1974] I SCR '22; •. followed.

3. To rely on the contents of the lettO:r Ex. P. 9 written bi the Superin tend,; nt. of police to_ his superior officer,. Without examining the writer of

th~ letter and without affording an opportunity to the defence to Crossexamine the writer,. is totally misconceived. The document w-as no.t available to be relied upon for any pupose an~ the High Court in the ins'tant case was wrong in seeking support from it by way of corroboration of the or81 evidence. [9.70" HJ

.4. In view of the exres§ words i~ the definition of "abduction" in Sectioµ 362 of the J.P. C., the offence of. abduction against the accused has .n9.t bee"n fu.Jly proved, since the name ofVinod the leader of the party has not been mentioned at all during the investigation and even according tO the ro, ajority -ofwitriesses, on the perSuation of the -acused (appellants) he went inside his hous~ and came properly dressed and to accompaily the group to v_illage Rampura. [98CD]

5. The appelJants were not liable to be convicted under section 367 of. the Penal Code because from the rfon aeceptance by the High Court of the G story of murder of the. deceased by the appellants and non recording a finding that the grievous hurt leading 10 death was caued by them, it wiH De clear that the act of picking Of the deceased from hisvillage was unconnected with what happened later. [981'0]

6. The charge under section 148 I.P.C. has been conceded by the

. '

 counsel for the S t3.te to relate to what followed at Rampufa and is not -t' H conriected with the accuSation of abduction. The common object as stated • by the proseCution would not b; available fer sustaining the coµvicton ndr section 148 l.P.C. in that background. (980-HJ . . . ·. . . •

...

ViNOD CHATURVEDI v; M.f. STATE (Ranganath Misra, J.) 95.

CRIMINAL

APPELLATE JURISDICTION : . Criminal . Appeal Nos. 192-193 of 1983

 Appeals by Special leave from the Judgment and Order dated the 31st January, 1983 of the Madhya Pradesh High Court in Criminal Appeal No. 732 of 1980. ·

• A.N. Mu/fa and S.K. Gambhir, for the Appellant in C.A. 192 of 1983. ·

Rajendar Singh a, nd .A.K. Mahajan for the Appellants . in CA. l 93 of 1983. • A.K. Sanghifor the Respondent in both the Appeals.

The Judgment of the Co, urt was delivered by

RANGANATH MISRA, J.

These appeals by special leave are directed against the judgment of the High Court of Madhya Pradesh reversing the order of acquittal passed by 'the learned trial Judge. Criminal Appeal No. 192 of 1983 is by Vinod Chaturvedi while the other is by Jive of the co-accused. All of .them had been charged for offences punishable under Sections 148, 364 and 302/ 149 of the Indian Penal Code and were acquitted by the Additional Sessions Judge. The State of Madhya Pradesh carried an appeal being Criminal Appeal No. 732 of 1980. to the . High Court assailing the acquittal and the High Court allowed 'the appeal and while main• tairiing the acquittal under. Section 302/149 of the Indian Penal Code, convicted the appellants for offences punishable under Sections 148 and 367 of the Penal Code and directed each. of them . . to be sentenced 3 years rigorous imprisonment for each of the olrences with a further direction that the two sentenc.es would run concurrently.

According to the prosecution on 27th April, 1973, around 4 p.m. the appellants kidpapped Brindaban, the deceased son of P.W. I , from village Budha and took him in a jeep to Rampura about ope kilometre .away on the pretext that a pending dispute between Brindaban and Sol)le villagers of Rampura would be settled amicably. It was further alleged that later in the evening Briµdaban wa~ done to death by being given several b\ows by blunt and deadly weapons pursuant to the common object of the appellants of killing him .. The dead body was brought to village l}udha on the following day. Investigation as taken ur on tq~

SUPREME COURT' REPORTS .- ·

(1984) 3 S.C.R.

lJasis of the firs1 information report and as a result thereof five persons were put on trial in session trial No. 107 of 1973 but they were acquitted.by the learned trial Judge by judgment dated 29.1.74.

The trial court came to' hold that the investigation was defective and the .real accused persons had not been brought to trial.

Nothing appears to have been done in the matter until 1977 when

a fresh inv.estiga ti on was undertaken and it resulted in prosecution of the .appellants in the court of session as killers of Brindaban.

Prosecution exmined seven eye-witnesses being P.W. 1 Sunderlal, father of the deceased; P. W. 2 Nathu, a co-villager and claimed toJie a servant of P.W." by the qefnce; P.W. 3 Kalua, a nephew of, the deceased; P.W, 23 Jhallu, a brother of tlie deceased, P.W 24, Nanhaibai wife of the deceased, and P.Ws. Band 14, two outsidePs who have been dclared hostile by the prosecu~ tion.c The trial court assessed the evidence in a fair way and was not prepared to rely upon it.

Accordingly he disbelieved the prosecution case and directed acquittal of the accused persons.

The High Court did not come to the conclusion on the basis of the ocular evidence that the same was acceptable and 0n the basis 1 thereof a conviction could be recorded, but heavily relied on two documents-the first being Exhibit P-1, 'a letter sent by P.W. l Sunderlal to the Superintendent of Police dated 29;4.73 and the second; being Exhibit P-9 a confidential letter of the Superinten dent of Polic.e to the Deputy Inspector General of the Department The High Court found support for the prosecl\tion case fromthese two letters and acceptillg the pos1tion that their contents corrobo ; ated the oral evidence of the witnesses proceeded to reverse the acquittal. It, however, did not accept the prosecution case relating to the charge of. murder.. Thus, while sustaining the acquittal in respect of the charge of murder the court convicted the appellants under Sections 148 and 367 of the I.P.C. ·

. The peculiar features of this case are that the prosecution had alleged .that Brindaban had been !hurdered by a set of fiv~ persons different from the present appellants and had made them face a regular trial. Three most material witnesses being P.Ws. 1, 3 and 24 of the present trial who are close relations of deceased Brindaban had then testified 'before the Court thpt those f\ve accused persons and no others including the appellants were.

responsibl~ for the . death of Brindaban. After the acquittal in .

l9'74 ttothing happened \n te matter for three yeafs and sudenlf ·

. " ' ''

, .

' .

!!!f'" '(

ViNOD CHATURVEDi'v. M.P. SrATE (Ranganath Misra, J.) 97

on the same old allegations in the hands of the police, fresh investigation was undertaken and the present set of accused persons were arrayed as murderers of Brindaban. Those fliree eye• witnesses 7-Vho on the earlier 01casion had deposed that five named .. assailants were the murderers of the Brindaban changed their version and now spoke that the present appellants were the . murderers. The fact that these alleged eye-witnesses were prepared to implicate the five persons who were acquitted on the earlier occasion add the present appellants on the subsequent occasion in

8 Serious charge like mufder is indicative of the fact that DO credence can be given to the evidence ilf these witnesses and they • were willing to lend their oath to any story that the prosecution_ advanced. Once the evidence of P.Ws. I, 3 and 24 is brushed aside on that grmd, the residue by itself would not be adequate to support the charge. We have grave doubts whether the High Court in whose hands there has been a reversal of the acquittal. would have found th\) remaining evidence to be good basis for the. conviction;

The High Court fell into a clear error in' relying on the two letters marked as Exhibit P-1 and Exhibit P-9. Exhibit P-1 was a letter of P.W .. l, Sunderlal to the Superintendent of Police. Admit tedly by 29.4.73 when this letter said to have been written, investigation had started on the basis of the firt information report and therefore, a letter written by P.W. I who stood in the place of the prosecutor would not, at all be: admissible in evidence.

No detailetl . reasons are warranted for this conclusion as the position is clearly covered by a decision of this Court in the case of Kali Riki v. State of Hirnachal Pradesh', Learned counsel for the State did not refute this conclusion .

So far as th'e other document is concerned, as already indicated by us, it is a letter written by the Superintende11t of Police to this administrativ • superi<>r.

The writer of the letter bas not been examined as a witness. No oppor Wnity has been given to the defence to cross-examine the writer. To rely on the contents of that letter in such circumstances' is totally misconceived. The document was not available to be relied .. upon for any purpose and the High Court clearly went wrong. in seeking support from it by way of corroboration of the oral evidence. ·

(U, (1974] 1 s.<;<.it. 722,

SUI'REME COURT REPORTS

(1984) 3 S.C.R.

There are several other unsatisfactory features in the prose,. cution case which the trial had taken note of but strangely. en0ugh tjiose did not commend themselves to the High Coµrt even for consideration. . Vinod had not betlll named as the leader of the party which came to village Budha to pick up Brinda ban iii the statements given during investigation by several witnesses. These witnesses had been confronted as required by law and apart from pleading either innoceni:e or helplessness, no other answer was given. Some witnesses had .deposed that Vi nod the mfrin architect ot the incident came armed with a gun while others claimed that he was armed with a lathi, There is considerable divergence .in the evidence as to \Vhether Brinda ban came into the jeep of his own accord or had been forcibly. put into it. Most of the witnesses ""· have stated that on being persuaded by the ac4*ised persons and

Vinod, in particular, l)e went •inside his house and came.properly dressed to accompany. the group to village Rampura. In that event, it cannot be naid. that Bi'indaban was abducted 'by the 11ccu1ed persl>ns. This is so in view of the definition of 'abduction' in Section 362 of the Code where it has been said: .. "Whoever bv force compels, or by any deceitful means induce1, any person to go from any place, is said to . abduct that person" .•

The High Court has convicted the appellants for the offence punishable under Section 367 of the Penal Code which could be possible . if there is abduction with a view to subjecting the abducted person, to grievous hur(or slavery etc. The High Court did not accept the story of murder of Brindaban by the appellants nor did it record a finding that the grievous hurt leading to death was caused by the appellants. The resultant position from it should have re'en that the act of picking of Brindaban from his village waa unconnected with what . happened to• Brinda ban later.

From if should have followed that the appellants were not liable to be convicted under Se•ition 367 of the Penal Code.

The charge under Section 148, I.P.C. has been .. conccded by the counsel for the State to relate to what followed at Rampura and i1 not connected with the accusation of abduction. The common object as statr.d by the prosecution would not be l\Vailable for sustaining the conviction under Section 148, I.P .C. in that backaround . ·

There are many other aspects with reference to which the trial ~C)Urt !w\I f\.>111l4 f!\U!t wit!\ the prosecutio11 C<\Se, While WI;

• <

. • J'l

VINOD CHATURVEDI v. M.P. STATE (Ranganath Misra, J.) 99

accept the submission advanced for the State that we should not reassess the whole' evidence with reference to minor details, we are satisfied that the prosecution had failed to establish the chrges and the High Court without a proper appraisal of the materials and without meeting the findings reached by the trial court reversed the acquittal. •

We accordingly allow the appeals, set aside the jud1mcnt of conviction recorded by the High Court by reversing the acquittal of the trial court and while restoring the judgment of the trial court, we direct that the appellants are acquitted of both the charges and the sentences of imprisonment are set aside. Each of the appellants is discharged from his bail'bond.

S.R .

. '

VJNODCHATURVEDI ETC. EJ'C

STATE OF MADHYA PRADESH

S. MURTAZA FAZAL ALI

RANGANATH MISRA, JJ.

section 386

Penal Code

Brindaban

Budba

deceased son of PW 1 was kidnapped in a jeep fr6m village Budba to the village Rarnpura whee h~ was done to death, five persons were put on trial in.

Rarnpura

Sunderlal

section 148

IPC

Sunaerlal

ofVinod

section 367

Penal Code

section 148

I.P.C

Rampufa

section 148

ViNOD CHATURVEDI

Ranganath Misra

A.N. Mu

S.K. Gambhir

Rajendar Singh

.A.K. Mahajan

A.K. Sanghifor

Vinod Chaturvedi

Sections 148, 364 and 302

Indian Penal Code

State of Madhya Pradesh

Section 302

Indian Penal Code

Sections 148 and 367

Penal Code

27th April, 1973

Brindaban

Budha

Rampura

SUPREME COURT' REPORTS

Nathu

Kalua

Jhallu

Nanhaibai

l Sunderlal

Sections 148 and 367

I.P.C

ViNOD CHATURVEDi'v

Vho

Sunderlal

Vinod

Bi'indaban

Section 362

Section 367

Penal Code

Penal Code

Section 148

I.P.C

Section 148