February 2.

SUPREME COURT REPORTS [1954]

RAJ RAJENDRA MALOJIRAO SHITOLE

THE STATE OF MADHYA BHARAT.

RAJA BALBHADRA SINGH

THE STATE OF MADHYA BHARAT.

[MEHR CHAND MAHAJAN c. J., MUKHERJEA, S. R. DAs, VIVIAN BosE and GHUL.\M HASAN JJ.]

Constitution of India, art. 385-Madhya Bharat Abolition of fagirs Act (XXVJII of 1951)-Whether void as not passed by a validly constituted legislature.

The decision of the Madhya Bharat High Court declaring section 4 (1) (g) and sub-els. (iv) and (v) of cl. 4 of Schedule 1 of Madhya Bharat Abolition of Jagirs Act (XXVIII of 1951) as illegal and inoperative was not questioned by either of the parties.

It was however, contended that the impugned Act

(XXVIII of 1951) was void as it was not passed by a validly constituted legislature within the meaning of the covenant entered into by the Rulers of Madhya Bharat as the provisions of cl. I ( c) of Schedule IV of thC covenant for the election of 20 members were not complied with.

Held, that as the Madhya Bharat Legislative Assembly was actually functioning on the 26th janflary, 1950, the validity of the Acts passed by it could not be questioned in view of art. 385 of the Constitution irrespective of the fact whether it had. been properly constituted in accordance with the terms of the covenant or not. • Scope of articles 379, 382 and 385 discussed.

CIVIL

APPELLATE JuR1smcTION : Civil Appeals .

Nos. 4 and 6 of 1953.

Appeals under article 132(1) of the Constitution of India from the j'udgment and Order dated the 4th December, 1952, of the High Court of Judicature of the

State of Madhya Bharat at Gwalior in Civil Miscellaneous Cases Nos. 614 of 1951 and 1 of 1952.

P. R. Das (B. Sen, with him) for the appellant in C.A. No. 4 of 1953.

Rameshwar Nath for the appellant in C. A. No. 6 of 1953.

M. C. Setalvad, Attorney-General for India, and K. A. Chitale, Advocate-General of Madhya Bharat

(Shiv Dayal, with them) for the respondent.

1954. February 2. The Judgment of the Court was delivered by

MAHAJAN C. J.-These appeals preferred on behalf of three zamindars of the State of Madhya Bharat against the judgment of the High Court of Judicature of that State dated the 4th Decqnber, 1952, raise common constitutional questions and can be disposed of by one judgment.

The State also preferred cross appeals against the same judgment.

During the pendency of these appeals, two petitions under article 32 of the Constitution of India were also made to this court to obtain the same relief as was claimed by the appellants in their respective appeals.

During the course of the arguments, the counsel appearing for the appellant. in Civil Appeal No. 5 of 1953 asked leave to withdraw the appeal. This was granted and the appeal was dismissed as having been withdrawn. Petitions Nos. 116 and 117 of 1953 preferred under article 32 were also withdrawn and were accordingly dismissed.

Civil Appeals Nos. 4 and 6 of 1953 were argued before us and this judgment concerns them alone.

The appellant in Civil Appeal No. 4 of 1953, Raj Rajendra Maloji Rao Shitole, is the proprietor of extensive landed properties in the State of Madhya Bharat comprising 260 villages under different Sanads granted to his ancestors by the Rulers of Gwalior from time to time. It was alleged by him that his income from these properties was in the sum of Rs. 2,61,637 and that the State of Madhya l)harat, under purported exercise of its powers under section 3 of the Madhya Bharat Abolition of Jagirs Act, was about to issue a Notification for resumption of all his land. By a petition dated the 7th December, 1951, preferred to the High Court he asked for a mandamus to restrain the State from issuing any Notification under section 3(1) of the Act in respect of his properties and from

Rqj RaJtndra Malojirao Shitole

The State of Madhya Bharat.

Mahajan C. J.

•954

Raj Rajendra Maiojir® Skitole v.

The Stateof Madhya Bharat.

Mahajan C.J.

interfering with rights in the said property. The appellant in Civil Appeal No. 6 of 1953 is another Jagirdar of the same State. He preferred a similar petition to the High Court praying for the same relief. These twe> petitions, along with a number of other petitions preferred under article 226 of the Constitution challenging the validity of the Madhya Bharat Abolition of Jagirs Act and praying for the issue of a mandamus restraining the State from issuing the Notification under section 3 ( 1) of the said Act, were heard by a Bench of three Judges of the High Court of Madhya Bharat. The .court, by a majority judgment, declared that the Madhya Bharat Abolition of Jagirs Act No.

XXVIII of 1951 was valid except as regards section 4(1) (g) and sub-clauses (iv) and (v) of clause 4 of Schedule I which were held illegal and inoperative. A writ of mandamus was directed to be issued to the State Government directing it not to give effect to the pmvisions of the impugned Act stated above. Leave te> appeal to the Supreme Court was granted to the parties and in pursuance of the leave the appellants preferred the appeal above mentioned and the State preferred the two cross appeals. The cross appeals were not pressed by the learned Attorney-General and nothing more need be said about them. They are therefore dismissed with costs.

As regards Civil Appeals Nos. 4 and 6 of 1953, the facts are : That in April, 1948, after the partition of India, and the formation of two Dominions, India and Pakistan, the Rulers of the States of Gwalior, Indore and certain other States in Central India being convinced that the welfare of the people of that region could best be secured by the establishment of a State compnsmg the territories of their respective Stares with a common Executive, Legislature and Judiciarv entered into an agreement for the formation of a United State of Gwalior, Indore and Malwa (Madhya Bharat). It was resolved by them to entrust to a Constituent Assembly consisting of elected representatives of the people the drawing up of a democratic Constitution for the State within the framework of the Constitution of India to which the Rulers of these

States had acceded. The covenant entered into by these Rulers was published on the 7th October, 1948.

The Rulers agreed, under article III 'of the covenant, to elect a Rajpramukh of the United State, and by article VI the Ruler of each Covenanting State agreed to make over the administration of the State to the Rajpramukh not later than the first day of July, 1948, and it was agreed that thereupon all rights, authority and jurisdiction belonging to the Ruler which appertain, or are incidental to, the Government of the Covenanting States shall vest in the United State and were thereafter to be exercisable only as provided by the covenant or by the Constitution to be framed thereunder.

By article X it was agreed that as soon as practicable a Constituent Assembly, for the purpose of framing a Constitution for the United State within the framework of the covenant and the Constitution of India, was to be formed and clause (2) of the said article provided :

"The Rajpramukh shall constitute not later than the first day of August, 1948, an interim Legislative Assembly for the United State in the manner indicated in Schedule IV."

Schedule IV laid down the following procedure for the constitution of the Legislative Assembly :

"I. The Legislative Assembly shall consist of- ( a) forty members elected by the members of the Gwalior Legislative Assembly ;

(b) fifteen members elected by the members of the Indore Legislative Assembly ; and ( c) twenty members elected by an electoral college to be constituted by the Rajpramukh m consultation with the Government of India to represent Covenanting States other than Gwalior and Indore.

2. The election shall be by proportional representation by means of the single transferable vote.

3. The Rajpramukh may make rules for carrying into effect the foregoing provisions of this Schedule and securing the due constitution of the interim Legislative As!'embly."

Raj Rajendra Malojirao Shitoll"

The State of Madhya Bharat.

Mahajan C.J.

Raj Rajendra Malojirao Shitole

The State of Jo..[adhva B!1arat. _,

lv.!aha)an C.J.

In pursuance of this covenant the Rajpramukh took the oath of office on the 28th of May,

1948. In the meantime 40 members representing the Indore group we're elected to the interim legislative assembly on the 8th and 9th of May, 1948, respectively. As regards the election of 20 members that had to be elected by an electoral college, what happened was this. The Ministry of States, Government of India, on the 5th July, 1948, informed the Rajpramukh that there were many practical difficulties in setting up an electoral college consisting of elected representatives of the various States, because in many of the smaller States there were no elected bodies of any kind.

After considering the various difficulties it was suggested to the Rajpramukh that the twenty seats may be allocated between the different States in a certain manner mentioned in the latter and out of these, fourteen may be allotted to the nominees of the Praja Manda! and the remaining six may be nominated by the Rajpramukh himself. This suggestion was modified by a letter of the 19th of November, 1948, and it was fina:ly agreed upon that the Madhya Bharat Provincial Congress Committee may be asked to elect six persons to represent the smaller States in the Madhya Bharat interim legislative assembly. This suggestion was not exactly in accord with what had been indicated in clause 1 (c) of Schedule IV. These representatives were elected in the manner suggested in the two letters, on the 19th October, 1948, and they were declared to be validly elected in terms of the covenant.

On the 30th of October, 1948, the Rajpramukh promulgated an Ordinance entitled "The Interim Legislative Assembly Ordinance Samvat 2005'', Ordinance No. 18 of 19"r8.

In the preamble to the Ordinance it was dclared that in accordance with the prov1s10ns of the covenant the legislative assembly had already been duly constituted.

The various sections of the Ordinance provided for the working of the interim legislative essembly, i.e., the manner in which it could be summoned ai1d dissolved or prorogued, how its President and Deputy President were to be elected and how it was to exercise the power of

Voting and what number of members would constitute the quorum. On the 6th . of December, 1948, the Ordinance was repealed and Act XXIII of 1949 took its place. The legislative assembly thus constituted 'was actual! y functioning on the 26th of January, 1950, \v hen the Constitution of India came into force. In the meantime, by subsequent covenants, the Rulers of the Covenanting States had agreed to accept the Constitution of India as the Constitution of the United State of Madhya Bharat and had abandoned their covenant of forming a separate Constituent Assembly for framing a Constitution for the United State of Madhya Bharat. After the coming into force . of the Constitution of India the interim legislative assembly constituted by the Rajpramukh and which was functioning on the 26th of January, 1950, continued to function till some time in the year 1952 when new elections took place and a legislative assembly in conformity with the provisions of the Constitution ot India was duly constituted.

On the 30th of November, 1949, the Government of the State of Madhya Bharat introduced a Bill entitled the "Madhya Bharat Abolition of J agirs Bill' before the interim legislative assembly and the Bill was passed into an Act on the 28th of August, 1951, and having been reserved for the consideration of the President received his assent on the 27th November,

1951. It was published in the Madhya Bharat Gazette Extraordinary on the 7th of December, 1951. The said Act, by section 3, provided for a date to be appointed by the Government by notification for resumption of all jagir lands in the State and by section 4 it provided that as from such a date, the right, title and interest of every jagirdar and of every other person claiming through him in his jagir lands including forests, trees, fisheries, wells, tanks, ponds, watr-channels, ferries, pathways, village-sites, huts, bazars and mela grounds and mines and minerals whether being worked or not, shall stand resumed to the State free from all encumbrances. The Act also provided a scheme for assessment of compensation in respect of iag1rs thus resumed.

Raj Rajtndra MaWjirao Shitol11

The State of Madhya Bharat.

Mahajan C. J1

Raj Rajen"ra Malojirao Shitole

Thi State of Madhya Bharat.

Mahajan C. J.

The appellants contested the validity of this law on a number of grounds, and, inter alia, on the following :-

(I) That the scrcalled legislature which passed the Act was not a legislature within the meaning of the covenant entered into by the Rulers of Gwalior, Indore and certain other States in Central India for the formation of the United State of Gwalior, Indore and Malwa (Madhya Bharat) or within the meaning of Schedule IV of the said covenant.

(2) That the legislature of Madhya Bharat was not competent to enact the said Act and the said acquisition or resumption of jagirs was not for a public purpose and there was no provision for payment of compensation as understood in law, the compensation provided for being wholly illusory and the Act was a fraud on the Constitution.

Before the High Court, Mr. P. R. Das who appeared for most of the petitioners, confined his arguments to. some of the grounds mentioned in clause (2) above.

His first contention that the impugned Act was passed by a legislature not validly constituted, he reserved for arguing before this court as the Madhya Bharat High Court by a Full Bench decision in Shree Ram Dubey v. The State of Madhya Bharat('), had already repelled that contention. The two points argued by him before the High Court were : (I) That there was no public purpose behind the acquisition for the resumption of jagir lands and therefore the Act was unconstitutional and illegal.

(2) That some of the provisions of the impugned Act were ultra vires in so far as they constituted a fraud on the Constitution.

Both these points which were urged before the High Court were not argued before us by the learned counsel. The point that there was no public purpose behind the acquisition was abandoned because it was concluded by the decision of this court in the Orissa Zamindari appeals, K. C. Gajapati Narayan Deo and Others v. The State of Orissa(•).

[I] A.LR. 1952 M.B. 57-178. [2] A.LR. 1s53 S.C. 375; [1954] S.C.R. 1.

As regards the second point, as already indicated, three provisions of the impugned Act had been declared void by the High Court :ind Mr. Das contented him- . self by accepting that decision. The State Government had impugned the correctness of the decision of the High Court declaring these three provisions of the Act to be void but it also did not press that point. The result of these concessions in this court is that the arguments in the two appeals were limited to the first point urged in the petition, namely, whether the impugned Act was passed by a Legislature not validly constituted under the covenant entered into by the Rulers of Madhya Bharat.

Mr. P. R. Das contended that as the Interim Legislative Assembly was not constituted according to the provisions of Schedule IV of the covenant it was a body of usurpers and therefore any laws made by it were wholly void and of no effect whatsoever.

It was urged that the two bodies, viz., Praja Manda! and the Provincial Congress Committee who, in two separate divisions, elected fourteen and six members, did not constitute an electoral college to fulfil the requiremer1t of clause 1 ( c) of Schedule IV, and the members elected could not be said to have been elected in the manner prescribed by the Schedule and that the Rajpramukh and the Government of India, in the absence of an amending covenant, had no power -to vary the provisions of the Schedule. It was said that the object of clause 1 ( c) of Schedule Iv' was that the election of 20 members should be by an electoral college constituted by the Rajpramukh in consultation with the Government of India to represent the Covenanting States other than Gwalior and Indore and that the election by the Praja Manda! and the Congress Committee of 14 and 6 members was in clear breach of the terms of the covenant and that in this manner no representation was give11 to the minorities and full effect was not given to the rule that the election should be by proprortional representation by means of single transferable vote. The learned Attorney-General met these contentions by urging, (1) that the question was not open having regard to the provisions of article 385 of the Constitution of India

1954 •

Raj Rajendra • Malojirao Shitolt' v.

The State of Madhya Bharat;_

Mahajan C.J.

Raj Rajendra Malujirao Shitole - v.

T!te StateZof Maah; a Bharat.

Maf..ajan C. J.

(2) that the election of 20 members representing the eighteen States took place in literal compliance of the covenant,

(3) that in any vent there was substantial compliance with the covenant, and lastly ( 4) that the declarations made in the Ordinance by the Rajpramukh and the provisions contained in the Ordinance were conclusive and were accepted by all the

States concerned and could no longer be challenged.

After a careful consideration of the respective arguments addressed by Mr. P. R. Das and the learned Attorney-General we have reached the conclusion that it is not necessary to consider in detail all the points discussed by the learned counsel, as in our judgment the question seems to be concluded by the provisions of article 385 of the Constitution of India. There is no gainsaying the fact that the election of 20 members to represent the 18 States was not made strictly in the manner indicated in Schedule IV of the covenant, but it also cannot be disputed, and in fact was not disputed before the High Court, that the Legislative Assembly which passed the impugned Act was on the 26th of January, 1950, in spite of its defective constitution, in fact functioning as the Legislature of the State of Madhya Bharat. It had been declared to have come into existence by an Ordinance promulgated by the Rajpramukh and its factual existence is apparent from the laws that it made subsequent to its formation.

Part XXI of the Constitution of India deals with "Temporary and Transitional Provisions".

About two dozen articles in this Part concern themselves with the solution of the problems of their interval in between the repeal of the Government of India Act and the coming into being of bodies and authoritie!S formed by the Constitution.

Until the House or Houses of Legislature or bodies and authorities formed oy the Constitution could be duly formed it was necessary to say with certain definiteness as to what bodies or authorities would exercise and perform the duties conferred by the different provisions of the Constitution in the meantime. When a silent revolution was taking place and Princely kingdoms were fast

disappearing and a new democratic Constitution was being set up and a provision had to be made for the interval between the switch-over from one Constitu- . tion to another, there was hardly any time to enquire and consider whether the bodies or authorities or House or Houses of Legislature formed under the old Constitutions which were being scrapped had been formed in strict compliance with the provisions of those Constitutions or whether there were any defects in their. formation.

The Constitution-makers therefore took notice of their factual existence and gave th m recogmt10n under the Constitution and invested the bodies that were actually functioning as such, whether regularly or irregularly, with the authority to exercise the powers and perform the duties conferred by the provisions of the Constitution. That is clearly the scheme of all the articles mentioned in Part XXI of the Constitution. Particular reference may be made to articles 379, 382 and to article 385 which specifically governs the present case. Article 379 is in these. terms:

" ( 1) Until both Houses of Parliament have been. duly constituted and summoned to meet for the first session under the provisions of this Constitution, the. body functioning as the Constituent Assembly of the Dominion of India immediately before the' commence-. ment of this Constitution shall be the provisional Parliament and shall exercise all the powers and perform all the duties conferred by the provisions of this.

Constitution on Parliament.

Explanation.-For the purposes of this clause,_ the Constituent Assembly of the Dominion of India includes- '

(i) the members chosen to represent any State or. other territory for which representation is provided under clause (2), and

(ii) the members chosen to fill casual vacancies m the said Assembly."

The provision made in this article in unambiguous terms makes the body fw1ctionlng as the Constitu' ent Assembly, whether constituted perfectly or--

1~54-

Raj 'Rajendra.

Malojirao Shitol~,

v .

The Slate of Madhya Bhatai;

Mahajan.C. J.

Raj Rajendra Malojirao Shitole

Tht Slate of Madh]:l Bharat.

Mahl1jan C. ].

imperfectly and whatever its membership on the date immediately before the commencement of the Constitution, as the provisional Parliament and vests it with all the functions and duties conferred by the provisions of the Constitution on the Parliament. The President was given power under the provisions of this article to add members to this body to give representation to certain States who were not previously represented, and it was specifically prescribed that if there are any vacancies then the vacancies could be filled up and the members returned to fill these vacancies will be considered members of the provisional Parliament. These specific provisions are indicative of the fact that the Constitution-makers, in enacting this article, took notice of the factual existence of certain bodies without concerning themselves with the question whether they had been validly constituted under the Constitution that brought them into being. Article 382 of the Constitution is similarly worded. It provides that until the House or Houses of the Legislature of each State specified in Part A of the First Schedule has or have been duly constituted and summoned to meet for the first session under the provisions of this Constitution, the House or Houses of the Le, gislature of the corresponding Province functioning immediately before the commencement of this Constitution shall exercise the powers and perform the duties conferred by the provisions of this Constitution on the House or Houses of the Legislature of such State. Article 385 is in exact conformity with the two earlier articles. It provides that-

"Until the House or Houses of the Legislature of a State specified in Part B of the First Schedule has or have been duly constituted and summoned to meet for the first session under the provisions of this Constitution, the body or authority functioning immediately before the commencement of this Constitution as the Legislature of the corresponding Indian State shall exercise the powers and perform the duties conferred by the provisions of this Constitution on the House or Houses of the Legislature of the State so specified."

The whole intent and purpose of these articles was to give recognition to those bodies or authorities or House or Houses of Legislature which were actually functioning before the 26th of January, 1950, and to invest them with the powers conferred by the provisions of this Constitution.

The Constitution-makers wanted to indicate the arrangements made by them for the interval with certain amount of definiteness in order to avoid any disputes during the interim period as to who the body or authority was, to exercise the powers conferred by the provisions of the Constitution.

They therefore chose the formula that whichever body or authority or House or Houses of Legislature was

actu:illy functioning immediately before the commencement of the Constitution would be the body oc

authority or the House that would exercise the powers and perform the duties conferred by the provisions of this Constitution on the House, body or authority specified in the Constitution. They did not take any risk on this question and the bodies actually functioning were, like persona designata, invested with powers conferred by the- Constitution. That being the scheme of this Part and that being also the clear and unambiguous language of article 385 it follows that the Madhya Bharat Interim Legislative Assembly that was actually functioning on the 26th January, 1950,

was invested by the Constitution of India with powers conferred by the provisions of the Constitution, irrespective of the fact whether it had been properly constituted in accordance with the term~ of the covenant or not. The inquiry into this question thus became barred by adopting this procedure. Such a procedure was fully justified and was founded upon considerations of policy and necessity' for the protection of the public and individuals whose interests may be affected thereby. It is manifest that endless confusion would have resulted if the Constitution had not :adopted that formula and had not barred an inquiry into all questions as to the original formation of such bodies by giving validity and recognition to those bodies or authorities as were actually functioning on

the 26th of January, 1950. Not only did it give

1 954

Rai Rajendra Malojirao Shitolt

Tlze State rf Madh_va Bharat.

Mahajan C. J,

Raj Rqjendra Malojirao Shitole

The State of Madhya Bharat.

Mahajan C.J.

validity and recognition to those bodies which were in fact functioning then but it also invested these designated bodies and authorities with powers conferred by the provisions of the Constitution itself. That being our view as to the true meaning and intent of the language employed in article 385 of the Constitution it follows that the contention raised by Mr. P. R. Das as to the defective formation of the Interim Legislative Assembly of Madhya Bharat has no validity.

Even if that body was not formed in strict compliance with the provisions indicated in Schedule IV of the covenant its defective formation does not affect the constitutionality of the impugned statute.

The impugned statute was passed in the year 1951 after the Constitution of India had given recognition to, and conferred powers on, the Assembly under article 385 of the Constitution. When it made this law it was exercising its powers under the Constitution of India and not under the covenant which brought it int<> existence.

The result therefore is that the only contention that Mr. P. R. Das argued before us cannot be sustained and it must be held that it is not well founded.

For the reasons given above we see no force in these two appeals and they are therefore dismissed with co its.

Appeals dismissed.

Agent for the appellant in C. A. No. 4 : I. N. Shroff.

Agent for the appellant in C. A. No. 6 : Rajinder Narain.

Agent for the respondent : R. H. Dhcb11r ..

RAJ RAJENDRA MALOJIRAO SHITOLE

STATE OF MADHYA BHARAT

THE STATE OF MADHYA BHARAT

MEHR CHAND MAHAJAN

MUKHERJEA

S. R. DAs

VIVIAN BosE

GHUL.\M HASAN JJ.

Constitution of India

art. 385

Madhya Bharat Abolition of fagirs Act

Madhya Bharat High Court

section 4

cl. 4

Schedule 1

Madhya Bharat Abolition of Jagirs Act

Madhya Bharat

Schedule IV

Madhya Bharat Legislative Assembly

art. 385

articles 379, 382 and 385

article 132(1)

Constitution of India

P. R. Das

B. Sen

Rameshwar Nath

M. C. Setalvad

K. A. Chitale

Shiv Dayal

MAHAJAN

article 32

Constitution of India

article 32

Raj Rajendra Maloji Rao Shitole

Gwalior

State of Madhya l)harat

section 3

7th December, 1951

section 3(1)

State of Madhya Bharat

Mahajan

Raj Rajendra Maiojir® Skitole

Stateof Madhya Bharat

Mahajan C.J.

article 226

section 3

High Court of Madhya Bharat

section 4(1)

clause 4

Schedule I

Supreme Court

India

Pakistan

Indore

Central India

Judiciarv

Malwa

Constitution of India

7th October, 1948

United State

first day of July, 1948

Government of the Covenanting States

Constitution of India

Schedule IV

Schedule IV

Gwalior Legislative Assembly

Indore Legislative Assembly

Rajpramukh

Government of India

Raj Rajendra Malojirao Shitoll

State of Madhya Bharat

Raj Rajendra Malojirao Shitole

State of Jo..[adhva B!1arat

Rajpramukh

28th of May,

1948

9th of May, 1948

Ministry of States, Government of India

5th July, 1948

Praja Manda

19th of November, 1948

clause 1

Schedule IV

19th October, 1948

30th of October, 1948

6th . of December, 1948

26th of January, 1950

Constitution of India

Constitution of India

United State of Madhya Bharat

Constitution of India

30th of November, 1949

28th of August, 1951

27th November,

1951

7th of December, 1951

section 3

section 4

Raj Rajtndra MaWjirao Shitol11

Raj Rajen"ra Malojirao Shitole

United State of Gwalior

Schedule IV

P. R. Das

Das

Schedule IV

Provincial Congress Committee

clause 1

Schedule IV

clause 1

Schedule I

article 385

Constitution of India

ajan

article 385

Constitution of India

Schedule IV

Constitution of India

articles 379, 382

article 385

Article 379

Parliament

Slate of Madhya Bhatai

Article 382

First Schedule

Article 385

First Schedule

article 385

26th January, 1950

Constitution of India

Rai Rajendra Malojirao Shitolt

Raj Rqjendra Malojirao Shitole

State of Madhya Bharat

article 385

Schedule IV

Constitution of India

article 385

Constitution of India

I. N. Shroff

Rajinder Narain

R. H. Dhcb11r


S.C.R.

SUPREME COURT REPORTS

ZAMINDAR OF ETTAYAPURAM

11.

THE STATE OF MADRAS.

(and connected appeals)

rMEHR CHAND MAHAJAN c. J., MuKHERJEA,

S. R. DAs, VIVIAN BosE and GHULAM HASAN JJ.]

Madras Estates (Abolition and Conversion into Ryotwari) Act, (Act

XXV/ of 1948)-Volidity thereof-Article 31(~ of the Constitution.

1he !v1adras Estates (Abolition and Conversion into Ryotwari) Acl, (Act XXVI of 1948) was passed by the Provincial Legislature of Madras functioning under the Government of India Act, 1935 and it received the assent of the Governor-General of India On the 2nd of April, 1949.

After the advent of the Constitution. the ACt was reserved for the certification of the President and it \Vas.

certified on the 12th of April, 1950 : Held, that in view of the provisions of art. 31(6) of the Constitution the validity of the Act could not be challenged on the ground that it contravened the provisions of s. 299(2) of the Govcrnn1ent of India Act, 1935 . . Shankari Prasad Singh Deo v. Union of India ([1952] S.C.R. 89), The State of Bihar v. Maharajadhiraja Sir Kameshwar Singlr ((1952] S.C.K. 889) and Narayan Deo v. The State of Oriua ([1954J S.C.R. I) referred to. ·

CIVIL

APPELLATE

JURISDICTION :

CIVIL

APPEALS Nos. 170 to 176 and 178 to 183 of 1953.

Appeals from the Judgment and Order dated the 22nd August, 1952, of the High Court of Judicature at Madras in Civil Miscellaneous Petitions Nos. 13386,. 13388, 13390, 7812, 12003, 13188, 13262, 7822, 13123, 13347, 13341, 12997, 12494 of 1950 and Order dated 8th September, 1952, in C. M. P. No. 13936 of 1950.

' K. S . . Krishnaswamy Iyengar (K. S. Champakesa Iyengar, with him) for the appellants.

. - ' V. K. T.

Chari, Advocate-General of Madras (R. Ganapathy Iyer and V. V. Raghavan, with him) for the respondent (State of Madras) in Civil Appeals Nos. 170 to 176 and 178 to 181.

. M. Seshachalapathi for the respondent (State of Andhra) in Civil Appeals Nos. 182 and 183.

1954. February 5. The Judgment of the Court was delivered by MuKHERJEA J. 12-95 s. c. r./59

I95t

. Fe.biuary, 5

Zamindatof Etrayapuram

TM Slate of

Madras.

Mukhetjea J.

MuKHERJEA J.-These consolidated appeals, numbering foufteen in all, are directed against a common judgment of a Division Bench of the Madras High Court dated the 23rd of August, 1952, by which the learned Judges dismissed the petitions of the different appellants made under article 226 of the Constitution.

The appellants are landholders of Madras, holding zamindaries within that State, and in their applications under rticle 226 of the Constitution they prayed for writs in the nature of mandamus, directing the State of Madras to forbear from notifying and taking over possession of the estates held by them and also to cancel the notifications already issued, in exercise of its powers under the Madras Estates (Abolition and Conversion into Ryotwari) Act, (Act XXVI of 1948).

This Act, the constitutional validity of which has been assailed by the appellants, was passed by the Provincial Legislature of Madras functioning under the Government of India Act, 1935, and it received the assent <if the Governor-General of India on the 2nd of April,

1949. The avowed object of the Act is to abolish the zamindary system by repealing the Madras Permanent -Settlement Regulation of 1802, to acquire the rights of landholders in the permanently settled and other -estates and to introduce the R yotwari system in all such estates.

After the advent of the Constitution, the Act was reserved for certification of the President and it was certified on the 12th of April, 1950. In the petitions presented by the appellants, a large number of grounds were put forward by way of attacking the validity of the legislation which was characterised as confiscatory in its character and subversive of the fundamental right of property, which the petitioners had in the zamindaries held by them under the

Permanent Settlement Regulation.

Pending the .disposal of thes~ petitions, the Constitution (First Amendment) Act of 1951 was passed on 1st of June, 1951, and this amendment introduced two new articles namely, article

31-A and 31-B in the Constitution, :appartently with a view to protect the various laws -enacted for acquisition of estates from being challenged under the relevant articles of Part III of the

Constitution. Article 31-B specifically refers to a number of statutes mentioned in the ninth Schedule to the Constitution and it declares expressly that none of them shall be deemed to be void on the ground that they <:ontravened any of the fundamental rights, notwithstanding the decision of a court or tribunal to the contrary. It is not disputed that Madras Act XXVI <Jf 1948 is one of the statutes included in this schedule.

It may be remembered that an attempt was made to :impeach the validity of the Constitution (First Amendment) Act itself before this court in the case of Shankari Prasad Singh Deo v. Union of India (1 ). The :attempt failed and after the pronouncement of this , court in Shankari Prasad's case, the grounds upon which the writ petitions of the appellants were sought to be supported became for the most part unavailing'.

It appears that at the time of the final hearing of the :applications the arguments actually advanced on behalf of the petitioners were aimed not at invalidating the enactment as a whole, but only some of its provisions, firstly on the ground that there was no public purpose behind the acquisition of some of the items of property mentioned therein and secondly, that the provisions for compensation in certain aspects were <:olourable exercise of legislative powers and constituted a fraud upon the Constitution Act of 1935. These arguments were sought to be supported entirely on the :authority of the majority decision of this court in the <:ase of The State of Bihar v.

Maharajadhiraja Sir Kameshwar Singh (2 ) to the extent that it pronounced two of the provisions of the Bihar Land Reforms Act. 1950-a legislation similar in type to the Madras Act of 1948-to be unconstitutional.

These contentions did not find favour with the learned Judgel ?f the High Court who-heard the petitions and holding that the principles enunciated by the majority of this court in. the Bihar case referred to above were not applicable to the impugned provisions of the Madras Act, they dismissed all the petitions. Certificates, howevr, were granted by the High Court to the petitioners

(1) [1952JS.C.R. 89.

(>) [1952) S.C.R. 889.

I95-4

Z•min'1•r•f E1ta;1apur11m

Thi S1a_l1 of

Madr111.

MukherjtaJ.

~54

Zamindarof Ettayapuran v.

The Stale of

Madras.

Mukh'1jea J.

under article 132( 1) of the Constitution and it is on the strength of these certificates that the appeals have come before us.

Mr. Ayyangar, appearing in support of these appeals, has taken his stand solely upon the doctrine of 'colourable legislation' as enunciated by the majority of this court in the Bihar case referred to above. He has very propertly not attempted to make any point as to the absence of a public purpose in regard to any of the items of acquisition, since it is clear that according to the majoriy view of this court, as explained in Narayan Deo v. State of Orissa (' ), the existence of a public purpose is not a justiciable issue in case of an enactment which having fulfilled the requirements of .clause ( 4) of article 31 of the Constitution enjoys the protection afforded by it.

The contentions of Mr. Ayyangar, in substance, are that the provisions of section 27(i) as well as of section 30 of the impugned Act are colourable legislative provisions which have been enacted in fraud of the Constitution Act of 1935.

It appears that in determining the amount of compensation, that is to be paid under the Act, in respect of an acquired estate, it is necessary, first of all, to ascertain what has been described as the 'basic annual sum' in regard to that estate. The basic annual sum comprises several items or parts which have been set out in section 27 and the subsequent sections of the Act, and it is upon the amount of the basis annual sum determined in accordance with the provisions of these sections that the total amount of compensation money payable to a proprietor is made to depend.

Mr. Ayyangar contends that section 27(i) of the Act, which lays down that in computing , the basic annual sum only one-third of the gross annual R yotwari demand of specified kinds is to be taken into. account, is a colourable provision which ignores altogether the actual income derived from the property and introduces an artificial and an arbitrary standard for determining the income or profits which has absolutely no relation to facts. Similarly, in computing the net miscellaneous revenue, which is an

(1) [1945] S.C.R. 1. A.l.R. 1953 S. C. 375 at P. 3Bo.

.element in the computation of the basic annual sum, what is to be taken into account under section 30 is not the average of net annual income which the proprietors themselves derived from the sources, mention- .ed in the Act, when they were in possession of tha estates, but which the Government might derive from them in future years after the date of notification.

Thus if on account of mismanagement or for other :reasons the Government does not derive any income from these sources, the proprietor would not have any compensation under this head at all. It is argued :that these are mere devices or contrivances aimed at -confiscation of private property and they neither lay down nor are based upon any principle of compensa- :tion.

Whatever the merits of these contentions might be, it appears to us that there is an initial and an insuper- :able difficuity in the way of the learned counsel's

-invoking the authority of the majority decision of this court in the case of The State of Bi liar v. M a!zarajadhi- .raja Sir Kameslzwar Singh( 1 ) to the circumstances of the present case.

The Bihar Land Reforms Act, which was the subject matter of decision in that case, was a legislation which was pending at the time when the Constitution came into force. It was reserved for consideration of the President and received his assent :in due course and consequently under clause ( 4) of article 31 of the Constitution it was immune from judicial scrutiny on the ground that the compensation provided by it was inadequate or unjust. With regarcl to two of the provisions of the Act, however, which were embodied in sections 4 (b) and 23(f) of the Act,

it was held by the majority of this court that they were void as they really did not come within entry 42 of List III of Schedule VII of the Constitution,

under which they purported to have been enacted.

Entry 42 of List III speaks of "principles oq which compensation for property acquired or requisitioned for the purposes of the Union 'or of a State or for any •other public purpose is to be determined, and the form and the manner in which such compensation is

(1) [1952] S.C.R. 889.

:(aminda. of Ettayapuram

Thi Stale of

ModrtJJ.

Mukhnjta ].

Zamin.dar of Ettayapuram

Thi State of

Madras.

M, kh,, feaJ.

to be given." It was pointed out that entry 42 W:lS' undoubtedly the description of a legislative head and in deciding the competency of a legislation under this entry, the court was not concerned with thejustice or propriety of the principles upon which the determination of the compensation was to be made or the form or manner in which it was to be given. But even then, the legislation must rest upon some principle of giving compensation and not of denying or withholding it, and a legislation could not be supported which was based upon something which was non-existent or was unrelated to facts and consequently could not have a conceivable bearing on any principle of compensation. The initial difficulty in the way of invoking this doctrine in the present case lies in thefact that the legislation, which is impugned here, waspassed by the Madras Provincial Legislature functioning under the Government of India Act, 1935, and' there was no entry in any of the lists attached to the Act of 1935 corresponding to entry 42 in List III of the Indian Constitution. The only entry relevant to this point in the Act of 1935 was entry 9 of List II which spoke merely of 'compulsory acquisition of land' ; and it is clear that a duty to pay compensation or of laying down any principle regarding it was not inherent in the language of that entry. The guarantee for payment of compensation, so far as the Constitution Act of 1935 is concerned, was contained in section 299' clause (2) which was worded as follows :

"Neither the Federal Legislature nor a Provincial Legislature shall have power to make any law authorising the compulsory acquisition for public purposes of any land, or any commercial or industrial undertaking ........ unless the law provides for the payment of compensation for the property acquired and' either fixes the amount of the compensation, or specifies the principles on which, and the manner in which,. it is to be determined." The appellants could have very well relied uponthis guarantee if a bar had not been created in their way by the provision of article 31 ( 6) of the Constitution. That clause of article 31 stands of follows :

"Any law of the State enacted not more than eighteen months before the commencement of this Constitution may within three months from such commencement be submitted to the President for his certification ; and thereupon, if the President by public notification so certifies, , it shall not be called in question in any court on the ground that it contravenes the provisions of clause (2) of this article or has contravened the provisions of sub-section (2) of section 299 of the Government of India Act, 1935."

It is not disputed that the Madras Act XXVI of 1948 does fulfil all the requirements mentioned above.

Consequently, it is not possible for us to allow the appellants to raise the contentions which the learned counsel on their behalf wants to raise. The result is that the appeals would stand dismissed, but in the circumstances of this case we shall make no order as to costs.

Appeals dismissed.

Agent for the appellants : S. Subramanian.

Agent for the respondents : R. H. Dhebar.

THE LIQUIDATORS OF PURSA LIMITED v.

COMMISSIONER OF INCOME-TAX,

BIHAR.

[MEHR CHAND MAHAJAN C.J., s. R. DAS, GHULAM

HASAN and JAGANNADHADAS JJ. J

Income-tax Act (XI of 1922) s. 10(2) (vii) proviso 2- Any such machinery or. plant must have been used in the account- Jng year-Section 66-Finding of fact-When appeal court can intervene.

The fundamental idea underlying the words used in the definition of "business" in s. 2( 4) of the Income-tax Act is the continuous exercise of an activity and the same central idea is implicit in the wr?s ."carried on by him" occurring in s. 10( 1) and those cr1ttcal \Vords are an essential constituent of that which is to be produce the taxable income, and therefore the

z..., Wlt1' ef it:H"7";-..

T lw St<h ef -· MW.hnj<a].

1954 p,......, 9

ZAMINDAR OF ETTAYAPURAM

THE STATE OF MADRAS

rMEHR CHAND MAHAJAN

MuKHERJEA

S. R. DAs

VIVIAN BosE

GHULAM HASAN JJ.

12th of April, 1950

art. 31(6)

s. 299(2)

India Act, 1935

High Court of Judicature at Madras

K. S . . Krishnaswamy Iyengar

K. S. Champakesa Iyengar

V. K. T.

Chari

R. Ganapathy Iyer

V. V. Raghavan

M. Seshachalapathi

Mukhetjea

article 226

Madras

State of Madras

2nd of April,

1949

1st of June, 1951

article

31

Article 31

Shankari Prasad

article 132( 1)

Ayyangar

Bihar

article 31

section 27(i)

section 30

section 27

section 27(i)

section 30

article 31

sections 4

Schedule VII

section 299

article 31

article 31

section 299

Government of India Act, 1935

Madras Act XXVI of 1948

S. Subramanian

R. H. Dhebar

MEHR CHAND MAHAJAN

R. DAS

GHULAM

HASAN

JAGANNADHADAS

Income-tax Act

s. 10(2)

Section 66

s. 2( 4)

Income-tax Act

s. 10( 1)


S.C.R.

SUPREME COURT REPORTS 767

"Any law of the State enacted not more than eighteen months before the commencement of this Constitution may within three months from such commencement be submitted to the President for his certification ; and thereupon, if the President by public notification so certifies, , it shall not be called in question in any court on the ground that it contravenes the provisions of clause (2) of this article or has contravened the provisions of sub-section (2) of section 299 of the Government of India Act, 1935."

It is not disputed that the Madras Act XXVI of 1948 does fulfil all the requirements mentioned above.

Consequently, it is not possible for us to allow the appellants to raise the contentions which the learned counsel on their behalf wants to raise. The result is that the appeals would stand dismissed, but in the circumstances of this case we shall make no order as to costs.

Appeals dismissed.

Agent for the appellants : S. Subramanian.

Agent for the respondents : R. H. Dhebar.

THE LIQUIDATORS OF PURSA LIMITED v.

COMMISSIONER OF INCOME-TAX,

BIHAR.

[MEHR CHAND MAHAJAN C.J., s. R. DAS, GHULAM

HASAN and JAGANNADHADAS JJ. J

Income-tax Act (XI of 1922) s. 10(2) (vii) proviso 2- Any such machinery or. plant must have been used in the account- Jng year-Section 66-Finding of fact-When appeal court can intervene.

The fundamental idea underlying the words used in the definition of "business" in s. 2( 4) of the Income-tax Act is the continuous exercise of an activity and the same central idea is implicit in the wr?s ."carried on by him" occurring in s. 10( 1) and those cr1ttcal \Vords are an essential constituent of that which is to be produce the taxable income, and therefore the

z..., Wlt1' ef it:H"7";-..

T lw St<h ef -· MW.hnj<a].

1954 p,......, 9

1954.

The f, iguiJai...s of Pursa Limitld

tax is payable only in respect of the profits or gains of the business which is carried on by the assessec.

That under clause (vii) of s. 10(2) the machinery and plant must be such as were used at least for a part of the accountv.

Commissiom

lncumHa'Jt~

Bihat.

6/ ing year.

As the machinery and plant of the sugar factory which were sold had not at all been used for the purpose of business during the accounting year, the second proviso to s. 10

(2) (vii) could have no application and the assessees were nut liable.

Although the High Court will not disturb or go behind a finding of fact of the Tribunal, it is \vell settled that \Vhere it is competent for a Tribun~1l to tn::ike findings of fa~-r \Vhich :.ire excluded from revie\v, the appeal court has ahvays juris<lictioi. to intervene if it appears either that the 1ribunal has n1isunderstt.od the statutory language because the proper construction of the statutory language is a 1natter of la\v or that the Tribunal has made a finding for which there is no evidence or \Vhich is inconsistent with the evidence and contradictory of it.

Commissioner of lncomt-tax Y. Sluufl FVallace and ConiptJny (L.R. 59 I.A. 206), and Conunissioncrs of l11la11d Revenue v. Fraser {24 Tax Cases 498) referred to.

CIVIL

APPELLATE JuR1smcTION : Civil Appeal No. 33 of 1953.

Appeal by special leave from the Judgment and Order dated the 16th May, 1951, of the High Court of Judicature at Patna in Miscellaneous Judicial Case No. 126 of 1950, arising out of the Order dated the 17th May, 1949, of the Income-tax Appellate Tribunal, Calcutta Bench, Calcutta, in LT.A. No. 147 of 1948-49.

Sukumar Mitra (S. N. Mul(herjee, with him) for the appellant.

C. K. Daphtary,. Solicitor-General for India (Porus A. Mehta, with him) for the respondent.

1954. February 9. The Judgment of the Court was .delivered by DAs J.-This is an appeal by special leave from the judgment of the Patna High Court delivered on a reference made by the Income-tax Appellate Tribunal under section 66(1) of the Indian Incometax Act.

The tribunal referred the following two questions for the opinion of the High Court :

1. On the facts and in the circumstances of this case is the surplus of Rs. 13,05,144 arising out of the sale of the plant and machinery of the sugar factory chargeable under section 10 (2) (vii) ?

2. vVas the profit of Rs. 15,882 on the sale of stores of the factory taxable under the Income-tax Act in the circumstances of this case ?

The reference came up for hearing before a Division Bench consisting of Shearer and Sarjoo Prasad JJ. and after a prolonged hearing the learned fudges delivered separate judgments on the 27th February, 1951, giving diver.gent answers to the questions, Shearer J. answering both the questions in the negative and Sarjoo Prasad J. giving an affirmative answer to both of them. The matter thereupon was placed before a third Judge, Ramaswami J., who, after a fresh hearing delivered his judgment on the 16th May, 1951, agreeing with Sarjoo Prasad J. on the first question and with Shearer J. on the second . question. The result was that the High Court by a majority decision answered the first question in the affirmative, i.e., against the assessee, and the second question in the negative, i.e., in favour of the . assessee.

The assessee applied to the High Court for leave to appeal to this court against the High Court's decision on the first question. The High Court having declined to grant the necessary certificate the assessee applied for and obtained the special leave of this court to prefer the present appeal. The ,\epartment has not preferred any appeal against the High Court's decision on the second question and nothing further need be said about that question. ·

The controversy arose in course of the proceedings for the assessment of Pursa Ltd., to income-tax for the assessment year 1945-46, the relevant accounting year covering the period between the 1st October, 1943, to 30th September, 1944.

Pursa Ltd., was a company incorporated in 1905 under the Indian Companies Act but all its shareholders and directors were ; residents in the United Kingdom. The business of the

The Liquidators of Purso Limiled ·

Commissiorin a/

lncomMax,· ·

Bihar.

Das].'

'9!14 Tw LiguidaJors of Pur.ra Limited

C.-.Usi<Jnn of

Income-tax,

Bihar.

Das"].

company was that of growers of sugarcane, manufacturers of sugar and dealers in sugar. It is common ground that the crushing season for the manufacture of sugar is from December to April of each year.

It appears that towards the end of 1942 an attempt was made to sell the entire business of the company but such attempt did not succeed.

It appears from the case filed by the respondent in this appeal that in the middle of 1943 the directors of the company commenced negotiations for the sale of the factory and other assets of the company with the ultimate object of winding up the company. From the correspondence,. affidavit and other materials placed before the tribunal and referred to by Sarjoo Prasad J. in his judgment it appears that on the 9th August, 1943, an inventory was prepared and a firm offer was received from Dalmia Jain & Company Ltd., for the purchase of the factory and stores as on that date. This offer was on the 16th August, 1943, communicated by cable to the directors in England. On the 20th August, 1943, the director$ asked the local managers in India to proceed with the matter in anticipation of the sanction of the shareholders which the directors expected to obtain at an extraordinary general meeting to be held very shortly.

That meeting, however, was held on the 8th October, 1943, i.e., 8 days after the accounting year had starterl.

At that meeting the firm offer of Dalmia Jain & Company Ltd. was accepterl and a concluded agreement for sale came into existence.

Thereafter instructions were given to the solicitors to draw up the necessary documents.

On the 7th December, 1943, a written memorandum of agreement was executed whereby the company agreed to sell and demise to Dalmia Jain & Company Ltd., free from all mortgages and charges at and for the price of rupees twenty-eight lacs all the lands, buildings, machinery and plant and all vats, reservoirs, cisterns, pumps, machinery, engines, boilers, plant, implements, utensils, tramways, furniture, stores, articles and things as on the ninth day of August, one ·

thousand nine hundred and forty-three (subject to subsequent use and consumption in the ordinary course

of business) used in connection with the said sugar factory, but excepting stocks of manufactured . sugar and stocks of grain in godown on the ninth day of August, one thousand nine hundred and forty-three and all stores and other articles bought or received by the company after the date. Dalmia Jain & Company Ltd., paid the sum of rupees twenty-eight lacs on the same day and on the 10th December, 1943, they g6t possession of the factory. On the date of the aforesaid sale, the company possessed sugar stock valued at rupees six lacs which was excluded from the sale.

This stock of sugar the company continued to sell up to June, 1944. It is said that the said stock of sugar was excluded because at the time it was not possible to know at what date such a sale would be concluded and the sugar produced in 1943 had to be sold by and through the exclusive selling agents of the company under a contract entered into with them. It is, however, not disputed that between the 9th August, 1943, when the firm offer was obtained and the 10th December, 1943, when possession of the factory was made over to Dalmia Jain & Company Ltd., the company never used the machinery and plant for the purpose of manufacturing sugar or for any other purpose except that of keeping them in trim and running order.

Indeed, throughout the accounting period the machinery and plant were not used by the company.

The company went into voluntary liquidation on the 20th June, 1945. The reason for the delay in putting the company into liquidation is said to have been caused by considerable legal difficulties with regard to the transfer of certain mok.arari lands belonging to the company. The liquidators appointed by the shareholders of the company represented the company in the matter of proceedings for assessment of the company for the assessment year 1945-46.

In the course of these assessment proceedings the Income-tax Officer on the 21st February, 1947, wrote a letter to the liquidators asking for elucidation on certain points.

Amongst other things, the Incometax Officer wanted to know the liquidators' objection why the company's activities during the previous

195•

The LiquMDlorr qf .Pursa Limited

Commissioner of

lncotn4-ttJX,

Bihar.

Das].

1954.

Thi Liquidat.Ws of Pursa Limited

.; COmmissiorur of

/'IJ(; Omf-lax,

Bihar.

Da•J.

year might not be treated as amounting to a realisation of assets on impending liquidation rather than to the carrying on of business within the meaning of the Income-tax Act. To this letter an answer was sent by the liquidators on the 19th March, 1947, pointing out that the company had gone into liquidation on the 20th June, 1945, and that in view of the date of liquidation the liqnidators could not agree that the company was not carrying on business during the year ended 30th September, 1944, and they further pointed out that the various debits contained in the sugar factory accounts were those incurred in carrying on the company's business.

By his letter dated the 17th May, 1947, the Income-tax Officer claimed that large profits which had been made by the company on the sale of their machinery and plant were taxable under the second proviso to section 10 (2) (vii) of the Income-tax Act and called upon the liquidators to retain sufficient funds and assets in their hands to meet the heavy tax liabilities that might eventually arise and also to warn the share!Jolders accordingly.

He also asked for certain information which, however, the liquidators did not furnish. The liquidators, in their letter in reply dated the 22nd May, 1947, did not agree that the profits were taxable, for the profits to which reference had been made were not profits arising from a business carried on by the company but were profits arising from the company ceasing to carry on business. The Income-tax Officer, however, by his order dated the 21st June, 1947, held that the profits of the sale of machinery and plant were liable to assessment nnder section 10 (2) (vii) of the Act and added a sum of Rs. 13,05,144 to the profits.

The Appellate Assistant Commissioner of Incoinetax having dismissed the liquidators' appeal on the 30th January, 1947, the liquidators went up on further appeal to the Income-tax Appellate Tribunal. By its order dated the 17th May, 1949, the tribunal dismissed that appeal. Upon an application under section 66 ( 1) of the Act the tribunal stated a case to the High Court referring the two questions hereinbefore

...

set out. The subsequent history of the matter has already been mentioned and needs no reiteration.

The relevant portion of section 10 of the Incometax Act as amended by Act VI of 1939 was as follows:-

"10 (1) The tax shall be payable by an assessee under the head "Profits and gains of business, profession or vocation" in respect of the profits or gains of any business, profession or vocation carried on by him.

(2) Sl)ch profits or gains shall be computed after making the following allowances, namely :-

(i) ....................................... .

(ii) ....................................... .

(iii) ........ ································

(iv) in respect of insurance against risk of damage or destruction of buildings, machinery, plaint, furniture, stocks or stores, used for the purposes of the business, . profession or vocation, the amount of any premium paid ; ( v) in respect of current repairs to such buildings, machinery, plant, or furniture, the amount paid on account thereof ;

(vi) in respect of depreciation of such buildings, machinery, plant, or furniture being the property of the assessee, a sum equivalent to such percentage on the original cost thereof to the assessee as may m any case or class of cases be prescribed :

(vii) in respect of any machinery or plant which has been sold or discarded, the amount by which the written down value of the machinery or plant exceeds the amount for which the machinery or plant is actually sold or its scrap value : Provided that such amount 1s actually written off in the books of the assessee :

Provided further that where the . amount for which any such machinery or plant is sold exceeds the written down value, the excess shall be deemed to be profits of the previous year in which the sale took place ; ..................................... ........... . . ; ,,,. ................................................

The Liquidators- -of Pu.rSa. L(rt)il1t/·

v. <;:omm_Usioner of

lncomi-tai,

' Bi~0; r.

DttsJ.

T ht LiquidatOTs .., f PllfJa Limited

v. {]ommissioner of

lncome-tox,

Biliar.

Da•].

It is necessary to bear in mind the meaning and import of the provisions of section 10 (2) (vii) in so far as they apply to the present case .

Under section 10 tax is payable by an assessee "in respect of the profits or gains of any business, profession or vocation carried on by him." "Business" is defined by section 2, sub-section ( 4) as "including any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture." As pointed out by the Judicial Committee in Shaw Wal/ace & Co.' s case( 1) the fundamental idea underlying each of these words is the continuous exercise of an activity and the same central idea is implicit in the words "carried on by him" occurring in section 10 (1) and those critical words are an essential constituent of that which is to produce the taxable income. Therefore, it is clear that the tax is payable only in respect of the profits or gains of the business which is carried on by the assessee.

Sub-section (2) permits allowances to be made before the taxable profits are ascertained. Proviso (2) to clause (vii) of that sub-section on which the Income-tax authorities have relied makes the excess of sale proceeds over the written down value of "any such machinery or plant" to be deemed to be profits of the previous year in which the. sale took place. Any such machinery or plant in the proviso dearly refers to the machinery or plant in respect of which the allowance is to be given under that clause.

Although the word "such" was not used in the body of clause (vii), the scheme of sub-section (2) which is apparent from the other clauses of allowances e.g., (iv), ( v) and (vi), clearly indicates that the machinery or plant referred to in clause (vii) must be the same as those mentioned in the earlier clauses, i.e., such machinery or plant as were "used for the purposes of the business, profession or vacation." Indeed, the position has been made clear and placed beyond any doubt by the subsequent amendment of 1946 which added the word "such" in clause (vii). The words "used for the purposes of the business" obviouslv [1] L. R. 59 J.A. 206" at P. 213. .

mean used for the purpose of enabling the owner to .carry on the business and earn profits in the business.

In other words, the machinery or plant must be used for the purpose of that business which is actually carried on and the profits of which are assessable -under section 10 ( 1). The word "used" has been read in some of the pool cases in a wide sense so as to include a passive as well as active user. It is not necessary, for the purposes of the present appeal, to express any opinion on that point on which the High Courts have expressed different views. It is, however, clear that in order to attract the operation -of clauses (v), (vi) and (vii) the machinery and plant must be such as were used, in whatever sense that word is takeh, at least for a part of the accounting year. If the machinery and plant have not at all been used at any time during the accounting year no allowance can be claimed under clause (vii) in respect of them and the second proviso also does not come into operation.

In its statement of the case, after referring to its .decision that the profits on the sale of machinery and plant were assessable under section 10 (2) (vii), the 'tribunal proceeded to state :

"This decision was based on two considerations.

First, that as admitted by the applicant company the company had been carrying on its business up to the date of th,, sale of the machinery, nameiy, '7th December, 1943. The tribunal was of the opinion :that as the applicant company had not ceased to

carry on its business till the date of the sale of the machinery, it must be held that the sale of the machinery was a part of the applicant company's carrying on of the business. The second reason for the decision of the tribuna I was that the applicant company did not sell its sugar stocks amounting to over Rs. 6,00,000 on 7th December, 1943.

The .applicant company's plea that the sugar stocks could not be sold as the applicant company had sole agents for the sa1e of sugar, was not accepted by the tribu- nal. The lncome-tax Appellate Tribunal found that :i; ugar continued to be sold for more than 6 months

The Liquidators of Pursa Limited

CommiJsiofllf' of

Jncomt-tox,

Bihar.

Das].

TM Liquid<Jtors of Pur$a Limited

Cammissioner of

Income-tax,

Bihar.

Das].

after the sale of the machinery and substantial expenses on establishment and general charges continued to be incurred. From this the Income-tax Appellate Tribunal concluded that the sugar stocks had not been sold on 7th December, 1943, purposeiy in order to sell these to the best advantage later on.

This, the Income-tax Appellate Tribunal held, showed that the applicant company carried on business even subsequent to the sale of machinery on 7th December, 1943."

Although the High Court will not disturb or gt> behind the finding of fact of the tribunal, it is now well settled that where it is competent for a tribunal to make findings in fact which are excluded from review, the appeal court has alwavs jurisdiction tt> intervene if it appears either that the tribunal has misunderstood the statutory language-because the proper construction of the statutory language is a matter of law-or that the tribunal has made a finding for which there is no evidence or which is inconsistent with the evidence and contradictory of it. [See Lord Normand in Commissioners of Inland Revenue v.

Fraser( 1)]. It appears to us that the tribunal misdirected itself in law as to the meaning and import of the relevant provisions of section 10 of the Act. It completely overlooked the fact which is plainly in evidence on the record that the machinery and plant which were sold had not at all been used for the purposes of the business carried" on in the accounting year and consequently the second proviso to section 10

(2) (vii) could have no application to the sale proceeds of such machinery and plant. In fact the entire decision of the tribunal was vitiated by its failure tokeep in view the true meaning and scope of section Hr

(2) (vii) and cannot, therefore, be supported.

It further appears to us that in the statement of the case the tribunal was not merely stating something in the nature of a primary fact but was also drawing a conclusion which is to a certain extent contrary to the primary finding. As is stated clearly in the statement of tl1e case, the decision of the tribunal was based on

(1) 24 Tax Cas. 498 at p. 501.

S.C.R.

Sl : EME COURT REPORTS 777

two considerations. The first consideration was founded on an admission by the liquidators that the company had been carrying on its business up to the date of the sale of the machinery on the 7th December, 1943. This admission is quite consistent with the case that the company was only selling its stock of sugar and not doing any business of manufacture of sugar. Indeed, the manufacturing process does not begin until December of each year and the memorandum of agreement was made on the 7th December, 1943, and possession was delivered to the purchaser on the 10th December, 1943. It is nobody's case and it has not been found that the company had manufactured any sugar during the whole of the accounting year. Therefore, this finding that the company carried on its business up to the 7th December, 1943, certainly does not indicate that the company was also carrying on any business of growing sugarcane or manufacturing sugar by the use of the machinery or plant in question. The second finding that the company carried on business even after the sale of the machinery and the plant clearly indicates that that business had nothing

to do with the machinery or plant. Both the findings, therefore, are inconclusive. The matter, however, does not rest there. It appears to us that the findings of fact, taken literlly, cannot support the decision of the tribunal. If, as held by the tribunal, "the sale of the. machinery was a part of the applicant company's carrying on of the business" then the sale must be regarded as an ordinary operation of such business and consequently the profits arising out of such ordinary business operation would be assessable under the provisions of section IO (I) and it would not be necessary to have recourse to tl1e statutory fiction

created by the second proviso to clause (vii) under which the excess of the sale proceeds over the written down value is to be deemed to be profits of the business. If the profits on the sale of the machinery and plant are to be made assessable under the second proviso, as has been done by the tribunal, then it must be conceded that these deemed profits were not : in reality the profits of the business carried on by the

(2) 24 Tax Casc9498 at p. 501.

l 3-95 S. C. I-(59

Thi Liquidators of Pursa Limited v.

CommiJsioner of

Income.Jax,

Bi/zar.

Das].

1h, Liquidators -0/ Pursa LimiJ1d

Commissiorur of

Jncom1-lax~

Bihar.

Das].

company and, therefore, the sale transaction which brought in these profits was not in fact part of the company's business, which conclusion again will be inconsistent with the finding of fact if the business is not understood as limited only to the selling of sugar.

For reasons stated above, it appears to us that having misdirected itself in law as to the scope and effect of the relevant portions of section 10 of the Act the tribunal did not approach the facts from a proper angle and, further, that its findings cannot, in the circumstances of this case, be given such sanctity as would exclude the same from review by the High Court or this court. Turning to the facts to be gathered from the records it is quite clear that the intention of the company was to discontinue its business and the sale of the machinery and plant was a step in the process of the winding up of its busines.

The sale of the machinery and plant was not an operation in furtherance of the business carried on by the company but was a realisation of its assets in the process of gradual winding up of its business which eventually culminated in the voluntary liquidation of the company. Even if the sale of the stgck of sugar be regarded as carrying on of business by the company and not a realisation of its assets with a view to winding up, the machinery or plant not being used during the accounting year at all and in any event not having had any connection with the carrying on of that limited business during the accounting year, section 10

(2) (vii) can have no application to the sale of any such machinery or plant. In this view of the matter, the answer to the first question should be in the negative and we answer accordingly.

The result is that this appeal is allowed and the respondent shall pay the costs of the appellants both in this court and in the High Court.

Appeal allowed.

Agent for the appellant : B. N. Ghose.

Agent for the respondent : G. H. Rajadhyaksha.

section 299

Government of India Act, 1935

Madras Act XXVI of 1948

S. Subramanian

R. H. Dhebar

THE LIQUIDATORS OF PURSA LIMITED

COMMISSIONER OF INCOME-TAX,

BIHAR

MEHR CHAND MAHAJAN C.J.

s. R. DAS

HASAN

JAGANNADHADAS JJ.

Income-tax Act

s. 10(2)

Section 66

s. 2( 4)

Income-tax Act

s. 10( 1)

s. 10(2)

s. 10

L.R. 59 I.A. 206

High Court of Judicature at Patna

Sukumar Mitra

S. N. Mul(herjee

C. K. Daphtary

Porus A. Mehta

Patna High Court

section 66(1)

section 10

Income-tax Act

Shearer

Sarjoo Prasad

Ramaswami

16th May, 1951

Pursa Ltd.

1st October, 1943

30th September, 1944

Pursa Ltd.

Companies Act

United Kingdom

9th August, 1943

Dalmia Jain & Company Ltd.

16th August, 1943

England

20th August, 1943

India

8th October, 1943

7th December, 1943

10th December, 1943

20th June, 1945

21st February, 1947

LiquMDlorr qf .Pursa Limited

Income-tax Act

17th May, 1947

section 10

Income-tax Act

22nd May, 1947

21st June, 1947

section 10

30th January, 1947

Income-tax Appellate Tribunal

17th May, 1949

section 66

section 10

section 10

section 10

section 2

Shaw Wal/ace & Co.

section 10

section 10

section 10

Liquidators of Pursa Limited

Normand

section 10

section 10

section 10

section 10

B. N. Ghose

G. H. Rajadhyaksha


S.C.R.

SUPREME COURT REPORTS

THE RAJAHMUNDRY ELECTRIC SUPPLY

CORPORATION LTD. v.

THE STATE OF ANDHRA. [MEHR CHAND MAHAJAN c. J., MUKHERJEA,

S. R. DAs, VIVIAN BosE and GHULAM HASAN JJ.] Madras Electricity Supply Undertakings (Acquisition) Act- { Madras Act XLIII of 1949)-Volidity of-No entry in the three Legislative Lists of seventh schedule of Government of India Act, 193_5.

The Madras Ele<tricity Supply Undertakings (Acquisition) Act (Madras Act XLIII of 1949) was beyond the legislative competency of the Madras Legislature because there was no entry in any of the three Lists of the Seventh Schedule of the Govern- 1nent of India Act, 1935, relating to compulsory acquisition of any commercial or industrial undertaking although s. 299 (2) clearly contemplated a law authorising compulsory acquisition for public purposes of a commercial or industrial undertaking.

State of Bihar v.

Maharajadhiraja Sir Kameshwar Singli ([1952] S.C.R. 889) referred to.

C1VIL

APPELLATE JuRISDICTJON: Civil Appeal No. 72 of 1952.

Appeal under articles 132 ( 1) and 133 ( 1) (b) of the Constitution of India from the J udgmeni: and Order dated the 27th April, 1951, of the High Court of Judicature at Madras (Rajamannar C. J. and Satyanarayana Rao

J.) in Civil Miscellaneous Petition No. 4697 of 1951.

M. K. Nambiyar (U. Sethumadhava Rao, with him) for the appellant.

M. Seshachalapathi for the respondent.

V. K. T. Chari, Advocate-General of Madras (Porus A. Mehta and V. V. Raghavan, with him) for the Intervener (State of Madras).

1954. February 10. The Judgment of the Court was delivered by

DAs }.-This is an appeal arising out of a judg- . ment delivered on the 27th April, 1951, by a Bench of the Madras High Court in C.M.P. No .. 4697 of 1951 filed under article 226 of the Constitution for the issue of a writ of certiorari or other appropriate writ to call

Feiruary 10.

The Rajahmundry

Electric Supply Corporation Ltd. v.

Tht State of Andhra.

Das].

for the records and quash the order of the Government passed under section 4( 1) of the Madras Act XLIII of 1949 declaring the undertaking of the appellant company to vest in the Government.

The appellant company was formed and registered under the Indian Companies Act in 1924 with the object, inter alia, of generating and supplying electrical energy to the public in Rajahmundry. In 1949 the Madras Legislature passed the Madras Electricity Supply Undertakings (Acquisition) Act,

1949. The Act received the assent of the Governor-General on the 18th January, 1950, and was published in the Official Gazette on the 24th January, 1950. Upon the Constitution of India coming into force on the 26th January, 1950, the Act was submitted to the President for his certification and on the 12th April, 1950, the President certified that the Act should not be called in question in any court on the ground that it contravened the provisions of clause (2) of article 31 or it contravened the provisions of sub-section (2) of section 299 of the Government of India Act, 1935. By an order in writing made on the 2nd September, 1950, the Government of Madras acting under section 4(1) of the Act declared that the undertaking of the appellant company should vest in the Government on the date specified therein. Under the proviso to section 4(1) the Government from time to time postponed the date of vesting and the 2nd April, 1951, was the last extended date fixed for such vesting. On the 29th March, 1951, the appellant company filed C.M.P. No. 4697 of 1951, under article 226 for quashing the order of the Government.

Shortly stated the contentions of the appellant before the High Court were that the Act was ultra vires in that (1) it was beyond the legislative competency of the Madras Legislature to enact it, (2) it was not enacted to subserve any public purpose, and (3) the compemation provided for was illusory.

The High Court repelled each and all of the aforesaid contentions of the appellant company. It held that the legislation was with respect to electricity under entry 31 of the

concurrent list in the seventh Schedule to the Government of India Act, 1935, and was not a legislation with respect to corporations under entry 33 in list I as contended by the appellant and that, therefore, the.

Madras Legislature was competent to enact it. It further held that the Act having received the certificate of the President the challenge based on an alleged absence of public purpose or the illusory nature of the compensation was shut out and could not be raised.

The High Court, however, held that certain sections and rule 19(2) of the Rules framed under the Act were invalid and subject thereto dismissed the application of the appellant company. The High Court granted leave to the appellant company to appeal before this court.

The appeal has now coine up for hearing before us. • Learned counsel appearing in support of the appeal has not pressed before us the contention raised in the High Court as to the absence of public purpose or the illusory nature of the compensation provided by the Act. He has confined his submissions to the question of the legislative competency of the Madras Legislature to enact this piece of legislation. In the High Court the contest centred round the question whether the Act was a law with respect to electricity under entry 31 of the concurrent list or with respect to corporations under entry 33 in list I. The High Court held that the Act was, in pith and substance, a law with respect to electricity and was, therefore, within the legislative competency of the Provincial Legislature.

In his arguments before us learned counsel contended that

th@ act is in substance and effect one for the acquisition of an electrical undertaking and, as such, is ultra vires because- ( a) the acquisition of an electrical undertaking was not a legislative item in any of the three lists in the seventh schedule to the Government of India Act, 1935, and

(h) in so far as it relates to the acquisition of an electrical undertaking of a corporation 1t 1s a law with respect to corporations under entry 33 in list I. ·

The Rajahmundry

Electric Supply Corporation Ltd, v.

The Stat• of Andhra.

Das].

195+

T/ie Rajalunumlry

Ekctric Supply Corporation IJd.

TM Stat1 •/

Andhrc.

Das].

In our opinion this appeal can be disposed of on the first of the two grounds mentioned above.

Turning to the Act it will be noticed that the long title of the Act is "an Act to make provision for the acquisition of undertakings in the Province of Madras supplying electricity." The preamble recites the expediency of making Provision "for the acquisition of undertakings in the Province of Madras engaged in supplying electricity." Section 1 gives the short title, extent and commencement of the Act. Section 2 i,.s a definition section. Section 3 provides that the Act shall apply to all undertakings of licensees including certain undertakings therein mentioned.

Section 4 empowers the Government to take over any undertaking by making an order in writing declaring that such undertaking shall vest in the Government on a specified date. Section 5 provides for compensation pay~ able to a licensee who is not a local authority. The section gives an option to the licensee to claim compensation on one of three bases therein specified.

Section 6 deals with compensation payable where the licensee is a local authority.

Section 7 specifies the properties or assets which will vest according as compensation is claimed under one basis or another.

Section 8 provides for the appointment of a sole representative to act as the sole and accredited representative of the licensee in connection with the handing over of the undertaking and performing on behalf of the licensee the functions thereinafter specified. The choice of basis of compensation is to be made within one month under section 9 and such choice once intimated to the Government is not to be open to revision except with the concurrence of the Government.

Section 10 authorises the Government, in case the licensee has disposed of any of the assets otherwise than in the normal course of events causing loss to the Government as succeeding owners, to deduct from tl>e compensation payable to the licensee an amount which they consider to he the loss sustained by them.

Section 11 prescribes the various deductions which the Government shall be entitled to make from the compensation payable under the Act. The manner of

payment or deposit of compensation is laid down in section 12.

Section 13 permits the Government to repay all loans, debentures, mortgages and the like outstanding on the vesting date at any time before the time fixed for repayment. Section 14 is the arbitration section. Section 15 provides for the termination of the managing agency.

Section 16 authorises the Government to terminate the services of any person on the staff of the licensee immediately before the vesting date. Section 17 requires all licensees to prepare and hand over to the Government a complete inventory of all the assets. Section 18 gives power of entry to the Government or any officer authorised by the Government upon any land or premises in the possession of the lice'1see. Section 19 prescribes penalties for various defaults therein specified.

Section 20 makes certain officers of a company liable for the offence committed by the company.

Section 21 gives protection against suit or prosecution for anything done in good faith

under any rule or order made under the Act. Section 22 confers rule-making power on the Government.

Section 23 provides that the provisions of certain Acts in so far as they are inconsistent with the provisions of this Act shall have no effect. Section 24 gives power to the Government to do anything which appears to them necessary for the purpose of removing any difficulty. From the above summary it will be noticed that the Act does not purport to make any provision for the granting of licenses or maintenance of works for generating or transmitting energy or for supplying electrical energy as one would expect to find in a law dealing with electricity nor does the Act purport to make any provision for the incorporation, regulation or winding up of trading corporations. On the contrary, it is abundantly clear from the long title, the preamble and the sections that it is, in pith and substance, nothing but an Act to provide for the acquisition of electrical undertakings.

Section 299 (2) of the Government of India Act, 1935, provided that neither the Federal nor a Provincial Legislature would have power to make any law authorising the compulsory acquisition for public purposes

Th• Rajalmwndry

Ekctric Supply Corporation ltd. ...

Tii• Stale of

Andhra.

Das].

The Rqjahmundry

Elect1ic Supply Corporation lid.

The State of

A.ndhra.

Das].

of any land or any commercial or industrial undertaking or any interest in or in any company owning any commercial or industrial undertaking unless the law provided for the payment of compensation for the property acquired. Compulsory acquisition of property is undoubtedly an important sovereign right of the State but this right has to be exercised under a bw.

The legislative power of the State was distributed by sections 99 and 100 amongst the Federal Legislature and the Provincial Legislatures in the manner provided in the several lists set forth in the Seventh Schedule to the Act. Section 100 read with entry 9 in list II authorised the Provincial Legislature to make a law with respect to compulsory acquisition of land. There was no entry in any of the three lists relating to compulsory acquisition of any commercial or industrial undertaking, although section 299 (2) clearly contemplated a law authorising compulsory acquisition for public purposes of a commercial or industrial undertaking. The acquisition of a commercial or industrial undertaking not being the subject-matter of any entry in any of the three legislative lists, neither the Federal Legislature nor the Provincial Legislature could enact a law with respect to compulsory acquisition of a commercial or industrial undertaking. Under section 104, however, the Governor-General, in his individual discretion, could, by public notification, empower either the Federal Legislature or a Provincial Legislature to enact a law with respect to any matter not enumerated in any of the lists in the seventh schedule to the Act. It is, therefore, clear that although Parliament expressly entrusted the Provincial Legislature with power to make a law with respect to compulsory acquisition of land it did not straightaway grant any power, either to the Federal Legislature or the Provincial Legislature, to make a law with respect to compulsory acquisition of a .commercial or industrial undertaking but left it to the discretion of the Governor-General to empower either of the Legislatures to enact such a law. There is no suggestion that the Governor-General had, in exercise of his discretionary powers under section 104, authorised the Madras

S.CJl.

SUPREME COURT REPORTS 785

Legislature to enact the impugned Act and, therefore, the Act was, prima facie, beyond the legislative competency of the Madras Legislature.

The learned Advocate-General of Madras urges that there was implicit in every entry in the legislative lists in the Seventh Schedule to the Government of India Act, 1935, an inherent power to make a law with crespect to a matter ancillary or incidental to the subject-matter of each entry. His argument is that each entry in the list carried with it an inherent power to provide for the compulsory acquisition of any property, land or any commercial or industrial undertaking; while making a law under such entry. It is quite true that the powers of each Legislature to make laws with respect to the clifferent subjects assigned to it by the appropriate list were to be regarded as wide and plenary and also covering matters incidental or ancillary to such subject-matter, but it is, nevertheless, clear from the provision of the Act that the power to make a law for compulsory acquisition was, under entry 9 in list II, given only to Provincial Legislatures and that such power of the Provincial Legislatures was, under that entry, limited to m'aking a law for the compulsory acquisition of Janel only and that unless the Governor-General made an order under section 104 of the Act the Provincial Legislatures had no power to make a law for the compulsory acquisition of any property other than land and that the Federal Legislature had no power to make any law with respect to the compulsory acq'.lisition of any property at all. If the argument of the learned Advocate-General were correct then entry 9 in list II was wholly unnecessary for under entry 21 in list II the Provincial Legislatures could make a law for the compulsory . acquisition of land.

A similar argument was repelled by this court in the State of Bihar v.

Maharajadlziraja Sir Kameslzwar Singh( ). The matter is placed beyond any doubt or dispute by the provisions of section 127 of the Government of India Act, 1935, which provided that the Federal micrht, if it .deemed it necessary to acquire any land si; uate in a

(1) [1952] S, C.R. 889.

195~

T/le Rojahmundry

Ekctric Supply Corporation LJd.

Th• State of

Andhra.

Das],

195{

Th• Rqja/unundry

EU.lri< SuHIJ Corpuration LJd.

Th• State •f

A.ndhr•.

DasJ.

[95{

F1brnary 11.

Province for any purpose connected with a matter with respect to which the Federal Legislature had powi;. to' make laws, require the Province to acquire the land on behalf and at the expense of the Federation. If power inhered in the Federal Legislature to make a law for the acquisition of any property for any purpose connected with a matter with respect to which it had power to make laws then section 127 would not have been necessary at all.

The absence of any entry empowering any Legislature to make laws with respect to cmnpulsory acquisition of a commercial or industrial undertaking and the provisions of section 127 to which reference has just been made make it abundantly clear that the contentions urged by the learned Advocate-General cannot possibly be sustained.

In our opinion, therefore, it must be held that the Madras Legislature had no legislative competency to enact the impugned law. This is sufficient to dispose of this appeal and it is not necessary to express any opinion on the other points raised in the court below.

The result, therefore, is that this appeal must be allowed with costs both in the High Court as well as in tJ1is court.

Appeal, allowed.

Agent for the appellant : M. S. K. Aiyangar.

Agent for the respondent : R. H. Dhebar.

Agent for the intervener : R.H. Dhebar.

THE STATE OF BIHAR v.

ABDUL MAJID

[MEHR CHAND MAHAJAN C. J., MUKlIEllJEA, S. R. DAs, VMAN BosE and GHULAM HASAN JJ.]

Civil servant-Wrongful dismissal-Suit for recovery of arl'ears of salary-Whether competent-Rule of English law-Civil servant-Holding office at the pleasure of Crotvn-Whether applic~ able in India.

Held, that the rule of English law that a civil servant cannot maintain a suit against the State or against the Crown for the-

THE STATE OF ANDHRA

MEHR CHAND MAHAJAN

MUKHERJEA

S. R. DAs

VIVIAN BosE

GHULAM HASAN JJ.

Madras Act XLIII of 1949

Madras Act XLIII of 1949

Seventh Schedule

India Act, 1935

s. 299

articles 132

Constitution of India

High Court of Judicature at Madras

U. Sethumadhava Rao

M. Seshachalapathi

V. K. T. Chari

Porus A. Mehta

V. V. Raghavan

article 226

section 4( 1)

Madras Act XLIII of 1949

Companies Act

Rajahmundry

18th January, 1950

24th January, 1950

Constitution of India

26th January, 1950

12th April, 1950

article 31

section 299

Government of India Act, 1935

2nd September, 1950

Government of Madras

section 4(1)

section 4(1)

2nd April, 1951

29th March, 1951

article 226

Madras Legislature

Government of India Act, 1935

Madras

Section 1

Section 2

Section 3

Section 4

Section 5

Section 6

Section 7

Section 8

section 9

Section 10

Section 11

section 12

Section 13

Section 14

Section 15

Section 16

Section 17

Section 18

Section 19

Section 20

Section 21

Section 22

Section 23

Section 24

Section 299

Government of India Act, 1935

Rqjahmundry

Elect1ic Supply Corporation

State of

A.ndhra

sections 99 and 100

Seventh Schedule

Section 100

section 299

section 104

Parliament

section 104

Seventh Schedule

section 104

section 127

Government of India Act, 1935

section 127

section 127

M. S. K. Aiyangar

R. H. Dhebar

R.H. Dhebar

STATE OF BIHAR

ABDUL MAJID

MEHR CHAND MAHAJAN

MUKlIEllJEA

VMAN BosE