March 24

SUPREME COURT REPORTS

SETH THAW ARDAS PHERUMAL

THE UNION OF INDIA

(and connected <lppeal)

[1955] •

[VIVIAN BOSE, JAGANNADllAOAS and SINHA, J.J .J

Arbitratio11 Act, 1940, (Act Xvi 1940), .-. l6t /)(c)-Arbitratio11 -Award-Legality thereof-\Flwn ca" be challenged-Arbitratvr- Condition precedent for his jurisdiction-Award-\\i'hen Jinal-Both

parties specifically referring a qut?stiun of law for the decision 11/ aTbitrator-Cases where question of law specifically referred aud cases where decision incidentally tnaterial (however necessary) in order to decide the question actually refrred-Distinction between -wrong construction of contract-Error of law-Iuterest awarded-Contract not providing for it-Require1nents of Interest Act, 1839 !Act XXXII of 1839) not fulfilled--Specific type of loss actually contemplated by the partie.--Expres.- stipulatio" that no damage will be payabe-Parties bound down to the agreement- Agreement on which s:;, it based no1 found in tlie written contract but implied under s. 9 of the fodian Contract Act, 1872-Matter not covered by the arbitration clause---Error of law apparent au the face of the award.

'The appellan;, a contractor, entered into a contract with the Dominion of India for the supply of bricks. A clause in the contract required all disputes arising out of or relating to the contract tq be referrt:d to arbitration. Disputes arose and the matter was duly referred. The arbitrator gave an award in the contractor's favour.

The Union Government, which by thc'Il had displaced the Dominion of India, contested the a\vard on a nunibcr of grounds.

Held: (1) that it is not enough for the contract to provide for arbitration; more is necessary.

An arbitrator only gets jurisdiction when either, both the parties specifically agree to refer specified matters or, failing that, the court compels them to do so under the arbitration clause if the dispute is covered by it;

(2) the legality of an award cannot be challenged on facts, but it can be challenged on questions of law provided the illegality is apparent on the face of the award: s. 16'l)!c) of the Arbitration Act;

(3) the only exception is when both parties specifically refer a question of law for the decision of the arbitrator. In that event they are hound by his decision on that particular question as well as by his decision on the facts.

But a distinction must be drawn between cases in which a question of law is specifically referred and those in which a deci,.ion is incidentally material (however necessary) in order to decide the question actually referred. The law about this is the sallll' in India as in England. 1923 A.C. 395 and

1933 A.C. 592, followed. 54 C.W.N. 74 at 79, 50 I.A. 324 at 330 &

331, 54 I.A. 427 at 430, 29 I.A. 51 at 60, 1942 A.C. 356 at 368 l'eferred to and 1950 S.C.R. 7.92 at 798, explained; 1955

Seth Thawa•das Quaere: -Whether the courts will interfere when a question of Pheimal law is specifically referred if the arbitrator acts illegally in deciding The Unioi; of India it, such as deciding on inadmissible evidence or on principles of construction which the la\Y does not countenance. 1923 A.C. 395 at 409, refen:.ed to;

( 4) a wrong construction of the contract is an error of law and can be challenged provided the error appears on the face of the award;

(5) so is the awarding of interest when the <:ontract does not provide for interest and the requirements of the Interest Act are not fulfilled: 65 I.A. 66, referred to.

Quaere: whether the Interest Act applies to arbitrations~

(6) when a specific type of loss is directly contemplated by the parties to a contract and they expressly stipulate that no damages will. be payable in respect of it they must be bound down to their agreement and any claim for damages in respect of such loss must be dismissed;

(7) when the agreement on which the suit is based is not to be found in a contract which has been reduced to writing but has to be implied under s. 9 of the Contract Act then the matter is not covered by an arbitration clause of the kind referred to above because the dispute in such a case arises out of and relates to the implied agreement and not to the written contract; 1942 A.C. 356 at 371, referred to.

CIVIL APPELLATE J!JRISDICTION: Civil Appeal No. 260 of 1953 and connected appeal (C.A. No. l2 of 1954).

Appeals from the Judgment and Decree dated the 11th day of May 1951 of the High Court of Judicature at Patna in Miscellaneous Appeal No. 253 of 1950 and in appeal from Original Order No. 252 of 1950 arising out of the order dated the 11th day of May 1951 of the Court of Subordinate Judge, Dhanbad in Suit No. 34 of 1949 and in Title Suit No. 27 of 1949 respectively.

Mahabir Prasad, Advocate-General for the State of Bihar (S. P. Varma and M. M. Sinha, with him). for the appellant (In Civil Appeal No. 260 of 1953).

Mahabir PrasaZ dvocate-General for the State of Rihar (M. M. Sinha for R. C. Pmsad. with himl for the appellant (Jn Civil Appeal No. 12 of 1954). '

Sith Tha-.JJardas

l'hcrlunal

 G. K._ Daphtary, Solicito}-General fo~>lndia (Porus A •. ~JJfehta and P. G. Gokhale, with him), for the respondent (In both the Appeals). - ·-

TllcUnio:o/ lnd; a

- - 1955. l\Iar6h 24.

The Judgment of the Court- Was delivered by

_ BosE J.-_ This appeal and Civil Appeal No. 12 of l!J54, which will also be governed by this judgment, raise the same points though there are some differences in the facts. \Ve_ will deal with Civil Appeal No. 260 of 1953 first. _.

The suit there related to an arbitration matter.

The appellant before us, whomit will be convenient to call the contractor, entered into a contract with the Dominion of -India through an Additional Chief Engineer of the C.P. \V.D. on l-ll-1945 for the supply of bricks to the C.P.\V.D., a department of the Dominion Government. Disputes arose about a number of matters. -Clause 14 of the agreement provided that all disputes arising out of or relating to the contract should be referred to the Superintending Engineer of the Circle for the time being. Accordingly, there was a reference on 21-1-1949 and an award followed on 8-5-l!l49. It was filed in the Court of the Subordinate Judge, Dhanbad, and the contractor prayed that it be accepted and that a decree be passed in terms of it.

The Dominion of India filed objections under section 30 of the Arbitration Act, 1940 and prayed that the award be set aside and alternatively that it be modi- ' "4 fied or corrected.

The contractor's application was registered as a suit under section 20(2) of the Act and a decree was passed in terms of the award on 18-3-1950. - By that time the Constitution had come into force and the Union of India replaced the Dominion of India as a defendant.

The Union of India filed an appeal to the High Court.

The appeal was allowed in part.

The contractor thereupon appealed to this Court. The dispute that was referred to the arbitrator consisted of 17 heads of claim but only three of them are t contested here, namely items 5, 8 and 17.

In the 5th head of claim the contractor claimed Rs.

JYSj 75,900 as the price of 88 lacs of katcha bricks that Serh Thall'arda.1 h k h Pher111nal were destroyed by rain.

T ese bric s were not t e v. subject-matter of the contract but the contractor put The Union of India his claim in this way. no.e.t.

The contract was for the supply of 2} crores of pucca bricks which had to be delivered according to the followil)g schedule-

30 lacs by 25-1-46

50 lacs by 25-2-46 55 lacs by 25-3-46 55 lacs by 25-4-46 60 la'cs by 25-5-46.

Delivery was to be at the kiln site. In order to keep to this schedule the contractor had to think ahead and work to a particular time table. First, he had to prepare katcha or unbaked bricks and place them in his kilns for baking. While this lot was baking he had to prepare and stock another lot of katcha bricks ready to take the place of the baked bricks as soon as they were removed, It was the duty of the C.P.W.D. to remove these bricks as soon as they were ready for delivery, that is to say, as soon as they were fully baked. At a certain stage of the contract the C.P.W.D .. failed to remove the backed bricks which were ready ·

for delivery and removal. This caused a jam in the kilns and prevented the contractor from placing afresh stock of unburnt bricks in the kilns, and in the meanwhile his stock pile of katcha bricks ready for baking kept on mounting up: Had everything been done to time the n crores of bricks would have been delivered before therains set in.

But owing to the default of the C.P.W.D. in not removing the burnt bricks· which were ready for removal, delay occurred in the time table and the rains set in with the result that 88 lacs of katcha bricks were destroyed by the rains.

As this loss was occasioned by the default of the C.P.W.D. the contractor claimed that he should be paid their price.

The reply of the Union Government was two-fold.

First it contended that the katcha bricks formed no

part of the contract and even if it w:1s at fault in not

/955 taking delivery of the burnt bricks in time all that it

Setlr T!rawarda; could be held liable for would be for breach of that

Plrer:_mat contract; and said that the Joss that was occasioned by

The Union 'If India the damage caused to the katcha bricks which formed

B7'seJ. no part of the contract was too remote. Secondly, that compensation for this Joss could not in any event be claimed because this kind of situation was envisaged by the parties when the contract was made and they expressly stipulated that the Dominion Government would not be responsible. The Union Government relied on additional clause 6 of the agreement which is in these terms:

"The department will not entertain any claim for idle Jabour or for damage to unburnt bricks due to any c, ause whatsoever".

The arbitrator held that this clause was not meant "to

absolve the department from carrying out their part of the contract" and so he awarded the contractor Rs_ 64,075 under tliis head.

We are clear that the arbitrator went wrong in law.

Government departments have their difficulties no less than contractors. There is trouble with labour, there is the likelihood of machinery breaking down in out of the way places and so forth; there was also the danger of thunder sto.rms and heavy showers of rain in the month .of May: it will be remembered that the last date of delivery was 25-5-46.

If, with that in view, Government expressly stipulated, and the contractor expressly agreed, that Government was not to be liable for any loss occasioned by a consequence as remote. as this, then that is an express term of the contract and the contractor must be tied down to it.

If he chase to contract in absolute terms that was his affair. But having contracted he cannot go back on his agreement simply because it does not suit him to abide by it. This is not to say that Government is absolved froni all liability, but all it can be held responsible for is for damages occasioned by the breach of its contract to remove the pucca bricks which it had undertaken to remove. But what would such a breach entail?

The contractor had a duty under section 73 of the l955 Contract Act to minimise the loss, accordingly he would Seth Thawardas have had the right to remove the bricks himself and Pherumat stack them elsewhere and claim compensation for the The Unio~· of India loss so occasioned; and indeed two of his heads of claim (not in dispute here) relate to that.

He has been awarded Rs. 11,744-11-0 under claim No. 4 for the extra load in connection with the stacking of 1 crore 7 lacs of bricks due to the accumulation at the kiln site owing to the department's failure to work to its part of the time table, and in addition, he has been given Rs. 15,500 under claim 13 for the cost of levelling and dressing land to enable him to stack these extra bricks.

Alternatively, he could have sold the bricks in the market and claimed the difference in price, but ordinarily he could not have cl;; timed compensation for damage done to the katcha bricks unless he could have shown that that kind of damage, ordinarily too remote, was expressly contemplated by the parties when the contract was made: section 73 of the Contract Act.

Here it is clear that this was in their express contemplation and they chose to provide against such a contingency by making clause 6 an express clause in

their contract. There can therefore be no doubt that the arbitrator was wrong in his law. His construction of the terms of the contract was at fault. The question now arises whether his decison on this point is final despite it being wrong in law.

In India this question is governed by section 16(1)

(c) of the Arbitration Act of 1940 which empowers a Court to remit an award for reconsideration.

"where an objection to the legality of the award is apparent upon the face of it".

This covers cases in which an error of law appears on the face of the award. But in determining what such an error is, a distinction must be drawn between cases in which a question of law is specifically referred and those in which a decision on a question of law is incidentally material (however necessary) in order to decide the question actually referred. If a question of law is specifically referred and it is evident that the

8--8 SCT 'ND 182

.BoseJ.

1955 parties desire to have a decision from 'the arbitrator Seth Thawardas about that rather than one from the Courts, then the Pher;_mal Courts. will not interfere, though even there, there is Th• Union of India authonty for the view that the Coutts will interfere if it is apparent that the arbitrator has acted illegally

80"' J. in reaching his decision, that is to say, if he has decided on inadmissible evidence or on principles of construction that the law does not countenance or something of that nature. See the speech of Viscount Cave in Kelantan Government v. Duff Development Co.(') at page 409. But that is not a matter which arises in this case.

The law about this is, in our opinion, the same in England as here and the principles that govern this class of case have been reviewed at length and set out with clarity by the House of Lords in F. R.

Absalom Ltd. v. Great Western (London) Garden Village {iociety (') and in Kelantan Government v. Duff Development Co.('). In Durga Prasad v. Sewkishendas(') the Privy Council appHed the law expounded in A bsalom's case(') to India: see also Champsey Bhara & Co. v. Jivraj Balloo Spinning and Weaving Co.(') and Saleh Mohomed Umer Dossal v. Nathoornal Kessamal('). The wider language used by Lord Macnaghten in Ghulam Jilani v. Muhammad Hassan(") had reference to the revisional powers of the High Court under the Civil Procedure Code and must be confined to the facts of that case where the question of law involved there namely limitation, was specifically referred. An arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. He is a tribunal selected bv the parties to decide their disputes according to law and so is bound fo follow and apply the law, and if .he does not, he can be set right by the Courts provided his error appears on the face of the award. The single exception to this is when the parties choose specifically to refer a question of law as a separate and dis- . ' tmct matter.

(I) [19231 A.C. 395.

(3) 54 C W.N. 74.79.

(5) 54 I.A. 427, 430.

(2l [1933] A.C. 592.

(4) 50 I.A. 324. 330 & 331.

(6) 29 I.A. 51, 60.

Reference was made to a decision of this Court in 1955

A_. M. Mair & Co. v. Gordhandass Sagarmul!(') where Seth Thawardas Fazl Ali, J. quoted a passage from Viscount Simon's Plterumal speech in Heyman V. Darwins Ltd. ('where the lear- The U11io~· of India ned Lord Chancellor (Viscount Simon) in turn quoted from Lord Dunedin in another case. It was argued on the basis of this that if you have to have recourse to the contract to establish your case, then the dispute must fall within the arbitration clause.

That is undeniable but it is not enough that the dispute should fall within the clause. It' is also necessary that the parties should define what the dispute is and agree to refer the dispute so set out and defined to arbitration, or,. if they do not, that the Court should compel them to do so: (see Lord Macmillan in Heyman's case(') just cited at pages 369 and 370). If, therefore, rio specific question of law is referred, either by agreement or by compulsion, the decision of the arbitrator on that is not final however mueh it may be within his jurisdiction, and indeed essential, for him to decide the question incidentally. Lord Russell of Killowen and Lord Wright were both in the earlier case, F. R. A bsafon Ltd. v. Great Western (London) Garden Vi11age Society ('); as well as in Heyman's case(') and they would have pointed to any distinction had there been a likelihood of conflict; but in fact there is none and we do not read Fazl Ali J.'s judgment as a decision to . the contrary.

We have next to see w1i.ether the arbitrator was specifically asked to construe clause 6 of the contract or any part of the contract, or whether any question of law was specifica11y referred. We stress the word "specifically" because parties who make a reference to arbitration have the right to insist that the tribunal of their choice shall decide their dispute according to law, so before the right can be denied to them in any particular matter. the Court must be very sure that both sides wanted the decision of the arbitrator on a point of law rather than that of the Courts and that they wanted his decision on that point to be final.

(J) 1950 S.C.R. 792 at 798. 12) 1942 A.C. 356 at 368. (3) 1933 A.C. 592.

BoseJ.

Seslt Thawardas Pherumal v.

The Union of India

BoseJ

The clause in the contract that requires disputes about the contract to be referred to arbitration is clause 14 and is in the following terms:

"Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specification and instructions hereinbefore mentioned and as to quality of materials or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, specification, instructions, orders or these conditions, or otherwise concerning the supplies whether arising during the progress of delivery or after the completion of abandonment thereof shall be referred to the arbitration of the Superintending Engineer of the Circle for the time being in the manner provided by law relating to arbitration for the time being in force who after such investigation as he may think proper shall deliver his award which shall be final, conclusive and binding on all parties to the contract".

The dispute sprang out of a series of claims made in a number of letters written by the contractor to the Additional Chief Engineer, C.P.W.D. and culminated in a petition, Ex. B(l), in which the contractor summarised his claims. The document is not dated.

On receipt of this, someone on behalf of the C.P.W.D. invoked the jurisdiction of the arbitrator. That letter has not been filed. The arbitrator then wrote .to the contractor and asked him to submit a statement of claim. That letter has not been filed either but reference is made to it in Ex. C(l), the statement of claim which the contractor filed in response to that letter. As the material documents setting out the terms of reference are not here, we were asked by both sides to infer what the terms were from this statement of claim and the recitals in the award. The learned counsel for the contractor relied on the following: In the statement of claim--

" Item 5.-Loss of katcha bricks ...... Rs. 75,900.

The chief reason of the destruction of these hricks was the failure of the depa.rtment to lift the

monthly quota of bricks ...... The argument of the de- 1955 partment that they are not liable to \:!Ompensate us Se111 Thawardas On this account because Of clause 6 Of the agreement Plieruma/ . IS not correct.

Tile U11io11 of J11dia Clause 6 refers to only such cases over whih Bose J. the department has no control. But if the department would have lifted the bricks (this was entirely under their control) then no such loss would have occurred. Also be it noted that clause 6 refers only to 'damage' and not to 'destruction' .................. Damage

means~ only partial loss ........... .it cannot mean total destructibn". The award states-

"The statement of claims sulnn; tted by the contractor contains seventeen items in respect of which the contractor claimed a total payment of Rs. 4, 76,138-12-0 plus interest ... , ....... .i.e., approximate total amount claimed: Rs. 5,03,803-12-0 as detailed below".

Then follow the seventeen items of which item 5 is-

"Payment for katcha bricks destroyed by rain: Rs. 75,900".

The body of the award deals with this as follows:

" Claim No. 5 Payment for 88 lacs of katcha bri:::ks destroyed by rain.

The contractor argued etc ........... .

The Executive Engineer stated ... _. ........ The C.P.W.D. moreover were safeguarded by clause 6 of the contract. ...................... .

The contractor maintained that clause 6 of the contract could not be invoked when the department was at fault as in this case. Clause 6 was meant to cover contingencies which were not of the department" s own making. I hold that the removal of the bricks in such a manner or to prevent accumulation in excess of 60 lacs was an implied contractual obligation on the part of the C.P.W.D ..................... .I further hold that the C.P.W.D. cannot take shelter hehind clause 6 of the contract. This clause is not. in my opinion. meant

JY55 to absolve the department from carrying ou~ their Seth Jhawardas part of the contract. It is impossible not to admit Phmmwl this without offending the rudiments of common sense v. . " The Union ef India reason1ng .

BoseJ.

We are of opinion that this is not the kind of specific reference on a point of law that the law of arbitrntion requires. In the first place, what was shown to us is no reference at all. It is only an incidental matter introduced by the Dominion Government to repel the claim made by the contractor in general terms under claim No. 5. In the next place, this was the submission of the contractor alone. A reference rc4uires the assent of both sides. If one side is not prepared to submit a given matter to arbitration when there is an agreement between them that it should be referred. then recourse must be had to the Court under section

20 of the Act and the recalcitrant party can then be compelled to submit the matter under sub-section (4).

In the absence of either, agreement by horh sides about the terms of reference, or an order of the Court under section 20(4) compelling a reference, the arbitrator is not vested with the necessary exclusive jurisdiction.

Therefore, when a question of law is the point at issue, unless both sides specifically agree to refer it and agree to be bound by the arbitrator's decision, the jurisdiction of the Courts to set an arbitration right when the error js apparent on the face of the award is 'lot ousted. The mere fact that both parties submit incidental arguments about a point of law in the course of the proceedings is not enough. The language of Lord Wright in F. R. A bsalom Ltd. v. Great Western (London) Garden Village Society ('), a case similar to this so far as this point is concerned, is apposite here-

"There is here no.submission of any specific question of law as such and as a specific question of law; no doubt incidentally, and indeed necessarily, the arbitrator will have to decide some questions on the construction of the building contract, but the two

matters submitted"are both composite questions of Jaw and fact: there is no express submission of the

(I) [1933) A.C. 592, 616.

true effect of the contrnct on the basis of undis- 1955 puted facts, as in the Kelantan case(') or as a separate Seth Thawardas and distinct matter on facts to be separately assumed Phe~'.mal or found, as in In re King and D11vee11(') .................. The U11io11 of India The arbitrator was not being asked simply and specinoseJ. fically to decide, upon some agreed or assumed basis of fact. the true interpretation of either clause 26 or clause 30 of the conditions or of both together; he was being required to make an award on the two matters submitted on whatever questions of fact and law might emerge".

Clause 32 of the contract in the House of Lords case was the equivalent of clause 14 in ours. It ran--

"Provided always that in case any dispute or difference shall arise ............... as to the construction of the contract or as to any matter or thing arising thereunder ......... such dispute shall be and is hereby referred to the arbitration and final decision of etc.'' The arbitrator relied on that to invest him with jurisdiction to determine, as a matter of law, the construction of clauses 26-30 of that contract. The House of Lords held that in the absence of a specific reference about the construction of the contract the jurisdiction of the Courts was not taken away. Lord Russell of Killowen put it this way at page 610-

'No specific question of construction or of law

wa~ submitted. The parties had, however, been ordered to deliver pleadings. and by their statement of claim the contractor had claimed th~t the arbitrator should under his powers revise the last certificate issued etc ................... It is at this point that the question of the construction 0f condition 30 arose as a question of law. not specifically suhmittcd, but material in the decision of the matters which had been submitted. This q11estion of law the arbitrator has decided; but if upon the face of the award he has decided it wrongly his decision is, in my opinion. open to review by the Court".

That is exactly the position here.

Simply because the matter was referred to incidentally in the plead-

(1) [19231 A.C. 395.

(2) [1913) 2 K.B. 32, 36,

1955 ings and arguments . in support of, or against, the Seth Thawbrdas general issue about liability for damages, that is l}Ot

Phemmal enough to clothe the arbitrator with exclusive juris- T/re Unio~· of India diction on a point of law.

noseJ.

The next question is whether the error is apparent on the face of the award. That, in our opinion, is clear from the passages we have quoted from the award.

We hold that clause 6 ex; pressly relieves the Union Government of all liability under this head of claim and that the arbitrator was wrong in awarding any sum on that account.

The next head in dispute is item No. 8 in the statement of claim:

"Cost of additional wages paid to the coolies on account of non-supply of ration and cloth-Rs. 51,495".

Here again no specific question of law was referred, so all we have to see is whether there is an error of law apparent on the face of the award.

The contractor put his case as , follows in the statement of claim:

"At the time when this work was allotted to us there was rationing system in the locality. As per conditions of contract we were bound not to employ local labour and we had to imnort coolies from far olT places. We had in ouF employ about 1800 coolies and it was an impossibility to arrange their ration from open market. This difficulty was brought to the notice of the authorities concerned, and they promised us to supply ration. It was only after this promise tha.t we signed the agreement. ........ From a perusal of these letters it is clear that the department promised us to supply ration .. .... These circumstantial evidences are sufficient enough to show" that there was a mutual understanding between the parties that ration will be supplied. In the eyes of law even circumstantial evidence is sufficient to prove that such a promise was made. Any breach of that promise makes the department legally liable to compensate for that loss ...... Apart froin the legal responsibility it was also a moral responsibility for the department to supply ration".

This claim, therefore, was not grounded on any clause 1955 of the contract, nor was it said to be implied in the Seth Thawardas contract. What was relied on was a collateral pro- Pherumal mise evidenced, not by the contract, but by two The U11io~; of India\ letters written by "the. department" and a promise BoseJ. by "the authorities concerned"; and later this promise is tnrned into a "mutual understanding" and to a "moral responsibility" in addition to a legal one.

The arbitrator dealt with this as follows. He began by saying-

"The contractor his tender on 25-9-45 that the department arrangements. etc.''

stated that when he submitted he did so in the hona fide belief would make the necessary

Then he sets out the following dates. On 1-11-45 the contractor was told that his tender had been accepted.

On 9-11-45 the contractor "warned" the Executive Engineer about his "immediate requirements in respect of rations". The contract was finally accepted and signed on 22-11-45.

Now it is admitted that the contract contains no ciause about rations and it is also evident that the question was not raised when the tender was accepted on behalf of the Dominion Government. The question was raised in a letter to the Executive Engineer and the contractor si!:!ned the contract without waiting for a reply. ,

It is well settled that governments can onlv he bound by contracts that are entered into in a parti· cular wav and which are signed by the proper auth0rit v. A reference to the agreement. Ex.

AO), will show that it was accented on behalf of the Dominion Government by the Additional Chief Fn.iiineer and not

bY an Executive Engineer. A letter written to the Executive En!!:ineer would therefore have no effect and even if it he assumed that the letter was forwarded to the Addition::il Chief Enl!ineer for consideration, what does it amount to? A tender embodvinl!

certain terms is suhmitted and is accented on 1-11-4".

B0th sides are a.l!reed on all matters' contained ih it and their conduct shows that hoth side~ indic::iterl thCit the contract should be reduced to writing. Re-

9-8 SCIIND'82

1955 fore the agreement is signed, one party wants to in- S•th Thawardas elude a further condition in the contract. We will Pherumal assume that the requet was made to the other con-

Th< Unio~· of India tr acting party. But without wailing fo~ the assent

Bose J~ of the other side, both sides accept and sign the contract as it existed before the fresh suggestion was made.

It is an error in law to dednce from this that there was acceptance ofl the fresh proposal. On the contrary. the legal conclusion is that the new suggestion was dropped and that the contractor was content to accept the contract as it was without this condition.

In any case, a person cannot be bound by a one-sided offer which is never accepted, particularly when the parties intend that the contract should be reduced to writing. That is the whole point of insisting on a document. It excludes speculation as to what was and what was not agreed to however much the matter might have been raised by one of the partie~ durng the stage of negotiation.

The arbitrator continues that the contractor stated that-

"it was a well known and established fact that Sindri was a rationed area; that the C.P.W.D. were giving rations at controlled rates to their employees and contractors through arrangements with the Joe~ I Ci•.1il Supply Authorities; that nobody working under the C.P.W.D. was allowed to make independent arrangements or approach the Civil Supply Authorities direct"

and the contractor contended that the verv fact that he tendered such low rates showed that he exvected to supply his labourers with rations at controlled rates.

The arbitrator then sets out some more of the c0111ractor's contentions and from them concludes that

"there was an implied contractual obligation for the C.P.W.D. to make available controlled rations to the contractor and that this obligation '.\'as not fulfillecl with due diligence and care".

He accordingly awarded Rs. 40.000 as compensation under this head.

The error is apparent. Facts must he based either on evidence or on admissions; they cannot be found to

exist from a mere contention by one side especially 1955 when they are expressly denied by the other. The Seth Thawardas inference from the facts stated above is th&~ the con- Pherumal tractor entered into the agreement with his eyes open The Unio~· of India and whatever his one-sided hopes may have been he was content to enter into the agreement as it stood without binding the other side to the uew conditions and without even waiting to ascertain the reaction of the other side to his further proposals.

It has to be remembered that rationing was not a 111atter that was under the direction and control of the Dominion Government. It was a local matter handled by the then Provincial authorities and under their direction and control. The C.P.W.D.; as a. department of the Dominion Government, was not concerned with rationing except that its employees had to submit to rationing like everybody else in the Sindri

area. This confusion between the Dominion Government and the Provincial Government occurs in the arbitrator's opening sentence under this head where he sets out the contractor's contention that

"commodities such as rations and cloth which were absolutelv essential for the maintenance of his labourers and i1hich 11erl:' unda Govemml:'nt control".

As the arbitrator bases solely on the ..::ontrator's contentions it is evident that he failed to appreciate the fact that the Dominion Government and the Provincial rationing authorities were separate entities distinct. from one another. The position accordingly reduces itself to this: two persons, neither of which is a part ot the Provincial Government or has any control over rationing. chose to enter into an agreement for work i-ri a rationed area. They insisted that their contract should be reduced to writing, and that indeed was essential, this being a contract with the Dominion Government which was incapable of contracting in any other way; they agreed upon and concluded all their terms; then. at the last minute, one side raised a point about rationing but without waiting for a repiy and without having the term entered in the ' contract. he <; igned the contract as it stood before the

point was raised even during the negotiation. It is

Bose!.

\ . 1955 an error in law to hold that any contractual obligation can be inferred or implied. from these .circum- Scth Thawardas

Pherunial stances.,:· ' : v.

Then there is still another error~ If this implied .The Union.of India agreement about rations and cloth does not spring\ 1 - out of the written contract but is to be inferred col- Bosc J. laterally as a distinct and subsidiary contract, and we gather that that is the finding, especially as reference was made to section 9 of the . Contract Act, then that is not a contract 'to which the arbitration clause can apply. . Wide though it is, clause 14 is confined to any matter relating to the written contract and if ration and cloth are not~ covered by the written contract, they are not matters that relate to it. If parties choose to add a fresh contract in addition to or in substitution for the old, then the. arbitration clause-cannot cover .the new contract. - See Lord l\Iacmillan in Heyman v. Darwins Ltd.(') . .

The last item in dispute in this appeal is claim No. 17 about interest. The statement of claims sets out-_

"Item 17-Interest on the amount of money involved in this claim at the rate of Rs. 6 per cent.-· Rs. 27,6~5. ·. _ .

This work was finished in l\Iay 1946 and it . was proper for the department to have decided all our claims at least by 31st December 1947 ....................... .

But this was not done ... Due to this a heavy amount remained blocked up and we were compelled to take money from our bankers on interest. \Ve therefore pray for interest for '16 months from 1-1-48 to 31-4-49". . .

The arbitrator held-

"The contractor's contention that his claims should have been settled by January l!J48 is, in my opinion, reasonable.

I therefore award interest at 6% for 16 months on the total amount of the awards given i.e., Rs. 17,363". _ Then the arbitrator sets out the amounts awarded under each head of claim. A perusal of them shows that each head relates to a claim for an unliquidated sum. The Interest Act, 1839 applies, as interest is

(1) (1942] A.C. 35G at 371.

not otherwise payable by law in this kind of case (see J<Jss Bengal Nagpur Ry. Co. v. Ruttanji Rumji (')), but even Seth Tlzawartlas if it be assumed that an arbitrator is a "court" within Plzerumal the meaning of that Act, (a fact that by no means ap- Tlze U11io~· of India pears to be the case), the following among other condition:, must be fulfilled before interest can be awarded under the Act:-.

(1) there must be a debt or a sum certain;

(2) it must be payable at a certain lime or otherwise;

(3) these debts or sums must be payable by virtue of some written contract at a certain time;

(4) There must have been a demand in writing stating that interest will be demanded from the date . of the demand.

Not one of these elements is present, so the arbitrator erred in law in thinking that he had the power to allow interest simply because he thought the der:pand was reasonable. '

It was suggested that at least interest from the date of "suit" could be awarded on the analogy of section 34 of the Civil Procedure Code, 1908. But section 34 does not apply because an arbitrator is not a "court" within the meaning of the Code nor does the Code apply to arbitrators, and, but for section 34, even

a Court would not have the power to give interest after the suit. This was. therefore. also rightly struck oat from the award.

We pause to note that there was only a delay of five days at the outside in the over-all picture. The last date for removal of the last instalment of bricks was 25-5-46 and the contractor says under this head that the whole contract was completed by the end of May, 1946. lt is difficult to see how 88 lacs of bricks could have been damaged by rain in the last five days of May, and if the damage occurred before it would have occurred anyway, for on the contractor's case he had to have a large stack of unbaked bricks on hand ready to enter the kilns in order to kcer race with his time tahle. However. that was a

(1)651.A.66.

BoseJ.

1955 matter within the jurisdiction of the arbitrator and is Seth Thawardas not matter in which the Courts can interfere.

Pherumal

Th• Unio;· 0f Julia That concludes Civil Appeal No. 260 of 1953 and - ' we now turn to the other appeal, Civil Appeal No. 12 BoseJ. of 1954. Only two items are in dispute here. Heads 4 and 17 of the claim.

The overall pattern of the clai'm is the same as in the other case. 'fhere was a contractor and he entered into an agreement containing the same terms and conditions, except about the details of supply.

It was signed on the same day as the other and by the same authority on behalf of the Dominion Government, and the matter went before the same arbitrator and the award in this case was given on 1-5-1949, one week before the other award. Here also, no specific question of law was referred and we need not cover the same ground. Our decision is the same here as there.

The fourth head of claim is about cloth and rations. The claim here, and the Dominion Government's reply, is the same as in the other case, but the award in-this case is not based on an implied contractual obligation but on "a moral and implied obligation".

The error here is even greater than before.

The sum claimed was Rs. 51,495 and the amount awarded was Rs. 30,000.

The seventeenth head of claim was about intere; t. The contractoJ claimed Rs. 27,665 and the arbitrator awarded Rs. 9,954. There is the same error of law apparent on the face of the award.

'The High Court was right in dismissing the claims made under the heads in dispute here. The two appeals fail and each is dismissed with costs in this Court.

A ppea/s dismissed.

SETH THAW ARDAS PHERUMAL

THE UNION OF INDIA

VIVIAN BOSE

SINHA, J.J

Interest Act, 1839

s. 9

Contract Act, 1872

Dominion of India

s. 16

Seth Thawa•das Quaere

Interest Act

Interest Act

s. 9

Mahabir Prasad

S. P. Varma

M. M. Sinha

Mahabir PrasaZ

~JJfehta

P. G. Gokhale

Dominion of -India through

Clause 14

Subordinate Judge, Dhanbad

section 30

Arbitration Act, 1940

section 20(2)

Union of India

India

clause 6

section 73

Seth Thawardas

Pherumat

section 73

clause 6

section 16(1)

Viscount Cave

England

Macnaghten

Seth Thawardas Fazl Ali

Viscount Simon

Heyman V. Darwins Ltd.

Dunedin

Macmillan

Heyman

Russell

Wright

Fazl Ali

clause 6

clause 14

clause 6

Clause 6

clause 6

clause 6

clause 6

Clause 6

clause 6

section

20

section 20(4)

clause 26

clause 30

Clause 32

clause 14

Killowen

Seth Thawbrdas

clause 6

clause 1955

Sindri

C.P.W.D.

Dominion Government

Union.of India

section 9

clause 14

Interest Act, 1839

Seth Tlzawartlas

Plzerumal

section 34

Civil Procedure Code, 1908

section 34

section 34


2 S.C.R.

SUPREME COURT REPORTS

MESSRS MOHANLAL HARGOVIND DAS,

BID! MERCHANTS, JABALPUR (M.P.) v.

THE STATE OF MADHYA PRADESH &

ANOTHER.

[S. R. DAS, ACTING c. J., BHAGWATI, }AGANNADHA-

DAS, }AFF..R IMAM and CHANDRASEKHARA A1YAR JJ.]

Constitution of India-Art. 286(2)-Central Provinces and Berar Sa!es Ta:r Act, 1947 (XX/ of 1947), sA(6)-Petitioners- Bidi merchants of Madhya Pradesh-Importing tobacco from the State of Bombay-Whether mch transactions. of sales of goods-Affected by the ban under Art. 286(2) of the Constitution-Petitioners registered

111 "dealers" under Central Provinces and Berar Sales Ta:r Act, 1947 and dealers in Bombay selling or supplying tobacco to the petitioners also registered as "dealers" under Central Provinces and Berar Sales Ta:r Act, 1947-Whether makes the transactions as intra-State transactions between two registered dealers in the State of Madhya Pradesh.

The petitioners arc carrying on business on a very large scale of making and selling bidis having their head office in Jabalpur in the State of Madhya Pradesh and arc registered as "dealer" for the purposes of the Central Provinces and Berar Sales Tax Act, 1947. In the course of their said business, the petitioners import tobacco from the State of Bombay in very large quantities after it is blended in that State by the veridors with various other types of indigenous tobacco by an elaborate process.

This finished tobacco, after its import within the State of Madhya Pradesh is rolled into bidis which arc exported to various other States, largely to the State of Uttar Pradesh.

The dealers in the State of Uttar Pradesh and sur.h other States who buy bidis from the petitioners sell the same to various other dealers and 'onsumers in those States.

The Sales Tax authorities in the State of Madhya Prndesh required the petitioners under threat of criminal prosecution to file a statement of return of the total purchases of tobacco made by them out of Madhya Pradesh and delivered to them in Madhya Pradesh with a view to assess and levy purhase tax on the transa.:tions of purchases made by the petitioners as stated above.

Held, that the State of Madhya Pradesh had no authority to impose or to authorise the imposition of such a tax and that the action of the State authorities contravened the provisions of Art. 286(2) of the Constitution inasmuch as the transactions in question were in the course of inter-State trade or commerce :is the finished tobacco which was supplied to the petitioners moved from the State of Bombay to the State of Madhya Pradesh.

M11w1 Molw&lal

Horgorind Da1, Bidi M1rdonls, Jab<l/Jfll (M.P.)

TNSl.Uof Ma4Ji1• """'"° """·-·

The contention that not only the petitioners were the register~. ed dealers under Ruic 8 of the Central Provinces and Berar Sales Tax Rules, 1947 but the dealers in Bombay who sell or supply tobacco to them were registered as "dealers" for the purpose of the Central Provinces and Bcrar Sales Tax Act, 1947 and therefore the transactions were between two registered dealers in the St.ate of Madhya Pradesh and thus constituted purely internal sales of the goods was without force because what one has to look at is the real narurc of the transactions and not the outside form and as the tn.nt~ actions in dispute invo}vcd movement of the goods across the border they were clearly tranctions of sales of goods in the course of intu State trade or commerce and were hit by the ban under ArL 286(2) of the Constitution.

OatGINAL Juuso1cnoN : Petition No. 67 of. 1955.

Under Article 32 of the Constitution of India for the enforcement of Fundamental Rights.

M. C. Setalvad, Attorney-Genoral of India, C. K.

Daphtary, Solicitor-General of India, G.

Pathak_, (!. B. Dadachanji, A. P. Sen, Rameshtuar Nath .and Rajinder Narain, with them), for the petitioners.

T. L. Shevde, Advocate-General of Madhya Pradesh (M. Adhikari and /. N. Shroff, with him), for the State of Madhya Pradesh.

1955.

September, 20.

The Judgment of the Court was ddi vered by

BHAGWATI J.-The pet1t1oners are a firm carrying on business on a very large scale of making and selling bidis having their head office in Jabalpur in the State of Madhya Pradesh.

They are registered as "dealer" for the purpose of the Central Provinces and Berar Sales Tax Act, 1947.

In the course of their said busines, the petitioners import tobacco from the State of Bombay in very large quantities after it is blended in that State by the vendors with various other types of indigenous tobacco by an elaborate process.

This finished tobacco, after its imnort within the State of Madhya Pradesh is rolled into hidis which are exported to various other States, largely to the State of Uttar Pr.1rlesh.

The rk:ikrs in the Statr: of Uttar Pradesh

' -.:.

-• 1

and such other States who buy bidis from the petitioners sell the same to various other dealers and consumers in those States.

The Sales Tax authorities in the State of Madhya Pradesh required the petitioners under threat of criminal prosecution to file a statement of return of the total purchases of tobacco made by them out of Madhya Pradesh and delivered to them in Madhya Pradesh with a view to assess and levy purchase tu on the transactions of purchases made by the petitioners as above.

The petitioners filed under protest two returns dated the 11th September 1954 and 3rd December 1954 for the periods 3rd May 1954 to 29th

July 1954 and 30th July 1954 to 26th October 1954 respectively but without prejudice to their right to challenge the validity of the assessment and levy of the said tax on the aforesaid transactions.

The Sales Tax authorities further called upon the petitioners to deposit the alleged purchase tax which amounts to thou5ands of rupees in every quarter of the year.

The petitioners thereupon filed this petition under article 32 of the Constitution for a writ of mandamus or any appropriate direction or order seeking to restrain the State of Madhya Pradesh and the Commissioner of Sales Tax, Madhya Pradesh, from enforcing the said Act and its provisions against the petitioners and for consequential reliefs. The petitioners averred that the imposition of tax on sale or purchase of tobacco rolled into bidis exported out of Madhya Pradesh in the manner described was in contravention of article 286(1) (a) of the Constitution, that the tobacco purchased by them for the purpose of making bidis exported outside Madhya Pradesh was never intended for use as raw material for the making of bidis for the purpose of consumption in Madhya Pradesh and section 4, sub-section (6) of the Act had no application to the tobacco so used and there was no liability to pay the alleged tax and that to the best of the petitioners' information tobacco had not been notified hy the State Government in the Gazette for the puq1o<:c of section 12( A) of the Act

hl1ur1 Mohan/al

H1W.fni1UI Das, lliJi Mntllanb,

,....(M.P.) ..

Th181.t1of l'wld1JJ •...nn. .......,.,.

M1ssrs Moftanlal

Hargooind Das, Bi!fi Merci.ants, Jab•lpur {M.P.J v.

The Stat• of Madlr!a Prad4sh

and anotha

and that the Sales Tax authorities, under the Act. were, therefore, not entitled to levy any tax on the petitioners.

The petitioners also submitted that the transactions in question had taken place in the course of inter-State commerce, that the State of Madhya Pradesh had no authority to impose or to authorise the imposition of such a tax and that the action of the State authorities contravened the provisions of article 286(2) of the Constitution.

The Respondents filed a return denying the contentions of the petitioners and submitted that the petitioners by purchasing tobacco which was entered in their registration certificate as raw material for the manufacture of bidis for sale by actual delivery in Madhya Pradesh for consumption in that State made themselves liable to pay the tax by exporting bidis to other States and thus utilising it for a different purpose under section 4(6) of the Act.

They admitted that the petitioners imported tobacco from the State of Bombay in large quantities but stated that the tobacco, after its arrival in the petitioners' bidi factories, was cleaned, sieved and blended A few more facts relevant for the decision of this petition may be stated in this context.

Not only the petitioners but also the dealers in Bombay who sell or supply tobacco to the petitioners are registered as

"dealers" for the purpose of the Central Provinces and Berar Sales Tax Act, 1947.

The petitioners are the holders of a certificate of registration, No. LDG 53 obtained by them under Rule 8 of the Central Provinces and Berar Sales Tax Rules, 1947. When making purchases of the tobacco in question they also made declarations in the form required by Rule 26(II) declaring that they had purchased the said goods from Shri Shah Chhaganlal Ugarchand Nipani, a dealer holding registration certificate No.

Blv!Y /93- MP and from Shri Maniklal Chunanlal Baroda, a dealer holding registration certificate No. BMY/341- MP on different dates therein mentioned for use as raw material in the manufacture of goods for sale by actual delivery in Madhya Pradesh for the purpose .of consumption in that State.

In the return which

was filed by the petitioners for the quarter beginning from 3rd May 1954 and ending with 29th July 1954, the petitioners mentioned Rs. 16,47,567-3-3 as the purchase price of goods purchased on declaration as being goods specified in the registration certificate :is inten<led for use as raw material in the manufacture of goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State but utilisc<l for any other purpose.

In the return which was filed by them for the quarter beginning from 27th July 1954 and ending with 26th October 1954, they di<l not fill in any figure but showed the ahove item as blank contending that the Sales Tax authorities were not entitled to levy any purchase tax against them in respect of the same.

The learned Attorney-General appearing for the pet1t10ners before us contended ( 1) that the transactiom in question were in the course of inter-State commerce and were, therefore, within the ban of article 286(2) and the State of Madhya Pradesh had no authority to impose or to authorise imposition of tax on these transactions, (2) that in any event the goods were delivered for consumption in the State of Ut'.:ar Pradesh and were not liable to a levy of tax at the instance of the State of Madhya Pradesh,

(3) that, section 4(6) of the Act was invalid inasmuch as it offended against the provisions of article 286(1) (a), and lastly ( 4) that even if the above contentions were negatived, section 4(6) of the Act had, on its true constructioil, no application to the facts of the present case.

He, however, urged that if the Court was with him 0'.1 his first contention, viz., that the transactions in question took place in the course of inter- State commerce it was not necessary to go into the other contentions.

We are of the opinion that this contention of the learned Attorney-General i~; sound.

It was in fa::t admitted by the RespoPdents in their return that the petitioners imported tobacco from the State of Bombay in large quantities.

The Bombay suppliers processed tobacco in their go<lowns situated within the State of Bombay and supplied the finished tobacco

Mes, rs Moha1Jlal Hargovind Das, Bidi Merchant.r, Jabalpur (M. 1-'.)

The StaU of Madhya Pradtsh

and anolM1.

Bhagwati J.

Mmn Mohatrlal HMtouitul Da.i, Bidi Mmlumll, Jaolp (M.P.) v.

Tlw8"'*•/ M~Proi<d ""'.,,.,,,.,,

~.,.,.,, ].

to the petitioners in Madhya Pradesh.

The petitioners imported this finished tobacco into Madhya Pradesh from these suppliers who were carrying on business in the State of Bombay and there was of necessity, as a result of these transactions, the mOTement of the goods across the border.

As a result of the transactions entered into by the petitioners with these suppliers the finished tobacco which was supplied to the petitioners moved from the State of Bombay to the State of Madhya Pradesh and these traru> actions were, therefore, in the course of inter-State trade or commerc(.

The only answer which was made by the learned Advocate-General of Madhya Pradesh was that Shri Shah Chhaganlal Ugarchand Nipani and Shri Maniklal Chunanlal B:!toda were themselves dealers holding registration certificates Nos. BMY /93/MP and BMY / 341-MP being registered as such under the provisions of the Central Provinces and Berar Sales Tax Act, 1947, and that, therefore, the transactions were between two registered dealers in the State of Madhya Pradesh and therefore constituted purely internal sales of the goods.

If they were thus internal sales there was no question of their being transactions in the course of inter-State trade or commerce and therefore they were not subject to the ban imposed under article 286(2).

This answer suffers from over-simplification. No doubt, the dealers who supplied the finished tobacc0o to the petitioners were registered dealers under the Central Provinces and Berar Sales Tax Act, 1947, but that fact by itself would not be sufficient to invest the transactions which otherwise were in the course of inter-State trade or commerce with the character of intra-State transactions or internal sales or purchases.

What one has got to look at is the real namre of the transactions and not the outside form. A person who carries on business of selling or supplying goods in Madhya Pradesh and who comes within the definition of "dealers" given in section 2(c) of the Act has, under pain of penalty visited upon him uncler section 24 of the Act, to register himself as a dealer

and possess a registration certificate under section 8(1) of the Act.

Merely because he got himself registered as such to avoid the penalty which would otherwise be visited upon him by the State it cannot be stated that whatever transactions he entered into with other dealers in the State of Madhya Pradesh were all intra- State transactions or internal sales or purchases irres.- pcctive of the fact that the transactions involved movement of the good51, across the border and were clearly transactions of sale of goods in the course of inter-State trade or commerce, We were taken by the learned Attorney-General through the several provi• sions of the Act and we arc confirmed in our opinion that these transactions sought to be taxed by the Sales Tax authorities of the State of Madhya Pradesh were transactions in the course of inter-State trade or commerce.

The activities of selling or supplying goods in Madhya Pradesh if carried on habitually would amount to a carrying on of the business of selling or supplying goods in the State of Madhya Pradesh and even an outside merchant who indulged in such activities may in such event be said to be carrying on business in Madhya Pradesh and would come within the definition of "dealer" given in section 2(c) of the Act.

When we come, however, to section 8 which deals with the registration of dealers, that section requires that a dealer while being liable to pay tax under the Act shall not carry on business as a dealer unless he has been registered as such and possesses a registration certificate.

The liability to pay tax under the Act is thus postulated and unless and until a person is liable to pay such tax he need not get himself registered as a dealer.

All the transactions entered into by a registered dealer, however, do not necessarily import a liability to pay tax under the Act because, whenever the question arises in regard to his liabilty to pay any tax under the Act, such liability would have to be determined in spite of his being a registered dealer with reference, inter alia, to the provisions of section 27-A of the Act which incorporates within its terms the bans w!iich have been imposed on the powers of the State Legislatures to

Mnm Malumllll

HMgaoirttl Do1, Bidi M1rcba1111, Ju•llW (M. r:r ...

TlllStoof "'"""'• Proifl1f! --""' .,.., iJ.

Mes!rl Mohan/al

Hartovind Das,

Ridi Merchants, Jabalpur (M. P.)

Th~ State of Madhya Pro.rfesh

and another

Bhagawati j.

tax under article 286 (1) (a) and (2) of the Constitution.

If, therefore, a dealer who has got himelf registered as dealer under the provisions of section 8 ( 1) of the Act is sought to be made liable in respect of transactions of sale effected by him he could claim exemption from such liability if the transactions of sale or purchase took place in the course of inter-State trade or commerce after the 31st March, 1951, except in so far as Parliament may by law otherwise provide.

In the case before us there was no such provision made by Parliament and the transactions in question were all after the 31st March, 1951, with the result that the ban imposed by article 286(2) was in operation and if the transactions took place in the course of inter-State trade or commerce not only were Shri Chhaganlal U garchand Nipani and Shri Maniklal Chunanlal Baroda exempt from the liability to pay the tax on these transactions but the petitioners also were similarly exempt.

No liability, therefore, could be imposed either for Sales Tax or for Purchase Tax within the terms of the Act on these transactions which as above stated took place in the course of inter- State trade or commerce.

It was, however, urged that the petitioners had made declarations at the time of making the purchases of this finished tobacco that they had purchased the said goods for use as raw material.s in the manufacture of goods for sale for actual delivery in Madhya Pradesh for the purpose of consumption in that State and that by virtue of the provisions of section 4(6) of the Act they were liable to pay the purchase tax on the purchase price of goods which had been utilised for any other purpose. Whatever steps rhe State of Madhya Pradesh may be able to take in regard to nbn-compliance with the terms of the declarations by the petitioners we are clearly of opinion that the State of Madhva Pradesh is restrained from imposing any tax on the transactions of purchasr: or sale which take place in the course of inter-St2te trade or commerce and no question of liability of the petitioners by virtue of such declarations survives because even initially Shri Shah Chhaganlal Ugarchand Nipani and Shri Maniklal Chunanlal Baroda were not liable to pay any tax on these transactions nor could any such liability for tax be transferred to the petitioners by virtue of such declarations.

If, therefore, there was no basis for any such liability, the declarations by themselves cannot create any new liability and the petitioners cannot be held liable to tax even by the operation of section 4(6) of the Act, the very basis of the liability sought to be imposed therein having disappeared.

The result, therefore, is that the Respondents will be restrained from enforcing the Central Provinces and Berar Sales Tax Act, 1947, and its provmons against the petitioners and from imposing a tax in respect of the transactions in question and in particular from imposing a tax on the purchase price of goods purchased on the declarations under Rule 26 being goods specified in the registration certificate as intended for use as raw material in the manufacture of goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State but utilised for any other purpose under the provisions of section 4(6) of the Act.

The Reondents will pay the petitioners' costs of this petition.

THE TROPICAL INSURANCE CO LTD.

& OTHERS

THE UNION OF INDIA & ANOTHER (and connected petition.)

[S. R. DAS, ACTING C.J., BHAGWATI, VENKA1'A-

RAMA AYYAR, JAFER IMAM and CHANDRA-

SEKHARA AYYAR JJ.)

Insurance-Insurer doing life insurance business along with general insurance business-Power of Central Government to appoint Administrator-Such power, if confined exclusively to life insurance business-Grounds not taken in petition under Art 32, if can be urged at the hearing-Insurance Act (IV of 1938), s. 52-A-Constitution of India, Art 32.

1955 Mmrs Mohdll/al

J/argovind Das, Bidi Merthanls, Jabalpur (M. P.) v.

Tht Stale of Madhya Pradesh

and anothtr

Bhagawati J.

Sep11m/Jel 22

MOHANLAL HARGOVIND DAS, BIDI MERCHANTS, JABALPUR (M.P.)

THE STATE OF MADHYA PRADESH &

ANOTHER

BHAGWATI

AFF..R IMAM

Constitution of India

Art. 286(2)

Art. 286(2)

Bombay

Madhya Pradesh

Jabalpur

State of Uttar Pradesh

Uttar Pradesh

Madhya Prndesh

State of Madhya Pradesh

Art. 286(2)

Article 32

Constitution of India

M. C. Setalvad

C. K.

Daphtary

B. Dadachanji

A. P. Sen

Rameshtuar Nath

Rajinder Narain

T. L. Shevde

M. Adhikari

N. Shroff

BHAGWATI

State of Bombay

State of Uttar Pr.1rlesh

29th

July 1954

article 32

article 286(1)

section 4

section 12( A)

article 286(2)

section 4(6)

Shah Chhaganlal Ugarchand Nipani

Maniklal Chunanlal Baroda

27th July 1954

26th October 1954

article 286(2)

section 4(6)

article 286(1)

section 4(6)

StaU of Madhya Pradtsh

Bhagwati

Maniklal Chunanlal

article 286(2)

section 2(c)

section 24

section 8(1)

section 2(c)

section 8

section 27

State of Madhya Pro.rfesh

Bhagawati

article 286

section 8

31st March, 1951

Parliament

article 286(2)

Chhaganlal U garchand Nipani

section 4(6)

State of Madhva Pradesh

section 4(6)

section 4(6)

TROPICAL INSURANCE CO LTD

UNION OF INDIA

RAMA AYYAR

JAFER IMAM

CHANDRA-

SEKHARA AYYAR

Central Government

Art 32

Insurance Act

s. 52

Constitution of India

Art 32

Stale of Madhya Pradesh


2 S.C.R.

SUPREME COURT REPORTS 517

chand Nipani and Shri Maniklal Chunanlal Baroda were not liable to pay any tax on these transactions nor could any such liability for tax be transferred to the petitioners by virtue of such declarations.

If, therefore, there was no basis for any such liability, the declarations by themselves cannot create any new liability and the petitioners cannot be held liable to tax even by the operation of section 4(6) of the Act, the very basis of the liability sought to be imposed therein having disappeared.

The result, therefore, is that the Respondents will be restrained from enforcing the Central Provinces and Berar Sales Tax Act, 1947, and its provmons against the petitioners and from imposing a tax in respect of the transactions in question and in particular from imposing a tax on the purchase price of goods purchased on the declarations under Rule 26 being goods specified in the registration certificate as intended for use as raw material in the manufacture of goods for sale by actual delivery in Madhya Pradesh for the purpose of consumption in that State but utilised for any other purpose under the provisions of section 4(6) of the Act.

The Reondents will pay the petitioners' costs of this petition.

THE TROPICAL INSURANCE CO LTD.

& OTHERS

THE UNION OF INDIA & ANOTHER (and connected petition.)

[S. R. DAS, ACTING C.J., BHAGWATI, VENKA1'A-

RAMA AYYAR, JAFER IMAM and CHANDRA-

SEKHARA AYYAR JJ.)

Insurance-Insurer doing life insurance business along with general insurance business-Power of Central Government to appoint Administrator-Such power, if confined exclusively to life insurance business-Grounds not taken in petition under Art 32, if can be urged at the hearing-Insurance Act (IV of 1938), s. 52-A-Constitution of India, Art 32.

1955 Mmrs Mohdll/al

J/argovind Das, Bidi Merthanls, Jabalpur (M. P.) v.

Tht Stale of Madhya Pradesh

and anothtr

Bhagawati J.

Sep11m/Jel 22

Tht Tropical Insurance Co. Ltd,

and otlurs

TM Union of India

and anotlur

SUPREME COL'RT REPORTS [19551

The petitioners, two Insurance Companies, carrying on business both in life insurance and general insurance, questioned the validity of notifications issued against them under s. 52-A of the Insurance Act for appointment of Administrators to take ovr management of their affairs on the ground, inter alia, that s. 52-A was exclusively restricted to life insurance business and the Government had no power to take over n1anagement of general insurance business.

Held, that the Insurance Act of 1938 no doubt makes a distinc tion between life insurance business and general insurance business, but its main concern is to protect life insurance policy-holdcrs.

Although s. 52-A of te Act has no application to an insurer who carries on husiness in general insurance alone, it undonhtedlv applies

to an insurer who combines both and gives the Central Government the powe-r, on the report of the Controller, to appoint an Administrator to take over the management of the entire business of the insurer including general insurance business when such insurer is found to act in a manner prejudicial to the interests of the life policy-holders.

That grounds not specifically taken in petitions under Ait. 32 cannot be urged at the time of the hearing.

ORIGINAL JuRisDICTioN : Petitions Nos. 186 & 195 of 1954.

Under Article 32 of the Constitution of India for the enforcement of Fundamental Rights.

S. C. Isaacs, (Mohan Behari Lal and P. K. Ghosh, with him) for the petitioners in both petitions.

M. C. Setalvad, Attorney-General of India (Porus A Mehta and P. G. Gokhale, with him) for the respondents.

1955.

September

22. The Judgment of the Court was delivered by

IMAM J.-These petitions under article 32 of the Constitution of India question the validity of the notifications issued under section 52-A of the Insurance Act of 1938 (hereinafter referred to as the Act) and the appointment of an Administrator. In the case of the Tropical Insurance Company Ltd. an Administrator was appointed under notification dated the 14th of July, 1951 and in the case of the Jupiter General Insurance Company Ltd. another Administrator was appointed under notification dated the 10th of July,

1951.

These two insurance companies do insurance business of life insurance and general insurance. Admittedly previous to the appointment of the Administrators the Controller issued notices under section 52-A to the petitioners and the Finance Ministry of the Central Government sent letters to them pointing out the allegations in the report of the Controller to which they replied.

The learned Counsel for the petitioners has candidl y stated that he coultl not raise any constitutional point after the fourth amendment to the Constitution of India.

He assumed, therefore, that the provisions of sections 52-A to 52-G of. the Act were constitutional but he urged that the notifications under section 52-A and the taking over of the management of the affairs of the companies were invalid inasmuch as they were in excess of the powers conferred by section 52-A of the Act and that the notifications appointing the Administrators do not fix the period of management as required by law.

He further urged that the provisions of the section 52-B of the Act had not been complied with and in consequence the management by the Administrator had been excessively prolonged and thus had become unlawful.

There has, therefore, been a violation of the "fundamental rights of the petitioners. Finally it was urged that there was no authority either under the provisions of the Act or of any other law by which the Government was empowered to take over management of the affairs of the company with respect to its general irtsurance business.

The power of the Government under section 52-A was restricted exclusively to life insurance business.

As to the first two contentions, they were urged in Petitions Nos. 94 of 1954 and 183 of 1954 but were not allowed to be put forward by this Court as these questions had not been specifically raised in the petitions under article 32 of the Constitution and they were accordingly dismissed.

The position is simila~ in this respect so far as the present applications are concerned and consequently it must be held that the . petitioners cannot be allowed now to urge grounds which they had not taken in their petitions. 66

T"4 Tropical Iruurance Co. Ltd.

and others

The Union of Indio

and another

Imam].

The Tropical Insurana Co. IJd.

and others

T/11 Union oj

4 India and another

Imam].

There remains, however, to consider the last contention urged on behalf of the petitioners.

It was pointed out by Mr. Isaacs that the petitioners are insurance companies doing both life insurance business and general insurance business.

He contends that section 52-A of the Act, on a true interpretation of its provisions, applies only to the life insurance business carried on by an insurer and not to the general insurance business done by him. The Administrator appointed under section 52-A Gf the Act could therefore take over management only of the life insurance business done by the insurer. The notifications authorising him to take over the management of the insurance business of the insurer including his general insurance business were thus beyond the powers conferred on Government under section 52-A of the Act and such taking over of the management of the general insurance business of the petitioners by the Administrator was, therefore, without lawful authority.

In view of the submission made by the learned Counsel, it is necessary to set out the relevant provisions of the section 52-A. Sub-section

(1) of that section states:-

"If at any time the Controller has reason to believe that an insurer carrying on life insurance business is acting in a manner likely to be prejudicial to the interests of holders of life insurance policies, he may, after giving such opportunity to the insurer to be heard as he thinks fit, make a report thereon to the Central Government".

Sub-section (2) states:-

"The Central Government, if it is of opinion after considering the report that it is necessary or proper to do so, may appoint an Administrator to manage the affairs of the insurer under the direction and control of the Controller''.

Sub-section ( 4) states :-

"The management of the business of the insurer shall as on and after the date of appointment of the Administrator vest in such Administrator, but except with the leave of the Controller the Administrator shall not issue any further policies".

Section 52-B of the Act is concerned with the powers and duties of the Administrator.

Under this section, the Administrator shall conduct the management of the business of the insurer with the greatest economy compatible with efficiency and shall, as soon as may be possible, file with the Controller a report stating what specified courses unde:r the section should be taken which would be most advantageous to the general interest of the holders of life policies.

One of the courses specified is the winding up of the business of the insurer.

Section 52-D of the Act is concerned with termination of the appointment of the Administrator. Section 53 of the Act is concerned with the winding up by the Court and it enable the Controller to apply to the Court for winding up of an insurance, company on certain grounds, one of them being that the continuance of the company would be prejudicial to the interests of the policy-holders

Mr. Isaacs urged that the Act made a clear distinction between life insurance business and general insurance business of an insurer.

He referred to various sections of the Act with reference to Registration, Separation of Accounts and Funds and Balance-Sheets.

It was also pointed out by him that the Act defines "general insurance business" and "life insurance business" and these two kinds of businesses are quite distinct.

There could be little doubt that the Act does regard "life insurance business" as something distinct from "general insurance business".

It seems to us. however, that while keeping this distinction in mind, we have to give to the words used in section 52-A(l) their ordinary and natural meaning. "Insurer" has been defined in section 2 of the Act.

The definition speaks of an insurer cc.rrying on an insurance business.

This business may be either a life insurance business or a general insurance business or both.

Under section 7 of the Act deposits have to be made by every insurer other than an insurer specified in sub-clause ( c) of clause (9) of section 2.

The section specifies µie amount of deposit to be made where the business done is life insurance only.

Similarly it specifies the deposit to be made in the case of business. 15-93 S.C. India/59

TlllTropieal 11u.,_ Co. Ltd.

11114 al/urs

Thi Ullin of India """ •. ,,..,

1-J.

Tht Tropical Iruurance Co. [Jr!.

and others

The Union of Ilfdia and ,,,.,,,,,,.

1-1.

done which comes within the description of general insurance business only.

It also contemplates a combination of life insurance business and general insurance business and specifies the deposit to be made in such event. It is clear that section 52-A ( 1) does not apply to an insurer doing only general insurance business.

The question . for decision is does it apply to him when he also does along with such business life insurance business?

Section 52-A(l) speaks of "an insurer carrying on life insurance business".

It does not speak of "only life insurance business".

It is permissible for an insurer to combine in his insurance business both life and general insurance business. If he acts in a manner which is likely to be prejudicial to the interests of the holders of the life insurance policies with him, he makes himself amenable to the provisions of the section 52-A of the Act and the Controller is authorised to make a report to the Central Government.

The Central Government, after considering the report, may appoint an Administrator to manage '.'the affairs" of th~ insurer and the management of "the business" of the insurer shall vest in the Administrator.

The words "the affairs" and "the business" of the insurer are wide enough to empower the Central Government to take over the management of the entire business of the insurer including his general insurance business.

To hold otherwise would be to give an unnatural meaning to the words used in section 52-A of the Act.

In the present case the insurers are public limited companies and it is difficult to conceive that the Act intended to vest in the Administrator the management of only the life insurance business while the insurers would be free to manage the general insurance business, because under section 52-B the Administrator may suggest to the Controller for the winding up of the company after managing its insurance busines.s economically and efficiently.

Under section 53 a Court may order a winding up of an insurance company if on an application by the Controller, it is satisfied that the continuance of the company is prejudicial to the interests of the policy-holders.

The winding up of the com-.

pany would be concerned with its entire insurance business including life and general insurance business, because there could be no partial winding up of a company.

It is not difficult to imagine that the affairs of the company with reference to its general insurance business may be in such a hopeless state that winding up may be the only course to be taken to protect the interests of the life . policy-holders.

When the provisions of the Act are closely examined, it will be noticed that its main policy has been to safeguard the interests of life policy-holders, who are deeply affected by the manner in which the insurance business of an insurer is carried on. We have no difficulty in interpreting section 52-A(l) to mean that where an insurer is carrying on insurance business of various kinds which includes life insurance business, he becomes amenable to the provisions of section 52-A if he is acting in a manner prejudicial to the interests of the holders of life policies and he would have to suffer the consequences following the report made by the Controller and the appointment of an Administrator by the Government.

The provisions in the Act making a distinction between life insurance business and general insurance business, the keeping of separate accounts :md balance-sheets have been enacted for the safeguard of the holders of life insurance policies and they provide an over-all picture of the business done by the insurer showing the exact state of affairs concerning !he life insurance business of the insurer. These provisions cannot and do not aflect the provisions of of section 52-A of the Act.

These pet1t1ons are accordingly dismissed with costs to be paid by Petitioners 2, 3 and 4 in Petition No. 186 of 1954 and Petitioners 2 and 3 in Petition No. 195 of 1954.

Tiu Tropical Insurance Co. !Jd.

and olhtrs

Tiu Union of India

and anothtr

/11111m].

chand Nipani

Maniklal Chunanlal Baroda

section 4(6)

Madhya Pradesh

section 4(6)

THE TROPICAL INSURANCE CO LTD.

& OTHERS

THE UNION OF INDIA & ANOTHER

S. R. DAS

BHAGWATI

JAFER IMAM

Art 32

Insurance Act

s. 52

Constitution of India

Art 32

Stale of Madhya Pradesh

Bhagawati

Tropical Insurance Co. Ltd

s. 52

Insurance Act

s. 52

Insurance Act

s. 52

Central Government

Article 32

Constitution of India

S. C. Isaacs

Mohan Behari Lal

P. K. Ghosh

M. C. Setalvad

Porus A Mehta

P. G. Gokhale

IMAM

article 32

Constitution of India

section 52

Insurance Act

Tropical Insurance Company Ltd.

14th of July, 1951

Jupiter General Insurance Company Ltd.

10th of July,

1951

section 52

Constitution of India

sections 52

section 52

section 52

section 52

section 52

article 32

Tropical Iruurance Co. Ltd.

Union of Indio

Tropical Insurana Co. IJd

Isaacs

section 52

section 52

section 52

section 52

Section 52

Section 52

Section 53

section 52

section 2

section 7

section 2

Tropical Iruurance Co.

Union of Ilfdia

section 52

Section 52

section 52

section 52

section 52

section 53

section 52

section 52

section 52

Tiu Tropical Insurance Co.


~•plnoHT21

SUPREME COURT REPORTS

MACHANDER, SON OF PANDURANG

ti.

STATE OF HYDERABAD.

[1955]

[VIVIAN BosE, JAGANNADHADAS and B. P. SINHA JJ.]

Examination of the accused-Duty of trial court-Failure to examine accused on material points-Effect-Acquittal-Code of Criminal Procedure (Act V of 1898), 1. 342.

The appellant was put up on his trial on a charge of murder.

The trial continued for 4! years. His brother who was a co-accused absconded. The evidence against the appellant was circumstantial.

His confession, made 8 days after his arrest, led to certain discoveries but he was never questioned about it by the trial court under s. 342 of the Code of Criminal Procedure. The High Court excluded the confession fro!ll the evidence, upheld the conviction but altered the death sentence to one of rigorous imprisonment for life. The Supreme Court took the view that the High Court was right in excluding the confession from the evidence and the conviction was unustainablc on the evidence on record. Held, that in the particular facts of the case the omission to examine the accused under s. 342 of the Code was no mere technicality and it would. be unjust to the accused to remand the case for a retrial and the order of conviction and sentence passed on him must be set aside.

That while it is no doubt incumbent on the court to sec that no guilty person escapes, it is still more its duty to sec that justice is not delayed and accused persons indefinitely harassed. The scales must be held even between the prosecution and t~ e accused.

That it is imperative that Magistrates and Sessions Judges should remember the duty that s. 342 of the Code of Criminal Procedure imposes on them of questioning the accused person fairly and properly telling him in clear and simple language the case he has to meet and the material points made against him so that he can, if he so desires, explain and meet them.

CRIMINAL

APPELLATE JuR1smcnoN : Criminal Appeal No. 9 of 1955.

Appeal by special leave from the Judgment and Order dated the 26th September, 1951, of the Hyderabad High Court in Criminal Confirmation N?. 638/6 of 1951 and Criminal Appeal No. 770 of 1951, arising out of the Judgment and Order dated the 27th June, 1951, of the Q>urt of the Sessions Judge, Osmanabad, in Criminal Case No. 12/8 of 1951.

R. Patnaik for the appellant. 1955

Porus A. Mehta and P. G. Gokha/.e dent. for the respon- Muliantllr, Son efP~ v. 1955.

September 27.

The Court was delivered by Judgment of the 91'* of H, U, dbad

BosE J.-This is another of those cases in which Courts are compelled to acquit because Magistrates and Sessions Judges fail to appreciate the importance of section 342 of the Criminal Procedure Code and fail to carry out the duty that is cast upon them of questioning the accused properly and fairly, bringing home to his mind in clear and simple language the exact case he has to meet and each material point that is sought to be made against him, and of affording him a chance to explain them if he can and so desires.

Had the Sessions Judge done that in this case it is possible that we would not have been obliged to acquit.

The facts are simple.

The appellant Machandcr was charged with the murder of one Manmath.

Machander's brother Gona was also challaned but as he absconded he could not be tried.

The appellant and the deceased and Gona reside in the same village.

There was some ill-feeling between the appellant and the deceased and it can be accepted that Gona shared his brother's sentiments because, so far as the latest cause for enmity goes, Gona is equally concerned; and this also applies to Pandu, the appellant's father, and Bhima, another brother.

The causes for enmity are the following.

In or about the year 1947 the appellant appears to have stolen a pair of bullocks and a cart belonging to the deceased. The deceased prosecuted him for the theft and also instituted a civil suit for the price of the cart and bullocks. He succeeded in both cases.

The appellant was convicted of theft and sent to jail. a decree was also passed against him for Rs. 520 and that decree was duly executed.

We now come to the events immediately preceding the murder. The appellant and his family took forcible possession of some land belonging to the

19~5

}J.achandtr, Son of Paniurang

Stat~ of Hyderabad

Bos~J

deceased's sister Parubai.

She sued the whole family for possession of this land, that is to say, she impleaded the appellant's father Pandu, the appellant and his two brothers Bhima and Gona.

The last hearing was on 15-12-1950 and the decision was announced on 16-12-1950.

It was in Parubai's favour.

The deceased conducted this litigation on behalf of his sister.

He was present in Court on the 15th and was present :!J: Parenda, where the Court is situate, up to 3 P.M. on the 16th, the day the decision was announced. )hat was the last that was seen of him.

These facts are said to be the cause of the ill-feeling.

But, as the facts themselves indicate, a similar cause for enmity (though not to the same degree) could be assigned to the father and the other brothers; equally, they had similar opportunities. The movements of the appellant have been traced to Parenda and back but not the movements of the rest of the family.

So it is not shown that they had no similar opportunity to murder.

It can however be , accepted that cause for enmity on the appellant's part is established.

It is proved that the deceased went to Parenda on the 15th for the last hearing of the case and that the was also there on the 16th' up to 3 P.M.

It is also proved that the appellant was in Court on the 15th and that he was in Parenda on the following day. It can be accepted that both the deceased and the appellant were present in Court at the same time on the 15th and that therefore the appellant knew that the d~ ceased had attended the Court that day. But there is no proof that the two met each other or that either knew about the movements of the other on the 16th.

All we know is that both went to see their respective pleaders at different places and times and learned the result of the case.

Four or five days after the case, the appellant came home but not the deceased.

The deceased's son Shanti ling (P. vV. 10), who knew that the appellant had also gone to Parenda for the case, asked him where his father was. The appellant said that the father had not attended court.

This made the son

anxious, so he. went to Parenda to make enqumes.

The pleaders there told him that his father had attended court on the 15th and that he was in Parenda till 3 P.M. on the 16th.

Shantiling (P. W. 10) immediately informed the police that his father was missing and gave them a description of him and also a list of the things he was wearing and a description of the horse he was riding.

This was on the 26th.

Three days later, on the 29th, he lodged a regular complaint and said that he was afraid his father had been murdered and said that he suspected the appellant and his brother Gona.

The appellant was arrested the same day and after his arrest he led the police and Panchas to a place where blood-stained earth and grass were found and a blood-stained stone, also some of the articles which Shantiling (P. W. 10) had des.cribed to the police on the 26th, namely pieces of a silver linga, two silver

adas, a silver spike and a white gilt button.

All except the kadas were found to be stained with human blood.

About 25 paces from here the appellant pointed out another place where the corpse of the deceased was found to be buried.

Pearl ear-rings and a kardoda of yarn with three iron keys were still on the body.

They were all stained with human blood and are proved to have belonged to the deceased.

On the 1st of January 1951 the appellant took the police and the Panchas to a place where two saddle straps and two iron stirrups were buried.

One of the stirrups was stained with human blood.

On the 3rd the reins of the horse and the horse itself were discovered but this discovery was not at the instance of the appellant.

Except for the confession, which has been excluded, this is all there is against the appellant.

The question is whether that is enough to bring guilt home to him. Stated briefly, the circumstances are-

1. That the appellant knew that the deceased had attended the Court at Parenda on the 16th and that he had seen him there but when questioned about it he told a lie.

Machander, <Son

of Pandurang

Stal1 of Hyderabatl

Bose].

19.55

Mae/uJltdn, SIM

q/P-.,.1 v.

Stau of ~'6t1Nd

BM•]·

In passing it is to be observed that this is not the class of case in which an accused person is last seen with a murdered man within a few hours of the murder.

Though the deceased and the appeJlant were both in Court at the same time, they were not there "together" and in view of the i11-will between them and in view of the fact that the deceased went on a horse it is unlikely that they travelled together either going or coming; and the appellant was not with the deceased when he was last seen at 3 P.M. on the 16th.

But it is clear that the appellant wanted to hide .something.

2. That thirteen days after the murder he knew that Manmath had been murdered.

He also knew where the murder had been committed and where the body and certain articles belonging to the deceased were hidden.

3. That there was ill-will between them, but an ill-will that othre members of the appellant's family might be expected to share.

4. That he had fuJI opportunity to commit the crime, but the same kind of opportunity that the other members of his family also had.

The question is whether these four circumstances, regarded in the background of this case, are sufficient to warrant a conclusion of murder by the appellant.

In our opinion, they are not because the same circumstances could be s;1id to point with equal suspicion at other members of the appellant's family.

It has to be remembered that the brother Gona was also suspected and that he absconded and could not be traced.

We do not say that he was the murderer and it would be wrong to suggest that in his absence, but if he was, then the appellant's knowledge of the murder and of the concealment, thirteen days later, might have been derived from Gona, or it might even be that he saw his brother commit the crime and hide the corpse and the articles.

Those are hypotheses that are not unreasonable on the facts of this particular case and they have not been reasonably excluded. Consequently, we are unable to hold that mere knowledge thirteen days later, coupled with a motive which three others

share, and a lie about the deceased' s movements told four, <'>r five days after the murder, are enough; and as that is all that the High Court has based on, the conviction must be set aside.

Y.l e have assumed throughout that the identity of the corpse that was discovered on the 29th and the fact of murder have been established. Those facts were not admitted before us but we need not discuss the point.

It is enough to say that, in our opinion, both facts are satisfactorily proved.

We referred, earlier in our judgment, to a confession which the High Court has excluded. This was excluded from evidence because the appellant was not questioned about it under section 342, Criminal Procedure Code.

We gather that the High Court thought that that occasioned prejudice though the learned Judges do not say so in so many words The appellant was arrested on the 29th and he made many discoveries on the 29th December 1950 and on the 1st, 2nd and 3rd January 1951 but did not confess till the 6th.

Much might have happened in the eight days between his arrest and the 6th, so the High Court was not unjustified in refusing to take that into consideration without hearing the appellant's side of the s, tory.

We were asked to reopen the question and, if necessary, t<'> remand the case.

But we decline to do that.

Judges and magistrates must realise the importance of the examination under section 342 of the Criminal Procedure Code and this Court has repeatedly warned them or the consequences that might ensue in certain cases.

The appellant was arrested in December 1950 and has been on his trial one way and another .:ver since, that is to say, for over 4} years.

We are not prepared to keep persons who are on trial for their lives under indefinite suspense because trial judges omit to do their duty. Justice is not one-sided.

It has many facets and we have to draw a nice balance between conflicting rights and duties.

While it is incumbent on us to see that the guilty do not escape it .ts even .m0re necessary to see that persons accused

Machandtr, Son

of Pandurang

State of Hyderabad

Bo1tJ.

A1achander, Son

ofPandurang

Stalt of Hydtrabad

BoJ' J.

of crime are not indefinitely harassed. They must he given a fair and impartial trial and while every reasonable latitude must be given to those concerned with the detection of crime and entrusted with the administration of justice, limits must be placed on the lengths to which they may go. Except in clear cases of guilt, where the error is purely technical, the forces that are arrayed against the accused should no more be permitted in special appeal to repair the effects of their bungling than an accused should be permitted to repair gaps in his defence which he could and ought to have made good in the lower courts.

The scales for justice must be kept on an even balance whether for the accused or agaii:ist him, whether in favour of the State or not; and one broad rule must apply in all cases.

The error here ts not a mere technicality. The appellant appears to have been ready to disclose all on the 29th and make a clean breast of everything and yet the police waited eight days before getting a confession judicially recorded.

That may be capable of explanation but the difficulty of asking an accused person to establish facts of this kind in his favour four and a half years later is obvious. Without therefore attempting to lay down any general rule, we are not prepared to order a retrial in this case because of the facts that appear here.

The appeal is allowed. The ~<;>nviction and sentence are set aside and the appellant is acquitted.

MACHANDER, SON OF PANDURANG

STATE OF HYDERABAD

VIVIAN BosE

JAGANNADHADAS

B. P. SINHA JJ.

Code of Criminal Procedure

s. 342

Code of Criminal Procedure

Supreme Court

s. 342

s. 342

Code of Criminal Procedure

R. Patnaik

Porus A. Mehta

P. G. Gokha/.e

section 342

Machandcr

Manmath

Machander

Gona

Pandu

Bhima

J.achandtr

Parubai

Parenda

Shantiling

Panchas

1st of January 1951

Machander

section 342

Criminal Procedure Code

29th December 1950

1st, 2nd and 3rd January 1951

section 342