{"document_id": "1959_1_925_995_EN", "year": 1959, "text": "S.C.R.\n\nSUPREME COURT REPORTS 925\n\nIn our opinion on the plain construction of the words used ins. 116 of the amending Act, s. 342A is available to the appellant. The High Court, it appears, was misled into construing the words in clause (c) of s. 116 i.e. \"as if this Act had not been passed\". The High Court was therefore in error and the appellant is entitled, in our view, as a competent witness for the defence to testify in disproof of the charges made against him or any other person charged together with him at the same trial.\n\nAnant Gopal\n\nSheorey\n\nThe State of\n\nBombay\n\nWe would, therefore; allow this appeal,.set aside the order of the courts below and hold that the application made by the appellant to appear as a witness was well-founded and should have been allowed.\n\n• Appeal allowed .\n\nTHE ASSOCIATED CEMENT COMPANIES LTD.,\n\nDW ARKA CEMENT WORKS, DW ARKA v.\n\nITS WORKMEN & ANOTHER\n\n(S. R. DAS c. J., N. H. BHAGWATI, s. K. DAS, P. B. GAJENDRAGADKAR and K. N. WANCHOO JJ.)\n\nIndustrial Dispute-Bonus-Available surplus-Determination cf-Full Bench formula-Basis-Applicability-Revision if required\n\n-Prior Charges-Mode of calculation-Gross profits, ascertainment cf-Rehabilitation charges, how determined-Gratuity fund, whether can be claimed as prior charge-Distribution of surplus-Overtime payment, if can be taken into consideration in awarding bonus.\n\nFor the year 1953-54, the employers pai\"- bonus to the workmen equal to three months' wages, but the workmen demanded bonus equivalent to seven months and six months basic wages with dearness allowance. The employers contended that after making deductions for the prior charges from the gross profits in accordance with the formula evolved by the Full Bench of the Labour Appellate Tribunal in Mill Owners Associa- . tion, Bombay v. The Rashtriya Mill Mazdoor Sangh, (1950) L.L.J.' • . 1247, there was no available surplus left an4 consequently the\n\nKapur].\n\nr959\n\nMay 5.\n\n~}1~· Associated\n\nCement Companies Ltd.\n\n.. _. •. v.\n\nIts Workmen\n\n~ . J,'\n\nworkmen could claim no bonus. The workmen countered that the formula required revision as the employers were becoming increasingly more rehabilitation conscious and their appetite for the provision for rehabilitation was fast growing with the result that in most cases, after allowing for rehabilitation, there was no surplus left for the payment of bonus and the main object of the formula was thus frustrated. The workmen further contended that the whole of the rehabilitation expenses should not be provided for out of trading profits and that the claim for rehabilitation should be fixed at a reasonable amount and the industry should be required to find the balance from other sources : Held, that though there may be some force in the plea made for the revision of the Full Bench formula, the problem raised by the said plea is of such a character that it can be appropriately considered only by a high-powered commission and not by this Court while hearing the present group of appeals. Besides the Full Bench formula had on the whole worked fairly satisfactorily in a large number of indu..tries all over the country, and the claim for bonus should be decided by Tribunals on the basis of this formula without attempting to revise it. The formula was elastic enough to meet reasonably the claims of the industry and labour for fair play and justice.\n\nIf the content of each item specified in the formula was determined objectively in the light of all relevant and material facts, the Tribunals would generally find it possible to make reasonable adjustments between the rival claims and provide for a fair distribution of the available surplus.\n\nMuir Mills Co. Ltd. v. Suti Mills Mazdoor Union, Kanpur, [1955] l S.C.R. 991, Baroda Borough Municipality v. Its Workmen, [1957]S.C.R. 33, Sree Meenakshi Mills Ltd. v. Their Workmen, [1958] S.C.R. 878 and The State of Mysore v. The Workers of Kolar Gold Mines, [1959] S.C.R. 895, referred to.\n\nThe formula was based on two considerations: first, that labour was entitled to claim a share in the trading profits of the industry, because it had partially contributed to the same; and second, that labour was entitled to claim that the gap between its actual wage and the living wage should, within reasonable limits, be filled up. In dealing with the claims for bonus. the two-fold basis of the formula must always be kept in mind.\n\nFurther, it was•not necessary that the workmen must actually manufacture or produce the goods before they become entitled to claim any bonus.\n\nBurma Shell Oil Storage & Distributing Co. of India Ltd. v.\n\nTheir Workmen, (r953) 2 L.L.J. 246, applied.\n\nThe working of the formula begins with the figure of gross 0profits, taken from the profit and loss account, which are arrived at after payment Qf wages and dearness allowance to employees\n\nand other items of admissible expenditure. It would be open to the Tribunal to examine the accounts and to disallow deliberate and mala fide debit entries made to reduce the amount of gross profits. It would likewise be open to the parties to claim the exclusion of items, credit or debit, on the ground that they were patently and obviously extraneous and entirely unrelated to the . trading profits of the year. But the Tribunal must resist the temptation of dissecting the balance-sheet too minutely or attempting to reconstruct it. ]. K. Cotton Manufacturers Ltd., Kanpur v. Their Workmen,\n\n(1954) L.A.C. 716, applied.\n\nThe formula deals with the claims for bonus on the basis that the relevant year is a self-sufficient unit and the appropriate accounts have to be made on the notional basis in respect of the said year. Hence, the refund of excess profits and the adjustment of the previous year's depreciation and losses cannot be made against the bonus year's profits.\n\nMoo/, el Mills etc. Textile Mills, Nagpur v. The Rashtriya Mills Mazdoor Sangh, (1955) l L,.L.J. 534; Bennett Coleman and Co. Ltd.\n\nv. Their Workmen, (1955) 2 L.L.J. 60, referred to.\n\nAfter ascertaining the amount of gross profits, the first item of deduction therefrom relates to depreciation. The depreciation which has to be deducted from the gross profits should be the notional normal depreciation as explained in the case of Surat Electricity Co. Ltd., (1957) 2 L.L.J. 648, and should not include the initial and additional depreciation allowable under the Income-tax Act.\n\nU. P. Electric Supply Co. Ltd. v. Their Workmen, (1955) 2 . L.L.J. 431; Surat Electricity Co's. Staff. Union v. Surat Electricity\n\nCo. Ltd., (1957) 2 L.L.J. 648, referred. to.\n\nThe second item of deduction is on account of income-tax.\n\nOn the balance obtained after deducting the depreciation from the gross profits the tribunal has to calculate the amount of income-tax payable for the bonus year. In makirig this calculation it would not be reasonable toallow the employer to claim under the item of income-tax an additional amount in respect of the two further depreciations which are expressly authorised under s. rn(2)(vi) of the Income-tax Act.\n\nTherefore the two concessions thus given by the Income-tax Act should not be taken into account in determining the amount\" of income-tax under the formula.\n\nSree Meenakshi Mills Ltd. v. Their Workmen, [1958] S.C.R. 878, explained and followed.\n\nThe third item of deduction under the formula relates to\n\nr959\n\nThe Associated Cement Companies Ltd. v • Its Workmtn\n\nthe return on paid up capital as well as working capital. The, formula provides generally for the payment of interest at 6% •\n\nII8\n\nI959\n\nThe Associated\n\nCement Companies Ltd. v.\n\nIts Workmen\n\nper annum on the paid up capital and at 2% on working capital.\n\nThese rates are not inflexible and will vary according to the circumstances of each case.\n\nWorkmen of Assam Co. Ltd. v. Assam Co. Ltd., [r959] S.C.R. 327; Ruston and Hornsby (India) Ltd. v. Their Workmen, (r955):r L.L.J. 73, Mill Owners Association, Bombay v. The Rashtriya Mill Mazdoor Sangh, (r952) r L.L.J. 5r8, Tea and Coffee Workers Union.\n\nv. Brooke Bond (India) (Private) Ltd., (r956) r L.L.J. 645, U. P.\n\nElectric Supply Co. Ltd. v. Their Workmen, (r955) 2 L.L.J. 4r3, referred to.\n\nThe fourth item of deduction is on account of rehabilitation which inclndes replacement and modernisation but not expansion.\n\nRehabilitation has to be calculated for the plant and machinery as well as the buildings.\n\nThe whole of the rehabilitation charges have to come out of the trading profits as this guarantees the continuance of the industry to the benefit both of the employer and labour. The Tribunal has to .estimate the probable cost of replacement of plant and machinery at the time when such replacement would become due. In determining such cost, the Tribunal has to project the price level into the future, determined not only in the light of the prices prevailing during the bonus year, but also of subsequent price levels. The decision on the question of the probable cost of rehabilitation is always reached by adopting a suitable multiplier. This multiplier is based on the ratio between the cost price of the plant and machinery and the probable price which may have to be paid for its rehabilitation, replacement or modernisation. As there has been a continuous rise in the price of industrial plant and machinery, the older the plant which needs rehabilitation, the higher is the multiplier. If the employer has deliberately or mala fide refrained from rehabilitating his old machinery with a view to claim a higher multiplier, his conduct may be taken into account in determining the multiplier and the amount of rehabilitation payable to him. Once a proper multiplier is adopted, the probable cost of rehabilitation can be easily determined by multiplying the original cost by the multiplier. At this stage the divisor steps in. The total amount required for rehabilitation has to be divided by a suitable divisor in order to ascertain the annual requirement of the employer in that behalf year by year.\n\nBefore awri.rding an appropriate amount in respect of rehabilitation for the bonus year, deductions have to be made, first on account of the break-down value of the plant and machinery which is usually calculated at the rate of 5% of the cost price, secondly the depreciation and general liquid resources available to the employer other than those earmarked for specific purposes, thirdly all the rehabilitation amounts which may 0have been allowed to the employers in the previous years, but had remained un11,5ed in the meanwhile.\n\n.. ..\n\nIt is only after all the prior charges have thus been determined and deducted from the gross profits that the available surplus can be ascertained for payment of bonus. The procedure adopted by some Tribunals of notionally working out the amount of bonus and then giving it priority in the calculations before the determination of the income-tax payable inevitably lessens the amount of tax proportionately, and should be deprecated.\n\nRehabilitation cannot be given priority before the income-tax payable is ascertained and deducted from the gross profits.\n\nNo addition should be made to the list of prior charges recognised by the formula even with respect to the employers claim for deductions on account of gratuity fund created for the benefit of the workmen. But the Tribunal ought to, when the avail- . able surplus is determined, take into account such a claim and reasonable amount of allowance should be definitely borne in mind in finally fixing the amount of bonus.\n\nM/s. Metro Motors v. Their Workmen, (1952) 2 L.L.J. 205, referred to.\n\nWh; n the available surplus has been ascertained, three parties are entitled to claim shares therein: labour's claim for bonus, the industry's claim for the purpose of expansion and other needs and the share-holders' claim for additional return on the capital invested by them. The ratio of distribution would obviously depend on several factors: such as the gap between the actual wages and the living wages, the setting apart of a gratuity fund by the employer and the amount thereof, the extent of the available surplus, the dividends actually paid by the employer and 'those paid by comparable concerns, the probabilities of expansion, the general financial condition of the employer and his necessity to meet urgent liabilities.\n\nIt would be wrong on principle to take overtime payment into account in calculating the bonus payable to each workman.\n\nOnce the total amount payable as bonus is determined on the principles as indicated, the question of overtime payment being taken into account can no longer be a dispute between the employer and his workmen but one hetween the workmen inter se.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 459 and 460 of 1957. • Appeals by special leave from the judgment and order dated the 30th November, 1956, of the Industrial Tribunal, Bombay, in Reference I. T. Nos. 10 and 13 of 1956 ..\n\nI9.59\n\nThe Associated Cement Companies Ltd;\n\nIts Workmen\n\n R. H. Kolah, Dadachanji and S. N. Andley,. for the ~~~ . .\n\nI959\n\nThe Associated\n\n0. L. Dudhia and I. N. Shroff, for the respondents in C. A. No. 459 of 1957.\n\nCemen• • A. S. R. Chari and I. N. Shroff, for the respondents Companies Ltd. in 0. A. No. 460 of 1957. v.\n\nIts Workmen\n\n1959. May 5. The Judgment of the Court was delivered by ·\n\nGajendragadkar ].\n\nGAJENDRAGADKAR J.-These two appeals arise out\n\nof a demand for bonus made against the appellants by their workmen for the year 1953-54. The Associated Cement Companies Ltd., Bombay, the Cement Marketing Company of India Ltd., Bombay and the Concrete Association of India, Bombay, were faced with a demand of their workmen employed in their offices at Bombay for bonus equivalent to seven months' basic wages with dearness allowance. The industrial dispute arising out of this demand was referred by the Government of Bombay for adjudication before the Industrial Tribunal, Bomb1ty, under s. 10 of the Industrial Disputes Act and it was numbered I. T. No. 10 of 1956.\n\nThe Associated Cement Companies Ltd., Dwarka Cement Works, Dwarka, was similarly faced with a demand of its workmen for bonus equivalent to 50% of total earnings or six months' total earnings. This dispute was referred to the same tribunal and was numbered I. T. No. 13of1956. By consent of parties both the references were heard together and evidence was recorded and documents tendBred in the first reference.\n\nBy its award delivered on November 30, 1956, the tribunal directed the companies to pay their workmen drawing a basic pay or wages up to Rs. 500 per month bonus equivalent to 1/3 of their basic wages or pay (less bonus already paid for the year 1953-54) subject to the conditions specified in the award. It is against this'award that the respective companies have preferred the two appeals by special leave. In this judgment the said companies will hereafter be described as the appellant and their workmen as respondents.\n\nThe A. C. C. is the principal.company concerned in the dispute.\n\nThe Cement Marketing Company of\n\nI,.\n\nIndia Ltd.; (hereafter called the C. M. I.) has been x959 separately registered under the Indian Companies Act The Associated as a Joint Stock Company; but it is a hundred Cement per cent. subsidiary of the A. C. C.\n\nThe C. M. I. are companies Ltd. the Sales Managers of the A. C. C. while the Concrete v.\n\nAssociation of India (hereafter called the C. A. I.) is Its Workmen merely a department of the C. M. I. As a result of . - the agreement which came into operation from Ga; endragadkar J.\n\nAugust 1, 1953, all financial transactions of the C. M. I. in relation to sales now find a place in the accounts of the A. C. C.\n\nSimilarly all of its fixed assets have been taken over and appear in the balance-sheets of the\n\nA. C. C.\n\nAll the three concerns have a common staff in Bombay. The A. C. C. had already paid to its employees bonus equivalent to three months' basic wages for t.he year 1953-54 and so had the C. M. I. to its workmen. It appears that the C. M. I., including the\n\n0. A. I., undertakes to pay to its employees the same amount of bonus as has been paid or awarded to the employees of the A. C. C.\n\nThere is no dispute that the A. 0. C. is the biggest amongst the companies in India which manufacture cement. It owns 15 cement factories at different places in India and 2 in Pakistan. Out of the total quantity of cement despatched by all the cement factories in India in 1953-54 the A. C. C. despatched 55·46 o/o.\n\nThe A. C. C. came into existence in 1936 as a result of the merger of four important groups of companies engaged in the manufacture of cement.\n\nThese were F. E. Dinshaw, Tatas, Killick Nixon and Khatau, groups. It appears that 11 companies in all merged with the A. C. C.\n\nBefore the tribunal the case for the respondents was that the appellant held a position of monopoly in the cement industry and was easily in a {lOSition to pay the bonus claimed by them. Their allegation was that the appellant had inflated the capital invested by the merging companies while taking them over in 1936 ; it had set up new factories out of the profits earned by it without raising fresh capital and thereby had used profits for the purpose of expansion. In the year 1953- • 54 the appellant had capitalised . the full amount\n\nr959 standing to the credit of the premium-on-shares\n\nThe Associated account and had transferred a part of the reserves for\n\nCement taxation to the capital account thus increasing the Companie.< Ltd. aggregate capital. The emoluments of the workers v. were inadequate and so they were entitled to the Its Workmen bonus claimed by them in order to fill up the gap\n\nG . d-dk 1 between the actual wage paid to them and the living a; en raga ar . d h Th d wage uetot em. e respondents also conten ed that the claim made by the appellant for rehabilitation and replacement in the dispute for the year 1951- 52 included not only the amount required for rehabilitation and replacement but also expansion ; and so, according to them, the appellant was not entitled to any amount for rehabilitation purposes in the year in dispute. They also alleged that the appellant was not entitled to claim interest at more than 4% on paid-up capital and 2 % on working capital. Thus the respondents urged that if all the relevant facts are taken into account it would be found that the claim for bonus made by them in the two respective references was just and proper. In support of their case the respondents filed several statements which, they claimed, had been prepared in accordance with the Full Bench formula, and they also cross-examined Mr. Tongaonkar who gave evidence on behalf of the appellant.\n\nThis claim was resisted by the appellant. It was urged on its behalf that the points raised by the respondents in the present references had been heard and finally decided in the previous adjudication (Ref . . I. T. No. 115 of 1953) which dealt with their claim for bonus for the preceding year; and it was alleged that the respondents were barred from raising the same questions over again in the present adjudication. The cement machinery, though heavy, is subject to rigours of extremely tcrngh and heavy duties and the machinery has to run ceaselessly day and night throughout the year.\n\nThe appellant contended that, having regard to the special features of the cement industry, the machinery had to be kept on the highest standards of ma, intenance and needed frequent replacement , and rehabilitation. A cement factory is a very expensive industril proposition. The appellant denied that\n\nI,.\n\nit was in a monopolistic position and pleaded that its r959 object was to deliver cement as cheaply as possible The Associated to the consumers: The respondents' allegation that Cement there was\" puffing up of block capital at the time of Companies Ltd. the merger in 1936\" was denied by the appellant and v. it was not admitted that ever since its inception it had Its Workmen steadily made huge profits. The appellant also denied G . d -dk 1 the allegation of the respondents that the profits a; en raga ar . coming out of the business had been used in expanding its factories. It had used all available resources including premium on issue of shares and depreciation fund for replacement, rehabilitation and modernisation. It was not true that the appellant had built huge reserves and that the wages paid by the appellant to its employees were inadequate; on the contrary .they compared very favourably with those in other comparable industries. The appellant denied the statement of the respondents that no plant reinstatement reserve over and above the depreciation allowance was necessary in the current year and it urged that the calculations made by the respondents alleged to be in terms of the Labour Appellate Tribunal formula were inaccurate. In its turn the appellant claimed more than 6% interest on paid-up capital and more than 4% interest on working capital.\n\nThe appellant also emphasised that it had already paid to the respondents bonus for three months though the strict working out of the formula would show that there was no available surplus for the relevant year and so the respondents would not be. entitled to any bonus at all.\n\nIn support of its case the appellant examined Mr. G. R. Tongaonkar, its controller of planning and development, and produced a statement (Ex. C-2) showing the original cost of the blocks to be •replaced and the approximate replacement cost. It also produced amongst other documents a statement (Ex. C-10) showing the cost of the assets of the merging companies on July 31, 1936, as taken over by the appellant and the statement (Ex. C-29) showing the capital expenditur(/ from 1936-37 to 1953-54 on expansion, modernisation, • rehabilitation, replacement, simdry 'Capipal jobs, etc.\n\nz959 In addition a statement was filed by the appellant\n\nThe Associoted (Ex. C-23) showing that the calculations made under cement the Full Bench formula would show a substantial Companies Ltd. deficit and that would support its case that there was\n\nv. no available surplus for the relevant year from which Its Workmen any bonus could be claimed by the respondents. .\n\nEx. C-2 is a statement prepared by Mr. Tongaonkar Ga21ndragodkar J showing the original cost of the block to be replaced and the approximate replacement cost.\n\nThis statement has been prepared on the basis that the approximate cost to the merging companies of their assets as on 31-7-1936 was 5·73 crores. It is admitted that this statement has lumped together all the properties of the appellant including plant and machinery, as well as buildings, roads, bridges and railway-sidings and has classified them into four categories. The.statement contains 9 columns. The first column gives the year or years of purchase of machinery. This column classifies the four categories of the blocks according to their respective years of purchase. The first category consists of blocks purchased up to 1939, the second purchased between 1940-44, the third purchased between 1945-47 and the last purchased between 1949-54.\n\nColumn 2 gives the original cost o\"f the said categories as on 31-7-1954. Column 3 gives particulars of such portions of the blocks as have been discarded, scrapped or sold. In this column the years in which the blocks were discarded, scrapped or sold are indicated and their original cost is mentioned. Columns 4 and 5 give the present approximate cost of rehabilitation according as the machinery in question is either purchased or made by the appellant itself. The cost of machinery which may have to be purchased is shown in col. 4, while the cost of machinery which may be prodl1Ced by the appellant is shown in col. 5.\n\nThe figures in col. 4 have been arrived at by multiplying the corresponding figures in col. 2 by a ratio, which, according to Mr. 'l'ongaonkar, supplies an appropriate multiplier.\n\nRegarding the replacement cost of 1939 block, the witness has applied the multi- • plier 4·28, whereas in regard to the subsequent block of 1940-44 e has utilised the multiplier of 2·8. The\n\nfigures mentioned in col. 5 for 1939 and 1940-44 blocks r959 . have been arrived at by reducing the corresponding The Associated figures given in col. 4 by 20%. Column 6 gives the Cement approximate present life of the machinery and plant Companies Ltd. mentioned in col. 4 ; col. 7 sets out the breakdown v. value of the machinery referred to in col. 4, whilst Its Workmen col. 8 gives the approximate cost of rehabilitation ofG . _,--.-dk 1 h. h . l 5 l b kd l a; enuraga ar • mac mery ass own in co. ess rea own va ue as shown in col. 7.\n\nThe last column works out the annual requirements of the appellant in respect o.f the rehabilitation of the four categories of blocks.\n\nThe figures in this column are arrived at by dividing the amounts mentioned in col. 8 by the respective divisors mentioned in col. 6.\n\nThe total annual requirement of the appellant in respect of rehabilitation is shown as of the prder of Rs. 3,29,61,752.\n\nEx. C-23 is a statement prepared by Mr. Tongaonkar to show the deficiency in profits in relation to payment. of additional bonus claimed by the respondents for the accounting year 1953-54. This statement has been prepared alternatively on the basis of statutory depreciation allowable by income-tax authorities and also on the basis of straight computation at ordinary rates. The first method results in a deficit of Rs.\n\n107·20 lakhs, while the second in a deficit of Rs. 97·86 lakhs. In working out the provision for rehabilitation, this statement first takes the replacement cost of block up to 1939 as per Ex. C-2 to be Rs. 1601 19 lakhs.\n\nFrom this amount the available reserve!:! as on 1-8-1953 which are of the order of Rs. 311 lakhs are deducted, leaving a balance of Rs. 1290i9 lakhs.\n\nThen the replacement costs of the three remaining categories of blocks are taken into account and all-the said amounts are divided by the appropriate divisors mentioned in col. 6 of Ex. C-2.\n\nThe reslt is the sum of Rs. 284·48 lakhs, and that is claimed by the appellant as the pFovision for rehabilitation under the formula. · In his evidence Mr. Tongaonkar has given reasons in support of the respective multipliers and divisors adopted by him in making his calculations in' Ex. C-2: •\n\nII9\n\nr959 He has also given several details on all the relevant and material points in support of the appellant's case.\n\nThe As.sociafod h d h d Cement Naturally t e respon ents ave cross-examine him Companfrs Ltd. at length. One of the questions in controversy between v. the parties in the present appeals centres round the Its Workmen appreciation of Mr. Tongaonkar's evidence and the value to be attached to the statements prepared by Gajendragadkat .J. him.\n\nOn the contentions raised by the parties before it the tribunal framed ten issues for determination and it has made its findings on them in the light of the evidence adduced before it. It has held that the appellant had not inflated the capital invested by the merging companies while taking them over in 1936.\n\nIt has allowed 6% interest on the entire paid-up capital of Rs. 1267·59 lakhs, and 4% interes1i on the working capital. In regard to the claim for depreciation the tribunal has held that it was normal depreciation calculated according to the straightline method which should be allowed. On the question of incometax, the tribunal has allowed the same at 83·4 pies in a rupee as claimed by the appellant on its net profits.\n\nIt has, however, rejected the appellant's case that the income from investments in shares and securities received by it should be excluded for the purpose of bonus; while it has allowed the sum of Rs. 10 lakhs provided by the appellant as annual contribution to the reserve for gratuity, as also the expenditure on the cost of dismantling buildings, prospecting expenses, etc. It did not accept the respondents' case that the bonus paid by the appellant to its officers should be reduced or wholly disallowed for the purpose of calculations under the formula; and, on the question as to whether overtime payment should be included in the payll1Jlnt of bonus, it has upheld the respondents' contention and allowed the inclusion of the said payment. .\n\nHaving disposed of these minor issues, the tribunal examined at length the claim made by the appellant in regard to the provision for rehabilitation, replace- ment antl modernisation. Indeed this was the most ' controversial apd the most important issue raised\n\nbefore it.\n\nThe tribunal axamined the evidence of Mr. r959 Tongaonkar as well as Ex. C-2 and .other documents The Associated produced by him, and came to the conclusion that Cement \" Ex. C-2 presents an incorrect and exaggerated Companies Ltd. picture of the A.C.C.'s requirements of rehabilitation v. and replacement\" and so it cannot be relied upon.\n\nIts Workmen Aceording to the tribunal the multiplier 4·28 adopted . d -:Zk J by Mr. Tongaonkar was itself an inflationary figure ; Ga; en rag ar • and it thought that\" the consequence of applying it not to the original price but to its increased price paid by the A.C.C. would be to obtain an inflationary result. It appears that the tribunal was inclined to hold that 2·7 was a fair multiplier representing the price increase over the pre-war base. The tribunal was also not satisfied with Mr. Tongaonkar's evidence in regard to the life of planJ; and machinery; and so it held that the period of life given in col. 6 of Ex. C-2 cannot be accepted as correct. While dealing with the question about the rise in prices, the tribunal has held that it was usual to take the average level of prices prevailing in a period of about five years in preference to the prices prevailing in a particular year as was done by Mr.\n\nTongaonkar. The tribunal subjected Mr. Tongaonkar's evidence on the question of replacement, rehabilitation and modernisation to a close examination and held that the method adopted by Mr. Tongaonkar in distinguishing between modernisation and expansion was of a purely subjective estimate \"which does not bear the scrutiny of an objective test\". On the whole the tribunal was not prepared to accept Mr~ Tongaonkar's evidence at its face value and it was not prepared to treat Ex. C-2 and consequently Ex. C-23 as reliable. It is relevant to point out at this stage that the tribunal has not made any finding about the life of the machinery nor has it recorded any conclusion as to a proper divisor. In fact it has completely left out of consideration Exs. C-2 and C-23 while determining the amount which should be allowed for the appellant's claim for rehabilitation for the relevant year.\n\nThe tribunal then examined the principle 'underly-· • ing the Full Bench formula and held j; hat •it was not\n\n'959 intended to be worked out as a rigid mathematical formula. \"We must make it\", says the tribunal,\" as The A ssociaJed cement flexible as possible so as to do justice to everybody oon- Companies Ltd. cerned in the earning of profits\". The general question, v. which it has considered in this connection, is how far Its Workmen and to what extent profits of a concern should contribute - to the satisfaction of the claims of industry for replaoe- Gajrndragadkar .J. ment, rehabilitation and modernisation. It was impressed by the argument that, where the requirements under these items are so huge as to be out of ,• tune with the profits, it would be open to an industrial adjudicator to allow only a reasonable provision to be made out of the profits for the said items and leave the industry concerned to tap other resources to make up the balance. In support of.this conclusion it has referred to the observations made by ]'.R.M. de. Paula in his \" Principles of Auditing \", the report of the Taxation Enquiry Commission and of the working party for the Cotton Textile Industry. It has also relied on a part of the speech delivered by Mr. J. R.D.\n\nTata in addressing the annual general meeting of the shareholders of the Tata Iron and Steel Company in August 1950. .\n\nIn this connection the tribunal has expressed its apprehension that lf all the money required for a continuous process of modernisation and expansion is to come out of the profits made by the concern, labour will rarely see a day when they will enjoy bonus grant- \" ed to them out of profits; though it has hastened to add that it was far from its mind that a progressive concern like the A.C.C. should not keep pace with time and modernise its machinery ; but it only wished that it should give a fair deal to the workers in the distribution of the profits. Having held that, if the claims for rehabilitatio11 turn out to be huge and out of tune with the profits made by the industry, it would be open to the-tribunal to grant.the claim of the industry in that behalf only to the extent that it deems to be reasonable and fair, it proceeded to consider how far and to what extent the appellant's claim should be allowed in the present proceedings. • It is necessary to mention that in dealing with this\n\nquestion the tribunal was considerably influenced by x959 the past conduct of the appellant . .It thought that for The Associated rehabilitation the appellant had claimed no more than Cement Rs. 192 or 193 lakhs in the previous adjudication procompanies Ltd. ceedings where the dispute for bonus had reference to v. the year 1951-52. If the claim then made by the Its Workmen appellant was no more than Rs. 192 or 193 lakhs, the . - present claim for Rs. 284 lakhs, the tribunal thought, Ga; endragadkar J. was obviously inflated and unral. Similarly the tribunal emphasised the fact that the programme earlier submitted by the appellant to the Tariff Commission was in turn more modest than the claim made in the said adjudication proceedings. It appears that in the said programme the appellant had made out a case for the estimated expenditure of Rs. 18·36 crores to be.spread over a period of ten years from 1-8-1952 to 31-7-1962 and that works out approximately at the figure of Rs. 184 lakhs per year. It was on these facts that the tribunal held that \"if the A.C.O. estimated its annual requirements of rehabilitation, replacement and modernisation at Rs. 192 lakhs per year during the period of ten years commencing from 1-8-1952; I do not think that it should be allowed to depart from it now\". In substance, according to the tribunal, the present claim for rehabilitation was very much inflated, it had no relation to realities, and so the appellant should not be allowed to make such a claim.\n\nThat is why it did not think it necessary to record any finding as to the proper divisor, and to determine, in the light of Mr. Tongaonkar's evidence, what approximately would be a fair or reasonable amount for rehabilitation under the formula.\n\nIt is thus clear that in making its final calculations the tribunal has assumed that the claim made by the appellant for rehabilitation, replacement and modernisation must be taken to be no more than Rs. 192 or 193 lakhs, and on that assumption it has considered to what extent the claim should be allowed. Ultimately the tribunal came to the conclusion that. in the circumstances of the case it would be fair to allow the appellant about Rs. 165 to 170 lakhs as annual provi- • sion for the said ite.ms. In support 0, f this <; ion<; ilusion\n\nr959 the tribunal has relied on the fact that for the two\n\nThe Associated years 1952-53 and. 1953-54 the appellant had spent Cement about Rs. 339·76 lakhs for the purpose of rehabilitacompanies Ltd. tion, replacement 1and modernisation and that works v. at the average of Rs. 170 lakhs per year. The tribunal Its Workmen has then taken into account the fact that the appellan1;\n\n. d-dk had a plant reinstatement reserve of Rs. 235 lakhs Ga; en raga\n\n0 ' J. and a general reserve of Rs. 76 lakhs in the beginning of the year 1953-54. If these amounts which would be available for rehabilitation are spread over the ten year period of the tentative programme planned by the appellant, the annual figure would come to Rs. 31 lakhs; and this amount would have to be deducted from Rs. 165 lakhs which the tribunal was inclined to grant in respect of the relevant item. That is how the tribunal has made the appropriate calcultions under the formula, and has shown that, even after the payment of one month's additional bonus as directed by it, the appellant would still be left with a surplus of Rs. 23·48 lakhs. That in brief is the nature and effect of the findings made by the tribunal.\n\nBefo.re dealing with the merits of the points raised in these appeals it would be convenient to refer to the genesis and the terms of the formula which has been evolved by the Full Bench of the Labour Appellate Tribunal in the case of The Mill Owners Association, Bornhay v. The Rashtriya Mill Mazdoor Sangh, Bornhay (1) in 1950. It appears that from 1940 A. D. onwards the claims for bonus made by the employees against their employers in different industries were dealt with on an ad-hoc basis from case to case.\n\nSometimes the employers voluntarily paid bonus to their workmen; and where disputes arose they were decided by the tribunals in the light of the circumstances• of each case without relying on any broad consideration of policy or without attempting to lay down any general principles.\n\nIn 1948 a bonus dispute arose between the Mill Owners Association, Bombay and its employees, and it was referred fQr adjudication to the Industrial Court. In • considering this dispute the Industrial Court went\n\n(r) (1950) 1;.L.J. 1247.\n\nelaborately into the matter, laid down certain princir959 ples and awarded to the workmen \"bonus equivalent in The Associated amount to 3/8 of the total basic earnings of each workcement man subject to certain conditions.\n\nCompanies Lii..\n\nIn the subsequent year a similar dispute arose. bev. tween the same parties ; and it was again referred to Its Workmen the Industrial Court for adjudication. The Court Gajendragadkar J. made its award on July 7, 1950, directing 55 mills of the Association to pay to their workmen, whether permanent or temporary, 1/6 of the basic earnings of each of them as bonus. This award was challenged by the Association before the Labour Appellate Tribunal.\n\nIt was urged on behalf of the Association that the wage structure in the textile industry had been settled by standardisation and so bonus must be regarded as a gratuitous payment; and it was argued that at any rate grant of bonus cannot be made for the purpose of making up the deficiency between the actual and living wages.\n\nThese contentions were rejected by the Labour Appellate Tribunal and the question about the grant of bonus was considered on general principles on the basis of which a formula., often described as the First Full Bench Formula, was ultimately evolved. \"As both capital and labour contribute to the earnings of the industrial concern\", observed the appellate tribunal, \"it is fair that labour should derive some benefit if there is a surplus after meeting prior or necessary\n\ncharges\". The appellate tribunal was also of the view that where the goal of living wages had been attained, bonus, like profit sharing, would represent more as the cash incentive to better efficiency and production; but where the industry had not the capacity to pay a living wage bonus must be looked upon as the temporary satisfaction wholly or in part of the needs of the employee. In other words, actiording to this decision, the award of bonus is based on a two-fold consideration. It is made in recognition of the fact that labour has made some contribution to the profit earned by the industry, and so it is entitled to claim a share in it ; and it is also intended to help labour to bridge or :narrow down the gap, as far as may be reasonably • possible, between the living wage to whic.l; t labour is entitled and the actual wage received by it.\n\nr959 Dealing with the problem from this point of view the appellate tribunal conceded that investment neces- The Associated Cement sarily implies the legitimate expectation of the investor Companies Ltd. to secure recurring returns on the money invested by v. him in the industrial undertaking, and so it held that Its Workmen it was essential that the plant and machinery should - be kept continuously in good working order for the Gajendragadka. j. f h S h . purpose o ensurmg t at return. uc mamtenance of the plant and machinery would necessarily be to the advantage of labour because the better the machinery the larger the earnings and the brighter the chance of securing a good bonus. On this consideration it was held that the amount of money that would be necessary for rehabilitation, replacement and modernisation of the machinery would be a prior charge on the gross profits of the year. Sin1Je the depreciation allowed by the income-tax authorities is only a percentage on the written-down value. the depreciation fund set apart on that basis would not be sufficient for the purposes of rehabilitation and an extra amount would have to be annually set apart notionally under the heading of' reserves' to make up the deficit.\n\nThis position was apparently not disputed by the employees.\n\nThe claim made by the industry that a fair return on the paid-up capital must be secured and that ordinarily it should be paid at the rate of 6% per annum was also not disputed. The employees, however, challenged the claim of the industry that reserves employed as working capital should carry any interest; but their objection was overruled and it was held that working capital also would be entitled to interest though at a much lower rate than that on the paid-up capital. Then the question of taxes was considered and it was agf:eed that a provision had to be made for taxes which would be payable on the amount determined after deducting depreciation from the gross profits less any bonus which may be awarded. In the result the appellate tribunal laid down the manner and method in which the available surplus should be • determined. The notional accounting for this purpose starts with the figure of the gross profits which are\n\n• ...\n\narrived at after payment of wages and dearness x959 allowance to the employees and other relevant items The Associated of expenditure. .Then a deduction for depreciation is Cement made, and on the notional balance thus derived a procompanies Ltd. vision for taxes payable is allowed. Then follow the v. provisions for reserves for rehabilitation, return on Its Workmen paid-up capital and return on reserves employed as . working capital. That gives the amount of surplus ifGa; endragadkar J. any. Whenever the working of this formula leaves an amount of available surplus, labour was held entitled to claim a reasonable share in this amount by way of bonus for the current year. This formula is based on considerations of social justice and is intended to satisfy the legitimate claims of both capital and labour in respect of the profits made by the industry in a pa'l'ticular year. It takes the particular year as a unit and makes all its notional calculations on the :, basis of the gross profits usually taken from the profit and loss account; in this particular case the available surplus determined by the application of the formula was found to be 2·61 crores; and out of this surplus 0·30 crores were awarded as bonus to clerks and other staff and 1·86 crores was awarded as bonus to the employees leaving a net notional balance of 0·45 crores.\n\nThis Court had occasion to consider the said formula in Muir Mills Co. Ltd. v. Suti Mills Mazdoor Union, Kanpur (1).\n\nThe judgment in that case indicates that without committing itself to the acceptance of the formula in its entirety, this Court in general accepted a, s sound the view that since labour and capital both contribute to the earnings of the industrial concern, it is fair that labour should derive some benefit if there is a surplus after meeting the four prior or necessary charges specified in the formulf1. It is relevant to add that in dealing with the concept of bonus this Court ruled that bonus is neither a gratuitous payment made by the employer to his workmen nor can it be regarded as a deferred wage.\n\nAccording to this decision, where wages fall short of the living,\n\n(t) [1955] I S.C.R. 991. •\n\n' '\n\n'959 standard and the industry makes profit part of which is due to the contPibution of labour, a claim for bonus The Associated cement can be legitimately made. However neither the pro- Companies Ltd. priety nor the order of priority as between the four v. prior charges and their relative importance nor their Its WMkmen content was examined by this Court in that case;\n\nG . d-dk and though the formula has subsequently been gene- •J•• rnga ar J. rally accepted by this Court in several reported decisions (Baroda Borough Municipality v. Its Workmen (1 ), Bree Meenakshi Mills, Ltd. v. Their Workmen(') and The State of Mysore v. The Workers of Kolar Gold Mines(')), the question about the adequacy, propriety, or validity of its provisions has not been examined nor has the general problem as to whether the formula needs any variation, change or addition been argued and considered. It is for the first time since 1950 that, in the present appeals, we are called upon to examine the formula carefully and express our decision on the merits of its specific provisions. As we have already indicated, in dealing with the present dispute the tribunal has held that, in working out the formula, it could relax its provisions even though the proposed relaxation may mean a material variation of the formula itself.\n\nOn behalf of the appellant Mr. Kolah has taken strong exception to this approach.\n\nHe has argued that, in the last eight years and more, on the whole the formula has worked fairly well in the interest of both capital and labour, and so the tribunal was not justified in departing from it in the present case.\n\nThis argument undoubtedly raises a question of considerable importance.\n\nBefore examining this argument, however, it is necessary to consider one preliminary point: Was the tribunal justified in holding that the appellant could not be allow'!ld to add to its previous claim for rehabilitation ? The decision of the tribunal on this point seems to indicate that the tribunal thought that the appellant was estopped from making any such claim; and the correctness of this conclusion is challenged by .the appellant.\n\n(1) [1957] S.C.R. 33, 39.\n\n(2) [1958] S.C.R. 878, 884.\n\n(3) [1959] S.C.R. 895.\n\n.. •\n\nIt is true that, in the report submitted by the appellant before the Tariff Commisson 'in April 1953, it\n\nr959\n\nThe Associated had set out the details of its ten year programme which Cement included, besides replacement, rehabilitation, modern- Companies Ltd.' isation and expansion, mechanisation of quarries as v. well as construction and improvement of houses for its Its Workmen labour staff. The report of the Tariff Commission - . (p. 30) shows that the cost of the programme was Gajendragadkar f. estimated at Rs. 18·36 crores, excluding the cost of a new plant at Sindri, or about Rs.184 lakhs per annum.\n\nSubsequently in January 1954, when Mr. Tongaonkar gave evidence in the previous adjudication proceedings, he produced a statement (Ex. U-8) according to which the appellant's annual requirements for rehabilitation would be of the order of Rs. 192 or 193 lakhs, \"whereas in the present proceedings the said claim is made at Rs. 284 lakhs. A bare statement of these facts prima facie suggests that the appellant's present claim for rehabilitation has been growing from stage to stage, and in its present form it is very much inflated; and that is what the tribunal has also assumed. In our opinion this assumption is not wholly correct. Mr. Tongaonkar's evidence shows that in the report of the jobs submitted tq_ the Tariff Commission the appellant had not included all relevant items of rehabilitation, replacement and modernisation.\n\nThe report merely gave a list of the jobs which the appellant had proposed to undertake during the ten year period ending July 31, 1962. It was in no sense an exhaustive statement about the appellant's requirement:> in regard to the rehabilitation of all its blocks.\n\nIn fact, having regard to the nature and scope of the enquiry before the Tariff Commission, the report made by the appellant had to be restricted to the urgent jobs which it wanted to undertake during the execution of its ten year programme ; and so it would not be reasonable to hold that the figure of annual rehabilitation expenses which can be deduced from the said report has any relation to the claim for rehabilitation made by the appellant in terms of the workillg of the. formula.\n\nThen again the appellant's claim for re:Rabilitation\n\n'959 in the earlier proceedings has also been satisfactorily explained by Mr. Tongaonkar. The respondents The Associated\n\nCement have placed considerable reliance on the statement Companies Lid. filed by Mr. Tongaonkar in the said proceedings v. (Ex. U-8). This document has been produced by the Its Workmen respondents in support of their contention that it\n\n• - k purports to make a claim for Rs. 192 lakhs per year Ga; endragad ar ]. for rehabilitation. That no doubt is true ; but in terms the document purports to show the estimated expenditure required during the ten year period there specified; and as Mr. Tongaonkar has stated, it does not include a full statement of the claim in regard to the rehabilitation of all the blocks belonging to the appellant. In considering the respondents' argument on this point, it is necessary to bear in mind that in the earlier proceedings the appellant had filed a separate statement showing the amount to which it was entitled by way of rehabilitation under the formula ; this statement was Ex. C-3 and it has been produced in the present case and exhibited as U-5. It appears that in the earlier proceedings the tribunal did not attach any importance to the said document and virtually ignored it because, like the present tribunal, it held that \" it does not appear to be necessary to plan further ahead than ten years and it is desirable to base calculations of rehabilitation on realities \"(1).\n\nEven so the Labour Appellate Tribunal found that the appellant's contention that its workmen were not entitled to any additional bonus was not well-founded even if its claim for rehabilitation was confined to Rs. 192 or Rs. 193 lakhs. Besides, Mr. Tongaonkar has stated on oath that Ex. U-8 was not among the documents originally submitted by the appellant to the tribunal in 1954. It was in fact prepared and submitted at a later stage at the instance of the tribunal itself. . It is, therefore, clear that Ex. U-8 was not intended to, and did not supply, the basis of the appellant's claim in the earlier proceedings in accordance with the formula.\n\nA study of the items contained in Ex. U-8 also sup- • ports the same conclusion.\n\nMr. Tongaonkar has\n\n(1) (1955) 1 L.L.j. 588, 592. -\n\nstated that the total amount of the estimated exx959 penditure shown in this documeh.t included only a . b The Associated small portion of the expenditure required for reha i- Cement litation of the post-1944 block. It is true that Mr.\n\nCompanies Ltd.\n\nTongaonkar's statement that in the said total amount v. nearly Rs. 50 lakhs represent the amount for replace- Its Workmen ment or rehabilitation of post-1944 block is inaccu- - rate. The Ohaibasa Cement Factory and the Sevalia Gajendragadkar f.\n\nCement Factory for the rehabilitation of which Rs. 64·98 and 85·15 lakhs have been claimed in Ex. U-8 are undoubtedly parts of the post-1944 block and the amounts claimed for. them are very much more than Rs. 50 lakhs. It is nevertheless clear that the items in Ex. U-8 do not include a claim for rehabilitation for all the blocks of the appellant, and it is not surprising either, because a claim for the rehabilitation of all the blocks had been separately made by the appellant in the earlier proceedings under Ex. 0-3. Thus there can be no doubt that neither the report submitted by the appellant before the Tariff Commission nor the estimate given by Ex. U -8 was prepared under the formula ; and so any disparity in the amounts claimed in the two earlier documents cannot be seriously pressed into service against the appellant when it seeks to make a claim for rehabilitation strictly in accordance with the formula. We must, therefore, hold that the tribunal was in error in coming to the conclusion that by reason of its previous conduct the appellant could not be allowed to place its claim for rehabilitation at a figure higher than Rs. 192 lakhs in the relevant year.\n\nIn this connection it would be pertinent to remember that in dealing with the employer's claim for rehabilitation the tribunal is called upon to assess respective values of the relevant factors on h.}'pothetical and empirical considerations, and so it may generally not be useful or wise to take recourse to strict legalistic principles like estoppel in deciding this question and indeed all material questions in industrial adjudicati9ns. . .\n\nDoes the formula need to be revised, and should it •\n\n1be revised and reconstructed ? Thin is. the question\n\nr959 which we must now consider. It appears that some\n\nTh• Associated tribunals have tak~ the view that the r'igid working cement of the formula may defeat its object of recognising Companies Ltd. the social justice of labour's claim for bonus and so\n\nv. they have made suitable adjustments in its operation.\n\nIts wo, km'\" It is this approach which has raised the larger issue . - of principle in the group of appeals which have Ga; endrngadkar 1 been placed for disposal before the Constitution Bench. So we must examine this question in its broad aspects and if we decide not to change the formula we must state what, in our opinion is the content of the different items mentioned in the formula and how they should be calculated and mutually adjusted.\n\nLet us first set out the case as it has been made for changing the formula. It is u_rged that though the formula purports to recognise the principle of social justice on which labour's claim for bonus is based, it does not accord to the said claim the high priority it deserves. Social justice has been given a place of pride in the preamble to the Constitution and it has been enshrined in the Directive Principles under Arts. 38 and 43. Since 1950, ideas about social and economic justice have made an appreciable progress and they require the readjustment of priorities prescribed by the formula in favour of the claim for bonus.\n\nIt is also contended that experience in industrial adjudication during the last eight years and more shows that employers are becoming increasingly more rehabilitation-conscious and their appetite for the provision of rehabilitation is fast growing from year to year. In the present case, for instance, though the appellant occuries a dominant position in its line of trade and though it makes large profits, it has made such a tall claim for rehabilitation that if the said claim is allowed the working of the formula leaves no available surplus from which bonus can be granted to labour. The appellant has no. doubt paid bonus for three monilhs and it is unlikely that the appellant • would depart from its practice of paying the said bonus even Jn future ; but that does not affect the\n\n• •\n\nI959 position that in the light of the a:ruiellant's claim for rehabilitation the working of the formula would not The Associated justify the grant of any bonus to labour. This shows Cement that the notional claim for rehabilitation which an Companies Ltd. employer can make under the formula tends to be v. completely divorced from the reality or actuality of Its Workmen the need of rehabilitation; and that needs to be - . t d Gajendragadkar ]. correc e .\n\nBesides, it is said, that the theory that the trading profits of the industry must provide for the whole of the rehabilitation expenses is not universally accepted by enlightened and progressive businessmen and economists. In this connection reliance is placed on the observations of F. R. M. de Paula in his \"Principles of Auditing \" that \" the object of depreciation is the replacement of original investment capital and that an increase in replacement. cost is an important matter and means that additional capital is required in order to maintain the original earning capacity\". It is also pointed out that the Institute of Chartered Accountants in England and Wales, in its recommendations made in 1949 under the heading \" Rising price levels in relation to accounts\" has pointed out that \"the gap between historical and replacement costs might be too big to be bridged by a provision made for replacement spread over a period of years either . by way of supplementing the depreciation charges or by setting up in lieu of depreciation a provision for\n\nrenewals based on estimated replacement costs\". It is therefore suggested that in revising the formula the claims for rehabilitation should be fixed at a reasonable amount and industry should be required to find the balance from other sources and if necessary from its share in the available surplus. • In this connection it is pointed out that when the Labour Appellate Tribunal evolved the formula it was dealing directly with the needs of the textile industry and there was no dispute that the plant and machinery of the textile industry had become old and obsolescent and needed immediate replacement, rehabilitation and modernisation. It is doubtful whether, in • giving priority to the claim for rehabiliiation in the\n\n'959 context of the need; of the textile industry with which\n\nThe Associated the appellate tribunal was concerned, it really intend-\n\nCement ed that rehabilitation should be claimed by every Companie.< Ltd. industry on theoretical considerations whether or not v. the said claim was justified by its actual or practical Its Wo, kmea need for rehabilitation.\n\nG . d dk 1 In substance the argument is that the Full Bench a; en raga ar . f b A , . o the La our ppellate Tribunal evolved its formula in order that labour may get a reasonable share in the available surplus and may thereby receive assistance in filling up the gap between its actual wage and the living wage which it looks forward to receive in due course ; and if it is found that, in working out the items which are treated as prior charges, in a majority of cases the formula leaves no available surplus, then its main object is frustrated and that is the justification for revising it and readjusting its priorities. \" In support of this view reliance has also been placed on the recommendations of the Committee on 'Profit-sharing'. This Committee had been appointed in 1948 to advise the Government of India \"on the principles to be followed for the determination of (a) fair wages to labour, (b) fair return to capital employed in the industry, (c) reasonable reserves for the maintenance and expansion of the undertaking, and\n\n(d) labour's share of the surplus profits, calculated on a sliding scale normally varying with production, after provision has been made for (b) and (c) above\".\n\nThe Committee viewed its problem from three important angles, viz., \" profit-sharing as an incentive to production, profit-sharing as a method of securing industrial peace, and profit-sharing as a step in the participation of labour in management\". The Committee recog11ised that putting back profits into the industry is one of the most useful forms of capital investment and this should be encouraged and it recommended that a figure of 20% for reserves should be generally aimed at, though it considered that, as a first chare, 10% of the net profits should be compul- • sorily set aside for reserves, leaving it to the good sense of the managerqent to allocate the balance or more out of their -own share of surplus profits. In regard\n\nto the labour's share in the surplus profits, the Comr959 mittee stated that, having due regai.V to the conditions Prevailing in the industry selected for an experiment The Asscciated Cement in profit-sharing, it had come to the conclusion that Companies Ltd. labour's share should be 50% of the surplus profits of v. the undertakings. It is a matter of common know- Its Workmen ledge that so far Government have not thought it . - desirable, expediept or possible to legislate in this Ga; endragadkar J. matter in the light of the recommendations made by this Committee ; but it is suggested that these recommendations afford a rational basis for reconstructing the formula.\n\nIt may be conceded that there is some force in some of the arguments urged in support of the plea that the formula should be revised and its priorities should be readju:ated and redefined ; but, on the other hand, we cannot ignore the fact that on the whole the formula has worked satisfactorily in a large number of industries all over the country. Except for a few cases, particularly in Bombay, where some of the tribunals have taken the view that, in its rigid form, the formula has become unworkable from the point of view of labour, in a majority of cases industrial disputes arising between employers and their workmen in regard to bonus have been settled by tribunals on the basis of this formula; and it would not be unreasonable or inaccurate to say that by and large labour's claim for bonus has been fairly and satisfactorily dealt with. The main Bource of contest in the working of the formula centres round the industry's claim for rehabilitation; but, as we shall presently point out, if this claim is carefully scrutinised and examined in the light of evidence which the employer has to produce in support of his claim, even the settlement of this item would, as it is intended to, invest. the tribunal with sufficient. discretion to make the working of the formula elastic enough to meet its two-fold object of doing justice both to industry and labour.\n\nIt is true that in the working of the formula employers sometimes make an attempt to add ite!lls to the list of prior claims. In The State of Mysore v. The •\n\nr959 Workers of Kolar Gold Mines (1), it was urged before\n\nThe Associated this Court by te industry that it was a wasting Cement industry and as such it needed special consideration.\n\nCompanies Ltd. The contention was that for the prosperity and longev. vity of the ind us try a special provision for the pro- Its Workmen specting of new ore has to be made and that should be . - added as an additional item in the list of prior charges.\n\nGa; endragadkar J. This argument was, however, rejected and it was held that the special features of the industry would be taken into account in determining the amount which could be reasonably claimed under rehabilitation. This decision shows the reluctance of this court to vary or add to the formula which on the whole has so far worked fairly satisfactorily.\n\nThe theory that the whole of the rehabilitation charges need not come out of the trading profits of the industry does not appear to be generally accepted. As has been observed by Paula himself: \"In the past the accepted principle has been that the main object of providing for the depreciation of wasting assets is to recoup the original capital invested in the purchase of such assets.\n\nAs part of the ca pita! of the concern has been invested in the purchase of these assets, therefore, when their working life comes to an end, the earning capacity of these assets ceases. Thus they will become valueless for the purposes of the business, and the original capital sunk in their acquisition, less any scrap value, will have been lost. Hence, in order to keep the original capital of a business intact, if any part thereof is invested in the purchase of wasting assets, revenue must be held back by means of depreciation charges to profit and loss account, in order to replace the capital that is being lost by reason of the fact that it is represented by assets that are beingconsumed or exb, austed in the course of trading or seeking to earn income \" (2). It is also stated by the same author that\" in all cases where one of the direct causes of earning revenue is gradually to consume fixed assets of wasting nature, the depreciation of such assets should be provided for out of ; revenue\" (3). It is true\n\n(1) [19yj] S.C.R. 895. •\n\n(2) F.R.!II. de Paula's• Principles of Auditing', 1957, p. 136.\n\n(3) Ibid, p. 138.\n\n\\ ..\n\nI959 that the author -recognises that \"owing to the very considerable increa.se in the pric<'l\\ level since the f h 1939 5 • d d The Associated termination o t e ' .4 war, m ustry is fin ing its Cement original money capital insufficient for its needs. Thus companies Ltd. the cost of replacement of fixed assets has greatly v. increased and in addition, further working capital is Its Workmen required to finance a given volume of production. . - M t d t 1. t d t Ga; endragadkar J any econom1s s, m us ria is s, an accountan s con- tend that provision should be made, in arriving at profits, for this increased capital requirement\".\n\nHaving noticed this view the author adds that \"at the time of writing this matter is still being debated and final decisions have not yet been reached \", and he concludes that \" until a final solution of this complex problem is reached it would be inadvisable for the auditor j; o act on any principle other than that recom. mended by the Institute \"(1); and that principle appears to be that ; depreciation should be provided for out of revenue.\n\nBesides, it must be borne in mind that, in adjusting the claims of industry and labour to share in the profits on a notional basis, it would be difficult to repel the claim of the industry that a provision should be made for the rehabilitation of its plant and machinery from the trading profits. On principle the guaranteed continuance of the industry is as much for the benefit of the employer as for that of labour; and so reasonable provision made in that behalf must be regarded as justified.\n\nThe recommendations made by the Committee on 'Profit-sharing' cannot be of much assistance because they raise questions of policy and principle which Legislature can more appropriately consider. If the Legislature feels that the claims for social and economic justice made by labour should be redefined on a clearer basis it can step in and legislate in that behalf. It may also be possible to have the question comprehensively considered by a high-powered commission which may be asked to examine the pros and cons of the -problem in all its aspects by taking evidence from all industries and all bodies cif workmeq. The plea for the revision of the formula raises an issue\n\n(r) F.R.M. de Paula's• Principles of Auditing', I957.'P So. •\n\n'959 which affects all industries; and before any change is made in it, all instries and their workmen would The Associated. cement have to be heard and their pleas carefully considered.\n\nCompanies Ltd. It is obvious that while dealing with the present group v. of appeals it would be difficult, unrea.sonable and Its Workmen inexpedient to attempt such a task. That is why we\n\nG . d -dh 1 think that labour's claim for bonus should be decided aJen raga ar by tribunals on the basis of the formula without attempting to revise it.\n\nWhilst we are not prepared to accede to the argument that the formula should be revised, we wish to emphasise that the formula is elastic enough to meet reasonably the claims of the industry and labour for £airplay and justice. In its broad features it recognises the claims of the industry and tabulates them under different items as prior charges, and then proviQ.es for the distribution of available surplus between the labour, the industry and the shareholders. The items specified in the formula have to be worked out notionally on theoretical grounds; in determining the content of each one of the items it is therefore essential to scrutinise and weigh carefully all the relevant and material facts. If the content of each item is determined objectively in the light of all relevant and material facts, the tribunals would generally find it possible to make reasonable adjustments between the rival claims and provide for a fair distribution of the available surplus. In this sense it is necessary to treat the formula as elastic and not rigid in working out detailed calculations under it.\n\nWe have no doubt that if the industry and labour genuinely desire to settle the disputes as to bonus without the intervention of the conciliator or the adjudicator, the formula would help them to arrive at a reasonable• settlement. If . the employer does not make an unduly inflated claim under the items which safeguard industry's interests, and if workmen do not make an exaggerated demand for bonus, it would normally not be beyond the cooperative effort of the parties .to arrive at a reasonable figure which should • be paid to labour by way of bonus from year to year.\n\nIt is unneessa.ry to emphasise that industrial disputes\n\nsettled amicably are in the interest of both capital and\n\nI959 labour. Amicable settlements of ch disputes lead to The Associated. peace, harmony and co-operation between capital Cement and labour and that invariably helps more production companies Ltd. which is a matter of great national importance at v .. present.\n\nIts Workmen But unfortunately, in many cases, both the industry . - ... and labour do not appear to be too keen on settlingGa1endragadkar f. these disputes amicably, with the result that claims for bonus give rise to disputes year after year and inevitably the machinery under the Industrial Disputes Act is set in motion. Conciliation efforts are made but they do not succeed ; then reference is made under s. 10 of the Act and the dispute is taken before the tribunal ; since both the parties are not in a mood to co-op_!3rate with each other, over-statements are made on both sides, allegations are met by counter-allegations and they are sought to be supported by evidence.\n\nIn such a case the tribunals must examine the rival contentions and scrutinise the evidence adduced by the parties objectively and in a judicial manner. If proper evidence is led and it is judicially weighed, the tribunals would be able to work the formula in a reasonable manner and arrive at a result which would be substant; ially in conformity with the object underlying the formula. It is obvious that, in making the relevant calculations under the items of prior charges specified in the formula, the tribunals should have a clear idea as to the content of each one of the said prior charges; and so it is necessary to examine carefully this aspect of the matter.\n\nWe have already noticed that the formula for awarding bonus to workmen is based on two considerations; first that labour is entitled to claim a share in the trading profits of the industry pecause it ha.s . partially contributed to the same ; and second that labour is entitled to claim that the gap between its actual wage and the living wage should within reasonable limits be filled up.\n\nThe concept of labour's contribution to the profits of the industry has reference to the contribution made by the employer and the workmen taken together as a class ; .and so it would •\n\nx959 not be relevant to inquire which section of labour has\n\nThe Associated contributed to what,_share of the profits. The broad\n\ncement idea underlying this concept is that the capital invest- Companies Ltd. ed by the employer and labour contributed by workv. men jointly produce the profits of an industry. This Its Workmsn does not necessarily mean that, in the industry in\n\nG . d -dk 1 question, labour must actually manufacture or produce a; en raga ar . d h . f goo s, t ough, rn the case o manufacture and production of goods contribution of labour is patent and . obvious. In the Burma-Shell Oil Storage anil Distributing Co. of India, Ltd. v. Their Workmen(') the Labour Appellate Tribunal rejected the employers' claim that, since workmen employed by them did not manufacture or produce any goods but merely assisted them in the distribution of oil, they were not entitled to claim any bonus under the formula. \" It is wrong to say\", observed the Labour Appellate Tribunal, \"that because the employees of these oil companies merely market the oil they have not earned the right to any bonus \". It was also pointed out, that \" the workmen had to perform duties of various intensity for marketing an article of public utility, and in that sense they contribute to production according to the concept of economists\". So were the clerks held entitled to bonus for their duties in the general business of the concern though they had nothing to do with the physical act of marketing the commodity.\n\nIt was also emphasised that the other object of granting the bonus was to help the workmen to fill up the gap between their actual wages and the living wage.\n\nThus in dealing with the claim for bonus made by workmen the two-fold basis of the formula must always be kept in mind.\n\nThe working of the formula begins with the figure of gross profits taken from the profit and loss account which are arrived at after payment of wages and dearness allowance to the employees and other items of expenditure. As a general rule the amount of gross profits thus ascertained is accepted without submitting the statement of the profit and loss account to. a close scrutiny. If, however, it appears that •\n\n(r) (1953) II L.L.J. 24.6.\n\nentries have been made on the debit side deliberately r959 and mala fide to reduce the amout of gross profits, it The Associated would be open to the tribunal to examine the question cement and if it is satisfied that the impugned entries have Companies Ltd. been made mala fide it may disallow them. This v. principle has been recognised by the Labour Appellate Its Workmen Tribunal when it observed, for instance, in M/s. J. K. G . - k Cotton Manufacturers Ltd., Kanpur v. Their Worka; endragatl. ar J. men (1) that \"if managing agents deliberately divert profits to the selling agents with a view to deprive labour of their bonus and pay commission to the selling agents at high rates then certainly the matter must be taken into consideration in the determination of available surplus balance\". It would likewise be open to the parties to claim the exclusion of items eithei;: on the credit or on the debit side on the ground that the impugned items are wholly extraneous and entirely unrelated to the trading profits of the year.\n\nIn considering such a plea the tribunal must resist the temptation of dissecting the balance-sheet too minutely or of attempting to reconstruct it in any manner. It is only glaring cases where the impugned item may be patently and obviously extraneous that a plea for its exclusion should be entertained. Where the employer makes profits in the course of carrying on his trade or business, it would be unreasonable to inquire whether each one of the items of the said profit is related to the contribution made by labour. In such matters the tribunal must take an overall, practical and commonsense view. Thus it may be stated that as a rule the gross profits appearing at the foot of the statement of the profit and loss account should be taken as the basic figure while working out the formula.\n\nIn working out the formula the oiher important fact which should not be ignored is that the formula proceeds to deal with the labour's claim for bonus on the basis that the relevant year for which bonus is claimed is a self-sufficient unit and the appropriate accounts have to be made on the notiorn; i.l basis in respect of the said 'year. It is substantially because •\n\n(r) [1954] L.A.C. 716, 745 (Also vide [1952] L.A.C. 420, 421.)\n\n1959 of this basic assumption that if an employer receives during the bonus'Year a refund with respect to the The Associated Cement excess profits tax paid by him in a previous year the Companies Ltd. amount of refund is not included on the credit side. v.\n\nIn Model Mills etc. Textile .Mills, Nagpur v. The Its Wo•kmen Rashtriya Mill Mazdoor Sangh (1) the Labour Appel- - late Tribunal observed that according to the formula, .Gajendrngadkar ]. th 't t b d d t d h e mcomeax rs o e e uc e as a pr10r c arge on trading results of the year just as much as the bonus is to be ascertained upon the trading results of the year. The concession made by the income-tax authorities in making a refund of the excess profits tax already paid by the employer is intended to aid a concern on account of past losses and so it has nothing to do with the formula. The same principle governs cases where owing to a loss incurred ip the previous year or years the employer is entitled to claim allowance for adjustment under s. 24 (2) of the Income-tax Act during the bonus year; and so it is held that the allowance for adjustment which the employer claims cannot be taken into account in determining the amount of income-tax payable on the profits of the bonus year under the formula.\n\nIn Bennett Coleman and Co., Ltd. v. Their Workmen (2) the Labour Appellate Tribunal rej9cted the contention raised by labour that since under s. 24 (2) the employer would not be liable to pay tax during the bonus year no provision for payment of tax should be made in working out the formula. The Labour Appellate Tribunal pointed out that the fact that the employer was not required to pay tax during the bonus year was the result of the adjustment of the previous year's unabsorbed depreciation and losses against current year's profit, and that had no relevance in determining the available• surplus from the trading profits of the bonus year. The same view has been taken in several other decisions to which the Labour Appellate Tribunal. has referred.\n\nIn our opinion, once it is realised that in working out the formula the bonus year is t; Lken as a unit self-sufficient by itself, the • decisions of the Labour Appellate Tribunal in regard\n\n(1) (1955) I 1:-· L. J• 534, 540.\n\n(2) (1955) II L. L. J. 60.\n\nto the refund of excess profits tax and the adjustment r959 of the previous year's depreciation '\\nd losses against The Associated the bonus year's profits must be treated as logical and Cement 00~ ~~~~ Having ascertained the amount of gross profits, the v. first item of deduction relates to depreciation. The Its Workmen propriety of this deduction was not questioned before . - k the Labour Appellate Tribunal which evolved the Ga; endragad ar f. formula ; but the content of the item of depreciation became a matter of controversy subsequent to 1950.\n\nAfter 1948, s. 10 (2) (vi) of the Income-tax Act has provided for initial and additional depreciation besides the statutory depreciation which was already admissible. In other words, depreciation allowed under the Income-tax Act now consists of what may be called the statutory normal depreciation calculated under r. 8 as well as initial depreciation and additional depreciation.\n\nThe allowance of these. depreciations is an exception to the general rule that . the income has to be taxed without reference to the diminution in the value of the capital. Under the amended provision of s. 10 (2) (vi) of the Income-tax Act the employers began to claim that from the gross profits all the depreciations admissible under the Income-tax Act should be debited; and this claim was upheld by some tribunals and rejected by otters.\n\nThis conflict of decisions led to confusion ; and so a Full Bench of the Labour Appellate Tribunal was constituted to decide this and other points in the case of the U. P. Electric Supply Co., Ltd., etc. Electricity Supply Undertakings v. Their Workmen (1 ).\n\nThe Full Bench held that\" the depreciation which should be deducted from the gross profits in working the formula is annual depreciation allowable under the provisions of the Income-tax Act including the multiple shift depreciation; it also held that the initial depreciation and additional depreciation which were also allowed under the Income-tax Act are abnormal additions to the income-tax depreciation designed to meet particular contingencies and for a limited period ?\n\n(1) (1955) II L. L. J. 431. • 122\n\n'959. and so it would not be fair to the workmen that these\n\nThe Associated two depreciations hould be rated as prior charges Cement before the available surplus is ascertained\". Appa- Companies Ltd. rently some doubt arose as to what exactly was allowv. ed to be deducted under this Full Bench decision ; and Its Workmen two of the members of the Full Bench took occasion\n\nG • - k to clarify the position in Surat Electricitv Co.'s Staff •1endragad ar J. Union v. Surat Electricity Co., Ltd. (1).\n\nThis decision shows that what the Full Bench intended to treat as depreciation for the purpose of the formula was a notional amount of normal depreciation ; in order to avoid any future doubt or confusion, the judgment in the case has set out the manner in which this notional normal depreciation has to be worked out. Since this decision was pronounced it is the notional normal depreciation that is deducted from the gross prnfits in working the formula. It seems to us that the view taken by the Full Bench is wholly consistent with the basic idea of social justice on which the original formula is founded.\n\nThe relevant provisions of the Income-tax Act allowing further depreciation are based on considerations which have no relevance to the original formula ; indeed, as the Full Bench has pointed out, if the said two items of depreciations are allowed to be deducted from the gross profits it would in a majority of cases defeat the object of the formula itself. We would accordingly hold that the depreciation which has to be deducted from tho gross profits should be the notional normal depreciation as explained in the case of Surat Electric Co., Ltd. (1).\n\nThe balance obtained after deducting depreciation from the gross profits is then takerr as the amount on which calculations have to be made about the incometax payable for the bonus year. This item gives rise to a controve!'sy between the parties. It is urged for the employers that in determining the amount payable by way of income-tax on this balance the tribunal should not take into consideration allowances which are made under the relevant provisions of the Incometax Act~ There is no doubt that in taxing the , employer for the bonus year the Income-tax Act would\n\n(1) (1957) II.L. L. •J. 648.\n\nmake allowance not only for the normal depreciation r959 but also for the initial and additnal depreciations; The Associated but the argument is that the income-tax should be Cement determined notionally without reference to the said Companies Ltd .. allowances. In support of this argument it is further v. urged that though the employer may obtain credit for Its Workmen the two further depreciations for some years, later on G . d -dk the said allowances will not be made and his liability a; en raga ar f. to pay tax would be correspondingly increased. It is but fair, so the argument runs, that the employer should be allowed to create a fund of income-tax reserve from which he would be able to bear his tax liability in future as and when it is bound to increase.\n\nOn the other hand it is contended on behalf of workmen tliat while determining the amount of tax payable for the bonus year the tribunal cannot ignore the concession given to the employer by the Income-tax Act by making the allowance of two further depreciations. What the employer claims is not the amount of tax payable during the bonus year but much more in additfon in order to build up a reserve and thi.s notion of building up a tax reserve for meeting future, though certain, increased tax liability is foreign to the basic idea of the formula. For making calculations under the formula the bonus year is taken as a unit and all items specified in the formula should be worked out on that basis. That is why the refund of the excess profits tax received in the bonus year is excluded from consideration and the right of the employer to adjust his previous year's losses and depreciation against the trading profits of the bonus year is likewise ignored.\n\nSo too the fact that the employer may have to pay increased taxes in future years must be treated as irrelevant. That in brief is the case for workmen.\n\nIn our opinion, having regard to the basis of the formula and the manner in which the other items of the formula are required to be worked out, it would not be reasonable to allow the employer to claim under the item of income-tax an additional amount.is respect of the two further depreciations which are expressly • , allowed to him under s.10(2)(vi) of .the Income-tax\n\n'959 Act. It is clear that the amount determined under\n\nThe Associated this item would no1rrepresent the actual tax which the cement income-tax department will recover from the employer. companies Ltd. In that sense it would always be a notional amount ; v. but in calculating even this notional amount it would Its Workmen be unfair and unjust to ignore the concessions allowed\n\nG . d-dk 1 to the employer by s. 10(2)(vi). The creation of a fund a; en raga ar of income-tax reserve may conceivably lead to unnecessary complications. Besides, if on principle the further depreciations allowed by the Income-tax Act are treated as inadmissible under the formula and so are excluded from consideration, it would be substantially inconsistent with the object of such exclusion to allow the employer to claim tax in respect of the said amounts of the two depreciations. It is clear that even if the amount of income-tax is determined after taking into account the concession given to the employer by s. 10(2)(vi) it would work no hardship to the employer, for the simple reason that in future years when these concessions cease to be operative and his liability to pay the tax correspondingly increases, he would be entitled to claim the amount of incometax which would then be payable by him.\n\nThis method of calculating income-tax is thus fair to both the parties and it has besides the merit of being consistent with the basic character of the formula. It would be relevant in this connection to remember that, though in most of the industries workmen continue to be employed from year to year, notionally and on principle, the claim for bonus for a particular year is made on behalf of workmen employed during the said year; and in that sense, the relevant calculations have to be made with the bonus year as a unit. That is why considerations of future tax liability of the employer are{oreign to the calculation under the formula.\n\nWe would, therefore, hold that in calculating the amount of tax payable for the bonus year the tribunals should not take into account the concessions given by the Income-tax Act to the employers under the two more depreciations allowed under , s. 10(2)(vi) of the Income-tax Act.\n\nThis poii:t has been c; onsidered by this Court in\n\nSree MeenaksM, Mills, Ltd. v. Their Workmen (1) where x959 it has upheld the view taken by' the Full Bench of The Associated the Labour Appellate Tribunal in the case of the U. P. cement Electric Co., Ltd., etc., Electricity Supply Undertak- Companies Lid. ings (2) and has directed that in determining the v. amount of income-tax payable during the bonus year, Its Workmen the further depreciations pemissible under the In- Gajendragadkar 1. come-tax Act should be taken mto account. We would only like to add that in that case this Court had no occasion to say what exactly the normal depreciation meant; but it is clear that the normal depreciation mentioned in the judgment was not intended to mean anything other than the notional normal depreciation as explained by the Labour Appellate Tribunal in the case of the Su, rat Electric Co., Ltd. (3).\n\nThe amount of income-tax thus determined has then to be deducted as a prior charge.\n\nThe next step in the working of the formula relates to the deduction of an appropriate amount in respect of the return on paid-up capital as well as working capital. We have already noticed that the formula provides generally for the payment of interest at 6% per annum on the paid-up capital and at 2% on working capital. Subsequent decisions show that the tribunals do not regard the said rates as inflexible and they have suitably modified them in the light of he relevant circumstances in each case.\n\nWe think that this is a correct approach and that it is necessary to fix the rates of interest on the two items of paid-up capital and working capital according to the circumstances of each case. In this connection it may be added that ordinarily industrial tribunals award interest at the rate of 6% per annum on paid-up capital.\n\nIn Workmen of Assam Co., Ltd. v. Asam Co., Ltd.(') this Court held that interest allowed by the tribunal at 7% on paid-up capital and confirmed by the Labour Appellate Tribunal was justified because\" an industry connected with agriculture like the tea industry is exposed to greater risks than any other indllstry suc.h\n\n(1) [1958] S.C.R. 878. (2)\n\n(1955) II L.L, J. 431. • (3)\n\n(1957) II L.L.J. 648.\n\n(4) [1959].S.C, R. 327 . .\n\nx959 as weather, pests in the plants and gradual deteriora-\n\nTh• Associated tion of the sol \". <'fn the <;>ther hand, in Ruston and Cement Hornsby (India) Ltd. v. Their Workmen(') the Labour Companies Ltd. Appellate Tribunal allowed only 4% return on the v. part of paid-up capital represented by bonus shares ns:workmen for the year in which such shares were issued and . - observed that \"for subsequent years no distinction Ga; endragadkar J. between it and other paid-up capital represented by paid-up shares should be made\". Similarly, in regard to reserves or depreciation used as working capital interest has been allowed either at 4% or at 3% or even at 2% according to the relevant circumstances.\n\nIn the Mill Owners Association, Bombay v. The Rashtriya Mill Mazdoor Sangh(') the Labour Appellate Tribunal has observed that \"as we have said before, there is no fixed rule as to the rates of such return (on ca pita!) and each case must depend on its individual facts.\n\nWe have in appropriate cases given as high as 4% but in case of the mills the Full Bench has considered that the equivalent of 2% would be reasonable and we propose to retain it at that level for the present\". In Tea and Coffee Workers Union v. Brooke Bond (India) (Private) Ltd. (3) the Industrial Tribunal has considered the previous decisions on the question of the return on working capital and held that, in the case before it, it would be an adequate return on the working capital if 3% interest is allowed because there were no special reasons existing for allowing a higher rate.\n\nIn dealing with this aspect of the matter it is relevant to point out that no distinction has been made by tribunals between reserves used as working capital and depreciation fund similarly used. In the Mill Owners Association, Bombay v. The Rashtriya Mill Mazdoor Sangh(') (page 523) when labour objected to the depreciation fund earning any return even if it was utilised in or about the business of the year, the Labour Appellate Tribunal overruled the objection and observed that \" no essential difference could be\n\nrµade between the depreciation fund and any other\n\n(r) (1955) I L.L.J. 73.\n\n(2) (r952) I L.L.J. 5r8, 522.\n\n(3) (1958) I L.L.J. 645.\n\nfund belonging to the company wich could be investx959 ed so as to earn a return\". It is thus clear that what is The A ssociatcd material is not the origin of the fund. . It is the fact Cement that the fund in the hands of the concern has been Companies Ltd. used as working capital that justifies the claim for v. an adequate return on it. We think it is common- Its Workmen sense that if the concern utilises liquid funds available G . d-dk 1 in its hands for the purpose of meeting its working a; en raga ar .• expenses rather than borrow the necessary amount.s it is entitled to claim some reasonable return on the funds thus used. It is of course necessary that the employer must show that the amount under the depreciation fund was in fact available and that it has actually been used as working capital during the relevant year. What return should be allowed on such funds must inevitably be a question of fact to be decided by the tribunal in its discretion in each case in the light.of the relevant circumstances. It would thus be noticed that in working out these two items under the formula there is no fixed or rigid rule about the rate of interest which can be claimed and awarded. It is also clear that if any fund is used by the employer for the purpose of expanding his business he is not entitled to claim any return on such fund under those items. In the case of the U. P. Electric Supply Co., Ltd. etc. Electricity Supply Undertakings (1) the . Full Bench of the Labour Appellate Tribunal held that \"considering all the factors presented to them they did not think that a case had been made out for giving a special prior charge in the shape of return on . the reserves utilised for expansion \".\n\nWhen the amounts awardable to the employer under these two items are determined they have to be treated as prior charges in the calculation of available surplus under the formula. • The original formula referred to replacement, rehabilitation and modernisation of the plant and machinery. Soon after the formula was evolved a dispute arose as to whether the industry was entitled to claim\n\nreabilitation for its buildings as well and it• was held that \"a claim for rehabilitation for buildings had to •\n\n(1) (1955) II L.L.J. 431.\n\n'959 be treated as a prior charge just like the claim for the rehabilitation of pltnt and machinery\" (1). , This posi- The Associated tion is not disputed before us, and we think rightly.\n\nCMnent - That takes us to the item of rehabilitation and it is Co1npanie.<o Ltd. v. this item which poses a very difficult problem. We Its wo, kmen have already noticed that the object of providing . - depreciation of wasting assets in commercial account- GaJendragadkar l ing is to recoup the original capital invested in the purchase of such assets; but the amount of depreciation which is allowed under the formula can hardly cover the probable cost of replacement. That is why the formula has recognised the industry's claim for rehabilitation in addition to the admissible depreciation. Since the Second World War prices of industrial plant and machinery have registered a continuous upward rise and its inevitable consequence has been a proportiono.te rise in the claim for rehabilitation. In considering the claim for rehabilitation it is first necessary to divide the blocks into plant and machinery on the one hand and other assets like buildings, roads, railway-sidings, etc., on the other. Then the cost of these separate blocks has to be ascertained and their probable future life has to be estimated. Once this estimate is made it becomes possible to anticipate approximately the year when the plant or machinery would need replacement; and it is the probable price of such replacement on a future date that ultimately decides the amount to which the employer is entitled by way of replacement cost. 'Ihis problem can be considered itemwise where the industry does not own too many factories and itemwise study of the plant and machinery is reasonably possible; but if the industry owns several factories and the number of plants and machines is very large it would be difficult to make a study of the replacement costs itemwise, and in such a case the study has to be blockwise. In either case what the tribunal has to estimate is the probable cost of replacement of plant and machinery at the time when such replacement would become due.\n\nIt would •be clear that the decision of this question • would inevitably depend upon several uncertain\n\n(1)\n\n(195?,) I L.LJ. 518, 522.\n\nSUPREME COtrB.T REPORTS 961\n\nfactots. The estimate about the probable life of the 1959 plant and machinery is itself to son1'8 extent a matter The AssociaM4 of guess work and any anticipation, however intelli- Cement gently made, about the probable trend of prices during Companies Lt&: the intervening period would be nothing but a guess. v.\n\nThat is how, in the determination of this problem; Its Workmen several imponderables face the tribunals.\n\n0 f th t h' h t tt.. Gajendtagadkat J.· ne o e porn s w w -raises a con roversy :m i±lS connection is : What level of prices shouldthe tribu:- :hal consider in making its calculations about the ptobable cost 0£ replacement ? Would it be the price level prevailing during th-e bonus year or that pievaif-. ing at the time when the tribunal holds its enquiry?- Prima facie it may appear that it is the price level prevailing in the bonus year that should be treated as relevant; but if the relevance of the evidence about th:e price level is limited only to the bonus year~ it may hinder rather than help the process of a satisfac• tory determination of the probable cost of replacement, What the tribunal has to do in determining such cost is to project the price level into the future and this can be more satisfactorily done if the price level whfoh: has to be projected into the future is determined not only in the lightof the prices prevailing duringthe bonus year but also in the light of subsequent pri'ce levels. It seems to us that in: order to enable the tri• bunal to make an estimate in this matter as near actualities or realities as possible it is aecessary that the tribunal should be given fuU discretion to adm'it all relevant evidence about the tren<lin price 1-evels.\n\nThe prfoe level during the bonus year would no dottht be admissible ; but that alone should not be taken as the basis for decision. That is the view which the tribunals have taken in a majority of caise_s in dealing with the question of reh!!!bilitrution rund we do :oot think that there is any justifieation for disturbing the\n\nusua~ practice in that behalf. .\n\nThe problem of determining the' probruhle cost 0f replacement itself is very difficult;- butth€'. difficulty is immeasutably increased,~ when it, is rememberedthai.t the cfam for rehabilitation. covers not only cases of •\n\n1\"23\n\nI959 replacement pure and simple but of rehabilitation and modernisation.\n\nI11 the context rehabilitation is distin- The Associated h d f d h Cement gms e rom or inary repairs w ich go into the companies Lid. working expenses of the industry. It is also distinv. guished from replacement.\n\nIt is quite conceivable Its Workmen that certain parts of machines which constitute a - block may need rehabilitation though the block itself Gajendragadhar f. can carry on for a number of years ; and this process of rehabilitation is in a sense a continual process. Unlike replacement, its date cannot always be fixed or anticipated. So with modernisation ; and all these three items are included in the claim for rehabilitation.\n\nThat is why we think it is necessary that the tribunals should exercise their discretion in admitting a.II relevant evidence which would enable them to determine this vexed question satisfactorily.\n\nAt this stage it is relevant to remember that the claim under this item is confined to rehabilitation, replacement and modernisation. It is common ground that expansion of the plant and machinery is not included in this item ; but in several cases it is not easy to distinguish between modernisation of the plant and machinery and its expansion. It is urged that an expert can, if he so chooses, make an attempt to include expansion within what he may describe as modernisation by clever use of technical words and details, and that it is precisely this aspect of the matter which has to be carefully examined by the tribunal. The industry sometimes claims that a plant may become obsolescent because it has become out of date and has to be substituted by a new mo, flern plant.\n\nIs the introduction of the new modern plant in such circumstances an item of expansion or mere modernisation? It is difficult to lay down any general tests which woulcf govern the decision of this question. If jt appears fairly on the evidence that the introduction of the modern plant or. machine is in substance an item of expansion of the industry, expenses incurred in that behalf have to be excluded. On the other hand, if the employer had to introduce the new plant !)ssentia':lly becl).use the use o, f the old plant-though ' capable of givi_ng service-was uneconomic and otherwise wholly inexpedient, it may be a case of modern\" isation. Similarly, if by the introd'ltction of a. modern\n\nI959\n\nThe Associated plant or machine the production capacity of the Cement industry has appreciably increased, it would be rele\" Companies Ltd. vant for the tribunal to consider in an appropriate v. case whether it would be possible to apportion ex- Its Workme~ penses on the basis that it is a case of partial modern- -- isation and partial expansion. If, however, the Gajendragadkar J. increased production is not of a significant order it may be regarded as incidental to replacement or modernisation and the question of apportionment may not arise. We have set out these considerations in order to emphasise the fact that in dealing with the problem of rehabilitation the tribunal must carefully examine the evidence and consider the employer's clairri in all its aspects before determining the amount which should be allowed by way of rehabilitation as a prior charge in the relevant year.\n\nThe decision on the question of the probable cost of rehabilitation is always reached by adopting a suitable multiplier. 'fhis multiplier is based on the ratio between the cost price of the plant and machinery and the probable price which may have to be paid for its rehabilitation, replacement or modernisation.\n\nSince there has been a continuous rise in the prices of industrial plant and machinery the older the plant which needs rehabilitation the higher is the multiplier, That is why there is always a competition between industry and workmen on this point. Industry is sometimes tempted to keep its old pre-1939 block alive with a vie~ to claim a higher multiplier which gives it a larger amount of rehabilitation expenditure; whereas workmen urge that the old pre-1939 block has been nominally kept alive as a device and so press for a lower multiplier which would reduce the claim for rehabilitation. Once a proper multiplier is adopted in respect of each one of the blocks the first step in determining the probable cost of rehabilitation can be easily taken. It then becomes a. matter of mere arit_hmetical cal cu la ti on. . _ , . At this stage the_divi139r &teps in .. The total amount required for rehabilitation whichi~ dl:lteJ!IDind y:he •\n\nt959\n\napplication of a suitable multiplier in respect of each block has to be dfVided by a suitable divisor in respect Ths Associated\n\nCement of each block in order to ascertain the annual require- Companies Ltd. ment of the employer in that behalf year by year.\n\n\"' In the case of the divisor the employer seeks for a lls Workmen lower divisor whereas workmen claim a higher divisor - and this contest has to be decided by the tribunal by Gajendragadkar ]. h\" £ 1 th \"d b ,. \"t\n\nreac . mg a air cone usron on e ev1 ence eiore 1 about the probable future life of the block in question.\n\nIt would thus be noticed that the adoption of a suitable multiplier and divisor plays a very important part in the decision of the vexed question about the employer's rehabilitation claim.\n\nBefore actually awarding an appropriate amount in respect of rehabilitation for the bonus year certain deductions have to be made. The first deduction is made on account of the breakdown value of the plant and machinery which is usually calculated at the rate of 5% of the cost price of the block in question. Then the depreciation and general liquid reserves available to the employer are deducted. The reserves which have already been reasonably earmarked for specific purposes of the industry are, however, not taken into account in this connection. Last of all the rehabilitation amount which may have been allowed to the employer in previous years would also have to be deducted ifit appears that the amount was available at the time when it was awarded in the past and that it had not been used for rehabilitation purposes in the meanwhile. These are the broad features of the steps which have to be taken in deciding the employer's claim for rehabilitation under the working of the formula.\n\nIt would thus be clear that the decision of this major item• in the working of the formula presents many difficulties; and in the last analysis its decision depends upon several hypothetical and empirical cimsiderations. It is, therefore, not surprising that in the case of Metal Box Co. of India, Ltd. v. Its\n\nWorkmen (1 ) the Labour Appellate Tribunal has observed that \" It is unfortunately too true that all\n\n(1).[1952} L.A.C. 315, 321. ...\n\ns.c.R.\n\nSU:PEE~E COURT REPORTS\n\nour calculations as to rehabilitation may be dispro¥ed .r959 by subsequent events; it is impssible to say what the ld b h The A ssociq.td trend of world prices wou e in t e next fifteen Cement years or which circumstances will intervene before Companies Ltfi. :that period to upset such calculations one way or the v. other, and no calculations of this kind are capable of Its Workmev mathematical accuracy. We have to take a common- . .~ ka sense view of these matters and make an allowance Ga; en<lragad\n\n' J. for rehabilitation to the best of our ability and in accordance with our formula \". It has also been observed by the Labour Appellate Tribu.nal that if an appropriate multiplier and divisor are determined \" they are generally used because the tribunals ta.Ire the view that the reconsideration of the said multiplier and divisor should not be hastily undertaken and could be justified only on the basis of a substantial change of a stable character extending or likely to extend over a sufficient number of years so as to make a definite and appreciable difference in the cost of replacement\". (Vide: The Mill Owners Association\n\nBombay v. The Rashtriya Mill Mazdoor Sangh (1) ).\n\nIn dealing with the employer's claim for rehabilitation tribunals have always placed the onus of proof on the employer. He has to prove the price of the plant and machinery, its age, the period during which it requires replacement, the cost of replacement, the amount standing in the depreciation and reserve fund, and to what extent the funds at his disposal would meet the cost of replacement. If the employer fails to lead satisfactory evidence on these points tribunals have OJ.il occasions totally rejected his claim for rehabilitation. (Vide: Ganesh Flour Mills Co. Ltd., Kanpur\n\nv. Ganesh Flour Mills Staff Union, Kanpur(2) Bombay Gas Co. Ltd. v. Their Workmen (3); Dharan: gadhra Chemical Works Ltd. v. Its WPJrkmen (4) ).\n\nIf the tribunals are satisfied that the employer is deliberately and wit~ut a sufficient cause not taking any steps to rehabilitate, replace or modernise his machinery even though an appropriate allowance is made in that behalf from year to year, they may take ioto\n\n(I) {1952) I L.L.J. 5t8.\n\n(3) (1955) II L.L.J. 15'~·\n\n(2) [1952] L n.C. 172.j ('!) (1?e~) l J,,.L.J. 475\n\n'959 account this conduct j.n determining the extent of such\n\nThe Associa\"d allowance in the bonus year in question. Similarly if it Cement appears that the employer has deliberately or mala Companies Ltd. fide refrained from rehabilitating or replacing his old v. machinery with a view to claim a higher multiplier in Its Workmen calculating the rehabilitating amount, the tribunals G . d -dk 1 may take his conduct into account in determining the\n\n\"1'\" raga\n\n0 .' actual allowance of rehabilitation to him.\n\nThe main difficulty in deciding questions about reha. bilitation arises from the fact that satisfactory evidence is not always placed before the tribunals and it is urged that the evidence given by the employers' experts is interested and the workmen with their limited resources are not able to test the said evidence by adequate. or effective cross-examination. In such a case the tribunal may, if it so desires and if it is possible, secure the assistance of assessors (vide s. 38 of the Industrial Disputes Act). It is therefore neces- Bary that the tribunal should require the employer to give clear and satisfactory evidence about all the . rel.evant facts on which it can make the requisite estimate. The questions which the tribunal has to consider under this item are Assentially questions of fact and its final decision on them is bound to be hypothetical, since it would be based on a fair evaluation of several circumstances which are by no means certain and which cannot be predicated with any amount of precision or even definiteness. That is why it is of the utmost importance that all relevant and material evidence should be adduced by the employer and it should be properly tested by cross-examination. When that is done the tribunal must do its best to consider the said evidence objectively and reach its final decision in a judicial manner.\n\nOnce the amdunt of rehabilitation is thus determined the available surplus for the bonus year is ascertained and the final stage is reached when the tribunal has to give directions for the distribution of the said available surplus.\n\nIt is not seriously disputed that three parties are entitled to claim a share in this avail- •ablc surplus ; labour claims boµus from it, the industry claims a share for the purpose of its expansion •\n\n!...+.\n\nI959 and other needs, and share-holders claim a share by way of additional return on .the capital invested by them. In the case of the Mill Owners Association, The Associated\n\nCement Bombay (1) where the formula was evolved, out of the Companies.Lid; available surpliis of Rs. 2·61 crores 2·16 crores was vi distributed by way of bonus leaving a balance of 0·45 Its Workmen crores with the industry. In the Trichinopoly Mills - Ltd. v. National Cotton Mills Workers' Union (2) theGaj•ndragadkar J. available surplus was found to be Rs. 34,660 and out of it Rs. 30,000 was ordered to be distributed as bonus to the workmen.\n\nThese two and other similar instances, however, cannot be pressed into.service for the purpose of evolving any general rule as to the ratio or proportion in which the available surplus should be distributed. The ratio of distribution would obviously depend upon several facts : What are the wages paid to the workmen and what is the extent of the gap between the same and a living wage ? Has the employer set apart any gratuity fund? If yes, what is the amount that should be allowed for the bonus year? What is the extent of the available surplus?\n\nWhat are the. dividends actually paid by the employer and what are the probabilities of the industry entering upon an immediate programme of expansion? What dividends are usually paid by comparble concerns ? What is the general financial position of the employer ? Has the employer to meet any urgent liability such as redemption of debenture bonds? These and similar considerations will naturally determine the actual mode of distribution of the available surplus. In this connection labour's claim to fill up the gap between the wage actually paid to it and. the living wage has an important bearing on the decision of this point. Industry's claim for paying additional return on capital and for making addtional\n\nprovision for expansion would also have to be considered. The fact that the employer would be entitled to a rebate of income-tax on the amount of bonus paid to his workmen has to be taken into acount and in many cases it plays a significant part in the final distribution.\n\nTherefore, in our opinion,· once the •\n\n. (!). (195.2) I L.L). 518.\n\n(2) (1?5~ IILbJ ~?z. . j\n\n'959 available surplus is determined, the tribunal should,\n\nTl>e Associated in the light of all refevant circumstances, proceed to\n\nCemen• make an award directing the payment of a fair and Companies Ltd. just amount to labour by way of bonus. If the formula v. is thus worked reasonably it would in a large majority Its Workmen of cases succeed in achieving its principal object of\n\nG . , --:= 1 doing justi-0e both to labour and industry. •J•••r•c~••r ·\n\nB ,.. 'th th f k' th eiore we part w1 e questrnn o wor mg e formula it is necessary to observe that the practice adopted by some tribunals in giving the amount of bonus a priority in the calculations is not justified.\n\nLogically it is only after all the prior charges have been determined and deducted from the gross profits that available surplus can be ascertained; and it is only after the available surplus is ascertained that the question of awarding bonus can be considered. Some tribunals seem to work out notionally the amount of bonus which they think can be awarded and place that amount higher up in the process of making calculations before the income-tax payable is determined.\n\nThe inevitable consequence of this procedure is to make the amount of tax proportionately less.\n\nWe wish to make it clear that this procedure should not be followed.\n\nAs we have already pointed out, in directing the distribution of the available surplus the tribunal has to take into account the rebate of incometa:it to which the employer is entitled on the amount of bonus paid to his workmen but that on principle is different from placing the amount of bonus immediately after depreciation in the working of the formula. , :ft has been urged before us by the respondents that the amount of rehabilitation as well as the amount of depreciation should be deducted from the gross profits before income.tax payable is ascertained. In this connection reliance is placed on the fact that in its judgment which evolved the formula the Labour Appellate Tribunal has at one place described rehabilitation as the first charge in priorities. Having regard to the context in whfoh the said statement is made it , is clear that all that the Labour Appellate Tribunal wanted to mphasise was that the textile industry •\n\nwith which it was directly concerned in the said case r 959 needed rehabilitation very urgently:' The final cal cu- The Associated lations made in the judgment give a clear indication as cement to how the formula has to be worked out. We are, Companies Ltd. therefore, satisfied that rehabilitation cannot be given v. the high priority claimed for it by the respondents.\n\nIts: Workmen We must now consider whether the tribunal wasG . d-dk . . h . d\" . h t• h Id b a; en raga ar J. rig t rn irectrng t at over ime payment s ou e included in the calculation of the bonus which it has directed the appellant to pay. Mr. Kolah contends that the direction to include overtime wages is contrary to the usual practice followed by industrial tribunals and it is also unsound on principle.\n\nThis dispute arises between the employer and the workmen in this acute form because the total amount of bonus is not determined logically after ascertaining the available surplus. If the said amount is logically determined as indicated by us, then the question as to whether overtime wage& should be included or not would really be a matter of dispute between workmen inter se ; because\n\n- once the amount of bonus is determined, how it should be distributed between workmen inter se would cease to be a matter of direct concern to the employer.\n\nTherefore we think that there would be no occasion for such a dispute between the employer and his work- men if the tribunals follow the logical method of determining the amount of bonus in the manner indicated by us.\n\nOn principle we do not think it would be fair to the workmen as a whole that overtime should be included in calculating the bonus which each workman should receive. Workmen who do overtime get additional payment for such overwork. If in addition to sucli payment they are allowed to include the said payment in their wages in calculating bonus to which they are entitled, obviously the gap between their actual wage and he living wage would be filled up to a larger extent than in the case of other workmen who do not receive such.additional overtime payment. Besides, if the payment of bonus proceeds on the broad consideration that it is due to the workmen for their contribution to the profits it would be unreasonable to make . . 124\n\nz959 a distinction between workmen and workmen on the\n\nThe Associated ground that some\"'have contributed more to the profit Cement than others; and that is exactly what would follow if Compan; es Ltd. overtime workers are allowed to claim a larger v. amount of bonus than their other colleagues. That Its W°'kmen is why we think that the tribunal was not justified\n\n• d dk 1 in directing that the calculations of bonus should be GaJe• raga ar made on the basis that overtime payments constituted a part of the basic wages of the employees.\n\nThe next point to consider relates to the return on paid-up capital to which the appellant is entitled. The tribunal has awarded to the appellant return at the rate; of6% on paid-up capital and at 4% on the working capital. The appellant claims a return at a higher rate on paid-up capital whereas the respondents contend that the return should be paid on the paid-up capital at a lower rate. In support of its claim for a higher return the appellant has relied on the fact that\n\nit has consistently paid dividends at a reasonably low rate and it did not seek to make undue profits even during the years of war. In this connection Mr. Kolah • has invited our attention to a statement, Ex. C-1, showing the percentage of dividend to paid-up capital and invested capital for the eighteen financial years 1936-37 to 1953-54 and he has asked us to contrast the low rates of dividend evidenced by it with dividends paid by other companies as shown by another document Ex. C-12. He has also asked us to take into account the highest and the lowest quotation for the company's shares in the Bombay Stock Exchange during the period 1949-55. On the othei:- hand Mr.\n\nDudhia has urged that during the relevant year the appellant has capitalised Rs. 35·85 lakhs from the reserve fund and 175·45 lakhs from Premium-on- Shares Acoount by issuing one bonus share for every five shares held by the shareholders; and he argues that the tribunal was in error in allowing 6% on the paidup capital during the bonus year. Incidentally Mr.\n\nDudhia also relied, though half-heartedly, on the finding of.the tribunal that the appellant had paid an inflated price for the pre-1939 block. It is true that in one pl!l'ce the tribunal has made an observation to\n\n. •\n\nr959 this effect ; but it is clear that the said observation is inconsistent with its definite finding recorded earlier f • h d The Associated in the course o its Judgment t at it was not prepare Cement to hold that the A. C. C. had inflated the capital companies Ltd • . invested by the merging companies by taking them v. over in 1936. Therefore this part of Mr. Dudhia's Its Workmen argument is invalid. In our opinion, the question as . - to what return should be allowed to paid-up capital in Ga; endragadkar J. a given case must be left to be determined by the tribunal in its discretion having regard to all the relevant facts ; and if the tribunal has in its discretion awarded 6% interest on the paid-up capital we see no reason to interfere with its decision. It is clear that no question. of principle or law is involved in the matter.\n\nThere is one more point which we must consider before we proceed to deal with the facts in the present case. This point relates to the employer's claim to treat the amount in the gratuity fund as a prior charge ; and this claim has been allowed by the tribu- - nal. It appears that in M/S. Metro Motors v. Their Workmen (3) the Labour Appellate Tribunal observed that it was desirable in all cases to create a separate reserve fund for the payment of gratuity and it directed that the modest fund claimed by the employer for the year in question was a proper deduction from its profits. The question which we have to decide is whether the allowance on this account should be treated as a prior charge in making the calculations under the formula.\n\nThere can be no doubt that, in a sense, the gratuity fund is created for the benefit of workmen and there should be no difficulty in recognising the appellant's claim for the deduction of an appropriate amount on this account; but we think on principle it is desirable that no additionshould be made to the list of prior charges recognised by the formula. Even so when the available surplus is determined the tribunal ought to take into account the employer's elaim on aeeount of the gratuity fund created for the benefit of his workmen and the amount which the tribunal may regard as a reasonable\n\n(1) (1952) II L.L.J. 205, •\n\nI959\n\nallowance in that behalf should be definitely borne in mind in finally dtCiding the amount which should be The Associated\n\nCemen• paid to the workmen by way of bonus. This method Companies Ltd. will meet the employer's claim adequately without v. making any addition to the list of priorities specified lls Workmen in the formula. Mr. Dudhia contended that the\n\n. dk 1 tribunal should not have allowed R.s. 10 lakhs under Ga1en ragad or this item but we do not think there is any substance in this contention.\n\nIncidentally Mr. Dridhia has pointed out that in dealing with the appellant's claim for a return on working capital the tribunal has made a mistake by including a further sum of 0·66 lakhs as return on investments. Mr. Kolah has conceded that this is a mistake and so the return on the working capital would stand at 26·10 lakhs only.\n\nIt is now necessary to consider the evidence of Mr. Tongaonkar and decide the most controversial point of fact in dispute between the parties about the appellant's requirements for rehabilitation. Mr. Tongaonkar holds the Degree of Bachelor of Science of • the London University, and he is also a Member of the Institution of Electrical Engineers, London.\n\nHe joined the appellant in November 1934, but before that he had nearly three years' practica-1 experience in England in various engineering firms ; and on his return to India, he had joined the Dinshaw group of cement factories. He continued to work with the said group until its merger with the appellant in 1936, when he was appointed by the appellant. Mr. Tongaonkar is in charge of the department •which deals with the construction of new cement factories, modernisation and extension of the existing cement factories, design and manufacture of cement machinery for A. C. C., an<l major engineering problems of the A.C.C.\n\nSince April 1956 he has been appointed the Controller of Planning and Development of the A. C. C.\n\nHe visits the A. C. C. factories very frequently and claims to be acquainted with the oonditioll\" of the plant and machrnery at all the A. C. C. factories.\n\nThere is no doubt that Mr. Tongaonkar is qualified to give evidence on the. technical points which are relevant in\n\ndealing with the question of reb._abilitation. Even so, z959 in appreciating his evidence, it would not be unreason- The Associated able to bear in mind the fact that he is an officer Cement employed by the appellant, and as such he is likely to Companies Lid. be interested in supporting the claim for rehabilitation v. which the appellant has decided to make.\n\nIts Workmen According to Mr. Tongaonkar, the average future G . d-dk 1 life of the plant and machinery existing in 1939 would a; en raga ar_ be approximately seven years from 1-8-1954. Similarly, the approximate future life of the three other categories of blocks would be 13, 15 and 20 years respectively. He has stated that in calculating the life of machinery, it is ncessary to take into consideration, first the mechanical condition of the machinery, second whether it is efficient or has been rendered obsolete because new machinery of modern design with a considerably better efficiency has come into the market.\n\nIn other words, the probable useful life of the machinery may be prematurely determined by the emergence of more efficient machinery. In support of this statement he has given some instances where the appellant's plant or machinery had to be changed mainly for the reason that a new corresponding plant or machinery was more efficient and gave more satisfactory results. However, stated generally, .. in the opinion of the witness, the average life of a cement plant taken as a whole would be 25 years if it is properly maintained.\n\nMr. Tongaonkar then gave evidence about the rise in prices of plant and machinery and he produced Ex. 0-36 which is a statement showing the progressive increase in prices from pre-war days up to 1955-56 of major items of machinery, gear boxes, motors and power plant used in cement factories.\n\nHe has stated that the said statement had been prepared on the basis of actual quotations which he had in his possession. His evidence shows that between 1951-54 there has been a rise ofll %, whereas between 1954-56 there has been a rise of 7% in the prices of the relevant items of machinery. He then sought to corroborate his evidence on this point by the expenditure actually incurred by the appellant while putting into commission\n\n'959 a new cement factoi;.v at Sindri in about 1955.\n\nThs Associated The calculations made by him in this behalf show that\n\nCement the cost of construction of a new factory is approxi- Companies Ltd. mately 4·3 times the cost of construction of similar v. factory in 1939.\n\nIts Wo>kmen In regard to the life of buildings, Mr. Tongaonkar\n\n• . d-dk 1 stated that first-class buildings lived approximately\n\n' 01'\" •aga\n\n0 ' • c 40 'd d th 1 ' d 1or years prov1 e ey are proper y mamtame and provided they are not in earthquake zone; but he added, that for the main unit of the cement plant it is usual to take the life of buildings at 25 years. He also stated that in many cases the existing buildings have got to be either demolished or considerably modified when the main machinery whose life is 25 years has to be replaced by modern machinery which is of a. different design and which would require buildings and foundations of different size and type. Thus, for this special circumstance also, he was not prepared to give the buildings of the appellant an average life longer than 25 years.\n\nIn regard to the increase in the cost of constructing buildings, he produced two statements, C-6 and C-14.\n\nEx. C-6 shows the increase in prices of building materials since 1938-1954, whereas Ex. C-14 shows the continually increasing amount of expenditure incurred by the appellant for construction of labour quarters, etc.\n\nIt is on this evidence that Mr. Tongaonkar has adopted the respective multipliers and divisors in arriving at the figure of the amount required for rehabilitation. As we have already pointed out, for the pre-1939 block he has taken 4'28 as the multiplier, whereas for the block purchased between 1940-44: he has taken 2·8 as the multiplier. He has explained that the multiplier <1f 4·28 is really made up of two multipliers. Certain portion of the plant and equipment which is obtained from abroad is estimated at 60% of the total cost and the expenditure on the remaining items is estimated at 40% of the total cost.\n\nThe m11ltipliers of these two groups are estimated at 4·8 and -3·5 respectively, and by calculations it has been noticed that the ayerage ratio comes to 4·28. This is the •\n\n-··\n\ngenesis of, and the justification for, the adoption of r959 4\"28 as the multiplier. He ha!!' also added that the The Associated proportion of 60% and 40% which he had mentioned cement was based on his experience of building a number Companies Ltd. of cement factories and of carrying out extension v. and modernisation of existing cement factories.\n\nThe Its Workmen multiplier was based, said the witness, on the state Gajendragadkar 1 of comparative quotations of plant, and machinery received in 1939 and quotations received of similar machinery recently. It would thus be clear that in devising the multiplier and divisor, Mr. Tongaonkar has drawn very largely on his experience and has drawn inferences which he thought were reasonable.\n\nBesides in making the relevant calculations he has not dealt with the plant and machinery and the buildings and other assets separately, but has lumped them together under the respective blocks.\n\nThe approximate cost of the merging companies of their a.ssets as on July 31, 1936, was 5·73 crores of rupees. Ex. C-3 which is a certificate issued by the Chartered Accountants shows that \"according to the blocks, the original cost of the block of fixed assets excluding good will and purchase of rights and land as at 31st July, 1954, of the appellant under the groups of years of acquisition'', amounted to Rs .. 19,41,38,100.\n\nSimilarly, Ex. C-28 which is also a certificate issued by the Chartered Accountants, shows that the original cost of such portion of fixed assets excluding goodwill and purchase of rights and lands as have been discarded, scrapped or sold as on July 31, 1954, of the appellant cQmpanies under the groups of years of acquisition noted in the certificate, amounted to Rs. 1,70,91,\n\n296. The figures supplied by these two certificates are mentioned in cols. 2 and 3 respectively in Ex. C-2.\n\nUnder the method adopted by Mr. Tongaonkar the cost of discards is shown in the respective years when the portions of blocks were discarded; and the amounts spent on rehabilitation from year to year have gone with the blocks of the said respective years shown in col. 2.\n\nThe amount of rehabilitation has thus been calculated by the adoption of the multiplie~ and divisor selected by Mr. Tongaoqkar. The question . ..\n\n'959 which calls for our decision is whether the multipliers\n\nThe Associated and divisors adopted 1\"' Mr. Tongaonkar can be said Cement to be appropriate. As we have already mentioned, it companies Ltd. is the multipliers and divisors that play a decisive part v. in the determination of the employer's claim for lts Workmen rehabilitation in all bonus proceedings.\n\n~ . d gad'a J.\n\nMr. Tongaonkar's evidence has been severely criti- ; a; en '° \" ' d d- f h b l d cised by the respon ents an m act, t e tri una oes not appear to have been favourably impressed by it.\n\nBefore dealing with the criticism made against his evidence, it would be pertinent to observe that the witness has given exhaustive details on the points put to him in examination-in-chief, and his evidence, read as a whole, does make an imposing reading. But sometimes the wealth of details given by experts is apt to complicate the narrow points of dispute between the parties and to create doubt and confusion ; the large number of technical details expressed in technical language may, in some cases, tend to cloud rather than clarify the points which the tribunal has to consider.\n\nWe feel inclined to hold that that is what has happened to some extent in the present case. But that by itself cannot obviously be said to introduce any infirmity in the evidence given by the expert or affect its credibility. It only means the tribunal has to analyse his statements, examine them carefully in the light of his cross-examination and decide how far it would be justified in acting on them.\n\nIt has been urged before us by the respondents that the claim made by Mr. Tongaonkar in regard to the rehabilitation of the pre-1939 block should be i; ejected.\n\nThe contention is that this block must have been .completely replaced before 1953 and no claim for its rehabilitation can be entertained. This argument was based substantilly on the assumption that a part of Rs. 997-42 lakhs must have been utilised for the purpose of replacing the said block. Mr. Tongaonkar has stated that prior to 1-8-1954 the total amount spent on modernisation, replacement and rehabilitation and othe:i; sundry jobs, but excluding expan- .sic:in, was approximately Rs. 9·97 crores, and in support of this tatement he produced Ex. C-29,\n\n·-\n\nwhich shows the said expendite year by year. z959 According to this statement 78 lakhs had been. spent The Asscciated on the construction of Rohri Works and Kistna Works, Cement and Rs. 622·13 lakhs had been spent on the expansion companies Ltd. during the post.war period. This gives the figure of v.\n\nRs. 700•13 lakhs.\n\nDeducting this amount from the Its Workmen total expenditure of Rs. 1697·55 lakhs, the balance of G . - Rs. 997•42 lakhs is shown as expenditure on moderna; endragadkar f. isation, rehabilitation, replacement and other sundry capital jobs. It is in respect of' this amount of Rs. 997·42 lakhs that Mr. Tongaonkar was severely cross-examined. In cross-examination he stated that he was not in a position to say whether out of the total expenditure of Rs. 997·42 lakhs shown in Ex. 0-29 a major portion had been spent on rehabilitation and replacement of the pre-1939 block and 1940-44 block. He admitted that the figures in Ex. C-29 had been prepared by the Accounts Department from the :Financial Books so far as year to year total expenditure was concerned and he also stated that it was -n.ot possible for him to give details about the said expenditure. These answers indicated that the amount of Rs. 997·42 lakhs had been ascertained mechanically by deducting from the total expenditure of Rs. 1697·55 lakhs incurred on all jobs up to 31-7-1954 the estimated expenditure of Rs. 700·13 lakhs which was treated as expenditure for expansion during the said period. It is on these statements that the respondents placed reliance in support of their argument that the amount of Rs. 997·42 lakhs must have been utilised for completely repla.cing the pre-1939 block.\n\nThus presented, the argument no doubt appeared very plausible, and so we asked Mr. Kolah to give us a satisfactory explanation about the items of this expenditure.\n\nAccordingly Mr. Kolah has filed a state:dl.ent, Ex. I which gives a rough classification of the total capital expenditure of about Rs. 997 lakhs incurred up to 31-7-1954 on modernisation, replacement, rehabilitation and other sundry and miscellaneous jobs. The several items of this expenditure are broadly indicated under eight heads, the last of which covering an •\n\nI959 amount of Rs. 160 jakhs has in its turn been split up into five separate items by the statement I(a). There The Associated b Cement was some dispute before us a out the admissibility of Compani\" Ltd. some of the said items under cl. 5 of this document v.\n\nI(a). But Mr. Kolah contends, and it is not disputed Its Workmen by the respondents either, that even if the whole of the - disputed item 5 is excluded, the remaining items on Gajendragadkar J. Ex. I give a fairly satisfactory explanation about the work of rehabilitation, replacement and modernisation on which the bulk of Rs .. 997·42 lakhs must have been spent. In view of this statement we must hold that the assumption made by the respondents that the said amount of Rs. 997·42 lakhs must have been utilised for replacing the pre.1939 block is not well-founded.\n\nIt is then contended that there is no justification for keeping the pre.1939 block still alive in view of the estimate made by Mr. Tongaonkar about the life of the cement plant and machinery.\n\nThe suggestion is that the oldest block is deliberately kept alive in order to enable the appellant to claim a higher multiplier in calculating the rehabilitation amount. It cannot be-- said that there is no force at all in this criticism. In fact Mr. Tongaonkar himself has admitted that a given portion of this block could have been discarded earlier, but he added, that a part. of it had been rehabilitated as a temporary measure in order to carry on. That is why that particular portion of the block had not been discarded so far.\n\nAccording to him the pre-1939 block contains a portion whose useful life is already over, but the appellant would have to carry on with it until finances could be found for\" modernisation or reconstruction or entire replacement of the said block. In our opinion, this explanation cannot be said to be wholly satisfactory. If the useful life of the whole •block had really expired, the appellant would have easily found it possible to replace the said block in due time having regard to its general financial position.\n\nThe next criticism made against Mr. Tongaonkar's evidence is that admittedly he has not calculated the • average life of the said block. He stated that he had assessed the pre-1939 block by his personal visits to •\n\nthe factory by observing to what extent it had been\n\nI959 rehabilitated as a temporary measure and by consider- T he Associated ing what its present condition was. It is possible that Cement with his knowledge and experience Mr. Tongaonkar Companies Ltd. may be able to form a proper assessment about the v. life of the machinery in the manner deposed to by Its Workmen him. But unfortunately, effective cross-examination . - h• t h b t\"fl d t t t b Ga; endragadkar ]. on t 1s porn as een s 1 e .o some ex en ecause we find that on some material points questions put to the witness were objected to by Mr. Kolah and the objection was upheld by the tribunal. The witness was asked whether he could tell the tribunal with his wide experience, how many years on the average 1939 block had spent prior to 1939. This question was clearly relevant and from the respondents' point of view it was important. If the witness was able to predicate about the future useful life of the machinery from his examination of the plant, it was suggested to him that it should be possible for him to give an estimate about the life already spent by it by the same -process. The object of this question obviously was to show that the machinery in question had lived much longer than its estimated life as deposed to by the witness.\n\nThis question having been disallowed, any further cross-examination to test the claim of the witness that from the inspection and examination of the mauhinery he can predicate the period of its future useful life became impossible. The witness was further asked to state whether it would be correct to assume that the said pre-1939 block had on an average spent more than i5 years of its life. This question also was disallowed, and the respondents naturally make a serious grievance that they were not given an opportunity to show that Mr. Tongaonkar's estimate about the life of the plant and machinery was a -gross understatement.\n\nThe respondents have then objected to the inclusion of several items in the approximate cost of rehabilitation mentioned in col. 8 of Ex. C-2.\n\nThe new additional packing machine in regard to the fadory at .\n\nBanmore as well as the crane storage are, it is urged, • not items of rehabilitation, but of expaHsioq. .Similar\n\n1959 criticism is made in regard to the dust-collector plants, coal-handling plants, items in regard to the fluidifica- The Associated Cement tion system, diesel engine shunting locomotive and Companies Ltd. similar other items. The respondents' grievance is v. that by including these items which are really matters Its Wo•kmen of expansion, the amount of approximate cost of reha-\n\n- k bilitation has been unduly increased. We are unable Gajendragad ar ]. t \"f th . . . t'fi d o say i e grievance is JUS i e .\n\nIn regard to the multiplier adopted by Mr. Tongaonkar, the criticism is that it is based on hypothetical considerations determined by him in a subjective manner. It is also pointed out that the failure of the witness to take out the present day replacement cost of individual items of the pre-1939 block has introduced an additional element of uncertainty in the final calculations made by him in regard to the multiplier.\n\nNo doubt, the witness has stated that he has used the multiplier of 4·8 on a comparative study of the quotations received between 1939 and the present day, but dealing with the machinery blockwise is not a very satisfactory way of determining such a multiplier. Insupport of this argument, reference is made to the statements made by the witness to the cost of 180-tonper-day kiln, if manufactured by the appellant, would be lower than that of a 300-ton-a-day kiln.\n\nThe witness then added that the appellant does not manufacture a 180-ton-a-day kiln, and if such a kiln is imported from abroad its cost would be somewhat higher than that of a 300-ton-a-day kiln manufactured by the appellant under present day conditions. He was then asked whether he had got a qutation of a 180-ton-a-day kiln, and he admitted that he had none, and that he had estimated it approximately at Rs. lli lakhs. The respondents urged that this estimate about the cost of Qll imported 180-ton-a-day kiln is purely notional and is not based on any material at all. This part of the criticism is justified.\n\nThe next argument urged against the statements prepared by Mr. Tongaonkar is that he appears to have taken into account the prices prevailing in 1956 • ' and has completely ignored the prices as they obtained in the preyious years. We have already observed that\n\nin deciding the amount of rehabilitation by the adopz959 tion of an appropriate multiplier~ the tribunal should The Associated take into account all relevant facts and these would Cement not be confined to the price level prevailing in any Companies Ltd. one particular year. When deciding the hypothetical v. question as to what would be the price in future when Its Workmen the plant and machinery would have to be replaced or - rehabilitated, the tribunal has to take an overall Gajendragadkar f. picture of prices into account, and the argument is that concentration on the price level of 1956 alone has introduced an infirmity in the calculations made by the witness.\n\nThere is another infirmity in these calculations which has been criticised by the respondents. Mr. Tongaonkar has lumped together the plant and machinery as well as buildings and other properties belonging to the appellant in col. 2 of Ex. 0-2. The more scientific and satisfactory method of dealing with the question of rehabilitation is to treat the plant and machinery separately from the buildings and other assets that - need rehabilitation. In fact we asked Mr. Kolah to give us a statement showing the cost of the plant and machinery and the buildings and other assets separately in order to enable us to have a clearer picture about the extent of the rehabilitation needs of the appellant.\n\nHe has acP-ordingly filed a statement, Ex. F(a).\n\nThere is yet another point on which Mr. Tongaonkar's evidence has been criticised by the respondents.\n\nIt is argued that this evidence shows that under his\n\nconcept'Of modernisation several items of expansion can be included. Mr. Tongaonkar has stated that by 'modernisation' he meant 'a composite scheme comprising replacement of the part af the old machinery by new machinery, installation ofadditivnal machinery because the layout of the composite modernisation scheme is different from the previous layout and rehabilitation of the remaining machinery as a short term measure'. By ' rehabilitatfon' he meant' alterations to a machine or machinery, installation forimprovii; ig its mechanical performance, its technical efficiency or • to extend its life by a further span '. . Th.is would also\n\nx959 include what he corgpendiously describes as the re-\n\nThe A<sociated moval of weak links.\n\nAccording to him expansion cement can be divided into two groups, viz., Group No. -1 Companies Ltd. construction of the completely new factory solely for v. obtaining additional production; and Group No. 2 Its Workmen would cover the specific additional machines which\n\nG • d-dk 1 are installed not for modernisation purposes as such, a; en raga \"' but with the primary object of obtaining additional production. He concedes that in the 'modernisation of an existing factory ' expansion is only a part of the scheme. This means that in the 'modernisation scheme' there would be an element of' expansion'. It would thus be clear that the very broad and wide description of 'modernisation' given by the witness would justifiably give rise to an apprehension in the minds of workmen that under the heading of 'modernisation' items of 'expansion ' pure and simple are likely to creep in. That is why evidence given by experts in such proceedings needs to be scrutinised carefully, with a view to exclude items of' expansion' properly so. called from the relevant calculations.\n\nMr. Tongaonkar. has stated that when plant or machinery is rehabilitated or replaced it may lead to increase in production. But such an increase is purely incidental. But what would be the position where, for instance, a 180-ton-a-day kiln is substituted by a 300-ton-a-day kiln by way of rehabilitation or replacement ?\n\nThe employer is entitled to say that the first category of kilns is not available in the market or that the later category of kilns is more profitable and economically more useful. That being so, if the first kiln is discarded and is substituted by the latter, that is an item of rehabilitation or replacement and not of expansion. On the other hand, by the substitation of the latter kiln there would be such an appreciable increase in production that the worknien may be entitled to contend that some apportionment should be made and the rehabilitation part of the machinery should be separated from the e4pansion part which has crept into the transaction . • We confess that it would be very difficult to undertake the tas.k of making any such apportionment.\n\nEven so, tribunals may have o consider the workz959 men's plea if'they are satisfied that the steps taken The Associated by the employer by way of rehabilitation have led to Cement a very large increase in production. In this connec- Companies Ltd. tion the respondents have relied on Ex. H. 0. C-2 v. which, according to them, shows considerable increase Its Workinen in production, and that, it is urged, is the result of . - d t f h b'lit t' Ga; endragadkar j. expans10n an no o re a I a 10n.\n\nMr. Tongaonkar has suggested in his evidence that it is the intention of the employer that decides the character of the transaction. If the employer wants to instal new machinery solely with the object of expanding his business, that is expansion ; but if he purchases new machinery for business reasons and not for the purposes of expansion, it would be rehabilitation notwithstanding the fact that the new machinery gives rise to increased production. This approach, in our opinion, gives undue importance to the intention of the employer and we think that, on a proper occasion, the question may have to be considered by the -- application of some objective tests. In this connection it would be relevant to bear in mind the fact that the steps taken by the appellant for rehabilitating, replacing or modernising its machinery are a part of its plan of expanding its business so as to meet the growing demand for cement in our country.\n\nIn deciding the question as to whether the claim as disclosed by the statements prepared by Mr. Tongaon kar is inflated or not, the respondents have asked us to consider the estimate made by the appellant's\n\nChairmn in that behalf. In his speech delivered on January 24, 1951, at the Fourteenth Annual General Meeting of the appellant company, the Chairman stated that most of the company's pre-war plant would be due for replacement in the cw.rse of the next ten years and he added that '' at the present price levels, replacement will cost on an average 2! times the original cost. This will involve an expenditure of about Rs. 8 crores over and above the provision already made for depreciation\". The contention .is that, considered in the light of this estimate, the pre-. sent claim for rehabilitation is very ip.uch inflated.\n\n'959 When Mr. Tongaonkai; was asked about this estimate he stated that the Chairman had not consulted him The Associated Cement while drafting the annual report or while drafting the Companies Ltd. portion of the speech in regard to ' rehabilitation ' and v. he also added that he did not agree with the figures Its Workmen given by the Chairman regarding the replacement\n\nG . d-dk 1 cost of plant and machinery in his report dated a1en rnga ar 'J 24 19 1 Th' 1 . anuary , 5 . is exp anat10n may not be very satisfactory. But we cannot ignore the fact that when the Chairman made his statement he did not purport to calculate the claim for rehabilitation in terms of the formula and so it would not be fair to test the evidence of the witness in the light of the estimate given by the Chairman in his speech.\n\n\\Ve have so far considered the broad arguments urged against Mr. Tongaonkar's evidence. U nfortunately, the tribunal has contented itself merely with the observation that the multiplier of 2·7 would be adeqnate; and it has given no finding as to the suitable divisor. That is why we mnst now proceed to adopt a suitable multiplier and divisor for deciding -- the question of rehabilitation. We have already stated our conclusions in regard to some of the infirmities in the evidence of Mr. Tongaonkar and the statements prepared by him. He has lumped together all assets of the appellant that need rehabilitation.\n\nHe has taken into account the prices prevailing only in 1956, and in the selection of an average multiplier he has probably been slightly generous to the appellant. His estimate about the life of the plant and machinery has not been allowed to be sufficiently tested in crossexamination and, on the whole, it appears to err a little too much on the side of a conservative estimate; and if that is so his divisor may need revision ; it is also probable that in the items included by him under rehabilitation may have been included some which are more of the character of expansion than rehabilitation, replacement or modernisation. Besides, it is not unlikely that the steps taken by the appellant ostensibly for rehabilitation, replacement and modernisation of •the machinery have appreciably increased its production, and that. may partly be due to the fact that the\n\ngeneral plan of expansion adoted by the appellant 1959 . has been in operation for some time past. It is in the The Associated light of these facts that we have to examine the appel- Cement lant's claim for rehabilitation. In doing so, we have Companies Ltd. taken Ex. C-2, Ex. C-23 and Ex. F (a) as a basis for v.\n\nOur calculations. It is somewhat unfortunate that in Its Workmen making its claim for rehabilitation Mr. Tongaonkar - d\"d t k 1 1 t\" t 1 t fGajendragadkar ]. 1 no ma e ca cu a 10ns separa e y m respec o plant and machinery as distinct from buildings, roads, bridges and railway sidings. It is true that at our instance a statement Ex. F (a) has been filed before us; but if such a statement had been filed before the tribunal, the respondents would have had a better opportunity of testing the accuracy of the calculations made in it and the basis on which the respective multipliers and divisors are sought to be deduced from it. We would, therefore, like to make it clear that the calculations which we now propose to make in regard to the item of rehabilitation should not be taken to be binding on the parties in subsequent years. --ff, in the light of our decision on the principal points raised before us in the present appeals, the parties decide to settle their disputes about bonus for subsequent years there would be no occasion for the tribunal to deal with ·hem on the merits. If, however, these disputes have to be settled by the tribunal, it would be open to the parties to lead evidence in support of their respective contentions. The tribunal also would be at liberty to consider the matter afresh and come to its own conclusion on the merits.\n\nLet us now proceed to make the relevant calculations. 'rhe first step to take is to correct the figures in Ex. C-2 by excluding the cost of buildings, roads, bridges !!-nd railway-sidings from the total cost mentioned in it against the several blocks. his cost has been supplied to us by the appellant in Ex. F (a).\n\nThis is how the corrections work out. In our calcula~ tions all figures are expressed in 'lakhs ' :\n\n126 •\n\nI959 Chart I . • The Associated Period Original cost Less cost of Balance Cement of block buildings etc.\n\nCompanies Ltd. v. (1) (2) (3) (4) Its Workmen Up to 1939 486•89 132•98 353·91 1940-44 59•91 22•38 37·53 Gajendragadkai ]. 1945-47 208·93 68•15 140·78 1948-54 1144•81 333·47 811•34 In Ex. F (a) the appellant h_as shown the respective average ratios in col. 5 in regard to items of property mentioned in col. 2. We think, in making our calculations, it would ou the whole be fair to adopt 3·5 as a suitable multiplier up to 1939, 2 from 1940-47 and 1 from 1948-54 (as in C-2) for replacement by part A.C.C. machinery. We have not disturbed the divisors taken by C-2 though we feel inclined to hold that Mr. Tongaonkar has underestimated the probable life of machinery. The amount of yearly requirement for rehabilitation for the total block minus buildings, etc., would then work out at Rs. 229·39.\n\nThis does not-- take into account the available reserves; that aspect is considered later on:\n\nChart II.\n\nPeriod Original cost of Multiplier Total Less Balance Life Yearly break of requiredown as roachiment in Ex. C.2 nery (in Yrs.) (1) (2) (3) (4) (5) (6) (7) (8) (approx.) Up to 1939 353·91 x 3•5 1238·68 65·92 1172·76 \"\n\n167·54 1940-44 37'53 x 2 75·06 4·66 70·40 13 5·41 _1945-47 140·78 x 2 28r56 Il\"I9 270·37 15 18·02 1948-54 811·34 x I 81r34 42·84 768·50 20 38·42\n\nTotal 229'39\n\nThen we would deal with the buildings, roads, bridges and railway-sidings. These may be given an average life of 30 years for all blocks in order to compensate for cases where they have to be demolished .on account of modernisation. According to the\n\n• previous statements of the appellant the life of factory buildings was about 35 years and residential • ·\n\nareas 50 years. Even so we propose to take the average life of 30 years in malting our calculations in respect of these blocks. The multipliers may be taken as 2·25 for pre-1939 blocks, 1·5 for 1940-47 blocks, 1 for 1948-54 blocks. The Bombay block has been taken as in Ex. C-2 :\n\nChart III.\n\nPeriod Cost Multi- Total Less Balance life Yearly plier breakdown requirevalued at s% of cost ment\n\n(1) (2) (3) (4) (5) (6) (7) (8) Up to r939 r32·98 x 2·2s 299·20 6•65 292s5 20 r4·63 r940-44\n\n22·38 X I'S\n\n33'S7\n\nI'IZ 32·4s 2s\n\nI'29 r94s-47 68·1s x rs 102·22 3·40 98·82 2s\n\n3'9S r948-S4\n\n333'47 X I 333\"47 r6·67 316·80 30 ros6\n\nOffice 40·83 so28 73\n\n49'SS 69\n\n'7I block\n\nBombay}\n\nTotal ... 31·14 Thus the total yearly requirement for rehabilitation of this block would come to 31l4 lakhs.\n\nThe appellant's claim for rehabilitation can now be alculated on the basis of Ex. C-23 as corrected in the light of the three charts prepared by us.\n\nAs the calculations in the chart show, we would hold that the appellant is entitled to an allowance of 216·10 lakhs for rehabilitation in the relevant year: . .\n\nChart IV.\n\nReplacement of pre-1939 block:\n\nCost of machinery\n\n(Chart II) 1172·76 Deduct reserves 311·00\n\nBalance 861·76 divided by 7: Add for buildings\n\n(Chart III)\n\nTotal• ...\n\nReplacement cost of 1940-44 block Including buildings etc. (5·41 plus l 29) .. . do for 1945-47 (18·02 plus 3·95) .. . do for 1948-54 (38·42 plus 10·56) .. . do for Bombay Office\n\nTotl\n\n123·11\n\n14•63\n\n137•74\n\n6·70 21•97 48·98\n\n•71\n\n216•10\n\nI959\n\nThe Associated Cement Companies Ltd. v.\n\nIts Workmen\n\nGaj endragadkar J.\n\nI959\n\nHaving decided that the total claim for rehabilitation admissible to th~ appellant is 216·10 lakhs for the The Associated Cement relevant year, we must now proceed to determine companies Ltd. whether on the working of the formula any surplus v. profit is available. We have made the following Its Workmen calculations in the light of the principles laid down by - us in this judgment: Gajendragadkar ].\n\nChart V.\n\nTotal profit excluding Bhupendra factory Less notional normal depreciation (p. 428, Pt. I) Less income-tax payable @ 7 as. in the Rupee as per Note A below Less 6% on paid-up capital Less 4% on working capital\n\nTotal\n\nBalance Less provision for rehabilitation\n\n100·22\n\n115•16\n\n76•06 26•10\n\n317·54\n\n ...\n\n428•71\n\n317·54\n\n111·17 -\n\n115·88**\n\nBalance (-) 4·71 This is how we have calculated the income-tax payable for the relevant year :\n\nGross profits Less statutory depreciation\n\nBalance Income-tax @ 7 as. in the Rupee\n\nNote A.\n\n428•71\n\n165•49\n\n263·22\n\n115•16\n\n**Provision for rehabilitation (vi de Chart V) : Total from Chart IV 216·10 Less notional normal depreciation 100·22\n\nBalance **115•88\n\nWe ought to add that in our calq, ulations we have not\n\nI959 taken into account the Bhupendra Factory because The Associated,: the relevant material for working out the figures in Cement regard to this factory is not adequate or satisfactory. companies Ltd.\n\nHowever from such material as is available it appears v. that if the profits made by the said factory are Its Workmen included in the calculations and rehabilitation required - by it is worked out, it would not materially affeet the Gajendragadkar f. figure of rehabilitation amount determined by us.\n\nThe result is that there is no available surplus from which the respondents can claim any bonus for the relevant year. It is true that the appellant has already paid the respondents 20·65 lakhs as bonus for the relevant year, and it is likely that it may continue to do so in future; but that is a matter which is not governed by the formula.\n\nIn view of the fact that the working of the formula leaves no available surplus the appeal must be allowed and the award made by the tribunal set aside. Since the appellant had come to this Court for the decision --o\"\"f the larger and more important question about the revision of the formula, we would direct that there should be no order as to costs.\n\nAppeal allowed.\n\nIN RE THE KERALA EDUCATION BILL, 1957.\n\nREFERENCE UNDER ARTICLE 143(1) OF THE\n\nCONSTITUTION OF INDIA.\n\n(S. R .. DAS c. J., BHAGWATI, VENKATARAMA AIYAR, B. P. SINHA, JAFER IMAM, s. K. DhS and J. L.\n\nKAPUR JJ.) President's Reference-Kerala Education Bill, r957-Constitutional validity-Advisory jurisdiction of the Supreme Court, scope of -Cultural and educational rights of minorities-Constitution of India, Arts. r43(I), I4, 29, 30 and 226. • • This was a reference under Art. 143(1) of the Constitution made by the Presid, ent of -India for obtaining the opinion of the\n\n- .\n\nMay :n.", "total_entities": 156, "entities": [{"text": "s. 342A", "label": "PROVISION", "start_char": 124, "end_char": 131, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 116", "label": "PROVISION", "start_char": 245, "end_char": 251, "source": "regex", "metadata": {"statute": null}}, {"text": "THE ASSOCIATED CEMENT COMPANIES LTD.,\n\nDW ARKA CEMENT WORKS, DW", "label": "PETITIONER", "start_char": 804, "end_char": 867, "source": "metadata", "metadata": {"canonical_name": "THE ASSOCIATED CEMENT COMPANIES LTD., DWARKA CEMENT WORKS, DWARKA", "offset_not_found": false}}, {"text": "ITS WORKMEN & ANOTHER", "label": "RESPONDENT", "start_char": 877, "end_char": 898, "source": "metadata", "metadata": {"canonical_name": "ITS WORKMEN & ANOTHER", "offset_not_found": false}}, {"text": "S. R. DAS", "label": "JUDGE", "start_char": 901, "end_char": 910, "source": "metadata", "metadata": {"canonical_name": "S. R .. DAS", "offset_not_found": false}}, {"text": "N. H. BHAGWATI", "label": "JUDGE", "start_char": 918, "end_char": 932, "source": "metadata", "metadata": {"canonical_name": "NATWARLAL HARILAL BHAGWATI", "offset_not_found": false}}, {"text": "P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 945, "end_char": 965, "source": "metadata", "metadata": {"canonical_name": "P. B. GAJENDRAGADKAR", "offset_not_found": false}}, {"text": "K. N. WANCHOO JJ.", "label": "JUDGE", "start_char": 970, "end_char": 987, "source": "metadata", "metadata": {"canonical_name": "K.N. WANCHOO", "offset_not_found": false}}, {"text": "Associated\n\nCement Companies Ltd.", "label": "PETITIONER", "start_char": 1947, "end_char": 1980, "source": "ner", "metadata": {"in_sentence": "~}1~· Associated\n\nCement Companies Ltd.\n\n.. _. •.", "canonical_name": "Associated Cement Companies Ltd., Bombay"}}, {"text": "Its Workmen", "label": "RESPONDENT", "start_char": 1995, "end_char": 2006, "source": "ner", "metadata": {"in_sentence": "v.\n\nIts Workmen\n\n~ .", "canonical_name": "ITS WORKMEN & ANOTHER"}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 6383, "end_char": 6397, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 7035, "end_char": 7049, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Therefore the two concessions thus given by the Income-tax Act", "label": "STATUTE", "start_char": 7052, "end_char": 7114, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Brooke Bond (India) (Private) Ltd.", "label": "RESPONDENT", "start_char": 8021, "end_char": 8055, "source": "ner", "metadata": {"in_sentence": "v. Brooke Bond (India) (Private) Ltd., (r956) r L.L.J. 645, U. P.\n\nElectric Supply Co. Ltd. v. Their Workmen, (r955) 2 L.L.J. 4r3, referred to."}}, {"text": "Associated Cement Companies Ltd", "label": "RESPONDENT", "start_char": 12931, "end_char": 12962, "source": "ner", "metadata": {"in_sentence": "10 and 13 of 1956 ..\n\nI9.59\n\nThe Associated Cement Companies Ltd;\n\nIts Workmen\n\n R. H. Kolah, Dadachanji and S. N. Andley,.", "canonical_name": "Associated Cement Companies Ltd., Bombay"}}, {"text": "Dadachanji", "label": "LAWYER", "start_char": 12992, "end_char": 13002, "source": "ner", "metadata": {"in_sentence": "10 and 13 of 1956 ..\n\nI9.59\n\nThe Associated Cement Companies Ltd;\n\nIts Workmen\n\n R. H. Kolah, Dadachanji and S. N. Andley,."}}, {"text": "S. N. Andley", "label": "LAWYER", "start_char": 13007, "end_char": 13019, "source": "ner", "metadata": {"in_sentence": "10 and 13 of 1956 ..\n\nI9.59\n\nThe Associated Cement Companies Ltd;\n\nIts Workmen\n\n R. H. Kolah, Dadachanji and S. N. Andley,."}}, {"text": "L. Dudhia", "label": "LAWYER", "start_char": 13064, "end_char": 13073, "source": "ner", "metadata": {"in_sentence": "L. Dudhia and I. N. Shroff, for the respondents in C. A. No."}}, {"text": "I. N. Shroff", "label": "LAWYER", "start_char": 13078, "end_char": 13090, "source": "ner", "metadata": {"in_sentence": "L. Dudhia and I. N. Shroff, for the respondents in C. A. No."}}, {"text": "A. S. R. Chari", "label": "LAWYER", "start_char": 13148, "end_char": 13162, "source": "ner", "metadata": {"in_sentence": "Cemen• • A. S. R. Chari and I. N. Shroff, for the respondents Companies Ltd. in 0."}}, {"text": "Gajendragadkar", "label": "JUDGE", "start_char": 13318, "end_char": 13332, "source": "ner", "metadata": {"in_sentence": "The Judgment of the Court was delivered by ·\n\nGajendragadkar ].", "canonical_name": "P. B. GAJENDRAGADKAR"}}, {"text": "GAJENDRAGADKAR", "label": "JUDGE", "start_char": 13337, "end_char": 13351, "source": "ner", "metadata": {"in_sentence": "GAJENDRAGADKAR J.-These two appeals arise out\n\nof a demand for bonus made against the appellants by their workmen for the year 1953-54.", "canonical_name": "P. B. GAJENDRAGADKAR"}}, {"text": "Associated Cement Companies Ltd., Bombay", "label": "PETITIONER", "start_char": 13477, "end_char": 13517, "source": "ner", "metadata": {"in_sentence": "The Associated Cement Companies Ltd., Bombay, the Cement Marketing Company of India Ltd., Bombay and the Concrete Association of India, Bombay, were faced with a demand of their workmen employed in their offices at Bombay for bonus equivalent to seven months' basic wages with dearness allowance.", "canonical_name": "Associated Cement Companies Ltd., Bombay"}}, {"text": "Cement Marketing Company of India Ltd.", "label": "ORG", "start_char": 13523, "end_char": 13561, "source": "ner", "metadata": {"in_sentence": "The Associated Cement Companies Ltd., Bombay, the Cement Marketing Company of India Ltd., Bombay and the Concrete Association of India, Bombay, were faced with a demand of their workmen employed in their offices at Bombay for bonus equivalent to seven months' basic wages with dearness allowance."}}, {"text": "Concrete Association of India, Bombay", "label": "ORG", "start_char": 13578, "end_char": 13615, "source": "ner", "metadata": {"in_sentence": "The Associated Cement Companies Ltd., Bombay, the Cement Marketing Company of India Ltd., Bombay and the Concrete Association of India, Bombay, were faced with a demand of their workmen employed in their offices at Bombay for bonus equivalent to seven months' basic wages with dearness allowance."}}, {"text": "Government of Bombay", "label": "ORG", "start_char": 13840, "end_char": 13860, "source": "ner", "metadata": {"in_sentence": "The industrial dispute arising out of this demand was referred by the Government of Bombay for adjudication before the Industrial Tribunal, Bomb1ty, under s. 10 of the Industrial Disputes Act and it was numbered I. T. No."}}, {"text": "s. 10", "label": "PROVISION", "start_char": 13925, "end_char": 13930, "source": "regex", "metadata": {"statute": null}}, {"text": "Industrial Disputes Act", "label": "STATUTE", "start_char": 13938, "end_char": 13961, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Associated Cement Companies Ltd.", "label": "ORG", "start_char": 14009, "end_char": 14041, "source": "ner", "metadata": {"in_sentence": "The Associated Cement Companies Ltd., Dwarka Cement Works, Dwarka, was similarly faced with a demand of its workmen for bonus equivalent to 50% of total earnings or six months' total earnings."}}, {"text": "Dwarka", "label": "GPE", "start_char": 14043, "end_char": 14049, "source": "ner", "metadata": {"in_sentence": "The Associated Cement Companies Ltd., Dwarka Cement Works, Dwarka, was similarly faced with a demand of its workmen for bonus equivalent to 50% of total earnings or six months' total earnings."}}, {"text": "November 30, 1956", "label": "DATE", "start_char": 14444, "end_char": 14461, "source": "ner", "metadata": {"in_sentence": "By its award delivered on November 30, 1956, the tribunal directed the companies to pay their workmen drawing a basic pay or wages up to Rs."}}, {"text": "A. C. C.", "label": "ORG", "start_char": 14946, "end_char": 14954, "source": "ner", "metadata": {"in_sentence": "The A. C. C. is the principal.company concerned in the dispute."}}, {"text": "Cement Marketing Company of\n\nI,.\n\nIndia Ltd.", "label": "PETITIONER", "start_char": 15011, "end_char": 15055, "source": "ner", "metadata": {"in_sentence": "The Cement Marketing Company of\n\nI,."}}, {"text": "Companies Act", "label": "STATUTE", "start_char": 15142, "end_char": 15155, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "C. M. I.", "label": "PETITIONER", "start_char": 15266, "end_char": 15274, "source": "ner", "metadata": {"in_sentence": "subsidiary of the A. C. C.\n\nThe C. M. I. are companies Ltd. the Sales Managers of the A. C. C. while the Concrete v.\n\nAssociation of India (hereafter called the C. A. I.) is Its Workmen merely a department of the C. M. I. As a result of . -"}}, {"text": "endragadkar", "label": "JUDGE", "start_char": 15524, "end_char": 15535, "source": "ner", "metadata": {"in_sentence": "the agreement which came into operation from Ga; endragadkar J.\n\nAugust 1, 1953, all financial transactions of the C. M. I. in relation to sales now find a place in the accounts of the A. C. C.\n\nSimilarly all of its fixed assets have been taken over and appear in the balance-sheets of the\n\nA. C. C.\n\nAll the three concerns have a common staff in Bombay."}}, {"text": "August 1, 1953", "label": "DATE", "start_char": 15540, "end_char": 15554, "source": "ner", "metadata": {"in_sentence": "the agreement which came into operation from Ga; endragadkar J.\n\nAugust 1, 1953, all financial transactions of the C. M. I. in relation to sales now find a place in the accounts of the A. C. C.\n\nSimilarly all of its fixed assets have been taken over and appear in the balance-sheets of the\n\nA. C. C.\n\nAll the three concerns have a common staff in Bombay."}}, {"text": "India", "label": "GPE", "start_char": 16240, "end_char": 16245, "source": "ner", "metadata": {"in_sentence": "C. is the biggest amongst the companies in India which manufacture cement."}}, {"text": "Pakistan", "label": "GPE", "start_char": 16338, "end_char": 16346, "source": "ner", "metadata": {"in_sentence": "It owns 15 cement factories at different places in India and 2 in Pakistan."}}, {"text": "F. E. Dinshaw", "label": "OTHER_PERSON", "start_char": 16634, "end_char": 16647, "source": "ner", "metadata": {"in_sentence": "These were F. E. Dinshaw, Tatas, Killick Nixon and Khatau, groups."}}, {"text": "Tatas", "label": "WITNESS", "start_char": 16649, "end_char": 16654, "source": "ner", "metadata": {"in_sentence": "These were F. E. Dinshaw, Tatas, Killick Nixon and Khatau, groups."}}, {"text": "Killick Nixon", "label": "OTHER_PERSON", "start_char": 16656, "end_char": 16669, "source": "ner", "metadata": {"in_sentence": "These were F. E. Dinshaw, Tatas, Killick Nixon and Khatau, groups."}}, {"text": "Khatau", "label": "OTHER_PERSON", "start_char": 16674, "end_char": 16680, "source": "ner", "metadata": {"in_sentence": "These were F. E. Dinshaw, Tatas, Killick Nixon and Khatau, groups."}}, {"text": "Companie.< Ltd.", "label": "ORG", "start_char": 17476, "end_char": 17491, "source": "ner", "metadata": {"in_sentence": "the full amount\n\nr959 standing to the credit of the premium-on-shares\n\nThe Associated account and had transferred a part of the reserves for\n\nCement taxation to the capital account thus increasing the Companie."}}, {"text": "Tongaonkar", "label": "OTHER_PERSON", "start_char": 18622, "end_char": 18632, "source": "ner", "metadata": {"in_sentence": "In support of their case the respondents filed several statements which, they claimed, had been prepared in accordance with the Full Bench formula, and they also cross-examined Mr. Tongaonkar who gave evidence on behalf of the appellant.", "canonical_name": "l'ongaonkar"}}, {"text": "G. R. Tongaonkar", "label": "OTHER_PERSON", "start_char": 21288, "end_char": 21304, "source": "ner", "metadata": {"in_sentence": "In support of its case the appellant examined Mr. G. R. Tongaonkar, its controller of planning and development, and produced a statement (Ex."}}, {"text": "July 31, 1936", "label": "DATE", "start_char": 21602, "end_char": 21615, "source": "ner", "metadata": {"in_sentence": "C-10) showing the cost of the assets of the merging companies on July 31, 1936, as taken over by the appellant and the statement (Ex."}}, {"text": "Tongaonkar Ga21ndragodkar", "label": "OTHER_PERSON", "start_char": 22230, "end_char": 22255, "source": "ner", "metadata": {"in_sentence": "C-2 is a statement prepared by Mr. Tongaonkar Ga21ndragodkar J showing the original cost of the block to be replaced and the approximate replacement cost."}}, {"text": "31-7-1936", "label": "DATE", "start_char": 22470, "end_char": 22479, "source": "ner", "metadata": {"in_sentence": "This statement has been prepared on the basis that the approximate cost to the merging companies of their assets as on 31-7-1936 was 5·73 crores."}}, {"text": "31-7-1954", "label": "DATE", "start_char": 23167, "end_char": 23176, "source": "ner", "metadata": {"in_sentence": "Column 2 gives the original cost o\"f the said categories as on 31-7-1954."}}, {"text": "l'ongaonkar", "label": "OTHER_PERSON", "start_char": 23861, "end_char": 23872, "source": "ner", "metadata": {"in_sentence": "2 by a ratio, which, according to Mr. 'l'ongaonkar, supplies an appropriate multiplier.", "canonical_name": "l'ongaonkar"}}, {"text": "1-8-1953", "label": "DATE", "start_char": 25728, "end_char": 25736, "source": "ner", "metadata": {"in_sentence": "as on 1-8-1953 which are of the order of Rs."}}, {"text": "Gajendragadkat", "label": "JUDGE", "start_char": 26759, "end_char": 26773, "source": "ner", "metadata": {"in_sentence": "One of the questions in controversy between v. the parties in the present appeals centres round the Its Workmen appreciation of Mr. Tongaonkar's evidence and the value to be attached to the statements prepared by Gajendragadkat .J. him.", "canonical_name": "P. B. GAJENDRAGADKAR"}}, {"text": "r959 Tongaonkar", "label": "OTHER_PERSON", "start_char": 28587, "end_char": 28602, "source": "ner", "metadata": {"in_sentence": "The tribunal axamined the evidence of Mr. r959 Tongaonkar as well as Ex."}}, {"text": "A.C.C.", "label": "ORG", "start_char": 29150, "end_char": 29156, "source": "ner", "metadata": {"in_sentence": "d -:Zk J by Mr. Tongaonkar was itself an inflationary figure ; Ga; en rag ar • and it thought that\" the consequence of applying it not to the original price but to its increased price paid by the A.C.C. would be to obtain an inflationary result."}}, {"text": ".R.M. de. Paula", "label": "RESPONDENT", "start_char": 31736, "end_char": 31751, "source": "ner", "metadata": {"in_sentence": "In support of.this conclusion it has referred to the observations made by ]'.R.M. de.", "canonical_name": "F.R.!II. de Paula's•"}}, {"text": "Taxation Enquiry Commission", "label": "ORG", "start_char": 31805, "end_char": 31832, "source": "ner", "metadata": {"in_sentence": "Paula in his \" Principles of Auditing \", the report of the Taxation Enquiry Commission and of the working party for the Cotton Textile Industry."}}, {"text": "Cotton Textile Industry", "label": "ORG", "start_char": 31866, "end_char": 31889, "source": "ner", "metadata": {"in_sentence": "Paula in his \" Principles of Auditing \", the report of the Taxation Enquiry Commission and of the working party for the Cotton Textile Industry."}}, {"text": "J. R.D.\n\nTata", "label": "OTHER_PERSON", "start_char": 31951, "end_char": 31964, "source": "ner", "metadata": {"in_sentence": "It has also relied on a part of the speech delivered by Mr. J. R.D.\n\nTata in addressing the annual general meeting of the shareholders of the Tata Iron and Steel Company in August 1950. ."}}, {"text": "Tata Iron and Steel Company", "label": "ORG", "start_char": 32033, "end_char": 32060, "source": "ner", "metadata": {"in_sentence": "It has also relied on a part of the speech delivered by Mr. J. R.D.\n\nTata in addressing the annual general meeting of the shareholders of the Tata Iron and Steel Company in August 1950. ."}}, {"text": "1-8-1952", "label": "DATE", "start_char": 33997, "end_char": 34005, "source": "ner", "metadata": {"in_sentence": "18·36 crores to be.spread over a period of ten years from 1-8-1952 to 31-7-1962 and that works out approximately at the figure of Rs."}}, {"text": "-7-1962", "label": "DATE", "start_char": 34011, "end_char": 34018, "source": "ner", "metadata": {"in_sentence": "18·36 crores to be.spread over a period of ten years from 1-8-1952 to 31-7-1962 and that works out approximately at the figure of Rs."}}, {"text": "A.C.O.", "label": "ORG", "start_char": 34151, "end_char": 34157, "source": "ner", "metadata": {"in_sentence": "It was on these facts that the tribunal held that \"if the A.C.O. estimated its annual requirements of rehabilitation, replacement and modernisation at Rs."}}, {"text": "Mill Owners Association, Bombay", "label": "ORG", "start_char": 37409, "end_char": 37440, "source": "ner", "metadata": {"in_sentence": "In 1948 a bonus dispute arose between the Mill Owners Association, Bombay and its employees, and it was referred fQr adjudication to the Industrial Court."}}, {"text": "July 7, 1950", "label": "DATE", "start_char": 38049, "end_char": 38061, "source": "ner", "metadata": {"in_sentence": "The Court Gajendragadkar J. made its award on July 7, 1950, directing 55 mills of the Association to pay to their workmen, whether permanent or temporary, 1/6 of the basic earnings of each of them as bonus."}}, {"text": "Labour Appellate Tribunal", "label": "COURT", "start_char": 38266, "end_char": 38291, "source": "ner", "metadata": {"in_sentence": "This award was challenged by the Association before the Labour Appellate Tribunal."}}, {"text": "Gajendragadka", "label": "JUDGE", "start_char": 40386, "end_char": 40399, "source": "ner", "metadata": {"in_sentence": "r959 Dealing with the problem from this point of view the appellate tribunal conceded that investment neces- The Associated Cement sarily implies the legitimate expectation of the investor Companies Ltd. to secure recurring returns on the money invested by v. him in the industrial undertaking, and so it held that Its Workmen it was essential that the plant and machinery should - be kept continuously in good working order for the Gajendragadka.", "canonical_name": "P. B. GAJENDRAGADKAR"}}, {"text": "Kolah", "label": "OTHER_PERSON", "start_char": 45724, "end_char": 45729, "source": "ner", "metadata": {"in_sentence": "On behalf of the appellant Mr. Kolah has taken strong exception to this approach."}}, {"text": "Sindri", "label": "GPE", "start_char": 47176, "end_char": 47182, "source": "ner", "metadata": {"in_sentence": "18·36 crores, excluding the cost of a new plant at Sindri, or about Rs.184 lakhs per annum."}}, {"text": "July 31, 1962", "label": "DATE", "start_char": 48175, "end_char": 48188, "source": "ner", "metadata": {"in_sentence": "The report merely gave a list of the jobs which the appellant had proposed to undertake during the ten year period ending July 31, 1962."}}, {"text": "Tariff Commission", "label": "ORG", "start_char": 48394, "end_char": 48411, "source": "ner", "metadata": {"in_sentence": "In fact, having regard to the nature and scope of the enquiry before the Tariff Commission, the report made by the appellant had to be restricted to the urgent jobs which it wanted to undertake during the execution of its ten year programme ; and so it would not be reasonable to hold that the figure of annual rehabilitation expenses which can be deduced from the said report has any relation to the claim for rehabilitation made by the appellant in terms of the workillg of the."}}, {"text": "Ohaibasa Cement Factory", "label": "ORG", "start_char": 51540, "end_char": 51563, "source": "ner", "metadata": {"in_sentence": "The Ohaibasa Cement Factory and the Sevalia Gajendragadkar f.\n\nCement Factory for the rehabilitation of which Rs."}}, {"text": "Sevalia Gajendragadkar f.\n\nCement Factory", "label": "ORG", "start_char": 51572, "end_char": 51613, "source": "ner", "metadata": {"in_sentence": "The Ohaibasa Cement Factory and the Sevalia Gajendragadkar f.\n\nCement Factory for the rehabilitation of which Rs."}}, {"text": "Constitution Bench", "label": "COURT", "start_char": 53817, "end_char": 53835, "source": "ner", "metadata": {"in_sentence": "of principle in the group of appeals which have Ga; endrngadkar 1 been placed for disposal before the Constitution Bench."}}, {"text": "Arts. 38 and 43", "label": "PROVISION", "start_char": 54512, "end_char": 54527, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "Gajendragadkar", "label": "JUDGE", "start_char": 55949, "end_char": 55963, "source": "ner", "metadata": {"in_sentence": "t d Gajendragadkar ].", "canonical_name": "P. B. GAJENDRAGADKAR"}}, {"text": "F. R. M. de Paula", "label": "OTHER_PERSON", "start_char": 56263, "end_char": 56280, "source": "ner", "metadata": {"in_sentence": "In this connection reliance is placed on the observations of F. R. M. de Paula in his \"Principles of Auditing \" that \" the object of depreciation is the replacement of original investment capital and that an increase in replacement."}}, {"text": "Institute of Chartered Accountants in England and Wales", "label": "ORG", "start_char": 56594, "end_char": 56649, "source": "ner", "metadata": {"in_sentence": "It is also pointed out that the Institute of Chartered Accountants in England and Wales, in its recommendations made in 1949 under the heading \" Rising price levels in relation to accounts\" has pointed out that \"the gap between historical and replacement costs might be too big to be bridged by a provision made for replacement spread over a period of years either ."}}, {"text": "Government of India", "label": "ORG", "start_char": 58917, "end_char": 58936, "source": "ner", "metadata": {"in_sentence": "This Committee had been appointed in 1948 to advise the Government of India \"on the principles to be followed for the determination of (a) fair wages to labour, (b) fair return to capital employed in the industry, (c) reasonable reserves for the maintenance and expansion of the undertaking, and\n\n(d) labour's share of the surplus profits, calculated on a sliding scale normally varying with production, after provision has been made for (b) and (c) above\"."}}, {"text": "Asscciated Cement", "label": "ORG", "start_char": 60233, "end_char": 60250, "source": "ner", "metadata": {"in_sentence": "V to the conditions Prevailing in the industry selected for an experiment The Asscciated Cement in profit-sharing, it had come to the conclusion that Companies Ltd. labour's share should be 50% of the surplus profits of v. the undertakings."}}, {"text": "Paula", "label": "OTHER_PERSON", "start_char": 63250, "end_char": 63255, "source": "ner", "metadata": {"in_sentence": "As has been observed by Paula himself: \"In the past the accepted principle has been that the main object of providing for the depreciation of wasting assets is to recoup the original capital invested in the purchase of such assets."}}, {"text": "F.R.!II. de Paula's•", "label": "RESPONDENT", "start_char": 64512, "end_char": 64532, "source": "ner", "metadata": {"in_sentence": "(2) F.R.!II.", "canonical_name": "F.R.!II. de Paula's•"}}, {"text": "F.R.M. de Paula's•", "label": "RESPONDENT", "start_char": 66861, "end_char": 66879, "source": "ner", "metadata": {"in_sentence": "The plea for the revision of the formula raises an issue\n\n(r) F.R.M. de Paula's• Principles of Auditing', I957.'P So. •", "canonical_name": "F.R.!II. de Paula's•"}}, {"text": "Industrial Disputes Act", "label": "STATUTE", "start_char": 69784, "end_char": 69807, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 10", "label": "PROVISION", "start_char": 69911, "end_char": 69916, "source": "regex", "metadata": {"statute": null}}, {"text": "Labour Appellate Its Workmen Tribunal", "label": "COURT", "start_char": 74003, "end_char": 74040, "source": "ner", "metadata": {"in_sentence": "This v. principle has been recognised by the Labour Appellate Its Workmen Tribunal when it observed, for instance, in M/s. J. K. G . -"}}, {"text": ".Gajendrngadkar", "label": "OTHER_PERSON", "start_char": 76354, "end_char": 76369, "source": "ner", "metadata": {"in_sentence": "Textile .Mills, Nagpur v. The Its Wo•kmen Rashtriya Mill Mazdoor Sangh (1) the Labour Appel- - late Tribunal observed that according to the formula, .Gajendrngadkar ]."}}, {"text": "s. 24", "label": "PROVISION", "start_char": 76935, "end_char": 76940, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 76952, "end_char": 76966, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 24", "label": "PROVISION", "start_char": 77340, "end_char": 77345, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10", "label": "PROVISION", "start_char": 78778, "end_char": 78783, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 78800, "end_char": 78814, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 78980, "end_char": 78994, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 10", "label": "PROVISION", "start_char": 79352, "end_char": 79357, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 79374, "end_char": 79388, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 79489, "end_char": 79503, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 80027, "end_char": 80041, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 80190, "end_char": 80204, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 81506, "end_char": 81520, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Surat Electric Co., Ltd.", "label": "ORG", "start_char": 82001, "end_char": 82025, "source": "ner", "metadata": {"in_sentence": "We would accordingly hold that the depreciation which has to be deducted from tho gross profits should be the notional normal depreciation as explained in the case of Surat Electric Co., Ltd. (1)."}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 82583, "end_char": 82597, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 83602, "end_char": 83616, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s.10(2)(vi)", "label": "PROVISION", "start_char": 84863, "end_char": 84874, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10(2)(vi)", "label": "PROVISION", "start_char": 85305, "end_char": 85317, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 85495, "end_char": 85509, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 10(2)(vi)", "label": "PROVISION", "start_char": 85891, "end_char": 85903, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 86992, "end_char": 87006, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 10(2)(vi)", "label": "PROVISION", "start_char": 87073, "end_char": 87085, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 87093, "end_char": 87107, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Su, rat Electric Co., Ltd.", "label": "ORG", "start_char": 87983, "end_char": 88009, "source": "ner", "metadata": {"in_sentence": "We would only like to add that in that case this Court had no occasion to say what exactly the normal depreciation meant; but it is clear that the normal depreciation mentioned in the judgment was not intended to mean anything other than the notional normal depreciation as explained by the Labour Appellate Tribunal in the case of the Su, rat Electric Co., Ltd. (3)."}}, {"text": "Gajendtagadkat", "label": "JUDGE", "start_char": 96584, "end_char": 96598, "source": "ner", "metadata": {"in_sentence": "0 f th t h' h t tt.. Gajendtagadkat J.· ne o e porn s w w -raises a con roversy :m i±lS connection is : What level of prices shouldthe tribu:- :hal consider in making its calculations about the ptobable cost 0£ replacement ?", "canonical_name": "P. B. GAJENDRAGADKAR"}}, {"text": "Dharan", "label": "RESPONDENT", "start_char": 107113, "end_char": 107119, "source": "ner", "metadata": {"in_sentence": "Vide: Ganesh Flour Mills Co. Ltd., Kanpur\n\nv. Ganesh Flour Mills Staff Union, Kanpur(2) Bombay Gas Co. Ltd. v. Their Workmen (3); Dharan: gadhra Chemical Works Ltd. v. Its WPJrkmen (4) )."}}, {"text": "s. 38", "label": "PROVISION", "start_char": 108533, "end_char": 108538, "source": "regex", "metadata": {"statute": null}}, {"text": "Industrial Disputes Act", "label": "STATUTE", "start_char": 108546, "end_char": 108569, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Mill Owners Association", "label": "ORG", "start_char": 109997, "end_char": 110020, "source": "ner", "metadata": {"in_sentence": "In the case of the Mill Owners Association, The Associated\n\nCement Bombay (1) where the formula was evolved, out of the Companies."}}, {"text": "theGaj•ndragadkar", "label": "JUDGE", "start_char": 110339, "end_char": 110356, "source": "ner", "metadata": {"in_sentence": "In the Trichinopoly Mills - Ltd. v. National Cotton Mills Workers' Union (2) theGaj•ndragadkar J. available surplus was found to be Rs."}}, {"text": "Bombay Stock Exchange", "label": "ORG", "start_char": 118291, "end_char": 118312, "source": "ner", "metadata": {"in_sentence": "He has also asked us to take into account the highest and the lowest quotation for the company's shares in the Bombay Stock Exchange during the period 1949-55."}}, {"text": "Dudhia", "label": "OTHER_PERSON", "start_char": 118365, "end_char": 118371, "source": "ner", "metadata": {"in_sentence": "On the othei:- hand Mr.\n\nDudhia has urged that during the relevant year the appellant has capitalised Rs."}}, {"text": "s. 10", "label": "PROVISION", "start_char": 121582, "end_char": 121587, "source": "regex", "metadata": {"statute": null}}, {"text": "Dridhia", "label": "OTHER_PERSON", "start_char": 121706, "end_char": 121713, "source": "ner", "metadata": {"in_sentence": "Incidentally Mr. Dridhia has pointed out that in dealing with the appellant's claim for a return on working capital the tribunal has made a mistake by including a further sum of 0·66 lakhs as return on investments."}}, {"text": "Institution of Electrical Engineers, London", "label": "ORG", "start_char": 122336, "end_char": 122379, "source": "ner", "metadata": {"in_sentence": "Mr. Tongaonkar holds the Degree of Bachelor of Science of • the London University, and he is also a Member of the Institution of Electrical Engineers, London."}}, {"text": "England", "label": "GPE", "start_char": 122492, "end_char": 122499, "source": "ner", "metadata": {"in_sentence": "He joined the appellant in November 1934, but before that he had nearly three years' practica-1 experience in England in various engineering firms ; and on his return to India, he had joined the Dinshaw group of cement factories."}}, {"text": "Dinshaw group", "label": "ORG", "start_char": 122577, "end_char": 122590, "source": "ner", "metadata": {"in_sentence": "He joined the appellant in November 1934, but before that he had nearly three years' practica-1 experience in England in various engineering firms ; and on his return to India, he had joined the Dinshaw group of cement factories."}}, {"text": "1-8-1954", "label": "DATE", "start_char": 123920, "end_char": 123928, "source": "ner", "metadata": {"in_sentence": "d-dk 1 life of the plant and machinery existing in 1939 would a; en raga ar_ be approximately seven years from 1-8-1954."}}, {"text": "31st July, 1954", "label": "DATE", "start_char": 129103, "end_char": 129118, "source": "ner", "metadata": {"in_sentence": "C-3 which is a certificate issued by the Chartered Accountants shows that \"according to the blocks, the original cost of the block of fixed assets excluding good will and purchase of rights and land as at 31st July, 1954, of the appellant under the groups of years of acquisition'', amounted to Rs .. 19,41,38,100."}}, {"text": "July 31, 1954", "label": "DATE", "start_char": 129459, "end_char": 129472, "source": "ner", "metadata": {"in_sentence": "C-28 which is also a certificate issued by the Chartered Accountants, shows that the original cost of such portion of fixed assets excluding goodwill and purchase of rights and lands as have been discarded, scrapped or sold as on July 31, 1954, of the appellant cQmpanies under the groups of years of acquisition noted in the certificate, amounted to Rs."}}, {"text": "Tongaoqkar", "label": "OTHER_PERSON", "start_char": 130091, "end_char": 130101, "source": "ner", "metadata": {"in_sentence": "The amount of rehabilitation has thus been calculated by the adoption of the multiplie~ and divisor selected by Mr. Tongaoqkar.", "canonical_name": "l'ongaonkar"}}, {"text": "Rohri Works", "label": "ORG", "start_char": 132550, "end_char": 132561, "source": "ner", "metadata": {"in_sentence": "spent The Asscciated on the construction of Rohri Works and Kistna Works, Cement and Rs."}}, {"text": "Kistna Works, Cement", "label": "ORG", "start_char": 132566, "end_char": 132586, "source": "ner", "metadata": {"in_sentence": "spent The Asscciated on the construction of Rohri Works and Kistna Works, Cement and Rs."}}, {"text": "Associated b Cement", "label": "ORG", "start_char": 134746, "end_char": 134765, "source": "ner", "metadata": {"in_sentence": "There The Associated b Cement was some dispute before us a out the admissibility of Compani\" Ltd. some of the said items under cl."}}, {"text": "Compani\" Ltd.", "label": "ORG", "start_char": 134820, "end_char": 134833, "source": "ner", "metadata": {"in_sentence": "There The Associated b Cement was some dispute before us a out the admissibility of Compani\" Ltd. some of the said items under cl."}}, {"text": "cl. 5", "label": "PROVISION", "start_char": 134863, "end_char": 134868, "source": "regex", "metadata": {"statute": null}}, {"text": "Gajendragadkar", "label": "GPE", "start_char": 135066, "end_char": 135080, "source": "ner", "metadata": {"in_sentence": "But Mr. Kolah contends, and it is not disputed Its Workmen by the respondents either, that even if the whole of the - disputed item 5 is excluded, the remaining items on Gajendragadkar J. Ex."}}, {"text": "Cement", "label": "OTHER_PERSON", "start_char": 137106, "end_char": 137112, "source": "ner", "metadata": {"in_sentence": "It is possible that Cement with his knowledge and experience Mr. Tongaonkar Companies Ltd. may be able to form a proper assessment about the v. life of the machinery in the manner deposed to by Its Workmen him."}}, {"text": "Tongaonkar Companies Ltd.", "label": "ORG", "start_char": 137151, "end_char": 137176, "source": "ner", "metadata": {"in_sentence": "It is possible that Cement with his knowledge and experience Mr. Tongaonkar Companies Ltd. may be able to form a proper assessment about the v. life of the machinery in the manner deposed to by Its Workmen him."}}, {"text": "s 1", "label": "PROVISION", "start_char": 137411, "end_char": 137414, "source": "regex", "metadata": {"statute": null}}, {"text": "Gajendragad", "label": "JUDGE", "start_char": 139632, "end_char": 139643, "source": "ner", "metadata": {"in_sentence": "We are unable Gajendragad ar ].", "canonical_name": "P. B. GAJENDRAGADKAR"}}, {"text": "Group No. -1 Companies Ltd.", "label": "ORG", "start_char": 143865, "end_char": 143892, "source": "ner", "metadata": {"in_sentence": "Group No."}}, {"text": "Tongaon kar", "label": "OTHER_PERSON", "start_char": 147485, "end_char": 147496, "source": "ner", "metadata": {"in_sentence": "In deciding the question as to whether the claim as disclosed by the statements prepared by Mr. Tongaon kar is inflated or not, the respondents have asked us to consider the estimate made by the appellant's\n\nChairmn in that behalf.", "canonical_name": "l'ongaonkar"}}, {"text": "January 24, 1951", "label": "DATE", "start_char": 147648, "end_char": 147664, "source": "ner", "metadata": {"in_sentence": "In his speech delivered on January 24, 1951, at the Fourteenth Annual General Meeting of the appellant company, the Chairman stated that most of the company's pre-war plant would be due for replacement in the cw.rse of the next ten years and he added that '' at the present price levels, replacement will cost on an average 2!"}}, {"text": "Tongaonkai", "label": "OTHER_PERSON", "start_char": 148236, "end_char": 148246, "source": "ner", "metadata": {"in_sentence": "'959 When Mr. Tongaonkai; was asked about this estimate he stated that the Chairman had not consulted him The Associated Cement while drafting the annual report or while drafting the Companies Ltd. portion of the speech in regard to ' rehabilitation ' and v. he also added that he did not agree with the figures Its Workmen given by the Chairman regarding the replacement\n\nG .", "canonical_name": "l'ongaonkar"}}, {"text": "S\n\n33", "label": "PROVISION", "start_char": 154862, "end_char": 154867, "source": "regex", "metadata": {"statute": null}}, {"text": "S7", "label": "PROVISION", "start_char": 154868, "end_char": 154870, "source": "regex", "metadata": {"statute": null}}, {"text": "S4", "label": "PROVISION", "start_char": 154943, "end_char": 154945, "source": "regex", "metadata": {"statute": null}}, {"text": "SS 69", "label": "PROVISION", "start_char": 155012, "end_char": 155017, "source": "regex", "metadata": {"statute": null}}, {"text": "Associated Cement Companies Ltd.", "label": "PETITIONER", "start_char": 155889, "end_char": 155921, "source": "ner", "metadata": {"in_sentence": "do for Bombay Office\n\nTotl\n\n123·11\n\n14•63\n\n137•74\n\n6·70 21•97 48·98\n\n•71\n\n216•10\n\nI959\n\nThe Associated Cement Companies Ltd. v.\n\nIts Workmen\n\nGaj endragadkar J.\n\nI959\n\nHaving decided that the total claim for rehabilitation admissible to th~ appellant is 216·10 lakhs for the The Associated Cement relevant year, we must now proceed to determine companies Ltd. whether on the working of the formula any surplus v. profit is available.", "canonical_name": "Associated Cement Companies Ltd., Bombay"}}, {"text": "Its Workmen\n\nGaj endragadkar", "label": "RESPONDENT", "start_char": 155926, "end_char": 155954, "source": "ner", "metadata": {"in_sentence": "do for Bombay Office\n\nTotl\n\n123·11\n\n14•63\n\n137•74\n\n6·70 21•97 48·98\n\n•71\n\n216•10\n\nI959\n\nThe Associated Cement Companies Ltd. v.\n\nIts Workmen\n\nGaj endragadkar J.\n\nI959\n\nHaving decided that the total claim for rehabilitation admissible to th~ appellant is 216·10 lakhs for the The Associated Cement relevant year, we must now proceed to determine companies Ltd. whether on the working of the formula any surplus v. profit is available."}}, {"text": "S. R .. DAS", "label": "JUDGE", "start_char": 158456, "end_char": 158467, "source": "ner", "metadata": {"in_sentence": "(S. R .. DAS c. J., BHAGWATI, VENKATARAMA AIYAR, B. P. SINHA, JAFER IMAM, s. K. DhS and J. L.\n\nKAPUR JJ.)", "canonical_name": "S. R .. DAS"}}, {"text": "BHAGWATI", "label": "JUDGE", "start_char": 158475, "end_char": 158483, "source": "ner", "metadata": {"in_sentence": "(S. R .. DAS c. J., BHAGWATI, VENKATARAMA AIYAR, B. P. SINHA, JAFER IMAM, s. K. DhS and J. L.\n\nKAPUR JJ.)"}}, {"text": "VENKATARAMA AIYAR", "label": "JUDGE", "start_char": 158485, "end_char": 158502, "source": "ner", "metadata": {"in_sentence": "(S. R .. DAS c. J., BHAGWATI, VENKATARAMA AIYAR, B. P. SINHA, JAFER IMAM, s. K. DhS and J. L.\n\nKAPUR JJ.)"}}, {"text": "B. P. SINHA", "label": "JUDGE", "start_char": 158504, "end_char": 158515, "source": "ner", "metadata": {"in_sentence": "(S. R .. DAS c. J., BHAGWATI, VENKATARAMA AIYAR, B. P. SINHA, JAFER IMAM, s. K. DhS and J. L.\n\nKAPUR JJ.)"}}, {"text": "JAFER IMAM", "label": "JUDGE", "start_char": 158517, "end_char": 158527, "source": "ner", "metadata": {"in_sentence": "(S. R .. DAS c. J., BHAGWATI, VENKATARAMA AIYAR, B. P. SINHA, JAFER IMAM, s. K. DhS and J. L.\n\nKAPUR JJ.)"}}, {"text": "s. K. DhS", "label": "JUDGE", "start_char": 158529, "end_char": 158538, "source": "ner", "metadata": {"in_sentence": "(S. R .. DAS c. J., BHAGWATI, VENKATARAMA AIYAR, B. P. SINHA, JAFER IMAM, s. K. DhS and J. L.\n\nKAPUR JJ.)"}}, {"text": "J. L.\n\nKAPUR", "label": "JUDGE", "start_char": 158543, "end_char": 158555, "source": "ner", "metadata": {"in_sentence": "(S. R .. DAS c. J., BHAGWATI, VENKATARAMA AIYAR, B. P. SINHA, JAFER IMAM, s. K. DhS and J. L.\n\nKAPUR JJ.)"}}, {"text": "Constitution of India", "label": "STATUTE", "start_char": 158735, "end_char": 158756, "source": "regex", "metadata": {}}, {"text": "Art. 143(1)", "label": "PROVISION", "start_char": 158823, "end_char": 158834, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}]}
{"document_id": "1959_1_979_1008_EN", "year": 1959, "text": "(1) S.C.R.\n\nSUPREME COURT REPORTS 979\n\nno material on the record by which it can reasonably be said that the provisions of sub-s. (2) of s. 14 of the Act applied to the present case.\n\nIt was urged that the act of Veeravva in adopting the second defendant was to bring in a stranger and this action of hers could be questioned by a reversioner, as any aVenation made by her, during her life time.\n\nReference was made to s. 42 of the Specific Relief Act, Illustration (f). In our opinion, this is of no avail to the appellant, because Illustration (f) obviously refers to a Hindu widow's estate and has no reference to a full owner. The right of a reversioner as one of the heirs under s. 42, Specific Relief Act, is limited to the question of preserving the estate of a limited owner for the benefit of the entire body of reversioners; hut as against a full owner, the reversioner has no such right. In our opinion, under the Act Veeravva becoming a full owner of her husband's estate, the suit could not succeed and the appeal must accordingly fail.\n\nIn our opinion, the appellant's suit was not maintainable~ having regard to the provisions of s. 14 of the Act, even if it be assumed that there was no valid adoption of the second defendant. The appeal accordingly fails and is dismissed with costs.\n\nAppeal dismissed.\n\nKolturuswami\n\nVeeravva\n\nImam].\n\nTHE ASIATIC STEAM NAVIGATION CO., LTD. x959\n\nV • January u.\n\nSUB-LT. ARABINDA CHAKRA V ARTI (SYED JAFER IMAM, S. K. DAS and J. L. KAPUR, JJ.)\n\nShipping-Collision-Negligence-\" Standing on\" vessel- \" Giving way\" vessel-Rights and duties-Nautical assessors- Advice not binding on Court-Merchant Shipping Act, I894 (57 & 58 Viet. c. 60) Regulations of I9IO, Arts. 2I, 23, 25, 27, 29.\n\nOn December 13, 1940, in the afternoon, a cargo ship, N, left Madras harbour bound for Calcutta heading for the open sea. She was being navigated in a swept channel outside the\n\n'959 harbour and was on her proper, namely the starboard side of the . . channel. At that time a patrol ship, K, was on an opposite Th~ Asitic _Steatncourse making for Madras harbour and entered the channel at '(· Nav•gatwn about 6-25 p. m.\n\nAt 6-30 p. m. N decided to overtake K by go- Co., Ltd. ing port on an erroneous assumption that K was going in the v. same direction as N and was not an ?TI-coming ship.\n\nBy about Sub-Lt. AYabinda 6-45 p.m. when K sighted N on the port bow the two ships were\n\nChaA.avarti opposite each other near about the mid-line of the channel, the distance between the two being then a little more than a mile.\n\nN continued her port course and went over the mid-line into the wrong side of the channel and at about 6-48 p. m. the distance between the two ships was less than I a mile. K noticed at that moment that N was converging on her and accordingly in order to avoid a collision K turned to hard port and gave a signal to that effect. N, however, took starboard action to get back to the right side of the channel and get out of the way of K. At about 6-49 p. m. finding that a collision was imminent the commander of N ordered full speed astern, but it was too late and a collision took place at about 6-51 p. m.\n\nThe appellant, the owner of N, instituted a suit for damages against the respondent, who was one of the officers in charge of and responsible for the navigation of K, on the plea that the collision was caused by the negligent navigation of K. .The tial judge who had been assisted by nautical advisers, held that K wrongly altered her course at the moment when she did, and if any step had to be taken she should have altered not to port r but to starboard, and if any other action was necessary, she should have put her engines full speed astern. On appeal, the High Court, which also had the assistance of two assessors, -reversed the findings of the trial court and dismissed the suit.\n\nOn appeal to the Supreme Court, the appellant contended that I): should have anticipated that sooner or later N would correct her mistake and go to the starboard side of the channel and, therefore, as the \"standing on\" vessel, K should have kept her course and speed as required by Art. 21 of the Regulations of 1910, made under the Merchant Shipping Act( 1894, and that if she had done so, there would have been no collision.\n\nAs in the • lower courts, this Court also had the assistance of two assessors.\n\nHeld, that K was justified in taking port action at, 6-48 p. m. when a collision seemed iinminent, in view of Arts. 27 and 29 of the Regulations under which when a vessel finds herself so close to another vessel that a collision cannot be avoided by the action of the \"giving way\" vessel alone, she must also take such action as will best aid to avert collision: Held, further, that it was an act of negligence on the part of N to take hard starboard action, instead of following the provisions of Art. 23, as the \"giving way''. vessel, by slackening the speed of or reversing N between 6-45 p. m. and 6-48 p. m.\n\n\"The Tioga\", (1945) 78 LI. L. Rep. l and \" The Empire Brent\", (rg4JS) 81 LI. L. Rep. 306, distinguished.\n\nThe function of nautical assessors is to advise the court •959 upon nautical matters but the decision of the court rests entirely with the court and even in purely nautical matters the court is The Asiatic :i!cam not bound to follow the advice of the assessors, but on questions Navi.(alio11 of nautical science and skill great attention must be paid to the Co., Lid. opinion of the assessors since they are the only source of inforv. mation on these points anc1 some reason must be given for SZ<b-Lt. AmuiH<la disregarding them.\n\nCha1mivarti The assessors in an appeal court are not substituted for those consulted in the trial court; they are <nlditional to them; and if one adviser or two advisers are to be p, refcrrcd, it is because in the judginent of the court the advice given is such as, in itself, is the more acceptable.\n\nThe relevant articles of the Regulations of 19ro, made under 1 h~ Merchant Shipping Act, 1894, arc set out in the judgment.\n\nCn.-u, APPELLATE JURISDICTION: Civil Appeal No. 229 \\ , f 1954.\n\nAppeal from the judgment and decree dated February 28, 1952, of the Bombay High Court in Appeal No. 34 of 1952, arising out. of the judgment. and decree dated February 5, 1951, of the said High Court in Admiralty Suit No. 1 of 1943.\n\nS. O. Isaacs, P. N. Bhagwati, S. N. Mukherjee and B. N. Ghosh, for the appellants.\n\nE. E. Jhirad and T. M. Sen, for the respondent.\n\n1959. January 12. The Judgment of the Court was delivered by\n\nS. K. DAS, J.-This appeal on a certificate given s. [(. Das J. by the High Court of Judicature at Bombay is from the decision of a Division Bench of the said High Court in Appeal No. 34 of 1951, da.ted February 27 and 28, 1952, by which it reversed the decision of a single Judge of the said High Court in Admiralty Suit No. 1 of 1943 dated August 8, 1950.\n\nThe appellant., Asiatic Steam Navigation Company Ltd., is a company incorporated in the United Kingdom with its registered office in London and has an office in Calcutta. The respondent i.s ex-Sub-Lieutenant Arabinda Chakravarti, who at all material times was a commissioned officer in the then Royal Indian Navy with its headquarters at Bombay. The action which the appellant brought arose out of a collision in\n\n'959 a swept channel, a little distance outside the Madras n, 1 -:--;-: 5 harbour, on December 13, 1940, at about 6-51 p.m.\n\n;.~;~:; io:••m The two ships concerned in the collision were the ca .. Ltd. cargo vessel, S. S. Nizam of 5,322 gross tons and\n\nH. M. S. Ka/, awati, a patrol ship of 1,185 tons.\n\nFor\n\nSub-Lt. Arauinda the sake of brevit.y and convenience, these two vessels\n\nChakrnv•rli will be referred to in this judgment as the N izam and s. K. va, J.\n\nKa/, awati.\n\nAt all material times, the appellant owned the Nizam and the respondent, it was stated, was one of the officers in charge of and responsible for the navigation of the Kalawati . One F. C. H. Mason was the Chief Officer of the Nizam and the Master was Malcolm John McLure. Henry Lee was the Commander of the Ka1awati and Arabinda Chakravarti, as stated above, was one of the officers in charge of and responsible for the navigation of the Kalawati at the relevant time.\n\nThe case set out by the appellant in the plaint was this.\n\nOn December 13, 1940, in the afternoon the Nizam, which was then under charter to the Ministry of Shipping, left Madras harbour bound for Calcutta carrying a cargo. She was then tight, staunch, strong, well manned and in every respect sound and fit. A few minutes after 6-45 p.m. when the weather was fine, clear but cloudy, the moon full, the wind moderate, the sea calm and the set of the tide from north to south, the Nizam was being navigated in a swept channel outside the Madras harbour.\n\nThe swept channel was approximately about one mile wide and seventeen miles long. The Nizam was heading for the open sea on her proper course to Calcutta and was being navigated in a proper and seamanlike manner and was on her proper, namely the starboard side of the channel. The Kalawati was on an opposite course making for Madras harbour. The Nizam having the Kalawati about one point on her starboard bow star. boarded with the result that the two vessels were about one mile apart on courses which would result in their passing from port to port with a distance of about half a mile between them.\n\nAt that time, the Kalawati made a \" light \" signal to the Nizam ; the signal was not legible and the N izam sent a signal\n\nwhich asked for a repetition of the signal of the Kalax959 wati. The N izam continued hard to starboard, but The Asiatic Steam the Kalawuti altered course to port with the result Navigation that the Kalawati wa.s converging on the course co., Ltd. of the Nizam.\n\nThe Nizam continued to go to v. . fltarboard and the Kalawati to port ; thel'eafter, Sub-Lt. Arabida\n\nII• . d . . h N.\n\nChakravatli w en a co 1s1on seeme very immment, t e izam was put full speed astern, but the Kalawati was navis. f{. Das J. gated across the bows of the Nizam and the result was that the starboard quarter of the Kalawati came into collision with the bows of the Nizam. The Kalawati then pivoted round the bows of the Nizam and again came into collision with the latter. After alleging the facts stated above, the appellant pleaded in the plaint that the collision was ca.used by the negligent navigation of the Kalawati and the following particulars of that negligence were given: (a) alteration of the Kalawati's course to port so as to t&ke her a.cross the bows of the Nizam; (b) failure of the Kalawati to stop or to go a.stern and/or to put her helm ha.rd a-starboard when there was yet time for her to do so and avoid a. collision; (c) in breach of the Regulations for the Prevention of Collisions at Sea the Kalawati failed to keep to her proper side, namely, the starboard side of the channel, when it was her duty to do so, and further the Kalawati failed to keep out of the way of the Nizam when it was her duty to do so and (d) a proper look-out was not kept on board the Kalawati.\n\nThe total claim which the appellant preferred for the damage sustained was a sum of Rs. 88,000 and odd and particlars of the claim were set out in sch. B of the plaint.\n\nIn his written statement the respondent denied any liability for the damage sustained by the Nizam. The case of the respondent as set out in his written statement was, to put it briefly, this. The re&pondent said that at about 6-45 p.m. on December 13, 1940, he was the officer on watch and the Kalawati was steering a course north 800 west keeping to the Kalawati's proper side of the channel. The N izam was sighted at about that time, about 20' on the port side and about 2i miles away, heading for the open sea and\n\n'959 steering eastwards and running a parallel and op-\n\nTh A -:--t. st posite course. Due to certain wartime regulations, the e sia ic eam .\n\nNovigation lights of both the vessels were blacked out.\n\nAccord.\n\nCo., Ltd. ing to the courses which the Nizam and the Kalawati v. were then pursuing they would have passed each Sub-Lt. Arabinda other clear port to port and the respondent signalled\n\nChakravarU to the N izam with a portable Aldis Lamp and asked s. K. Das J. for her identity. The Niiam replied with one long flash indicating that she was ready to receive signals from the Kalawati.\n\nAs the respondent was about to continue signalling, he noticed that the Nizam altered her course to port in such a. manner that she was converging on and crossing the course of the Kalawati.\n\nThe respondent then stopped signalling and a.s the Nizam continued on the wrong course ta.ken by her until her bows were fine on the port bows of the Kalawati, a collision seemed imminent, the two vessels then being about two cables a.pa.rt. In order to avert the imminent risk of collision the respondent ordered the Kalawati to be put ha.rd aport and simultaneously indicated to the N izam the a.Iteration of the Kalawati' B course. The Nizam, however, instead of keeping to the course already ta.ken by her and passing the Kalawati on the-; itarboard side, erroneously attempted to correct the earlier wrong course ta.ken by her and attempted to go back to her proper side of the . channel. The N izam then altered her course to ha.rd star boa.rd with the result that the two vessels were in such a position that it was not possible to avert a. collision either by slackening the speed of the Kalawati or by going astern. In substance, the case of the respondent was that the collision was ca.used by the circumstances\n\n(a) that the N izam failed to keep to her proper side of the channel, (b) that she continued to port in such a manner a.s to put the Kalawati in a perilous position and the Kalawati had to take avoiding action and finally (c)' the Nizam was negligent in altering her course to hard astarboard after being made a.ware repeatedly that the course of the Kalawati had been altered to port. Therefore, according to the respondent, the action of the N izam in steering starboard after Kalawati had ta.ken port action, was the proximate and effective cause of the collision.\n\nOn the pleadings stated above, several issues were r959 framed but the principal question for decision by the The Asiat\"c Steam learned trial Judge was if it was the negligent action Navig:tion of the Nizam or of the Ka'lawati which caused the Co., Ltd. collision. Issues 1, 2 and 3 were the issues which v. related to this question. A further question was raised Sub-Lt. Arabida by issues 4 and 6 and that related to contributory Chakravaro negligence, and in case it was found that both the s 1 • K. Das • vessels were to blame for the collision, the question raised was in what proportion the negligence of the Nizam and of the Kalawati contributed to the collision. The learned trial Judge found in favour of the present appellant on the principal question and expressed his finding in the following words :-\n\n\"I' have come to the finding that the first helm action was taken-and rightly taken-at the crucial time by the Nizam going hard a.starboard, and the Kalawati turned to port when there was no question of the imminence of any collision. . ........ In these circumstances, as a standing on vessel the Kalawati turned - and wrongly in my opinion - to port and but for her turning to port, there was no question of the two vessels coming .into a perilous position. In these circumstances, I am of the opinion that the Nizam was justified in starboarding. The Kalawati had to keep her course under the rule being a standing on vessel, and should have maintained her course in that manner until the last safe moment, but to my mind she turned to port much before any such occasion arose. On this point, I may say that had the Kalawati to take any action at all, the normal action would have been going to starboard, and this would have completely a.voided the collision. On this point I may state that the nautical advisers whom I have had occasion to consult are in agreement with the view I am adopting.\n\nI may also state that in my opinion the Nizam put its engines full speed astern a.t the earliest opportunity, looking to the situation. The Nizam was put full speed astern at least 2i minutes approximately before the collision took place, and even if the statement of\n\nr959 McLure that she was dead slow before the collision is n\n\nA -. -. 5 a slight overstatement it must follow that the back of\n\n'N;::;;,;0~'\"mthe momentum of the Nizam hadalready been wholly co, Ltd. broken and there is evidence that she was doing about v. 3 to 4 knots instead of her 9 to 10 knots normal speed.\n\nSub-Lt. Arabinda On the other hand, I am clearly of the opinion that it\n\nCha.\\.-avai-ti was fundamentally wrong for the Captain of the Kalawati not to put her engines full speed astern S. K. Das ]. immediately he saw the l!itua.tion was perilous. In fact, instead of doing so, he went full speed ahead.\n\nTo my mind, that was not only a wrong judgment but a judgment inspired by desperation, namely, that by putting them full speed ahead, with a bit of luck, he would have cleared himself of the DOie of the Nizam.\n\nI have, therefore, come to the conclusion that the Kalawati wrongly altered her course at the moment when she did, and if any step had to be taken she should have altered not to port b11t to starboard, and if any other action was necessary, she should have put her engines full speed a.stern.\" In view of the aforesaid findings, the learned trial Judge expressed the view that the question of coutri butory negligence did not a.rise, as also the question in what proportion ea.ch contributed to the collision.\n\nThe question of damages was, by agreement, held over until the findings on the question of negligence and, after the learned trial Judge had given the necessary findings on the question of negligence, the damage sustained by the N izam was assessed at Rs. 76,893-2-8 and a decree waR passed for that a.mount with interest thereon at four per cent. per annum from June 19, 1941.\n\nThe respondent then preferred a.n appeal and the appeal was heard by Cha.gla., C. J., and Bhagwati, J.\n\nLike , the trial Judge, the Judges who heard the appeal also had the assi\"tauce of. two assessors. On the principal question as to whether the collision wa11 caused by the negligent action of the N iuim or of the Kalawati, the learned Judges who heard the appeal reversed t.he findings of the learned trial Judge. They said:\n\n\"Tlwrl'fol'c, in our opinion, on this evidencf!, we\n\n(1) S.C.R. SUPH.EME COURT HEPOHTS 987\n\nmust find as a fact that the N izam did not alter her z959 course to starboard at 6-45 p.ro., but she did so much r' , -. -. ,, I d l\"k l 6 48 h h ''e as1at1e ,,.awm. atcr an very I e y at - p.m. w en s e gave one Naviaatio\" blast to indicate the change of course. Now, if that i:-; co .• u.1. the fact we find, we have to consider what bearing v. that finding of fact has upon the question of the 'iu 11-Lt. Arabir.<1;1 defendant's negligence. The question is whether the Chakravarti defendant was justified in turning his ship to port at l\n\nS. R. Das]. 6-48 p.m. if at t iat moment the N izam was still steering to port. The question is whetper at 6-48 p.m. there was a reasonable probability of a collision which justified the Kalawati in changing her course to port in order to avoid that collision. We have the plan before us and we have the evidence before us, put as this question of fact involves a question of nautica.l skill we have availed ourselvtJs of the assistance of the assessors.\n\nCommander Kale is emphatically of the opinion that at 6-48 p.m. if the N izam was pursuing the same course that she was doing from 6-38 p.m., there was a reasonable probability of a collision which it was the duty of the defendant to avoid as best as he could, and according 1.o Commander Kale, the only way he could have. possibly avoided it was by steering his ship to port.\n\nCapt.\n\nMalcolm does not agree with this view. He takes the view that the Kalawati should have raLher turned to stal'board than to port, and his opinion is based on the consideration that the Kalawati should have assumed that at sometime or other the Nizam would turn starboard and taking that possibility into consideration she should have gone to the right side and not to the wrong side. With respect to Capt. Malcolm, we are inclined to prefer the opinion given by Commander Kale as to what should have been done under the circumstances ... Now, as the Nizam was the\" giving way\" vessel, there was the primary obligation upon her if necessary to stop the ship or to go n.stern, and on the evidence it is difficult to resist the conclusion that the order to go full speed astern, could have been given earlier either by the Captain himself or by Mason. On this point both the assessors have expressed their opinion that as a matter of naucical skill\n\n1959 it would have been possible and indeed it should ha.ve\n\nA -:--,. 51 been done, viz., that the ship should have been ordered e sia tc eam .\n\nNavigation to go full speed astern earlier than 6-49 p.m. co .. Ltd.\n\nIn our opinion, therefore, there a.re these two facts v. which have definitely contributed to the collision Sub-Lt. habinda taking place at 6-52 p.m. The first is the failure on\n\nChakravarti the part of the N izam to give the signal that she was s. K. Das 1. going starboard, even assuming that we accept the plaintiffs' case that she starboal'ded a.t 6-45 p.m. If she had given. the signal then it would have given proper and full warning to the Kalawati as to what the Nizam was doing or going to do at that momeut.\n\nThe other fact which has also contributed in our opinion to the collision is the failure on the pa.rt of the\n\nNizam to go full speed a.stern earlier than 6-49 p.m.\" In the result, t.he appeal was allowed a.nd the action of the appellant was dismissed with costs throughout.\n\nWe have already stated that the High Court of Bombay gave a certificate of fitness under Art. 133 of the Constitution and the present appeal ha.s been brought to this Court in pursuance of that certificate.\n\nTwo assessors, Capt. J. A. Cleeve and Commodore A. K. Chatterjee, have assisted us.\n\nAt the very out. set, it is necessary to clarify two points. Firstly, it appears that the learned Judges who heard the appeal in the Bombay High Court did not base their findings on the evidence of the respondent or his witnesses; nor did the learned trial Judge attach any great importance to the evidence of the respondent or his witnesses. The learned Judges said:-\n\n\" We do not blame the learned Judge because, when the evidence of both these witnesses was laid before us, we also felt that the evidence was not given in a manner which would inspire confidence.\" Learned counsel for the appellant has placed before us in full the evidence of the appellant and its witnesses.\n\nHe has also placed before us such portions of the evidence of the respondent and his witnesses as, in his opinion, support the case of the appellant. In arriving at our conclusions we have also proceeded on the footing that as the courts below did not consider the evidence of the respondent's witnesses to be reliable,\n\n'. --\n\nthe principal question of negligence must be decided '959 on the evidence of the appellant's .witnesses. The trial r' A-_-_ 5 Jd k . fht \"d ·· d h Jd \"' siatic team u ge too one view o t a ev1 ence an t e u gos Navigation who heard the appeal took another view. There being co., Ltd. no concurrent finding~, we allowed learned counsel for v. the appellant to place the entire evidence of the appel- Sub-Lt. Arabinda lant's witnesses before us in support of his contentions.\n\nChakruva>ti The other point relates to the assessors. It has not been disputed before us that the function of nautical s. K. Das J. assessors is to advise the court upon nautical manners and as Scott, L. J., said in The Olan Lamont.('):\n\n\" •.....•..... their ad vice is expert evidence, admissible in Admiralty Courts, on all issues of fact about\n\nseamanship.\" The de~ ision of the case, however, rests entirely with the court and even in purely nautical matters the court is not bound to follow the ad vice of assessors, but on questions of nautical science and skill great attention must obviously be paid to the opinion of the assessors since they are the only source of information on these points and some reason should be given for disregarding them. In the Australia(') Lord Dunedin deprecated putting to assessors a question that is tantamount to asking them whether they would find for the plaintiff or the defendant and repudiated the. idea that the views of the assessors in an appeal court are entitled to more respect than those of assessors below. The assessors.in an appeal court are not substituted for those previously consulted; they are additional to them; and if one adviser or two advisers are to be preferred, it is because in the judgment of the court the advice given is such as, in itself, is the more acceptable. There can be no question of any appeal from one set of assessors to another. \\Ve have followed the same principles with regard to the advice of the assessors given in this case and we shall refer to such advice in the course of this judgment when it has a hearing on the questions at issue before us.\n\nThe principal point for determination in this case is which of the two, the Nizam or the Kalaicati, was\n\n(1) (1946) 79 LI. L. Rep. ,521, 524 (Lloyds List Law Reports). -\n\n(2) [1927] A. C. 145.\n\n990 SUPltEME COURT REPORTS [1959) Supp.\n\n1959 responsible for the collision; and if both were respon-\n\n1.h . . . sible, what is the extent of the responsibility of ea.ch ? e Asiatic Steam F d t . t' f th . . .\n\nN avigvtion or a e ermma 10n o ese questions 1t 1s necessary co:, Ltd. first to find what courses the aforesaid two boats were v. following at the relevant time and what changes of Sub-Lt. habinda course were made by them. These facts have to be\n\nChakravarti determined first and in doing so we must keep in mind some of the Regulations made under the Merchant s. K. Das J.\n\nShipping Act, 1894. It hs been admitted by counsel for both parties that these H.egulations apply, and we are concerned with the Hegulations of 1910, namely, those made by an Order in-Council dated October 13,\n\n1910. They embody rules which were to be followed at the relevant time by all vessels upon the high seas, and in all waters connected therewith, navigable by sea-going vessels.\n\nArticles 17 to 27 of the 1910 legu lations relate to steering and sailing rules.\n\nArticle 17 applies to sailing vessels, and Art. 18 to steam vessels.\n\nArticle 18 says in effect that when two steam vessels a.re meeting end on or nearly end on so as to involve risk of collision, each should alter her course to star. board so that each may pass on the port side of the other. Article 19 is in these terms:\n\nArt. 19. \" When two steam vessels a.re crossing, so as to involve risk of collision, the vessel which has the other on her own starboard side shall keep out of the way of the other.\" The vessel which has to keep out of the way of the other is called the \" give way \" vessel and the other is ca.lied the \" standing on \" vessel. In the case before us there is no dispute that the N izam was the give way vessel and the Kalawati the standing on vessel.\n\nArticle 21 has some bearing 011 the question at is>uo before us and is in these terms : Art. 21. \" Where by any of these ltules one of two vessels is to keep out of the way, the other shall keep her course and speed.\" Article 23 says :\n\n\"Every steam vessel which is directed by these Rules to keep out of the way of another vessel shall, un approaching her, if.necessary, slacken her speed or stop or reverse.\"\n\nArticle 24 sa.ys inter alia that notwithstanding a.nyr959 thing in the Rules, every vel!Sel overtaking another Th , 5 f h k 1\n\n1 ns1a1tc t1am shall keep out of the way o t e overta en vesse .\n\nNaviKatio\" Article 25 is very important for our purpose, as learnco., I.td. ed counsel for the a.ppella.nt ha.s pla.ced great reliance v. on it. This Article must. be quoted in extenso.\n\nSub-Lt. Arabi\"d\" Art. 25. \" In narrow channels every steam vessel Cltaltravarli shall, when it is sa.fe and practicable, keep to that side 5 1 1 • K. Das • of the fairway or mid-channel which lies on the starboard side of such veB&el.\" There ha.s been considerable difficulty in defining a \"narrow channel\", and in the trial court the present respondent denied that the awept channel outside the Madras harbour was a narrow channel within the meaning Of Art. 25 aforesaid. The courts below proceeded, however, on the footing that the channel in question was a narrow channel within the meaning of the said Article and we have also proceeded on the same footing.\n\nArticle 27 is t.lso important for our purpOse. It says:\n\nArt. 27. \"In obeying and construing these Rules, due regard shall be had to all dangers of navigation\n\nand collision, and to any special circumstances which may render a departure from the a.hove Rules necessary in or<ler to a.void immediate danger.\" Art.icles 29 a.nd 30 are two 1esidua.ry Articles. Article 29 inter alia says that nothing in the Rules shall exonerate any vessel from the consequences of any neglect to keep a. proper look out or of the neglect of any precaution which may be required by the ordinary\n\npra<:tice of sea.men, or by the special circumstances of the case, and Art. 30 says that nothing in the Rules shall interfere with the operation of a special rule, duly ma.de by a. local authority, relative to the navigation of any harbour, river or inland waters.\n\nWe proceed now. to a consideration of the evidence with regard to those facts on which the determination of the question of negligencEl depends in this case. We do not propose to embark on a. very detailed third review of the evidence given in the case, but shall confine ourselves to those salient points which, in our view, arc determinative of the principal question at\n\nr959 issue between the parties, namely, that of negligence for the collision which took place at about 6.51 p. m. t The NAsfat;',. Steam on December 13, 1940. We shall for that purpose\n\noviga ion r h \"d f co., Ltd; re1er to t e ev1 ence o Mason, McLure and Abdul v.\n\nN abi, three witnesses for the appellant.\n\nAs to the Sub-Lt. Arnbinda effect of the evidence of these three witnesses, the\n\nChakravarti learned Judges who heard the appeal in the Bombay High Court came to conclusions different from those s. f(. Das 1 of the learned trial Judge and one of the points for our consideration will be if the appellate Court gave good and convincing reasons for differing from the view of the evidence which the learned trial Judge took. It t may be stated here that the aforesaid three witnesses were examined by Blagden, J., in April, 1945, and February, 1946, and that learned Judge made some notes as to the manner in which the three witnesses gave their evidence. Our attention has been drawn to those notes by learned counsel for the appellant.\n\nBlagden, J., however had ceased to be a Judge of the Court before the suit was tried. The respondent and his witnesses were examined in 1950 by Coyajee, J., who tried the suit and gave judgment in favour of the • appellant.\n\nIt appears from the evidence that at about 4-45 p.m. on December 13, 1940, the Nizam took the pilot on board and proceeded to sea.\n\nAt about 5-22 p.m. the pilot was dropped and she proceeded at full speed under McLure's orders up the swept channel, the speed being about 10! knots. McLure handed over to Mason at about 5-55 p.m. and the Nizam was then steering a course north 86° east, making some allowance for the leeway to port for the set of the tide from north to sOLith.\n\nAt about 6 p.m. the third officer relieved Mason; Mason returned to the bridge at 6-30 p.m. and took over from the third officer. Mason said that be had checked the bearings of the Nizam just before he left the bridge a.t 6 p. m. and she was then two ca.hies on the proper side of the channel.\n\nSoon after 6-30 p.m. Mason saw a vessel about two points on the starboard bow of the Nizam at a. distance of about three miles.\n\nMason's evidence was that he thought then that the Nizam was overtaking\n\nthat other vessel which must have been the Kalawati. 1959 At 6-38 p.m. Mason altered the course of the N izam ne Asiatic Steam 8° to port, because he thought that the Nizam and the Navigation Kalawati were on converging courses. At 6-43 p.m.\n\nCo., Ltd. the look-out on the Nizam rang the bell twice i11dicatv. • S<1b-Lt. Ar.1bi11da mg a. vessel viz. the Kalawati on the starboard side.\n\nChakrava, ti Mason then said that at about 6-45 p.m. the Kalawati was about one mile on the Nizam's starboard bow and s. K. Das J. was clearly seen to be crossing to starboal'd port. The Kalawati then ma.de an .Aldis lamp' signal and Mason replied I.M.I. with a torch which asked for a. repetition of the signal. Mason then ordered ha.rd a.starboard; he did this because under certain wartime orders a merchant vessel had to turn away from any ship that signalled. At 6-47 p.m. the Kalawati was several points on the port bow of the N izam and near a.bout 6-48 p.m. the Kalawati altered her course to port and indicated the alteration by two short blasts.\n\nMason replied by one short blast indicating that the Nizam was turning to starboard. At a.bout 6-49 p.m.\n\nMcLure came on board and he rang full speed astern.\n\nBy about 6-51 p.m., however, the collision took place.\n\nThe above gives in brief a. summary of the events which, according to Ma.son, led to the collision.\n\nMcLure's evidence was that he returned to the bridge at about 6-48 p.m. on hearing two short blasts from the Kalawati, and on coming to the bridge he saw that the Kalawati was turning to port. McLure at once ordered full speed a.stern and ca.used three short blasts to be given; but the collision occurred within about two minutes. Abdul Na.bi was the Quarter Master of the N izam. His evidence was to the effect that Mason ca.me on the bridge at about 6-30 p.m. and at that time the N izam was steering a course north 86° east.\n\nAt about 6-40 p.m. (Abdul Na.bi said that it was ten miriutes after Mason came on the bridge) he received an order to steer 8 ° to port and he did so. Some five or ten minutes after he received another order to go to starboard, that is, to the Nizam's former course.\n\nThen came the la.st order to hard a.starboard and this was at about the time when Abdul Nabi heard two\n\n'7959 blats from the Kalawati. It may be here remarked -. -. that Abdul Nabi's evidence differs essentially from\n\nTh•NA\"~'\",. 5''\"mthat of Mason as to the time when the Nizam went t aviga ion h f co .• Ltd. hard a.starboard and also as to t e sequence o events v. which led to the alteration of the Nizam's course from Sub-Lt. Arabinda north 86 ° east to 8 ° port first, then to her former\n\nChakravarti course and then again to hard a.starboard. We shall later return to these discrepancies. s. K. Das J.\n\nThe three circumstances, however, which stand out from the evidenc~ of Mason are-(a) that the Nizam was on the proper side of the channel at about 6-45 p.m.; (b) she turned to ha.rd a.starboard at about r 6-45 p.m. in order to present her stern to the Kalawati in compliance with certain wartime orders; and (c) the Kalawati turned to port at a.bout 6-48 p.m. after she had seen the N izam turn to ha.rd a.starboard some three minutes earlier. If Mason's evidence is correct with regard to the aforesaid three circumstances and the Kalawati turned to port after she had seen the N izam turn to ha.rd astarboard and if at the time the Kalawati. was on the wrong side of the channel, then there can be very little doubt as to where the responsit bility for the collision should lie. Coyajee, J., accepted Mason's evidence with regard to the aforesaid three circumstances and held that the responsibility for the collision lay on the Kalawati, because she turned to port at the time she did after having seen the Nizam turn to hard a.starboard some three minutes earlier.\n\nThe learned Judges who heard the appeal did not accept as correct Mason's evidence that the Nizam turned to hard a.starboard at about 6-45 p.m. in order to present her stern to the Kalawati ; on the contrary, from the evidence of McLure and Abdul Na.bi read with the evidence of Mason, they ca.me to the conclusion that it was impossible to accept the appellant's case that the Nizam turned starboard at 6-45 p.m. and it was more likely that she turned to starboard at about 6-48 p.m. after she had heard the signal of the Kalawati that she was turning to port.\n\nIn other words, the learned Judges found that the Kalawati had turned to port first in order to avoid an imminent risk of collision and it was then that the N izam\n\n\\ -\n\naltered her course to starboard in order to get to the z9s9\n\n~ proper side of the channel.\n\nThe Asia;. Steam The question before us is which of these two views N•vigation - is correct. On a careful consideration of the evidence co., Ltd. and the submissions made thereon by learned counsel v. . for the parties we are of the opinion that the view of Sub-Lt. Arab•~•da\n\nl ' .\n\nChakravarti the earned Judges who heard the appeal 1s the correct view. According to the evidence of Mason, he checked s. K. Da$ J. the bearings of the Nizam before he left the bridge at 6 p.m. and on checking the bearings from the Madras Light House and a. conspicuous white house on the north side of the harbour, he found that the Nizam was two cables on the proper side of the channel. It appears that there should have been a dan buoy in mid-channel to mark the mid-line. Mason said that he looked for it, but did not find it. There was a fairway buoy at the end of the channel, that is, near the mouth of the channel from the open sea. It is not disputed that the Kalawati entered the channel south of the fairway buoy and was at the time of the entry into the channel on the wrong side. The question, however, is what was the position of the two boats at the relevant time, namely, at about 6-45 p.m. when the distance between the two boats was about a mile or so.\n\nMason's evidence itself shows that at about 6-45 p.m. both the boats were near about the mid-line of the channel. It is to be remembered that though the N izam was about two cables on the proper side of the channel at about 6 p.m., she had altered her , course 8° to port, even according to Mason, at about 6-38 p.m.\n\nAbdul Nabi's evidence indicated that the Nzam had altered her course to pOI't by about 10°.\n\nEven allowing for the set of the tide, if the Nizam had continued in her port course in order to overtake the Kalawati (as Mason was then under the impression that the N izam was overtaking the Kalawati), she would cross the mid-line and go into the wrong side of\n\n~ the channel. It is worthy of note that in the plaint there was no mention of the circumstance that the N izam altered her course to port in order to overtake the Kalawati, on the wrong impression that both the bua.ts were go_ing in the same direction.\n\nBut be that\n\nz959 as it may, it is quite clear that the Nizam did alter\n\nTha. Asiatic Steam h.er COdur.se tho port at aboiJult 6b38 p. 6 m 4 , 8 and if hshe con1 d. t Navigation tmue m t at course t a out p.m., s e wou co., Ltd. be near the mid-line of the channel or just across it at v. the relevant time. Mason admitted this and said in Sub-Lt. Arabinaa cross-examination : \" At 18-45 I was just about in the\n\nCh•A•••••li mid-channel and the Kalawati was then steering a s. K. Das 1. crossing course\". Mason prepared a chart to show the position of the two boats and this was marked as Ext. A. This chart also showed that at about 6·45 p.m. the Nizam was on the mid-line and if the Nizam had continued her port course she would be on the wrong side of the channel at about 6-48 p.m. Even though the Kalawati had entered the channel south of the fairway buoy, which was her wrong side, she was steering a course north 80° west, making an allowance for a southerly drift of about 1 or I 5 knots. By steering that course the Kalawati would also be near the mid-line of the channel at-about 6-45 p.m. She would be on her right side of the channel at 6-46 p.m.\n\nThis is also made clear from the chart, Ext. A.\n\nLearned counsel for the appellant repudiated the correctness of the chart, Ext. A, but it is a chart prepared by his own witness and so far as the position of the Nizam was concerned, the chart must have been prepared on the position and course of the Nizam as given by the appellant's own witnesses. We see no good reasons for discarding the chart, Ext. A.\n\nAt our request the assessors also prepared a chart showing the position of the two boats on the following assumptions: (a) Nizam's speed about 10·2 knots,\n\n(b) J(alawati's speed a-bout 11 knots, (c) the set of tne tide about 71 knots and (d) length of the swept channel about 18 miles. This chart also showed that at about 6-45 p.m. the Nizam was on the mid-line and the Kalawati had crossed the mid-line into her right side of the channel. If the set of the tide was two knots or three knots, I'S some of the witnesses said, then both the Nizam and the Kalawati would be outside the swept channel, and if the Kalawati was sighted two pointson the starboard bow of the Nizam she would be further south of the southern limit of the\n\nf .\n\nswept channel. On a 1onsideration of the evidence\n\nI959 in the case it appears to us that at the relevant time, Th A-.-. 5 b h h b h • siallc team namely, 6-45 p.m., ot t e oats were near about t e Navigation mid-line, may be a little on the right or wrong side co., Ltd. of it, and the distance between the two boats was v. a.bout one mile at that time. The very elaborate Sub-Lt. Arabinda argument of learned counsel for the appellant based Chakravarti on Art. 25, which requires every steam vessel in a - S. K. Das]. narrow t:ha.nnel to keep to the starboard side of the channel, loses much of its force when we remember that at the relevant time the two boats were near the mid-line of the channel and, according to Mason, the Kalawati was then crossing to starboard port. One of the assessors, Commodore Chatterjee, gave as his opinion that if the Kalawati was coming from the south, it would be easier for her to enter the channel south of the fairway buoy and he would not consider it as a breach of the. rules of the road unless the Kalawati was embarrassing another ship coming out of the channel. Capt. Cleeve said that as a merchant ship captain he would never o it, but as a naval ship\n\ncptaiQ he might do it and although it might be against the spirit of the regulations, it would not be a\n\nbreach of them. It is to be remembered again that the Kalawati entered the channel at about 6-25 p. m. and at the time the N izam was about seven miles away. We do not, therefore, think the circumstance that the Kalawati entered the swept channel south of the fairway buoy decisive on the issue of negligence.\n\nAs we have remarked earlier the decisive question is what was the position of the two boats at the relevant time, namely, at a.bout 6-45 p. m.? The evidence leaves no room for any doubt that at the relevant time the two boats were near about the mid-line of the channel.\n\nThe question is what happened thereafter? Mason said that from 6-38 to 6-41 p.m. he assumed that he was overtaking the Kalawati ; from 6-41 to 6-45 p.m. he was in two minds and when at 6-45 p. m. the Ifolawati signalled the N izam, then Mason came to know that the Ka'lawati was steering a crossing course.\n\nMason said that he then changed to hard starboard.\n\nz9s9 This part of the evidence of Mason is flatly contradict- Th• A•;;;. 51 ed by Abdul Nabi and is further not supported by t Navii•tio• ,.,,. several circumstances to which we shall presently co., LJ4. refer. It is true that none of the witnesses gave the •· time with the precilion of a watch and what they 5•h-l.i. Ar•bi\"\"• said about time was more or less approximate. Abdul\n\nChak•••••li Nabi was, however, very definite that Mason first s. x. Dru 1. ordered the Nizam to steer 8° to port; then there was\n\na second order to go to the former course and lastly there was an order to go hard astarboard. If Abdul Nabi is telling the truth, then even making due allowance for the approximate nature of the times which he mentioned, the evidence of Mason that he changed the course of the Nizarn to hard astarboard at about 6-45 p.m. cannot be correct. Then, take the following circumstancea one by one. If Muon had changed the courae of the Nizam to hard utarboard, why did he not give a 1ignal to indicate the change of course ?\n\nThe evidence is very clear. on this point. It was the Kalawati which gave two short blasts at about 6-48 p.m. to indicate that she was changing to port. Theret after the Nizam replied by one short blast indicating that she was changing to starboard. If the Nizam had changed to starboard three minutes earlier, why was no signal given ! It is necessary to refer here to Art. 28 which says that when vessels ate in sight of one another a steam vessel under way shall indicate the course taken by her. Mason madiw an attempt to say in his evidence that Art. 28 was not adhered to in wartime; but then he had to admit that only a few minutes after, the Nizam did give one short blast in reply to the two short blasts of the Kalawati. It is obvious that Art. 28 was not abrogated during wartime and it was the duty of the Nizam to indicate by one short blast that she was changing to starboard, if she actually did so at 6-45 p.m. We are, however, . of the opinion, in agreement with the learned Judges of the appellate Bench, that the N izam did not change t her course to starboard at 6-45 p.m. as Ma.son wants us to believe; on the contrary, the N izam continued her port course till about 6-48 p. m. and she changed to starboard only after she had heard the two blasts from\n\nthe Kalawati. This, we think, is clear from two very '959 important circumstances. McLure admitted in his evi- Th\n\nA-:---,. 51 . . e sia tc eam dence that at the speed and under the cond1t1ons pre- Navigation vailing immediately before the collision, it would take co., Ltd. the N izam about 2i minutes to swing 90° with her helm v. ha.rd over. If actually Mason had altered the course Sub-Lt. Arabida\n\nof the Nizam to hard a.starboard at 6-45 p.m., then Chakravarlt she would be heading back towards Madras at the - time when the collision took place. Even McLure said: \"If Ma.son's statement is correct, I should have expected my ship to be heading at right angles to her former course.\" That was not, however, the position of the Nizam when the collision took place. The assessors were agreed that once the wheel had been placed hard starboard, it was not possible to put the wheel further to starboard. If actually more than five minutes had passed, after the N izam had been put hard starboard, she would be swinging starboard a.II the time and she would take a. turn of about 180° within five minutes. In any event, by about 6-48 p.m. she would be at right angles to her former course, as stated by McLure. We think that McLure's evidence on this point destroys the ca.se of Ma.son that he had altered the Nizam's course to hard a.starboard at 6-45 p.m. Then there is the second important circumstance that McLure admitted that he knew nothing a.bout any helm action of the N izam from 5-55 p.m. to 6-48 p.m. McLure said :\n\n\" First I heard at 6-43 p.m. two bells indicating an object on the starboard bow.\n\nI was still in my ca.bin at the time. I was reading Admiralty messages.\n\nI heard two blasts from the other ship at 6-48 p. m.\n\nI have no recollection of feeling any helm action of my ship before that. I immediately went up on the bridge. The N izam did not sound one blast till I had reached the top of the ladder. That would normally suggest that the Kalawati had turned to port first\".\n\nMcLure further said that when a ship alters course and signals, the alteration and the signal must be simultaneous.\n\nIt would be surprising indeed that McLure would not notice the helm action to hard starboard if actually the Nizam had been put hard\n\nS. K. Das].\n\n'959 starboard at 6-45 p.m. The assessors were asli:ed Th• A;;;;. Steam abot this matter and Commodore Chatterjee said that\n\n• Navigation if the helm was put ha.rd over, he would feel it even if Co., Ltd. he was asleep. Capt. Cleeve said that the master of v. a fast .ship would feel the helm action sooner than the Sub.Lt. Arabinda master of a slo. w ship, probably twenty to thirty Chakravarti seconds sooner. McLure, however, felt no helm action s. K. Das J. at all up till 6-48 p.m. This also shows that the story\n\nof Mason that he changed the course of the Nizam to hard a.starboard at 6-45 p.m. was not correct.\n\nThe reason which Ma.son gave for altering the course of the Nizam hard a-starboard at 6-45 p. m. was an alleged war-time order that a merchant vessel when challenged must turn away from the challenging vessel. This reason is far from convin-Oing. No such war-time order was produced in evidence. In Ex. C (Surveyor's report dated January 27, 1941) the reason for the starboard action was stated thus :-\n\n\" At 6-45 p. m. the other vessel appea.rd to be about one point on the starboard bow and a.bout one mile distant and to be heading to cross the bows of s. s. \"Nizam \".\n\nThe helm put ha.rd a.starboard in order to pass astern of the other vessel.\" There was no reference to any wartime order or regulation then. McLure said in his evidence :\n\n\"The rule about turning away from 11 challenging vessel was a secret matter and I did not think it fit to mention it even to my Managing Agents. Mason told me he originally steered to starboard in order to pass port to port.\" Even Mason was far from being firm as to the reason which .Jed him to turn ha.rd a.starboard at 6-45 p. m.\n\nHaving said that the only reason was the alleged wartime order, he changed and said that he turned hard starboard because he was dazzled with the Aldis lamp signal and the Kalawati was too close. He admitted that he knew then that the Kalawati was a. patrol vessel which was not hostile; yet he wanted to turn astern, as the Nizam had a gun mounted astern!\n\nAgain, he changed and gve a third reason for going bard starboard, namely, be wanted to get out. of the way of the Kalawati. In this state of the evidence, it is\n\nimpossible to place implicit reliance on Mason's evid- .r959 ence that he turned hard starboard at 6-45 p. m. for The Asiatic steam the reason that a so-called war-time order required Navigation him to do so. Learned counsel for the appellant drew Co., Ltd. our attention to the respondent's evidence on this 5 v. t Th d \"d ub-Lt. Arabinda pom . e respon ent sa1 : Chak a 1; \"When a ship is challenged she gives her name ' var and turns round but not in the swept channel or in s. K. Das J. the harbour.\n\nI do not agree that in the swept channel when a , ship was challenged to give her name she would have to turn round. I did state before the Marine Enquiry that when a merchant ship is challenged she would turn a.bout necessarily by starboard movement and give her name and the turning about would be action preparatory to running away and that owing to war these regulations were in force.\n\nI say that I was trapped into giving answers by vague questions.\"\n\nWe agree that the respondent's evidence is not very ingenuous; but it cannot be accepted as an admission which relieved the appellant from proving the existence of a war-time order or regulation of the kind and nature suggested by Mason in his evidence.\n\nMason's evidence taken as a whole seems to indicate that the order to turn ha.rd starboard came m'uch later than 6-45 p. m. and the reason for the order was to get back to the right side of the channel and to get out of the way of the Kalawati, if possible. Unfortunately, the action was taken too late and after the Kalawati had already turned to port. On the evidence, we are unable to hold that the Nizam took starboard action before the Kalawati turned to port.\n\nThe question now arises-why did the Kalawati turn to port at about 6-48 p. m. and in doing ao, did she commit an act of negligence or an act which in any way contributed to the collision ? On behalf of the appellant, it has been argued that even if we find on the facts that the Kalawati took port action first, this action was wholly unjustified and wrong and, in a.ny event, the Kalawati could and should have gone to starboard to avoid the collision; therefore, she was wholly to blame.\n\nAlternatively~ it has been argued\n\n1a(i\n\nz959 that she was mostly to blame and the blame should r - be apportioned. We shall deal with the alternative Thi Asiatie Steam I Nav; gation argTument at. a ter sthaged\"d l K l . t co., Ltd. he quest10n 1s-w y 1 t ie .a .awati turn to por v. at about 6-48 p. m. ? We think that Mason's own Sub-Lt. Arabinda evidence furnishes an answer to the question. We Chakravarti know from the Kalawati's log book that she entered\n\n5 , K. Das J. the swept channel at about 6-25 p. m. south of the fairway buoy and she was then steering a course of north 80° west; by about 6-45 p. m. she was on the mid-line of the channel when she sighted the ; Niz.am on the port bow. The Niz.am had already altered her course to port. Ma.son summarised the position at 6-45 p. m. thus : \" At 18-45 she {meaning the Kalawati) was about one mile on my starboard bow and was crossing to starboard port.\" Capt. Clecve thus explained the meaning of the aforesaid statement: \" That means that the distance between the two boats was one mile, and she (Kalawati) was a mile off to my (Nizam's) starboard bow and she was crossing from my starboard to my port. \" Mason further f clarified the position by saying that the two boats were then steering crossing courses and it was not correc.t_ to say that if both ships had kept their course and speed as it was at 6-43 p. m., they would have passed port to port. Mason also said that \" the two boats were on converging courses at 18-45 hours \".\n\nObviously, there would ha. ve been a collision, if no a.voiding action was taken by either boat. That is why Mason was at pains to point out in his evidence r that he took starboard action at 6-45 p. m. to get out of the way of the Kalawati and if both the ships had kept their courses as they were immediately after Ma.son had starboarded at 6-45 p. m., they would have passed port to port with a.bout half a. mile to spa.re.\n\nWe have found, however, that Mason's statement that he had starboarded at 6-45 p. m. was not correct. The position, therefore, was that the two boats were on f crossing courses in a narrow channel and when the Kalawati signalled with the Aldis lamp, she found that the N izam was still steering to port. The Aldis lamp has a small telescope attached to it and from a\n\ndemon$tration made in Court., it became obvious that\n\nthe respondent was in & po11ition to see through the z959 telescope what coorse the N izam was taking.\n\nAt Tll• Asiati& 51.,..,. about 6-48 p. m. the distance between the two boats Navigation was less than half a mile, and unless the Kalawati co .• Ltd. took a voiding action, a collision was imminent. Therev. . fore the Kalawati took port action and indicated her Sub-Lt. habusda d ' b h l Tb • t\"fi t\" Cllallrava1ti irection y t e necessary signs. . e JUS 1 ca. ion for the port action of the KaZawati was the continus. K. Das J. a.nee of the Nizam on a. port course-a. course which was not only ta.king the N izam over the mid-line into the wrong side of the channel but was also making her converge on the course of the Kalawati.\n\nThe Kalawati was the standing on vessel, and it was the duty of the N izam to get out of the way.\n\nInsead of doing th, at, the N izam persisted in her port course and changed to hard starboard after the Kalawati had justifiably ta.ken port action to avoid an imminent risk of collision. It has been argued before us that the Kalawati should have anticipated that sooner or later the N izam would correct her mistake and go to the starboard side of the channel and, therefore, as the standing on vessel, the Kalawati should have kept her course and speed as required by Art. 21, and if she had done so, there would ha.ve been no collision.\n\nThis argument fails to take note of the perilous position in which the Kalawati was placed by the continuance of the Nizam in a port course till about 6-48 p. m. and furthermore ignores Arts. 27 and 29 under which when a vessel finds herself so close to another vessel that a collision cannot be avoided by the action of the giving-way vessel alone, she must also take such action as will best a.id to avert collision.\n\nThe Kalawati was, therefore, justified, in taking port action at 6-48 p. m. when a collision seemed imminent and perhaps the collision would have been averted if the N izam had not taken the unfortunate action of hard starboarding after the Kalawati had taken port action.\n\nMcLure realised the position as soon as he came on\n\ntlie bridge at 6-49 p. m. and ordered full speed astern.\n\nUnfortunately, it was too late then. If Ma.son had followed the provisions of Art. 23 and had slackened the speed of or reversed the Nizam between 6-45 p. m. and 6,48 p. m. the collision might have been averted.\n\nr959 Instead, however, he ordered the Nizam to be put -. -. hard starboard at about 6-48 p. m. This, in our opini- The ~\"~ 1\"/ 1'\"m on, was an act of negligence, which wa.s primarily\n\n;:'.g~1~'.n responsible for the collision. The findings of the lea.rnv. ed trial Judge were, in our view, vitiated by re a.son of Sub-Lt. A<abinda the circumstance that he accepted a.s correct Ma.son's\n\nCh•A•••••ti evidence that he had put the N izam ha.rd a.starboard at 6-45 p. m. in the teeth of circumstances which s. K. Das J. showed clearly enough that Mason's evidence about starboarding at 6-45 p. m. could not be correct. These circumstances were-(!) if Mason had put the Niam hard starboMd at 6-45 p. m., the N izam would be 90\"' to her former course by 6-48 p. m. and by 6-49 or 6-50 p. m. she would be turning towards Madras; (2) McLure did not feel any such helm action at 6-45 p. m.; (3) the N izam gav.e no signal of starboarding at 6-45 p. m. but gave such signal after the Kalawati had turned to port soon after 6·48 p. m.; and (4) the reason which Mason gave for starboarding at 6-45 p. m. did not stand the test of scrutiny. In the court of appeal below, one of the assessors, Commander Ka.le, said definitely tha.t the only war-time restrictions in 1940 were with regard to lights and wireless communication.\n\nHe sa.id that signals had to be given by ships when they decided to change their course, and the more so when ships were in restricted waters and there was another vessel coming ahead. We think that the learned Judges who heard the appeal rightly emphasised the importance of the circumstances stated above, and having given them due weight, rightly reversed the findings of the lea.med trial Judge.\n\nTo summarise our conclusions now: (I) we accept the position that the Kalawati entered the channel at 6-25 p. m. on the wrong side and the Nizall? was two cables on the right side at about 6 p. m.; but by 6-45 p. m., the two boats were opposite each other near about the mid-line of the channel, the distance between the two being then a little more than a mile ; (2) the Nizam did not take any hard starboard action at 6-45 p. m.- rather she continued to steer to a port course till a.bout 6-48 p. m. and .probably went over the mid-line into the wrong side of the channel ; (3) when the Kalawati signalled with the Aldis lamp, she\n\nnoticed that the N izam was steering to port and was x959 on a course converging on the Kalawati and at about Th\n\nA -:--- 1 .. 51 h K 1- \" k \"d\" • b I\n\nSI\" IC etml 6-48 p. m. t e aw, wati too avo1 mg act10n y turn- Navigatiou ing hard to port and gave a. signal to that effect; (4) co., Ltd. the N izam then took starboard action to get back to v. the right side of the channel and get out of the way Sub-Lt. Arabinda of the J{alawati; and (5) when McLure came on the Chakravarti bridge at about 6-49 p. m. he ordered full speed astern s. I<. Das J. . -but it was too late and the collision took place at about 6-51 or 6-52 p. m.\n\nOn the aforesaid findings there is little difficulty\n\n.1 left in adjudging where the responsibility lies for the collision.\n\nAs we have said earlier, the responsibility lies with the N izam.\n\nIt ii; necessary to notice now, very briefly, two decisions on which learned counsel for the appellant has relied: \"The Tioga\" (1) and the \"Empire Brent \" (2).\n\nIn the Tioga the question for consideration was the liability for damages in respect of a collision which occurred in the swept channel of the N. E. Coast of England between the Pundit, a ship in the port column of a south-bound convoy of eight ships, and the Tioga, an independent north-bound ship.\n\nThe decision proceeded on the footing that south bound ships were under a strict duty to keep within the western half of the channel and north-bound within the eastern half, thus passing each other port to port.\n\nDown the centre of the channel there was a line of flashing buoys four or five miles apart. There was a general prohibition of navigation lights, which made the strict observance of the rule of the road in the swept channel exceptionally imperative. The night was overcast and dark, and there was drizzling rain diminishing visibility. In those circumstances, it was found that the Pundit, instead of keeping to her right water, trespassed into the Tioga's water, and furthermore when she first saw the Tioga's red at a quarter of a mile away, her instant duty was to starboard out of the Tioga's way so as to pass port to port. This the Pundit failed to do.\n\nTherefore, the Pundit was held responsible on two grounds, which Scott, L. J., explained in the following words :-\n\n(1) (1945) 78 Ll. L. Rep. l (Lloyd's List Law Reports).\n\n(2) (1948) 81 LI. L. Rep. 306 (Lloyd's List Law Reports).\n\nI9J9 \"The two ships were either meeting or crossing;\n\nA -:-\n\n1. St and in either case it was the Pundit's duty to pass the ' Sia'' eam T' t t t If th h' Navigation ioga por o por . ey were crossing s 1ps it was co., Ltd. also her duty to keep out of the way of the Tioga and v. go under her stern ; if meeting ships, simply to star- SubLI. Arabfoda board her helm. In addition, there was the special\n\nChakrnv••11 duty of the Pundit in that channel to regain her right - water. She had been blundering out of it and ens. K. Das j. dangering north-bound traffic ; and I entirely agree with the learned Judge's view that for that reason alone she was seriously to blame ; and that position of itself would entitle the Tioga to expect her to be actually on a starboard helm, correcting her error, at the moment she put her lights on\".\n\nWe do not think that the decision in the Tioga is of any great assistance to the appellant. On our findings, it was the duty of the Nizam to keep out of the way of the Kalawati; and at 6-48 p.m. the N izam was in all probability in her wrong water and the Kalawati in her right water - at any rate - both were near the mid-line of the channel, and in these circumstances, the Nizam's action in starboarding after she had seen the Kalawati, turn to port cannot be justified either on the principles laid down in the decision aforesaid or on the provisions of the rule of the road in a narrow channel.\n\nIn the Empire Brent the collision took place in the river Mersey between the steamship Starmont and the steamship Empire Brent. It was found that so far as the Starmont was concerned, she deliberately set a course which meant that for most of the way up the river she was necessarily proceeding on the wrong side of the river for her. The Empire Brent had just left the Princes Landing Stage when she had to cope with the situation created by the approach of the Starmont. In these circumstances it was held that the Starmont was wholly in the wrong for coming up on the eastern side of the river and for breaking in that way the narrow channel rule which prevails in the Mersey.\n\nWillmer, J., said:- . \" I find it difficult to find words sufficiently strong to condemn the action of a man who persists in coming up on the wrong side of the river-especially as this\n\naction of the Starmont was quite deliberate &nd was z959 merely for the purpose of her own convenience.\" Th\n\nA .. 5 1 sutsc te11m Dealing with the alternative case that the starboard- Navigation ing action of the Empire Brent was the whole cause Co., Lt4. of the collision even if the Starmont was wrong in v. coming up on the ea.stern side of the river the learned Sub-Lt. Arabintla J d b d ' CllaAravarti u ge o serve :\n\n\" That alternative way of putting . the case s. K. Das J. has become academic, having regard to my finding that the vessels were green to green at any rate up to the time when they were about three-quarters of a. mile apart. But, lest it should be thought that I agree with it, I should like to take the opportunity of saying that I regard that contention as wholly wrong. As I understand the principles which apply in narrow channels, it has been la.id down for many, many yea.rs that, although the crossing rule does from time to time have to be applied in narrow channels (when, for instance, a vessel which is crossing the channel has to act in relation to a vessel which is proceeding up or down the channel), nevertheless, when vessels are approaching each other, navigating respectively up ancl down the channel, it is Art. 25 of the Collision\n\nRegulations which applies and applies exclusively.\n\nThere is no room in such a situation for applying the provisions of the crossing rule at the same time as the provisions of the narrow channel rule, because the requirements under the rules a.re different. I have no hesitation in saying that as between a vessel coming up and a vessel going down, approaching each other in that way in a narrow channel like the Mersey, the narrow channel rule, and the narrow channel rule only, is the rule which has to be applied. However, that is a digression, because, having regard to my findings of fact, the point is academic.\"\n\nLearned counsel for the appellant has placed strong reliance on the aforesaid observations and has contended that in the present case also the provisions of the narrow channel rule should apply and not those of the crossing rule. We do not see how a strict or exclusive application of the narrow channel rule will help the appellant in the present case. We have found that the N izam was in her right water at about 6 p.m.\n\nr959 but she had altered her course to port later and at a.!iout Th A --:-; St 6-45 p.m. she was near the mid-line and at 6-48 p.m.\n\n'N;:; g:ioneam when she starboarded in answer to the Kalawati's port co .• Ltd; action, she was in a.II probability in tho wrong water. v.\n\nThe N izam cannot, therefore, say that if. the narrow Sub-Lt. Arnl>inda channel rule only applied, sho is bound to succeed.\n\nCl•akravarli We do not, therefore, think that the ratio of the decision in the Empire Brent helps to establish the case of S. l<. Das]. the appellant.\n\nIn view of our findings, we consider it unnecessary to deal with the alternative claim of the appellant as to an apportionment of the blame for the collision in question.\n\nWe do not think that the Kalawati was to blame for ta.king port action when she did, and we have already stated our reasons therefo1.\n\nThere is a. further difficulty in the way of the appellant. It is true that the question of contributory negligence was one of the issues before the learned trial Judge, but in the view which he took of the evidence, he considered it unnecessary to decide it. The appeal was decided on the footing that the Kalawati was not guilty of negligence and the entire liability for the collision was that of the Nizam. The appellant has no doubt contested the correctness of the findings arrived at by the learned Judges of the appellate bench; but neither in the memorandum of appeal nor in the atatemelj.t of the case presented to this Court did the appellant raise the alternative claim which it has now raised. During the course of the hearing of the appeal in this Court, a. petition was made for adding a. fresh ground of appeal in order to raise the alternative claim of an apportionment of liability for the collision under tho rules for the division of loss prescribed under the Moiritime Conventions Act, 1911. We do not think that the prayer for an alternative claim can be allowed at this stage, because on our findings there is no case for an apportionment of the blame.\n\nIn the result, the appeal fails and is dismissed with costs.\n\nWe have already passed orders for the payment of the fees of the two assessors, and no fresh orders thereon are necessary.", "total_entities": 49, "entities": [{"text": "s. 14", "label": "PROVISION", "start_char": 137, "end_char": 142, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 42", "label": "PROVISION", "start_char": 419, "end_char": 424, "source": "regex", "metadata": {"statute": null}}, {"text": "Specific Relief Act", "label": "STATUTE", "start_char": 432, "end_char": 451, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 42", "label": "PROVISION", "start_char": 684, "end_char": 689, "source": "regex", "metadata": {"statute": null}}, {"text": "Specific Relief Act", "label": "STATUTE", "start_char": 691, "end_char": 710, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 14", "label": "PROVISION", "start_char": 1145, "end_char": 1150, "source": "regex", "metadata": {"linked_statute_text": "Specific Relief Act", "statute": "Specific Relief Act"}}, {"text": "Imam", "label": "JUDGE", "start_char": 1345, "end_char": 1349, "source": "metadata", "metadata": {"canonical_name": "SYED JAFFER IMAM*", "offset_not_found": false}}, {"text": "THE ASIATIC STEAM NAVIGATION CO., LTD", "label": "PETITIONER", "start_char": 1353, "end_char": 1390, "source": "metadata", "metadata": {"canonical_name": "THE ASIATIC STEAM NAVIGATION CO., LTD", "offset_not_found": false}}, {"text": "SUB-LT. 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{"document_id": "1959_2_1002_1011_EN", "year": 1959, "text": "1002 SUPREME COURT REPORTS [1959] Supp.\n\nI959 think, with due respect, that the High Court should M/s. sarupchand have, on a correct appraisal of the legal situation, Hukamchand & Co. ordered this relief, and we accordingly, after explain- . v. . ing the law applicable .to the case, order the approunion ;~India priate Income-tax Officer to hear and determine this\n\n& ' \"' matter i.n the light of our observations.\n\nHidayatullah J.\n\nWe may set down here that the two partners of the firm to whom relief has been given by way of refund after the Appellate Assistant Commissioner's order undertook unconditionally to refund the amounts, before the matter is considered by the Income-tax Officer.\n\nWe order that the two partners shall return the amounts in the manner to be ordered by the Income-tax Officer, before action is taken to determine the matter.\n\nI959\n\nMay 5.\n\nIn the result, the appeal is allowed with costs throughout to be paid by respondents 2 and 3. The Union of India shall, however, bear its own costs. It may be noted that no separate costs were incurred by it either in this Court or in the Court below. It joined respondents 2 and 3 in the statement of the case filed in this Court and also appeared through the same counsel in both the Courts.\n\nAppeal allowed.\n\nTHE INDIAN OXYGEN & ACETYLENE CO.,\n\nPRIVATE LTD., BOMBAY v.\n\nITS WORKMEN & ANOTHER\n\n(S. R. DAS, c. J., N. H. BRAGWATI, s. K. DAS, P. B. GAJENDRAGADKAR and K. N. V\\TANOHOO, JJ.)\n\nIndustrial Dispute-Bonus-Full Bench formullt, if can be disregarded-Rehabilitation, claim for-Average life, calculation of -Method of Weighted Average-Exhmtsted Assets-Whether can be taken into account.\n\nThe workmen claimed bonus for the years r952-53 and r953-54. The employers contended that on a proper working\n\n./ (\n\nout of the Full Bench formula there was no available surplus x959 and so no bonus was payable. The Tribunal held that the formula was not binding on it and on genuine considerations of The Indian Oxygen social justice it rejected the claim of the employers for rehabili- & Acetylene Co., tation and awarded bonus at the rate of t and r/3 annual basic Priuate Lid., wages for 1952-53 and 1953-54 respectively. Alternatively, the Bombay Tribunal found that in case the claim for rehabilitation had to v. be allowed there would be no available surplus in either of the Its Workmen relevant years. & Another Held that, the Tribunal was bound to give effect to the Full Bench formula and to allow the employer's claim for rehabilitation.\n\nA.C.C. Ltd., Bombay v. Their Workmen, [1959] .S.C.R. 925, followed.\n\nIn the calculations made by the Tribunal on its alternative finding it had acted on correct principles. It had rightly taken into account the price level prevailing in 1956 and not merely that prevailing in the two bonus years.\n\nThe amount of rehabilitation allowed in previous years had to be brought into account if it had not been used up but it was not shown that had not been in the present case.\n\nIn calculating the average life of the buildings, machinery, etc., the method of weighted average was scientifically more accurate and gave a more accurate and realistic result. The rehabilitation costs of those assets which had spent their lives and were exhausted was also admissible in making calculations under the weightage method if in the relevant year such assets were in existence and use.\n\nCi:vrL APPELLATE JURISDICTION: Civil Appeal No. 753 of 1957.\n\nAppeal by Special Leave from the Judgment and Order dated the 6th October, 1956, of the Industrial Tribunal, Bombay, in Reference (I. T.) Nos. 40 & 44 of 1956.\n\nC. K. Daphtary, Solicitor-General of India, N. A.\n\nPalkhivala, J. B. Dadachanji and S. N. Andley, for the appellant.\n\nD. H. Buch and 1. N. Shroff, for respondent No. I.\n\n0. L. Dudhia and 1. N. Shroff, for respondent No. 2.\n\nJanardhan Sharma and B. P. Maheshwari, for the Intervener.\n\n1959. May 5. The Judgment of the Court was delivered by\n\nr959 GAJENDRAGADKAR, J.-This appeal by special leave\n\nTh 1 d-.- 0 arises from a bonus dispute between the Indian Oxy- &' A;,,;1;,., \"g'., n gen & Acetylene Co., Private Ltd., (hereafter calld\n\nl'dvate Ltd, the appellant) and its workmen, the relevant years Bombay for the bonus claim being 1952-53 and 1953-54. This\n\nv. claim was made separately by the workmen exeluding\n\n1~ ~~:~;;:n the members of the clerical staff as well as by the clerical staff and the two claims thus made were referred Gajendragadkar J. by the Bombay Government to the Industrial Tribunal for its adjudication. The cl1joim raised by the workmen excluding clerical staff was numbered as Hef. (I. T.) No. 40of1956, while that made by the clerical staff was numbered as Hef. (I. T.) No. 44 of\n\n1956. Both categories of workmen will hereafter be described as the respondents in this judgment.\n\nThe appellant is a private limited company incorporated in 1935 and it has its head office at Calcutta.\n\nIts business is to manufacture and sell oxygen and acetylene. It is a subsidiary of the British Oxygen Co. Ltd. It sells its products to the hospitals and nursing homes and in large quantities to industrial concerns for welding, cutting and blasting operations.\n\nIt voluntarily paid bonus equal to two months' basic wages for both the years in dispute; but the respondents were not satisfied with the said payment and they made a claim for 1/3 of their total earnings for the two respective years. That is bow the dispute arose between the parties.\n\nIt appears in evidence that all the shares of the appellant (excepting two or three held by nominee share-holders) are held by the British Oxygen Co. Ltd.\n\nEvidence also shows that the appellant has been prospering and has been expanding at a rapid rate. In has capitalised its reserves in 1940, 1941, 1942, 1945, 1946, 1947 and 1949 with the result that the major portion of its capital is made up or'bonus shares. It bas made good profits for the year ending September 30, 1953, as well as for the year ending September 30,\n\n1954. There is also no doubt that a large gap exists between the actual wages paid by it to its workmen and the living wage. It is on these allegations that the respondents made a claim for bonus of 1/3 of tqeir total earnings.\n\nThe appellant pleaded that it was paying good z959 wages to the respondents and that under the formula - 0 h d . l . dd\" Thelndian xygen t e respon ents were not entitled to c aim any a ic;;. Acetylene co., tional bonus for the relevant years. In fact, accord- Private Ltd., ing to the appellant, if the formula was properly Bombay worked the bonus already v'oluntarily paid by it to v. the respondents could not have been claimed by them.\n\nIts Workmen\n\n& Another The tribunal has, however, rejected the appellant's _ case and has directed it to pay to the respondents Gajeiidragadkar J. bonus at the rate of 1/4 of the annual basic wages for 1952-53 and 1/3 of the said wages for 1953-54 (less the bonus already paid for these years). It has also directed that in calculating the amount of bonus overtime and dearness and other allowances should be excluded. This award has been made subject to the two conditions specified by it. It is the correctness of this award that is challenged by the appellant before us.\n\nThe first point which the appellant has urged is against the finding of the tribunal that it was not bound to give effect to the Full Bench formula.\n\nIn determining the available surplus the Tribunal has taken the view that the formula was not binding on it and that on considerations of social justice to which it has referred it was open to it to reject the claim of the appellant for rehabilitation. This question has been considered by us at length in the case of A. G. G. Ltd., Bombay v. Their Workmen (1) and we have held that in dealing with claims for bonus industrial tribunals must give effect to the formula.\n\nWe have also indicated. how the calculations under the formula should be made in such disputes. In view of the saiu decision we must hold that the Tribunal was in error is not granting to the appellant its claim for rehabilitation.\n\nAccording to the calculations made by the Tribunal, without providing for any rehabilitation (Ex. TA) it has reached the conclusion that the available surplus for the years 1952-53 and 1953-54 respectively would be Rs. 6,14,830/- and Rs. 12,16,120/-. It is on the basis of this available surplus that the Tribunal has made its award.\n\nHowever, the Tribunal has found\n\n(r) [1959] S.C.R. 925.\n\n'959 alternatively that in case the claim for rehabilitation\n\nTh I d-. - 0 made by the appellant has to be awarded, then there B n ian xygen Id . bl .;;. Acetylene co., wou be no ava1la e surplus for both the relevant 1'1ivate Ltd., years. This is shown by the calculations made by it Bombay under Ex. TB. Thus it would be clear that on the v. alternative finding made by the Tribunal the appel- 11' Wo•kmrn !ant would be entitled to succeed and the award & Another under appeal would have to be set aside.\n\nGojendrngadkar .J.\n\nIt is, however, urged before us by the respondents that the calculations made by the Tribunal on its alternative finding are not correct. In other words, the respondents seek to support the final award passed by the Tribunal on.the ground that some of the conclusions reached by the Tribunal in making its calculations on the alternative basis are erroneous. The first point which has been urged by the respondents in this behalf is that the Tribunal was wrong in taking into account the price level prevailing in 1956.\n\nThe argument is that the price level prevailing in the two bonus years alone should have been taken into account.\n\nWe have considered this point in A. C. C.'s case (1) and we have held that it is inexpedient to confine the relevant decision of the Tribnnal solely to the price level prevailing in the bonns years.\n\nTherefore the objection that the Tribunal has committed an error in this matter must be rejected.\n\nThen it is urged that in making its calculations the tribunal has not applied its mind to the fact that, though the appellant bas been allowed substantial amounts by way of rehabilitation in previous awards, those amounts are not brought into account in considering its claims for rehabilitation. It appears that the tribunal was inclined to take the view that once an allowance is made to the employer by way of rehabilitation of plant and machinery, it is not open to the tribunal to enquire what he had done with the said amount. In the A. C. C.'s case (1) we have held that if an amount for rehabilitation is allowed to an employer and it appears that during the relevant year the said amount was available to him then in subsequent years the said amount will have to be taken into account unless it is shown that in the meanwhile\n\n(1) [1959] S.C.R. 925.\n\nit had been used for the purpose of rehabilitation. So we\n\nI959 would accept the respondents' contention that the aph r a-· - 0 pellant is bound to take into consideration the amount T&e A; et; l:ne xb!.en previously allowed to it by way of rehabilitation.\n\nPrivate Ltd., ' There is, however, one point which must be borne Bombay in mind in considering this plea. In the previous v. awards to which our attention was drawn by the res- Its Workmen\n\n& Another pondents, 20% of the net profits appear to have been _ awarded to the appellant on a rough and ready basis Gajendragadkar J. by way of provision for rehabilitation as well as expansion. It is significant that the award of the said amount expressly refers to repairs, replacement, modernisation and reasonable expansion. It is now well settled that the employer is not entitled to claim a prior charge under the formula for any item of expansion but the awards previously passed between the appellant and its workmen seem to have allowed for a claim for expansion as a prior charge, and that fact cannot be ignored in dealing with the respondents' present contention.\n\nBut apart from this aspect of the matter, it is clear that the appellant has brought into account one-half of its general reserve as on September 30, 1953, and September 30, 1954, respectively, and these amounts are Rs. 5,51,363 and Rs. 3,95,376. In view of this fact it is difficult to accept the argument that the amounts allowed to the appellant by way of rehabilitation in the previous years had not been brought into account.\n\nWe would like to add that this point had not been taken before the tribunal, and may be .. could not be taken before it, because the tribunal has held that the employer could not be called upon to bring into account the said amount.\n\nThen it is urged that in working out the figures of rehabilitation the tribunal \\}'as in error in accepting the appellant's claim. The award shows that the tribunal was very favourably impressed by the evi- dence given by Mr. Saigal and Mr. Basak on behalf of the appellant. It appears that in arriving at the average life of the buildings, machinery, etc., Mr.\n\nBasak has adopted the method of weighted average. \" This method is a development of the concept of the\n\n'959 ordinary arithmetic mean\" (1). Under this method, \"in\n\nTh I d-. - 0 general terms, a set of quantities 'X' is given, to each 6 n ian xygen f h\" h tt h d h 'W' d h ' h d & Acetylene co .. o w IC 1s a ac e a we1g t , an t e weig te Private Ltd., arithmetic mean is obtained as the summation of ' W ' Bombay x 'X' divided by the summation of' W '\". There is v. no doubt that this method is scientifically more accu- Its wo, kmen rate and gives a more accurate and reRlistic result in & Another determining the average life of the assets. Let us Gajend.agadkar J. illustrate this method by taking an example given by the tribunal itself:\n\nGast of Asset.\n\nRs. 5 8 300\n\nLife.\n\n1 year 2 years 10 years ----- 13 years\n\nAnnual replacement cost required.\n\nRs. 5 4 30\n\n39 The average life calculated by Mr. Basak according to the weighted average metho.d is 1'rr'if- = 8·02 years, while the arithmetical average of the figures in column two is JI<f!. = 4·33 years; this latter is an incorrect estimate, for the small items distort the average. Within two years the first two items will go out and though the remaining machinery is expected to last for 8 years more, the arithmetical average would give it a remaining life of 2·33 years.\n\nThe respondents do not challenge the validity of this method; bnt they contend that in working out the method some calculations have been made which are open to objection. Before dealing with these objec- . tions it may be stated generally that when Mr. Saigal\n\nand Mr. Basak gave evidence they were not asked any definite or precise questions on which the objections urged before us are based. It is desirable that in enquiries of this kind, when experts give evidence on behalf of the employer, workmen should cross-examine them on all points which they propose to urge against the employer's claim in regard to rehabilitation.\n\nHowever, we would like to deal with the merits (I) \"Statistics for Economists\" by R.G.D. Allen, 1949 Ed .• p. 96.\n\nof the said contentions in the light of such evidence 1959 as is available on the record.\n\nTh In;:-a 0 yg fi . . h h t h\" h h e \"'' n x en The rst contention IS t at t e asse s w IC ave &- Acetylene co., spent their lives and are thus exhausted should not be Private Lid., continued in making calculations under the weightage Bombay method. This objection applies to such assets as v. d k W l' d Its Workmen leasehold buildings, cars an true s. e are me me &- Another to think that the method adopted by the appellant in making its calculations gives a more correct picture of Gajendragadkar ]. the assets actually in use and the rehabilitation cost claimed in respect of them. If in the relevant year the asset is in existence and use, a claim for its rehabilitation. would not become inadmissible. The same argument is put in another form and it is urged that where an asset which has come to an end is taken into account it would be wrong to take into account in the same year a new asset which has come into existence. The suggestion is that by this method a double claim fo:r.t rehabilitation creeps into the calculation.\n\nWe are not satisfied that even this argu- .ment is wellfounded. Let us examine this argument by reference to one item. The lease.hold .buildings of the appellant include two buildings known as D. A. and Oxygen respectively at Bombay (Ex. 0. 19).\n\nAs on September 30, 1953, the estimated life of these buildings from October 1, 1953, is shown to be one year and the annual provision claimed for rehabilitating them is shown as Rs. 97,468 and Rs. 30,590 respectively. These claims have not been made in the subsequent year. In the same year two new buildings called D. A. and Oxygen respectively which were erected in 1952 have been included and the annual provision for rehabilitation in respect of them is made at His. 6,474 and 6,972 respectively. Now, if the respondents' argument is accepted and the calculations made in regard to the new buildings were excluded from the statements, the appellant would apparently be entitled to claim a somewhat higher amount. It may be mentioned that in working out the figures for rehabilitation in respect of new buildings Ex. 0. 11 has included this item of Rs. 13,000 and odd in the larger\n\n1010 SUPBEME OOUR'.1' REPOB'.l'S [1959] Supp.\n\n1959 item of Bs. 4,58,316 mentioned against uncovered\n\n1 , 1 d-. - 0 requirement for rehabilitation and replacement in the rte n ian xygen h . d d .\n\nR 2 31 700 b f ,;;, Acetylene co .• year, w ereas m e uctmg s. , , y way o Private Ltd., normal depreciation for the said year an amount of Bombay Rs. 22,000 and odd has been taken to be the normal\n\nv. depreciation in respect of the new buildings ; that is to\n\n1~ ~~::,::\" say, as against a Claim of Rs. 13,000 and odd made for rehabilitation in respect of the said two buildings\n\nGajendragadhar J. in Ex. C. 19, a deduction by way of normal depreciation has been allowed to the extent of Bs. 22,000 and odd.\n\nTherefore it does not appear on the evidence as it stands, that the method adopted by the appellant in making its calculations has introduced any serious infirmity or has given a distorted or inflated claim about the provision ror rehabilitation.\n\nIn this connection it is relevant to refer to the fact that the calculations made by the appellant are based upon an item-wise study of its plant and machinery, and such a method, it is concede'1, is bound to lead to more satisfactory results.\n\nMr. Hasak produced Exs. C. l to C. 16 which contained all the relevant\n\ncalculation~ and he stated in cross-examination that as a matter of business practice a businessman has to think of replacing his machines even though they may have been bought in the relevant year.\n\nOf course, in considering the claim for rehabilit; ation in respect of such an item the multiplier would normally be l and the divisor would represent the total future life of the said machines. In regard to the exhausted assets the witness stated that if they are not included in the schedule the final result on Exs. C. 11 and C.\n\n12 would be incorrect because in these statements the total depreciation provided up to the opening of the year has been deducted and this sum includes proportionate depreciation also on the assets referred to. He has also added that the total value of all fixed assets shown in Exs. C. 11 and C. 12 \"have got to agree with the values shown in the balance-sheets\"; and he claimed that \"his method of calculating weighted average of the remaining life of assets is the most correct that can be employed\".\n\nSimilarly Mr. Saigal was cross-examined about the Bangalore plant which\n\nhad been installed in 1946.\n\nHe stated that theoretir959 cally it should have a life till 1968 but in effect \"the Tl 1 d-:--0 . , l ie n ian xygen plant had become so unreliable that they had to msta & Acetylene co., new one and to keep the old one as a standby.\n\nPrivate Ltd., According to this witness actually the life of the Bo1'tbay machinery enumerated in Ex. C. 20 works out to less v. than 22 years but for simplicity in accounting he had\n\n1~ ~:::;:;; n taken the figure to be 22. As we have already mentioned the tribunal took the view that the evidence Gajendragadkar J. given by the appellant's witnesses in the present proceedings was satisfactory and we do not think that any material has been brought out in cross-examination which would justify the respondents' contention that the tribunal had not properly appreciated the said evidence. In the result we hold that the respondents have failed to show: that any of the conclusions reached by the tribunal in making its calculations under its alternative finding are wrong.\n\nThe appeal accordingly succeeds and must be allowed and the award passed by the tribunal must be set aside.\n\nIn view of the fact that the principal point raised by the appeal was one of some importance and it has been argued in a group of appeals before us, we think that the parties should bear _their own costs.\n\nAppeal allowed.", "total_entities": 5, "entities": [{"text": "THE INDIAN OXYGEN & ACETYLENE CO.,\n\nPRIVATE LTD., BOMBAY", "label": "PETITIONER", "start_char": 1282, "end_char": 1338, "source": "metadata", "metadata": {"canonical_name": "THE INDIAN OXYGEN & ACETYLENE CO., PRIVATE LTD., BOMBAY", "offset_not_found": false}}, {"text": "ITS WORKMEN & ANOTHER", "label": "RESPONDENT", "start_char": 1343, "end_char": 1364, "source": "metadata", "metadata": {"canonical_name": "ITS WORKMEN & ANOTHER", "offset_not_found": false}}, {"text": "S. R. DAS", "label": "JUDGE", "start_char": 1367, "end_char": 1376, "source": "metadata", "metadata": {"canonical_name": "SUDHI RANJAN DAS*", "offset_not_found": false}}, {"text": "P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 1412, "end_char": 1432, "source": "metadata", "metadata": {"canonical_name": "P.B. GAJENDRAGADKAR", "offset_not_found": false}}, {"text": "cl1", "label": "PROVISION", "start_char": 4541, "end_char": 4544, "source": "regex", "metadata": {"statute": null}}]}
{"document_id": "1959_2_1012_1046_EN", "year": 1959, "text": "I959\n\nMay 5.\n\n1012 SUPREME COURT REPORTS [1959) Supp.\n\nM/S. TITAGHUR PAPER MILLS CO. LTD. v.\n\nITS WORKMEN\n\n(S. R. DAS, c. J., N. H. BHAGWATI, s. K. DAS, P. B. G.AJENDRAGADKAR and K. N. WANCHOO, JJ.)\n\nIndustrial Dispute-Production Bonus, nature of-Jurisdiction of Tribunal to revise production bonus scheme introduced by employer-Profit Bonus-If can be awarded in addition to prodi; ction bonus-Available surplus-Deduction for rehabilitation, how calculated.\n\nIn 1949 the appellant framed a scheme called\" Tonnage Production Bonus Scheme\" whereunder the workmen were to get 13 days' basic wages by way of bonus on a production of 30,000 tons and thereafter an additional one day's basic wage for every 460 tons produced upto a maximum of 36,000. The scheme was accepted by the workmen. In 1953 the workmen raised industrial disputes claiming profit bonus for the years 1950-51 and 1951-52 in addition to the production bonus and asked for revi- sion of the production bonus scheme. The Industrial Tribunal, to which the disputes were referred, rejected both the claims.\n\nOn appeal, the Appellate Tribunal awarded profit bonus equal to one month's basic wage for 1951-52 but dismissed the claim for 1950-51 as having been made too late. It revised the production bonus scheme by providing for rt day's basic wage for each increase of 460 tons over 30,000 tons upto 36,000 tons and for 2\n\ndays• basic wage for each increase of 460 tons in excess of 36,000 tons. The appellant contended (i) that the Tribunal had no jurisdiction to vary the production bonus scheme; (ii) that such a scheme could only be varied by agreement ; (iii) that no proper grounds had been made out for varying the scheme; (iv) that prolit bonus could not be awarded in addition to production bonus; (v) that the production bonus in this case was really profit bonus; and (vi) that there was no available surplus out of which profit bonus could be paid.\n\nHeld, that the Tribunal had jurisdiction to revise the production bonus scheme.\n\nPayment of production bonus was payment of further emoluments depending not upon extra profits, but, upon extra production, as an incentive to the workmen to put in more than the standard performance.\n\nThough it was discretionary with the appellants to intro- 1' duce the scheme, once the scheme was introduced and put into operation, it became a term of employment of the workmen and any dispute with respect to such term of employment was an industrial dispute which could properly be referred to a Tribunal. The power of the Tribunal in considering the scheme\n\nwas not confined to the question of mala fides etc. of the employer's action but it had power to vary the terms of the scheme if circumstances justified it.\n\nThere was no justification for interfering with the scheme upto a production of 36,000 tons in view of the agreement between the parties. But the scheme did not provide for production above 36,000 tons and as such there was no agreement with respect to this, and as the production bad gone up beyond 36,000\n\ntons it was necessary to provide for production bonus beyond this quantity. There were two reasons for increase in the rates of payment of production bonus, viz., (i) the intensification of the efforts of the workmen in increasing production, and (ii) the progressive going down of the labour cost of production per ton as production increased. The rates had to be increased progressively with production. Consequently, for each 460 tons increase • in production the proper rates for payment of production bonus would be ri, I~, If and 2 days' basic wages respectJvely for production between 36,000 and 42,000 tons, 42,000 and 48,000 tons, 48,000 and 54,000 tons and 54,000 and 60,000 tons.\n\nThe \"Tonnage Production Bonus Scheme\" introduced by the appellant was in fact also a production bonus scheme and not a profit bonus scheme. The fact that one of the terms of the scheme empowered the directors to cancel or reduce the payment of production bonus in case the gross profit was not sufficient to meet fixed dividends, interest, depreciation charges, taxation and 10% dividend to ordinary shareholders did not make it a profit bonus scheme as the circumstances mel)tioned are not the same that have to be taken into account in arriving at the available surplus according to the Full Bench formula.\n\nNor was the position altered by the clause in the scheme which empowered\" the appellant to cancel or modify the scheme in case Government enforced by legislation any scheme for bonus or profit sharing as this did not mean that the scheme itself was for profit sharing or profit bonus. The other clauses of the scheme clearly indicated that it was for production bonus. If there was an available surplus of profits according to the Full Bench Formula the workmen were entitled to get profit bonus in addition to the production bonus.\n\nMathuradas Kanji v. Labour Appellate Tribunal, A.LR. [1958) S.C. 899, distinguished.\n\nHeld further, that there was available surplus of profits and the profit bonus equal to one month's basic wages was properly awarded by the Appellate Tribunal for 1951-52. The claim for deduction for rehabilitation was made on a wrong basis by the appellant. In order to arrive at a realistic figure for rehabilitation the total block should be divided into three heads: (i) land,\n\n(ii) buildings, railway sidings and things of that nature which had a much longer life and where no imports were needed, and\n\n(iii) machinery. In the case of land no replacement was necessary and no provision need be made for rehabilitation. In the\n\nI959\n\nMI s. Titaghur Paper Mills\n\nCo., Ltd. v.\n\nIts Workmen\n\nI959\n\nMjs. Titaghur\n\nPaper /Wills\n\nCo., Ltd. v.\n\nIts fVorkmen\n\ncase of buildings etc. the multiplier would be smaller while the divisor would be larger.\n\nMachinery had again to be sub-divided according to when it was purchased so as to arrive at correct multipliers and divisors.\n\nAs machinery purchased before the last war stood on one footing there would be a pre-1939 block.\n\nThe second block may be of machinery purchased during the war and the third of that purchased after the war.\n\nThe last two \\Vere not rigid divisions.\n\nIn the circumstances of the present case, the proper multipliers for these three blc cks would be 4, 2 and r respectively. As both Tribunals had accepted ro as the divisor that may be accepted as the divisor for the three blocks. Calculating on that basis the rehabilitation costs did not wipe out the entire gross profits as claimed by the appellants and there was an available surplus out of which profit bonus could be paid.\n\nThe clerical staff, budli workers and temporary workers \\Vere not entitled to claim attendance bonus as they \\Vere different from other workmen.\n\nCIVIL\n\nAPPELLATE JURISDICTION: Civil Appeals Nos. 450 & 451 of 1957.\n\nAppeals by special leave from the judgment and order dated July 31, 1956, of the Labour Appellate Tribunal of India, Calcutta, in Appeals Nos. Cal. 282/55 and 6/56.\n\nC. K. Daphtary, Solicitor.General of India, H. N.\n\nSanyal, Additional Solicitor-General of India, D. N.\n\nMukherjee and B. N. Ghose, for the Appellant (In C.A.\n\nNo. 450/57).\n\nA. Roy Mukherjee and H. N. Hingorani, for the respondent (In C. A. No. 450/57.) M. C. Setalvad, Attorney-General for India, C. K.\n\nDaphtary, Solicitor-General for India and H. N. Sanyal, Additional Solicitor-General of India, D. N. Mukherjee and B. N. Ghose, for the appellants (In C. A. No. 450/57).\n\nSadhan Chandra Gupta, J anardhan Sharma and M. K. Ramamurthi, for the respondents (In C. A. No. 451/57).\n\nSadhan Chandra Gupta, Janardhan Sharma and M. K. Ramamurthi, for the appellant (In C. A. No. 451/57).\n\nM. 0. Setalvad, Attorney-General for India, H. N.\n\nSanyal, Additional Solicitor-General of India, D. N.\n\nMukherjee and B. N. Ghose, for the respondent (In C. A. No. 514/57).\n\nG. D. Ambukar for the Secretary, for the Intervener No. 1.\n\nSadhan Chandra Gupta and Janardhan Sharma, for Intervener No. 2.\n\n1959. May 5.\n\nThe Judgment of the Court was delivered by\n\n• WAN CHOO, J .-These are three appeals by special leave from the same decision of the Labour Appellate Tribunal of India and will be dealt with together.\n\nThe first two appeals (Nos. 450 & 451) are by Messrs.\n\nTitaghur Paper Mills Co. Ltd., and the third (No. 514) by its workmen.\n\nTitaghur Paper Mills Co., Ltd. (hereinafter called company) own two paper mills one at Titaghur (hereinafter called Mill No. 1) and the other at Kankinarah (hereinafter called Mill No. 2). It appears that there had been a dispute between the company and its workmen in 1948, which was referred to the adjudication of a tribunal. That was disposed of by the tribunal on November 5, 1949. Among the matters then referred was the question of profit bonus for the years 1945-46 and. 1946-47. When that matter was under the consideration of the tribunal, the company put forward a scheme of production bonus on the basis of a minimum production of 30,000 tons of paper in a year in the two mills together. The basis of the scheme was that the workmen would get 13 days' basic wage (this being equivalent to half of one month's basic wage) by way of bonus on a production of30,000\n\ntons for both mills. Thereafter the workmen were to get an additional one day's basic wage for e\\rery 460 tons produced upto a maximum of 36,000 tons when the production bonus would . come up to 26 days' basic wage (which would be equivalent to one month's basic wage including weekly holidays).\n\nThe company in putting forward the scheme said that \"as an admittedly rough basis for such a scheme something on the\n\n;\\J /s Titaghur Paper Mills Co., Ltd. v.\n\nIts Workmen\n\nWanchoo ].\n\n'959\n\nM/s. Titagltur\n\nPaper Mills\n\nCo., Ltd. v.\n\nIts Work1nen\n\nWanchoo ].\n\nfollowing lines might, we think, be equitable\". It then gave the scheme mentioned above. The tribunal dealing with the question of profit bonus for the years 1945-46 and 1946-47 observed that the scheme of production bonus put forward by the company had been accepted by the union as satisfactory and for the purpose of that proceeding it accepted the scheme as a measure for awarding profit bonus for the years 1945- 46 and 1946-47. The actual bonus worked out to 17 days' basic wage for 1945:46 and 19 days' basic wage for 1946-47; (see award of Sri M. 0. Banerji, in the publication of Government of West Bengal, Labour Department, 'Awards made by the Tribunals for the quarter ending December, 1949 '', pp. 130-150). It further appears that the detailed scheme was later communicated to the union in July 1950 and as the principle had already been accepted by the union before Sri Banerji the scheme was put in operation from April 1, 1949, and production bonus 1ias all along\n\nbeen paid in accordance with it after that date.\n\nDisputes, however, arose between the company and its workmen in 1953. The workmen of Mill No. 2 were the first to raise a dispute in August 1953, in which inter alia they demanded profit bonus for the years\n\n1950-51 and 1951-52 and also prayed for certain changes in the production bonus scheme. The workmen of Mill No. 1 also raised a dispute ?'l.1d presented a charter of demands to the company in October 1953.\n\nThey also c; lemanded profit bonus for the two years mentioned above and revision of the production bonus scheme.\n\nThese disputes were referred by the Government of West Bengal to the Fi.fth Industrial Tribunal, West Bengal. There were two references, one relating to each mill.\n\nThey were heard separately by the Industrial Tribunal which gave two separate awards rejecting all the demands made by the workmen.\n\nConsequently, two appeals were preferred by the workmen before the Labour Appellate Tribunal. There the two appeals were heard together at the request of the parties and disposed of by the Tribunal by the same judgment on July 31, 1956. .\n\nThe Fifth Industrial Tribunal rejected the claim of\n\n~ \\\n\nthe workmen for revision of the production bonus scheme and for grant of profit bonus for the years\n\n195'0~51 and 1951-52. It was of opinion that the claim for profit bonus for the two years was not maintainable as the workmen had been given production bonus and that met the profit bonus claim of the workmen for the two years and all claims for profit bonus for these two years must be taken to have been fully satisfied.\n\nThe question of delay in making the profit bonus claim was also raised; but the Fifth Industrial Tribunal was of the view that the profit bonus claim could not be defeated merely on the ground of delay. As to the revision of production bonus scheme, it held that that scheme had been accepted by the union and no reason had been shown why the rate of one day's basic wage as production bonus for every increase of 460 tons over 30,000 tons should be disturbed. It was also of the view that increased production was not due to increased efforts on the part of the workmen but\n\nwaf3 due mainly to increase in labour strength as well as installation of new machinery.\n\nOn appeal the Labour Appellate Tribunal rejected the claim for profit bonus for the year 1950-51 on the ground that it was made too late. It, however, disagreed with the view of the Fifth Industrial Tribunal that the production bonus scheme fully satisfied the claim of 'the workmen for profit bonus and therefore no profit bonus should be given even for the year 1951-52, with regard to which it was of opinion that the claim was not belated. It, therefore, went into the figures of profits and arrived at the available surplus in accordance with the formula known as the Full Bench Formula evolved in The Mill-Owners'\n\nAs11ociation, Bombay v. The Rashtriya Mill Mazdoor Sangh, Bombay (1).\n\nHaving arrived at the available surplus it granted one month's profit bonus in addition to what the workmen were entitled to under the production bonus scheme as revised by it. As to the production bonus scheme, it was of the view that there were reasons for revising it and therefore revised \\1) l1950) L.L.J. 1247.\n\nr959\n\nM fs. 7itaghur\n\nPaper Mills Co., Ltd. v.\n\nIts Workmen\n\nWanchoo ].\n\n.I959\n\nM fs. Titaghur\n\nPaper Mills\n\nCo, Ltd. v.\n\nIts J.Vorktnen\n\nWanchoo ).\n\nit, providing for 1 i days~ basic wage for each increase of 460 tons over 30,000 tons up to the limit of 36,000 tons and two days' basic wage for each\"increase o.f 460 tons in excess of 36,000 'tons. It may be mentioned, however, that the change in the production bonus scheme was not made retrospective and would therefore come into force from after the judgment of the Labour Appellate Tribunal. The appeals of the work- men were therefore allowed in these two respects, which have led to the two appeals by the company before us. \"The workmen through their union have also filed an appeal against those portions of the decision of the Labour ppellate Tribunal which rejected their demands.\n\nIn the two appeals by the company two matters relating to (i) productiot) bonus and (ii) profit bonus have been raised before us.\n\nWe shall first take up these two matters and then come to the appeal by the workmen.\n\nThe main contentions on behalf of the company with respect to the production bonus scheme are three-fold, namely,\n\n(1) The Industrial Tribunal has no jurisdiction to go into the question of production bonus scheme at all, for such a scheme by its very nature can only be a matter of agreement between the employer and the employees and cannot be imposed by a tribur1al;\n\n(2) Even where a production bonus scheme is in force, its terms cannot be varied by a tribunal and any variation can only be the outcome of an agreement between the employer and the employees, because initiation or introduction of such a scheme is what may be called a 'management function'; and (3) Even if an industrial tribunal has the power to vary the production bonus scheme, no material was placed on the record in this case on the basis of which the tribunal could order a variation in the scheme .in force in the company.\n\nAs to the award of profit bonus for the year 1951-52 the attack was two-fold, namely,\n\n(4) It was not open to a tribunal to award both production bonus and profit bonus and in any case it\n\ncould not be done in the present case as the production bonus here was nothing more than profit bonus; and (5) Even if both production bonus and profit bonus could be awarded, there was no available surplus in this case out of which profit bonus for that\n\nyea, r could be paid.\n\nRe. (J). . Before we go into the question of jurisdiction of a tribunal under the Industrial Disputes Act, 1947, (hereinafter called the Act}, we should like to consider what production bonus essentially is.\n\nThe payment of production bonus depends upon production and it> in addition to wages.\n\nIn effect, it is an incentive to higher production and is in the nature of an incentive wage.\n\nThere are various plans prevalent in other countries for this purpose known as Incentive Wage Plans worked out on various bases, for example, Halsey Premium Plan, Bedaux Point Premium Plan,\n\nHaynes Manit System and Emerson Efficiency Bonus Plan; (see Labour Law by Smith, Second Edition, p. 723).\n\nThe simplest of such plans is the straight piece-rate plan where payment is made according to .each piece produced, subject in some cases to a gua- . ranteed minimum wage for so many hours' work. But\n\n'the straight piece-rate system cannot work where the\n\nfinishe, d product is the result of the co-operative effort of a large nqmber of workers each doing a small part which contnbutes to the result. In such cases, production bonus by tonnage produced, as in this case, is given.\n\nThere is a base or standard above which extra payment is made for extra production in addition to the baf\\ic wage.\n\nSuch a pian typically guarantees time wage up to the time represented by standard performance and gives workers a share in the savings represented by superior performance. But whatever may be the nature of the plan the payment in .., effect is an extra emolument for extra effort put in by workmen over the standard that may be fixed.\n\nThat is the reason why all these plans are known as Incentive Wage Plans and generally speaking have little to do with profits. The extra payment depends not on\n\nM /s. Titaghur\n\nPaper Mills Co., Ltd. v Its Workmen\n\nWanchoo ] .\n\n- , --\n\n• 1020' SUPRE111E COURT REPORTS. [1959] Supp.\n\n1959 extra profits but on extra production. This extra pay. ment calculated on the basis ofextra production is in a fl.Ifs. Titaghur\n\nPap\" Mills case like the present where the payment is made after co .• Ltd. the annual production is known, in the nature of emol~- v. __ men ts paid at the end of the year. Therefore generally Its Workmen speaking, payment of production bonus is nothing more nor less than a payment of further emoJ.uments ivanckoo ]. d d epen ing upon production as an incentive to the workmen to put in more than the standard performance. -Production bonus in this case also is of this -nature and is nothing more than additional emolument paid as an incentive for higher production. \\Ve shall later consider the argument whether in this case the production bonus is anything other than profit bonus.\n\nIt is enough to say at this stage that the bonus under the scheme in this case also depends essentially on production and therefore is in the natllreof incenth'e wage.\n\nLet us now turn to the question of jurisdiction of the tribunal under the Act to consider a production bonus scheme at all. The argument is that the introduction of a production _bonus scheme is purely discretionary with the employer and no tribunal can impose such a scheme. Whetber there should be increased production in a particular concern is a matter to be determined entirely by the employer and depends upon a consideration of so many complex factors, namely, the state of. the market, the demand for the product, -the range of prices, and so on. It is, therefore, entirely for the efuployer to introduce a _production bonus scheme or not. There is good deal of force in the argument up to this point; but the argument goes further and it is said that even after the scheme is introduced, it is for the same reasons in the discretion of the employer whether to continue it or not. Therefore, it is urged that the tribunal cannot have jurisdiction to consider a production bonus scheme at all, for the tribunal would then be doing something which the employer can set at naught by withdrawing the scheme or by\n\n- nullifying the effect of the tribunal's order by so arranging that the production does not reach the level at which production bonus __ becomes payable, for\n\n...\n\nexample, by not providing enough raw material for the purpose. It is further urged that if it is entirely in the discretion of the employer to introduce or not to introduce a production bonus scheme, the fact that the employer introduces a scheme will not give jurisdiction to the tribunal to interfere with it in any way, for otherwise the tribunal would be compelling the employer in the guise of a revision of the scheme to do something which the tribunal could not initially do.\n\nOur attention in this connection was drawn to Shalimar Rope Works Mazdoor Union, Howrah v.\n\nMessrs. Shalimar Rope Works Ltd., Shalimar, Howrah (1), where it was observed that though a production bonus scheme may be desirable in the interest of harmonious relationship between the employer and employees, there is no obligation on the part of the management to give production bonus and no decision had been brought to the notice of the Labour Appellate Tribunal holding that a scheme of production bonus was obligatory on the part of the company ; (see p. 504).\n\nWe are, however, not called upon to decide in this case whether a demand for the introduction of a production bonus scheme where there was none before can be made a subject-matter of industrial dispute as defined in s. 2 (k) of the Act or whether a scheme of p.rnduction bonus can for the first time be imposed on the.employer by a tribunal under the Act. The problem tha\\is before us is whether the tribunal under the Act w1H have jurisdiction to deal with a production bonus scheme in a concern where it has been introduced. The answer to this question depends upon the terms of the Act and not on the consideration whether the _scheme can be initiated only by the employer in the first instance. In order that the tribunal may have jurisdiction all that is necessary is that an industrial dispute within the meaning of s. 2 (k) of the Act should exist or be apprehended and there should be a reference of such dispute by the appropriate government to the tribunal under s. 10.\n\nNow ' industrial dispute ' has been defined in very wide terms in B. 2 (k) and for our purpose it means any\n\n(1) (r957) L.A.C. 496.\n\nI959\n\nMjs. litaghur\n\nl'apcr Mills\n\nCo., Ltd. v.\n\nIts Workmen\n\nWanchoo J.\n\nr959\n\nJl.J/s. Titoghur\n\nPapev Mills\n\nCf'4, Ltd. v.\n\nIts IVorknien\n\nJVanchoo }.\n\ndispute or difference between the employers and workmen which is connected with the employment or non-employment or the terms of employment or with the conditions of labour, of any person. \\\"! e have already held that the production bonus scheme in this case is an incentive wage plan and what is paid under the scheme over and above the basic wage is supplementary emolument depending upon annual production.\n\nA dispute arising about such an emolument clearly comes within the words \" terms of em ployment \". As soon therefore as an employer introduces a production bonus scheme and the same is put in operation and the workmen accept it, it becomes. a term of employment of the workmen working under him and any dispute with respect to such a term of employment is an industrial dispute and if it is referred to a tribunal under s. 10, as has been done in this case, it has jurisdiction under s. 15 to \"deal with it. The argument therefore on this head must be rejected and it must be held that the tribunal had jurisdiction under the Act to deal with the scheme of production bonus which had been introduced in this company and was in force at all material times.\n\nRe. (2).\n\nThis brings us to the second question, namely, where a scheme of this kind is in force and there is a dispute with regard to it.s terms, what is the extent of the powers of a tribunal to deal with it . .JThe argument is put in this way.\n\nThe introduction and continuance of a prClduction bonus scheme is one of tho functions of management. Therefore, when a question of revision of such a scheme comes up before a tribunal, all that the tribunal \"should look into is whether this matter is an exclusive managlnnent 'function? If it comes to the conclusion that it is an exclusive management function, it should not interfere with the details of the scheme, unless it also comes to the conclusJon that the employer is guilty of mala fides, victimization, fraud or unfair labour practice through the introduction or continuance of the scheme. It is said that even though the tribunal may have jurisdiction to consider such a scheme, it should refuse to interfere\n\nIll •\n\n• ' '••'' . . •\n\n(2) S.C.R. SUPREME COURT Rb:t ~~TS . ;-.'.~ .. ' 1023\n\nwith it as soon as it comes-to the conclusion that it is an exclusive management function and there is no question of mala.fides, etc. ' \\Ve think it unnecessary for present purposes to embark on a discussion of what is and what is not an exclusive management function. Basically, everything connecte,!l with the management of an industrial concern is a management function, except the internal affairs of any union which may exist. The Act has . made no distinction between what may be called exclusive management functions and others. It is also well settled that the tribunals under the Act have power to interfere witli management functions falling within their purview in the interest of industrial peace and the Act was enacted with that object. Therefore, once it is conceded, as is the case here, that the tribunal has jurisdiction to entertain such an industrial dispute which comes within the terms of s. 2(k) we see no reason why the power of the tribunal to take into consideration an incentive wage plan like a production bonus scheme already introduced should be limited merely to the consideration of the question whether the employer's action is mala fide, etc. \\Vhere a production bonus scheme is in force and has become a term of employment, there is no reason why the tribunal should not have the power to vary its terms if circumstances justify it. Nor can the power of revision be denied to the tribunal in respect of a scheme actually introduced on the grouiid that the introduction of such a scheme was an exclusive management function and therefore it should be immune from being touched at all. Therefore, even assuming that the initiation of a production bonus scheme is an exclusive\n\nmanagement function and the final decision with respect to its introduction rests initially with the management., the right of the tribunal to take into considera. tion such an initiated scheme (which has become a term of employment) and to revise it cannot for a moment bo doubted under the Act. It is true that the tribunal will not lightly interfere with a scheme. introduced by the management and accepted by the union. It is also true that the tribunal would only\n\nM fs. Tilaghur\n\nPaper Mills\n\nCo .• Ltd. v.\n\nIts lVorkmen\n\nJVanchoo ].\n\nI959\n\nJ, J/s. Titaghur\n\nPuper lltJills\n\nCo., Ltd. v.\n\nIts JV 01/lmen -·· J\"Vanchoo ].\n\n• I\n\n• 1024 SUPRElUE COURT REPORT~ [1959] Supp.\n\nmake a change in the rates for gciod and sufficient reasons. There can be no doubt, hwever, that the tribunal . has jurisdiction under the .Act to take into consideration a production bonus scheme which lias been introduced and is in operation and in proper cases to revise it, and if necessary to change the rates and other conditions on which such bonus is .payable. . Our attention in this connection was dro.\\yn to Indian Iron&: Steel Co. Ltd. v. Their Workmen('), where the limits of the power of a tribunal to interfere with an order of dismissal were considered. That case is in our opinion of no help to the appellant. It was laid down there that undoubtedly the management of a concern had power to direct its own internal. administration and discipline ; but the power was not unlimited and when a dispute arose, Industrial Tribunals had the power to see whether the termination of services of a workman was justified and to give appropriate relief.\n\nIt was further laid down under what conditions the Industrial Tribunal will interfere with the order of dismissal. On a parity of reasoning, the Industrial Tribunal has the power under the Act to revise the production bonus scheme once it has been initiated. It will do so only for good and cogent reasons, such as a material change in method, product, tools, material, design, or production conditions, or a saving in labour cost and the like, .maintaining as far as possible the established relationship between earnings and effort and avoiding rates w.liich will give results out of all proportion to the basic wage. \"Ve are therefore of opinion that the argument under this head must also be rejected .\n\n. Re. (3). .\n\nThe main contention under this head is that there was no material before the Appellate Tribunal to ·\n\njustify the increase in the rate which it ordered. We have already pointed out that the scheme put forward by the company. was to pay a production bonus of 13 days' basic wage on a minimum production of 30,000 tons. Thereafter one day's basic wage was to\n\n(I) (1958] S.C.R 667.\n\n. 1\n\n(2) S.C.R. SUPREME COURT REPOitTS 1025\n\nbe paid for every 460 tons produced up to the axi mum of 36,000 tons, the rated capacity of the mills being then said to be over 36,000 tons.\n\nThe Appellate Tribunal has kept the minimum production at 30,000 tons with a bonus of 13 days' basic wage.\n\nBetween 30,000 and 36,000 tons it has raised the rate to 1 i days' basic wage for each increase of 460 tons over 30,000 tons to the limit of 36,000 tons, and thereafter to two days' basic wage for each increase of 460 tons in excess of 36,000 tons. It ga:ve two reasons in support of this increase, namely, (i) that the great increase in production since the introduction of the scheme was attributable to a very considerable extent to the increase of efforts on the part of labour and therefore a reasonable proportion of the increased income on account of increased production should go to labour, and (ii) that one day's wage only as bonus for every 460 tons over 30,000 tons is not commensurate with the actual increase of income on that increased block of prod.uction. It is not clear to us what exactly the Appellate Tribunal had in mind when it talked of the increase of income as a reason for increase in the rate. The question of increase in the rate has to be considered in two stages, namely, (i) the increase between 30,000 and 36,000 tons and (ii) the increase when production goes beyond 36,000 tons. It appears from what Mr. Banerji said in his award of 1949 that the basic principle of the scheme, as it was put forward before him, was accepted by the union as satisfactory, meaning thereby that the union considered that 13 days' basic wage for a minimum production of 30,000 tons and one day's basic wage for every 460 tons beyond that upto 36,000 was fair to labour. It has been urged that there was no agreement between the workmen and the company in connection with this scheme. It does appear that all the terms, which were incorporated in the scheme communicated to labour in July 1950, were not initially evolved with the agreement of the union ; but so far as the rate of bonus was concerned that was accepted by the union as satisfactory. In the company's appeals, we are\n\ni959\n\nM /s. Titaghur\n\nPaper Mills Co., Ltd. v Its Workmen\n\nWanchoo ].\n\nI959\n\nM/s. Titaghur\n\nPaper Milts\n\nCo,. Ltd. v.\n\nIts Workmen\n\nWanchoo ].\n\nconcerned only with the rate. The question therefore is whether the Appellate Tribunal was justified in changing this rate which was agreed to as satisfactory by the union up to a production of 36,000 tons. We are of opinion that in view of the agreement between the parties up to a production of 36,000 tons there was no such material before the Appellate Tribunal as would justify interference with the agreed rate.\n\nThe intensification of labour must have been taken into account when th,!l union agreed to the rate up to 36,000 tons, and there is nothing to show that since then there has been any change in the conditions to call for a change in the rate. The order of the Appellate Tribunal so far as it relates to production up to 36,000 tons cannot be sustained, as no material was placed before it to warrant a change in that agreed rate.\n\nThen we come to the rate after 36,000 tons. There the considerations in our view are different. The scheme only provided _for a production o{ 36,000 tons.\n\nIt is true that thereafter the production bas gone up beyond 36,000, and the company has been paying the same flat rate of one day's basic wage for every 460 tons for the extra production and the workmen have been accepting that payment. At the same time there was no collective acceptance by the union on behalf of the workmen of this rate being satisfactory or fair for production above 36,000 tons.\n\nProduction went beyond 36,000 tons for the first time in 1951-52 and a dispute was raised in October 1953 by the workmen of Mill No. 1 not very long after production for that year was known. There was no dispute as to the general revision of the rate by the workmen of Mill No. 2 ; but it was conceded on behalf of the company that the two mills must be treated on the same footing in this matter. The company therefore cannot say that the Appellate Tribunal should not have interfered with the rate above 36,000 tons, because there was a collective agreement by the union on behalf of the workmen and there was no material before it to change the rate even beyond 36,000 tons. Two reasons were given by the Appellate Tribunan for the\n\nchange it ordered. Of these the second is difficult to understand as it is not clearly or happily expressed, though the first reason, (namely, increased effort on the part of labour) would certainly apply when we consider production beyond 36,000 tons. It stands to reason that where the labour force is more or less the same, production beyond the original target of 36,000\n\ntons would mean more intensification of effort by labour, for it is not in dispute that the working hours have remained the same. Other things being equal, the greater the production by the same labour force in the same space of time, there is bound to be more intensification of labour to achieve this result.\n\nThis is certainly a matter which the Appellate Tribunal could take into account in considering whether the rate after 36,000 tons should be raised. A comparison of figures of production and labour force employed between 1948 and 1952 (assuming other factors to be the same) would show that there must have been intensification of labour effort to get the increased production. In 1948, total labour force in the two mills was 5,860 (Exs. F & H). In 1952, it went up to 6,213, an increase of just over 6 per cent.\n\nProduction on the other hand was 28,244 tons in 1948-49 while it was 37,738 tons in 1951-52, an increase of slightly above 33 per cent. So it is obvious that the increase in production is much more than the increase in labour force. It is true that in 1950 a new paper-making machine was substituted in one of the mills, and some bamboo-crusli.ers and digesters were also added during this period and other large amounts spent on machinery, and that fact certainly accounts for a part of the increase. It is, h<;>wever, not possible to ascertain, with anything like mathematical accuracy, as to how much of the increase in production is attributable to improved machinery and how much of it is referable to intensification of labour of the workmen. It may nevertheless be taken as fairly certain that the increase in production is referable to a great extent to intensification of the efforts of the workmen, for there has been no appreciable increase in the labour force. 'Ve have not got the _figures of labour force in the\n\nI959\n\nM Js. Tita, ghur\n\nPaper Mills\n\nCo .• Ltd. v.\n\nIts Workmen\n\nWanchoo ].\n\nI959\n\nJo.Ifs. Titaghur\n\nPaper Mills Co., Ltd. v.\n\nIts Workmen\n\nWanchoo ].\n\nlater years, though production has gone on increasing, till it is said it will reach 54,000 tons mark in 1958.59.\n\nIt is apparent, therefore, that there must have been progressive intensification of labour as the production rose beyond 36,000 tons, and in the premises that was a circumstance which the Appellate Tribunal was properly entitled to take into account when considering a change in the rate for production over 36,000 tons .\n\n. The second ground given by the Appellate Tribunal, as we have said :ibove, is not quite clear to us. Learned counsel for the workmen have, however, explained that what the Tribunal means is that as the production increases more and more the labour cost per ton goes down; and thus there is a saving in labour cost to the company and the workmen are entitled to share in this progressive saving of labour cost. The principle which is inherent in this explanation is in fact the basis of progressive increase in production bonus rates as production increases. This will be clear• from an illustration, which we shall give just now.\n\nThis illustration is based as nearly as possible on the conditions in these two mills with this difference that we have taken round figures for facility of multiplication; the result will be more or less the same if actual figures are taken. For the parposes of this illustration, we shall assume that the labour force and other relevant factors remain constant. Let us start with a basic production of 30,000 tons with a labour force of 6,000 and an average wage of all kinds at Rs. llO/-\n\nper mensem (Ex. E).\n\nThe total labour cost on this basis for 30,000 tons per year comes to 79·2 lacs, giving labour cost per ton as Rs. 264/-.\n\nNow, when production increases to 36,000 tons and a production bonus of Rs. 25/- per year (Ex. E) is added to the wage, labour cost for the extra production of 6000 tons comes to Rs. I 5 lacs.\n\nThe total labour cost, therefore, for 36,000 tons is 80·7 lacs, which works out to slightly above Rs. 224/- per ton. When production goes up to 42,000 tons, the labour cost increases by 3 lacs, giving a labour outlay of 82·2 lacs; this works out to just below Rs. 196 per ton. When production increases\n\nto 48,000 tons, the extra labour cost is 4·5 lacs, making a total of 83·7 lacs for 48,000 tons; thus the cost per ton is slightly above Rs. 174/-. When production goes up to 54-,000 tons, labour cost increases by 6 lacs, giving a total cost of 85·2 lacs for 54,000 tons, w bi ch works out to just below Rs. 158/- per ton. When production reaches 60,000 tons, which is double the basic production, the additional sum paid to labour in bonus is 7·5 lacs and the total cost 86·7 lacs for 60,000\n\ntons which works out to R.s. 144·5 per ton.\n\nThis is on the basis of the production bonus above 36,000 tons being kept at the same rate at which it is provided in the scheme in this case. It will be clear, therefore, that as production increases (if other factors are the same, namely, labour force and machinery), there is a progressive increase in the saving of labour cost. This, in our opinion, makes out a clear case, where one is dealing with tonnage production bonus, for a progressive increase in the bonus. We know that in this case there has been an increase, but of a small order, in the labour force during the period of increased production; we also know that a new paper-making machine has been put in in the place of an old one and new bamboo-crushers and digesters have been added; and we know that during the period from April l, 1948, to April 1, 1959, there bas been a total outlay on machinery and plant, worth 223·94 lacs including the above.\n\nThere is no doubt, therefore, that when production is expected to reach the figure of 54,000 tons in 1958-59, this outlay on machinery and plant must also have contributed to it.\n\nThe increase in labour force, if any, after April I, 1952, niay also have made its contribution. But it appears to us that it is still valid to say that there is saving in labour cost which increases progressively as production goes up and labour can therefore legitimately claim a progressively higher rate. Therefore, though the Appellate Tribunal's second reason does not appear to have been clearly expressed, something like what we have said above must have been at the back of its mind when it decided to change the rate above 36,000 tons.\n\nThere can be no doubt that the consideration we have\n\nM /s. Titaghur\n\nPaper Mills Co., Ltd. v.\n\nIts Workmen\n\nJVanchoo ].\n\nz959\n\nMfs. Titothur\n\nPaper l\\1ills Co., Ltd. v.\n\nIts Workmen\n\nJVanchoo J.\n\nset.out above, will be valid to support the view taken by the A ppel!ate Tribunal that there should be a change in the rate, though it may not necessarily support the actual change ordered by it. We must not forget that there was no collective bargaining resulting in an agreement between the union and the company so far as production above 36,000 tons is• concerned as was the case so far as production upto 36,000 tons went.\n\nA case has, therefore, been made out for a change in the rate when production goes above 36,000 tons.\n\nThe next question is whether the flat rate of two days' basic wage for every 460 tons allowed by the Appellate Tribunal can be supported. Usually, when tonnage production bonus is worked out, the rates progressively increase.\n\nWe may in this connection refer to the illustration given in\" Payment by Results\" published by the International Labour Office, Geneva, at p. 102. \"'Te think, therefore, that though there is a case for increasing the rate when production goes above 36,000 tons, it should be on a progressively increasing system. The present scheme, as we have pointed out earlier, was evolved as an admittedly rough basis which was thought to be equitable. Following the same rough basis and using the same block of 6,000 tons with slabs of 460 tons, we think that on the data available at present, it would be fair to give progressive rates for production from over 36,000 tons up to 60,000 tons. We need not go beyond this for the present, and if production increases beyond 60,000 tons, the matter can be gone into again. We consider, therefore, that the rate should be changed as follows for production over 36,000 tons:-\n\n(i) From over H days' basic wage on the same 36,000 tons to scale as is provided in the sche- 42,000 tons. me from 30,000 to 36,000 tons.\n\n(ii) From over l,~ days' basic wage on the same 42,000 tons to conditions as above. 48,000 tons.\n\n(iii) From over\n\n48,000 tons to l~ days' basic wage -do- 54,000 tons.\n\n(iv) From over 54,000 tons to 2 days' basic wage -do- 60,000 tons.\n\nWe therefore modify the change in the rate ordered by the Appellate Tribunal as above.\n\n&.~~ .\n\nThe contention under this head is that though this scheme is called a production bonus scheme, in reality it is no more than a profit bonus scheme; and therefore, the workmen are not entitled to an.')' profit bonus worked out on the Full Bench formula referred to a.hove in addition to what they get under this production bonus scheme. In this connection reliance is placed particularly on clauses (14) and (18) of the scheme. Let us therefore determine the true nature of the scheme. The scheme is headed \" Tonnage Production Bonus Scheme\" and not a scheme for profit bonus based on the Full Bench formula. It is true that this nomenclature is not decisive but is nevertheless a factor which may properly be taken into consideration. The primary and basic object of the scheme, as given in cl. (2), is to stimulate the interests and endeavours of the clerks and workers of the company in increasing the production of saleable paper and to ensure that the workers will get by way of incentive an increased return for their labour contributing to the benefits which would accrue from such increased productivity. This again shows that this is a production bonus scheme and nothing else. Then comes\n\ncl. (4), whi.ch lays down that upto a minimum of 30,000 tons the bonus would be 13 days' basic wage; thereafter there is increase of one day's basic wage for every 460 tons till the figure of 26 days' basic wage is reached for a total production of 36,000 tons. Here again there is no connection between profits and bonus that accrues under this clause. If, for example, production falls below the minimum of 30,000 tons, there will be no bonus at all under the scheme whatever may be the profits. This one circumstance clearly brings out the true nature of this scheme, namely, that it is a scheme of production bonus and not of\n\nI959\n\nM /s, Titaghur\n\nPap\" Mills\n\nCo., Ltd. v.\n\nIts Workmen\n\nWanchoo ],\n\n'959\n\nM/s. Titaghur\n\nPaper Mills Co., Ltd. v.\n\nIts Workmen\n\nWanchoo ],\n\nprofit bonus under the Full Bench formula. That formula had nothing to do with production.\n\nBonus under that formula depended entirely on the available surplus of profits worked out in the manner provided therein.\n\nThen we come to clause (14).\n\nThat clause lays down that the scheme will be subject to one most imp\"Ort; tnt general exception, namely, th!tt the profit earning capacity of the company, irrespective of the volume of production of saleable paper, remains satisfactory during the financial year. Accordingly the clause prescribes that the directors may at their sole discretion either cancel altogether or reduce in scale of monetary payments the bonus in any one or more financial years in which the gross profit earned by the company over the whole financial year is not sufficient to meet fixed dividends and interest, depreciation charges and taxation and thereafter pay for the whole year dividend not less than IO per cent. to the ordinary shareholders of the company. It is said that this makes the scheme a profit bonus scheme. We are unable to agree with this contention. It is true that the scale of payment is likely to go down or there may even be no payment of bonus at all in the circumstances mentioned in cl. (14).\n\nBut the circumstances mentioned there are admittedly not the same which have to be taken into account in arriving at the available surplus according to the Full Bench Formula.\n\nClause (14) appears to us to be just one condition upon which the payment of production bonus would depend, like some other clauses in the scheme. For example,\n\ncl. (5) seems to provide that workers who work for less than half the total number of working days in the financial year for which bonus is being paid, shall not get any bonus, for it only makes those workers who work for more than half the total number of working days, worked out according to other rules, entitled to bonus. Clause (6) says that certain kinds of workers will not be entitled to bonus, namely, Bungalow servants, Budli clerks or workers, temporary clerks or workers, casual workers or clerks. It also provides that any person gumy of any major misdemeanour may at the sole discretion of the Mill Manager or the\n\nCost Accountant not be given this bonus either in part or in whole as a punishment, and that this would be done after taking proceedings in writing for the purpose. Clause (7) provides another condition as to what service will count towards earning bonus and what will not; for example, leave on full or part pay shall count as bonus service while leave without pay will not count as qualifying service towards bonus. Again\n\ncl. (8) lays down that a worker will be entitled to the maximum bonus if he works for all the working days during the financial year, for which the bonus is declared. Clause (9) then provides how the maximum bonus can be reduced, if a worker does not work for all the working days. Clause (14) therefore is also another clause which may either lead to no payment of bonus or less payment than prescribed under cl. (4).\n\nFurther the fact that this is not a profit bonus scheme bu.ta production bonus scheme will also be clear from what cl. (14) actually provides. It says that if the conditions mentioned in it are not falfilled, the workers would not be entitled to bonus or may get less.\n\nThis means that if the conditions are fulfilled, workers would be entitled to bonus. Now, suppose, that the gross profit in a year is sufficient to meet fixed dividends and interest, depreciation charges and taxation and 10 per cent. dividend to the ordinary shareholders.\n\nThereafter the balance of profit left is only (let us say) Rs. 5/-. But as the conditions of cl. (14) are fulfilled, the workers would be entitled to production bonus, though the amount of Rs. 5/- which remains, cannot possibly meet the claim of bonus. It is clear therefore that this bonus scheme is not the same as the profit bonus worked out under the Full Bench formula and it cannot be called a profit bonus scheme even otherwise.\n\nThis is nothing more nor less than a pure production bonus scheme based on tonnage, depending on certain conditions one of which is related to profits also.\n\nThe nature of this bonus, therefore, in our opinion, is entirely different from the nature of profit bonus under the Full Bench formula and we do not see why if there is an available surplus of profits\n\n130 •\n\nI959\n\nM /s. Titaghur\n\nPaper Mills\n\nCo., Ltd, v !Is Workmen\n\nWanchoo ].\n\n'959\n\nM /s. Titaghur\n\nPaper Mills\n\nCo .• Ltd, v.\n\nIts JV01.k1nen\n\nWanchoo ].\n\naccording to the Full Bench formula, the workmen should not get profit bonus in accordance with that formula. The two things, in our opinion, are different.\n\nUnder the scheme what the workers get is a supplementary emolument worked out on certain basis.\n\nUnder the Full Bench formula, what they get is something out of the profits, ifthete is an available surplus on the ground that both capital and labour contribute to the accrual of profits and it is only fair that labour should get a part of it. .\n\nIn this connection our attention was drawn to Mathuradas Kanji v. Labour Appellate Tribunal (1), where it was observed that \"one of the categories of bonus is described as \"incentive bonus\". The name indicates that it is given as a cash incentive to greater effort on the part of the labour. But the essential condition for the payment of incentive bonus just like any other kind of bonus, is that the industry concerned must earn profits part of which is due to the contribution which the workmen made in increasing production.\" That was not a case of production bonus at all. The bonus dealt with there was included in an agreement between the government and its contractors in a contract relating to clearing and transporting of imported foodgrains. It was provided that if the rate of discharge from a ship exceeded 1,500 tons per 24 hours and no shed demurrage was incurred, the government would pay to the contractors remuneration at the prescribed rates plus a bonus of annas four per ton. The workmen employed by the contractors claimed that this bonus should be given to them.\n\nThat claim was negatived on the ground that the workers could not claim, on the terms of the contract, that the bonus of annas four per ton was payable to them. These observations made in a different setting have therefore no relevance iu the context of the production bonus scheme with which we are dealing here and which has become a term of employment of the workmen.\n\nAs for cl. (18), it provides that if during the currency of three years for which the scheme was to\n\n(1) A.I.R. 1958 S.<;. 899.\n\nremain in force in the first instance, the government enforced by legislation any scheme or provision for bonus or profit shring, the company may decide to cancel or modify the scheme in its entirety. It is urged that this shows that the scheme was one for profit sharing or profit bonus, because it was likely to be cancelled or modified if legislation was introduced with respect to these. It may be that the scheme might have been cancelled or modified if such legislation was passed.\n\nBut that does not mean that the scheme itself provided for profit sharing or profit bonus. It is one thing to cancel or modify a scheme because the' legislature steps in to provide for extra payment for workmen.\n\nBut the nature of the provision of law, which was then expected, cannot be imposed on this scheme, which must be judged on its own terms; these leave no doubt that it is not a profit bonus scheme but an incentive wage plan depending upon production in the main. The contention therefore that the bonus under the scheme is a profit bonus and therefore the workmen are not entitled to the profit bonus under the Full Bench formula must fail.\n\nRe. (5).\n\nThe contention under this head is that even if profit bonus is payable in addition to production boims, there was no available surplus of profits to justify the Appellate Tribunal in granting one month's bonus.\n\nThe workmen had asked for two month's bonus: but the Appellate Tribunal after working out the available surplus on the basis of the Full Bench formula granted them one month's bonus. The Full Bench formula was evolved in 1950 in connection with a case relating to the textile industry and bas been since then generally applied to many other industries. The necessity for evolving that formula arose in this way: When prices are stable or falling, there is no necessity of making further provision for rebabilitatfon for the usual depreciation, provided for the purposes of the Income-tax Act, is sufficient to build up a fund for replacement of plant and machinery when they are worn out; but when prices are rising the usual depreciation fund is not enough to replace plant and\n\nI959\n\nM /s. Titaghur\n\nPaper Mills Co., Ltd. v.\n\nIts Workmen\n\nWanchoo ./.\n\n•959\n\n.P.1 /s. Titaghur\n\nPaper Jl!ills\n\nCo., Ltd. v.\n\nIts Workmen\n\nWanchoo ].\n\nmachinery which become useless.\n\nThis was particularly so after the end of the last war, when the question of replacing machinery purchased before the war, i.e., before 1939, came up before the Full Bench of the Labour Appellate Tribunal in 1950. In order, therefore, to meet this particular situation arising out of a steep rise in prices, the Full Bench formula was evol ved to provide for a further sum for rehabilitation out of the profits besides the statutory depreciation. This was on a notional basis and depended upon a multiplier which was used to find out the current prices of machinery to be replaced and a divisor based on the useful life of the machinery to find out what sum should be provided each year for what was called rehabilitation.\n\nIn order, however, that this sum notionally provided for rehabilitation each year has a realistic connection with the amount in fact necessary for the purpose, it is, in our opinion, necessary that what is known as the total block of a concern including land, buildings, plant and machinery, should be properly sub-divided, as otherwise a fiat multiplier at the same rate for the total block might not give an accurate amount to be provided for rehabilitation.\n\nIt is, therefore, necessary in order to arrive at an approximately realistic figure for rehabilitation that the total block should be divided into three heads, namely, (i) land, (ii) buildings, railway sidings and things of that.nature which have a much longer life and where imports are not needed, and (iii) machinery.\n\nIn the case of land, no replacement is necessary and therefore nothing need be provided for rehabilitation under this head. Even where land is leasehold and the lease is expiring, any payment for renewal of lease will be an expense and need not enter into calculations for rehabilitation. Further if there are buildings belonging to the concern on leasehold land, their rehabilitation charge be will allowable under the head buildings. In the case of buildings,· railway sidings etc., the multiplier will be smaller while the divisor will be larger. As for machinery, there is again the necessity of further sub-division, according to when the machinery was purchased. The machinery purchased\n\nbefore the last war stands on one footing and thus there will be a block of machinery which may be know as pre-1939. The second block of machinery may well be that purchased during the war and the last block that purchased after the war. The last two are not rigid divisions; but they indicate that machinery has to be divided into blocks according to years of purchase to arrive at a correct multiplier and a correct divisor.\n\nBearing these principles in mind, let us see how the Full Bench formula works in this case. We may mention that there is no dispute in this case as to the components of the formula, the only dispute being confined to its actual application. The company claimed a multiplier of 4·5 and a divisor of 10, and on that basis gave a chart showing a deficit of 112 lacs in the amount required for rehabilitation for 1951-52.\n\nAnother chart was also filed by the company in which the multiplier was taken as 3·5 and the divisor as 10, and the deficit was worked out at 65 lacs. What the company did was to take the total block consisting of land, buildings, railway sidings and machinery, valued at 468 lacs and multiply it by 4·5 or 3·5, making no distinction between land, buildings and railway sidings, and machinery. The divisor was also taken as 10, making no distinction again between these three categories, and further making no distinction between the machinery purchased before 1939, during the last war and after the last war. This, in our opinion, was a completely unrealistic way of working out the amount required for rehabilitation, and that is why the company was able to show in its charts such a large deficit.\n\nThe Appellate. Tribunal did not accept these charts.\n\nIt Jeft out of account land altogether, and rightly so.\n\nAs for buildings, it applied a different multiplier and a different divisor, and so far as that is concerned no dispute has been raised before us.\n\nAs for machinery, consisting of plant, machinery, bamboo forest block, furniture, flotilla and vehicles, it divided the block for this purpose into two parts, namely, the block as it existed on April 1, 1947, and the additions made\n\nM /s. Titaghur\n\nPaper Mills Co., Ltd. v . . Its Workmen\n\nWanchoo ].\n\nr959\n\nAI/s. Titaghur\n\nPaper Mills Co., Ltd.\n\nbetween April 1, 1947, to March 31, 1951. It applied a multiplier of 3 so far as the block upto April 1, 1947, was concerned and took the block of additions after 1-4-1947 at cost price, thus using one as multiplier. It is not clear why the Appellate Tribunal did not include the additions made in 1951-52. The Appellate Tribunal also accepted the divisor 10 for all this plant, machinery, etc., and made no difference between the useful life of the machinery purchased at different times. Eventually, after making the relevant calculations, it came to the conclusion that there was an available surplus of profits amounting to 22 la-cs.\n\nIt, therefore, awarded one month's profit bonus on basic normal wage.\n\nIts Workmen\n\nfV anchoo •].\n\nIt is contended on behalf of the company that evidence had been produced on its behalf to show that • the prices of machinery had appreciated 4il; times as compared to the prices in 1939, and therefore, the multiplier of 4·5 should have been allowed at least on t_he block of machinery up to 1939. Thereafter it is claimed that some multiplier above one should be given for the block 1939-1947 and also for the block 1947-51. It is further contended that the additions made in 1951-52 should also have been taken into account.\n\nIt may be mentioned that the Labour Appellate Tribunal which evolved the Full Bench formula in 1950 had used the multiplier 2·7 in that case for prewar block and that multiplier has been used since then in many other cases. It is, however, contended on behalf of the company that that multiplier is not sacrosanct, and if in fact there has been a greater rise in price, there is no reason why a higher multiplier should not be used. It may be acc.epted that if an employer is able to prove that in fact there has b¥en . a greater rise in price, he should be given a higher multiplier. But there has to be good proof tendered by the employer for the multiplier which he claims.\n\nLet us see, therefore, what proof the company has tendered in this case for a multipler of 4·5 for the block upto April 1, 1939. In its written-statement the company said that it was a known fact that the\n\nprice of plant and machinery had increased by 300 per cent. to 400 per cent. since before the war.\n\nAt that stage there was no claim that the price had increased 4~ times e, fter April 1, 1939. The company's claim, therefore, as put in in the written-statement, was for a maximum multiplier of 4 for the block upto April 1, 1939. In the evidence of Mr. Taylor, who appeared as a witness for the company, however, claim was made that prices had gone up by 4~ times.\n\nThis was based on Ex. D produced by the company which was compiled on the basis of inquiries about certain machinery' from certain firms and copies of the correspondence with the firms were also produced.\n\nNineteen items were mentioned in Ex. D and the average multiplier was worked out as 4·56.\n\nAmong the items listed in Ex. D were motors, beaters, machine drive, paper-making machine, turbo-alternator, couch roll, bamboo-crushers, bamboo-digesters, • boiler, circular tanks and three roaster smelter units ..\n\nThe total price of these items was 19 lacs, (we have converted pounds into rupees for this purpose).\n\nBesides these, there are other items, like steam piping, steam tee, galvanized bend and steam bends, which are probably required in large quantities and the price per foot or per piece has been mentioned. The correspondence which was attached to Ex. D consists of four letters, one of September 1954 and three of June 1955, relating to one paper-making machine similar to one installed in Mill No. 2, a turbo-alternator similar to one installed in Mill No. 1, a machine drive similar to one installed in Mill No. 1 and a boiler similar to one installed in Mill No. 1. Now:, the cost of machinery block as at April 1, 1939, was of the order of 153 lacs while Ex. D only deals with machinery of the value of 19 lacs as mentioned above.\n\nMr. Taylor did not say in his evidence that Ex. D was a sample and that other machines were of the same type as mentioned in Ex. D or that the prices of other machinery had gone up similarly or to the same extent.\n\nExs. D-1 to D-4 indicate that the price of one out of ten paper-making machines was ascertained and nothing was ascertained about nine others.\n\nSimilarly prices of one\n\nI959\n\nM /s. Tifaghur\n\nPaper Mills\n\nCo., Ltd. v.\n\nIts Workmen\n\nWanchoo ].\n\n'959\n\nM/s. Titaghur\n\nPaper Mills Co., Ltd. v.\n\nturbo-alternator, one machine drive and one boiler of Mill No. 1 were ascertained.\n\nWe do not know how many more such machines are in the two mills ; nor do we know that the increase in price~ of these types of machines is also four and a half times. In the circum- Its Wo'k\"'\"' stances, we feel that the company has failed to provide sufficient material on the basis of which it can claim Wanchoo ], 4·5 as the multiplier. It is the company which is • claiming that a certain multiplier be used for calculating rehabilitation reserve, and it was its duty to produce good and sufficient evidence as to the correct multiplier if it wants that multiplier to be used.\n\nWe cannot also forget that in its written-statement the company only claimed a rise of 300 per cent. to 400 per cent. on pre-war price. In the circumstances, the tribunal was not unjustified in not giving the mu!Liplier of 4·5. 'Ve also feel that in these circumstances • we shall not be justified in giving the company a , multiplier higher than 4, for that was the maximum claim it had put forward in its written-statement. We should, however, like to make it clear that though we are using the multiplier 4 for the block as at April 1, 1939, this should not be taken to be a precedent for future years, even for this company, and it will be open to either party to adduce proper evidence to show what the exact multiplier should be for this block, whether more than 4 or less.\n\nThen we come to the block from April 1, 1939 to March 31, 1947.\n\nThe Tribunal gave the multiplier 3 for this block also. But that was because it gave the same multiplier for the entire block as at 1947, including the pre-war block.\n\nAs,· however, we are giving a multiplier of 4 for the prewar block, the multiplier 3 for the block April 1, 1939 to March 31, 1947, can only be justified, if the company has proved that that was the rise in the prices after 1939. So far as that is concerned, the company did not produce any evidence before the Industrial Tribunal. It seems, ho1vever, that certain documents were produced before the Appellate Tribunal on June 12, 1956, when the appeals were ready for argument.\n\nThe order-sheet of June 12, 1956, shows that the\n\n....\n\nAppellate Tribunal allowed four statements regarding certain machines given by different firms to be admitted into evidence. Learned counsel for the workmen object to our looking into these statements on the ground that they never knew that any such statements had been filed at the last moment before the Appellate Tribunal and nobody seems to have relied on these statements before the Appellate Tribunal and the judgment also makes no mention of them.\n\nThere seems to be a good deal of force in these contentions. However, looking at these statements, ; which. have been taken on record, we find that they relate to ten items. Four of them are of the years 1945-48 and the increase of price varies from 60 per cent. to 75 per cent. Two are of 1950 and the increase varies from 15 per cent. to 50 per cent., three are of 1951 and the increase varies from 99·5 per cent. to 116 per cent., and one is of 1954 and the increa.se is 60 per cent.\n\nThe increased price is as of 1956. Even taking these documents into account, we feel that the company cannot ask for a multiplier higher than 2 for the block between 1939-1947.\n\nBut even this will not be -taken as a precedent for future and it will be open to either party to give better evidence in order to vary this multiplier one way or the other.\n\nAs for the block after 1947, it appears that the company added machinery to t; he tune of 87 lacs between April I, 1949 and March 31, 1952, while the prices quoted for the years 1950 and 1951 in these documents were only of machines worth 5 lacs.\n\nWe do not know whether this machinery is of the same kind as that mentioned in these documents. They cannot, therefore, be a guide for a.rriving at any multiplier higher than one for thiS period relating to this block of 87 lacs.\n\nHere again we should like to make it clear that if in future years better evidence is produced, the question of giving a multiplier higher than I for this block can be considered.\n\nThis disposes of the multipliers on the blocks of machines divided into three periods. We now come to the divisor.\n\nBoth the Tribunals have accepted 10\n\nI959\n\nM /s. Titaghur\n\nPaper Mills\n\nCo., Ltd. v.\n\nIts Workmen\n\nWanehoo ].\n\nI959\n\nM /s Titaghur Paper Mills Co .• Ltd v.\n\nIts H1orkmen\n\nW11nchoo J.\n\nas the divisor on the evidence of Mr. Taylor.\n\nWe must say that it looks odd to us that there should be the same divisor for pre.1939 machinery, and post- 1939-but-pre-194 7 machinery, and post-1947-but-pre- 1952 machinery. It stands to reason that newer the machinery the larger must be the divisor for the Del.Ver machinery would have a.longer useful life. However, as both the Tribunals have accepted 10 as the divisor for the entire machinery in this case, we shall also have to accept it; but we should like to make it clear tJiat this should also not be taken as a precedent for future years and it will be open to either party to show that the divisor should be different, whether more or less than 10, for various blocks of machinery relating to the three periods.\n\nLet us now work out the figures on the basis of the above considerations. We have taken the basic figures as supplied to us by the learned counsel for the company:\n\nREHABILITATION COST\n\nIn lacs In lacs of Rs. of Rs.\n\n(a) Plant & machinery as at 1-4.1939:\n\n153·43 x 4 = 613·72\n\nMachinery added between 22·41 x 2 = 1-4-1939 and 31-3-1947 :· Additions between 1-4-1947 and 31-3-1952:\n\n87·27 x 1 =\n\nTotal. ........\n\nLess 5% breakdown value ...\n\nBalance ......\n\nLess depreciation upto 31-3-1951\n\nBalance ......\n\nLess Reserves- General Reserve...... 25·49 Plant Replacement ...... 67·98\n\nBalance ......\n\nDividing by 10 ........... .\n\n44•82\n\n87·27 ----\n\n745·81\n\n13•15 ----\n\n732·66 176·03 ----\n\n556·63\n\n93•47 ----\n\n463•16\n\n46•31\n\n....\n\n. ,\n\n(b) Buildings :\n\nValue of building as at 31-3-47: Additions between 1-4-47 and 31-3-52:\n\nLess 5% breakdown\n\nLess depreciation upto 31-3-1951 :\n\n42•85 x 2·5 = 96•41\n\n21·19 = 21·19\n\nTotal . . . . . .. .. 117·60\n\n3·20\n\nBalance...... 114·40\n\n47·21\n\nBalance...... 67·19 Dividing by 27..... ... . . .. . .. 2·48 ****** Rehabilitation for-\n\n(a) Plant & Machinery\n\n(b) Building ............... 46•31 ............... 2•48\n\nTotal......... 48·79 Less depreciation for 1951-52...... ... 16·50\n\nBalance...... 32·29 Rehabilitation Amount for 1951-52: 32·29 Rehabilitation amount for 1951-52 thus comes to 32·29 lacs. In the charts supplied by the company the net profits after deducting prior charges other than rehabilitation cost were worked out at 36·09 lacs.\n\nWe find, however, that there is one mistake in this calculation inasmuch as 76·3 lacs have been included in working capital, though this was merely a book entry and there was no cash corresponding to it. 4 per cent. interest was allowed on working capital and this would mean that the net profits should increase by 3·05 lacs as that interest was allowed extra in the company's chart before the Appellate Tribunal. Thus the amount of net profits available, before the allowance of rehabilitation charges, comes to 39·14 lacs (36·09 + 3·05). Deducting 32·29 lacs we arrive at the available surplus of profits amounting to 6·85 lacs (39·14-32·29), which is to be distributed equitably between the three sharers mentioned in the\n\nz959\n\nM /s. Titaghur Paper Mills Co., Ltd. v.\n\nIts Workmen\n\nWanchoo ].\n\nI959\n\n111 /s. Titaghur Paper Mills Co •• Ltd. v. !ls Worktnen\n\nWanchoo ].\n\nvery decision of the Labour Appellate Tribunal which evolved the formula. The total cost of one month's bonus on basic wages allowed by the Appellate Tribunal is about 3 lacs.\n\nTaking all the circum.stances of this case into consideration we do not think that any case has been made out for interference with this order of the Appellate Tribunal. We may P, Oint out that we have not taken into account bamboo-mills and grass.block for reasons given by the Appellate Tribunal, which commend themselves to us.\n\nThis brings us to the appeal by the workmen. Only three points have been urged before us out of the many taken in the grounds of appeal, and we shall deal only with these three. They are-\n\n(i) The minimum basic wage should have been raised from Rs. 30 to Rs. 35;\n\n(ii) Clerical staff as well as Budli and tern porary workers should have been included in the attendance bonus scheme ; and\n\n(iii) Profit bonus should have been allowed at two months' basic wages for 1951-52 instead of one month's.\n\nRe. (i).\n\nBoth the Tribunals have rejected the claim for raising the basic wage on the principle of \"Industrycum-Region Rate of Basic Wages\". The workmen relied on the wages paid in the Bengal Paper Mills Ltd. at Raniganj, which is also a paper-making concern. The minimum basic wage there is Rs. 38-3, dearness allowance l{s. 35 and the incentive \"age is said to work out to Rs. 7-5-6 per mensem, making the total Rs. 80-8-6. In the present company, minimum basic wage is Rs. 30; dearness allowance is Rs. 35; house allowance is Rs. 2; attendance bonus works out to Rs. 8 and production bonus is about Rs. 3, making a total of Rs. 78. It will thus be seen that the difference is not great.\n\nFurther, if the production bonus and incentive wage are not taken into account, the present company pays Rs. 75 per mensem while the Raniganj company pays Rs. 73·3. In the circumstances, we see no reason for interfering with the concurrent order of the two Tribunals.\n\n(2) S.C.R.\n\nSUPREME COUHT REPORTS 1045\n\nRe. (ii).\n\nThe Tribunals rejected the claim for extending the attendance bonus scheme to clel'ical staff, budli workers and temporary workers. They were of the view that these workmen stand on a different footing. For the clerical staff the reason given was that they enjoyed the advantage of the incremental scales which were till then denied to other categories of mill hands for whose benefit the attendance bonus scheme was introduced. As for the budli and temporary workers, the Tribunals said that the scheme could not be applied to them on account of uncertainty of the tenure of their service. So far as the . budli and temporary workers are concerned, the reason given by the Tribunals for treating them differently appears to us to justify their being excluded. As to clerical staff, it appears from the correspondence which ensued between the union and the company on the introduction of attendance bonus scheme that the scheme was introduced primarily in connection with the installation of a time keeping office.\n\nThe clerks are obviously in a different category from the workmen engaged in actual production. In the circumstances, apart from the considerations which were considered by the two Tribunals, there is, in our opinion, justification for treating clerks in a different way from other workmen. The company also told the union that so far as they knew no scheme of attendance bonus had ever been applied to clerks, probably because absenteeism among clerks is not so great as among other workmen.\n\nWe see no reason, therefore, to disturb the concurrent finding of the two Tribunals in this matter.\n\nRe. (iii).\n\nWe have already worked out above the available surplus of profits, from which profit bonus can be given. The amount of ava.ilable surplus comes to 6·85 lacs and one month's basic wages, which have been allowed as profit bonus, c0me to about 3 lacs.\n\nThe percentage therefore is already sufficiently high and if profit bonus is allowed at the rate of two months' basic wages it will come to about 6 lacs and\n\nr959\n\nMfs. Titaghur Paper Mills Co., Ltd. v.\n\nIts Workmen\n\nWanchoo ].\n\nI959\n\nMJs. Titaghur Paper Mills Co., Lid.\n\nIts Workmen\n\nWanchoo ].\n\nwould be more or less equal to the entire available surplus. It is well settled tha,.t the available surplus bas to be divided in a fair manner between the industry, the shareholders and the workmen. We cannot forget that the workmen have also got production bonus for this year. In the circumstances, there is no scope for grant of any further profit bonus beyond that allowed by the Appellate Tribunal.\n\nWe, therefore, partly allow the appeals of the company and vary the production bonus rate in the manner indicated above. We dismiss the appeals of the company with respect to profit bonus. We also dismiss the appeal of the workmen. In view of the fact that the parties have partly succeeded and partly failed, we order them to bear their own costs of this court in all the appeals.\n\nAppeals Nos. 450 and 451 allowed in part.\n\nAppeal No. 514 dismissed.", "total_entities": 15, "entities": [{"text": "M/S. TITAGHUR PAPER MILLS CO. LTD", "label": "PETITIONER", "start_char": 55, "end_char": 88, "source": "metadata", "metadata": {"canonical_name": "M/S. TITAGHUR PAPER MILLS CO. LTD", "offset_not_found": false}}, {"text": "ITS WORKMEN", "label": "RESPONDENT", "start_char": 94, "end_char": 105, "source": "metadata", "metadata": {"canonical_name": "ITS WORKMEN", "offset_not_found": false}}, {"text": "S. R. DAS", "label": "JUDGE", "start_char": 108, "end_char": 117, "source": "metadata", "metadata": {"canonical_name": "SUDHI RANJAN DAS*", "offset_not_found": false}}, {"text": "N. H. BHAGWATI", "label": "JUDGE", "start_char": 126, "end_char": 140, "source": "metadata", "metadata": {"canonical_name": "NATWARLAL HARILAL BHAGWATI", "offset_not_found": false}}, {"text": "K. N. WANCHOO, JJ.", "label": "JUDGE", "start_char": 179, "end_char": 197, "source": "metadata", "metadata": {"canonical_name": "K.N. WANCHOO", "offset_not_found": false}}, {"text": "Before we go into the question of jurisdiction of a tribunal under the Industrial Disputes Act, 1947", "label": "STATUTE", "start_char": 16454, "end_char": 16554, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 2", "label": "PROVISION", "start_char": 21886, "end_char": 21890, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 2", "label": "PROVISION", "start_char": 22492, "end_char": 22496, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10", "label": "PROVISION", "start_char": 22643, "end_char": 22648, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10", "label": "PROVISION", "start_char": 23769, "end_char": 23774, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 15", "label": "PROVISION", "start_char": 23833, "end_char": 23838, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 2(k)", "label": "PROVISION", "start_char": 26069, "end_char": 26076, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 144", "label": "PROVISION", "start_char": 39196, "end_char": 39202, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 53766, "end_char": 53780, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 35", "label": "PROVISION", "start_char": 72019, "end_char": 72024, "source": "regex", "metadata": {"statute": null}}]}
{"document_id": "1959_2_107_122_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPORTS 107\n\nin the circumstances of the present cases, be held to\n\nI959 have caused prejudice to him. We must accordingly hold that the continuation of the trial of the three Gopi Chand v. cases against the appellant according to the summons The Delhi procedure subsequent to October I, 1950, has vitiated Administration the trial and has rendered the final orders of convic- , tion and sentence invalid. We must accordingly setGajendragadkar J. aside the orders of conviction and sentence passed against the appllant in all the three cases.\n\nThat takes us to the question as to the final order which should be passed in the present appeals. The offences with which the appellant stands charged are of a very serious nature; and though it is true that he has had to undergo the ordeal of a trial and has suffered rigorous imprisonment for some time that would not justify his prayer: that we should not order his retrial. In our opinion, having regard to the gravity of the offences charged against the appellant, the ends of justice require that we should direct that he should be tried for the said offences de novo according to law.\n\nWe also direct that the proceedings to be taken against the appellant hereafter should be commenced without delay and should be disposed of as expeditiously as possible.\n\nAppeal allowed.\n\nRetrial ordered.\n\nTIRUVENIBAI & ANOTHER\n\n1).\n\nSMT. LILABAI (P. B. GAJENDRAGADKAR and M. HIDAYA'.1.'ULLAH, JJ.) Registration-Contract to lease-Agreement not creating a present and immediate demise-Whether requires registration-\" Agreement to lease \", Meaning of-Indian Registration Act, I90/i (I6 of\n\nI908), S. 2(7).\n\nA document purporting to be a receipt and bearing a four anna revenue stamp was executed by Min favour of the respondent and recited, inter alia, as follows: \" I have this day given\n\nI959\n\nJanuary :JI.\n\nr959 to you the land described below which is owned by me.\n\nNow you have become occupancy tenant of the same.\n\nYou may Tirttvenibai enjoy the same in any way you like from generation to genera- & Anoth\" tion.\n\nMy estate and heirs or myself shall have absolutely no v. right thereto. You shall become the owner of the said land Smt. Lilabai from date r-6-4+ I will have absolutely no right thereto after the said date ......... The estate ...... has been given to you in lieu of your Rs. 8,700 due to you, subject to the condition that iii case your amount has not been paid to you on date 1-6-44, you may fully enjoy the estate .... in any way you like from generation to generation.\" The respondent instituted a. suit against M for the specific performance of a contract to lease alleging that under the document he had contracted to lease to her in perpetuity in occupancy right his lands in consideration of the debt of Rs. 8,700 and as the amount was not paid within the due date, he was liable to perform and give effect to the said contract.\n\nM contended, inter alia, that the document was an agreement to lease under s. 2(7) of the Indian Registration Act, r908, and that as it was not registered it was inadmissible in evidence. Held, that an agreement to lease under s. 2(7) of the Registration Act, 1908, must be a document which effects an actual demise and operates as a lease.\n\nAn agreement between t\\vo parties which entitles one of them merely to claim the execution of a lease from the other without creating a present and in1mediate demise in his favour is not an agreement to lease within the meaning of s. 2(7) of the Act.\n\nHeld, further, that on a construction of the document in question, it \\Vas not intended to, and did not, effect an actual or present demise in favour of the respondent and consequently it was not an agreement to lease under s. 2(7) of the Act.\n\nAccordingly, the document did not require registration and was admissible in evidence.\n\nHemanta Kumari Devi v. Midnapitr Zamindari Co., Ltd.,\n\n(1919) L.R, 46 I.A. 240, relied on.\n\nPanchanan Bose v. Chandra Charan Misra, (r9IO) I.L.R. 37 Cal. 808, approved.\n\nNarayanan Chetty v. Muthia Servai, (1912) I.LR. 35 Mad. 63, Purmananddas ]iwandas v. Dharsey Kirji, (r886) I.L.R. IO Born.\n\nIOI, Balram v. Mahadeo, I.L.R. 1949 Nag. 849 and Poole v. Bently, (r8IO) 12 East. r68; I04 E.R. 66, distinguished.\n\nCIVIL APPELLATE Jumsm.cTION: Civil Appeal No. 239 of 1955.\n\nAppeal from the Judgment and Decree dated the 30th November, 1953, of the former Nagpur High Court in First Appeal No. 118 of 1947, arising out of the Judgment and Decree dated the 12th August,\n\n194 7, of the Court of the Additional District Judge, 1 959 Wardha, in Civil Suit No. 9-A of 1946.\n\nT iruvenibai M. 0. Setalvad, Attorney-General for India, J. B. & Another Dadachanji, S. N. Andley and Rameshwar Nath, for v. the appellants.\n\nSmt. Lilabai M. Adhikari, Advocate-General for the State of Madhya Pradesh and I. N. Shroff, for the respondent.\n\n1959. January 21.\n\nThe Judgment of the Court was delivered by\n\nGAJENDRAGADKAR, J.-This is an appeal by the Gajendragadkar J. widow, and the minor son of Mangilal, defendant 1, and it has been filed with a certificate by the High Court of Judicature at Nagpur. It arises out of a suit filed by the respondent Shrimati Lilabai w/o Vrijpalji, for the specific performance of a contract to lease or in the alternative for damages and for a declaration against defendant 2, the daughter of defendant 1 that she has no right, title or interest in the property in suit. The respondent's case was that defendant 1 had executed an instrument (Ex. P-1) in favour of the respondent by which he had contracted to lease to her in perpetuity in occupany right his four khudkasht lands admeasuring 95·19 acres situated in Mouza Mohammadpur in consideration of the debt of Rs.\n\n8,700.\n\nAccording to the respondent the instrument had provided that, if defendant 1 did not repay to her the said debt on June 1, 1944, the said contract of lease would be operative on and from that date. Defendant 1 did not repay the loan by the stipulated date and so he became liable to perform and give effect to the said contract of lease on June l, 1944. The respondent repeatedly called upon defendant 1 to perform the said contract, but defendant 1 paid no heed to her demands and so she had to file the present suit for specific performance. The respondent had been and was still ready and willing to specifically perform the agreement and to accept a deed of lease for the lands in question in lieu of the said debt of Rs. 8, 700. Defendant 1, however, had been guilty of gross and unreasonable delay in performing his part of the contract and that had caused the respondent the loss of\n\n'959 the benefit of the lease and consequent damage. On\n\nTfruvenibai these allegations the respondent claimed specific per-\n\n& Another formance of the contract and an amount of Rs. 2,340 v. as compensation or in the alternative damages Smt. Lilabai amounting to Rs. 11,080.\n\nG . d dk 1 To this suit Mst. Durgabai, the daughter of defena; en raga ar . d d b . ant I ha een 1mpleaded as defendant 2 on the ground that she was setting up her own title in respect of the lands in suit and a declaration was claimed against her that she had no right, title or interest in the said lands. Defendant 2 filed a written statement contesting the respondent's claim for a declaration against her but she did not appear at the trial which proceeded ex parte against her. In the result defendant 1 was the only contesting defendant in the proceedings. Several pleas were raised by defendant 1 against the respondent's claim. He denied the receipt of the consideration alleged by her and he pleaded that the document (Ex. P-1) was a bogus, sham and collusive document which had been brought into existence for the purpose of shielding his property from his creditors and it was not intended to be acted upon. It was also urged by him that the said document, if held to be genuine, was an agreement to lease under s. 2(7) of the Indian Registration Act, and since it was not registered it was inadmissible in evidence.\n\nThe learned trial judge framed appropriate issues on these pleadings and found against defendant I on all of them. Accordingly a decree was passed ordering defendant 1 to execute a lease-deed in respect of the fields mentioned in the plaint on a proper stamp paper in occupancy right in favour of the respondent and to put her in possession of them.\n\nA decree for the payment of Rs. 2,316 by way of compensation was also passed against him. The declaration claimed by respondent against defendant 2 was likewise granted.\n\nThis decree was challenged by defendant I by his appeal before the High Court of Judicature at Nagpur. Pending the appeal defendant 1 died and his widow and his minor son came on the record as his\n\nlegal representatives and prosecuted the said appeal. r959 The High Court held that the document was support- Tiruvenibai ed by consideration, that it was not an agreement to & Another lease under s. 2(7) of the Indian Registration Act and v. therefore it did not require registration and was snit. Lilabai admissible in evidence. In the result the decree pass- - ed by the trial court was confirmed and defendant l's Gajendragadkar J. appeal was dismissed.\n\nThe present appellants then applied to the High Court for leave to appeal to this Court and the High Court granted leave because it held that the basic question involved in the decision of the appeal was the legal effect of Ex. P-1 and that the construction of a document of title is generally regarded as a substantial question of law. It 1s with this certificate that the present appeal has come before this Court, and it raises two questions for our decision : Is the document (Ex. P-1) an agreement to lease under s. 2(7): If not, does it require registration under s. 17 of the said Act? All other issues which arose between the parties in the courts below are concluded by concurrent findings and they have not been raised before us.\n\nBefore dealing with these points, we must first consider what the expression \"an agreement to lease\" means under s. 2(7) of the Indian Registration Act, hereinafter referred to as the Act. Section 2(7) provides that a. lease includes a counterpart, kabuliyat, an undertaking to cultivate and occupy and an agreement to lease. In H emanta K umari Debi v. M idnapur Zamindari Go. Ltd. (1) the Privy Council has held that \"an agreement to lease, which a lease is by the statute declared to include, must be a document which effects an actual demise and operates as a lease\". In other words, an agreement between two parties which entitles one of them merely to claim the execution of a lease from the other without creating a present and immediate demise in his favour is not included under s. 2, sub-s. (7). In Hemanta Kumari Debi's case (1) a petition setting out the terms of an agreement in compromise of a suit stated as one of the\n\n(1) (1919) L. R. 46 I. A. 240.\n\n'959 terms that the plaintiff agreed that if she succeeded in another suit which she had brought to recover ffruvenibai certain land, other than that to whicl:t the com: & Another\n\nv. promised suit related, she would grant to the defensmi. Lilabai dants a lease of that land upon specified terms. The petition was recited in full in the decree made in Gajendragadkar hthe compromised suit under s. 375 of the Code of.\n\nCivil Procedure, 1882.\n\nA subsequent suit was brought for specific performance of the said agreement and it was resisted on the ground that the agreement in question was an agreement to lease under s. 2(7) and since it was not registered it was inadmissible in evidence. This plea was rejected by the Privy Council on the ground that the document did not effect an actual demise and was outside the provisions of s. 2(7).\n\nIn coming to the conclusion that the agreement to lease under the said section must be a document which effects an actual demise the Privy Council has expressly approved the observations made by Jenkins, C. J., in the case of Panchanan Bose v. Chandra Charan Misra (1) in regard to the construction of s. 17 of the Act. The document with which the Privy Council was concerned was construed by it as\" an agreement tha.t, upon the happening of a contingent event at a date which was indeterminate and, having regard to the slow progress of Indian litigation, might be far distant, a lease would be granted \"; and it was held that\" until the happening of that event, it was impossible to determine whether there would be any lease or not \". This decision makes it clear that the meaning of the expression \" an agreement to lease\" \"which, in the context where it occurs and in the statute in which it is found, must relate to some document that creates a present and immediate interest in the land\". Ever since this decision was pronounced by the Privy Council the expression \" agreement to lease \" has been consistently construed by all the Indian High Courts as an agreement which creates an immediate and a present demise in the property covered by it.\n\nIt would be relevant now to refer to the observations\n\n(1) (1910) I.L.R. 37 Cal. 808.\n\nof Jenkins, C. J., in the case of Panchanan Bose (1). r959 In that case, a solehnama by which no immediate Tiruvenibai interest in immoveable property was created was & Another held not to amount to a lease within the meaning v. of cl. (d) of s. 17 of the Act but merely an agreement Smt. Litabai to create a lease on a future day. \"Such a docu- . - ment \", it was observed, \" fell within cl. (h) of s. 17 and Ga; endragadkar I as such was admissible in evidence without registration\".\n\nJenkins, C. J., held that \"on a fair reading of the document, no immediate interest was created, there was no present demise, and the document was merely an agreement to create a lease on a future day, the terms of which were to be defined by documents to be thereafter executed \". \" This being so \", said the learned C. J., \" I think the appellants have rightly contended before us that the document was admissible in evidence as it falls within cl. (h) of s. 17 of the Indian Registration Act\". This decision would show that an agreement which creates no immediate or present demise was not deemed to be a lease under s. 2(7) and so it was held to fall within s. l 7(h) of the Act and this view has been specifically affirmed by the Privy Council in Hemanta K umari Debi's case (2).\n\nIt is true that in Narayanan Ohetty v. Muthiah Servai (3) a Full Bench of the Madras High Court had held that an agreement to execute a sub-lease and to get it registered at a future date was a lease within s. 3 of the Indian Registration Act of 1877 (III of 1877) and was compulsorily registrable under cl. (d) of s. 17.\n\nSuch an agreement to grant a lease which requires registration, it was held, affects immoveable property and cannot be received in evidence in a suit for specific performance of an agreement. The question which was referred to the Full Bench apparently assumed that the agreement in question required registration and the point on which the decision of the Full Bench was sought for was whether such an agreement can be received in evidence in a suit for specific performance\n\n(1) where possession is given in pursuance of an agreement, and (2) where it is not; and the Full Bench\n\n(r) fr9ro] I.L.R. 37 Cal .808.\n\n(2) [1919] L.R. 46 I.A. 240.\n\n(3) (1912) I.L.R. 35 Mad. 63. 15\n\n'959 answered this question in the negative. \"An agreement to lease\", it was observed in the J\n\n0 udgment of the Tiruvenibai\n\n.., Another Full Bench, \" is expressly included in the definition of v. the lease in the Registration Act while it cannot be Smt. Lilabai suggested that an agreement to sell falls within any - definition of sale\". It is clear that the question about Gajendrngadkar J. the construction of thn words \" agreement to lease \"\n\nwas not specifically argued before the Full Bench, and the main point considered was the effect of the provisions of s. 49 of the Act. In that connection the argument had centred round the effect of the provisions of cl. (h) of s. 17 of the Registration Act and s. 54 of the Transfer of Property Act. The Full Bench took the view that in enacting s. 49 of the Act the Legislature meant to indicate that the instrument should not be received in evidence even where the transaction sought to be proved did not amount to a transfer of interest in immoveable property but only created an obligation to transfer the property. A contract to sell immovable property in writing, though it may affect the property without passing an interest in it, is exempted from registration by clause (h) (now cl. 2 (v)) of section 17 but an agreement in writing to let, falling within cl. (d) of s. 17, is not. That is why,. according to the Full Bench, such an agreement cannot be received in evidence of the transaction which affects the immovable property comprised therein. Thus this decision does not directly or materially assist us in construing the expression \"agreement to lease\".\n\nBesides, the said decision has not been followed by the Madras High Court in Swaminatha Mudaliar v.\n\nRamaswami Mudaliar(') on the ground that it can no longer be regarded as good law in view of the decision of the Privy Council in Hemanta Kumari Debi's case('), and, as we have already pointed out, all the other High Courts in India have consistently followed the said Privy Council decision.\n\nThe learned Attorney-General has, however, contended before us that the correctness of the decision of the Privy Council in Hemanta Kumari Debi's case(') is open to doubt and he has suggested that we\n\n(r) (I92I) l.L.R. 44 Mad. 399\n\n(2) (I9I9) L.R 46 I A. 240.\n\nshould re-examine the point on the merits afresh. We 1959 do not think there is any substance in this contention Tiruvenibai because, if we may say so with respect, the view taken & Another by the Privy Council in the said case is perfectly right. v.\n\nSection 17(1) of the Act deals with documents of which Smt. Lilabai registration is . compulsory. It is obvious that the Ga 'endra adkar J. documents fallmg under els. (a), (b), (c) and (e) of 1 g sub-s. (1) are all documents which create an immediate\n\nand present demise in immovable properties mentioned therein. The learned Attorney-General's argument is that cl. (d) which deals with leases does not import any such limitation because it refers to leases of immoveable properties from year to year or any term exceeding one year or reserving a yearly rent; and the Act deliberately gives an in\"tllusive definition of the term 'lease ' in s. 2(7).\n\nThis argument, however, fails to take into account the relevant provisions of the Transfer of Property Act.\n\nSection 4 of the said Act provides that s. 54, paragraphs 2 and 3, 59, 107 and 123 shall be read as supplemental to the Indian Registration Act, 1908. Section 107 is material for our purpose. Under this section a lease of immoveable property from year to year or for any term exceeding one year or reserving a yearly rent can be made only under a registered instrument. This section also lays down that where a lease of immoveable property is made by a registered instrument, such instrument, or, where there are more instruments than one, each instrument, shall be executed by both the lessor and the lessee. It would be noticed that if s. 107 has to be read as supplemental to the Act, the definition of the word 'lease ' prescribed by s. 105 would inevitably become relevant and material; and there is no doubt that under s. 105 a lease of immoveable property is a transfer of right to enjoy such property made in the manner specified in the said section. Therefore, it would not be right to assume that leases mentioned in\n\ncl. (d) of s. 17, sub-s. (1), would cover cases of documents which do not involve a present and immediate transfer ofleasehold rights. It would thus be reasonable to hold that, like the instruments mentioned in els. (a), (b) and (c) of s. 17(1), leases also are instruments\n\n116 SUPREME COUR'.l' REPORTS [1959] Supp.\n\n'959 which transfer leasehold rights in the property immediately and inpresenti. VVe have already referred Tiruvenibai\n\n& Anoth\" to the requirement of s. 107 of the Transfer of Prov. perty Act that a lease must be executed both by the Smt. Lilabai lessor and the lessee. It may be pertinent to point out - that an instrument signed by the lessor alone which Gajendrngadka. J. may not be a lease under s. 107 may operate as an agreement to lease under s. 2(7) of the Act.\n\nThe legislative history of the provisions of s. l 7(2)(v} may perhaps be of some assistance in this connection.\n\nSection l 7(h) of Act III of 1877 which :corresponds to\n\nthe present s. 17(2) (v) did not appear in the earlier Registration Acts of 1864, 1866 and 1871. Its introduction in Act III of 1877 became necessary as a result of the decision of the Privy Council in Fati Chand\n\nSahu v. Lilarnbar Singh Das (1) in which it was held that an agreement to sell immoveable property for Rs. 22,500 coupled with an acknowledgment of the receipt of Rs. 7,500 and a promise to execute a saledeed on the payment of the balance was compulsorily registrable under s. 17 of the Act (2).\n\nSection l 7(h) was therefore enacted in 1877 to make it clear that a document which does not itself create an interest in the immoveable property does not require registration even if .it expressly contemplates and promises the creation of that interest by a subsequent document; in other words, contracts of sale and purchase of which specific performance would be granted under certain circumstances fall within this provision and would no longer be governed by the said decision of the Privy Council in the case of Fati Chand Sahu v.\n\nLilarnbar Singh Das (1 ).\n\nThus the policy of the Legislature clearly is to exclude from the application of els. (b) and (c) of s. 17(1) agreements of the said character. On principle, there is-no difference between such agreements of sale or purchase and agreements to lease.\n\nUnder both classes of documents no present or immediate demise is made though both of them may lead to a successful claim for a specific performance. That is why the Privy Council observed in the\n\n(1) (1871) 9 Bcng. LR. 433; 14 M.I.A. 129.\n\n(2) Act XX of 1866.\n\ncase of Hemanta Kumari Debi (1) that the context and\n\nI959 the scheme of the statute justified the view taken by Tiruvenibai Jenkins, C. J., in the case of Panchanan Bose (2). & Another It may also be relevant to bear in mind that the v: other documents which are included within the word Smt. Lilabai ' lease ' by s. 2(7) of the Act support the same conclu- . - sion.\n\nA counterpart, as it is usually understood, is a Ga; endragadkar J. writing by which a tenant agrees to pay a specified rent for the property let to him and signed by him alone. It is thus in the nature of a counterpart of a lease and as such it is included within the meaning of the word ' lease' under s. 2(7). Same is the position of a kabuliyat and an undertaking to cultivate or occupy.\n\nIn other words, it is clear that all the four instruments which, under the inclusive definition of s. 2(7), are treated as leases satisfy the test of immediate and present demise in respect of the immoveable property covered by them. We must, therefore, hold that the expression \" an agreement; to lease \" covers only such agreements as create a present demise.\n\nLet us now proceed to deal with the question as to whether the document (Ex. P-1) constitutes\" an agreement to lease \". It purports to be a receipt executed in favour of the respondent by defendant 1 and bears a four anna revenue stamp. \"I have this day given to you\", says the document, \"the land described below which is owned by me.\n\nNow you have become occupancy tenant of the same. You may enjoy the same in any way you like from generation to generation.\n\nMy estate and heirs or myself shall have absolutely no right thereto. You shall become the owner of the said land from date 1-6-1944.\n\nI will ha.ve absolutely no right thereto after the said date\". Then the document proceeds to mention tbe properties and describes them in detail, and it adds \" all the above fields are situate at Mouza Mohammadpur, mouza No. 312, tahsil Arvi, district Wardha. The estate described above has been given to you in lieu of your Rs. 8,700 due to you, subject to the condition that in case your amount has not been paid to you on date 1-6-1944, you may fully enjoy the estate described\n\n(1) (1919) L.R. 46 I.A. 240.\n\n(2) (1910) I.L.R. 37 Cal. 808.\n\nI959\n\nTiruvenibai\n\n& Another v.\n\nSmt. Lilabai\n\nGaJendragadkar\n\nllS SUPREME COURT REPORTS [1959] Supp. , above in any way you like from generation to generation\". The question for our decision is: Does this document amount to an agreement to lease uuder s. 2(7) of the. Act ?\n\nIn construing this document it is necessary to remember that it has been executed by laymen without 1 legal assistance, and so it must be liberally construed without recourse to technical considerations. The heading of the document,. though relevant, would not determine its character. It is true that an agreement would operate as a present demise although its terms may commence at a future date. Similarly it may amount to a present demise even though parties may contemplate to execute a more formal document iu future. In considering the effect of the document we must enquire whether it contains unqualified and unconditional words of present demise and includes the essential terms of a lease.\n\nGenerally if rent is made payable under an agreement from the date of its execution or other specified date, it may be said to create a present demise.\n\nAnother relevant test is the intention to deliver possession. If possession is given under an agreement and other terms of tenancy have been set out, then the agreement can be taken to .be an agreement to lease. As in the construction of other documents, so in the construction of an agreement to lease, regard must be had to all the relevant and material terms; and an attempt must qe made to reconcile the relevant terms if possible and not to treat any of them as idle surplusage.\n\nThe learned Attorney-General contends that this document is not a contingent grant of lease at all.\n\nAccording to him it evidences a grant of lease subject to a condition and that shows that a present demise fo intended by the parties. He naturally relies upon tho opening recitals of the document.\n\nAccording to him, when the document says tht defendant I has given to the respondent the land described below and that the respondent has become occupancy tenant of the same, it amounts to a clear term of present demise. A similar recital is repeated in the latter part of the document where it is stated that the estate described\n\nI959 above has been given to the respondent in lieu of Rs. 8,700 due to her. In our opinion, it would be un- Tiruvenibai reasonable to construe these recitals by themselves, & Another a.part from the other recitals in the document.\n\nWe v. cannot lose sight of the fact that the document ex- Smt. Lilabai pressly states that the respondent shall become the - owner of the laud from 1-6-1944 and that defendant 1 Gajendragadkar f. would have no title over it after that date. This recital also is repeated in the latter part of the document ; and it makes the intention of the parties clear that it is only if the amount of debt is not repaid by defendant 1 on the date specified that the agreement was to come into force.\n\nIn other words, reading the document as a whole it would be difficult to spell out a present or immediate demise of the occupancy rights in favour of the respondent. In this connection the fact that the document is described as a receipt may to some extent be relevant. It is clear that by executing this document the defendant wanted to comply with the respondent's request for acknowledging the receipt of the amount coupled with .the promise that the amount would be repaid on 1-6-1944. The defendant also wanted to comply with the respondent's demand that, if the amount was not repaid on the said date, he would convey the occupancy rights in his lands to her. Besides, it is significant that the document does not refer to the payment of rent and does not contemplate the delivery of possession until 1-6-1944. If the document had intended to convey immediately the occupancy rights to the respondent it would undoubtedly have referred to the delivery of possession and specified the rate at which, and the date from which, the rent had to be paid to her.\n\nThe stamp purchased for the execution of the document also incidentally shows that the document was intended to be a receipt and nothing more.\n\nUnder s. 2 of the Central Provinces Land Revenue Act, 1917 (C. P.\n\nII of 1917) an agricultural year commences on the first day of June and it is from this date that the agreement would have taken effect if defendant 1 had not repaid the debt by then. It is clear that the respondent was not intended to be treated as an\n\noccupancy tenant between the date of the document and June I, 1944.\n\nDuring that period the agreement Tfruvenibai did not come into operation at all. In other words, it is & Another v. on the contingency of defendant's failure to repay the\n\nr959\n\nsnit. Litabai amount on June I, 1944, that the agreement was to take effect. We have carefully considered the material Gajendrngadkar J. terms of the document and we are satisfied that it was not intended to, and did not, effect an actual or present demise in favour of the respondent. In our opinion, therefore, the High Court was right in holding that the document was not an agreement to lease under s. 2(7) of the Act and so did not require registration.\n\nWe would now briefly refer to some of the decisions on which the learned Attorney-General relied in support of his construction of the document. In Purmananddas Jiwandas v. Dharsey Virji (1), the agreement between the parties had expressly provided that the lease in question was to commence from October l, 1882, though the agreement was executed seven days later, that the rent was to commence from that day and the rent then due was to be paid by the next day. It is in the light of these specific terms that the Bombay High Court held that the relevant words in the document operated as an actual demise.\n\nNone of these conditions is present in the document with which we are concerned.\n\nSimilarly in Poole v. Bentley ('), by the instrument in question, Poole had agreed to let unto Bentley, and Bentley had agreed to take, all that piece of land described for the term of 61 years at the yearly rent of£ 120 free and clear of all taxes, the said rent to be paid quarterly, the first quarter's rent within 15 days after Michaelmas 1807, and that in consideration of the lease, Bentley had agreed within the space of four years to expend and lay out in 5 or more houses of a third-rate or class of building £ 2000 and Poole had agreed to grant a lease or leases of the said land and premises as soon as the said 5 houses were covered in.\n\nIn dealing with the construction of this document Lord (I) (1886) I.L.R. 10 Born. 101.\n\n(2) (1810) 12 East. 168; 104 E.R. 66.\n\nEllenborough, C. J., observed that the rule to be collectx959 ed from the. relevant decisions cited before him was Tiruvenibai that the intention of the parties as described by the &; Another. words of the instrument must govern the construction v. and that the intention of the parties to the document smt. Lilabai before him appeared to be that the tenant, who was to - have spent so much capital upon the premises within Gajendragadkar J. the first four years of the term, should have a present legal interest in the term which was to be binding upon both parties; though, when certidn progress was made in the building, a more formal lease or leases might be executed. This decision only shows that if the intention is to effect a present demise the fact that a further formal document is contemplated by the parties would not detract from the said intention. It would, however, be noticed that the document in that case contained a stipulation for the payment of the rent and the tenant was to be let into possession immediately. This case also does not assist the appellant.\n\nIn Satyadhyantirtha Swami v. Raghunath Daji (1) the contract of lease was contained in two documents which showed that the lands were being cultivated by Appaji and Ravji who had signed the first document and that they were authorised to. continue in occupation of the lands on terms mentioned in the first document. The argument that a part of the agreement would not come into operation till some years later, it was held, did not operate to make the document other than a present demise. It is difficult to appreciate how this decision can assist us in construing the present document.\n\nIn Balram v. Mahadeo (2) the Nagpur High Court was dealing with an instrument which purported to be a receipt and the terms of which seemed to contemplate the execution of a sale-deed in respect of the properties covered by it. Even so, the material clause was that \"it is agreed to give to you both the above fields in occupancy rights\". It was held that, on a fair and reasonable construction, the document was\n\n(r) A.I.R. 1926 Born. 384. 16\n\n(2) l.L.R. 1949 Nag. 849.\n\n'959 intended to affect a transfer of the occupancy right in presenti and was as such an agreement to lease. No TiYuvenibai\n\n& Anoth!r doubt, as observed by Bose, J., \" on a superficial view v. of the document it would not appear to be an agree' Smt. Lilabai ment to lease.\n\nBut in construing a transaction one . - has to look beneath the verbiage and ascertain what Ga1endragadkar J. are the real rights which are being transferred. When that is done, we consider that this document is an agreement to lease despite the fact that it calls itself a receipt and speaks throughout of a sale \". It is unnecessary to consider the .merits of the conclusion reached by the Nagpur High Court in this case. It would be enough to say that the said decision would not afford any assistance in construing the document before us. Besides it is obvious that in construing documents, the usefulness of the precedents is usually of a limited character; after all courts have to consider the material and relevant terms of the document with which they are concerned ; and it is on a fair and reasonable construction of the said terms that the nature and character of the transaction evidenced by it has to be determined. In our opinion, the High Court was right in holding that the instrument (Ex. P-1) was not an agreement to lease under s. 2(7) of the Act.\n\nThe result is the appeal fails and must be dismissed with costs.\n\nAppeal dismissed.", "total_entities": 72, "entities": [{"text": "TIRUVENIBAI & ANOTHER", "label": "PETITIONER", "start_char": 1370, "end_char": 1391, "source": "metadata", "metadata": {"canonical_name": "TIRUVENIBAI & ANOTHER", "offset_not_found": false}}, {"text": "SMT. LILABAI (P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 1398, "end_char": 1432, "source": "metadata", "metadata": {"canonical_name": "P.B. 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{"document_id": "1959_2_123_136_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 123\n\nM/S. DIWAN SUGAR & GENERAL MILLS\n\n(PRIVATE) LTD. AND OTHERS\n\nTHE UNION OF INDIA\n\n(S. R. DAS, c. J., JAFER IMAM, s. K. DAS, K. N. W ANclioo and M. HrnAYATULLAH, JJ.)\n\nSugar Control-Notification fixing price ex-factory-Legality -Restrictions on right to trade-Discrimination-Sugar (Control) Order, r955, cl. 5-Essential Commodities Act, I955 (IO of r955), s. 5-Constitution of India, Arts. r4, r9(r)(g).\n\nIn exercise of the powers under s. 3 of the Essential Commodities Act, 1955, and under cl. 5 of the Sugar (Control) Order, 1955, the Government of India issued a notification dated July 30, 1958, fixing the ex-factory price per maund of sugar produced in Punjab, Uttar Pradesh and North Bihar. The petitioners challenged the legality o:t the notification on the grounds (1) that it was beyond the ambit of authority conferred on the Central\n\nGovernment under s. 3 of the Essential Commodities Act, 1955, and clause 5 of the Sugar (Control) Order, 1955, and that, in any case, it was bad as it could not subserve the purposes of the Act ensuring equitable distribution of the commodity to the consumer at a fair price, (2) that the Act and the Order did not authorise the Central Government to fix ex-factory prices, and, in aµy case, the notification failed to fix prices for the ultimate consumer, (3) that it imposed an unreasonable restriction on the right to trade under Art. l9(1)(g), inasmuch as it fixed the price arbitrarily, and there was no reasonable safeguard against the abuse of power, and (4) that it was discriminatory because it fixed ex-factory prices only for factories in Punjab, Uttar Pradesh and North Bihar and not for factories in other parts of liidia and there was no reasonable classification discernible on any intelligible differentia on the basis of which prices had been controlled in certain regions only.\n\nHeld, (1) The notification dated July 30, 1958, is within the authority conferred on the Central Government by s. 3 of the Essential Commodities Act, 1955, and cl. 5 of the Sugar (Control) Order, 1955\n\n(2) Section 3 of the Act which provides for control of price is very general in terms and authorises the Central Government to fix the ex-factory price of sugar without fixing the wholesale or retail prices ; and, since fair prices for the consumer are ensured by fixing the ex-factory price, the notification in question subserves the purposes of the Act, and is valid.\n\n(3) Clause 5 of the Sugar (Control) Order, 1955, lays don the factors which have to be taken into consideration in fixing prices, and as the prices were fixed in accordance therewith, the\n\nr959\n\nJanuary 23.\n\nDiwan Sugar &-\n\nGeneral Mills (Private) Ltd. v.\n\nUnion of India\n\naction taken by the Government in the interests of the general public could not be challenged on the ground that it was an unreasonable restriction on the right to carry on trade under Art. rg(r)(g) of the Constitution.\n\n(4) Though under the notification prices are fixed for factories only in Punjab, Uttar Pradesh and North Bihar, in effect, they are fixed for the whole of India, as the other States are deficit; consequently, the notification brougM about no discrimination between different regions.\n\nORIGINAL JURISDICTION: Writ Petition No. 134 of 1958.\n\nWrit Petition under Article 32 of the Constitution of India for the Enforcement of Fundamental Rights.\n\nN. C. Chatterjee, K. P. Mukherjee, P. D. Himatsinghka and B. P. Maheshwari, for the petitioners.\n\nM. C. SetalvarZ, Attorney-General for India, B. Sen and R. H. Dhebar, for the respondent.\n\nJ{. P. Khaitan, K. P. Mukherjee and B. P. Maheshwari, for Interveners l to 10.\n\nG. S. Pathak, K. P. Mukherjee and B. P. Maheshwari, for lnterveners 11 to 13.\n\n1959. January 23.\n\nThe Judgment of the Court was delivered by -..\n\nWanchoo J.\n\nWANCHOO, J.-This petition under Art. 32 of the Constitution challenges the legality of the notification\" dated July 30, 1958, (hereinafter called the impugned notification), issued by the Government of India fixing the ex-factory price per maund of sugar produced in Punjab, Uttar Pradesh and North Bihar. It has been supported by two sets of interveners consisting of sugar factories in these areas who did not join the petition.\n\nThe case of the petitioners is that the Essential Commodities Act, 1955 (X of 1955), (hereinafter called the Act), was passed by Parliament in 1955, for the control of the production, supply and distribution of, and trade and commerce in, certain commodities, which included sugar. By s. 3 of the Act, the Central Government was given the power, if it was of opinion that it was necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and\n\navailability at fair prices; to provide by order for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therefn.\n\nSection 3(2) further provided inter alia for controlling the price at which any essential commodity might be bought or sold. In exercise of these powers, the Central Government promulgated the Sugar (Control) Order, 1955, (hereinafter called the Order), on August 27, 1955.\n\nClause 5 of the Order gave power to the Central Government, by notification in the Official Gazette, to fix the price or the maximum price at which any sugar might be sold or delivered, and different prices might be fixed for different areas/factories or different types or grades of sugar. Such price or maximum price had to be fixed with due regard to various factors, with which we shall deal later. On June 27, 1958, the Central Government promulgated the Sugar Export Promotion Ordinance, No! V of 1958, empowering it to appoint an export agency for carrying out the work of buying sugar in the Indian market and exporting the same to foreign markets and fixing the quantity of sugar for export. The Central Government was also authorised by that Ordinance to fix quotas apportioning the quantity of sugar to be supplied by each factory for export and levy an additional excise duty at the rate of Rs. 17 per maund on any factory failing to deliver its quota of sugar for ex port. On the same day, . three notifications were issued : (i) fixing 50,000 tons of sugar as the quantity to be exported out of India during the period ending October 31, 1958, (2) appointing the Indian Sugar Mills Associatiou, Calcutta, as the export agency, and\n\n(3) delegating the powers conferred on the Central\n\nGovernment to the Chief Director of Sugar and Vanaspati, Ministry of Food and Agriculture also.\n\nThen followed the impugned notification fixing ex-factory prices of sugar produced by the factories in Punjab, Uttar Pradesh and North Bihar. It is being challenged on the ground that the price fixed is considerably below the cost of production and ignores various factors affecting the cost of production and distribution of sugar including charges incidental to sale and\n\nI959\n\nDiwan Sugar &·\n\nGeneral Mills\n\n(Private) Ltd. v.\n\nUnion of India -·- Wanchoo ].\n\nI959\n\nDiwan Sugar 6'\n\nGeneral Mills (Private) Ltd. v.\n\nUnion of India\n\nWanchoo ].\n\ndistribution. The impugned notification is also attacked on the ground that it did not fix any price at which the persons purchasing sugar from the mills would sell it, so that it was open to the middleman who bought sugar from the factories to sell it at any price, thus creating discrimination between factories and factories and between the producers selling sugar and the middlemen who buy sugar selling the same in their turn. It is also alleged that fixing of the price was arbitrary and did not take into account the cost of production of a large number of units in the country and did not provide for a fair and equitable distribution of sugar in the country at a price in any way related to the price at which the factories were compelled to sell their products. Consequently, the petitioners prayed for an appropriate order, direction or writ in the nature of mandamus or any other writ quashing the Sugar (Control) Order, 1955, arrd all orders made in pursuance of it including the impugned notification.\n\nThe petition has been opposed by the Central Government. It is contended on their behalf that the entire object of fixing the price of sugar was (a) to make it available at a reasonable price to the consumer, and (b) to ensure adequate and smooth flow and supply of sugar which is an essential commodity for the life of the people to all parts of the country according to their need~ and requirements, checking the speculative tendency of the market and destroying the creation of an artificial shortage by unscrupulous persons.\n\nPrices of sugar were first put under control as far back as 1942 and this control continued up to 1947, when it was withdrawn on December 8, 1947.\n\nIt was, however, found that internal prices were raised during the de-control period on the pretext of subsidizing export, which never materialised. In consequence, control was again imposed on September 2, 1949 ; but it was lifted in 1952, when it was found that there was sufficient stock available at the end of the 1951-52 season. In 1953-54, however, production fell and control had again to be imposed for that season. It was, however, lifted a year later.\n\nIn November 1956\n\nthere was a considerable surplus of sugar and the Central Government permitted export of 1·53 lakh of metric tons in 1957. The Central Government was again approached in 1958 to make the export of sugar a permanent feature and it agreed to allow export during 1958 in view of the carry over from the previous season and also for earning foreign exchange in the interest of the country. Therefore, the Central Government promulgated the Sugar Export Promotion Ordinance, No. V of 1958, on June 27, 1958.\n\nBut as this Ordinance was expected, a tendencyideveloped in the sugar industry to push up prices after the month of April 1958. As a result of this tendency, prices went up by about a rupee per maund in May and June 1958,. and it was feared that they might go up further in view of the quota for export announced on June 27, 1958. In view of this apprehension, the industry assured Government that the sugar factories would offer to sell their released stocks freely at prices prevalent before the export policy was announced, i.e., in the week before June 27, 1958. In spite, however, of this assurance, there was a general rise in prices during the four weeks preceding the impugned notification.\n\nThis rise was particularly marked in Northern India. It was in these 'circumstances that the Government decided to control ex-factory prices of sugar in Punjab, Uttar Pradesh and North Bihar.\n\nThe Government took all relevant factors into account in fixing the price.\n\nThis was done in the interest of the general public in order that sugar might be available at fair prices.\n\nAs Uttar Pradesh and North Bihar are the main surplus areas and feed the deficit areas of the country, it was not necessary to control prices elsewhere; nor was it necessary to control prices beyond the ex-factory stage as the prices in the wholesale or the retail markets are governed by ex-factory prices. There was in the circumstances no question of discrimination or any unreasonable restriction on carrying on trade in sugar. The Government did not admit that the price fixed was below the cost of production generally. Consequently, it was prayed that the petition should be dismissed.\n\nI959\n\nDiwan Sugar &\n\nGeneral Mills\n\n(Private) Ltd. v.\n\nUnion of India\n\nWanchoo ].\n\nI959\n\nDiwan Sugar &\n\nGeneral ft1ills\n\n(Private) Ltd. v.\n\nUnion of India\n\nWanchoo j.\n\nLearned counsel appearing for the petitioners and the interveners raise the following points in support of their contention that the impugned notification is illegal and invalid :-\n\n(1) (a) The impugned notification is beyond the ambit of authority conferred on the Central Government under s. 3 of the Act and clause 5 of the Order, and in any case it is bad as it cannot possibly subserve the purposes of the Act ensuring equitable distribution of the commodity to the consumer at a fair price ;\n\n(b) The impugned notification merely fixes exfactory prices and is bad, firstly, on the ground that the Act and the Order do not authorise the Central Government to fix ex-factory prices, and, secondly, on the ground that even if ex-factory prices can be fixed under the Act and the Order, the impugned notification is still bad as it fails to fix prices for the ultimate consumer which must be done under the Act;\n\n(2) The impugned notification imposes an unreasonable restriction on the right to trade under Article 19 (1) (g), inasmuch as (i) it compels factories to sell sugar at a loss, (ii) it fixes the price arbitrarily, and (iii) there is no reasonable safeguard against the abuse of power and no provision for a check by way of appeal or otherwise ;\n\n(3) The impugned notification is bad inasmuch as it is discriminatory because it fixes ex-factory prices only for factories in Punjab, Uttar Pradesh and North Bihar and not for factories in other parts of India and there is no reasonable classification discernible on any intelligible differentia on the basis of which prices have been controlled in certain regions only.\n\nRe. (J) (a).\n\nThe Act deals with essential commodities which have been defined therein. The preamble shows that it has been passed in the interest of th~ general public for the control of the production, supply and distribution of, and trade and commerce in, certain commodities.\n\nSection 3 of the Act gives power to the Central Government to pass orders under the Act if it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing\n\ntheir equitable distribution and availability at fair prices. No attack has been made on the vires of the Act; but the vires of the Order relating to sugar passed under the Act and particularly of the impugned notification fixing ex-factory prices in Punjab, Uttar Pradesh and North Bihar have been attacked.\n\nThe Order in our opinion merely carries out the purposes of the Act and cl. 5 thereof gives the ambit of the powers of the Central Government in fixing prices, and lays down the manner in which it should be done and the factors which should be taken into consideration in doing so.\n\nThough in the petition, the Order was attacked on the ground that it gave ' uncontrolled, unguided and unfettered' power to the executive and imposed unreasonable restrictions on the right to carry on trade, no arguments were addressed to us on the constitutionality of the Order itself. We are in this case concerned only with that part of the Order\n\nwhich deals with the fixation of price.\n\nClause 5 provides for factors that the Government will take into ace omit in fixing prices and these are: (i) price or minimum price fixed for sugarcane, (ii) manufacturing cost, (iii) taxes, (iv) reasonable margin. of profit for producer and/or trade, and (v) any incidental charges. It is amply clear from this that price is to be fixed after taking into account all reasonable factors which go into the consideration of price fixation. In view of this it cannot be said that the Order gives ' uncontrolled, unguided and unfettered ' power to the executive to fix prices arbitrarily.\n\nWe shall proceed therefore on the basis that the Act and the Order so far as they are concerned with the fixation of price are valid.\n\nThis brings us to the' question whether the impugned notification is beyond the authority conferred on the Central Government by s. 3 of the Act and clause 5 of the Order. Reading s. 3 of the Act with the preamble, it would be obvious that the object of the Act is to provide for control of the production, supply and distribution of, trade and commerce in, essential commodi- . ties in the interests of the general puQlic, so that the\n\nI9$9\n\nDiwan Sugar&·\n\nGeneral Mills (Private) Ltd. v.\n\nUnion of India\n\nWanchoo J.\n\n'959\n\nDiwan Sugar &\n\nGeneral idills (Private) Ltd. v.\n\nUnion of India\n\nWanchoo ].\n\nsupplies of such commodities may be maintained or increased, their equitable distribution secured and they may be available to the general public at fair prices.\n\nConsidering the history of sugar control and the trends which appeared in the market from April, 1958, it cannot possibly be said that the impugned notification does not subserve the purposes of the Act and the Order. There can be little doubt that fixation of ex-factory prices of sugar mills in the main surplus areas would have the effect of stabilising sugar prices for the general public, which is the consumer, at a fair level and make sugar available at fair prices. In the affidavit filed on behalf of the Government it is stated that as a result of this action prices have come down to normal levels. This is demonstrable proof, if such was needed, that the impugned notification subserves the purposes of the Act.\n\nThis contention, therefore, fails.\n\nRe. (1) (b).\n\nThe argument under this head is two-fold. It is said that in the first instance, s. 3 of the Act requires that prices for the consumer only should be fixed.\n\nThe object of s. 3 is undoubtedly to secure essential commodities at fair prices for the general public, i.e., the consumer. It is well-known that there are three kinds of prices prevalent in the market for a commodity like sugar, namely, ex-factory price, wholesale price and retail price. It is the last that the consumer has to pay. It is urged that when s. 3 provides for availability of essential commodities at fair prices to the general public it means that price can only be fixed at the stage where the consumer is the purchaser. In particular, our attention was invited to clause (c) of s. 3 (2), which provides for control of price at which any essential commodity may be bought or sold. Now there is no doubt that the object of the Act is to secure essential commodities for the consumer, i.e., tlie general public;'at fair prices; but it does not follow from this that t, his object can only be achieved if retail prices are fixed and that there is no other way of achieving it. In any case, clause (c) of s. 3 (2)' which speaks specifically of control of price is very general\n\nin terms. It provides for fixation of price at which any essential commodity may be bought or sold ; it does not specify the stage at which the price should be fixed.\n\nTherefore, we are of opinion that the control provided under clause (c) of s. 3 (2) is control at any of the three stages mentioned above. There is no reason to cut down the generality of the words used in clause (c) so as to make them applicable only to the last stage, namely, the retail price. This contention, therefore, thats. 3 only authorises the Central Government to fix the retail price, i.e., the price for the consumer, fails.\n\nIt is then urged that even if the power is there to fix prices at all stages, the Act requires that the price must be fixed for the consumer, whether it is fixed at an earlier stage or not.\n\nThere are no words in s. 3 (1) ors. 3 (2) (c) of the Act, which compel such an interpretation. It is true that the object of the Act is to ensure fair prices for the consumer; but if fair prices for the consumer can be ensured by fixing the exfactory price, there is no reason why the Government should go on also to fix the wholesale or retail price.\n\nIt is well-known that the wholesale and retail prices depend upon ex-factory price, in the case of a commodity like sugar. Therefore if fixation of price at the ex-factory level is enough to ensure a fair price for the consumer, there is no reason why the Government should not stop at that and should go on also to fix wholesale and retail prices. It is urged that the middleman who buys from the factory is not controlled and he can sell at any price; and, therefore, the object of the Act may not be achieved.\n\nTheoreti cally this may be so and a middleman may abuse his position. If he does so, we have no doubt that the Government will intervene as it has ample power to fix wholesale and retail prices also.\n\nBut if the purpose is served by merely fixing the ex-factory price, we see no reason why the Government must fix wholesale and retail prices also. The petitioners have not even alleged that as a matter of fact the wholesalers and retailers are profiteering and making it impossible for sugar to be available for the general public at a fair\n\nI959\n\nDiwan Sugav &\n\nGeneral Mills {Private) Ltd, v.\n\nUnion of India\n\nWanchoo ].\n\n'?59 price. In the circumstances, it was not necessary in fact for the Government to fix wholesale or retail Diwan Sulfa' & •\n\nI 1 c h ]d' h G'\"''\"l Mills pnces. n aw, we see no warrant 1or o mg t at (P, ivafo) Ltd. under s. 3 (1) ands. 3 (2) (c) of the Act, the Governv. ment must not only fix ex-factory prices but also Union of India wholesale and retail prices. What prices the Government will fix depend upon their estimate of the situawan'\"00 f. tion, which would serve the object of the Act. We are, therefore, of opinion that there is no force in this contention either. Re. (2).\n\nThe contention under this head is that the impugned notification is invalid as it is an unreasonable restriction on the petitioners' right to carry on trade under Art. 19 (1) (g).\n\nThe argument is urged in three ways; namely, (i) factories are being compelled to sell at below the cost of production, (ii) the price fixed is arbitrary, and (iii) there is no safeguard against abuse of power.\n\nThe argument that the factories are being compelled to sell at below the cost of production is put in two ways. It is said that the press note issued by the Government on July 30, 1958, shows that the Government was of the view that prices should be pegged at the level at which they were in the week preceding June 27, 1958, and inasmuch as they fixed prices below that level or even below the level at which they were at the end of May, 1958, the prices were below the cost of production.\n\nWe must say that this is a complete misunderstanding of the press note of J nly 30, 1958.\n\nAll tha.t that press note said was that prices had risen even before June 27, 1958, in expectation of a large export quota.\n\nThereafter, the Government were assured by the industry that prices would not rise further after J nne 27 ; but this assurance was not kept and prices went up further by one rupee per ma.nnd by the end of July. It was in these circumstances that the Government intervened.\n\nThere was, however, no commitment in this press note by the Government that if they intervened they would fix prices at what they were either in the week before June 27, 1958, or in the last week of May; nor is there anything in the press note to suggest that the\n\nprices prevalent on either of these two days were proper prices and that any price below them would not even meet the cost of production. The press note had nothing to do with the cost of production; nor were the Government bound to fix the prices at the level of the end of June or the end of May. When they eventually decided to intervene at the end of , July, they were free to take action under the Act and the Order and so long as the prices fixed were in accordance therewith, the action could not be challenged on the ground that it was an _unreasonable restriction on the right to carry on trade under Art. 19 (1) (g).\n\nClause 5 of the Order lays down the factors which have to be taken into consideration in fixing prices. These factors include among other things a reasonable margip of profit for the producer and/or trade and any incidental charges.\n\nThis was. kept in mind when prices were fixed by the impugned notification. The petitioners have certainly filed with their affidavit a schedule giving the cost of production. According to them, their cost of production is above the price fixed by the impugned notification. This schedule has not been admitted by the Government.\n\nWe see no reason to accept the ipse dixit of the petitioners as to their cost of production. The sugar crushing season begins about the end of October and finishes about the end of May, so that fixation of price in July, 1958, would be on the basis of the 1957-58 season.\n\nMarket prices were available to the Government when they fixed the prices by the impugned notification. In the case of the three States, namely, Punjab, Uttar Pradesh and North Bihar, the prices fixed by the impugned notification were above the prices prevalent in the beginning of April and also above the average prices for the month of April, though in the: case of Punjab and_ West Uttar Pradesh they were slightly below the prices of the 30th of April. These prices were prevalent in the free market and must certainly have taken account of a fair margin of profit for the producer, though in the case of an individual factory due to factors for which the producer might himself be responsible, the cost of production might have been a little more.\n\nr959\n\nDiwan Sugar &\n\nGeneral .Wills\n\n(Private) Ltd. v.\n\nUnion of India\n\nWanchoo J.\n\n'959\n\nDiwan Sugar &>\n\nGeneral Mills\n\n(Private) Ltd. v.\n\nUnion of India\n\nWanchoo ].\n\nTherefore, the prices fixed by the Government by the impugned notification can in no circumstances be said to have been proved to be below the cost of production.\n\nThe petitioners were also not unaware of this state of affairs, and therefore, in the rejoinder came out with the story of distress sales by the mills in the early part of the crushing season.\n\nWe are not impressed by this story, and in any case there could hardly be any question of distress sales in April when the crushing season was almost coming to an end.\n\nWe see therefore no reason to hold that the prices fixed were below the cost of production aJ?d were therefore an unreasonable restriction on the petitioners' right to carry on trade under Art. 19(l)(g). This also disposes of the second ground of argument under this Head, namely, that the prices were arbitrary. All relevant factors prescribed under cl. 5 of the Order were apparently taken into consideration and the prices fixed themselves show that they were not arbitrary. The last argument in this connection is that there is no reasonable safeguard against the abuse of power and no check by way of appeal or otherwise is provided against the order of the Central Government. It is enough to say that we are here dealing with the power of the Central Government to fix prices in the interests of the general public. It is in these circumstances absurd to expect that there would\" be some provision by way'of appeal or otherwise against this power of the Central Government. So long as the Central Government exercises its power in the manner provided by the Act and the Order-and this is what it appears to have done-, it cannot be said that any further safeguard is necessary in the form of an appeal or otherwise. The safeguards are to be found in cl. 5 itself, namely, that the Central Government must give consideration to the relevant factors mentioned therein before fixing the price, and thus these factors are a check on the power of the Central Government if it is ever.minded tO abuse the power.\n\nWe are therefore of opinion that the impugned notification is not an unreasonable restriction on the petitioners' right to carry on trade under Art. 19(1)(g).\n\nRe. (3).\n\nThis raises the question of discrimination. It is said that price control is imposed on factories in Punjab, Uttar Pradesh and North Bihar and that there is no reasonable basis for such classification ; factories in other parts of India are left uncontrolled with the result that there is discrimination. From the material supplied it appears that there are 97 sugar factories in Punjab, Uttar Pradesh and North Bihar while there are 50 sugar factories in the rest of India, of which as many as 18 are in the State of Bombay. In the other States there are very few factories, the lowest being in West Bengal, Orissa and Ker ala with one factory each and the highest being in Madhya Pradesh with seven factories. We also understand that the major part of production of sugar in this country is from the factories in Punjab, Uttar Pradesh and North Bihar. Of the 97 factories which have been controlled, as many as 90 are in Uttar Pradesh and North Bihar and it is these two areas which are what are called mainly surplus areas.\n\nThe price of sugar in India depends upon the price of the factories in Uttar Pradesh and Bihar. The contention of the Government is that as soon as the price is controlled in Punjab, Uttar Pradesh and Bihar the price for the whole of India is fixed, for other States are deficit and import sugar from these States, particularly Uttar Pradesh and North Bihar.\n\nIn these circumstances if price is fixed in this area, price all over India is practically fixed, and it is not necessary to fix prices separately so far as factories in other States which are said to be mainly deficit, are concerned. In the circumstances we are of opinion, that though in form prices are fixed for factories only in Punjab, Uttar Pradesh and North Bihar, in effect they are fixed for the whole of India, once the production of these three regions is controlled. There is, therefore, in our opinion no discrimination in effect by the fixation of prices in these three regions.\n\nThe argument that there is discrimination is purely theoretical, in view of the economic factors which control the price of sugar in this country. Thus in fact there is no discrimination after the control of sugar\n\nI959\n\nDiwan Sugar b\n\nGenerul Mills (Private) Ltd. v.\n\nUnion of India\n\nWanchoo j.\n\nI959\n\nDiwan Sugar(&..\n\nGeneral Mills (Private) Ltd. v.\n\nUnion of India\n\nWanchoo j.\n\n'959\n\nJanuary 28.\n\nprices in these three regions and the contention that the factories in the other areas are left free to sell at any price is specious and does not merit a moment's consideration. We are therefore of opinion that in effect the impugned notification brought about no discrimination between different regions or between producers and middlemen in view of what we have said already in Re. l (b ), and consequently, it is not necessary to consider the last part of the submission under this head. There is in fact no discrimination by the impugned notification and this contention fails on that ground.\n\nThere is no force therefore in this petition and it is hereby dismissed with costs.\n\nPetition dismissed.\n\nBENGAL CHEMICAL & PHARMACEUTICAL\n\nWORKS LTD., CALCUTTA\n\nTHEIR WORKMEN (P. B. GAJENDRAGADKAR, A. K. SARKAR and K. SuBBA RAo, JJ.)\n\nIndustrial Dispute-Reference-Government, if empowered to transfer from one Tribunal to another-Award-If can be superseded by fresh agreement-Disputes referred on fresh agreement-Reference if bad-Industrial Disputes Act, r947 (r4 of r947), ss. 2(r) and\n\n7A.\n\nIndustrial Disputes (Amendment and Miscellaneous Provisions) Act: r956 (36 of r956), s. 30-litdustrial Disputes (Amendment) Act, r957 (r8 of r957), s. 2.\n\nSupreme Court-Scope of furisdiction vis-a-vis the Award of Tribunal-Right of appeal-Constitution of India, Art. r36.\n\nAggrieved by an Award of r95r, the employees placed before the Company a fresh charter of demands which was mutually settled by a written agreement which provided, inter alia, that the existing rate of dearness allowance should prevail which was adjustable to any future substantial change in the cost of living index of the working class.\n\nAs the cost of living increased disputes arose, and in spite ol the said Award of r95r,", "total_entities": 56, "entities": [{"text": "S. DIWAN SUGAR & GENERAL MILLS\n\n(PRIVATE) LTD. AND OTHERS\n", "label": "PETITIONER", "start_char": 40, "end_char": 98, "source": "metadata", "metadata": {"canonical_name": "M/S. DIWAN SUGAR & GENERAL MILLS (PRIVATE) LTD. AND OTHERS", "offset_not_found": false}}, {"text": "THE UNION OF INDIA", "label": "RESPONDENT", "start_char": 99, "end_char": 117, "source": "metadata", "metadata": {"canonical_name": "THE UNION OF INDIA", "offset_not_found": false}}, {"text": "S. R. DAS", "label": "JUDGE", "start_char": 120, "end_char": 129, "source": "metadata", "metadata": {"canonical_name": "SUDHI RANJAN DAS*", "offset_not_found": false}}, {"text": "JAFER IMAM", "label": "JUDGE", "start_char": 138, "end_char": 148, "source": "metadata", "metadata": {"canonical_name": "SYED JAFFER IMAM", "offset_not_found": false}}, {"text": "cl. 5", "label": "PROVISION", "start_char": 340, "end_char": 345, "source": "regex", "metadata": {"statute": null}}, {"text": "Essential Commodities Act", "label": "STATUTE", "start_char": 346, "end_char": 371, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 5", "label": "PROVISION", "start_char": 392, "end_char": 396, "source": "regex", "metadata": {"linked_statute_text": "Essential Commodities Act", "statute": "Essential Commodities Act"}}, {"text": "Constitution of India", "label": "STATUTE", "start_char": 397, "end_char": 418, "source": "regex", "metadata": {}}, {"text": "s. 3", "label": "PROVISION", "start_char": 473, "end_char": 477, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "Essential Commodities Act, 1955", "label": "STATUTE", "start_char": 485, "end_char": 516, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "cl. 5", "label": "PROVISION", "start_char": 528, "end_char": 533, "source": "regex", "metadata": {"linked_statute_text": "the Essential Commodities Act, 1955", "statute": "the Essential Commodities Act, 1955"}}, {"text": "s. 3", "label": "PROVISION", "start_char": 900, "end_char": 904, "source": "regex", "metadata": {"linked_statute_text": "the Essential Commodities Act, 1955", "statute": "the Essential Commodities Act, 1955"}}, {"text": "Essential Commodities Act, 1955", "label": "STATUTE", "start_char": 912, "end_char": 943, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "clause 5", "label": "PROVISION", "start_char": 949, "end_char": 957, "source": "regex", "metadata": {"linked_statute_text": "the Essential Commodities Act, 1955", "statute": "the Essential Commodities Act, 1955"}}, {"text": "s. 3", "label": "PROVISION", "start_char": 1991, "end_char": 1995, "source": "regex", "metadata": {"statute": null}}, {"text": "Essential Commodities Act, 1955", "label": "STATUTE", "start_char": 2003, "end_char": 2034, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "cl. 5", "label": "PROVISION", "start_char": 2040, "end_char": 2045, "source": "regex", "metadata": {"linked_statute_text": "the Essential Commodities Act, 1955", "statute": "the Essential Commodities Act, 1955"}}, {"text": "Section 3", "label": "PROVISION", "start_char": 2086, "end_char": 2095, "source": "regex", "metadata": {"linked_statute_text": "the Essential Commodities Act, 1955", "statute": "the Essential Commodities Act, 1955"}}, {"text": "Clause 5", "label": "PROVISION", "start_char": 2458, "end_char": 2466, "source": "regex", "metadata": {"linked_statute_text": "the Essential Commodities Act, 1955", "statute": "the Essential Commodities Act, 1955"}}, {"text": "Article 32", "label": "PROVISION", "start_char": 3308, "end_char": 3318, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "Constitution of India", "label": "STATUTE", "start_char": 3326, "end_char": 3347, "source": "regex", "metadata": {}}, {"text": "Art. 32", "label": "PROVISION", "start_char": 3851, "end_char": 3858, "source": "regex", "metadata": {"linked_statute_text": "the Constitution of India", "statute": "the Constitution of India"}}, {"text": "case of the petitioners is that the Essential Commodities Act, 1955", "label": "STATUTE", "start_char": 4255, "end_char": 4322, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 3", "label": "PROVISION", "start_char": 4536, "end_char": 4540, "source": "regex", "metadata": {"linked_statute_text": "The case of the petitioners is that the Essential Commodities Act, 1955", "statute": "The case of the petitioners is that the Essential Commodities Act, 1955"}}, {"text": "Section 3(2)", "label": "PROVISION", "start_char": 4938, "end_char": 4950, "source": "regex", "metadata": {"linked_statute_text": "The case of the petitioners is that the Essential Commodities Act, 1955", "statute": "The case of the petitioners is that the Essential Commodities Act, 1955"}}, {"text": "Clause 5", "label": "PROVISION", "start_char": 5213, "end_char": 5221, "source": "regex", "metadata": {"linked_statute_text": "The case of the petitioners is that the Essential Commodities Act, 1955", "statute": "The case of the petitioners is that the Essential Commodities Act, 1955"}}, {"text": "s. 3", "label": "PROVISION", "start_char": 11963, "end_char": 11967, "source": "regex", "metadata": {"statute": null}}, {"text": "clause 5", "label": "PROVISION", "start_char": 11983, "end_char": 11991, "source": "regex", "metadata": {"statute": null}}, {"text": "Article 19", "label": "PROVISION", "start_char": 12681, "end_char": 12691, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "Section 3", "label": "PROVISION", "start_char": 13586, "end_char": 13595, "source": "regex", "metadata": {"statute": null}}, {"text": "cl. 5", "label": "PROVISION", "start_char": 14180, "end_char": 14185, "source": "regex", "metadata": {"statute": null}}, {"text": "Clause 5", "label": "PROVISION", "start_char": 14784, "end_char": 14792, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 15635, "end_char": 15639, "source": "regex", "metadata": {"statute": null}}, {"text": "clause 5", "label": "PROVISION", "start_char": 15655, "end_char": 15663, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 15686, "end_char": 15690, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 17127, "end_char": 17131, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 17218, "end_char": 17222, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 17562, "end_char": 17566, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 17801, "end_char": 17805, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 18223, "end_char": 18227, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 18539, "end_char": 18543, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 19117, "end_char": 19121, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 20809, "end_char": 20813, "source": "regex", "metadata": {"statute": null}}, {"text": "Art. 19", "label": "PROVISION", "start_char": 21339, "end_char": 21346, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "Art. 19", "label": "PROVISION", "start_char": 23426, "end_char": 23433, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "Clause 5", "label": "PROVISION", "start_char": 23444, "end_char": 23452, "source": "regex", "metadata": {"statute": null}}, {"text": "Art. 19(l)(g)", "label": "PROVISION", "start_char": 25921, "end_char": 25934, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "cl. 5", "label": "PROVISION", "start_char": 26083, "end_char": 26088, "source": "regex", "metadata": {"statute": null}}, {"text": "So long as the Central Government exercises its power in the manner provided by the Act", "label": "STATUTE", "start_char": 26713, "end_char": 26800, "source": "regex", "metadata": {}}, {"text": "cl. 5", "label": "PROVISION", "start_char": 26989, "end_char": 26994, "source": "regex", "metadata": {"linked_statute_text": "So long as the Central Government exercises its power in the manner provided by the Act", "statute": "So long as the Central Government exercises its power in the manner provided by the Act"}}, {"text": "Art. 19(1)(g)", "label": "PROVISION", "start_char": 27390, "end_char": 27403, "source": "regex", "metadata": {"linked_statute_text": "So long as the Central Government exercises its power in the manner provided by the Act", "statute": "So long as the Central Government exercises its power in the manner provided by the Act"}}, {"text": "Industrial Disputes Act", "label": "STATUTE", "start_char": 30829, "end_char": 30852, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "ss. 2(r) and\n\n7A", "label": "PROVISION", "start_char": 30873, "end_char": 30889, "source": "regex", "metadata": {"linked_statute_text": "Tribunal to another-Award-If can be superseded by fresh agreement-Disputes referred on fresh agreement-Reference if bad-Industrial Disputes Act", "statute": "Tribunal to another-Award-If can be superseded by fresh agreement-Disputes referred on fresh agreement-Reference if bad-Industrial Disputes Act"}}, {"text": "s. 30", "label": "PROVISION", "start_char": 30977, "end_char": 30982, "source": "regex", "metadata": {"linked_statute_text": "Tribunal to another-Award-If can be superseded by fresh agreement-Disputes referred on fresh agreement-Reference if bad-Industrial Disputes Act", "statute": "Tribunal to another-Award-If can be superseded by fresh agreement-Disputes referred on fresh agreement-Reference if bad-Industrial Disputes Act"}}, {"text": "s. 2", "label": "PROVISION", "start_char": 31040, "end_char": 31044, "source": "regex", "metadata": {"linked_statute_text": "Tribunal to another-Award-If can be superseded by fresh agreement-Disputes referred on fresh agreement-Reference if bad-Industrial Disputes Act", "statute": "Tribunal to another-Award-If can be superseded by fresh agreement-Disputes referred on fresh agreement-Reference if bad-Industrial Disputes Act"}}, {"text": "Constitution of India", "label": "STATUTE", "start_char": 31131, "end_char": 31152, "source": "regex", "metadata": {}}]}
{"document_id": "1959_2_136_149_EN", "year": 1959, "text": "I959\n\nDiwan Sugar(&..\n\nGeneral Mills (Private) Ltd. v.\n\nUnion of India\n\nWanchoo j.\n\n'959\n\nJanuary 28.\n\n136 SUPREME COURT REPORTS [1959] Supp.\n\nprices in these three regions and the contention that the factories in the other areas are left free to sell at any price is specious and does not merit a moment's consideration. We are therefore of opinion that in effect the impugned notification brought about no discrimination between different regions or between producers and middlemen in view of what we have said already in Re. l (b ), and consequently, it is not necessary to consider the last part of the submission under this head. There is in fact no discrimination by the impugned notification and this contention fails on that ground.\n\nThere is no force therefore in this petition and it is hereby dismissed with costs.\n\nPetition dismissed.\n\nBENGAL CHEMICAL & PHARMACEUTICAL\n\nWORKS LTD., CALCUTTA\n\nTHEIR WORKMEN (P. B. GAJENDRAGADKAR, A. K. SARKAR and K. SuBBA RAo, JJ.)\n\nIndustrial Dispute-Reference-Government, if empowered to transfer from one Tribunal to another-Award-If can be superseded by fresh agreement-Disputes referred on fresh agreement-Reference if bad-Industrial Disputes Act, r947 (r4 of r947), ss. 2(r) and\n\n7A.\n\nIndustrial Disputes (Amendment and Miscellaneous Provisions) Act: r956 (36 of r956), s. 30-litdustrial Disputes (Amendment) Act, r957 (r8 of r957), s. 2.\n\nSupreme Court-Scope of furisdiction vis-a-vis the Award of Tribunal-Right of appeal-Constitution of India, Art. r36.\n\nAggrieved by an Award of r95r, the employees placed before the Company a fresh charter of demands which was mutually settled by a written agreement which provided, inter alia, that the existing rate of dearness allowance should prevail which was adjustable to any future substantial change in the cost of living index of the working class.\n\nAs the cost of living increased disputes arose, and in spite ol the said Award of r95r,\n\nwhich was not terminated according to law, the dispute ansmg 1959 out of the said written agreement was referred for adjudication by the Government to the Second Industrial Tribunal, Calcutta, Bengal Chemical & in September, 1956. In April 1957, the Government transferred Pliar'maceutical the dispute from the Second Industrial Tribunal to the Fifth Works Ltd., Industrial Tribunal. The Company, inter alia, contended that Calcutta the Government had no power to transfer the dispute from one v.\n\nTribunal to another and that the reference was bad as the 1951 Their Workmen Award had not been duly terminated.\n\nThe Industrial Disputes (Amendment and Miscellaneou• Provisions) Act (36 of 1956) amending the Industrial Disputes Act (14 of 1947) came into force on August 28, 1956, giving authority to the Government to transfer a reference from one Tribunal to another, which was followed by a further amending Act, being Industrial Disputes (Amendment) Act (18 of 1957) whereunder among other things a new definition of 'Tribunal' was given, whereby the Industrial Tribunal constituted prior to March Io, 1957, under s. 7A of Act 14 of 1947 was included.\n\nHeld, that as a result of the amendments to the Industrial Disputes Act, 1947, the Government had authority to transfer a case from one Tribunal to another. 'Tribunal' as defined by s. 2(r) of the Industrial Disputes Act, 1947, aamended by Act 36 of 1956, read with amending Act 18 of 1957, empowers the Government to transfer a reference from one Tribunal to another.\n\nWhere, in spite of a previous award, the employees after raising fresh demands enter.ed into a new agreement with the employer which started a fresh chapter regulating the relationship of the parties, the previous award, though not terminated in accordance with the provisions of law, must be deemed to have been superseded.\n\nHeld, further, that though Art. 136 of the Constitution is couched in the widest terms and confers a discretionary power (which cannot exhaustively be defined) on the Supreme Court to grant special leave to appeal from the order of a tribunal, but it is necessary for the Supreme Court to exercise its said discretionary jurisdiction only in cases (a) where there is a violation of the principle of natural justice, (b) raises an important principle of industrial law requiring elucidation and final decision by the Supreme Court, or (c) discloses such other exceptional or special circumstances which merit the final decision by the Supreme Court. Such discretionary reserve power cannot obviously be so construed as to confer a right of appeal to any party from the decision of a Tribunal. where he has none under the law.\n\nIndustrial Disputes Act is intended to be a self-contained one and it seeks to achieve social justice on the basis of collective bargaining, conciliation and arbitration. Awards are given on circumstances peculiar to each dispute and the Tribunals are to a\n\n1959 large extent free from restrictions of technical considerations imposed on courts.\n\nBengal Chemial &- A free and liberal exercise of the discretionary powers by Pharmaceutical the Supreme Court may materially affect the fundamental basis\n\nWoi-ks Ltd., of the decision, namely, quick solution to such disputes to achieve Calcutta industrial peace. v.\n\nWhere an Industrial Tribunal on the consideration of the Their Workmen f entire material placed be ore it and having regard to the overall picture, came to a conclusion of facts, the Supreme Court will not interfere with such finding of fact nor will it be justified to allow to make a new case for the first time before it.\n\nPritam Singh v. State of Madras, [1950) S.C.R. 453; Hem Raj v. State of Ajmer, (1954) S.C.R. rr33 and Sadhu Singh v.\n\nState of PEPSU, A.LR. 1954 S.C. 272, referred to.\n\nCIVIL APPELATE JURISDICTION: Civil Appeals Nos. 125 and 164 of 1958.\n\nAppeals by special leave from the Award dated August 26, 1957, of the Fifth Industrial Tribunal at West Bengal in Case No. VIII-264/56.\n\nS. G. Issacs and S. N. Mukherjee, for the Appellants in C. A. No. 125/58 and Respondents in C. A.\n\nNo. 164/58.\n\nN. G. Chatterjee and Dipak Datta Ghoudhri, for the Respondents in C. A. No. 125/58 and Appellants in C. A. No. 164/58. ·\n\n1959. January 28.\n\nThe Judgment of the Court was delivered by\n\nS!lbba Rao J.\n\nSuBBA RAO, J.-These appeals are by Special Leave from the Award by Shri G. Palit, Judge, Fifth Industrial Tribunal, West Bengal, in the matter of a dispute\n\n- between Messrs.\n\nBengal Chemical & Pharmaceutical Works Limited, Calcutta, and their employees, represented by Bengal Chemical Mazdoor Union, Calcutta.\n\nThe Government of West Bengal by its order dated September 13, 1956, referred the following dispute between the parties referred to above to the Second Industrial Tribunal, under s, 10 of the Industrial Disputes Act, 194 7 (Act 14 of 194 7), hereinafter referred to as the Act. \" Is the demand of the employees for increase in Dearness Allowance justified ? If so, at what rate?\". The said Act was amended by the\n\nIndustrial Disputes (Amendment & Miscellaneous 1 959 Provisions) Act, 1956 (36 of 1956), which came into - f A 6 0\n\nA .1 9 1956 h Bengal Chemical & Orce on ugust 28, 195 . n pri , , t e Pharmaceutical Government made an order transferring the said disworks Ltd., pute from the file of the Second Industrial Tribunal to Calcutta that of the Fifth Industrial Tribunal. The Fifth v.\n\nIndustrial Tribll.llal, after making the necessary in- Their Workmen quiry, made the award on August 26, 1957, and it was Subba Rao J. duly notified in the Calcutta Gazette on September\n\n26, HJ57.\n\nAs a mistake had crept in, the award was modified by the Tribunal by its order dated the 29th November, 1957; and the modified award was published in the Calcutta Gazette on the 29th November, 1957.\n\nUnder the award t.he Tribunal held that there was a rise in the cost of living index and that to neutralise the said rise the employees should get an increase of Rs. i in dearness allowance on the pay scale up to Rs. 50 and Rs. 5 on the pay scale above Rs. 50. On that basis the dearness allowance payable to the employees was worked out and awarded. The correctness of the award is questioned ih these appeals. The Company preferred Civil Appeal No. 125 of 1958 against the award in so far it was against it and the Union preferred Civil Appeal No. 164 of 1958 in so far it went against the employees. For convenience of reference, the parties will be referred to in the course of the judgment as the Company and the Union.\n\nLearned Counsel for the Company raised before us the following points: (1) The order dated April 9, 1957, made by the Government transferring the dispute from the file of the Second Industrial Tribunal to that of the Fifth Industrial Tribunal was illegal ; (2) the previous award made by the Tribunal between the same parties on April 26, 1951, and confirmed by the Labour Appellate Tribunal by its order dated August 30, 1951, had not been terminated in accordance with the provisions of s. 19(6) of the Act and therefore the present reference was bad in law and without jurisdiction ; (3) there was no change in the circumstances obtaining at the time the previous award was made and those prevailing at the time of the present reference as to justify making out a new award; (4) the Tribunal\n\nr959 went wrong in taking the rise in the cost of living\n\nCl . 1 , index between the yearr 1954 and 1957 instead of tak- Bengaz iemica . h fl t · h b h Pha, ma\"utical mg t e uc uatmg rate m t e mdex etween t e date wo, ks Ltd., of the earlier award, i.e., August 30, 1951, and the date Calcutta of the present reference in the year 1957; (5) the v.\n\nTribunal went wrong in so far as it based its decision Thefr Workmen on the Second Engineering Award of 1950 which was already considered by the Tribunal in \"its earlier award Subba Rao ]. of the year 1951; and (6) in any event, in computing the amount, the Tribunal applied wron_g criteria.\n\n- \\.Ye shall consider the above contentions seriatim.\n\nBut before doing so, it will be convenient to refer briefly to the scope of jurisdiction of this Court under Art. 136 of the Constitution vis-a-vis the awards of Tribunals.\n\nArticle 136 of the Constitution does not confer a right of appeal to any party from the decision of any tribunal, but it confers a discretionary power on the Supreme Court to grant special leave to appeal from the order of any tribunal in t.he territory of India. It is implicit in the discretionary reserve power that it cannoff be exhaustively defined. It cannot obviously be so construed as to confer a right to a party where he has none under the law. The Industrial Disputes Act is intended to be a self-contained one and it seeks to achieve social justice on the basis of collective bargaining, conciliation and arbitration.\n\nAwards are given on circumstances peculiar to each dispute and the tribunals are, to a large extent, free from the restrictions of technical considerations imposed on courts.\n\nA free and liberal exercise of the power under Art. 136 may materially affect the fundamental basis of such decisions, namely, quick solution to such disputes to achieve industrial peace.\n\nThough Art. 136 is couched in widest terms, it is necessary for this Court to exercise its discretionary jurisdiction only in cases where awards are made in violation of the prh:iciples of natural justice, causing substantial and grave injustice to parties or raises an important principle of industrial law requiring elucidation and final decision by this Court or discloses such other exceptional or special circumstances which merit the consideration of this Court. The points raised by the\n\nlearned Counsel, except perhaps the first point, do not r959 stand the test of any one of those principles.\n\nC' . 1 L d C 1 h Benga.l .irmica & earne ounse for the Company, owever, says Pharmaceutical that, though the said principles might be applied at works Ltd, the time of granting leave, once leave is given no such Calcutta restrictions could be imposed or applied at the time of v. the final disposal of the appeal. The limits to the Their Workmen exercise of the power under Art. 136 cannot be made Subba Rao J. to depend upon the appellant obtaining the special leave of this Court, for two reasons, viz., (i) at that stage the Court may not be in full possession of all material circumstances to make up its mind and (ii) the order is only an ex parte one made in the absence of the respondent. The same principle should, therefore, be applied in exercising the power of interference with the awards of tribunals irrespective of the fact that the question arises at the time of granting special leave or at the time the appeal is disposed of. It would be illogical to apply two different standards at two different stages of the same case. The same view was expressed by this Court in Pritam Singh v. The State of Madras (1), Hem Raj v. State of Ajmer(2) and Sadhu Singh v. State of Pepsu (3).\n\nThe first question turns upon the construction of the relevant provisions.of the Act as amended by the Industrial Disputes (Amendment and Miscellaneous Provisions) Act, 1956. The relevant provisions inserted by the Amending Act read as follows :\n\n\"Section 2(r) : 'Tribunal ' means an Industrial Tribunal constituted under section 7 A.\"\n\n\"7 A. Tribunals.-(!) The appropriate Government may, by notification in the official Gazette, constitute one or more Industrial Tribunals for the adjudication of industrial disputes relating to any matter, whether specified in the Second Schedule or the Third Schedule.\n\n(2) A Tribm1al shall consist of one person only to be appointed by the appropriate Government.\n\n(3) A person shall not be qualified for appointment as the presiding officer of a Tribunal unless-\n\n(r) [1950] S.C.R. 453.\n\n(2) [1954] S.C.R. II53.\n\n(3) A.LR. 1954 S.C. 271.\n\nr959\n\n(a) he is, or has been, a Judge of a High Court;\n\nBengal Chemical &- or\n\nPha•maceutical\n\n(b) he has held the office of the Chairman or any wa\"\" Ltd.,· other member of the Labour Appellate Tribunal con.\n\nCalcutta stituted under the Industial Disputes (Appellate Triv. bunal) Act, 1950 (48 of 1950), or of any Tribunal, for Their Workmen d f 1 h a per10 o not ess t an two years.\n\nSubba Rao;.\n\n(4) The appropriate Government may, if it so thinks fit, appoint two persons as assessors to ad vise the Tribunal in the proceeding before it.\"\n\n\"33B. (1) The appropriate Government may, by order in writing and for reasons to be stated therein, withdraw any proceeding under this Act pending before a Labour Court, Tribunal, or National Tribunal, as the case may be, for the disposal of the proceeding and the Labour Court, Tribunal or National Tribunal to which the proceeding is so transferred may, subject to special directions in the order of transfer, proceed either de novo or from the stage at which it was so transferred : Provided that where a proceeding under section 33 or section 33A is pending before a Tribunal or National Tribunal, the proceeding may also be transferred to a Labour Court.\" Section 30 of the Amend, ing Act reads :\n\n\"If immediately before the commencement of this Act, there is pending any proceeding in relation to an industrial dispute before a Tribunal constituted under the Industrial Disputes Act, 1947 (14 of 1947), as in' force before such commencement, the dispute may be adjudicated and the proceeding disposed of by the Tribunal after such commencement, as if this Act has not been passed.\" Section 7, before ihe Amendment ran thus :\n\n \" The appropriate Government may constitute one or more Industrial Tribunals for the adjudication of industrial disputes in accordance with the provisions of this Act.\n\n(2) A Tribunal shall consist of such number of members as the appropriate Government thinks fit.\n\nWhere the Tribunal consists of two or more members, one of them shall be appointed as chairman.\n\n(3) Every member of the Tribunal shall be an x959 independent person, .\n\nBengal -;;;:; mical &\n\n(a) who IS or has been a Judge of a High Court Pharmaceutical or a District Judge, or Works Ltd.,\n\n(b) is qualified for appointment as a Judge of a Calcutta High Court : v. 1 f Their Workmen Provided that the appointment to a Tribuna o any person not qualified under part (a) shall be made subba Rao J. in consultation with the High Court of the Province in which the Tribunal has or is intended to have, its usual place of sitting.\" It will be seen from the aforesaid provisions that the Amending Act, which came into force on August 28, 1956, changed the constitution of a tribunal to some extent and conferred a power for the first time on the Government to transfer a proceeding pending before a tribunal to another tribunal; or in the case of a proceeding under s. 33 or 33A pending before a tribunal to another tribunal or to a Labour Court.\n\nSection 30 of the Amending Act expressly saves a pending proceeding before a tribunal constituted under the Act before the Amending Act came into force and directs that such dispute shall be adjudicated and the proceeding disposed of by that tribunal after the commencement of the Amending Act as if that Act had not been passed.\n\nA combined and fair reading of the aforesaid provisions, it is argued, was that s. 33B, inserted in the Act by the Amending Act, was prospective in operation, i.e., it would apply only to proceedings initiated in the tribunal constituted under the amended Act and that proceedings pending before the tribunals constituted under the Act before the commencement of the Amending Act would be disposed of as if the Amending Act had not been passed.\n\nThe Parliament, presumably to clarify the position, brought out another.Amending Act styled the Industrial Disputes (Amendment) Act, 1957 (18 of 1957), whereunder among other things, a new definition of \" Tribunal\" was given in substitution of that ins. 2(r) of the Act.\n\nThe substituted definition reads : \"'TribuIJ.al' means an Industrial Tribunal constituted under section 7 A and includes an Industrial\n\n'959 Tribunal constituted before the 10th day of March,\n\nB 1-c,- . 1957, under this Act.\" enga 1cm1cal (5..\n\nI'ha, ma\"utical Sub-section (2) of s. 1 of the Amending Act 18 of 1957\n\nw,, k, Ltd., says that s. 2 shall be deemed to have come into force\n\nCalcutta on the 10th day.of March, 1957.\n\nThe result is that\n\nv. section 33B should be read along with the definition Their Workmen of a \"Tribunal\" inserted by the Amendment Act 18\n\nSubba Rao;. of 1957, as if that definition was in the Act from March 10, 1957. If that definition of a \"Tribunal\" be read in place of the word \" Tribunal\" in s. 33B, the relevant part of that sectiou reads:\n\n\"(1) The appropriate Government may, by order in writ.ing and for reasons to be stated therein, withdraw any proceeding under this Act pending before a Tribunal constituted before the 10th day of March, 1957, and transfer the same to another Tribunal constituted under section 7 A of the Act.\" So construed it follows that in respect of proceedings pending in a tribunal constituted before the 10th day of March, 1957, the Government has the power to transfer them from that date to any other tribunal.\n\nIt is said that this construction would make s. 30 of the Amending Act 36 of 1956 otiose or nugatory.\n\nThat section contained only a saving clause and it was not inserted in the Act ; it served its purpose, and oven if it ceased to have any operative force after the Amendment of 1957, that circumstance cannot have any bearing on the impact of the amendmentof the definition of \" Tribunal \" on the provisions of s. 33B of the Act.\n\nIn the present case, the Government made the order of transfer on April 9, 1957, i.e., after s. 2 of Amendment Act 18 of 1957 was deemed to have come into force. It must, therefore, be held that the Government acted well within its powers in transferring the dispute pending before the Second Industrial Tribunal, to the Fifth Industrial Tribunal.\n\nThe second contention, namely, that the Award of 1951 was not terminated in accordance with law, does not appear to have been pressed before the Tribunal.\n\nThe governing section is s. 19(6) which says :\n\n\"Notwithstanding the expiry of the period of operation under sub-section (3), the award shall\n\ncontinue to be binding on the parties until a period of\n\nI959 two months has elapsed from the date on which noticeB 1-Ch . · b b d b l d h enga emical & IS given y any party oun y t 1e a war to t e Pharmaceutical other party or parties intimating its intention to works Ltd., terminate the award.\" Calcutta In the first written-statement filed by the Company v. d Their Workmen before the Tribunal, no plea was taken base upon s. 19(6) of the Act. In the second written-statement Subba Rao J. filed by the Company on December 20, 1956, a contention was raised to the effect that the award dated June 21, 1951, was not terminated under s. 19(6) of the Act, that the said award was binding between the partfos and therefore the reference was bad in law.\n\nNotwithstanding the said allegation, the award discloses that no issue was raised on that count and no argument was advanced in support thereof.\n\nThis attitude might have been adopted by the Company either because it did not think fit to rely upon a technical point but had chosen to get a decision of the Tribunal on merits, or it might be that there was no basis for the contention, as the company might have received notice under the said section. Though it may not be quite relevant, it may be mentioned that even in 1951 when the dispute between the parties was referred to the Industrial Tribunal, though a similar contention was open to the Company and indeed was suggested by the Tribunal, it moved the Tribunal to give an award on the merits of the matter.\n\nIf this plea had been seriously pressed, the Tribunal would have raised a sepa; rate issue and the Union\n\nwould have been in a position to establish that notice had been served on the Company as required by s. 19(6) of the Act.\n\nAs the question raised depends upon elucidation of further facts, we do not think that we would be justified in allowing the Company to raise the plea before us, and we, therefore, do not permit them to do so.\n\nThe fourth. point turns on the construction of the terms of the agreement entered into between the parties on September 15, 1954. The dispute between the parties had an earlier origin and apart from the\n\n•959 present reference, there were as many as four refer. ences and four awards, and the last of them was dated Bengal Chemfoal & April 3 1951. The Companv preferred an appeal\n\nPhatmaceuticol ' h d h L b• A J] T \"b w , k Ltd. agamst t at awar to t e a our ppe ate n unal,\n\na1:utta ' Calcutta, which, with some modification, confirmed v. the award of the Tribunal on Augu&t 30, 1957. That Thei• Wo•kmen award as modified by the Appellate Tribunal fixed the basic wages and the rate of dearness allowance pay- Subba Rao f. able to the employees.\n\nThe employees were not satisfied with the a ward and they placed before the Company a new charter of demands claiming higher rates of dearness allowance and wages, but the dispute was compromised and the parties entered into an agreement dated September 15, 1954, by virtue of which, the Company introduced the incremental scale in the wage structure. As regards the dearness allowance, it was stated in cl. 11 of the agreement as follows :\n\n\" The existing rate of D. A. will prevail unless there is a substantial change in the working class cost of living index, in which case the rate will be suitably adjusted.\" On the construction of this clause depends the question of the Union's right to claim enhanced dearness allowance. It is common case that if the cost of living index in the year 1951 was taken as the basis, there was a fall in the rate of working class cost of living index in 1957. On the other hand, if the cost of living index in 1954 was the criterion, there was a substantial increase in the cost of living index in 1957.\n\nThe question, therefore, is.what did the parties intend to agree by the aforesaid clause in the agreement. To ascertain the intention of the parties, we should consider the circumstances under which the said agreement was entered into between the parties. Exhibit 6 is the said agreement. The preamble to the agreement reads:\n\n\"The Company and the Union came to a settlement in respect of the Pay Scales and Grades in the Charter of Demands dated 25th June, 1953, at the intervention of Shri A. R. Ghosh, Asstt. Labour Commissioner during the Conciliation proceedings ending on the 30th August, 1954.\"\n\nThe preamble indicates that the entire situation r959 obtaining on the date of the agreement was reviewed - d . d h f h l Bengal Chemical & an the parties agree to t e terms o t e sett ement Pharmaceutical mentioned therein. Under clause (1) of the agreement, works Ltd., pay scale and grade as given in annexure B was Calcutta agreed upon for the time being for a period of three v. years as an experimental measure, to be reviewed, Their Workmen modified or suspended or withdrawn after three years, Subba Rao J. depending upon the Company's business and financial condition.\n\nBy cl. (2), the employees agreed not to raise any dispute involving any further financial burden on the Company during the next three years in respect of pay scale and grade. Clauses (3) to (5) deal with increments and the age of retirement.\n\nClause (6) provides for the piece-rated (contract) workers in respect of their increments. Clause (7) is in respect of increment for the daily-rated workers.\n\nClause (8), is in respect of the grade and scale of pay and increments of Chemists, Engineers and Doctors, etc. Clause (9) is to the effect that the employees who would be made permanent thenceforward would be grouped under two divisions for the purposes of giving effect to the scale of pay. Clause (11) which we have already extracted above relates to the dearness allowance. Clause (12) says \"barring the question of bonus for 1358 and 1359 B. S. the Union withdraws its claim in respect of other items in the Charter of Demands dated 25th June, 1953.\"\n\nWe have given the agreement in extenso only for the purpose of showing that all the disputes between the parties arising out of the charter of demands dated June 25, 1953, were settled between them and reduced to writing. The agreement was self-contained and started a new chapter regulating the relationship of the parties to the dispute in respect of matters covered by it. The award must be dee\"med to have been superseded by the new agreement. In this context the crucial words \" existing rate of D. A. \", on which both the learned Counsel relied, could have only one meaning. Do the words \" existing rate \" refer to the date of the agreement or to the date of the award ? It is true that the existing rate of D. A. had its origin in the award and was made to prevail\n\n'959 under the agreement, that is to say that the rate was\n\nl - . accepted by the parties as reasonable on the date of Benga Chemical & h '11 h b\n\n I J • Pharmaceutical t e agreement, t1 t ere was a su stant1a c iange m\n\nworks Ltd.. the working class cost of living index. If the conten- Calcutta tion of the learned Counsel for the Company should v. prevail, the agreement would not be self-contained, but Their Workmen only to be construed as modifying the earlier award to\n\nSttbba Rao J. some extent. We are satisfied that in regard to matters covered by it, the agreement replaced the earlier a ward and therefore the date of the agreement is the crucial one for ascertaining whether there was substantial change in the working class cost of living index in the year 1957.\n\nWe, therefore, reject this contention.\n\nContentions 3, 5 and 6 raise pure questions of fact.\n\nThe Tribunal, on the consideration of the entire material placed before jt, came to the conclusion that there was change of circumstan.ces which entitled the employees to claim an increase in their dearn, ess allowance. It has also fixed the rate of increase in the dearness allowance on the basis of the rise in the cost of living index. In doing so, it also took into consideration the difficulties facing the industry and the repercussion of the rise in the dearness allowance on the consumers in general. Having regard to the overall picture, it came to the conclusion that full neutralisation of the deficiency as a result of rise in the cost of living iudex by dearness allowance could not be permitted and therefore allowed them only 75 per cent. of the increase in the dearness allowance to -which they would have otherwise been entitled on the basis of the rise in the cost of living index. The finding given by the Tribunal is one on fact and we do not see any permissible ground for interference with it in this appeal by special leave.\n\nBefore closing, one point strenuously pressed upon us by the learned Counsel for the Company which is really another attempt to attack the finding of fact given by the Tribunal from different angle must be mentioned ; it was that the Tribunal wrongly relied upon Exhibit 3, corrected on the basis of the information given by the State Statistical Bureau, west Bengal, for ascertaining. the working class cost of living index since August 1954 up to March 1957.\n\nOn the\n\nbasis of Exhibit 3, the Tribunal held tha.t the working x959 class cost of living index stood at 344·1 in August Bengal -;;:; mical & 1954 and it rose to 400•6 in May 1957, with the result Pharmaceutical that there was a rise of 56 points, a substantial rise in Works Ltd., the cost of living index. Exhibit 3 certainly supports Calcutta the finding of the Tribunal. The learned Counsel for Their ;; orkmen the Company points out with reference to the relevant entries in the Monthly Statistical Digest, West Ben- Subba Rao J. gal, that the said figures relate only to working class menials and the corresponding entries in regard to the working class cost of living index do not indicate so much increase as in the case of the menial class.\n\nLearned Counsel has also taken us through the relevant figures.\n\nThe relevant entries in the Monthly Statistical Digest were not filed before the Tribunal.\n\nIndeed when the Union's witness, Shri Satyaranjan Sen, was examined before the Tribunal, he was not cross-examined with a view to elicit information that Exhibit 3 did not relate to the working class cost of living index.\n\nWhen Shri Chatterjee, the Assistant Manager of the Company, who was examined after Shri Sen, gave evidence, he not only did not object to the entries in Exhibit 3 but stated that he was not aware of any substantial increase in the working class cost of living index and complained that similar entries for all the relevant_years had not been produced. Even before the Tribunal it does not appear that any argument was advanced contesting the relevancy of Exhibit 3 on the ground that it did not refer to the working class cost of living index. In the circumstances, we do not think that we are justified to allow the learned Counsel for the Company to make out a new case for the first time before us, upsetting the Tribunal's basis for calculation and involving further and different calculations.\n\nIn the result, we confirm the award of the Tribunal and dismiss the appeal with costs.\n\nThe learned Counsel, appearing for the Union, did not press the appeal No. 164 of 1958, filed by the Union, and therefore it is also dismissed with costs.\n\nAppeals dismissed.", "total_entities": 50, "entities": [{"text": "BENGAL CHEMICAL & PHARMACEUTICAL\n\nWORKS LTD., CALCUTTA", "label": "PETITIONER", "start_char": 848, "end_char": 902, "source": "metadata", "metadata": {"canonical_name": "BENGAL CHEMICAL & PHARMACEUTICAL WORKS LTD., CALCUTTA", "offset_not_found": false}}, {"text": "THEIR WORKMEN (P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 904, "end_char": 939, "source": "metadata", "metadata": {"canonical_name": "P.B. 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{"document_id": "1959_2_150_180_EN", "year": 1959, "text": "I959\n\nFebruary 2.\n\n150 SUPREME COURT REPORTS [1959] Supp.\n\nM/S. LIPTON LIMITED AND ANOTHER\n\nTHEIR EMPLOYEES (SYED JAFER IMAM, S. K. DAS and J. L. KAPUR, JJ.)\n\nIndustrial Dispute-Bonus-Fixation of grades and scales of pay-Co1npany with head office in England and branch in India- Employces in the Delhi Office-Claim to bonus on the basis of global profits-Revision of wage structure-Principle-Bonus and Wage, distinction-Jurisdiction of the Tribunal to make an award in respect of employees of Delhi office employed outside State of Delhi. , The appellant company was incorporated in the United' Kingdom, with its registered office in London and its business in the United Kingdom consisted of stores and groceries, including tea which represented only about ro% of its business there. Its operations in India were carried on by a branch with its head office in Calcutta, and the business there consisted mainly in the sale of \"packeted\" tea throughout India. The Delhi office of its Indian branch controlled the salesmen and other employees employed in the Punjab, Delhi State, Rajasthan and. Uttar Pradesh, but had no connexion with the export side of the business.\n\nThe Indian Branch had no subscribed capital nor any reserves, and the capital used in India was money advanced from the company's fund in England.\n\nThe dispute between the respondents who were the employees of the Delhi office and the company related, inter alia, to (1) fixation of grades and scales of pay; (2) whether retrospective effect should be given to the new scales of pay ; and (3) bonus for the year r95r. The respondents contended that the total global profits of the appellant company should form the ba3is for determining the claim to bonus on the ground that it was an integrated industry which had trading activities in various countries. The Tribunal found that the Indian workmen did not in any way contribute to the profits which the appellant •company derived from its ex-India business, that the Indian branch rnaintain, ed separate accounts which had been audited and accepted by the Income-tax authorities as showing the profit anil loss of the Indian branch of the business, and\"that though, at the relevant time, the appellant company was one legal entity and the capital of the Indian branch came from London, the Indian branch was treated as a separate entity for all practical purposes.\n\nThe Tribunal also found that for 1951 there was no available surplus for distribution as bonus to the employees in India. In the matter of fixation of grades and scales of pay, the Tribunal found that the existing scale of wages of the Delhi employees was far below the standard of a living wage, and for fixing the wage level it took into consideration the company's global capacity to pay and came to the conclusion that having regard to its global\n\nresources the company was financially able to bear a slightly z959 higher wage structure.\n\nAccordingly, the Tribunal revised the grades by giving. an increase of 20% to all workers.\n\nAs to the Lipton Ltd. date from which the revised grades were to take effect, the v.\n\nTribunal directed that they should have retrospective effect Their Employees from January r, 1954, instead of January l, 1953, as claimed by the Union.\n\nThe appellant contended that the Tribunal erred in taking into consideration the global financial resources of the company in support of an increase in wages while holding that the Indian branch was a separate entity for the payment of bonus, that the financial resources of the Indian branch did not show any capacity to pay higher wages, and that. in any case, there was no reliable evidence to show that the existing wage structure required revision if it was compared to the wage structure in similar industries in the Delhi region.\n\nA question was also raised as to whether the Industrial Tribunal, Delhi, had jurisdiction to make an award in respect of employees of the Delhi office who were employed outside the State of Delhi.\n\nHeld: (1) that on the finding that the Delhi office controlled all its employees in the matter of appointment, leave, transfer, supervision, etc., whether employed in Delhi State or outside it, the Industrial Tribunal, Delhi, had jurisdiction to adjudicate on the dispute between the appellant company and its workmen of the Delhi office, as the Delhi State Government was the appropriate Government within the meaning of s. 2 of the Industrial Disp\\ltes Act, 1947. and under s. 18 of the Act the award made by the Tribunal was binding on all persons employed in the Delhi office ;\n\n(2) that in the circumstances in which the appellant company operated in India at the relevant time and on the finding that no part of the profits made in India was diverted to England and that the Indian business depended on . its own trading results, the global profits of the company could not be made the basis for awarding bonus to Indian workmen, and that the latter can claim bonus only if there was an available surplus of profits of the Indian business ; .\n\nMuir Mills Co. Ltd. v. Suti Mills Mazdoor Union, Kanpur, [1955] l S.C.R. 991, Ganesh Flour Mills Co. Ltd v. Employees of Ganesh Flour Mills, A.LR. 1958 S.C. 382, Burn and Co., Calcutta\n\nv. Their Employees, [1956] S.C.R. 781 and Barad~ Borough Municipality v. Its workmen, [1957] S.C.R. 33, referred to.\n\n(3) that in determining the question of a revision of the wage scale, the relevant considerations were: (r) whether the existing wage structure required revision by reason of its being below the standard of living wage, and (2) whether the industry could bear the additional burden of an increase in the wage scale on the basis of industry-cum-region by reason bf its financial resources in India; that judged by the considerations stated\n\nI959\n\nLipton Ltd. v.\n\nTheir Employees\n\nabove, it could not be said that the Tribunal erred in revising the wage structure on the basis of the evidence adduced before it ; and that the increase in the wages was not beyond the financial resources of the company as disclosed by its trading results in India.\n\nThere is a distinction between bonus and wage. Bonus comes out of profits and is paid, if after meeting prior charges, there is an available surplus.\n\nWages primarily rest on contract and are determined on a long term basis and are not necessari1y dependent on profits made in a particular year.\n\nCrown Aluminium Works v. Their Workmen, [r958] S.C.R. 65r and Express Newspapers (Private) Ltd. v. The Union of India, [r959] S.C.R. r2, 1\"elied on.\n\n(4) that the new scales of pay should be brought into effect from November r, r955, instead of January I, r954, as directed by the Tribunal.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 713 to 715 of 1957.\n\nAppeals by special leave from the judgment and order dated May 25, 1956, of the Labour Appellate Tribunal of India (Lucknow Bench) in Appeals Nos.\n\nIII-272, 282 and 327 of 1955, arising out of an Award dated August 18, 1955, of the Additional Industrial Tribunal, Delhi.\n\nM. 0. Setalvad, Attorney-General for India, B. Sen and S. N. Mukherjee, for the appellants.\n\nA. V. Viswanatha Sastri and Janardan Sharma, for the respondents.\n\n1959. February 2.\n\nThe Judgment of the Court was delivered by s. J<. Das J.\n\nS. K. DAS, J.-These are three appeals by special leave. The appellant in' all the three appeals is a company called Messrs. Lipton Ltd,., London, having an office at Asaf Ali Road, New Delhi (hereinafter referred to as the Lipton, Ltd.).\n\nThe respondents are the employees of the Delhi office of the said Lipton, Ltd. represented by the Lipton Employees Union (hereinafter referred to as the Union) .. On April 14, 1958, a petition was filed on behalf of the appellant for an amendment of the cause title of the three appeals, wherein it was stated that as a matter of internal arrangement the Board of Directors of the\n\nLipton Ltd., London, decided to separate the export side of its business from its internal trade in respect of its branch in India and on April 4, 1957, a separate sterling company called Lipton (India) Ltd., was incorporated in the United Kingdom and this new Company took over the internal side of the business in India on and from January 5, 1958, but the export side of the business continued to be a branch of the Lipton Ltd., London. Pursuant to the aforesaid arrangement, the employees of the Delhi office of the Lipton, Ltd., were notified of the formation of the new Company and on and from January 5, 1958, their services were transferred to Lipton (India) Ltd., on condition that their services would be treated as continuous, uninterrupted and on the same terms as before. On •the aforesaid statements, the appellant made a prayer that the cause title of the three appeals should be amended by substituting Lipton (India) Ltd. in place of Lipton, Ltd.\n\nWe directed that Lipton (India) Ltd. be added as one of the appellants without prejudice to either party on the merits of the case. 'l'wo of the appeals (Civil Appeals Nos. 713 and 714 of 1957) were consolidated by an order of this Court, and they raise certain common questions with regard to (1) fixation of grades and scales of pay of the respondent-employees and (2) bonus for the year 1951.\n\nThe third appeal (Civil Appeal No. 715 of 1957) raises a somewhat different question with regard to overtime payment and is directed against an order of the Additional Industrial Tribunal, Delhi, dated October 15, 1955, by which the Tribunal made a modification in its award dated August 18, 1955, in respect of overtime payment. It will be convenient if Civil Appeal No. 715 of 1957 is dealt with separately from the other two appeals.\n\nIt is necessary now to state very briefly some of the facts which have given rise to these three appeals.\n\nThe Lipton, Ltd., is a company incorporated in England having its registered office in London. Its business in the United Kingdom consists of stores and groceries, including tea which represents only about\n\nI959\n\nLipton Ltd. v.\n\nTheir Employees\n\nS. K. Dfls J.\n\n154 SUPRE¥E COURT REPORTS [1959] Supp.\n\nI959 10% of its business there. Its operations in India are carried on by a branch with its head office in Calcutta.\n\nLipton Ltd.\n\nThis branch, which may be conveniently called the Their ;;,, ployees Indian branch, has been operating in this country for more than 60 years. The company is principally s. K. Das J. interested in the sale of \"packeted\" tea throughout India together with small sales of imported tinned milk and also in the export of tea to all parts of the world. The Lipton, Ltd., does not own any tea gardens in India and has no financial interest in the producing side of the industry. All the teas which are sold in India or which are exported are purchased from producers in India, either through public auctions in Calcutta and Cochin or by private contract. It has factories in Calcutta, Allahabad and Conoor in which teas are blended and packed into retail packets for sale throughout India. It sells tea direct to retail dealers and, with relatively minor exceptions, does not operate through wholesalers. Dealers are supplied by the company's own salesmen each of whom has a sales depot at which he maintains stocks of the company's products. The salesman sells these teas at the company's wholesale prices to dealers for cash and remits the cash through banking channels to Calcutta.\n\nThe sales organisation is controlled through six offices, one of which is located at Delhi. The Delhi office controls the salesmen and other employees employed in the Punjab, Delhi State, Rajasthan and Uttar Pradesh on its business; but the Delhi office has no connexion with the export side of the business. So far as the export business is concerned, it consists of two different types of trade activities. In some foreign countries the Indian branch sells packet tea under the Lipton label on which it is able to make a profit; these profits appear in the accounts of the Indian branch, which are separately maintained and audited.\n\nThis type of trade activity is mostly confined to Burma, Iraq, Iran and certain small Middle East countries. The greater part of the export trade, however, consists of purchases made at the Calcutta auctions on behalf of overseas buyers, who utilise the services of Lipton's expert tea tasting staff in Calcutta\n\nto buy tea on their account at the auctions and the r959 Indian branch is remunerated for this service by the Lipton Ltd. payment of a commission of one per cent. The Indian v. branch has no subscribed capital nor any reserves. Their Employees A. W. Samuel, Administrator, Lipton, Ltd., thus explained the position with regard to the capital of 5 K. bas J. the Indian branch in his evidence :-\n\n\" Our Company has no subscribed capital in India nor any reserves. The capital used in India is money advanced from the company's fund in England, and the amount of this advance at the balance sheet date is shown as the balance of the current account with the Liptons Ltd., London. We have also to resort to overdraft on the local banks to meet the working capital demand in India\".\n\nIt appears that an account is maintained which is known as the London General Account and the capital which enables the Indian branch to operate in India is recorded as the balance of the current account in the Indian books and to determine the amount of capital employed in India a daily average of the\n\n- current account has to be taken and the working capital of the Indian branch is the amount by which the fixed current assets exceed the total liabilities.\n\nThe Delhi office of the Indian branch employs peons, sweepers, van-workers, god.own workers, village salesmen, drivers, junior clerks, godown keepers, senior clerks, stenographers, divisional salesmen and other categories of workers, details whereof need not be set out in full at this stage. The case of the Union was that a.s far back as June, 1951, the workers of the Delhi office had made a representation for an increase in pay; the representation was repeated in April, 1952.\n\nAs the management did not accede to their request a union of Lipton employees was formed in September 1953. This Union framed a charter of demands and submitted it in December, 1953. The charter of demands consisted of a large number of items and as the management con1; ended that it was not in a position to meet the demands, certain conciliation proceedings followed.\n\nThey, however, came to nothing and on October 1, 1954, the industrial dispute\n\nLipton Ltd:\n\nTheir Employees\n\nS. K. Das].\n\nbetween the Lipton, Ltd., and the Union was referred to the Additional Indus1rial Tribunal, Delhi, for adjudication.\n\nThe reference set forth in a sub-joined schedule the matters upon which adjudication was necessary, and the schedule contained twenty terms of reference out of which the two items with which we are now concerned related to (a) fixation of grades and scales of pay including the question whether the new scales should be given retrospective effect from January 1, 1953, and (b) bonus for each of the years 1951, 1952 and 1953.\n\nAfter hearing the parties the Tribunal made its award on August 18, 1955. It disallowed the claim of bonus, but as to the fixation of grades and scales of pay it allowed an increase of about 20 per cent. to all workers over their present wages and proportionate increase in the dearness allowance, details whereof we shall state at a later stage.\n\nAs to overtime payment which was item no. 8 of the terms of reference the Tribunal said :-\n\n\"Since the company is allowed by law to take 48 hours work in a week from its employees, it is only fair that if a worker puts in over-time work in any • week within a total of 48 working hours, he should bEj. only paid at the single rate for all over-time work that he puts in between 39 and 48 hours in the week. If the over-time work done by the worker brings his total working hours during the week to more than 48 hours, any excess over-time work above 48 hours should be paid at double the rate. I direct accordingly.\" It may be stated here that there was a dis]'.lllte about the working hours also and the Tribunal changed the working hours from 9-30, a.m.~5 p.m. to 10 a.m.- 5 p.m.•on week-days with half an hour's interval for lunch, and 10 a.m. to 1 p.m. on Saturdays-thus bringing the total to 36 hours in a week. The question of over-time arose only if a workman was asked to work in excess of the working hours fixed by the Tribunal.\n\nOn October 12, 1955, the Union made an application in which it stated that the figure \"39 \" occurring in paragraph 24 of the award relating to over-time payment was obviously a mistake for '.' 36 \"; because the\n\nlearned Tribunal had fixed in paragraph 23 of the 1959 award that the working hours of a workman should Lipton Ltd. be 36 hours a week.\n\nThe learned Tribunal considered' v. this application without any notice to the present Their Employees appellant and corrected the error by amending the figure 39 to 36. The Tribunal proceeded on the footing 5 K. Das f. that the mistake was a clerical error due to an accidental slip which could be corrected under r. 23 of the Industrial Disputes (Central) Rules, 1947.\n\nAgainst the award of the Industrial Tribunal three appeals were taken to the Labour Appellate Tribunal (Lucknow Bench). The two main appeals before the Appellate Tribunal, namely, No. 272of1955 and No. 282 of 1955, were filed by the Lipton, Ltd., and the Union respectively and related to the various items of the terms of reference on which the Industrial Tribunal had given its decision. The third appeal, No. 327 of 1955, related'to the subsidiary matter of over-time payment regarding which the Industrial Tribunal had amended its award. So far as the two items with which in Civil Appea; ls Nos. 713 and 714 of 1957 we are now concerned, the Labour Appellate Tribunal in its decision dated May 25, 1956, upheld the decision of the Industrial Tribunal as respects fixation of grades and scales of pay comprised in the term of reference numbered 1 (a); it also upheld the decision of the Industrial Tribunal to give retrospective effect to the new scales of pay froJ? January 1, 1954, which was covered by the term of reference numbered 1 (b).\n\nAs to bonus, which was item 4 of the terms of reference, the Appellate Tribunal upheld the decision of tht; l Industrial Tribunal with regard to the years 1952 and 1953 but for 1951 it awarded an extra two months salary as bonus for that year in addition to the bonus of one month's salary which the Lipton, Ltd., had already granted ex gratia to the workmen. As to the subsidiary appeal relating to the over-time payment,~ the Appellate Tribunal agreed with the view of the Industrial Tribunal that there was an error in computing the working hours and the error being of a clerical nature, it was open to the Tribunal to correct it.\n\nFrom the decision of the Labour Appellate Tribunal\n\n'959 in the three appeals in question, the appellant\n\nLipton Ltd. obtained special leave to appeal to this Court on June v. 27, 1956, and in pursuance of the order of this Court Their Employees granting such special leave, the present appeals have been preferred. s. 1' Dos J.\n\nCivil Appeal No. 715 of 1957. It is now convenient to dispose of Civil Appeal No. 715 of 1957.\n\nWe have no doubt in our mind that the error in computing the w_orking hours with regard to over-time payment was due to an accidental slip in making the calculation; it was nothing but a clerical error which the Industrial Tribunal was entitled to correct even without notice to the appellant. The learned Attorney-General who appeared for the appellant in these three appeals has not pressed Appeal No. 715 of 1957. This appeal must accordingly be dismissed with costs.\n\nCivil Appeals Nos. 713 and 714 of 19_57. We now turn to the other two appeals, namely, Civil Appeals 713 and 714 of 1957.\n\nWe have already stated that the . only points which survive for decision are those relating to items l(a), l(b) and 4 of the terms of reference.\n\nThese items relate to fixation of grades and scales of pay, whether retrospective effect should be given to the new scales of pay, and bonus for 1951. The other items of the award relating to City compensatory allowance, leave, holidays, etc., have not been challenged before us. We are, therefore, saying nothing about those items of the award, which must necessarily stand. It may be made clear, however, at this stage that one of the points taken before the Industrial Tribunal on behalf of the Lipton, Ltd., was that the Industrial Tribunal had no jurisdiction to make an award in respect of employees of the Delhi office who were employed outside the State of Delhi. This point ' of jurisdiction was decided against the appellant and the Industrial Tribunal pointed out that all the work-\n\n* men of the Delhi office, whether they worked in Delhi or not, received their salaries from the Delhi office ; they were controlled from the Delhi office in the matter of leave, transfer, supervision, etc., and, therefore, the Delhi State Government was the appropriate Government within the meaning of s. 2 of the Industrial\n\nDisputes Act, 1947, relating to the dispute which arose between the Lipton, Ltd., and the Union and under s. 18 of the said Act the award made by the Tribunal was binding on all persons employed in the Delhi office.\n\nThe Appellate Tribunal upheld the decision of the Industrial Tribunal on this point and though this question of jurisdiction was raised in the appeals before us, it was not seriously pressed by the learned Attorney- General. We are of the view that the Industrial Tribunal had jurisdiction to adjudicate on the dispute between the Lipton, Ltd., and its workmen of the Delhi office.\n\nNow, we go on to the two main points urged on behalf of the appellant. We take up first the question of bonus. Item 4 of the terms ofreference related to bonus and the claim of the Union was made in two parts. Item 4 reads thus:-\n\n\" Bonus: (a) Whether every workman be paid bonus at the rate of 5 months' salary for each of the years 1951, 1952 and 1953 and what other directions are necessary in this respect ?\n\n(b) Whether special bonus equivalent to three months salary should be paid to all workmen in honour of the company's Diamond Jubilee celebration for the year 1953? \" Before the Industrial Tribunal the claim of the Union was that the total global profits of the Lipton, Ltd., should be the basis for determining the claim to bonus ; the contention on behalf of the Lipton, Ltd., was that the profits of the Indian business only should be taken into account in assessing any available surplus for the payment of bonus. The Industrial Tribunal held that as both labour and capital contributed to the earnings of an industrial concern, labour must have its legitimate share of the profits to which it has contributed; since, however, the employees of the Lipton, Ltd., in India do not by any stretch of reasoning contribute to the profits which accrue to the Lipton, Ltd., in respect of its trading activities outside India, the employees in India cannot claim bonus on account of any profits which the Lipton, Ltd., derive from its ex-India business.\n\nOn this footing the\n\nI959\n\nLipton Ltd. v.\n\nTheir Employees\n\nS. K. Das].\n\n'959 Industrial Tribunal considered the question of bonus\n\nLipton Ltd. and held that for 1951 there was no available surplus v. for distribution as bonus to the employees in India in Their Employees accordance with the formula evolved by the Full Bench of the Labour Appellate Tribunal in Millowner's 5 K. Das f.\n\nAssociation, Bombay v.\n\nRashtriya Mill Mazdoor Sangh (1) generally though not completely approved by this Court in Muir Mills Co. Ltd. v. Suti Mills Mazdoor Union,· Kanpur ('). For 1952 and 1953 the claim of the Union for bonus, the Industrfal Tribunal held, was still weaker; because in those years there was still less available surplus for distribution as bonus to its workers, and so far as the second part of the claim of the Union, namely, Diamond Jubilee bonus, was concerned, the Industrial Tribunal rejected it outright.\n\nThe Labour Appellate Tribunal substantially affirmed the decision of the Industrial Tribunal and gave several reasons why the global profits of the Lipton, Ltd., could not be taken into account for the payment of bonus to its workers in India. After having given those reasons, the Labour Appellate Tribunal referred to the auditors' report dated March 17, 1952, with regard to the profit and loss account and balance-sheet of the Indian business as on January 5, 1952. In that report which related to the year 1951 it was stated that the value of the stocks of tea held at the end of 1951 had been written down below cost by Rs. 9,93,824-5-3.\n\nThe auditors' report then said :-\n\n\"We estimate the net realisable value of the total stocks of tea as on January 5, 1952, to be in excess of their cost and, therefore, in our opinion, such stocks have been undervalued to the extent of the above reduction below cost.\" Relying on this report the Labour Appellate Tribunal added back Rs. 9,93,824 to the available surplus of Rs. 9,66,654 which the profit and loss account of the Indian business for the year 1951 showed.\n\nAdding the two figures the Labour Appellate Tribunal opined that the available surplus at the end of 1951 was Rs. 19,60,478. After deducting therefrom the\n\n(1) [1950) L.L.J. 1247.\n\n(2) [1955) 1 S.C.R. 991.\n\nlegitimate prior charges on account of (a) rehabilita: tion, (b) a four per cent. return on capital and (c) one month's bonus already paid to the workers, the Labour Appellate Tribunal came to the conclusion that there was a clear available surplus of Rs. 4,11,478 for distribution of extra bonus over and above the bonus of one month's salary which the Lipton, Ltd., had already paid to its workers.\n\nIt has been contended before us, and rightly in .our opinion, that the Labour Appellate Tribunal committed a manifest error with regard to the sum of Rs. 9,93,824 and odd. It is true that the auditors in their report referred to the under-valuation of the stock of tea available at the end of 1951 by a sum of Rs. 9,93,824 and odd.\n\nAn explanation of such undervaluation was given in the written statement of the Lipton, Ltd., dated February 8, 1955. It was stated therein:-\n\n\" It is a well recollected fact and the Court will not need evidence in support of this that the tea market dropped rapidly and in a catastrophic fashion towards the end of 1951. As a result of this the Company apprehended seve:we losses on the stocks which it was carrying and provision for this loss was made in the 1951 accounts by an adjustment to the value of stocks of tea on hand at the end of December, 1951.\n\nThe amount of this adjustment was Rs. 9,93,824. As a result of this, the profits made during 1951 were understated in the company's accounts and overstated in the accounts for 1952. It should be noted that the Income-tax Department insisted that these profits were made in 1951 and not in 1952 and the Company was taxed accordingly.\" What is worthy of note is that when the Income-tax Department insisted that the sum of Rs. 9,93,824 should be treated as the profits of 1951, the said amount was added back in the summarised profit and loss account of the Indian branch and the available surplus of Rs. 9,66,654 was shown therein after having taken into consideration the sum of Rs. 9,93,824. This is clear from the summarised profit and loss account\n\nLipton Ltd. v.\n\nTheiY Employees\n\nS. K. Das].\n\nx959 of the Indian branch. It is clear, therefore, that the 1951 profit and loss account took into consideration Lipton Lid. the sum of Rs. 9,93,824 and after adding back that Their .;;,, ployees sum to the profits of 1951, the available surplus of Rs. 9,66,654 was arrived at. The Labour Appellate s. K. Das J.\n\nTribunal was, therefore, manifestly in error in adding back the sum of Rs. 9,93,824; because that amount had already been added back in arriving at the available surplus of 1951. Thus, the main reason which the Labour Appellate Tribunal gave for its decision to award the payment of extra bonus for 1951 disappears, and it is not disputed that if the available surplus for 1951 was only Rs. 9,66,654, then after making the necessary deduction for prior charges, nothing would be left for payment as extra bonus in 1951 to the workers in India. So far as the other two years, 1952 and 1953, are concerned, it is unnecessary to consider the profits of those two years, because there is no appeal before us on behalf of the Union.\n\nOn behalf of the Union, however, it has been very strongly contended that the bonus for 1951 as awarded by the Labour Appellate Tribunal can be justified if the global profits of the Lipton, Ltd., are taken into consideration, and it has been argued before us that there is no reason why the Lipton, Ltd., should not be treated as one integrated industry which has trading activities in various countries and, for the purpose of the payment of bonus, why the total global profits of the Lipton, Ltd., should not be taken into consideration.\n\nWe do not think that the Union is justified in asking for bonus for a particular year on the basis of the world profits of the Lipton, Ltd. The true nature of a claim for bonus has been the subject of many decisions in Labour Tribunals and Courts. It has been judicially recognised that bonus is not deferred wage, and the justification for a demand of bonus as an \"industrial claim\" arises when wages fall short of the living wage aud the industry makes sufficient profits to which both labour and capital have contributed.\n\nSubstantially, the claim for bonus is a claim which is paid out of the available surplus from the profits of an\n\nindustrial undertaking, to which both labour and capital have contributed. This aspect of bonus was considered in Muir Mills Co. Ltd. v. S1tti Mills Mazdoor\n\nUnion, Kanpur (1). It has also been said in some cases that bonus is a temporary and partial filling-up of the gap that exists between a living wage and the actual wage paid: where the goal of living wage has been attained, bonus is a mere cash incentive to greater efficiency and production, but where an industry has not the capacity to pay a living wage or its capacity varies or is expected to vary from year to year so that the industry cannot afford to pay a living wage, the payment of bonus may be looked upon as a temporary satisfaction, wholly or in part, of the needs of the employees.\n\nLearned counsel for the Union has emphasised this latter aspect and has contended that there is nothing unfair in considering the global profits of the Lipton, Ltd., in awarding a temporary satisfaction, in part, of the needs of its Indian employees.\n\nWe do not think that it is necessary or advisable to lay down any inflexible, general rule as to the basis of a claim for bonus by some of its employees in an industrial undertaking which carries on trade activities in several countries or even in different parts of the same country. So far as foreign countries are concerned, many considerations such as restrictions on foreign remittaI, lces and other trade restrictions may have to be taken into account in determining the question, as in Ganesh Flour Mills v. Employees of Ganesh Flour Mills (2).\n\nThere are a number of decisions of Labour Tribunals, most of which were noticed in Ganesh Flour Mills Co. Ltd. v. Employees of Ganesh }!'lour Mills (2), where a distinction has been made between a parent concern and subsidiary concerns or even between different units of the same concern, and, speaking generally, the test laid down for the payment of bonus in such cases is (1) if the different units are so connected together or integrated that the payment of bonus to one section of employees will violate the principle that all workers should share in the prosperity to which they have jointly contributed, or (2) the\n\n(1) [1955] 1 s.c.R. 991.\n\n(2) A.I.R. 1958 S.C. 382.\n\nI959\n\nLipton Ltd. v.\n\nTheir Emplpyees\n\nS. K. Das].\n\nLipton Ltd. v.\n\nTheir Employees\n\nS. J(. Das].\n\ndifferent units are so separated or unconnected that the trade activity of one and the contribution of labour made in the profits thereof has no necessary connexion with the trade activity and profits of the other units. In the former case the undertaking has been treated as a whole as in Burn and Go., Calcutta v.\n\nTheir Employees (1); and Baroda Borough Municipality v. Its.Workmen (2); in the latter, it has been held that each unit must rest its claim for bonus on the profits made by that unit. Whether a particular case comes under the former category or the latter must depend on its own facts and circumstances, and we may readily agree that the mere keeping of separate accounts may not in all cases be the proper criterion for determining whether the different units are integrated or not.\n\nFor the purpose of these appeals it is sufficient, however, to state that in view of the findings arrived at by the Tribunals below, it will be unfair and unjust to grant bonus to the Indian workers on the global profits of the Lipton, Ltd. The Tribunals below have clearly found that the Indian workmen do not in any way contribute to the profits which the Lipton, Ltd., derive from its ex-India business. As a matter of fact, even the nature of the trade activity is not quite the same ; tea represents only about 10 per cent. of the trading activities of the Lipton, Ltd., in the United Kingdom, whereas tea. is the main commqdity of the trading activity of the Indian branch. The Indian branch maintains separate accounts which have been andited and accepted by the Income-tax authorities as showing the profit and loss of the Indian branch of the business. The Labour Appellate Tribunal has very clearly found that Lhough, at the relevant time, t}\\e Lipton, Ltd., was one legal entity and the capital of the Indian branch came from London, the Indian branch was treated as a separate entity for all practical purposes. It said:\n\n\" Lipton, London never interferes with the trading operations c:f Lipton, India, in India. Lipton, India buys vast quantity of tea amounting to millions\n\n(1) [1956] S.C.R. j>81.\n\n(2) [1957] S.C.R. 33.\n\nof tons at:' auctions in Indi~ and sells the same loose or in packets at a profit in the markets of India. Profits thus made go entirely to the credit of the Indian concern. No part of the profits is diverted to England.\n\nLipton, India also purchases tea for export ...... Trading results of Lipton, India must be regarded to be restricted to the earning of commission on tea exported and returns on sale of tea-loose or in packets-in the internal markets in India. Lipton, India has got to pay income-tax to the Government of India on the basis of its earnings on those two heads. Workmen of the Indtan organisation have to work mainly for purchase of tea at auctions in India, for sale of tea at profit in Indian markets and for export of tea on commission to a lesser extent. Therefore, the returns on these heads are the only things upon which the staff of the Indian organisation may depend for bonus.\" In the appeals before us the claim for bonus was made really on the basis of an available surplus of profits, and we agree with the Labour Appellate Tribunal that the Indian workers can claim bonus if there is an available surplus of profits out of the Indian business. In the circumstances in which the Lipton, Ltd., operated in India at the relevant time, it would be unjust to award bonus to the Indian workmen on the basis of the global profits of the Lipton, Ltd. It is not disputed that the Lipton, Ltd., is a very big organisation and has huge reserves which were built up in previous years out of its world profits.\n\nThere is no evidence to show to what extent, if any, the Indian business contributed to those profits. On\n\nthe finding of the Labour Appellate Tribnal that no part of the profits made in India is diverted to England and on the further finding that the Indian business depends on its own trading results, we are of the view that the Tribunals below correctly held that the global profits of the Lipton, Ltd., could not be the basis for awarding bonus to its Indian workmen.\n\nThere was some argument before us as to whether the 1 % commission w hi oh the Indian brainch earned on the e; icport of tea correctly represented the proper remuneration payable to the Indian business.\n\nThat,\n\nI959\n\nLipton Ltd. v.\n\nTheir Employees\n\nS. K. Das].\n\n'959 however, is a question which we do not think is open to enquiry in the present appeals. The Income-tax Lipton Ltd. h h f h v. aut orities accepted as correct t e returns o t e Their Employees Lipton, Ltd., as to their Indian business. It was not suggested that anything more than 1 % was in fact s. K. Das J. taken as commission by the Indian branch, or that the accounts were \"cooked \" in that respect. Whether the 1 % commission was the normal market rate of commission for purchases on behalf of overseas buyers was not investigated; on the contrary, the accounts filed by the Lipton, Ltd., in this respect were accepted as correct. That being the position, it is not open to the respondent to contend that the available surplus should be determined on mere speculation as to what the Indian branch should have earned in the export side of its business.\n\nOn a consideration of all the relevant factors, we are of the view that the Labour Appellate Tribunal was in error in awarding an extra two months' bonus for 1951 and the decision of the Industrial Tribunal was correct. Therefore, the award in so far as it directs the payment of extra two months' bonus for 1951 must be set aside.\n\nWe now go to the more difficult question of fixation of grades and wages.\n\nWhat the Union demanded in the matter of fixation of grades and scales of pay wlII appear from the terms of reference.\n\nThese terms were :-\n\n\"Fixation of grades and scales of pay: l(a) Whether the following pay scales should be adopted and what directions are necessary in this respect:-\n\nPeon, Sweeper, Vant Mazdurs and God- ... Rs. 60-3-90-4-130-5-155. own Mazdurs.\n\nVillage salesmen. ... Rs. 70-5-120-7i-195-10-245.\n\nDrivers. . .. Rs. 90-7i-150-10-250-15-325.\n\nJunior Clerks, Typ-} ists'. Salesmen and ... Rs. 90-7i-150-10-250-15-325.\n\nAssistant Godown Keepers. • Godown Keepers. . .. Rs. 120-10-200-12-320-20-460.\n\nI959\n\ngraphers, Compto- ... Rs. 150-10-250-15-400-20-500.\n\nLipton Ltd.\n\nSenior Clerks, Steno-} ·\n\nmeter Operators and v.\n\nDiv. Salesmen.\n\nTheir Employees\n\n(b) Whether pay scales as stated in 'a' above should come into effect retrospectively from 1-1-53 and what should be the method of adjustments while fixing'the actual pay in the revised scale?\" The Industrial Tribunal gave an increase of 20% to all workers and set out in tabular form the category of workers, their present grades, and the revised grades which the Tribunal was allowing on the basis of a 20% increase. It is necessary to set out the tabular form here :-\n\n\"CATEGORY\n\nPeons, Sweepers, Van Mazdoors and Godown Mazdoors.\n\nVillage Salesman.\n\nDrivers.\n\nJunior Clerks and Typists.\n\nSalesman.\n\nGodown Keepers Gr. 1\n\n\" 2 \" 3 Senior Clerks and\n\nPRESEN'r\n\nGRADE\n\n27-2-45 40-0-50 65-3-95\n\n70-5-125\n\n50-0-71> 70-5-130 125-8-200 195-10-235\n\nComptometer Operators. 120-8-200 Stenographers. 125-8-205 Divisional Salesman 80-0-125\n\nREVISED\n\nGRADE\n\n35-2-55 50-2-60 78-3-114\n\n84-6-150 60-5-90 84-6-150 150-9-240 230-10-280\n\n140-10-240 150-10-240 100-10-150.\" As to the date from which the revised grades were to take effect, the Tribunal directed that they should have retrospective effect from January 1, 1954, instead of January 1, 1953, as claimed by the Union.\n\nThis direction the Tribunal gave because the Union had presented its demands to the Lipton, Ltd., for the first time towards the end of December, 1953.\n\nThe Tribunal also, gave certain directions as to how the present employees should be brought into the\n\nS. K. Das].\n\nr959 new scales and what adjustments should be made therefor.\n\nLipton Ltd.\n\nThe Tribunal proceeded on the footing that the\n\nTheiY ;-,,, ployees existing wage structure, though not far below what it called the minimum fair wage, was far below the s. K. Das J. standard of a living wage, the progressive attainment of which (the Tribunal said) is the aim of all labour laws. The Tribunal then considered the question of financial capacity of the Lipton, Ltd., to bear a higher wage structure and expressed itself as follows:\n\n\"Since as remarked before, the existing wage level of the company's employees cannot be said to be far below the minimum fair wage level obtaining in this country, this wage level can be increased only if it can be found that the company is in a financially sound position to bear the additional burden. This again brings us. face to face with the question whether it is the company's capacity to pay on an all-world basis that should be considered for this purpose or only the prosperity of its Indian branch. So far as bonus is concerned, since bonus according to the latest theory represents a due share of the labour in the profits of business so largely contributed to by it, profit accruing from foreign business does not come into the picture in distributing bonus. The same principle cannot be extended to the fixing of the wage level of the workers, for all the employees in India are of course employees of the parent company ........................ .\n\nThe company's global resources cannot, therefore, be disregarded in determining its capacity to pay. At the same time, the company's overall balance-sheet and state of business cannot furnish the sole criterion for the fixing of the upper limit of the fair wage in India, for if a burden is imposed upon the company which is out of all proportion to the income that it derives from the business in India, the company may very well be tempted to close aown its business in India and employ the capital thus released elsewhere.\n\nNo one can be happy over a situation like this, the company's employees least of all.\n\nWhile, therefore, the company's global capacity to pay cannot be kept\n\nout of consideration in fixing the wage level of its Indian employees, any increase in the wages cannot be granted on a level that would not leave it worth while for the company to continue its business in India. In other words, while the company's overall prosperity may be considered in fixing the wage level in India, I should see to it that the increas.e should not be such that it drives the company out of India altogether.\"\n\nThe Tribunal pointed out that according to the last balance-sheet filed in the case the share capital of the Lipton, Ltd., amounted in 1954 to £ 2,75,000 (but the balance-sheet however shows £ 2,500,000) while the reserve capital stood at £ 3,60,417.\n\nThe Tribunal expressed the view that having regard to its global resources, the Lipton, Ltd., was financially able to bear a slightly higher wage structure in order to bridge the gap, in part at least, between the existing wage structure and the living wage standard. The Tribunal also referred to the circumstance that though the\n\nLiJ:)ton, Ltd., had incurred losses in 1949 and 1950, it had turned the corner in 1951 and the Company having overhauled its system of sales, there was a reasonable expectation of larger profits in future years.\n\nThe Tribunal said that in the course of arguments before it, it put to the parties whether an overall increase of five lakhs of rupees in the wage structure on an all India basis could be borne by the company.\n\nThe Tribunal then said :\n\n\"Mr. Samuel was prepared to accept this additional burden on the condition that in future there will be no liability on the Company to pay bonus to their workers on an ex gratia basis, which they have been paying so far to their workers every year at. the rate of one month's basic salary.\" On the aforesaid grounds, the Tribunal came to the conclusion that the Lipton, Ltd., could easily stand an additional burden to the tune of fivil or six lakhs of rupees over the wages and dearness allowance at present paid to its employees all over India, and as the total annual wage bill of the Indian workmen was\n\nr959\n\nLipton Ltd. v.\n\nTheir Employees\n\nS. K. Das].\n\nL959\n\nLipton Ltd. v.\n\nTheir Employees\n\nS. K. D.s ].\n\nin the neighbourhood of about twenty lakhs, an increase of 20% allowed to all workers over their present wages and proportionate increase in the dearness allowance would not exceed six lakhs. On this basis the Industrial Tribunal gave its award.\n\nThe Labour Appellate_ Tribunal substantially affirmed the reasons given by the Industrial Tribunal and said that the two questions which arose for determination were (1) whether the existing scales of pay required revision and (2) whether the revised scales as fixed by the Industrial Tribunal were unwarrauted and beyond the financial capacity of the Lipton, Ltd.\n\nBoth these questions the Appellate Tribunal answered in favour of the respondent workmen.\n\nIn the appeals before us, the learned Attorney- General appearing for the Lipton, Ltd., has very strongly contended that the reasons given by the Tribunals below for a vevision of the wage structure are unsound in principle and unjustified on facts ; he has particularly laid stress on the contradiction involved in taking the glubal financial resources of the Lipton, Ltd., in support of an increase in wages while holding that the Indian branch is a separate entity dependent on its own profits for the payment of bonus. He has also submitted that the financial resources of the Indian branch do not show any capacity to pay higher wages; nor was there, according to him, any reliable evidence to show 1lhat the existing wage structure required revision if it was compared to the wage structure in similar industries in the Delhi region.\n\nHe pointed out that the Tribunal was wrong in thinking that the Lipton, Ltd., turned the corner in 1951 and that there was a reasonable expectation of_larger profits in future years, and in support of his contention, he referred to the appel- !ant's statement of the case, wherein the appellant stated in the following chart from the profit and loss figures of the Indian branch from 1949 to 1957 in the context of its a veragc capital:\n\nAverage Capital (representing Head office Current Account).\n\nNet Profit\n\n1949 1950 1951 1952 1953 1954 1955 1956 1957 (in lakhs of rupees) i year.\n\n162 158 167 209 195 235 245 193 165\n\n(after taxa- 8·2 3·6 2·4 6·3 TO 8·2 2·8 10·6 6o tion)\n\n(loss) (loss) Percentage of Net\n\n(loss) (loss)\n\nProfit/Loss 5·1 2·3 1·4 3·0 3·6 3·5 ro 5·5 3·6 to the Aver- (loss) (loss) (loss) (loss). age Capital.\n\nThe learned Attorney-General then referred to the alleged admission of Samuel as to the capacity of the Lipton, Ltd., to bear an additional burdyn of about five lakhs and drew our attention to the affidavit of S. K. Choudhury, personnel officer of the Lipton Ltd., made before the Appellate Tribunal, in which it was stated that Samuel never agreed that the appellant was able to bear an additional burden of five lakhs in the wage structure. On these submissions, the learned Attorney-General has very strongly contended that the Tribunals below were wrong, in principle as well as on facts, in disturbing the present wage structure.\n\nWe think that, in the main, three questions arise for consideration: (l) were the Tribunals below wrong in having regard to the global financial resources of the Lipton Ltd., in fixing the wage structure whereas for the payment of bonus the profits of the Indian branch only were taken into consideration; (2) did the existing wage structure require revision and was there any reliable evidence to show the wage strucof any comparable industry in the same region, on the assumption that the capacity to pay should be gauged on the industry-cum-region basis; and (3) has Lipt10ll Ltd., fina.ncial capacity to bear the additional burden on its Indian resources?\n\nLipton Ltd. v. Their Employees\n\nS. K. Das].\n\nI959\n\nLipton Ltd. v.\n\nTheir Employees\n\nS. I<. Das ].\n\nIt is necessary first to state that there is a distinction between bonus and wage-a distinction to which we had earlier adverted in this judgment.\n\nBonus comes out of profits and can claim no priority over dividend or other prfor charges; bonus is paid if after meeting prior charges, there is an available surplus.\n\nWages stand on a somewhat different footing; wages primarily rest on contract and are determined on a long term basis and are not necessarily dependent on profits made in a particular year. The distinction between the two has been adverted to in two recent decisions of this Court: Messrs. Grown Aluminium\n\nJV or ks v. Their JV orkmen (1) and Express N ew8papers (Private) Ltd. v. 'Phe Union of India (2).\n\nIn the Crow11 Aluminium Works (1 ) this Court has observed:\n\n\" The old principle of the absolute freedom of contract and the doctrine of laissez faire have yielded pface to new principles of social welfare and common good.\n\nLabour naturally looks upon the constitution of wage structures as affording 'a bulwark against the dangers of a depression, safeguard against unfair methods of competition between employers and a guarantee of wages necessary for the minimum requirements of employees'. There can be no doubt that in fixing wage structures in different industries, industrial adjudication attempts, gradually and by stages , though it may be, to attain the principal objective of a welfare state to secure 'to all citizens justice, social and economic '.\n\nTo .the attainment of this ideal the Indian Constitution has given a place of pride and that is the basis of the new guiding principles of social welfare and common good to which we have just referred.'' In so far as bare minimum wage is concerned, it has been held that no industry has the right to exist unless it is able to pay its workmen at least a bare minimum wage; in other words, minimum wage is the first charge on an industry. In the later decision of the Express Newspapers (Private) Ltd. (2) the three concepts of the minimum wage, fair wage and living wage have been examined, and it has been pointed out that\n\n(1) [1958] S.C.R. 651, 660.\n\n(2) [1959] S.C.R. 12.\n\nthe content of the expressions \" minimum wage \", z959 \"fair wage\" and \"living wage\" is not fixed and static; it varies and is bound to vary from time to Lipt\";, Ltd. time.\n\nTheir Employees The present case is not one of payment of the minimum wage; it is a c'ase of payment ofa fair wage which s. K. Das J. still falls short of a living wage. For the payment of a fair wage as for a living wage, the financial capacity of the industry is undoubtedly a relevant considerlrtion. The question before us is--how is the financial\n\ncapacity of the Lipton, Ltd., to be judged? The question of the capacity of the industry to pay a fair wage has been considered in the Express Newspapers ·(Private) Ltd. (1) (at p. 89) and the following observations are apposite-\n\n\" The capacity of industry to pay can mean one of three things, viz.,\n\n(i) the capacity of a particular unit (marginal, representative or average) to pay,\n\n(ii) the capacity of a particular industry as a whole to pay or\n\n(iii) the capacity of all industries in the country to pay.\" The Committee on ]fair \\, Yages had said (pp. 13-15 of the report):\n\n\"In determining the capacity of an industry to pay, it would be wrong to 'take the capacity of a particular unit or the capacity of all industries in the country. The relevant criterion should be the capacity of a particular industry in a specified region and, as far as possible, the same wages should be prescribed for all units of that industry in that region.\" This is known as the industry-cum-region basis for the fixation of wages. In the Ea; press Newspapers (Private) Ltd. (1) this Court has laid down the following principles for the fixation of wages (at p. 92):\n\n\"The principles which emerge from the above discussion are :\n\n(1) that in the fixation of rates of wages which include within its compass the fixation of scales of wages also, the capacity of the industry to pay is one\n\n(1) [1959] S.C.R. 12.\n\nLipton Ltd. v.\n\nTheir Employees\n\nS. K. Das}.\n\nof the essential circumstances to be taken into consideration except in cases of bare subsistence or minimum wage where the employer is bound to pay the same irrespective of such capacity;\n\n(2) that the capacity of the industry to pay is to be considered on an industry-cum-region basis after taking a fair cross section of the ind us try ; and\n\n(3) that tQe proper measure for gauging the capa- City of the industry to pay should take into account the elasticity of demand for the product, the possibility of tightening up the organisation so that the industry could pay higher wages without difficulty and the possibility of increase in the efficiency of the lowest paid workers resulting in increase in production considered in conjunction with the elasticity of demand :K>r the product-no doubt against the ultimate• background that the burden of the increased rate should not be such as to drive the employer out of business.\"\n\nWe do not think that-it is necessary to decide in the present case whether the Tribunals below were right in having regard to the global resources of the Lipton, Ltd., in the matter of the revision of the wagestructure; because we consider that on an application of the principle of industry-cum-region, the revision of the wage-structure made by the Tribunals below cannot be said to be unjustified on the financial resources of the Lipton, Ltd., as disclosed by its trading results in India.\n\nThe learned Attorney-General has referred to certain larger considerations : he has suggested that if the global resources of a company like the Lipton, Ltd., which operates in several coun: tries are taken into consideration in determining the wage structure, it may result in disparity of wages in different regions giving rise to industrial unrest and it may also have the effect of stopping new industries in this country. and thereby increase unemployment.\n\nThese are matters which may require serious consideration in a more appropriate case ; but in the present case we may examine the problem from the narrower point of view, namely, the trading results in India of the Lipton, Ltd.\n\nWe may first dispose of a subsidiary but connected\n\n(2) S.C.R.\n\nSUPREME COURT REPOR'rS 175\n\npoint. In the Industrial Tribunal the case proceeded on the footing that the Lipton, Ltd., had a uniform system of wages in India and if the wage structure of the Delhi employees was revised it would mean revising the wage structure of the employees in other Indian offices as well. It was further suggested that if the wage structure was tmiformly revised at all other places, then the cost of the increase in wages taken along with the cost of other reliefs granted by the Industrial Tribunal, would be much more than five or six lakhs. We do not think that this would be a good ground for setting aside the award.\n\nThe Industrial Tribunal, Delhi, had jurisdiction to make an award in respect of the employees of the Delhi office only ; it had no jurisdiction to make an all-India award. Moreover, if the true principle for fixation o( wages is region-cum-industry, then there is no reason why the Delhi award should automatically apply to all the other regions.\n\nIt has not been disputed before us that the existing wage of the Delhi employees is far below the living wage. The first question is-was there any reliable evidence to show that in comparable industries in the same region, the wages were higher and, therefore, the wage structure required revision to the extent allowed by the Industrial Tribunal. On behalf of the Union evidence was given about the scales of pay of employees in t_he Delhi office of a number of industrial undertakings, such as the Standard Vacuum Oil Company, Thomas Cook (Continental) Overseas, Burma Shell, Lever Brothers (India) Ltd. and Associated Companies, and Marshall Sons and Co. (India) Ltd.\n\nOn behalf of. the appellant it has been contended that none of the above are comparable industries; some are oil companies, some engineering concerns and some manufacturing concerns. On behalf of the Union, it has been pointed out that so far as the drivers, sweepers, peons, clerks, godown keepers, typists, stenographers and the like are concerned, and these form the bulk of the employees, their nature of work is about the same in all the aforesaid industries and, therefore, there was a basis for comparison on which the\n\nI959\n\nLipton Lid, v.\n\nTheir Employees\n\nS. K. Das].\n\nI959\n\nLiplon Ltd. v.\n\nTheir Employees\n\nS. J(. Das, f.\n\nTribunals below could proceed.\n\nWe are of the view that it is impossible to say in this case that there was no evidence on which the Tribunals could proceed to revise the wage structure; on the contrary there was evidence accepted by the Tribunals below which justified a revision of the wage structure.\n\nThe Appellate Tribu!!al also referred to the scales of pay obtaining in Brooke Bond, India, and opined that the appellant's scales of pay were lower than the Brooke Bond scales.\n\nThis opinion of the Appellate Tribunal' has been challenged before us ; firstly, it has been contended that though Brooke Bond has a similar trading activity in tea, it is not a comparable industry because it owns tea gardens in India; secondly, it has been pointed out that no evidence of the Brooke Bond's scales of pay was given and the opinion of the Appellate Tribunal was a mere surmise. It appears that no evidence was given before the Industrial Tribunal about the Brooke Bond's scales of pay, but some additional evidence was offered at the appellate stage; this was not, however, accepted. In the circumstances, we do not think that the Brooke Bond's scales of pay can be taken into consideration. But as we have earlier said, there was other evidence on which a comparison could be and was made by the Tribunals below. That comparison justified an increase in the wage structure.\n\nThe next question is-do the trading results in India of the Lipton, Ltd., show that it has the financial capacity to bear the burden of the wage increase?\n\nThe statement, in chart form, of the profit and loss figures from 1949-1957 to which we have earlier referred, shows that net profits in 1952 exceeded six lakhs, in 1953 seven lakhs, in 1954 eight lakhs and in 1956 ten lakhs. We have said earlier that wages do not necessarily come out of the net profits of a particular year, and it cannot be said that a fair wage must inevitably be postponed till a fair return on capital is obtained.\n\nWages are fixed on a long term basis and depend also on the cost of living and the needs of workmen. Judging the trading results of the Indian business of the Lipton, Ltd., over a period of years,\n\nwe cannot say that the Tribunals below committed r959 any error in revising the wage structure. It is germane L.\n\nL d to point out here that Samuel's evidence showed that ipt°;_\n\n the managerial staff of the Indian business, recruited Their Employees in England, receive very high salaries. Samuel said that the General Manager, who is the Chief Executive s. K. Das J.\n\nOfficer of the Indian branch of the Lipton, Ltd., gets a salary of Rs. 5,000 per month. The next officer is the Administrator whose pay is Rs. 4,250 per month.\n\nThe third man, who is the Manager of the Tea Department, gets the same pay as the Administrator. The fourth is the Accountant 0£ the company and his pay is Rs. 3,800 per month. The fifth is the Marketing Controller whose pay is Rs. 3,650 per month. The Factory Manager gets Rs. 3,350 per month. There are several other officers who also get a very high salary and the total number of covenated Executive Officers consists of 32 Europeans and 17 Indians.\n\nNow, the point taken on behalf of the Union is that the wage structure of the Indian branch is top-heavy, in the sense that the higher administrative officers get a salary which is out of all proportion to the wage scale of the employees with whom we are now concerned. It is further contended that the high salaries paid to the superior Executive show (1) that the wage structure of the lower employees requires revision and\n\n(2) that the financial capacity of the Indian branch is not as negligible as the appellant wants to make out.\n\nWe think, however, that it is not the duty ofa Labour Tribunal or Court to dictate to an industrial concern what salaries should be paid to superior executive officers who are not workmen within the meaning of the Industrial, Disputes Act, 1947. We have pointed out, however, in the Express Newspapers (Private) Ltd. (1) that \" the possibility of tightening up the organisation so that the industry could pay higher wages without difficulty and the possibility of increase in the efficiency of the lowest paid workers resulting in increase in production must be considered in conjunction with the elasticity of demand for the product-\n\n(r) [1959] S.C.R. r2.\n\n1959 no doubt against the ultimate background that the burden of the increased rate should not be such as to Lipton Ltd. drive the employer out of business\". This is an\n\nThefr ;;,, ployees aspect of the matter which the Tribunals below had considered and the Industrial Tribunal had partis. K. Das J. cularly said that the increase in the wage structure was not such as would drive the Lipton, Ltd., out of its Indian business.\n\nOur attention has been drawn to the financial implications of the award and it has been pointed out that the total annual cost to the company of the increase in the wage structure of the employees in the Delhi office would be in the neighbourhood of Rs. 49,721 per year ; on an all-India basis it would be in the neighbourhood of Rs. 2,71,000 and odd. Having regard to the evidence which Samuel gave it cannot be said that the burden of the increased rate was such as would be beyond the financial resources of the Lipton, Ltd., on its trading results in India or was such as would drive the Lipton, Ltd., out of India. Even on the basis of all ; the reliefs granted by the award, the total cost to the company for the Delhi office would be in the neighbourhood of Rs. 1,15,000 and on an all- India basis Rs. 6,34,000.\n\nWe have said earlier that the award was not an all-India award, and so far as the fixation of wages is concerned, it must be judged on the principle of industry-cum-region. So judged, we do not think that the increase is beyond the financial resources of the Lipton, Ltd., as disclosed by its trading results in India.\n\nOn behalf of the appellant, it has been submitted that one of the tests for measuring the capacity of the industry to pay the increased wage is, amongst others, the selling price of the product and it has been pointed out that by reason of the imposition in 1953 of an excise duty of three annas per pound of packet tea, there is serious competition from those who sell tea in _loose form and any further increase in price will give rise to consumers' resistance and ultimately result in lesser sale and lesser profits. In our opinion the industrial Tribunal rightly pointed out that the moderate increase in the wage scale proposed by it would only\n\nbe a very small fraction of the overall cost of production of a packet of tea and would have very little repercussion in its price. Lastly, our attention was drawn to an award of the Special Industrial Tribunal, Madras, dated October 15, 1956, between the management of the Lipton, Ltd., Madras and its workers employed in Madras where on more or less similar facts the Industrial Tribunal repelled the argument on behalf of the workmen that the global financial position of the Lipton, Ltd., should be taken into account in considering the capacity of the company to pay higher salaries and dearness allowance, and it was held that the Lipton, Ltd., could not be burdened wit~ any addit; ional liability and the employees must wait for better days. That award is not the subject of the present appeals and we consider it unnecessay, and indeed inadvisable, to make any pronouncement as to the correctness or otherwise of that award.\n\nThe only other point which requires conside.ration is the question of the date from which the new scales of pay should come into effect. The Industrial Tribunal fixed January 1, 1954, on the ground that the Union had presented its charter of demands to the appellant for the first time towards the end of December 1953. 'Ve are unable to agree with the Tribunals below that the circumstance that a charter of demands was presented in December 1953 is a good ground for giving retrospective effect to the new scales of pay. The charter of demands presented by the Union consisted of 20 items and in the matter of the wage scale what the Union demanded was in some cases more than 50 to 75% increase on the existing scales of pay. Obviously, the demands were exorbitant and the management was justified in refusing to accept the demands in toto. We are, therefore, unable to agree that retrospective effect should be given to the new scales of pay from January 1, 1954. The award was made on August 18, 1955, and it was published on October 6, 1955.\n\nWe think that it will be more just to bring the new scales of pay with effect from November l, 1955, and we direct accordingly. The other directions given\n\nI959\n\nLipton Ltd. v.\n\nTheir Employees\n\nS: K. Das].\n\nI959\n\nLipton Ltd. v.\n\nTheir Employees\n\n S. K. Das].\n\nI9~9\n\nFebruary a.\n\n180 SUPitEME .COURT REPOitTS [1959] Supp.\n\nby the Industrial Tribunal to bring the present employees into the new scales of pay will stand subject to the necessary modification that instead of January 1, 1954, the relevant date should be November I, 1955.\n\nThe result,, therefore, is as follows: Appeal No. 715 of 1957 is dismissed with costs. Appeals Nos. 713 and 714 off 957 are allowed to the extent indicated above.\n\nThe order for the grant of bonus for 1951 is set aside and the new scales of pay will take effect from November 1, 1955, instead of from January 1, 1954. There will be no order for costs in these two appeals.\n\nAppeals Nos. 713 and 714 allowed in part.\n\nAppeal N_o. 715 dismissed.\n\nDAMODHAR TUKARAM MANGALMURTI\n\nAND OTHERS\n\nTHE STATE OF BOMBAY (SYED JAFER IMAM, S. K. DAS and J. L. KAPUR, JJ.) Lease-Construction-Enha11ce1nent of rent-\" Fair and eqititable enhancement as the lessor shall determine\" -Lease, whether void for uncertainty-Court's power to determine fair and equitable rent.\n\nIn r909, for the purpose of residential accommodation, plots of land were given on lease by the Government to the appellants and others for which a premium of Rs. 350 and an annual rent of ll.s. 3-8-0 for each plot had to be paid. Clause III of the deed \"of lease in each case provided: \" And the lessor does further covenant that he will at the end of the term of 30 years hereby granted and so on from time to time thereafter at the end of each successive further term of years as shall be granted at the request of the lessee execute to him a renewed lease of the land hereby demised for the term of 30 years: Provided that the rent of the land hereby demised shall be subject to such fair and equitable enhancement as the lessor shall determine on the grant of every rene\\val: Provided also that every such renewed lease of the land shall contain such of the covenants, provisions and conditions in these presents contained as shall be applicable and shall always contain a covenant for further renewal of the lease.'", "total_entities": 15, "entities": [{"text": "S. LIPTON LIMITED AND ANOTHER\n", "label": "PETITIONER", "start_char": 61, "end_char": 91, "source": "metadata", "metadata": {"canonical_name": "M/S. LIPTON LIMITED AND ANOTHER", "offset_not_found": false}}, {"text": "THEIR EMPLOYEES (SYED JAFER IMAM", "label": "JUDGE", "start_char": 92, "end_char": 124, "source": "metadata", "metadata": {"canonical_name": "SYED JAFFER IMAM*", "offset_not_found": false}}, {"text": "S. K. DAS", "label": "JUDGE", "start_char": 126, "end_char": 135, "source": "metadata", "metadata": {"canonical_name": "S.K. DAS", "offset_not_found": false}}, {"text": "L. KAPUR, JJ.", "label": "JUDGE", "start_char": 143, "end_char": 156, "source": "metadata", "metadata": {"canonical_name": "J.L. KAPUR", "offset_not_found": false}}, {"text": "s. 2", "label": "PROVISION", "start_char": 4417, "end_char": 4421, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 18", "label": "PROVISION", "start_char": 4471, "end_char": 4476, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 1", "label": "PROVISION", "start_char": 19226, "end_char": 19230, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 2", "label": "PROVISION", "start_char": 21176, "end_char": 21180, "source": "regex", "metadata": {"statute": null}}, {"text": "Disputes Act, 1947", "label": "STATUTE", "start_char": 21200, "end_char": 21218, "source": "regex", "metadata": {}}, {"text": "s. 18", "label": "PROVISION", "start_char": 21306, "end_char": 21311, "source": "regex", "metadata": {"linked_statute_text": "the Industrial\n\nDisputes Act, 1947", "statute": "the Industrial\n\nDisputes Act, 1947"}}, {"text": "s 5", "label": "PROVISION", "start_char": 23634, "end_char": 23637, "source": "regex", "metadata": {"statute": null}}, {"text": "[1955) 1 S.C.R. 991", "label": "CASE_CITATION", "start_char": 25481, "end_char": 25500, "source": "regex", "metadata": {}}, {"text": "S1", "label": "PROVISION", "start_char": 29957, "end_char": 29959, "source": "regex", "metadata": {"statute": null}}, {"text": "Disputes Act, 1947", "label": "STATUTE", "start_char": 60703, "end_char": 60721, "source": "regex", "metadata": {}}, {"text": "s. 3", "label": "PROVISION", "start_char": 66822, "end_char": 66826, "source": "regex", "metadata": {"statute": null}}]}
{"document_id": "1959_2_180_201_EN", "year": 1959, "text": "I959\n\nLipton Ltd. v.\n\nTheir Employees\n\n S. K. Das].\n\nI9~9\n\nFebruary a.\n\n180 SUPitEME .COURT REPOitTS [1959] Supp.\n\nby the Industrial Tribunal to bring the present employees into the new scales of pay will stand subject to the necessary modification that instead of January 1, 1954, the relevant date should be November I, 1955.\n\nThe result,, therefore, is as follows: Appeal No. 715 of 1957 is dismissed with costs. Appeals Nos. 713 and 714 off 957 are allowed to the extent indicated above.\n\nThe order for the grant of bonus for 1951 is set aside and the new scales of pay will take effect from November 1, 1955, instead of from January 1, 1954. There will be no order for costs in these two appeals.\n\nAppeals Nos. 713 and 714 allowed in part.\n\nAppeal N_o. 715 dismissed.\n\nDAMODHAR TUKARAM MANGALMURTI\n\nAND OTHERS\n\nTHE STATE OF BOMBAY (SYED JAFER IMAM, S. K. DAS and J. L. KAPUR, JJ.) Lease-Construction-Enha11ce1nent of rent-\" Fair and eqititable enhancement as the lessor shall determine\" -Lease, whether void for uncertainty-Court's power to determine fair and equitable rent.\n\nIn r909, for the purpose of residential accommodation, plots of land were given on lease by the Government to the appellants and others for which a premium of Rs. 350 and an annual rent of ll.s. 3-8-0 for each plot had to be paid. Clause III of the deed \"of lease in each case provided: \" And the lessor does further covenant that he will at the end of the term of 30 years hereby granted and so on from time to time thereafter at the end of each successive further term of years as shall be granted at the request of the lessee execute to him a renewed lease of the land hereby demised for the term of 30 years: Provided that the rent of the land hereby demised shall be subject to such fair and equitable enhancement as the lessor shall determine on the grant of every rene\\val: Provided also that every such renewed lease of the land shall contain such of the covenants, provisions and conditions in these presents contained as shall be applicable and shall always contain a covenant for further renewal of the lease.'\n\nBy the year 1939 the first 30 years' period of some of the leases came to an end, and the Government sought to enhance the annual rent from Rs. 3-8-0 to Rs. 21-14-0 per plot and also to insert some new terms in the renewed deeds of lease. The appellants brought a suit inter alia for a declaration that the enhancement proposed was not fair and equitable within the meaning of Clause III of the deed of lease, that the fair and equitable rent should be Rs. 7 per plot and that if the court was of the opinion that Rs. 7 was not a fair and equitable rent then it should fix such sum as it considered fair and equitable. The respondent pleaded that such a suit was incompetent. The question was whether the civil court had jurisdiction to enquire whether the enhancement of the rent determined by the lessor was fair and equitable within the meaning of cl,.. III of the deed of lease, and whether, in any case, the lease was void for uncertainty.\n\nHeld, (per Jafer Imam and S. K. Das, JJ.), that the lease is not void for uncertainty; that the expression \"fair and equitable\" in the clause in question means fair and equitable in fact, and not what the lessor subjectively considered to be fair and equitable ; and, that reading the clause as a whole and giving effect to all the words used therein, the meaning is that the lessor must first determine what it considers to be fair and equitable enhancement, but, if in fact it is not so, it is open to the lessee to ask the court to determine what is fair and equitable enhancement. Accordingly, the suit was maintainable.\n\nThe rule laid down in Gourlay v. The Duke of Somerset, (1815) 19 Ves. 429; 23 E.R. 576, held applicable.\n\nThe New Beerbhom Coal Company Limited v. Boloram Mahata and others, (1880) L.R. 7 I.A. 107 and Secretary of State for India in Council v. Volkart Brothers, (1926) I.LR. 50 Mad. 595, relied on.\n\nCollier v. Mason, (1858) 25 Beav. zoo; 53 E.R. 613 and Tekchand Kapurchand v. Mt. Birzabai, A.LR. 1942 Nag. i19,\n\ndistinguished.\n\nPr Kapur, J.-The correct interpretation to be put on\n\ncl. III of the deed of lease is that the lessor was given the authority to determine the enhancement of rent but such enhancement was to be fair and equitable and what would be fair and equitable in any particular case was also to be determined by the lessor. The rule applicable to the present case is that relating to valuation or fixation of prices that where the valuation is fixed by a valuer the court will hold it conclusive in the absence of fraud or mistake or misconduct and the court will not enter into the propriety of the valuation made or substitute its own valuation in place of that determined by the valuer because that will not be an execution of the contract of the parties but making a contract for them.\n\nCase law discussed.\n\nM angalmurti v.\n\nState of Bombay\n\nI959\n\nM angalmurti v.\n\nSlate of Bombay\n\nS. K. Das].\n\nCIVIL\n\nAPPELLATE JURISDICTION: Nos. 181 and 181-A of 1955.\n\nCi vii Appeals\n\nAppeals from the judgment and decree dated September 30, 1952, of the former Nagpur High Court in Second Appeals Nos. 699 and 700 of 1946, arising out of the judgment and decree dated February 21, 1946, of the court of First Additional District Judge, Nagpur, in Civil Appeals Nos. 22-A and 23-A of 1946, against the judgment and decree dated January 2, 1945, of the Court of Second Subordinate Judge, Nagpur, in Cjvil Suit No. 143-A of 1944.\n\nH.J. Umrigar, Ratnaparkhi A. G. and Shankar Anand Zinjarde, for the appellants.\n\nW. s; Barlingay and R. H. Dhebar, for the respondent. ·\n\n1959. February 2.\n\nThe Judgment of Jafer Imam and S. K. Das, JJ., was delivered by S. K. Das, J.\n\nKapur, J., delivered a separate judgment.\n\nS. K. DAS, J.-These two appeals arise out of a litigation which has had a chequered career in the courts below. The short facts are these. The suit out of which the appeals arise was instituted on January 13, 1941, but the plaint was amended on May 4, 1942.\n\nThe amended plaint was to the effect that in or about the year 1905 the defendant, the then Provincial Government of the Central Provinces and Berar, Nagpur, \"opened up\" an area known as the C1; addock Town Area which was originally called the Sitabuldi Extension Area or Dhantoli Area.\n\nDue to the scarcity of residential accommodation in the city of Nagpur, the then Provincial Government along with some prominent members of , the Nagpur Municipal Committee devised a scheme to extend residential accommodation by acquiring agricultural land and making it available for residential purposes.\n\nWith that object in view, the area .in question was acquired and building sites of the average size of about 10,000 sq. ft. each were carved out. These were leased out on a premium of Rs. 350 and an annual rent of Rs. 3-8-0 each. The indenture of lease in each case contained a. clause to the following effect :-\n\n\"III. And the lessor does further covenant that he will at the end of the term of 30 years hereby granted and so on from time to time thereafter at the end of each successive further term of years as shall be granted at the request of the lessee execute to him a renewed lease of the land hereby demised for the term of 30 years; Provided that the rent of the land hereby demised shall be subject to such fair and equitable enhancement as the lessor shall determine on the grant of every renewal : Provided also that every such renewed lease of the land shall contain such of the covenants, provisions and conditions in these presents contained as shall be applicable and shall always contain a covenant for further renewal of the lease.\" One of the leases was executed on May 24, 1909, and some other leases near about that year. By the year 1939 the first 30 years' period of some of the leases came to an end. The original plaintiffs, who were two in number and who sued in their individual right as also representing the members of an association known as the Craddock Town Plot-holders Association alleged that on the expiry of the terms of the leases in question, during which period some of the lessees had built houses on the leasehold property, the then Provincial Government proposed an enhancement of Rs. 21-14-0 from Rs. 3-8-0 as annual rent and also the insertion of some new terms in the re.newed deeds of lease.\n\nThe plaintiffs, on the contrary, said that Rs. 7 per plot was the fair and equitable enhancement. Various representations to the relevant authorities having proved unavailing, the plaintiffs instituted the suit in which they prayed (a) that the enhancement of rent from Rs. 3-8-0 to Rs. 21-14-0 per plot was not fair and equitable within the meaning of\n\ncl. III of the deed of lease; (b) that the offer of Rs. 7 as annual rent made by the association was fair and reasonable; (c) that the defendant do insert in the renewed deeds of lease only such conditions as were to be found in the original deed and not to add to them to the detriment of the lessees' interest ; and\n\n(d) that in the event of this Court not agreeing that\n\nr959\n\nM angalmurti v.\n\nState of Bombay\n\nS. K. Das].\n\nI959\n\n.i11 angalmurti v.\n\nState of Bombay\n\nS. K. Das].\n\nRs. 7 was a fair and reasonable rent, a fair and equitable rent should be fixed by it. The suit was contested by the defendant on several grounds, with most of which we are not now concerned.\n\nThe learned Subordinate Judge of Nagpur, who dealt with the suit in the first instance, took up certain preliminary issues for decision and by a judgment dated April 13, 1942, he disposed of those preliminary issues. One such issue material for our purpose was in these terms: \"In case of dispute as to what is fair and equitable rent, has the civil court no right to determine what is fair rent?\" On this preliminary issue, he found \"that under the terms of cl. III of the indenture of lease, the defendant was entitled to fix a fair and equitable rent; but the civil court has jurisdiction to enquire whether the rent fixed by the defendant is fair and equitable within the meaning of\n\ncl. III \". We need not refer to the other preliminary issues on which the learned Subordinate Judge gave his decision, because those issues no longer survive.\n\nOn the disposal of the aforesaid preliminary issue, the plaint was amended and some more lessees were added, the 30 years' period of whose leases had also expired ; therefore the position was that the plaintiffs were those lessees, the 30 years' period of whose leases had expired and as respects the renewal of whose leases the defendant had proposed an enhancement of Rs. 21-14-0. The defendant claimed that it had been very reasonable in fixing the enhanced rent and it further claimed the right of withdrawing the offer of Rs. 21-14-0 and of making a fresh demand at a much higher rent if the lessees did not agree to the terms originally proposed by the defendant. The defendant further denied that the offer of Rs. 7, that is, twice the original rent, made by the lessees was a reasonable and fair enhancement.\n\nAfter the disposal of the preliminary issues the learned Subordinate Judge proceeded to try the suit on merits and on January 2, 1945, he found on issue no. 4 that Rs. 14 per year would be the fair and equitable enhanced rent for each plot of about 10,000 sq. ft. and he fixed that rent for the next term of 30 years to\n\nwhich the lessees were entitled under cl. III; he further directed the grant of a rebate of 25 per cent. to those lessees 'Yho agreed to a renewal for a term ending in 1948.\n\nFrom the decision of the learned Subordinate Judge two appeals, one by the plaintiffs, and the other by the defendant, were taken to the District Judge and they were heard by the Additional District Judge of Nagpur, who by his Judgment dated February 21, 1946, affirmed the decision of the learned Subordinate Judge that under cl. III of the indenture of lease it was open to the Subordinate Judge to determine what was the fair and equitable rent. The learned Additional District Judge, however, reversed the finding of the learned Subordinate Judge as to the quantum of the fair and equitable rent. He came to the conclusion that the enhancement of rent should not exceed Rs. 7, as any increase over that amount would not be a fair and equitable one within the meaning of\n\ncl. III of the indenture of lease.\n\n From the decision of the learned Additional District Judge, two appeals were taken to the then High Court of Judicature at Nagpur by the defendant Government. The appeals were first placed before a single Judge who directed that they should be heard by a Division Bench. The appeals were then heard by B. P.\n\nSinha, C. J. (as he then was) and Mudholkar, J. The learned Chief Justice came to the conclusion that the suit must fail on the ground that the authority of the court had been invoked in a matter which really lay in contract and the civil court had no jurisdiction to determine the fair and equitable rent. Mudholkar, J., came to a contrary conclusion and held that the suit was maintainable and the courts below could determine the fair and equitable rent. On the question of what should be the fair and equitable rent, the learned Chief Justice gave no finding except saying that \" the decision of the lower appellate court on the question of assessment of fai:u and equitable rent was not satisfactory, because it had gone more by the rule of the thumb than upon the evidence adduced in the\n\nI959\n\nM angalmttrti\n\nStale of Bombay\n\nS. K. Das j.\n\n'959\n\nM angalmurti v.\n\nState of Bombay\n\nS. K. Das].\n\ncase or upon any other sound basis.\" Mudholkar, J., however, said that he saw no adequate ground for differing from the view taken by the lower appellate court with regard to the quantum of fair and equitable rent. On this difference of opinion between the learned Chief Justice and Mudholkar, J., the case was referred to a third Judge, namely, Hemeon, J., who agreed with the view of the learned Chief Justice that, on a proper construction of cl. III of the indenture of lease, the civil court had no jurisdiction to determine the fair and equitable rent and the parties had consciously and deliberately stipulated to abide by the lessor's fixation of a fair and equitable enhancement of rent; and in that view of the matter, he expressed no opinion as to what s.hould be the fair and equitable rent.\n\nIn accordance with the opinion of the majority of Judges, the appeals in the High Court were allowed and the suit was dismissed with costs.\n\nThe plaintiffs, who are the appellants here, then asked for a certificate of fitness under Art. 133(l)(c) of the Constitution of India. The High Court granted the necessary certificate by an order dated October 23, 1953, and the present appeals have been filed in pursuance of that certificate. The area in question being now within the State of Bombay, the State of Bombay has been substituted as the respondent before us.\n\nThe principal question before us is one of construction of cl. III of the indenture of lease. On behalf of the appellants it has been argued that the construction put upon the clause by the majority of Judges in the High Court is not correct inasmuch as it gives no effect to the words \" fair and equitable enhancement \" occurring therein. On behalf of the respondent, it has been submitted that the expression \" subject to such fair and equitable enhancement as the lessor shall determine \" is tantamount to saying \" subject to such enhancement as the lessor shall determine to be fair and equitable,, ; in other words, the argument of learned counsel for the respondent is that the parties had deliberately chosen to abide by whatever was determined to be fair and equitable enhancement by\n\nthe lessor. Mudholkar, J., had proceeded on the footr959 ing that the primary intention of the parties was that\n\n£ bl d h Mangalmurti the enhncement must be air and equita e an t e v. adjectival clause \"as the lessor shall determine \" state of Bombay following the word 'enhancement' being subordinate - to the primary intention of the parties could be s. K. Das J. ignored. Learned counsel for the respondent has very strongly submitted that this view is not correct. •\n\nWe think that the clause should be read as a whole and every effort should be made to give effect to all the words used therein. The relevant portion of the clause states-\" such fair and equitable enhancement as the lessor shall determine \". If the construction is that whatever the lessor determines as fair and equitable enhancement must be treated as bindingon the lessee, then the words ' fair and equitable ' are not given the meaning and sense which they have according to the ordinary acceptation of those words. ']'air ' and 'equitable' mean fair and equitable in fact, and not what the lessor subjectively considered to be fair and equitable. The words 'fair' and 'equitable' both mean' just or unbiased' (see the Concise Oxford Dictionary, 4th Edn., p. 426 and p. 402). If the intention was to.leave the enhancement to the subjective determination of the lessor, the clause would have more aptly said-'such enhancement as the lessor shall determine'.\n\nWe consider that the words' fair and equitable' must be given their due meaning and proper effect.\n\nThe question then asked is-what meaning is to be given to the words' such ...... as the lessor shall determine'.\n\nIt is indeed true that these words constitute an adjectival clause to the expression ' fair and equitable enhancement', but we consider that the meaning of the adjectival clause is merely this : the lessor must first determine what it considers to be fair and equitable enhancement; but if in fact it is not so, it is open to the lessee to ask the Court to determine what is fair and equitable enhancement. We do not think that on a proper construction of the clause, the intention was to oust the jurisdiction of the Court and make the determination of the enhancement by the lessor final and binding on the lessee.\n\nWe think that\n\nI959\n\nM angalmurti v.\n\nState of Bombay\n\nS. K. Das].\n\nthe conclusion at which Mudholkar, J., arrived on this point was correct, though not exactly for the reasons given by him.\n\nIf the construction stated above is the correct constrmtion, then no further difficulty is presented by\n\ncl. III. The learned Judges of the High Court unanimously expressed the view that the lease was not void for u\\icertainty, and in that view we concur. There is authority in support of the view that a covenant to settle land 'at a proper rate' or 'upon such terms and conditions as should be judged reasonable ' is not void for uncertainty (see -The New Beerbhoom Coal Company Limited v. Boloram Mahata and others(') and Secretary of State for India in Council v. Volkart Brothers(')). In the former case, Sir Barnes Peacock who delivered the judgment of their Lordships said :\n\n\" The High Court affirmed the decision, but not for reasons which their Lordships consider to be correct. They affirmed it upon the ground that it was impossible to determine what was a reasonable rate.\n\nTheir Lordships cannot think that in the present 9ase the Court, upon a proper inquiry, would have been unable to determine it.\n\nThere might have been considerable difficulty in fixing the rate; but difficulties often occur in determining what is a reasonable price or a reasonable rate, or in fixing the amount of damages which a man has sustained under particular circumstances. These are difficulties which the Court is bound to overcome.\"\n\nOur attention has been drawn to some English decisions in which the point arose if a contract which appoints a way of determining the price can be specifically enforced.\n\nThere are two lines of decisions. In Milnes v. Grey(') the contract provided that the price shall be valued by two different persons to be nominated and if they happened to disagree then those two persons shall choose a third person whose determination shall be final.\n\nThe question was whether such a contract could be specifically performed and the\n\n(1) (1880) L.R. 7 I.A. 107.\n\n(2) (1926) I.L.R. 50 Mad. 595.\n\n(3) (1807) 14 \\?'\"es, 400; 33 E.R. 574.\n\nanswer given by the Master of the Rolls can be best put in his own words :\n\n\" The more I have considered this case, the more I am satisfied, that, independently of all other objections, there is no such agreement between the parties, as can be carried into execution. The only agreement, into which the Defendant entered, was to purchase at a price, to be ascertained in a specified mode.\n\nNo price having ever been fixed in that mode, the parties have not agreed upon any price; Where then is the complete and concluded contract, which this Court is called upon to execute ? \" In Taylor v. Brewer (1) a claim to compensation was founded on the resolution of a committee which provided that \"such remuneration be made as should be deemed right \". It was held that the engagement was merely an engagement of honour and no claim could be made on it. An example of the other line of decisions is furnished by Gourlay v. The Duke of Somerset (2).\n\nIn that case the agreement provided for \" all such usual and proper conditions, reservations, and agreements, as shall be judged reasonable and proper by John Gale, land surveyor, and in case of his death, by some other proper a.nd competent person to be mutually agreed upon by the said parties\". The plaintiff came to court and the question arose whether the reference to ; settle the lease to be made by the defendant to the plaintiff should be to the Master or to Mr. Gale, the defendant contending tha.t the court decreeing specific performance will take the whole subject to itself and determine by its own officer, not by a particular individual, what are usual and proper covenants. Sir William Grant, Master of the Rolls, said:- , ·\"When the agreement is, that the price of the estate shall be fixed by arbitrators, and they do not fix it, there is no contract as the price is of the essence of a contract of sale, and the Court cannot make a contract, where there is none; but, where the Court has determined, that the agreement is binding and (I) (I8I3) IM. & s. 290; I05 E.R. I08,\n\n(2) (1815) 19 Yes. 429; 34 E.R. 576.\n\nI959\n\nM angalmurti v.\n\nState of Bombay\n\nS. K. Das].\n\nI959\n\nMangalniurti\n\nState of Bombay\n\n..S. K. Das ].\n\nconcluded and such as ought to be executed, it does not require foreign aid to carry the details into execution. Gale's agency is not of the essence of this contract ......... If the parties had gone to Gale, and got him to settle a lease, and one of them had objected to the covenants as improper, and the Bill had been filed by the other, the Court would have inspected. the lease; and if it were found unreasonable, would not have decreed an execution of the agreement.\" We consider that the present case comes within the rule laid down in Gourlay v. The Duke of Somerset (1).\n\nLearned counsel for the respondent placed strong reliance on Gollier v. Mason ('). That was a case in which the defendant had agreed to purchase a property at a valuation to be made by AB ; the Court, though it considered AB's valuation very high and perhaps exorbitant, decreed specific performance, there appearing neither fraud, mistake or miscarriage. The case was decided on the footing that the contract provided that the property shall be purchased at such a price or sum as should be fixed by reference to AB, and it was pointed out that there being no evidence of fraud, mistake or miscarriage the parties were bound by the contract they had made. There was no question in that case of the court stepping in, under the terms of the contract, to determine what was fair and reasonable. Learned counsel for the respondent also relied on Tekchand Kapurchand v. Mt. Birzabai (').\n\nThe principle lai1'l down therein was that a contract binds the parties to it and their representatives and the court's power to interfere with contracts is limited to such cases as fraud, undue influence or mistake and relief against penalty or forfeiture.\n\nIndeed, we agree that if the contract in the present case was that whatever the lessor determined as the enhanced rent would be binding on the parties, then the court has no power to interfere with that contract unless it is vitiated by fraud, undue influence, mistake, etc. If, however, the proper construction of cl. III of the contract is what\n\n(1) (1815) 19 Ves. 429; 34 E. R. 576.\n\n(2) (1858) 25 Beav. 200; 53 E.R. 613.\n\n(3) A.I.R. 1942 Nag. II9.\n\nw~ have held it to be, then the contract itself provides 1959 that the enhanced rent though determined by the less- M angalmurti or in the first instance, must be fair and equitable. On v. such a construction the determination of the enhancestate of Bombay ment by the lessor would not be final and it would be - open to the court to determine what is fair and equits. K. Das J. able enhancement.\n\nWe say this with respect, but the Patna decisions (Secretary of State for India in Council v. Nistarini Annie Mitter (1) and Se.cretary of State v. Babu Rajendra Prasad (2) ), referred to by the learned Chief Justice in his judgment are not in point. Those decisions were not concerned with interpreting a clause in the agreement like the one before us and it was rightly held that in the absence of a contract between the parties, the court had no power to impose upon the parties a bargain not of their own making.\n\nFor the reasons given above, we hold that the decision of the majority of the learned , Judges of the High Court with regard to the interpretation of cl. III of the indenture of lease is not correct and these appeals must go back for a fresh hearing by the High Court in accordance with law for determination of what should be t!ie fair and equitable enhancement. On that point there was no concluded finding by the majority of the learned Judges of the High Court, but learned counsel for the appellants submitted that the finding of the learned Additional District Judge on the quantum of fair and equitable enhancement was a finding f fact and therefore binding in second appeal. At this stage we express no opinion on such a submission, nor do we express any opinion whether the courts below or any of them have gone wrong in principle in determining what should be the fair and equitable enhancement and whether on merits it should be Rs. 7 or Rs. 14 or Rs. 21-14-0, or even a higher sum.\n\nAll these points must be considered afresh by the High Court.\n\nThere is a further point which must also be dealt with in the High Court.\n\nThe learned Subordinate Judge decided on issue no. 7 with regard to the conditions for a renewal of the lease tha, t the Government\n\n(8) (1927) I.L.R. 6 Pat. 446.\n\n(9) A.I.R. 1937 Pat. 391.\n\nI959\n\nM angaltnurti\n\nState of Bombay\n\nS. K. Das].\n\nKapur J.\n\nwere not entitled to make any alterations in the clauses relating to re-entry and notice of demand as contained in cl. II of the original lease. The learned Addi. District Judge said :\n\n\" As regards the new form of lease, it is clear that the chi.use regarding building would be deleted if it is found to be superfluous or redundant. While that in respect of right of lessor to enter on the land without a demand of ground rent (in case of failure to pay it on the appointed date) it is not necessary to interfere as it would amount to making a contract for the parties. It is better to leave the matter to the parties and their legal advisers.\" Whether the view of the learned Subordinate Judge or of the District Judge is correct or not was not considered by the High Court and as the appeals are going back on remand this point should also be dealt with by the High Court.\n\nAccordingly, we allow the appeals and set aside the judgment and decree of the High Court dated September 30, 1952.\n\nThe appeals must go back for a fresh hearing by the High Court in accordance, with law and in the light of the observations made above. In the peculiar circumstances of this case, there will be no order for costs of the hearing of the appeals in this Court. Costs incurred in the two courts below and costs incurred in the High Court, both before and after remand, will be dealt with by the High Court when finally disposing of the appeals.\n\nKAPUR, J.-I regret I am unable to agree in the proposed judgment that it is open to the Court in the circumstances of this case to go into the question of the valuation and to determine as to what, in its opinion, would be fair and equitable enhancement in rent and to interfere with the enhancement as determined by the lessor under the terms of the indenture of lease executed on May 24, 1909.\n\nThe original lease was for a term of 30 years with a provision for renewal for another 30 years with the proviso that the rent of the land demised was \"subject to such fair and equitable enhancement as the lessor shall determine\".\n\nThe facts are set out in the judgment of my learned r959 brother, S. K. Das, J., and it is not necessary to repeat h Pl f l d b 0 f Mangalmurti t em. ots o an measuring a out 1 ,000 sq. t. v. were given on lease by the Government to the appelstate of Bombay lants and others, for which the premium to be paid - was Rs. 350 and the rent Rs. 3-8-0 per annum or Re. 1 Kapur J. per cent. of the premium. Lease deeds were executed in 1909 under clause III of which the lessor determined the enhanced rent at Rs. 21-14-0 and thus raised it from Rs. 3-8·0 per plot to Rs. 21-14-0.\n\nThe appellants brought a suit for declaration that the enhancement proposed was excessive and the fair and equitable rent should be Rs. 7 per plot and if the Court was of the opinion that Rs. 7 was not a fair and equitable rent then it should fix such sum as i1; considered fair and equitable. The respondent pleaded that such a suit was incompetent. The question for decision is what is the effect of using the adjectival words \"fair and equitable\". For the appellants it was argued that because in the lease deed the enhancement contemplated was qualifiea by the words \"fair and equitable\" the determination became clothed with a qualification which made it subject to judicial review and determi. nation because it was for the Court to say whether the determined enhancement conformed to the standard prescribed in the disputed clause or not. The . respondent contended on the other hand that the rule applicable to determinations by valuers is that it is conclusive and cannot be overhauled except upon proof of fraud and imposition of gross misconduct.\n\nThus according to the submission of the appellant the clause in dispute means such enhancement as the lessor shall determine and which determination shall, in the opinion of the Court, be fair and equitable and according to the respondent it means that the amount of enhancement shall be fair and equitable but what is fair and equitable shall be determined by the lessor, such determination being conclusive. The appellants do not contend that the lessor is not a valuer and that if the qualifying words \" fair and equitable\" had not been used then\n\n'959 the enhancement determined would notbe conclusive but the contention is that by using these words the M angalmurti v. quality and the quantity of enhancement is no longer State of Bombay in the sole determination of the lessor but the final determination must be of the Court because otherwise Hapur J. any fanciful amount would have to be accepted as fair and equitable and that the parties intended that the lessor was not the final determiner of the quality and quantity of enhancement and his determination was not conclusive but the lessee if dissatisfied could get the matter reviewed by the Court.\n\nIn my view the correct interpretation to be put on this clause of the lease deed is what is contended for by the respondent. The lessor was given the authority to determine the enhancement but such enhancement was to be fair and equitable and what would be fair and equitable in any particular case was also to be determined by the lessor. The lease deed entered into between the parties is dated May 24, 1909. In the first clause are given the usual obligations of the lessee as to payment of rent, the purpose of the building to be constructed, the period in which it was to be completed, the design of the building and keeping it in proper condition. In the second clause of the agreement the lessor covenanted peaceful possession subject to the right of the lessor to recover rent as arrears of land revenue and other remedies for non-observance of the obliga- tions contained in the first clause with a provision for re-entry upon failure of certain conditions. In the third clause the lessor covenanted for grant of lease for further periods of 30 years at the request of the lessee with the following proviso : . \"Provided that the rent of the land_ hereby demised shall be subject to such fair and eci, uitable enhancement as the lessor shall determine on the grarit of every ren.ewal \". . . . . _.\n\nThis is the disputed clause .. Now it appears that this further covenant was for the benefit of the lessee and the reservations made are couched in such la.nguage which left the discretion in regard to. eµhancement of rent to the lessor. What the enhancement was to be and what would be fair and equitable was left to the\n\ndetermination of the lessor. It is not an unusual provision in a lease for a long term of years with provision for renewal to leave the question of rent to b'e determined by the lessor or an outside valuer and it would not, in my respectful opinion, be a correct interpretation to say that the enhancement by a valuer would be unchallengeable if the adjectival words \" fair and equitable\" are not used but would be subject to court's review if these words are employed. That is going contrary to the very notion of valuations and their legal incidence.\n\nThe extent of the power of courts over valuations by valuers has been stated in text books and in certain decided cases. In Williston on Contracts, Vol. 3, s. 802, at p. 2252 the law is stated thus:\n\n\" In the absence of fraud or mistake, the price fixed by agreed valuers is conclusive upon the parties.\n\nThough an excessively large or an unreasonably small price involves some element of penalty or forfeiture, the possibility of this is not enough to overcome the express terms of the contract in the absence at least of fraud, gross mistake, or such arbitrary conduct as is outside what the parties could have reasonably contemplated\".\n\nAnd it is not a far step to say that in all cases of valuation the parties do contemplate a fair and equitable amount to be fixed or determined and not any price fancifulor otherwise.\n\nIn Collier v. Mason (1) the defendant agreed to purchase a property at a valuation to be made by a third party. The defendant repudiated the value as exorbitant and refused to complete his contract and the plaintiff-vendor instituted a suit for specific performance.\n\nThe Court held that the valuation was very high and perhaps exorbitant but it decreed specific performance of the contract as there appeared no fraud, mistake or miscarriage. It was said by the Master of the Rolls \"It may have been improvident as between these parties to enter into a contract to buy and sell property at a price to be fixed by another person, but that cannot avoid the contract.\n\n(1) (1858) 25 Beav. 200; 53 E. R 613.\n\nMangalmurti v.\n\nState of Bombay\n\nKapur].\n\nr959 Here the referee has fixed the price, which is said to be evidence of miscarriage, but this Court, upon the Mangalmiuti\n\nv. principle laid down by Lord Eldon, must act on that\n\nState of Hombay valuation, unless there be proof of some mistake, or some improper motive, I do not say a fraudulent one; Kapur J. as if the valuer had valued something not included, or had valued it on a wholly erroneous principle, or had desired to injure one of the parties to the contract; or even, in the absence of any proof of any of these things, if the price were so excessive or so small as only to be explainable by reference to some such cause ; in any one of these cases the Court would refuse to act on the valuation \".. It does not a.ppear that in that case the words \"fair and equitable\" were used but that is implied in every reference. for valuation to be made by an agreed .referee. He cannot act in a fanciful or a corrupt manner or with puerile motives nor can be make a valuation which be does not consider to be fair and equitable.\n\nIn cases of transfer of property the form of contract to buy and sell may make a provision and very often such a provision is made that the price payable shall be that which a certain valuer shall fix.\n\nSuch a requirement is an express condition or a condition implied in fact qualifying the obligation of the buyer to pay tbe price and such a contract cannot be performed unless the valuation first takes place. Such a condition is a necessary condition or an inherent condition.\n\nWilliston on Contracts, 'Vol. 3, s. 800; Firth\n\nv. Midland Railway Go. (1).\n\nIn such contracts it must be assumed that the parties laid weight on the particular individuality of the valuer.\n\nAccordingly if the valuer dies. or refuses to act the buyer cannot be compelled to pay the price.\n\nA similar condition is common in long-term leases and in provisions for renewal of leases and where the parties choose to abide by the determination of a valuer and that valuation is not acceptable to one of the parties, Courts will not interfere, the only exception being fraud, mistake or misconduct. In Vickers v. Vickers(') which was a suit for specific\n\n{1) (1875) L.R. 20 Eq. 100, 112.·\n\n(2) (1867) L.R. 4 Eq. 529.\n\nperformance of a contract enforcing an option of r959 purchase where the stock was to be valued in the usual . b 1 d f h l M angalnzurti way y two va uers an one o t e va uers was not allowed to proceed, it was held that there was no state 0;· Bombay contract between the parties which the Court could specifically enforce. Sir W. Page Wood, V. C., said at I•apur J. p. 535: . \"If a nomination of that kind fails, or if the two persons named do not make their award, this Court has said there is no constat of the price ; the contract is not a complete contract, and there is nothing on which it can act\".\n\nIn Weekes v. Gallard (1) where a contract was entered into for the sale of certain property, the price to be fixed by two valuers who afterwards valued the property at inadequate price, it w'as held that in the abence of fraud or collusion on the part of the valuer, the buyer was entitled to specific performance of the contract. Lord Romilly said :-\n\n\"The court has really no discretion in the matter.\n\nThe discretion of the court is bound, as Lord Ellenborough says, by fixed rules. In one case of this kind a house and furniture were valued at three times their value, and yet there was a decree for specific performance. The only defence to such a suit would be fraud or collusion\".\n\nA valuer may, in one sense, be called an arbitrator but not in the proper legal sense of the term. Per Lindley, L. J., In re Carus Wilson & Greene (2).\n\nBut there is this difference between arbitration and valuation that the object of the former is to settle a dispute which has arisen and of the latter to avoid a dispute arising. The arbitrator is called in to settle judicially any matter in controversy between the parties and the valuer by the exercise of his knowledge and skill has to make a valuation the object being to prevent disputes from arising.\n\nA valuer like an arbitrator is required to act fairly and diligently.\n\nHe cannot act in .a fanciful or a perverse manner and his determination must be fair and equitable whether the authority given to him uses these words or not. But once a\n\n(I) (1869) 21 L.T. 655.\n\n(2) (1886) 18 Q.B.D. 7, IO,\n\nI959\n\n/1.1 angal1nurti\n\nState of Botnbay\n\nKapur ].\n\nvaluation is properly made the valuation is conclusive as between the parties and the Court in the absence of fraud, mistake or collusion cari no more go info whether it 'is fair and equitable thari a Court can sit in appeal against 'the award of an arbitrator as to what would be fair amount of damages in a particular case of breach of contract. See also Emery v, Wase (:).\n\nThe decision in Gourlay v. Somerset (Duke of)(') was relied upon by the appellants in support of their case.\n\nThat does not, in my opinion, deal with the matter now before us. There the suit was for specific performance of an agreement to grant a lease. One of the conditions of the contract was that the farm was to be let on conditions, reservations and agreements \"as shal) be judged reasonable and proper by John Gale ......... \". The Court was of the opinion that Gale's agency was not of the essence of the contract and that it could not be contended that the contract was to end if Gale refused to settle a lease.\n\nThe Court said : \" Suppose the reference is made to Gale ; is his decision liable to exception ? If it is, the decision with regard to the propriety of the lease will ultimately be that of the Court. If not, the Court may be carrying into execution a lease, which it may think extremely unreasonable and improper. If the parties had gone to Gale, and got him to settle a lease, and one of them had objected to the covenants as improper and the Bill had been filed by the other, the Court would have inspected the lease; and if it were found unreasonable, would not have decreed an execution of the agreement\".\n\nThat was a case relating to covenants other than fixation of price. With regard to the valuation or fixation of price it was said that if an agreement was that the price of the estate would be fixed by arbitrators and they did not fix it there was no contract of sale as the contract as to the mode of fixing the price was of the essence of the contract of sale and the Court could not make a contract where there is none. Similarly it may be said that where the valuation is fixed by a valuer\n\n(1) (1801) 5 Vos. 846, 847, 848; 31 E.R. 889.\n\n(2) (1815) 19 Yes. 429; 34 E.R. 576.\n\nthe court will hold it conclusive in the absence of fraud or mistake or misconduct. The Court will not enter into the propriety of the valuation made or substitute its own valuation in place of that determined by the valuer because that will not be an execution of the contract of the parties but making a contract for them.\n\nThe Transfer of Property Act contains no provision by which the Court is empowered to fix rent of premises demised although by legislation in the case of agricultural holdings certain tribunals have been set up to make such determinations. The appellant relied on The New Beerbhoom Goal Company v. Boloram Mahata (1).\n\nThe covenant between 'the parties was:- \" Within that aforesaid mouzah we will not give a pottah, let give settlement to anybody. If you take possession according to your requirement of extra land over and above this pottah, and we shall settle any such lands with you at a proper rate\".\n\nA suit was brought by the lessees against the lessor to obtain specific performance to execute a permanent lease of a large area of land claiming benefit of the covenant above given and contended that the defendants were bound to let them the land whenever called upon to do so.\n\nThe appellant company stated that they had negotiated with the lessor for lease of the adjoining land (not of land which they had agreed to lease) upon the terms that they were to pay Rs. 1-8-0 for waste land and Rs. 3 for cultivable land and the suit was for the grant of specific performance of the agreement by compelling the lessor to grant them the lease at those rates and if the Court would not order the lease at those rates then at such rates as the Court shall think reasona hie. The trial Court held that apart from 51 bighas mentioned in the covenant the lessor could not be compelled to grant a lease for the remaining land of the mouzah. The High\n\nCourt affirmed this decision but on the ground that it was impossible to determine what. was the reasonable rate. Sir Barnes Peacock said:-..\n\n(r) (1880) L.R. 7 I.A. 107.\n\nz959\n\nM angalmurti v.\n\nState of Bombay\n\nKapur ].\n\nI959\n\nMangalmurti v.\n\nSJate of BOmbay\n\nKapur J.\n\n\" Their Lordships cannot think that in the present case the court, upon a proper inquiry, would have been unable to determine it (proper rent). There might have been considerable difficulty in fixing the rate; but difficulties often occur in determining what is a reasonable price or a reasonable rate, or in fixing the amount of damages which a man has sustained under particular circumstances. These are difficulties which the Court is bound to overcome \".\n\nThese observations of the Privy Council are relied upon by the appellants to support the argument that it is open to the Court to determine what the reasonable rate would be. This was not a case where any question of valuation arose nor was it a case where a valuation made by a valuer was sought to be reviewed as not being proper and apart from the fact that the observations are mere obiter this case is no authority for saying that the determination of a valuer is subject to review by courts.\n\nAnother case which the appellant relied upon was The Secretary of State for India v. Volkart Brothers (1).\n\nThere, in a deed of lease granted for 99 years by the East India Company there was a clause for renewal for another like period on the lessee paying a sum of money and \" upon such terms and conditions as should be judged reasonable\". The Secretary of State assigned a major portion of the holding to a third party and Volkart Brothers before the expiry of the original lease period tendered the due amount and asked for renewal of the lease which the Secretary of State refused to renew and sued to eject the lessees and the latter sued for specific performance of the covenant for renewal. It was held by a majority that the covenant was not unenforceable on account of uncertainty.\n\nKrishnan, J., was of the opinion that such a covenant was too vague and uncertain and unenforceable because the clauses to be inserted in the contract were themselves uncertain and the contract could not be enforced. Venkatasubba Rao, J., was.of the opinion that if the parties would not agree to a reasonable rent the Court will intervene and fix it; The New Beerbhoom\n\n(1) (1926) I.L.R. 50 Mad. 595\n\nCoal Company v. Boloram Mahata (1) was relied upon. 1959 Coutts Trotter, C. J., was also of the opinion that the Mangalmurti covenant was not too vague to be enforced. But this v. again was a case not of interfering with the deter- State of Bombay mination of a valuer but of specific performance of a contract of renewal and it was held that by taking evidence even a vague and indefinite covenant relating to renewal could be made definite.\n\nIn my opinion, therefore, the Court cannot go into the question of correctness or otherwise of the determination of the lease and the appeal should therefore be dismissed with costs.\n\nBY OouRT.-In view of the opinion of the majority, the appeals are allowed, setting aside the judgment and decree of the High Court dated September 30, 1952.\n\nNo order as to costs of the hearing in this Court.\n\n.Appeals allowed .\n\n. THE STATE OF MADHYA PRADESH v.\n\nMUBARAK ALI (P. B. GAJENDRAGADKAR, A. K. SARKAR and K. SuBBA RAo, JJ.) Criminal Law-Public servant receiving bribe-Investigation by officer below rank of Deputy Superintendent of Police-Permission to investigate granted by Magistrate-Order not disclosing material before Magistrate nor disclosing reasons for order-Permission, if invalid-Investigation, scope of-Prevention of Corruption Act, r947\n\n(2 of r947), s. 5A-Code of Criminal Procedure, r898 (Act 5 of\n\nI898), S. 4(I).\"\n\nSection 5A of the Prevention of Corruption Act, 1947, provided: \"No police officer below the rank ......... of a deputy Superintendent shall investigate any offence punishable under s. 161, s. 165 or s. l65A of the Indian Penal Code or under s. 5(2) of the Act without the order of. ........ a magistrate of the first class ......... \".\n\n(1) (1880) L.R. 7 I.A. ro;.\n\nKapur .f.\n\nI959\n\nFebruary 3.", "total_entities": 24, "entities": [{"text": "S. K. Das", "label": "JUDGE", "start_char": 40, "end_char": 49, "source": "metadata", "metadata": {"canonical_name": "S.K. DAS*", "offset_not_found": false}}, {"text": "DAMODHAR TUKARAM MANGALMURTI\n\nAND OTHERS", "label": "PETITIONER", "start_char": 774, "end_char": 814, "source": "metadata", "metadata": {"canonical_name": "DAMODHAR TUKARAM MANGALMURTI AND OTHERS", "offset_not_found": false}}, {"text": "THE STATE OF BOMBAY (SYED JAFER IMAM", "label": "JUDGE", "start_char": 816, "end_char": 852, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF BOMBAY (SYED JAFER IMAM", "offset_not_found": false}}, {"text": "L. KAPUR, JJ.", "label": "JUDGE", "start_char": 871, "end_char": 884, "source": "metadata", "metadata": {"canonical_name": "J.L. 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{"document_id": "1959_2_1_7_EN", "year": 1959, "text": "THE SUPREME COURT REPORTS\n\nFAGUNA KANTA NATH v.\n\nTHE STATE OF ASSAM (J. L. KAPUR and K. N. w ANCHOO, JJ.)\n\nCriminal Law-Abetment--Bribery-Conviction for bribery set aside-Maintenance of conviction for abetment-Legality-Indian\n\nPenal Code (Act XLV of r86o), ss. ro7, r6r, r65A.\n\nThe appellant was triedJor an offence under s. l65A of the Indian Penal Code for having abetted K, an Inspector in charge of checking paddy, in the commission of an offence by the latter under s. 161 of the Code.\n\nThe prosecution case was that while the complainant was taking paddy for sale K demanded Rs. 200/- as bribe and threatened him that unless the money was paid the paddy would be seized, that at the instance of K the complainant handed over the bribe money to the appellant for being counted and that the latter after checking the money paid it to K. The Special Judge who tried the case accepted. the prosecution story and convicted K under s. 161 of the Indian Penal Code and the appellant for abetment of the offence. On appeal, the High Court was of the opinion that the evidence was not strong enougli to prove payment to K, and set aside his conviction, but confirmed that of the appellant on the ground that money was taken by him for P, ayment to K as illegal gratification and whether he actually paid it to him or not the offence fell under s. l65A.\n\nHeld, that the conviction of the appellant for abetment under s. l65A of the Indian Penal Code must under the circumstances be set aside. On the facts found, the appellant received the money in the presence of and for and on behalf of K and if K was acquitted on the ground that no offence under s. l6I was committed, then no question of intntionally aiding by any act or omission the commission of the offence arose. Consequently, the appellant's conviction for the offence of abetment was not maintainable.\n\nDalip Singh v. State of Punjab, [1954] S.C.R. 145, distinguished.\n\nCRIMINAL\n\nAPPELLATE\n\nJURISDICTION: Criminal Appeal No. 203 of 1956. _ Appeal by special leave from the judgment and order dated December 14, 1955, of the Assam High Court at Gauhati in Criminal Appeal No. 54 of 1955, arising out of the judgment and order dated May 23,\n\nI959\n\nJanuary IJ.\n\nz959 1955, of th1l Court of the Special Judge, Lower Assam Districts at Dhubri in Special Case No. 2 of 1954.\n\nFaguna Kanta 1 • Nath Nur-ud-Din Ahmad and K. R. Ohaudhury, for the v. appellant.\n\nThe State of Assam Naunit Lal, for the respondent.\n\n1959. January 13.\n\nThe Judgment of the Court was delivered by\n\nKapur J.\n\nKAPUR, J.-This appea.I by special leave is directed against the judgment and order of the High Court of Assam.\n\nThe appellant before us was tried for an offence under s. l65A of the\" Indian Penal Code for having abetted one Khalilur Rahman in the commission of an offence by the latter under s. 161, Indian Penal Code.\n\nBoth the appellant and Khalilur Rahmau were convicted of the offences with which they were charged and sentenced to one year's rigorous imprisonment. On appeal the High Court acquitted Khalilur Rahman but maintained the conviction and sentence of the appellant.\n\nThe facts of this appeal are that on May 9, 1952, the complainant Narendra Nath Brahma was taking two carts carrying 25 Mds. of paddy for sale to Billashiparabazar along the path which runs by the side of the river Gauranga.\n\nWhen he had gone only a short distance he was stopped by the paddy-checking Inspector, Khalilur Rahman, who was accompanied by the appellant and three others. Khalilur Rahman demanded Rs. 200 as bribe and threatened the complainant that unless the amount demanded was paid his cart and paddy would be seized. In this he was supported by the appellant and three others. The complainant expressed his inability to give that much amount but ultimately he agreed to pay Rs. 150. He borrowed Rs. JOO from one Surajmal Oswal out of which he offered Rs. 80 to Khalilur Rahman who asked him to hand them over to the appellaut who. counted the money and made it over to Khalilur Rahman. The complainant was also forced to execute a promissory note for a sum of Rs. 70 in favour of the appellant and he promised that the money would be paid the following day after the paddy was sold. The\n\n1959 complainant learnt in the bazar that another person Happaram Rai had been similarly treated but he had only paid Rs. 15.\n\nOn May 11, 1952, the complainant Fagua 1:anta approached the appellant for the refund of his money ~. and the return of his pronote and although the appel- The State of Assam lant promised he did not do so.\n\nThe same day there was a meeting at ]'utkibari Middle English School where the Deputy Commissioner was present. The complainant presented to him a written complaint describing how he was forced to pay Rs. 80 and made to execute a pronote for Rs. 70.\n\nThereupon both Khalilur Rahman and the appellant were prosecuted, the former under s. 161, Indian Penal Code, read with s. 5(2) of the Preventio;1 of Corruption Act, 1947 (2 'of\n\n1947) and the latter under s. 165A and they were convicted and sentenced by the Special Judge as already stated.\n\nThe evidence of the complainant was that before Rs. 200 was demanded from him, the appellant and Khalilur Rahman \" went aside and had some talks and coming together accused Khalilur Rahman demanded Rs. 200 \". He also stated \"I told them that I managed to procure ls. 80 somehow and I wanted to hand over to accused Khalilur Rahman who directed me to hand over to accused Faguna, saying he would take counting, accused Faguna counted the money and then made over the entire money to accused Khalilur Rahman saying that.Rs. 80 would not do and I should execute a handnote for the balance of Rs. 70 promising to pay on the following Saturday\". According to the complainant it was Khalilur Rahman ho tore out a page from his note book and handed over the same to the cqmplainant and also lent him his fountain pen and after the pronote was executed both the pen and the pronote were handed over to Khalilur Rahman. The Special Judge found :-\n\n\" I am fully convinced that a sum of Rs. 80 was realised from the complainant for forbearing from seizing of the paddy by the accused Khalilur Rahman, being helped and abetted by the accused ]'aguna Kanta Nath.\"\n\nKapur].\n\nz959 He therefore convicted Khalilur Rahman under s. 161, Indian Penal Code, but acquitted him of an offence Faguna Kanta Nath under s. 5(2) of the Prevention of Corruption Act, v. 194 7, and convicted the appellant, for abetment of The State of Asoam that offence. On appeal Deka, J., held that from the complaint made by the complainant it was not Kapur f. clear that any payment was made to Khalilur Rahman. He said :\n\n\"It may be that Khalilur. Rahman was a party to squeezing out some money from a dealer in paddy who tried to evade the law, but that falls far short of proving that he had accepted the money through\n\nFgunakanta Nath as alleged now in Court''.\n\nThe learned Judge accepted the complainant's story that money was paid to the appellant but he was of the opinion that the evidence was not strong enough to prove payment to Khalilur Rahman and therefore he was \"prepared to give .the benefit of doubt to Khalilur Rahman and direct that his conviction under s. 161, Indian Penal Code be set aside\". As to the appellant he was of the opinion that money was taken by him for payment to Khalilur Rahman as illegal gratification and whether he actually paid it to him or not the offence fell under s. 165A and therefore he held the appellant guilty under that section. Thus according to the learned Judge the case against Khalilur Rahman was not proved and as money had been paid to the appellant he was guilty of abetment under s. 165A, Indian Penal Code.\n\nThe appellant has come to this Court by special leave.\n\nT.he main argument raised on behalf of the appellant is that as Khalilur Rahman has been acquitted, on the facts and circumstances of this case the conviction of the appellant for abetment cannot be sustained. The evidence of the complainant on which the conviction is based was that the money was demanded by Khalilur Rahman and at bis instance it was made over to the appellant who counted the money and handed it over to Khalilur Rahman. The pronote was also written at the instance of Khalilur Rahman and was handed over to him. The part played by the appellant according to the story of the\n\ncomplainant was that before the demand of bribe z959 both Khalilur Rahman and the appellant \"went aside\" and held a conference and Khalilur Rahman then Faguna Kanta Nath demanded Rs. 200. Rs. 80 was brought by the comv. plainant and paid to the appellant at the instance of The State of Assain Khalilur Rahman for the purpose of counting and he in turn gave it to Khalilur Rahman who put it in his Kapur f. trouser's pocket. About this portion of the evidence the trial Court said \" it may not be fully true \" and the finding of the High Court was that the money remained with him and was not paid to Khalilur Rahman; the question is whether in these circumstances the offence of abetment can be held to have been made out.\n\nUnder the.Indian law for an offence of abetment it is not necessary that the offence should have been committed. A man may be guilty as an abettor whether the offence is committed or not.\n\nSection 165A is as follows :\n\nS. 165A \"Whoever, abets any offence punishable under section 161 or section 165, whether or not that offence is committed in consequence of the abetment, shall be punished with imprisonment of either description for a term which may extend to three years or with fine or with both\".\n\nTherefore for a person to be guilty of abetment of an offence under s. 161, it is not necessary that the offence should have been committed.· Abetment is defined in s. 107 and a person abets the doing of a thing when\n\n(1) he instigates any person to do that thing or (2) engages with one or more other person or persons in any conspiracy for the dofog of that thing, ...... or (3) intentionally aids, by any act or illegal omission, the doing of that thing. Explanation (2) to s. 107 is as follows:-\n\n\" Whoever, either prior to or at the time of the commission of an act, does anything in order to facilitate the commission of that act, and thereby facilitates the commission thereof, is said to aid the doing of that act.\" It is not suggested that there was any instigation by the appellant for the commission of the offence.\n\n'959 Further the circumstances proved against the appellant\n\nFagnna Kanta did not bring the case under the second part of s. 107\n\nNath bec.ause it is not alleged that there was any conspiracy v. and a charge of conspiracy must necessarily fail if the The State of Assam other alleged conspirator is acquitted: See The King\n\nv. Plummer (1) which has received the approval of this Kapur J.\n\nCourt in Topandas v. State of Bombay (2).\n\nIn either of , these cases it is immaterial whether the person instigated commits the offence or not or the persons conspiring together actually carry out the object of conspiracy.\n\nThere then remains the third part of s. 107 that is abetment by aid.\n\nA person abets by aiding when by the commission of an act he intends to facilitate and does facilitate the commission thereof. By the acquittal of Khalilur Rahman. the High Court must be deemed to have held that there was nci offence under s. 161.\n\nBut it was contended on behalf of the respondent that the acquittal of Khalilur Rahman was wrong and this Court should hold that a wrong acquittal does not prevent the conviction of the appellant for the offence of abetment. Counsel for the respondent referred to Dalip Singh v. State of Punjab(') where at p. 156 Bose, J., said:\n\n\"We have taken into consideration the fact that the High Court considers that the portion of Mst.\n\nPunnan's story regarding the lambardars has been falsely introduced by the police, also .that both courts have rejected the evidence about the dying declaration.\n\nDespite that, we agree with the learned Sessions Judge that Mst. Punnan and Mst. Charni are to be believed regarding the main facts and that they correctly named all seven accused as the assailants. On that finding the conviction under section 302 read with section 149 can be sustained. We accordingly uphold these convictions. The acquittals in the other three cases will of course stand but the mere fact that these persons have, in our opinion, been wrongly acquitted cannot affect the conviction in other cases \".\n\nIn that case although the High Court had acquitted three accused persons of an offence under s. 302 read\n\n(1) [1902] 2 K.B. 339.\n\n(2) [1955] 2 S.C.R. 881.\n\n(3) [1954] S.C.R. 145\n\nwiths. 149, Indian Penal Code, yet as in the opinion\n\nI959 of this Court the acquittal was wrongs. 149 was held Faguna Kanta applicable in the case of four others who had been Nath convicted by the High Court of s. 302 read with v. s. 149. The decision in that case must be circumscrib- The State of Assam ed to the peculiar circumstances of that case. In the present case the person who demanded the illegal Kapur J. gratification for allowing the carts to proceed was Khalilur Rahman who had the authority to do or not to do a particular act and all\"that the appellant is alleged to have done was to receive the money at the instance of Khalilur Rahman for counting and then paid the money to him. It is not tbe prosecution case that the appellant abetted tbe offence by instigating Khalilur Rahman to demand the illegal gratification ; nor has the prosecution set up or proved a case of conspiracy between the appellant and Khalilur Rahman for the commission of an offence under s. 161.\n\nOn the findings of the Court the appellant received the money for and on behalf of Khalilur Rahman and the evidence of t_he complai:dant is that Khalilur Rahman bad asked him to hand over the money to the appellant. If Khalilur Rahman is acquitted and therefore the offence under s. 161 is held not to have been committed, then in this case no question of intentionally aiding by any act or omission the commission of the offence arises. It may be as counsel for the respondent contended that the acquittal of Khalilur Rahman is wrong and it appears and we say so with respect that the findings of the High Court are inconsistent but as the matter of Khalilur Rahman is not before us by way of appeal against acquittal we do not express any opinion on that question.\n\nWe are of the opinion that on the facts found and circumstances established in this case and as Khalilur Rahman has been acquitted the appellant's conviction cannot be upheld.\n\nWe therefore allow this appeal and set aside the order of conviction. 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{"document_id": "1959_2_201_212_EN", "year": 1959, "text": "(2) S.O.R.\n\nSUPREME COURT REPORTS 201\n\nCoal Company v. Boloram Mahata (1) was relied upon. 1959 Coutts Trotter, C. J., was also of the opinion that the Mangalmurti covenant was not too vague to be enforced. But this v. again was a case not of interfering with the deter- State of Bombay mination of a valuer but of specific performance of a contract of renewal and it was held that by taking evidence even a vague and indefinite covenant relating to renewal could be made definite.\n\nIn my opinion, therefore, the Court cannot go into the question of correctness or otherwise of the determination of the lease and the appeal should therefore be dismissed with costs.\n\nBY OouRT.-In view of the opinion of the majority, the appeals are allowed, setting aside the judgment and decree of the High Court dated September 30, 1952.\n\nNo order as to costs of the hearing in this Court.\n\n.Appeals allowed .\n\n. THE STATE OF MADHYA PRADESH v.\n\nMUBARAK ALI (P. B. GAJENDRAGADKAR, A. K. SARKAR and K. SuBBA RAo, JJ.) Criminal Law-Public servant receiving bribe-Investigation by officer below rank of Deputy Superintendent of Police-Permission to investigate granted by Magistrate-Order not disclosing material before Magistrate nor disclosing reasons for order-Permission, if invalid-Investigation, scope of-Prevention of Corruption Act, r947\n\n(2 of r947), s. 5A-Code of Criminal Procedure, r898 (Act 5 of\n\nI898), S. 4(I).\"\n\nSection 5A of the Prevention of Corruption Act, 1947, provided: \"No police officer below the rank ......... of a deputy Superintendent shall investigate any offence punishable under s. 161, s. 165 or s. l65A of the Indian Penal Code or under s. 5(2) of the Act without the order of. ........ a magistrate of the first class ......... \".\n\n(1) (1880) L.R. 7 I.A. ro;.\n\nKapur .f.\n\nI959\n\nFebruary 3.\n\nI959\n\nThe State of M adhy.i l'radesh\n\nMubarak Ali\n\nOn January II, 1955, B, the manager of a company, gave information to the Sub-Inspector of Police, Special Police Establishment, that the respondent, an Assistant Station Master, was demanding a bribe for sending the goods belonging to the company by raiL The Sub-Inspector, after assisting B to trap the respondent, came on the scene, questioned the latter, searched his person and recovered the marked notes and other articles from him. The Sub-Inspector filed an application before the District Magistrate, stating that he had been deputed to investigate the case and the permission might be given to him to do so under s. 5A of the Act. On the application the Magistrate passed the order ' 1 permission given.\" Neither the application nor the order made thereon disclosed that any material was placed before the Magistrate on the basis of which he gave permission.\n\nA charge-sheet was filed before the Special Judge. The respondent filed objections questioning, inter alia, the validity of the Magistrate giving permission to the Sub-Inspector to make the investigation. The Special Judge disallowed the objection. On revision, the High Court set aside the order of the Special Judge with a direction that\" in order to rectify the defects and cure the illegality\" he should order the Deputy Superintendent of Police to carry on the investigation himsef while the case remained pending on his file.\n\nThe State preferred an appeal against the order of the High Court by special leave:- Held, that the statutory safeguards under s. 5A of the Prevention of Corruption Act must strictly be complied with for they were conceived in public interest and were provided as a guarantee against frivolous and vexatious prosecution~.\n\nA Magistrate cannot surrender his discretion to a police officer, but must exercise it having regard to the relevant material made available to him at the stage of granting permission. He must also be satisfied that there is sufficient reason owing to the exigencies of the administrative convenience to entrust a subordinate officer with the investigation.\n\nWhere an officer other than the designated officer seeks to make an investigation, he should get order of a Magistrate empowering him to do so before he proceeds to investigate, and it is desirable that the order giving the permission should ordinarily on the face of it disclose the reasons for giving permission.\n\nWhere objection is taken by the accused that the order giving permission was invalid, the prosecution, at the earliest opportunity, must adduce evidence to support the contention that the Magistrate gave the permission only after having satisfied himself on the advisability of doing so on the material placed before him.\n\nH. N. Rishbud & Inder Singh v. State of Delhi, [r955] r S.C.R. n50 and Viswabhusan Naik v. The State of Orissa, [1955] I S.C.R. 92, relied on.\n\nHeld, further, that an investigation starts after the police x959 officer receives information in regard to an offence, and that as under s. 5 of the Act attempt to obtain from any person any The State of gratification is in itself an offence, any steps taken by the Sub- Madhya Pradesh Inspector after the information was given to him amounted to v. investigation.\n\nMubarak Ali\n\nCRIMINAL\n\nAPPELLATE\n\nJURISDICTION: Criminal Appeal No. 141 of 1958.\n\nAppeal by special leave from the judgment and order dated November. 28, 1957, of the Madhya Pradesh High Court in Criminal Revision No. 78 of 1957, arising out of the judgment and order dated August 21, 1957, of the Court of Special Judge at Gwalior in File No. 2/57 Special Case.\n\nG. 0. Mathur and R.H. Dhebar, for the appellant.\n\nThe respondent did not appear.\n\n1959. February 3.\n\nThe Judgment of the Court was delivered by\n\nSuBBA RAO, J.-This is an appeal by special leave Subba Rao J. against the Judgment of the High Court of Madhya Pradesh at J abalpur directing the Special Judge, Indore, to order the Deputy Superintendent of Police to carry on the investigation afresh. The facts are simple.\n\nOne Shri Mohinder Nath Bhalla was the manager of Daisy Sewing Machine Co. Ltd., Bhopal. On January 11, 1955, between 12 and 1 p. m., he contacted the Sub-Inspector of Police, Special Police Establishment, Gwalior, and gave him the following information: The company had opened their stall in the Gwalior Mela and. he (Shri Bhalla) had to book empty wooden cases of machine and machine parts from Golakmandir railway station, which was near th<?\n\nGwalior Mela, to New Delhi. When he went to the station to enquire for booking the said cases, the Station Master demanded annas ten for each case as illegal gratification, but he did not agree to it. Subsequently, the Assistant Station Master agreed to accept annas eight for each case and asked him to bring the wooden cases between 2 and 4 p. m. on the same day, i.e., January 11, 1955. On this allegation he requested the police to take action \" to stop the said sort of\n\nz959\n\nThe State of Madhya Pradesh v.\n\nMubarak Ali\n\nSubba Rao ].\n\ncorruption\". The police officer went along with the informant to his stall at Gwalior Mela and saw the twenty wooden .cases_..:twelve big and eight smallready for booking.\n\nThe said Shri Bhalla gave the police officer a typed complaint signed by him and duly attested by two witnesses.\n\nWith the assistance of the police officer, a trap was laid. The numbers of the rupee notes intended to be given as bribe to the Assistant Station Master were entered in a memorandum which was attested by witnesses. The said rupee notes were given to Shri Bhalla in the presence of the witnesses. Shri Bhalla was instructed to pay the amount to the Assistant Station Master when demanded by him in such a manner that the witnesses could overhear the conversation and also see the Assistant Station Master taking the bribe. He was also told that on his giving a signal, the police would come on the scene.\n\nThe plan was carried out in detail as agreed. The Assistant Station Master, after some bargaining, took the bribe, and after the act of bribery was completed, Shri Bhalla gave the pre- • arranged signal.\n\nThe Sub-Inspector then went to the Station Office and disclosed his identity to the Assistant Station Master in the presence of witnesses and asked him to produce the money taken by him as bribe. The Assistant Station Master, when questioned by the Sub-Inspector, gave him his name and also produced the notes which he had kept in his pocket.\n\nThe police officer took those notes and counted them.\n\nThe numbers on those notes tallied with those noted in the memorandum. He then searched the person of the Assistant Station Master and secured the articls found on him. He also searched the person of Shri Bhalla and took from his shirt two currency notes, which he did not give to the Assistant Station Master, as the bargain was struck at a smaller amount, and secured the same. The numbers of those notes also tallied with the corresponding numbers noted in the memorandum. Thereafter, a memorandum of the articles recovered was prepared in the presence of the witnesses and was duly attested by them. The forwarding note, together with the record copy of the\n\nR/R prepared in respect of the booking of the twenty wooden cases to New Delhi, was taken possession of and another memorandum was prepared in regard to them.\n\nAn inventory of the twenty wooden cases lying on the platform near the weighing machine as booked by the Assistant Station Master was also prepared and the same was attested by the witnesses.\n\nThe Sub-Inspector, having regard to the aforesaid facts, came to the conclusion that the facts disclosed offences punishable under ss. 120-B and 161 of the Indian Penal Code and s. 5(2) of the Prevention of Corruption Act, 1947 (2 of 1947), had been committed by the Assistant Station Master, Shri Mubarak Ali, and the pointsman, Shri Mool Chand, of Golakamandir railway station. On the same day he sent a report of the aforesaid facts to the Special Police Establishment, Office, Madhya Bharat. The office registered it on January 14, 1955, in its register. Seven days thereafter, on January 21, 1955, the Sub-Inspector filed an application . before the Additional District Magistrate (Judicial), Gwalior, asking for permission to investigate the offence under the aforesaid sections.\n\nThe record does not disclose what further steps were taken by the Sub-Inspector after he obtained the said permission from the Additional District Magistrate. On October 1, 1955, a charge-sheet was filed before the Special Judge, Anti-Corruption, Indore. It appears from the record that soon after the case was taken up for trial, the respondent filed objections questioning, inter alia, the validity of the order of the Additional District Magistrate giving permission to the Sub- Inspect0r to make the investigation. But the scope of the objections is not clear as they have not been placed before us. It appears that the Special Judge intended to take evidence on the question of delegation of power of investigation, but the prosecution applied for adjournment on the ground that an appeal had been filed in the High Court against a similar order directing the prosecution to give evidence on the said question and the same was pending there. The learned Special Judge, though inclined not to give the adjournment, made an order giving an adjournment\n\nI959\n\nThe State of Madhya Pradesh v.\n\nMubarak Ali\n\nSubba Rao].\n\n'959 of three weeks on December 3, 1955, on the ground\n\nThe State of that \"the Specia~ Police Establishment Office might Madhya Prndcsh not have any gnevance on that account\". We do v. not know what transpired between December 3, 1955, Muba•ak Ali and the date of disposal of the objections by the Special Judge, i.e., August 21, 1957.\n\nOn August 21, Subba Rao f 1957, the learned Special Judge made au order discharging Shri Moo! Chand, the pointsman, and charging Shri Mubarak Ali, the Assistant Station Master, under s. 161 of the Indian Penal Code.\n\nBy the said order the learned Judge, presumably an officer different from the one who gave the adjournment in 1955, disallowed the objection of the accnsed on the ground that on the date when the Magistrate gave the sanction, there were many papers in connection with a case against the accused, on observing which the Magistrate could have satisfied himselfwhetherthere was a prima facie case or not against the accused and that there was no reason to believe that at the time of giving the sanction, the Magistrate did not peruse the papers. The accused preferred a Revision against the said order to the High Court of Madhya Pradesh.\n\nThe High Court came to the conclusion that the Sub- Inspector applied for permission ten days after investigation had started and that the Magistrate did not satisfy himself that there were good and sufficient reasons for authorising the officer of a lower rank to conduct the investigation but had given the permission as a mere matter of routine. In the result, the High Court set aside the order of the Special Judge with a direction that \" in order to rectify the defects ' and cure the illegality \" he should order the Deputy Superintendent of Police to carry on the investigation himself while the case remains pending on his file\".\n\nThe State preferred the present appeal against the said order of the High Court.\n\nLearned Counsel, appearing for the State, raised before us two. points: , (i) the High Court was not justified in holding that the Magistrate gave the permission as a mere matter of routine without satisfying himself as to the advisability of giving such permission ; (ii) the High Court was wrong in holding\n\nthat the investigation started ten days prior to the 1959 obtaining of permission of the Magistrate by the Sub- The State of Inspector.\n\nMadhya Pradesh To appreciate the first contention, it is necessary to v .• set out some of the relevant provisions of The Preven- Mubarak Ali tion of Corruption Act, 1947 (2 of 1947), hereinafter referred to as the Act.\n\nSubba Rao J.\n\nSection 3 (as it stood before the Prevention of Corruption (Amendment) Act, 1955 (50 of 1955):\n\n\" An offence punishable under section 161 or section 165 or section 165A of the Indian Penal Code (Act 45 of 1860) shall be deemed to be a cognizable offence for the purposes of the Code of Criminal Procedure, 1898 (Act 5 of 1898), notwithstanding anything to the contrary contained therein\".\n\nSection 4. \"(1) Where in any trial of an offence punishable under section 161 or section 165 of the Indian Penal Code (Act 45 of 1860), it is proved that an accused person has accepted or obtained, or has agreed to accept or attempted to obtain, for himself or for any other person, any gratification (other than legal remuneration) or any valuable thing from any person, it shall be presumed unless the contrary is proved that he accepted or obtained, or agreed to accept or attempted to obtain, that gratification or that valuable thing, as the case may be, as a motive or reward such as is mentioned in the said section 161, or, as the case may be, without consideration or for a consideration which he knows to be inadequate\".\n\nThe Act was passed, as the preamble indicates, to make more effective provisions for the prevention of bribery and corruption among public servants. It introduced a definition of the offence of criminal misconduct in discharging an official duty and new rules of presumption against accused in the case of the said offence.\n\nBut in the year 1952, by Act 59 of 1952, presumably on the basis of the experience gained, s. 5A was inserted in the Act to protect the public servants against harassment and victimization. If it was in the interest of the public that corruption should be eradicated, it was equally in the interest of the public that honest public servants should be able to\n\n'959 discharge their duties free from false, frivolous and\n\nThe State of malici?us accusations. To. achieve this object, ss. 5A Madhya Pradesh and 6 mtroduced the followmg two safeguards: (1) no . v. police officer below the rank-(a) in the presidency\n\nMubrak Ali towns of Madras and Calcutta, of an assistant com- . missioner of police, (b) in the presidency town of Subba Rao f. Bombay, of a superintendent of police and (c) elsewhere, of a deputy superintendent of police, shall investigate any offence punishable under s. 161, s. 165 or s. 165A of the Indian Penal Code or under sub-s. (2) of s. 5 of the Act, without the order of a presidency magistrate or a magistrate of the first class, as the case may be, or make any arrest therefor without a warrant-see s. 5A ; (2) no court shall take cognizance of an offence punishable under s. 161 or s. 164 or s. 165 of the Indian Penal Code or under s. 5(2) of the Act, alleged to have been committed by a public servant, except with the previous sanction, of the appropriate Government-see s. 6.\n\nThese statutory safeguards must be strictly complied with, for they were conceived in public interests and were provided as a guarantee against frivolous and vexatious prosecutions.\n\nWhile in the case of an officer of assured status and rank, the legislature was prepared to believe them implicitly, it prescribed an additional guarantee in the case of police officers below that rank, namely, the previous order of a presidency magistrate or a magistrate of the first class, as the case may be. The magistrate's status gives assurance to the bona fides of the investigation.\n\nIn such circumstances, it is self-evident that a ma'gistrate cannot surrender his discretion to a police offic0r, but must exercise it having regard to the relevant material made available to him at that stage. He must also be satisfied that there is sufficient reason, owing to the exigencies of administrative convenience, to entrust a subordinate officer with the investigation.\n\nThis Court in H. N. Rishbud and Inder Singh v. The State of Delhi (1) emphasised the necessity to adhere strictly to the provisions of s. 5A of the Act. J agannadhadas, J.; who delivered the judgment of the Court, observed at p. 1159 :\n\n(•) [1955] I S.C.R. 1150.\n\n\" When, therefore, the Legislature thought fit to x959\n\nremov~ the protection rom t?e ublic servants, in so The State of far as it relates to the mvest1gat10n of the offences of Madhya Pradesh corruption comprised in the Act, by making them v. cognisable, it may be presumed that it was considered Mubarak Ali necessary to provide a substituted safeguard from undue harassment by re_quiring that the investigation Subba Rao f. is to be conducted normally by a police officer of a designated high rank. Having regard therefore to the peremptory language of sub-section (4) of section 5 of the Act as well as to the policy apparently underlying it, it is reasonably clear that the said provision must be taken to be mandatory\". .\n\nAfter adverting to the argument advanced on behalf of the State, the learned Judge closed the discussion thus at p. 1162:\n\n\" We are, therefore, clear in our opinion that section 5(4) and proviso to section 3 of the Act and the corresponding section 5-A of Act LIX of 1952 are mandatory and not directory and that the investigation conducted in violation thereof bears the stamp of illegality \".\n\nThis Court again considered the scope of s. 6 of the Act in Biswabhusan. Naik v. The State of Orissa (1).\n\nOne of the questions raised there was that the .sanction given by the Government was invalid. In rejecting that contention Bose, J., observed at p. 95:\n\n\" The judgment of the Judicial Committee relates to clause 23 of the Cotton Cloth and Yarn (Control) Order, 1943, but the principles apply here. It is no more necessary for the sanction under the Prevention of Corruption Act to be in any particular form, or in writing. or for it to set out the facts in respect of which it is given than it was under clause 23 of the Order which their Lordships wer{) considering. The de:; iirability of such a course is obvious because when the facts . are not set out in. the sanction proof has to be given aliunde that sanction was given in respect of the facts constituting . the offence charged, but an\n\n(r) [1955] r S.C.R. 92. 27 .•\n\nThe State of Madhya Pradesh v.\n\nMubarak Ali\n\nSubba Rao j.\n\nomission to do so is not fatal so long as the facts can be, and are, proved in some other way\".\n\nWhile the former decision emphasises the importance of the protection given by the Act to public servants against harassment, the latter decision points out the desirability of giving all the necessary facts in an order giving sanction-the same applies to an order of a Magistrate-and also the necessity of proof aliunde of the said facts in case the facts are not disclosed in the sanction. Applying the said two principles, we must hold that in a case where an officer other than the designated officer, seeks to make an investigation, he should get the order of a Magistrate empowering him to do so before he proceeds to investigate and it is desirable that the order giving the permission should ordinarily, on the face of it, disclo8e the reasons/for giving the permission. .Fm one reason or other, if the said salutary practice is not adopted in a particular case, it is the duty oft.he prosecution to establish, if that fact is denied, that the Magistrate in fact has taken into consideration the relevant -circumstances before granting the permission to a subordinate police officer to investigate the case.\n\nIn the present case, though objection was taken by the accused at the earliest stage in 1955 on the ground that the order giving permission was invalid no attempt was made by the prosecution, though years have elapsed between the date of the petition and that of the order of the Sessions Judge, to adduce any evidence to support the contention that the Magistrate gave the permission to the Sub-Inspector only after satisfying himself on the advisability of doing so on the material placed before him. The only material that was placed before the Sessions Judge was the application filed by the Sub-Inspector before the Magistrate seeking the said permission and the order made by him thereon. In that application the Sub-Inspector stated that he had been deputed to investigate the case and therefore permission might be given to him to do so under s. 5-A of the Act.\n\nOn that application, the Magistrate passed the order \"permission given\". Neither the application\n\nnor the order made thereon discloses that any matex959 rial was placed before th~ fagistrate o_n _the basis The State of of which he gave the perm1ss10n.\n\nEx facie it appears Madhya Pradesh to us, just like it appeared to the High Court, v. that the Magistrate did not realise the significance Mubarak Ali of his order giving permission, but only mechanically issued the order on the basis of the application Subba Rao f. which did not disclose any reason, presumably because he thought that what was required was only a formal compliance with the provisions of the section.\n\nA request was made before the High Court that an opportunity should be given to the prosecution to enable them to produce the necessary evidence to support the order of the Magistrate. But the learned Judge of the High Court rightly did not accede to that belated request. We, therefore, without any hesitation, agree with the High Court that the provisions of s. 5A of the Act have not been strictly complied with in this case.\n\nIn this view no other question arises for consideration. But as the learned Counsel appearing for the State contended that the observations of the learned Judge of the High Court that permission of the Magistrate was obtained ten days after the investigation was started was wrong, it would be as well that we considered the argument briefly. Section 4(1) of the Code of Criminal Procedure defines \" invest!gation \" as to include all the proceedings under that Code for the collection of evidence conducted by the police officer or other persons other than a Magistrate who is authorised by the Magistrate in this behalf. Chapter XIV of the Code prescribes the procedure for investigation.\n\nInvestigation starts after the police officer receives information in regard to an offence.\n\nUnder the Code \"investigation consists generally of the following steps: (i) proceeding to the spot ; (ii) ascertainment of the facts and circumstances of the case; (iii) discovery and arrest of the. suspected offender; (iv) collection of evidence relating to the commission of the offence which may consist of (a) the\n\nexaminat1on of various persons (including the accused) and the reduction of their statements into writing, if\n\nz959' the officer thinks fit, (b) the search of places of seizure\n\nThe state of of things considered trecessry for the investiation Madhya Pradesh and to. b: produced• at the trial; and (v) format10n of v. the opm10n as to whether oh the material' collected Mubarak Ali there is a case to place the accused before a Magistrate for trial and if so taking the necessary steps for the' Subba Rao f. same by the filing of a charge-sheet under s. 173. \"-· ' See H. N. Rishbud and Inder Singh'v: The 'Stdfe of Delhi (1).\n\nFrom the narration of facts given supra, 'it would be seen that in the present case Shri 'Bhalla gave information to the Sub-Inspector on January 11, 1955, as regards the attempt by the Station Master as well as the Assistant Station Master to take bribe from him.\n\nUnder s. 5 of the Act, attempt to obtain from any person for himself or for any other person any gratification is in itself an offence and there' fore the information certainly related to an offence.\n\nThereafter, the Sub-Inspector, after assisting Shri Bhalla to trap the accused, came on the scene, questioned the accused, searched his person and recovered the marked notes and other articles from him ; he searched the person of the informant and recovered the other notes marked but not given to the accused; he took possession of the twenty wooden boxes intended to be booked and the forwarding note together with the record copy of the R/R; he got prepared relevant memoranda for the aforesaid recoveries and got them duly attested by witnesses; and thereafter on the basis of his investigation he sent a report to the Special Police Establishment Office, Indore. We do not know on the material placed before us what further things he did in the matter of investigation between the 14th and 21st when he obtained the permission of the District Magistrate. In the circumstances, we must hold, agreeing with the High Court that the investigation in this case was started by the Sub-Inspector on the 11th, i.e., ten days prior to his obtaining permission of the Magistrate.\n\nThe appeal fails and is dismissed.\n\nAppeal dismissed.\n\n(z) [1955] 1 S.C.R. II50.", "total_entities": 67, "entities": [{"text": "THE STATE OF MADHYA PRADESH", "label": "PETITIONER", "start_char": 899, "end_char": 926, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF MADHYA PRADESH", "offset_not_found": false}}, {"text": "MUBARAK ALI (P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 931, "end_char": 964, "source": "metadata", "metadata": {"canonical_name": "P.B. GAJENDRAGADKAR*", "offset_not_found": false}}, {"text": "A. K. 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1947"}}, {"text": "section 161", "label": "PROVISION", "start_char": 14005, "end_char": 14016, "source": "regex", "metadata": {"linked_statute_text": "The Preven- Mubarak Ali tion of Corruption Act, 1947", "statute": "The Preven- Mubarak Ali tion of Corruption Act, 1947"}}, {"text": "section 165", "label": "PROVISION", "start_char": 14020, "end_char": 14031, "source": "regex", "metadata": {"linked_statute_text": "The Preven- Mubarak Ali tion of Corruption Act, 1947", "statute": "The Preven- Mubarak Ali tion of Corruption Act, 1947"}}, {"text": "section 165A", "label": "PROVISION", "start_char": 14035, "end_char": 14047, "source": "regex", "metadata": {"linked_statute_text": "The Preven- Mubarak Ali tion of Corruption Act, 1947", "statute": "The Preven- Mubarak Ali tion of Corruption Act, 1947"}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 14055, "end_char": 14072, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Code of Criminal Procedure, 1898", "label": "STATUTE", "start_char": 14157, "end_char": 14189, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Section 4", "label": "PROVISION", "start_char": 14269, "end_char": 14278, "source": "regex", "metadata": {"linked_statute_text": "the Code of Criminal Procedure, 1898", "statute": "the Code of Criminal Procedure, 1898"}}, {"text": "section 161", "label": "PROVISION", "start_char": 14335, "end_char": 14346, "source": "regex", "metadata": {"linked_statute_text": "the Code of Criminal Procedure, 1898", "statute": "the Code of Criminal Procedure, 1898"}}, {"text": "section 165", "label": "PROVISION", "start_char": 14350, "end_char": 14361, "source": "regex", "metadata": {"linked_statute_text": "the Code of Criminal Procedure, 1898", "statute": "the Code of Criminal Procedure, 1898"}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 14369, "end_char": 14386, "source": "gazetteer", "metadata": 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"start_char": 16242, "end_char": 16259, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 5", "label": "PROVISION", "start_char": 16283, "end_char": 16287, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 5A", "label": "PROVISION", "start_char": 16451, "end_char": 16456, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 161", "label": "PROVISION", "start_char": 16525, "end_char": 16531, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 164", "label": "PROVISION", "start_char": 16535, "end_char": 16541, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 165", "label": "PROVISION", "start_char": 16545, "end_char": 16551, "source": "regex", "metadata": {"statute": null}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 16559, "end_char": 16576, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 5(2)", "label": "PROVISION", "start_char": 16586, "end_char": 16593, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 6", "label": "PROVISION", "start_char": 16727, "end_char": 16731, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 5A", "label": "PROVISION", "start_char": 17829, "end_char": 17834, "source": "regex", "metadata": {"statute": null}}, {"text": "Madhya Pradesh corruption comprised in the Act", "label": "STATUTE", "start_char": 18136, "end_char": 18182, "source": "regex", "metadata": {}}, {"text": "section 5", "label": "PROVISION", "start_char": 18533, "end_char": 18542, "source": "regex", "metadata": {"linked_statute_text": "Madhya Pradesh corruption comprised in the Act", "statute": "Madhya Pradesh corruption comprised in the Act"}}, {"text": "section 5(4)", "label": "PROVISION", "start_char": 18857, "end_char": 18869, "source": "regex", "metadata": {"linked_statute_text": "Madhya Pradesh corruption comprised in the Act", "statute": "Madhya Pradesh corruption comprised in the Act"}}, {"text": "section 3", "label": "PROVISION", "start_char": 18885, "end_char": 18894, "source": "regex", "metadata": {"linked_statute_text": "Madhya Pradesh corruption comprised in the Act", "statute": "Madhya Pradesh corruption comprised in the Act"}}, {"text": "section 5", "label": "PROVISION", "start_char": 18928, "end_char": 18937, "source": "regex", "metadata": {"linked_statute_text": "Madhya Pradesh corruption comprised in the Act", "statute": "Madhya Pradesh corruption comprised in the Act"}}, {"text": "s. 6", "label": "PROVISION", "start_char": 19124, "end_char": 19128, "source": "regex", "metadata": {"linked_statute_text": "Madhya Pradesh corruption comprised in the Act", "statute": "Madhya Pradesh corruption comprised in the Act"}}, {"text": "clause 23", "label": "PROVISION", "start_char": 19395, "end_char": 19404, "source": "regex", "metadata": {"statute": null}}, {"text": "Prevention of Corruption Act", "label": "STATUTE", "start_char": 19539, "end_char": 19567, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "clause 23", "label": "PROVISION", "start_char": 19694, "end_char": 19703, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 5", "label": "PROVISION", "start_char": 22141, "end_char": 22145, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 5A", "label": "PROVISION", "start_char": 23196, "end_char": 23201, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 4(1)", "label": "PROVISION", "start_char": 23608, "end_char": 23620, "source": "regex", "metadata": {"statute": null}}, {"text": "Code of Criminal Procedure", "label": "STATUTE", "start_char": 23628, "end_char": 23654, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Chapter XIV of the Code", "label": "STATUTE", "start_char": 23887, "end_char": 23910, "source": "regex", "metadata": {}}, {"text": "s. 173", "label": "PROVISION", "start_char": 24919, "end_char": 24925, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 5", "label": "PROVISION", "start_char": 25268, "end_char": 25272, "source": "regex", "metadata": {"statute": null}}]}
{"document_id": "1959_2_213_216_EN", "year": 1959, "text": "(2) S.C.R: SUPREME COURT REPORTS 213\n\nTHE AMALGAMATED ELE, CTRICITY CO., LTD. r959 . v. .: .. , . '· February IJ.\n\nI .N .• S. BATHENA .. ' .,··· (JAFER IMAM, A. K. SARKAR and\n\n K. 'Su:BB.A RAo; JJ.) · ·\n\nArbitration_:_Arbit; ation claus~ in eletricity licence-Whether binding on consumer of electricity-Electricity (Supply) Act, r948 (54 of r948); s. 57, ct. XV I of Sixth Schedule.\n\nThe arbitration clause incorporated by s. 57(1) of the Electricity (Supply) Act, 1948, in a licence granted by the Government for the supply of electrical energy to the consumers is not available for adjudicating upon a dispute between the licensee. and the consumer, for the licence is an engagement between the licensee and the Government and the arbitration clause in it refers only to disputes between them. Section 57(1) does not make the arbitration clause a statutory provision by virtue of which disputes between any and every person may be referred to arbitration.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 361 of 1958.\n\nAppeal by special leave from the judgment and order dated December 11, 1957, of the Mysore High Court in Civil Revision No. 702 of 1956, against the judgment and order dated August 10, 1956, of the Court of the Second-Extra Assistant Judge, Belgaum, in Misc. Appeal No. 36 of 1955, arising out of the order dated September 1, 1955, of the 1st Joint Civil Judge, Junior Division, Belgaum, in Regular Civil Suit No. 197 of 1955.\n\nM. M. Gharekhan and J. N. Shroff, for the appellant.\n\nD. D. Chawla and G. Gopalakrishna.n, for the respondent.\n\nB. Sen and T. M. Sen, for the intervener (Attorney- General of India).\n\n1959. February 13. The Judgment of the Court was delivered by\n\nSARKAR, J.-This is an appeal from the judgment passed by the High Court at Bangalore on a petition in revision. The question is whether a certain suit should be stayed under s. 34 of the Arbitration Act, 1940.\n\nSarkar J.\n\n, 959 The appellant carries on business as a supplier of -- electrical energy in Belgaum. It obtained a licence The Amalgamated from the Government under s. 3 of the Indian Elec- Electricity co., Ltd. tricity Act, 1910, authorising it to supply the energy\n\nBaena in that area. The respondent, who is the plaintiff in the suit, obtained supply of electricity from the appel- Sarkar J. lant. The respondent felt that he was being overcharged by the appellant for the electricity so supplied. He thereupon filed a suit in the Court of the Civil Judge, Belgaum, on or about the 8th of June, 1955, claiming a refund of the amount paid in excess of what he thought was the legitimate charge. The appellant then applied under s. 34 of the Arbitration Act for a stay of the suit on the ground that the matter was referable to arbitration under the provisions of the Electricity (Supply) Act, 1948. The application was dismissed by the Civil Judge and his decision was confirmed by the Extra Assistant Sessions Judge on appeal and lastly, by the High Court in revision. The appellant has now come to this Court.\n\nThe appellant contends that this matter is referable to arbitration under the provision contained in\n\ncl. XVI of the Sixth Schedule of the Act of 1948.\n\nA few of the provisions of these Acts will now have to be referred to. Under the Act of 1910 the business of supplying electrical energy can be carried on only with the sanction of the Government. Section 3 of that Act makes provision for the grant of a licence for supplying electrical energy. The appellant obtained a licence in 1932.\n\nA form of the licence is set out in the rules framed under the Act of 1910 and that form prescribes the maximum limit which a licensee is entitled to charge a consumer for the electrical energy supplied. The Act of 1948 made a somewhat different provision with regard to these charges. It provided by s. 57 as follows:-\n\n\" S. 57.\n\n(1) The provisions of the Sixth Schedule and the Table appended to the Seventh Schedule shall be deemed to be incorporated in the licence of every licensee, not being a local authority, from the date of the commencement of the licensee's next succeeding\n\n(2) S.C.R. SUPREME COURT REPORTS 215\n\nyear of account, and from such date the licensee shall x959 comply therewith accordingly and any provisions of Th A 1 1 d such licence or of the Indian Electricity Act, 1910, or El:ctrici7; f;.~~1~. any other law, agreement or instrument applicable to v. the licensee shall, in relation to the licensee, be void Bathena and of no effect in so far as they are inconsistent with the provisions of this section and the said schedule and Table.\n\n(2) ........................................................... \" This section had therefore. the effect of incorporating in the licence the terms of these two Schedules and provided that they would prevail over the terms of any previously granted licence or the provisions of the Act of 1910, or any other law, agreement or instrument inconsistent with these Schedules. The Sixth Schedule mn, de ne\\v provisions about the clmrges t ]rn, i; a licensee was entitled to realiRe for the current supplied. Clause XVI of that Schedule contains a provision for arbitration and it is on that that the appellant relies. That clause is in these terms: \" Any dispute or difference as to the interpretation or any matter arising out of the provisions of this Schedule shall be referred to the arbitration of the Authority.\" The appellant contends that the dispute covered by the respondent's suit is one of the kind mentioned in this clause and therefore must be referred to arbitration under its terms.\n\nWe will assume that the dispute is of the kind_mentioned in cl. XVI of the Sixth Schedule.\n\nWe are however unable to see that it is a dispute which is referable to arbitration under that clause. It is not the appellant's case that cl. XVI is a clause in any contract between it and the respondent. That being so, the only other way in which it is possible for the appellant to contend that the respondent is bound to refer the dispute to arbitration under this clause is by showing that it is astatutory provision for arbitration.\n\nNo doubt if it were so, then in view of the provisions of s. 46 of the Arbitration Act the appellant would be entitled to apply for a stay of the suit under s. 34 of that Act.\n\nWe are however wholly unable to agree that cl. XVI is such a statutory provision. The only\n\nSarkar ].\n\n'959 statutory provision that we find on the subject is that\n\nTh A I t d contained in s. 57 and its effect is that the terms of e ma ganta e l XVI d l .\n\nElectricity co., Ltd. c . an the other c a uses m the 1xth Schedule v. are to be deemed incorporated in a licence granted by Batkena the Government under s. 3 of the Act of 1910 and the\n\nSarkar j. licensee is to comply with the terms of that Schedule.\n\nTherefore all that we get is that the licence which is granted by the Government to a supplier of electricity, like the appellant, is to contain a clause that certain disputes would be referred to arbitration. The licence is an engagement between the Government and the licensee, binding the parties to it to its provisions. It is unnecessary to decide whej; her this engagement is contractual or statutory, \"for, in either case it is between the two of them only. An arbitratioi+ clause in an instrument like this can only be in respect of disputes between the parties to it. Such an arbitration clause does not contemplate a dispute between a party, to the instrument and one who is not such a party .. We are unable to reads. 57 as making\n\ncl. XVI in the Sixth Schedule a statutory provision by which certain disputes between any .and every person have to be referred to arbitration. . .\n\nIt was said on behalf of the appellant that th~ licence is a statutory document. That, in our vie.w, is a loose way of putting the thing. By that the utmost that can be meant is that it is issued under the terms of a statutory provision and . must , qpmply with the provisions thei; eof.\n\nBut that cannot convert it into a sti:ttutory provision for reference to arbitr.ation of disputes irrespective of the parties between whom the\n\ndsputes may exist. . . In our view, therefore, c.1. XVI of the . SJxth Sche- 'dule of the Act of 1948 contains no provision for, arbi'.\n\ntrat.ion, statutory or otherwise, for reference o( t, he dispute of the nature we have b_efore us, between.a licensed. supplier of electricity .and. a. consumer. of .it from' him. . . . . . . , ,. . . ln the result, this appeal fails and is dismised with costs. ' Appeal dismissed.", "total_entities": 27, "entities": [{"text": "213\n\nTHE AMALGAMATED ELE, CTRICITY CO.", "label": "PETITIONER", "start_char": 33, "end_char": 71, "source": "metadata", "metadata": {"canonical_name": "THE AMALGAMATED ELECTRICITY CO., LTD", "offset_not_found": false}}, {"text": "N .• S. BATHENA", "label": "RESPONDENT", "start_char": 118, "end_char": 133, "source": "metadata", "metadata": {"canonical_name": "N. S. 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{"document_id": "1959_2_217_227_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 217\n\nW AMAN SHRINIW AS KINI v.\n\nRATILAL BHAGWANDAS & CO. (JAFER IMAM, S. K. DAS and J. L. KAPUR, JJ.)\n\nLandlord and Tenant-Ejectment-Agreement of lease allowing sub-letting-Sub-letting prohibited by statute-Landlord's suit for ejectment-Right of ejectment under statute-Equal participant in illegality-Plea of Waiver-Agreement to waive an illegality- Bombay Hotel and Lodging Houses Rates Control Act, r947 (Bom. 57 of r947), ss. r3(r)(e), r5-Jndian Contract Act, r872 (9 of r872), s. 23.\n\nThe appellant was a tenant originally iri the old building but after it was purchased by the respondent he vacated it and became a tenant under the respondent in the new premises. In the old building the appellant had sub-tenants, who shifted to the new premises along with the appellant when the latter occupied those premises. One of the terms of the lease which were contained in a letter dated June 7, 1948, written by the respondent to the appellant provided: \"In the shops in the old chaw] which are with you, you have kept sub-tenants. We are permitting you to keep sub-tenants in the same manner, in this place also.\" On April 20, 1949, the respondent brought a suit for ejectment against the appellant on the ground, inter alia, that s. 15 of the Bombay Hotel and Lodging Houses Rates Control Act, 1947, prohibited_sub-letting and under s. 13(1)(e) of the Act the landlord has the right to evict -the tenant on account of sub-letting. The appellant's -defence was (1) that s. 15 of the Act was confined to\" any other law\", that it did not apply to contracts between the landlord and tenant and therefore.it did not preclude an agreement between the parties as to sub-letting, (2) that the parties were in pari delicto and therefore the respondent could not succeed, and (3) that the right of the respondent to sue for ejectment on the ground of sub-letting being a personal right for his benefit, he must be taken to have waived it as he had allowed the appellant to sub-let and, consequently, he could not evict him under s. 13(1)(e) of the Act.\n\nHeld: (1) that the non-obstante clause \"Notwithstanding anything contained in any Jaw\" ins. 15 of the Bombay Hotel and Lodging Rates Control Act, 1947, applies to contracts also as they would fall under the provisions of the law relating to contracts;\n\n(2) that the respondent was entftled to sue for ejectment, though the agreement recognised sub-letting, as the suit was brought not for the enforcement of the agreement but to enforce the right of eviction which flowed directly from an infraction of the provisions of s. 15 of the Act and for which the Act itself\n\nFebruary I6.\n\nz959 provided a remedy. The section is based upon public policy, and where public policy demands, even an equal participant in Waman an illegality is allowed relief by way of restitution or rescission, Shriniwas Kini though not on the contract; and,\n\nv..\n\n(3) .that the plea of waiver which the appellant relied on Ratilal cannot be sustained because as a result of giving effect to that Bhagwandas & Co. plea the court would be enforcing an illegal agreement and thus contravene the statutory provisions of s. IS of the Act.\n\nAn agreement to waive an illegality is void on grounds of public policy and would be unenforceable.\n\nKapu1 ].\n\nCase law reviewed.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 674 of 1957.\n\nAppeal by special leave from the judgment and decree dated August 10, 1955, of the Bombay High Court in C. R. Application No. 1213 of 1953, arising out of the judgment and decree dated April 25, 1953, of the Assistant Judge, Thana, in C. A. No. 97 of 1952, against the judgment and decree dated January 31, 1952, of the Court of the Civil Judge, J. D. Kalyan, in Suit No. 153of1949.\n\nPurBhottam TricumdaB, RameBhwar Nath and S. N.\n\nAndley, for the appellant.\n\nH.J. Umrigar, Ratnaparkhi Anant Govind and W. P. Oka, for the respondent.\n\n1959. February 16.\n\nThe Judgment of the Court was delivered by\n\nKAPUR, J.-This is an appeal by special leave against the judgment of the High Court of Bombay confirming the order of ejectment passed by the Assistant Judge, Thana. The tenant who was the defendant in the suit is the appellant and the landlord who was the plaintiff is the respondent.\n\nThe facts giving rise to this litigation shortly stated are that the appellant was a tenant for about 20 years in the premises known as \" Fida Ali Villa \"in Kalyan.\n\nThis building was purchased by the respondent who gave notice to the appellant to vacate, as he wanted to construct a new building on the site of the old building. The appellant agreed to vacate and the respondent let to him a portion of his new building which\n\nwas not far from \"Fida Ali Villa\". The appellant had four sub.tenants, three of them also shifted to the new\n\nI959\n\nWaman premises which were let to the appellant by the res.\n\nShriniwas Kini. pondent. Although it was disputed, the courts below v. have found that they occupied the same. position qua Ratilal the appellant. The 4th, a Bohri, was fixed up by the Bhagwandas & Co. respondent in some other place. There was some dispute as to the date when these new premises were let to the appellant, the appellant alleging that they were let on July 1, 1948, and the respondent that they were let on June 1, 1948. The trial Court found that they were let on June 1, 1948. The terms of the lease are contained in a document dated June 7, 1948, which is a letter in Marathi written by the respondent to the appellant and contains the following terms as to sub-tenancy:\n\n\"In the shops in the old chawl which are with you you have kept sub-tenants. We are permitting you to keep sub-tenants in the same manner, in this place also \".\n\nThe parties were not agreed as to the correctness of the translation of this term. The submission of the appellant was that the word 'sub-tenant' should be in the plural and of the respondent that it should be in the singular but whether it is in the singular or plural it does not make any difference to the principal argument advanced in this Court. On January 3, 1949, the respondent gave notice to the defendant to vacate the premises on the ground of non-payment of rent and sub-letting which it was alleged had resulted in the termination of the tenancy.\n\nOn April 20, 1949, the respondent brought a suit for ejectment on the groud of non-payment of rent and sub-letting of the premises. The defence of the appellant was that under the terms of the lease he had the right to sub-let the premises.\n\nAs to the claim on the ground of non-payment of rent be deposited the arrears of rent in court. The trial Court held that subletting was lawful in spite of s. 15 of Bombay Hotel and Lodging Houses R, ates Control Act, 1947 (Born. 57 of 1947)~ He also held that the appellant did not occupy he premises on the same terms and conditions on whic he occupied the old premises in \"Fida Ali\n\nKapur].\n\n'959 Villa\". He passed a decree for Rs. 445 on account of rent remaining due and dismissed the respondent's Waman Sh.iniwas J{ini suit for ejectment. On appeal the Assistant Judge at v.\n\nThana reversed the decree holding that s. 15 of the Ratilal Act com.pletely prohibited sub-letting and under Bhagwandas & Co. s. 13(l)(e) of the Act the landlord had the right to evict - the tenant on account of sub-letting. The appellant I<apur j. h t en went in revision to the High Court of Bombay, but it affirmed the order of ejectment. The appellant has come to this Court by special leave.\n\nCounsel for the appellant urged that there was no new tenancy after the coming into force of the Act and therefore ss. 13(l)(e) and 15 of the Act did not apply; (2) that the tenant had not sub, let the premises to the sub-tenants and they were merely licensees of the landlord; (3) that no new sub-tenancy had been created; (4) that s. 15 was confined to 'any other law'; it did not apply to contracts between the landlord and tenant and therefore it did not preclude an agreement between the parties as to sub-letting; (5) that the parties were in pari delicto -and therefore the plaintiff-respondent could not succeed. He also raised a new ground which had not been raised in the courts below or in the grounds of appeal or in the statement of case in this Court, that the. respondent had waived his right in regard .to the prohibition against sub-tenancy and the provision in s. 13(l)(e) was for the protection of his rights which he was entitled to waive.\n\nThe courts below have held that the tenancy by the letter of June 7, 1948, was a new tenancy and not a continuation of the old and that the sub-tenants were tenants of the appellant and not licensees of the respondent and in this Court no serious argument was addressed on these points. The previous tenancy was of a different building called 'Fida Ali Villa' which came to an end when the appellant vacated those premises and entered into a new agreement of lease in regard to the premises in dispute. There was no privity between the respondent and the sub-tenants of the appellant and they could not be termed his licensees.\n\nThese contentions are without substance and have rightly been rejected.\n\nIt was then argued that under s. 15 of the Act there '959 is no prohibition against a contract of sub-letting, the Waman non-obstante clause being confined to other laws. The Shriniwas Kini section when quoted runs as follows :- v. \"Notwithstanding anything contained in any law Ratilal it shall not be lawful after the coming into operation Bhagwandas & Co. of this Act for any tenant to sub-let the whole or any Kapur J. part of the premises let to him or to assign or transfer in any other manner his interest therein : Provided that the (State) Government may, by notification in the Official Gazette, permit in any area the transfer of interest in premises held under such leases or class of leases and to such extent as may be specified ill the notification\".\n\nThis section prohibits sub-letting and makes it unlawful for a tenant to assign or to transfer his interest in the premises let to him. The non-obstante clause would mean that even if any other law allowed subletting, e. g., s. 108 of the Transfer of Property Act, the sub-letting would, because of s. 15, be unlawful.\n\nThis would appy to contracts also as all contracts would fall under the provisions of the law relating to contracts, i.e., Contract Act. An agreement contrary to the provisions of that section (s. 15) would be unenforceable as being in contravention of the express provision of the Act which prohibits it. It is not permissible to any person to rely upon a contract the making of which the law prohibits (s. 23 of the Contract Act).\n\nCounsel for the appellant contended that the view of the Bombay High Court in P. D. Aswani v. Kavashah Dinshah Mulla (1) was erroneous and that the correct rule was laid down by that Court in Cooper\n\nv. Shiavax Cam.batta {2}.· That was a case under s. 10 of Bombay Rents, Hotel Rates and Lodging Houses Rates (Control) Act (Born. VII of 1944) which in express terms allowed sub-letting as follows:-\n\n\" Notwithstanding anything to the contrary in any law for the time being in force, a tenant may sublet any portion of his premises to a sub-tenant, provided be forthwith intimates in writing to his landlord\n\n(1)\n\n(1953) 56 Born. L.R. 467. (2) A.LR. I949 Born. 131.\n\n1959 the fact.of his having so sub-let the premises and also ;,;;;;'an the rent at wb'ich t4ey have.been sub-let\".\n\nShdniwas_Kini It was contended tliat the non-obstante clauses in s.10'\n\nv. of Act VII of 1944 and of s. 15 of the Act being simi- Ralilal lar in language must be similarly interpreted. The\n\nBhgwanaas & Co.non-obstante clause has to be read in conjunction --with\n\nKapur;. the rest of the section. Section 10 of the Act of 1944 ·\n\n- ---permitted sub-letting on certain conditions. By s. 9 of\n\ntnat Act provision was made for a contract between the landlord and the tenant prohibiting sub-letting and in Cooper v. ShiavaxOam_batia (') the 'two provisions were reconci!Efd by saying that a contract under s. 9 prevailed over the permission.given-by s. 10. Buts. 15 expressly prohibits sub-letting and therefore a contract to the contrary cannot neutralise its prohibitory effect. The non-obstante clause of the two sections, s. 10 of the Act of 1944 and of s. 15 of the Act there- fore cannot be said to have the same effect.\n\nThe respondent's suit for ejectment was brought unaer s. 13(l)(e) whiqh provides: \"Notwithstanding anything contained in this Act (but subject to the provisions of section 15), a land- , lord shall be erttitled to recover possession of any premises if the Court is satisfied ................................................................. '\n\n...................... ........................ .................. .\n\n(e) that the tenant has, since the coming into operation of this Act, sub-let the whole or part of the premises or assigned or transferred in any other manner his interest therein ; \". It was contended that s. 13(l)(e) had to be read separately and not in conjunction with s. 15 of the Act.\n\nThe section itself makes it quite clear that it is subject to the provision of s. 15 and the two sections must therefore be read together. The appellant pleaded that -under the agreement between him and the respondent he was entitled to sub-let the premises. Such an agreement, in our opinion, is void because of the provisions of s. 15 of the Act ands. 23 of the Contract Act and enforcement of the agreement would produce the\n\n(1) A.I.R. 1949 Bom. 131.\n\n(2) S.C.lt.\n\nSUPREME COURT REPORTS 223\n\nI959 very result which the law seeks to guard against and to prevent and by sustaining the plea of the appellant Waman the Court would be enforcing an agreement which is Shriniwas Kini prohibited and. made illegal. v.\n\nThe appellant relied on the maxim in pari delicto Ratilal potior est conditio posidentis to support his plea that Bhagwandas & Co. the respondent could not enforce his right under s. 13 (l)(e).\n\nBut this maxim \"must not be understood as meaning that where a transaction is vitiated by illegality the person left in possession of goods after its completion is always and of necessity entitled to keep them. Its true meaning is that, where the circumstances are such that the Court will refuse to assist either party, the consequence must, in fact, follow that the party in possession will not be disturbed\". (Per Du Parcq, L. J., in Bowmakers Ltd. v. Barnet Instruments Ltd. (1).\n\nThe respondent in the present case did not call upon the Court to enforce any agreement at all.\n\nWhen the instrument of lease was executed and possession given and sub-letting done it received its full effect ; no aid of the Court was required to enforce it. The respondents' suit for ejectment was not brought for the enforcement of the agreement which recognised sub-letting but he asked the Court to enforce the right of eviction which flows directly from an infraction of a provision of the Act (s. 15) and for which the Act itself provides a remedy.\n\nThere is thus a manifest distinction between this case where the plaintiff asked the Court to afford him a remedy against one who by contravening s. 15 of the Act has made himself liable to eviction and those cases where the Court was called upon to assist the plaintiff in enforcing an agreement the object of which was to do an illegal act. The respondent is only seeking to enforce his rights under the statute and the appellant cannot be permitted to assert in a Court of justice any right founded upon or growing out of an illegal transaction. Gibbs &: Sterr et Manufacturing Co.\n\nv. Brucker (2). In our opinion s. 15 of the Act is based on public policy and it has been held that if public policy demands it even an equal participant in the\n\n(I) [1945] I K.B. 65, 72.\n\n(2) (1884) III U.S. 5'!J7 i 28 L. Ed. 534•\n\nKapur ].\n\n224 SUP:REM:ln COtJR'r REPORTS [1959] Supp.\n\nz959 illegality is allowed relief by way of restitution of rescission, though not on the contract.\n\nWaman It was next contended that s. 13(1)(e) is a provision Shriniwas J(ini\n\nv. for the protection of private rights of the landlord and Ratilal unless there is in the Act itself any provision to the Bhagwandas & ca. contrary such rights as far as they were personal rights may be parted with or renounced by the land- Kapm f. lord. In other words the right of the respondent to sue for ejectment on the ground of sub-letting being a personal right for his benefit, the landlord must be. taken to have waived it as by an express contract he had allowed the tenant to sub-let and consequently he could not evict the appellant under s. 13(1)(e) of the Act.\n\nThe plea of waiver was taken for the first time in this Court in arguments. Waiver is not a pure question of law but it is a mixed question of law and fact.\n\nThis plea was neither raised nor considered by the courts below and therefore ought not to be allowed to be taken at this stage of the proceedings. But it was argued on behalf of the appellant that according to the law of India the duty of a pleader is to set up the facts upon which he relied and not any legal inference to be drawn from them and as he had set up all the circumstances from which the plea of waiver could be inferred he should be allowed to raise and argue it at this stage even though it had not been raised at any previous stage not even in the statement of case filed in this Court and he relied upon Gouri Dutt Ganesh Lal l!'irm v. Madho Prasad {1).\n\nAssuming that to be so and proceeding on the facts found in this case the plea of waiver cannot be raised because as a result of giving effect to that plea the Court would be enforcing an illegal agreement and thus contravene the statutory provisions of s. 15 baseq on public policy and produce the very result which the statute prohibits and makes illegal. In Surafinull Nargoremull v. Triton Insurance Go. ('), Lord Sumner said:-\n\n\"No Court can enforce as valid that which competent enactments have declared shall not be valid, nor is obedience to such an enactment a thing from\n\n(1) A.I.R. 1943 P. C. 147.\n\n(2) (1924) L.R. 52 I. A. 126.\n\nwhich a Court can be dispensed by the consent of the\n\nI959 Parties, or by a failure to plead or to argue the point Waman at the outset: Nixon v. Albion Marine Insurance Go. (1).\n\nShriniwas Kini The enactment is prohibitory. It is not confined to v. affording a party a protection of which he may avail Ratilal himself or not as he pleases. It is not framed solely for Bhagwandas &- Co. the protection of the revenue and to be enforced solely at the instance of the revenue officials, nor is the prohibition limited to cases for which a penalty is exigible \".\n\nIn the instant case the question is not merely of waiver of statutory rights enacted for the benefit of an individual but whether the Court would aid the appellant in enforcing a term of the agreement which s. 15 of the Act declares to be illegal. By enforcing the contract the consequence will be the enforcement of an illegality and infraction ofa statutory provision which cannot be condoned by any conduct or agreement of parties. Dhanukudhari Singh v. Nathima Sahu (2). In Corpus Juris Secundum, Vol. 92, at p. 1068, the law as to waiver is stated as follows:-\n\n\" ............ a waiver in derogation of a statutory right is not favoured, and a waiver will be inoperative and void. if it infringes on the rights of others, or would be against public policy or mo'rals ............ \".\n\nIn Bowmakers Limited v. Barnet Instruments Ltd. (3) the same rule was laid down. Mulla in his Contract Act at page 198 has stated the law as to waiver of an illegality as follows:-\n\n\"Agreements which seek to waive an illegality are void on grounds of public policy. Whenever an illegality appears, whether from the evidence given by one side or the other, the disclosure is fatal to the case.\n\nA stipulation of the strongest form to waive the objection would be tainted with the vice of the original contract and void for the same reasons. Wherever the contaJDination reaches, it destroys\".\n\nThis, in our opinion, is a correct statement of the law and is supported by high authority. Field, J., in\n\n\\l) \\1867) L.R. 2 Ex. 338.\n\n(2) (1907) n C. W. N. 848, 852.\n\n(3) [1945] 1 K.B. 65, 72. 29\n\nKapur].\n\nI959\n\nOscanyan v. Winchester Arms Company(') quoted with approval the observation of Swayne, J., in Hall v.\n\nWaman Shriniwas ]{ini Coppell(') :- v. \" The principle is indispensable to the purity of Ratilat its administration. It will not enforce what it has Bhagwandas <~Co.forbidden and denounced. The maxim Ex dolo malo\n\n]{apur j. non oritur actio, is limited by no such qualification. The proposition to the contrary strikes us as hardly worthy of serious refutation. Wherever the illegality appears, whether the evidence comes from one side or the other, the disclosure is fatal to the case.\n\nNo consent of the defendant can neutralise its effect.\n\nA stipulation in the most solemn form, to waive the objection; would be taiuted with the vice of the original contract, and void for the same reasons. Wherever the contamination reaches, it destroys \".\n\nWaiver is the abandonment of a right which normally every body is at liberty to waive. A waiver is nothing unless it amounts to a release. It signifies nothing more than an intention not to insist upon the right.\n\nIt may be deduced from acquiescence or may be implied. Chitty on Contract, 21st Ed., p. 381 : Stackhouse v. Barnston ('). But an agreement to waive an illegality is void on grounds of public policy and would be unenforceable.\n\nIn Mytton v. Gilbert (4) Ashurst, J., said:-\n\n\"Besides, there is still further reason why the trustees should not be estopped ; for this is a public Act of Parliament, and the Courts are bound to take notice that the trustees under this Act had no power to mortgage the toll-houses.\n\nThis deed therefore cannot operate in direct opposition to an Act of Parliament, which negatives the estoppel \".\n\nVaughan Williams, L. J., in Norwich Corporation v.\n\nNorwich Electric Tramways Company(') said :-.\n\n\" The case is not like that of a provision in an agreement which is for the benefit of one of the parties and which he may waive. This is a provision in an Act of Parliament, wh_ich, though to some extent\n\n(1) (1881) 103 U.S. 261; 26 L. Ed. 539.\n\n(2) 7 Wallace 542.\n\n(3) (1805) 10 Ves. 453; 32 E.R. 921.\n\n(4) (1787) 2 T.R. 171; 100 E.R. 91.\n\n(5) [1906] 2 K.B. II9, 124.\n\nI959 it may be for the benefit of the parties to the difference, must be regarded as inserted in the interest of the public also\".\n\nWaman Shriniwas Kini In that case there was a provision made by the Legisv. lature that disputes mentioned in the section of the Ratilal Act were to be determined by an Expert nominated by Bhagwandas & Co. the Board of Trade and it was contended that though not in the strict technical sense estoppel, it was a waiver of the provisions introduced into the Statute for the benefit of private rights. No doubt that was a case which proceeded on a question of jurisdiction but the judgment proceeded on the principle of waiver of a statutory provision inserted in public interest.\n\nThus the plea of waiver is unsustainable.\n\nIn our opinion, therefore, the judgment of the High Court is sound and the appeal must therefore be dismissed with costs.\n\nAppeal dismissed.\n\nM/S. RAMAN & RAMAN LTD. v.\n\nTHE STATE OF MADRAS & OTHERS (JAFER IMAM, A. K. SARKAR and SuBBA RAo, JJ.)\n\nMotor Vehicles-Legislation empowering State Government to issue orders and directions-Interpretation-Nature of jurisdiction conj erred-Such orders and directions, if law regulating rights of parties-Motor Vehicles (Madras Amendment) Act, z948 (XX of I948), s. 43A.\n\nThe appellant and the fourth respondent along with others were applicants for a stage carriage permit.\n\nThe Regional Transport Authority after hearing the applicants granted the permit to the appellant. On appeal by the fourth respondent, the Central Road Traffic Board set aside the order of the Regional Transport Authority and granted the permit to the fourth respondent. The appellant moved the State Government in revision but to no effect. He thereafter moved the High Court under Art. 226 of the Constitution for a writ of certiorari quashing the orders of the Central Road Traffic Board and the State Government. The single Judge who heard the matter quashed\n\nRapur J.\n\nI959\n\nFebruary xB.", "total_entities": 55, "entities": [{"text": "W AMAN SHRINIW AS KINI", "label": "PETITIONER", "start_char": 38, "end_char": 60, "source": "metadata", "metadata": {"canonical_name": "WAMAN SHRINIWAS KINI", "offset_not_found": false}}, {"text": "RATILAL BHAGWANDAS & CO", "label": "RESPONDENT", "start_char": 65, "end_char": 88, "source": "metadata", "metadata": {"canonical_name": "RATILAL BHAGWANDAS & CO", "offset_not_found": false}}, {"text": "S. K. DAS", "label": "JUDGE", "start_char": 103, "end_char": 112, "source": "metadata", "metadata": {"canonical_name": "S.K. DAS", "offset_not_found": false}}, {"text": "L. KAPUR, JJ.", "label": "JUDGE", "start_char": 120, "end_char": 133, "source": "metadata", "metadata": {"canonical_name": "J.L. 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{"document_id": "1959_2_227_255_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 227\n\nI959 it may be for the benefit of the parties to the difference, must be regarded as inserted in the interest of the public also\".\n\nWaman Shriniwas Kini In that case there was a provision made by the Legisv. lature that disputes mentioned in the section of the Ratilal Act were to be determined by an Expert nominated by Bhagwandas & Co. the Board of Trade and it was contended that though not in the strict technical sense estoppel, it was a waiver of the provisions introduced into the Statute for the benefit of private rights. No doubt that was a case which proceeded on a question of jurisdiction but the judgment proceeded on the principle of waiver of a statutory provision inserted in public interest.\n\nThus the plea of waiver is unsustainable.\n\nIn our opinion, therefore, the judgment of the High Court is sound and the appeal must therefore be dismissed with costs.\n\nAppeal dismissed.\n\nM/S. RAMAN & RAMAN LTD. v.\n\nTHE STATE OF MADRAS & OTHERS (JAFER IMAM, A. K. SARKAR and SuBBA RAo, JJ.)\n\nMotor Vehicles-Legislation empowering State Government to issue orders and directions-Interpretation-Nature of jurisdiction conj erred-Such orders and directions, if law regulating rights of parties-Motor Vehicles (Madras Amendment) Act, z948 (XX of I948), s. 43A.\n\nThe appellant and the fourth respondent along with others were applicants for a stage carriage permit.\n\nThe Regional Transport Authority after hearing the applicants granted the permit to the appellant. On appeal by the fourth respondent, the Central Road Traffic Board set aside the order of the Regional Transport Authority and granted the permit to the fourth respondent. The appellant moved the State Government in revision but to no effect. He thereafter moved the High Court under Art. 226 of the Constitution for a writ of certiorari quashing the orders of the Central Road Traffic Board and the State Government. The single Judge who heard the matter quashed\n\nRapur J.\n\nI959\n\nFebruary xB.\n\nI959\n\nM/s. Raman &\n\nRanian Ltd. v.\n\nThe Stats of Madras & Others\n\nthe said orders and directed the State Transport Appellate Tribunal, which was constituted in place of the Central Road Traffic Board, to dispose of the appeal according to law. On a Letters Patent appeal by the fourth respondent, the Appellate Bench of the High Court set aside the order of the single Judge and restored the order of the Central Road Traffic Board. Hence this appeal by special leave. The point for determination in the appeal was whether the order granting the permit to the appellant made by the Regional Transport Authority on the basis of an order issued by the State Government under s. 43A of the Motor Vehicles Act, 1939, as amended by the Motor Vehicles (Madras Amendment) Act, 1948, could be set aside on the basis of another order imposing new restrictions issued thereunder while the appeal was pending before the Central Road Traffic Board and thus involved the question as to whether an order or direction issued by the State Government under s. 43A of the Act had the force of law, so as to create a vested right in the appellant.\n\nHeld (per Jafer Imam and Subba Rao, JJ.), that s. 43A of the Motor Vehicles Act, 1939. as amended by the Motor Vehicles (Madras Amendment) Act, 1948, properly construed, must be given a restricted meaning and the jurisdiction it conferred on the State Government must be confined to administrative functions. An order or direction made thereunder by the State Government, therefore, could not have the status of law regulating rights of parties and must partake of the character of an administrative order.\n\nC. S.S. Motor Service, Tenkasi v. The State of Madras, I.L.R. 1953 Mad. 304 and Gopalakrishnan Motor Transport Co., Ltd. v.\n\nSecretary, Regional Transport Authority, Krishna District, V ijayawada, A.LR. (1957) A.P. 882, approved.\n\nConsequently, in the instant case, the appellant could not be said to have acquired a vested right that was defeated by a new law enforced pending the appeal and the order of the Central Road Traffic Board could not .be set aside merely on the ground that it had decided the appeal on the basis of an order issued subsequent to the grant of the permit if such order was otherwise in public interest.\n\nPer Sarkar. J.-It could hardly be said that the rule that a court hearing an appeal from a decision should not ordinarily take into consideratiol) a law passed subsequent to that decision had application where a quasi-judicial tribunal heard an appeal from another such tribunal. Consequently, in the instant case, it could not be said that there was an error of law apparent on the face of the record so as to attract a writ of certiorari and the appeal must fail on that ground.\n\nNo applicant for a permit under the Motor Vehicles Act could have a substantive right to the permit vested in him and\n\nthe granting or refusal of a permit by the Regional Transport Authority could not operate as res judicata.\n\nIt was unnecessary for the purpose of the present case to decide what kind of orders could be issued by the State Government under s. 43A of the Act, for whatever its nature, administrative or otherwise, if an order under that section entitled a person to its observance, and there was hardly any doubt as to that, it would be a law a mistake of which would justify the issue of a writ of certiorari at his instance.\n\nThe Mayor of Rochester v. The Queen, (1858) EL. BL. & E.L. 1924; 120 E.R. 791, referred to.\n\nNagendra Nath Bora v. The Commissioner of Hills Division and Appeals, Assam, [1958] S.C.R. 1240, distinguished.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 37 of 1958.\n\nAppeal by special leave from the judgment and order dated September 14, 1956, of the Madras High Court in Writ Appeal No. 64 of 1956, arising out of the judgment and order dated May 1, 1956, of the said High Court in Writ Petition No. 852 of 1955.\n\nG. S. Pathak, R. Ganapathy Iyer and G .. Gopalakrishnan, for the appellant.\n\nA. V. Viswanatha Sastri, J.B. Dadachanji and S. N.\n\nAndley, for respondent No. 4.\n\n1959. February 18. The judgment of Imam and Subba Rao, JJ., was delivered by Subba Rao, J.\n\nSarkar, J., delivered a separate judgment.\n\nSuBBA RAO, J.-This appeal by Special Leave against the judgment of the High Court of Judicature at Madras raises the ques.J, ion of interpretation of s. 43A of the Motor Vehicles Act, 1939 (IV of 1939), as amended by the Motor Vehicles (Madras Amendment) Act, 1948 (Mad. XX of 1948), hereinafter referred to as the Act. On February 19, 1955, the Regional Transport Authority, Tanjore, Madras State, the second respondent herein, called for applications under s. 57(2) of the Act for grant of a stage carriage permit on the Saliamangalam Kodavasal route. The appellant and the fourth respondent, K. M. Shanmugam, Proprietor, K. M. S. Transport, Ammapet, Tanjore District, along with others, applied for the grant of the said permit. The Regional Transport Authority\n\nz959\n\nM/s. Raman &\n\nRaman Ltd. v.\n\nThe State of Madras & Others\n\nSubba Rao].\n\nx959 at its meeting held on April 19, 1955, after hearing the\n\nM/s. Raman & representations of the applicants, granted the permit Raman Ltd. to the appellant. The fourth respondent and two v. others preferred appeals against the said order to the The State of Central Road Traffic Board, Madras, the third respon- Madras & Others dent herein. The Central Road Traffic Board by its order dated June 25, 1955, set aside the order of the Subba Rao].\n\nRegional Transport Authority and granted the permit to the fourth respondent. The appellant preferred a Revision Petition against that order to the first respondent, the State of Madras, but the first respondent rejected the petition by its order dated October l~,\n\n1955. Thereafter, the appellant filed a Writ Petition (No. 852 of 1955) in the High Court of Madras under Art. 226 of the Constitution to quash the orders of the Central Road Traffic Board and the State of Madras.\n\nRajagopalan, J., of the said High Court by his order dated May 1, 1956, quashed the order of the Government and directed the State Transport Appellate Tribunal which had been constituted in place of the Central Road Traffic Board to dispose of the appeal in accordance with law. Against the judgment of the learned Judge, the fourth respondent preferred an appeal under the Letters Patent and the Appellate Bench of that High Court, consisting of Rajamannar, C. J., and Ramaswami, J., set aside the order of Rajagopalan, J., and restored the order of the Central Road Traffic Board. The appellant with special leave filed the present appeal against that judgment of the High Court. _ Mr. Pathak, appearing for the appellant, raised before us the following two points: (i) The appeal filed by the fourth respondent against the order of the Regional Transport Authority to the Central Road Traffic Board was barred by limitation and the Board acted illegally in disposing of the appeal without deciding the question of limitation; and (ii) the appellant had the fundamental right to carry on the business of transport subject to reasonable restrictions imposed by law as on the date he applied for a permit or at any rate when the Regional Transport Authority issued the permit to him, and that the Central Road\n\nTraffic Board committed an error, evident on the face r959 of the record, in disposing of the appeal in accordance with the new restrictions imposed by law made pend- M/s. Raman &- ing the appeal before it. Stated as a legal proposition, Raman Ltd. the contention is that the appellant had acquired a The s:te of vested right to carry on the business of transport and Madras & Others that the same could not be defeated by a subsequent law made pending the appeal, which was only pro- Subba Rao J. spective in character.\n\nThe first argument need not detain us, for the learned Counsel, in view of the finding of the High Court\n\nthat as a matter of fact the appeal to the Central Road Traffic Board was not barred, fairly did not press it before us.\n\nThis leaves us with the second and the only argument in the case. To appreciate the contention it is necessary to set out some more relevant facts : On March 28, 1953, the Government made an order, G. 0. Ms. No. 1037 Home, purporting to be under s. 43A of the Act.\n\nThe material part of that order reads:\n\n\"(1) That additional buses should not be permitted to ply on existing routes unless there is a clear need for increase in the number of buses plying on a particular route and wasteful competition should be discouraged but healthy competition where there is room should be encouraged and,\n\n(2) that the transport authorities while granting stage carriage permits should work up to the minimum of 5 permits with a spare bus for each operator and the issue of permits should be so regulated as not to encourage benamidars on one hand and inefficient operators on the other.\"\n\nOn November 15, 1954, in supersession of paragraph 2 of the above order, the Government issued an order, G. 0. Ms. No. 3353 Home, to the following effect:\n\n\" The Governor of Madras hereby directs that each viable stage carriage unit in this State shall consist of not less than 10 buses and that in the matter of grant of stage carriage permits, other things being equal, and with a view to build up such viable units, the following shall be the order of preference :\n\n232 SUPREMECOURT REPORTS [1959] Supp.\n\n(1) Operators with less than 10 buses but nearer the mark of 10.\n\nM/s. Raman &\n\nRaman Ltd.\n\n(2) Operators with IO and more buses. v.\n\n(3) Others including new entrants.\n\nThe State of The Governor also directs that in order to facili, Madras & Others tate the amalgamation of existing small units into - viable units transfer of permits shall be allowed Subba Rao j. liberally.\"\n\nOn June 15, 1955, the Government issued .another order, G. 0. Ms. No. 1689 Home, whereby the Central Road Traffic Board was informed that pending further orders of Government after re-examination of the question of formation of viable units of stage carriages, the orders in para. (2) of G. 0. Ms. No. 1037 Home dated 28th M; i, rch, 1953, would be in force.\n\nThe effect of this order was that the first order was restored pending final orders.\n\nWhen the Regional Transport Authority issued the permit in favour of the appellant, G. 0. Ms. No. 3353 Home dated 15th November, 1954, was in force, and when the Central Road Traffic Board made the order giving the permit to the fourth respondent, G. 0. Ms.\n\nNo. 1689 Home dated 15th June, 1955, was in operation. Apart from other considerations, the Regional Transport Authority relied upon the former G. 0. in preferring the appellant to other applicants,· while the Central Road Traffic Board referred to G. 0. Ms.\n\nNo. 1037 Home dated 28th March, 1953, which was restored by the later G. 0. in preferring the fourth respondent to the appellant. We shall give further details of the orders of the Regional Transport Authority and the Appellate Tribunal in the context of another argument, but, for the present, the aforesaid facts would suffice.\n\nIt would be convenient at this stage, before entering into the controversial question, to state briefly some of the well-established principles relevant to the • question raised : (i) A citizen has a fundamental right to ply motor vehicles on public pathways under Art. 19(1 )(g) of the Constitution, and any infringement of that right by the State can be justified only if it falls within the scope of Art. 19(6) thereof-See 0. S.S.\n\nMotor Service, Tenkasi v. The State of Madras (1) and Saghir Ahmad v. The State of U. P. (2); (ii) proceedings before tribunals issuing permits are of quasijudicial in character-See 0. S.S. Motor Service, Tenkasi v. The State of Madras (1) and New Prakash Transport Go. Ltd. v. New Suwarna Transport Go.\n\nLtd. (3); (iii) a new law which takes away or impairs vested rights acquired under existing laws must be deemed to be intended not to have retrospective operation, unless such law makes it retrospective expressly or by implication-See Maxwell on the Interpretation of Statutes, p. 215; Garikapatti Veeraya v.\n\nN. Subbiah Chowdhury {4) and Seth Gulab Chand v.\n\nKudilal (5); and (iv) the same principle applies to a law made pending an appeal before an appellate Court-See P. M. Seshadri v. Province of Madras (6).\n\nSo much is not, and cannot, de disputed. We shall assume that the said principles apply to a law made pending an appeal against an order of a quasi-judicial tribunal. The main controversy centres round the fact whether the orders made and the directions issued by the State Government under s. 43A of the Act are \"laws\" as to attract the operation of the aforesaid principles.\n\nWhile Mr. Pathak says that the said directions are as much laws as those of the provisions of a statute or rules made thereunder, Mr. A. Viswanatha Sastri contends that, having regard to the scheme of the Motor Vehicles Act and the different sections of the Act vesting powers in the State Government with regard to different matters dealt with by the Act, the power conferred on the State Government under s. 43A is a power to make orders or issue directions in respect of administrative matters regulating the relationship between the State Government and the Transport Authorities and that such orders do not affect the legality or the validity of judicial acts of the said authorities. To appreciate the rival contentions, it is necessary to consider the relevant provisions of the Act.\n\n(r) I.L.R. 1953 Mad. 304, 330, 334\n\n(3) [1957] S.C.R. 98, rr8.\n\n(5) [1959] S.C.R. 313, 322. 30\n\n(2) [1955] 1 S.C.R. 707, 719.\n\n(4) [1957] S.C.R. 488, 515.\n\n(6) A.I.R 1954 Mad. 543.\n\nz959\n\nM / s. Raman &\n\nRaman Ltd. v.\n\nThe State of Madras & Others\n\nSubba Rao J.\n\nz959 The Act, which is a Central Act, was passed in the year 1939 and subsequently it was amended from time\n\nM~::n~~\":; d~ to time both by Parliament and also by the local v. legislatures. The main object of the Act is to regulate The State of the motor traffic in every State in the interest of the Madras & Others public. Chapter II contains provisions relating to licensing of drivers of motor vehicles. Chapter III Subba Rao J. prescribes for the registration of motor vehicles.\n\nChapter IV provides for the control of transport vehicles. Chapter V lays down the general provisions regarding construction, equipment and maintenance of motor vehicles. Chapter VI regulates the control of traffic. Chapter VIII deals with the insurance of motor vehicles against third party risks. Chapter IX defines the offences, lays down the penalties and prescribes the procedure for detecting offences and enforcing penalties. Chapter X deals with miscellaneous matters. Every Chapter contains a specific provision conferring a pqwer on the State Government to make rules for the purpose of carrying into effect the provisions of that Chapter. To carry out the objects of the Act, the State Government is authorized to create a hierarchy of officers such as the State Transport Authority, the Regional Transport Authority, the Registering Authority, etc. Such Authorities are entrusted with administrative as well as quasi-judicial functions.\n\nChapter IV with which we are now concerned follows the same pattern. Its general heading is \"Control of Transport Vehicles\". Section 42 prohibits the owners of transport vehicles from using them in any public place without permits. Section 43 empowers the State Government to control road transport. Section 44 enables the State Government to constitute Transport Authorities to exercise and discharge the specified powers and functions. Under s. 44(4) the State Transport Authority is authorized to issue directions to any Regional Transport Authority and the latter shall be guided by such directions. Sections 46, 4 7, 48, 57, 60 and 64 prescribe the procedure for issue of permits and also create a hierarchy of Tribunals for hearing of applications and disposal of appeals. The said procedure is clearly quasi-judicial in character and has\n\nbeen held to be so by this Court. Sections 67 and 68 confer a power on the State Government to make rules to regulate the operation of transport carriages and also to make rules for the purpose of carrying into effect the provisions of this Chapter.\n\nUnder the aforesaid provisions and the rules made thereunder, the State Transport Authority is made the administrative head of all the other Transport Authorities functioning in the State, and the Central Road Traffic Board the appellate authority in the hierarchy of Tribunals constituted under the Aet. As the admh1istrative head the State Transport Authority is authorized under s. 44(4) of the Act to issue directions to any Regional Transport Authority, who shall be guided by such directions.\n\nAs an appellate tribunal the Central Road Traffic Board is empowered to dispose of the appeals preferred against the orders made by the subordinate authorities under the Act in respect of specified matters. But the Central Act did not make any provision enabling the State Governments to control either the quasi-judicial or the administrative wings of the machinery provided under the Act. While the State Transport Authority could issue directions to other Transport Authorities constituted under the Act, a State Government could not likewise issue any directions either to the State Transport Authority or to its subordinate authorities. So too, while the Central .Road Traffic Board could in its appellate jurisdiction set aside or modify the orders of the subordinate tribunals, the State Government was not in a position to set aside the improper orders of the tribunals under the Act. Presumably, therefore, to bring the said authorities under its control, both on the judicial and the administrative wings, Motor Vehicles (Madras Amendment) Act, 1948 (Mad. XX of 1948), was passed and it became law on December 21, 1948.\n\nAmong other amendments, ss. 43A and 64A were inserted in the Act. Section 43A reads:\n\n\" The State Government may issue such orders and directions of a general character as it may consider necessary, in respect of any matter relating to road transport, to the State Transport Authority or\n\nI959\n\nMjs. Raman &\n\nRaman Ltd. v.\n\nThe State of Madras & Others\n\nSubba Rao].\n\nr959 a Regional Transport Authority; and such Trans-\n\nM /s. Raman\"\" port Authority shall give effect to all such orders and\n\nRanian Ltd. directions.\"\n\nSection 64A is to the following effect : The State af \" The State Government may, on its own motion Madras & Others l' d 11 ,. d f _ or on app 10a.t10n ma e to it, ca .or the recor s o subba Rao J. any order passed or proceeding taken under this Chapter by any authority or officer subordinate to it, for the purpose of satisfying itself as to the legality, regularity or propriety of such order or proceeding and after examining such records, may pass such orders in reference thereto as it thinks fit.\" So far as s. 64A is concerned, in express terms it confers a judicial power on the State Government to keep a subordinate judicial tribunal within bounds. Section 64A, along with ss. 45 to 57, 60 and 64, forms a complete code in respect of the quasi-judicial disposals of the issue of permits. The permits should be issued in accordance with the provisions of the Act and the rules framed thereundAr following the judicial procedure. The words used in s. 43A are very wide. It says that the State Government may issue orders and directions of a general character in respect of any matters relating to road transport. Divorced from the context and the setting in which the new sectiou appears, it may comprehend any orders or directions of a general character in respect of road transport ; and, if so construed; it would not only subvert the other provisions of the Act but also would be vulnerable to attack on the ground of constitutional invalidity. It would entrust the Government with a naked arbitrary power capable of being used to compel quasi-judicial tribunals to dispose of cases in a particular way ; it would enable them to couch the order in a general way to induce a tribunal to come to a particular deoi\n\nsion in a given case; and it would be destructive of the entire judicial procedure envisaged by the Act and the rules framed thereunder in the matter of disposal of specified questions. It would be attributing to the\n\nlegislatre an incongruity, for the State Government could issue . directions in respect of which it could make rules ignoring the safeguards provided in the\n\nmaking of the rules. Section 133 lays down that every power to make rules given by the Act is subject to the condition of the rules being made after previous publication. It.also enjoins on the Central and the State Governments to place the said rules for not less than fourteen days before the appropriate legislature and the rules so made shall be subject to such modification as the legislature may make in such session in which they are so laid. All these salutary precautions can be ignored if the directions given under s. 43A are given the status of law; on the other hand, if a restrictive meaning is given as it should be in the context, there would be a happy correlation of the functions of the various bodies under the Act, includ - ing the Government. The Government's legislative power is recognised under ss. 67 and 68 of the Act; its judicial power is maintained under s. 64A and its administrative power is affirmed under s. 43A. Chapter IV and the rules made thereunder confer administrative powers on the Regional Transport Authorities and the State Transport Authority. Section 43A enables the State Government to make orders and issue directions of a general character in respect of those functions to implement the provisions of the Act and the rules made thereunder ; and the said authorities shall give effect to all such orders and directions.\n\nThe context in which and the setting wherein the section is inserted also lend support to the said conclusion. Section 42 describes the necessity for permits and s. 43 confers specific powers on the Government to control road transport. Section 43A coming ther~ after and before the sections conferring quasi-judicial powers on tribunals is indicative of the fact that the jurisdiction conferred under s. 43A is confined to administrative functions of the Government and the tribunals rather than to their judicial functions; for, if the section was intended to confer .lgislative power, it should have found its place aftr- ~-, 64A or somewhere near the end of the Chapter. Though it is not a conclusive test, t}le pla.cing of the proyisions of ss. 43A and Q4A,. which were ipserted by he same Amending Act is also a pointr to the intentjdn of the\n\nI959\n\nM/s, Raman &\n\nRaman Ltd,\n\nThe State of M adra• & Others\n\nSubba Rao].\n\nI959\n\nM/s. Ranian &-\n\nRaman Ltd. v.\n\nThe State of Madras & Others\n\nSubba Rao ].\n\nlegislature, namely, that s. 43A was intended to govern administrative functions of the tribunals.\n\nThe terms of the section and the manner of issuing orders and directions thereunder also support the same conclusion. The legislature used two words in the section : (i) order and (ii) directions. Whenever it intended to affect the rights of parties, it used the word \" rules \", but in this section it designedly used the words appropriate to the control of admiuisLrative machinery. The words \" directions and order\" are defined in one of the Law Lexicons thus: \"Direction contains most of instruction in it; order most of authority. Directions should be followed; orders obeyed. It is necessary to direct those who are unable to act for themselves; it is necessary to order those whose business it is to execute the orders. \" The said meaning of the words is more appropriate to administrative control rather than to rules of law affecting rights of parties. Further, the declaration in the section that the orders and the directions under the section shall be binding on the authorities concerned is indicative of the fact that they are not laws, for if they are laws, no such declaration is necessary. What is more, they need not even be published and may, if the Government so desires, take the form of secret communication to the authorities concerned. Nor is there any basis for the argument that as the directions are issued under a statutory power, they are \"laws\". The source of the power does not affect the character of the things done in exercise of that power.\n\nWhether it is a law or an administrative direction depends upon the character or nature of the orders or directions authorized to be issued in exercise of the power conferred. That should be determined on other considerations adverted to by us already. Our view is in accord with that expressed by a Division Bench of the Madras High Court in C. S.S. Motor Service, Tenkasi v. The State of Madras (1). There the constitutional validity of ss. 42, 43A, 4 7, 48 and 64A of the Act was questioned. In dealing withs. 43A, Venkatarama Ayyar, J., who delivered the judgment of the Court, observed at p. 335 thus :\n\n(1) l.L.R. 1953 Mad. 304. 330, 334.\n\n... -•\n\nr959 \"Coming next to section 43A, it is argued that it confers on the Provincial Government wide and unlimited powers to issue all such orders and directionsof M~~ .... ::m:;/'' a general character as they may consider necessary, v. that the transport authorities are bound under that The State of section to give effect to such orders and directions, Madras & Others\n\nthat there is nothing to prevent the Government from even issuing directions with reference to the judicial functions which those authorities have to discharge under the Act, that it could not be expected that such directions would be disregarded by those authorities and that in practice the provisions of section 4 7 could be evaded. Reference is also made to the fact that this section was introduced for nullifying the effect of the decision in Sri Rama Vilas Service Ltd: v. The Road Traffic Board, Madras (1) where it was held that the transport authorities had failed in the discharge of their judicial function in meekly giving effect to an order of the Government which was opposed to the provisions of the Act.\n\nSection 43-A appears to be intended to clothe the Government with authority to issue directions of an administrative character and in that view it would be valid.\n\nNo specific order or direction of the Government is attacked in these proceedings as invalid and the discussion is largely academic. The section must itself be held to be valid though particular orders passed thereunder might be open to challenge as unconstitutional.\" From the aforesaid observations, it is manifest that the learned Judge construed s. 43A as conferring a power on the State Government to issue directions of an administrative character. If the construction was otherwise, the learned Judge would have held that the section was constitutionally. bad as he had held in regard to other sections.\n\nThe High Court of Andhra Pradesh in Gopalakrishna Motor Transport Co.\n\nLtd. v. Secretary, Regional 'l.'ransport Authority, Krishna District, Vijayawada (2) had also considered the scope of the provisions of s. 43A.\n\nThere, the State Government issued an order under s. 43A of the Act prescribing the manner of checking a bus for over-\n\n(1) (1948) l M.L.J. 85.\n\n(2) A.I.R. 1957 A.P. 882.\n\nSubba Rao].\n\nr959 loading. The procedure prescribed was not followed\n\nM/s. Raman & by the Regional Transport :Authority, which was em- Raman Ltd. powered to suspend the permit on the ground of overv. loading under s.· 60 of the Act. One of the contentions The State of raised was that as the mandatory direction given by Madras & Others the State Government under s. 43A was not followed, the Regional Trarisport Authority in exercising its Subba Rao ]. powers under s. 60 should have held that there was no over-loading. In rejecting this plea, the High Court observed at p. 885 thus:\n\n\" Government has power to frame rules and also to issue administrative directions of a general character under Section 43-A of the Act. . ........... In so far as the order was couched in mandatory terms, it is incumbent upon the officers concerned to comply with it.\n\nAny instruction given under Section 43-A cannot override the discretionary power conferred upon the Transport Authority under section 60. . ..... We, therefore, hold that the order of the Government contained only administrative instructions issued under Section 43-A. It is true that some of the ad ministrative instructions impose a mandatory duty on the officers concerned and if they do not discharge their duty, Government may take disciplinary action against them. But, in our view, non-compliance with those directions cannot affect the finding the Au thority arrived at on other material on the question of over-loading.\" In the present case, the learned Chief Justice, who was a party to the decision in 0. S. S. Motor Service\n\nv. The State of Madras (1), presumably on the basis of that judgment observed thus:\n\n\"In our opinion, these Government orders, which are in the nature of general administrative directions to the transport authorities, do not vest any rights, indefeasible rights-in any applicant for a stage carriage permit \".\n\nThe result of the discussion may be summarised thus: The appellant had a fundamental right to carry\n\n(1) l.L.R. 1953 Mad. 304. 330, 334\n\n(2) S.C.R.\n\nSUPR:gME COURT REPORTS 241\n\non his motor transport business subject to reasonable r959 restrictions imposed upon that right by law. Some of the provisions of Chapter IV of the Act contain M /s. Raman\"\"\n\nRarnan Ltd. reasonable restrictions on the said right. He was given v a permit on the basis of the law imposing the said The stte of restrictions on his right. The orders made and the Madras & Others directions issued under s. 43A could cover only the administrative field of the officers concerned and Subba Rao J. therefore any direction issued thereunder was not law regulating the rights of the parties. The order made and the directions issued under s. 43A of the Act cannot obviously add to the considerations prescribed under s. 47 on the basis of which the tribunal is empowered to issue or refuse permit, as the case may be.\n\nThere was, therefore, no change in the law pending the appeal so as to affect the appellant's vested right.\n\nIn this view, the appellant cannot question the validity of the order of the Central Road Traffic Board on the ground that it decided the appeal on a law that was made subsequent to the issue of the permit to him.\n\nThe same result could be arrived at by different process of reasoning.\n\nThe appellant had a fundamental right to carry on the business of motor transport subject to reasonable restrictions imposed by law under Art. 19(6) of the Constitution. The Act imposed reasonable restrictions on the said right. One such restriction was that the State Government may issue such orders and directions of a general character as it may consider necessary in respect of any matter relating to road transport to the State Transport Authority.\n\nWhen the appellant applied for a permit, he must be deemed to have had the knowledge of the fact that his application would be disposed of by the State Transport Authority in accordance with orders and directions of a general character issued by the State Government. The directions were not new law that came into existence pending the appeal, but only issued under a law that was in existence even at the time he applied for a permit. The law was that embodied in s. 43A of the Act, namely, that the Government could issue directions binding on the authorities\n\nconcerned and that law was a pre-existing one and the application had to be disposed of subject to that M/s. Raman & law till it was finally terminated by an order: of the Raman Ltd.\n\nI959\n\nv. highest tribunal in the hierarchy. In this view also The State of there are no merits in the appellant's contention.\n\nMadrns & Othm Now coming to the merits of the case, the conten-\n\nSubb:i Rao ]. tions of the parties may be stated thus : The learned Counsel for the respondents contends that there is no material difference between G. 0. Ms. No. 1037 and G. 0. Ms. No. 3353, except in regard to one circumstance, which is not material for the present purpose: while in the former G. 0., the argument proceeds, the transport authority is directed to work up to a minimum of five units with a spare bns, under the latter G. 0., the viable unit fixed is not less than ten buses and the authority concerned is directed to work up to that limit. It is pointed out that the only difference is in the measure of a viable unit and that the fourth respondent's case falls squarely within the first category in the order of preference prescribed in G. 0. Ms.\n\nNo. 3353of1954. The learned Counsel for the appellant contends that the order of preference is based upon the achievement of the object, namely, building up of viable units of ten permits and that the appellant admittedly had only four permits and, therefore, far below the viable unit and he could not be given preference in a competition between him and the appellant, who had more than thirty permits. The problem presented can only be solved by a reasonable interpretation of the plain words used in G. 0. Ms. No. 3353 of 1954 read along with the expressed object sought to be achieved thereby. It will be convenient at this stage to read the said order omitting the unnecessary words: G. 0. Ms. No. 3353 Home dated 15th November, 1954.\n\n\"The Planning Commission has made the following recommendation in respect of Road Transport service: 'It is desirable for the existing private operators' units to amalgamate, wherever possible, into big viable units to enable them to achieve better returns and maintain better standards of operation '.\n\n1 , '\n\nI959 The Government considered that it will be in the M /s. Rama\"&· interests of the public if road transport services are Haman Ltd. conducted by operators having at least ten stage v. carriaaes and they have therefore decided that each The State of b • viable unit should consist of at least ten stage car- Madras & Others riages. - Subb;; ao ].\n\nIn exercise of the powers conferred by Section 43-A of the Motor Vehicles Act, 1939 (Central Act IV of 1939), and in supersession of the orders issued in paragraph (ii) of G. 0. Ms. 1037, Home dated 28th March, 1953, the Governor of Madras hereby directs that each viable stage carriage unit in this State shall consist of not less than IO buses and that in the matter of grant of stage carriage permits, other things being equal, and that with a view to build up such viable units, the following shall be the order of preference : I. Operators with less than 10 buses, I.mt nearer the mark of ten.\n\n2~ Operators with 10 and more buses. 3.\n\nOthers including new entrants.\n\nThe Governor also directs that in order to facilitate the amalgamation of existing small units into viable units transfer of permits shall be allowed liberally.\" The G. 0., was issued to achieve the object of inducing the operators to amalgamate wherever possible, into big viable units to enable them to achieve better returns and maintain better standards of operation.\n\nThe Government decided that a unit of at least ten buses would be necessary to achieve that object. To implement that policy, it directed that each viable stage carriage unit should consist of not less than ten buses and with a view to build up such viable units, it directed that, other things being equal, the order of preference contained therein should be followed.\n\nThe order of preference contained three categories, one excluding the other. They did not provide for any rules of preference inter se of operators coming within each one of the categories. Presumably, that was left to be decided by the transport authorities, having regard to the considerations mentioned in s. 47.\n\nThe argument\n\nM/s. li'a1nan 6'\n\nHaman Ltd. v.\n\nThe State of Madras & Others\n\nSubba Rao J.\n\nof the learned Counsel for the fourth respondent is based upon the first category, which reads:\n\n\"Operators with less than 10 buses but nearer the mark of IO\".\n\nHe contends that, having regard to the object of the G. 0., namely, to build up a viable stage .carriage unit of ten, in the absence of an operator with stage carriages nearer to the mark of ten than the fourth respondent, he is entitled to a permit in preference to the appellant provided other things are equal between them. In respect of this argument, emphasis is laid upon the word \"nearer\" and it is said that the said word indicates a rule of preference between operators coming within that category, namely, that an operator like the fourth respondent is to be preferred, if there is no other operator nearer than him to the mark of ten. This argument is attractive, but, in our view, it is inconsistent with the scheme of the order. It is true that the phraseology of category (I) has not been happily worded and perhaps grammatically not correct. But the intention is fairly obvious. For one thing the rule of preference is based upon the achievement of the object, i.e., the building up of a viable unit of ten permits, for the other, the rule of preference is only to govern the throe categories mentioned therein and not inter se between those falling in each category.\n\nThe word \"others\" in category (3) becomes meaningless, if operatoi:s far below the mark of ten permits fall within the first category. The more reasonable interpretation and that is in accord with the intention of the State Government is that other things being equal, in a competition between the three categories of operators mentioned in the order, operators nearer the mark of ten shall be preferred. In the absence of any such operator, operators with ten or more buses should be given the second preference. In the absence of such operators, others, i. e., operators who are not nearer the mark of ten and new entrants, will have to be preferred.\n\nThis rule of preference was not expected to cause any injustice as the restriction on the transfer of permits was removed and the small operators were permitted to amalgamate the existing units into viable units,\n\nThis policy did not achieve the expected results, but encouraged monopolies; with the result that the Government had to cancel the order of June 15, 1955, within about six months from the making of it; but\n\n'959\n\nM/s. Raman &\n\nRama1' Ltd.\n\nv. that circumstance does not affect the construction of The State of the clause.\n\nWe, therefore, hold that on a strict inter- Madras & Others pretation of the G. 0. Ms. No. 3353of1954, the fourth respondent would not have been entitled to the permit.\n\nBut as we have held tha.t the said order was not law but was only an administrative direction, it could not affect the validity of the order of the Central Road Traffic Board, if it made the order, having regard to the consideration laid down ins. 47 of the Act.\n\nThe main consideration under s. 4 7 of the Act is that the Regional Transport Authority shall, in deciding whether to grant or refuse such carriage permit, have regard to the interest of the public generally. The Central l{oad Traffic Board, after having found that the appellant had other advantages such as he operated a three-route permit touching the route under appeal, that his record was satisfactory and that he was not inefficient, came to the conclusion that by giving the permit to the fourth respondent, it would be encouraging not only healthy competition but also would be enabling him to work out to the minimum of five permits. It is true that if the 1954 order should govern the selection, the main reason given by the Board would be wrong.\n\nWhether a small unit or a large unit would be viable or would be in the interest of the public is always a debatable point and it is possible to take conflicting views on the question. One view is that an operator who is described as fleet-owner will have considerable experience in the business and will be in a position to keep a workshop and additional buses to meet any emergency and therefore he would be in a better position to operate the service without break and keep up the timings in the interest of the public than a stray bus operator.\n\nThe alternative view is that encouragement of large viable units will tend to monopoly and the freedom from competition will bring about deterioration in service. On the other hand, new entrants and operators\n\nSubba Rao j.\n\nr959 owning a few buses will liave incentive to bestow greater attention to the public needs, particularly in view M /s. Raman &\n\nRaman Ltd. of the competition from others in the same field. That v. both views are possible is evident from the fact that The State of the State Government has been changing its views so Mad, as & Others often on the subject; and indeed the cancellation of G. 0. Ms. No. 3353 of 1954, within six months from Subba Rao ]. h d b b\n\nSarkar ].\n\nt e ate of its issue, presuma ly on the asis of the experience gained during that period, is a clear indication that in the opinion of the Government, encouragement of large units was not in the interest of public. If that be so, one ca1mot say that the Central Road Traffic Board acted without jurisdiction when it accepted the view that the smaller units would be more in the interest of the public rather than larger units; nor the fact that it accepted the prevailing view of the Government on the subject would make it any the less an order within its jurisdiction, provided the said view was germane to one or other matters stated in s. 4 7 of the Act.\n\nAs pointed out by us, both the views are possible and the Board was well within its rights in holding that the public interest would be served if the permit was given to the fourth respondent, in the circumstances of the case.\n\nIn this view, no other question arises for consideration. The order of the Madras High Court is correct and the appeal is dismissed with costs.\n\nSARKAR, J.-The appellant before us is a company operating public motor bus services in the State of Madras. Its grievance is that it has been wrongly refused a permit to run a bus.\n\nMotor bus services transporting passengers on the public highways for consideration, called stage carriage services, are controlled by ss. 42 to 68 contained in Chapter IV of the Motor Vehicles Act, 1939. The Act provides that no vehicle can be used as a stage carriage save in accordance with a permit granted by a regional Transport Authority set up by the State Government. Section 4 7 of the Act lays down certain matters to which a Regional Transport Authority shall have regard in deciding whether to grant or refuse a\n\nstage carriage permit, one of which is the interest of the public generally. Section 68 of the Act authorises the State Government to make rules for the purpose of carrying into effect the provisions of Chapter IV. The rules framed under this section do not contain anything to guide the Regional Transport Authority in the matter of granting the permits save that r. 150 provides that it \"shall in all matters be subject to the orders of the Government and s)lall give effect to all orders passed by the Government whether on appeal or otherwise.\" Section 43-A of the Act however gives the State Government power to issue orders and directions to the Regional Transport Authority. That section is in these terms :\n\n\"The State Government may issue such, orders and directions of a general character as it may consider necessary, in respect of any matter relating to road transport,, to the State Transport Authority or a Regional Transport Authority ; and such Transport Authority shall give effect to all such orders and directions.\"\n\nWe are not concerned with the State Transport Authority in this case. The Act is a Central Act and s. 43-A was introduced into it by an amendment made by the legislature of the Province of Madras. The Government of Madras from time to time issued orders under this section providing certain considerations for the guidance of the Regional Transport Authorities in deciding applications for the grant of permits for stage carriages.\n\nThe appellant's contention is that the permit was refused to it by applying one of these orders which was not applicable to its case. Section 64 of the Act permits an appeal to an appellate authority from an order of a Regional Transport Authority refusing to grant a permit. This appellate authority in the State of Madras is called the Central Iioad Traffic Board. Section 64-A which again was introduced into the Act by an amendment of the legislature of the Province of Madras, empowers the Government to look into the records of any case concerning the grant of a permit and pass such order as it thought fit.\n\nNow as to the facts of this case, on March 28, 1953,\n\nr959\n\nMis. Raman &\n\nRaman Ltd. v.\n\nThe State of Madras & Others\n\nSarkar ].\n\nI959\n\nM/s. Raman &\n\nRaman Ltd. v.\n\nThe State of Madras & Others\n\nSarkar ].\n\n248 Stft>:RE!M~ COURT RE!PORTS [1959j Supp.\n\nthe Government issued an order under s. 43-A marked G. 0. Ms. No. 1037 laying down certain considerations to be observed in granting permits. On November 15, 1954, the Government issued a11other order marked G. 0. Ms. No. 3353 superseding the second parngraph of G. 0. Ms. No. 1037 and sullstituting fresh provisions in its place.\n\nAs I do not consider it necessary to discuss the terms of these orders, it will tend to clarity to proceed on the basis t:\\S if G. 0. Ms. No. 3353 superseded G. 0. Ms. No. 1037 wholly.\n\nThe appellant, the respondent No. 4 and eight, other persons had applied for the permit for a route for which applications had been invited. It does not appear from the record when these applications had been mjtde, but it appears that on April 9, 1955, the Regional Transport Authority after hearing all the competing applicants granted the permit to the appellant applying G. 0. Ms. No. 3353, this being the order then in force.\n\nSoon thereafter, namely, on May 20, 1955, the Government passed under the same section a fresh order being G. 0. Ms. No. 1403 cancelling G. 0.\n\nMs. No. 3353 and on June 15, 1955, it passed another order being G. 0. Ms. No. 1689 which, for the purpose of this case it may be said, had the effect of restoring G. 0. Ms. No. 1037.\n\nOn or about June 23, 1955, the respondent No. 4, who will be referred to as the respondent as he is the only contesting respondent, preferred an appeal to the Central Road Traffic Board against the decision of the Regional Transport Authority. It may be that some of the other disappointed applicants for the permit also preferred similar appeals but with them we are not concerned. The Board considered the representations of all the parties before it and made an order on June 25, 1955, setting aside the decision of the Regional Transport Authority and granting the permit to the respondent. According to the appellant, in making this order the Board followed G. 0. Ms. No. 1037. The\n\ncomplaint of the appellant is that the Board went wrong in doing so as G. 0. Ms. No. 1037 was not in force when the appellant's application was considered by the legional Transport Authority but had been\n\nbrought into force subsequently, and as the Board was r959 only hearing an appeal from the Regional Transport h . . b d d 'd h d' Mfs.Raman& Aut onty it was oun to em e t e case accor mg Raman Ltd. to the order in force when the Regional Transport v.\n\nAuthority made its decision and was not entitled to The State of decide it according to an order which came into exist- Madras & Others\n\nence subsequently. The appellant took the matter up to the Government under s. 64-A of the Act but Sarkar J. the Government refused to interfere.\n\nThe appellant then moved the High Court at Madras for a writ of certiorari quashing the orders of the Board granting the permit to the respondent and of the Government refusing to interfere. Rajagopalan, J., who heard the application, thought that the Government had failed to exercise its jurisdiction by not deciding a point raised before it, namely, whether the appeal to the Board had been made within the prescribed time. He, therefore, set aside the order of the Government and sent the case back for reconsideration.\n\nThe respondent went up in appeal from the order of Rajagopalan, J. The appeal was heard by a bench of the same High Court consisting of Rajamannar, C. J., and Ramaswami, J., and was allowed. The learned Chief Justice who delivered the judgment of the court, held that Rajagopalan, J., was not right in thinking that the Government had failed to decide whether the appeal to the Board had been filed by the respondent within the prescribed time.\n\nHe rejected the contention of the appellant that the order of the Board was liable to be set aside inasmuch as it had been made pursuant to G. 0. Ms. No. 1037 which was not the order in force when the Regional Transport Authority heard the matter. He observed, \"these Government orders, which are in the nature of general administrative directions to the transport authorities, do not vest any rights, indefeasible rights-in any applicant for a stage carriage permit\". He also held, \"It cannot be said that because on the date of the disposal of the application by the Regional Transport Authority a particular G. 0. was in force, any one had a vested 32\n\nr959 right conferred on him by that G. 0. 'Ve think that it was permissible to the Central Road Traffic Board A~n~:m~;/\" to decide between the claimants on the basis of the v.\n\nG. 0. which was in force at the time the appeal was The State of being heard.\" The appellant has now come to this Madras & Others Court by special leave in appeal against this judg- - mont.\n\nSarkar ].\n\nOnly one point has been argued by Mr. Pathak appearing in support of the appeal.\n\nHe said that the Board was a quasi-judicial tribunal and an order made by it is therefore liable to be quashed by a writ of certiorari if that order discloses an error apparent on the face of it. He then said that the order of the Board of June 25, 1955, was erroneous in law as it decided the case by the terms of G. 0. Ms. No. 1037, which was brought into force after the date of the decision of the Regional Transport Authority and bad not been given a retrospective operation, and the Board which was hearing an appeal from the Regional Transport Authority, could only decide whether that Authority had gone wrong in the application of the provisions in force at the time of the hearing before it, namely, the provisions contained in G. 0. Ms.\n\nNo. 3353. He also said that such error was apparent on the face of the record as the Board in its decision stated that it was deciding the case by G. 0. Ms.\n\nNo. 1037.\n\nIt has not been contended before us that the Board is not a quasi-judicial Tribunal. It clearly is so.\n\nIn view of the many decisions of this Court in similar matters it would be impossible to take a contrary view. Then again it is a principle firmly established and accepted by this Court that a writ of certiorari can issue where the decision of a tribunal discloses an error of law apparent on its face.\n\nI am also clear in my mind that if it was an error for the Board to have followed G. 0. Ms. No. 1037, such error appeared on the face of its decisions for it expressly purported to be guided by G. 0. Ms. No. 1037. The only questions that remain are whether this was an error and an apparent error. These I now proceed to discuss.\n\nIt is true that G. O. Ms. No. 1037 which had been\n\nsuperseded by G. 0. Ms. No. 3353 on November 15, r959 1954, was revived by G. 0. Ms. No. 1689 issued on June 15, 1955, i.e., after the date of the decision of the M/s. Raman & Raman Ltd. legional Transport Authority given on April 9, 1955, v. when G. 0. Ms. No. 3353 prevailed. I will assume The state of now that G. 0. Ms. No. 1689 did not bring back G. 0. Madras & Others Ms. No. 1037 with retrospective force.\n\nWas the Board then wrong in applying G. 0. Ms. No. 1037 Sarkar J. when it decided the appeal from the Regional Transport Authority's decision? I do not think so.\n\nIt may be that when one regular and ordinary court hears an appeal from the decision of another such court, it cannot, generally speaking, take into consideration a law which has been passed since that decision.\n\nBut it is far from clear that the same rule applies when an appeal from the order of a quasi-judicial tribunal is heard by another such tribunal, as is the case here. No authority to warrant such a proposition was cited and as at present advised, I am not prepared to assent to it. In any case, it can safely be said, and it is enough for the purpose of this case to do so, that it is far from clear that a quasi-judicial tribunal like the one before us is not entitled in hearing appeal from another such tribunal to apply a rule which has come into existence since the decision under appeal. If it is not so clear there of course is no error apparent on the face of the record.\n\nIt cannot be overlooked that such a tribunal is not enforcing a vested right which one party has against another or others. The tribunal is to choose from amongst a number of persons the fittest to be granted a permit. The overriding interest in the selection is of one who is not a party to the proceedings, namely, the travelling public. The lower tribunal is entitled to be heard on an appeal under s. 64, a procedure which is wholly inapplicable in appeals from the decisions of what are called courts of law.\n\nAs a general rule, a court gives effect at the t.ria, l to the substantive rights of the parties existing at the date of the writ and it is for this reason that a change in the law cannot ordinarily be taken into account in appeals.\n\nNow such a consideration does not prevail in the\n\n'959 present case. It is not said that a person when he\n\nM/s. Raman & makes an application for a permit acquires a right to Raman Ltd. have his application decided by the order under tho v. section then in force.\n\nAll that is said is that the The State of Transport Authority must consider the applications Madras & Others according to the order in force at the time it hears\n\n- them. If this is so, as I think it is, then the basis for Sa'fhaY ]. saying that the appellate authority cannot consider a Government order issued since the order under appeal was made, completely disappears. Another reason given for the view that a court of appeal cannot take into consideration a new law is that, \"a matter of substantive right which has become res judicata cannot be upset by a subsequent general change of the law\": see Re a Debtor, Ex parte Debtor('). Now it does not seem to me possible to say that an applicant for a permit has a substantive right to the permit vested in him.\n\nNor is it possible to conceive of the decision of a Regional Transport Authority in granting or refusing to grant a permit as having any operation by way of res judicata. It therefore seems to me that there is no warrant for applying the general rule applicable to a court of law hearing an appeal from a similar subordinate court which prevents it from taking notice of a new law, to tribunals such as those with which this case is concerned. • I wish to add one thing more on this subject. Even in the case of a ppoals strictly so called, the court hearing the appeal may take cognisance of new laws which are made applicable to pending cases: see Quilter v. Mapleson (2).\n\nI have so long been proceeding on the assumption that G. 0. Ms. No. 1689 bad no retrospective effect at all. Now it seems to me that there is at least grave doubt if G. 0. Ms. No. 1689 which revived G. 0. Ms. No. 1037, was not intended to be applied to pending appeals. It was directed only to the Central Road Traffic Board which heard appeals, and this would indicate that it was intended that the Board would follow it in deciding the appeals that were then pending before it. It is not therefore clear that G. 0. Ms. No. 1689 was not intended to\n\n(r) [1936J Ch. 237, 2n\n\n(2) (1882) 9 Q.B.D. 672.\n\nhave at least this retrospective effect. If it did, which r959 on the form of the order it, may well be said to have l\\Ifs. Rama\" & done, then that would be another reason for saying Raman Ltd. that it is not clear that the Board was in error in v. applying it.\n\nThe State of In my view therefore it has not been shown that Madras & Others the Board committed an error apparent on the face of its decision in applying G. 0. Ms. No. 1037 to the appellant's case. This appeal must therefore fail.\n\nBefore leaving the case I wish to express my opinion on a matter which was pressed on behalf of the respondent. It was said that only administrative orders could be made under s. 43-A which orders were not laws, and therefore an error with regard to them would not be an error of law which would warrant the issue of a certiorari. I am unable to assent to this contention. To my mind the question is not solved by describing the orders as administrative orders, a term as to the meaning of which, I confess, I am not clear. So it does not seem to me to be necessary to enquire what kind of orders could be issued under s. 43-A. In my view if an order under the section is one to the observance of which a person is entitled, that would be a law, a mistake of which would justify the issue of the writ at his instance. The whole justification for a writ of certiorari is to prevent, where no other remedy is available, a patent injustice being allowed to stand. It would be strange if a person was entitled to the observance of a rule and was held not to have a remedy for its breach. It can make no difference by what name that rule is called. I wish to read here as a salutary advice to follow, what Pollock 0. B. and Martin B. sttid in The Mayor of Rochester v. The Queen (1) regarding the writ, \" Instead of being astute to discover reasons for not applying this great constitutional remedy for error and mis-government, we think it our duty to be vigilant to apply it in every case to which, by any reasonable construction, it can be made applicable.\"\n\nThe real question thus is whether the applicants for permits were entitled to the observance of the orders\n\n(r) (1858) EL. BL. & EL. 1024, 1033; 120 E.R. 791.\n\nSarhar ].\n\nr959\n\n111 /s, Ranzan Qi..\n\nRantan Ltd. v.\n\nThe State of 1\\1 adras Qi.. Others\n\nSarkar ].\n\n254 SUPl{E:M:E COURT REPORTS [1959] Supp.\n\nwith which we are dealing. I think they clearly were.\n\nThe orders were made under a statutory provision.\n\nThat itself would make them binding. Further, the statute expressly says that the \"Transport Authority shall give effect to all such orders and directions \".\n\nThe statute applies to all; every one is entitled to the benefit of it. Any person interested has therefore a right to claim that an order passed under the section shall be observed by the Transport Authorities. The respondent himself made such a claim and has got tho benefit of one of these orders.\n\nIt was however said that it is true that the Transport Authorit.ies owed a duty to observe the orders but that was a duty they owed to the Government alone and that a breach of this duty only exposed them to disciplinary action by the Government but did not vitiate their decisions.\n\nI find no words in the section so to limit the scope of the duty imposed by it on the Transport Authorities. The nature of the orders makes it impossible to think that it was intended to visit a breach by disciplinary action only. These orders lay down principles to be applied in deciding whether a person should or should not be given a permit. They affect persons materially; they affect persons' living. I find it very difficult to think that the only sanction for such rules can be disciplinary action.\n\nIt seems to me abhorrent that judicial bodies should in the discharge of their functions be subjected to disciplinary action. Then I think it would certainly be a very unusual statute which sets up quasi-judicial tribunals with power to affect people materially and binds the tribunals on pain of disciplinary action only to proceed according to rules made under its authority but gives the persons deeply affected by the tribunal's decision no right to claim that the rules should be observed. I am unable to hold that the Motor Vehicles Act is a statute of this kind.\n\nI ought to refer to the case of N agendra Nath Bora\n\nv. The Commissioner of Hills Division and Appeals, Assam('). That was a case concerning a licensing authority for liquor shops. It was there said that a\n\n{I) [1958] S.C.R. 1240,\n\nbreach of certain executive instructions issued to the licensing authority did not amount to error of law. I think that case is clearly distinguishable. It dealt with executive instructions and therefore not such as were issued under a statutory power. There is nothing to show that it was the bounden duty of the tribunal, the licensing authority, to obey these instructions.\n\nHad it not been that a hierachy of appeals had been provided for, it would perhaps have been held in that case that the authority was not a quasi-judicial authority at all. Furthermore, it was held there that no one had an inherent right to a settlement of a liquor shop. Therefore it seems to me that that case does not help in deciding the effect of the orders issued under s. 43-A. It is interesting to note that it was said in that case referring to the writ of certiorari at p. 412 that, \"its purpose is only to determine, on an examination of the record, whet.her the inferior tribunal has exceeded its jurisdiction or has not proceeded in accordance with the essential requirements of law which it was meant to administer.\" The words\" law which it was meant to administer\" are very significant. The Transport Authorities in the present case were certainly meant to administer the orders issued under s. 43-A.\n\nThere is one thing more that I wish to observe in this connection. It may be that an order which it is the bounden duty of the Transport Authority to obey may give it a certain amount of discretion, but that in my view would not make the order any the less a law. If the discretion has been duly exercised, there would be no error of law for the law itself gives the discretion. It would be the bounden duty of the tribunal to observe that law and so if necessary to exercise the discretion given by it.\n\nFor the reasons earlier mentioned, however, I agree that the appeal should be dismissed.\n\nAppeal dismissed.\n\nI959\n\nM /s. Raman &·\n\nRaman Ltd. v.\n\nThe State of Madras & Others\n\nSarkar ].", "total_entities": 91, "entities": [{"text": "M/S. RAMAN & RAMAN LTD", "label": "PETITIONER", "start_char": 934, "end_char": 956, "source": "metadata", "metadata": {"canonical_name": "M/S. RAMAN & RAMAN LTD", "offset_not_found": false}}, {"text": "THE STATE OF MADRAS & OTHERS", "label": "RESPONDENT", "start_char": 962, "end_char": 990, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF MADRAS & OTHERS", "offset_not_found": false}}, {"text": "A. K. SARKAR", "label": "JUDGE", "start_char": 1004, "end_char": 1016, "source": "metadata", "metadata": {"canonical_name": "A.K. SARKAR*", "offset_not_found": false}}, {"text": "SuBBA RAo, JJ.", "label": "JUDGE", "start_char": 1021, "end_char": 1035, "source": "metadata", "metadata": {"canonical_name": "K. SUBBA RAO", "offset_not_found": false}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 1295, "end_char": 1301, "source": "regex", "metadata": {"statute": null}}, {"text": "Art. 226", "label": "PROVISION", "start_char": 1791, "end_char": 1799, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 2675, "end_char": 2681, "source": "regex", "metadata": {"statute": null}}, {"text": "Motor Vehicles Act, 1939", "label": "STATUTE", "start_char": 2689, "end_char": 2713, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 3042, "end_char": 3048, "source": "regex", "metadata": {"linked_statute_text": "the Motor Vehicles Act, 1939", "statute": "the Motor Vehicles Act, 1939"}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 3179, "end_char": 3185, "source": "regex", "metadata": {"linked_statute_text": "the Motor Vehicles Act, 1939", "statute": "the Motor Vehicles Act, 1939"}}, {"text": "Motor Vehicles Act, 1939", "label": "STATUTE", "start_char": 3193, "end_char": 3217, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "No applicant for a permit under the Motor Vehicles Act", "label": "STATUTE", "start_char": 4754, "end_char": 4808, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 5112, "end_char": 5118, "source": "regex", "metadata": {"linked_statute_text": "No applicant for a permit under the Motor Vehicles Act", "statute": "No applicant for a permit under the Motor Vehicles Act"}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 6360, "end_char": 6366, "source": "regex", "metadata": {"statute": null}}, {"text": "Motor Vehicles Act, 1939", "label": "STATUTE", "start_char": 6374, "end_char": 6398, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 57(2)", "label": "PROVISION", "start_char": 6669, "end_char": 6677, "source": "regex", "metadata": {"linked_statute_text": "the Motor Vehicles Act, 1939", "statute": "the Motor Vehicles Act, 1939"}}, {"text": "Art. 226", "label": "PROVISION", "start_char": 7874, "end_char": 7882, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 10290, "end_char": 10296, "source": "regex", "metadata": {"statute": null}}, {"text": "Art. 19(1 )(g)", "label": "PROVISION", "start_char": 13371, "end_char": 13385, "source": "regex", "metadata": {"statute": null}}, {"text": "Art. 19(6)", "label": "PROVISION", "start_char": 13509, "end_char": 13519, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 14651, "end_char": 14657, "source": "regex", "metadata": {"statute": null}}, {"text": "Motor Vehicles Act", "label": "STATUTE", "start_char": 14943, "end_char": 14961, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 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"PROVISION", "start_char": 18107, "end_char": 18125, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 44(4)", "label": "PROVISION", "start_char": 18706, "end_char": 18714, "source": "regex", "metadata": {"statute": null}}, {"text": "ss. 43A and 64A", "label": "PROVISION", "start_char": 19979, "end_char": 19994, "source": "regex", "metadata": {"linked_statute_text": "While the State Transport Authority could issue directions to other Transport Authorities constituted under the Act", "statute": "While the State Transport Authority could issue directions to other Transport Authorities constituted under the Act"}}, {"text": "Section 43A", "label": "PROVISION", "start_char": 20021, "end_char": 20032, "source": "regex", "metadata": {"linked_statute_text": "While the State Transport Authority could issue directions to other Transport Authorities constituted under the Act", "statute": "While the State Transport Authority could issue directions to other Transport Authorities constituted under the Act"}}, {"text": "Section 64A", "label": "PROVISION", "start_char": 20473, "end_char": 20484, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 64A", "label": "PROVISION", "start_char": 20988, "end_char": 20994, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 64A", "label": "PROVISION", "start_char": 21133, "end_char": 21144, "source": "regex", "metadata": {"statute": null}}, {"text": "ss. 45 to 57, 60 and 64", "label": "PROVISION", "start_char": 21157, "end_char": 21180, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 21430, "end_char": 21436, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 133", "label": "PROVISION", "start_char": 22596, "end_char": 22607, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 23101, "end_char": 23107, "source": "regex", "metadata": {"statute": null}}, {"text": "ss. 67 and 68", "label": "PROVISION", "start_char": 23395, "end_char": 23408, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 64A", "label": "PROVISION", "start_char": 23460, "end_char": 23466, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 23514, "end_char": 23520, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 43A", "label": "PROVISION", "start_char": 23665, "end_char": 23676, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 42", "label": "PROVISION", "start_char": 24056, "end_char": 24066, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43", "label": "PROVISION", "start_char": 24107, "end_char": 24112, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 43A", "label": "PROVISION", "start_char": 24182, "end_char": 24193, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 24347, "end_char": 24353, "source": "regex", "metadata": {"statute": null}}, {"text": "ss. 43A", "label": "PROVISION", "start_char": 24691, "end_char": 24698, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 24978, "end_char": 24984, "source": "regex", "metadata": {"statute": null}}, {"text": "ss. 42, 43A, 4", "label": "PROVISION", "start_char": 26967, "end_char": 26981, "source": "regex", "metadata": {"statute": null}}, {"text": "section 43A", "label": "PROVISION", "start_char": 27203, "end_char": 27214, "source": "regex", "metadata": {"statute": null}}, {"text": "section 4", "label": "PROVISION", "start_char": 27858, "end_char": 27867, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 43", "label": "PROVISION", "start_char": 28273, "end_char": 28283, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 28787, "end_char": 28793, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 29256, "end_char": 29262, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 29315, "end_char": 29321, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 29801, "end_char": 29807, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 60", "label": "PROVISION", "start_char": 29904, "end_char": 29909, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 43", "label": "PROVISION", "start_char": 30135, "end_char": 30145, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 43", "label": "PROVISION", "start_char": 30321, "end_char": 30331, "source": "regex", "metadata": {"statute": null}}, {"text": "section 60", "label": "PROVISION", "start_char": 30419, "end_char": 30429, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 43", "label": "PROVISION", "start_char": 30548, "end_char": 30558, "source": "regex", "metadata": {"statute": null}}, {"text": "Some of the provisions of Chapter IV of the Act", "label": "STATUTE", "start_char": 31622, "end_char": 31669, "source": "regex", "metadata": {}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 31917, "end_char": 31923, "source": "regex", "metadata": {"linked_statute_text": "Some of the provisions of Chapter IV of the Act", "statute": "Some of the provisions of Chapter IV of the Act"}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 32148, "end_char": 32154, "source": "regex", "metadata": {"linked_statute_text": "Some of the provisions of Chapter IV of the Act", "statute": "Some of the provisions of Chapter IV of the Act"}}, {"text": "s. 47", "label": "PROVISION", "start_char": 32226, "end_char": 32231, "source": "regex", "metadata": {"linked_statute_text": "Some of the provisions of Chapter IV of the Act", "statute": "Some of the provisions of Chapter IV of the Act"}}, {"text": "Art. 19(6)", "label": "PROVISION", "start_char": 32862, "end_char": 32872, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43A", "label": "PROVISION", "start_char": 33646, "end_char": 33652, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 43", "label": "PROVISION", "start_char": 36329, "end_char": 36339, "source": "regex", "metadata": {"statute": null}}, {"text": "Motor Vehicles Act, 1939", "label": "STATUTE", "start_char": 36349, "end_char": 36373, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Central Act IV of 1939", "label": "STATUTE", "start_char": 36375, "end_char": 36397, "source": "regex", "metadata": {}}, {"text": "s. 47", "label": "PROVISION", "start_char": 38016, "end_char": 38021, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4", "label": "PROVISION", "start_char": 41114, "end_char": 41118, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4", "label": "PROVISION", "start_char": 43730, "end_char": 43734, "source": "regex", "metadata": {"statute": null}}, {"text": "ss. 42 to 68", "label": "PROVISION", "start_char": 44440, "end_char": 44452, "source": "regex", "metadata": {"statute": null}}, {"text": "Chapter IV of the Motor Vehicles Act, 1939", "label": "STATUTE", "start_char": 44466, "end_char": 44508, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Section 4", "label": "PROVISION", "start_char": 44682, "end_char": 44691, "source": "regex", "metadata": {"linked_statute_text": "Chapter IV of the Motor Vehicles Act, 1939", "statute": "Chapter IV of the Motor Vehicles Act, 1939"}}, {"text": "Section 68", "label": "PROVISION", "start_char": 44908, "end_char": 44918, "source": "regex", "metadata": {"linked_statute_text": "Chapter IV of the Motor Vehicles Act, 1939", "statute": "Chapter IV of the Motor Vehicles Act, 1939"}}, {"text": "Section 43", "label": "PROVISION", "start_char": 45380, "end_char": 45390, "source": "regex", "metadata": {"linked_statute_text": "Chapter IV of the Motor Vehicles Act, 1939", "statute": "Chapter IV of the Motor Vehicles Act, 1939"}}, {"text": "s. 43", "label": "PROVISION", "start_char": 45966, "end_char": 45971, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 64", "label": "PROVISION", "start_char": 46434, "end_char": 46444, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 64", "label": "PROVISION", "start_char": 46667, "end_char": 46677, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43", "label": "PROVISION", "start_char": 47204, "end_char": 47209, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 64", "label": "PROVISION", "start_char": 49804, "end_char": 49809, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 64", "label": "PROVISION", "start_char": 55544, "end_char": 55549, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43", "label": "PROVISION", "start_char": 58871, "end_char": 58876, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43", "label": "PROVISION", "start_char": 59314, "end_char": 59319, "source": "regex", "metadata": {"statute": null}}, {"text": "Motor Vehicles Act", "label": "STATUTE", "start_char": 62440, "end_char": 62458, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 43", "label": "PROVISION", "start_char": 63473, "end_char": 63478, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43", "label": "PROVISION", "start_char": 64004, "end_char": 64009, "source": "regex", "metadata": {"statute": null}}]}
{"document_id": "1959_2_256_269_EN", "year": 1959, "text": "I959\n\nFebruary 23.\n\n256 SUPREME COURT REPORTS [1959] Supp.\n\nTHE COMMISSIONER OF INCOME-TAX,\n\nMYSORE,\n\nTRAV ANCORE-COCHIN AND COORO,\n\nBANGALORE v.\n\nTHE INDO MERCANTILE BANK, Lli\\H'l'ED\n\n(and connected appeal)\n\n(N. H. BrrAGWATI, B. P. SINHA and\n\nJ. L. KAPUR, JJ.)\n\nInconie Tax-Business Loss-Set off-Profits niade in Travancorc State-Losses inc1'rrcd o1'tside the Statc--Scopc of tile proviso to the 111ain cnactn1e1it-Travancore Inco1ne-tax Act, II2I (Travancorc XXIII of II2I), SS. 4, 9, IJ, I8, 32(I), first proviso-Indian Income-tax Act, I922 (XI of I922), ss. 3, 4, 6, IO, I4, 24(I), first proviso.\n\nSection 32(1) of the Travancore Income-tax Act, which corresponds to s. 24(1) of the lndian Income-tax Act, 1922, provided : \"Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in Section 9 [s. 6 of the Indian Act] he shall be entitled to have the amount of loss set off against this income, profits or gains under any other head in that year: Provided that where the loss sustained is a loss of profits or gains which 'vould but for the loss have accrued or arisen \\vithin British India or in an Indian State and would under the provisions of clause (c) of sub-section (2) of Section 18 [corresponding to s. 14 of the Indian Act] have been exempted from tax, such loss shall not be set off except against profits or gains accruing c1r arising within British India or in an Indian State and exc1npt fro1n tax under the said provisions \".\n\nThe assessees were companies having their head offices in the erstwhile State of Cochin with branches in the erstwhile State of Travancore and in other places outside the latter State.\n\nThey made profits in 1ravancore State but incurred losses in Cochin State and other places, and for the purposes of assessment to income-tax they sought to deduct this lo>s from the profits made in Travancore State. The Income-tax Officer acting under the provisions of the Travancore Income-tax Act, determined the assessable inco1ne representing only the profits made in Travancore State and under s. 32(1), first proviso of the Travancore Income-tax Act [which corresponds to the first proviso to s. 24(1) of the Indian Income-tax Act, 1922] refused to allow a deduction of the losses incurred. The assessees claimed that the business\n\n(2) S.C.R.\n\nSUPREME COURT REPOHTS 257\n\nwhich they were carrying on was one and indivisible for the purpose of determining the amount assessable to income-tax and that they were entitled to a deduction of the losses incurred outside Travancore State. The contention on behalf of the incometax authorities was (I) that under the first proviso to s. 32(1) of the Travancore Income-tax Act losses incurred in places outside the State of Travancore cannot be set off against profits made in that State, (2) that though profits and losses in the State arising under the same head could be set off, the proviso, aforesaid, affected not only the generality of the main enactment but also introduced an addendum that where the profits of the business arose in the State and the losses under the head business were sustained outside that State, those losses could not by virtue of the proviso be deducted from profits made in the State,\n\n(3) that the proviso applied only to the head \"business\" in the two respective territories, as the words used therein are \"where the loss sustained is a loss of profits or gains \" and the word \"income\" is not mentioned therein, and (4) that the word \"business\" in s. 13 of the Tra van core Act corresponding to s. IO of the Indian Act, must mean business in Travancore State under s. 13 of that Act and \"business in British India\" under the Indian Act, because before 1939 income was not chargeable under the two Acts, unless it was received or accrued in Travancore State or British India, as the case may be, and profits and gains of business in territories outside Travancore or in an Indian State were exempted from payment of income-tax in Travancore State or in British India, as the case may be.\n\nHeld: (1) Under s. 24(1) of the Indian Income-tax Act, 1922 [s. 32(1) of the Travancore Income-tax Act] a set off can be claimed only when the loss arises under one head and the income, profits and gains against which it is sought to be set off arises under a different head. In cases where profits and losses arise under the same head they have to be adjusted against each other under the provisions of ss. 7 to l2B of the Indian Act.\n\nArunachalam Chettiar v. Commissioner of Income-tax, (1936) L.R. 63 I. A. 233 and Anglo-French Textiles Co., Ltd. v. Commissioner of Income-tax, Madras, [1953] S.C.R. 448, relied on.\n\n(2) The territory of a proviso is to carve out an exception to the main enactment and exclude something which otherwise would have been within the section; it has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that that is its necessary effect.\n\nAbdul Jabar Butt v. State of Jammu and Kashmir, [1957] S.C.R. 51, Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax, [1955] 2 S.C.R. 483, Madras & Southern Mahratta Railway Co. v. Bezwada Municipality, (1944) L.R. 7I I.A. n3\n\nI959\n\nCommissioner of Income-tax v.\n\nJndo Mercantile\n\nHank, Limited.\n\nand Corporation of the City of Toronto v. Attorney-General for Commissioner of Canada, [1946] A.C. 32, relied on.\n\nIncome-tax Consequently, s. 24(1), first proviso, of the Indian Income-\n\nI959\n\nI11do JI! ercantile Bank, Limited.\n\nKapur].\n\ntax Act, 1922 [s. 32(1), first proviso, of the Travancore Act] bars the right of set off only where a loss in the Indian States under one head is sought to be set off against profits in British India under any other head, and does not apply to profits and losses and computation thereof which fall under s. Io of the Indian Act, corresponding to s. 13 of the Travancore Act.\n\n(3) The mere fact that the word \"income\" is not used in the proviso does not justify the construction that the intention of the Legislature was to restrict the right to a set off of profits and losses arising in Indian States only to business or to modify the mode of computation under s. IO of the Indian Income-tax Act.\n\n(4) The word \"business\" in s. IO of the Indian Income-tax Act, 1922, is not confined to business in British India, in view of the definition of \"total income\" and \"total world income\" and chargeability of total income under s. 3, or the provisions of s. 4 where in the case of a resident \"total income\" includes income, profits and gains accruing within or without British India.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 259 and 260 of 1958.\n\nAppeals by special leave from the judgment and orders dated August 5, 1955, of the former Travancore- Cochin High Court in Income-tax Reference Appeals Nos. 6 of 1953 and 21 of 1954.\n\nK. N. Rajagopa\"la Sastri, R. H. Dhebar and D. Gupta, for the appellant.\n\nG. B. Pai and Sardar Bahadur, for the respondent in C. A. No. 259 of 1959.\n\nA. V. Viswanatha Sastri and Naunit Lal, for the respondents in C. A. No. 260 of 1958.\n\n1959. February 23.\n\nThe Judgment of the Court was delivered by\n\nKAPUR, J.-These two appeals by special leave raise a common question of law, and .that is, whether business losses incurred in the erstwhile State of Cochin could, under the Income-tax Act of Travancore, be set off against the business profits' made in the erstwhile State of Travancore. In Appeal No. 260/ 58 a further question arose whether in the case of\n\nthat assessee the year ending June 30, 1949, was the previous year for the assessment year 1950-51 with the result that it should be assessed under the Indian Income-tax Act of 1922. But this question was not answered by the High Court which confined itself to answering the first question which was common to both the appeals. The appellant before us in both the appeals is the Commissioner of Income-tax and the respondents are the two assessees, in one case a Bank and the other a private limited company. The main argument has been confined to the question of applicability of s. 32(1) and the first proviso to that section of the Travancore Income-tax Act (hereinafter called the Tra van.core Act).\n\nIn C. A. No. 259/58 the assessee is a public limited company incorporated in the State of Cochin with branches in that State as well as in what was British India and in Travancore State. It filed its incometax return showing an income of Rs. 11,872 for the assessment year 1948-49, its accounting year being the previous calendar year. The Income-tax Officer determined its assessable income to be Rs. 90,947 representing only the profit it made in Travancore State and under s. 32(1) proviso (i) of the Travancore Act he refused a deduction of Rs. 79,275 shown as loss from branches situate outside the State of Travancore, in British India and other Indian States. The assessee's appeal to the Income-tax Commissioner was unsuccessful but the Appellate Tribunal held that the banking business of the assessee being one and indivisible for the purpose of determining the amount assessable to income-tax it was entitled to deduct the losses incurred outside Travancore State from the profits accruing and arising in that State. At the instance of the Commissioner of Income-tax the following question was referred to the High Court of Travancore-Cochin :-\n\n\"Is the aforesaid sum of Rs. 79,275 a loss of the assessee arising outside the Travancore State for purpose of the first proviso to section 32(1) of the Travancore Income-tax Act ? \" This question was slightly modified by the High Court\n\nI959\n\nCommissioner of Income-tax v.\n\nI ndo M ercanlile\n\nBa:'nk, Limited.\n\nKapur].\n\nr959\n\nCommissioner of Income-tax v.\n\nIndo Mercantile Bank, Limitod.\n\nJ(apur ].\n\n260 SUPREME COUR1' REPORTS [1959] Supp.\n\nwhich after referring to several decided cases answered the question in favour of the assessee.\n\nIn C. A. 260/58 the assessee is a private limited company with its registered office in the former Cochin State. It was carrying on business at its head office in Cochin State and it also carried on business in Travancore State. The assessment was made under the Travancore Act and relates to the previous year ending June 30, 1949, the assessment year being 1950-\n\n51. The assessee made a profit in Travancore State and incurred a loss in the State of Cochin and sought to deduct this loss from the profit of Tra vancore State thus showing a net profit of Rs. 2,643. This was not allowed by the Income-tax Officer aI)d on appeal this order was confirmed by the Appellate Assistant Commissioner. The Appellate Tribunal also did not accept the submissions of the assessee and upheld the order of assessment. On an application of the assessee the following question was referred to the High Court of Travancore-Cochin :-\n\n\" W'hether on the facts and in the circumstances of the case the loss of Rs. 27, 709 arising in Cochin State could be set off against the profit of Rs. 38,998 arising in Travancore State? \" and was answered in favour of the assessee. The Commissioner has come up in appeal pursuant to special leave against both these judgments.\n\nIt may be stated that the relevant sections of the Travancore Act which govern the two appeals are identically worded with those of the Indian Incometax Act of 1922 (to be called the Indian Act).\n\nThe corresponding sections are as follows : Headings Sections in\n\nApplication of the Act Head of income chargeable to income-tax Business Exemptions of a general nature Set off of loss in computing aggregate income\n\nTravancore Act. 4\n\n9 13\n\nSection in Indian Act. 4\n\n6 10\n\nIt is only necessary to set out s. 32(1) of the Travancore Act and the proviso which correspond to s. 24(1) and proviso (i) of the Indian Act and which are necessary for the decision of the appeals before us:\n\nS. 32(1) \"Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in Section 9 (Section 6) he shall be entitled to have the amount of loss set off against this 'income, profits or gains under any other head in that year: Provided that where the loss sustained is a loss of profits or gains which would but for the loss have accrued or arisen within British India or in an Indian State and would under the provisions of clause (c) of sub-section (2) of Section 18 (Section l4(2)(c) ), have been exempted from tax, such loss shall not be set off except against profits or gains accruing or arising within British India or in an Indian State and exempt from tax under the said provisions\". (Sections in brackets are the corresponding sections of the Indian Act).\n\nSo the only difference between the two sections is that in the proviso to s. 24(1) of the Indian Act instead of the words \"an Indian State \" the words \"British India or in an Indian State\" have to be substituted.\n\nThe question for decision is as to how this proviso is to be construed. Ordinarily the effect of an excepting or a qualifying proviso is to carve something out of the preceding enactment or to qualify something enacted therein which but for the proviso would be in it and such a proviso cannot be construed as enlarging the scope of an enactment when it can be fairly and properly construed without attributing to it that effect.\n\nCorporation of the City of Toronto v. Attorney- General for Canada (1).\n\nBut it has been held that a section framed as a proviso to a preceding section may sometimes contain matter which is in substance a fresh enactment adding and not merely qualifying that which goes before. Rhondda Urban Council v.\n\nTaff Vale Railway (2).\n\nIt was argued on behalf of the Revenue that this\n\n(1) [1946] A.C. 32, 37.\n\n(2) [1909] A.C. 253, 258.\n\nI959\n\nCommissioner of Income-tax v.\n\nI ndo Mercantile Bank, Limited.\n\nKapur ].\n\nr959 proviso falls in the second category and takes the\n\nC -_ -_ present cases out of s. 32(1) of the Travancore Act onnmmoner of d . l' b'J' t t h fi Income-tax an m1poses a Ia I ity o ax on t e pro ts or gains v. arising in that State, disallowing a deduction of the Indo Mmantile losses in British India and in States other than Tra-\n\nBnnk, Limited. va.ncore State against profits made in Travancore\n\nI<apur ].\n\nState: Rhondda Urban Council v. Taff Vale Railway (1) and Hcr; rrison v. Ward('). It may be mentioned that in the majority of cases decided in India the proviso to s. 24(1} of the Indian Act has been construed in a manner contrary to the submissions made on behalf of the Hevenue.\n\nIn order to determine the true meaning of the words of the proviso it is necessary and convenient to refer to the scheme of the Indian Act which is admitted by the parties to be same as that of the Travancore Act. From 1922 to 1939 in order to be taxable income, profits and gains had to be received or had to accrue in British India. In 1939 the idea of 'total world income ' was introduced and the definition of ' total income' was modified by the Indian Income-tax (Amendment) Act (VII of 1939) which also made consequential changes in other sections of the Indian Act.\n\nUnder s. 2(15) of the Act 'total income' was defined to mean the total amount of income, profits and gains computed in the manner laid down in that Act. The ' total world income ' was defined as including all income, profits and gains wherever accruing or arising except income to which the Act did not apply.\n\nSection 3 provided for the charge of income-tax in respect of the tot9'l income of the previous year. Under s. 4 the total income of any previous year of any person who was resident included all income, profits and gains from wh11tever source derived but (i) it must accrue or arise to him during the year in British India or (ii) accrue or arise to him without British India during such year. The third clause is not necessary for this appeal.\n\nSection 4(3) provided what income, profits or gains were not to be included in the total income of the person receiving them. Both under the Indian Act and under the Travancore Act\n\n(1) [1909] A.C. 253, 258.\n\n(2) [1922] r Ch. 517.\n\nthere were six heads of income chargeable to incometax. In the Indian Act they were set out in s. 6 as follows:-\n\nS. 6 \"Save as otherwise provided by this Act the following heads of income, profits and gains shall be chargeable to income-tax in the manner hereinafter appearing, namely :-\n\n(iv) Profits and gains of business, profession or vocation.\n\n\" Then followed ss. 7 to 12B laying down the method of computation of the income arising from each head.\n\nIn 1941 during the war an exemption was given for the purpose of taxability to any income, profits or gains which accrued or arose within what was then called Indian States but which were not received or brought into British India. This was done by s. 8 of the Indian Income-tax (Amendment) Act, 1941 (XXIII of 1941) by which another clause (c) was added to s. 14(2) which was as follows:\n\n\"The tax shall not be payable by an assessee:\n\n(c) in respect of any income, profits or gains accruing or arising to him within (an Indian State) unless such income, profits or gains are received or deemed to be received in or are brought into the Indian State in the previous year by or on behalf of the assessee or are assessable under section 12B or section 42 \".\n\nThus income, profits or gains arising under any of the heads under s. 6 became exempted in circumstances above-mentioned but the effeqt of this exemption was\n\nno€ to exclude such income of an assessee for all purposes as was the case under ~. 4(3).\n\nSuch suins were to be t11.ken into account for the pu, i:pose of determining the rate under s. 16 of the Indian Act.\n\nA further consequential change was made in s. 24(1) by\n\nCommissioner of\n\nIncome-tax\n\nIndo Mercantile Bank, Limited.\n\nKapur ].\n\n1959 the addition of the first proviso and a similar addition was made in the Travancore Act to s. 32(1) which has Commission\" of already been quoted and it is this proviso which is the Income.tax v. subject-matter of controversy between the parties.\n\nA Inda Mmantile review of the various sections and enactments shows Bank. Limited. that during 1922.1939 the tax was leviable on income, profits and gains arising or accruing to an assessee in Rapu, f British India. In 1939 the total income became taxable subject to exclusions in sub-s. 3 of s. 4 and the chargeability of the ' total income ' was laid down in s. 3. In 1941 income, profits or gains which a resident made in an Indian State and in the case of Travancore State income, profits or gains which a resident made in British India or other Indian States were exempted from payment of income-tax unless received or brought into the respective territories, but this income, profits or gains had to be included for the purpose of calculating the rate.\n\nNow we come to s. 24(1).\n\nThis section was introduced in 1922 before which under the Indian Act of 1918 a loss under one head of income could not be set off against income under another head, the taxabilit_y of income arising from each head being separate. By the addition of this section the loss under one head of profits or gains was allowed to be set off against income, profits and gains under any other head in any assessment year. There was also a provision in s. 24(2) for carrying over the loss after such set off had been effected.\n\nSection 24(1) became the subject matter of controversy in the courts.\n\nThe Privy Council in Arunachalam Chettiar v. Commissioner of Income-tax (1) held that this section was meant for a set off of profits arising under different heads and not where profits and losses had to be adjusted if they arose under the same head. Sir George Rankin said at p. 241:\n\n\"In their Lordships' opinion, whether a firm is registered or unregistered, partnership does not obstruct or defeat the right of a partner to an adjustment on account of his share of loss in the firm, whether the set off be against other profits under the same\n\n(1) (1936) L.R. 63 I.A. 233.\n\n(2) S.C.lt\n\nSUPREME COURT REPORTS 265\n\nhead of income within the meaning of s. 6 of the Act or under a different head (in which case only need recourse be had to s. 24, sub-s. 1) \".\n\nThus the Privy Council emphasised that the object of s. 24(1) was to allow a set off of profits against losses arising under different heads and only in such cases could recourse be had to s. 24(1).\n\nIn cases where profits and losses arose under the same head they had to be adjusted against each other.\n\nThis Court in Anglo- French Textiles Go. Ltd. v. Commissioner of Incometax, Madras (1) again emphasised that distinction in the following words :-\n\n\"Next, a set off under section 24(1) can only be claimed when the loss arises under one head and the profits against which it is sought to be set off arises under a different head.\n\nWhen the two arise under the same head, of course the loss can be deducted but that is done under section 10 and not under section 24(1) \". (Per Bose, J.) Indeed it is not disputed that when profit and loss arose under the same head in any place which was not an Indian State recourse had to be had to the provisions of ss. 7 to 12B and not to any other section. But it was contended on behalf of the Revenue that the first proviso to s. 24(1) of the Indian Act not only affected the generality of the main enactment but also introduced an addendum that where the profits of the business arose in what was British India in the case of the Indian Act or what was Travancore State in the case of the Travancore Act and the losses under the head business were sustained in an Indian State or in the latter case in any other Indian State or British India, these losses could not by virtue of the proviso be deducted from profits made in British India or Travancore State as the case may be.\n\nThey could only be adjusted against profits arising in an Indian State or in the case of Travancore State in British India or another Indian State. Thus the proviso, it was contended, was a modification of the method of computation under s. 10(2) of the Indian Act for\n\n(1) [1953J S.C.R. 448, 453 34\n\nI959\n\nCommissioner of\n\nIncome-tax\n\nInda Mercantile Bank, Limited.\n\nKapur ].\n\n'959 determining profits and gains of the business of any - resident.\n\nWe should be averse to lend any oounten- Cornmissioizer of h d f ' 1 Income-t•x ance to sue a mo e o construmg a proviso un ess the v. language used expressly or by necessary intendment Indo Mmantile len, ds to that conclusion. The proper function of a\n\nBank, Limited. proviso is that it qualifies the genemlity of the\n\n]{apur j. main enactment, by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Ordinarily it is foreign to the proper function of a proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment. \"It is a fundamental rule of construction that a proviso must be considered with relation to the principal matter to which it stands as proviso''. Therefore it is to be construed harmoniously with the main enactment. (Per Das, C. J.) in Abdul Jabar Butt v.\n\nState of Jammu & Kashmir (1).\n\nBhagwati, J., in Ram Narain Sons Ltd. v. Assistant Commissioner of Sales Tax (2) said :\n\n\"It is a cardinal rule of interpretation that a proviso to a particular provision of a statute only embraces the field which is covered by the main provision. It cn, rves out n, n exception to the main provision to which it has been enacted as a proviso and to no other\".\n\nLord Macmillan in Madras & Southern Mahratta Railway Go. v. Bezwada Municipality (3) laid down the sphere of a proviso as follows :-\n\n\" The proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enn, ctment, and its effect is confined to that case.\n\nWhere, as in the present case, the language of the main enactment is clear and unambiguous, a proviso can have no repercussion on the interpretation of the main enactment, so as to exclude from it by implication what clearly falls within its express terms \".\n\nThe territory of a proviso therefore is to cn, rve out an\n\n(1) [1957] S.C.R. 51, 59.\n\n\n(3) (1944) L.R. 71 I.A. u3, 122.\n\n(2) S.C.R. SUPHEME COURT REPORTS 267\n\nexception to the main enactment and exclude something which otherwise would have been within the section. It has to operate in the same field and if the language of the main enactment is clear it cannot be used for the purpose of interpreting the main enactment or to exclude by implication what the enactment clearly says unless the words of the proviso are such that that is its necessary effect. (Vide also Corporation of The City of 'Paronto v. Attorney-General for Canada) (1).\n\nIn the proviso in dispute there are no positive words which would support an interpretation in favour of the disintegration of the head \" business \"and compel the application of the proviso to the same head, specially keeping in view the object of the main section, i.e., s. 24(1) which was to set off loss of profits or gains under one head against income, profits or gains under any other head.\n\nIt was then submitted that in the proviso the words used were \"where the loss sustained is a Joss of profits or gains\" and therefore it necessarily applied to the head \" business \" in the two respective territories.\n\nBut in the main enactment itself, i.e., s. 24(1) of the Indian Act the words used are \"a loss of profits or gains\". The mere fact that the word \"income\" is not used does not justify the constru.ction that the intention of the Legislature was to restrict the set off of profits and losses arising in Indian States only to business or to modify the mode of computation under s. 10 of the Indian Act. That the use of these words does not circumscribe the proviso to business alone is shown by the difference in the language of the proviso to sub-s. (2) of s. 24 of the Indian Act:-\n\nS. 24 (2) .......................................................... .\n\n\" provided that\n\n(a) where the loss sustained is a loss of profits and gains of a business or vocation to which the first proviso to sub-section (1) is applicable, and the profits and gains of that business, profession or vocation are, under the provisions of clause (c) of sub-section (2) of section 14, exempt from tax, such loss shall not be set\n\n(1) [1946] A.C. 3z, 37.\n\nI959\n\nCo1nmissioner of\n\nInconze tax\n\nInda Mercantile Bank, Limited.\n\nKapur J.\n\n'959 off except against profits and gains accruing or arising . . in (an Indian State) from the same business, profesc ommisstoner of • • d Income-tax s10n or vocat10n an exempt from tax under the v. said provisions\".\n\nIndo Me'.cantite That proviso shows that where the Legislature wanted\n\n/Jank. Limited. to restrict the losses and profits or gains to business\n\nKapur J. alone they specifically said so. It is significant that in ss. 2(13) and (5) of the Indian Act of 1918 corresponding to ss. 2(15) and 6 of the Indian Act of 1922 the word used was\" income\" which in the latter Act was expanded into \"income, profits and gains \". The Privy Council said in the Commissioner of Income-tax,\n\nv. Shaw Wallace and Co. (1) that \"the object of the Indian Act is to tax \" income \" a term which it does not define. It is expanded no doubt into \"income, profits and gains\" but the expansion is more a matter of words than of substance\". It was also so said in Commissioner of Income-tax, Bengal v. Mercantile Bank of India Ltd.('). See also London County Council v.\n\nAttorney-General (3).\n\nThus the mere use of the words loss of profits or gains to be set off against profits and gains would not be sufficient to restrict the scope of the proviso to the profits and losses arising under the head business in the two territories, i.e., British India and the Indian States.\n\nOn behalf of the Revenue an alternate argument was raised for which support was sought from two decisions of the Allahabad High Court in In Re: Mishrimal Gulabchand (') and Raghunath Parshad v. Commissioner of Income-tax('). There it was held thats. 10 of the Indian Act had to be read with s. 14(2) (c) and if profits could not be added for the purposes of' total income' losses sustained also could not be deducted.\n\nCounsel for the Revenue did not go to this extent that because profits were exempted losses could not be deducted; his argument was that because before 1939 income was not chargeable unless it was received or accrued in British India therefore business in s. 10 could only mean business in British India. But this\n\n(1) (1932) L.R. 59 I.A. 206, 212.\n\n(2) (1936) L.R. 63 I.A. 457.\n\n(3) [1901] A.C. 26.\n\n(4) [1950] 18 l.T.R. 75-\n\n(5) [1955] 28 l.T.R. 45.\n\nargument does not take note of the definition of' total 1959 income ', ' total world income' and chargeability of c :--:-- 1 . . . ommissioner o total mcome under s. 3 or the prov1s10ns of s. 4 where Income-tax in the case of a resident 'total income' includes v. income, profits and gains accruing within or without Inda Mercantile British India. Therefore to say that business in s. 10 Bank, Limited. means business in British India or business the profits or gains of which are taxable in British India is to ignore the definitions and ss. 3, 4 and 6. Section 10 of the Indian Act does not distinguish between business in British India and business in an Indian State or so divide business.\n\nBut then it was. said that as the profits or gains of business in an Indian St.ate were exempted from payment of tax in British India business in s. 10 must mean business in British India.\n\nThat would be straining the language of s. 10 and would necessitate addition of words in s. 10 which are not there in the section.\n\nIn the course of argument a number of cases of the various High Courts were cited and criticised.\n\nW c find it unnecessary to refer to them because we have indicated above what is the correct sphere of a proviso and what proviso (i) to s. 24(1) means.\n\nIn our view the question referred to the High Court which is common to the two appeals was rightly answered in favour of the assessee.\n\nAs to the second question in Civil Appeal No. 260 of 1958 we do not propose to say anything. It will be open to the assessee in that appeal to take such steps in regard to that question as it may be advised.\n\nIn the result the appeals fail and are dismissed with costs.\n\nAppeals dismissed.\n\nKapur J.", "total_entities": 112, "entities": [{"text": "THE COMMISSIONER OF INCOME-TAX,\n\nMYSORE,\n\nTRAV ANCORE-COCHIN AND COORO,\n\nBANGALORE", "label": "PETITIONER", "start_char": 60, "end_char": 142, "source": "metadata", "metadata": {"canonical_name": "THE COMMISSIONER OF INCOME-TAX, MYSORE, TRAVANCORE-COCHIN AND COORG, BANGALORE", "offset_not_found": false}}, {"text": "B. P. SINHA", "label": "JUDGE", "start_char": 227, "end_char": 238, "source": "metadata", "metadata": {"canonical_name": "BHUVNESHWAR PRASAD SINHA", "offset_not_found": false}}, {"text": "L. KAPUR, JJ.", "label": "JUDGE", "start_char": 247, "end_char": 260, "source": "metadata", "metadata": {"canonical_name": "J.L. KAPUR", "offset_not_found": false}}, {"text": "SS. 4, 9", "label": "PROVISION", "start_char": 477, "end_char": 485, "source": "regex", "metadata": {"statute": null}}, {"text": "Indian Income-tax Act", "label": "STATUTE", "start_char": 516, "end_char": 537, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "ss. 3, 4, 6", "label": "PROVISION", "start_char": 558, "end_char": 569, "source": "regex", "metadata": {"linked_statute_text": "Indian Income-tax Act", "statute": "Indian Income-tax Act"}}, {"text": "Section 32(1)", "label": "PROVISION", "start_char": 602, "end_char": 615, "source": "regex", "metadata": {"linked_statute_text": "Indian Income-tax Act", "statute": "Indian Income-tax Act"}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 634, "end_char": 648, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 24(1)", "label": "PROVISION", "start_char": 671, "end_char": 679, "source": "regex", "metadata": {"linked_statute_text": "Indian Income-tax Act", "statute": "Indian Income-tax Act"}}, {"text": "Income-tax Act, 1922", "label": "STATUTE", "start_char": 694, "end_char": 714, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Section 9", "label": "PROVISION", "start_char": 831, "end_char": 840, "source": "regex", "metadata": {"linked_statute_text": "Income-tax Act, 1922", "statute": "Income-tax Act, 1922"}}, {"text": "s. 6", "label": "PROVISION", "start_char": 842, "end_char": 846, "source": "regex", "metadata": {"linked_statute_text": "Income-tax Act, 1922", "statute": "Income-tax Act, 1922"}}, {"text": "Section 18", "label": "PROVISION", "start_char": 1228, "end_char": 1238, "source": "regex", "metadata": {"linked_statute_text": "Income-tax Act, 1922", "statute": "Income-tax Act, 1922"}}, {"text": "s. 14", "label": "PROVISION", "start_char": 1257, "end_char": 1262, "source": "regex", "metadata": {"linked_statute_text": "Income-tax Act, 1922", "statute": "Income-tax Act, 1922"}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 1961, "end_char": 1975, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 32(1)", "label": "PROVISION", "start_char": 2076, "end_char": 2084, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 2118, "end_char": 2132, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 24(1)", "label": "PROVISION", "start_char": 2176, "end_char": 2184, "source": "regex", "metadata": {"statute": null}}, {"text": "Indian Income-tax Act, 1922", "label": "STATUTE", "start_char": 2192, "end_char": 2219, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 32(1)", "label": "PROVISION", "start_char": 2659, "end_char": 2667, "source": "regex", "metadata": {"linked_statute_text": "the Indian Income-tax Act, 1922", "statute": "the Indian Income-tax Act, 1922"}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 2686, "end_char": 2700, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 13", "label": "PROVISION", "start_char": 3507, "end_char": 3512, "source": "regex", "metadata": {"statute": null}}, {"text": "IO of the Indian Act", "label": "STATUTE", "start_char": 3557, "end_char": 3577, "source": "regex", "metadata": {}}, {"text": "s. 13", "label": "PROVISION", "start_char": 3624, "end_char": 3629, "source": "regex", "metadata": {"linked_statute_text": "IO of the Indian Act", "statute": "IO of the Indian Act"}}, {"text": "s. 24(1)", "label": "PROVISION", "start_char": 4063, "end_char": 4071, "source": "regex", "metadata": {"linked_statute_text": "IO of the Indian Act", "statute": "IO of the Indian Act"}}, {"text": "Indian Income-tax Act, 1922", "label": "STATUTE", "start_char": 4079, "end_char": 4106, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 32(1)", "label": "PROVISION", "start_char": 4108, "end_char": 4116, "source": "regex", "metadata": {"linked_statute_text": "the Indian Income-tax Act, 1922", "statute": "the Indian Income-tax Act, 1922"}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 4135, "end_char": 4149, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "ss. 7", "label": "PROVISION", "start_char": 4451, "end_char": 4456, "source": "regex", "metadata": {"linked_statute_text": "the Indian Income-tax Act, 1922", "statute": "the Indian Income-tax Act, 1922"}}, {"text": "(1936) L.R. 63 I. A. 233", "label": "CASE_CITATION", "start_char": 4536, "end_char": 4560, "source": "regex", "metadata": {}}, {"text": "[1955] 2 S.C.R. 483", "label": "CASE_CITATION", "start_char": 5244, "end_char": 5263, "source": "regex", "metadata": {}}, {"text": "s. 24(1)", "label": "PROVISION", "start_char": 5563, "end_char": 5571, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 32(1)", "label": "PROVISION", "start_char": 5677, "end_char": 5685, "source": "regex", "metadata": {"statute": null}}, {"text": "Io of the Indian Act", "label": "STATUTE", "start_char": 5969, "end_char": 5989, "source": "regex", "metadata": {}}, {"text": "s. 13", "label": "PROVISION", "start_char": 6008, "end_char": 6013, "source": "regex", "metadata": {"linked_statute_text": "Io of the Indian Act", "statute": "Io of the Indian Act"}}, {"text": "IO of the Indian Income-tax Act", "label": "STATUTE", "start_char": 6327, "end_char": 6358, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "IO of the Indian Income-tax Act, 1922", "label": "STATUTE", "start_char": 6391, "end_char": 6428, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 3", "label": "PROVISION", "start_char": 6585, "end_char": 6589, "source": "regex", "metadata": {"linked_statute_text": "IO of the Indian Income-tax Act, 1922", "statute": "IO of the Indian Income-tax Act, 1922"}}, {"text": "s. 4", "label": "PROVISION", "start_char": 6612, "end_char": 6616, "source": "regex", "metadata": {"linked_statute_text": "IO of the Indian Income-tax Act, 1922", "statute": "IO of the Indian Income-tax Act, 1922"}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 7471, "end_char": 7485, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 7815, "end_char": 7829, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 32(1)", 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"Section in Indian Act", "statute": "Section in Indian Act"}}, {"text": "s. 24(1)", "label": "PROVISION", "start_char": 11876, "end_char": 11884, "source": "regex", "metadata": {"linked_statute_text": "Section in Indian Act", "statute": "Section in Indian Act"}}, {"text": "S. 32(1)", "label": "PROVISION", "start_char": 11987, "end_char": 11995, "source": "regex", "metadata": {"linked_statute_text": "Section in Indian Act", "statute": "Section in Indian Act"}}, {"text": "Section 9", "label": "PROVISION", "start_char": 12100, "end_char": 12109, "source": "regex", "metadata": {"linked_statute_text": "Section in Indian Act", "statute": "Section in Indian Act"}}, {"text": "Section 6", "label": "PROVISION", "start_char": 12111, "end_char": 12120, "source": "regex", "metadata": {"linked_statute_text": "Section in Indian Act", "statute": "Section in Indian Act"}}, {"text": "Section 18", "label": "PROVISION", "start_char": 12483, "end_char": 12493, "source": "regex", "metadata": {"linked_statute_text": "Section in Indian Act", "statute": "Section in Indian Act"}}, {"text": "Sections in brackets are the corresponding sections of the Indian Act", "label": "STATUTE", "start_char": 12719, "end_char": 12788, "source": "regex", "metadata": {}}, {"text": "s. 24(1)", "label": "PROVISION", "start_char": 12866, "end_char": 12874, "source": "regex", "metadata": {"linked_statute_text": "Sections in brackets are the corresponding sections of the Indian Act", "statute": "Sections in brackets are the corresponding sections of the Indian Act"}}, {"text": "s. 32(1)", "label": "PROVISION", "start_char": 14033, "end_char": 14041, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 2(15)", "label": "PROVISION", "start_char": 15224, "end_char": 15232, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 3", "label": "PROVISION", "start_char": 15529, "end_char": 15538, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4", "label": 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"PROVISION", "start_char": 25209, "end_char": 25217, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 24(1)", "label": "PROVISION", "start_char": 25592, "end_char": 25600, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10", "label": "PROVISION", "start_char": 25925, "end_char": 25930, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 24", "label": "PROVISION", "start_char": 26105, "end_char": 26110, "source": "regex", "metadata": {"statute": null}}, {"text": "S. 24", "label": "PROVISION", "start_char": 26132, "end_char": 26137, "source": "regex", "metadata": {"statute": null}}, {"text": "section 14", "label": "PROVISION", "start_char": 26497, "end_char": 26507, "source": "regex", "metadata": {"statute": null}}, {"text": "s10", "label": "PROVISION", "start_char": 26809, "end_char": 26812, "source": "regex", "metadata": {"statute": null}}, {"text": "ss. 2(13)", "label": "PROVISION", "start_char": 27089, "end_char": 27098, "source": "regex", "metadata": {"statute": null}}, {"text": "ss. 2(15) and 6", "label": "PROVISION", "start_char": 27150, "end_char": 27165, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 14(2)", "label": "PROVISION", "start_char": 28315, "end_char": 28323, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10", "label": "PROVISION", "start_char": 28699, "end_char": 28704, "source": "regex", "metadata": {"statute": null}}, {"text": "(1932) L.R. 59 I.A. 206", "label": "CASE_CITATION", "start_char": 28762, "end_char": 28785, "source": "regex", "metadata": {}}, {"text": "(1936) L.R. 63 I.A. 457", "label": "CASE_CITATION", "start_char": 28797, "end_char": 28820, "source": "regex", "metadata": {}}, {"text": "s. 3", "label": "PROVISION", "start_char": 29059, "end_char": 29063, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4", "label": "PROVISION", "start_char": 29085, "end_char": 29089, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10", "label": "PROVISION", "start_char": 29278, "end_char": 29283, "source": "regex", "metadata": {"statute": null}}, {"text": "ss. 3, 4 and 6", "label": "PROVISION", "start_char": 29435, "end_char": 29449, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 10", "label": "PROVISION", "start_char": 29451, "end_char": 29461, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10", "label": "PROVISION", "start_char": 29737, "end_char": 29742, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10", "label": "PROVISION", "start_char": 29821, "end_char": 29826, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10", "label": "PROVISION", "start_char": 29870, "end_char": 29875, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 24(1)", "label": "PROVISION", "start_char": 30149, "end_char": 30157, "source": "regex", "metadata": {"statute": null}}]}
{"document_id": "1959_2_270_300_EN", "year": 1959, "text": "1 959\n\nJ'.1arch 2.\n\n270 SUPHEME COUHT REPORTS [1959] Supp.\n\nPREM NATH KAUL\n\nTHE STATE OF JAMM:U & KASHMilt\n\n(S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAB,\n\nK. N. WANCHOO and M. HIDAYATULLAH, JJ.)\n\nLanded Estate, Abolition of-Validity of enactment-Legislative Competency of Yuvaraj Karan Singh-Jamm1' and Kashmir Big Landed Estate Abolition Act, XV II of 2007.\n\nThis appeal challenged the validity of the Jammu and Kashmir Big Landed Estate Abolition Act, XVII of 2007 which was enacted by Yuvaraj Karan Singh on October 17, 1950, in exercise of the powers vested in hirn bys. 5 of the Jammu and Kashmir Constitution Act 14 of 1996 (1930) and the final proclamation issued by Maharaja Hari Singh on June 20, 1949, by which he entrusted all his po\\vers and function to the Yuvaraj.\n\nThe object of the Act was to improve agricultural production by abolishing big landed estates and transferring land to the actual tillers of the soil.\n\nThe suit out of which the present appeal arises was brought by the appellant in a representative capacity for a declaration that the Act was void, inoperative and ultra vires and that he \\Vas entitled to retain peaceful possession of his lands.\n\nBoth the trial Court.as also the High Court in appeal found against him and dismissed the suit. Hence this appeal by special leave.\n\nThe validity of the Act was challenged mainly on the ground that Yuvaraj Karan Singh had no authority to promulgate the Act. It was contended that (r) when Maharaja Hari Singh conveyed his powers to the Yuvaraj by his proclamation of June 20, 1949, he was himself a constitutional monarch and could convey no higher powers, (2) the said proclamation could not confer on the Yuvaraj the powers , specified therein, (3) the powers of the Yuvaraj were substantially limited by his own proclamation issued on November 25, 1949, by which he sought to make applicable to his State the Constitution of India, that was soon to be adopted by its Constituent Assembly, in so far as it was applicable, (4) as a result of the application of certain specified Articles, including Art. 370 of the Constitution of India to the State of Jammu Kashmir, the Yuvaraj became a constitutional monarch without any legislative authority or powers and\n\n(5) the decision of the Constituent Assembly of the State not to pay compensation \\Vas invalid since the Assembly itself was not properly constituted.\n\nHeld, that Yuvaraj Karan Singh, when he promulgated the Act, had the power to do so and its validity was beyond question.\n\n(2) S.C.R.\n\nSUPREME COUR'.1' REPORTS 271\n\nIt was indisputable that prior to the passing of the Independr959 ence Act, 1947, Maharaja Hari s; ngh like his predecessors, was an absolute monarch so far as the internal administration of his Piem Nath Kaul State was concerned. Section 3 of the Regulation l of 1991 v.\n\n(1934) issued by the Maharaja not only preserved all his pre- Th\"4State of . existing powers but also provided that his inherent right to Jammu & Kash1mr make any regulation, proclamation or ordinance would remain unaffected. The Constitution Act 14 of 1996 (1939) promulgated by him did not alter the position. Sections 4 and 5 of that Act preserved all the powers that he had under s. 3 of the Regulation\n\nl of 1991 and s. 72 preserved his inherent powers so that he remained the same absolute monarch as he was before.\n\nWith the lapse of British paramountcy on the passing of the Independence Act, 1947, the Maharaja continued to be the same absolute monarch, subject to the agreements saved by the proviso to s. 7 of the Act, and in the eyes of international law could conceivably claim the status of an independent sovereign.\n\nIt was unreasonable to suggest that the provisions of the Instrument of Accession signed by the Maharaja on October 25, 1947, affected his sovereignty, in view of cl. 6 thereof, which expressly recognised its continuance in and over his State.\n\nThere was no substance in the argument that as a result of his proclamation issued on March 5, 1948, which replaced the emergency administration by a popular interim Government headed by Sheik Mohammad Abdullah and constituted a Council of Ministers who were to function as a cabinet, the Maharaja became a constitutional monarch. The cabinet had still to function under the Constitution Act 14 of 1996 (1939) under the overriding powers of the Maharaja.\n\nWhen the Maharaja on June 20, 1949, therefore, issued the proclamation authorising the Yuvaraj to exercise all his powers, although for a temporary period, it placed the Yuvaraj in the same position as his father till the proclamation was revoked.\n\nThe Maharaja was himself an absolute monarch and there could be no question as to his power of delegation.\n\nIn Re. Delhi Laws Act, r9r2, [1951] S.C.R. 747, referred to.\n\nThe proclamation issued by the Yuvaraj on November 25, 1949, did not vary the constitutional position as it stood after the execution of the Instrument of Accession by the Maharaja nor could it in any way affect the authority conferred on the Yuvaraj by his father.\n\nThe contention that the application of certain specified Articles of the Indian Constitution to the State by the Constitution (Application to Jammu and Kashmir) Order (C. 0. ro) issued by the President on January 26, 1950, affected the sovereign powers of the Yuvaraj was not correct.\n\nNeither the scheme of Art. 370 nor the explanation to cl. (r) of that Article contemplated that the Maharaja was to be a constitutional ruler. The temporary provisions of that Article were\n\n2'2 SUPRJllME COURT REPORTS (1959] Supp.\n\n1959 based on the assumption that the ultimate relationship between India and the State should be finally determined by the Consti• Prem Nath Kaul tuent Assembly of the State itself.\n\nSo, that Article could not, v. either expressly or by implication, be intended to limit the The State of plenary legislative powers of the Maharaja. Till the Constituent j(onmu & l(ashmir Assembly of the State, therefore, made its decision, the Instrument of Accession must hold 1he field.\n\n• The initial formal application of Art. 385, which was subsequently deleted from the list of Articles applied to the State, could not justify the conclusion that it had adversely affected the legislative powers of the Yuvaraj.\n\nThere was no substance in the contention that the decision of the Constituent Assembly not to pay compensation was invalid as the Assembly itself was not properly called or constituted.\n\nThere could be doubt that the Yuvaraj was perfectly competent to issue the proclamation dated April 20, 1951, in variation of the Maharaja's, under which the Assembly was ultimately constituted, and so the Assembly was properly convened.\n\nCIVIL\n\nAPPELLATE JURISDICTION: Civil Appeal No. 152 of 1955.\n\nAppeal by special leave from the judgment and order dated March 25, 1953, of the Jammu and Kashmir High Court in Civil First Appeal No. 4 of 2009.\n\nN. C. Chatterjee, Gopi Nath Kunzru and Naunit Lal, for the appellants.\n\nH. N. Sanyal, Additional Solicitor General of India, J aswant Singh, Advocate General for the State of Jam mu and Kashmir, R. H. Dhebar and T. M. Sen, for the respondent. 1959.\n\nMarch 2.\n\nThe Judgment of the Court was delivered by\n\nGajendragadka. J.\n\nGAJENDRAGADKAR, J.-This appeal by special leave arises from a suit filed by the appellant in a representative capacity (Civil Suit No. 4 of 2008) against the State of Jammu & Kashmir praying for a declaration that the Jammu & Kashmir Big Landed Estate Abolition Act, XV II of 2007 (hereinafter called the Act) is void, inoperative and ultra vires of Yuvaraj Karan Singh who enacted it and for a further declaration that the appellant was entitled to retain the peaceful possession of his lands.\n\n(2) S.C.R. SUPREME COURT REPOR'rS 273\n\nIt appears that the validity of the Act was similarly z959 challenged by Maghar Singh by his suit filed on the P N h • Original Side of the High Court of Jammu & Kashmir rem :' Kaul (Civil Suit No. 59 of 2007); and Mr. Justice Kilam The state of who had heard the said suit had rejected the plainljjff's Jainmu .s. Kashmir contentions and held that the Act was valid.\n\nWhen the appellant' suit came for trial before the Gajendragadkar f.\n\nDistrict Court it was conceded on his behalf that the points raised by him against the validity of the Act had been decided by Mr. Justice Kilam and that, in view of the said decision, the appellant could not usefully urge anything more before the District Court.\n\nThe learned District Judge who was bound by the decision of Mr. Justice Kilam applied it to the suit before him and held that the Act was valid and that the appellant was not entitled to the two declarations claimed by him. In the result the appellant's suit was dismissed.\n\nAgainst this decree the appellant preferred an appeal in the High Court of Jam mu & Kashmir (Civil Appeal No. 4 of 2009).\n\nMaghar Singh whose suit had been dismissed by Mr. Justice Kilam had also preferred an appeal (No. 29 of 2008) before the High Court.\n\nThe two appeals were heard together by a Division Bench of the High Court which held that the Act was valid and that the appellants were not entitled to any declaration claimed by them. Both the appeals were accordingly dismissed.\n\nAgainst the decree passed by the High Court dismissing his appeal the appellant applied to the High Court for leave to appeal to this Court. The said application was, however, dismissed.\n\nThereupon the appellant applied for, and obtained, special leave to appeal to this Court.\n\nIn dealing with this appeal it is necessary to narrate in some detail t.he events which took place in Kashmir and the constitutional changes which followed them in order to appreciate fully the background of the impugned legislation. A clear understanding of this background will help us to deal with the appellant's case in its proper perspective. In 1925 Maharaja\n\n'959 Hari Singh succeeded Maharaja Pratap Singh as the Ruler of Kashmir. It appears that for some time Prem Nath Kaul v. prior to 1934 there was public agitation in Kashmir n, state of for the establishment of responsible government.\n\nJammu & l<ashmfr Presumably as a sequel to the said agitation Maharaja . - Hari Singh issued Regulation 1 of 1991 (1934).\n\nThe Ga;•ndragadhar J. Regulation began with the statement of policy that it was the declared intention of the Maharaja to provide for the association of his subjects in the matter of legislation and the administration of the State and that it was in pursuance of the said intention that the Regulation was being promulgated. This Regulation consisted of 46 sections which dealt with the legislative, executive and judicial powers of the Maharaja himself, referred to the subjects which should be reserved from the operation of the Regulation, made provision for the constitution of the Legislature of the State, conferred authority on the Council to make rules for specified purposes and referred to other relevant and material topics. It is relevant to refer to only two sections of this Regulation.\n\nSection 3 provides that all powers legislative, executive and judicial in relation to the State and its government are hereby declared to be, and to have been always, inherent in and possessed and retained by His Highness the Maharaja of Jammu & Kashmir and nothing contained in the Regulation shall affect or be deemed to have affected the right and prerogative of His Highness to make and pass regulations, proclamations and ordinances by virtue of his inherent power.\n\nSection 30 lays down that no measure shall be deemed to have been passed by the Praja Sabha until and unless His Highness has signified his assent thereto.\n\nThe Regulation leaves it to the absolute discretion of His Highness whether to assent to such a measure or not.\n\nFive years later the Maharaja promulgated the Jammu & Kashmir Constitution Act 14of1996(1939).\n\nFrom the preamble to this Constitution it appears that, before its promulgation, the Maharaja had issued a proclamation on February 11, 1939, in which he had announced his decision as to the further steps to\n\nbe taken to enable his subjects to make orderly pror959 gress in the direction of attaining the ideal of active Prem Nath Kaul co-operation between the executive and the Legislav. ture of the State in ministering to the maximum hap- The State of piness of the people. In accordance with this desire Jammu & J(ashmir the text of the Constitution contained in Regulation 1 - of 1991 was thoroughly overhauled and an attempt Gajendragadlwr J. was made to bring the amended text into line with that of similar Constitutions of its type. This Constitution is divided into six parts and includes 78 sections. Part 1 is introductory. Part 2 deals with the executive; Part 3 with the Legislature; Part 4 with the Judicature; Part 5 contains miscellaneous provisions; and Part 6 provides for repeal and saving and includes transitional provisions. It is significant that s. 5 of this Act, like s. 3 of the earlier Regulation, recognises and preserves all the inherent powers of His Highness, while s. 4 provides that the State was to be governed by and in the name of His Highness, and all rights, authority and jurisdiction which appertain or are incidental to the government of the State are exercisable by His Highness except in so far as may be otherwise provided by or under the Act or as may be otherwise directed by His Highness. The other provisions of the Act are all subject to the overriding powers of His Highness specifically preserved by s. 5.\n\nAs we will point out later on, in substance the Constitutional powers of the Maharaja under the present Act were exactly the same as those under the earlier Act.\n\nwhile the State of Jammu & Kashmir was being governed by the Maharaja and the second Constitution as amended from time to time was in operation, political events were moving very fast in India and they culminated in the passing of the Indian Independence Act, 1947. Under s. 7 (1) (b) of this Act the suzerainty of His Majesty over the Indian States lapsed and with it lapsed all treaties and agreements in force at the date of the passing of the Act between His Majesty and the Rulers of the Indian States, all obligations of His Majesty existing at that date towards Indian States or the Rulers thereof, and all powers,\n\n'959 rights, authority or jurisdiction exercisable by His p,, m Nath J(aul Majesty at that date in or in relation to Indin States\n\nv. by treaty, grant, usage, sufferance or otherwise. The The state of proviso to the said section, however, prescribed that,\n\nJammu & Kashmfr notwithstanding anything in para. (b), effect shall, as . - nearly as may be, continue to be given to the provi- GaJendragadkar f. sions of any such agreement as therein referred to in relation to the subjects enumerated in the proviso or other like matters until the provisions in question are denounced by the Ruler of the Indian State on the one hand or by the Dominion or Province concerned on the other hand, or are superseded by subsequent agreements. Thus, with the lapse of British paramountcy the State of Jammu & Kashmir, like the other Indian States; was theoretically free from the limitations imposed by the said paramountcy subject to the provisions of the proviso just mentioned.\n\nOn October 22, 1947, the tribal raiders invaded the territory of the State; and this invasion presented a problem of unprecedented gravity before the Maharaja.\n\nWith the progress of the invading raiders the safety of the State was itself in grave jeopardy and it appeared that, if the march of the invaders was not successfully resisted, they would soon knock at the doors of Srinagar itself. This act of aggression set in motion a chain of political events which ultimately changed the history and political constitution of Kashmir with unexpected speed.\n\nOn October 25, 1947, the Maharaja signed an Instrument of Accession with India which had then become an Independent Dominion. By the First Clause of the Instrument the Maharaja declared that he had acceded to the Dominion of India with the intent that the Governor-General of India, the Dominion, Legislature, the Federal Court and any other Dominion Authority established for the purpose of the Dominion shall, by virtue of the Instrument of Accession, subject always to the terms thereof and for the purposes only of the Dominion, exercise in relation to the State of Jammu & Kashmir such functions as may be vested in them by or under the Government of India Act, 1935, as in force in the Dominion of India on August 15, 1947.\n\nWe may usefully refer to some other relevant claus-\n\nI 959 es of this Instrument. By cl. 3 the Maharaja agreed Prem Nath Kaul that the matters specified in the Schedule attached to v. the Instrument of Accession were the matters with The State of respect to which the Dominion Legislature may makefammu & Kashmir laws for this State. Clause 5 provides that the Instru- G . d -dk 1 . b d f h a; en raga ar . ment shall not be vaned y any amen ment o t e Government of India Act, 1935, or of the Indian Independence Act, 1947, unless such amendment is accepted by the Maharaja by an Instrument supplementary to the original Instrument of Accession.\n\nBy cl. 7 it was agreed that the 1\\!Iaharaja would not be deemed to be committed to the acceptance of any future Constitution of India nor would his discretion be fettered to enter into agreements with the Government of India under any such future Constitution. Clause 8 is very important. It says that nothing in the Instrument affects the continuance of the Maharaja's sovereignty in and over his State, or, save as provided by or under the Instrument, the exercise of any powers, authority and rights then enjoyed by him as Ruler of the State, or the validity of any law then in force in the State. The Schedule attached to the Instrument refers to four topics, defence, external affairs, communications and ancillary, and under these topics twenty matters have been serially enumerated as those in respect of which the Dominion Legislature had the power to make laws for the State. Thus, by the Instrument of Accession, the Maharaja took the very important step of recognising the fact that his State was a part of the Dominion of India.\n\nMeanwhile, the invasion of the State had created tremendous popular fervour and patriotic feelings in resisting the act of aggression and this popular feeling inevitably tended to exercise pressure on the Maharaja for introducing responsible and popular government in the State. The Maharaja tried to pacify the popular demand by issuing a proclamation on March 5, 1948.\n\nBy this proclamation he stated that in accordance with the traditions of his dynasty he had from time to time provided for increasing association of his people with the administration of the State with the object of\n\n'959 realising the goal of full responsible government at as P -;;-, 1 early a date as possible, and he added that he had rnn ; 1\n\n• Kau noted with gratification and pride the progr.ess made\n\nThe Stale of so far aud the legitimate desire of his people for the Jammu & I<ashmir.immediate establishment of a folly democratic consti- . - tution based on adult franchise with a hereditary Ga; endrngadka. f. Ruler from his dynasty as the constitutional head of an executive responsible to the Legislature. It appears that before this proclamation was issued the Maharaja had already appointed Sheikh Mohammed Abdullah who was then the popular leader of the people as the head of the emergency administration. By the proclamation the Maharaja replaced the emergency administration by a popular interim government and provided for its powers, duties and functions pending the formation of a fully democratic constitution. Clause 1 of the proclamation provides for the composition of the Ministry, whereas by cl. 2 the Prime Minister and other ministers are required to function as a cabinet and act on the principle of joint responsibility.\n\nA Dewan appointed by the Maharaja is to be a member of the Cabinet. Clause 4 provides that the Council of Ministers shall take appropriate steps, as soon as restoration of normal conditions has been completed, to convene a N atioual Assembly based on adult franchise having due regard to the principle that the number of representatives from each voting area should, as far as practicable, be proportionate to the population of that area. Clause 5 then lays down that the Constitution to be framed by the National Assembly shall provide adequate safeguards for the minorities and contain appropriate provisions guaranteeing freedom of conscience, freedom of speech and freedom of assembly.\n\nClause 6 states that when the work of framing the Constitution is completed by the National Assembly the Constitution would be submitted through the Council of Ministers to the Maharaja for his acceptance.\n\nThe proclamation ended with the expression of hope that the formation of a popular interim government and the inauguration in the near future of a fully democratic Constitution would ensure the contentment, happiness and the moral and material advancement\n\nof the people of the State.\n\nThough under this r959 Proclamation a popular interim government was set Prem N alh Kaul up, the constitutional position still was that the popuv. lar government had theoretically to function under The state of the Constitution of 1939. It appears that before the Jammu & Kashmir popular government was thus installed in office the . - Maharaja had deputed four representatives of the Ga; endragadkar f.\n\nState to represent the State in the Constituent Assembly called in the Dominion of India to frame the Constitution of India.\n\nAfter the popular interim government began to function the political events in the State gathered momentum and the public began to clamour for the framing of a democratic Constitution at an early date.\n\nWhen the atmosphere in the State was thus surcharged, the Maharaja issued his final proclamation on June 20, 1949, by which he entrusted to Yuvaraj Karan Singh Bahadur all his powers and functions in regard to the government of the State because he had decided for reasons of health to leave the State for a temporary period. \"Now therefore I hereby direct and declare\", says the proclamation, \"all powers and functions whether legislative, executive or judicial which are exercisable by me in relation to the State and its government including in particular my right and prerogative of making laws, of issuing proclamations, orders and ordinances, or remitting, commuting or reducing sentences and of pardoning offenders, shall, during the period of my absence from the State, be exercisable by Yuvaraj Karan Singh Bahadur \".\n\nAs subsequent events show this was the last official act of the Maharaja before he left the State.\n\nAfter Yuvaraj Karan Singh took the Maharaja's place and began to function under the powers assigned to him by the said proclamation, the interim popular government installed earlier was functioning as before.\n\nOn November 25, 19.49, Yuvaraj Karan Singh issued a proclamation by which he declared and directed that the Constitution of India shortly to be adopted by the Constituent Assembly of India shall, in so far as it is applicable to the State of Jammu & Kashmir, govern the constitutional relationship between\n\n280 SUPRE:ME: COURT R:mPORTS [1959] Supp.\n\nt959 the State and the contemplated Union of India and P -h shall be enforced in the State by him, his heirs and \"m ~~\n\n1 Kaul successorR in accordance with the tenor of its provi-\n\nThe sta\" of sions. He also declared that the provisions of the said Jammu & J(ashmfr Constitution shall, as from the date of its commence- . - ment, supersede and abrogate all other constitutional Ga1endrngadkar J. provisions inconsistent therewith which were then in force in the State. The preamble to this proclamation shows that it was based on the conviction that the best interests of the State required that the constitutional relationship established between the State and the Dominion of India should be continued as between the State and the contemplated Union of India; and it refers to the fact that the Constituent Assembly of India which had framed the Constitution of India included the duly appointed representatives of the State and that the said Constitution provided a suitable basis to continue the constitutional relationship between the State and the contemplated Union of .India. On January 26, 1950, the Constitution of India came into force.\n\nThis proclamation was followed by the Constitution (Application to Jammu & Kashmir) Order, 1950 (C. 0. 10) which was issued on January 26, 1950, by the President in consultation with the Government of Jammu & Kashmir and in exercise of the powers conferred by cl. (1) of Art. 370 of the Constitution. It came into force at once. Clause (2) of this order provides that for the purposes of sub-cl. (i) of Art. 370 of the Constitution, the matters specified in the First Schedule to the Order correspond to matters specified in the Instrument of Accession governing the accession of the State of Jammu & Kashmir to the Dominion of India as the matters with regard to which the Dominion Legislature may make laws for that State; and accordingly the power of Parliament to make laws for that State shall be limited to the matters specified in the said First Schedule. Clause (3) provides that, in addition to the provisions of Art. 1 and Art. 370 of the Constitution the only other provisions of the Constitution which shall apply to the State of Jammu & Kashmir shall be those specified in the\n\n(2) S.C.R. SUPREME COURT R~POR'rS 281\n\nSedond Schedule to the Order and shall so apply subz959 ject to the exceptions and modifications specified in the said Schedule. The First Schedule to the Order Prem Nath Kaul v. specified 96 items occurring in the Union List; while Th• State of the Second Schedule set out the Articles of the Consti- Jammu & Kashmir tution made applicable to the State together with the exceptions and modifications. Later on we will haveGajendragadkar J. occasion to refer to some of these Articles on which the appellant has relied.\n\nIt appears that, after the interim popular Government took office, the Revenue Minister made a statement of policy at a meeting of the special staff of revenue officers held in the Govi:irnor's office on August 13, 1950. The Minister stated that whatever the difficulties, the Cabinet was determined to go ahead and transfer the proprietorship of the land to the tiller.\n\nThe main idea underlying the proposed agricultural reform was that a landlord shall not possess more than 20 acres of agricultural land. In addition he would be allowed 8 kanals for his use and Sagzar and 4 kanals for his second house if in existence, and 10 kanals for Bedzar or Safedzar. It was contemplated that a committee would be appointed to settle the details and other matters incidental to the said agricultural plan.\n\nIt was presumably in pursuance of this plan adopted by the interim Cabinet that the Act was promulgated by Yuvaraj Karan Singh on October 17, 1950.\n\nThe preamble to the Act shows that it was promulgated because no lasting improvem.ent in agricultural production and efficiency was possible without the removal of the intermediaries between the tiller of the soil and the State, and so, for the purpose of improving agricultural production, it was expedient to provide for the abolition of such proprietors as own big landed estates and to transfer the land held by them to the actual tiller. The Yuvaraj enacted the law in exercise of the powers vested in him under s. 5 of the Constitution Act of 1996 and the proclamation issued by Maharaja Hari Singh on June 20, 1949. The Act consists of 47 sections and purports to carry out its 36\n\nt959 policy of improving the agricultural production of the State by providing for the extinction of the proprietors' P1em Nath J(aul v. titles and the transfer oi the lands to the tillers, and The state of by setting up a self-contained machinery for the carry- Jaminu e;. Kashmir ing out of the scheme of the Act and for settlement of . - all incidental disputes arising thereunder.\n\nGo; endrngadka, 1 For the purpose of this appeal, however, it is necessary to refer to a few reievant sections which deal with the broad features of the extinction of the proprietors' rights and the transfer of lands to the tillers.\n\nS. 2 of the Act inter alia defines land, proprietor and tiller, while s. 3 excludes certain specified lands from the operation of the Act. Section 4, sub-s. (1) provides for the extinction of the right of ownership in certain lands and it lay.s down that notwithstanding anything contained in any law for the time being in force, the right of ownership held by a proprietor in land other than the land mentioned in sub-s. (2) shall, subject to the other provisions of the Act, extinguish and cease to vest in him from the date the Act comes into force.\n\nSub-section (2) of s. 4 enumerates lands which are excluded from the operation of sub-s. (1).\n\nThey are (a) units of land not exceeding 182 kanals including residential sites, Bedzars and Safedzars, (b) Kahikrishmi areas, Araks, Kaps and unculturable wastes including those used for raising fuel or fodder, and (c) orchards. The proviso to sub-s. (2) gives government the power to dispose of lands mentioned in cl. (b) in such a manner as may be recommended by the committee to be set up for that purpose. Section 26 of the Act deals with the question of payment to the proprietors. It provides that there shall, until the Constituent Assembly of the State settles the question of compensation, with respect to the land expropriated under this Act, be paid by the government to every proprietor who has been expropriated, an annuity in the manner indicated in the section. In other words, subject to the final decision of the Constituent Assembly, s. 26 contemplates the payment of annuity to the expropriated proprietors according to the scale prescribed in the section. With the rest of the sections we are not concerned in the present appeal.\n\nAfter the Act was enacted by the Yuvaraj he issued '959 a proclamation on April 20, 1951, directing that a P N h C 't A bl · f t t' f rein at Katti onst1 uent ssem y cons1stmg o represen .a ives o v. the people elected on the basis of adult franchise shall The State of be constitnted forthwith for the purpose of framing a Jamm11 & Kashmir Constitution for the State of J ammu & Kashmir. The proclamation sets out the manner in which members Gajendragadkar J. of the said Constituent Assembly would be elected and makes provisions for the holding of the said elections.\n\nIt also authorised the Constituent Assembly to frame its own agenda and make rules for regulating its procedure and the conduct of its business. The preamble to this proclamation shows that the Yuvaraj was satisfied that it was the general desire of the people that a Constituent Assembly should be brought into being for the purpose of framing a Constitution for the State and that it was commonly felt that the convening of the said Assembly could no longer be delayed without detriment to the future well.being of the State. The Yuvaraj also felt no doubt that the proclamation issued by the Maharaja on March 5, 1948, in regard to the convening of the national assembly as per els. 4 to 6 no longer met the requirements of the situation in the State. Thus this proclamation was intended to meet expeditiously the popular demand for the framing of a democratic constitution ; and it indicates that a decisive stage had been reached in the political history of the State.\n\nIn accordance with this proclamation a Constituent Assembly was elected and it framed the Constitution for the State. By the Constitution thus framed the hereditary rule of the State was abolished, and a provision was made for the election of a Sadar-i-Riyasat to be at the head of the State. On November 13, 1952, the Yuvaraj was elected to the office of the Sadar-i-\n\nRiyasat and with his election the dynastic rule of Maharaja Hari Singh came to an end.\n\nOn November 15, 1952, the Constitution (Application to Jammu & Kashmir) Second Amendment Order, 1952 (C. 0. 43) was issued; and it came into force on November 17, 1952. By this Order the earlier Order of 1950 was amended as a result of which all references\n\nr959 in the said Order to the Rajpramukh shall be con-\n\nN h K 1 strued as references to the Sadar-i-Riyasat of Jammu Prem al au & Kashmir. Similarly in the Second Schedule to the v.\n\nThe s1a1e of said Order some amendments were made. On the Jammu & KashmiY same day a Declaration (C. 0. 44) was made by the\n\n- President under Art. 370, sub-art. (3) of the Constitu- Gajendragadkar f. tion that from November 17, 1952, the said Art. 370\n\nshall be operative with the modification that for the explanation in cl. (I) thereof the new explanation shall be substituted. The effect of this new explanation was that the government of the State meant the person for the time being recognised by the President, on the recommendation of the Legislative Assembly of the State, as the Sadar-i-Riyasat of Jammu & Kashmir acting on the advice of the Council of Ministers of the State for the time being in force.\n\nOn November 18, 1952, Yuvaraj Karan Singh was recognised as the Sadar-i-Riyasat of Jammu & Kashmir. On May 14, 1954, another Constitution (Application to Jammu & Kashmir) Order (C. 0. 48) was made by the President which inter alia applied Art. 31A and 31B to the State with certain modifications and included the Act in the Ninth Schedule of the Constitution. The last two Orders were issued subsequent to the enactment of the Act and so they would have no bearing on the decision of the points raised before us.\n\nWe have briefly referred to them for the sake of completing the narrative of the material events.\n\nThe validity of the Act is impeached mainly on the ground that Yuvaraj Karan Singh had no authority to promulgate the said Act. It is this argument which has been urged before us by Mr. Chatterjee in different and alternative forms that needs careful examination.\n\nThe first attack against the competence of Yuvaraj Karan Singh proceeds on the assumption that at the time when Maharaja Hari Singh conveyed his powers to Yuvaraj Karan Singh by his proclamation of June 20, 1949, he was himself no more than a constitutional monarch and as such he could convey to Yuvaraj Karan Singh no higher powers. Let us first deal with this argument.\n\nPrior to the passing of the Independence Act, 1947, the sovereignty of Maharaja\n\nHari Singh over the State of J ammu & Kashmir was\n\nI959 subject to such limitations as were constitutionally Prem Nath l\\aul imposed on it by the paramountcy of the British v.\n\nCrown and by the treaties and agreements entered The state of into between the Rulers of the State and the BritishJammu& Kash111ir Government. It cannot be disputed that so far as . - the internal administration and governance of the Ga; eudragadkar f.\n\nState were concerned Maharaja Hari Singh, like his predecessors, was an absolute monarch; and that all powers legislative, executive and judicial in relation to his State and its governance inherently vested in him. This position has been emphatically brought out by s. 3 of Regulation 1 of 1991 (1934). 'Though by this Regulation Maharaja Hari Singh gave effect to his intention to provide for the association of his subjects in the matter of legislation and administration of the State, by s. 3 he fully preserved in himself all of his pre-existing legislative, executive and judicial powers. Section 3 not only preserves the said powers but expressly provides that nothing contained in the Regulation shall affect or be deemed to have , affected the right and prerogative of His Highness to make and pass regulations, proclamations and ordinances by virtue of his inherent authority. It is thus clear that the rest of the provisions of the Regulation were subject to the overriding powers preserved by His Highness.\n\nIt is, however, urged that this constitutional position was substantially altered by the subsequent Constitution Act of 1996 (14 of 1996). We are unable to accept this argument.\n\nSections 4 and 5 of this Act in terms continue to preserve all the powers legislative, executive and judicial as well as the right and prerogative of His Highness just as much a.s s. 3 of Regulation 1 of 1991. It is significant that the provisions of Pt. II which deals with the executive, like those of Pt. III which deals with the Legislature, begin with the express provision that they are subject to the provisions of ss. 4 and 5.\n\nIn other words, the powers conferred on the executive and the Legislature, limited and qualified as they are, are made expressly subject to the overriding powers of His Highness.\n\n'959 Besides, there are specific provisions in the Act which\n\nPrem Nath l(aul clearly emphasise the preservation of the said powers. v.\n\nSection 24 which enumerates the reserved matters The State of over which the Praja Sabha had no authority to legis- Jammu &- J(ashmir late provides by cl. (i) that the provisions of the Act and the rules made thereunder and their repeal or Gajendrngadka' J. modifications constitute reserved matters.\n\nBesides\n\ncl. (j) confers on His Highness the authority to add other specified matters to the list of reserved matters from time to time. These provisions make it clear that his Highness could enlarge the list of reserved matters thereby limiting the jurisdiction of the Praja Sabha.\n\nSimilarly the legislative procedure prescribed by s. 31, sub-ss. (2) and (3) clearly shows that it is only such bills as received the assent of His Highness that became law, His Highness's power to assent or not to assent to the bills submitted to him being absolutely unfettered. The ordinances issned by His Highness under s. 38 cannot be repealed or altered by the Praja Sabha by virtue of s. 39; and lastly s. 72 expressly preserves the inherent power and prerogative of His Highness.\n\nThus there can be no doubt that though this Act marked the second step taken by His Highness in actively associating his subjects with the administration of the State, it did not constitute even a partial surrender by His Highness of his sovereign rights in favour of the Praja Sabha. So far as the said powers are concerned, the constitntional position under this Act is substantially the same as under the earlier Act.\n\nIt is contended by Mr. Chatterjee that the prerogative rights which are preserved by ss. 5 and 72 of this Act represent only such rights as had not been entrusted to the Praja Sabha ; and in support of this contention he referred us to the observation made by Dicey that \"the discretionary authority of the Crown originates generally not in Act of Parliament, but in the prerogative-a term which has caused more perplexity to students than any other expression referring to the constitution. The prerogative appears to be both historically and as a matter of actual fact nothing else than the residue of discretionary or arbitrary\n\nauthority, which at any given time is legally left 1959 in the hands of the Crown\" (1).\n\nThis observation h b d h l b h H f L Prem Nath I<aul as een cite wit approva y t e ouse o ords in the case 0 of Attorney-General v. IJ_e Key8er's Royal The ~te of Hotel Ltd. (·).\n\nWe do not see how this statement can Jammu &- Kashmir assist us in determining the constitutional status, and the extent of the powers, of Maharaja Hari Singh in Gajendragadkar ]. relation to the governance of the State. The said discussion in Dicey's treatise has reference to the special features of the history of English constitutional development; and it would naturally be of no relevance in dealing with the effect of the Constitution of 1996 with which we are concerned.\n\nAs we have just indicated this Constitution emphatically brings out the fact that the Maharaja was an absolute monarch and in him vested all the legislative, executive and judicial powers along with the prerogative rights mentioned in ss. 5 and 72.\n\nWhilst this was the true constitutional position the Independence Act, 1947, was passed by the British Parliament; and with the lapse of the British paramountcy the Rulers of Indian States were released from the limitations imposed on their sovereignty by the said paramountcy of the British Crown and by the treaties in force between the British Government and the States; this was, however, subject to the proviso prescribed by s. 7 of the Independence Act under which effect had to be given to the provisions of the agreements specified in the proviso, until they were denounced by the Rulers of the States or were superseded by subsequent agreements. In the result, subject to t.he agreements saved by the proviso, Maharaja Hari Singh continued to be an absolute monarch of the State, and in the eyes of international law he might conceivably have claimed the status of a sovereign and independent State. But it is urged that the sovereignty of the Maharaja was considerably affected by the provisions of the Instrument of Accession which he signed on Octobe1 25, 1947. This argument is clearly untenable. It is true that by cl. l of the\n\n(r) Dicey on\" Law of the Constitution\", 9th Ed., p. 424,\n\n(2) [1920] A.C. 508, 526.\n\n28S SUPREME COURT R~FORTS [i959] Supp.\n\n!959 Instrument of Accession His Highness conceded to the\n\n\" N-h l( 1 authorities mentioned in the said clause the right to nem al au . . l . h. S t h f . v. exercise m re at10n to 1s ta e sue unct10ns as may The seaee of be vested in them by or under the Government of India Jammu 0 Rashmfr Act, 1935, as in force in the said Dominion on August . - 15, 1947, but this was subject to the other terms of the Ga; endrngadka• J. Instrument of Accession itself; and cl. 6 of the Instrument clearly and expressly recognised the continuance of the sovereignty of His Highness in and over his\n\nState. We must, therefore, reject the argument that the execution of the Instrument of Accession affected in any manner the legislative, executive and judicial powers in regard to the government of the State which then vested in the Ruler of the State.\n\nThere is one more argument which has been urged before us on the question of Maharaja Hari Singh's powers. It is said that when Maharaja Bari Singh issued his proclamation on March 5, 1948, replacing the emergency administration by a popular interim government headed by Sheikh Mohammad Abdullah and constituting a Council of Ministers who were to function as a Cabinet and act on the principle of joint responsibility, he virtually introduced a popular democratic government in the State, surrendered his sovereign rights, and became a constitutional monarch.\n\nThere is no substance in this argument. The proclamation merely shows that, under pressure of public opinion and as a result of the difficult and delicate problem raised by the tribal raid, the Maharaja very wisely chose to entrust the actual administration of the government to the charge of a popular Cabinet; but the description of the Cabinet as a popular interim government did not make the said Cabinet a popular Cabinet in the true constitutional sense of the expression. The Cabinet had still to function under the Constitution Act 14 of 1996 (1939) and whatever policies it pursued, it had to act under the overriding powers of His Highness. It is thus clear that until the Maharaj a issued his proclamation on June 20, 1949, all his powers legislative, executive and judicial as well as his right and prerogative vested in him as before. That is why the argument that Maharaja\n\nHari Singh had surrendered his sovereign powers in r959 favour of the Praja Sabha and the popular interim N h , 1 b . h f . Prem at } au government, there y acceptmg t e status o a const1v. tutional monarch cannot be upheld.\n\nThe State of The next point which calls for our decision is:Jammu&Kashmir What was the effect of the proclamation issued by - Maharaja Hari Singh in favour of Yuvaraj Karan Gajendragadkar J.\n\nSingh on June 20, 1949 ? The terms of this proclamation have already been set out by us.\n\nThere is no doubt that, during the temporary period that the Maharaja wanted to leave the State for reasons of health, he conferred on Yuvaraj Karan Singh all his powers and functions in regard to the government of the State. Since the Maharaja was himself an absolute monarch, there was no fetter or limitation on his power to appoint somebody else to exercise all or any of his powers. There was no authority or tribunal in the Sta.te which could question his right or power to adopt such a course.\n\nAs Chief Justice Kania has observed in Re: Delhi Laws Act, 1912 (1) \" A legislative body which is sovereign like an autocratic Ruler has power to do anything. It may, like a Ruler, by an individual decision, direct that a certain person may be put to death or a certain property may be taken over by the State. A body of such character may have power to nominate someone who can exercise all its powers and make all its decisions. This is possible to be done because there is no authority or t.ribunal which can question the right or power of the authority to do so\".\n\nSimilarly, Mahajan, J., has observed in the same case that \" The Parliament being a legal omnipotent despot, apart from being a legislature simpliciter, it can in exercise of its sovereign power delegate its legislative functions or even create new bodies conferring on them power to make laws\"; and the learned Judge added that \"whether it exercises its power of delegation of legislative power in its capacity as a mere legislature or in its capacity as an omnipotent despot, it is not possible to test it on the touchstone of judicial precedent or judicial scrutiny as courts of justice in England cannot inquire into it\".\n\nIn his judgment Mukherjea, J., has also made similar\n\n(1) (1951] S.C.R. 747, 765, 766, 889, 969.\n\n1959 observations after quoting the words of Sir Ed ward\n\n;-1 K 1 Coke in regard to the \" transcendent and absolute p,, m v~\n\n1 ' au power and jurisdiction of Parliament\". What is true\n\nThe state of of the British Parliament would be truer about an Jammu & Kashmir absolute and despotic monarch, the exercise of whose . - paramount power as a sovereign is not subject to any Ga1endragadkar f. popular and legislative control. If that be the true position, the proclamation issued by Maharaja Hari Singh authorising Yuvaraj Karan Singh to exercise all his powers would clothe him with all such powers and he would be in the same position as his father so long as the proclamation stood.\n\nBesides, it would be permissible to observe that though the proclamation purports to have been issued on the ground that l\\faharaja Hari Singh was leaving the State for a temporary period for reasons of health, it was clear even then that the temporary departure of the Maharaja really meant his permanent retirement from the State. It was realised by him as much as by his subjects that to face the stress and strain caused by the unusual problems raised by the act of aggression against the State, it was necessary that he should quit and young Yuvaraj Karan Singh should take his place. Thus considered the proclamation really amounted to his abdication and installation by him of Yuvaraj Karan Singh as the Ruler of the State.\n\nIt is, however, not necessary to consider any further this aspect of the matter in dealing with the authority of Yuvaraj Karan Singh, because, as we have just held, . Maharaja Hari Singh was competent to delegate his powers to Yuvaraj Karan Singh for a temporary period as his proclamation purported to do; and by virtue of such delegation, Y uvaraj Karan Singh was clothed with all the authority which his father possessed as the Ruler of the State until the proclamation was revoked.\n\nTherefore the argument that Maharaja Hari Singh's proclamation issued on June 20, 1949, did not confer on Yuvaraj Karan Singh the specified powers cannot be accepted.\n\nThe next contention is that the powers of Yuvaraj Karan Singh were substantially limited by the proclamation issued by him on November 25, 1949. We are not impressed even by this argument. By this\n\nproclamation Yuvaraj Karan Singh purported to x959 make applicable to his State the Constitution of India - h. h h 1 b d t d b th C Prem Nath Kaul w 10 was s ort y gowg to e a op e y e onstituent Assembly of India in so far as was applic- Tho s~te of able; in other words, this proclamation did not carry Jammu & Kashmir the constitutional position any further than where it - stood after and as a result of the execution of the Gajendragadkar J.\n\nInstrument of Accession by Maharaja Hari Singh. It is thus clear that the proclamation did not affect Yuvaraj Karan Singh's authority and powers as the Ruler of the State which had been conferred on him by the proclamation of hi:::; father issued in that behalf.\n\nMr. Chatterjee, however, has very seriously pressed before us his contention that, as a result of the application of certain specified articles of the Constitution to the State of Jammu & Kashmir, all vestiges of sovereignty which Yuvaraj Karan Singh could have claimed had vanished ; and in consequence he had become merely a constitutional monarch of the State without any legislative authority or powers. Indeed it is this part of the case on which Mr. Chatterjee placed considerable emphasis. In this connection, it would be relevant to recall that by the Constitution Order 10, in addition to the provisions of Art. 1 and Art. 370, certain other provisions of the Constitution were made applicable to the State with exceptions and modifications as specified in the Second Schedule.\n\nArticles 245, 254 and 255 as well as Art. 246 as modified from Pt. XI of the Constitution were applied to the State. Similarly from Pt. XIX Art. 366 was applied, and from Pt. XXI Arts. 370 and 385 were applied. In this connection it is also necessary to bear in mind that Pt. VI which deals with the States in Pt. A of the First Schedule has not been applied, nor has Pt. VII which consisted of Art. 238 been applied. Art. 238 provides for the application of provisions of Pt. VI to States in Pt. B of the First Schedule. Schedule Seven which consists of the three Legislative Lists has also not been applied. It is thus clear that though by the application of Art. 1 the State beca.me a part of the territory of India and constituted a State under Part B, the provisions of\n\n1959 Pt. VI and Pt. VII did not apply to it nor did the - Schedule prescribing the three Legislative Lists. This Prem Nath I<aul c • f d bl t d fi .act 1s o cons1 era e 1mpor ance an s1gm canco Th• s~~1, of in dealing with the appellant's contention.\n\nJammu & Kashmfr Since Mr. Chatterjee has strongly relied on the -- application of Art. 370 of the Constitution to the State Gajendragadkar lin support of his argument that the Yuvaraj bad ceased to hold the plenary legislative powers, it is necessary to examine the provisions of this Article and their effect.\n\nThis Article was intended to make temporary provisions with respect to the State of Jammu & Kashmir. It rea<; ls thus:\n\n\"Art. 370: (I) Notwithstanding anything in this Constitution,- ( a) the provisions of article 238 shall not apply in relation to the State of J ammu & Kashmir;\n\n(b) the power of Parliament to make laws for the said State shall be limited to-\n\n(i) those matters in the Union List and the Concurrent List which, in consultation with the Government of the State, are declared by the President to correspond to matters specified in the Instrument of Accession governing the accession of the State to the Dominion of India as the matters with respect to which the Dominion Legislature may make laws for that State; and\n\n(ii) such other matters in the said Lists as, with the concurrence of the Government of the State, the President may by order specify.\n\nExplanation.-For the purposes of this article, the Government of the State means the person for the time being recognised by the President as the Maharaja of Jammu and Kashmir acting on the advice of the Council of Ministers for the time being in office under the Maharaja's Proclamation dated the fifth day of March, 1948;\n\n(c) the provisions of article I and of this article shall apply in relation to that State;\n\n(d) such of the other provisions of this Constitution shall apply in relation to that State subject to such exceptions and modifications as the President\n\nmay by order specify;\n\nProvided that no such order which relates to the\n\nI959 matters specified in the Instrument of Accession of the P ;-; h K 1 State referred to in paragraph (i) of sub-clause (b) '\"\"' : au shall be issued except in consultation with the Govern- The state of ment of the State: Jammu & Kashmir Provided further that no such order which relates to matters other than those referred to in the last Gajendragadkar f. preceding proviso shall be issued except with the concurrence of that Government.\n\n(2) If the concurrence of the Government of the State referred to in paragraph (ii) of sub-clause (b) of clause (1) or in the second proviso to sub-clause (d) of that clause be given before the Constituent Assembly for the purpose of framing the Constitution of the State is convened, it shall be placed before such Assembly for such decision as it may take thereon.\n\n(3) Notwithstanding anything in the foregoing provisions of this article, the President may, by public notification, declare that this article shall cease to be operative or shall be operative only with such exceptions and modifications and from such date as he may specify: Provided that the recommendation of the Constituent Assembly of the State referred to in clause (2) shall be necessary before the President issues such a notification.\" Clause (1) (b) of this Article deals with the legislative power of the Parliament to make laws for the State; and it prescribes limitation in that behalf. Under paragraph (1) of sub-cl. (b) of cl. (1) Parliament has power to make laws for the State in respect of matters in the Union List and the Concurrent List which the President in consultation with the Government of the State declares to correspond to matters specified in the Instrument of Accession; whereas in regard to other matters in the said Lists Parliament may, under paragraph (ii), have power to legislate for the State after such other matters have been specified by his order by the President with the concurrence of the Government of the State. It is significant that paragraph (i) refers to consultation with the Government of the State while paragraph (ii) requires its concurrence.\n\n'959 Having thus provided for cousultation with, and\n\nP N h K I the concurrence of, the Government of the State, the rem at au . v. explanat10n shows what the Government of the State The state of means in this context. It means according to the Jammu & Kashmfr appellant, not the Maharaja acting by himself in his . - own discretion, but the person who is recognised as Ga1e•d•agadk•• J. the Maharaja by the President acting on the advice of\n\nthe Council of Ministers for the time being in office.\n\nIt is on this explanation that the appellant has placed considerable reliance.\n\nSub-clauses (c) and (d) of cl. (1) of the Article provide respectively that the provisions of Art. 1 and of the present Article shall apply in relation to the State; and that the other provisions of the Constitution shall apply in relation to it subject to exceptions and modifications specified by the Presidential order.\n\nThese provisions are likewise made subject to consultation with, or concurrence of, the Government of the State respectively.\n\nHaving provided for the legislative power of the Parliament and for the application of the Articles of the Constitution to the State, Art. 370, cl. (2) prescribes that if the concurrence of the Government of the State required by the relevant sub-els. of cl. (1) has been given before the Constituent Assembly of Kashmir has been convened, such concurrence shall be placed before such Assembly for such decision as it may take thereon. This clause shows that the Constitutionmakers attached great importance to the final decision of the Constituent Assembly, and the continuance of the exercise of powers conferred on the Parliament and the President by the relevant temporary provisions of Art. 370(1) is made conditional on the final approval by the said Constituent Assembly in the said matters.\n\nCl. (3) authorises the President to declare by public notification that this article shall cease to be operative or shall be operative only with specified exceptions or modifications; but this power can be exercised by the President only if the Constituent Assembly of the State makes recommendation in that behalf. Thus the proviso to cl. (3) also emphasises the importance\n\n(2) S.C.R. SUPREME COURT R~POR'rS 29~\n\nwhich was attached to the final decision of the Constit959 tuent Assembly of Kashi; nir in regard to the relevant Prem Nath Kaul matters covered by Art. 370. . v.\n\nThe appellant contends that the scheme of this The State of Article clearly shows that the person who would be Jammu & Kashmir recognised by the President as the Maharaja of . - Jammu & Kashmir was treated as no more than aGa; endragadkar f. constitutional Ruler of the State. In regard to matters covered by this Article he could not function or decide by himself and in his own discretion. The consultation contemplated by this Article had to be with the Maharaja acting on the advice of the Council of Ministers and the concurrence prescribed by it had to be similarly obtained and given, and that brings out the limitations on the powers of the Maharaja. It is also urged that the final decision in these matters has been deliberately left to the Constituent Assembly which was going to be convened for the framing of the Constitution of the State, and that again emphasises the limitations imposed on the powers of the Maharaja.\n\nThis argument assumes that under the explanation to Art. 370(1) it is the person recognised by the President as the Maharaja who has to act on the advice of the Council of Ministers in relation to matters covered by Art. 370. But, it is possible to take the view that the said clause really indicates that in recognising any person as the Maharaja of the State the President has to act on the advice of the Council of Ministers for the time being in office under the Maharaja's proclamation dated March 5, 1948. If that be the true construction of the explanation, then the argument that, before the Maharaja is consulted or his concurrence is obtained, he must act on the advice of his Ministers would not be valid. We would, however, like to deal with the argument even on the assumption that the construction put by the appellant on the explanation is right.\n\nOn the said construction the question which falls to be determined is: Do the provisions of Art. 370(1) affect the plenary powers of the Maharaja in the matter of the governance of the State ? The effect of the application of the present Article has to be judged in\n\n'959 the light of its object and its terms considered in the P\"m Nath Kaul context of the special features of the constitutional rev. lationship between the State and India. The Constitu- The State~! tion-makers were obviously anxious that the said rela- Jammu & [{as1'mir tionship should be finally determined by the Constituent\n\n. -dk 1 Assembly of the State itself; that is the main basis Ga; endraga ar •,. d t f th · d ior, an purpor o , e temporary prov1s10ns ma e by the present Article; and so the effect of its provisions must be confined to its subject-matter. It would not be permissible or legitimate to hold that, by implication, this Article sought to impose limitations on the plenary legislative powers of the Maharaja. These powers had been recognised and specifically provided by the Constitution Act of the State itself; and it was not, and could not have been, within the contemplation, or competence of the Constitution-makers to impinge even indirectly on the said powers. It would be recalled that by the Instrument of Accession these powers have been expressly recognised and preserved and neither the subsequent proclamation issued by Yuva.- raj Ka.ran Singh adopting, as far as it was applicable, the proposed Constitution of India, nor the Constitution Order subsequently issued by the President, purported to impose any limitations on the said legislative powers of the riuler.\n\nWhat form of government the State should adopt was a matter which had to be, and naturally was left to be, decided by the Constituent Assembly of the State. Until the Constituent Assembly reached its decision in that behalf, the constitutional relationship between the State and India continued to be governed basically by the Instrument of Accession.\n\nIt would therefore be unreasonable to assume that the application of Art. 370 could have affected, or was intended to affect, the plenary powers of the Ma.haraja in the matter of the governance of the State. In our opinion, the appellant's contention based on this Article must therefore be rejected.\n\nThe application of Arts. 245, 254 and 255, and of Art. 246 as modified, does not seem to have any bearing on the question of the authority and powers of the Ruler of the State. Their application merely serves to provide for the legislative powers of the Parlian:ient\n\n(2) S.C.R.\n\nSUPREME COUR'r REPORTS 297\n\nto make laws in respect of matters covered by Art. z959 370.\n\nIncidentally we may point out that the applica- Prem Nath Kaul tion of Arts. 246 and 254 as provided by the Constiv tution Order 10 of 1950 has been subsequently The s; ate of modified by the Constitution Order 48 of 1954. Simi- Jammu &- Kashmir larly Art. 255 which was originally applied by the . - first Order has been deleted by the latter Order. This Gayendragadkar J. shows that it was subsequently realised that the original application of the said Articles prescribed by the earlier Order was more anticipatory and notional and required either suitable modification or cancellation.\n\nThe appellant has then relied upon the provisions of Art. 385. It provides :\n\n\"Art. 385.-Until the House or Houses of the Legislature of a State specified in Part B of the First Schedule has or have been duly constituted and summoned to meet for the first session under the provisions of this Constitution, the body or authority functioning immediately before the commencement of this Constitution as the Legislature of the corresponding Indian State shall exercise the powers and perform the duties conferred by provisions of this Constitution on the Honse or Houses of the Legislature of the State so specified.\"\n\nIt is difficult to see how this Article supports the appellant's contention. In fact it is not easy to appre ciate what the application of this Article to the State really meant. As we have already pointed out the application of the specified Articles to the State was not intended to affect, and constitutionally could not have affected, the form of the government prevailing in the State and the plenary legislative powers of the Maharaja in regard to the government of the State.\n\nAs in regard to the application of Arts. 245, 254 and 255, so in regard to this Article as well, it was subsequently realised that the application of the Article was purely notional and could serve no purpose. That is why by C. 0. 48 of 1954 this Article has been deleted from the list of Articles applied to the State. It seems to us that the initial formal application of this Article cannot justify the appellant's case that the plenary legislative powers vesting in the Ruler of the State 38\n\n' 959 were not only affected but, as the appellant contends, Prem Nath Kaul completely extinguished. The constitutional position v. in regard to the government of the State continued to The State of be the same despite the application of this Article. In Jammu & Kashmir dealing with the application of this Article and Arts.\n\nGajend, agadk\"' 1 245, 254 and 255, it would be permissible to rely on\n\nthe rule of construction set out in Maxwell that \" a thing which is within the letter of a statute is generally to be considered as not within the statute unless it is also the real intention of the Legislature\" (1).\n\nIt is evident that the Constitution-makers have treated the problem of Kashmir on a special basis and that though the association of Kashmir with India which began with the Instrument of Accession has been steadily and gradually growing closer and closer on a democratic basis, it still presents features not common to any other State included in the Union of India. We have no doubt that at the time when the Act was passed the plenary legislative powers of the Yuvaraj had not been affected in any manner.\n\nThe result is that Yuvaraj Karan Singh was competent to enact the Act in 1950 and so the challenge to the validity of the Act on the ground that he did not possess legislative competence in that behalf cannot succeed.\n\nIt is clear that the validity of the Act cannot be challenged on the ground that the Act did not provide for the payment of compensation. For one thing s. 26 of the Act did contemplate the payment of compensation.\n\nBesides, as the law of the State then stood, there was no limitation on the legislative power of the Ruler such as is prescribed by Art. 31 of the Constitution ; and Art. 31 had not been then applied to the State.\n\nSubsequently when Art. 31(2} was extended to the State the Act no doubt became the existing law and it :Ii.as been saved by the new and modified cl. (5) of the said Article.\n\nThere is another aspect of the matter to which reference must be made.\n\nSection 26 of the Act had left the final decision on the question of the payment of compensation to the Constituent Assembly of the State; and it is common ground that the Constituent Assembly has decided not to pay any compensation. Mr. Chatterjee contends that this decision is\n\n(1) Maxwell on \"Interpretation of Statutes\", 10th Ed., p. I7•\n\ninvalid because the Constituent Assembly itself was r959 not properly called and constituted. There is no sub- . h\" Aft y\n\n. K s h 'Prem Nath Kaul stance m t is argument. er uvaraJ aran mg was put in charge of the duties of governing the State The ;; ate of by Maharaja Hari Singh by his proclamation issued Jammu & Kashmi• on June 20, 1949, he began to function as a Ruler and was entitled to exercise all his powers in that behalf. Gajendragadkar J.\n\nHe realised that the original plan of Maharaja Hari Singh to call a national assembly which he announced on March 5, 1948, would not meet the requirements of the situation which had radically changed; and the Yuvaraj thought that a Constituent Assembly on a broader basis should be called and should be entrusted with the task of framing a Constitution witbout any delay. It is idle to suggest that the Yuvaraj was bound to convene the national assembly on the same lines as were laid down by Maharaja Hari Singh in his proclamation and with the same object, for the same purpose, and subject to the same conditions. It was for the Yuvaraj to consider the situation which confronted him and it was within his competence to decide what solution would satisfactorily meet the requirements of the situation. We have no doubt that the Yuvaraj was perfectly competent to issue the proclamation on April 20, 1951, under which the Constituent Assembly ultimately came to be elected and convened.\n\nIf the Constituent Assembly was properly constituted and it decided not to pay any compensation to the landlords it is difficult to understand how the validity of this decision can be effectively challenged.\n\nThat leaves only one question to be considered. It is contended that the Act is invalid under Art. 254 of the Constitution because it is inconsistent with the two earlier Acts, No. IO of 1990 and No. 4 of 1977. It is unnecessary to enquire whether there is any repugnancy between the Act and the earlier Acts to which the appellant refers.\n\nIn our opinion the argument based on the provisions of Art. 254 must be rejected on the preliminary ground that it is impossible to invoke the assistance of this Article effectively because in terms the essential conditions for its application are absent in the present case. This argument assumes that under Art. 254(1) if there is repugnancy between\n\nz959 any provision of a law made by the Legislature of a\n\nN h K l State and any provision of an existing law with res- Prem at au fh h pect to one o t e matters enumerated m t e Concur- The ;; at, of rent List, then subject to the provisions of cl. (2), the Jammu o;. Kashmir law made by the Legislature of the State was to the\n\n- extent of the repugnancy void. The appellant concedes Gajendragadkar .J. that there is no scope for applying the provisions of\n\ncl. (2) of Art. 254 which deals with cases where the subsequent law has been reserved for the consideration and assent of the President ;.but this aspect of the matter itself shows that the whole Article would in substance be inapplicable to the State. Clause (2) of Art. 254, which is its integral and important part, postulates that the µegislature of the State, in enacting a law on the relevant matter may reserve it for consideration of the President and his assent, and thereby save the consequences of cl. (1); and cl. (2) was clearly inapplicable to the State. Besides, it is clear that the essential condition for the application of Art. 254(1) is that the existing law must be with respect to one of the matters enumerated in the Concurrent List; in other words, unless it is shown that the repugnancy is between the provisions of a subsequent law and those of an existing law in respect of the specified matters, the Article would be inapplicable; and, as we have already pointed out, Schedule Seven which contains the three Legislative Lists was not then extended to the State; and it is, therefore, impossible to predicate that the matter covered by the prior law is one of the matters enumerated in the Concurrent List. That is why Art. 254 cannot be invoked by the appellant.\n\nOn this view, it is not necessary to consider whether the construction sought to be placed by the appellant on this Article is otherwise correct or not.\n\nThe result is that all the grounds urged by the appellant against the validity of the Act fail, and so it must be held that the High Court was right in taking the view that the plaintiff had not shown that the Act was ultra vires.\n\nThe appeal accordingly fails and is dismissed with costs.\n\nAppeal dismissed.", "total_entities": 138, "entities": [{"text": "PREM NATH KAUL", "label": "PETITIONER", "start_char": 60, "end_char": 74, "source": "metadata", "metadata": {"canonical_name": "PREM NATH KAUL", "offset_not_found": false}}, {"text": "THE STATE OF JAMM:U & KASHMilt", "label": "RESPONDENT", "start_char": 76, "end_char": 106, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF JAMMU & KASHMIR", "offset_not_found": false}}, {"text": "S. R. 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{"document_id": "1959_2_301_315_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 301\n\nRAI BAHADUR SETH TEOMAL\n\nTHE COMMISSIONER OF INCOME TAX AND\n\nTHE COMMISSIONER OF EXCESS PROFITS\n\nTAX (B. P. SINHA, J. L. KAPUR and\n\nM. HIDAYATULLAH, JJ.)\n\nIncome Tax-Place of Assessment-Transfer of assessee's case to a different Commissioner of Income-tax-Assessment by Incometax Officer-Jurisdiction-Indian Income-tax Act, r922 (XI of\n\nI922), SS. 5, 64.\n\nThe appellant was carrying on the business of a railway contractor in a place in the district of R. In April 1943, the Income-tax Officer of R which was under the charge of the Commissioner of Income-tax, Bengal (Mufassil), served a notice under s. 22(2) of the Indian Income-tax Act, 1922, on the appellant who in pursuance of the notice filed the return on February 28, 1944. The Income-tax Officer then served notices on him under ss. 22(4) and 23(2) of the Act for the production of books, etc., but before the final assessment was made, the Central Board of Revenue by an order passed under s. 5(2) of the Act, transferred the appellant's case along with some other assessment cases, to the Commissioner of Income-tax (Central), Calcutta.\n\nOn February 11, 1948, the Income-tax Officer, Calcutta, to whom the appellant's case was assigned, issued notices again under ss. 22(4) and 23(2) of the Act and after making the usual enquiries made the assessment order on March 15, 1948. The appellant's appeals to the Appellate Assistant Commissioner and then to the Appellate Tribunal raising objections to the legality of the transfer of his case to Calcutta and to the jurisdiction of the Income-tax Officer, Calcutta, were dismissed. The Appellate Tribunal held that as the objection related to the place of assessment it was not competent for the Tribunal to go into that question. The appellant then made an application to the Commissioner of Income-tax for reference under s. 66(1) of the Act, but this was dismissed on the ground that the assessee never raised any objection before the Income-tax Officer to his jurisdiction and that, in any case, the question of jurisdiction could not arise out of the order of the Tribunal. An application filed by the appellant to the High Court under s. 66(2) of the Act was dismissed and though the order of dismissal was not taken up on appeal, the appellant filed an appeal to the Supreme Court against the order of the Appellate Tribunal. It was contended for the appellant that under s. 64(1) and (2) of the Act he was entitled to be assessed by the Income-tax Officer of the area within which the place of his business was situate, that the\n\nr959\n\nMarch z.\n\n'959 assessment by the Income-tax Officer of Calcutta was illegal assumption of jurisdiction and that, in any case, the order of Seth Teomol transfer by the Central Board of Revenue under s. 5(2) of the v.\n\nAct was not valid because, if it wanted to transfer the assess- Conunissioner of ment proceedings from the file of one Income-tax Officer to ·\n\nIncome-tax another it could be done only under s. 5(7A) and not under s. 5(2).\n\nHeld: (1) Sub-section (7A) of s. 5 which confers on the Central Board of Revenue the power to transfer any case from one Income-tax Officer to another is not a provision which in any way modifies or cuts down the power given to the Central Board of Revenne under sub-s. 2 of s. 5 which enables it to specify as to which of the Commissioners would perform functions in respect of different areas, persons, incomes or cases or classes thereof. The two sub-sections are complementary and operate in two separate spheres.\n\nPannalal Binjraj v. Union of India, [1957] S.C.R. 233 and Bidi Supply Co. v. Union of India, [1956] S.C.R. 267, distinguished.\n\nIn the present case, the Central Board of Revenue directed the Commissioner of Income-tax (Central), Calcutta, to exercise his functions in respect of certain cases including the case of the appellant and that fell under s. 5(2) and not under s. 5(7A). The order of transfer was, therefore, valid.\n\n(2) The jurisdiction of the Income-tax Officer, Calcutta, to make the assessment on the appellant cannot be challenged, in view of sub-s. 5(a) of s. 64 of the Act, under which sub-ss. (1) and (2) of s. 64 have no application to an assessee in respect of whom an order has been made by the Central Board of Revenue nnder s. 5(2) of the Act.\n\n(3) Objections as to the place of assessment cannot be raised in appeal either before the Appellate Assistant Commissioner or before the Appellate Tribunal.\n\nWallace Brothers & Co. Ltd. v. Commissioner of Income-tax, Bombay, Sind and Baluchistan,. [1945] F. C. R. 65 and Seth Kanhaiyalal v. Commissioner of Income-tax, [1936] 5 I.T.R. 739, relied on.\n\nDayaldas Kushiram v. Commissioner of Income-tax (Central), [1939] 8 I.T.R. 139 and Dina Nath Hem Raj v. Commissioner of Income-tax, (1927) I.L.R. 49 All. 616, distinguished.\n\nConsequently, as the question as to the place of assessment could not arise out of the order of the Appellate Tribunal no such question of law could be referred to the High Court.\n\nCIVIL\n\nAPPELLATE JURISDICTION: Civil Appeals Nos. 384 and 385 of 1957.\n\nAppeal by special leave from the Order dated November 28, 1952, of the Income-ta:8: Appellate\n\nTribunal (Calcutta Bench) in LT.A. No. 4067 and E.P.T. Appeal No. 391of1951-52.\n\nN. 0. Chatterjee, B. Sen Gupta and B. P. Maheshwari, for the appellant.\n\nK. N. Rajagopala Sastri, R.H. Dhebar and D. Gupta, for the respondents.\n\n1959. March 2.\n\nThe Judgment of the Court was delivered by KAI'UR', J.-These two appeals pursuant to special leave are brought against two orders of the Income. tax Appellate Tribunal (Calcutta Bench) dated N ovember 28, 1952, passed in appeal No. I. T. A. 4067 of 1951-52 in respect of income-tax assessment for the assessment year ending 31st March, 1944, and in appeal No. E. P. T. A. 391 of 1951-52 in respect of Excess Profits tax assessment of the appellant for the chargeable accounting period ending March 31, 1943.\n\nThe original assessee was R. B. Seth Teomal who was the manager of a Hindu undivided family. On Seth Teomal's death on May 30, 1944, Seth Ottanmal became the manager. He is now the appellant representing the Hindu undivided family. He will be termed as the appellant in these appeals. Seth Teomal was carrying on the businesss of a railway contractor at Lalmonirhat in the district of Rangpur which is now in Pakistan. In April 1943 a notice was served on him under s. 22(2) of the Income-tax Act (hereinafter called the Act). He filed the return on February 28,\n\n1944. The Income-tax Officer, Rangpur, served notices on him under ss. 22(4) and 23(2) for production of books, etc. It appears that assessment proceedings continued before the Income-tax Officer, Rangpur, but no final assessment was made.\n\nAccording to an affidavit which has now been filed in this Court the Central Board of Revenue by an order passed under sub-s. (2) of s. 5 of the Act assigned the appellant's case along with some other assessment cases to the Commissioner of Income-tax (Central), Calcutta. The order contains the following endorsements which give an indication of the reason for the case being assigned to the Commissioner of Incometax {Central) :\n\nSeth Teomal v.\n\nCommissioner of I nco1netax\n\nJ(apur ].\n\nt959\n\nSeth Teomal v.\n\nCom1nissioner of\n\nIncometax\n\nIlapur ].\n\nao4 StJPREME COURT Rli:PORTS (1959J Supp.\n\n\" Copy forwarded to :-\n\n(1) ..... .................................................... ···•··\n\n(2) Commissioner of Income-tax (Central), Calcutta. These cases are reported to have E. P. T. liabilities \".\n\nThus the appellant's case which was before an Incometax Officer within the area in charge of the Commissioner of Income-tax, Bengal (Mofussil) was withdrawn from him and was assigned to the Commissioner of Income-tax (Central), Calcutta. On February 11, 1948, the Income-tax Officer District N -C (I. T. cum E.P.T.) to whom it appears the appellant's assessment case was assigned issued notice again under ss. 22(4) and 23(2) of the Act. That officer after making the usual enquiries made the assessment order on March 15, 19, l8. The order for Excess Profits Tax assessment. was made on March 30,1948. .\n\nAgainst these orders two appeals were taken to the Appellate Assistant Commissioner on April 30, 1948.\n\nIn the appeal against income-tax assessment the appellant inter alia raised the following two grounds in regard to the jurisdiction of the Income-tax Officer, Calcutta:\n\n\"5. For that the petitioner is not aware of any order passed for the transfer of the case from Rangpur to Calcutta and it is submitted that without such an order and communication of such order the assessment is challengeable for want of jurisdiction \".\n\n\"32. For that the appellants challenge the jurisdiction as there was no proper order of transfer and the business was carried on outside Calcutta and assessments had never before been made in Calcutta''.\n\nBut no such ground was taken in the appeal against Excess Profits Tax assessment. The Appellate Assistant Commissioner dismissed both these appeals. In regard to jurisdiction he held :- \"It however appears from records on hand that the principal place of business of the concern was at Rangpur and as the income attracted E. P. T. liability the case was transferred to Calcutta under Orders of C. B. R. Hence there is no substance in the contention of the learned Advocate which fails\".\n\nThe appellant then took two appeals to the Incometax Appellate Tribunal. In the appeal against incometax assessment he took two objections in regard to jurisdiction :\n\n\" For that the objection taken before the learned A. A. C. on jurisdiction should not have been summa- rily disposed of by passing reference to an order of transfer of the case from Rangpur to Calcutta without at the same time discussing when the question of jurisdiction was seriously raised and how and under what circumstances and to whom was the case transferred and for what purpose\".\n\n\"2. For that the appellant begs leave to repeat that transfer was not legal or proper and was not made by any proper authority to legalise such transfer\".\n\nIn the Excess Profits Tax appeal also this time an objection was taken as to jurisdiction :\n\n\"For that the assessment is bad in law having been made without jurisdiction\".\n\nThe Appellate Tribunal held against the appellant in a short paragraph:\n\n\"So far as the fi:r; st objection is concerned, in our opinion, it is not within our jurisdiction to go into this. matter. The objection relates to the place of assessment. As held in 1945 I. T. R. 39 (Wallace Brothers & Co. Ltd. v. Commissioner of Income-tax, Bombay, Sind and Baluchistan, Federal Court) the question as to the proper place of assessment is not one for adjudication by a Court or by any Appellate Authority. Consequently we overrule the first contention of the Assessee.\" The Tribunal thus held that as the objection related to the place of assessment the Tribunal was not competent to go into that question. Upon this the appellant applied for a reference to be made under s. 66(1) of the Act and prayed for five questions to be referred. The two questions relating to jurisdiction were:-\n\n(1) \"Had the Income-tax Officer (Non-Companies Income-tax cum Excess Profits Tax District, Calcutta, jurisdiction to make the assessment ?\n\nI959\n\nSeth Teomal v.\n\nCommissioner of Income-tax\n\nJ{apur ].\n\n'959\n\n(2) Was the Income-tax Appellate Tribunal correct in the circumstances in helding that it bas no juris- Seth Teomal d' t' t d t th t f b I v.\n\nIC 10n o e ermme e compe ence o t e ncome-tax Commissioner of Officer in making the assessment ? \" .\n\nIncome-tax In 'the \" facts of the case \" attached to the grounds of Appeal it was stated that the accounts were produced Kapuy 1 before the Income-tax Officer, Calcutta, under protest because the jurisdiction of that officer was being challenged. In reply to this the Commissioner after refer.- ring to Wallace Brothers' case (') stated that it did not appear from the assessment record that the assessee ever raised any objection to the jurisdiction of the Income-tax Officer and if it had been taken the matter would have been referred by the Income-tax Officer to the Commissioner as required by law. This' application under s. 66(1) was dismissed on the ground that the question of jurisdiction could not arise out of the order of Tribunal and reliance was placed on Wallace Brothers' case (1) and Seth Kanhaiyalal v. Commissioner of Income-tax (2).\n\nThe appellant applied to the High Court under s. 66 (2) of the Act and prayed for the following two questions and some others to be referred:-\n\n(i) \"Had the Income-tax Officer (N. C. I. T.\n\nCum E. P. T. District Calcutta) jurisdiction to make the assessment ? ·\n\n(ii) Was the Income-tax Appellate Tribunal correct in the circumstances in holding that it hatl no jurisdiction to determine the competence of the Income-tax Officer in making the assessment ?\" The High Court dismissed this application on July 23,\n\n1954. No appeal has been filed in this Court against the order of the High Court but an appeal has been filed against the order passed by the Income-tax Appellate Tribunal.\n\nOn behalf of the Revenue a preliminary objection was taken that as no appeal had been filed against the order of the High Court that order had become final and this Court, therefore, should not entertain the appeal against the order of the Tribunal and reliance was placed on the observations of Venkatarama\n\n(r) .[1945] F.C.R. 65; 13 I.T.R. 39. ' (2) [r936] 5 I.T.R. 739.\n\nAiyar, J., in Govinda Rajulu Mudaliar v. Commissioner of Income-tax (1).\n\nAt p. 810 it was observed:- \"The present appeal is against the decision of the Tribunal itself. It is no doubt true that this Court has decided in Dhakeswari Cotton Mills Ltd. v.\n\nCommissioner of Income-tax, West Bengal (2) that an appeal lies under article 136 of the Constitution of India. to this court against a decision of the Appellate Tribunal under the Indian Income-tax Act. But seeing that in this case the appellant bad moved the High Court and a decision has been pronounced adverse to him and this has become final, obviously it would not be open to him to question the correctness of the decision of the Tribunal on grounds which might have been taken in an appeal against the judgment of the High Court.\n\nAll the points urged before us were taken in the reference under s. 66 (2) of the Indian Income-tax Act. It would therefore follow that these grounds are not open to the appellant \".\n\nBut counsel for the appellant relied on Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-tax (2) where the scope of appeals under Art. 136 were set out by the learned Chief Justice. In this case however it is not necessary to go into this .question because in our opinion there is little substance in the appeal itself.\n\nCounsel for the appellant has urged two grounds in support of his appeal: (1) that his place of business WftS Lalmonirhat and under s. 64 (1) and (2) of the Act he was entitled to be assessed by the Income-tax Officer of that area and (2) that assessment by the Income-tax Officer of Calcutta was an illegal assumption of jurisdiction and therefore he was entitled to have the order of assessment quashed. In order to decide these questions reference has to be made to the scheme of the Act. The provisions relevant to the issue of jurisdiction are ss. 5 and 64.\n\nThe former is headed \"Income-tax authorities\" and the latter \"Place of assessment\".\n\nAssessment is made by the Income-tax Officer under s. 23 (3).\n\nAgainst an order of assessment or the liability to be assessed an appeal (1)\n\n[1958] 34 LT.R. 807, 810. (2) [1955] l S.C.R. 941, '/49\n\nz959\n\nSeth Teomal v.\n\nCommissioner of Income tax\n\nKapur ].\n\n308 SUPREME COURT REPOI'tTS [1959] Supp.\n\n1959 lies under s. 30 to the Appellate Assistant Commissioner and a further appeal to Income-tax Appellate Seth Tcomal v.\n\nTribunal under s. 33 of the Act. And then a reference commissioner of can be. made by the Tribunal to the High Court under\n\nIncometax s. 66 (1) of the Act and if the Tribunal does not make such reference the High Court can under s. 66 (2) Kapu' J. be moved and it can then direct that such reference be made.\n\nThe heading of s. 64 is\" Place of assessment\". Subsection ( l) of s. 64 provides that the assesseo shall be assessed by the Income-tax Officer of the area in which he carries on his business. Sub.section (2) lays down that in all other oases an assessee shall be assessed by the Income-tax Officer of the area in which he resides.\n\nUnder these two sub-sections therefore the appellant, because he was carrying on business at Lalmonirhat, had to be assessed by the Income-tax Officer of that area, i.e., by the Income.tax Officer of l'tangpur. Sub-section (3) of that section provides that if a question as to the place of assessment arises, it is to be determined by the Commissioner of Income-tax or by Central Board of Revenue according as the case may be. Under the first proviso to this s.ub.section before the question as to the place of assessment is determined the assessee bas to have an opportunity of representing his views and under the second proviso the place of assessment cannot he called into question by the assessee if he has made a return in response to the notice under sub-s. (1) of s. 22 and has stated therein the principal place where he .carries on his business or if he has not made such a return, the time specified in the notice has expired.\n\nThe third proviso to this sub.section is :\n\n\"Provided further that if the place of assessment is called in question by an assessee the Income Tax Officer shall, if not satisfied with the correctness of the claim, refer the matter for determination under this sub-section before assessment is made\".\n\nThus urtder s. 64(3) the question of determination as to the place of assessment only arises if an objection is taken by the assessee and the Income Tax Officer has any doubts as to the matter. But the determination\n\nis to be by the Commissioner of Income Tax or the Central Board of Revenue. The Act does not contemplate any other authority.\n\nIt was contended on behalf of the assessee that he produced his accounts before the Income Tax Officer at Calcutta under protest. There is no mention of this protest in the assessment file and that is what was stated by the Commissioner of Income Tax in his reply which he gave on March 3, 1953, before the Income-tax Appellate Tribunal and which has been set out above. If such an objection had been raised the question would have been referred by the Incometax Officer to the Commissioner as required under s. 64(3). That stage never arose because the objection does not seem to have been taken at the stage when it should have been taken, i.e., before the Income-tax Officer, Calcutta.\n\nBut it is contended by counsel for the appellant that in the present case there is an illegal assumption of jurisdiction as the officer who made the assessment had no jurisdiction at all to make the assessment. It was also contended that if the Central Board of Revenue wanted to transfer the assessment proceedings from the Income-tax Officer, Rangpur, to the Income-tax Officer at Calcutta, it could only exercise that jurisdiction by making an order under s. 5(7 A) and not under s. 5(2) of the Act. He relied on Taylor\n\nv. Taylor (1) where it was held that if a mode of exercise of power is laid down in the statute it has to be exercised in that way and no other. He also relied on Nazir Ahmad v. The King Emperor (2). He further contended that this was not a case which fell under s. 5(2) of the Act.\n\nSection 5(7A) gives to the Central Board of Revenue the power to transfer any case from one Income-tax Officer to another which can be made at any stage of the proceedings and does not necessitate the reissuing of a notice under s. 22(2) if it had already been issued by the Income-tax Officer from whom the case is transferred and in the explanation the word 'case' in relation to any person whose name is specified in, the order of transfer means\n\n(1) (1875) l Ch. D. 426, 431.\n\n(2) (1936) L.R. 63 I.A. 372.\n\nSeth Teomal v.\n\nCommissioner of\n\nlncoma-tax\n\nHapur ].\n\nz959 all proceedings under the Act which may be pending\n\nSeth T'omal ?n thehahte of thbe transfer andd jnfcludehs all proceed. mgs w JC may e commence a ter t e date of the v. c Comtniss£oner of transier •\n\nIncome-tax Section 5 although headed ' Income-tax authorities ' also gives to the Central Board of Revenue and Kapu' J. the Commissioners of Income-tax certain powers in regard to withdrawing of cases from one area into other and from one Income-tax Officer to another.\n\nSuh-section (2) of this section gives power to the Central Government to appoint as many Commissioners of Income-tax as it thinks fit and they have to perform their functions in respect of different areas, persons and cases or classes thereof.\n\nThe relevant portion of the sub-section is as follows :-\n\nS. 5(2) \"The Central Government may appoint as many Commissioners of Income-tax as it thinks fit and they shall perform their functions in respect of such areas or of such persons or classes of persons or of such incomes or classes of incomes or of such cases or classes of cases as the Central Board of Revenue may direct ............... \" In the present case there are more than one Commissioner of Income-tax in Bengal and the Central Bpard of Revenue assigned certain cases including the case of the appellant to the Commissioner of Income-tax (Central) at Calcutta for the exercise of his functions as Commissioner.\n\nNow this is a power which the Central Board of Revenue did possess under sub-s. (2) of s. 5.\n\nAs to which Income-tax Officer was to deal with that case was for the Commissioner of Incometax to designate.\n\nSub-section 7 A of s. 5 confers on the Central Board of Revenue the power to transfer any case from one Income-tax Officer to the other which can be done at any stage of the proceedings. This sub.section is not a provision which in any way modifies or cuts down the power given to the Central Board of Revenue under s. 5(2). The two sub-sections are complementary , and operate in two separate spheres.\n\nSub-section (2) is for the purpose of specifying as to which of the Commissioners would perform functions in respect of\n\ndifferent areas, persons, incomes or cases or classes thereof.\n\nIt was argued that s. 7 A is a special provision and it necessarily excludes the operation of sub-s. (2) but as we have saiq above the two sections are not mutually exclusive. They operate in two different spheres, their areas of operation are different and therefore the power which the Central Board of Revenue exercised in the present case cannot be said to be illegal. It was not transferrin'g the appellant's case from the Income-tax Officer, Rangpur, to the Income-tax Officer, Calcutta. It directed the Commissioner of Incometax (Central), Calcutta, to exercise his functions in respect of certain cases including the case of the appellant and that falls under s. 5(2) and not under s. 5(7A).\n\nReference was made to Pannalal Binjraj v. Union of India (1).\n\nBut that was a case in which the question raised was of constitutional validity of sub-s. 7 A of s. 5 and it was held that it was a measure of administrative convenience and was v.alid and neither infringed the fundamental rights under Art. 14 nor under Art. 19(l)(g).\n\nThere are no observations in that case which militate against the view that subss. (2) & (7 A) operate in different areas nor did that question arise in that case.\n\nThe contention there raised was that sub-s. 7 A conferred arbitrary and uncontrolled powers of transfer and was discriminatory and violative of the provisions of Art. 14 and imposed an unreasonable restriction on the right to carry on trade or business in contravention of Art. 19 (l)(g).\n\nCounsel referred to Bidi Supply Co. v. Union of India (2) But that case also does not deal with the matter now before us.\n\nThe simple question to be decided is whether the Income-tax Officer, Calcutta, could make the assessment in the appellant's case.\n\nThe submission that there was illegal assumption of jurisdiction by the Income-tax Officer of Calcutta is not well-founded. If the Central Board of Revenue had the power to direct the Commissioner of Incometax (Central), Calcutta, to exercise his functions in\n\n(1) [1957} S.C.R. 233, 266.\n\n(2) [1956} S.C.R. 267.\n\nz959\n\nSeth Teomal v.\n\nCommissioner of Income-tax\n\n[{ajn<r ].\n\n'959 respect of several cases including the appellant's\n\nSeth Teomal mentioned in the ordei: dated November 29, 1946, as v. indeed it had under s. 5(2), then neither that order could commissionu of be challenged nor the power of the Income-tax Officer,\n\nIn'ome-tax Calcutta, to make the assessment.\n\nAfter an order by\n\nJ(apur ]. the Central Board of Revenue under s. 5(2) of the Act the provisions of sub-ss. (I) and (2) of s. 64 have no application because of sub-s. (5a) of s. 64 which is as follows:\n\nSub-s. 5 \"The provisions of sub-section (I) and subsection (2) shall not apply and shall be deemed never at any time to have applied to any assessee-\n\n(a) on whom an assessment or reassessment for the purposes of this Act has been, is being or is to be made in the course of any case in respect of which a Commissioner of Income-tax appointed without reference to area under sub-section (2) of section 5 is exercising the functions of a Commissioner of Incometax ''.\n\nIn view of this provision no objection can be taken on the ground of sub-sections (I) and (2) of s. 64.\n\nCounsel for the appellant relied on a judgment of the Bombay High Court in Dayaldas Kushiram v. Commissioner of Income-tax (Central) (1 ), where it was held that s. 64 was intended to ensure that as far as practicable the assessee should be assessed locally, i.e., by the Income-tax Officer of the area in which the assessee carries on business and there must, so far as the exigencies of the case allow, be some reasonable relation to the place where the assessee carries on business or resides. In that case the assessee was carrying on business in C Ward and the proper officer under s. 64 to assess him was the Income-tax Officer of that Ward. As a result of the coming into force of s. 5(2) the Commissioner of Income-tax (Central) was created without reference to the area. The case of the assessee on whom the notice had been served but had not been assessed in due course assigned to the Commissioner of Income-tax (Central) who designated an Income-tax Officer for assessment of the 11.ssessee. The assessee thereupon made an application under s. 45 of\n\n(1) [1939] 8 I.T.Il. 139.\n\nthe Specific Relief Act and prayed for direction to the Commissioner of Income-tax (Central) and the Incometax Officer to whom his case had been assigned to forbear from continuing the proceedings on the grounds that the Income-tax Officer had no jurisdiction having regard to s. 64 of the Act. It was held that the Income-tax Officer was not the Income-tax Officer of the area in which the assessee was carrying on business. It was also held that in spite of the insertion of s. 5(2) of the Act such assessment was without jurisdiction because there was no amendment of s. 64. As a result of this judgment Ordinance IX of 1939 was promulgated which subsequently was enacted as subs. 5 of s. 64. After the Ordinance the assessee Dayaldas Kushiram was assessed by the same Officer and after unsuccessful appeals to the Commissioner of Income-tax and the Appellate Tribunal he made an application under s. 66(1) on three questions: (1) Whether the order passed by the Commissioner of Incometax deciding the place of assessment of the assessee could be the subject matter of appeal to the Incometax Appellate Tribunal ; (2) vVhether the Tribunal had the power to entertain an appeal on the question as to the place of assessment of an assessee even in the absence of the order of Commissioner of Income-tax and\n\n(3) whether the question as to the place of assessment is a question of law arising out of the order of the Appellate Tribunal. It was held that the order of the Commissioner was made under s. 5(2) and not under s. 64(3) and as the Ordinance had retrospective effect these questions did not arise and that the assessment of the assessee was validly made by the Income-tax Officer and the Ordinance removed the invalidity of the orders made prior to the passing of the Ordinance so far as they related to the assessee.\n\nBeaumont, C. J., held that the Income-tax Act did not determine the place of assessment but the officer who had to assess and that there could be no appeal under the Act against the order of the Commissioner as to the place of assessment, but only against the order of assessment of the Income-tax Officer.\n\nr959\n\nSeth Teomal v.\n\nCommissioner of Income-tax\n\nKapu,. ].\n\nSUPREME COURT RE; E'ORTS [1959] Supp.\n\nr959 Counsel for the appellant also relied on the judg-\n\nSeth Teomal ment of the Allahabad High Court in Dina Nath Hem v.\n\nRaj v. Commissioner of Income-tax(').\n\nIn that case Commission\" of the assessee was carrying on business at Calcutta and\n\nIncome-tax he was sought to be assessed at Kanpur and an objection was taken to the Income-tax Officer, Kanpur, making the assessment. The Income-tax Officer did not proceed in accordance with s. 64(3) and therefore it was held that assessment made by him was without jurisdiction. In the present case no question has been raised as to the jurisdiction of the Income-tax Officer who made the assessment and apart from that the order was made by the Central Board of Revenue under s. 5(2) of the Act and s. 64(5) becomes operative and sub-ss. (1) and (2) of s. 64 are inoperative. See also Seth Kanhaiya\"lal v. Commissioner of Income. tax (2).\n\nThe question then arises whether the objection as to the place of assessment, i. e., by the Income-tax Officer of Calcutta could be challenged in appeal to the Appellate Assistant Commissioner and then before the Appellate Tribunal. In our opinion it could not be.\n\nThe scheme of the Act shows that no appeal in regard to the objection to the place of assessment is contemplated under the Act.\n\nUnder s. 64(3) of the Act a question as to the place of assessment, when it arises, is determined by the Commissioner.\n\nAny such order cannot be made a ground of appeal to the Appellate Assistant Commissioner under s. 30 of the Act which provides for appeals against orders of assessment and other orders enumerated in s: 30 but no appeals is there provided against orders made under s. 64(3).\n\nSimilarly appeals to the Appellate Tribunal which lie under s. 33 of the Act also do not provide for any appeal on the question of the place of assessment. In Wallace Brothers' case (3 ) at p. 79 Spens, C. J., after referring to s. 64(3) and the proviso thereto said:\n\n\"These provisions clearly indicate that the matter is more one of administrative convenience than of\n\n(1) (1927) I.LR. 49 All. 616.\n\n(2) [1936] 5 l.T.R. 739.\n\n(3) [1945] F.C.R. 65: 13 I.T.R. 39.\n\njurisdiction and in any event it is not one for adjudiz959\n\nction by thhe Cohurt ..... f ... h .... A ... Thdis confirms us in 1 the Seth Teomal view that t e sc eme o t e ct oes not contemp ate v. an objection as to the place of assessment being raised conmiissione• of on an appeal against the assessment after the assess- Income-tax ment has been made. As we have already pointed out, the objection was not raised in the present case l(apur J. even before the Appellate Income-tax Officer but only before the Appellate Tribunal\".\n\nThere is nothing in the Bidi Supply case (1) which in any way detracts from the efficacy of the decision of the Federal Court in Wallace Brothers' case (2).\n\nWe have already said that Bidi Supply case (1) deals with the vires of s .. 5(7 A).\n\nIn this view of the matter the question as to the place of assessment does not arise out of the order of the Income-tax Appellate Tribunal and therefore no question of law could be referred nor could the High Court make such order under s. 66(2). In our opinion, the High Court rightly dismissed the appellant's application for directing the case to be stated under s. 66(2) of the Act.\n\nThe appeals therefore fail and are dismissed with costs. In the circumstances of the case there will be only one set' of costs.\n\nAppeals dismissed.\n\n(2) [1945] F.C.R. 65; 13 I.T.R. 39.", "total_entities": 109, "entities": [{"text": "301\n\nRAI BAHADUR SETH TEOMAL", "label": "PETITIONER", "start_char": 33, "end_char": 61, "source": "metadata", "metadata": {"canonical_name": "RAI BAHADUR SETH TEOMAL", "offset_not_found": false}}, {"text": "THE COMMISSIONER OF INCOME TAX AND\n\nTHE COMMISSIONER OF EXCESS PROFITS\n\nTAX", "label": "RESPONDENT", "start_char": 63, "end_char": 138, "source": "metadata", "metadata": {"canonical_name": "THE COMMISSIONER OF INCOME TAX AND THE COMMISSIONER OF EXCESS PROFITS TAX", "offset_not_found": false}}, {"text": "L. KAPUR", "label": "JUDGE", "start_char": 156, "end_char": 164, "source": "metadata", "metadata": {"canonical_name": "J.L. KAPUR", "offset_not_found": false}}, {"text": "M. 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{"document_id": "1959_2_316_338_EN", "year": 1959, "text": "I959\n\niYJ arch 4.\n\nSUPREME COURT REPORTS [1959] Supp.\n\nKAVALAPPARA KOTTARATHIL KOCHUNNI\n\nMOOPIL NAYAR v.\n\nTHE STATE OF MADRAS AND OTHERS\n\n(and connected petition)\n\n(S. R. DAS, c. J., N. H. BHAGWA'l'I, B. P. SINHA, K. SumiA ltAo and K. N. WANCHoo, JJ.)\n\nFundamental Rights, Enforcement of-Maintainability of petition-Powers a.11-d jurisdiction of Supreute Court-Extcnt-Consiiiution of India, Art. 32.\n\nThe petitioner in Petition No. L!J was the Moopil Nair of the Kavalappara sthanam and, as the sthanee, claimed to be the sole proprietor of the sthanam properties. The respondents Nos. 2 to rJ, who were the junior members of the Kavalappara tarwad or family, resisted the claim on the ground that the properties were tarward properties and they had rights in them.\n\nThere was litigation between the parties and ultimately the Privy Council held in favour of the petitioner. The petitioner transferred some of the properties to his wife and t\\vo <laughters and son and they:were the petitioners in the t'vo other petitions.\n\nThe parties were governed by the Marumakkathayam Law and in 1955 the l\\1adras Legislature, purporting to remove certain misapprehensions evident in decisions of courts, passed the Madras Marumakkathayam (Removal of Doubts) Act, 1955 (Act 32 of 1955), which bys. z provided as follows:-\n\n\" 2.\n\nCertain kinds of sthanam properties declared to be tarward properties :-Notwithstanding any decision of Court, any sthanam in respect of 'vhich-\n\n(a) there is or had been at any time an intermingling of the properties of the sthanam and the properties of the tarwad, or\n\n(b) the members of the tarwad have been receiving maintenance from the properties purporting to be sthanan1 properties as of right, or in pursuance of a custom or otherwise, or\n\n(c) there had at any time been a vacancy caused by there being no male member of the tarwad eligible to succeed to the sthanam, shall be deemed to be and shall be deemed always to have been a Marumakkathayam tarwad and the properties appertaining to such a sthanam shall be deemed to be and shall be deemed always to have been properties belonging to the tarwad to which the provisions of the Madras Marumakkathayam Act, 1932, (Madras Act XXJI of 1932), shall apply.\"\n\n(2) S.C.R.\n\nSUPREME COURT HEPORTS 317\n\nImmediately after the publication of the Act, the respondents Nos. 2 to lJ, published notices in the press that by reason of the passing of the Act, Kavalappara estate had become their tarwad property and that rents could be paid to the sthanee only as the Karna van of the properties and not otherwise. The notices further stated that the done es under the i wo deeds of gift executed by the sthanee were not entitled to the properties conveyed to them and should not be paid any rents at all. One of the respondents filed a partition suit and others also contemplated doing the same. The petitioners sought for a writ of mandamus or any other writ or order directing the respondents to forbear from enforcing the impugned Act against the sthanee and the sthanam estate and declaring the Act to be unconsti tutional and invalid. Preliminary objection was raised on behalf of some of the respondents as to the maintainability of the petitions and it was contended that (1) the prayer for a writ of mandamus was not maintainable since there was an adequate remedy in the partition suit filed by one of the respondents; (2) that violation of right of property by private individuals was not within the purview of Art. 19(1)(£) or Art. 31(1) and the remedy was not by way of application under Art. 32; (3) that no application under Art. 32 could be maintained until the State\n\nhad taken or threatened to take any action under the impugned law that would infringe fundamental rights; (4) that the proceeding under Art. 32 could not be converted into or equated with a declaratory suit under s. 42 of the Specific Relief Act in and (5) that this court could not, on an application under Art. 32, embark upon an enquiryinto disputed questions of fact.\n\nHeld (per Das, C. J., Bhagwati, Sinha and Subba Rao, JJ.), that all the contentions must be negatived and all the preliminary objections must fail.\n\nThe right to enforce a fundamental right conferred by the Constitution was itself a fundamental right guaranteed by Art. 32 of the Constitution and this court could not refuse to entertain a petition under that Article simply because the petitioner might have any other adequate, alternative, legal remedy.\n\nRashid Ahmed v. Municipal Board, Kairana, [1950] S.C.R 566 and Ramesh Thappar v. The State of Madras, [1950] S.C.R. 594, referred to.\n\nIn the instant cases as the grievance of the petitioners was primarily against the impugned Act passed by the Madras Legislature, which was a State as defined by Art. 12 of the Constitution and the dispute was not one between two sets of private individuals but between the petitioners on the one hand and the State and persons claiming under a law made by the State on the other, Art. 32 must apply.\n\nP. D. Shamclasani v. Central Bank of India Ltd., [1952] S.C.R. 39r, distinguished and held inapplicable . . Where an enactment such as the impugned Act, unlike\n\nI959\n\n]( avalappara K ottarathil\n\nKocliunni Moopil Nayar\n\n\"· The State of 1\\1 dras & Others\n\nr959\n\nKaValappara\n\n](ottarathil\n\nKochunni Moopil Nayar\n\nothers that contemplated some further action to be taken by the State after the enactment had come into force, automatically took away or abridged.a person's fundamental rights immediately. it came into force, there was no reason why the aggrieved person , shoul4 not immediately be entitled to seek the remedy under Art. 32 of the Constitutibn.\n\nThB State of .l\\.fadras 6- Others\n\nState of Bombay v. United Motors (India) Limited, [r953] S'.C.R. ro69 and Himmatlal Harilal Mehta v. The State of Madhya Pradesh, [r954] S.C. R. rr22, referred to.\n\nIn view of the language used in s. 2 of .the impugned Act and its effect, there could be no doubt that the petitioners could legiti[Uately complain that their fundamental right to hold and dispose of the sthanam properties have been viola led by the action of the Legisla lure.\n\nArtie!~ 32 of the Constitution conferred Mde powers on this Court and such 'powers were not confined to the issuing of prerogative writs alone. In appropriate cases, this court had the right in its discretion to frame its writs or orders suitable to the exigencies created by enactments.\n\nIt was clear on the authorities that this Court could, where the occasion so required, make. eyen a declaratory order with consequential relief under Art. 32 of the Constitution. Chiranjit Lal Chowdhury v. The Unio\" of Indiq, [r950] S.C.R. 900, Rashid Ahmed v. Municipal Board, Kaira1'a, [1950] S.C.R. 566, T. C. Basappa v. T. Nagappa, [r955] r S.C.R. 250 and Ebrahim Vazir Mayat v. The State of Bombay, [r954] S.C.R. 933, relied on.\n\nMaharaj Umeg Singh v. The State of Bombay, [r955] 2 S.C.R.\n\nI64, considered.\n\nThis court would fail in its duty as the custodian and protector of the fundamental rights if it were to decline to entertain a petition under Art. 32 simply because it involved the determination of disputed questions of fact.\n\nClause (2) of Art. 32 conferred on this court the power to issue directions or orders or \\vrits of various kinds mentioned therein and in dismissing a petition, it had either to hold that any particular writ asked for was not appropriate to the occasion or that the petitioner had failed to establish a fundamental right or its breach. In either case, however, it had to decide the petition on merits.\n\nChiranjit l,.al Chowdhuri v. The Unio1' of India, [r950] S.C.R. 869, Kathi Raning Rawat v. The State of Saurashtra,. [1952] S.C.R. 435 and J.?amkrishna Dalmia v. Shri Justice S. R. Tendolkar, [1959] S.C.R. 279, referred to.\n\nIn appropriate cases opportunity might also be given to the parties to establish their cases by further affidavits, or by issuing a commission or even by setting the application down for trial on evidences.\n\nPer Wanchoo, J.-If the petitions were based solely on the infringement of Ar~. r4, there could be no doubt that they would not be maintainable. Even though they were based on the\n\ninfringement of Art. 19(1)(£) also, their maintainability would still be in doubt in the absence of any further provision in the impugned Act for its direct enforce.ment by the State.\n\nORIGINAL JURISDICTION: Petitions No. 433 of 1955 and 40-41 of 1956.\n\nPetitions under Article 32 of the Constitution of India for enforcement of Fundamental Rights.\n\nM. 0. Setalvad, Attorney-General for India, M. K.\n\nNambiyar, J. B. Dadachanji, S. N. Andley and Rameshwar Nath, for the petitioners.\n\nT. M. Sen, for the State of Madras.\n\nK. V. Suryanarayana Iyer, Advocate-General for the State of Kerala and T. M. Sen, for the State of Kerala.\n\nM. R. Krishna Pillai, for respondents Nos. 2-9.\n\nPurshottam Tricumdas and M. R. Krishna Pillai, for respondent No. 12 in Petitions Nos. 40 and 41 of 1956.\n\nK. R. Krishnaswami, for respondents Nos. 11, 13-17 in Petn. No. 443 of 55.\n\nPurshottam Tricumdas and K. R. Krishnaswami, for respondent No. 12 in Petn. No. 443 of 55.\n\nA. V. Viswanatha Sastri and M. R. Krishna Pillai, for Intervener No. 1.\n\nSardar Bahadur, for Intervener No. 2.\n\nM. R. Krishna Pillai, for Intervener No. 3.\n\n1959. March 4.\n\nThe Judgment of Das, C. J., Bhagwati, Sinha and Subba Rao, J J., was delivered by Das, C. J. Wanchoo, J., delivered a separate Judgment ..\n\nDAS, C. J.-The circumstances leading up to the presentation of the above noted three petitions under Art. 32, which have been heard together, may be shortly stated : In pre-British times the Kavalappara Moopil Nair, who was the senior-most male member of Kavalappara Swaroopam of dynastic family, was the ruler of the Kavalappara territory situate in Walluvanad\n\nI959\n\nK avalappara Kottarathil Kochunni Moopil Nayar v.\n\nThe State of Madras & Other,>\n\nDas C. ].\n\nr959 Taluk in the district of South Malabar. He was an independent prince or chieftain having sovereign J(avalappara h' . d h ICotto.athil rights over is territory an as sue was the holder of Hochimni the Kavalappara sthanam, that is tp say, \"the sta.tus .\n\nMoopil Naya1 and the attendant property of the senior Raja\".\n\nApart from the Kavalappara sthanam, which was a The 5101'0 °( Rajasthanam, the Kavalappara Moopil Nair held five Madias Ci, 1'\"\" th th th d' t t t d t h' _ o er s anams m e same IS rw gran e o IS an-\n\nDas c. ;. cestors by the superior overlord, the Raja of Palghat, as reward for military services rendered to the latter.\n\nHe also held two other sthanams in Cochin, granted to his ancestors by another overlord, the Raja of Cochin, for military services. Each of these sthanams has also properties attached to it and such properties belong to the Kavalappara Moopil Nair who is the sthanee thereof.\n\nOn the death in 1925 of his immediate predecessor the petitioner in Petition No. 443 of 1955 became the Moopil Nair of Kavalappara and as such the holder of the Kavalappara sthanam to which is attached the Kavalappara estate and also the holder of the various other sthanams in Mahi.bar and Cochin held by the Kavalappara Moopil Nair. The petitioner in Petition No. 443 of 1955 will hereafter be referred to as \" the sthanee petitioner \". According to him all the properties attached to all the sthanams belong to him and respondeuts 2 to 17, who are the junior members of the Kavalappara family or tarwad, have no interest in them.\n\nThe Madras Marumakkattayam Act (Mad. XXII of\n\n1932) passed by the Madras Legislature came into force on August 1., 1933. This Act applied to tarwads and not to sthanams and s. 42 of the Act gave to the members of a Malabar tarwad a right to enforce pa.rtition of tarward properties or to have them registered as impartible. In March 1934 respondents 10 to 17, then constituting the entire Kavalappara tarwad, applied under s. 42 of the said Act for registration of their family as an impartible tarwad. In spite of the objection raised by the sthanee petitioner, the Sub- Collector ordered the registration of the Kavalappara tarwad as impartible. The sthanee petitioner applied to the High Court of Madras for the issue of a writ to\n\nquash the order of the Sub Collector, but the High x959 Court declined to do so on the ground that the sthanee petitioner had no real grievance as the said order did ~~;~'.;!a~::za not specify any particular property as impartible Kochunni property. While this decision served the purpose of Moopil Nayar the sthanee petitioner, it completely frustrated the v. object of respondents IO to 17. On April IO, 1934, The State of therefore, respondents IO to 17 filed 0. S. No. 46 of Madras &- Others 1934 in the court of the Subordinate Judge of Otta.\n\nDas C. ]. palam for a declaration that all the properties under the management of the defendant (meaning the sthanee petitioner) were tarwad properties belonging equally and jointly to the plaintiffs (meaning the respondents IO to 17 herein) and the defendant, i.e., the sthanee petitioner, and that the latter was in management thereof only as the Karna van and manager of the tarwad. The sthanee petitioner contested the suit asserting that he was the Kavalappara Moopil Nair and as such a sthanee and that the properties belonged to him exclusively and that the plaintiffs (the respondents 10 to 17 herein) had no interest in the suit properties. By his judgment pronounced on February 26, 1938, the Subordinate Judge dismissed the 0. S. \"46 of 1934. The plaintiffs (the respondents\n\n10 to 17 herein) went up in appeal to the Madras High Court, which, on April 9, 1943, allowed the appeal and reversed the decision of the Subordinate Judge and decreed the suit. That judgment will be found reported in Kuttan Unni v. Kochunni (1). The defendant, i.e., the sthanee petitioner herein carried the matter to the Privy Council and the Privy Council by its judgment, pronounced on July ~9, 1947, reversed the judgment of the High Court and restored the decree of dismissal of the suit passed by the Subordinate Judge. In the meantime in 1946 respondents 10 to 17 had filed a suit (0. S. 77 of 1121) in the Cochin Court claiming similar reliefs in respect of the Cochin sthanam. After the judgment of the Privy Council was announced, respondents 10 to 17 withdrew the Cochin suit. The matter rested here for the time being.\n\n(1) (1943) I.L.R. [1944) Mad. 515. 4l\n\nKavalappara Kotlarathil Kochunni M oopil Nayar\n\nThe S1ate of Madras &- Others\n\nDas C. ].\n\nOn February 16; 1953, respondents 10 to 17 took the initiative again and presented a Memorial to the Madras Government asking that legislation be undertaken to reverse the Privy Council decision.\n\nThe Government apparently did not think fit to take any action on that Memorial. Thereafter a suit was filed in the g_ourt of the Subordinate Judge at Ottapalam by respondents 2 to 9 who were then the minor members of the tarwad claiming Rs. 4,23,000 as arrears of maintenance and Rs. 44,000 as yearly maintenance for the future.\n\nThe suit was filed in forma pauperis.\n\nThere were some interlocutory proceedings in this suit for compelling the defendant (i.e., the sthanee petitioner) to deposit the amount of the maintenance into court which eventually came up to this Court by special leave but to which it is not necessary to refer in detail. During the pendency of that pauper suit, the sthanee petitioner, on August 3, 1955, executed two deeds of gift, one in respect of the Palghat properties in favour of his wife and two daughters who are the petitioners in Petition No. 40 of 1956 and the second in respect of the Cochin properties in favour of his son who is the petitioner in Petition No. 41 of 1956.\n\nMeanwhile respondents 2 to 17 renewed their efforts to secure legislation for the reversal of the decree of the Privy Council and eventually on August 8, 1955, procured a private member of the Madras Legislative Assembly to introduce a Bill (L. A. Bill N o .. 12 of 1955) intituled \" The Madras Marumakkathayam (Removal of Doubts) Bill, 1955\" with only two clauses on the allegation, set forth in the statement of objects and reasons appended to the Bill, that certain decisions of courts of law had departed from the age old customary law of Marumakkathayees with regard to sthanams and sthanam properties and that those decisions were the result of a misapprehension of the customary law which governed the Marumakkathayees from ancient times and tended to disrupt the social and economic structure of several ancient Marumakkathayam families in Malabar in that Karnavans oftarwad were encouraged to claim to be sthanees and thus deny the legitimate rights of the members of tarwads\n\nwith the result that litigation had arisen or were pendr959 ing. It was said to be necessary, in the interests of 1\\avalappara harmony and well being of persons following the Kottarathil Marumakkathayam law, that the correct position of Kochunni customary law governing sthanams and sthanam Moopil Nayar properties should be clearly declared.\n\nThis Bill came v. before the Madras Legislative Assembly on August MTdhe 5':1\"0 °h1 , d T . a ras .,,. t ers 20, 1955, and was passed on the same ay. he Bill _ having been placed before the Madras Legislative Das c. J.\n\nCouncil, the latter. passed the same on August 24, 1955.\n\nThe assent of the President to the Bill was obtained on October 15, 1955, and the Act intituled \"the Madras Murumakkathayam (Removal of Doubts) Act, 1955\" being Madras Act 32 of 1955 and hereinafter referred to as the impugned Act, was published in the official gazette on October 19, 1955.\n\nSection 1 of the impugned Act is concerned with the short title and its application. Section 2, which is material for our purposes, is expressed in the following terms :\n\n\"2. Certain kinds of sthanam properties declared to be tarwad properties :::..__Notwithstanding any decision of Court, any sthanam in respect of which-\n\n(a) there is or had been at any time an intermingling of the properties of the sthanam and the properties of the tarwad, or\n\n(b) the members of the tarwad have been receiving maintenance from the properties purporting to be sthanam properties as of right, or in pursuance of a custom or otherwise, or\n\n(c) there had at any time been a vacancy caused by there being no male member of the tarwad eligible to succeed to the sthanam, shall be deemed to be and shall be deemed always to have been a Marumakkathayam tarwad and the properties appertaining to such a sthanam shall be deemed to be and shall be deemed always to have been properties belonging to the tarwad to which the provisions of the Madras Marumakkathayam Act, 1932, (Madras Act XXII of 1933), shall apply.\n\nExplanation-All words and expressions used in this Act shall bear the same meaning as in the Madras\n\n'959 Marumakkathayam Act, 1932 (Madras Act XXII of\n\n1933).\"\n\nK;;,~~\"!'af:; z\" Almost immediately after the publication of the Kochunni impugned Act in the gazette, respondents 2 to 17 Moopil Nayar published notices in \" Mathrubumi \", a Malayalam v. daily paper with large circulation in Malabar, Cochin Th• State 0h1 and Travancore, to the effect that by reason of the Madras & 01 ers • f h d A K 1 h d _ passmg o t e impugne ct, ava appara estate a\n\nDas c. J. become their tarwad properties and that rents could be paid to the sthanee petitioner only as the Karnavan of the properties and not otherwise. The notices further stated that the donees under the two deeds of gift executed 'by the sthanee petitioner were not entitled to the properties conveyed to them and should not be paid any rent at all. After the passing of the impugned Act one of the respondents filed another suit, also inf orma pauperis, in the same court. It is also alleged by the petitioners that respondents 2 to 17 are contemplating the filing of yet another suit for partition, taking ad vantage of the provisions of the impugned Act. • It was in these circumstances detailed above that the Kavalappara Moopil Nair, i.e., the sthanee petitioner, on December 12, 1955, filed the present petition No. 443 of 1955 under Art. 32 of the Constitution.\n\nThis was followed by Petition No. 40 of 1956 by his wife and two daughter.sand Petition No. 41 of 1956 by his son. Both the last mentioned petitions were filed on February 3, 1956. The first respondent in all the three petitions is the State of Madras and respondents 2 to 17 are the members of the sthanee petitioner's tarwad. In his petition the sthanee petitioner prays \"that a writ of Mandamus or any other proper writ, order or directions be ordered to issue for the purpose of enforcing his fundamental rights, directing the respondents to forbear from enforcing any of the provisions of the Madras Act 32 of 1955 against the petitioner, his Kavalappara sthanam and Kavalappara estate, declaring the said Act to be unconstitutional and invalid\". The prayers in the other two petitions are mutatis mutandis the same.\n\nShri Purshottam Tricumdas appearing for some of\n\nthe respondents has taken a preliminary objection as to the maintainability of the petitions. The argument in support of his objection has been developed and elaborated by him in several ways. In the first place, he contends that the petitions, in so far as they pray for the issue of a writ of Mandamus, are not maintainable because the petitioners have an adequate remedy in that they can agitate the questions now sought to be raised on these petitions and get relief in the pauper suit filed by one of the respondents after the passing of the impugned Act. This argument overlooks the fact that the present petitions are under Art. 32 of the Constitution which is itself a guaranteed right. In Rashid Ahmed v. Municipal Board, .Kairana (1) this Court repelled the submission of the Advocate-General of Uttar Pradesh to the effect that, as the petitioner had an adequate legal remedy by way of appeal, this Court should not grant any writ in the nature of the prerogative writ of Mandamus or Certiorari and observed :\n\n\"There can be no question that the existence of an adequate legal remedy is a thing to be taken into consideration in the matter of granting writs, but the powers given to this Court under Art. 32 are much wider and are not confined to issuing prerogative writs only.\" Further, even if the existence of other adequate legal remedy may be taken into consideration by the High Court in deciding whether it should issue any of the prerogative writs on an application under Art. 226 of the Constitution, as to which we say nothing nowthis Court cannot, on a similar ground, decline to entertain a petition under Art. 32, for the right to move this Court by appropriate proceedings for the enforcement of the rights conferred by Part III of the Constitution is itself a guaranteed right.\n\nIt has accordingly been held by this Court in Ramesh Thappar v. The State of Madras (2) that under the Constitution this Court is constituted the protector and guarantor of fundamental rights and it cannot, consistently with the responsibility so laid upon it,\n\n(1) [1950] S.C.R. 566.\n\n(2) [1950] S.C.R. 594\n\nK avalappara\n\nK ottarathil\n\nKochunni M oopil Nayar v.\n\nThe State of Madras & Others\n\nDas C. ].\n\nKavalappara\n\nKottarathil\n\nJ(ovhunni Moopil Nayar v.\n\nThe State of Madras & Others\n\nDas C. ].\n\nrefuse to entertain applications seeking the protection of this Court against infringement of such rights, although such applications are made to this Court in the first instance without resort to a High Court having concurrent jurisdiction in the matter. The mere existence of an adequate alternative legal remedy cannot per se be a good and sufficient ground for throwing out a petition under Art. 32, if the existence of a fundamental right and a breach, actual or ·\n\nthreatened, of such right is alleged and is prima f acie established on the petition.\n\nThe second line of argument advanced by learned counsel is that the violation of the right to property by private individuals is not within the purview of Art. 19(l)(f) or Art. 31(1) and that a person whose right to property is infringed by a private individual must, therefore, seek his remedy under the ordinary law and not by way of an application under Art. 32.\n\nIn support of this part of his argument, learned counsel relies on the decision of this Court in P. D. Shamdasani v. Central Bank of India Ltd. (1).\n\nIn that case the respondent Bank had, in exercise of its right of lien under its articles of association, sold certain shares belonging to the petitioner and then the latter started a series of proceedings in the High Court challenging the right of the Bank to do so.\n\nAfter a long lapse of time, after all those proceedings had been dismissed, the petitioner instituted a suit against the Bank challenging the validity of the sale of his shares by the Bank. The plaint was rejected by the court under 0. 7, r. ll(d) of the Code of Civil Procedure as barred by limitation. Thereupon the petitio- ner filed an application under Art. 32 of the Constitution praying that all the adverse orders made in the previous proceedings he quashed and the High Court be directed to have \" the above suit set down to be heard as undefended and pronounce judgment against the respondent or to make such orders as it thinks fit in relation to the said suit\". It will be noticed that ' the petitioner had no grievance against the State as defined in Art. 12 of the Constitution and his petition\n\n(1) [1952] S.C.R. 391.\n\nwas not founded on the allegation that his fundamental right under Art. 19(l)(f) or Art. 31(1) had been infringed by any action of the State as so defined or by anybody deriving authority from the State. The present position is, however, entirely different, for the gravamen of the complaint of the sthanee petitioner and the other petitioners, who claim title from him, is directly against the impugned Act passed by the Madras Legislature, which is within the expression\n\n\" State \" as defined in Art. 12. Therefore in the cases now before us the petitions are primarily against the action of the State and respondents 2 to 17 have been impleaded because they are interested in denying the petitioner's rights created in their favour by the impugned Act.\n\nIndeed by means of suits and public notices, those respondents have in fact been asserting the rights conferred upon them by the impugned Act.\n\nIn these circumstances, the petitioners' grievance is certainly against the action of the State which, by virtue of the definition of that term given in Art. 12 of the Constitution, includes the Madras Legislature and it cannot certainly be said that the .subject matters of the present petitions comprise disputes between two sets of private individuals unconnected with any State action. Clearly disputes are between the petitioners on the one hand and the State and persons claiming under the State or under a, law made by the State on the other hand. The common case of the petitioners and the respondents, therefore, is that the impugned Act does affect the right of the petitioners to hold and enjoy the properties as sthanam properties; but, while the petitioners contend that the law is void, the respondents maintain the opposite view. In our opinion these petitions under Art. 32 are not governed by our decision in P. D. Shamdasani's case (1) and we see no reason why, in the circumstances, the petitioners should be debarred from availing themselves of their constitutional right to invoke the jurisdiction of this Court for obtaining redress against infringement of their fundamental rights.\n\n(r) [1952] S.C.R. 391,\n\nKavalappara\n\nKottarathil Kochunni M oopil Nayar v.\n\nThe Slate of Madras & Others\n\nDas C. ].\n\nI959\n\nKavalappara Kottarathil Kochunni M oopil Nayar v.\n\nThe State of Madras &- Others\n\nDas C. ].\n\n. 328 SUPREM:lli COURT REPORTS [1959) Supp.\n\nThe third argument in support of the preliminary point is that au application under Art. 32 cannot be maintained until the State has taken or threatens to take any action under the impugned law which action, if permitted to be taken, will infringe the petitioners' fundamental rights. It is true that the enactments abolishing estates contemplated some action to be taken by the State, after the enactments came into force, by way of issuing notifications, so as to vest the estates in the State and thereby to deprive the proprietors of their fundamental right to hold and egjoy their estates. Therefore, under those enactments some overt act had to be done by the State before the proprietors were actually deprived of their right, title and interest in their estates. In cases' arising under those enactments the proprietors could invoke the jurisdiction of this Court under Art. 32 when the State did or threatened to do the overt act.\n\nBut quite conceivably an enactment may immediately on its coming into force take away or abridge the fundamental rights of a person by its very terms and without any further overt act being done.\n\nThe impugned Act is said to be an instance of such enactment. In such a case the infringement of the fundamental right is complete eo instanti the passing of the enactment and, therefore, there can be no reason why the person so prejudicially affected by the law should not be entitled immediately to avail himself of the constitutional remedy under Art. 32.\n\nTo say that a person, whose fundamental right has been infringed by the mere operation of an enactment, is not entitled to invoke the jurisdiction of this Court under Art. 32, for the enforcement of his right, will be to deny him the benefit of a salutary constitutional remedy which is itself his fundamental right. The decisions of this Court do not compel us to do so. In the State of Bombay v. United Motors (India) Limited (1) the petitioners applied to the High Court on November 3, 1952, under Art. 226 of the Constitution challenging the validity of the Bombay Sales Tax Act, 1952, which came into force on November 1, 1952.\n\nNo notice had\n\n(1) (1953] S.C.R. 1069.\n\n(2) s.c.R.\n\nSt1PR~M~ COUR'r R~PORTS 329\n\nbeen issued, no assessment proceeding had been started and no demand had been made on the petitioners for the payment of any tax under the impugned Act.\n\nIt should be noted that in that petition one of the grounds of attack was that the Act required the dealers, on pain of penalty, to apply for registration in some cases and to obtain a license in some other cases as a condition for the carrying on of their business, which requirement, without anything more, was said to have infringed the fundamental rights of the petitioners under Art. 19(1)(g) of the Constitution and no objection could, therefore, be taken to the maintainability of the application. Reference may also be made to the decision of this Court in Himmatlal Harilal Mehta v. The State of Madhya Pradesh (1).\n\nIn that case, after cotton was declared, on April 11, 1949, as liable to sales tax under the Central Provinces and Berar Sales T!J.x Act, 1'947, the appellant commenced paying the tax in respect of the purchases made by him and continued to pay it till December 31, 1950.\n\nHaving been advised that the transactions done by him in Madhya Pradesh were not \" sales\" within that State and that consequently he could not be made liable to pay sales tax in that State, the appellant declined to pay the tax in respect of the purchases made during the quarter ending March 31, 1951.\n\nApprehending that he might be subjected to payment of tax without the authority of law, the appellant presented an application to the High Court of Judicature at Nagpur under Art. 226 praying for an appropriate writ or writs for securing to him protection from the impugned Act and its enforcement by the State.\n\nThe High Court declined to issue a writ and dismissed the petition on the ground that a mandamus could be issued only to compel an authority to do or to abstain from doing some act and that it was seldom anticipatory and was certainly never issued where the action of the authority was depen: dent on some action of the appellant and that in that case the appellant had not even made his return and no demand for the tax could be made from him.\n\n(I) [1954] S.C.R. II22. 42\n\nI959\n\nKavalappara\n\nJ( ottarathil\n\nKochunni Moopil Nayar v, The State of Madras b Others\n\nDas C. ].\n\nI959\n\nKavalappara f(ottarathil I<ochunni /11 oopil Nayar\n\nTh~ State of Madras & Others\n\nDas C. ].\n\n330 StJPREME COtJRT REPORTS [1!}591 Supp.\n\nBeing aggrieved by that decision of the High Court, the petitioner in that case came up to this Court on appeal and this Court held that a threat by the State to realise the tax from the assessee without the authority of law by using the coercive machinery of the impugned Act was a sufficient iufringemcnt of his fundamental right which gave him a right to seek relief under Art. 226 of the Constitution. It will be noticed that the Act impugned in that case had by its terms made it incumbent on all dealers to submit returns, etc., and thereby imposed restrictions on their fundamental right to carry on their businesses under Art. 19(1) (g).\n\nThe present case, however, stands on a much stronger footing. The sthanee petitioner is the Kavalappara Moopil Nair and as such holds certain sthanams and the petitioners in Petitions Nos. 40 and 41 of 1956 derive their titles from him.\n\nAccording to the petitioners, the sthanee pet.itioner was absolutely entitled to all the properties attached to all the sthanams and respondents 2 to 17 had no right, title or interest in any of the sthanam properties. Immediately after the passing of the impugned Act, the Madras Marumakkathayam Act, 1932, became applicable to the petitioners' sthanams and the petitioners' properties became subject to the obligat.ions and liabilities imposed by the last mentioned Act. On the passing of the impugned Act, the sthanee petitioner immediately became relegated from the status of a sthanee to the status of a Karna van and manager and the sthanam properties have become the tarwad properties arid respondents 2 to 17 have automatically become entitled to a share in those properties along with the petitioners. The right, title or interest claimed by petitioners in or to their sthanam properties is, by the operation of the statute itself and without anything further being done, automatically taken away or abridged and the impugned Act has the effect of auto~ inatically vesting in respondents 2 to 17 an interest in those properties as members of the tarwad. Indeed respondents 2 to 17 are asserting their rights and have issued public notices on \"the basis thereof and have also instituted a suit on the strength of the rights\n\ncreated in them by the impugned Act.\n\nNothing further remains to be done to infringe the peitioners' right to the properties as sthanam properties. It is true that the sthanee petitioner or the other petitioners deriving title from .him are still in possession of the sthanam properties, but in the eye of law they no loncrer possess the right of the sthanee and they cannot~ as the sthanee or persons deriving title from the sthanee, lawfully claim any rent from the tenants. In view of the language employed in s. 2 quoted above and its effect the petitioners can legitimately complain that their fundamental right to hold and dispose of the sthanam properties has been injured by the action of the Legislature which is \"State\" as defined in Art. 12 of the Constitution. In the premises, the petitioners are prima f acie entitled to seek their fundamental remedy under Art. 32.\n\nThe next argument in support of the objection as to the maintainability of these petitions. is thus formulated: The impugned Act is merely a piece of a declaratory legislation and does not contemplate or require any action to be taken by the State or any other person and, therefore, none of the well-known prerogative writs can afford an adequate or appropriate remedy to a person whose fundamental right has been infringed by the mere passing of the Act. If such a person challenges the validity of such an enactment, he must file a regular suit in a court of competent jurisdiction for getting a declaration that the law is void and, therefore, cannot and does not effect his right.\n\nIn such a suit he can also seek consequential reliefs by way of injunction or the like, but he cannot avail himself of the remedy under Art. 32.\n\nIn short, the argument is that the proceeding under Art. 32 cannot be converted into or equated with a declaratory suit under s. 42 of the Specific Relief Act.\n\nReference is made, in support of the aforesaid contention, to the following passage in the, judgment of Mukherjea, J., as he then was, in the case of Chiranjit Lal Chowdhuri v.\n\nThe Union of India (1) :-\n\n\" A.s regards the other point, it would appear from\n\n(1) [1950] S.C.R. 869, goo.\n\nKa\"7ialappara\n\nK ollarathil\n\nKochunni Moopil Nayar v.\n\nThe Slate of Madras & Others\n\nDas C. ].\n\nI959\n\nKavalapPara\n\nKottarathil\n\nKochunni Moopil Nayar\n\nThe State of Madras &- Others\n\nDas C. ].\n\n-332 SUPREME' COUl'tT REPORTS [1959j Supp.\n\nthe language of article 32 of the Constitution that the sole object of the article is the enforcement of fundamental rights guaranteed by the Constitution.\n\nA proceeding under this article cannot really have any affinity to what is known as a de.claratory suit\".\n\nBut further down on the same page his Lordship said:-\n\n\" Any way, article 32 of the Constitution gives us very wide discretion in the matter of framing our writs to suit the exigencies of particular cases, and the application of the petitioner cannot be thrown out simply o.n the ground that the proper writ or direction has not been prayed for\".\n\nIt should be noted that though in that case the petitioner prayed, inter alia, for a declaration that the Act complained of was void under Art. 13 of the Constitution it was not thrown out on that ground, The above statement of the law made by Mukherjea, J., is in accord with the decision of this Court in the earlier case of Rashid Ahmed v. Municipal Board, Kairana (1).\n\nThe passage from our judgment in that case, which has already been quoted above, also acknowledges that the powers given to this Court by Art. 32 are much wider and are not confined to the issuing of prerogative writs only. The matter does not rest there.\n\nIn T. G. Basappa v. T. Nagappa (2) Mukherjea, J., again expressed the same view :-(Page 256).\n\n\"The language used in articles 32 and 226 of our Constitution is very wide and the powers of the Supreme Court as well as of all the High Courts in India extend to issuing of orders, writs or directions including writs in the nature of habeas corpus, mandamus, quo warranto, prohibition and certiorari as may be considered necessary for enforcement of the fundamental rights and in the case of the High Courts, for other purposes as well. In view of the express provisions of our Constitution we need not now look back to the early history or the procedural technicalities of these writs in English law, nor feel oppressed by any difference or change of opinion expressed in particular cases by English Judges\".\n\n(1) [1950) S.C.R. 566.\n\n(2) [1955) I S.C.R. 250, 256.\n\nIn Ebrahim Vazir Mayat v. The State of Bombay (1) the order made by the majority of this Court was framed as follows:-\n\n\" As a result of the foregoing discussion we declare section 7 to be void under Article 31(1) in so far as it conflicts which the fundamental right of a citizen of India under article 19(1) (e) of the Constitution and set it aside.\n\nThe order will, however, operate only upon proof of the fact that the appellants are citizens of India. The case will, therefore, go back to the High Court for a finding upon this question. It will be open to the High Court to determine this question itself or refer it to the court of District Judge for a finding \".\n\nThat was a case of an appeal coming from a High Court and there was no difficulty in remanding the case for a finding on, an issue, but the fact to note is that this Court did make a declaration that s. 7 of the Act was void.\n\nWe are not unmindful of the fact that in the case of Maharaj Umeg Singh v. The State of\n\nBombay (2) which came up before this Court on an application under Art. 32, the petitioner had been relegated to filing a regular suit in a proper court having jurisdiction in the matter. But on a consideration of the authorities it appears to be well-established that this Court's powers under Art. 32 are wide enough to make even a declaratory order where that is the proper relief to be given to the aggrieved party. The present case appears to us precisely to be an appropriate case, if the impugned Act has taken away or abridged the petitioners' right under Art. 19(1) (f) by its own terms and without anything more being done and such infraction cannot be justified. If, therefore, the contentions of the petitioners be well-founded, as to which we say nothing at present, a declaration as to the invalidity of the impugned Act together with the consequential relief by way of injunction restraining the respondents and in particular respondents 2 to 17 from asserting any rights under the enactment so declared void will be the only appropriate reliefs which the petitioners will be entitled to get. Under Art. 32 we must, in appropriate cases, exercise our discretion and\n\n(1) [1954] S.C.R. 933, 941.\n\n(2) [1955] 2. S.C.R 164.\n\nI959\n\nKavalappara Kottarathil Kochunni M oopil Nayar v.\n\nThe State of Madras & Others\n\nDas C. ].\n\nz959\n\nK avalappara\n\nJ(ollarathil\n\nJ\\ocllunni Jlloopil Nayar v.\n\nThe State of Madras & Others\n\nDas C. J.\n\nframe our writ or order to suit the exigencies of this case brought about by the alleged nature of the enactment we are considering. In a suit for a declaration of their titles on the impugned Act being declared void, respondents 2 to 17 will certainly be necessary parties, as persons interested to deny the petitioners' title. We see no reason why, in an application under Art. 32 where declaration and injunction are proper reliefs, respondents 2 to 17 cannot be made parties. In our opinion, therefore, there is no substance in the argument advanced by learned counsel on this point.\n\nThe last point urged in support of the plea as to the non-maintainability of these applications is that this Court cannot, on an application under Art. 32, embark upon an enquiry into disputed question of fact.\n\nThe argument is developed in this way. In the present case the petitioners allege, inter alia, that the impugned Act has deprived them of their fundamental right to the equal protection of the law and equality before the law guaranteed bi Art. 14 of the Constitution. Their complaint is that they have been discriminated against in that they and their sthanam properties have been singled out for hostile treatment by the Act. The petitioners contend that there is no other sthanam which comes within the purview of this enactment and that they and the sthanams held by them are the only target against which this enactment is directed. The respondents, on the other hand, contend that the language of s. 2 is wide and general and the Act applies to all sthanams to which one or more of the conditions specified in s. 2 may be applicable and that this Court cannot, on an application under Art. 32, look at any extraneous evidence but must determine the issue on the terms of the enactment alone and that in any event this Court cannot go into disputed questions of fact as to whether there are or are not other sthanees or sthanams similarly situate as the petitioners are. In support of his contention Shri Purshottam Tricumdas refors us to some decisions where some of the High Courts have declined to entertain applications under Art. 226 of the Constitution involving disputed\n\n(2) s.o.n. . StlP1tl!:M:E: COtJltT REPORTS 3M\n\nquestions of fact and relegated the petitioners to regular r959 suits in courts of competent jurisdiction. We are not J(avalappara called upon, on this occasion, to enter into a discus- Rotta.athil sion or express any opinion as to the jurisdiction and Kochunni power of the High Courts to entertain and to deal Moopil Nayar with applications under Art. 226 of the Constitution v. where disputed questions of fact have t~ be decided Tdhe Stateoohf b . .\n\nMa ras 0t ers and we prefer to confine our o servat10ns to the Imme- _ diate problem now before us, namely, the limits of the Das c. J. jurisdiction and power of this Court when acting under Art, 32 of the Constitution. Shri Purshottam Tricumdas concedes that the petitioners have the fundamental right to approach this Court for relief against infringement of their fundamental right. What he says is that the petitioners have exercised that fundamental right and that this fundamental right goes no further. In other words he maintains that nobody has the, fundamental right that this Court must entertain his petition or decide the same when disputed questions of fact arise in the case. We do not think that that is a correct approach to the question.\n\nClause (2) of Art. 32 confers power on this Court to issue directions or orders or writs of various kinds referred to therein. This Court may say that any particular writ asked for is or is not appropriate or it may say that the petitioner has not established any fundamental right or any breach thereof and accordingly dismiss the petition. In both cases this Court decides the petition on merits. But we do not countenance the proposition that, on an application under Art. 32, this Court may decline to entertain the\n\nsmne on the simple ground that it involves the determination of' disputed questions of fact or on any other ground. If we were to accede to the aforesaid contention of learned counsel, we would be failing in our duty as the custodian and protector of the fundamental rights. We are not unmindful of the fact that the view that this Court is bound to entertain a petition under Art. 32 and to decide the same on merits may encourage litigants to file many petitions under Art. 32 instead of proceeding by way of a suit. But that consideration cannot, by itself, be a cogent reason\n\nJ{avalappara K ottarat hil\n\nJ(ochunni Moopil Nayar v.\n\nThe Stale of Madras & Others\n\nDas C. ].\n\n236 StlPR:li:M~ COtfR'I' R~POR'l'S [l95!l] Supp.\n\nfor denying the fundamental right of a person to approach this Court for the enforcement of his fundamental right which may, prima facie, appear to have been infringed. :Further, questions of fact can and very often are dealt with on affidavits. In Ohiranjitlal Ohowdhuri's case (1) this Court did not reject the petition in limine o~ the ground that it required the determination of disputed questions of fact as to there being other companies equally guilty of mismangement.\n\nIt went into the facts on the affidavits and held, inter alia, t, hat the petitioner had not discharged the onus that lay on him to establish his charge of denial of equal protection of the laws. That decision was clearly one on merits and is entirely different from a refusal to entertain the petition at all. In Kathi Raning Rawat\n\nv. The State of Saurashtra (') the application was adjourned in order to give the respondent in that case an opportunity to adduce evidence before this Court in the form of an affidavit. An affidavit was filed by the respondent setting out facts and figures relating to an increasing number of incidents of looting, robbery, dacoity, nose cutting and murder by marauding gangs of dacoits in certain areas of the State in support of the claim of the respondent State that \"the\n\nsecurity of the State and public peace were jeopardised and that it became impossible to deal with the offences that were committed in different places in separate courts of law expeditiously\". This Court found no difficulty in dealing with that application on evidence adduced by affidavit and in upholding the validity of the Act then under challenge. That was also a decision on merits although there were disputed questions of fact regarding the circumstances in which the impugned Act came to be passed. There were disputed questions of fact also in the case of Ramkrishna Dalmia v. Shri Justice S. R. Tendolkar (').\n\nThe respondent State relied on the affidavit of the Principal Secretary to the Finance Ministry setting out in detail the circumstances which lead to the issue of the impugned notification and the matters\n\n(r) [1950) S.C.R. 8~9. 900.\n\n(2) [1952) S.C.R. 435. .\n\n(3) [r959) S.C.R. 279.\n\nrecited therein and the several reports referred tu in the said affidavit. A similar objection was taken by learned counsel for the petitioners in that case as has now been taken. It was urged that reference could not be made to any extraneous evidence and that the basis of classification must appear on the face of the notification itself and that this Court should not go into disputed questions f fact.\n\nThis Court overruled that objection and held that there could be no objection to the matters brought to the notice of the Court by the affidavit of the Principal Secretary being taken into consideration in order to ascertain whether there was any valid basis for treating the petitioners and their companies as a class by themselves. As we have already said, it is possible very often to decide questions of fact on affidavits. If the petition and the affidavits in support thereof are not conv!ncing and the court is not satisfied that the petitioner has established his fundamental right or any breach thereof, the Court may dismiss the petition on the ground that the petitioner has not discharged the onus that lay on him. The court may, in some appropriate cases, be inclined to give an opportunity to the parties to establish their respective cases by filing further affidavits or by issuing a commission or even by setting the application down for trial on evidence, as has often been done on the original sides of the High Courts of Bombay and Calcutta, or by adopting some other appropriate procedure. Such occasions will be rare indeed and such rare cases should not, in our opinion, be regarded as a cogent reason for refusing to entertain the petition under Art. 32 on the ground that it involves disputed questions of fact.\n\nFor reasons given above we are of opinion that none of the points urged by learned counsel for the respondents in support of the objection to the maintainability of these applications can be sustained.\n\nThese applications will, therefore, have to be heard on merits and we order accordingly. The respondents represented by Shri Purshottam Tricumdas must pay one set of costs of the hearing of this preliminary ob, jection before us to the petitioners. .\n\nI 43\n\nI959\n\nK avalappara K ottarathil\n\nKochunni Moopi_I Nayar v.\n\nThe State of Madras 0- Others\n\nDas C. ].\n\n'959 WANCHOO, J.-I have read the judgment just delivered by my Lord the Chief Justice, with which my Kavalappara h b h h w h h Kotta.athil ot er ret ren concur, wit great care. it t e Kochunni utmost respect for my brethren for whom I have the Moopil Nayar highest regard, I must state that if these applications v. were based only on the infringement of Art. 14 of the The State 01 Constitution, I would have no hesitation in dismissing Madra~ Others them as not maintainable. f need not elaborate my\n\nwanchoo 1. reasons in this case and sha, ll content myself by observing that where the law, as in this case, is general in terms and there is no question of its direct enforcement by the State in the form, for example, of grant of licences, issue of notices, submission of returns, and so on, actually resulting in wholesale abuse of its provisions, this Court will not permit an applicant under Art. 32 to lead evidence to show that the law was meant to hit him alone. However, the applicants also rely on the infringement of the fundamental right guaranteed under Art. 19(l)(f). As to that, I have doubts whether an application under Art. 32 challenging a general law of this kind, which affects one or other of the fundamental rights guaranteed under Art. 19, can be maintained, in the absence of any further provision therein for direct enforcement of its provisions by the State 'in the form already indicated above, by a person who merely apprehends that he might in certain eventualities be affected by it. However, on_ the present occasion, I do not propose to press my doubts to the point of dissent and therefore concur with the proposed order.\n\nPreliminary objection overruled.", "total_entities": 102, "entities": [{"text": "KAVALAPPARA KOTTARATHIL KOCHUNNI\n\nMOOPIL NAYAR", "label": "PETITIONER", "start_char": 55, "end_char": 101, "source": "metadata", "metadata": {"canonical_name": "KAVALAPPARA KOTTARATHIL KOCHUNNI MOOPIL NAYAR", "offset_not_found": false}}, {"text": "THE STATE OF MADRAS AND OTHERS", "label": "RESPONDENT", "start_char": 106, "end_char": 136, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF MADRAS AND OTHERS", "offset_not_found": false}}, {"text": "S. R. DAS", "label": "JUDGE", "start_char": 165, "end_char": 174, "source": "metadata", "metadata": {"canonical_name": "SUDHI RANJAN DAS*", "offset_not_found": false}}, {"text": "B. P. 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{"document_id": "1959_2_339_354_EN", "year": 1959, "text": "(2) S.C.R.. SUPREME COURT REPORTS\n\nMAHADEO v.\n\nTHE STATE OF BOMBAY\n\n(and connected petitions)\n\n(S. R. DAs, C. J., S. K. J;>As, P. B. GAJENDRAGADKAR, K. N. WANCHOO and M. HrnAYATULLAH, JJ.)\n\nFundamental Rights, Violation of-Agreement with Proprietors for grant of right to pick and carry away tendu leaves and other ancillary rights-N aturc of such rights-Non-Registration of agreement-Effect-Abolition of proprietary rights in Estates, etc.-Nonrccognition of the agreements by State, if violates fundamental rights -Central Provinces Land Revenue Act, r9r7 (Central Provinces II of r9r7), ss. 2(r3), 47(3), 202-Madhya Pradesh Abolition of Proprietary Rights (Estates, M ahals, Alienated Lands) Act, r950 (Madhya Pradesh I of r95r), ss. 2(6), 3, 4.\n\nSome of the proprietors of the former State of Madhya Pradesh granted to the several petitioners rights to take forest produce, mainly tendu leaves, from the forests included in the Zamindaris belonging to the proprietors. The agreements conveyed to the petitioners in addition to the tendu leaves other forest produce like timber, bamboo-s, etc., the soil for making bricks, and the right to build on and occupy land for the purpose of their business. These rights were spread over many years, but in the case of a few the period during which the agreements were to operate expired in 1955 Some of the agreements were registered and the others unregistered. After the coming into force of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950, the Government disclaimed the agreements and auctioned the rights afresh, acting under s. 3 of the Act under which \"all proprietary rights in an estate ......... in the area specified in the notification, vesting in a proprietor of such estate ...... or in a person having interest in such proprietary right through the proprietor, shall pass froJU such proprietor or such other person to and vest in the State for the purposes of the State free of all encumbrances\".\n\nThe petitioners filed petitions under Art. 32 of the Constitution of India challenging the legality of the action taken by the Government on 'the ground that it was an invasion of their fundamental rights. They contended (1) that the Government stepped into the shoes of the quondam proprietors and was bound by the agreements into which the latter had entered, before their proprietary rights were taken over by the Government, (2) that the petitioners were not proprietors as defined in the Act and therefore ss. 3 and 4 of the Act did not apply to them, (3) that the agreements were in essence and effect licenses granted to them to cut, gather and carry away the produce in the shape of\n\nI959\n\nMarch 9.\n\nMahadeo v.\n\nThe Stnte of Bombay\n\ntendu leaves, or lac, or timber or wood, (4) that the agreements granted no 'interest in land' or 'benefit to arise out of land' and that object of the agreements could only be described as sale of goods as defined in the Indian Sale of Goods Act, and (5) that the interest of the petitioners was not proprietary right but only a right to get goods in the shape of leaves, etc.\n\nThe petitioners relied on the decision in FirmChhotabhai ]ethabai Patel and Co. v.\n\nThe State of Madhya Pradesh, [1953] S.C.R. 476.\n\nHeld: (1)that the agreements required registration and in the absence of it the rights could not be entertained.\n\nSrimathi Shantabai v. State of Bombay, [1959] S.C.R. 265, followed.\n\n(2) that in cases where the period stipulated in the agreement had expired, the only remedy, if any, was to sue for breach of contract and no \\\\'rit to enforce expired agreements could issue.\n\n(3) that on their. true construction the agreements in question were not contracts of sale of goods.\n\n(4) that both under the Act in question and the Central Provinces Land Revenue Act, 1917, the forests and trees in the Zamindari area belonged to the proprietors and they were items of proprietary' rights.\n\nConsequently, the rights conveyed to the petitioners under the agreements '\\Vere proprietary rights, which under ss. 3 and 4 of the Act, became vested in the State.\n\n(5) that assuming that the agreements did not amount to grant of any proprietary right by the proprietors to the petitioners, the latter could have only the benefit of their respective contracts or licenses. In either case, the State had not, by the Act, aCquired or taken possession of such contracts or licenses and, consequently, there had been no infringement of the petitioners' fundamental rights which alone could support a petition under Art. 32 of the Constitution.\n\nChhotabai ]ethabai Patel and Co. v. The State of Madhya Pradesh, [1953] S.C.R. 476, not followed. Ananda Behera v. The State of Orissa, [1955] 2 S.C.R. 919, followed.\n\nORIGINAL JURISDICTION: Petitions Nos. 26 and 27 of 1954, 24 and 437 of 1955, 256 of 1956, 12, 16, 17 and 73 of 1957.\n\nPetition under Article 32 of the Constitution of India for the enforcement of Fundamental Rights.\n\nJl, f. S. K.. Sastri, for the petitioners in Petitions Nos. 26 and 27 of 54 aud 24 of 1955.\n\nV. N. Swami and M. S. K.. Sastri, for the petitioners in Petitions Nos. 437 of 55 and 256 of 56.\n\nL. K. Jha, J. M. Thakur, S. N. Andley and J. B.\n\nDadachanji, for the petitioner in Petition No. 12 of 1957.\n\nN. S. Bindra and Harbans Singh, for the petitioners in Petitions Nos. 16 and 17of1957.\n\nN. S. Bindra and Govind Saran Singh, for the petitioner in Petition No. 73 of 1957.\n\nH. N. Sanyal, Additional Solicitor-General of India, H.J. Umrigar and R. H. Dhebar, for the respondent in Petitions Nos. 26 and 27 of 1954, 24 and 437 of 1955, 256 of 1956 and 12 of 1957.\n\nM. Adhikary, Advocate-General for the State of Madhya Pradesh and J. N. Shroff, for the respondent in Petitions Nos. 16, 17 and 73 of 1957.\n\n1959. March 9.\n\nThe Judgment of the Court was delivered by\n\nI959\n\nMahadeo v.\n\nThe State of Bombay\n\nHrnAYATULLAH, J.-The judgment in Petition Hidayatullah ].\n\nNo. 12 of 1957 shall also dispose of petitions Nos. 26 and 27 of 1954, 24 and 437 of 1955, 256 of 1956 and 16, 17 and 73 of 1957.\n\nThese petitions under Art. 32 arise out of alleged agreements by which some of the proprietors in the' former State of Madhya Pradesh granted to one or other of the petitioners the right to take forest produce, mainly tendu leaves, from the forests included in Zamindari and Malguzari villages of the grantors.\n\nGovernment has disclaimed these agreements and auctioned the rights afresh. The petitioners state that this is an invasion of their fundamental rights. The dates on which these alleged agreements were entered into, the terms thereof and the periods during which they were to subsist are different from case to case. It is not necessary in this judgment to recite the terms of these documents, and it is sufficient to group them for purpose of decision, on the bases whether the said agreements still subsist, and whether they are incor- •· porated in a registered instrument or not.\n\nPetitions Nos. 437 of 1955 and 256 of 1956 are founded on unregistered documents. The answering respondent does not admit these documents, and contends that they cannot be looked into to prove tb.eir\n\nI959\n\nMahadeo v.\n\nThe State of Bombay\n\nElidayatullah ] .\n\nterms, in view of the decision of this Court in \"Shrimathi Shantabai v. State of Bombay (1). .\n\nPetitions Nos. 16, 17 and 73 of 1957 form another group, inasmuch as the period during which the alleged agreements were to operate expired in 1955.\n\nAdditionally, the documents on which the claim is founded . in those petitions are unregistered. In , the last mentioned case, it is pleaded that the answering State Government had recognised the agreements in favour of the petitioner but resiled from that position subsequently, which allegation has been adequately explained by the State Government in its affidavit. The recognition was not in favour of the petitioner but in favour of one Thakur Kamta Singh, who claimed under an agreement entered into by one Vishwanath Singh on a date when he had already transferred his interest in the Zamindari to his son, Onkar Prasad Singh. This point was therefore not taken before us at the hearing, and nothing more need be said about it. The main objection against these petitions is that the agreements having expired, there is nothing left to enforce either in favour of the petitioners or against the State Government, and the remedy, if any, of the petitioners is to sue the State and/or the proprietors for the breach.\n\nThe last group consists of Petitions Nos. 26 and 27 of 1954, 24 of 1955 and the present petition (No. 12 of 1957). In these petitions, the agreements with the petitioners are made by registered documents and the terms during which they are to operate have yet to expire. These cases, it is stated, fall outside the rule in Shantabai's case (1), to which reference has already been made. They are stated to fall within the decision of this Court reported in l!'irm Ghhotabhai J ethabai Patel and Go. v. The State of Madhya Pradesh (').\n\nIn all these petitions, counsel argue that the view expressed in the last mentioned case is correct, while the view in Shantabai' s case (1) needs further consideration.\n\nThe argument of the petitioners in these several cases is that Government steps into the shoes of the\n\n(1) [1959] S.C.R. 265.\n\n(2) (1953] S.C.R. 476.\n\nquondam proprietors, and is bound by the agreements into which the latter had entered, before their proprietary rights were taken over by Government. They also raise the contention that the petitioners were not proprietors as defined in the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 (hereinafter called the Act), and thus ss. 3 and 4 in terms do not apply to them. These sections, it is contended, do not apply to profit a prendre, which the petitioners enjoy under these agreements. In support of this contention, reference is made to the decision of this Court in Ohhotabhai's case (1), and to the definition of' proprietor' in the Act.\n\nReference is also made to some provisions of the C. P. Land Revenue Act to be mentioned hereafter, to prove that the persons on whom the right to collect forest produce was conferred by the proprietors cannot be regarded as proprietors even under that Act.\n\nThis, in main, is the argument in these cases, and even those petitioners whose agreements are incorporated in unregistered documents or whose agreements have since expired, adopted the same line of argument denying the necessity for registration of such agreements. The matter in so far as it relates to the first two groups is simple.\n\nIt has already been ruled in Shantabai's case (2) that if the right be claimed on foot of an unregistered agreement, it cannot be entertained. Such documents were examined from five different angles in that case, and it was held that the document-if it conferred a part or share in the proprietary right, or even a right to profit a prendreneeded registration to convey the right. If it created a bare licence, the licence came to an end with the interest of the licensors in the forests. If proprietary right was otherwise acquired, it vested in the State, and lastly, if the agreements created a purely personal right by contract, there was no deprivation of property, because the contract did not run with the land.\n\nBose, J., who delivered a separate judgment, also held that in the absence of registration no right was created.\n\n(1) [1953] S.C.R, 476.\n\n(2) [1959] S.C.R. 265.\n\nI959\n\nMahadeo v.\n\nThe Slate of Bombay\n\nHidayatullah ].\n\nMahadeo v.\n\nThe State of Bombay\n\nHidayatullah f:\n\nIn view of the clear pronouncement of this Court, the first two groups of petitions must fail.\n\nPetitions Nos. 16, 17 and 73 of 1957 also fail for the added reason that the agreements having expired, the only remedy, if any, is to sue for breach 'of contract and no writ to enforce expired agreements can issue.\n\nThis brings us to the arguments advanced in the last four petitions in the third group which were also adopted by the other petitioners, whose petitions we have just considered.\n\nAll these petitioners strongly relied upon Chhotabhai's case (1). It is therefore necessary to examine attentively what was decided there. In that case, it was held at p. 483 that:\n\n\"The contracts and agreements appear to be in essence and effect licenses gra.nted to the transferees to cut, gather, and carry away the produce in the shape of tendu leaves, or lac, or timber, or wood.\" Reference in this behalf was made to a decision of the Privy Council in Mohanl.al Hargovind of Jubbalpore v.\n\nCommissioner of Income-tax, Central Provinces and Berar ('), where it was observed:\n\n\"The contracts grant no interest in land and no interest in the trees or plants themselves. They are simply and solely contracts giving to the grantees the right to pick and c1trry away leaves, which, of course, implies the right to appropriate them as their own property.\n\nThe small right of cultivation given in the first of the two contracts is merely ancillary and is of no more significance than would be, e.g., a right to spray a fruit tree given to the person who has bought the crop of apples.\n\nThe contracts are short-term contracts. The picking of the leaves under them has to start at once, or practically at once, and to proceed continuously.\" The Bench next observed that there was nothing in the Act to affect the validity of the several contracts and agreements, and that the petitioners were neither proprietors within the meaning of the Act, nor persons having \"any interest in the proprietary right through the proprietors\".\n\nAfter quoting from Baden Powell's\n\n(1) (1953] S.C.R. 476.\n\n(2) I.L.R. 1949 Nag. 892, 898.\n\nLand Systems of British India, Vol. I, p. 217, as to what was meant by 'proprietorship' in the Land Revenue Systems in India, it was observed that the definition of 'proprietor' in the Act conveyed the same sense.\n\nFinally, repelling the argument that the agreements concerned \" future goods '', it was held on the basis of a passage in Benjamin on Sale, 8th Edition, page 136, that a present sale of the right to goods having a \"potential existence\" could be made.\n\nSince possession was taken under the agreements and consideration had also passed, there could be \"a sale of a present right to the goods as soon as they come into existence.\"\n\nReference was also made (at pp. 480, 481) to s. 6 of the Act, which provides: . \"(1) Except as provided in sub-section (2), the transfer of any right in the property which is liable to vest in the State under this Act made by the proprietor at any time after the 16th March, 1950, shall, as from the date of vesting, be void.\" It was observed in the case as follows:\n\n\"The date, 16th March, 1950, is probably the date when legislation on these lines was actively thought of, and sub-section (1) hits at transfers made after this date. This means that transfers before that date are not to be regarded as void. Even in the case of transfers after the said date, sub-section (2) provides that the Deputy Commissioner may declare that they are not void after the date of vesting, provided they were made in good faith and in the ordinary course of management.\n\nThe scheme of the Act as can be gathered from the provisions referred to above makes it reasonably clear that whatever was done before 16th March, 1950, by the proprietors by way of transfer of rights is not to be disturbed or affected, and that what vests in the State is what the proprietors had on the vesting date.\n\nIf the proprietor had any rights after the date of vesting which he could enforce against the transferee such a.s a. lessee or a licensee, those rights would no doubt vest in the State.\"\n\nI959\n\nMahadeo v.\n\nThe State of Bombay\n\nHidayatullah ].\n\nr959\n\nMahadeo v.\n\nThe State of Bombay\n\nHidayatullah ].\n\nIt was accordingly held that the State Government could not interfere with such agreements but had only the right to enforce rights arising therefrom \"standing in the shoes of the proprietors.\"\n\nIt is clear from the foregoing analysis of the decision in Chhotabhai's case (') that on a construction of the documents there under consideration and itdopting a principle enunciated by the Privy Council in M ohan\"lal Hargovind of Jubbalpore v. Commissioner of Incometax, Central Provinces and Berar (') and relying upon a passage each in Benjamin on Sale and the wellknown treatise of Baden-Powell, the Bench came to the conclusion that the documents there under consideration did not create any interest in land and did not constitute any grant of any proprietary interest in the estate but were merely contracts or licenses given to the petitioners \"to cut, gather and carry away the produce in the shape of tendu leaves, or lac, or timber or wood\". But then, it necessarily followed that the Act did not purport to affect the petitioners' rights under the contracts or licenses.\n\nBut what was the nature of those rights of the petitioners ? It is plain, that if they were merely CO):ltractual rights, then as pointed out in the two later decisions, in Ananda Behera v. The State of Orissa ('), Shantabai's case('), the State has not acquired or taken possession of those rights but has only declined to be bound by the agreements to which they were not a party. If, on the other hand, the petitioners were mere licensees, then also, as pointed out in the second of the two cases cited, the licenses came to an end on the extinction of the title of the licensors. In either case there was no question of the breach of any fundamental right of the petitioners which could support the petitions which were presented under Art. 32 of the Constitution. It is this aspect of the matter which was not brought to the notice of the Court, 'and the resulting omission to advert to it has seriously impaired, if not completely nullified, the effect and weight of the decision in Chhotabhai's case(') as a precedent.\n\n(1) [1953] S.C.R. 476.\n\n\n(2) I.L.R. 1949 Nag. 89>, 898.\n\n(4) [1959] S.C.R. 265.\n\nThe argument of counsel in these cases followed the broad pattern of the decision in Ohhotabhai's case (1), and we next proceed to consider it. H is contended that what vests in the State is the right which the proprietors had on the date of vesting because s. 3 of the Act is not retrospective, and that the agreements are \" in essence and effect licenses granted to the transferees to cut, gather and carry away the produce in the shape of tendu leaves, or lac, or timber or wood\". These agreements, it is submitted, grant no 'interest in land ' or ' benefit to arise out of land', the object of the agreements can only be described as sale of' goods ' as defined in the Indian Sale of Goods Act, and the grant of such a. right is not comprehended in the first sub-section of s. 3 where it says:\n\n\" ............ all proprietary rights in an estate, mahal.. ...... .in the area specified in the notification, vesting in a proprietor of such estate, Mahal.. .... or in a person having interest in such proprietary right through the proprietor, shall pass from such proprietor or such other person to and vest in the State for the purposes of the State free of all encumbrances\".\n\nIt is finally contended that the interest of these petitioners is not ' proprietary right ' at all but a right to get' goods ' in the shape of leaves, lac, etc. We have to examine these contentions critically.\n\nBefore we do so, it is necessary to set out in brief the terms of the agreements which have been produced in these cases. In Petition No. 12 of 1957 there were two agreements, Annexures A and B. The first was executed in 1944 and granted the right from 1947 to 1956; the second was executed in 1946 and granted the right from 1957 to 1966. These are long term agreements and they are typical from case to case.\n\nIndeed, the second agreement was made even before the first began, and the total period is 20 years. In addition to the right to the leaves the documents provided for many other matters. It is convenient to quote only from Annexure ' B ' :\n\n\"Before this I had given you a similar contract selling Tendu leaves produce by contract dated\n\n(1) [1953] S.C.R. 476.\n\nI959\n\nMahadeo v.\n\nThe State of Bombay\n\nHidayatullah ].\n\nI959\n\nAlahadeo\n\nThe State of Bombay\n\nIiidayatullah ].\n\n7-7-1944 registered on 12-7-1944. In pursuance of that registered contract, which is for five years from 1947 to 1951 and another for subsequent five years from 1952 to 1956 in all for ten years, you are to remain in possess10n and occupation of the areas and the Tendu leaves produce till the termination of the year 1956 for which time you continue your possession and thereafter in pursuance of this contract you continue for further period of ten years your possession and occupation from 1957 to 1966 as is usual and customary pruning and coppicing Tendu leaves plants, burning them, and instal Fadis for collection of Tendu leaves and construct Kothas (godo\"wns) for storage of the leaves at your sweet will and choice on any open plot or land within the estate with my permission and you are allowed to take free of all costs any Adjat timber, bamboos, etc., from my forests for constructing them. I shall charge you no further consideration.\n\nIn the same manner, for the purpose of constructing these godowns and such thing you may according to your convenience (you may) manufacture bricks at any place you like in the vicinity of any rivers, rivulet, N ala or pond at your costs. I shall not receive from you any extra amount as rent for the use and occupation of land that will be used for construction of Kothas, for manufacturing bricks and for locating Fadis (Bidi leaves collection centres).\n\nAll those are included in the consideration fixed for this contract.\n\nAll these rights are already conferred on you in the previous contract dated 7-7-1944 and under this contract for the entire contract period. It is also open to you to collect Tendu leaves not only those growing in the summer season but also those growing in Kartik.\n\nDuring the term of this contract, if for one reason or another it becomes necessary for you to sell the Tendu leaves produce and assign this contract to any •other person you can do so.\n\nBut you shall be responsible for me to give my consent after inquiring of the fitness of the intended transferee. However, you shall continue to be responsible to pay to me the agreed amount of instalments on or before the agreed dates ; and if the agreed amount of instalment is not paid to me on or\n\nbefore the agreed date, I shall have full right to start proper proceedings in that connection\".\n\nIn Petition No. 26 of 1954, the period of the two agreements was from 1944 to 1963. There too, the rights were similar to those in Petition No. 12 of 1957, and analogous terms are to be found in Petitions Nos. 27 of 1954 and 24 of 1955.\n\nThe question that arises is, what is the nature of this right? In English law, distinction was made between easements. and profit a prendre and a right to take the produce of the soil was regarded as a profit a prendre.\n\nWhile easements were not regarded as an interest in land, a right to take the produce of the soil or a portion of it was an interest in land: Fitzgerald v. Fairbanks (1). Profit-a-prendre can be the subject of a grant.\n\nWhere they take the form of a grant, they are benefits arising from land. In all these cases, there is not a naked right to take the leaves of Tendu trees together with a right of ingress and of regress from the land; there are further benefits including the right to occupy the land, to erect buildings and to take other forest produce not necessarily standing timber, growing crop or grass. The right of ingress and of regress over land vesting in the State can only be exercised if the State as the owner of the land allows it, and even apart from the essential nature of the transaction, the State can prohibit it as the owner of the land.\n\nWhether the right to the leaves can be regarded as a rig_ht to a growing crop has, however, to be efamined\n\nwith reference to all the terms of the documents and all the rights conveyed thereunder. If the right conveyed comprises more than the leaves of the trees, it may not be correct to refer to it as being in respect of 'growing crop ' simpliciter.\n\nWe are not concerned with the subtle distinctions made in English law between emblements, fructus naturals and fmctus industriales, but we have to consider whether the transaction concerns \"goods\" or \"moveable property\" ol\"\" immovable property \".-The law is ma.de difficult by the definitions which exist in the General Clauses Act, the Sale of Goods Act, the (I) [1897] 2 Ch. 96.\n\nMahadeo v.\n\nThe State of Bombay\n\nHidayatullah ].\n\n'959\n\nll1 ahadeo v.\n\nThe State of Bo1nbay\n\nHidayatullah j.\n\nTransfer of Property Act and the Registration Act.\n\nThese definitions must be placed alongside one another to get their ambits.\n\nIf the definitions are viewed together, it is plain that they do not tell us what \"immovable property\" is.\n\nThey only tell us what is either included or not included therein. One thing is clear, however, that things rooted in the earth as in the case of trees and shrubs, are immovable property both within the General Clauses Act and the Transfer of Property Act, but in the latter, \"standing timber\",\" growing crop,, and \" grass\" though rooted in earth are not included. Of these, \" growing crop \" and \" grass \" form the subjectmatter of the sale of goods, and \" standing timber\"\n\ncomes within the last part of the definition of ' goods ' in the Indian Sale of Goods Act, to be subject thereto if the condition about severing mentioned in the definition of' goods' exists. It has already been pointed out that the agreements conveyed more than the tendu leaves to the petitioners. They conveyed other forest produce like timber, bamboos, etc., the soil for making bricks, the right to prune, coppice and burn tendu trees and the right. to build on and occupy land for the purpose of their business. These rights were spread over many years, and were not so simple as buying leaves, so to speak, in a shop. The expression \" growing crop \" might appropriately comprehend tendu leaves, but would not include, ' Adjat timber', bamboos, nor even tendu plants.\n\nThe petitioners were not to get leaves from the extant trees but also such trees as might grow in the future. They could even burn the old trees, presmnably, so that others might grow in their place. In these circumstances, the agreements cannot be said to be contracts of sale of' goods' simpliciter.\n\nIt remains now to consider whether the rights enjoyed by the petitioners can be said to fall within s. 3(1) of the Act. That section divests the proprietors of their proprietary rights, as also any other person having an interest in the proprietary right through the proprietor and vests those rights in the State.\n\nThat section has to be read with the section which\n\nfollows, and which sets out the consequences of vesting of such rights in the State. The rights which vest can be stated briefly to be (a) all proprietary rights in the proprietor, and (b) all proprietary rights in any person having interest in such proprietary rights through the proprietor. These rights vest in the State free of all encumbrances.\n\nSection 4 of the Act provides inter alia that after the notification has been issued, then, 'notwithstanding anything contained in any contract, grant or document or in any other law for the time being in force and save as otherwise provided in this Act'-the following consequences (among others) shall ensue:\n\n\" (a) all rights, title and interest vesting in the proprietor or any person having interest in such proprietary right through the proprietor in such area including Land (cultivable or barren), grassland, scrubjungle, forest, trees, fisheries, wells, tanks, ponds, water-channels, ferries, pathways, village sites, hats, bazars and melas ; and in all subsoil, including rights, if any, in mines and minerals, whether being worked or not, shall cease and be vested in the State for purposes of the State free of all encumbrances; and the mortgage debt or charge on any proprietary right shall be a charge on the amount of compensation payable for such proprietary right to the proprietor under the provisions of this Act ;\n\n(b) all grants and confirmation of title of or to land in the property so vesting or of or to any right or privilege in respect of such property or land revenue in respect thereof shall, whether liable to resumption or not, determine : \".\n\nIf these petitioners can be said to be possessing \" an interest in the proprietary right '', then their rights, title and interest in the land determine under the Act, and vest in the State. The petitioners, therefore, contend that their rights under the agreements cannot be described as ' proprietary right ' or even a share of it.\n\nThey rely on the definition of ' proprietor ' in the Act, and refer under the authority of s. 2(b) of the Act to the Central Provinces Land Revenue Act, 1917.\n\nThe definition in the Act is not exhaustive. It only\n\nI959\n\nMahadeo v.\n\nThe State of\n\nBombay\n\nHidayatullah ].\n\nr959\n\nMahadeo v.\n\nThe State of Bombay\n\nHidayatullah ] ,\n\ntells us who, besides the proprietor, is included in the term 'proprietor'. Further, the definitions in the Act are subordinate to the requirements of the context and the subject-matter of any particular enactment. From the Act, we know that the proprietor's interest in forest, trees, shrub, grass and the like passes to the State. The question th us resolves into two short ones-did the former proprietors own proprietary interest in these trees, and did they part with that proprietary interest and convey it to the petitioners ?\n\nThere is but little doubt that in so far as the Act is concerned, it does contemplate cesser of all proprietary rights in land, grass land, scrub jungle, forest and trees, whether owned by the proprietor or th rough him by some other person. The contention of the petitioners is that by the term \"proprietor\" is meant what that term conveys in the Central Provinces Land Revenue Act, and reference is made for this purpose to various sections therein. The term \" proprietor\" is defined in the Central Provinces Land Revenue Act thus:\n\n\"\"Proprietor\" except_in sections 68, 93 and 94, includes a gaontia of a Government village in Sambalpur Territory.\" This definition does not advance the matter any further.- In several sections, special explanations are added to define \"proprietors \". In all those explanations, the term is not defined, but is said to include 'thekedars or headmen with protected status', 'mortgagee with possession ', ' lessees holding under leases from year to year' and the like. In addition, there is invariably the inclusion of ' a transferee of proprietary rights in possession', which again leaves the matter at large. See ss. 2(5), 2(21), 53 and 68.\n\nCounsel faced with this difficulty rely upon the scheme of settlement in Ch. VI of the Central Provinces Land Revenue Act, and the record of rights which consists of Khewat, a statement of persons possessing proprietary rights in the mahal including inferior proprietors or lessees or mortgagees in possession, specifying the nature and extent of the interest of each; and Khasra or field book and Jamabandi or list of persons\n\n(~) S.C.R.\n\nSUPR~ME COURT R~:Po:RTS 353 ·\n\ncultivating or occupying land in the village.\n\nThese documents are prepard separately. The petitioners contend that by 'proprietary right' is meant that right which can find a place or be entered in the Khewat, and the rights enjoyed by the petitioners are not and cannot be entered in the Khewat because thay are not' proprietary rights'. They also refer to the schemes of settlement under which' proprietors',' subproprietors ', etc., are determined and offered assessment.\n\nIn our opinion, these arguments, though attractive, do not represent the whole of the matter. What these documents record and what the settlement operations determine are the kinds of' proprietors' among whorn the entire bundle of rights is shared. Every proprietor or sub-proprietor enjoys proprietary rights oTir land, forests, etc., falling within his interest. The right to forest trees, etc., is the qonsequence of proprietorship, and indeed, under s. 47(3) the State Government can declare which rights and interest must be regarded as 'proprietary rights'. That sub-section provides:\n\n\"The State Government may declare the rights and interests which shall be deemed to be proprietary rights and interests within the meaning of sub-section (2).\" The second sub-section provides :\n\n\"The Deputy Commissioner shall ca urn to be recorded, in accordance with rules made under s. 227, all changes that have taken place in respect of, and all transactions that have affected, any of the proprietary rights and interests in any land.\"\n\nThe matter is made clear if one refers to the provisions of s. 202 of the Land Revenue Act. That section confers on Government the power to regulate the control and management of the forest-growth on the lands of any estate or mahal. A reading of sub-ss. (4) to (8) of that section clearly shows that forests belong to the proprietors from whom under those sub-sections they can be taken over for management, the profits of the management less expenes being paid to the proprietors or to superior and inferior proprietors as the case may be. Sub-sections (9) and (10) provide;\n\n~ .\n\nMahadeo v.\n\nThe State of Bombay\n\nHidayatullah J.\n\nMahadeo v.\n\nThe State of Bombay\n\nHidayatullah ].\n\n354 SUPREME COURT REPOR1'S t1959j Supp.\n\n(9) \"No lease, lien, encumbrance or contract with respect to the forest land held under direct manage - ment shall be binding upon the Government.\n\n(10) On the expiration of the period fixed for th~ direct management, the forest land shall be restored to the proprietor thereof.\"\n\nEven here, the term ' proprietor ' is explained. by the usual explanation showing the same category of persons as included in'the section.\n\nFrom this, it is quite clear. that forests and trees belonged to the proprietors, and they were items of proprietary rights. The first of the two questions posed by us, therefore, admits of none but an affirmative answer.\n\nIf then the forest and the trees belonged to the proprietors as items in their ' proprietary rights ', it is quite clear that these items of proprietary rights have been transferred to the petitioners. Tlie answer to the second question is also in the affirmative. Being a 'proprietary right ', it vests in the State under ss. 3 and 4 of the Act. The decision in Chhotabhai's case (1) treated these rights as bare licenses, and it was apparently given per incuriam, and cannot therefore be followed.\n\nEven assuming that the documents in question do not amount to grant of any proprietary right by the proprietors to the petitioners, the latter can have only the benefi£ of their respective contracts or licenses. In either case, the State has not, by the Act, acquired or taken possession of such contracts or licenses and consequently, there has been no infringement of the petitioners' fundamental right which alone can support a petition under Art. 32 of the Constitution.\n\nThe result is that these petitions fail, and are dismissed, but in view of the fact -that they were filed because of the .decision in Chhotabhai's case (1), there shall be no order about costs.\n\nPetitions dismissed.\n\n(1) [1953] S.C.R. 476.", "total_entities": 45, "entities": [{"text": "MAHADEO", "label": "PETITIONER", "start_char": 35, "end_char": 42, "source": "metadata", "metadata": {"canonical_name": "MAHADEO", "offset_not_found": false}}, {"text": "THE STATE OF BOMBAY", "label": "RESPONDENT", "start_char": 47, "end_char": 66, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF BOMBAY", "offset_not_found": false}}, {"text": "S. R. 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{"document_id": "1959_2_355_364_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPORTS 355\n\nMCGREGOR & BALFOUR LTD. v.\n\nTHE COMMISSIONER OF INCOME-TAX,\n\nWEST BENGAL\n\n(B. P. SINHA, J. L. KAPUR and\n\nM. HIDAYATPLLAH, JJ.)\n\nIncome-tax-Company carrying on business in England and India-Refund of excess profits tax paid in England-If can be taxed in India-Indian Finance Act, Ig46, s. II(4).\n\nThe appellant carried on business in England and in India.\n\nFor the previous years it paid excess profits tax in both countries and it obtained deduction of the amounts so paid from its profits and gains for the purposes of the Indian Income-tax Act. In the assessment year 1947-48 it obtained a repayment of Rs. 2,31,009 out of the excess profits tax paid in England. The Income-tax authorities acting under s. n(14), Indian Finance Act, 1946, included this amount received in England in the taxable profits of the appellant. The appellant contended that the repayment not being within the taxable territory it could not be taxed.\n\nHeld, that the amount received as repayment of the excess profits tax was rightly taxed. Under s. n(14) the amount of repayment was deemed to be ' income ' for purposes of the Indian Income-tax Act and that 'income' was to be treated as the income for the previous year during which the repayment was made.\n\nSection n(14) created a liability irrespective of the considerations arising from the general provisions of the income-tax law. The distinction between incomes within and without taxable territories was made unnecessary by s. n(14).\n\nEglinton Silica Brick Co. Ltd. v. Marria:n, (1924) 9 Tax Cas. 92; A. & W. Nesbitt Ltd. v. Mitchell, (1926) II Tax Cas. 217 and Kirke's Trustees v. The Commissioners of Inland Revenue, (1926) II Tax Cas. 323, applied.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 265 of 1956.\n\nAppeal from the judgment and order dated August 26, 1954, of the Calcutta High Court in Income-tax Reference No. 107 of 1952.\n\nS. Mitra, Dipak Chaudhry and B. N. Ghosh, for the appellants.\n\nG. K. Daphtary, Solicitor-General o.f India, K. N.\n\nRajagopala Sastri, R.H. Dhebar and D. Gupta, for the respondent.\n\nI959\n\nMarch r6.\n\n1959 1959.\n\nMarch 16. The Judgment of the Court was Mcgregor & delivered by .\n\nBalfour Ltd.\n\nHIDAYATULLAH, J.-Messrs. Mcgregor & Balfour,\n\nC . v: ,, Ltd., Calcutta (hereinafter called the Company) is a ommissioner o, C . t d . th U 't d K\" d I r,, coine-tax, ompany mcorpora e m e m e mg om. ts west Bengal head office is also there. It, however, does business in India also. In some of the previous years, the Com- Hidayatullah J. pany was required to pay excess profits tax both in England and in India. When it did so, it obtained deduction of the amounts from its profits and gains for purposes of the Indian Income-tax Act, under s. 12(2) of the Indian Excess Profits Tax Act..\n\nIn the assessment year 1947-1948 which corresponded to the accounting year of the Company ending on October 31, 1946, it obtained a repayment of Rs. 2,31,009 out of the excess profits tax paid in England. This was under s. 28(1) of 4 & 5, Geo. VI, Ch. 30. For purposes of the levy of the Indian Income-tax, this sum 1was included in the taxable profits of the Company by the Income-tax Officer.\n\nHe purported to act under s. 11(14) of the Indian Finance Act, 1946 (hereinafter called the Act).\n\nThe income of the Company in India was held to be Rs. 6,34,937 (including the sum of Rs. 2,31,009) while the income outside the taxable territory was held to be Rs. 4,29,620.\n\nApplying s. 4A(c)(b) of the Indian Income-tax Act, the Income-tax Officer. assessed the Company on its total world income.\n\nThe appeals of the Company made successively to the Appellate Assistant Commissioner and the Incometax Appellate Tribunal were dismissed. The Tribunal, however, referred the following questions of law to the High Court at Calcutta under s. 66 of the Indian Income-tax Act :\n\n\"(1) Whether on the above facts and circumstances of this case the Tribunal was right in holding that the sum of Rs. 2,31,009 was income of the assessee during the assessment year under consideration and was liable to be assessed under the Indian Income-tax Act? and {2) If so, whether this amount could not be taken into consideration for determining the residence of the\n\nassessee under s. 4A(c)(b) of the Indian Income-tax\n\nI959\n\nAct ?, ,, Mcgregor & This reference was heard by Chakravarti, C. J., and Balfour Ltd.\n\nLahiri, J., who by their judgment dated August 26, v. 1954, answered the first question in the affirmative Commissioner of and the second in the negative.\n\nThey, however, ncoe-tozi granted a certificate under s. 66A of the Indian Inest enga come-tax Act, read with Art. 135 of the Constitution Hidayatullah J. to appeal to this Court. No appeal has been filed on behalf of the Department, and the second of the two questions must be taken to be finally settled in this case.\n\nThe contentions of the Company in this appeal, thus, concern only the first question, and they are two: It was said firstly thats. 11(14) of the Finance Act could not be made applicable to the assessment year 1947-1948, because the provision was not incorporated in the Indian Income-tax Act or repeated in the subsequent Finance Acts. This argument was not seriously pressed before us, and beyond mentioning it, Mr. Mitra for the Company did not choose to elaborate it. We think that Mr. Mitra has been quite correct in not pursuing the matter. The section framed as it is, does apply to subsequent assessment years just as it did to the assessment for 1946-194 7, and prima f acie, it was not necessary to follow one of the two courses detailed above. Since the point was not pressed before us, we need not give our reasons here.\n\nIt was said nextly that the High Court was in error in construing s. 11(14) of the Finance Act as a provision which created a liability proprio vigore, as if it was a charging section. It was contended that the repayment was not within the taxable territory, and in view of the answer to the second question as to the applicability of s. 4A(c)(b}, there could be no tax upon it. On behalf of the Department it was argued that the sub-section created a charge by itself and the fiction therein created being sufficient and clear, it was not necessary to consider where the income arose.\n\nSection 11(14) of the Finance Act reads as follows:\n\n\"Where under the provisions of sub-section (2) of\n\n•959 Section 12 of the Excess Profits Tax Act, 1940 (XV of\n\nMcgregor & 1940), excess profits tax payable under the Jaw in Balfour Ltd. force in the United Kingdom has been deducted in v. computing for the purposes of income-tax and super- Commissioner of tax the profits and gains of any business, the amount\n\nIncome-tax. of any repayment under sub-sectiori (1) of Section 28 of West Bengal the Finance Act. 1941, (4 & 5, Geo. 6, c. 30), as amend-\n\nHidayatullah J. ed by Section 37 of the Finance Act, 1942 (5 & 6, Geo 6, c. 21 ), in respect of those profits, shall be deemed to be income for the purposes of the Indian Income-tax Act, 1922, and shall, for the purpose of assessment to income-tax and super-tax, be treated as income of the previous year during which the repayment is made.\" This section may be compared with 1 R. 4(1) of the Rules which are applicable to cases I and II of sch.\n\nD of the Income-tax Act, 1918 (8 & 9, Geo. V, c. 40):.\n\n\"Where any person has paid excess profits duty, the amount so paid shall be allowed as a deduction in computing the profits or gains of the year which included the end of the accounting period in respect of which the excess profits duty has been paid; but where any person has received repayment of any amount previously paid by him by way of excess profits duty, the amount repaid shall be treated as profit for the year in which the repayment is received.\"\n\nThe English rule above quoted deals first with the deduction of the amount paid as excess profits duty from the profits or gains of .the year which inclndes the end of the accounting period in respect of which the excess profits duty has been paid,-a matter dealt with in s. 12(2) of the Indian Excess Profits Tax Act, and next with the assessability to tax of the amount repaid from the excess profits duty previously charged -a matter dealt with in sub-ss. (11) and (14) of s. 11 of the Finance Act.\n\nThe object and purpose of the legislation in each case is the same, and though the two provisions are not ipsissima verba, tpey are substantially in the same words and also in pari materia. The concluding words of the English rule \"the amount repaid shall be treated as profits of the year in which the repayment is received \", and which have been interpreted by\n\n(2) s.c.tt. SUPREME C0t1RT lt~POR'J.IS as9\n\nEnglish Courts may specially be compared with the concluding words of subs. (14) of s. 11 of the :Finance Mcgregor &.\n\nAct, which run: Balfour Ltd. \"any repayment ...... shall, for the purposes of v. assessment to income-tax and super-tax, be treated as Commissioner of the income of the previous year during which the Income-tax, repayment is made.\" West Bengal There can be no doubt that the intention underlying the two provisions is the same, and the language is substantially similar.\n\nNow, the English rule was interpreted by the English Courts to create a liability irrespective of considerations arising from the general provisions of the income-tax law. In Eglinton Silica Brick Co., Ltd. v.\n\nMarrian (1), the assessee company which had gone into voluntary liquidation in 1904 was carried on by the liquidator till 1921 when the business was sold to another company which took it over on October 5, 1921, and the business of the appellant company then ceased. The income-tax assessment for the year 1921- 22 was apportioned between the two companies and inasmuch as the assessee company had suffered a loss, it was reduced to nil in its case. The assessee company then received£. 7,224 and£. 1,150 in 1952 after it had ceased to carry on business as repayments of excess profits duty, and this income was assessed under R. 4(1) above mentioned. The question was whether this was right.\n\nThe case was considered by the Lords of the First Division, and they gave their opinion against the assessee firm.\n\nThe Lord President (Clyde) with whom Lords Skerrington, Cullen and Sands agreed (Lord Sands dubitans) explained the two parts of the rule as follows:\n\n\"The principle is obvi.ous. It is that if a taxpayer has made profits assessable (directly, or indirectly through the operation of the three years' average) to income tax, and the Revenue takes a share of those profits in the name of Excess Profits Duty, it is only fair that the profits actually assessed to Income Tax should suffer some corresponding deduction ......... \"\n\n(1) (1924) 9 Tax Cas. 92, 98.\n\nHidayatullah J.\n\nMcgregor &> Balfour Ltd. v.\n\nCom1nissioner of Income tax, West Bengal \"'\n\nJfidayatullah ].\n\nThe problem which arose in the case of repay. ment of Excess Profits Duty was different.\n\nNobody knew or could know how soon, or how late, repayment might fall to be made; nor whether the business whose profits were assessed to Excess Profits Duty would be in the same hands when repayment (if any) came to be made. By that time the business might ha\\e ceased to be in existence. Repayment might therefore have to be made to a person who was not carrying on. the original business. The original trader might have given up business, died, and an executor might have come in his place. The solution provided for all these cases is that contained in the second part of the para. graph, according to which the amount repaid to any person is to be ' treated as profit for the year in which the repayment is received.' It is obvious that the amount of the former trading profits so repaid could not actually be trading profits for such year. None the less, the amount repaid is to be treated as if it were that which-in fact-it is not, and cannot be. The amount repaid consists of trading profits which reach the taxpayer out of their proper time. However belated his fruition of them, they have not lost their original character as trading profits. In my opinion, this is what explains the position of paragraph (1) of l't ule 4 as part of the Rules under Cases I and II of Schedule D, which are concerned with the profits of trades and vocations. That some artificia.l rule should be formulated was in the circumstances inevitable, and the highly artificial character of the rule adopted is shown by the words in which it is expressed-' the amount repaid shall be treated lts profit for the year in which the repayment is received.' In short, the amount repaid is deemed to be something that it is not, and could not in the actual circumstances possi. bly be. Nor is this in any. way unreasonable or contrary to what might be expected, if regard be had to the subject-matter. For, as has been seen, the Excess Profits Duty was itself a part of the trading profits computed by methods familiar under the Income Tax Act. It was not merely a part of something which entered into the computation of profit; it was actual\n\ncomputed profit.\n\nAnd, but for the disparity between the' accounting period' and the three years' average, it would have been directly assessable to Income\n\nTax.\"\n\nA similar view was taken in the Court of Appeal by Lord Hanworth, M. R., Scrutton, L. J., u.nd Romer, J. (Scrutton, L. J., dubitans) in A. & W. Nesbitt Ltd. v.\n\nMitchell (1).\n\nThere too, the assessee company after suffering losses in the accounting period May 1 to November 25, 1920, went into liquidation and ceased to trade. On April 22, 1924, the repayment of Excess Profits Duty took place, and this was assessed to income-tax. The Master of the Rolls described the amount received as repayment in these words:\n\n\"But in respect of what is that payment made?\n\nIt is not a legacy, it is not a sum which has fallen from the skies ; it is a sum which is repaid because there was too large a sum paid by the Company to the Revenue Authorities over the whole period during which Excess Profits Duty was paid, and that sum means and is intended to represent a repayment of a sum which was paid by them in respect of the duty charged upon the excess profits of their trading. It comes back, therefore, not having lost its character but being still the repayment of a sum-too much, it is true,-but a sum taken out of the profits which were made by the Company in the course of its trading, profits which at the time they were made were subject to Income Tax and subject to Excess Profits Duty, and that is the character of the repayment that has been made.\" Dealing with the rule, the Master of the Rolls observed:\n\n\"I have pointed out, this is a case where the Company has received pay.mentof an amount previously paid by way of Excess Profits Duty and having that characteristic attaching to it ; and we are told by the Statute that when such a sum is repaid it is to be treated as a profit for the year in which the repayment is received. It is said it may be treated as a\n\n{1) (1926) n Tax Cas. 2n, 217, 218. 46\n\nI959\n\nMcgregor & Balfour Ltd. v.\n\nCommissioner of\n\nIncome-tax, West Bengal\n\nHidayatullah ].\n\nz959 profit; but it ought not to be treated as an assessable profit. The answer, to my mind, is that it is paid back\n\n:.~;;:: 0 ~,~ not by way of a sum which has no origin or ancestry; it v. is a sum which represents a repayment of the amount Commissioner of previouly paid by that Company in the form of Excess\n\nInoomo-tax.\n\nProfits Duty upon their trading. If it is to have that West Bengal character and is to be treated as such a profit, altho-\n\nHidayatullah 1. ugh it be a repayment of sums paid in respect of profits, it is to be treated as a profit for the year in which the repayment is received.\n\nThe word 'treated' indicates that it is to be dee-; ed to be something which in fact it is not, or whether it is so or not it is to be treated as a profit, and therefore it is, to my mind, impossible to discuss the question of whether or not difficulties may arise or whether it may be criticised as financially not quite sound that it should be treated in this method in that particular year ; but we are told by the Statute that it is to be treated as a profit for the year in which the repayment is received.\" In a case similar on facts as the ones cited above (Kirke's Trustees v. '1.'he Commissioners of Inland Revenue(')), the House of Lords (Viscount Cave, L. C., Lord Atkinson, Lord Shaw of Dunfermline, Lord Sumner and Lord Carson) placed the same construction upon the latter part of H. 4(1).\n\nThe following passage in the speech of Lord Sumner, explaining the extent of the fiction in the latter part of the Rule, is extremely instructive :\n\n\"The express mandatory terms of the sentence show, in carefully chosen language, that he is to submit to something by reason of his having previously enjoyed this advantage in the shape of repayment of an amount previously paid by way of Excess Profits Duty. Something which is not a profit, but is only a money repayment, something which may not result in a profit, because although trading goes on there is so great a loss on the year that this repayment does not make up the deficit, something which may not be a trading profit, because trading has ceased altogether, nevertheless is to be treated as profit and as profit for the year. ' Treated ' is a fresh word free from legal technicality.\n\n(1) (1926) 11 Tax Cas. 323, 332.\n\nIt is the widest word that could be chosen. The Legisz959 lature avoided saying 'shall be assessed as' or 'shall h . f fi d l , Mcvego• & be brought into t e computat10n o pro t an oss , Balfou• Ltd. and simply says that something which is not profit v. but mere payment shall be treated as profit, which it Commissioner of may or may not be, and as profit for the xear. I think, Income-tax, therefore, that the word 'treated' is an apt word to West Bengal impose a charge\".\n\nHiaayatullah J.\n\nSee also in this connection Olive and Partington Ltd. v.\n\nRose (1).\n\nThese cases were relied on by Chakravarti, C. J., and Lahiri, J., in the judgment under appeal, and the learned Judges pointed out that the addition of the words \" for the purposes of assessment to income-tax and super-tax\" rather strengthen the reasoning in its application to the words of the Indian Statute. We agree with this statement. It is to be noticed that the sub-section creates two fictions.\n\nBy the first fiction it makes the amount of any repayment 'income' for the purposes of the Indian Income-tax Act, and goes on to say that that ' income ' shall be ' treated ' for purposes of assessment to income-tax and super-tax, as the income of the previous year.\n\nMr. Mitra, for the Company contends that no doubt the 'amount may be treated as' income' for the purposes of the Indian Income-tax Act, but the Department is still under a duty to prove that the Company is liable to tax at all.\n\nAccording to him, this will ha.ve to be treated as income received outside the taxable territory, because if the fiction contemplated its being treated as 'within the taxable territory ', it would have said so specifically. In our opinion, this submission cannot be accepted.\n\nThat this would have been taxable income but for the provisions of s. 12(2) of the Excess Profits Tax Act, goes without saying. The income character of the receipt is restored by the fiction, and it is to be brought under assessment without any further proof than this that it has been received as repayment of tbe United Kingdom tax, in respect of which a deduction was made in the earlier years. The distinction between\n\n(r) (1929) 14 Tax Cas. 701.\n\n'959 incomes within and without taxable territories is made unnecessary by demanding that this amount by way Mcgregor &· f h ]] b b h d ' Balfour Ltd. o repayment s a e roug t to tax an ' treated as v. income within the previous year. The effect thus is Commissioner of that the sub-section charges the said amount with a\n\nIncome-tax. liability to tax by its own force or ta borrow the words West Dengal of Lord Sumner, is apt to 'impose a charge'.\n\nIn our opinion, the amount received as repayment Hidayatullah J. of excess profits tax must be deemed to be 'income '\n\nI959\n\nMarch I6.\n\nfor the purposes of the Indian Income-tax Act and for assessment it must be treated as income of the previous year. The answer to question No. 1 given by the Calcutta High Court was thus correct.\n\nThe appeal fails, and is dismissed with costs.\n\nAppeal dismissed.\n\nADDITIONAL COLLECTOR, BAN ARES\n\nMAHARAJ KISH ORE KHANNA\n\n(JAFER IMAM, A. K. SARKAR and K. SuBBA RAo, JJ.)'\n\nExecution of Decrees-Decree passed by Special Judge in U.P. • -If can be exernted outside U. P.-Extra-territoriality-Transfer of such decree-Collector and Additional Collector, if exercise same powers-Limitation-U. P. Encumbered Estates Act, r934 (U. P.\n\nXXV of I934), ss. r4(7) and 24(3)-Code of Civil Procedure, r908 (V of r908), s. 39-Indian Limitation Act, r908 (IX of r908), Art. r82.\n\nThe respondent, who owned landed properties at Banaras in Uttar Pradesh and at Purnea in Bihar, was heavily indebted and applied to the Collector, Banaras under s. 4 of the U. P. Encumbered Estates Act, 1934, for liquidation of his debts.\n\nThe Collector, acting under s. 6, forwarded the application to the Special Judge, appointed under the Act who on March 21, 1940, passed after the enquiry directed by the Act three money decrees in favour of three creditors of the respondent and forwarded them to the Collector for execution. Section 14(7) of the Act provided that such decrees were to be deemed to be decrees of a civil Court", "total_entities": 46, "entities": [{"text": "355\n\nMCGREGOR & BALFOUR LTD", "label": "PETITIONER", "start_char": 34, "end_char": 61, "source": "metadata", "metadata": {"canonical_name": "MCGREGOR & BALFOUR LTD", "offset_not_found": false}}, {"text": "THE COMMISSIONER OF INCOME-TAX,\n\nWEST BENGAL", "label": "RESPONDENT", "start_char": 67, "end_char": 111, "source": "metadata", "metadata": {"canonical_name": "THE COMMISSIONER OF INCOME-TAX, WEST BENGAL", "offset_not_found": false}}, {"text": "B. P. SINHA, J.", "label": "JUDGE", "start_char": 114, "end_char": 129, "source": "metadata", "metadata": {"canonical_name": "BHUVNESHWAR PRASAD SINHA*", "offset_not_found": false}}, {"text": "L. KAPUR", "label": "JUDGE", "start_char": 130, "end_char": 138, "source": "metadata", "metadata": {"canonical_name": "J.L. 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{"document_id": "1959_2_364_375_EN", "year": 1959, "text": "364 SUPREME COURT REPORTS [1959] Supp.\n\n'959 incomes within and without taxable territories is made unnecessary by demanding that this amount by way Mcgregor &· f h ]] b b h d ' Balfour Ltd. o repayment s a e roug t to tax an ' treated as v. income within the previous year. The effect thus is Commissioner of that the sub-section charges the said amount with a\n\nIncome-tax. liability to tax by its own force or ta borrow the words West Dengal of Lord Sumner, is apt to 'impose a charge'.\n\nIn our opinion, the amount received as repayment Hidayatullah J. of excess profits tax must be deemed to be 'income '\n\nI959\n\nMarch I6.\n\nfor the purposes of the Indian Income-tax Act and for assessment it must be treated as income of the previous year. The answer to question No. 1 given by the Calcutta High Court was thus correct.\n\nThe appeal fails, and is dismissed with costs.\n\nAppeal dismissed.\n\nADDITIONAL COLLECTOR, BAN ARES\n\nMAHARAJ KISH ORE KHANNA\n\n(JAFER IMAM, A. K. SARKAR and K. SuBBA RAo, JJ.)'\n\nExecution of Decrees-Decree passed by Special Judge in U.P. • -If can be exernted outside U. P.-Extra-territoriality-Transfer of such decree-Collector and Additional Collector, if exercise same powers-Limitation-U. P. Encumbered Estates Act, r934 (U. P.\n\nXXV of I934), ss. r4(7) and 24(3)-Code of Civil Procedure, r908 (V of r908), s. 39-Indian Limitation Act, r908 (IX of r908), Art. r82.\n\nThe respondent, who owned landed properties at Banaras in Uttar Pradesh and at Purnea in Bihar, was heavily indebted and applied to the Collector, Banaras under s. 4 of the U. P. Encumbered Estates Act, 1934, for liquidation of his debts.\n\nThe Collector, acting under s. 6, forwarded the application to the Special Judge, appointed under the Act who on March 21, 1940, passed after the enquiry directed by the Act three money decrees in favour of three creditors of the respondent and forwarded them to the Collector for execution. Section 14(7) of the Act provided that such decrees were to be deemed to be decrees of a civil Court\n\nof competent jurisdiction. Section 24(3) of the Act provided x959 that for purposes of execution against property outside U. P. such decrees were to be deemed to be in favour of the Collector. The Additional execution of the decrees was commenced by the Additional Collector, Banares Collector, Banaras against the respondent's properties in U. P. v.\n\nThereafter, the Additional Collector applied to the Additional Maharaj Civil Judge, Banaras, and on January 4, 1947, got the said decrees Kishore Khanna transferred to the Subordinate Judge, Purnea and on March 17,\n\n1947. he applied to the Subordinate Judge for execution of the decrees by attachment and sale of the respondents properties at Purnea. The Subordinate Judge made an order directing execution to issue, but, on appeal, the High Court set aside the order on the ground that the Subordinate Judge had no jurisdiction to entertain the executiol). application.\n\nHeld, that the Subordinate Judge Purnea had jurisdiction to execute the decrees. By virtue of s. 14(7) of the Act a decree of the Special Judge was, within U. P., a decree for all purposes of the Code of Civil Procedure and could properly be transferred under s. 39 of the Code for execution to a Court outside U. P.\n\nNo question of extra-territorial operation of the Act arose in the application of s. 14(7) to the decrees as the Purnea Court was merely applying the U. P. Act to decrees passed in U. P.\n\nFor the purposes of execution and sale the Additional Collector was to be deemed to be the Collector as he exercised the Collector's powers in this regard. As such the applications for transfer and execution of the decree were properly made by the Additional Collector.\n\nIt was the same Court which exercised the powers of the Additional Civil Judge as also those of the Special Judge. The order of transfer of the decree made by the Additional Civil Judge could be treated as having been made by the Special Judge. As such it was made by the same Court which passed the decrees and was a good order under s. 39 of the Code.\n\nThe application for execution before the Subordinate Judge, Purnea was made while execution proceedings in respect of the same decrees were pending before the Additional Collector, Banaras and was a continuation of the same. No question of limitation could arise in respect of such an application. ...\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 298of1955.\n\nAppeal from the judgment and order dated April 28, 1953, of the Patna High Court in Appeal from Original Order No. 90 of 1949, arising out of the judgment and order dated January 25, 1949, of the Sub-Judge, Purnea, in Misc. Case No. 54 of 1947.\n\nSir Iqbal Ahmad, S. N. Andley, J. B. Dadachanji and Rameshwar Nath, for the appe1lant.\n\n'959 M. G. Setalvad, Attorney-General for India and R. G.\n\nAdditional Prasad, for the respondent.\n\nCollector, Banares\n\n1959. March 16.\n\nThe Judgment of the Court v. was delivered by Maharaj Kishore Khanna SARKAR, J.-This appeal arises out of a proceeding in execution of an adjudication made under the pro- Sarkar J. visions of the United Provinces Encumbered Estates Act, 1934 (U. P. XXV of 1934), an Act passed by the legislature of the United Provinces, now called the Uttar Pradesh. The questions that arise in this appeal largely turn on the provisions of that Act and they have therefore to be referred to.\n\nThe Act was intended to give relief to the proprie-. tors of certain landed properties in the United Provinces.\n\nSection 4 of the Act enabled a proprietor of such landed properties to make an application in writing to the Collector of the District in which any of his lands is situate, stating the amount of his debts and asking for the application of the Act to him.\n\nUpon such an application being made, the Collector is to make an order under s. 6 forwarding it to a Special Judge appointed under the Act who, under s. 3 is any civil judicial officer appointed for a local area, to exercise the powers conferred and to perform the duties imposed, by the Act.\n\nSection 7 of the Act provides that upon the making of an order by the Collector under s. 6, subject to certain exceptions which it is not necessary to enumerate, all proceedings pending in the courts in the United Provinces in respect of a debt due by the applicant shall be stayed and all execution processes issued against him by such courts shall become null and void and no fresh process in execution shall be issued against him, nor any fresh suit or other proceeding instituted. The Special Judge after he has received the application sent to him by the Collector is required by s. 8 to call upon the applicant to submit a written statement verified in the manner of a plaint, setting out full particulars of his debts, the names and addresses of his creditors and the nature and extent of his proprietary rights in land as also of all his properties which are liable to attachment under s. 60 of\n\nthe Code of Civil Proced\"ure.\n\nUnder s. 9 the Special r959 Judge has then to publish a notice calling upon per- Aaai 1 sons having claims against the applicant to submit the Collector'. '°;; nares same within a time specified. Section 10 states that v. the claimant shall give full particulars of his claim Maharaj and of the applicant's properties. Section 11 provides Kishore Khanna that the Special Judge will publish a further notice Sarkar f. specifying the properties mentioned by the applicant as belonging to him and any person wishing to make a claim to any such property has to do so within a certain period. The same section gives power to the Special Judge to decide the claims made to the properties and provides that the decision made by him is • to be deemed to be a decree of a civil court of competent jurisdiction. Section 14 lays down that the Special Judge will inquire into the claims submitted by the creditors against the applicant and decide the questions in issue on the same principles as .those on which a court of law would have decided them, but he has the power to reduce the interest due and to give relief to the applicant in respect of such claims under certain specified United Provinces Acts. Sub-section (7) of s. 14 provides that if upon enquiry the Special Judge finds that any amount is due to any claimant he shall pass a simple money decree for such amount together with costs and interest and \" such decree shall be deemed to be a decree of a civil court of competent jurisdiction \" but it shall not be executable within the United Provinces except under the provisions of the Act. The next section to be referred to is s. 19 which requires the Special Judge to send the decrees grantedunder s. 14(7) to the Collector for execution in accordance with the provisions of Chapter V of the Act and to inform him of the nature and extent of the property which he has found to be liable to satisfy the debts of the applicant. Then come the provisions as to execution contained in Chapter V.\n\nThe sections in this Chapter provide that the Collector will himself and without being required to be moved for the purpose by any person, proceed to execute the decree against the properties of the applicant within the United Provinces by the various methods indicated, and for\n\n'959 realising the value of the applicant's properties the Col- Aaai 1 lector shall have all the powers of a civil court for the Collecto: ' 0 ;:nares execution of a decree.\n\nWith regard to the properties ·•. of the applicant outside the United Provinces, the Act Maharaj could not provide for execution.\n\nTo cover such cases Kishore Khanna it was enacted by s. 24(3) -that for the purpose of\n\nSarkar ]. execution against property outside the United Provinces the decrees passed by the Special Judge would be deemed to be decrees in favour of the Collector. These are all the provisions of the Act that need be referred to for the purposes of this case.\n\nThe facts may now be stated. The respondent was • the proprietor of landed properties in the United Provinces and was entitled to claim relief under the Act.\n\nRe became heavily encumbered in debts. It is not necessary to go into his financial embarrassment in great detail and it will be enough to say that in 1926 and 1927 he had created several mortgages on his properties in favour of the Allahabad Bank, the Banares Bank and a person called Kalia, for very large sums.\n\nIn 1929, the Banares Bank filed a suit against the respondent in the Court of the Additional Sub-Judge, Banares, in the United Provinces for enforcement of its mortgage making the other creditors of the respondent named above parties to the suit. A decree was passed in that suit giving the creditors priority in a certain order. The Allahabad Bank not being satisfied with that order of priority, filed an appeal in the High Court at Allahabad which was decided in its favour.\n\nWhile the appeal was pending, the respon- -dent applied to the Collector of Banares for relief under the Act.\n\nThe procedure laid down in the Act as earlier summarised was duly followed and on March 21, 1940, the Special Judge of Banares to whom the application had been forwarded by the Collector, passed three money decrees in favour of the three creditors of the respondent mentioned above in a certain order of priority with which we shall not be concerned in this case. The total amount of such decrees came nearly to rupees nine lacs. He then sent the decrees to the Collector of Banares for execution as required by the Act. The execution of the decrees\n\nwas thereafter commenced by the Additional Collecx959 tor, Banares under the provisions of the Act against Add.. 1 h t • . h U . d p . itiona t e proper ies in t e mte rovmces.\n\nCollector, Banares The respondent owns an estate in the district of v.\n\nPurnea in Bihar, called the Semapur estate. Under Maharaj s. 24(3) of the Act earlier mentioned, the decrees Kishore J(hanna passed by the Special Judge are to be deemed to be d £ h f Sarkar ]. ecrees in avour of the Collector for t e purpose o execution against the Semapur estate. The Additional Collector, Banares, applied to the Additional Civil Judge, Banares, for transmission of the said decrees to the Court of the Subordinate J u<lge, Purnea for execution and an order for transmission of the decrees to the Court at Purnea was accordingly made by that Judge on January 4, 1947. Thereafter on March 17, 1947, the Additional Collector, Banares, applied to the Subordinate Judge, Purnea, as the transferee Court to execute the decrees by attachment and sale of the Semapur estate. The Subordinate Judge thereupon made an order directing execution to issue as sought.\n\nThe respondent preferred an appeal to the High Court at Patna from this order of the Subordinate Judge, Purnea and his appeal was allowed with the result that the execution of the decrees against the Semapur estate failed.\n\nThe present appeal is. by the Additional Collector, Banares against the order of the High Court.\n\nThe first question that arises in this appeal is whether the Subordinate Judge, Purnea, had jurisdiction to order execution of the decree transferred to him.\n\nThe High Court held that he did not have that jurisdiction. The matter was put in this way. The decree was not a decree under the Code of Civil Procedure.\n\nIt was only to be deemed as such because of s. 14(7) of the Act. The Act was an Act of the United Provinces legislature which could not pass a legislation having effect outside the United Provinces.\n\nThe operation of s. 14(7) of the Act had therefore to be confined within the borders of the United Provinces.\n\nThe Subordinate Judge, Purnea could not apply that section in Bihar and treat the decree as a decree\n\n' 959 under the Code. If he could not do so he could not Additional order execution of the decree. If he were permitted Collector, Banares so to apply the Act, then an Act of the legislature of\n\nv. . the United 'Provinces would be indirectly affecting MaharaJ property outside the United Provinces which it could Kishore J(hanna t d' tl d Th A t Id b 1 d . B. _ no irec y o. e c cou e app ie m 1har\n\n5., kar J. only by giving it an extra-territorial operation. This the law did not allow. So the decree could not be executed in Purnea: We think that this argument is fallacious.\n\nNo question of any extra-territorial application of the United Provinces Act, either directly or indirectly, arises in this case. It is clear that by virtue of s. 14(7) of the Act, a decree of the Special Judge under the Act is within the United Provinces, a decree for all purposes of the Code. It could therefore be transferred decree under s. 39 of the Code c;>f Ci vi! Procedure to a court outside the United Provinces, for execution. Now when a decree is transferred, it is the duty of the transferee court to execute it by all methods provided by the Code of Civil Procedure. But it is said that the transferee court must be satisfied that it is a decree under the Code of Ci vi! Procedure before it can order execution under that Code.\n\nHow then is the transferee court to decide that ? . It has before it a decree passed not by itself but by another court. It has therefore to satisfy itself that the decree was one w hicb, for that court, was a decree passed under the Code. In order to do that it is a_sked to apply .the United Provinces Act to the decree passed within the United Provinces. How can it be said that if it so applies the United Provinces Act it is giving it an extra-territorial operation? It is doing nothing of the kiud. It is applying an Act of the United Provinces to something which happened within the territories of those Provinces; it is applying an United Provinces Act to a matter within the competence of the legislature of the United Provinces to legislate upon.\n\nNo doubt a court outside the United Provinces is applying a statute of those Provinces, but that does not amount to giving extra-territorial operation to that tatute. If the statute is being so applied\n\nI959 to one of its legitimate objects, it is not being given any extra-territorial operation at all.\n\nW f h fi d d•ffi 1 t t h th Additional e urt er n it i cu t o apprema e ow e c 11 1 B application by the Subordinate Judge of Purnea of the\n\n0\\_ anares United Provinces Act to the decree of the Special Maharaj Judge, Banares, sent to him for execution, results in Kishore Khanna the United Provinces Act affecting property outside the United Provinces. The only result of such appli- Sarkar J. cation is to remove the objection that that decree is not a decree of a court in the United Provinces passed under the Code ; the Act is not thereby made to affect property outside the United Provinces. Of course, if that decree is a decree under the Code it can be executed against any property outside the United Provinces.\n\nThat however is not the result of the United Provinces Act but of the Code of Civil Procedure which is a central legislation and applies to Bihar also.\n\nThe High Court was therefore wrong in thinking that the Subordinate Judge, Purnea, had no jurisdiction to execute the decree passed under the Act within the United Provinces and sent to him for execution.\n\nIt was then contended that the order of transfer of the decree was invalid because under s. 39 of the Code such an order could be made only on the application of the decree-holder and in the present case it had not been made on his application. His point was this.\n\nUnder s. 24(3) of the Act, a decree of the Special Judge is to be deemed to be a decree in favour of the Collector for the purpose of execution against property outside the United Provinces. Therefore, in the present case it was the Collector, Banares, who was the decreeholder and he alone could apply for the transfer of the decree. Actually however the order for the transfer had been made in this case on the application of the Additional Collector, Banares. So it was said the order was invalid. Now this argument depends upon the Collector and the Additional Collector being different persons. It is clear however that they are not.\n\nThat appears from ss. 14 and 14A of the United Provinces Land Revenue Act, 1901, to which our attention was drawn. Section 14 gives power to the Government to appoint a Collector for discharging the\n\n•959 duties mentioned in the Act or anv other law for the\n\nAdd. . 1 time being in force.\n\nSection 14A(l) gives power to Co!lector' 1 '°;:nares the Government to appoint an Additional Collector. ',,.\n\nSub-section (3) of s. 14A provides that the \"Addi- Mah•raj tional Collector shall exercise such powers and perform Kishore Khanna such duties of a Collector\" as the Government may - direct. The Additional Collector therefore exercises .Sarkar J. . such of the powers and discharges such of the functions of the Collector, as the Government directs him to do.\n\nWe have before us a document containing such an order by which the work of sale and execution which under the Encumbered Estates Act had to be done by a Collector, had been entrusted to the Additional Collector. It follows that for the purposes of execution and sale under the Act, the Additional Collector is to be deemed to be the Collector as he exercises the latter's powers in this regard. The Additional Collector was hence quite competent to apply for the transfer of the decree . . The third point against the validity of the order of the learned Subordinate Judge was that under s. 39 of the Code the decree could be transferred only by the Court which passed it. It was said that in the present case it is only by virtue of s. 14 of the Act • that the decision of the Special Judge is deemed to be a decree ; that since it was his decision, he must be deemed to have passed it. It was then pointed out that the order for the transfer of the decree had in fact been made by the Additional Civil Judge, Banares, and not by the Special Judge, Banares, and hence that order was of no effect.\n\nThis is an argument with which we are not much impressed. It has been pointed out to us that the powers of a special Judge under the Act were conferred on the Court of the Additional Subordinate Judge, Banares, by the United Provinces Government's Revenue Department notification No. 767-Rev. published in the United Provinces Gazette of the 12th October, 1935. The Additional Subordinate Judge later came to be called the Additional Civil Judge. It is therefore the same court which exercises the powers of an Additional Civil Judge as also those of a Special Judge under the Act.\n\nWe find\n\nno difficulty in treating the order of transfer as havz959 ing been made by the Special Judge. The fact that All;;- 1 the order purported to be made by the Additional Collector: io;:narcs Civil Judge was a matter of mere irregularity and canv. not make it invalid. Nor do we find any lack of Maharaj power in the Special Judge to order a transfer of the Kishore Hhanna decrees .. The Act provides hat his adjudication Sarkar J. would be treated as a decree of a civil court of competent jurisdiction. The execution of such a decree outside the United Provinces is also clearly contemplated bys. 24(3).\n\nWe have earlier held that such execution is permissible in law. That being so, in order to give effect to the provisions of the Act it has to be held that the Special Judge must be deemed to be a court which passed the decree within the meaning of s. 39 of the Code of Civil Procedure. Nor does there seem to be any objection to think that the Special Judge is a civil court. From the provisions of the Act earlier set out there is no doubt that he adjudicates upon rights of the parties and acts in the same way as any other civil court would do. Indeed, apart from the fact that the proceedings before him do not commence by the filing of a plaint, we find no distinction between him and a court as ordinarily understood. The order of transfer of the decree is hence, in our view, clearly a good order.\n\nLastly, it was said that the decree was barred by limitation long before the order for its transfer was made. It was contended that art. 182 of the Limitation Act governed the case, and the application for its execution had been made beyond the time limited.\n\nThe question is, does the article apply? The High Court held that that article had no application to the present case and that no question of limitation arose \" for the execution proceeding in Purnea Court is merely a continuation of the execution proceeding pending before the Collector of Banares \". In our opinion, the High Court was right in the view that it took. It is quite clear that if the application for execution with which we are concerned was made in a pending execution proceeding, no question of the application of art. 182 arises. It has long been\n\n1959 recognised by the courts in our country that a right to . . continue a proceeding which is pending is a right Add•trnnal h\" h f d d d f c u 1 B w IC arises rom ay to ay an no question o any 0\n\n0 '~. anarcs bar of limitation with regard to the enforcement of\n\nMaharaj such a right arises: See Kedar Nath Dutt v. Harra J(ishoro Khanna Chand Dutt('); Subba Ghariar v. Muthuveeran Pillai (2).\n\nThe question then is, was the application for execu- Sarkar J. tion which has resulted in the order under appeal, one for continuing a pending execution proceeding? It is not disputed that all along since the decree was sent by the Special Judge to the Collector for executionand before that date the decree was not executableit has continuously been in execution under the provisions of the Act by the Additional Collector, Banares, and that such execution proceeding was pending on the date of the present application for execution. The question thus is, whether the execution proceeding started in the Court of the Subordinate Judge, Purnea, was a continuation of the execution proceeding by the Additional Collector, Banares. We think it was.\n\nWe have to remember thats. 14(7) of the Act which said that an adjudication of the Special Judge was to be deemed to be a decree also provided that that decree would not be executable within the United Provinces except under the provisions of the Act.\n\nWe have also to remember that the Act provided that as against the properties within the United Provinces the decree could only be executed by the Collector on his own by the various methods provided. We may also point out that s. 24(4) provides that for the purpose of such execution the Collector is to have all the powers of a civil court for the execution of a decree. It is therefore clear that the only mode of execution of the decree within the United Provinces contemplated by the Act is the execution by the Collector. Within the United Provinces the execution of the decree by the Collector would be deemed to be an execution under the Civil Procedure Code. The execution by the Collector is execution of what is a decree within the Code. When the decree is executed outside the United Provinces, where, as already stated, it can be legally\n\n(1) (1B82) U,.R. 8 Cal. 420.\n\n(2) (1912) I.L.R. 36 Mad. 553.\n\nexecuted, the amount realised by the execution by the\n\nI959 Collector has to be taken into account.\n\nWhen the Adar 1 Subordinate Judge, Purnea, has to decide the question Collector'. '°;:nares whether the application for execution made to him is v. in continuance of an existing execution proceeding, he Maharaj has to recognise the proceeding before the Additional Kishore Khanna Collector, Banares, as a proceeding in execution under the Code for it is so under the Act. In doing this, for Sarkar ].\n\nthe reasons earlier mentioned, he would not be giving any extra-territorial operation _to the Act. It seems to us therefore that the execution of the decree by the Collector must be deemed to be execution of a decree for all purposes and therefore an application l)'.lade to the Subordinate Judge, Purnea, for execution of the same decree while an execution proceeding was pending before the Collector, must be a continuation of the r oo:ecution last mentioned.\n\nNo question of limitation can arise in regard to such an application.\n\nWe think therefore that this appeal must succeed.\n\nWe set aside the order of the High Court and restore the order of the Subordinate Judge, Purnea. The respondent will pay the costs of the appellant in this Court and in the High Court.\n\nAppeal allowed.\n\nTHE COMMISSIONER OF INCOME-TAX,\n\nHYDERABAD-DECCAN v.\n\nMESSRS. VAZIR SULTAN & SONS\n\n(N. H. BHAGWATI, B. P. SINHA and\n\nJ. L. KAPUR, JJ.)\n\nIncome Tax-Capital or income-Compensation for termination of agency-Agency terminable at will-Partial termination of agency -Sterilisation of asset or loss of profit-Indian Income-tax Act, r922 (XI of r922).\n\nIn 1931 the respondent, a registered firm, was appointed the sole selling agents and distributors for the Hyderabad State of\n\nI959\n\nMarch 20.", "total_entities": 68, "entities": [{"text": "Income-tax Act", "label": "STATUTE", "start_char": 657, "end_char": 671, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "ADDITIONAL COLLECTOR, BAN ARES", "label": "PETITIONER", "start_char": 890, "end_char": 920, "source": "metadata", "metadata": {"canonical_name": "ADDITIONAL COLLECTOR, BANARES", "offset_not_found": false}}, {"text": "MAHARAJ KISH ORE KHANNA", "label": "RESPONDENT", "start_char": 922, "end_char": 945, "source": "metadata", "metadata": {"canonical_name": "MAHARAJ KISHORE KHANNA", "offset_not_found": false}}, {"text": "JAFER IMAM", "label": "JUDGE", "start_char": 948, "end_char": 958, "source": "metadata", "metadata": {"canonical_name": "SYED JAFFER IMAM*", "offset_not_found": false}}, {"text": "A. K. SARKAR", "label": "JUDGE", "start_char": 960, "end_char": 972, "source": "metadata", "metadata": {"canonical_name": "A.K. SARKAR", "offset_not_found": false}}, {"text": "K. SuBBA RAo, JJ.", "label": "JUDGE", "start_char": 977, "end_char": 994, "source": "metadata", "metadata": {"canonical_name": "K. SUBBA RAO", "offset_not_found": false}}, {"text": "Encumbered Estates Act", "label": "STATUTE", "start_char": 1216, "end_char": 1238, "source": "regex", "metadata": {}}, {"text": "Code of Civil Procedure", "label": "STATUTE", "start_char": 1287, "end_char": 1310, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 39", "label": "PROVISION", "start_char": 1330, "end_char": 1335, "source": "regex", "metadata": {"linked_statute_text": "Encumbered Estates Act", "statute": "Encumbered Estates Act"}}, {"text": "Indian Limitation Act", "label": "STATUTE", "start_char": 1336, "end_char": 1357, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 4", "label": "PROVISION", "start_char": 1550, "end_char": 1554, "source": "regex", "metadata": {"linked_statute_text": "Indian Limitation Act", "statute": "Indian Limitation Act"}}, {"text": "Encumbered Estates Act, 1934", "label": "STATUTE", "start_char": 1568, "end_char": 1596, "source": "regex", "metadata": {}}, {"text": "s. 6", "label": "PROVISION", "start_char": 1657, "end_char": 1661, "source": "regex", "metadata": {"linked_statute_text": "Encumbered Estates Act, 1934", "statute": "Encumbered Estates Act, 1934"}}, {"text": "Section 14(7)", "label": "PROVISION", "start_char": 1921, "end_char": 1934, "source": "regex", "metadata": {"linked_statute_text": "Encumbered Estates Act, 1934", "statute": "Encumbered Estates Act, 1934"}}, {"text": "Section 24(3)", "label": "PROVISION", "start_char": 2050, "end_char": 2063, "source": "regex", "metadata": {"linked_statute_text": "Encumbered Estates Act, 1934", "statute": "Encumbered Estates Act, 1934"}}, {"text": "s. 14(7)", "label": "PROVISION", "start_char": 3041, "end_char": 3049, "source": "regex", "metadata": {"statute": null}}, {"text": "the Code of Civil Procedure", "label": "STATUTE", "start_char": 3139, "end_char": 3166, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 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"the United Provinces Encumbered Estates Act, 1934"}}, {"text": "Special Judge appointed under the Act", "label": "STATUTE", "start_char": 5859, "end_char": 5896, "source": "regex", "metadata": {}}, {"text": "s. 3", "label": "PROVISION", "start_char": 5908, "end_char": 5912, "source": "regex", "metadata": {"linked_statute_text": "Special Judge appointed under the Act", "statute": "Special Judge appointed under the Act"}}, {"text": "Section 7", "label": "PROVISION", "start_char": 6052, "end_char": 6061, "source": "regex", "metadata": {"linked_statute_text": "Special Judge appointed under the Act", "statute": "Special Judge appointed under the Act"}}, {"text": "s. 6", "label": "PROVISION", "start_char": 6138, "end_char": 6142, "source": "regex", "metadata": {"linked_statute_text": "Special Judge appointed under the Act", "statute": "Special Judge appointed under the Act"}}, {"text": "s. 8", "label": "PROVISION", "start_char": 6637, "end_char": 6641, "source": "regex", "metadata": 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{"document_id": "1959_2_375_406_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 375\n\nexecuted, the amount realised by the execution by the\n\nI959 Collector has to be taken into account.\n\nWhen the Adar 1 Subordinate Judge, Purnea, has to decide the question Collector'. '°;:nares whether the application for execution made to him is v. in continuance of an existing execution proceeding, he Maharaj has to recognise the proceeding before the Additional Kishore Khanna Collector, Banares, as a proceeding in execution under the Code for it is so under the Act. In doing this, for Sarkar ].\n\nthe reasons earlier mentioned, he would not be giving any extra-territorial operation _to the Act. It seems to us therefore that the execution of the decree by the Collector must be deemed to be execution of a decree for all purposes and therefore an application l)'.lade to the Subordinate Judge, Purnea, for execution of the same decree while an execution proceeding was pending before the Collector, must be a continuation of the r oo:ecution last mentioned.\n\nNo question of limitation can arise in regard to such an application.\n\nWe think therefore that this appeal must succeed.\n\nWe set aside the order of the High Court and restore the order of the Subordinate Judge, Purnea. The respondent will pay the costs of the appellant in this Court and in the High Court.\n\nAppeal allowed.\n\nTHE COMMISSIONER OF INCOME-TAX,\n\nHYDERABAD-DECCAN v.\n\nMESSRS. VAZIR SULTAN & SONS\n\n(N. H. BHAGWATI, B. P. SINHA and\n\nJ. L. KAPUR, JJ.)\n\nIncome Tax-Capital or income-Compensation for termination of agency-Agency terminable at will-Partial termination of agency -Sterilisation of asset or loss of profit-Indian Income-tax Act, r922 (XI of r922).\n\nIn 1931 the respondent, a registered firm, was appointed the sole selling agents and distributors for the Hyderabad State of\n\nI959\n\nMarch 20.\n\nI959\n\nThe Commissioner of Income-tax, Hyderabad-Deccan v.\n\nAf essrs. Vazir Sultan & Sons\n\ncigarettes manufactured by V (a limited company) under the terms of a resolution of the Board of Directors, the agency commission being a discount of 2% on the gross selling price. In 1939 another arrangement was made whereby the respondent's agency was extended to the rest of India.\n\nBy a resolution dated June 16, 1950, the agency of 1939 was terminated on payment of Rs. 2,26,263 to the respondent by way of compensation, but the respondent continued to be distributors for the 1-:Iyderabad State. For the assessment year 195r-52 the Income-tax Officer included the aforesaid sum in the respondent's total income and taXed it as a revenue receipt under the head of \"business\". The respondent claimed that it did not carry on business of acquiring and working agencies. that the agency acquired in 1931 was a capital asset of its business of distributing cigarettes in the Hyderabad State, that the expansion of territory outside the Hyderabad State in 1939 was an accretion to the capital asset already acquired by it, that the resolution of 1950 was in substance a termination of the agency qua territory outside the Hyderabad State which resulted in the sterilisation of the capital asset qua that territory, that the sum of Rs. 2,19,3~3 received by it in the year of account was by way of compensation for the termination of the agency outside Hyderabad State and'being therefore compensation for the sterilisation pro tanto of a capital asset of its business was a capital receipt and therefore was not liable to tax. It was contended on behalf of the Incometax Authorities that the sole selling agency which was granted by the company to the assessee in the year r931 was merely expanded as regards territory in r939 and what was done in r950 was to revert to the old arrangement, that the structnre or the profit-making apparatus of assessee's business was not affected thereby, that the expansion as well as the restriction of the assessee's territory were in the ordinary course of the assessee's business and were mere accidents of the business which the assessee carried on and that the sum of Rs. 2,19,343 received by the assessee as and by way of compensation for the restriction of the territory was a trading\"' or an income receipt and was therefore liable to tax. It was also urged that the agency agreement between the respondent and the company was terminable at the will of the latter and so it could not be considered as an enduring asset.\n\nHeld (per Bhagwati and Sinha, JJ., Kapur, J, dissenting) that the agency agreements in question did not constitute the business of the respondent, but formed a capital asset, being the profitmaking apparatus of its business of distribution of the cigarettes manufactured by the company within the respective territories, and, consequently, any payment made by the company as compensation for terminating the agency wonld only be a capital receipt in the hands of the respondent.\n\nCommissioner of Income-tax v. Shaw Wallace & Co., (1932) L. R. 59 I. A. 206, relied on.\n\nCommissioner of Income Tax and Excess Profits Tax, Madras\n\nv. The South India Pictures Ltd., Karaikudi, [1956] S.C.R. 223 and Commissioner of Income-tax, Nagpur v. Rai Bahadur,]airam\n\nValji, [1959] Supp. l S.C.R. rro, distinguished.\n\nCase law reviewed.\n\nHeld, further, that the fact that the agency agreements were terminable at will, or that only one of them was terminated, would not make any difference because in either case, when the agency was terminated and the amount. was paid as compensation for such termination it resulted in the sterilisation of the capital asset pro tanto and it was received as a capital receipt in the hands of the respondent.\n\nGlenboig Union Fire-Clay Co., Ltd. v. The Commissioners of Inland Revenne, (1922) 12 Tax Cas. 427, relied on.\n\nPer Kapur, J.-The true effect of the facts of the present case was that in 1939 the respondent's area of distribution was increased from the State of Hyderabad to the whole of India and in 1950 it was again reduced to the original area of 1931, so that the respondent did not lose its agency. Consequently, the termination of the agency in 1950 did not affect the trading activities of the respondent and, therefore, viewed against the background of the respondent's business organisation and profitmaking structure the compensation for the termination of the agency was no more than that for the loss of future profit and commission. The compensation therefore was in the nature of surrogatum and in this view of the matter it was revenue and not capital.\n\nThe answer to the question, as applied to agencies, whether the compensation is capital or revenue, is that it will be a capital receipt if it is received as the value of the agency, i. e., it is a price of the business as if it is brought to sale. On the other hand it is revenue receipt if it is paid in lieu of profits or commission.\n\nIn view of the decision The Commissioner of Income-tax v.\n\nThe South India Pictures Ltd., Karaikudi, [1956) S.C.R. 223, and the observations of Bose, J., in the case of Raghuvanshi Mills Ltd. v. Commissioner of Income-tax, [1953] S.C.R. 17], the authority of Commissioner of Income-tax v. Shaw Wallace & Co., (1932) L.R. 59 I.A. 206, must be taken to be considerably shaken.\n\nCIVIL\n\nAPPELLATE JURISDICTION: Civil Appeal No. 340 of 1957.\n\nAppeal from the judgment and order dated November 29, 1954, of the Hyderabad High Court in Reference No. 234/5 of 1953-54.\n\nf!.. N. Rajagopala Sastri, R. H. Dhebar and //.Gupta, for the appellant.\n\nI959\n\nThe Commissioner\n\nof Income-tax, Hyderabad-Deccan v.\n\nMessrs, V azir Sult an & Sons\n\n•959 A. V. Viswanatha Sastri, P. Rama Reddy and R.\n\nThe Commissioner Jlfahalinga Iyer, for the respondents.\n\nof Income-tax,\n\n1959. March 20.\n\nThe Judgment of Bhagwati and Hyderabad-Deccan Sinha, JJ., was delivered by Bhagwati, J. Kapur, J., v. delivered a separate Judgment.\n\nMessrs. Vazir Sultan<>- Sons BHAGWATI, J.-This appeal with a certificate from the High Court of Judicature at Hyderabad raises the Bhagwati J. question whether the sum of Rs. 2,19,343 received by the assessee in the year of account relevant for the assessment year 1951-52 was a revenue receipt or a capital receipt.\n\nThe facts leading up to this appeal may be shortly stated: The assessee is a registered firm consisting of five brothers and the wife of a deceased brother having equal shares in the profit and loss of the partnership.\n\nThe firm was appointed the sole selling agents and sole distributors for the Hyderabad State for the cigarettes manufactured by M/s. Vazir Sultan Tobacco Co., Ltd., under the terms of a resolution of the Board of Directors dated January 6, 1931.\n\n\" Mr. Baker reported that an arrangement had been come to for the time being whereby the firm of Vazir Sultan & Sons, were given the distributorship of \" Charminar \" Cigarettes within the H. E. H. the Nizam's Dominions and that they were allowed a discount of 2% on the gross selling price.\"\n\nNo written agreement was entered into between the Company and the assessee in respect of the above mentioned arrangement nor was there any correspondence exchanged between them in this behalf. In 1939 another arrangement was arrived at between the assessee and the company whereby the assessee was given a discount of 2% not only on the goods sold in the Hyderabad State but on all the goods sold in the Hyderabad State and outside Hyderabad State. It does not appear that the Board of Directors passed any resolution in support of this new arrangement nor was any agreement drawn up between.the parties incorporating the said new arrangement.\n\nOn June 16, 1950, the Board of Directors passed the following resolution reverting to the old arrangement embodied in the resoluion dated January 6, 1931:- • \"The Chairman, having referred to resolution No. 24 passed at the board meeting held on 6-1-31 and having reported that Vazir Sultan & Sons had agreed to revert to the arrangement outlined in that resolution with effect from 1-6-50, it was on tb,.e proposition of Mr. S. N. Bilgrami, seconded by Mr. N. B. Chenoy resolved that payment of the sum of O.S. Rs. 2,26,263 be made to Vazir Sultan & Sons by way of compensation, Vazir Sultan & Sons, to pay D. B. Akki & Co., out of that amount the sum of 0. S. Rs. 6,920 also by way of compensation.\n\nMr. Mohd. Sultan & Mr.\n\nHameed Sultan stated that, as partners in the firm of Vazir Sultan & Sons, they did not take part in this resolution, although they had accepted on behalf of Vazir Sultan & Sons, the terms thereof.\"\n\nThe sum of Rs. 2,19,343 was accordingly received by the assessee in the year of account 1359 F.\n\nThe Income-tax Officer included this sum in the assessee's total income and taxed it as a revenue receipt. On appeal the Appellate Assistant Commissioner held that the sum of Rs. 2,19,343 was not a revenue receipt but a capital receipt being compensation for the loss of the agency and as such not liable to tax. The Income-tax Officer (C Ward) Hyderabad thereupon preferred an appeal to the Income-tax Appellate Tribunal, Bombay, which held that the said sum received by the assessee was a revenue receipt and liable to tax. The assessee then applied to the Appellate Tribunal for a reference to the High Court under sec. 66(1) of the Income-tax Act and the Tribunal accordingly referred the following question of law to the High Court:-\n\n\" Whether the sum of 0. S. Rs. 2,19,343 received by the assessee Firm from Vazir Sultan Tobacco Co., • Ltd., is a revenue receipt or a capital receipt ?\" The High Court answered the question in favour of the assessee stating the question in a different form, viz.,\n\nI959\n\nThe Commissioner\n\nof Income-tax, Hyderabad-Deccan v.\n\nMessrs. Vazir Sultan & Sons\n\nBhagwati ].\n\nz959 \"Whether the sum of 0. S. Rs. 2,19,343 received\n\nh C -. . by the assessee firm from Vazir Sultan Tobacco Co., T e ommissioner d . . of Income-tax Lt ., IS liable to be taxed under the Indian Income-\n\nHyderabad-Deccn tax: Act?\" , v.\n\nThe appellant thereafter applied to the High Court Messrs. Vazir for a certificate of fitness which was granted by Sultan'\"' Sons the High Court on February 21, 1955, and hence\n\nBhogwati J. this appeal.\n\nThe question. that falls to be determined is whether the sum which was in express terms of the resolution mentioned by way of \"compensation \" for the loss of the agency was a revenue receipt (trading receipt or an income receipt) as contended by the Revenue or a capital receipt as contended by the assessee.\n\nIt was urged on behalf of the appellant that the sole selling agency which was granted by the Company to the assessce in the year 1931 was merely expanded as regards territory in 1939 and what was done in 1951 was to revert to the old arrangement, and the structure or the profit-making apparatus of the assessee's business was not affected thereby.\n\nThe expansion as well as the restriction of the assessee's territory were in the ordinary course of the assessee's business and were mere accidents of the business which the assessee carried on and the sum of Rs. 2,19,343 received by the assessee as and by way of compensation for the restriction of the territory was a trading or an income receipt and was therefore liable to tax.\n\nIt was, on the other hand, contended on behalf of the assessee that it did not carry on business of acquiring and working agencies, that the agency acquired in 1931 was a capital asset of the assessee's business of distributing Charminar cigarettes in the Hyderabad State, that the expansion of territory outside the Hyderabad State in 1939 was an accretion to the capital asset already acquired by the assessee, that the resolution of 1950 was in substance a termination or• cancellation of the agency qua territory outside the Hyderabad State and resulted in the sterilisation of the capital asset qua that territory, that the sum of\n\nRs. 2,19,343 received by the assessee in the year of\n\nI959 account was by way of compensation for the termina- Th c--. . . . f h 'd H d b d e ommissioner t10n or cancellat10n o t e agency outs1 e y era a of Income tax State and being therefore compensation for the sterili- Hyderabad-Dec; an sation pro tanto of a capital asset of the assessee's v. business was a capital receipt and was therefore not Messrs. Vazir liable to tax.\n\nSultan & Sons The question whether a particular receipt is a reve- Bhagwati 1. nue receipt or a capital receipt or a particular expenditure is a capital expenditure or a revenue expenditure is beset with considerable difficulty and one finds the Revenue and the assessee ranged on different sides taking up alternate contentions as it suits their purposes. As was observed by Lord Macmillan in Van Den Berghs, Limited v. Clark (1) :-\n\n\" The reported cases fall into two categories, those in which the subject is found claiming that an item of receipt ought not to be included in computing his profits and those in which the subject is found claiming that an item of disbursement ought to be included among the admissible deductions in computing his profits. In the former case the Crown is found maintaining that the item is an item of income; in the latter, that it is a capital item. Consequently the argumentative position alternates according as it is an item of receipt or an item of disbursement that is in question, and the taxpayer and the Crown are found alternately arguing for the restriction or the expansion of the conception of income. \"\n\nThe question has therefore to be dealt with irrespective of the one stand or the other which is taken by the Revenue or the assessee and the Court has got to determine what is the true character of the receipt or the expenditure.\n\nIn the case of the Commissioner of Income-tax and Excess Profits Tax, Madras v. 1.1he South India Pictures Ltd., Karaikudi (2) this Court endorsed the following statement of Lord Macmillan in Ven Den Berghs, Ltd. v. Clark (1):\n\n\"That though in general the distinction between an income and a capital receipt was well recognised\n\n{1) (1935) 19 Tax Gas. 390, 429.\n\n{2) [1956] S.C.R. 223, 228.\n\nr959 and easily applied, cases did arise where the item lay on the border line and the problem had to be solved The Co1nmissioner of Income-tax, o~ te particular facts of each case.\n\nNo infallible Hyderabad-Deccan cnter10n or test can be or has been laid down and the v. decided cases are only helpful in that they indicate Mesm. Vazir the kind of consideration which may relevantly be Sultan & Sons borne in mind in approaching the problem.\n\nThe character of the payment received may vary accord- Bhagwati ]. ing to the circumstances. Thus the amount received as consideration for the sale of a plot of land may ordinarily be a capital receipt but if the business of the recipient is to buy and sell lands, it may well be his income. \"\n\nWhile considering the case law it is necessary to bear in mind that the Indian Income-tax Act is not in pari materia with the British Income Tax statutes, it is less elaborate in many ways, subject to fewer refinements and in arrangement and language it differs greatly from the provisions with which the courts in England have had to deal. Little help can therefore be gained by attempting to construe the Indian Income-tax Act in the light of decisions bearing upon the meaning of the Income-tax legislation in England.\n\nBut on analogous provisions, fundamental concepts and general principles unaffected by the specialities of the English Income-tax statutes, English authorities may be useful guides. ' (Vide the observations of the Privy Council in the Commissioner of Income-tax v.\n\nShaw Wallace & Co. (1); Gopal Saran Narain Singh v.\n\nCommissioner of Income-tax (2); Commissioner of Income-tax, Bombay Presideney and Aden v. Ohunnilal B.\n\nMehta(') and Raja Bahadur Kamakshya Narain Singh of Ramgarh v. 0.1. T., Bihar & Orissa (').\n\nBefore embarking upon a discussion of the principles emerging from the various decisions bearing upon this question, it is necessary to advert to an argument which was addressed to us by the learned counsel for the appellant in connection with the Privy Council decision in the Commissioner of Income-tax v. Shaw\n\nWallace & Go. (1).\n\nThat case was relied upon by the\n\n(1) (1932) L.R. 59 I.A. 206, 212.\n\n(3) (1938) L.R. 65 I.A. 332. 349\n\n(2) (1935) L.R. 62 I.A. 207, 214.\n\n(4) (1943) L.R. 70 I.A. 180, t88.\n\nAppellate Assistant Commissioner and the High Court 1959 as determinative of the question in favour of the Tl c-· .· • 1e ommissioneY assessee and it was strenuously urged before us on of Income-tax behalf of the Revenue that the authority of that deci- Hyderabad-Dec:an sion was considerably shaken not only by the later v.\n\nPrivy Council decision in Raja Bahadur Kamakshya Mems. Vazir Narain Singh v. C. I. T., Bihar and Orissa (1) but also Sultan & Sons by a decision of this Court in Raghuvansi Mills Ltd. v.\n\nBhagwati J.\n\nCommissioner of Income-tax, Bombay City(2).\n\nIt may be remembered that the term \"income\" was understood by their Lordships of the Privy Council in Shaw Wallace's Case (3) to connote a periodical monetary return coming in with some sort of regularity or expected regularity from definite sources. The source may not necessarily be one which is expected to be continuously productive, but it must be one whose object is the production of a definite return excluding anything in the nature of a mere windfall.\n\nIncome was thus likened pictorially to the fruit of a tree or the crop of a field (Ibid p. 212). This concept of \" income \" was adopted and in substance repeated by the Privy Council in Gopal Saran Narain Singh's Case (4) at p. 213, though Lord Russell of Killowen pronouncing the opinion of the Privy Council pithily remarked that anything which can properly be described as income is taxable under the Act unless properly exempted. The case of Raja Bahadur Kamakshya Narain Singh (1) struck a discordant note and Lord Wright delivering the opinion of the Board observed at p. 192 that it was not in their Lordships' opinion correct to regard as an essential element in any of these or like definitions a reference to the analogy of fruit or increase or sowing or reaping or periodical harvests and that such picturesque similes cannot be used to limit the true character of income in general. Lord Wright further observed at p. 194 :-\n\n\"Its applicability may in particular cases differ because the circumstances, though similar in some respects, may be different in others. Thus the profit realised on a sale of shares may be capital if the seller\n\n(1) (1943) L.R: 70 I.A. 180, 188.\n\n(3) (1932) L.R. 59 I.A. 206, 212.\n\n(2) [1953} S.C.R. lJ7.\n\n(4) (1935) L.R. 62 I.A. 207, 214,\n\nr959\n\nThe Commissioner of Income-tax, Hyderqbad-Deccan\n\nMessrs. Vazir Sultan &. Sons\n\nBhagwati ].\n\nis an ordinary investor changing his securities, but in some instances, at any rate, it may be income if the seller of the shares is an investment or an insurance company. Income is not necessarily the recurrent return from a definite source, though it is generally of that character. Income, again, may consist of a series of separate receipts, as it gencmlly does in the case of professional arnings. The multiplicity of forms which \"income \" may assume is beyond enumeration. Generally, however, the mere fact that the income flows from some capital assets, of which the simplest illustration is the purchase of an annuity for a lump sum, does not prevent it from being income, though in some analogous cases the true view may be that the payments, though spread over a period, are not income, but instalments payable at specified future dates of a purchase price.\" (Vide Secretary of State for India v. Scoble) {1).\n\nThis Court in Raghuvansi Mill's Case {2) also observed that the definition of\" income\" in Shaw Wallace's Case (') as a periodical monetary return coming in with some sort of regularity or expected regularity from definite-sources must be read with reference to tbe particular facts of that case.\n\nIt was therefore urged on behalf of the Revenue that periodicity or recurring nature of the receipt was not a necessary ingredient of\" income \" nor was the existence of a material external source capable of producing a recurrent return necessary before a receipt could be treated as income chargeable to tax.\n\nWe are not unmindful of this criticism of the definition of \" income \" adopted by the Privy Council in Shaw Wallace & Co.'s Case(') and the concept of \"income\" may have to be thus revised. But even granting the proposition that is contended for by the Revenue the result is no different in the present case because the head of income under which the assessee before us has been assessed to Income-tax is \"business \" a definite source from which the income in question sought to be assessed is alleged to have been\n\n(1) [1903] A.c. 299.\n\n(2) [1953] s.c.R. 177\n\n(3) (1932)'L.R. 59 I.A. 206, 212.\n\nderived and whether it is of a recurring or non-recurring nature therefore does not enter into the picture.\n\nThe exemption from liability in regard to that income is claimed by the assessee, not on the ground of the applicability of s. 4(3)(vii) of the Income-tax Act but on the ground that it is not a revenue receipt but a capital receipt, being compensation paid by the Company to the assessee for the termination or cancellation of the agency qua territory outside Hyderabad State, a capital asset of the assessee's business.\n\nWhat then are the considerations which have to be borne in mind in determining these vexed questions?\n\nThe distinction between a capital expenditure and a revenue expenditure came up for consideration before this Court in Assam Bengal Cement Co., Ltd. v. The Commissioner of Income-tax, West Bengal (1) and this Court laid down certain criteria for the determination as to whether a particular expenditure incurred by the assessee was a capital expenditure or a revenue expenditure. We need not therefore discuss that problem any 'further.\n\nAs to whether a particular receipt in the hands of an assessee is a capital receipt, or a revenue receipt, we had occasion to consider the same in the Commissioner of Income-tax and Excess Profits Tax, Madras v.\n\nThe South India Pictures Ltd., Karaikudi (2).\n\nThe assessee there carried on the business of distribution of films.\n\nIn some instances the assessee used to produce or purchase films and then distribute the same for exhibition in different cinema halls and in other cases used to advance monies to producers of films produced with the help of monies so advanced. In the course of such business it advanced monies to the Jupiter Pictures for the production of these films and acquired the rights of distribution of the three films under three agreements in writing dated September,\n\n1941, July 1942 and May 1943. In the accounting year ending March 31, 1946, and in the previous years the assessee had exploited its rights of distribution of the three pictures.\n\nOn October 31, 1945, the\n\n(r) [1955] I S.C.R. 972.\n\n(2) [1956] S.C.R. 223, 228.\n\nr959\n\nThe Commissioner\n\nof Income-tax, Hyderabad-Deccan v. 1\\!l essrs. V azir Sultan 0- Sans\n\nBhagwati ].\n\nI959\n\nThe Commissioner of Income-ta~.\n\nJJyderabad.,.-Deccan\n\nMessrs. Vazir Sultan & Sons\n\nBhagwati ].\n\nassessee and the Jupiter Pictures entered into an agreement cancelling the three agreements relating to the distribution rights in respect of the three films and in consideration of such cancellation the assessee was paid Rs. 26,000 in all by the Jupiter Pictures as compensation. It was held by the Majority of this Court that the sum received by the assessee was a revenue receipt (and not a capital receipt) assessable under the Indian Income-tax Act inasmuch as:-\n\n(1) the sum paid to the assessee was not truly compensation for not carrying on its business but was a sum paid in the ordinary course of business to adjust the relation between the assessee and the producers of the films;\n\n(2) the agreements which were cancelled were by no means agreements on which the whole trade of the assllssee had for all practical purposes been built and the payment received by the assessee was not for the loss of such a fundamental asset as was the ship managership of the assessee. in Barr Crombie & Co., Ltd. v. Commissioners of Inland Revenue (1) and\n\n(3) one could not say that the cancelled agreements constituted the framework or whole structure of the assessee's profit.making IJ<pparatus in the same sense as the agreement between the two margarine. dealers in Van Den Berghs Ltd. v. Clark(') was.\n\nThe criteria laid down by the majority judgment for determining whether the particular payment received by the assessee was income or was to be regarded as a capital receipt were:\n\n(i) whether the agreements in question were entered into by the assessee in the course of carrying on its business of distribution of films, and\n\n(ii) whether the termination of the agreements in question could be said to have been brought about in the ordinary course of business ; so that money received by the assessee as a result of or in connection with such (.:rmination of agreements could be regarded as having been received in the ordinary course of its business and therefore a trading receipt.\n\n(1) (1945) 26 Tax Cas. 406. ·\n\n(2) (1935) 19 Tax Cas. 390, 429.\n\nA similar question arose in Commissioner of Incometax, Nagpur v. Rai Bahadur J airam V azji (1) where this Court followed the same line of reasoning. The question there related to a sum of Rs. 2,50,000 received by the assessee as damages or compensation for the premature termination of a contract dated May 9,\n\n1940. The High Court on a reference under s. 66(1) of the Income-tax Act had held that the sum was a capital receipt in the hands of the assessee, and as such not liable to be taxed. It was contended on behalf of the Revenue that the contract dated May 9, 1940, was one entered into by the assessce in the ordinary course of his business, that the sum of Rs. 2,50,000 was paid admittedly as solatium for the cancellation of that contract, and that it was therefore a revenue receipt. The assessee on the other hand contended that the contract dated May 9, 1940, was for a period of 25 years of which more than 23 years had still to run at the time of the settlement, and it was therefore capital in character. Moreover, the true character of the agreement was that it brought into existence an arrangement which would enable him to carry on a business and was not itself any business and any payment made for the termination of such an agreement was a capital receipt.\n\nThis Court on the facts and circumstances of the case came to the conclusion that the contract in question was entered into by the assessee in the ordinary course of business andwas one entered into in the carrying on of that business. The arrangement ultimately entered into between the parties in regard to the payment of the said sum of Rs. 2,50,000 was accordingly treated as an adjustment made in the ordinary course of business and the receipt was therefore held to be an amount paid as solatium for the cancellation of a contract entered into by a person in the ordinary course of business.\n\nIn the course of the discussion reference was made to agency agreements and this Court observed :-\n\n\"In an agency contract, the actu.!tl business consists in the de.alings between the principal and his\n\n(1) (1959] Supp. r S.C.R. uo; 35 I.T.R. 148, 163.\n\nr959\n\nThe Commissioner of Income-tax, Hyderabad-Deccan v.\n\nMessrs. V azir Sultan & Sons\n\nBhagwati ].\n\nI959\n\nThe Commissioner of Income-tax, Hyderabad-Deccan v.\n\nMessrs. Vazir Sultan & Sons\n\nBhagwati ].\n\ncustomers, and the work of the agent is only to bring about that business.\n\nIn other words, what he does is not the business itself but something which is inti- , mately and directly linked up with it. It is therefore possible to view the agency as the apparatus which leads to business rather than as the business itself on the analogy of the agreements in Van Den Berghs Ltd. v. Clark(').\n\nConsidered in this light, the agency right can be held to be of the nature of a capital asset invested in business.\n\nBut this cannot be said of a contract entered into in the ordinary course of business. Such a contract is part of the business itself, not anything outside it as is the agency, and any receipt on account of such a contract can only be a trading receipt.\"\n\nThis Court further emphasised the distinction between an agency agreement and a contract.made in the usual course of business and pointed out that the agreement could in any event be regarded as a capital asset of the agent which would be saleable. Such a concept would certainly be out of place with reference to a contract entered into in the course of business and any payment made for the non-performance or cancellation of such a contract could only be da.mages or compensation and could not, in law or fact, be regarded as an assignment of the rights under the contract.\n\nOnce it was found that the contract was entered into in the ordinary course of business, any compensation received for its termination would be a revenue receipt, irrespective of whether its performance was to consist of a single act or a series of acts spread over a period.\n\nWhile thus indicating that an agency could be treated as a capital asset of the business this Court guarded itself against its being understood as deciding that the compensation paid for cancellation of an agency contract must always and as a matter of law be held to be a ca pita! receipt and it made the following pertinent observations :-\n\n\"Such a conclusion will be directly opposed to the decision in Kelsall's case(') and the Commissioner\n\n(1) [1935] 19 Tax Cas, 390, 429,\n\n(2) (1938) 21 Tax Cas. 608.\n\nI959 of Income-tax and Excess. Pro.fits Tax, Madras v. '1.'he South India Pictures Ltd., Karaikudi (1).\n\nThe fact is The Comniissioner tha~ an ageny contract which has the character of a of Income-tax, capital asset m the hands of one person may assume Hyderabad-Deccan the character of a trading receipt in the hands of v. another, as for example, when the agent is found to Messrs.\n\nVazir make a trade of acquiring agencies and dealing with Sultan &- Sons them. The principle was thus stated by Romer, L. J., d Bhagwati ]. in Golden Horse Shoe (New) Ltd. v. Thurgoo (2): ' The determining factor must be the nature of the trade in which the asset is employed. The land upon which a manufacturer carries on his business is part of his fixed capital. The land with which a dealer in real estate carries on his business is part of his circulating capital. The machinery with which a manufacturer makes the articles that he sells is part of his . fixed capital. The machinery that a dealer in machinery buys and sells is part of his circulating capital, as is the coal that a coal merchant buys and sells in the course of his trade. So, too, is the coal that a manufacturer of gas buys and from which he extracts his gas.' Therefore when a question arises whether a payment of compensation for termination of an agency is a capital or a revenue receipt, it would have to be considered whether the agency was in the nature of capital asset in the hands of the assessee, or whether it was only part of his stock-in-trade. Thus in Barr Crombie & Sons Ltd. v. Commissioners of Inland Revenue (3), the agency was found to be practically the sole business of the assessee, and the receipt of compensation on account of it was accordingly held to be a capital receipt, while in Kelsall's case the agency which was terminated was one of several agencies held by the assessee and the compensation amount received therefor was held to be a revenue receipt, and that was also the case in the Commissioner of Income-tax and Excess Profits Tax, .Madras\n\nv. The South India Pictures Ltd., Karaikudi (1).''\n\nWe may in this context also note the further observations made by this Court :-\n\n(1) (1956] S.C.R 223 228.\n\n(2) (1933) 18 Tax Cas. 280, 300.\n\n(3) (1945) 26 Tax Cas. 406.\n\nThn Com111issioner\n\nof Inconie-ta.:i:, l!yderabad-Dcccan v.\n\nMessrs. Vazi'T Sultan 6- Sons\n\nBhagwati ].\n\n\"But apart from these and similar instances, it might, in general, be stated that payments made in settlement of rights under a trading contract are trading receipts and are assessable to revenue.\n\nBut where a person who is carrying on business is prevented from doing so by an external authority in the exercise of a paramount power and is awarded compensation therefor, whether that receipt is a capital receipt or a revenue receipt will depend upon w bother it is compensation for injury inflicted on a capital asset or on a stock-in-trade. The decision in the Glenboig Union Fireclay Co., Ltd. v. The Commissioners of Inland Revenue (') applies to this category of cases.\n\nThere, the assessee was carrying on business in the manufacture of fire-clay goods and had, for the performance of that business, acquired a fire clay field on lease.\n\nThe Caledonian Railway which. passed over the field prohibited the assessee from excavating the field within a certain distance of the rails, and paid compensation therefor in accordance with the provisions of a statute. It was held by the House of Lords that this was a capital receipt and was not taxable on the ground that the compensation was really the price paid \" for sterilising the asset from which otherwise profit might have been optained.\" That is to say, the fire clay field was a capital asset which was to be utilised for the carl'ying on of the business of manufacturing fire clay goods and when the assessee was prohibited from exploiting the field, it was an injury inflicted on his capital asset. \\Vhere, however, the compensation is referable to injury inflicted on the stock-in-trade, it would be a revenue receipt. (Vide the Commissioners of Inland Revenue v: Newcastle Breweries Ltd. (').\"\n\nIt is no doubt true that this Court was not concerned with any agency agreement in the last mentioned case and the observations made by this Court there were by way of obiter dicta. The obiter dicta of this Court, however, are entitled to considerable weight and we on our part fully endorse the same. The earlier case of Commissioner of Income-tax and Excess Profits Tax, {r) (1922) 12 Tax Cas. 427.\n\n(2) (1927) 12 Tax Cas. 927.\n\nMadras v. The South India Pictures Ltd. (1) was indeed a case where the assessee had entered into agency agreements for the exploitation of the three films in question, but in that case the conclusion was reached that entering into such agency agreements for acquiring the films was a part of the assessee's business and the agreements in question having been entered into by the assessee in the ordinary course of business the cancellation of those agreements was also a part of the assessee's business and was resorted to in order to adjust the relation between the assessee and the producer of those films.\n\nIt would not be profitable to review the various English decisions bearing on this question as they have been exhaustively reviewed in the above decisions of this Court. The position as it emerges on a consideration of these authorities may now be summarised.\n\nThe first question to consider would be whether the agency agreement in question for cancellation of which the payment was received by the assessee was a capital asset of the assessee's business, constituted its profit making apparatus and was in the nature of its fixed capital or was a trading asset or circulating capital or stock-in-trade of his business. If it was the former the payment received would be undoubtedly a capital receipt; if, however, the same was entered into by the assessee in the ordinary course of business and for the purpose of carrying on that business, it would fall into the latter category and the compensation or payment received for its cancellation would merely be an adjustment made in the ordinary course of business of the relation between the parties and would constitute a trading or a revenue receipt and not a capital receipt.\n\nvVe may perhaps appropriately refer at this stage to an aspect of this question which was canvassed before us with some force and it was that there was no enforceable agreement as between the assessee and the Company which could be made the subject-matter of a legal claim for damages or compensation at his instance in the event of its termination or cancellation by the Company. The agency agreement was\n\n(1) [1956J S.C.R. 223, 2i8.\n\nI959\n\nThe Commissioner\n\nof Income-tax, Hyderabad-Deccan v.\n\nMessrs. Vazir Sultan b Sons\n\nBhagwati ].\n\nz959\n\nThe Cotnmissioner of Income-tax, Hyderabad-Deccan\n\nMessrs. Vazir Sultan &- Sons\n\nBhagwnti ].\n\nterminable at the will of the Company and if the Company chose to do so the assessee had no remedy at law in regard to the same. It is, however, to be remembered that in all these cases one has really got to look to the nature of the receipt in the hands of the assessee irrespective of any consideration as to what was actuating the mind of the other party. As Rowlatt, J., observed in the case of Chibbett v. Joseph Robinson & Sons('):-\n\n\"As Sir Richard Henn Collins said, you must not look at the point of view of the person who pays and see whether he is compellable to pay or not; you have to look at the point of view of the person who receives, to see whether he receives it in respect of his services, if it is a question of an office and in respect of his trade, if it is a question of trade and so on. You have to look at his point of view to see whether he receives it in respect of those considerations. This is perfectly true. But when you look at that question from what is described as the point of view of the recipient, that sends you back again, looking, for that purpose, to the point of view of the payer; not from the point of view of compellability or liability, but from the point of view of a person inquiring what is this payment for; and you have to see whether the maker of the payment makes it for the services and the receiver receives it for the services.\"\n\nThe learned Judge further observed at p. 61 :-\n\n\" But at any rate it does seem to me that compensation for loss of an employment which need not continue, but which was likely to continue, is not an annual profit within the scope of the Income-tax at all.\" (See also W. A. Guff v. Commissioner of Incometax, Bombay City) (') where the question whether the amount paid was compensation for which the employer was liable or was a payment made ex-gratia was considered immaterial for the purpose of the decision in that case).\n\nIt was also urged that the agency in question before us was not an enduring asset of the assessee's business as in its. very nature it was terminable at will,\n\n(1) (1924) 9 Tax Cas. 48, 60.\n\n(2) [1957] 31 I.T.R. 826.\n\nthere being no agreement or arrangement for a fixed term between the assessee and the Company. On the analogy of the test laid down by this Court in Assam Bengal Cement Co., Ltd. v. The Commissioner of Income-tax, West Bengal (1) while considering the distinction between a capital expenditure and a revenue expenditure, it was argued that the agency agreement in question could not be a capital asset of the assessee's business in so far as it was not of an enduring character and the compensation paid for its termination could not therefore be a capital receipt in the hands of the assessee. Whatever be the position, however, in the case of the acquisition of an asset by the assessee by making a disbursement for the purchase of the same, similar considerations would not necessarily operate when the amount is received by the assessee for the termination or cancellation of an asset of his business. The character of such a receipt would indeed have to be determined having regard to the fact whether the asset in question was a capital asset of the business or a trading asset thereof. For this purpose it will be immaterial whether that asset was of an enduring character or was one which was terminable at will.\n\nWe have therefore got to determine whether the agency in question before us was a capital asset of the assessee's business. One of the relevant considerations in the matter of such determination has been whether the asset was in the nature of fixed capital or constituted the circulating capital or stock-in-trade of the assessee's business.\n\nThis question was thus dealt with by Viscount Haldane in John Smith & Sons v.\n\nMoore (2) :-\n\n\"But what was the nature of what the Appellant here had to deal with? He had bought as part of the capital of the business his father's contracts. These enabled him to purchase coal from the colliery owners at what we were told was a very advantageous price, about fourteen shillings per ton.\n\nHe was able to buy at this price because the right to do so was part of the\n\n(l) [1955] l S.C.R. 972. 50\n\n(2) (1921) 12 Tax Cas. 266, 282.\n\n£959 -· The Commissioner of Income-tax, Hyderabad-Deccan v.\n\nMessts. Vazir Sultan &- Sons\n\nBhagwati j.\n\nI959\n\nThe Commissioner of Inco1ne-tax, Hyderabad-Deccan v.\n\nMessrs. Vazir Sultan & Sons\n\nBhagwati ].\n\nassets of the business. Was it circulating capital?\n\nMy Lords, it is not necessary to draw an exact line of demarcation between fixed and circulating capital.\n\nSince Adam Smith drew the distinction in the Second Book of his\" Wealth of Nations'', which appears in the chapter on the Division of Stock, a distinction which has since become classical, economists have never been able to define much more precisely what the line of demarcation is.\n\nAdam Smith described fixed capital as what the owner turns to profit by keeping it in his own possession, circulating capital as what he makes profit of by parting with it and letting it change masters. The latter capital circulates in this sense.\n\nMy Lords, in the case before us the Appellant, of course, made profit with circulating capital, by buying coal under the contracts he had acquired from his father's estate at the stipulated price of fourteen shillings and reselling it for more, but he was able to do this simply because he had acquired, among other assets of his business, including the goodwill, the contracts in question. It was not by selling these contracts, of limited duration though they were, it was not by parting with them to other masters, but by retaining them, that he was able to employ his circulating capital in buying under them.\n\nI am accordingly of opinion that though they may have been of short duration, they were none the less part of his fixed capital''. .\n\nIn the case before us the agency agreement in respect of territory outside the Hyderabad State was as much an asset of the assessee's business as the agency agreement within the Hyderabad State and though expansion of the territory of the agency in 1939 and the restriction thereof in 1950 could very well be treated as grant of additional territory in 1939 and the withdrawal thereof in 1950, both these agency agreements constituted but one employment of the assessee as the sole selling agents of the Company. There is nothing on the record to show that the acquisition of such agencies constituted the assessee's business or that these agency agreements were entered into by the assessee in the carrying on of any such business.\n\nThe agency agreements in fact formed a capital asset z959 of the assessee's business worked or exploited by the Th c -. . . . \" f e ommiss1oner assessee by entermg mto contracts 1or the sale o the of Income-tax \" charminar \" cigarettes manufactured by the Com- Hyderabad-Deccn pany to the various customers and dealers in the resv. pective territories. This asset really formed part of Messrs. Vazir the fixed capital of the assessee's business. It did Sultan & Sons not constitute the business of the assessee but was the Bhagwati ]. means by which the assessee entered into the business transactions by way of distributing those cigarettes within the respective territories. It really formed the profit-making apparatus of the assessee's business of distribution of the cigarettes manufactured by the Company. If it was thus neither circulating capital nor stock-in-trade of the business carried on by the assessee it could certainly not be anything but a capital asset of its business and any payment made by the Company as and by way of compensation for terminating or cancelling the same would only be a capital receipt in the hands of the assessee.\n\nIt would not make the slightest difference for this purpose whether either one or both of the agency agreements were terminated or cancelled by the Company. The position would be the same in either event.\n\nAs was observed by Lord Wrenbury in the Glenboig Union Fire-Cl.ay Co., Ltd. v. The Commissioners of Inl.and Revenne (1) at p. 465 :-\n\n\"The matter may be regarded from another point of view; the right to work the area in which the working was to be abandoned was part of the capital asset consisting of the right to work the whole area demised.\n\nHad the abandonment extended to the whole area all subsequent profit by working would, of course have been impossible but it would be impossible to contend that the compensation would be other than capital. It was the price paid for sterilising the asset from which otherwise profit might have been obtained.\n\nWhat is true of the whole must be equally true of part.\"\n\nIf both the agency agreements, viz., one for the territory within the Hyderabad State and the other for the territory outside Hyderabad State had been\n\n(1) (1922) 12 Tax Cas. 427.\n\nz959\n\nThe Commissioner of Income-tax, Hyderabad-Deccan v. 111 essrs. Jiazir Sultan & Sons\n\nBhagwati j.\n\nterminated or cancelled on payment of compensation, the whole profit-making structure of the assessee's business would have been destroyed. Even if one of these agency agreements was thus terminated, it would result in the destruction of the profit-making apparatus or sterilisation of the capital asset pro tanto and if in the former case the receipt in the hands of the assessee would only be a capital receipt, equally would it be a capital receipt if compensation was obtained by the assessee for the termination or cancellation of one of these agency agreements which formed a capital asset of the assessee's business.\n\nThe facts of the present case are closely similar to those which obtained in the Commissioner of Incometax v. Shaw Wallace & Co. (1). In that case also the assessees had for a number of years prior to 1928 acted as distributing agents in India of the Burma Oil Company, and the Anglo-Persian Oil Company, but had no formal agreement with either Company.\n\nIn or about the year 1927 the two companies combined and decided to make other arrangements for the distribution of their products. The assessee's agency of the Burma Company was accordingly terminated on December 31, 1927, and that of the Anglo Persian Company on June 30, following. Some time in the early part of 1928 the Burma Company paid to the assessee a sum of Rs. 12,00,000 \" as full compensation for cessation of the agency\" and in August of the same year the Anglo-Persian Company paid them another sum of Rs. 3,25,000 as \" compensation for the loss of your office as agents to the company\". On the facts and circumstances of the case the Privy Council came to the conclusion that the sums could only be taxable if they were the produce, or the result of, carrying on the agencies of the oil companies in the year in which they were received by the assessees. But when once it was admitted that they were sums received, not for carrying on that business, but as some sort of solatium for its compulsory cessation, the answer seemed fairly plain. Whatever be the criticism in regard to the concept of income adopted in this case noted\n\n(I) (1932) L.R. 59 I.A. 206, 212.\n\nearlier in this judgment, the decision could just as well r959 be supported on the grounds which we have herein- Th c .. • • e ommiss1oner before discussed and was gmte correct, the payments of Income-tax. having been received by the assessees as and by way Hyderabad-Deccan of compensation for the termination or cancellation of v. the agency agreements in question which were in fact Messis. Vazir the capital assets of the assessee's business.\n\nSultan & Sons The Appellate Assistant Commissioner as well as Bhagwati 1. the High Court were thus justified in the conclusion to which they came, viz., that the sum of Rs. 2,19,343 received by the assessee from the Company was a capital receipt.\n\nThe result, therefore, is that the appeal fails and will stand dismissed with costs throughout.\n\nKAPUR, J.-I have had the advantage of perusing Kapur f. the judgment prepared by my learned brother Bhagwati, J., but with great respect I am unable to agree and my reasons are these.\n\nThe sole question for determination in this case is as to whether a sum of Rs. 2,26,263 received by the assessees from V azir Sultan Tobacco Co. Ltd. as compensation for the termination of their agency for the distribution of ' charminar' cigarettes in areas of India other than Hyderabad State is or is not taxable in the hands of the assessees.\n\nThe answer to this question depends on whether the amount has been received by the assessees as a capital or a revenue receipt. In 1931 the assessees were appointed distributing agents for Hyderabad State only and for the rest of India in 1939, the agency commission in each case being a discount of 2% on the gross selling price.\n\nThe agency of 1939 was terminated by a resolution dated June 16, 1950, on payment of the compensation amount already mentioned but the assessees continued to be distributors for Hyderabad State. It must here be mentioned that the agency in question was terminable at will, and that any compensation paid for it would prima facie be revenue.\n\nDuring the accounting year the amount of income, profits and gains of the assessees from the cigarette distribution business and from another source, i. e.,\n\nr959 Acid Factory within the State of Hyderabad was\n\nThe Commission\" Rs. 4,53,159.\n\nThe order of the Income-tax Officer or of Income-tax, the Appellate Tribunal does not show how much of Hyderabad-Deccan this sum was attributable to the Cigarette distribuv. tion business and how much to the other source.\n\nMews. Vazfr There is no finding as to how and to what extent, if Sultan & Sons any, the business of the assessees was affected by the\n\nKapur j. cesser of distribution business outside that State.\n\nThe question now arises did the assessees receive the compensation in lieu of the commission they otherwise might or would have earned ifthe agreement had continued or did they receive it as compensation for the destruction of a profit-making asset. The answer to this question would again be dependent upon w hether the receipt in question is attributable to a fixed capital asset or to circulating capital. These two terms have been used in a number of cases but as applied to agencies compensation will be a capital receipt if it is received as the value of the agency, i.e., it is a price of the business as if it is brought to sale.\n\nOn the other hand it is revenue receipt if it is paid in lieu of profits or commission. In Van Den Berghs Ltd.\n\nv. Clark (1) Lord Macmillan described circulating capital as \"capital which is turned over and in the process of being turned over yields profit or loss.\n\nFixed capital is not involved directly in that process and remains uilaffected by it\". As was said by Lord Macmillan in the same case, it is not possible to lay down any single test as infallible or any single criterion as decisive in the determination of the question.\n\nUltimately it must depend upon the facts of a particular case.\n\nThe assessees rested their case on the decision of the Privy Council in Commissioner of Income-tax v. Shaw Wallace & Co. (2) on which the High Court has mainly relied. In that case the assessees carried on business in India as merchants and agents for various companies.\n\nThey were distributing agents for two oil companies. These two agencies were terminated and a sum of Rs. 12,00,000 was paid as compensation for the loss of these agency rights and the question was\n\n(1) (1935) 19 Tax Cas. 390.\n\n(2) (1932) L.R. 59 I.A. 206.\n\nwhether this was a capital payment. It was held to\n\nI959 be a capital and not a revenue receipt because the - ' d h 1 f h The Commissioner sum ece1ve w.as not t .e reu t o carrymg. on t e of Income-tax, agencies of the 011 companies, m other words, it could Hyderabad-Deccan not be regarded as profits or gains from carrying on v. the business but was received in the nature of a solat- Messrs. Vazir ium for cessation. The case was decided on the inter- Sultan & Sons pretation of the word 'business' as defined in s. 2(4) of the Income-tax Act, under which it \"includes any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture\". These words, it was held, were wide \"but underlying each of them is the fundamental idea of the continuous exercise of an activity which was also the idea underlying the relevant words of s. 10(1) of the Act, \"in respect of the profits or gains of any business carried on by him \", i. e., it is to be the profit earned by a process of production. The test of income was its periodicity because it connotes a periodical monetary return. This test of periodicity was not accepted by the Privy Council itself in Raja Bahadur Kamakshya Narain Singh's case (1).\n\nLord Wright there said\" income is not necessarily the recurrent return from a definite source, though it is generally so \". The test of periodicity was rejected by this Court in Raghuvanshi Mills Ltd. v. Commissioner of Income-tax (2) where Bose, J., said that the remarks of periodical monetary return must be confined to the facts of that case and it was held that money received from an insurance company for insurance against losses was income representing loss of profits as opposed to loss of capital. In a later case The Commissioner of Income-tax v. The South India Pictures Ltd. (3) it was said that if ShawWallace & Co. had other agencies similar to those of the two oil companies it would be difficult to reconcile the decision in that case with the later decisions in Kelsall Parsons & Co. v. Commissioners of Inland Revenue (4) and other cases (Per Das, 0. J.). In view of the decision in the South India Pictures' case and the observations of Bose, J., in the\n\n(1) (1943) L.R. 70 I.A. 180.\n\n(3) [1956] S.C.R. 223, 232.\n\n(2) [1953] S.C.R. 177, 183.\n\n(4) (1938) 21 Tax Cas. 608.\n\nKapur].\n\nr959 case of Raghuvanshi Mills Ltd. (1) the authority of\n\nTh C-. .\n\nShaw Wallace & Go.'s case {2) must be taken to be e ommMS<On\" \"d bl h k W h h h h of Jncome-tax, cons1 era y s a en. e ave t en to see ow t e Hydernbad-Deccan question has t_o be determined.\n\nVarious tests have been laid down in decided cases.\n\nMessrs. Vazfr According to Lord Cave, L. 0., an expenditure made Sultan & Sons not only once and for all but with a view to bringing\n\nKapur f into existence an asset or an advantage for the enduring benefit of a trade has been treated as properly attributable to capital and not to revenue. (British Insul, ated Gables(') ).\n\nAccording to Lord Atkinson the word \" asset \" need not be confined to \"something material\" and Romer, L. J., has added that the advantage paid for need not be \"of a positive character \" and may consist in the getting rid of an item of fixed capital that is of an onerous character (Anglo-Persian Oil Go. v. Dale(') ). If te receipt represents the aggregate of profits which an assessee would otherwise have received over a series of years the lump sum might be regarded as of the same nature as the ingredients of which it was composed (19 Tax Cas. 390 at p. 431) (') but it is not necessarily in itself an item of income {per Lord Buckmaster in Glenboig Union Firecl, ay Go. (') ).\n\nIn Van Den Berghs' case (') there were three agreements between a British and a Dutch company operative till 1940 making it possible for them to carry on their business 'in friendly alliance ' and providing for the sharing of profits in certain proportions.\n\nThe agreements were terminated in 1927 and the Dutch company paid the English company a sum of£ 450,000\n\nas compensation.\n\nThe question was the .character of the receipt-whether capital or revenue. It was held by the House of Lords that it was the former because the agreements were not \"ordinary commercial contracts in the course of carrying on their trade ; they were not contracts for the disposal of their employees or for the engagement of agents or other employees\n\n(<) [1953] S.C.R. 177, 183.\n\n(2) (1932) L.R. 59 I.A. 206.\n\n(3) (1926] A.C. 205, 213, 222.\n\n(4) [1932] 1 K. B. 124, 146.\n\n(5) Van Den Berghs Ltd. v. CJark.\n\n(6) (1922) 12 Tax Gas. 427, 464.\n\n(7) (1935) rg Tax Gas. 390.\n\nfor the conduct of their business nor were they merely agreements as to how their trading profits when earned should be distributed as between the contracting parties .. On the contrary the agreements related to the whole structure of the recipient's profit making apparatus. They regulated its activities, defined what it might or it might not do and affected the whole conduct of its business\". According to Lord Macmillan if the agreements formed the fixed framework within which the circulating capital operated, then they are not incidental to the working of its profit.making machine but were essential parts of the mechanism itself and therefore they would result in a capital receipt and not revenue receipt. Thus the agreements were designed to ensure that the businees was carried on to the best advantage but they did not themselves form part of the business. They were not agreements which must be regarded as pertinent to trading activities which yielded profits. As such the totality of payments on account of those agreements were held to be a capital receipt.\n\nThe various decided cases demarcate the areas on the two sides of the line in which a receipt may lie and in every case it has to be determined as to whether it falls on one side or the other. The simplest case is of income from property or business as distinct from something received in lieu of property or business itself.\n\nOne illustration of this is insurance against fire, destruction or damage and insurance against loss of profit, the former would bring in compensation in the nature of a capital. Another instance is where the whole business is bought over and the receipt is the price of the business itself as opposed to a lump sum payment for the loss of profit calculated on a proper basis. The test of income, i. e., periodicity or recurrence at fixed intervals has been doubted in this Court.\n\nRaghuvanshi Mills (1 ).\n\nAnother test is afforded by cases of tangible immoveable property. If an owner of such property is paid compensation for not working a part of his property,\n\n(r) [r953J S C.R. r77, r83. 5r .\n\nI959\n\nThe C 01nmissioner\n\nof Income-tax, Hyderabad-Deccan v.\n\nMessrs. Vazir Sultan & Sons\n\n/Jhagwati ].\n\nI959\n\nThe Com1nissioner of Income-tax, flyderabad-Deccan v.\n\nMessrs. Vazir Sultan &- Sons\n\nBhagwati ].\n\ne.g., a part of the demised premises the compensation is not profit because it is payment for sterilising that part of the asset from which otherwise profit might have been obtained. (Glenboig Union Fireclay case (1) at p. 464).\n\nThere is no difference in cases of this kind whether the abandonment extends to the whole area or is circumscribed to a part because in either case it is sterilising an asset from which otherwise profit might have been obtained. \"It makes no difference whether it may be regarded as a sale of the asset out and out or it be treated merely as a means of preventing the acquisition of profit that would otherwise be gained.\n\nIn either case the asset of the company to that extent has been sterilised or destroyed \".\n\nAnother test is whether the agreement related to the whole structure of recipient's profit-making apparatus and affected the whole conduct of his business or was the loss of a part of the fixed framework of the business. If it is, it is capital (Van Den Berg h's case (2) ).\n\nBut compensation for temporary and variable elements of the recipient's profit-making apparatus would be revenue (MacDonald's case('))- If the agreement affects the whole structure and character of the recipient's business then it is capital but not if the structure of the business is so designed as to absorb the shocks as by the cancellation of one agency (Kelsall Parson's case(')). In B1tsh Beach and Gent Ltd. v. Road el again the test of how the cancellation of the agreement affected the recipient's business was applied. Barr Orombie's case(~) is a case of capital asset as there the recipient lost his entire business which resulted in reduction of staff, salaries and even in office accommodation. The result was the cesser of its trading existence. The transaction took the form of a transfer for a price from one party to another of something that formed part of the enduring asset of one of them.\n\nCompensation for the loss of an agency would be for the loss of a ca pita! asset if the termination of the\n\n(r) (1922) 12 Tax Cas. 427, 464.\n\n(3) (1955) 36 Tax Cas. 388.\n\n(5) (1939) 22 Tax Cas. 519.\n\n(2) (1935) 19 Tax Cas. 390.\n\n(4) (1938} 21 Tax Cas. 608.\n\n(6) (1945) 26 Tax Cas. 406.\n\nagency was a damage to the recipient's business strucc959 tllre such as to destroy or materially cripple the whole The Commission., structure involving serious dislocation of the normal of Income-tax, commercial organisation but if it was merely com pen- Hyderabad-Decrnn sation for the loss of trading profit, i. e., in respect of v. commissions or it took the place of commission that Messrs. Vazir would have been earned if the engagement had conti- Sultan & Sons nued then it is revenue (Wiseburg v. Domville) (1).\n\nSo Bhagwati J. that the decision as to whether compensation was capital or revenue would depend upon whether the cessation of the agency destroys or materially cripples the whole structure of the recipient's profit making apparatus or whether the loss is of the whole or part of the framework of business.\n\nIf we apply these tests to the agreement which has been terminated in the present case, it does not fall in any of the class of cases of destruction of a capital asset. .\n\nFor the appellant reliance was placed on the observations of Venkatarama Aiyar, J., in Commissioner of Income-tax v. Rai Bahadur Jairam Valji (2) where it was pointed out that in an agency contract the actual business consists in the dealings between the principal and his customers and the work of the agent is only to bring about that business. In other words what the agent does is not business itself but, something which is intimately and directly linked with it. But an examination of the context shows that that is not what these observations mean.\n\nThe point that was to be decided in that case was whether a payment of compensation for the cancellation of a trading contract was a capital or revenue receipt, and dealing with decisions relating to the cancellation of agency contracts which were quoted in support of the contention that they were capital, the learned Judges observed that considerations applicable to agency contracts were inapplicable to trading contracts, because the twcr classes of contracts, were essentially different, and these differences were there pointed out. The purpose of these observations was to show that receipts from\n\n(r) (1956) 36 Tax Cas. 527.\n\n(2) [1959) Supp. I S.C.R. 110; [1959) 35 I.T.R. 148, 16r, 163.\n\nI959 trading contracts were revenue and not that receipts - from agency contracts are capital. That that is the The Commissioner f h b · f of Income-tax, true s.cope o t ese o servat10ns IS clear rom the Hyde.abad-Deccan followmg passage :\n\nv. \"In hold.ing that compensation paid on the cancell- Messrs. Vazir ation of a trading contract differs in character from Sultan & Sons compensation paid for cancellation of an agency con-\n\nBhagwati J. tract, we should not be understood as deciding that the latter must always, and as a matter of law be held to be a capital receipt. Such a conclusion will be directly opposed to the decisions in Kelsall's case (1) and Commissioner of Income.tax v. South India Pictures Ltd(').\n\nThe fact is that an agency contract which has the character of a capital asset in the hands of one person may assume the character of a trading receipt in the hands of another, as, for example, when the agent is found to make a trade of acquiring agencies and dealing with them\".\n\nThe Court there observed that when the assessee holds a number of agencies, the compensation paid for cancellation of any of them could be regarded as revenue receipt. This is inconsistent with the conclusion that an agency contract must always be regarded as a capital asset. The learned Judges further observed that they were not elaborating this part as they were there concerned with a trading contract and therefore the statement as to when receipts from agency contracts could be regarded as revenue receipts cannot be read as exhausting the circumstances under which they could be held to be revenue.\n\nAs a matter of fact there are three kinds of cases of agencies shown by the decided cases: (1) Kelsall Parsons' case(') where the recipient was carrying on several agencies and the test laid down was whether the business structure could absorb a shock of the termination of one.\n\n(2) The other is where the compensation is for a temporary and variable element of assessee's profit making apparatus; MacDonald's case (').\n\n(3) The third class of cases is represented by\n\n(1) (1938) 21 Tax Gas. 608.\n\n(2) [r956] S.C.R. 223, 232.\n\n(3) (r955) 36 Tax Cas. 388.\n\nFleming & Co.'s case (1) where the rights and advantages surrendered were such as to destroy or materially cripple the whole structure of the profit making apparatus.\n\nThe agencies themselves are of different kinds:\n\n(1) where the agent himself carries on the business and sells the product of the principal and gets commission for it; (2) where the agent's function is confined to bringing the principal and the customer together and he gets agency commission for the performance of only that service; (3) where the agent is a distributor and distributes the products of the principal through his sub-agents and charges commission for the distribution work. Cases (1) and (3) would not strictly fall within the scope of the observations in Commissioner of' Income-tax v. R. B. Jairam Valji (2) and case (2) would fall within the• second class of agreements mentioned in Van Den Bergh's case (3).\n\nThe agreement which is now before us and which was surrendered was terminable at will. The amount of profit which the assessee made from working the agency contract in Hyderabad State alone was much more than the amount which the assessees received for the termination of the whole of their agency outside the State. Thus it is clear that the termination did not affect the trading activities of the assessees and therefore the termination of the contract viewed against the background of the assessee's business organisation and profit-making structure appears to be no more than compensation for the loss of future profit and commission.\n\nThe true effect of the facts of this case appears to be this that in 1939 the assessee's area of distribution was increased from the State of Hyderabad to the whole of India and in 1950 it was again reduced to the original area of 1931. The asses. sees never lost their agency. As a result of this contraction of area they at the most have lost some agency commission. The compensation therefore was in the nature of surrogatum and in this view of the matter it is revenue and not capital.\n\n(1) (1951) 33 Tax Cas. 57.\n\n(2) [1959] Supp. 1 S.C.R. uo; [1959] 35 I.T.R. 148, 161, 163.\n\n(3) (1935) 19 Tax Cas. 390.\n\nI959\n\nThe Commissioner\n\nof Income-tax, Hyderabad-Deccan v.\n\nMessrs. Vazir Sultan &· Sons\n\nBhagwati ].\n\nr959\n\nThe Cominissioncr\n\nof Income-tax, llydcrabad- Deccan v.\n\nJt1essrs. Vazir Sultan & Sous\n\nBhagwati ] .\n\nr959\n\nMarch 26.\n\nI would therefore allow this appeal with costs throughout.\n\nBy COURT: In accordance with the majority judgment of the Court, the appeal is dismissed with costs throughout.\n\nAppeal dismissed.\n\nGHERULAL PARAKH\n\nMAHADEODAS MAIYA AND OTHERS\n\n(JAFER IMAM, A. K. SARKAR and K. SuBBA RAO, JJ.)\n\nWager-Collateral contract-Agreement of partnership to enter into wagering transactions-Legality-Indian Contract Act, r872\n\n(9 of I872), SS. 23, 30.\n\nThe question for determination in this appeal V11as \\Vhether - an agreement of partnership ¥.•ith the object of entering into vvagering transactions was illegal within the meaning of s. 23 of the Indian Contract Act. The appellant and the respondent No. I entered into a partnership with the object of entering into forward contracts for the purchase and sale of wheat with two other firms and the agreement between them was that the respondent would enter into the contracts on behalf of the partnership and the profit or loss would be shared by the parties equally.\n\nThe transactions resulted in loss and the respondent paid the entire amount due to the third parties.\n\nOn the appellant denying his liability for the half of the loss, the respondent sued him for the recovery of the same and his defence, inter alia, was that the agreement to enter into the wagering contracts \\Vas unlawful under s. 23 of the Contract Act. The trial Court dismissed the suit. The High Court on appeal held that though the wagering contracts \\Vere void under s. 30 of the Indian Contract Act, the object of the partnership was not unlawful within the meaning of the Act and decreed the suit. It was contended on behalf of the appellant (r) that a wagering contract being void under s. 30 of the Contract Act, was also forbidden by law within the", "total_entities": 39, "entities": [{"text": "THE COMMISSIONER OF INCOME-TAX,\n\nHYDERABAD-DECCAN", "label": "PETITIONER", "start_char": 1329, "end_char": 1378, "source": "metadata", "metadata": {"canonical_name": "THE COMMISSIONER OF INCOME-TAX, HYDERABAD-DECCAN", "offset_not_found": false}}, {"text": "VAZIR SULTAN & SONS", "label": "RESPONDENT", "start_char": 1391, "end_char": 1410, "source": "metadata", "metadata": {"canonical_name": "VAZIR SULTAN & SONS", "offset_not_found": false}}, {"text": "N. H. BHAGWATI", "label": "JUDGE", "start_char": 1413, "end_char": 1427, "source": "metadata", "metadata": {"canonical_name": "NATWARLAL HARILAL BHAGWATI*", "offset_not_found": false}}, {"text": "B. P. SINHA", "label": "JUDGE", "start_char": 1429, "end_char": 1440, "source": "metadata", "metadata": {"canonical_name": "BHUVNESHWAR PRASAD SINHA", "offset_not_found": false}}, {"text": "L. KAPUR, JJ.", "label": "JUDGE", "start_char": 1449, "end_char": 1462, "source": "metadata", "metadata": {"canonical_name": "J.L. KAPUR", "offset_not_found": false}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 1638, "end_char": 1652, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "(1932) L. R. 59 I. 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{"document_id": "1959_2_406_447_EN", "year": 1959, "text": "r959\n\nThe Cominissioncr\n\nof Income-tax, llydcrabad- Deccan v.\n\nJt1essrs. Vazir Sultan & Sous\n\nBhagwati ] .\n\nr959\n\nMarch 26.\n\n406 SUPREME COURT REPORTS [1959] Supp.\n\nI would therefore allow this appeal with costs throughout.\n\nBy COURT: In accordance with the majority judgment of the Court, the appeal is dismissed with costs throughout.\n\nAppeal dismissed.\n\nGHERULAL PARAKH\n\nMAHADEODAS MAIYA AND OTHERS\n\n(JAFER IMAM, A. K. SARKAR and K. SuBBA RAO, JJ.)\n\nWager-Collateral contract-Agreement of partnership to enter into wagering transactions-Legality-Indian Contract Act, r872\n\n(9 of I872), SS. 23, 30.\n\nThe question for determination in this appeal V11as \\Vhether - an agreement of partnership ¥.•ith the object of entering into vvagering transactions was illegal within the meaning of s. 23 of the Indian Contract Act. The appellant and the respondent No. I entered into a partnership with the object of entering into forward contracts for the purchase and sale of wheat with two other firms and the agreement between them was that the respondent would enter into the contracts on behalf of the partnership and the profit or loss would be shared by the parties equally.\n\nThe transactions resulted in loss and the respondent paid the entire amount due to the third parties.\n\nOn the appellant denying his liability for the half of the loss, the respondent sued him for the recovery of the same and his defence, inter alia, was that the agreement to enter into the wagering contracts \\Vas unlawful under s. 23 of the Contract Act. The trial Court dismissed the suit. The High Court on appeal held that though the wagering contracts \\Vere void under s. 30 of the Indian Contract Act, the object of the partnership was not unlawful within the meaning of the Act and decreed the suit. It was contended on behalf of the appellant (r) that a wagering contract being void under s. 30 of the Contract Act, was also forbidden by law within the\n\nmeaning of s. 23 of the Act, that (2) the concept of public policy\n\nI959 was very comprehensive in India since the independence, and such a contract would be against public policy, (3) that wager- Gherulal Pa.akh ing contracts were illegal under the Hindu Law and (4) that v. they were immoral, tested by the Hindu Law doctrine of piocis Ma/iadeodas obligation of sons to discharge the father's debts.\n\nMaiya & Others Held, that the contentions raised were unsustainable in law and must be negatived.\n\nAlthough a wagering contract was void and unenforceable under s. 30 of the Contract Act, it was not forbidden by law and an agreement collateral to such a contract was not unlawful within the meaning of s. 23 of the Contract Act. A partnership with the object of carrying on wagering transactions was not, therefore, hit by that section.\n\nPringle v. J afer Khan, (1883) I.L.R. S All. 443, Shibho Mal v. Lackman Das, (1901) I.L.R. 23 All. 165, Beni Madho Das\n\nv. Kaunsal Kishor Dhusar, (1900) I.L.R. 22 All. 452, Md. Gulam Mustafakhan v. Padamsi, A.LR. (1923) Nag. 48, approved.\n\nThacker v. Hardy, (1878) L.R. 4 Q.B. 685, Read v. Anderson,\n\n(1882) L.R. IO Q.B. IOO, Bridger v. Savage, (1885) L.R. IS Q.B. 363, Hyams v. Stuart King, [1908] 2 K.B. 696, Thwaites v. Coulthwaite, (1896) I Ch. 496, Brookman v. Mather, (1913) 29 T.L.R. 276 and J ajfrey & Co. v. Bamford, (1921) 2 K.B. 351, Ramlall Thackoorseydass v. Soojumnull Dhondmull, (1848) 4 M.l.A. 339, Doolubdas Pettamberdass v. Ramlall Thackoorseydass and Ors. (1850) 5 l\\U.A.\n\nI09, Raghoonauth Shoi'Chotayloll v. Manickchund and Kaisreechund,\n\n(1856) 6 M.I.A. 251, referred to.\n\nHill v. William Hill, (1949) 2 All E.R. 452, considered.\n\nThe doctrine of public policy was only a branch of the common law and just like its any other branch, it was governed by precedents; its principles had been crystallised under different heads and though it was permissible to expound and apply the)Tl to different situations, it could be applied only to clear and undeniable cass of harm to the public.\n\nAlthough theoretically it was permissible to evolve a new head of public policy in exceptional cirumstances, such a course would be inadvisable in the interest of stability of society.\n\nShrinivas Das Lakshminarayan v. Ram Chandra Ramrattandas, I.L.R. (1920) 44 Born. 6, Bhagwanti Genuji Girme v. Gangabisan Ramgopal, I.L.R. 1941 Born. 71, and Gopi Tihadi v. Gohhei Panda, I.L.R. 1953 Cuttack 558, approved.\n\nEgerton v. Brownlow, 4 H.L.C. l; IO E.R. 359, Janson v.\n\nDriefontein Consolidated Mines, Ltd., (1902) A.C. 484, Fender v.\n\nSt. John-Mildmay, (1938) A.C. land Monkland v. Jack Barclay Ltd., (1951) l All E.R. 714, referred to.\n\nLike the common law of England, which -did not recognise any principle of public policy declaring wagering contracts illegal, the Indian Courts, both before and after the passing of\n\nr959\n\nGherulal Parakh\n\nM ahadeg_das Maiya & Others\n\nAct 2r of 1848 and also after the enactment of the Indian Contract Act, 1872, held that wagering contracts were not illegal as being contrary to public policy and collateral contracts in respect of them were enforceable in law.\n\nRamlolt Thackoorseydass v. Soojumnull Dhondmull, (1848) 4 M.I.A. 339, referred to.\n\nGambling or wagering contracts \\Vere never declared to be illegal by courts in India as being contrary to public policy as offending the principles of ancient Hindu Law and it was not possible to give a novel content to that doctrine in respect of gaming and wagering contracts.\n\nThe State of Bombay v. R. M. D. Chamarbaugwala, [1957] S.C.R. 874, considered.\n\nThe common law of England and that of India never struck down contracts of wager on the ground of public policy and such contracts had always been held not to be illegal although the statute declared them to be void.\n\nThe moral prohibitions in Hindu Law texts against gambling were not legally enforced but were allowed to fall into desuetude and it was not possible to hold that there was any definite head. or principle of public policy evolved by courts or laid down by precedents directly applicable to wagering contracts.\n\nThere was neither any authority nor any legal basis for importing the doctrine of Hindu Law relating to the pious obligation of sons to pay the father's debt into the dominion of contracts. Section 23 of the Contract Act was inspired by the common law of England and should be construed in that light.\n\nThe word \"immoral\" was very comprehensive and varying in its contents and no universal standard could be laid down.\n\nAny law, therefore, based on such fluid concept would defeat its purpose.\n\nThe provisions of s. 23 of the Indian Contract Act indicated that the Legislature intended to give that word a restricted meaning. The limitation imposed on it by the expression\" the Court regards it as immoral\" clearly indicated that it was also a branch of the common law and should, therefore, be confined to principles recognised and settled by courts. Judicial decisions confined it to sexual immorality, and \\vager could not be brought in as new head within its fold.\n\nCrvIL APPELLATE JURISDICTION: Civil Appeal No. 215 of !955.\n\nAppeal from the judgment and decree dated April 1, 1953, of the Calcutta High Court in Appeal from Original Decree No. 89 of 1946, arising out of the judgment and decree dated December 4, 1945, of the Subordinate Judge, Darjeeling, in Money Suit No. 5 of 1940.\n\nL. K. Jha and D. N. Mukherjee, for the appellant.\n\nC. B. Aggarwala, K. B. Bagchi and Sukumar Gho8h, for Respondents Nos. l to 5.\n\n1959. March 26.\n\nThe Judgment of the Court was delivered by\n\nSUBBA RAO, J.-This appeal filed against the judgment of the High Court of Judicature at Calcutta raises the question of the legality of a partnership to carry on business in wagering contracts.\n\nThe facts lie in a small compass. They, omitting those not germane to the controversy before us, are as follows: The appellant, Gherulal Parakh, and the first respondent, Mahadeodas Maiya, managers of two joint families entered into a partnership to carry on wagering contracts with two firms of Hapur, namely, Messrs. Mulchand Gulzarimull and Baldeosahay Surajmull. It was agreed between the partners that the said contracts would be made in the name of the respondents on behalf of the firm and that the profit and loss resulting from the transactions would be borne by them in equal shares. In implementation of the said agreement, the first respondent entered into 32 contracts with Mulchand and 49 contracts with Baldeosahay and the nett result of all these transactions was a loss, with the result that the first respondent had to pay to the Hapur merchants the entire amount due to them. As the appellant denied his liability to bear his share of the loss, the first respondent along with his sons filed 0. S. No. 18 of 1937 in the Court of the Subordinate Judge, Darjeeling, for the recovery of half of the loss incurred in the transactions with Mulchand. In the plaint he reserved his right to claim any further amount in respect of transactions with Mulchand that might be found due to him after the accounts were finally settled with him. That suit was referred to arbitration and on the basis of the award, the Subordinate Judge made a decree in favour of the first respondent and his sons for a sum of Rs. 3,375.\n\nAfter the final accounts were settled between the first respondent and the two merchants of Hapur and after\n\nz959\n\nGherulal Parakh v.\n\nMahadeodas M aiya & Others\n\nSubba Rao ].\n\nI959\n\nGherulal Parakh\n\nMahadeodas M aiya & Others\n\nSubba Rao J.\n\nthe amounts due to them were paid, the first respondent instituted a suit, out of which the present appeal arises, in the Court of the Subordinate Judge, Darjeeling, for the recovery of a sum of Rs. 5,300 with interest thereon. Subsequently the plaint was amended and by the amended plaint the respondents asked for the same relief on the basis that the firm had been dissolved. The appellant and his sons, inter alia, pleaded in defence that the agreement between the parties to enter into wagering contracts was unlawful under s. 23 of the Contract Act, that as the partnership was not registered, the suit was barred under s. 69(1) of the Partnership Act and that in any event the suit was barred under 0. 2, Rule 2 of the Code of Civil Procedure.\n\nThe learned Subordinate Judge found that the agreement between the parties was to enter into wagering contracts depending upon the rise .and fall of the market and that the said agreement was void as the said object was forbidden by law and opposed to public policy.\n\nHe also found that the claim in respect of thetransactions with Mulchand so far as it was not included in the earlier suit was not barred under 0. 2, Rule 2, Code of Civil Procedure, as the cause of action in respect of that part of the claim did not arise at the time the said suit was filed.\n\nHe further found that the partnership was between the two joint families of the appellant and the first respondent respectively, that there could not be in law such a, partnership and that therefore s. 69 of the Partnership Act was not applicable. In the result, he dismissed the suit with costs.\n\nOn appeal, the learned Judges of the High Court held that the partnership was not between the two joint families but was only between the two managers of the said families and therefore it was valid. They found that the partnership to do business was only for a single venture with each one of the two merchants of Hapur and for a single season and that the said partnership was dissolved after the season was over and therefore the suit for accounts of the dissolved firm was not hit by the provisions of subsections (l) and (2) of s. 69 of the Partnership Act.\n\nThey further found that the object of the partners was to deal in differences and that though the said transactions, being in the nature of wager, were void under s. 30 of the Indian Contract Act, the object was not unlawful within the meaning of s. 23 of the said Act.\n\nIn regard to the Claim, the learned Judges found that there was no satisfactory evidence as regards the payment by the first respondent on account of loss incurred in the contracts with Mulchand but it was established that he paid a sum of Rs. 7,615 on account of loss in the contracts entered into with Baldeosahay.\n\nIn the result, the High Court gave a decree to the first respondent for a sum of Rs. 3,807-8-0 and disallowed interest thereon for the reason that as the suit in substance was one for accounts of a dissolved firm, there was no liability in the circumstances of the case to pay interest. In the result, the High Court gave a decree in favour of the first respondent for the said amount together with another small item and dismissed the suit as regards \" the plaintiffs other than the first respondent and the defendants other than the appellant\".\n\nBefore we consider the questions of law raised in the case, it would be convenient at the outset to dispose of questions of fact raised by either party. The learned Counsel for the appellant contends that the finding of the learned Judges of the High Court that the partnership stood dissolved after the season was over was not supported by the pleadings or the evidence adduced in the case. In the plaint as originally drafted and presented to the Court, there was no express reference to the fact that the business was dissolved and no relief was asked for accounts of the dissolved firm.\n\nBut the plaint discloses that the parties jointly entered into contracts with two merchants between March 23, 1937, and June 17, 1937, that the plaintiffs obtained complete accounts of profit and loss on the aforesaid transactions from the said merchants after June 17, 1937, that they issued a notice to the defen. dants to pay them a sum of Rs. 4,146-4-3, being half of the total payments made by them on account of\n\nI959\n\nGherulal Parakh\n\nMahadeodas Maiya & Others\n\nSubba Rao ].\n\n'959\n\nGherulal Parakh v.\n\nA1 ahadeod!ls M aiya &- Others\n\nSubba Rao].\n\nthe said contracts and that the defendants denied their liability. The suit was filed for recovery of the said amount. The defendant filed a written-statement on June 12, 1940, but did not raise the plea based on s. 69 of the Partnership Act. He filed an additional written-statement on November 9, 1941, expressly setting up the plea. Thereafter the plaintiffs prayed for the amendment of the plaint by adding the following to the plaint as paragraph 10:\n\n\"That even Section 69 of the Indian Partuership Act is not a bar to the present suit as the joint business referred to above was dissolved and in this suit the Court is required only to go into the accounts of the said joint business \".\n\nOn August 14, 1942, the defendant filed a further additionn, I written-statement alleging that the allegations in paragraph 2 were not true and that n, s no date of the alleged dissolution had been mentioned in the plaint, the plaintiffs' case based on the said alleged dissolution was not maintainable. It would be seen from the aforesaid pleadings that though an express allegation of the fact of dissolution of the partnership was only made by an amendment on November 17, 1941, the plaint as originally presented contained all the facts sustaining the said plea. The defendants in their written-statement, inter alia, denied that there was any partnership to enter into forward contracts with the said two merchants and that therefore consistent with their case they did not specifically deny the said facts.\n\nThe said facts, except in regard to the question whether the partnership was between the two families or only between the two managers of the families on which there was difference of view between the Court of the Subordinn, te Judge and the High Court., were concurrently found by both the Courts.\n\nIt follows from the said findings that the pn, rtnership was only in respect of forwn, rd contracts with two specified individuals and for a particular season.\n\nBut it is said that the said findings were not based on any evidence in the case. It is true that the documents did not clearly indicate any period limiting the operation of the partnership, but from the attitude adopted by the\n\ndefendants in the earlier suit ending in an award and 1959 that adopted.in the pdresent pleadings,£ thhe natre of Gherul-:i-Parakh the transact10ns an the conduct o t e parties, no v. other conclusion was possible than that arrived at by Mahadeodas the High Court. If so, s. 42 of the Partnership Act Maiya & Others directly applies to this case. Under that section in the absence of a contract to the contrary, a firm is dis- Subba Rao J. solved, if it is constituted to carry out one or more adventures or undertakings, by completion thereof. In this case, the partnership was constituted to carry out contracts with specified persons during a particular season and as the said contracts were closed, the partnership was dissolved.\n\nAt this stage a point raised by the learned Counsel for the respondents may conveniently be disposed of.\n\nThe learned Counsel contends that neither the learned Subordinate Judge nor the learned Judges of the High Court found that the first respondent entered into any wagering transactions with either of the two merchants of Hapur and therefore no question of illegality arises in this case. The law on the subject is well. settled and does not call for any citation of cases. To constitute a wagering contract there must be proof that the contract was entered into upon terms that the performance of the contract should not be demanded, but only the difference in prices should be paid. There should be common intention between the parties to the wager that they should not demand delivery of the goods but should take only the difference in prices on the happening of an event.\n\nRelying upon the said legal position, it is contended that there is no evidence in the case to establish that there was a common intention between the first respondent and the Hapur merchants not to take delivery of possession but only to gamble in difference in prices.\n\nThis argument, if we may say so, is not really germane to the . question raised in this case. The suit was filed on the basis of a dissolved partnership for accounts. The defendants contended that the object of the partnership was to carry on wagering transactions, i. e., only to gamble in differences without any intention to give or take delivery of goods.\n\nThe Courts, on the evidence, both\n\nr959\n\nGherulal Parakh v.\n\nMahadeodas Maiya G Others\n\nSubba Rao ].\n\ndirect and circumstantial, came to the conclusion that the partnership agreement was entered into with the object of carrying on wagering transactions wherein there was no intention to ask for or to take delivery of goods but only to deal with differences. That is a concurrent finding of fact, and, following the usual practice of this Court, we must accept it.\n\nWe, therefore, proceed on the basis that the appellant and the first respondent entered into a partnership for carrying on wagering transactions and the claim related only to the loss incurred in respect of those transactions.\n\nNow we come to the main and substantial point in the case.\n\nThe problem presented, with its different facets, is whether the said agreement of partnership is unlawful within the meaning of s. 23 of the Indian Contract Act. Section 23 of the said Act, omitting portions unnecessary for the present purpose, reads as follows:\n\n\" The consideration or object of an agreement is lawful, unlessit is forbidden by law, or ................................. the Court regards it as immoral, or opposed to public policy.\n\nIn each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.\" Under this section, the object of an agreement, whether it is of partnership or otherwise, is unlawful if it is forbidden by law or the Court regards it as immoral or opposed to public policy and in such cases the agreement itself is void.\n\nThe learned Counsel for the appellant advances his argument under three sub.heads: (i) the object is forbidden by law, (ii) it is opposed to public policy, and\n\n(iii) it is immoral. We shall consider each one of them separately. .\n\nRe. (i)-forbidden by law : Under s. 30 of the Indian Contract Act, agreements by way of wager are void; and no suit shall be brought for recovering anything\n\nalleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. Sir William Anson's definition of \"wager\" as a promise to give money or money's worth upon the determination or ascertainment of an uncertain event accurately brings out the concept of wager declared void by s. 30 of the Contract Act. As a contract which provides for payment of differences only without any intention on the part of either of the parties to give or take delivery of the goods is admittedly a wager within the meaning of s. 30 of the Contract Act, the argument proceeds, such a transaction, being void under the said section, is also forbidden by law within the meaning of s. 23 of the Contract Act. The question, shortly stated, is whether what is void can be equated with what is forbidden by law. This argument is not a new one, but has been raised in England as well as in India and has uniformly been rejected. In England the law relating to gaming and wagering contracts is contained in the Gaming Acts of 1845 and 1892. As the decisions turned upon the relevant provisions of the said Acts, it would help to appreciate them better if the relevant sections of the two Acts were read at this stage :\n\nSection 18 of the Gaming Act, 1845:\n\n\" Contracts by way of gaming to be void, and wagers or sums deposited with stakeholders not to be recoverable at law-Saving for subscriptions for prizes-............... All contracts or agreements, whether by parole or in writing, by way of gaming or wa-- gering, shall be null and void; and ......... no suit shall be brought or maintained in any court of law and equity for recovering any sum of money or valuable thing alleged to be . won upon any wager, or which shall have been deposited in the hands of any person to abide the event on which any wager shall have been made: Provided al ways, that this enactment shall not be deemed to apply to any subscription or contribution, or agreement to subscribe or contribute, for or towards any plate, prize or sum of money to be awarded to the winµer or winners of any lawful game, sport, pastime or exercise.\"\n\nI959\n\nGherul al PMakh\n\nMahadeodas Maiya & Others\n\nSubba Rao].\n\nGhe1ulal Parakh\n\nv. i'vf ahadeodas M aiya & Others\n\nSubba Rao ].\n\nSection 1 of the Gaming Act, 1892 :\n\n\" Promises to repay sums paid under contracts void by 8 & 9 Viet. c. 109 to be null and void.-Any promise, express or implied, to pay any person any sum of money paid by him under or in respect of any contract or agreement rendered null and void by the Gaming Act, 1845, or to pay any sum of money by way of commission, fee, reward, or otherwise in respect of any such contract, or of any services in relation thereto or in connexion therewith, shall be null and void, and no action shall be brought or maintained to recover any such sum of money.\" While the Act of 1845 declared all kinds of wagers or games null and void, it only prohibited the recovery of money or valuable thing won upon any wager or desposited with stakeholders. On the other hand, the Act of 1892 further declared that moneys paid under or in respect of wagering contracts dealt with by the Act of 1845 are not recoverable and no commission or reward in respect of any wager can be claimed in a court of law by agents employed to bet on behalf of their principals. The law of England till the passing of the Act of 1892 was analogous to that in India and the English law on the subject governing a similar situation would be of considerable help in deciding the present case.\n\nSir William Anson in his book\" On Law of Contracts\" succinctly states the legal position thus, at page 205:\n\n\" ............... the law may either actually forbid an -agreement to be made, or it may merely say that if it is made the Courts will not enforce it. In the former case it is i!Iegal, in the latter only void ; but inasmuch as illegal contracts are also void, though void contracts are not necessarily illegal, the distinction is for most purposes not important, and even judges seem sometimes to treat the two terms as inter-changeable.\" The learned author proceed~ to apply the said general principles to wagers and observes, at page 212, thus:\n\n\"Wagers being only void, no taint of illegality attached to a transaction, whereby one man employed another to make bets for him ; the ordinary rules which\n\ngovern the relation of employer and employed applied in such a caRe.\"\n\nPollock and Mulla in their book on Indian Contract define the phrase \"forbidden by law \" in s. 23 thus, at page 158:\n\n\"An act or undertaking is equally forbidden by law whether it violates a prohibitory enactment of th::i\n\nLegislature or a principle of unwritten law. But in India, where the criminal law is codified, acts forbidden by law seem practically to consist of acts punishable under the Penal Code and of acts prohibited by special legislation, or by regulations or orders made under authority derived from the Legislature.\"\n\nSome of the decisions, both English and Indian, cited at the Bar which bring out the distinction between a contract which is forbidden by law and that which is void may now be noticed. In Thacker v.\n\nHardy (1), the plaintiff, a broker, who was employed by the defendant to speculate for him upon the stock Exchange, entered into contra.cts on behalf of the defendant with a third party upon which he (the plaintiff) became personally liable. He sued the defendant for indemnity against the liability incurred by him and for commission as broker. The Court held that the plaintiff was entitled to recover notwithstanding the provisions of 8 & 9 Viet. c. 109, s. 18 (English Gaming Act, 1845). Lindley, J., observed at page 687:\n\n\"Now, if gaming and wagering were illegal, I should be of opinion that the illegality of the transactions in which the plaintiff and the defendant were engaged would have tainted, as between themselves, whatever the plaintiff had done in futherance of their illegal designs, and would have precluded him from claiming, in a court of law, any indemnity from the defendant in respect of the liabilities he had incurred : Cannan v. Bryce (3 B. & Ald. 179) ; M cK innell v.\n\nRobinson (3 M. & W. 434); Lyne v. Siesfeld (1 H. &\n\nN. 278).\n\nBut it has been held that although gaming and wagering contracts cannot be enforced, they are\n\n(r) (1878) L.R. 4 Q.B. 685. 53\n\nx959\n\nGherulal Parakh\n\nMahadeodas Maiya & Others\n\nSubba Rao j.\n\nGherulal Parakh\n\nMahadeodas Maiya &>Others\n\nS11bba Rao ] .\n\nnot illegal.\n\nFitch v. Jones (5 E. & B. 238) is plain to that effect.\n\nMoney paid in discharge of a bet is a good consideration for a bill of exchange: Oulds v.\n\nHarrison (10 Ex. 572); and if money be so paid by a plaintiff at the request of a defendant, it can be recovered by action against him : Knight v. Gamber (15 C.\n\nB. 562); J essopp v. Lutwyoho (10 Ex. 614); Rosewarne\n\nv. Billing (15 C. B. (N. S.) 316); and it has been held that a request to pay may be inferred from an authority to bet: Oldham v. Ramsden (44 L. J. (0. P.) 309).\n\nHaving regard to these decisions, I cannot hold that the statute above referred to precludes the plaintiff from maintaining this action.\" In Read v. Anderson (1) where an agent was employed to make a bet in his own name on behalf of his principal, a similar question arose for consideration. Hawkins, J., states the legal position at page 104 :\n\n\"At common law wagers were not illegal, and before the passing of 8 & 9 Viet. c. l 09 actions were constantly brought and maintained to recover money won upon them. The object of 8 & 9 Viet. c. 109 (passed in 1845) was not to render illegal wagers which up to that time had been lawful, but simply to make the law no longer available for their enforcement, leaving the parties to them to pay them or not as their sense of honour might dictate.\"\n\nAfter citing the provisions of s. 18 of that Act, the learned Judge proceeds to observe thus, at page 105:\n\n\" There is nothing in this language to affect the legality of wagering contracts, they are simply rendered null and void; and not enforceable by any process of law. A host of authorities have settled this to be the-true effect of the Statute.\" This judgment of Hawkins, J., was confirmed on appeal (reported in' 13 Q. B. 779) on the ground that the agency became irrevocable on the making of the bet.\n\nThe judgment of the Court of Appeal cannot be considered to be a direct decision on the point. The said principle was affirmed by the Court of Appeal again in Bridger v. Savage (').\n\nThere the plaintiff sued his\n\n(1) (1882) L.R. 10 Q.B. 100.\n\n(2) (1885) L.R. 15 Q.B. 363.\n\nagent for the amount received by him in respect of the winnings from the persons with whom the agent had betted.\n\nBrett, M. R., observed at page 366 : \" ............ the defendant has received money which he contracted with the plaintiff to hand over to him when he had received it. That is a perfectly legal contract ; but for the defendant it has been contended that the statute 8 & 9 Viet. c. 109, s. 18, makes that contract illegal. The answer is that it has been held by the Courts on several occasions that the statute applies only to the original contract made between the persons betting, and not to such a contract as was made here between the plaintiff and defendant.\"\n\nBowen, L. J., says much to the same effect at page 367:\n\n\"Now with respect to the principle involved in this case, it is to be observed that the original contract of betting is not an illegal one, but only one which is void. If the person who has betted pays his bet, he does nothing wrong; he only waives a benefit which the statute has given to him, and confers a good title to the money on the person to whom he pays it.\n\nTherefore when the bet is paid the transaction is completed, and when it is paid to an agent it cannot be contended that it is not a good payment for his principal. ........... So much, therefore, for the principle governing this case. As to the authorities, the cases of Sharp v. Taylor (2 Phil. 801), Johnson v. Lansley (12 C. B. 468), and Beeston v. Beeston (1 Ex. D. 13), all go to shew that this action is maintainable, and the only authority the other way is that of Beyer v.\n\nAdams (26 L. J. (Ch.) 841), and that case cannot be supported, and is not law.\" This case lays down the correct principle and s supported by earlier authorities.\n\nThe decision in Partridge v. Mallandaine (1) is to the effect that persons receiving profits from betting systematically carried on by them are chargeable with income-tax on such profits in respect of a \"vocation\" under 5 & 6 Viet. c. 35 (the Income Tax Act) Schedule D. Hawkins, J., rejecting the argument that the\n\n(r) (1887) L.R. 18 Q.B. 276.\n\nI959\n\nGlterulal Paraklt\n\nM altadeodas 1Waiya & Others\n\nSubba Rao ].\n\n1959 profession of bookmakers is not a calling within the\n\nh 1- 1- 11 meaning of the Income Tax Act, makes the following G eru a Para•i . v. observat10ns, at page 278: Mahadeodas \"Mere betting is not illegal. It is perfectly law- Maiya e,. Others fol for a man to bet if he likes.\n\nHe may, however, have a difficulty in getting the amount of the bets Subba Rao J from dishonest persons who make bets and will not\n\npay.\" The decision in Hyams v. Stuart King (1) deals with the problem of the legality of a fresh agreement between parties to a wager for consideration. There, two bookmakers had betting transactions together, which resulted in the defendant giving the plaintiff a cheque for the amount of bets lost to him.\n\nAt the request of the defendant, the cheque was held over by the plaintiff for a time, and part of the amount of the cheque was paid by the defendant. Subsequently a fresh verbal agreement was come to between the parties, by which, in consideration of the plaintiff holding over the cheque for a further time and refraining from declaring the defendant a defaulter and thereby injuring him with his customers, the defendant promised to pay the balance owing in a few days.\n\nThe balance was never paid and the plaintiff filed a suit to recover the money on the basis of the fresh verbal agreement. The Court of Appeal, by a majority, Fletcher Moulton, L. J., dissenting, held that the fresh verbal agreement was supported by good consideration and therefore the plaintiff was entitled to recover the amount due to him. At page 705, Sir Gorell Barnes posed the following three questions to be decided in the case: (I) Whether the new contract was itself one which falls within the provisions of 8 & 9 Viet. c. 109, s. 18; (2) whether there was any illegality affecting that contract; and (3) whether that contract was a lawful contract founded on good consideration.\n\nAdverting to the second question, which is relevant to the present case, the President made the following observations at page 707 :\n\n\" ............... it is to be observed that there was nothing illegal in the strict sense in making the bets.\n\n(1) (1908] 2 KB. 6g6.\n\nThey were merely void under 8 & 9 Viet. c. 109, and there would have been no illegality in paying them.\n\nThere is no doubt whatever about this. There was also nothing illegal in giving the cheque nor would there have been any illegality in paying it, though the defendants could not have been compelled by the plaintiff to pay it, because by statute it was to be deemed and taken to have been made and given for an illegal consideration, and therefore void in the hands of the plaintiff. .. .... The statutes do not make the giving or paying of the cheque illegal, and impose no penalty for so doing.\n\nTheir effect and intention appear only, so far as material, to be that gaming or wagering contracts cannot be enforced in a Court of Law or Equity ................ \"\n\nThe view expressed by the President is therefore consistent with the view all along accepted by the Courts in England. This case raised a new problem, namely, whether a substituted agreement for consideration between the same parties to the wager could be enforced, and the majority held that it could be enforced, while Fletcher Moulton, L. J., recorded his dissent.\n\nWe shall have occasion to notice the dissenting view of Fletcher Moulton, L. J., at a later stage.\n\nThe aforesaid decisions establish the proposition that in England a clear distinction is maintained between a contract which is void and that which is illegal and it has been held that though a wagering contract is void and unenforceable between parties, it is not illegal and therefore it does not affect the validity of a collateral contract.\n\nThe same principle has been applied to collateral. contracts of partnership also. In Thwaites v. Ooulthwaite (1) the question of legality of a partnership of bookmaking and betting was raised. There the plaintiff and defendant were partners in a bookmakers and betting business, which was carried on by the defendant; the plaintiff claimed an account of the profits of the partnership, and the defendant contended that, having regard to the nature of the business, no such relief could be obtained.\n\nChitty, J., rejected the\n\n(1) (1896) I Ch. 496.\n\nI959\n\nGherulal Parakh\n\nMahadeodas Maiya & Others\n\nSubba Rao].\n\nI959 plea holding that the partnership WaS Valid, for the\n\nGherulal Parakh following reasons, among others, and stated at page v. 498: Mahadeod,,, \"The Gaming Act, 1845 (8 &. 9 Viet. c. 109), did Maiya & Othm not make betting illegal; this statute, as is well known, merely avoided the wagering contract. A man Sttbba Rao J. may make a single bet or many bets ; he may habitually bet; he may carry on a betting or bookmakers business within the statute, provided the business as carried on by him does not fall within the prohibition of the Betting Act, 1853.\" In Thomas v. Day (' ), a similar question arose. There the plaintiff claimed an account and money due under a partnership which he alleged had existed between himself and the defendant to take an office and carry on a betting business as bookmakers. Darling, J., held that a partnership to carry on the business of a bookmaker was not recognized by law, that even if there was such a legal partnership, an action for account would not lie as between the two bookmakers founded on betting and gambling transactions. This judgment certainly supports the appellant; but the learned Judge did not take notice of the previous decision on the subject and the subsequent decisions have not followed it.\n\nWhen a similar objection was raised in Brookman v. Mather (2), Avery, J., rejected the plea and gave a decree to the plaintiff. There the plaintiff aud the defendant entered into a partnership to carry on a betting business.\n\nTwo years thereafter, in 1910, the partnership was dissolved and a certain amount was found due to the plaintiff from the defendant and the latter gave the former a promissory note for that amount. A suit was filed for the recovery of the amount payable under the promissory note.\n\nAvery, J., reiterated the principle that betting was not illegal per se. When the decision in Thomas v. Day (1) was cited in support of the broad principle that the betting business could not be recog11ized as legal in a Court of Justice, the learned Judge pointed out that that case was decided without reference to Thwaites\n\n(1) (1908) 24 T.L.R. 272.\n\n(2) (1913) 29 T.L.R. 276.\n\nv. Ooulthwaite (1). This judgment, therefore, corrected the deviation made by Darling, J., in Thomas v.\n\nDay (2 ) and put the case law in line with earlier precedents.\n\nThe earlier view was again accepted and followed in Keen v. Price (3) where an action by one of the partners in a bookmakers and betting business against the other for an account of the partnership dealings was entertained. But the Court gave liberty to the defendant to object to repaying anything which represented profits in such business. The reason for this apparent conflict between the two parts of the decision is found in the express terms of the provisions of the Gaming Act of 1892. Commenting upon Thwaites v. Coulthwaite (1) in which Chitty, J.,. held that such an action would lie for an account of the profits of the partnership, Sargant, J., pointed out that in that case the Gaming Act, 1892, was not referred to. At page 101, the learned Judge says:\n\n\" Curiously enough, in that case the Gaming Act, 1892, was not referred to, and although the decision is a good one on the general law, it cannot be regarded as a decision on the Act of 1892.\" This judgment confirms the principle that a wager is not illegal, but states that after the Gaming Act, 1892, a claim in respect of that amount even under a collateral agreement is not maintainable.\n\nIn O'Connor and Ould v. Ralston (4), the plaintiff, a firm of bookmakers, filed a suit claiming from the defendant the amount of five cheques drawn by him upon his bank in payment of bets which he had lost to them and which had been dishonoured on presentation. Darling, J., held that as the plaintiffs formed an association for the purpose of carrying on a betting business, the action would not lie. In coming to that conclusion the learned Judge relied upon the dissenting view of Fletcher Moulton, L. J., in Hyams v. Stuart King (5).\n\nWe shall consider that decision at a later stage.\n\n(r) (1896) I Ch. 496.\n\n(2) (1908) 24 T.L.R. 272.\n\n(3) (1914) 2 Ch. 98.\n\n(4) (1920) 3 K.B. 451.\n\n(5) [1908] 2 K.B. 696,\n\nI959\n\nGherulal Parakh v.\n\nMahadeodas Maiya & Others\n\nSubba Rao ].\n\n'959\n\nGherulal Parakh v.\n\nMahadeodas Maiya & Others\n\nSubba Rao J.\n\nThe opinion of Darling, J., was not accepted in Jeffrey & Co. v. Bamford (1) wherein lVIcCardie, J., held that a partnership for the purpose of carrying on a betting and bookmakers business is not per se illegal or impossible in law. The learned Judge says at page 356:\n\n\" ............ betting or wagering is not illegal at common law .... ..\n\nIt has been repeatedly pointed out that mere betting on horse races is not illegal \".\n\nThe learned Judge, after noticing the earlier decisions already considered by us and also some of the observations of Fletcher Moulton, L. J., came to the conclusion that the partnership was not illegal.\n\nWe shall now scrutinize the decision in Hill v.\n\nWilliam Hill(') to see whether there is any substance in the argument of the learned Counsel for the appellant that this decision accepted the dissenting view of Fletcher Moulton, L. J., in Hyam§ v. Stuart King (3) or the view of Darling, J., in Thomas v. Day(') and O'Connor and Ouki v. Ralston(\"). The facts in that case were: The appellant had betting transactions with the respondents, a firm of bookmakers.\n\nAs a result . of those transactions, the appellant lost£ 3,635-12-6.\n\nAs the appellant was unable to pay the amount, the matter was referred to the committee of Tattersalls, who decided that the appellant should pay the respondents a sum of £ 635-12-6 within fourteen days and the balance by monthly instalments of £100. It was laid down that if the appellant failed to make those payments, he was liable to be reported to the said committee which would result in his being warned off Newmarket Heath and posted as defaulter. The appellant informed the respondents that he was unable to pay the £635-12-6 within the prescribed time and offered to send them a cheque for that sum post-dated October 10, 1946, and to pay the monthly instalments of £100 thereafter. On the responde:nts agreeing to that course, the appellant sent a post-dated cheque to\n\n(1) (1921) 2 K.B. 35'-\n\n(2) (1949) 2 All E.R. 452.\n\n(3) [1908) 2 KB. 696.\n\n(4) (1908) 24 T.L.R. 272.\n\n(5) (1920) 3 K.B. 451.\n\n...\n\nthem and also enclosed a letter agreeing to pay the monthly instalments.\n\nAs the post-dated cheque was dishonoured and the appellant failed to pay the entire amount, the respondents filed a suit claiming the amount due to them under the subsequent agreement.\n\nThe respondents contended that the sum the appellant had promised to pay was not money won upon a wager within the meaning of the second branch of s. 18, but was money due under a new lawful and enforceable agreement and that even if the sum was to be regarded as won on a wager, the agreement was outside the scope of the second branch of s. 18 of the Gaming Act, 1845. The House of Lords by a majority of 4 to 3 held that the agreement contained a new promise to pay money won upon a wager and that the second branch of s. 18 applied to all suits brought to recover money alleged to have been won on a wager and therefore the contract was unenforceable. In coming to that conclusion, Viscount Simon, one of the Judges who expressed the majority view, agreed with Fletcher Moulton, L. J., in holding that the bond constituted an agreement to pay money won upon a wager, notwithstanding the new consideration, and was thus unenforceable under the second limb of s. 18.\n\nIn Hyams v. Stuart King(1), the facts of which we have already given, the suit was filed on the basis of a subsequent agreement betweeu the same parties to the wager.\n\nThe majority of the Judges held that the subsequent agreement was supported by good consideration, while Fletcher Moulton, L. J., dissented from that view. The basis for the dissenting view is found at page 712.\n\nAfter reading s. 18 of the Gaming Act, 1845, the learned Judge proceeded to state:\n\n\" In my opinion too little attention has been paid to the distinction between the two parts of this enactment, and the second part has been treated as being in effect merely a repetition of the first part. I cannot accept such an interpretation. So far as the actual wagering contract is concerned, the earlier provision is ample. It makes that contract absolutely void,\n\n(r) [r908] 2 K.B. 696. 54\n\nGherulal Parakh v.\n\nMahadeodas Maiya 0- Others\n\nSubba Rao j.\n\nI959\n\nGherulal Parah/I\n\nMlahadeodas Maiya &<Others\n\nSttbba Rao ].\n\nand it would be idle to enact in addition that no suit should be brought upon a contract that had thus been rendered void by statute. The language of the later provision is in my opinion much wider. It provides with complete generality that no action shall be brought to recover anything alleged to be won upon any wager, without in any way limiting the application of the provision to the wagering contract itself.\n\nIn other words, it provides that wherever the obligation under a contract is or includes the payment of money won upon a wager, the Courts shall not be used to enforce the performance of that part of the obligation\". - These observations must be understood in the context of the peculiar facts of that case.\n\nThe suit was between the parties to the wager. The question was whether the second part of the concerned section was comprehensive enough to take in an agreement to recover the money won upon a wager within the meaning of that part. Fletcher Moulton, L. J., held that the second part was wide and comprehensive enough to take in such a claim, for the suit was, though on the basis of a substituted agreement, for the recovery of the money won upon a wager within the meaning of the words of that part of the section. The second question considered by the learned Judge was whctl; ier the defendants' firm which was an association formed for the purpose of a betting business was a legal partnership under the English Law. The learned Judge relied upon the Gaming Act, 1892, in holding that it was not possible under the English law to have any such partnership. At page 718, the learned Judge observed:\n\n\" In my opinion no such partnership is possible under English law.\n\nWithout considering any other grounds of objection to its existence, the language of the Gaming Act, 1892, appears to me to be sufficient to establish this proposition. It is essential to the idea of a partnership that each partner is an agent of the partnership and (subject to the provisions of the partnership deed) has authority to make payments on its behalf for partnership purposes, for which he is entitled\n\nto daim credit in the partnership accounts and thus receive, directly or indirectly, repayment. But by the Gaming Act, 1892, all promises to pay any person any sum of money paid by him in respect of a wagering contract are null and void.\n\nThese words are wide enough to nullify the fundamental contract which must be the basis of a partnership, and therefore in my opinion no such partnership is possible, and the action for this reason lone was wrongly framed and should have been dismissed with costs\".\n\nIt would be seen from the said observations that Fletcher Moulton, L. J., laid down two propositions:\n\n(i) The second part of s. 18 of the Gaming Act, 1845, was comprehensive enough to take in a claim for the recovery of money alleged to be won upon a wager though the said claim was based upon a substituted contract between the same parties; and (ii) by reason of the wide terms of the Gaming Act, 1892, even the fundamental contract, which was the basis of a partnership, was itself a nullity. The learned Lord Justice did not purport to express any opinion on the effect of a void contract of wager on a collateral contract.\n\nIn Hill's case (1) the only question that arose was whether the second part of s. 18. was a bar to the maintainability of a suit under a substituted agreement for the recovery of money won upon a wager.\n\nThe majority accepted the view of Fletcher Moulton, L. J., on the first question.\n\nThe second question did nut arise for consideration in that case. The House of Lords neither expressly nor by necessary implication purported to hold that collateral contract of either partnership or agency was illegal ; and that the long catena of decisions already referred to by us were wrongly decided. This judgment does not therefore support the contention of the learned Counsel for the appellant.\n\nThe legal position in India is not different.\n\nBefore the Act for Avoiding Wagers, 1848, the law relating to wagers that was in force in British India was the common law of England. The Judicial Committee in Ramlall Thackoorseydass v. Soojumnull Dhondmull (2)\n\n(1) (1921) 2 K.B. 351.\n\n(2) (1848) 4 M.I.A. 339.\n\n• I959\n\nGherulal Parakh\n\nMahadeodas Maiya & Others\n\nSubba Rao ].\n\nI959 •\n\nGherulal Parakh\n\nMahadeodas M aiya &- Others\n\nSubba Rao ].\n\nexpressly ruled that the common law of England was in force in India and under that law an action might be maintained on a wager.\n\nThe wager dealt with in that case was upon the average price which opium would fetch at the next Government sale at Calcutta.\n\nLord Campbell in rejecting the plea that the wager was illegal observed at.page 349:\n\n\"The Statute, 8 & 9 Viet. c. 109, does not extend to India, and although both parties on~ the record are Hindoos, no peculiar Hindoo law is alleged to exist upon the subject; therefore this case must be decided by the common law of England\".\n\nIt is a direct decision on the point now mooted before us and it is in favour of the respondents. Again the Privy Council considered a similar question in Doolubdass Pettamberdass v. Ramlall Thackoorseydass and others (1 ).\n\nThere again the wager was upon the price that the Pa.tna opium would fetch at the next Government sale at Calcutta.\n\nThere the plaintiff instituted a suit in the Supreme Court of Bombay in .January, 1847, to recover the money won on a wager.\n\nAfter the suit was filed, Act 21 of 1848 was passed by the Indian Legislature w hereunder all agreements whether made in speaking, writing, or otherwise, by way of gaming or wagering, would be null and void and no suit would be allowed in any Court of Law or Equity for recovering any sum of money or valuable thing alleged to be won on any wager.\n\nThis section was similar in terms to that of s. 18 of the Gaming Act, 1845.\n\nTheir Lordships held that the contract was not void and the Act 21 of 1848 would not invalidate the contracts entered into before the Act came into force.\n\nAdverting to the next argument that under Hindu Law such contracts were void, they restated their view expressed in Ramlall Thackoorseydass v.\n\nSoojumnull Dhondmull (') thus at page 127 :\n\n\"Their Lordships have already said that they are not satisfied from the authorities referred to, that such is the law among the Hindoos .... \" The Judicial Committee again restated the law m similar terms in Raghoonauth Sahoi Ohotayloll v.\n\n(1) (1850) 5 M.I.A. 109.\n\n(2) (1848) 4 M.I.A. 339.\n\nManickchund and Kaisreechund (1).\n\nThere the Judicial Committee held that a wagering contract in India upon the average price opium would fetch at a future Government sale, was legal and enforceable before the passing of the Legislative Act, No. 21 of 1848.\n\nThe aforesaid three decisions of the Privy Council clearly establish the legal position in India before the enactment of the Act 21 of 1848, namely, that wagering contracts were governed by the common law of England and were not void and therefore enforceable in Courts. They also held that the Hindu Law did not prohibit any such wagers.\n\nThe same view was expressed by the Indian Courts in cases decided after the enactment of the Contract\n\nAct.\n\nAn agent who paid the amount of betting lost by him was allowed to recover the same from his principal in Pringle v. Jafar Khan (2).\n\nThe reason for that decision is given at page 445 :\n\n\"There was nothing illegal in the contract; betting at horse-races could not be said to be illegal in the sense of tainting any transaction connected with it. This distinction between an agreement which is only void and one in which the consideration is also unlawful is made in the Contract Act. Section 23 points out in what cases the consideration of an agreement is unlawful, and in such cases the agreement is also void, that is, not enforceable at law. Section 30 refers to cases in which the agreement is only void, though the consideration is not necessarily unla, wful.\n\nThere is no reason why the plaintiff should not recover the sum paid by him...... \" In Shibho Mal v. Lackman Das (3) an agent who paid the losses on the wagering transactions was allowed to recover the amounts he paid from his principal. In Beni Madho Das v. Kaunsal K ishor Dhusar (4) the plaintiff who lent money to the defendant to enable him to pay off a gambling debt was given a decree to recover the same from the defendant. Where two partners entered into a contract of wager with a third\n\n(r) (1856) 6 M.I.A. 25r.\n\n(3) (1901) I.L. R. 23 All. 165.\n\n(2) (1883) I.L.R. 5 All. 443\n\n(4) (1900) I L.R. 22 All. 452.\n\nc959\n\nGherulal Parakh\n\nMahadeodas M aiya & Others\n\nSubba Rao ].\n\n£959\n\nGherulal Parahh\n\nv. -M ahadeodas M aiya & OJhers\n\nSubba Rao\n\nparty and one partner had satisfied his own and his co-partner's liability under the contract, the Nagpur High Court; in Md. Gulam Mustafakhan v. Padamsi (1) held that the partner who paid the amount could legally claim the other partner's share of the loss.\n\nThe learned Judge reiterated the same principle acce- J. pted in the decisions cited supra, when he said at page 49:\n\n\" Section 30 of the Indian Contract Act does not affect agreements or transactions collateral to 'vagers...... ... \" The said decisions were based upon the well-settled principle that a wagering contract was only void, but not illegal, and therefore a collateral contract could be enforced.\n\nBefore closing this branch of the discussion, it may be convenient to consider a subsidiary point raised by the learned Counsel for the appellant that though a contract of partnership was not illegal, in the matter of accounting, the loss paid by one of the partners on wagering transactions, could not be taken into consideration.\n\nReliance is placed in support of this contention on Chitty's Contract, p. 495, para. 908, which reads:\n\n\" Inasmuch as betting is not in itself illegal, the law does not refuse to recognise a partnersllip formed for the purpose of betting. Upon the dissolution of such a partnership an account may be ordered. Each partner has a right to recover his share of the capital subscribed, so far as it .has not been spent; but he cannot claim an account of profits or repayments of amounts advanced by him which have actually been applied in paying the bets of the partnership.\" In support of this view, two decisions are cited. They are: Thwaites v.\n\nOoulthwaite (') and Saffery v.\n\nMayer (3).\n\nThe first case has already been considered by us.\n\nThere, Chitty, J., in giving a decree for account left open the question of the legality of certain transactions till it arose on the taking of the\n\n(1) A.LR. (1923) Nag. 48.\n\n(2) (1896) l Ch. 496.\n\n(3) L.R. (1901) I K.B. II.\n\n(2) S.C.R.\n\nSUPREME COURT REPOR'l'S 431\n\naccount. Far from helping the appellant, the observations and the actual decision in that case support the respondents' contention. The reservation of the question Of particular transact.ions presumably related only to the transactions prohibited by the Betting Act, 1853. Such of the transactions which were so prohibited by the Betting Act would be illegal and therefore the contract of partnership could not operate on such transactions. The case of Saffery v.\n\nMayer (1) related to a suit for recovery of money advanced by one person to another for the purpose of betting on horses on their joint account. The appellate Court held that by reason of the provisions of the Gaming Act, 1892, the action was not maintainable.\n\nThis decision clearly turned upon the provisions of the Gaming Act, 1892. Smith, M. R., observed that the plaintiff paid the money to the defendant in respect of a contract rendered null and void and therefore it was not recoverable under the second limb of that section. The other Lord Justices also based their judgments on the express words of the Gaming Act,\n\n1892. It will be also interesting to note that the Court of Appeal further pointed out that Chitty, J., in Thwaites' Oase(2) in deciding in the way he did omitted to consider the effect of the provisions of the Gaming Act, 1892, on the question of maintainability of the action before him.\n\nThe aforesaid passage in Chitty's Contract must be understood only in the context of the provisions of the Gaming Act, 1892.\n\nThe aforesaid discussion yields the following results :\n\n(1) Under the common law of England a contract of wager is valid and therefore both the primary contract as well as the collateral agreement in respect thereof are enforceable ; (2) after the enactment of the Gaming Act, 1845, a wager is made void but not illegal in the sense of being forbidden by law, and thereafter a primary agreement of wager is void but a collateral agreement is enforceable ; (3) there was a conflict on the question whether the second part of s. 18 of the Gaming Act, 1845, would cover a case for the recovery of money or valuable thing alleged to be won upon\n\n(I) L.R. (I90I) I K.B. II.\n\n(2) (I896) I Ch. 496.\n\nI959\n\nGherulal Parakh\n\nMahadeodas M aiya & Others\n\nSubba Rao ].\n\nGherulal Parakk v.\n\nMahadeodas Maiya & Others\n\nSubba Rao ].\n\nany wager under a substituted contract between the same parties: the House of Lords in Hill's Gase (1 ) bad finally resolved the conflict by holding that such a claim was not sustainable whether it was made under the original contract of wager between the parties or under a substituted agreement between them; (4) under the Gaming Act, 1892, in view of its wide and comprehensive phraseology, even collateral contracts, including partnership agreements, are not enforceable; (5) s. 30 of the Indian Contract Act is based upon the provisions of s. 18 of the Gaming Act, 1845, and though a wager is void and unenforceable, it is not forbidden by law and therefore the object of a collateral agreement is not unlawful under s. 23 of the Contract; Act; and (6) partnership being an agreement within the meaning of s. 23 of the Indian Contract Act, it is not unlawful, though its object is to carry on wagering transactions. We, therefore, hold that in the present case the partnership is not unlawful within the meaning of s. 23(A) of the Contract Act.\n\nRe. (ii}--Public Policy: The learned Counsel for the appellant contends that the concept of public policy is very comprehensive and that in India, particularly after independence, its content should be measured having regard to political, social and economic policies of a welfare State, and the traditions of this ancient country reflected in Srutis, Smritis and N ibandas.\n\nBefore adverting to the aFgument of the learned Counsel, it would be convenient at the outset to ascertain the meaning of this concept and to note how the Courts in England and India have applied it to different situations. Cheshire and Fifoot in their book on \"Law of Contract\", 3rd Edn., observe at page 280 thus :\n\n\"The public interests which it is designed to protect are so comprehensive and heterogeneous, and opinions as to what is injurious must of necessity vary so greatly with the social and moral convictions, and at times even with the political views, of different judges, that it forms a treacherous and unstable\n\n(1) (1921) 2 K.B. 35I.\n\nground for legal decision. . ........... These questions\n\nI95!J have agitated the Courts in the past, but the present state of the law would appear to be reasonably clear.\n\nTwo observations may be made with some degree of assurance ..\n\nG hernial Parakh\n\nFirst, although the rules already established by precedent must be moulded to fit the new conditions of a changing world, it is no longer legitimate for the Courts to invent a new head of public policy.\n\nA judge is not free to speculate upon what, in his opinion, is for the good of the community. He must be content to apply, either directly or by way of analogy, the principles laid down in previous decisions.\n\nHe must expound, not expand, this particular branch of the law.\n\nSecondly, even though the contract is one which prima f acie falls under one of the recognized heads of public policy, it will not be held illegal unless its harmful qualities are indisputable. The doctrine, as Lord Atkin remarked in a leading case, \"should only be invoked in clear cases in whiph the harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inferences of a few judicial minds. .. .......... In popular language ... the contract should be given the benefit of the doubt\".\" Anson in his Law of Contract states the same rule thus, at p. 216:\n\n\"Jessel, M. R., in 1875, stated a principle which is still valid for the Courts, when he said : ' You have this Raramount public policy to consider, that you are not lightly to interfere with the freedom of contract' ; and it is in reconciling freedom of contract with other public interests which are regarded as of not less importance that the difficulty in these cases arises ........ .\n\n. We may say, however, that the policy of the law has, on certain subjects, been worked into a set of tolerably definite rules. The application of these to particular instances necessarily varies with the conditions of the times and the progressive development of public opinion and morality, but, as Lord Wright has said, 'public policy, like any other branch of the Common Law, ought to be, and I think is, governed by\n\nMahadeodas M aiya & Others\n\nSubba Rao ].\n\n'959 the judicial use of precedents. If it is said that rules\n\nGkernlal Parakk of public policy have to be moulded to suit new conv. ditions of a changing world, that is true; but the Mahadeodas same is true of the principles of the Common .Law Maiya & Others generally.\" .\n\nIn Halsbury's Laws of England, 3rd Edn., Vol. 8, the 5 \"bba Rao J. doctrine is stated at p. 130 thus:\n\n\"Any agreement which tends to be injurious to the public or against the public good is void as being contrary to public policy. . .............. It seems, however, that this branch of the law will not be extended.\n\nThe determination of what is contrary to the so-called policy of the law necessarily varies from time to time.\n\nMany transactions are upheld now which in a former generation would have been avoided as contrary to the supposed policy of the law.\n\nThe rule remains, but its application varies with the principles which for the time being guide public opinion.\"\n\nA few of the leading cases on the subject reflected in the authoritative statements of law by the various authors may also be usefol to demarcate the limits of this illusive concept.\n\nParke, B., in Egerton v. Brownlow('), which is a leading judgment on the subject, describes the doctrine of public policy thus at p. 123 :\n\n\" ' Public policy ' is a vague and unsatisfactory term, and calculated to lead to uncertainty and error, when applied to the decision of legal rights; it is capable of being understood in different senses; it may, and does, in its ordinary sense, mean 'political expedience', or that which is best for the common good of the community ; and in that sense there may be every variety of opinion, according to education, habits, talents, and dispositions of each person, who is to decide whether an act is against public policy or not. To allow this to be a ground of judicial decision, would lead to the greatest uncertainty and confusion.\n\nIt is the province of the statesman, and not the lawyer, to discuss, and of the Legislature to determine, what is best for the public good, and to provide for it by proper enactments. It is the province of the judge\n\n(1) 4 H.L.C. ' 123; IO E.R. 359, 408.\n\nto expound the law only; the written from the statu-\n\nI959 tes; the unwritten or common law - from the decisions f d d f t' C t f' Ghernlal Parakh o our pre ecessors an o our ex1s mg our s, rom text writers of acknowledged authority, and upon the Mah; deodas principles to be clearly deduced from them by sound Maiya & Others reason and just inference; not to speculate upon what is the best, in his opinion, for the ad vantage of the Subba Rao f. community. Some of these decisions may have no doubt been founded upon the ., prevailing and just opinions of the public good; for instance, the illegality of covenants in restraint of marriage or trade.\n\nThey have become a part of the recognised law, and we are therefore bound by them, but we are not thereby authorised to establish as law everything which we may think for the public good, and prohibit everything whi.ch we think otherwise.\" In Janson v. Driefontein Consolidated Mines, Ltd. {1)\n\nan action raised against British underwriters in respect of insurance of treasures against capture during its transit from a foreign state to Great Britain was r!'lsisted by the underwriters on the ground that the insurance was against public policy. The House of Lords rejected the plea. Earl of Halsbury, L.C., in bis speech made weighty observations, which may usefully be extracted. The learned Lord says at page 491: . \"In treating of various branches of the law learned persons have analysed the sources of the la\\v, and have sometimes expressed their opinion that such and such a provision is bad because it is contrary to public policy; but I deny that any Court can invent a new head of public policy ; so a contract for marriage brokerage, the creation of a perpetuity, a contract in restraint of trade, a gaming or wagering contract, or, what is relevant here; the assisting of the King's enemies, are all undoubtedly unlawful things; and you may say that it is because they are contrary to public policy they are unlawful; but it is becaus.e these things have been either enacted or assumed to be by the common law unlawful, and not because a judge or Court have a right to declare that such and such\n\n(r) (1902) A.C. 484.\n\nGherulul Parakh v.\n\nMahadeodas M aiya & Others\n\nSubba Rao].\n\nthings are in his or their view contrary to public policy. Of course, in the application of the principles here insisted on, it. is inevitable that the particular case must be decided by a judge ; he must find the facts, and he must decide whether the facts so found do or do not come within the principles which I have endeavoured to describe-that is, a principle of public policy, recognised by the law, which the suggested contract is infringing, or is supposed to infringe. \" These observations indicate that the doctrine of public policy is only a branch of common law and unless the principle of public policy is recognised by that law, Court cannot apply it to invalidate a contract.\n\nLord Lindley in his speech at p. 507 pointed out that public policy is a very unstable and dangerous foundation on which to build until made safe by decision. A promise made by one spouse, after a decree nisi for the dissolution of the marriage has been pronounced, to marry a third person after the decree has been made absolute is not void as being against public policy: see Fender v. St. John-Mildmay (1). In that •\n\ncase Lord Atkin states the scope of the doctrine thus at p. 12:\n\n\"In popular language, following the wise aphorism of Sir George Jessel cited above, the contract should be given the benefit of the doubt.\n\nBut there is no doubt that the rule exists. In cases where the promise to do something contrary to public policy which for short I will call a harmful thing, or where the consideration for the promise is the doing or the promise to do a harmful thing a judge, though he is on slippery ground, at any rate has a chance of finding a footing. .. .... But the doctrine does not extend only to harmful acts, it has to be applied to harmful tendencies. Hero the ground is still less safe and more treacherous \".\n\nAdverting to the observation of Lord Halsbury in Janson v. Driefontein Consolidated Mines Ltd.(') Lord Atkin commented thus, at page 11 :\n\n\" ............... Lord Halsbury indeed appeared to decide that the categories of public policy are closed,\n\n(1) (1938) A. C. i.\n\n(2) (1902) A, C, 484.\n\nand that the principle could not be invoked anew unx959 less the case could be brought within some principle Gherulal Parakh of public policy already recognised by the law.\n\nI do v. not find, however, that this view received the express Mahadeodas assent of the other memberi:i of the House; and it Maiya <!>Others seems to me, with respect, too rigid.\n\nOn the other hand, it fortifies the serious warning illustrated by the Subba Rao f. passages cited above that the doctrine should only be invoked in clear cases in which the harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inferences of a few judicial minds\".\n\nLord Thankerton summarised his view in the following terms, at p. 23:\n\n\" In the first place, there can be little question as to the proper function of the Courts in questions of ·\n\npublic policy. Their duty is to expound, and not to expand, such policy. That does not mean that they are precluded from applying an existing principle of public policy to a new set of circumstances, where such circumstances are clearly within the scope of the policy.\n\nSuch a case might well arise in the case of safety of the State, for instance. But no such case is suggested here. Further, the Courts must be watchful not to be influenced by their view of what the principle of public policy, or its limits, should be\".\n\nLord Wright, at p. 38, explains the two senses in which the words \"public policy\" are used:\n\n\"In one sense every rule of law, either common law or equity, which has been laid down by the Courts, in that course of judicial legislation which has evolved the law of this country, has been based on considerations of public interest or policy. In that sense Sir George Jessel, M. R., referred to the paramount public policy that people should fulfil their contracts. But public policy in the narrower sense means that there are considerations of public interest which require the Courts to depart from their primary function of enforcing contracts, and exceptionally to refuse to enforce them. Public policy in this sense is disabling \".\n\nGherulal F'ara!d1\n\nAJ ahadeodas Alaiya & Others\n\nSubba Rao ].\n\nThen the noble Lord proceeds to lay down the following principles on which a judge should exercise this peculiar and exceptional jurisdiction: (1) It is clear that public policy is not a branch of law to be extended; (2) it is the province of the judge to expound the law only; (3) public policy, like any other branch of the common law, is governed by the judicial use of precedents; aml (4) Courts apply some recognised principles to the new conditions, proceeding by way of analogy and according to logic and convenience, just as Courts deal with any other rule of the common law. The learned Lord on the basis of the discussion of case law on the subject observes at p. 40:\n\n\"It is true that it has oeen observed that certain rules of public policy have to be moulded to suit new conditions of a changing world : but that is true of the principles of common law generally.\n\nI find it difficult to conceive that in these days any new head of public policy could be discovered \".\n\nThe observations of the aforesaid Law Lords define the concept of public policy and lay down the limits of its applicaion in the modern times. In short, they state that the rules of public policy are well-settled and the function of the Courts is only to expound them and apply them to varying situations. While Lord Atkin does not accept Lord Halsbury's dictum that the categories of public policy are closed, he gives a warning that the doctrine should be invoked only in clear cases in which the harm to the public is substantially incontestable, Lord Thankerton and Lord Wright seem to suggest that the categories of public policy are well-settled and what the Courts at best can do is only to apply the same to new set of circumstances.\n\nNeither of them excludeB the possibility of evolving a new head of public policy in a changing world, but they could not conceive that under the existing circumstances any such head could be discovered.\n\nAsquith, L. J., in JJ!fonkland v. Jack Barclay Ltd.(') restated the law crisply at p. 723:\n\n\"The Courts have again and again said, that where a contract does not fit into one or other of these\n\n(1) (1951) 1 All E.R. 714.\n\npigeon-holes but lies outside this charmed circle, the courts should use extreme reserve in holding a contract to be void as against public policy, and should only do so when the contract is incontestably and on any view inimical to the public interest\".\n\nThe Indian cases also adopt the same view. A division bench of the Bombay High Court in Shrinivas Das Lakshminarayan v. Ram Chandra Ramrattandas (1)\n\nobserved at p. 20: \"It is no doubt open to the Court to hold that the consideration or object of an agreement is unlawful on the ground that it is opposed to what the Court regards as public policy. This is laid down in section 23 of the Indian Contract Act and in India therefore it cannot be affirmed as a matter of law as was affirmed by Lord Halsbury in Janson v. Driefontein Consolidated Mines, Limited (1902 A. C. 484 at p. 491) that no Court can invent a new head of public policy, but the dictum of Lord Davey in the same case that\" public policy is always an unsafe and treacherous ground for legal decision \" may be accepted as a sound cautionary maxim in considering the reasons assigned by the learned Judge for his decision \".\n\nThe same view is confirmed in Bhagwant Genuji Girme\n\nv. Gangabisan Ramgopal (2) and Gopi Tihadi v. Gokhei Panda (3).\n\nThe doctrine of public policy may be summarized thus : Public policy or the policy of the law is an illusive concept; it has been described as \"untrustworthy guide \", \"variable quality'', \"uncertain one '', \" unruly horse'', etc. ; the primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society, but in certain cases, the Court may relieve them of their duty on a rule founded on what is called the public policy; for want of better words Lord Atkin describes that something done contrary to public policy is a harmful thing, but the doctrine is extended not only to harmful cases but also to harmful tendencies ; this doctrine of public policy is only a branch of common law, and,\n\n(1) I.L.R. (1920) 44 Born. 6.\n\n(2) I.L.R. 1941 Born. 7r.\n\n(3) I.L.R. 1953 Cuttack 558.\n\nGherulal Parakh\n\nMahadeodas Maiya & Others\n\nSubba Rao J.\n\nr959\n\n, Gherulal Parakh\n\nMahadeodas Maiya & Others\n\nSubba Rao }.\n\njust like any other branch of common law, it is governed by precedents; the principles have been crystallized under different heads and though it is permissible for Courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public; though the heads are not closed and though theoretically it may be permissible to ev; olve a new head under exceptional circumstances of a changing world, it is advisable in the interest of stability of society not to make any attempt to dicover new heads in these days.\n\nThis leads us to the question whether in England or in India a definite principle of public policy has been evolved or recognized invalidating wagers .. So far as England is concerned, the passages from text-books extracted and the decisions discussed in connection with the first point clearly establish that there h; i, s never been such a rule of public policy in that country. Courts under the common law of England till the year 1845 enforced such contracts even between parties to the transaction. They held that wagers were not illegal.\n\nAfter the passing of the English Gaming Act, 1845 (8 & 9 Viet. c. 109), such contracts were declared void. Even so, the Courts held that though a wagering contract was void, it was not illegal and therefore an agreement collateral to the wagering contract could be enforced. Only after the enactment of the Gaming Act, 1892 (55 Viet. c. 9), the collateral contracts also became unenforceable by reason of the express words of that Act. Indeed, in some of the decisions. cited supra the question of public policy was specifically raised and negatived by Courts: See Thacker v. Hardy (1); Hyams v.Stuart King('); and Michael Jeffrey & Company v. Bamford ('). It is. therefore abundantly clear that the common law of England did not recognize any principle of public policy declaring wagering contracts illegal.\n\nThe legal position is the same in India. The Indian Courts, both before and after the passing of the Act\n\n(1) (1878) L.R. 4 Q.B. 685.\n\n(2) (1908] 2 K.B. 696.\n\n(3) (r949) 2 All E. R. 452. •\n\n21 of 1848 and also after the enactment of the Con- '959 tract Act, have held that the wagering contracts are - 'jj d h JI j · f Gh81ulal Parakh not i egal an t e co atera contracts -m respect o them are enforceable. We have already referred to Mah; deodas these in dealing with the first point and we need not Ma; ya & Others cover the ground once again, except to cite a passage from the decision of the Judicial Committee in Ram- Subba Rao J. loll Thackoorseydass v. Boojumnull Dhondmull ('), which is directly in point. -Their Lordships in considering the applicability of the doctrine of public policy to a wagering contract observed at p. 350:\n\n\" We are of opinion, that, although, •to a certain degree, it might create a temptation to do what was wrong, we are not to presume that the parties would commit a crime ; and as it did not interfere with the performance of any duty, and as if the parties were not induced by it to commit a crime, neither the interests of individuals or of the Government could be affected by it, we cannot say that it is contrary to public policy.\" There is not a singl!l decision after the above cited case, which was decided in 1848, up to the present day wherein the Courts either declared wagering contracts as illegal or refused to enforce any collateral contract in respect of such wagers, on the ground of public policy. It may, therefore, be stated without any contradiction that the common law of England in respect of wagers was followed in India and it has al ways been held that such contracts, though void after the Act of 1848, were not illegal. Nor the legislatures of the States excepting Bombay made any attempt to bring the law in India in line with that obtaining in England after the Gaming Act, 1892.\n\nThe Contract Act was passed in the year 1872.\n\nAt the time of the passing of the Contract Act, there was a Central Act, Act 21 of 1848, principally based on the English Gaming Act, 1845. There was also the Bombay Wagers (Amendment) Act, 1865, amending the former Act in terms analogous to those later enacted by the Gaming Act, 1892. Though the Contract\n\n(1) (1848) 4 M.I.A. 339 56\n\n '959 Act repealed the Act 21 of 1848, it did not incorporate -\n\nGherulal'-Parakl• in it the provisions similar to those of tlie Bombay v.\n\nAct; nor was any amendment made subsequent to the Mahadeodas passing of the English Gaming Act, 189~. The legis- Maiya <>- Othors lature must be deemed to have had the knowledge of the state' of law in England, and, therefore, we may Subba Rao J. assume that it did not think fit to make wagers illegal or'to hit at collateral contracts. The policy of law in India has therefore been to sustain the legality of wagers. , The history of he law of gambling in India would also show that though gaming in certain respects was controlled, it has never been absolutely prohibited.\n\nThe following are some of the gambling Acts in India: The Public Gambling Act (III of 1867)·; The Bengal Public Gambling Act (II of 1867); The Bombay Prevention of Gambling Act (IV of 1887); Madhya Bharat Gambling Act (LI of 1949); Madhya Pradesh Public Gambling Act; Madras Gaming Act (III of 1930); The Orissa, Prevention of Gambling Act (XVII of 1955); the Punjab Public Gambling Act (III of 1867); the Rajasthan Public Gambling Ordinance (Ordinance XL VIII of 1949) and the U.P. Public Gambling Act.\n\nThese Acts do not prohibit gaming in its entirety, but aim at suppressing gaming in private houses when carried on for profit or gain of the owner or occupier thereof and also gaming in public. Gaming without contravening the provisions of the said Acts is legal. Wherever the State intended to declare a particular form of gaming illegil'l, it made an express statute to that effect : See s. 2~A of the Indian Penal Code. In other respects, gaming and wagering are allowed in India. It is also common knowledge that horse races are allowed throughout India and the State also derives revenue therefrom.\n\nThe next question posed by the learned Counsel for the appellant is whether under the Hindu Law it can be said that gambling contracts are held to be illegal.\n\nThe learned Counsel .relies upon the observations of this Court in The State of Bombay v . .R. M. D. Ohamar- baugwala (1).\n\nThe question raised in that case was\n\n(1) [1957] S.C.R. 874.\n\nwhether the Bombay Lotteries and Prize Competition •959 Control and Tax (Amendment) Act of 1952 extending c;\n\n1~ hh the definition of \"prize competition\" contained in \"rn \".. \"'\" s. 2(1)(d) of the Bombay Lotteries and Prize Competi- Mailad•odas tion Control and Tax Act of 1948, so as to include Maiya ~Others - prize competition carried on through newspapers printed and published outside the State, was constitu- Subaa Rao J. tionally valid. It was-contended, inter alia, that the Act offended the fundamental right of the respondents, who were conducting prize competitions, under Art. 19(1) (g) of the Constitution and also violated the freedom of inter-State trade .under Art. 301 thereof.\n\nThis Court held that the gambling activities in their very nature and essence were extra commercium and could not either be trade or commerce within the meaning of the aforesaid provisions and therefore neither the fundamental right of the respondents under Art. 19(1)(g) or their right to freedom of inter- State trade under Art. 301 is violated. In that context Das, C. J., has collected all the Hindu Law texts from Rig V:eda, Mahabharata, Manu, Brihaspati, Yagnavalkya, etc., at pp. 922-923. It is unnecessary to restate them here, but it is clear from those texts that Hindu sacred books condemned gambling in unambiguous terms.\n\nBut the question is whether those ancient <- text-books remain only as pious wishes of our ancestm:s or whether they were enforced in the recent centuries.\n\nAll the branches of the Hindu Law have not been administered by Courts in India ; only questions regarding succession, inheritance, marriage, and religious usages and institutions are decided according to the Hindu Law, except in so far as such law has been altered by legislative enactment. Besides the matters above referred to, there are certain additional matters to which the Hindu Law is applied to the Hindus, in some cases by virtue of express legislation and in others on the principle of justice, equity and good conscience. These matters are adoption, guardianship, family relations, wills, gifts and partition.\n\nAs to these matters also the Hindu Law is to be applied subject to such alterations as have been made by legislative enactments: See Mulla's Hindu Law, para.\n\nr9s9 3, p. 2. _In other respects the ancient Hindu Law Ghemlal Parako was not enforced in Indian Courts and it may be said v. that they became obsolete.\n\nAdmittedly there has not Mahadeodas been a sirigle instance in recorded cases holding gam- Maiya & Others bling or w; igering contracts illegal on the ground that\n\nsubba Rao 1. they are contrary to public policy as they offended the pri:µciples of ancient Hindu Law. In the circumstances, we find it difficult to import the tenets of Hindu Law to give a novel content to the doctrine of public policy in respect of c01itracts of gaming and wagering. • To summarize: The common law of England and that of India have never struck down contracts of wager on the ground of public policy ; indeed they have always been held to be not illegal notwithstanding the fact that the statute declared them void.\n\nEven after the con tracts of wager were declared to be void in England, collateral contracts were enforced till the passing of the Gaming Act of 1892, and in India, except in the State .of Bombay, they have been enforced even after the passing of the Act 21 of 1848, which was substituted by s. 30 of the Contract Act. The moral prohibitions in Hindu Law texts against gambling were not only not legally enforced but were allowed to fall into desuetude. In practice, though gambling is controlled in specific matters, it has not been declared illegal and there is no law declaring wagering illegal. Indeed, some of the gambling practices are a perennial source of income to the State.\n\nIn the circumstances it is not possible to hold that there is any definite head or principle of public policy evolved by Courts or laid down by precedents which would directly (Lpply to wagering contracts. Even if it is permissiblff for Courts to evolve a new head of public policy under extraordinary circumstances giving rise to incontestable harm to the society, we cannot say that wager is one of such instances of exceptional gravity, for it has been recognized for centuries and has been tolerated by the public and the State alike.\n\nJf it has any such tendency, it is for the legislature to make a law prohibiting such contracts and declaring them illegal and not for this Court to resort to judicial legislation.\n\n Re. Point 3-Immorality: The argument under this head is rather broadly stated by the learned Counsel for the appellant. Tbe learned counsel attempts to draw an analogy from the Hindu Law relating to the doctrine of pious obligation of sons to discharge their father's debts and contends that what the Hindu Law considers to be immoral in that context may appropriately be !l>pplied to a case under s. 23 of the Contract Act. Neither any authority is cited nor any legal hasis is suggested for importing the doctrine of Hindu Law into the domain of contracts. Section 23 vf the Contract Act is inspired by tlre common law of England and it would be more useful to refer to the English Law than to the Hindu Law texts dealing with a different matter.\n\nAnson in his Law of Contracts states at p. 222 thus:\n\n\"The only aspect of immorality with.which Courts of Law have dealt is sexual immorality............. .\" Halsbury in his Laws of England, 3rd Edn., Vol. 8, makes a similar statement, at p. 138: \"A contract which is made upon an immoral con. sidera.tion or for an immoral purpose is unenforceable, and there is no distinction in this respect between im. moral and illegal contracts. The immorality here. alluded to is sexual immorality.\" In the Law of Contract by Cheshire and Fifoot, 3rd Edn., it is stated at p. 279:\n\n\"Although Lord Mansfield laid it down that a contract contra bonos mores is illegal, the law in this connection gives no extended meaning to morality, but concerns itself only with what is sexually reprehensible.\" In the book on the Indian Contract Act by Pollock and Mulla it is stated at p. 157:\n\n\" The epithet\" immoral \" points, in legal usage, to conduct or purposes which the State, though disap. proving them, is unable, or not advised, to visit with direct punishmllnt.\"\n\nThe learned authors confined its operation to acts which are considered to be immoral according to the standards of immorality approved by Courts. The case 1aw both in England and India confines the operation of the doctrine to sexual immorality.\n\nTo cite\n\n'959\n\nGherulal Parak!J\n\nMahadeodas Maiya & Others\n\nSubba Rao ].\n\nr959\n\nGherulal Parakh\n\nMahadeodas P.1 aiya G Others\n\nSubba Rao ],\n\nonly some instances: settlements in consideration of concubinage, contracts of sale or hire of things to be used in a brothel or by a prostitute for purposes incidental to her profession, agreements to pay money for future illicit cohabitation, promises in regard to marriage for consideration, or contracts facilitating divorce are all held to be void on the ground that the object is immoral.\n\nThe .word \"immoral\" is a very comprehensive, word.\n\nOrdinarily it takes in every aspect of personal conduct deviating from the standard norms of life. It may_ also be said that what is repugnant to good conscience is immoral. Its varying content depends upon time, place andthe stage of civilization of a particular society. In short, no uni versa! standard can be laid down and any law based on such fluid concept defeats its own purpose_. The provisions of s. 23 of the Contract Act indicate the legislative intention to give it a restricted meaning. Its juxtaposition with an equally illusive concept, public policy, indicates that it is used in a restricted sense; otherwise there would be overlapping of the two concepts. In its wjde sense what is immoral may be against public policy, for public policy covers political, social and economic ground of objection. Decided cases and authoritative text. book writers, therefore, confined it, with every justification, only to sexual immorality. The other limitation imposed on the word by the statute, namely, \"the court regards it as immoral\", brings out the idea that it is also a branch of the common law like the doctrine of public policy, and, therefore, should be confined to the principles recognized and settled by Courts. Precedents confine the said concept only to sexual immorality and no case has been brought to our notice where it has been applied to any head other than sexual immorality. In the circumstances, we cannot evolve a now head so as to bring in wagers within its fold.\n\nLastly it is contended by the learned Counsel for the appellant that wager is extra-commercium and therefore there cannot be iu law partnership for wager within the meaning of s. 4 of the Partnership Act; for partnership nnder that section is relationship between\n\n(2) S.C.R. stJ:PR.:tnMm COttR'r Rit:Po:R'l's 447\n\npersons who have agreed to share the profits of a business. Reliance is placed in respect of this contention on the dec'ision of this Court in The State of Bombay v.\n\nR. M. D. Qhamarbaugwala (').\n\nThis question was not raised in the pleadings. No issue was framed in res-\n\nFct of it. No such case was argued before the learned Subordinate Judge or in the High Court; nor was this point raised in the '11pplication for certificate for leave to appeal to the Supreme Court filed in the.High Court. Indeed, the learned Advocate appea, ring for the appellant in the High Court stated that his client intended to raise one question only, namely, whether the partnership formed for the purpose of carrying on a business in differences was illegal within the meaning of s. 23 of the Contract Act. Further this plea was not specifically disclosed in the statement of case filed by the appellant in this Court. If this contention had been raised at the earliest point of time, it would have been open to the respondents to ask for a suitable amendment of the plaint to sustain their elaim. In the circumstances, we do not think that we could with justification allow the appellant to raise this new plea for the first time before us, as it would cause irreparable prejudice to the respondents.\n\nWe express no opinion on this point ..\n\nFor the foregoing reasons we must hold that the suit partnership was not , unlawfol within the meaning of s. 23 of the Indian Contract Act.\n\nIn the result, the appeal fails and is dismissed with costs.\n\nAppeal dismissed.\n\n(•) (1957] s.c.R. 874.\n\nI959\n\nGherulal _Parakh\n\nMahadeodas Maiya &- Ot/ie, s\n\nSi1bba Rao j.", "total_entities": 132, "entities": [{"text": "GHERULAL PARAKH", "label": "PETITIONER", "start_char": 357, "end_char": 372, "source": "metadata", "metadata": {"canonical_name": "GHERULAL PARAKH", "offset_not_found": false}}, {"text": "MAHADEODAS MAIYA AND OTHERS", "label": "RESPONDENT", "start_char": 374, "end_char": 401, "source": "metadata", "metadata": {"canonical_name": "MAHADEODAS MAIYA AND OTHERS", "offset_not_found": false}}, {"text": "JAFER IMAM", "label": "JUDGE", "start_char": 404, "end_char": 414, "source": "metadata", "metadata": {"canonical_name": "SYED JAFFER IMAM*", "offset_not_found": false}}, {"text": "A. 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"Public Gambling Act", "label": "STATUTE", "start_char": 79975, "end_char": 79994, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Public Gambling Act", "label": "STATUTE", "start_char": 80091, "end_char": 80110, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 2", "label": "PROVISION", "start_char": 80503, "end_char": 80507, "source": "regex", "metadata": {"linked_statute_text": "Public Gambling Act", "statute": "Public Gambling Act"}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 80517, "end_char": 80534, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 2(1)(d)", "label": "PROVISION", "start_char": 81243, "end_char": 81253, "source": "regex", "metadata": {"statute": null}}, {"text": "Control and Tax Act", "label": "STATUTE", "start_char": 81314, "end_char": 81333, "source": "regex", "metadata": {}}, {"text": "Art. 19(1)", 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{"document_id": "1959_2_448_458_EN", "year": 1959, "text": "l959\n\nMarch 26.\n\n44S StJPREM:rn COURT R:rnPoR'l'S [1959] Supp.\n\nMESSRS. HOWRAH TRADING CO., LTD. v.\n\nTHE COMMISSIONER OF INCOME-TAX,\n\nCALCUTTA (B. P. SINHA, J. L. KAPUR and\n\nM. HrnAYATULLAH, JJ.)\n\nIncome-tax-Assessee acquiring shares by blank transfcrs- Receipt of dividend on s\"ch shares-If assessee entitled to grossing \"P of dividend income and to credit for tax deducted at source- Indian Income-tax A, ct, r922 (XI of r922), ss. r6(2) and r8(5).\n\nThe assessee acquired shares in~ certain companies under \"blank transfers\" without getting the transfers registered with the companies and it received dividends in respect of these shares. It claimed-that the dividend income should be grossed up under s. 16(2) Income-tax Act and that it should be allowed credit under s. 18(5) for the tax deducted at source on the dividend in the hands of the companies.\n\nHeld, that, the assessee was not entitled to the benefits of ss. 16(2) and 18(5) as its name was not in the register of members of the companies. The benefit of s. 18(5) could only go to a shareholder; and a shareholder in that section meant the same thing as in the Indian Companies Act, 1913, i. e., a \"member\" having his name on the register.\n\nThe scheme of the Indian Companies Act, 1913, shows. that the words\n\n11 member\", \"shareholder\" and \"holder of a share\" have been used inter-changeably.\n\nThe words \"holder of a share\" are really equal to the word \"shareholder\" and the expression\" holder of a share\" denotes only a person who, as a shareholder, has his name entered on the register of members.\n\nIn re Wala Wynaad Indian Gold Mining Company, (1882) 21 Ch. D. 849, Shree Shakti Mills Ltd. v. Commissioner of Incometax, [1948] 1fJ I.T.R. 187, ]aluram Bhikulal v. Commissioner of Income-tax, 11952) 22 I.T.R. 490, Arvind N. Mafatlal v. Incomctax Officer, [1957J 32 I.T.R. 350, Bikaner Trading Co. v. Commissioner of Income-tax, [1953) 24 LT.~: 419, referred to.\n\nA company when it pays income-tax does not do so on behalf of the shareholders, but the shareholders get the benefit of such payment. The rates of income-tax applicable to the company are, in most instances, higher than the rates applicable to individual shareholders and by the process of grossing up the recipient of the dividend gets some benefit.\n\nCull v. Inland Revenue Commissionors, (1940) A.C. 51 and Inland Revenue Commissioners v. Blott, (r92r) 2 A.C. lJl, referred to.\n\n(2) S.C.R.\n\nStJPRF.lM~ COURT REPORTS 449\n\nIn blank transfers the transfer deed signed by the transferor r959 is handed over with the share scrip to the transferee who may M H 1 complete the transfer by entering his name and applying to the 7' esdss. C owLra' f . t t\" f h.\n\nTh I ra ing o. td. company or reg1s ra !On o 1s name. e company on y ' recognises those persons whose names are on the register of Th v.. . members and they alone are legally entitled to the dividend • Commissioner declared. In the case of a blank transfer equities exist between of Income-tax,\n\nCalcutta the transferor and the transferee and the transferee has a right to claim the dividend from the transferor who holds it in trust for him, but the company is only liable to the transferor and not to the transferee. Though the transferee is clothed with an equitable ownership he is not a full owner, since the legal interest vis-a-vis the company still outstands in the transferor.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 65 of 1956.\n\nAppeal from the judgment and order dated August 31, 1954, of the Calcutta High Court in Income-tax Ref. No. 57 of 1953.\n\nN. C. Chatterjee and B. P. Maheshwari, for the appellant.\n\nK. N. Rajagopala Sastri, R. H. Dhebar and D.\n\nGupta, for the respondent.\n\n1959. March 26.\n\nThe Judgment of the Court was delivered by HrnAYATULLAH, J.-Messrs. Howrah Trading Com- Hidayatullah J. pany, Ltd., Calcutta (hereinafter called the assessee) obtained on April 28, 1955, a certificate under s. 66A(2) of the Indian Income-tax Act from the Calcutta High Court, to appeal to this Court against the judgment dated August 31, 1954, in Income-tax Reference No. 57 of 1953. The Divisional Bench (Chakravarti, C. J., and Lahiri, J.) in the judgment under appeal merely followed their earlier judgment delivered the same day in Income-tax Reference No. 22 of 1953, since reported as Hindustan Investment Corporation v.\n\nCommissioner of Income-tax (1). It is the latter judgment which gives the reasons for the decision.\n\nThe facts of the case have been stated with sufficient fulness, yet briefly, in the statement of the case submitted by the Income-tax Appellate Tribunal (Calcutta Bench) and may be conveniently set out in its ow11 words:\n\n(r) (1955] 27 I.T.R. 202. 57\n\n1959 \"The applicant had received sums of Rs. 3,831,\n\nMeSS>s. Howrnh Rs. 6,606, Rs. 7,954 aud Rs. 8,304 in the four assess- Tmding Co .. Ltd. ment years, 1944-45, 1945-46, 1946-47 and 1947-48 as v. income from dividends. The shares in respect of The, Ciommiss, ion\" which this dividend income was received were the oJ ncomeax, .\n\nCalcutta property of the A pphcant but in the books of the various companies these stood in the names of other Hidayatullah J. persons. It appears that these shares were purchased by the Applicant from other persons under a blank transfer but the transfers had not been registered with the various companies. The Applicant's claim in these income-tax proceedings was that these shares although not registered in the name of the applicant were the property of the applicant. It was further claimed that this dividend income should be grossed up under s. 16(2) and credit for the tax deducted should be allowed to the Applicant under s. 18(5).\" The Income-tax Officer did not accept this claim, and the appeals of the assessee were rejected by the Appellate Assistant Commissioner of Income-tax, Calcutta, \"A\" Range and by the Appellate Tribunal.\n\nThe Tribunal, however, on being moved, referred the following question to the High Court :\n\n\" Whether in the facts and circumstances of this case, the Applicant (the assessee) was entitled to have this dividend income grossed up under section 16(2} and claim credit for tax deducted at source under section 18(5) of the Income-tax Act? \" The High Court answered the question in the negative, thus affirming the decisions of the Department and the Appellate Tribunal.\n\nThe assessee contends that the decision of the High Court is erroneous, and that it is entitled to have the dividend income 'grossed up' under s. 16(2) and also to claim credit for tax deducted at source, uuder s. 18(5) of the Income-tax Act. The relevant sectious are as follows:\n\n\" 16(2) : For the purposes of inclusion in the total income of an assessee any dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed or deemed to have been\n\n(2) S.C.R. . SUPREME COURT REPORTS 451\n\npaid, credited or distributed to him, and shall be inz959 creased to such amount as would, if income-tax (but t ) t h t\n\n1. bl t th t t l .\n\nMessrs. Howrah not superax a t e r~ e app ic~ e. o e o a m- Trading Co., Ltd. come of the company without takmg mto account any v. rebate allowed or additional income-tax charged for 1'he Commissioner the financial year in which the dividend is paid, ereof Income-tax, dited or distributed or deemed to have been paid, Calcutta credited or distributed, were dedncted therefrom, be ' Hidayatullah J. equal to the amount of the dividend: (proviso omitted). 18(5) : Any deduction made and paid to the account of the Central Government in accordance with the provisions of this section a'Il.d any sum by which a dividend has been increased under sub-section (2) of section 16 shall be treated as a payment of income. tax or super-tax on behalf ...... of the shareholder ..... . and credit shall be given to him therefor on the production of the certificate furnished under ..... section 20\n\n..... .in the assessment, if any, made for the following year under this Act : (proviso omitted). 49B(l): Where any dividend has been paid, credited or distributed or is deemed to have been paid, credited or distributed to any of the persons specified in section 3 who is a shareholder of a company which is assessed to income-tax in the taxable territories or elsewhere, such person shall, if the dividend is included in his total income, be deemed in respect of such dividend himself to have paid income-tax (exclusive of super-tax) of an amount equal to the sum by which the dividend has been increased under sub-section (2) of section 16.\"\n\nIt was contended in the High Court that inasmuch as s. 16(2) referred to an ' assessee ', the assessee company was entitled to have the dividend 'grossed up' by the addition of income-tax paid by the various companies at source and consequently to have the benefit of the credit allowed under the two remaining sections. In the opinion of the High Court, an assessee whose name was not in the register of members of the companies was not entitled to the benefit of these provisions. The learned Judges of the High Court were of the opinion that the word \" shareholder \" in\n\n'959 s. 18(5) had the same signification as the word \"mem-\n\n,1 - her\" used in the Indian Companies Act; and that \"ess>s. Howrah h l.fi d b •ct d Trading co., Ltd. t e assessee was not qua 1 e to e cons1 ere as a v. shareholder, even though by a blank transfer it had The Commissioner purchased the relevant shares. In our opinion, the of Income-tax, High Court was right in its conclusion.\n\nCalcutta A company when it pays income-tax, does not do\n\nHidayatullah ;. so on behalf of the shareholders. It is itself chargeable under the Act. In Gull v. Inland Revenue Commissioners (1), Lord Atkin stated the . Jaw (which in substance is also the law in our country) thus:\n\n\"My Lords, it is now clearly established that in the case of a limited company the company itself is chargeable to tax on its profits, and that it pays tax in discharge of its own liability and not as agent for its shareholders ......... At one time it was thought that the company, in payiug tax, paid 'on behalf of the shareholder ; but this theory is now exploded by decisions in this House, and the position of the shareholders as to tax is as I have stated it.\" When the company pays its own income-tax and declares a dividend from the balance of its profits, it deducts from such dividend a proportionate part of the amount of the tax paid by it. This principle is explained in another English case, and it is substantially also the law in this country. In Inland Revenue\n\nCommissioners v. Blott('), Viscount Cave stated the l(l. w in these words :\n\n\"Plainly, a company paying income-tax on its profits does not pay it as agent for its shareholders. It pays as a tax-payer, and if no dividend is declared, the shareholders have no direct concern in the payment. If a dividend is declared, the company is entitled to deduct from such dividend a proportionate part of the amount of the tax previously paid by the company; and, in that case, the payment by the company operates in relief of the shareholder. But no agency, properly so called, is involved.\" The share-holders, however, get the benefit of the payment of the tax by the company. Though under ( l) [r940] A.G. 51, 56; (1939) 22 Tax Cas. 6o3, 636.\n\n(2) [192rJ 2 A.C. 171, 201.\n\n(2) S.C.R.\n\nSUPREME COUH.T REPORTS 453\n\ns. 16(2) of the Act their dividend is increased by' a\n\nI959 proportionate amount of tax paid by the company, M\n\nI-I l the payment of the tax by the company is deemed Tr:~;:~ cow{a'. under ss. 18(5) and 49B(l) to be payment by the v. shareholders. The rates of income-tax applicable to The Commissioner the company are, in most instances, higher than the 0! Income-tax, rates applicable to the individual shareholders, and by Calcutta this process of 'grossing up', as it is commonly call- I-Iidayatultah J. ed, the recipient of the diVidend gets some benefit.\n\nThe position of a shareholder who gets dividend when his name stands in the register of members of the company causes no difficulty whatever. But transfers of shares are common, and they take place either by a folly executed document such as was contemplated by Regulation 18 of Table A ofthe Indian Companies Act, 1913, or by what are known as 'blank transfers'.\n\nIn such blank transfers, the name of the transferor is entered, and the transfer deed sig.ned by the transferor is handed over with the share scrip to the transferee, who, if he so chooses, c9mpletes the transfer by entering his name and then applying to the company to register his name in place of the previous holder of the share. The company recogn, ises no peri;; on except one whose name is on the register of members, upon whom alone calls for unpaid capital can be made and to whom only the dividend declared by the company is legally payable. Of course, between the transferor and the transferee, certain equities arise even on the execution and handing over of 'a bla.nk transfer', and among these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee.\n\nThese equities, however, do not touch the company, and no claim by th.e transferee whose name is not in the register of members can be made against the company, if 'the tranferor retains the money in his own hands and fails to pay it to him.\n\nA glance at the scheme of the Indian Companies_ Act, 1913, shows that the words \"member\", \"shareholder\" and \"holder of a share\" have been used interchangeably in that Act.\n\nIndeed, the opinion of most of the writers on the subject is also the same.\n\nBuckley on the Companies Act, 12th Edition, page\n\nMessrs. llow•ah 803 has pointed out that the right of a transferee is Trnding co .. Ltd. only to call upon the company to register his name v. and no more.\n\nNo rights arise till such registration\n\nr959\n\nT lie Conimissioner tak:es place. of Income-tax, Section 2(16) of the Indian Companies Act, 1913, Calcutta defines\" share\" as\" Rh are in the share capital of the\n\nHidayatullah J. company''. Section 5 deals with the mode of forming incorporated companies, and in the case of companies limited by shares, the liability of the members is limited to the amounts, if any, unpaid on the shares respectively held by them. By s. 18, Table A is made applicable to companies, unless by the Articles of any company the terms of Table A have been excluded or modified.\n\nRegulation 18 of Table A reads as follows: \" The instrument of transfer of any share in the company shall be executed both by the transferor and transferee, and the transferor shall be deemed to remain holder of the share until the name of he transferee is entered in the register of members in respect\n\nthereof.\" The words \" holder of a share \" are really equal to the word \" shareholder \", and the expression \" holder of a share \" denotes, in so far as the company is concerned, only a person who, as a shareholder, has his name entered on the register of members.\n\nA similar view of the Companies Clauses Consolidation Act, 1845, was taken in Nanney v. Morgan (1).\n\nThe learned Lord , Justices held that under s. 15 of that Act, the transferee had not the benefit of a legal title till certain things were done, which were indicated by Lopes, L. J., in the following passage:\n\n\" Therefore the transferor, until the delivery of the deed of transfer to the secretary, is subject to all the liabilities and entitled to all the rights which belong to a shareholder or stockholder, and, in my opinion, until the requisite formalities are complied with, he continues the legal proprietor of the stock or shares subject to that proprietorship being divested, which it may be at any moment, by a compliance with the requisite formalities. \"\n\n(I) (1888) 37 Ch. D. 346, 356.\n\n(2) S.C.R.\n\nSUPREME COURT :REPO:Rrs 455\n\nThe same position obtains in India, th_ough the com- '959 pletion of the transaction by having the name entered Messrs. Howrah in the register of members relates it back to the time Trading co, Ltd. when the transfer wa.s first made. See Nagabushanam v.\n\nv. Ramachandra Rao (1).\n\nThe Commissioner During the period that the transfer exists between of Income-tax,\n\n£ Calcutta the trans eror and the transferee without emerging as a binding document upon the company, equities exist 1-Iidayatullah 1. between them, but not between the transferee and the company. The transferee can call upon the transferor to attend the meeting, vote according to his directions, sign documents in relation to the issuance of fresh capital, call for emergent meetings and inter alia, also compel the transferor to pay such dividend as he may have received. See E. D. Sassoon & Go. Ltd. v.\n\nPatch (2 ) approved in Mathalone v. Bombay Life Assurance Go. Ltd. (3).\n\nBut these rights though they, no doubt, clothe the transferee with an equitable ownership, are not sufficient to make the transferee a full owner, since the legal interest vis.a-vis the company still outstands in the transferor ; so much so, that the company credits the dividends only to the transferor and also calls upon him to make payment of any unpaid capital, which may be needed. The cases in Black v. Homersham (4) or Wimbush, In re Richards v.\n\nWimbush (5) hardly advance the matter further than this.\n\nThe position, therefore, under the Indian Companies Act, 1913, is quite clear that the expression \" shareholder \" or \" holder of a share \" in so far as that Act is concerned, denotes no other person except a \"member\". The question that arises in the present case is whether by reason of ss. 16(2) and 18(5) the assessee, who was a transferee on a 'blank transfer' is entitled to the benefits of the grossing up of the dividend income. Learned counsel for the assessee strenuously contends that the assessee being an owner in equity of the shares and thus also of the dividend is entitled to this benefit.\n\nHe ; refers to the use of the word 'assessee' in s. 16(2).\n\nThe Department, on the\n\n(r) (r922) I.L.R. 45 Mad. 537.\n\n(2) (r922) 45 Born. L.R. 46.\n\n(3) [1954] S.C.R. rr7.\n\n(4) (r878-79) L.R. 4 Ex. D. 24,\n\n(5) [1940] I Ch. D. 92.\n\n456 SUPREME COURT REPOR'.l'S [1959] Supp.\n\n'959 other hand, says that the dividend can be increased\n\nMems. How, ah under s. 16(2) and credit allowed under s. 18(5) if the Trading co., Ltd. assessee is a 'shareholder', because the benefit of v. s. 18(5) can go only to the shareholder, i.e., a person The Commission\" with his name on the register of members, and not to\n\n0f Income-tax, a person holding an equity against such shareholder.\n\nCalcutta The assessee contends that the word \"shareholder\"\n\nHidayatuilah J. includes even a person who holds a share as a result of a blank transfer, and does not necessarily mean a member of the company, whose name is on the register of members.\n\nAuthorities on this point are not wanting, and indeed, in the judgment of the Calcutta High Court they have all been referred to.\n\nThey are all against the assessee. See Skree Shakti Mills Ltd. v. Commissioner of Income-tax('), Jaluram Bhikulal v. Commissioner of Income-tax('), Arvind N. Mafatlal v. Incometax Officer (3) and Bikaner Trading Co. v. Commissioner of Income-tax(').\n\nThe question: that falls for consiqeration is whether the meaning given to the expression \"shareholder \" used in s. 18(5) of the Act by these cases is correct.\n\nNo valid reason exists why\" shareholder\" as used in s. 18(5) should mean a person other than the one denoted by the same expression in the Indian Companies Act, 1913. In In re Wala Wynaad Indian Gold Mining Company('), Chitty, J., observed:\n\n\" I use now myself the term which is common in the Courts, 'a shareholder', that means the holder of the shares. It is the common term used, and only means the person who holds the shares by having his name on the register. \" Learned counsel for the assessee cited a number of authorities in which the ownership of the dividend was in question, and it was held that the transferee whose name was not registered, . was entitled to the dividend after transfer had been made. These cases are Commissioners of Inland Revenue v. Sir John Oakley (0), Spence v. Commissioners of Inland Revenue(')\n\n(1) [1948] 16 I.T.R. 187,\n\n(2) [1952] 22 I.T.R. 490.\n\n(3) [1957] 32 I.T.R. 350.\n\n(4) [1953] 24 I.T.R. 4r9.\n\n(5) (1882) 21 Ch. D. 849, 854.\n\n(6) (1925) 9 Tax Cas. 582.\n\n(7) (1941) 24 Tax Cas. 31I.\n\n(2) S.C.R. SUPREME COURT REPORTS 457\n\nand others cited at page 367 in Multipar Syndicate, r959 Ltd. v. Devitt ( 1 ). • • Messrs. Howrah No one can doubt the correctness of the propos1t1on Trading co., Ltd. in these cases, but from an equitable right to compel v. the transferor to give up the dividend to the trans- The Commissioner feree, to a claim to the dividend by him as a \" shareof Income-tax, holder\" against the company is a wide jump. In so Calcutta far as the company is concerned, it does not even Hidayatullah 1. issue the certificate under s. 20 of the Income-tax Act in the name of an unregistered transferee but only in the name of the transferor whom it recognises, because his name is borne on its books. Section 20 lays down:\n\n\" The principal officer of every company shall, at the time of distribution of dividends, furnish to every person receiving a, dividend a certificate to the effect that the company has paid or will pay income-tax on the profits which are being distributed, and specifying such other particulars as may be prescribed. \" The meaning of s. 20 as also of s. 18(5) is clear if they are read with s. 19A, under which information regarding dividends has to be supplied by the company when demanded by the Income-tax Officer. It lays down:\n\n\"The principal officer of every company ... shall, on or before the 15th day of June in each year, furnish to the prescribed officer a return in the prescribed form and verified in the prescribed manner of the names and of the addresses, as entered in the register of shareholders maintained by the company, of the shareholders to whom a dividend or aggregate dividends ex• ceeding such amount as may be prescribed in this behalf has or have been distributed during the preceding year and of the amount so distributed to each such shareholder.\" (Italics supplied).\n\nSection 19A makes it clear, if any doubt existed, that by the term\" shareholder\" is meant the person whose name and address are entered in the register of \"shareholders\" maintained by the company.\n\nThere is but one register maintained by the Company. There\n\n(r) (1945) 26 Tax Cas. 359. 58\n\n1959 is no separate register of \" shareholders\" such as the assessee claims to be but only a register of \" mem- Mems. Howrnh b \" Th' t k . d' t 1 t th . t f Trading co., Ltd. ers b. 1sd a es us 1mme h1a e y o c e reg1s er o v. mem ers, an demonstrates t at even 1or the purpose 1 he Commission\" of the Indian Income-tax Act, the words \"member\"\n\noJ Income-tax, and \"shareholder \" can be read as synonymous.\n\nCalcutta The words of s. 18(5) must accordingly be read in\n\nHidayatullak ;. the light in which the word \"shareholder\" has been used in the subsequent sections, and read in that manner, the present assessee, notwithstanding the equitable right to the dividend, was not entitled to be regarded as a \" shareholder \"· for the purpose of s. 18(5) of the Act. That benefit can only go to the person who, both in law and in equity, is to be regarded as the owner of the shares and between w horn and the company exists the bond of membership and ownership of a share in the share capital of the company.\n\nIn view of this, we are satisfied that the answer given by the Calcutta High Court on the question posed by the Tribunal was correct.\n\nThe appeal fails, and is dismissed with costs.\n\nAppeal dismissed.", "total_entities": 54, "entities": [{"text": "HOWRAH TRADING CO., LTD", "label": "PETITIONER", "start_char": 72, "end_char": 95, "source": "metadata", "metadata": {"canonical_name": "HOWRAH TRADING CO., LTD", "offset_not_found": false}}, {"text": "THE COMMISSIONER OF INCOME-TAX,\n\nCALCUTTA", "label": "RESPONDENT", "start_char": 101, "end_char": 142, "source": "metadata", "metadata": {"canonical_name": "THE COMMISSIONER OF INCOME-TAX, CALCUTTA", "offset_not_found": false}}, {"text": "L. KAPUR", "label": "JUDGE", "start_char": 160, "end_char": 168, "source": "metadata", "metadata": {"canonical_name": "J.L. 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{"document_id": "1959_2_459_475_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPORTS 459\n\nTHE COMMISSIONER OF INCOME.TAX,\n\nWEST BENGAL v.\n\nTHE CALCUTTA STOCK EXCHANGE ASSOCIA-\n\nTION LTD. (B. P. SINHA, J. L. KAPUR and\n\nM. HIDAYATULLAH, JJ.)\n\nIncome Tax-Stock Exchange Association-Authorised Assistants-Admission fee and monthly subscriptions in respect of them paid by members-Fee for putting the names of companies on QHotations List-Income therefrom-Assessability to tax-\" Performing specific services\", Meaning of-Indian Income-tax Act, r9zz (XI of r9zz), s. ro(6). .\n\nBy sub-s. 6 of s. ro of the Indian Income-tax Act, r922: \"A trade, professional or similar association performing specific services for its members for remuneration definitely related to those services shall be deemed for the purpose of this section to carry on business in respect of those services, and the profits and gains therefrom shall be liable to tax accordingly.\"\n\nThe members of the respondent company, whose principal object was to facilitate the transaction of business on the Stock Exchange, were enabled under the by-laws to have a certain number of Authorised Assistants so that the latter could use the premises of the company and transact business therein in the names and on behalf of the members who, for that purpose, were required to pay admission fees and monthly subscriptions in respect of each of them.\n\nThe by-laws of the company also provided that no dealings in respect of the shares of any particular company should be permitted on the Stock Exchange, unless an application made by a member of the respondent company and accompanied by a fee of Rs. rooo, for putting the name of that company on the Quotations List was approved by the prescribed Authority of the respondent company. During the accounting year in question the company received from its members admission fees and subscriptions in respect of the Authorized Assistants and fees for putting the names of companies on the Quotations List.\n\nThe question was whether the aforesaid amount was liable to be taxed under s. ro(6) of the Indian Income-tax Act,\n\n~~ .\n\nHeld, that with reference to a trade, professional or similar association, the performing of specific sel'vices under s. ro(6) of the Indian Income-tax Act, r922, mean conferring on its members some tangible benefit which otherwise would not be available to them as such, except for payment received by the association in respect of those services.\n\nI959\n\nMarek 26.\n\nr959 Accordingly, the income received by the respondent company towards the admission fees and the subscriptions in respect The Commissioner of the. Authorized Assistants. being the price paid for the services of Inconie-tax, of the respondent con1pany in making suitable arrangements for West Bengal an absentee member to transact business on his behalf and in his v. name by his representative or agent within the Stock Exchange, The Calcutta Stock as well as the fees received from members for enlisting the names\n\nExchange of companies not already on the Quotations List so as to permit Association Ltd. transactions in respect of the shares of the companies concerned, was remuneration definitely related to specific services performed by the respondent for its members within the meaning of s. rn(6) of the Indian Income-tax Act, r922, and was assessable to income-tax.\n\nSinha ].\n\nNative Share and Stock Brokers' Association v. The Commissioner of Income-tax, Bombay, [r946] r4 I.T.R. 628, approved.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 204 of 1958.\n\nAppeal from the judgment and decree dated January 6, 1956, of the Calcutta High Court in Income-tax Reference No. 74 of 1953.\n\nK. N. Rajagopal Sastri, R. H. Dhebar and D. Gupta, for the appellant.\n\nRadha Binod Pal, Panchanan Pal and D. N. Mukherjee, for the respondents.\n\n1959. March 26. The Judgment of the Court was delivered by\n\nSINHA, J.-The question for determination in this appeal on a certificate of fitness granted by the High Court of Calcutta, is whether the respondent's admitted income under certain heads, is chargeable to income-tax under the provisions of s; 10(6) of the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter referred to as the Act). The Calcutta High Court, by its judgment dated January 6, 1956, answered the question in the negative, disagreeing with the determination of the Income-tax Appellate Tribunal by its order dated April 23, 1949.\n\nThe facts of this case, upon which the decision of the appeal depends, may shortly be stated as follows: The respondent is a limited liability company incorporated on June 7, 1933, with a view to taking over the assets and liabilities of an unincorporated association called \" The Calcutta Stock Exchange Association\"\n\nand to carrying on the affairs of the Stock Exchange z959 which had been founded by that Association. Th c - ..\n\nThe principal object of the Respondent Company 0; 1:::::;::~' is to facilitate the transaction of business on the West Bengal Calcutta Stock Exchange. In view of that objective, v. the Company had to make rules and by-laws, regulat- The Calcutta Stock . h d d h d. . • d b • t t Exchange mg t e mo e an t e con 1t10ns m, an su 3ec o, A . 1.\n\nLtd which the business of the Stock Exchange bad to be ssocia ' 0n transacted. The Company is composed of\" members\" Sinha J. who may be either individuals or firms, who, except in the case of parties who had been members of the unincorporated Association have to be elected as such, and upon such elections, have to acquire a share of the Company and pay an entrance fee.\n\nThe members have to pay a monthly subscription according to the by-laws of the Company. Under the by-laws of the Respondent Company, members with a certain standing, are allowed to have \"Authorized Assistants \", upto a maximum of six in number. Such Authorized Assistants are permitted the use of the premises of the Association and to transact business therein in the names and on behalf of the members employing them.\n\nThe members have to pay an admission fee for such Authorized Assistants according to the following sea.le:\n\n\"(a) for the first two Assistants Rs. 1,000\n\n(b) for the third Assistant Rs. 2,000 ( c) for the fourth Assistant Rs. 3,000\n\n(d) for the fifth Assistant Rs. 4,000\n\n(e) for the sixth Assistant Rs. 5,000\n\n(f) for replacement Rs. 1,000 \".\n\nThe last item of replacement fee of Rs. 1,000/- is meant to cover the fee for substituting one Assistant by another. Before these by-laws were amended with effect from July 10, 1944, a member could have more than six such Assistants, but the number was limited to six by the new amendment which also provided that \"Members who have more than six Assistants, at present, shall not be allowed any replacement unless the number of Assistants in their firms has come down to six (maximum fixed).\" Rule (5), as amended, is in these terms :-\n\n1 95~ \"Every candidate applying for admission as - Assistant to a member must serve at least for one The Commissione. b · h fi f h b A of income-tax, year as a pro at10ner m t e rm o t at mem er.\n\nw,,1 Bengol probationer must apply to the Committee (through v. the member in whose office he will serve as proba- The Calcuua Stock tioner) in such form as may be prescribed by the\n\nfachnge Committee by paying Rs. 100/- as probationer fee Assomatwn Ltd. h\" h \"Jl b f d d . . t ,, w IC w1 not e re un e m any mrcums ances .\n\nSinha J.\n\nIt would, thus, appear that the rules relating to the admission of members' Assistants, confer the benefit upon those members only-either individuals or firms-who are qualified according to the by-laws to have such Assistants, and who have paid admission fees and pay a monthly subscription in respect of each of them, besides thefr own dues, to the Company.\n\nThe number of such Assistants has been sought by the by-laws to be limited upto a maximum of six, by imposing a progressively enhanced admission fee, apparently, with a view to discouraging the empToyment of a large crowd of such \" Authorized Assistants\". The by-laws also provide that\" an authorized assistant shall not enter into any contracts on his own behalf and all contracts made by him shall be made in the name of the member employing him and such member shall be absolutely responsible for the due fulfilment of all such contracts and for all transactions entered into by the authorized assistant on his behalf.\" It is also contemplated by the by-laws that. tickets have to be issued to the Authorized Assistants, besides the members' tickets. The bylaws also contemplate that a member shall give to the prescribed Authority of the Company, an immediate notice in writing, of the termination of the em ployment by him of any Authorized Assistant, and on such termination, the right of the Assistant to use the rooms of the Association, shall cease, and he shall not be at liberty to transact business in the name and on behalf of his employer. The by-laws also make provision for the supervision of the work of the Authorized Assistants to see that they function within the limits of their powers, and do not transact\n\nbusiness on behalf of persons or firms other than 1959 I those employing them. . . . • h · ( 1 lte Commissioner Durmg t e accountmg year 1944-45 assessn; ient of Income-tax, year 1945-46), the Re-spondent Company received west Bengal from its members the sum of Rs. 60,750/- as entrance v. fees, and the sum of Rs. 15,687 /- as subscription in The Calcutta Stock respect of the Authorized Assistants. The Company fachnge also received during the aforesaid year, a sum of Association Lid.\n\nRs. 16,000/- as fees for putting the names of companies Sinha 1. on the Quotations List. Unless a particular company's name is placed on the Quotations List, no dealings in respect of the shares of that company are permitted on the Stock Exchange. An application has to be made by a member to place on the Quotations List any company not already included in that List, and _on approval by the prescribed Authority of the Company, the name of the company thus proposed, is included in the List upon payment of a certain fee.\n\nThe companies themselves cannot apply to the Assoqiation for such enlistment. The application has to be made by a member, and has to be accompanied by a fee of Rs. 1,000/-, and it is only after the necessary scrutiny and investigation into the affairs of the proposed company have been made, that the enlistment applied for is granted. That is another source of income to the Respondent Company. It is no more necessary to refer to another item of income, which was admitted, during the course of the assessment proceedings in their appellate stage, to be liable to the payment of tax. We are, thus, concerned in the present controversy with the aforesaid sums of Rs. 60,750/-, Rs. 15,687/- and Rs. 16,000/-which were held by the Income-tax Officer, by his order dated March 27, 1946, to be liable to income-tax.\n\nThe Income-tax Officer rejected the contention raised on behalf of the assessee Company that the Authorized Assistants aforesaid were themselves members of the Company, and that therefore, the moneys received from them were exempt from taxation. He also held that though the Respondent Company was a mutual Association, each one of the three items of income, referred to above, was remuneration definitely related\n\n464 SUPREME OOUR'r REPORTS [1959] Supp.\n\nt959 to specific services performed, and was thus, charge-\n\nTh C -. . able to tax within the meaning of s. 10(6) of the Act. e ommission\" O I h A JI\n\nA C · b of Income-tax, !1 appea , t e ppe ate ssJStant . omm1ss10ner, y west Brngal his order dated June 30, 1947, considered the pomts v. at great length, and came to the conclusion that the The Calcuua Stock authorized Assistants were not members or substitute\n\nExchange members.\n\nHe held that the Authorized Assistants Association Ltd. h ' f h b were no more t an representatives o t e rnem ers\n\nSinha 1 . who employ thJJm, and they transact business on their behalf, and that the Association had framed rules and by-laws, regulating the admission, supervision and discontinuance of such Authorized Assistants. For\n\n~ coming to this conclusion, he relied upori the decision of the Bombay High Court in the case of Native Share and Stock Brokers ' Association v. The Commissioner of Income-tax('). The case was then taken up in appeal to the Income-tax Appellate Tribunal, which dismissed the appeal.\n\nThe Tribunal agreed with the finding of the taxing authorities that the Authorized Assistants were not members of the Company within the meaning of the Articles of Association of the Company, and that their position was analogous to that of the \"authorised clerks in Native Share and Stock Brokers' Association at Bombay\". In the course of its order, the Tribunal observed as follows:-\n\n\" The provision made in the regulations of the company, by which a member can take advantage of sending his authorised assistants to the company for transacting the business in the member's name is nothing but giving extra facilities to the members. By controlling the institution of authorised assistants the company renders specific services to the members and in particular to the member whose assistants work for him. The amounts received by the company from these sources are clearly covered by the provisions of section 10(6) \".\n\nAt the instance of the assessee, the Tribunal stated a case and referred the following questions of law to the High Court for its decision under s. 66(1) of the Act:-\n\n\" (1) Whether on the facts of this case the Incometax Appellate Tribunal was right in holding that\n\n(1) [1946) 14 I.T.R. 628.\n\nAuthorised Assistants were not members of the comr959 parry and as such the amounts of Rs. 15,687 /- and Th c - .. , d h b . ,· e ommissioner 60,750/- receive from t em as su scnpt10ns and of Income-tax entrance fees respectively should be included in the West Bengal assessable income. v.\n\n(2) Were these amounts received for specific servi- The Calcutta Strek ces performed by the Association or its members with- Exchange th • f b t\" (6) f t' 10 f th Association Ltd. m e meaning o su .sec 10n o sec 10n o e _ Indian Income-tax Act ?\n\n(3) Whether the sums of Rs. 16,000/- and Rs. 600/- were remuneration definitely related to specific services performed by the Association for its members within the meaning of sub-section (6) of section 10 \".\n\nThe reference was heard by a Di vision Bench consisting of Sir Trevor Harries, C. J., and Banerjee, J., of the Calcutta High Court.\n\nBefore that Bench, certain concessions were made. It was conceded by Dr. Pal, who also appeared before that Bench, that the Authorised Assistants were not members of the Company.\n\nIt was also agreed at the bar, on behalf of both the parties, that the two sums of Rs. 60, 750 and 15,687 were not received from the Authorized Assistants, as suggested in the question formulated, and that it. was common ground that they were received from members of the Association in respect of their Authorized Assistants. Therefore, the High Court took the view that the questions framed by the Tribunal did not arise, and that the Tribunal bad proceeded on a wrong basis of facts.\n\nThe High Court, therefore, re-cast the questions in these terms :-\n\n\" Whether in the facts and circumstances of this case the Income-tax Appellate Tribunal was right in holding that\n\n(a) the amounts of Rs. 15,687 / and Rs. 60, 750/. received from the members of the Association as subscriptions and entrance fees in respect of Authorized Assistants, and\n\n(b) the amounts of Rs. 16,000/- and Rs. 600/- received as fees for enlisting names of newly floated companies and for recognition of changes in the styles of firms respectively should be included in the assessable income of the assessees \",\n\nSinha ].\n\nc959 The Tribunal was asked to re-state a case upon the\n\nThe Commission\" questions as re-cast, extracted above. of Income-tax, Accordingly, the Tribunal drew up a fresh state- West Bengal ment of the case and re-submitted it to the High v.\n\nCourt. On this re-statement of the case, the matter was The Calcutta Stock heard by a Bench consisting of Chakra varti C. J. and\n\nExchange S k J T H\" h C . ' ' Association Ltd. ar ar, . he 1g ourt considered the terms of s. 10(6) of the Act, and came to the conclusion that Sinha J. the case had not been brought within those terms.\n\nThe High Court, in the course of its opinion, observed that though the assessee is undoubtedly a trade association, it did not perform any specific services for its members for remuneration. It then examined in detail the decision of the Bombay High Court in the case of Native Share and Stock Brokers' Association v. The Commissioner of Income-tax('), relied upon by the Department, and observed that the differences pointed out between the case in hand and the case decided by the Bombay High Court, were\" not vital, though they are not immaterial \", but it was not prepared to take the same view of the facts of this case as had been taken by the Bombay High Court in the case referred to above, or by the Travancore-Cochin High Court in the case of Commissioner of Income-tax v. Chamber of Commerce, Alleppey (2).\n\nThe High Court accepted the argument of Dr. Pal, which is also addressed to us, that the words \"performing specific services for \" were far stronger and more definite than the words \"render service to\", and that those words meant the actual doing of definite acts in the nature of services. The Court further observed that those words meant \" execute certain definite tasks in the interests and for the benefit of the latter(that is to say, the members) under an arrangement of a direct character\". It further observed that the words \"for remuneration\" and \" definitely related to those services \" meant that \" certain specific tasks must be performed or functions of a specific character must be discharged for payment and such payment is to be made to the association as wages for its labour in respect of those tasks or functions\". In this connection,\n\n(1) [1946) 14 I.T.R. 628.\n\n(2) [1955) 27 l.T.R. 535.\n\n(2) S.C.R. SUPREME COUltT B, EPORTS 467\n\nit may be addd that the High Court also made the r959 following observations bearing on the construction of The Commissioner the crucial words of s. 10(6) :- of Income-tax, \"When section 10(6) speaks of a trade, professio- Wesl Bengal nal or other similar association performing specific v. services for its members for remuneration, it contem- The Calcutta Stock plates, I think, services in regard to matters outside Ass!7:~::g•Ltd the mutual dealings for which the Association was formed and for the transaction of which it exists as a Sinha f. mutual association. If performance of functions even in regard to matters within the objects of the association as a mutual association be performance of specific service within the meaning of the sub-section, discharge of no function can be outside it and everything done would be specific service performed. That, I do not think, is what the sub-section means and intends\".\n\nIt is manifest that unless the assessee is brought within the terms of sub-s. (6) of s. 10, the three items of income coming into the hands of the Association, would not be chargeable to income-tax. That subsection is in these terms :-\n\n\" (6) A trade, professional or similar association performing specific services for its members for remuneration definitely related to those services shall be deemed for the purpose of this section to carry on business in respect of those services, and the profits and gains therefrom shall be liable to tax accordingly \".\n\nIt has to be observed at the outset that the performing of the services of the description mentioned in that sub.section, may not, but for the words of that section, have amounted to carrying on business in respect of those services. The use of the word \"deemed \" shows that the legislature was deliberately using the fiction of treating something as business which otherwise it may not have been. It is also noteworthy that the sub-section is couched in rather emphatic terms. We have, therefore, to examine the terms of the sub-section to see whether the three sums of money in question, or any of them, are or is within the ambit of those terms.\n\nThe words \" performing specific services\", in our opinion, mean, in the context, \"conferring particular benefits \" on the members. The word\n\n468 SUPREME COURT ItEPORTS [1959] Supp.\n\n'959 \" services \" is a term of a very wide import, but in the\n\nTh C-. . context of s. 10 of the Act, its use excludes its theolo- • ommimoncr . l t' W'th ,. t d of Income-tax gwa or ar 1st1c usage. 1 re1erence to a ra e, prowest Bengal• fessional or similar association, the performing of v. specific services must mean conferring on its members The Cafrutta StocA some tangible benefit which otherwise would not be\n\nExchange available to them as such, except for payment received Association Lid. by the association in respect of those services. The\n\nSinha 1. word\" remuneration\", though it includes \"wages\", may mean payment, which, strictly speaking, may not be called \"wages\". It is a term of much wider import including \" recompense '', \"reward \", \" payment \", etc.\n\nIt, theref9re, appears to us that the learned Chief\n\nJustice was not entirely correct in equating \"remuneration \" with \"wages \". The sub-section further requires that the remuneration should be \"definitely related\" to the specific services. In other words, it should be showh that those services would not be available to the members or such of them as wish to avail themselves of those services, but for specific payments charged by the association as a fee for performing those services.\n\nAfter these observations bearing on the interpretation of the crucial words, we shall now examine each of the three items of income, separately, to determine the question whether they answer, or any of them answers, the description of \"services \" contemplated by the sub-section.\n\nFirstly, the sum of Rs. 60,750 has been realised from such members as applied for and obtained permission of the Association to have the use of Authorized Assistants within the precincts of the Stock Exchange.\n\nThere cannot be the least doubt that unless those members paid the prescribed entrance fees for one or more Authorized Assistants upto a maximum of six, they could not have the benefit thus conferred upon such members. Ordinarily, a member has to transact business in the precincts of the Association by himself or by his business partner if there is a firm; but if that member is a very busy person, and wishes to avail of the services of Authorized Assistants, he has to pay the the prescribed foe. A member of the Association, with the ad vantage of mutuality, so long as he transacts\n\nbusiness within the precincts of the Association, by z959 himself or by his partner in the case of a firm, is not The c;.;;:ssioner required to pay any such entrance fee but only the of Income-tax, fee payable by every member as such. The entrance West Bengal fee, thus, is clearly chargeable only from such of the v. members as avail themselves of the benefit conferred The Calcutta Stock by the rules of the Association in that behalf. The A Echa 1\n\n. ngeLtd fi . , 'd fi h _ f ssocia ion • entrance ee IS, thus, a price pa1 or t e services o the Association in making suitable arrangements for Sinha fan absentee member to transact business on his behalf and in his name by his representative or agent. The entrance fee in question, therefore, cannot but be ascribed . to the specific services rendered by the Association in respect of Authorized Assistants who thus become competent to transact business on behalf of their principal.\n\nComing next to the sum of Rs. 15,687 which was realised from the members by way of subscription in respect of their Authorized Assistants, it is clear that this sum consists of the contributions severally made by the members periodically, so as to continue to have the benefit conferred by the Association of having the use of their representative or agent even during their absence.\n\nThere cannot be the least doubt that this is a very substantial benefit to those members who found it worth their while to engage the services of Authorized Assistants.\n\nA member is not obliged, as indicated above, to have such an Assistant, but the fact that he chooses to have such an Assistant on payment of the prescribed fee or subscription, itself, is proof positive that a businessman, who ordinarily thinks in terms of money, has found it worth-while to have the services of an Assistant by making an additional payment to the Association by way of recompense for the benefit, thus conferred upon him.\n\nLastly, the sum of Rs. 16,000 represents fees received from members for allowing their application for enlisting the names of companies not already on the Quotations List, so that the shares and stocks of these companies, may be placed on the Stock Market. As already indicated, it is not the company concerned which has directly to pay this fee, but the fee has to\n\nry59 be paid by the member who initiates the proposal\n\nTh• c0-;;;,-;;; ssioner and, apparently, finds it worth his while to pay that of Income-tax, prescribed fee to the Association. He would not make\n\nw,,, Bengal the payment unless he found it worth his while to do\n\nv. so. Apparently, such a member is interested in placing The Calc,, tta Stock the stocks of that company on the market. It cannot,\n\nA Exc, hngeLtd therefore, be denied that that sum of money is definitessocia ton . . . . ly related to the specific services performed by the Sinha ;.\n\nAssociation, namely, to permit transactions in respect of the shares of the company concerned, which services would not otherwise be available to the members as a body or to the individual member or members interested in that company.\n\nIn our opinion, therefore, each one of the three sources of income to the Association, accrues to it on account of its performing those specific services in accordance with its rules and by laws. Each one of the three distinct sources of revenue to the Association, is specifically attributable to the distinct services performed by the Association for its members or such of them as avail themselves of those benefits. And each one of those services is separately charged for, according to the rate or schedule laid down by the rules and by-laws of the Association. In our opinion, therefore, the requirements of sub-s. (6) of s. 10, have been fulfilled in the present case.\n\nBut we have yet to deal with the last argument accepted by the High Court, with reference to the terms of sub-s. (6) of s. 10, namely, that the services contemplated therein, have reference to \"matters outside the mutual dealings for which the Association was formed \". In the first place, there is no warrant for limiting the application of the words used by the legislature, in the way suggested. Secondly, the mutuality of the Association extends only to such benefits as accrue to every member on the payment made by him to the Association, but even if additional items of payment have to be made for additional services to be performed by the Association only for such of the members as avail themselves of those benefits, it cannot be said that the mutuality extends to those additional benefits also. It is, in our opinion,\n\nequally wrong to suggest that the services in question x959 should have been outside the objects of the Associa- Th c - .. If h A • d h f e ommissioner t1on. t e sso01at10n ren ers services to sue o of Income-tax, its members as avail themselves of such services as west Bengal are not within the scope of the business activities of v. the Associiation, those benefits, if any, would not be The Calcutta Stock conferred by the Association as such, because the Exchange Association has to function within the scope of its Association Ltd.\n\nobjects of incorporation.\n\nSinha J.\n\nHence, on a true construction of the provisions of the sub-section in question, we have come to the conclusion that the facts and circumstances of the present case, bring the three items of income of the Association within the taxing statute. In our opinion, the decision of the Bench of the Bombay High Court, consisting of Stone, C. J., and Kania, J., (as he then was), in the case of Native Share and Stock Brokers' Association v. Commissioner of Income-tax (1) is correct, and the facts of that case run very parallel to those of the case in hand, though there may be minor differences in the rules and by-laws of the Association then before the Bombay High Court. In that case, as in the present one, the rules of the Stock Brokers' Association (the Bombay Stock Exchange) contemplated a definite scheme for allowing members to employ authorized clerks and for the admission, conduct, control and supervision of those clerks, for the benefit primarily of the members who employed them. It was held by the High Court that the income received by the Association by way of fees in respect of those authorized clerks, was within the taxing statute and liable to income-tax.\n\nAfter examining in detail the provisions of the rules an<l the by-laws of the Association, Stone, C. J., made the following observations which are equally applicable to the rules and by-laws of the Association in the present case:-\n\n\" In my judgment these rules lay down a definite scheme and provide an organised arrangement, controlled and supervised by the Association for the benefit of its members. In my opinion the carrying\n\n(1) [1946] 14 l.T.R. 628.\n\n1959 of their scheme into effect is performing services for - its members by tire Association. No doubt the benefit The Commissioner f h h Id d d h b fi\n\n\" II of Income-tax, o t e sc eme wou re oun to t e ene t o: a. west Bengal members since all would have the advantage of d1s01v. plined supervision exercised over the authorised clerks The Calcutta Stock and remisiers of the others. I do not think that\n\nExchange because the payment for the carrying of the scheme Association Ltd. h I l is provided for only by members w o avai themsC' ves Sinha ;. of the use of the authorised clerks it makes any difference.\" Kania, J., (as he then was), in a separate but concurring judgment, made the following very pertinent observations:-\n\n\" A perusal of the rules referred to in the judgment of the learned Chief Justice shows that the institution of authorised clerks exists for the ben(lfits only of those who pay remuneration of Rs. 100 instead of going to the market and carrying on their business themselves. Individual members are permitted to work through an agent. For that the charge is made. The rules provide for the application and grant for such permission, registration of the authorised clerks on the individuals being recognised as clerks of particular members, supervision over the work of such clerks and particularly to prevent them from registering contracts either in their own name\n\nor in the name of another member; and a general supervision over their good behaviour is contemplated ......... \" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \"A question was raised as to whether these are specific services to be performed for particular members or whether the rules amount to performance of duties towards members in general. It is true that several of the services to be rendered may be helpful to the other members for their business. Taken as a whole I consider that as a performance of services by the Association for the benefit of members who pay the remuneration.\"\n\nWe have made these copious quotations from the judgment of the Bombay High Court, because, in our\n\n(2) S.C.R.\n\nSD_PREME COURT REPORTS 473\n\nI959 opinion, they truly apply the provisions of sub-s. (6) of s. 10 to associations like the one before us.\n\nThe Commissioner The other case to which our attention was drawn, of Income-tax, is Commissioner of Income-tax v. Chamber of Commerce, west Bengal Alleppey (1).\n\nThe facts of that case are not similar to v. those of the case before us, but the ratio decidendi of The Calcutta Stock that case are relevant. That case referred to the Exchange Alleppey Chamber of Commerce.\n\nThe Chamber inaugurated a produce section with the object of promoting the interests of merchants in general, and of those engaged in the produce trade, in particular, of acting as arbitrators and collecting and publishing information relating to the produce trade. Members were admitted to the produce section on payment of admission fees, monthly fees and contributions at certain prescribed rates. The question which was referred to the High Court, was whether the receipts by way of fees and contributions, could be chargeable under s. 10(6) of the Act, and it WMI answered in the affirmative.\n\nThough cases in England, by way of precedent for the decision of the case in hand, have not been cited at the Bar, apparently because the scheme of the Income-tax law in England is different and the words of the statute are not in parti materia, yet there are ' some cases which throw some light on the controversy before us.\n\nFor example, the case of The Carlisle and Silloth Golf Club v. Smith (Surveyor of Taxes) (2) related to a golf club which was not incorporated. It was admittedly a bona fide members' club, but under one of the terms of its lease, it had to admit non-members to play on its course on payment of \" green fees \" at certain prescribed rates. Those fees were paid by nonmembers. Receipts from those fees were entered in the general accounts of the Club, thus, showing an annual excess of receipts over expenditure of the Club as a whole. It was held by Hamilton, J., (as he then was), that the Club carried on a concern or business in respect of which it received remuneration which was assessable to income-tax. He pointed out that the\n\n(1) [1955] 27 I.T.R. 535\n\n(2) (1912) 6 Tax Cas. 48.\n\nAssociation Ltd.\n\nSinha J.\n\nx959 receipts from non-members 'went to augment the funds -. . of the Club, and the revenue thus received was applied\n\nT~~ 1commissioner for the purposes of the Club-towards its general exoj ncome-tax, .\n\nWest Bengal pend1ture.\n\nThe case was taken up to the Court of v.\n\nAppeal, and the decision of that Court is reported in The Calcutta Stockthe same Volume at p. 198.\n\nThe Court of appeal\n\nE':cange affirmed the decision and dismissed the appeal.\n\nAsso\"ation Ltd.\n\nThe Judgment of the King's Bench Division in The\n\nSinha J.\n\nLiverpool Gorn Trade Association, Limited v. Monks (H. M. Inspector of Taxes) (1) was based on facts which are similar to the facts of the present case. In that case, the Liverpool Corn Trade Association, Limited, was an incorporated body under the Companies Act, with the object, inter alia, of protecting the interests of the corn trade, and of providing a clearing house, a market, an exchange, and arbitration and other facilities to the trade. Membership of the Association was confined to persons engaged in the corn trade. Each member was required to have one share in the company, and had to pay an entrance fee and an annual subscription.\n\nNon-members could also become subscribers. Payments were made to the Association by members and others for services rendered through the clearing house, etc. The assessee was taxed on the excess of its receipts over expenditure. On appeal to the Special Commissioners, they upheld the assessment. One of the points raised before the Special Commissioners, was that transactions with its members were mutual ones, and that any surplus arising from such transactions, was not a profit assessable to income-tax. On appeal, the High Court agreed with the determination of the Special Commissioners, and held that any profit arising from the Association's transactions with members, was assessable to incometax as part of the profits of its business, and that the entrance fees and subscriptions received from members must be included in the computation of such profits.\n\nIt was suggested that the service in this case, if any, was extremely trivial and the remuneration which was large was for that reason not definitely related to the\n\n(r) (1926) ro Tax Cas. 442.\n\nservice. It was held by Upjohn, J., in Bradbury z959 (H. M. Inspector of Taxes) v. Arnold (1) that the extent The commissioner of the services was of no materiality. There, the quesof Income-tax. tion was being dealt with under Case VI of Schedule West Bengal Dbof thJ Income-tax Act, 1918. The learned Judge The Calc:; ta Stock 0 Serve !\n\nExchange \"There is no doubt that a contract for services Association Ltd. may, and clearly does, form a matter for assessment under Case VI of Schedule D, and not the less so that Sinha J. the services to be rendered are trivial or that they are to be rendered once and for all so that the remuneration may be regarded as a casual profit arising out of a single and isolated transaction\".\n\nThe same view was expressed by Harman, J., in Housden (Inspector of Taxes) v. Marshall (2).\n\nIn that case, a well-known jockey contracted with a newspaper company to make available to its nominee \" reminiscences of his life and experiences on the turf for the purpose of writing a series of four articles \", and to provide photographs, press cuttings, etc. He was paid £ 750.\n\nThe question was whether this amounted to sale of property, or was a payment for services renaered. It was held that it was the latter, and that it did not matter if the service rendered was trivial.\n\nIn view of what we have said above as to the nature of the service which the Association performed in respect of the Assistants, the payment of the fee was definitely related to that service. It is, therefore, plain that the case fell within s. 10(6) of the Act. It must, therefore, be held that the question referred to the High Court should have been answered in the affirmative, and that the High Court was in error in giving its opinion to the contrary.\n\nThe appeal must, accordingly, be allowed with costs here and below.\n\nAppeal allowed.\n\n(1) [1957] 37 Tax Cas. 665, 669.\n\n(2) [1958] 3 All E.R. 639.", "total_entities": 31, "entities": [{"text": "459\n\nTHE COMMISSIONER OF INCOME.TAX,\n\nWEST BENGAL", "label": "PETITIONER", "start_char": 34, "end_char": 83, "source": "metadata", "metadata": {"canonical_name": "THE COMMISSIONER OF INCOME-TAX, WEST BENGAL", "offset_not_found": false}}, {"text": "THE CALCUTTA STOCK EXCHANGE ASSOCIA-\n\nTION LTD", "label": "RESPONDENT", "start_char": 88, "end_char": 134, "source": "metadata", "metadata": {"canonical_name": "THE CALCUTTA STOCK EXCHANGE ASSOCIATION LTD", "offset_not_found": false}}, {"text": "L. 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{"document_id": "1959_2_476_499_EN", "year": 1959, "text": "March 26.\n\n476 SUPREME COURT REPORTS [1959] Supp.\n\nBALKRISHNA SAVALRAM PUJARI\n\nAND OTHERS\n\nSHREE DNYANESHW AR MAHARAJ\n\nSANSTHAN & OTHERS. (P. B. GAJENDRAGADKAR, A. K. SARKAR and K. SuBBA RAo, JJ.) Limitation-Suit for possession of Sansthan by hereditary worshippers on ouster by trustees-Period of limitation-Trustees, if in possession adversely to plaintiffs-Ouster, if a continuing wrong -Indian Limitation Act, I908 (9 of I908), Arts. I20, I24, s. 23.\n\nThe appellants who were the hereditary worshippers, called Guravs, of the Shree Dnyaneshwar Sansthan of Alandi, claimed to be its owners. The respondents as trustees of the said Sansthan dismissed eleven of the Guravs in 1911~ served a notice on the rest calling upon them to agree to act according to the orders of the Temple committee and appointed six Brahmins to carry on the services of the Sansthan. The Guravs did not agree and sued the respondents for a declaration of their rights of ownership and consequential reliefs. That litigation ended in the High Court in 1921 with the result that their claim of ownership stood rejected but their rights as hereditary worshippers were left open.\n\nThereafter 'the Gura vs took forcible possession of the temple on July 25, 1922. The trustees brought a suit under s. 9 of the Specific Relief Act on September 12, 1922, and obtained a decree on November 4, 1932. In execution of that decree the Guravs were dispossessed.\n\nThe suits, out of which the present appeals arise, were filed by the appellants against the trustees for declaration of their rights as hereditary servants of the Sansthan, a permanent jnjunction restraining the trustees from obstructing them in the exercise of the said rights and accounts.\n\nThe respondents claimed that the appellants were servants of the Temple committee and had no hereditary rights as claimed by them;· even if they had, their claim to such rights was barred by limitation. The trial Court decreed the suits. In appeal the High Court, while agreeing with the trial court on the merits, disagreed on the question of limitation, held the suits to be barred by limitation under art. 120 of the Limitation Act, the cause of action arising either on the filing of the s. 9 suit by the respondents or, in any event, on the date when the said suit was decreed, s. 23 of the Act having no application, and allowed the appeals. It was contended on behalf of the appellants in this Court that the suits were governed by art. 124 of the Limitation Act, and even if art. 120 applied, s. 23 saved limitation.\n\nHeld, that the High Court was right in holding that art. r20 an<:! not art. 124, of the Limitation Act applied and that s. 23 had no application to the suits in question.\n\nArticle 124 of the Limitation Act applies only where the 1959 cause of action for the suit is wrongful dispossession of the plaintiff and adverse possession by the defendant in respect of the Balkrishna hereditary office in question. In such suits, the contest usually Sava/ram Pujari\n\nis between rival claimants to the heniditary office and not & Others between such claimants and trustees. It is impossible to ignore v. the provision of Col. 3 to that article in deciding its applicabi- Shree Dnyaneshwar lit y.\n\nMaha raj Sans than Kunj Bihari Prasadji v. Keshavlal Hiralal, [1904] I.L.R. 28 & Others Born. 567 and Jalim Singh Srimal v. Choonee Lall Johurry, [19II]\n\n15 C.W.N. 882, held inapplicable.\n\nThathachariar v. Singarachariar, A.LR. 1928 Mad. 377, approved.\n\nAnnasami v. Advarachari, I.L.R. 1941 Mad. 275, distinguished.\n\nJhalandar Thakur v. ]harula Das, [1914] I.L.R. 42 Cal. 2444, referred to.\n\nSection 23 of the Limitation Act refers not to a continuing right but to a continuing wrong. A continuing wrong is essentially one that creates a source of continuin~ injury as opposed to one that was complete and makes the doer liable for such continuance. A completed injury would not be a conti11uing wrong even though it might give rise to continuing damage.\n\nThus tested, the injury to the appellants resulting from the decree obtained by the trustees in the s. 9 suit, which amounted to a ouster, was complete at the date of the ouster and s. 23 of the Limitation Act could not apply so as to save limitation.\n\nChoudhury Bibhuti Narayan Singh v. Maharaja Sir Guru Mahadev Asram Prasad Saki Bahadur, [1939] I.L.R. 19 Pat. 208 and Khair Mohammad Khan v. Mst. Jannat, [1940] I.L.R. 22 Lah. 22, referred to.\n\nMaharani Rajroop Kaer v. Syaed Abdul Hossein, [1880] L.R. 7 I.A. 240 and Hukum Chand v. Maharaj Bahadur Singh, [1933] L.R. 60 I.A. 313, distinguished and held inapplicable.\n\nOrvIL\n\nAPPELLATE JURISDICTION: Civil Appeals Nos. 220 to 223 of 1953.\n\nAppeals from the judgment and decrees dated April 14, 1943, of the Bombay High Court in Appeals Nos. 183, 184, 185 and 186 of 1942, arising out of the judg- . ments and decrees dated February 16, 1942, of the Court of the 1st Class Sub-Judge, Poona, in Suits Nos. 900/37, 392/35, 875/36 and 1202/33.\n\nV. P. Rege and Naunit Lal, for the appellants.\n\nN. C. Chatterjee, K. V. Joshi and Ganpat Rai, for respondents Nos. I to 6 (In all the Appeals).\n\n'959\n\n1959. March 26.\n\nThe Judgment of the Court was\n\nBalkr; shna delivered by ·\n\nSavalram Pujad GAJENDRAGADKAR, J.-These four appeals repre-\n\n& Othm sent the last stage of a long and tortuous litigation v. between the appellants Waghmares (also called Sh\"e Dnyaneshwar G ) h 1 th ht f h d \"t h M h . s th uravs w o c aim e rig s o ere 1 ary wors 1pa ara; ans an , h Sh . e;. Othm pers m t e ree Dnyaneshwar MaharaJ Sansthan, Alandi, and respondents 1 to 6 who are the trustees Gajendragadkar }.of the said Sansthan.\n\nAlandi, which is a small town situated on the banks of the river Indrayani at a distance of about 14 miles from Poona, is regarded aR a holy place of pilgrimage by thousands of Hindu devotees. In the last quarter of the 13th century Shree Dnyaneshwar Maharaj, the great Maharashtra Saint and Philosopher, lived at Alandi. He was a spiritual teacher and reformer ; by his saintly life and his inspiring and illuminating commentary on the Bhagvad Gita, known as Dnyaneshwari, he helped to create a popular urge and fervour for religious and social revolution which led to the foundation of a devotional cult; the followers of this cult are known as Warkaris in Maharashtra. They refuse to recognise any barriers of caste or class ; and amongst them prevails a feeling of real and genuine spiritual brotherhood. Every year, in the months of July and November, thousand~ of them proceed on pilgrimage on foot and accompany the annual palanquin procession from Alandi to Pandharpur. Pandharpur is the chief centre of pilgrimage in Maharashtra and it is regarded by devotees as the Banares of Southern India. About 1300 A. D.\n\nShree Dnyaneshwar Maharaj took Samadhi at Alandi and since then Alandi also has become a place of pilgrimage.\n\nIn or about 1500 A. D. a big temple was erected in front of the idol of Shiva called Siddeshwar where the said Shree Dnyaneshwar Maharaj took his Samadhi.\n\nIn due course the Mahratta Kings and the Peshwas of Poona granted the village of Alandi in inam for the upkeep of the temple and the Samadhi.\n\nAbout 1760 A. D. Peshwa Balaji Baji Rao framed a budget called Beheda or Taleband in order to regulate the management and worship of the shrine and provided for proper\n\nadministration of its annual revenue amounting to z959 Rs. 1,725. The appellants claim that their ancestors l d Balktishna were then in possession of the temp e an manage- Sava/ram Pujari ment of its affairs especially the worship of the shrine. & others The budget framed by the Peshwa shows that out of v. the sum of Rs. 1,725 an amount of Rs. 361 was assign- Shree Dnyaneshwar ed to the worshippers for some of their services.\n\nMaharaj Sansthan After the fall of the Mahratta power the manage- & Others ment of Alandi passed into the hands of the East Gajendragadkar 1.\n\nIndia Company which continued the old arrangement without any interference. In 1852, under orders from the Government of Bombay the Collector of Poona drew up a yadi or memorandum appointing six persons as Punchas (trustees) with directions to them for the management of the temple in accordance with the old tradition and practice as well as for the administration of the revenue of the village subject to the control and sanction of the Collector. This arrangement came to be described as \"the scheme of 1852\".\n\nIn 1863 the Religious Endowment Act was passed, and in consequence, in 1864 the Government of Bombay withdrew their superintendence over the affairs of the Alandi Sansthan ; and the trustees continued to manage the affairs of the temple without any supervision on the part of the Government. It was during this period that the appellants' ancestors began to assert that they were the owners of the shrine while the trustees insisted on treating them as the servants of the shrine. This conflict inevitably led to several disputes between the worshippers and the trustees.\n\nMatters appear to have come to a crisis in 1911 when the trustees dismissed eleven Guravs from the temple service on the ground that they were found guilty of gross misconduct. The Guravs nevertheless asserted that they were the owners of the shrine and that the trustees had no authority or power to dismiss them. Taking their stand on their ownership of the shrine some of the dismissed Guravs filed Civil Suit No. 485 of 1911 in the Court of the Subordinate Judge, Poona, against the trustees and this was the beginning of the long drawn out litigation which followed between the parties. In that suit the Guravs\n\n'959 claimed a declaration that they were the owners of\n\nBalkrishna the temple and not the servants of the temple com- Savalram Puja.i mittee; and as owners they were entitled to perform\n\n& Others the worship at the shrine and to appropriate the offerv. ings made to the idol of the Saint. This claim was Sh\"' Dyaneshwar resisted by the trustees who pleaded that the Gura vs Maha.a; hsansthan were merely the servants of the temple committee and\n\n&Oters h II 0 . _ not t e owners at a . n April 20, 1917, the learned Gajendragadkar J. trial judge dismissed the suit because he held that the Gura vs were not the owners of the shrine and were not entitled to the declarations claimed by them.\n\nAgainst this decision the Guravs preferred several appeals but these appeals were dismissed on August 3, 1921.\n\nWhile dismissing their appeals the High Court incidentally expressed the view that it was open to the Gura vs to come to terms with the temple committee and that the terms on which the Guravs could be reinstated can be decided appropriately in a suit filed under s. 92 of the Code of Civil Procedure. It was also observed by the High Court in its judgment that the temple committee did not dispute the fact that the Guravs were the hereditary pujaris and that they had some rights in that capacity. No doubt the committee claimed that under the scheme framed in 1852 it was competent to dismiss hereditary servants for a substantial cause such as gross misconduct.\n\nIt appears that instead of adopting the course indicated in the judgment of the High Court and filing a suit under s. 92 of the Code, the Guravs chose to take the law into their own hands, and obtained forcible possession of the temple 'premises on July 25, 1922, and began to perform the puja and to take the offerings placed before the deity as they had been doing prior to their dismissal. This was followed by a suit filed by the trustees on September 12, 1922 (Suit No. 1075 of 1922) unders. 9 of the Specific Relief Act.\n\nThis suit terminated in a decree in favour of the committee on November 4, 1922. In pursuance of this decree the committee recovered possession of the temple on November 16, 1922. Thus the Gura vs had occupied the temple precincts for about three and a half months.\n\n(2) S.C.R.\n\nSUPREME COttR'r Rl!jPOR'rS 481\n\nI959 When the Guravs were thus dispossessed by the committee in execution of the decree obtained by it, some of them proceeded to file Suit No. 19 of 1922 in Balkrishna the District Court of Poona; this suit purported to be Sava/ram Pujari one under s. 92 of the Code but it claimed the same & Others\n\nrelifs as ad been claimed by. the Gura vs in. thir Shree Dn; neshwar earlier smt of 1911. On April 25, 1927, the DistrwtMaharaj Sansthan Court dismissed this suit on the ground that the Gura- & Others vs could not reagitate the same questions over again. . - It was held that their claim was barred by the deci- Ga; endragadkar /. sion of the earlier Suit No. 485 of 1911. Against this decision the Gura vs appealed to the High Court (First Appeal No. 507 of 1927); but the High Court agreed with the conclusion of the District Court and dismissed the Guravs' appeal on June 20, 1933. It was held by the High Court that the suit as framed was not properly constituted under s. 92 of the Code.\n\nIt was at this stage that a properly constituted suit, No. 7 of 1934, was filed under s. 92 of the Code by the general public of Alandi along with two Gura vs in the District Court at Poona. This suit claimed that a proper scheme should be framed for the management of the temple. Even so, one of the allegations made in the plaint referred to the Guravs' rights as hereditary worshippers. It was apparently apprehended that this allegation would be treated as outside the scope of a scheme suit under s. 92 and so the Gura vs took the precaution of filing four separate suits on behalf of four branches in the W aghmare family one after the other. These suits were numbered as 1202 of 1933, 392 of 1935, 875 of 1936 and 900 of 1937; the plaintiffs in these suits were respectively the members of the third,. the fourth, the first and the second branch of the Waghmare family. It appears that the hearing of these suits were stayed by an order of the District Judge pending the final decision of the scheme suit which was being tried by him.\n\nThe scheme suit was taken up for hearing in 1937.\n\nAs many as 22 issues were framed in this suit and voluminous evidence was recorded. In the result the learned judge substantially confirmed the original\n\n482 SUPREME COtJRT REPORTS [1959] Supp.\n\nI959 scheme of 1852, though he issued certain directions . modifying it. This decree was passed on December Balkmhn•. . 11, 1937. The trustees felt aggrieved.by this decree Saualram PuJ•ri d h ll d . . b ,. . .,, Oth s an c a enge its propriety y pre1errmg an appeal, v.\" No. 92 of 1938, in the Bombay High Court. On Shree Dnyaneshwa. November 16, 1939, the High Court dismissed the Maharaj Sansthan appeal though it made some amendments in the sche-\n\n& Others me framed by the District Judge by consent of the\n\nGajendrkar ]. parties. . .\n\nAfter the scheme smt was thus disposed of by the High Court, the four suits filed by the pujaris were taken up for trial by the learned Subordinate Judge, First Class, Poona. In all these suits the appellants claimed their rights as hereditary vatandar Pujari Gurav Servants of the Sansthan. They alleged that they were under a duty to perform worship according to certain rites in Shree Dnyaneshwar. Sansthan and that they were also under an obligation to perform other incidental duties enumerated by them in .their plaints. Likewise they claimed that for remuneration they were entitled to receive coins and perishal;>le arti- . cles offered by the devotees and the committee as well as yearly emoluments from the committee. On these allegations the appellants claimed a declaration about their respective rights and an injunction permanently restraining the trustees from obstructing the appellants in the exercise of the said rights. They also claimed accounts from the trustees in regard to the offerings prior to the institution of the suit as well as those made after the institution of the suit and before the passing of the decree.\n\nThese allega.tions were denied by respondents I to 6.\n\nTheir case was that the appellants were the servants of the temple committee and as such had no hereditary rights set up by them. In the alternative, it was pleaded by them that even if the appellants had any hereditary rights the same had been lost by their misconduct and had been otherwise extinguished by limitation.\n\nAgainst the appellants' claim pleas of res judicata and estoppel were also raised.\n\nOn these pleadings as many as 21 issues were framed in the trial court. The trial court found in favour\n\nof the appellants on all the issues. The learned judge\n\nI959 h.elhd that the Gburahvs hadd hestablised 1\n\n. thde hetrekditahry Balkrishna rig ts set out y t em an e was me me to a e t e 5 1\n\nP . . . . ava ram u; art view that the respondents could not deprive the appel- & others lants of their hereditary rights of service because of v. the misconduct of some of their ancestors. He also Shree Dnyaneshwr found that there was no substance in the plea of es- Maharaj Sansthan toppel or res judicata and that the suits were not bar- & Others red by limitation. In the result the appellants' suits Gajendragadkar 1. were decreed on February 16, 1942. • Thereupon the respondents challenged these decrees by preferring appeals against them in the Bombay High Court. The four suits accordingly gave rise to First Appeals Nos. 183, 184, 185 and 186 of 1942 respectively. In these appeals the High Court agreed with the trial court in holding that on the merits the appellants had established their case and that their claim was not barI'ed either by res judicata or by estoppel.\n\nHowever, on the question of limitation the High Court took the view that the appellants' suits were governed by art. 120 of the Limitation Act and that they had been filed beyond the period of six years prescribed by the said article. That is why the High Court set aside the decrees passed by the trial court, allowed the respondents' appeals and dismissed the appellants' suits.\n\nHowever, in view of the .special facts of the case the High Court directed that each party should bear its own costs throughout. This judgment was pronounced on April 14, 1943. Like the trial court the High Court also dealt with all the four cases by one common judgment.\n\nIt appears that after this judgment was pronounced by the High Court but before it was signed, the a ppellauts moved the High Court on July 2, 1943, for a rehearing of one of the appeals (No. 186 of 1942). It was urged before the High Court that even ii art. 120 applied the claim made by the appellant in the said appeal (which arose from Suit No. 1202 of 1933) could not be held to be barred by limitation. The High Court was not impressed by this plea and so the motion for rehearing was discharged.\n\nSubsequently a Civil Application, No. 1039 of 1944,\n\n'959 was made by the appellant in the said appeal seeking\n\n8 lk . h to raise the same point over again but this applica-\n\nSava~•:'P~•d tion was rejected by the High Court on 'September 12,\n\n& Others 1944. v.\n\nThe appellants then applied for leave to appeal to Shree Dyaneshwar the Privy Council on August 15, 1944. Their applica-\n\nMahar•J Sansthan tions were heard together and were disposed of by an\n\n& Others d d M _ or er passe on arch 26, 1946, whereby leave was Gajendragadkar J. granted to them to appeal to the Privy Council and their prayer for consolidating all the appeals was also allowed. These appeals could not, however, be disposed of by the Privy Council before the jurisdiction of the Privy Council to deal with Indian appeals came to an end and so they ultimately came to this Court and were numbered as Appeals Nos. 220 to 223 of\n\n1953. It may be convenient to state that these appeals arise respectively from Suits Nos. 907 of 1937, 392 of 1935, 875 of 1936 and 1202 of 1933. It would thus be seen that the litigation which began between the parties in 1911 has now reached its final stage before us in the present appeals.\n\nAs we have already indicated, both the courts below have found in favour of the appellants on most of the issues that arose in the present litigation ; but the appellants have failed in the High Court on the ground of limitation. In the trial court the respondents had urged that the present suits were governed by art. 124 of the Limitation Act and that since the Guravs had been dismissed from service in 1911 and other Guravs refused to serve in 1913 and 1914 limitatation began to run against them at least from 1914 and so the suits were beyond time. The learned trial judge held that art. 124 was inapplicable. He also found alternatively that, even if the said article applied, the trustees did not have continuous possession of the suit properties from 1911 or 1914 for twelve years and so the suits were not barred by time. According to him the case was really covered by s. 23 of the Limitation Act, and so the plea of limitation could not succeed.\n\nThe High Court has agreed with the trial court in holding that art, 124 is inapplicable. It has, however,\n\ncome to the conclusion that the suits are governz959 ed by art. 120 of the Limitation Act, and, according . to its findings, limitation began to run against the 5\n\nB; lkrisna. . appellants either from September 12, 1922, when the ava;, a:'/iher~Jari trustees filed their suit under s. 9 of the Specific v.\n\nRelief Act, or, in any case from November, 1922, Shree Dnyaneshwar when, in execution of the decree passed in the said Maharaj Sansthan suit, the appellants were driven out of the temple pre- &- Others cincts by the trustees. The High Court has also held Gajendragadkar 1 thats. 23 can have no application to the present case. That is how the High Court has reached the conclusion that the appellants' suits are barred by time under art. 120. The question which arises for our decision in the present appeals, therefore, is one of limitation ; it has to be considered in two aspects: Was the High Court right in holding that art. 120 applies and that the cause of action accrued more than six years before the dates of the institution of the present suits ? ; Was the High Court also right in holding that s. 23 does not apply to the suits?\n\nOn behalf of the appellants Mr. Rege has contended that in substance, in their present suits the appellants have made a claim for possession of an hereditary office and as such they would be governed by art. 124 of the Limitation Act. In this connection he has referred us to the relevant allegations in the plaint to show that the appellants' prayer for a declaration about their hereditary rights and for a consequential permanent injunction amount to no more and no less than a claim for possession of the said hereditary office.\n\nIn support of this argument reliance has been placed on the decision of the Bombay High Court in Kunj Bihari Prasadji v. Keshavlal Hiralal (1). In that case the plaintiff had made a claim to the gadi of the Swaminarayan temple at Ahmedabad and had asked for a declaration that the will of the last Acharya which purported to appoint defendant 14 as his adopted son and successor was null and void. As a consequence a perpetual injunction was also claimed restraining the defendants from offering any obstruction to the plaintiff in occupying the said gadi. The\n\n(r) (1904) I.L.R. 28 Born. 567.\n\n'959 principal point which was decided in the case had\n\nBalktishna reference to the effect of the provisions of s. 42 of the Savalrnm p,.jari Specific Relief Act. The plaintiff's suit had been dis-\n\n& Others missed in the courts below on the ground that he had v. omitted to ask' for further relief as he was bound to do Sluee Dnyaneshwar under s. 42 of the said Act and the High Court held Mahara; Sansthan th t th t' d'd t h d' . & Othm a e sec 10n 1 no empower t e court to rnm1ss the suit under the said section. In considering the Gajendrngadkar }.nature of the claim made by the plaintiff Jenkins, C. J., observed that \" in the plaintiff's view the suit was not one of possession of land appertaining to the gadi but to determine who was to occupy the gadi and thus as gadinishin become the human agent of the deity. If that was so, then the in-junction restraining all interference with the occupancy by the plaintiff of the gadi secures in the most complete manner to him the rights he claims \". The learned Chief Justice also observed that \"the plaintiff might in terms have asked for possession of the office he said was his\", but he asked \" how would practical effect be given to an award of possession of office otherwise than by preventing interference with the rights of which it was made up\". Even so, having reversed the decree passed by the courts below, when the High Court remanded the case for retrial, the plaintiff was ad vised to amend his plaint and to define more precisely the terms of the injunction he sought. It is urged that, in the present appeals also, by asking for a declaration of their rights and for an appropriate injunction against the respondents, the appellants were in effect asking for possession of the hereditary office. It is doubtful if the claims made by the appellants in their respective suits are exactly analogous to the claim made by the plaintiff in Kunj Bihari Prasad's case (1).\n\nThe appellants have not only asked for an injunction but also for an account of the income received by the trustees from July 23, 1933, up to the date of the suit as well as for similar account from the date of the suit until the date of the decree. A claim for accounts in the form in which it is made may not be quite consistent with the appellants' contention that their suits are fo:i:. nothing more than possession\n\n(1) (1904) I.L.R. 28 Born. 567.\n\n(2) S.C.R.\n\nSUPREME COURT REPORT~ 487\n\nof the hereditary office ; but in dealing with the prex959 sent aJ?peals we are pepared to a_ssume that they Balkrishna have m substance claimed possess10n of the office. savalram Pujari The question which then arises is: Does this claim for 0 others possession attract the application of art. 124 of the v.\n\nLimitation Act?\n\nSkree Dnyaneshwar Article 124 governs suits for possession of an here- Maharaj Sansthan ditary office.\n\nThe period of limitation prescribed by & Others the article is twelve years and the said period begins Gajendragadkar J. to run when the defendant takes possession of the office adversely to the plaintiff. This is explained to mean that the hereditary office is possessed when the profits thereof are usually received or (if there are no profits) when the duties thereof are usually performed.\n\nIt is clear that b'efore this article can apply it must be shown that the suit makes claim for possession of an office which is hereditary; and the claim must be made against the defendant who has taken possession of the said hereditary \"Office adversely to the plaintiff.\n\nUnlike art. 142 the fact that the plaintiff is out of • possession of the hereditary office for more than twelve years before the date of his suit would not defeat his claim for possession of the said office. What would defeat his claim is the adverse possession of the said office by the defendant for the prescribed period.\n\nAs the explanation makes it clear usually the receipt of the profits may amount to the possession of the office; but if the defendant merely receives the profits but does not perform the duties which are usually performed by the holder of the office, the receipt of the profits by itself may not amount to the possession of office.\n\nThe cause of action for possession in suits falling under art. 124 is the wrongful dispossession of the plaintiff and the adverse possession by the defendant of the office in question. Claims for possession of hereditary offices which attract the application of this article are usually made by holders of the said offices against persons who claim adverse possession of the said offices; in other words, in suits of this kind, the contest is usually between rival claimants to the hereditary office in question.\n\nIn the present appeals the claim for possession is\n\n488 SUPREME COtfR't' REl>OR't'S [1959] Supp.\n\n1959 made by the appellants against the trustees of the\n\nB lk . h Sansthan. It is significant that the persons who are Sava;,.:' ; ari actually performing the duties of the worshippers\n\n& Others are not impleaded ; and they do not claim to hold v. office as hereditary officers either. They have been Shree Dyaneshwar appointed by the trustees as servants of the institution Maha;;10, i;,:sthan and they perform the duties of worship as such servants. The trustees, on the other hand, cannot be Gajendragadkar J. said to have taken possession of the office themselves adversely to the appellants. They do not take the profits themselves -Uor do they perform the duties associated with the said office. They have, in exercise of their authority and power as trustees, dismissed the appellants' predecessors from office and have made fresh appointments of servants to perform the worship at the Sansthan; and in making the said appointments, have in fact destroyed the hereditary character of the office. The dispute in the present appeals is between the worshippers who claim hereditary rights and the trustees of the institution who claim to have validly ' terminated the services of some of the predecessors of the appellants and to have made valid appointments to the said office. It is, therefore, impossible to accept the argument that the claim made by the appellants in their respective suits attracts the provisions of art.\n\n124. It is conceded by Mr. Rege that if art. 124 does • not apply, the suits would be governed by art. 120 which is a residuary article. It may prima facie appear somewhat strange that whereas a suit against a person claiming to hold the hereditary office adversely to the plaihtiff is governed by a period of twelve years, a claim against the trustees like the respondents in the present appeals who have dismissed the hereditary worshippers should be governed by a period of six years. It may be possible to suggest that there is a substantial difference in the nature of the two disputes; but apart from it, it is well-known that the artificial provisions of limitation do not always satisfy the test of logic or equity.\n\nMr. Rege, however, argued that in determining the scope of art. 124 we need not consider the provisions of col. 3 to the said article. His contention appears\n\nto be that once it is shown that the suit is for possesx959 shion o 1 f n hreditary oce, art.124 muhst appbly though Balkrishna• t e. c aim .ior possession may not ave . een made Sava/ram Pujari agamst a person who has taken possess10n of the & others office adversely to the plaintiff. He also urged alter- _ v. natively that the trustees should be deemed to haveShree Dnyaneshwar taken possession of the office adversely to the appel- Maharaj Sansthan lants.\n\nWe have already held that the conduct of the & Others trustees shows that they have not taken possession ofcajendragadkar J. the office adversely within the meaning of col. 3 of art. 124 ; and we do not think it is possible to ignore the provision of col. 3 in deciding whether or not art. 124 applies. It is true that in Jalim Singh Srimal v.\n\nOhoonee Lall J ohurry (1 ), while holding that the adjust- ment on which the plaintiff's claim was based in that case was in time both under arts. 115 and 120, Jenkins, C. J., has observed that the function of the third column of the second schedule is not to define causes of action but to fix the starting point from which the period of limitation is to be counted ; but this observation does not support the appellants' case that art. 124 would govern the suit even though the third column is wholly inapplicable to it. That obviously is not the effect of the observations made in Jalim Singh's case (1).\n\nThe question about the nature and scope of the provisions of art. 124 has been considered by the Madras High Court in Thathachariar v. Singarachariar (2). \"If we take into consideration the terminology used in the three columns of art. 124 \", observed Srinivasa Aiyangar, J., in that case, \"it is clear that the nature of the suit intended to be covered by that article must be a suit filed by a plaintiff who claims the office from a person who at that time holds the office\n\nhimself\". In our opinion this view is correct.\n\nWe may also refer to another decision of the Madras High Court in which this question has been considered. In Annasami v. Adivarachari (3) a Full Bench of the Madras High Court was dealing with a suit in\n\n(1) (19n) 15 C.W.N. 882.\n\n(2) A.I.R. 1928 Mad. 377. .\n\n(3) I.L.R. 1941 Mad. 27 5. 62\n\nz959 which the plaintiff had claimed an injunction restrain-\n\nBalkdshna ing the rustee and th~ archakas of th~ Sri B h u vara- Savalrnm Pujari baswam1 temple at Sr1mushnam from mterfering with\n\n& Others the performance of the duties of his office of mantrav. pushpam of the temple.\n\nThis suit had been filed in Skree Dnyaneshwar 1929. The office of mantrapushpam was a hereditary\n\nMah\";,, a~ 1 ;•nsthan office and the plaintiff had succeeded to it on the\n\n\"' death of his father iu 1906. The emoluments of the Gajendragadkar J. office consisted of a ball of cooked rice per diem and twelve annas per month. It appears that the plaintiff was a Vadagalai while the archakas of the temple were Thengalais and there was animosity between them ; and as a result of this animosity the plaintiff had never been able to perform the duties of his office.\n\nIt was common ground that the plaintiff was the lawful holder of the office and that he had been receiving its emoluments month by month until 1927. The archakas who resisted the plaintiff's claim did not claim that they were in possession of the office or that they had performed the duties of the said office.\n\nThe Full Bench held that, where a person is admittedly the lawful holder of the office and he is enjoying its emoluments, he must in law be regarded as being in possession of the office itself, especially where no one else is performing the duties of the said office ; and so under art. 124 it was enough for the plaintiff to show that he had been in receipt of the emoluments of the office to save his claim from the bar of limitation. The Full Bench also rejected the contention that under art. 120 the suit was barred because it was held that every time the trustee and the archakas prevented the plaintiff from performing his duties as a hereditary officer a fresh cause of action arose and so there can be no bar of limitation under art. 120. It would be noticed that the basis of this decision was that, in the eyes of law, the plaintiff was in possession of the hereditary office since he was receiving the emoluments of the said office month by month, and so every act of obstruction on the part of the archakas and the trustee was in the nature of a continuing wrong which gave rise to a fresh cause of action to the plaintiff from time to time.\n\nIn other words, on the facts the Full Bench held that\n\ns. 23 helped the plaintiff and saved. his suit from the x959 bar of limitation. As we will presently point out there Balkrishna is no scope for applying s. 23 to the facts of the pre- Savalram Pujari sent cases, and so the decision in Annasami lyengar's & Others case (1) cannot assist the appellants. v.\n\nIn this connection it is relevant to consider the deci- Shree Dnyaneshwar f th p C \"l Jh z d Th k Maharaj Sansthan swn o e nvy ounm in a an ar a ur v. & Others Jharula Das (2) in which it was held that art. 124 was inapplicable. The defendant Jharula Das had obtain- Gajendragadkar J. ed a decree for money on a mortgage which had been executed in his favour by Mst. Grihimoni, the widow of the shebait of the temple. In execution of the said decree the defendant had caused 3t as. share of the judgment-debtor including her right in the nett income of the daily offerings made before the idol to be put up for sale and had himself purchased it at the auction sale.\n\nAs such purchaser he was in possession of the income of the said share.\n\nThe judgment-debtor attempted to challenge the said sale by two suits but her attempts failed and the auction purchaser continued to be in possession of the income. On the death of Mst. Grihimoni, Bhaiaji Thakur, who succeeded to the office of the she bait, sued the defendant for possession of certain lands and claimed a declaration that he was entitled to receive the 3tas. share of the nett income from the offerings to the temple with other reliefs.\n\nThis claim was resisted by the defendant Jharula Das. In regard to the plaintiff's claim in respect of the said 3tas. share, the High Court had held that art. 124 applied and that the claim was barred under the said article. That is why the decree passed by the trial court in favour of the plaintiff in respect of the said income was reversed by the High Court. This decision was challenged by the plaintiff before the Privy Council and it was urged on his behalf that art. 124 did not apply. The Privy Council upheld this contention. It was clear that the office of the shebait of the temple was a hereditary office which could not be held by anyone who was not a Brahmin Panda. Jharula Das was not a Brahmin Panda. He was of an inferior caste and was not\n\n(r) l.L.R. r94r Mad. 275.\n\n(2) (1914) I.L.R. 42 Cal. 244.\n\nx959 competent to hold the office of the shebait of the temple, or to provide for the performance of the duties Balakrishna of that office.\n\nOn these facts the Privy Council held Savalram Pujari h f & Others t at the appropriation rom time to time by Jharula v.\n\nDas of the income derivable from the said 3ias. share Shree Dnyaneshwar did not deprive Mst. Grihimoni, and after her death, Maharaj Sansthan Bhaiaji Thakur, of the possession of the office of the\n\n& Othm shebait although that income was receivable by them\n\nG . d-dk 1 in right of the shebaitship. The basis of this decision a; en raga ar . • h . h' Jh 1s that, on eac occas10n on w 10h arula Das received and wrongfully appropriated to his own use a share of the income to which the shebait was entitled, he committed a fresh actionable wrong in respect of which a suit could be brought against him by the she bait; but it did not constitute him a shebait for the time being or affect in any way the title of the office. Thus this decision emphasises that for the application of art. 124 it is essential that the defendant to the suit must be in adverse possession of the hereditary office in question.\n\nWe must, therefore, hold that art. 124 does not apply to the suits filed by the appellants; and as we have already observed, if art. 124 does not apply, art. 120 does.\n\nThe next point which arises for our decision is whether under art. 120 the suits are barred by limitation.\n\nUnder art. 120 time begins to run against the • plaintiffs when the right to sue accrued to them, and that naturally poses the question as to when the right to sue accrued to the appellants. In deciding this question it would be necessary to recall briefly the material facts in regard to the past disputes between the appellants and the trustees. These disputes began in 1911. On January 31, 1911, the trustees wrote a yadi (memorandum) to the Collector of Poona asking his permission to dismiss eleven Guravs from service.\n\nThey set out in detail several items of misconduct of which the said Gura vs were guilty; and they expressed their opinion that for the proper management of the affairs of the institution it was necessary to terminate the services of the offending Gura vs (Ex. 407). On\n\nApril 1, 1911, the Collector sent a reply to the trustees and told them that, as a result of the Government\n\nResolution No. 4712 passed on November 29, 1864, z959 it was unnecessary for the trustees to obtain the Balkrishna Collector's sanction because it was competent to the savalram Pujari trustees to settle their own affairs without any such &- others sanction. The trustees then met in a committee on v.\n\nSeptember 18, 1911, and decided to dismiss from ser- Skree Dyaneshwar vice the said eleven Gura vs. In its resolution the Maha;'~ :ansthan committee stated that the Guravs were violent and\n\ners arrogant and it was likely that they may commit riot Gajendragadkar J. at the time when the committee would .seek to take charge from them. The committee also apprehended that the rest of the Guravs would make a common cause with those who had been dismissed from service and would refuse to serve the Sansthan. Even so the committee decided to appoint.six Brahmins temporarily to perform the service, because the committee was prepared to allow the rest of the Guravs to render service to the Sansthan if they were ready to act according to the orders of the committee and were willing to enter into a formal agreement in that behalf.\n\nIn accordance with this resolution the committee served notice on the eleven Guravs on October 13, 1911, terminating their services and calling upon them to hand over to the committee all articles in their charge and forbidding them from entering the temple in their capacity as servants. Notice was likewise served on the rest of the Gura vs calling upon them to agree to serve the Sansthan on conditions specified in the notice. These terms were not acceptable to the Gura vs and so, on behalf of two Guravs Eknath and his brother Ramachandra, notice was served on the trustees on October 26, 1911, complaining against the trustees' conduct in forcibly removing the Guravs from the temple and thereby wrongfully denying their rights. The notice warned the trustees that unless they retraced their steps and gave possession to the Guravs as claimed in the notice legal steps would be taken against them.\n\nThis notice was followed by the Guravs' Suit No. 485 of 1911. In the suit the plaintiffs claimed declaration about their rights of ownership and asked for consequential reliefs. This claim was denied by the\n\n' 959 trustees who claimed the right to dismiss the Guravs.\n\nBalkrishna It was alleged on their behalf that some of the plain- Savafram Pujad tiffs had been dismissed and others had resigned their\n\n& Othm employments and so all of them had lost their rights. v.\n\nThis suit was seriously contested but in the end the\n\nSMhr~' Dya5 neshwh\"'Guravs lost and their suit was dismissed on January ••lllMJ anst an 31 1918 & Others ' _ The Guravs then preferred appeals in the High Gaj, ndragadkar J. Court but these appeals were also dismissed on August 3, 1921.\n\nWe have already pointed out that, while dismissing the said appeals, the High Court made certain observations about the Guravs' hereditary rights of worship and suggested that these rights could be adjudicated upon in a suit filed under s. 92 of the Code. Thus at the time when the Guravs' appeals were dismissed the position was that the claim of ownership set up by them had been rejected; but the question as to whether they were entitled to the lesser rights of hereditary worshippers was left open.\n\nThe Gura vs then obtained forcible possession of the temple and that led to the trustees' suit under s. 9 of the Specific Relief Act, No. 1075 of 1922, on September 12, 1922. In this suit the trustees specifically alleged that the relationship of the defendants as servants of the Sansthan had ceased as from September, 1911, and they averred that the defendants had therefore no right to obtain possession of the temple. The defendants no doubt disputed this claim and pleaded that they were the hereditary vatandar pujari servants but their .claim was negatived and a decree for possession was passed on November 4, 1922. In execution of this decree the defendants were dispossessed.\n\nOn these facts the High Court has held in favour of the appellants, and rightly we think, that it was difficult to accept the respondents' contention that the cause of action for the present suits which were expressly based upon the status of the Gura vs as hereditary servants arose in 1911.\n\nBut, the High Court felt no doubt that the cause of action to file the present suits had accrued either on September 12, 1922, when the trustees filed their suit under s. 9 of the Specific Relief Act or in any event on November 4,\n\n1922, when the said suit was decreed and the Guravs x959 were consequently dispossessed. In our opinion this B lk . h conclusion is also right. One of the Guravs who was Saval:a;;:P:ari examined in the present litigation has stated that, \"if & Others in any year when it is the turn of any takshim to v. serve, if a person outside the Gurav family is appoint- Shree Dnyneshwar ed by the trustees, all the takshims have a right to Mahara1 ansthan object\".\n\nThere is also no dispute that since the dis- & Others missal of eleven Guravs in 1911 till the institution ofoajendragadkar J. the present suits none from the Gurav family has served the temple except for 3t months in 1922 when the Gura vs had wrongfully obtained possession of the temple. In 1922 the Guravs knew that their claim of ownership had been rejected and that the only right which they could set up was as hereditary worshippers of the temple and not its owners. This right was specifically denied by the trustees in their plaint while it was specifically set up in defence by the Gura vs in their written statement; and the decree that followed upheld the trustees' case and rejected the defendant's claim. On these facts the conclusion is irresistible that the right to sue accrued to the Guravs at the latest on November 4, 1922, when a decree was passed under s. 9 of the Specific Relief Act.\n\nIf not the plaint in the suit, at least the decree that followed clearly and effectively threatened the Gura vs' rights as hereditary worshippers and so the cause of action to sue on the strength of tl; ie said rights clearly and unambiguously arose at that time. If that be the true position it follows that the present suits which have been filed long after the expiration of six years from 1922 are barred by time under art. 120.\n\nIt is then contended by Mr. Rege that the suits cannot be held to be barred under art. 120 because s. 23 of the Limitation Act applies; and since, in the words of the said section, the conduct of the trustees amounted to a continuing wrong, a fresh period of limitation began to run at every moment of time during which the said wrong continued; Does the conduct of the trustees amount to a continuing wrong under s. 23 ? That is the question which this contention raises for our decision. In other words, did the\n\nz959 cause of action arise de die in diem as claimed by the\n\nB lk . h appellants? In dealing with this argument it is necesa ris na tb 'di 23\" Savalram Pujari sary o ear m mm t iat s. re1ers not to a continu-\n\n& OJhers ing right but to a continuing wrong. It is the very v. essence of a continuing wrong that it is an act which Shree D1yaneshwar creates a continuing source of injury and renders the Mahara; Sansthan doer of the act responsible and liable for the continu-\n\n& Others ance of the said injury. If the wrongful act causes an\n\nGajendragadkar J. injury which. is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues, then the act constitutes a continuing wrong. In this connection it is necessary to draw a distinction between the injury caused by the wrongful act and what may be described as the effect of the said injury. It is only in regard to acts which can be properly characterised as continuing wrongs that s. 23 can be invoked. Thus considered it is difficult to hold that the trustees' act in denying altogether the alleged rights of the Guravs as hereditary worshippers and in claiming and obtaining possession from them by their suit in 1922 was a continuing wrong.\n\nThe decree obtained by the trustees in the said litigation had injured effectively and completely the appellants' rights though the damage caused by the said decree subsequently continued. Can it be said that, after the appellants were evicted from the temple in execution of the said decree, the continuance 'of their dispossession was due to a recurring act of tort committed by the trustees from moment to moment ? As soon as the decree was passed and the appellants were dispossessed in execution proceedings, their rights had been completely injured, and though their dispossession continued, it cannot be said that the trustees were committing wrongful acts or acts of tort from moment to moment so as to give the appellants a cause of action de die in diem. We think there can be no doubt that where the wrongful act complained of amounts to ouster, the resulting injury to the right is complete at the date of the ouster and so there would be no scope for the application of s. 23 in such a case. That is\n\nthe view which the High Court has taken and we see z959 no reason to differ from it. h W ld l'k .c t f h d . .\n\nBalkris na e wou now 1 e to re1er o some o t e ec1s10ns Savalram Pujari which were cited before us on this point.\n\nThe first & Others case which is usually considered in dealing with the v. application of s. 23 is the decision of the Privy Council Shree Dnyaneshwar in Maharani Rajroop Kaer v. Syed Abdul Hossein (')Maharaj Sansthan I d h' d · · t & Others n or er to appreciate t is ec1s10n it IS necessary o _ refer, though briefly, to the material facts.\n\nThe Gajenrlragadkar J. plaintiff had succeeded in establishing his right to the pyne or an artificial watercourse and to the use of the water fl.owing through it except that which fl.owed through the branch channel; he had, however, failed to prove his right to the water in the tal except to the overflow after the defendants as owners of mouzah Mora had used the water-for the purpose of irrigating their own land. It was found that all the obstructions by the defendants were unauthorised and in fact the plaintiff had succeeded in the courts below in respect of all the obstructions except two which were numbered No. 3 and No. 10.\n\nNo. 3 was a khund or channel cut in the side of the pyne at a point below the bridge whereas No. 10 was a dhonga also below the bridge and it consisted of hollow palm trees so placed as to draw off water in the pyne for the purpose of irrigating the defendants' lands. It was in regard to these two obstructions that the question about the continuing wrong fell to be considered; and the Privy Council held that the said obstructions which interfered with the fl.ow of water to the plaintiff's mehal were in the nature of continuing nuisance as to which the cause of action was renewed de die in diem so long as the obstructions causing such interference were allowed to continue. That is why the Privy Oouncil allowed the plaintiff's claim in respect of these two obstructions and reversed the decree passed by the High Court in that behalf. In fact the conduct of the defendant showed that whenever he drew off water through the said diversions he was in fact stealing plaintiff's water and thereby committing fresh wrong every time.\n\nThus this is clearly not a case of exclus10n or ouster.\n\n(r) (1880) L.R.'7 I.A. 240. 63\n\n'959 Similarly, in Hukum Chand v. Maharaj Bahadur Singh (1 ) the Privy Council was dealing with a case Balkrishna Savafram Pujad where the defendants' act clearly amounted to a con-\n\n& others tinuing wrong and helped the plaintiff in getting the v. benefit of s. 23.\n\nThe relevant dispute in that case Sh\"e Dnyaneshwar arose because alterations had been made by the Maharaj Sansthan Swetambaris in the character of the charans in\n\n& Othm h d th D\" b 1 d h t _ certam s rmes an e igam ans comp ame t a Gajend.agadkar J. the said alterations amounted to an interference with\n\n. their rights. It had been found by the courts in India that the charans in the old shrines were the impressions of the footprints of the saints each bearing a lotus mark. \"The Swetambaris who preferred to worship the feet themselves have evolved another form of charan not very easy to describe accurately in the absence of models orphotographs which shows toe nails and must be taken to be a representation of part of the foot.\n\nThis the Digambaris refused to worship as being a representation of a detached part of the human body\". The courts had also held that the action of the Swetambaris in placing the charans of the said description in three of the shrines was a wrong of which the Digambaris were entitled to complain. The question which the Privy Council had to consider was whether the action of the Swetambaris in placing the said charans in three of the shrines was a continuing wrong or not ; and in answering this question in favour of the plaintiffs the Privy Council referred to its earlier decision in the case of Maharani Rajroop Koer (') and held that the action in question was a continuing wrong. There is no doubt that the impugned action did not amount to ouster or complete dispossession of the plaintiffs. It was action which was of the character of a continuing wrong and as such it gave rise to a cause of action de die in diem.\n\nIn our opinion, neither of these two decisions can be of any assistance to the appellants.\n\nOn the other hand the decision of the Patna High Court in Choudhury Bibhuti Narayan Singh v. Maharaja Sir Guru Mahadev Asram Prasad Saki Bahadur(')\n\n(1) (1933) L.R. 60 I.A. 313.\n\n(2) (1880) L.R. 7 I.A. 240.\n\n(3) (1939] l.L.R. 19 Pat. 208.\n\nas well as that of the Full Bench of the Punjab High '959 Court in Khair Mohammad Khan v. M st. J annat (1) 8 lk . h h d , , h h h a ris na support t e respon ents content10n t at w ere t e savalram Pujari\n\nimpugned act amounts to ouster there is no scope for & others the application of s. 23 of the Limitation Act.\n\nWe v. are therefore satisfied that there is no substance in Shree Dnyaneshwar ' ' M h\n\n. S th the appellants' contention that s. 23 helps to save' a ara; ans an I. 't t' .!.' h · &- Others im1 a ion 1or t e1r smts.\n\nThe result no doubt is unfortunate. The appellantscajendragadkar J. have succeeded in both the courts below in proving their rights as hereditary worshippers; but their claim must be rejected on the ground that they have filed their suits beyond time. In this court an attempt was made by the parties to see if this long drawn out litigation could be brought to an end on reasonable terms agreed to by them, but it did not succeed. In the result the appeals fail and are dismissed. We would, however, direct that the parties should bear their own costs throughout.\n\nAppeals dismissed.\n\nSARDAR SARUP SINGH & OTHERS\n\nTHE STATE OF PUNJAB & OTHERS\n\n(S. R. DAS, c. J., N. H. BHAGWA'L'I, s. K. DAS, P. B. GAJENDRAGADKAR and K. N. WANCHOO, JJ.)\n\nFundamental rights, violation of-Sikh Gurdwaras-Election of Gurdwara Board-Statutory provision therefor, when affects religion-Direct election by entire Sikh Community, if essential-\n\n\" Matters of religion,\" Meaning of-Sikh Gurdwaras Act, r925 (Punjab 8 of r925), as amended by Punjab Act I of r959, ss. 43, 43A, r48B-Constitution of India, Art. 26(b}, (d).\n\nIn 1925 the Sikh Gurdwaras Act, 1925, was passed, inter alia, for the better administration of certain Sikh Gurdwaras, and after the merger of the erstwhile State of Patiala and the East Punjab States Union, called Pepsu, with the State of Punjab, the Act was amended by the Sikh Gurdwaras (Amendment) Act, 1959, in order to extend the Act to the area which was formerly within Pepsu. 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{"document_id": "1959_2_499_516_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 499\n\nas well as that of the Full Bench of the Punjab High '959 Court in Khair Mohammad Khan v. M st. J annat (1) 8 lk . h h d , , h h h a ris na support t e respon ents content10n t at w ere t e savalram Pujari\n\nimpugned act amounts to ouster there is no scope for & others the application of s. 23 of the Limitation Act.\n\nWe v. are therefore satisfied that there is no substance in Shree Dnyaneshwar ' ' M h\n\n. S th the appellants' contention that s. 23 helps to save' a ara; ans an I. 't t' .!.' h · &- Others im1 a ion 1or t e1r smts.\n\nThe result no doubt is unfortunate. The appellantscajendragadkar J. have succeeded in both the courts below in proving their rights as hereditary worshippers; but their claim must be rejected on the ground that they have filed their suits beyond time. In this court an attempt was made by the parties to see if this long drawn out litigation could be brought to an end on reasonable terms agreed to by them, but it did not succeed. In the result the appeals fail and are dismissed. We would, however, direct that the parties should bear their own costs throughout.\n\nAppeals dismissed.\n\nSARDAR SARUP SINGH & OTHERS\n\nTHE STATE OF PUNJAB & OTHERS\n\n(S. R. DAS, c. J., N. H. BHAGWA'L'I, s. K. DAS, P. B. GAJENDRAGADKAR and K. N. WANCHOO, JJ.)\n\nFundamental rights, violation of-Sikh Gurdwaras-Election of Gurdwara Board-Statutory provision therefor, when affects religion-Direct election by entire Sikh Community, if essential-\n\n\" Matters of religion,\" Meaning of-Sikh Gurdwaras Act, r925 (Punjab 8 of r925), as amended by Punjab Act I of r959, ss. 43, 43A, r48B-Constitution of India, Art. 26(b}, (d).\n\nIn 1925 the Sikh Gurdwaras Act, 1925, was passed, inter alia, for the better administration of certain Sikh Gurdwaras, and after the merger of the erstwhile State of Patiala and the East Punjab States Union, called Pepsu, with the State of Punjab, the Act was amended by the Sikh Gurdwaras (Amendment) Act, 1959, in order to extend the Act to the area which was formerly within Pepsu. Under s. 43 of the Act, before it was amended in 1959, a Board had been constituted, called the Sikh\n\n(1) (1940) I.L.R. 22 Lah. 22,\n\n'959\n\nApril I.\n\n1959 Gurdwara Prabandhak Committee, to act as the committee of management in respect of some of the principal Sikh Gurd- Sardar \\Varas and in addition to exercise control, direction and general Sarup Singh superintendence over all committees appointed under the prov. visions of the Act; the Board consisted of three categories of State of Punjab members, namely (1) elected members, (2) certain designated members, and (3) co-opted members, which included persons residing in Pepsu and other parts of India.\n\nBy the Amending Act of 1959. s. r48B was added to the main Act, which provided : \" (r) As from the commencement of the Amending Act, in addition to the members of the Board constituted under s. 43 ......... (a) every person in the extended territories who, immediately before the commencement of the Amending Act, is a member of the Interim Gurdwara Board, Patiala, constituted by Punjab Government ......... shall be deemed to be a member of the Board, constituted under s. 43 ; and (b) thirty-five Sikhs including six Sikhs belonging to the Scheduled Castes residents in the extended territories ......... who shall ......... be elected by the persons specified in sub-s. (2) in accordance with the rules made in this behalf by the State Government, shall become the members of the Board ............ \".\n\nThe petitioners who profess and practice the Sikh faith filed a petition under Art. 32 of the Constitution challenging the constitutional validity of s. r48B on the ground that the section violated the fundamental right granted under Art. 26(b) of the Constitution to every religious denomination or any section thereof including the Sikh denomination \"to manage its own affairs in matters of religion\". They contended, inter alia, (1) that the amending Act of 1959 was passed with a view that a particular group of Sikhs might not regain the majority it had lost on November 16, 1958, when the annual election of the Sikh Gurdwara Prabandhak Committee was held; (2) that the members of the Interim Board, Patiala, who under s. 148B(1)(a) are deemed to be members of the Board constituted under s. 43, were appointed under a Punjab Government notification, and being merely nominees of Government did not represent the Sikh Community; that under s. 148B thirty-five Sikhs from the extended area were introduced into the Board by means of an indirect method, that is, by a limited Sikh electorate, the members of which electorate were in their turn elected by Sikhs as well as non-Sikhs; that the right guaranteed under Art. 26(b) was given to all members of the Sikh denomination to manage Sikh Gurdwaras, that the right must be exercised by all Sikhs who alone must elect their representatives and that the introduction of new members into the Board in respect of the extended territories in the manner envisaged by s. 148B, violated by itself the right of the Sikhs in a matter of religion and constituted an infringement of their fundamental right under Art. 26(b).\n\nHeld: (1) that in considering the question as to whether a\n\nprovision of law is constitutionally valid, the court cannot be called upon to embark on an enquiry into public policy or investigate into questions of political wisdom or even to pronounce upon motives of the legislature in enacting a law which it is otherwise competent to make ;\n\n(z) that a direct election by the entire Sikh Community in the management of Gurdwaras is not part of the Sikh religion; and,\n\n(3) that the method of representation for the extended areas under s. 148B of the Act was an arrangement dictated merely by considerations of convenience and expediency, and did not involve any principle of religion.\n\nAccordingly, s. 148B of the Act did not affect \"maters. of religion\" within the meaning of Art. z6(b) of the Const1tut10n and consequently did not contravene the fundamental right under that Article.\n\nThe Commissioner, Hindu. Religious Endowments, Madras v.\n\nSri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954) S.C.R. l005 and Sri Venkataramana Devaru v. The State of Mysore, [1958] S.C.R. 895, referred to.\n\nORIGINAL JURISDICTION: Petition No. 13 of 1959.\n\nPetit.ion under Article 32 of the Constitution of India for enforcement of .B'undamental Rights.\n\nHarnam Singh and Sadhu Singh, for the petitioners.\n\nS. M. Silcri, Advocate-General for the State of Punjab, Gopal Singh and D. Gupta, for respondent No. I. 1959.\n\nApril 1.\n\nThe Judgment of the Court was delivered by\n\nL959\n\nSardar Sarup Singh\n\nv, State of Punjab\n\nS. K. D.As, J.-This is a petition under Art. 32 of s. K. Das J. the Constitution in which the petitioners challenge the constitutional validity of s. 148-B of the Sikh Gurdwara8 Act, 1925 (Punjab VIII of 1925), hereinafter called the principal Act, the said section having been added to the principal Act by the Sikh Gurdwaras (Amendment) Act, 1959, hereinafter called the amending Act of 1959.\n\nThe petitioners profess and practice the Sikh faith and they allege that, they are interested in the maintenance and management of Sikh Gurdwaras, scheduled and notified under the principal Act.\n\nTheir main contention i8 that s. 148-B violates the fundamental right granted under Art. 26(b) of the Constitution to every religious denomination or any section thereof including the Sikh denomintion, \" to,\n\nSarda, Sarup Singh v.\n\nState of Punjab\n\nS. ](. Das J.\n\nmanage its own affairs in matters of religion\". The respondents to the petition are, firstly, the State of Punjab and, secondly, President and twelve members of the Interim Gurdwara Board, Patiala, who under\n\ncl. (a) of sub-s. (1) of s. 148-B shall be deemed to be members of the Board constituted under s. 43 of the principal Act. That Board is now known by the name of the Sikh Gurdwara Prabandhak Committee.\n\nThe application has been contested before us by respondent No. I only, namely, the State of Punjab, on the ground thats. 148-B does not, in any way, violate the fundamental right granted to the petitioners or other members of the Sikh denomination under Art. 26(b) of the Constitution. Therefore, the only question for consideration before us is ifs. 148-B of the principal Act does or does not contravene the fundamental right granted to the Sikhs under Art. 26(b) of the Constitution.\n\nWe shall presently set out the provisions of s. 148-B and also of some other relevant sections of the principal Act. But before we do that, it is necessary to state a few facts with regard to the passing of the amending Act of 1959. It has been stated before us that in or about the year 1919 there was considerable unrest amongst the Sikhs in the Punjab in respect of the management of their gurdwaras and shrines, and in 1922 an Act called the Sikh Gurdwaras and Shrines Act was passed ; this did not satisfy the Sikhs and in 1925 the principal Act was passed, as its preamble states, \"for the better administration of certain Sikh gurdwaras and for enquiries into matters and settle-. ment of disputes connected therewith\". The principal Act was amended from time to time. On November 1, 1956, there was merger of the erstwhile State of Patiala and the East Punjab States Union (hereafter called Pepsu in brief) with the State of Punjab. Sometime in February 1957 the Government of the State of Punjab appointed an advisory committee to report as to whether the principal Act should be extended to the area which was formerly within Pepsu. In September 1957 the committee recommended in favour of such extension.\n\nOn April 8, 1958, a bill called the Sikh\n\nGurdwaras (Amendment) Bill, 1958, was introduced in the Punjab Vidhan Sabha and the Bill was sent to the regional committees constituted by an order of the President called the Punjab Regional Committees Order, 1957, made under cl. (1) of Art. 371 of the Constitution. The regional committees dealt with the Bill i:i.nd made certain recommendations. For the purposes of the application before us, it is unnecessary to go into details of the proceedings before the regional committees. Sometime in November 1958 there was\n\na meeting of the Sikh Gurdwara Prabandhak Committee for the purpose of the annual election. Learned counsel for the petitioners has stated before us that at this meeting there was a majority by a very small margin (three votes only) in favour of a particular group of Sikhs and against another group known as the \"Shiromoni Akali Dal\".\n\nWithin one week, however, a notice was given for .calling a meeting to' consider the provisions of the amending Bill ; this meeting could not, however, be held as an order of stay was obtained from the Judicial Commission constituted under the principal Act. In December 1958 a special session of the Vidhan Sabha was summoned to consider the amending Bill. It has been stated tbat originally the amending Bill did not contain provisions like those later embodied ins. 148-B. The Bill was accordingly sent back to the regional committees and on December 27, 1958, the regional committees . submitted a final report and recommended the addition of provisions which subsequently became the provisions of s. 148-B of the principal Act. It may be here stated that even in the regional committees there was some opposition to the provisions in question. On December 31, 1958, the Bill was passed by the Vidhan Sabha and on January 3, 1959, it was passed by the Legislative Council. On January 8, 1959, it received the assent of the Governor and became Punjab Act No. I of 1959, which is the Amending Act of 1959. It came into force at once and some rules under the Act were made a few days after. On February 2, 1959, the present petition was filed and on February 14, 1959, the election of 35 Sikhs contemplated under\n\ncl. (b) of sub-s. (1) of s. 148-B was completed.\n\nI959\n\nSardr Sarup Singh v.\n\nState of Punjab\n\nS. K. Das].\n\nI959\n\nSard'1r Sarup Singh v.\n\nState of Punjab\n\nS. K. Das].\n\n504 SUPRE:r.m COURT REPORTS [1959] Supp.\n\nIt is necessary at this stage to refer to some of the old provisions of the principal Act as also the new provisions added by the amending Act of 1959.\n\nThe Board which is known as the Sikh Gurdwara Prabandhak Committee acts as the committee of management in respect of some of the principal Sikh gurdwaras; in addition, it also has the duty of en.1mring that every committee of management deals with the property and income of the gurdwara or gurdwaras managed by it in accordance with the provisions of the Act and for the fulfilment of this duty it exercises control, direction and general superintendence over all committees appointed under the provisions of the principal Act (see s. 125).\n\nThe Board is constituted under s. 43 of the principal Act. Previous to the passing of Punjab Act No. 44 of 1953, s. 43 said that the Board shall consist of (i) 84 elected members, (ii) the head ministers of certain well-known Sikh gurdwaras, (iii) 12 members nominated by the Rajpramukh of Pepsu and (iv) 17 members resident in India of whom not more than four shall be residents in Punjab, co-opted by the members of the Board as described in (i), (ii) and (iii) above. In 1953 was passed Punjab Act No. 44 of 1953 ands. 43 of the principal Act was amended.\n\nThe amended section was m these terms:-\n\n\" S. 43. (1) The Board shall consist of-\n\n(i) one hundred and thirty-two elected members;\n\n(ii) the head ministers of the Darbar Sahib, Amritsar, and, the following four Takhts, namely,- the Sri Akali Takht Sahib, Amritsar, the Sri Takht Kesgarh Sahib, Anandpur, the Sri Takht Patna Sahib, Patna, and the Sri Takht Nazur Sahib, Hyderabad- Deccan; and\n\n(iii) twenty-five members resident in India of whom at least twelve shall be residents of Pepsu, at least nine of other parts of India than Punjab and Pepsu and not more than four of Punjab, co-opted by the members of the Board as described in clauses (i) and (ii).\n\n(2) ............ ,, It would thus appear that after the passing of Punjab\n\n(2) s.c.R.\n\nStJPR~M:E COUR1:1 R:EPORTS t505\n\nAct No. 44 of 1953 the Board consisted of only three categories of members, namely, (1) elected members,\n\n(2) certain designated members and (3) 25 co-opted members. Now, we come to s. 148-B which was added by the amending Act of 1959. That section in so far as it is material for our purpose is in these terms :-\n\n\" S. 148-B. (1) As from the commencement of the Amending Act, in addition to the members of the Board constituted under section 43 and till the next election of the new Board under section 43-A-\n\n(a) every person i.n the extended territories who, immediately before the commencement of the Amending Act, is a member of the Interim Gurdwara Board, Patiala, constituted by Punjab Government, Home Department, Notification No. 18-Gurdwaras, dated the 10th January, 1958, shall be deemed to be a member of the Board, constituted under section 43; and\n\n(b) thirty-five Sikhs including six Sikhs belonging to the Scheduled Castes residents in the extended territories, to be divided among different districts thereof in proportion to the Sikh population of each district in the prescribed manner, who shall, within forty days of the commencement of the Amending Act, be elected by the persons specified in subsection (2) in accordance with the rules made in this behalf by the State Government, shall become the members of the Board from the date specified in subsection (3).\n\n(2) The thirty-five persons referred to in clause (b) of sub-section (1) shall be elected by-\n\n(i) the persons who are deemed to be the members of the Board under clause (a) of sub-section (1);\n\n(ii) the twelve members of the Board being residents of Pepsu as are referred to in clause (iii) of sub-section (1) of section 43;\n\n(iii) the sitting Sikh members of Parliament and the two Houses of State Legislature returned from any constituency or part thereof from the extended territories ;\n\n(iv) the Sikh members of Municipal Committees in the extended territories ;\n\nI959\n\nSardar Sarup Singh v.\n\nState of Punjab\n\nS. K. Das].\n\nSardar Sarup Singh v.\n\nState of P11njab\n\nS. K. Das},\n\n(v) the Presidents or Chairmen of such Singh Sabhas and the Managers or Secretaries of such Sikh educational institutions or Sikh religious organisations as are registered on or before the l st Dec em her, 1958, in the extended territories; and\n\n(vi) the Sikh Sarpanches and Sikh Nayay Pardhans of Nagar Panchayats and Panchayati Adalats, respectively : Provided that the electors under clauses (iii), (iv),\n\n(v) and (vi) are not disqualified under the proviso to section 49 of the Act.\n\n(3) . . . . . . . . . • . . . . . . . . . . ... . . . . . . . . . . . . . . . . . '\n\n(4) ........................ ······ ......... .\n\n(5) ... ······ ................ ······•····· ... \" It is worthy of note here that s. 148-B occurs in chapter XII-A and the heading of the chapter is \"Temporary and Transitional Provisions\" which indicates clearly enough that the provisions in sections 148-B to 148-F are temporary and transitional provisions.\n\nIt has been stated at the Bar that in about a year, a fresh election of the Board is due under s. 43-A, and the temporary and transitional provisions in chapter XII-A are to be in force only for the intervening period. Section 43-A which was also added by the amending Act of 1959 says -\n\n\" S. 43-A. (1) Whenever a new Board within the meaning of section 51 is constituted, it shall consist of-\n\n(i) one hundred and forty elected members;\n\n(ii) the Head Ministers of the Darbar Sahib, Amritsar, and the following four Takhats, namely:- the Sri Takhat Sahib, Amritsar, the Sri Takhat Keshgarh Sahib, Anandpur, the Sri Takhat Patna Sahib, Patna, and the Sri Takhat Hazur Sahib, Nanded; and\n\n(iii) fifteen members resident in India, of w horn not more than five shall be residents of Punjab, coopted by the members of the Board as described in clauses (i) and (ii).\n\n(2) The State Government shall, as soon as may be, call a meeting of the members of the Board described in clauses (i) and (ii) of sub-section (1) for the\n\npurpose of co-opting the members described in clause\n\n(iii) of that sub-section, and after the members have been co-opted, the State Government shall notify the fact of the Board having been duly constituted and the date of the publication of the notification shall be deemed to be the date of the constitution of the\n\nBoard.\" Thus, the new or permanent Board which will be constituted under s. 43-A will consist of (1) one hundred and forty elected members, (2) five designated members, and (3) fifteen co-opted members, and there will be no room for any nominated members therein.\n\nThe petitioners have raised no objections to the constitution of the Board under s. 43- A; all their objections are confined to the constitution of the Board under s. 148-B, even though it is a transient provision for the transitional period only.\n\nWhat then are these objections, in so far as they bear on the alleged violation of the petitfoners' fundamental right under Art. 26 (b) of the Constitution?\n\nLearned counsel for the pet.itioners has first commented on what he has characterised as undue haste in passing the amending Act of 1959. He has submitted that the Pepsu area came within the State of Punjab in November, 1956, and for about two years, the Punjab Government evinced no serious anxiety to extend the principal Act to that area; but from November 16, 1958, when the annual election of the Sikh Gurdwara Prabandhak Committee was held, up to January, 1959, when the amending Act of 1959 was pa.ssed, hurried proceedings were taken to enact the amending law in question and so constitute the Board that a particular group of Sikhs might not regain the majority it had lost on November 16, 1958. In our opinion these submissions (we do not say whether they are right or wrong) have no bearing on the question at issue before us.\n\nThe petitioners have not specifically alleged in their petition that the State Government has acted in any mala fide manner; and whatever justification some people may feel in their criticisms of the political wisdom of a particular legislative or executive action, this Court cannot be called\n\nr959\n\nSardar Sarup Singh\n\nState of Punjab\n\nS. J(, Das].\n\nSardar Sarup Singh v.\n\nState of Punjab\n\nS. J(. Das].\n\n508 SUPREME COURT l'tEPORTS [1959] Supp.\n\nupon to embark on an enquiry into public policy or investigate into questions of political wisdom or even to pronounce upon motives of the legislature in enacting a law which it is otherwise competent to make.\n\nWe do not say that in pronouncing on the rights of the parties before it, this Court must always stand aloof on the chill and distant heights of abstract logic and pay no heed to the great tides and currents which move society and men. If and when the occasion demands, for example, when there is violation of a fundamental right guaranteed by the Constitution, it will never hesitate to act. But it is well to remember that a fundamental right, such as freedom of religion, is of an enduring character and must stand beyond the sweep of changing and deflecting forces of current opinion. Our limited function in this case, therefore, is to examine the constitutionality of s. 148-B, and to that task we must now confine our attention.\n\nThe main argument of learned counsel for the petitioners is that Art. 26(b) gives to every religious denomination, or any section thereof, the right\" to manage its own affairs in matters of religion\" and the right is subject only to public order, morality and health. In this case, according to him, the right is given to all members of the Sikh denomination and not to any particular members thereof, to manage Sikh gurdwaras; therefore, the right must be exercised by all Sikhs, and they alone must elect their representatives to manage Sikh gurdwaras; and to the extent that s. 148-B departs from the aforesaid principle, it constitutes an infringement of the right guaranteed to the petitioners under Art. 26(b) of the Constitution.\n\nWe are unable to accept this argument as correct.\n\nArticle 26 of the Constitution, so far as it is relevant for our purpose, says-\n\n\" Art. 26. Subject to public order, morality and health, every religious denomination or any section thereof shall have the right--\n\n(a) ......................... ..\n\n(b) to manage its own affairs in matters of religion;\n\n(c) ......................... ..\n\n(d) to administer such property in accordance with law.\" The distinction between els. (b) and (d) strikes one at once. So far as administration of its property is concerned, the right of a religious denomination is to be exercised in \"accordance with law\", but there is no such qualification in cl. (b). In The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (1), this distinction was pointed out by this Court and it was there observed: \"The administration of its property by a religious denomination has thus been placed on a different footing from the right to manage its own affairs in matters of religion.\n\nThe latter is a fundamental right which no legislature can take away, whereas the former can be regulated by laws which the legislature can validly impose\". Secondly, the expression used in cl. (b) is ' in matters of religion '.\n\nIn what sense has the word 'religion' been used?\n\nThis was considered in two decisions of this Court : The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (') and Sri V enkataramana Devaru v. The\n\nState of Mysore (2), and it was held that freedom of religion in our Constitution is not confined to religious beliefs only, but extends to essential religious practices as well subject to the restrictions which the Constitution has laid down. In The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt (1) it was observed at p. 1026 that under Art. 26(b), a religious denomination or organisation enjoys complete autonomy in the mat.ter of deciding as to what rites and ceremonies are essential according to the tenets of the religion they hold (we emphasise here the word 'essential'). The same emphasis was laid in the later decision of Sri\n\nVenkataramana Devaru v. The State of Mysore( 2 ), where it was said that matters of religion in Art. 26(b) include practices which are regarded by the community as part of its religion.\n\nTwo questions, therefore,\n\n(r) (r954] S.C.R. roo5, 1023, ro26,\n\n(2) [r958] S.C.R. 895.\n\nSardar Sarup Singh v.\n\nState of Punjab\n\nS. !{, Das ].\n\nSardar Sarup Singh\n\nStale of Punjab\n\nS. ]{. Das ].\n\narise in connection with the argument of learned counsel for the petitioners: (1) does s. 148-B added to the principal Act by the amending Act of 1959 have reference only to administration of property of Sikh gurdwaras and, therefore, must be judged by cl. (d) of Art. 26 or (2) does it affect 'matters of religion' within the meaning of cl. (b) of the said Article ?\n\nThe argument on behalf of the petitioners is that the principal Act to which s. 148-B has been added relates not merely to administration of properties of Sikh gurdwaras but also to matters of religion and in so far as s. 148-B brings in new members into the Board, it affects Sikhs in their religious affairs.\n\nThe argument on behalf of the respondent State is that matters of religion in the sense of essential beliefs and practices of the Sikh faith are left untouched by s. 148-B, and even other relevant sections of the principal Act do not interfere with Sikh religion. In this connection, our attention has been drawn to the provisions in Ch. X which deal with the powers and duties of the Board and to those in Ch. XI which deal with powers and duties of Committees. Section 125, to which we have already referred,· states that the duty of the Board is to ensure that every Committee deals with the property and income of the gurd wara or gurd war as it mana.ges in accordance with the provisions of the Act and in fulfilment of that duty, the Board has vested in it control, direction and general superintendence over all committees appointed under the provisions of the Act.· Section 129 states-\n\n\" S. 129. 'rhe Board in any meeting may consider and discuss any matter with which it has power under this Act to deal and any matter directly connected with the Sikh religion, but shall not consider or discuss, or pa•s any resolution or order upon, any other matter.\" Ifs. 129 is read subject to s. 125 as the learned Ad vocate-General for the State contends it should be read, then the powers and duties of the Board, in substance and effect, relate to administration of gurdwara properties and matters ancillary thereto. They have\n\nhardly any reference to ' matters of religion '.\n\nSection 133 states generally the powers of Committees, and one of the powers is ' enforcing the proper observance of all ceremonies and religious observances in connexion with such gurdwara or gurdwaras and of taking all such measures as may be necessary to ensure the proper management of the gurdwara or gurdwaras and the efficient administration of the property, income and endowments thereof. ' Learned counsel for the petitioners has emphasised that part of the section which relates to 'proper observance of all ceremonies and religious observances ' and has contended that as the Board is the committee in respect of some of the principal gurdwaras, it has a duty to ensure proper observance of all essential religious ceremonies of the Sikh faith, which according to him is a 'matter of religion'. Under s. 134, the Committee\n\nhas power inter alia to dismiss an office-holder or minister, if he fails in the performance of ' any rituals and ceremonies in accordance with the teachings of Sri Guru Granth Sahib ' or has ceased to be a Sikh ; it is contended that this power also relates to a 'matter of religion' within the meaning of Art. 26(b).\n\nWithout .a fuller and more detailed examination of the provisions of the principal Act we hesitate to pronounce finally on the larger question if any of the other provisions of the principal Act affect matters of religion ; nor do we think it necessary to decide that larger question in the present case. vVe are of the view that the present petition can be decided on a shorter ground, even if we proceed on the assumption that some of the provisions of the principal Act relate to matters of religion and the Board, either acting in exercise of its power of control, direction and superintendence over other committees or in its capacity as the committee for certain gurdwaras, can pass orders about matters of religion.\n\nWe may point out, however, that the preamble of the principal Act indicates that it is mainly a law to provide for the better administration of certain Sikh gurdwaras and it is admitted that in so far as the powers of the Board relate to mere administration of gurdwara properties in either\n\nI959\n\nardar Sarup Si;, gh\n\nStale of Punjab\n\nS. R. Das ].\n\n'959\n\nSardar Sarup Singh v.\n\nState of Punjab\n\nS. K. Das ].\n\n512 SUPREME COtJRT REPORTS tl95i)) Supp.\n\nof its two capacities, such administration must be in accordance with law, and the appropriate legislature can lay down what the law should be.\n\nThe question which is decisive of the present petition is-does s. 148-B interfere in matters of religion? Sections 133 and 134 of the principal Act are not impugned before us; what is impugned is s. 148-B. That section has not in any way affected whatever powers the Board or Committee has under ss. 133 and 134 of the principal Act. The gravamen of the objections urged on behalf of the petitioners is that s. 148-B introduces, even though as a temporary measure, some more designated Sikh Members into the Board by cl. (a) of sub.s. (1) thereof and further introduces the election of thirty-five Sikhs (from the Pepsu area) into the Board by means of an indirect method, that i8, by a limited Sikh electorate, the members of which electorate are in their turn elected by Sikhs as well as non- Sikhs. In order to establish their case, the petitioners must prove not merely that some provisions of the principal Act refer to matters of religion, but that the introduction of new members into the Board in respect of the extended territories of the Pepsu area, in the manner envisaged by s. 148-B, violates by itself the right of the Sikhs in a matter of religion.\n\nLearned counsel for the petitioners is th us forced to take up the stand that a direct election of the members of the Board by the entire Sikh community is itself a matter of the Sikh religion and, therefore, part of the content of the right guaranteed under Art. 26(b).\n\nWe do not think that such a stand is correct or justified by Art. 26 of the Constitution : nor has any authoritative text been placed before us to show that a direct election by the entire Sikh community in the management of gurdwaras is part of the Sikh religion.\n\nThe principal Act, as it stood before the amending Act of 1959, does not support any such contention.\n\nHowever great our respect may be for the democratic principle of direct election, we do not think that having regard to the provisions of the principal Act and the circumstances in which s. 148-B came to be added thereto, the principle of clircct\n\nelection on universal denominational suffrage can be raised to the pedestal of religion within the meaning of Art. 26(b) of the Constitution. If it were so raised, then the co-option of some members which has not been challenged by the p<; l.titioners would also be violative of their fundamental right; so also any restrictions which the principal Act or the rules made thereunder may impose in the matter of election or the exercise of the vote, such as, restrictions with regard to the age of the voter, etc. Obviously, these are not matters of religion and we say without meaning any. offence to anybody that to treat these as matters of religion is tantamount to confusing religion with current politics.\n\nIt is to be remembered that the principal Act constituted a Board representative of the Sikhs both inside Punjab and outside it; that is why in the constitution of the Board there was provision for election, nomination, designation of the head ministers of certain principal Sikh gurdwaras, and also co-option.\n\nThe purpose obviously was to make the Board as representative as possible, and because an Act passed by the Punjab legislature could not contain provisions for the election of members from constituencies outside the Punjab, there arose the necessity for nomination, designation and co-option.\n\nThe designation of the head ministers of the tive principal Sikh shrines may be also attributed to the reason that they were important functionaries who should be on the Board.\n\nIn 1953, nomination was done away with and the number of co-opted members was increased to twentyfive, of whom at least twelve were to be residents of Pepsu. This was even before the principal Act was extended to the Pepsu area. When the amending Act of 1959 extended the principal Act to the Pepsu area, the problem at once arose as to how to give some representation to the Sikhs in the extended areas, for the intervening period before the next election of the Board, and also as a permanent measure: s. 148-B gives representation to those areas as an interim measure and s. 43-A as a permanent measure. Considering s. 148-B in the light of these circumstances, we 65\n\nI959\n\nSardar Sarup Singh v.\n\nState of Punjab\n\nS. K. Das j.\n\nI959\n\nSardar Sat'up Singh\n\nState of Punjab\n\nS. K. Das J.\n\nare unable to hold that it violates the fundamental right of the Sikhs under Art. 26(b) of the Constitution.\n\nThe method of representation for the extended areas during th!J interim period appears to us to be an arrangement dictated merely by considerations of convenience and expediency, and does not involve any principle of religion. The question before us is not whether a more satisfactory arrangement could have been made even for the interim period; perhaps, it could have been.\n\nLearned counsel for the petitioners has pointed out that many Sikhs of influence and standing in the Pepsu area will have no vote for the interim period. That may be unfortuuate, but is not a relevant consideration for determining the question before us, namely, whether there has been interference with freedom ofreligion.\n\nWe now proceed to consider the specific grievances which the petitioners have made in respect of the persons who come into the Board under s. 148-B. As to the members of the Interim Board, Patiala, who under cl. (a) of sub-s. (I) of s. 148-B are deemed to be members of the Board constituted under s. 43, it is argued that they were appointed under a Punjab Government notification dated January IO, 1958, and though they are Sikhs, they do not represent the Sikh community and are mere nominees of Government; furthermore, they are not subject to the disqualifications mentioned in ss. 45 and 46 of the Act in respect of elected and co-opted members respectively. We have pointed out earlier that the principal Act contained a provision before 1953 for nomination of 12 members by the Rajpramukh of Pepsu ; and after 1953, the co-opted members included twelve residents of Pepsu. By an order of the Maharaja of Patiala, the Interim Gurdwara Board, Patiala, was constituted to look after certain gurdwaras of the Pepsu area, and after merger the appointment was made by the Governor of the Punjab. Under s. 148-A which was also added to the principal Act by the amending Act of 1959, the Interim Gurdwara Boatd, Patiala, has ceased to function, and under s. 148-B(l)(a) the members of the Interim Board, Patiala, have become members\n\nof the Board constituted under s. 43.\n\nWe are unable to hold that the designation of such members, as an interim measure, to represent those gurdwaras in the Pepsu area which they were actually managing is violative of any fundamental right ; nor do we think that the non-application of the disqualifications stated in ss. 45 and 46 of the Act to these members advances the case of the petitioners any further. The principal Act did not contain any provisions as to disqualification of designated members; it contained provisions for disqualification of elected, nominated or co-opted members and after nomination had ceased in 1953, of elected or co-opted members only. It is permissible to presume that the legislature knows that the members it is designating do not suffer from any disqualifications; furthermore, the petitioners have not even suggested in their petition that the members of the Interim Board, Patiala, suffer from any of the disqualifications stated in s. 45 or s. 46. With regard to the thirty-five Sikhs to be elected under cl. (b) of sub-s. (1) of s. 148-B, there is a threefold contention. It has been submitted that (1) the electorate detailed in sub-s. (2) of s. 148-B is not representative of all the Sikhs ; (2) some of the members of the electorate like Sikh members of Parliament and Municipal Committees are in their turn elected by joint constituencies of Sikhs and non-Sikhs; and (3) some of the members of the electorate like Sikh Sarpanches and Sikh Naya Pradhans are in the service, and under the influence of Government.\n\nVVe do not agree that these considerations are determinative of the problem before us. We have already said that the method of representation to the Board for the extended areas as an interim measure is not a matter of religion. The circumstance that some members of the electorate are in their turn elected by constituencies consisting of Sikhs and non-Sikhs is far too remote and indirect to constitute an infringement of freedom of religion. The members of the electorate itself are all Sikhs and they have to elect thirty-five Sikhs.\n\nUnles one proceeds mechanically on mere abstract considerations, there is no real basis for the\n\nI959\n\nSardar Sarup Singh v.\n\nState of Punjab\n\nS. J{, Das ].\n\nI959\n\nSardar Sarup Singh\n\nState of Punjab\n\nS. J(. Das j.\n\nApril I.\n\n516 SUP HEME COUB, T REPORTS [1959] Supp.\n\ncontention that non-Sikhs can in any way influence the Board. We do not agree that Sikh Sarpanches and N aya Pradhans are in the service of Government or that their inclusion as members of the electorate violates the right of the Sikhs under Art. 26 (b) of the Constitution.\n\nIt may not be quite irrelevant to point out here that the twelve members of the Interim Gurdwara Board, Patiala, plus thirty .five elected Sikhs from the Pepsu area will be a minority as against 132 elected members and twenty-five co-opted members of the Board.\n\nFor the reasons given above, we hold that the petitioners have failed to make out a case of violation of their fundamental right. Accordingly, the petition fails and is dismissed with costs.\n\nPetition dismissed.\n\nOM Pl~ABHA JAIN v.\n\nGIAN CHAND & ANOTHER\n\n(JAFER IMAM, A. K. SARKAR and K. SuBBA RAO, JJ.)\n\nElection Dispute-Deposit for security for costs-Dismissal of Election Petition for non-compliance with rules therefor-Appeal- Maintainability-\" Trial·. meaning of-Recitals in deposit receipt -\"On whose behalf\", meaning of-Representation of the People Act, r95r (5r of r9sr), ss. 90(3), 98, 99, rr6-A, rr7.\n\nSection II7 of the Representation of the People Act, r95r, provided: \"The petitioner shall enclose with the petition a Government Treasury receipt showing that a deposit of one thousand rupees has been made by him ...... in favour of the Secretary to the Election Commission as security for the costs of the petition.\"\n\nThe respondent, who filed an election petition challenging the validity of the appellant's election, deposited the amount as required under s. II7 of the Act.\n\nIn the deposit receipt, the \\.VOrds \"Secretary to the Election Commission \" were put in as against the name of the person on whose behalf money was paid.\n\nThe appellant contended that the receipt in this form showed that the money had been paid by the respondent acting for the", "total_entities": 113, "entities": [{"text": "s. 23", "label": "PROVISION", "start_char": 326, "end_char": 331, "source": "regex", "metadata": {"statute": null}}, {"text": "Limitation Act", "label": "STATUTE", "start_char": 339, "end_char": 353, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 23", "label": "PROVISION", "start_char": 482, "end_char": 487, "source": "regex", "metadata": {"statute": null}}, {"text": "SARDAR SARUP SINGH & OTHERS", "label": "PETITIONER", "start_char": 1158, "end_char": 1185, "source": "metadata", "metadata": {"canonical_name": "SARDAR SARUP SINGH & OTHERS", "offset_not_found": false}}, {"text": "THE STATE OF PUNJAB & OTHERS", "label": "RESPONDENT", "start_char": 1187, "end_char": 1215, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF PUNJAB & OTHERS", "offset_not_found": false}}, {"text": "S. 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39328, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "ss. 90(3), 98, 99", "label": "PROVISION", "start_char": 39349, "end_char": 39366, "source": "regex", "metadata": {"linked_statute_text": "Representation of the People Act", "statute": "Representation of the People Act"}}, {"text": "Representation of the People Act", "label": "STATUTE", "start_char": 39400, "end_char": 39432, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}]}
{"document_id": "1959_2_516_526_EN", "year": 1959, "text": "I959\n\nSardar Sarup Singh\n\nState of Punjab\n\nS. J(. Das j.\n\nApril I.\n\n516 SUP HEME COUB, T REPORTS [1959] Supp.\n\ncontention that non-Sikhs can in any way influence the Board. We do not agree that Sikh Sarpanches and N aya Pradhans are in the service of Government or that their inclusion as members of the electorate violates the right of the Sikhs under Art. 26 (b) of the Constitution.\n\nIt may not be quite irrelevant to point out here that the twelve members of the Interim Gurdwara Board, Patiala, plus thirty .five elected Sikhs from the Pepsu area will be a minority as against 132 elected members and twenty-five co-opted members of the Board.\n\nFor the reasons given above, we hold that the petitioners have failed to make out a case of violation of their fundamental right. Accordingly, the petition fails and is dismissed with costs.\n\nPetition dismissed.\n\nOM Pl~ABHA JAIN v.\n\nGIAN CHAND & ANOTHER\n\n(JAFER IMAM, A. K. SARKAR and K. SuBBA RAO, JJ.)\n\nElection Dispute-Deposit for security for costs-Dismissal of Election Petition for non-compliance with rules therefor-Appeal- Maintainability-\" Trial·. meaning of-Recitals in deposit receipt -\"On whose behalf\", meaning of-Representation of the People Act, r95r (5r of r9sr), ss. 90(3), 98, 99, rr6-A, rr7.\n\nSection II7 of the Representation of the People Act, r95r, provided: \"The petitioner shall enclose with the petition a Government Treasury receipt showing that a deposit of one thousand rupees has been made by him ...... in favour of the Secretary to the Election Commission as security for the costs of the petition.\"\n\nThe respondent, who filed an election petition challenging the validity of the appellant's election, deposited the amount as required under s. II7 of the Act.\n\nIn the deposit receipt, the \\.VOrds \"Secretary to the Election Commission \" were put in as against the name of the person on whose behalf money was paid.\n\nThe appellant contended that the receipt in this form showed that the money had been paid by the respondent acting for the\n\nSecretary to the Election Commission and not by him in favour of the latter, and that as the receipt was, therefore, not in terms of s. rr7, the election petition should be dismissed. The Tribunal accepted the appellant's contentions and dismissed the election petition under the provisions of s. 90(3) of the Act.\n\nHeld, that the words \"on whose behalf\" in the deposit receipt, in the context, must mean \"in whose favour\" and that the receipt was in full compliance with s. n7 of the Act.\n\nHeld, further, that the order passed by the Tribunal under the powers contained in s. 90(3) of the Act dismissing the election petition is an order under s. 98 and is appealable under s. n6A.\n\nThe word \"trial\" in s. 98 of the Act mearts the entire proceeding before the Tribunal from the reference to it by the Election Commission to the conclusion.\n\nHarihar Singh v. Singh Ganga Prasad, A.I1R. 1958 Pat. 287, disapproved.\n\nHarish Chandra Bajpai v. Triloki Singh, .[1957] S.C.R. 370, relied on.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 85 of 1959.\n\nAppeal by special leave from the judgment and order dated August 12, 1958, of the Pnjab High Court in First Appeal Order No. 183 of 1957, arising out of the judgment and order dated November 8, 1957, of Shri Harbaksh Singh, Member, Election Tribunal, Karnal, in Election Petition No. 249 of 1957.\n\nPurshottam Tricumdas, J. B. Dadachanji, S. N.\n\nAndley and P. L. Vohra, for the appellant.\n\nGanpat Raf,, for respondent No. 1.\n\nNaunit Lal, for respondent No. 2. 1959.\n\nApril 1.\n\nThe Judgment of the Court was delivered by\n\nSARKAR, J.-In the 1957 General Elections the appellant was declared elected to the Punjab Legislative Assembly. The respondent, Gian Chand, filed an election petition for a declaration that the appellant's election was void.\n\nThe other respondent in this appeal, presumably another unsuccessful candidate at the election, had been made a party to the petition but he never appeared at any stage. For brevity we will refer to the respondent Gian Chand, as the respondent.. ·\n\nI959\n\nOm Prabha ] ain\n\nGian Chand\n\nSarkar ].\n\n19;9 The Election Tribunal before whom the petition\n\nOm Prabha Jain came _up for trial framed a number of issues and recordv. ed evidence. When the case was ready for argument, Gia\" Chand the appellant made an application to the Tribunal for an order dismissing the petition under s. 90(3) of the Sa.kar J.\n\nRepresentation of the People Act, 1951, which is later set out, on the ground that s. 117 of that Act had not been complied with. Section 117 requires that every election petition shall be accompanied by a Government Treasury receipt showing that a deposit of Rs. 1,000 had been made by the petitioner in favour of the Secretary to the Election Commission as security for the costs of the petition. The appellant's contention was that the receipt enclosed with the petition was not, for reasons which will be mentioned later, in terms ofthe section. The respondent objected to the application being entertained because of the delay in filing it and also on the ground that it could not be decided without taking evidence. The Tribunal overruled the respondent's objections am! held on a scrutiny of the receipt alone that it was not in terms of s. 117, and thereupon dismissed the election petition under the powers conferred by s. 90 (3) without deciding the other issues framed.\n\nThe respondent went up in appeal to the High Court of Punjab. It was there contended on behalf of the appellant that no appeal lay from an order dismissing an election petition for the reasons mentioned ins. 90 (3) and that the order of the Tribunal was in any event right. The High Court held that an appeal lay to it and that the order dismissing the petition was wrong because the terms of s. 117 had been complied with. The present appeal is against this order of the High Court.\n\nTbe first point that arises is whether an appeal Jay to the High Court. The Act provides by s. 116A that an appeal shall lie from every order made by an Election Tribunal under s. 98 or s. 99 to the High Court of the State in which the Tribunal is situated. The appellant's contention is that the order of the Tribunal dismissing the petition had not been made under either of these sections. lt is quite clear that the\n\nTribunal's order had not been made under s. 99.\n\nThe point that arises is whether the order had been made under s. 98. If it had not been made under s. 98, an appeal would clearly not lie.\n\nThe appellant contends that it was not so made but had been made under s. 90 (3).\n\nThese two sections are set out below : \"Section 98.-Decision of the Tribunal.-At the conclusion of the trial of an election petition the Tribunal shall make an order- ( a) dismissing the election petition ; or\n\n(b) declaring the election of all or any of the returned candidates to be void ; or\n\n(c) declaring the election of all or any of the returned candidates to be void and the petitioner or any other candidate to have been duly elected;\".\n\n\"Section 90.-Procedure before the Tribunal.-\n\n(3) The Tribunal shall dismiss an election petition which does not comply with the provisions of section 81, section 82 or section 117 notwithstanding that it has not been dismissed by the Election Commission under section 85.\" Section 85 provides :-\n\n\"Section 85.-If the prov1s10ns of section 81 or section 82 or section 117 have not been complied with, the Election Commission shall dismiss the petition.\"\n\nIt is first contended on behalf of the appellant that the provisions of s. 85 and s. 90 (3) are substantially the same and the fact that no appeal has been provided against the order made by the Election Commission under s. 85 should be taken as indicating that no appeal lay against an order under s. 90 (3).\n\nWe are unable to agree with this view. It seems to us that whether a; n appeal lies against an order of the Tribunal has to be decided by reference to s. 116A and not by reference to the fact that a similar order by the Election Commission has not been made appealable.\n\nIt is next said that an order under s. 98 is by the terms of the section, an order made at the conclusion of the trial of an election petition while an order dismissing a petition for any of the reasons mentioned in\n\nI959\n\nOm Prabha Jain v.\n\nGian Chand\n\nSarkar].\n\nOm Prabha Jain v.\n\nGian Chand\n\nSarkar j.\n\n520 SUPREME COURT REl'OR'.l.'S [1959] Supp.\n\ns. 90 (3) is an order made prior to the commencement of such trial or at least prior to its conclusion. It is said that the word \"trial\" in s. 98 means that stage of the trial where evidence is tendered and arguments are addressed. Therefore, it is contended, an order dismissing a petition under the powers contained in s. 90(3) is not an order under s. 98 and it is. consequently not appealable.\n\nvVe see no justification for this view. An order made under the powers contained in s. 90(3) brings to an end the proceedings arising out of a petition; after it is made, nothing more remains for the Election Tribunal to try or do in respect of that petition. Therefore, it would appear that it is made at the conclusion of the proceedings before the Tribunal. It follows that such an order is made at the conclusion of the trial by the Tribunal for, as will be presently seen, the sole duty of the Tribunal is to try the petition; the proceeding before it is the trial before it. For the same reason it would be impossible to say that the order was made before the commencement of the trial of the r1etition by the Tribunal. That would be entirely against the whole scheme of the Act which we now proceed to consider.\n\nChapter III of Part VI is headed \"Trial of Election Petitions\". It consists of ss. 86 to 107 and covers the entire ground from the moment an election petition comes to an Election Tribunal till the final order of the Tribunal terminating the proceeding arising out of the petition before it.\n\nThe first section, s. 86, provides that if the Election Commission does not think fit to dismiss under s. 85 the petition which has to be filed with it in the first instance, it shall refer the petition \"for trial\" to an Election Tribunal constituted by it for the purpose. Therefore it would seem that the sole duty of an Election Tribunal is to try an election petition referred to it. It is an ad hoc body created under s. 86 for this purpose only.\n\nWhen it passes an order which closes the proceedings before it arising out of an election petition, it must be deemed to have tried the petition and passed the order at the conclusion of such trial. It would no less be so when it\n\ndecides a matter before it and thereby brings the proceedings to a close on one of the several issues raised and does not decide the other issues. In such a case it has made the order after trial of that issue for clearly it cannot make an order on any issue without trying it. It has therefore made the order at the conclusion of the trial held by it.\n\nAnd for this purpose, it makes no difference that the issue tried is of the nature usually called as preliminary issue or that the Tribunal does or does not consider it necessary to try the remaining issues.\n\nThe same conclusion also follows from the other provisions of the said Chapter III of the Act, some of which are hereinafter mentioned. Section 86(4) gives the Election Commission the power to fill a vacancy occurring in the office of a member of an Election Tribunal and upon the vacancy being so filled up \" the trial \" of the petition shall be continued by the Tribunal as if the. person appointed in the vacancy had been on the Tribunal from the beginning. Since it is conceivable that a vacancy may occur in the office of a member of a Tribunal long before the final hearing, that is to say the taking of the evidence and the commencement of the arguments, this section by providing that upon the vacancy being filled \"the trial\" of the petition ., hall be continued must _be taken as contemplating the proceeding prior to the final hearing also as trial. Under s. 88 an Election Tribunal may in its discretion sit \"for any part of the trial \" at any place in the State in which the election had taken place. Here again the entire proceeding before the Tribunal from the reference to it by the Election Commission till the conclusion is being considered as the trial. Again under s. 89 the Election Commission may at any stage withdraw a petition pending before a Tribunal and transfer it \"for trial to another Tribunal\" and \"that Tribunal shall proceed with the trial from the stage at which it was withdrawn\" from the first Tribunal. So here too the entire proceeding from the first reference to an Election Tribunal is being spoken of as the trial. Hence the contention of the\n\nI959\n\nOm Prabha Jain v.\n\nGian Chand\n\nSarkar .f.\n\n'959 ·]earned counsel for the appellant that the trial men- - _ tioned in s. 98 is the stage in the proceedings in which Om Prabha Jain evidence is taken and arguments are heard, is unv.\n\nGian Chand founded. That word in the other sections in this part of the Act clearly means the entire proceeding before Sarkar J. a Tribunal from the reference to it by the Election Commission to the conclusion. We find no reason to give it a restricted meaning in s, 98.\n\nAgain, suppose in a case no evidence was 'necessary but the petition was dismissed after hearing arguments only. That would clearly be an order under s. 98. It would have been passed at the conclusion of the trial.\n\nHow is that case different from one in which on arguments having been heard, the petition is dismissed under the powers contained in s. 90(3) ? Obviously here also the order was made at the conclusion of the trial. An order passed by the Tribunal under the powers contained in s. 90(3) bringing the proceeding to a close is, therefore, in our view an order made under s. 98.\n\nThe learned counsel for the appellant referred us to Harish Chandra Bajpai v. Triloki Singh(') in support of his contention that the order of the Tribunal with which we are concerned in this case was not made at the conclusion of the\" trial. We are unable to find anything in that case to help hiJn.\n\nThere this Court was dealing with s. 90(2) of the Act in which the word 'trial ' occurred. This Court observed that the word 'trial ' standing b:y itself may be susceptible of two meanings, that is, as referring to the final hearing of the petition consisting of examfoation of witnesses, filing documents and addressing arguments, and also as referring to the entire proceedings before the Tribunal from the time that the petition is transferred to it under s. 86 of the Act until the pronouncement of the award. It held that the word 'trial' in the section meant the entire proceeding before the Tribunal. This case therefore does not show that the word 'trial' in s. 98 meant only the final hearing. On the contrary it shows that in s. 90(2) which is one of the sections in the Chapter of the Act with which we are concerned,\n\n(1) [1957) S.C.R. 370, •\n\nthe word 'trial' has been understood by this Court as r959 referring to the entire proceeding. That, as we have - said earlier, is really a good reason for thinking that Om Prabha Jain in s. 98 the word 'trial ' has the same wider meaning Gian vChand and not the narrow meaning of which, the word standing by itself may be capable.\n\nSarkar J.\n\nIt also seems to us that s. 90(3) which purports to deal with the \" procedure before the Tribunal \" only states the power of the Tribunal and s. 98 provides for the orders to be made by it in exercise of that power.\n\nThis view receives support from ss. 103, 106 ands. 107 of the Act.\n\nUnder s. 103, the Tribunal after it has made an order under s. 98 has to send a copy of it to the Election Commission and the records of the case to the District Judge of the place where it had, been sitting. Under s. 106, after receipt of the order of the Tribunal the Election Commission shall forward copies of the order to the appropriate authority and to the Speaker or Chairman of the House the election to which was being questioned by the petition. Section 107 provides that every order made under s. 98 or s. 99 shall take effect as soon as it is pronounced by the Tribunal. Now if the contention of the appellant is right and an order dismissing a petition under the powers contained under s. 90(3) of the Act is not an order under s. 98, such an order need not be sent either to the Election Commission or to the Speaker or the Chairman of the House concerned, neither would there be any provision in the Act stating when the order is to have effect, nor again any provision enabling the Election Tribunal, which isan ad hoc body, to dispose of the records of the case before it. There is no reason why the Act should provide that a dismissal of an election petition on the merits as it has been called, shall be dealt with by the Act in one way while a dis- missal on a preliminary point shall be dealt with differently when the practical result of both kinds of dismissal is the same. We are unable to think that the Act could have intended such a curious result.\n\nTherefore again, it seems to us that an order in exercise of the powers given by s. 90(3) is made under s. 98.\n\nWe were also referred to K. Kamaraja N adar v. K unju\n\n01n Prabha j ain v.\n\nGian Chand\n\nSarkar j.\n\nThevar (1) and the connected cases. There an objection under s. 90(3) to an election petition similar to that which the appellant took in this case, was described as a preliminary objection and it was said that if it was not decided first the result would be a full-fledged trial of the election petition involving examination of witnesses. It was therefore directed that the preliminary point should be decided first as that might save costs and harassment to the parties by making it possible to avoid the trial of the other issues.\n\nWe are unable to hold that this judgment supports the view that an order made under the powers given by s. 90(3) is not an order made at the conclusion of the trial; the direction to decide what has been called the preliminary objection, first does not lead to that conclusion. The Court was not concerned with any question as to when an order under the powers given by s. 90(3) could be made. It W!1S indicating a procedure best suited to the interests of the parties on the facts of that case and not laying down any rule of law.\n\nThe last argument advanced was based on s. 99.\n\nThat 'section says that at the time of making an order under s. 98 the Tribunal shall also, where the petition contains a charge of a corrupt practice having been committed, make an order recording a finding whether or not such corrupt practice had been committed. It is said that if all orders of the Tribunal dismissing an election petition were held to be orders under s. 98, then, where a petition contained a charge of a corrupt practice and it was dismissed under the powers contained in s. 90(3) the Tribunal had further to make a finding as to whether the commission of a corrupt practice had or had not been proved. It is contended that such a position would be senseless for it would prevent the Tribunal from ever disposing o{ an election petition summarily on a preliminary ground.\n\nTherefore it is said that all orders dismissing an election petition are not orders under s. 98 and that supports the view that an order under s. 90(3) is not an order under s. 98. \\Ve are not impressed by this argument. If the proper construction of s. 99 is that an election petition cannot be dismissed on a preliminary\n\n(r) [1959] S.C.R. 583.\n\nI959 point raised under s. 90(3) where it contains charges of corrupt practices having been committed, as the om Prabha Jain learned counsel for the appellant contends, that conv.\n\ntruction must have effect however senseless it may Gian Chand appear. Suppose an election is sought to be avoided on the grounds, that the returned. -candidate was not qualified or that one of the nomination papers had been improperly rejected and also on the ground of corrupt practices having been committed by the returned candidate, all of which are good grounds for setting aside an election under s. 100 of the Act. In ' such a case too, if the construction put upon s. 99 by the learned counsel for the appellant is right, the Tribunal cannot allow the petition on any one of the first two grounds, which it could have done after a very summary trial, but must proceed to decide the charges of corrupt practice alleged. This can be said to be eqnally senseless as where having dismissed a petition for non-compliance with s. 117 the Tribunal is made to record a finding on the corrupt practices alleged. On the other hand, if it is not senseless in the one case it is not senseless in the other. 'Ve do not therefore find much force in the argument based on an interpretation of s. 99 supposed to produce senseless results.\n\nAll this cannot, in any event, supply a reason for holding that an order which terminates the proceedings arising before an Election Tribunal is not an .order passed at the conclusion of the trial when it was made for the reasons mentioned ins. 90(3). we have earlier stated that the only duty of the Tribunal is to try and decide an election petition and the order on the preliminary point may dispose of that petition. We may also point out that under s. 99 (1) (b), the Tribunal at the time of making an order under s. 98 has also to make an order a warding costs and fixing the amount thereof. If an order authorised by s. 90(3) is not an order under s. 98 then, when dismissing a petition under s. 90(3) the Tribunal would appear to have no jurisdiction to make an order for costs.\n\nTht can hardly have been intended.\n\nWe therefore think that an order dismissing a petition for the reasons mentioned in s. 90(3) is an order\n\nSarkar ].\n\nr959 under s. 98 and is appealable under s. 116A. In our om Prabha Jain opinion, the ase of Harihar Singh v. Singh Ganga v.\n\nPrasad (1) which took the contrary view, was wrongly Gian Chand decided.\n\nAs to the merits of the appeal, we find no difficulty.\n\nSarkar J.\n\nUnder s. 117 of the Act the Treasury receipt has to show a deposit of Rs. 1,000 in favour of the Secretary to the Election Commission. 'J'here is no dispute that the respondent deposited the required amount and enclosed a deposit\" receipt with his petition. The 'deposit receipt filed by the respondent contained the following statements on which the appellant's contention is based :- I.\n\nBy whom tendered- Gian Chand 2.\n\nName of the person on Secretary to whose behalf money the Efoction is paid- Commission.\n\nThe contention is that the receipt in th.is form showed that the money had been paid by the respondent acting for the Secretary to the Election Commission and not by him in favour of the latter. We are wholly unable to read the deposit receipt in that way.\n\nThe second of the two entries reproduced above is intended to indicate the person in whose favour the money has been paid; 'on whose behalf' here clearly i.ndicates in whose favour or for whose benefit. The form of the receipt contains no other heading for indicating the person in whose favour the money was paid and of course it was paid in favour of somebody. That makes it perfectly clear that the words ' on whose behalf' mean in whose favour. It would be absurd to think that the respondent had paid the money into Treasury as security for the costs of the election petition acting as the agent of the Secretary, Election Commission, which would be the position if we were to accept the appellant's contention.\n\nWe feel no doubt that the receipt was in full compliance with s. 117 of the Act.\n\nIn the result we dismiss this appeal with costs.\n\n• Appeal dismissed.\n\n(•) A.LR. 1958 Pat. 287.", "total_entities": 105, "entities": [{"text": "Art. 26", "label": "PROVISION", "start_char": 353, "end_char": 360, "source": "regex", "metadata": {"statute": null}}, {"text": "OM Pl~ABHA JAIN", "label": "PETITIONER", "start_char": 863, "end_char": 878, "source": "metadata", "metadata": {"canonical_name": "OM PRABHA JAIN", "offset_not_found": false}}, {"text": "GIAN CHAND & ANOTHER", "label": "RESPONDENT", "start_char": 883, "end_char": 903, "source": "metadata", "metadata": {"canonical_name": "GIAN CHAND & ANOTHER", "offset_not_found": false}}, {"text": "JAFER IMAM", "label": "JUDGE", "start_char": 906, "end_char": 916, "source": "metadata", "metadata": {"canonical_name": "SYED JAFFER IMAM*", "offset_not_found": false}}, {"text": "A. 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{"document_id": "1959_2_527_535_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPORTS 527\n\nSHRI CHANDRIKA PRASAD TRIPATHI v.\n\nSHRI SIV PRASAD CHANPURIA & OTHERS.\n\n(B. P. SINHA, P. B. GAJENDRAGADKAR and\n\nK. N. W ANCHOO, J J.)\n\nElection Petition-Security deposit-Dismissal bf petition by Election Tribunal for defect in deposit-Appeal to Hir, h Court, if competent-Representation of the People Act, I95I (43 of I95I), ss. 90(3), 98, II6-A and IIJ.\n\nRespondent I filed an election petition challenging the election of the appellant. The security required to be deposited under s. n7 of the Representation of the People Act, 1951, was made in the following terms :\n\n\"Security deposits for Election Petition of Bargi Assembly Constituency No. 97, Distt. Jabalpur, Madhya Pradesh. Refundable by order of the Election Commission of India, New Delhi.\"\n\nBefore the Election Tribunal the appellant made an application alleging that there was non-compliance with the provisions s. n7 inasmuch as (i) the deposit was not in favour of the Secretary to the Election Commission, and (ii) the amount was only refundable to the depositor and would not be payable to appellant in case the petition was dismissed under s. 90(3).\n\nThe Tribunal upheld the objections and dismissed the petition under s. 90(3).\n\nRspondent l preferred an appeal under s. n6-A of the Act to the High Court. The High Court allowed the appeal, set aside the order of the Tribunal and sent back the petition for trial.\n\nThe appellant contended that no appeal lay to the High Court and that there was non-compliance with the provisions of s. n7.\n\nHeld, that, an appeal lay to the High Court under s. n6-A of the Act against the dismissal of the election petition under s. 90(3) by the Tribunal. The order passed by the TribuBal under s. 90(3) was an order passed at the, conclusion of the trial of the petition and was in substance and in law one under s. 98.\n\nOnce an election petition was entrusted to the Tribunal the trial started and any order passed by the Tribunal which concluded the trial was an order at the conclusiop of the trial.\n\nHarish Chandra Bajpai .v. Tirloki Singh, [r957] S.C.R. 370, referred to.\n\nGulsher Ahmad v. Election Tribunal, A.LR. r958 Madh.\n\nPra. 224, approved. Held, further that, there had been substantial compliance with the provisions of s. n7 of the Act. Section n7 was not tp be strictly or technically construed and a substantial compliance with its requirements was sufficient. The security in this case\n\nr959\n\nApril 9.\n\nx959 had been made in respect of the election petition in question and it had been credited towards the accounts of the Election Com- Shri Chandrika mission. The use of the words \"refundab]e\" would not prevent I)rasad Tripatlii the Election Commission from making an order of payment' of the v. amount to the successful party.\n\nShri Siv Prnsad Kamraj Nadar v. Kitnju Thevar, A.LR. [1958] S.C. 687, Chanpuria applied.\n\n& Othus\n\nCIVIL\n\nAPPELLATE JURISDICTION: Civil Appeal No. 343 of 1958.\n\nAppeal by special leave from the judgment and order dated March 8, 1958, of the Madhya Pradesh High Court in First Appeal No. 141 of 1957, arising out of the judgment and order dated December 5, 1957, of the Election Tribunal, Jabalpur, in Election Petition Case No. 1 of 1957.\n\nG. O .. Mathur, for the appellant.\n\nP. Rama Reddy and R. Mahali'f!gier, for respondent No. 1.\n\n1959. April 9.\n\nThe Judgment of the Court was delivered by\n\nGajendr.agadkar ].\n\nGAJENDRAGADKAR, J.-This appeal by special leave arises out of an election petition filed by respondent 1 (No. 320 of 1957) before the Election Commission, Ne:w Delhi, in which he pra.yed that the appellant's election to the Madhya Pradesh Legislative Assembly from Bargi constituency should_be declared to be void and that it should be further declared that he had himself been duly elected from the said constituency. The polling for the election in question was taken on March 9, 1957, and the result was declared on March 12, 1957. Of the three candidates who had stood for election, the appellant secured 9308 votes, respondent 1, 8019 votes and the third ca.ndidate, respondent 2, 3210 votes.\n\nThe petition filed by respondent 1 was entrusted to the Election Tribunal, J abalpur, for trial. On October 12, 1957, the appellant filed before the Election Tribunal, an objection under s. 90, sub-s. (3) of the Representation of the people Act, 1951 (hereinafter called tbe Act), alleging that espondent 1 had not complied with the provisions of s. 117 of the Act in regard to\n\nthe making of the deposit of the security for costs and '959 praying that his election petition should be dismissed Shri Clzandrika on that account under s. 90, sub-s. (3) of the Act. Prasad Tripathi Respondent 1 disputed these allegations and urged . v. tbat there was no justification for dismissing his peti- Shri Siv Prasad tion under s. 90, sub-s. (3) of the Act.\n\nChanpt1ria By its order passed on December 5, 1957, the Elec- & Others tion Tribunal held that the provisions of s. 117 were Gajendragadkar J. mandatory and that they had not been complied with by respondent 1. In the result the application filed by the appellant was allQwed, his objection was upheld and the election petition presented by respondent 1 was dismissed under s. 90, sub-s. (3) of the Act. - On December 27, 1957, respondent 1 preferred an appeal in the High Court of Madhya Pradesh at Jabalpur against the said order (Appeal No. 141 of 1957). In the High Court a preliminary objection was urged on behalf of the appellant that the appeal preferred by respondent 1 was incompetent under s. 116A of the Act. This objection was overruled and the merits of the appeal were considered by the High Court. On the merits the High Court held that respondent 1 had substaatially complied with s. 117 and so the order passed by the Election Tribunal dismissing the election petition filed by respondent 1 was set aside and the said petition was sent back to the Election Tribunal for disposal in accordance with law.\n\nOn February 22, 1958, the appellant applied to the High Court for a certificate of fitness but his application was dismissed. Thereupon the appellant applied for, and obtained, special leave to appeal from this Court on April 14, 1958. That is how this appeal has come to this Court.\n\nThe first point which calls for our decision in this appeal is whether the High Court was rigt in holding that the appeal preferred before it by respondent 1 was competent. The appellant's contention is that the impugned order was passed under s. 90, sub-s. (3) and no appeal is provided against such an order under s. 116A. Section 116A provides that an appeal shall lie from every order made by the tribunal under s. 98\n\n'959 or s. 99 to the High Court of the State in which the tribunal is constituted. We are not concerned in Shri Chandrika Prasad Tripathi the present appeal with s. 99.\n\nThe case for respondv.. ent 1 is that in substance and in law the impugned Shd Siv hasad order must be deemed to have been passed under s. 98.\n\nChanpuria That is the view which the High Court has taken and \"' Others we are satisfied that the High Court is right.\n\nGajendragadkar J.\n\nIt is true that in terms and in f?rJ:? the order was passed under s. 90, sub-s. (3); and it 1s a.lso true that the right to prefer on appeal is a creature of. the statute and no appeal can be held to be competent unless it is shown that such a right flows from the relevant statutory provision itself. In order to decide whether or not an order passed under s. 90, sub-s. (3) can be regarded in law and in substance as an order passed under s. 98, it would be relevant to consider the scope and effect of the provisions of the said two sections. Section 98(a) provides that at the conclusion of the trial of an election petition the tribunal shall make an order dismissing the election petition. There is no doubt that in the present case the Election Tribunal has dismissed the election petition filed by respondent 1.\n\nBut the appella.nt's contention is that this d_ismissal cannot be said to be under s: 98(a) because the order dismissing the petition has not been passed at the conclusion of the trial of the election petition. This argument is not well-founded.\n\nSection 90, sub-s. (3) under which the impugned order purports to have been passed occurs in ch. III of Pt. VI which deals with the trial of election petitions. In other words, s. 90, sub:s. (3) confers power on the tribunal to dismiss the election petition after the trial of the election petition has commenced.\n\nThe scheme of ch. III clearly indicates that once an election petition is referred to an Election Tribunal for trial under s. 86 the tribunal is possessed of the petition and all proceedings before it are proceedings in the trial of the said petition. Section 85 shows that for failure to comply with the provisions of ss. 81, 82 and 117, the Election Commission is empowered to dismiss the election petition. If the Election Commission exercises its jurisdiction and passes an order\n\ndismissing any election petition, it may be said that the z959 election petition never reached the stage of trial ; but Shri Chandrika once the petition has passed the scrutiny of the Elec- Prasad Tripatlii tion Commission under s. 85 and it has been referred v. to the Election Tribunal for trial, any further action Shri Siv Prasad taken by the parties or any order passed by the tribu- Chanpuria nal under the said petition would constitute a part of & Others the trial of the said petition. This question has been Gajendragadkar J. incidentally considered by this Court in Barish Chandra Bajpai v. Triloki Singh (1) while it was dealing with s. 90, sub-s. (2) of the Act; and it has been held that \"the provisions of ch. III read as a whole clearly show that ' the trial ' is used as meaning the entire proceedings before the tribunal from the time the petition is transferred to it under s. 86 until the pronouncement of the award\". _Therefore, there can be no doubt that the order passed under s. 90, sub-s. (3) is an order passed at the conclusion of the trial. It i~ true that it is an order on a preliminary point of law raised by the appellant; but even so the decision of the preliminary issue is undoubtedly a part of the trial of the petition and it cannot be said that the order passed on such a preliminary point is not an order passed at the conclusion of the trial when it, in fact, concludes the trial.\n\nSection 90, sub-s. (3) provides that the tribunal shall dismiss an election ptition which does not comply with the provisions of ss. 81, 82 or 117 notwithstanding that it has not been dismissed by the Election Commission under s. 85. It would thus be clear that an objection raised against the competence of the election petition on the ground that the provisions of the aforesaid sections have not been complied with can be considered by the Election Commission suo motu under s. 85 ; and if it is upheld the election petition can be dismissed without any further enquiry; but if the Election Commission does not dismiss the petition under s. 85, then the same objection can be raised before the Election Tribunal by the respondent to the election petition; and when it is so raised it assumes the character of a preliminary objection and {r) [1957] S.C.R. 370, 387.\n\n'959 is dealt with by the Election Tribunal as any prelimi-\n\n51 . Cl d .k nary objection would be dealt with by a civil court p,;; ad ·~;;;:1~; under the Code of Civil Procedure. That being so, a v. preliminary objection has been tried and the decision Shri Siv Prasad on the preliminary objection being in favour of the\n\nCkanpuria respondent the election petition is dismissed. Though .s. Others the order of dismissal in form may be under s. 90, sub-\n\nGajendragadkar 1. s. (3), it is in substance and in law an order of dismissal passed at the conclusion of the trial and must be deemed to be an order under s. 98(a). That is tho - view which the Madhya Pradesh High Court has taken in Gulshar Ahmed v. Election Tribunal(') and it was this decision which was followed by the High Court in the present proceedings. In our opinion, therefore, the contention raised by the appellant that the appeal preferred by respondent 1 before the High Court was incompetent must be rejected.\n\nThe question of construing s. 90 can be considered from another point of view. It provides for the procedure before the tribunal and lays down that it is open to the tribunal to dismiss an election petition under s. 90, sub-s. (3); but this being a procedural provision is would not be unreasonable to hold that, when the actual order dismissing the petition is passed, it would be referable to the provisions of s. 98(a).\n\nThe same conclusion would follow if we consider the provisions of ss. 103, 106 and 107. It cannot be suggested that the order passed by the tribunal dismissing the election petition for non-compliance of s. 117 is not required to be communicated to the Election Commission under s. 103 or transmitted by the Election Commission to the appropriate authority under s. 106. 8imilarly it cannot be said that such an order would not take effect as soon as it is pronounced by the tribunal under s. 107.\n\nIt would thus be noticed that though the provisions of these sections are obviously applicable to an order dismissing the election petition on the ground of noncompliance of s. 117, in terms the said sections refer to orders passed under s. 98 or s. 99. Therefore, we think it would be reasonable to hold that, where the tribunal dismisses an election petition by virtue of the provi-\n\n(1) f\\.l.R. 1958 Madh. Pra. 224.\n\nsions contained in s. 90, sub-s. (3), the order of dismisr959 sal must be deemed to have been made under s. 98. Shri Chandrika Similarly s. 99(1) (b) which empowers the tribunal to Prasad Tripathi fix the total amount of costs payable and to specify v. the person by and to whom that shall be paid in terms Shri Siv Prasad refers to cases where an order is made under s. 98. It Chanpuria cannot be suggested that, where an order of dismissal & Others is passed under s. 90, snb-s. (3), the tribunal cannot Gajendragadkar J. make an appropriate order of costs.\n\nThis provision - also indicates that the order passed under s. 90, subs. (3) is in law and in substance an order passed under s. 98(a). It is true that in cases where such an order is passed s. 99(1)(a) would not come into operation, but that can hardly affect the position that an order under s. 90, sub-s. (3) is nevertheless an order under s. 98.\n\nWe would like to add that by Act 58 of 1958 an explanation has been added to s. 90, sub-s. (3) which clarifies the legislative intention on this point. This explanation provides that an order of the tribunal dismissing an election petition under this sub-section shall be deemed to be an order made under cl. (a) of s. 98.\n\nAfter the enactment of this explanation there can be no doubt that an order passed under s. 90, sub-s. (3) would be appealable under s. 116A of the Act.\n\nThat takes us to the second point raised by the appellant that the High Court was in error in holding that respondent I had complied with the provisions of s. 117 of the Act.\n\nSection 117 provides that the petitioner shall enclose with the petition a Government Treasury Receipt showing that a deposit of Rs. 1,000/-\n\nhas been made by him either in a Government Treasury or in the Reserve Bank of India in favour of the Secretary to the Election Commission as security for costs of the petition. In the present case, respondent 1 has deposited the requisite security, but it is urged that the security has not been deposited as required by s. 117. This is how the security deposit has been made:-\n\nr959\n\nShti Ghandrika Prasad Tripathi v.\n\nShti ,-., iv Prasad Chanpuria\n\n& Others\n\nGajcndragadluir ].\n\n534 SUPREME COUitT REPORTS [1959] Supp.\n\nBy whom brought.\n\nShiv Pra.sad\n\nChanpuria.\n\nOn what account.\n\nSecurity deposits for Election Petition of Bargi Assembly Constituencv No. 97 Dist t.; Jabalpur, Madhya Pr a d es h.\n\nRefundable by order of the Election Comm1ss10n of India, New Delhi.\n\nUnder Amount. rupees in words.\n\nRs. One\n\nThousand and one only.\n\nRs. A.P. 1,000-0-0.\n\nTotal ... 1000-0-0.\n\nThe argument is that the security has not been depo-\n\n8ited in the name of the Secretary to the Election Commission as required by s. 117 and it is deposited with the condition that it is refundable by the order of the Election Commission of India. In other words, the only power which the Election Commission of India can exercise in respect of the security is to refund the amount to respondent 1 ; and it would not be competent to the Commission to direct the amount to be paid to the appellant even if the election petition filed by respondent 1 is dismissed with costs. In our opinion, this objection is purely technical. It has recently been held by this Court in Kamaraj Nadar v.\n\nK unju Thevar (') that s. 117 should not be strictly or technically construed and that wherever it is shown that there has been a substantial compliance with its requirements the tribunal should not dismiss the election petition under s. 90, sub-s. (3) on technical grounds.\n\nIndeed it is clear that the receipt with which this Court was concerned in the case of Kamaraj Nadar ('), was perhaps slightly more defective than the receipt in the present case. The argument based on the use of the word \"refundable\" ignores the fact that the security in terms has been made in respect of the election petition in question and it has been duly credited as towards the account of the Election Commission.\n\nTherefore, there can be no doubt that if an (1)\n\nA.I.R. 1958 S.C. 687.\n\noccasion arises for the Election Commission to make r959 an order about the payment of this amount to the Shri Chandrika successful party the use of the word \"refundable\" will Prasad Tripathi cause no difficulty whatever. We hold that the secuv. rity has been made by respondent 1 as required by Shri Siv Prasad s. 117 of the Act and would be at the disposal of the Chanpuria d. <!>- Others Election Commission in the present procee mgs. _ We would like to add that even s. 117 has been Gajendragadkar J. subsequently amended by Act 58 of 1958 and the reference to the Secretary has been deleted.\n\nThe result is the appeal fails and must be dismissed with costs.\n\nAppeal dismissed.\n\nBHAGW AN SINGH v.\n\nRAMESHW AR PRASAD SASTRI & OTHERS\n\n(B. P. SINHA, P. B. GAJENDRAGADKAR and\n\nK. N. W ANCHOO, JJ.)\n\nElection Dispute-Disqualification for membership-Election to State Legislature-Interest in contracts-Contract entered into as Mukhiya of Panchayat-Representation of the People Act, r95r (43 of I95I), SS. 7(d), 8I, IOO(I)(a).\n\nThe election of the appellant as a member of the Bihar State Assembly was challenged under s. 7(d) of the Representation of the People Act, 1951, by the first respondent who was also a candidate for election for the same constituency, on the ground that at the date of the nomination the appellant had an interest in contracts for execution of works undertaken by the Bihar Government, and that his nomination had been improperly accepted.\n\nThe appellant's plea inter alia was that he had executed the contracts not in his individual capacity but as the Mukhiya of the Village Panchayat and therefore the disqualification imposed bys. 7(d) of the Act could not be invoked against him. The contracts in question related to community projects undertaken in pursuance of the Second Five Year Plan, under which the execution of different works adopted under the plan was to be by popular local agencies like Village Panchayats. The contracts were all in the prescribed form and the appellant, at the com-\n\nI959\n\nApril r4.", "total_entities": 86, "entities": [{"text": "CHANDRIKA PRASAD TRIPATHI", "label": "PETITIONER", "start_char": 44, "end_char": 69, "source": "metadata", "metadata": {"canonical_name": "CHANDRIKA PRASAD TRIPATHI", "offset_not_found": false}}, {"text": "SIV PRASAD CHANPURIA & OTHERS", "label": "RESPONDENT", "start_char": 79, "end_char": 108, "source": "metadata", "metadata": {"canonical_name": "SIV PRASAD CHANPURIA & OTHERS", "offset_not_found": false}}, {"text": "B. P. SINHA", "label": "JUDGE", "start_char": 112, "end_char": 123, "source": "metadata", "metadata": {"canonical_name": "BHUVNESHWAR PRASAD SINHA*", "offset_not_found": false}}, {"text": "P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 125, "end_char": 145, "source": "metadata", "metadata": {"canonical_name": "P.B. GAJENDRAGADKAR", "offset_not_found": false}}, {"text": "Representation of the People Act", "label": "STATUTE", "start_char": 311, "end_char": 343, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "ss. 90(3), 98", "label": "PROVISION", "start_char": 364, "end_char": 377, "source": "regex", "metadata": {"linked_statute_text": "Representation of the People Act", "statute": "Representation of the People Act"}}, {"text": "Representation of the People Act, 1951", "label": "STATUTE", "start_char": 535, "end_char": 573, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 90(3)", "label": "PROVISION", "start_char": 1148, "end_char": 1156, "source": "regex", "metadata": {"linked_statute_text": "the Representation of the People Act, 1951", "statute": "the Representation of the People Act, 1951"}}, {"text": "s. 90(3)", "label": "PROVISION", "start_char": 1227, "end_char": 1235, "source": "regex", "metadata": {"linked_statute_text": "the 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{"document_id": "1959_2_535_547_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 535\n\noccasion arises for the Election Commission to make r959 an order about the payment of this amount to the Shri Chandrika successful party the use of the word \"refundable\" will Prasad Tripathi cause no difficulty whatever. We hold that the secuv. rity has been made by respondent 1 as required by Shri Siv Prasad s. 117 of the Act and would be at the disposal of the Chanpuria d. <!>- Others Election Commission in the present procee mgs. _ We would like to add that even s. 117 has been Gajendragadkar J. subsequently amended by Act 58 of 1958 and the reference to the Secretary has been deleted.\n\nThe result is the appeal fails and must be dismissed with costs.\n\nAppeal dismissed.\n\nBHAGW AN SINGH v.\n\nRAMESHW AR PRASAD SASTRI & OTHERS\n\n(B. P. SINHA, P. B. GAJENDRAGADKAR and\n\nK. N. W ANCHOO, JJ.)\n\nElection Dispute-Disqualification for membership-Election to State Legislature-Interest in contracts-Contract entered into as Mukhiya of Panchayat-Representation of the People Act, r95r (43 of I95I), SS. 7(d), 8I, IOO(I)(a).\n\nThe election of the appellant as a member of the Bihar State Assembly was challenged under s. 7(d) of the Representation of the People Act, 1951, by the first respondent who was also a candidate for election for the same constituency, on the ground that at the date of the nomination the appellant had an interest in contracts for execution of works undertaken by the Bihar Government, and that his nomination had been improperly accepted.\n\nThe appellant's plea inter alia was that he had executed the contracts not in his individual capacity but as the Mukhiya of the Village Panchayat and therefore the disqualification imposed bys. 7(d) of the Act could not be invoked against him. The contracts in question related to community projects undertaken in pursuance of the Second Five Year Plan, under which the execution of different works adopted under the plan was to be by popular local agencies like Village Panchayats. The contracts were all in the prescribed form and the appellant, at the com-\n\nI959\n\nApril r4.\n\nr959\n\nBhagwan Singh\n\nmencement of the contract, described himself by his name, stating that he belonged to the village. The preamble to the contract showed that the appellant undertook to carry out the construction of the development project under local works prov.\n\nRameshwar Prasad Sastri\n\nGajendragadkar\n\ngramme mentioned in the contrast as per estimate attached thereto, that he agreed to execute the work according to and subject to the terms and conditions contained therein and that he undertook to contribute 50% of the cost in cash and labour.\n\nAt the end of the contract he signed as Mukhiya, giving his address as the Gram Panchayat. The Election Tribunal found in favour of the appellant and dismissed the election petition, but, on appeal, the High Court took the view (1) that the description of the appellant given by him at the time when he signed the contracts was not a term of the contract and could not therefore support his plea that he had executed the contract as Mukhiya of the Panchayat, and (2) that the fact that he undertook liability to execute the contracts as required and to become liable for payment of any fine imposed by the local government officer in case of his default showed obligations of a personal character inconsistent with his plea.\n\nHeld, that, on a proper construction of the contracts taking into account all the terms and conditions as a whole and considering them in the light of the background of the Second Five Year Plan, when the appellant signed the contracts as the Mukhiya of the Village Panchayat he acted as its agent and not as an individual acting in his personal capacity.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 139 of 1959.\n\nAppeal by special leave from the judgment and order dated January 8, 1959, of the Patna High Court in Election Appeal No. 1 of 1958, arising out of the judgment and order dated November 30, 1957, of the Election Tribunal, Patna, in Election Petition No. 353 of 1957.\n\nB. K. P. Sinha and D. P. Singh, for the appellant.\n\nG. 0. Mathur and Dipak D. Ohoudhri, for respondent No. 1.\n\nR.H. Dhebar, for respondent No. 3. 1959.\n\nApril .14.\n\nThe Judgment of the Court w11.s delivered by J.\n\nGAJENDRAGADKAR, J.-This appeal by special leave arises from the election petition filed by respondent, 1 (No. 353 of 1957) in which he claimed a declaration that the election of the appellant as a member of the\n\nBihar Legislative Assembly Maner Constituency r959 should be declared to be void. In the last General Election for the said constituency which was held in Bhagwan Singh v.\n\nFebruary-March 1957, there were three candidates, Rameshwar the appellant, respondent 1 and respondent 2.\n\nThe Prasad Sastri last date for filing nomination papers at the said elec- - tion was January 29, 1957; the said papers were Gajendragadkar J. scrutinised on February 1, 1957. Respondent 1 had challenged the validity of the appellant's nomination paper at the said scrutiny but the returning officer had overruled the objection raised by respondent I and had accepted the nomination paper of the appellant along with those of the two other candidates.\n\nAfter the counting of votes was done on March 3, 1957, the appellant was declared duly elected at the election inasmuch as he had got 9,826 votes while respondents 1 and 2 had got 7,526 and 49 votes respectively. Thereupon respondent 1 filed his election petition under s. 81 of the Representation of the People Act, 1951 (hereinafter called the Act).\n\nIn his petition respondent 1 challenged the election of the appellant on several grounds all of which were controverted by the appellant. On the allegations of the parties the tribunal had framed several issues and parties had led evidence on them. At the stage of arguments, however, only a few issues were pressed by respondent 1 and all of them were found against him and in favour of the appellant. In the result the tribunal dismissed the election petition on November 30, 1957.\n\nAgainst the said decision of the tribunal respondent 1 preferred an appeal in the High Court of Judicature at Patna; and in his appeal he pressed only issue No. 1.\n\nThis issue was whether the nomination of the appellant was hit by the provision of s. 7(d) of the Act and as such whether the said nomination had been improperly accepted. On this issue the tribunal had found in favour of the appellant but the High Court reversed the said finding and accepted the plea of respondent 1.\n\nAs a result of this finding the High Court allowed the appeal preferred by respondent I and 68\n\n1959 declared on January 8, 1959, that the election of the appellant. was void nuder s. IOO(l){a) of the Act.\n\nBhagw:~ Singh The validity of the appellant's nomination has been\n\nRameshwa. challenged under s. 7(d) of the Act on the ground that Prasad Sastd at the date of the nomination he had an interest in a - contract for the execution of works undertaken by the Gajendragadkar J. Bihar Government. There is no doubt that if a person is interested in a contract for the execution of any work undertaken by the appropriate Government he is disqualified for membership of the State Legislature in question. The appellant, however, denied that. the disqualification imposed by s. 7(d) could be invoked against him.\n\nHis case was that the contracts in question had not been undertaken by the Bihar Government but they had been undertaken by the Central Government; and he also urged that he had not taken the said contracts individually in his personal capacity, but as the Mukhiya of the Jeorakhan Tola Gram Panchayat. On both these issues the Election Tribunal and the High Court have differed; and it is the said two issues that arise for our decision in the present appeal. It is clear that if the appellant succeeds in showing t.hat he had entered into the impugned contracts not individually but on behalf of the Panchayat of which he was the Mukhiya it would be unnecessary to consider whether the works covered by the said contracts had been undertaken by the Government of Bihar. Let us therefore first consider that point.\n\nThe impugned contracts are five in number. They were for the execution of works under local develop. ment works programme envisaged under the Second Five Year Plan formulated by the Government of India. These contracts are evidenced by five documents, Exs. 16-A, B, C, D & E. The first is for the construction of Beyapore-Jeorakhan Tola Road, the second for the construction of the Beyapore M. E.\n\nSchool, the third for the construction of a Dispensary at Jeorakhan Tola, the fourth for the construction of the Gram Panchayat building, and the last for the construction of a well at the said village. It is admitted by the appellant that these contracts had not been completed at the time of his nomination.\n\nIn considering the appellant's plea that he had exez959 outed these contracts as a Mukhiya of the Village Bhagwan Singh Panchayat of his village, it would be necessary to v. bear in mind the background of the scheme in pursu- Rameshwar ance of which these works were undertaken. The Prasad Sastri Second Five Year Plan published by the Planning . - Commission in 1956 shows that the programme ofGa; endragadkar f. starting these works was treated as a part of the cooperative movement and the Commission had therefore recommended that the States were to sponsor and assist actively in the organisation and development of Village Panchayats which was an important constituent of the programme of fostering corporate life in the rural areas as it would promote among the rural community active interest in the development programmes of the villages. The object of this programme which would operate in areas not yet reached by the National Extension Service was to enable village communities to undertake works of local benefit mainly with their own labour. The Commission realised that the resources of all the States taken together would fall far short of the requirements of this Plan and so it recommended large transfers of resources from the Centre to the States. In this connection the conclusion of the Commission was that out of Rs. 200 crores sanctioned for the year 1957-58, 12 crores would be required for the Centre for schemes undertaken or directly sponsored by the Community Project Administration and 180 crores were to form part of the balance for the ctates. Thus it is obvious that the basic idea underlying the Plan was to voke popular response to the community projects undertaken in pursuance of the Plan and to leave the execution of different works adopted under the Plan to be fulfilled by popular local agencies like Village Panchayats.\n\nThis policy was emphasised by the Secretary of the Planning Commission in his communication to all State-Oovernments, No. POf.Pub/52/53 dated August\n\n11, 1953 (H. 1).\n\nThis communication set out the seven categories of work which were most suitable for assistance and it said that the local contribution in cash or kind or through voluntary labour together\n\n540 SUPl~EME COURT REPORTS [1959] Supp.\n\n'959 with any contribution that the State Government or a local body might make should be a minimum of 50% Bhagwan Singh of the total cost of each work.\n\nThe intention was to v.\n\nRameshw•• spread the benefit over as wide an area and to as Prasad Sastri many people as possible.\n\nThe State Governments - were accordingly requested to arrange for a detailed Gajend.agadkar J. scrutiny of the schemes before they were accepted and for making adequate provisions providing for their proper execution. They were also required to nominate a liaison officer for each district or other suitable unit for the purpose of checking the execution of the works and for maintenance of such initial accounts as might be necessary. This communication makes detailed provisions about financing and accounting procedures to be followed and required the State Governments to make progress reports from time to time.\n\nIt appears that the Government of India was aware that the District Boards whose primary responsibility it was to sponsor-these undertakings would find the project beyond their financial resources and so it accepted the recommendation of the Planning Commission to contribute 50%. of the cost of each of the schemes on the condition that the remaining half had to be found by the District Board or by the public to be benefited by it in the form of cash or voluntary labour. · The five impugned contracts related to community projects of the kind envisaged by this programme. By its letter dated February 27, 1954 '(H. 2) the Bihar Government had advised all the District Local Boards , to assist the execution of such projects and to afford all facilities to and .co-operate with the district officers in the execution of the programmes undertaken by these projects without charging any remuneration for the same. The idea clearly was that if the Village Panchayats sponsored works undertaken under these programmes they should encourage people to contribute labour and even money. The result would be that the works undertaken would benefit the community at large and if any saving was made in executing the contract it would enure for the benefit of the village Panchayats that were usually expected to be the sponsoring units.\n\nIt is in the light of this background that we have to z959 consider the question whether the contracts in quesd b h 11 h d. .\n\nBhagwan Singh tion had been execute y t e appe ant in is in iv1v. dual capacity as contended by respondent 1 or in his Rameshwa~ capacity as the Mukhiya of the Village Panchayat as Prasad Sastri urged by the appellant. . - The four contracts evidenced by Exs. 16A, 0, D and Ga; endragadkar J.\n\nE are all similarly executed whereas contract 16-B which is in respect of the construction of the Beyapo:r; e M. E. School is somewhat differently worded.\n\nWith regard to this latter contract both the Election Tribunal and the High Court are agreed that it had been executed by the appellant as the Secretary of the Beyapore MadhyamikVidyalaya and that in this contract the appellant was not personally interested. The Election Tribunal took the view that the other contracts ar.e substantially of the same character whereas the High Court has held that they are entirely different and that the appellant has personally executed them. The question which we have now to decide is whether this view of the High Court is right.\n\nWe would take Ex. 16-A as typical of the remaining four contracts. The material terms of this contract are 8 in number and they are all in the prescribed form.\n\nAt the commencement of the contract the appellant has described himself by his name and he has stated that he belongs to the village of Jeorakhan Tola and that his profession is cultivation. The preamble to the contract shows that the appellant undertook to carry out the construction of the development project under local works programme mentioned in the contract as per estimate attached thereto and he agreed to execute the work according to and subject to the terms and conditions contained therein, and he also undertook to contribute 50% of the cost in cash and labour. At the end the appellant has signed as Mukhiya and has given his address as Jeorakhan Tola Gram Panchayat.\n\nThe High Court took the view that the description of the appellant given by him at the time when he signed the contract was not a term of the contract and could not therefore support his plea that he had executed the contract as Mukhiya of\n\nBhagw.in .5ingh\n\nlamcshwar J'rasad Sastri\n\nGajendragadkar\n\nthe Panchayat. It is on this ground that the High Court distinguished this and the other three allied contracts from the school contract, Ex. 16-B. In this latter contract the appellant has described himself as the Secretary, Madhyamik Vidyalaya, both at the commencement of the document and at the end where J. the appellant has signed. In our opinion, the distinction made by the High Court between the two sets of contracts is not valid. We do not see any reason to take the view that the description given by the appellant about his status while he signed the contract is no part of the contract itself. Incidentally we may observe that the contract is accepted by the officer who signs as the S. D. 0., Dinapore. The designation of the officer given by him while signing the acceptance of the contract indicates the character in which the officer has accepted the contract. Similarly. the description given by the appellant about his status and character when he signed the contract should be taken to denote the character in which he executed the contract.\n\nThe High Court also thought that els. 4 and 7 by which the appellant undertook liability to execute the contract as required and to become liable for payment of any fine imposed by the local government officer in case of his default clearly showed obligations of a personal type which were inconsistent with his plea that he had entered into the contract as the Mukhiya of the Panchayat. We think that this argument has no force. If the nature of the liability undertaken by these two clauses necessarily involves the conclusion that the execution of the contract must be by an individual person, then it is significant that the same two clauses occur in the school contract and yet the High Court has held .that the said contract has been executed by the appellant not in his individual capacity but as the Secretary of the Madhyamik Vidyalaya. Therefore too much reliance cannot be placed upon these two clauses to support the view that the contract has been executed by the appellant personally.\n\nBesides, the High Court has not properly considered the term of the contract by which the contracting\n\nparty undertakes to contribute 50% of the cost of the x959 work in cash or labour. In other words, the contract- Bhagwan Singh ing party becomes a sponsoring agent of the contract v. and agrees to undertake 50% of its cost. It is very Rameshwnr difficult to appreciate the suggestion that the appellant Prasad Sa<tri personally and in his individual character agreed to . - contribute 50% of the cost in cash or labour. In Ga; endragadkar J. ordinary course a person who undertakes to carry out a building contract expects to make profit and would never agree to contribute 50% of the cost of the contemplated work. This clause clearly indicates that the sponsoring of the contract was really done by the Village Panchayat which agreed through its Mukhiya that it would contribute 50% of the cost either in cash or in labour. Consistently with the general policy of\n\nPlan the Village Panchayat became a sponsoring agent and hoped and expected to obtain popular response from the villagers who would contribute their labour and thus make up the 50% of the cost of the intended work. Therefore, in our opinion, if the contract in question is considered in the light of the background of the Plan of which it forms one item, and all its conditions are taken into account together, there can be no doubt th'at the appellant as the Mukhiya of the Village Panchayat acted as its agent when he signed the contract, and not as an individual acting in his personal capacity.\n\nThis position is also corroborated by the record kept by the Village Panchayat in respect of these contracts. This record consists of the several proceedings before the Village Panchayat, the budgets adopted by it and the resolutions passed by it from time to time in respect of these contracts. It had been alleged by respondent 1 that the whole of this record had been fabricated for the purpose of the present proceedings. The Election Tribunal has made a definite finding against respondent 1 on this point: It has considered the oral evidence given by the appellant and other witnesses in proving the said record. It has examined the entries themselves on their merits and has taken into account the fact that some of the exhibits showed that they had been signed and\n\n'959 approved by the District Panchayat Officer from time to time. The tribunal, therefore, thought that it was Bhagwan Singh\n\nv. imposRible to believe that all persons who purported Ram., hwa. to sign the record had helped the appellant to manu- Prasad SastYi facture it simply because the appellant was the\n\n. - Mukhiya of the village.\n\nThe judgment of the High Gaymdragadkar J. Court shows that it was not prepared to reverse this finding in terms. It has, however, made certain observations in respect of this record which would show that it was not prepared to attach any importance to it. \"The papers\", says the judgment, \"do not inspire much confidence and cannot be relied upon in proof of the facts disclosed by them\". It is unfortunate that when a serious allegation was made against the whole of the record alleged to have been kept by the Village Panchayat and it had been categorically rejected by the Election Tribunal, the High Court should not have made its own finding on the point in clear and unambiguous terms.\n\nThe oral evidence led by the appellant in support of the record and the other material circumstances considered by the Election Tribunal do not appear to have been properly taken into account by the High Court in dealing with this point. The High Court was, however, impressed by what it called two defects in respect of this record. It observed that the accounts had not been audited as required by r. 20 of the Bihar Gram Panchayat Account Rules, 1949, and that the cash balance had not been kept by the Mukhiya in the nearest Post Office Savings Bank or in any recognised Co.operative Bank or a Government Treasury in the name of the Panchayat as required by r. 8.\n\nThese two defects may undoubtedly suggest that the officers of the Panchayat including the appellant had not acted properly and had not complied with the obligations imposed by the said rules ; but it is difficult to understand how the said two defects can have a material and direct bearing on the question as to whether the record had been fabricated. If the High Court intended to hold that the record had in fact been fabricated it should have considered the relevant evidence and the material circumstances\n\nmore carefully and should have made a definite finding r959 in that behalf. To say that the record bore onJy the signatures of the appellant and his clerk and to seek Bhagw~'. Singh to draw an adverse inferene from that fact is, in our Rameshwar opinion, adopting a wrong approach to the question.\n\nPrasad Sastri If the appellant was the Mukhiya he was bound to - sign the record, and so was the clerk bound to write Gajendragadkar J. it; that cannot therefore be treated as a suspicious circumstance by itself.\n\nWe have carefully examined this question and we do not see any reason why the well-considered finding of the Election Tribunal on this point should not have been accepted. Therefore, we must assume that the Panchayat record produced by the appellant is not shown to have been fabricated. .\n\nBesides, the High Court itself appears to have assumed that this record showed that there was an understanding between the appellant and the Village Panchayat in regard to the financial obligations involved in the execution of the impugned contracts. \"It might well be\", says the judgment,\" that the loss or the profit was ultimately to be borne or pocketed by the Gram Panchayat itself'.'; but that, according to the High Court,\" does not take away the effect of the contract itself which on the face of it was entered into by the appellant himself\". If the Panchayat agreed to bear the loss or take the profit flowing from the performance of the contract then it clearly supports the appellant's case that he had executed the contract as the Mukhiya of the Panchayat. The arrangement to which the High Court refers, if genuine, would be wholly inconsistent with the case set up by respondent I that the contract had been executed by the appellant personally.\n\nThe High Court has also held that the appellant had not made out this specific case either before the returning officer when his nomination was challenged or in the present proceedings when he filed his written statement. The appellant had no doubt stated in reply that he had no interest in any contract undertaken by the State Government. According to the\n\nx959 High Court his failure to add the further particular that the contract had been executed by him on behalf Bhagwan Singh f h p h d 1 v. o t e anc ayatshows that the sai pea is an after- Rameshwa. thought. We are unable to see the force of this criti- P.asad Sast.i cism. But apart from it, the question raised by the - appellant relates to the construction of the contract Gajendragadkar J. and we do not see how the construction of a document can be prejudicially affected by the failure of the party to make a more specific and more precise plea in his written statement. We have no doubt that, if the contract is considered as a whole, it would show that the appellant had executed it as the Mukhiya of the Village Panchayat and this conclusion cannot be affected by the alleged defect in the plea taken by him in the written statement.\n\nThe High Court has also relied on the fact that if the contract was intended to be executed by the 'appellant on behalf of the Panchayat it should have been executed in the name of the corporate body as required by s. 6 of the Bihar Panehayat Raj Act (Bihar Act 7 of 1958). It may be that the Gram Panchayat is a body corporate by the name specified in the notification under sub-s. (1) of s. 3 and has a perpetual succession and a common seal, and so has power to contract in the name of the body corporate; but as the judgment of the High Court itself points out the in validity of the contract would not affect the merits of the issue raised under s. 7(d) of the Act.\n\nThat is the view taken by this Court in Ohatturbhuj Vithaldas Jasani v. Moreshwar Parashram (1), and that in fact is the point made by the High Court in rejecting the appellant's contention that since the contract was invalid he could not be said to be interested in it under s. 7(d) of the Act. Therefore, the invalidity of the contract cannot help us in deciding the question as to whether, on its true construction, the contract can be said to have been executed by the appellant in his personal capacity or as the Milkhiya of the Village Panchayat. Our conclusion, therefore, is that the four impugned contracts have been executed by the appellant as the Mukhiya of the Village\n\n(1) [1954] S.C.R. 817.\n\nPanchayat just in the same way as he had executed the z959 school contract as the Secretary of the Vidyalaya in b Bhagwan Singh question. That eing so, s. 7(d) cannot be invoked v. against him. In view of this conclusion it is unneces- Rameshwar sary to decide whether the works in question had Prasad Sastri been undertaken by the Government of Bihar or by - the Central Government. .\n\nGajendragadkar ].\n\nThe result is that the appeal must be allowed, the order passed by the High Court set aside arid that of the tribunal restored ; respondent 1 shall pay the.\n\ncosts of the appellant throughout; and the Election Commission shall bear their own.\n\nWe would like to add that, after this appeal was argued before us on April 2, 1959, we had announced our decis!on that the appeal would be allowed and that the judgment would be delivered later on in due eourse. It is in pursuance of that order that the present judgment has been delivered.\n\nAppeal allowed.\n\nM/S. MAHARANA MILLS (PRIVATE) LTD. v.\n\nTHE INCOME-TAX OFFICER, PORBANDAR\n\n(B. P. SINHA, J. L. KAPUR and M. HrnAYATULLAH, JJ.)\n\nIncome Tax-Depreciation-Written Down V alue-C amputation for prior years-Whether binding for succeeding years-Fresh calculation for written down value by Income-tax Officer-Notice to assessee-When essential-Indian Income-tax Act, r922 (XI of r922), ss. ro(z)(vi), 35(r), 63,\n\nSub-section (r) of s. 35 of the Indian Income-tax Act, 1922, provided: \" .................. the Income-tax officer may ...... on his own motion rectify any mistake apparent from the record ...... and shall ...... rectify any such mistake which has been brought to his notice by an assessee: Provided that no such rectificatioa shall be made, having the effect of enhancing or reducing a\n\nI959\n\nApril I4.", "total_entities": 23, "entities": [{"text": "s. 117", "label": "PROVISION", "start_char": 350, "end_char": 356, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 117", "label": "PROVISION", "start_char": 509, "end_char": 515, "source": "regex", "metadata": {"statute": null}}, {"text": "BHAGW AN SINGH", "label": "PETITIONER", "start_char": 721, "end_char": 735, "source": "metadata", "metadata": {"canonical_name": "BHAGW AN SINGH", "offset_not_found": false}}, {"text": "RAMESHW AR PRASAD SASTRI & OTHERS", "label": "RESPONDENT", "start_char": 740, "end_char": 773, "source": "metadata", "metadata": {"canonical_name": "RAMESHW AR PRASAD SASTRI & OTHERS", "offset_not_found": false}}, {"text": "B. P. SINHA", "label": "JUDGE", "start_char": 776, "end_char": 787, "source": "metadata", "metadata": {"canonical_name": "BHUVNESHWAR PRASAD SINHA*", "offset_not_found": false}}, {"text": "Representation of the People Act", "label": "STATUTE", "start_char": 984, "end_char": 1016, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "SS. 7(d), 8I", "label": "PROVISION", "start_char": 1037, "end_char": 1049, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 7(d)", "label": "PROVISION", "start_char": 1154, "end_char": 1161, "source": "regex", "metadata": {"statute": null}}, {"text": "Representation of the People Act, 1951", "label": "STATUTE", "start_char": 1169, "end_char": 1207, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 81", "label": "PROVISION", "start_char": 5477, "end_char": 5482, "source": "regex", "metadata": {"statute": null}}, {"text": "Representation of the People Act, 1951", "label": "STATUTE", "start_char": 5490, "end_char": 5528, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 7(d)", "label": "PROVISION", "start_char": 6293, "end_char": 6300, "source": "regex", "metadata": {"linked_statute_text": "the Representation of the People Act, 1951", "statute": "the Representation of the People Act, 1951"}}, {"text": "s. 7(d)", "label": "PROVISION", "start_char": 6832, "end_char": 6839, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 7(d)", "label": "PROVISION", "start_char": 7304, "end_char": 7311, "source": "regex", "metadata": {"statute": null}}, {"text": "Bihar Gram Panchayat Account Rules, 1949", "label": "STATUTE", "start_char": 21506, "end_char": 21546, "source": "regex", "metadata": {}}, {"text": "s. 6", "label": "PROVISION", "start_char": 25460, "end_char": 25464, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 25635, "end_char": 25639, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 7(d)", "label": "PROVISION", "start_char": 25896, "end_char": 25903, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 7(d)", "label": "PROVISION", "start_char": 26193, "end_char": 26200, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 7(d)", "label": "PROVISION", "start_char": 26776, "end_char": 26783, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 27924, "end_char": 27938, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 35", "label": "PROVISION", "start_char": 28005, "end_char": 28010, "source": "regex", "metadata": {"statute": null}}, {"text": "Indian Income-tax Act, 1922", "label": "STATUTE", "start_char": 28018, "end_char": 28045, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}]}
{"document_id": "1959_2_547_562_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPORTS \"54:7\n\nPanchayat just in the same way as he had executed the z959 school contract as the Secretary of the Vidyalaya in b Bhagwan Singh question. That eing so, s. 7(d) cannot be invoked v. against him. In view of this conclusion it is unneces- Rameshwar sary to decide whether the works in question had Prasad Sastri been undertaken by the Government of Bihar or by - the Central Government. .\n\nGajendragadkar ].\n\nThe result is that the appeal must be allowed, the order passed by the High Court set aside arid that of the tribunal restored ; respondent 1 shall pay the.\n\ncosts of the appellant throughout; and the Election Commission shall bear their own.\n\nWe would like to add that, after this appeal was argued before us on April 2, 1959, we had announced our decis!on that the appeal would be allowed and that the judgment would be delivered later on in due eourse. It is in pursuance of that order that the present judgment has been delivered.\n\nAppeal allowed.\n\nM/S. MAHARANA MILLS (PRIVATE) LTD. v.\n\nTHE INCOME-TAX OFFICER, PORBANDAR\n\n(B. P. SINHA, J. L. KAPUR and M. HrnAYATULLAH, JJ.)\n\nIncome Tax-Depreciation-Written Down V alue-C amputation for prior years-Whether binding for succeeding years-Fresh calculation for written down value by Income-tax Officer-Notice to assessee-When essential-Indian Income-tax Act, r922 (XI of r922), ss. ro(z)(vi), 35(r), 63,\n\nSub-section (r) of s. 35 of the Indian Income-tax Act, 1922, provided: \" .................. the Income-tax officer may ...... on his own motion rectify any mistake apparent from the record ...... and shall ...... rectify any such mistake which has been brought to his notice by an assessee: Provided that no such rectificatioa shall be made, having the effect of enhancing or reducing a\n\nI959\n\nApril I4.\n\nI959 refund unless ...... the Income-tax Officer. ..... has the assessee of his intention so to do and has M /s. _Maharana reasonable opportunity of being heard.\".\n\ngiven notice to allowed him a\n\nMills (Private) Ltd.\n\nThe appellant, a private limited company, was assessed to\n\n1 v. income-tax for the assessment year 1953-54 under the provisions The nconi:tax of the Indian Income-tax Act, 1922, and as per the assessment Officer, Porvandar d d t d J h f d · d or er a e une 30, 1955. t e amount o eprec1at10n allowe under s. 10(2)(vi) of the Act was Rs. 3-48,105~ On August 8, 1955, the appellant made an application before the Income-tax Officer for rectification of the order under s. 35 of the Act, pointing out certain mistakes in calculation in regard to the depreciation amount. By his order of February 27, 1956, the Incometax Officer corrected the written down value of the different properties of the appellant and determined the total allowable depreciation to be Rs. l,94,07+ The appellant challenged the order dated February 27, 1956, on the grounds, inter alia, (1) that he was not given a written notice of the intended rectification of the written down value, (2) that the provisious under which the Income-tax Officer acted, i.e., s. 35 of the Act, was not meant for the purpose of making corrections in written down values, the correct provision being s. 34 which specifically refers to excessive depreciation, and (3) that, in any case, he had exceeded his jurisdiction under s. 35 of the Act in calculating the depreciation on the written down value of the buildings and machinery of the appellant acting suo motu, and that he could correct only those mistakes which had been pointed out by it.\n\nIt was found that notice was given to the appellant of the intended determination of the written down value, though it was • not a written notice, and that the matter was discussed with its representative. ' Held: (1) that the object of the provision as to notice under s. 35 of the Indian Income-tax Act, 1922, is that no order should be passed to the detriment of an assessee without affording him an opportunity for being heard and that if, as a matter of fact, the assessee knew of the proceedings and the matter had been discussed with him, an adverse order would not be invalid merely because no written no\\ice was given.\n\n(2) that the word \"record \" used in the phrase \" mistake apparent from the record\" ins. 35(1) of the Act refers not only to the order of assessment but comprises all proceedings on \\Vhich the assessment order is based and the Income-tax Officer is entitled for the purpose of exercising his jurisdiction under s. 35 to look into the whole evidence and the law applicable to ascertain whether there was an error.\n\nIf he doubts the written down value of the previous year it is open to him to check up the previous calculations and, if he finds any mistake, to make fresh calculations in accordance with the law applicable including the rules made thereunder.\n\nA mistake contemplated by this section is not one which is\n\nto be discovered as a result of an argument but it is open to the\n\nI959 Income-tax Officer to examine the record including the evidence and if he discovers any mistake he is entitled to rectify the M/s. Maharana error provided that if the result is enhancement of assessment Mills (Private) Ltd. or reducing the refund, then notice has to be given to the v. assessee and he should be allowed a reasonable opportunity of The Income-tax being heard.\n\nOfficer, Porbandar\n\nVenkatachcdam v. Bombay Dyeing & Mfg. Co., Ltd., [r959] S.C.R. 703, Commissioner of Income-tax v. Khemchand Ramdas, [r938] L.R. 65 I.A. 236 and Sidhramappa Andannappa Manvi\n\nv. Commissioner of Income-tax, [r95r] zr l.T.R. 333, relied on.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 39 of 1959.\n\nAppeal by special leave from the judgment and order dated November 26, 1957, of the Bombay High Court at Rajkot in Special Civil Application No. 119 of 1956.\n\nA. V. Viswanatha Sastri, S. P. Mehta, J. B. Dadachanji, S. N. Andley and Rameshwar Nath, for the appellants.\n\nM. 0. Setalvad, Attorney-General for India, R. Ganapathy Iyer and-D. Gupta, for the respondent.\n\n1959.\n\nApril 14.\n\nThe Judgment of the Court was delivered by\n\nKAPUR, J.-This is an appeal by special leave J{apur J. against the judgment and order of the High Court of Judicature at Bombay dismissing the appellant's petition under Art. 226.\n\nThe appellant before us is a private limited company carrying on the business of manufacturing and selling textiles and the respondent is the Income-tax Officer of Porbander.\n\nPrevious to the year 1949, in Porbander which became a part of the State of Saurashtra, there was no income-tax. In 1949 the Saurashtra Income-tax Ordinance (hereinafter termed the Ordinance) was promulgated which was applicable to the State of Saurashtra.\n\nBy that Ordinance income-tax became leviable and from 1950 onwards when Saurashtra became part of the Union of India the Indian Income-tax Act (hereinafter referred to as the Act) became applicable by reason of the Finance Act of 1950 (Act XXV of 1950).\n\nr959 The appellant was taxed for the accounting year 1949, M/\n\nM 1 i.e., the assessment year 1950-51. In that year the\n\nMill;· 1 p,;·,:~;~~d amount of depreciation allowed under s. 10(2)(vi) of v. the Act was Rs. 3,43,869 .. The appellant continued Th, Incon1'-ta• to be assessed to income. tax in the assessment years Offi\"' Po•banda.1951-52, 1952-53 and 1953-54 and the present appeal relates to the assessment of year 1953-54. According Kapi\" 1 to the assessment order dated June 30, 1955, the amount.of depreciation allowed for the asessment year 1953-54 was Rs. 3,48,105._ On August 8, 1955, the appellant made an application for rectification under s. 35 of the Act. In this application he pointed out several mistakes in calculations in regard to the depreciation amount. By his order of February 27, 1956, the Income-tax Officer corrected the Written Down Value of the different properties of the appellant and determined the total allowable depreciation to be Rs. 1,94,074. The order of the Income-tax Officer was as follows :\n\n\"To arrive at the Written Down Value of the assets it was necessary tu maintain depreciation record.\n\nThis being not done so far, is -Oone now and working attached. _ Depreciation allowance as per rules is worked out at Rs. 1,94,074 as per working sheet attached.\n\nThe correct computation of income is as under:- Income before allowing depreciation as per original assessment order: Rs. 1,00,674 Less charity disallowed wrongly written Rs. 21,889 instead of Rs. 20,124: Rs. 1,765\n\nIncome Less depreciation :\n\n( - ) Less Dividend income as per original assessment order :\n\n------ Rs. 98,909 Rs. 1,94,074\n\nRs. 95,165\n\nRs. 11,870 ------ Loss.\n\nRs. 83,295 Loss on account of depreciation to be carried forward.\n\nDeclared N. A.\"\n\nAnd thus the unabsorbed, depreciation amount which\n\nI959 under the assessment order of June 30, 1955, was d d R 3 h.\n\nM /s. Maharana Rs. 2,31,944 was re uce to s. 8 ,295 and t IS was Mills (Private) Ltd. set off against the appellant's income 0£ the assessv. ment year 1954-55. On February 29, 1956, the In- The Income-tax come-tax Officer passed two provisional assessment Officer, Porbandar orders for the years 1954-55 and 1955.56. In both these orders he calculated the depreciation amounts Kap\"' f. on the basis of the same Written Down Value as he had determined for the year 1953-54. The reasons for calculating them on the new basis were set out by the Income-tax Officer in his order dated May 18, 1956, and they were :-\n\n\"Less Depreciation. The depreciation of the Company has not been properly calculated by arriving at Written Down Value as per the Saurashtra Income Tax Ordinance and also as per Indian Income-tax Act. The assessee Company was being assessed regularly even as per Indian Income-tax Act. So Written Down Value of all assets are arrived at by working out the depreciation as per above Ordinance as well as Income Tax Act. The depreciation is worked out as per separate statement keeping in view the following:-\n\n(i) Definition of \"assessee\" as per Indian Income-tax Act.\n\n(ii) The exact meaning of W. D. V. as per Income~ tax Act.\n\n(iii) The meaning of W. D. V. as per the Saurashtra Income-tax Ordinance, 1949 and Rules (Page 20, para. 13-5-A).\n\n(iv) I. T. R. Volume 25, 558.\n\nDecision of Calcutta High Court as regards C.I. T., West Bengal,- M/s. Karnani Industrial Bank Ltd.\n\n(v) Views expressed by Taxation Enquiry Commissioner, 1953-54, Volume II, page 84, para. 34.\n\n(vi) Taxation Laws (Part' B' State) (Removal of Difficulties Order, 1950.\n\nThe depreciation thus worked out as per separate statement\".\n\nOn August 8, 1955, the appellant made an application under s. 35 for certain corrections in the calculations and the order thereon was passed on :February\n\ns959 27, 1956, but no written notice of the intended rectifi-\n\nM h cation of the Written Down Vaiue and the deprecia- /s. Ma arnna . . b h I Mills (P•ivate) Ltd. t10n amount was given y t e ncome-tax Officer to v. the appella11t under s. 35 read with s. 63 of the Act.\n\nThe Income-tax On March 9, 1956, the appellant wrote to the Income- Offi\"' Porbandar tax Officer protesting against the order:-\n\n\"You have exercised powers not vested in you Kapur j. d h d S . d un er t e sai 'ect10n, an you have gone beyond the purview of the Act by preparing statements and records which are prejudicial to the rights of the Company\".\n\nThe appellant requested the Income-tax Officer to cancel his previous order and to pass a fresh order correcting only those mistakes which had been pointed out by it. On the same day the appellant sent another letter as.king for the cancellation of the provisional assessment order for 1954-55 and requested for a revised assessment order on the basis of the return filed by it.\n\nThe reply of the Income-tax Officer of the same date was that the order was correct and a similar order was made on the second application in regard to the assessment of 1954-55.\n\nOn April 16, 1956, the appellant filed a petition in the High Court of Bombay under Arts. 226 and 227 in which it alleged that the Income-tax Officer had: . \"exceeded the limits of .jurisdiction vested in him and exercised illegally jurisdiction not vested in him by law under Section 35 and passed orders, inter alia, and suo motu and without giving any prior notice and altered the entire procedure and basis of calculating depreciation on the written down value of buildings and machinery of the petitioners\". , The appellant prayed that the order made under s. 35 of the Act be quashed and an injunction issued restraining the Income-tax Officer from recovering the assessed tax. The High Court dismissed this petition on the ground that it contained mis-statements of fact; that\n\n\"The advantage of this jurisdiction is not available to the subject when adequate and efficacious remedy is available to him under the ordinary law\"; that the appellant could, under s. 33A of the Act,\n\n(2) S.C.R.\n\nSUPHEME COURT HEPORTS 553\n\nhave gone in revision to the Commissioner. The High r959 Court also held against the appellant on merits. The appellant as come to .this Court by speci.al leave ad Mi;·(;:,:::i:~~d. three quest10ns were raised (1) that no notice as reqmrv. ed under s. 35 was given to the appellant; (2) that The Income-tax there was no record on the basis of which the rectifica- Officer, Porbandar tion in the Written Down Value of the property could be made. and (3) that there was no mistake apparent Kapur J. from the record.\n\nThe learned Attorney-General contended in the first instance that the remedy available under Art. 226 is a discretionary one and if the High Court had exercised its discretion no appeal was competent and in support of his contention he relied upon the judgment of this Court in K. S. Rashid & Son v. Income-tax Investigation Commission, etc. (1), where Mukherjee, J., (as he then was) said:- _ ... \" For purpose of this case it is enough to state that the remedy provided for in Art. 226 of the Constitution is a discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere \". - It is not necessary to decide in this case whether the order passed under Art. 226 is of a discretionary nature and therefore in appeal this Court' would not interfere with the exercise of discretion, because in our opinion, the case can be decided on other grounds of substance.\n\n'fhe first question is that of notice under s. 35 of . the Act. The affidavit of the Income-tax Officer shows that the correctness of the figures for determining the depreciation was discussed with the appellant's Secretary.\n\nThe Income-tax Officer stated that: \"The depreciation which was calculated in the assessment order of 1953-54 was as per the statement given by the petitioner. On submission of the said application the petitioner (Shri Ganatra, the Secretary of the Mills) was told that the depreciation will be given after rectifying mistakes. The petitioner had\n\n(t) (r954) S.C.R. 738, 747. 70\n\nr959 agreed to the same. There being no record of the\n\nh working out from the first available record in the M fs. Ma arana Mills (Private) Ltd. Assessment order for the Assessment year 1943-44, the v. petitioner was also supplied with the copy of the The Income-tax working of the depreciation along with the necessary Officer, PMbandar rules and regulation for calculating the same \".\n\nJ<apur j.\n\nHe also sta'ted that the order of rectification was passed \"almost at the end of the financial year, after explaining and discussing all the above calculation along with the relevant rules and regulation of the calculated depreciation\" ; that the order was not passed without giving a reasonable opportunity to the appellant; that the matter was discussed with its representative more than once; that the assessment for the year 1954-55 was made final after calculating the depreciation; that the point of depreciation wn, s not 1 raised by the applicant at any hearing and that even though no written notice was given, the representative of the appellant was given notice of the intended determination of the written Down Values. He also stated :\n\n\"Thus though no written notice is given, applicant is given notice of the intention of calculating depreciation on record basis and is also allowed a reasonable opportunity of being heard inasmuch as he was given the calculation of depreciation on .21-2-1956 \".\n\nThe orders placed on the record show that the Incometax Officer made calculation for the purpose of determining the depreciation amount and after giving deductions allowed by the Act and the Rules made thereunder arrived at the corrected figure of Rs. 1,94,074 for the assessment year 1953-64.\n\nApart from the fact that the petition of the appellant does not set out clearly all the facts which should have been set out, there is the affidavit of the respondent that the matter wasdiscussed with the representative of the appellant although no written notice was given. In this connection the learned Attorney-General has further submitted (1) that the order determining the depreciation amount allowable was not final ;\n\n(2) that the effect of the order making the rectification\n\n(2) S.C.R. SUPBEME COURT REPORTS 555\n\nwas not of enhancing the assessment or reducing the r959 refund; and (3) that the question of depreciation , h ld b d t h t• f t b df /s. Ma arana cou e raise a t e ime o assessmen in any su - Mills (Private) Lid. sequent year. v.\n\nThe object of the provision as to notice in s. 35 is The Income-tax that no order should be passed to the detriment of an Officer, Porbandar assessee without affording him an opportunity but it cannot be said that the Rule is so rigid that if, as a Kapur f. matter of fact, the assessee knows of the proceedings and the mattef has been discussed with him then an adverse order would be invalid merely because no notice under s. 63 was given.\n\nOf course this postulates that a reasonable opportunity has been given to show cause. Secondly this provision is applicable only where the assessment is enhanced or refund is reduced.\n\nNeither of those contingencies has arisen in the present case.\n\nThe depreciation allowed to the appellant in the year of assessment 1943-44 when the appellant was assessed as a non-resident, was Rs. 1,91,224. In the year 1944-45 t.here was no asssessable income in British India and so also in 1945-46. In the year 1946-4 7 there was a loss. In the year 194 7 -48 as in the preceding years the sales were effected at Porbander and there was no collection made in British India.\n\nThe total tax due was calculated at Rs. 43-llAs. In 1948-49 the sales were Rs. 38,656 and they were assessed to income-tax on a total income of Rs. 9,326. ]'or the accounting year 1948, i.e., the assessment year 1949-50 when the Ordinance came into force the total depreciation amount allowed was Rs. 3,66,925 which was much more than what was allowable on the Written Down Values determined in accordance with the provisions of the Ordinance which defined Written Down Value:\n\n\"\\Vritten Down Value means- ( a) In the case of assets acquired in the previous year, the actual cost to the assessee;\n\n(b) In the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Ordinance or allowed under any Act repealed hereby or\n\n556 SUPREME COUH, T REPORTS [1959) Supp.\n\nr959 which would have been allowed to him if the Indian\n\nMJs. Maha•ana Income-tax Act, 1922, was in force in past\".\n\nMills(Ptivate) Ltd. On the basis of this Ordinance and the other Statutes v. and Iiules mentioned in his affidavit, which have been The Income-tax set out above, the Income-tax Officer made the vari- Oific.,, Po•bonda• 1 1 t\" d d d th d · _ ous ca cu a 10ns an etermme e epremat10n Kapu• 1. amounts which have given rise to the controversy before us. These calculations were based on the Written Down Values for the successive assessment years up to the year of assessment 1953-54. •\n\nBut it was argued by counsel for the appellant tlia.t according to s. 10(5)(b) of the Act the Written Down Value in the case of assets acquired before the previous year mean the actual cost to the assessee Jess all depreciation actually allowed to him under the Act or under any Act repealed thereby and therefore the provisions of the Saurashtra Ordinance which came to an end when the Act became applicable cannot form the basis of determining the Written Down Value for the purposes of assessment of the years 1950-51 onwards. In reply it was submitted that the W rittcn Down Values were calculated and depreciation determined for the year 1943-44 and should in subsequent years ha:ve been calculated in accordance with the provisions of the Ordinance and they could not become - higher for purposes of s. 10(5)(b) of the Act merely because the Ordinance was replaced by the Act. In this connection reference was made to s. 12 of the Finance Act, 1950, s. 12 of which empowered the Central Government to make provision for the removal of difficulties in giving effect to the provisions of any of the Acts, Rules or Orders extended by s. 3 or s. 11 of that Act, i. e., Finance Act, 1950.\n\nUnder that section (s. 12) the Taxation Laws (Part B States) Removal of Difficulties Order, 1950, was promulgated on December 2, 1950, and by cl. 2 of this Order provision was made for computation of aggregate depreciation allowance and Written .Down Values.\n\nTo this Order the following explanation was added on March 9, 1953: (Notification No. S. R. 0. 477) :-\n\n\" For the purposes of this paragraph, the expression \" all depre'ciation actually allowed under any\n\n(2) S.C.R.\n\nSUPREME COUH.T REPORTS 557\n\nlaws or rules of a Part B State \" means and shall be r959 deemed to .ha.ve always. meant the agregate aII:-iwance Mfs. Maharana for depremat10n taken mto account m computmg the .Mills (P•ivate) Ltd. vVritten Down Value under any laws or rules of a v.\n\nPart B State or carried forward under the said laws The Income-tax or rules\".\n\nOfficer, I'orbandar But the appellant's counsel contended that this explanation is ultra vires because it was promulgated under s. 60-A of the Act and that section was inapplicable to the Order made under s. 12 of the Finance Act, 1950.\n\nHe relied on two cases decided by the Hyderabad High Court in S. V. Naik v. Commissioner of Incometax (1) and Commissioner of Income-tax v. D. B. R.\n\nJJ1 ills Ltd. (2) but we are informed that one of those judgments is under appeal to this Court and we therefore do not wish to express any opinion upon the correctness or otherwise of this contention raised by the appellant,\n\nIt was next argued by the learned Attorney-General that the 'Vritten Down Values determined under s. 35 are not final and can be re-determined in the following assessment years and in support he referred to\n\nK.arnani Industrial Bank v. Commissioner of Incomctax (3) where the original cost of the machinery purchased Rs. 3,40,000-was accepted in the successive asRessment years till it was doubted in the assessment order 1946-47 and was determined at H, s. 2,80,000 and it was contended that the Income-tax Officer had to take the Written Down Value of the previous year as correct.\n\nThus the question there raised was whether the Income-tax Officer was entitled in law to go behind the original cost accepted by his predecessor ever since the assessment year 1939-40. It was held that neither the principle of res judicata nor estoppel nor the terms of s. 10 (2) (vi) of the Act prevented the Income-tax Officer from determining for himself what the actual cost of the machinery had been and that depreciation had to be calculated for every year and it was open to the Income-tax Officer not merely to perform \"a mathematical operation on\n\n(r) [1955] 29 I.T.R. 206.\n\n(2) [1954] 29 I.T.R. 2m\n\n(3) [1951] 25 I.T.R. 558.\n\nKapur ].\n\nr959 the basis of the \\Vritten Down Value of the previous\n\n/ h year, but one of determining the \\Vritten Down Value ,.J s. !Ila aranu l .\n\nIf,, Mills (l'rivate) Ltd. lllllSe v.\n\nThe limit to which the Income-tax Officer can go n, J,, come-tax back does not stop at the Written Down Value of the Offim. P°'bandar previous year but extends up to the figure of the origi-\n\nKapur ]. nal cost, and the method enjoined bys. 10(5)(b) is not that the Income-tax Officer should merely scale down the Written Down Value of the previous year, but that be should take into consideration the actual cost, determining it for himself, if necessary, take also into consideration the allowances granted in the past and then make his own computation as to the Written Down Value for the assessment year with which he is concerned. Thus it cannot be said that merely because under s. 35 some Written Down Value and the depreciation amount have been determined they are a final determination binding for all times to come nor does the determination operate as estoppel or rM judicata for the following years. Therefore it cannot be said that there is no other efficacious and adequate remedy open to the appellant to challenge the depre.ciation amount determined under s. 35.\n\nCounsel for the appellant contended that the provision under which the Income-tax Officer acted, i. c., 35 was not meant for the purpose of making corrections in 'Written Down Values; and that for the purpose the appropriate and correct provision was s. 34 which specifically refers to excessive depreciation.\n\nThere are two sections under which an Income-tax Officer can act, i. e., ss. 34 and 35 and the question for decision that arises is whether s. 35 was open to him.\n\nSection 35 provides :\n\n\"The Commissioner or Appellate Assistant Com- 'missioner may, at any time within four years from the date of any order passed by him in appeal or, in the case of the Commissioner, in revision under section 33A and the Income-tax Officer may, at any time within four years from the date of any assessment order or refund order passed by him on his own motion rectify any mistake apparent from the record of the appeal, revision, assessment or refund as the cac may be, and\n\nshall within the like period rectify any such mistake r959 which has been brought to his notice by an assessee \". l\\f\n\nM 1 /s. aiarana The question therefore is was it a mistak.e apparent Mills (Private) Ltd. from the record which the Income.tax Officer has v. rectified. It was submitted that recalculation is not The Income-t•x rectifying a mistake which is apparent from the Officer, f'orbandar record.\n\nThe words used in the section are \"apparent Ka;:; J. from the record \" and the record does not mean only the order of assessment but it comprises all proceedings on which the assessment order is based and the Income-tax Officer is entitled for the purpose of exercising his jurisdiction under s 35 to look into the whole evidence and the law applicable to ascertain whether there was an error. If he doubts the Written Down Value of the previous year it is open to him to check up the previous calculations and if he finds any mistake it is open to him to make fresh calculations in accordance with the law applicable including the rules made thereunder.\n\nThe Privy Council in Commissioner of Income-tax v.\n\nKhem Chand Ramdas (1) held s. 35 to be applicable where the facts were that the assessee did not produce books of account and an assessment was made by the Income-tax Officer to the best of his judgment.\n\nAn application for the registration of the firm was however allowed and it was registered on January 17, 1927.\n\nOn the same day assessment was made under s. 23(4).\n\nAs it was a registered firm no super-tax was assessed.\n\nThe Commissioner called for the record under s. 33 and cancelled the registration on January 28, and ordered the Income-tax Officer to take necessary consequential action. The result of that was that the assessee became liable to super-tax. Consequently an order for s.uper-tax was made on May 4, 1929, and three days later notice of demand was issued. The Privy Council held that as the fresh action taken by the Income-tax Officer was hopelessly out of time the demand for super-tax was illegal because after the final assessment the Income-tax Officer could not go on making fresh computations and issuing fresh notices of demand to the end of all time but it was held that\n\n(r) (1938) L.R. 65 I.A. 236.\n\nz959 the provisions of ss. 34 and 35 prescribed the only\n\nM/s. Maharana circumstances in which fresh assessment could be made Mills (Private) Ltd. and fresh n_otice of demand could be issued.\n\nAt p. 426\n\nLord Romer observed : The Income-tax \"In the present case it is a i:lebatable question Office\" Porbandar whether the circumstances were such as to bring it\n\nKapur 1. within the provisions of Section 34. It is not necessary to determine that question inasmuch, as, in their lordship's opinion, the case clearly would have fallen within the provisions of section 35 had the Income-tax Officer exercised his powers under the section within one year from the date on which the earlier demand was served upon the respondents.\n\nFor, looking at the record of the assessments made upon them as it stoorl after the cancellation of the respondent's registrationand the order affecting the cancellation would have formed part of that record-it would be apparent that a mistake had been made in stating that no super-tax was leviable \".\n\nThus the order effecting the cancellation of the rogi~. tration of the assessee's firm was considered to have formed part of the record of the case.\n\nIn Sidhramappa Andannappa Manvi v. Commissioner of Income-tax (1) the facts were that a debt belonging to a joint family fell on partition to the share of the assessee.\n\nThis debt was held not to be recoverable by a judgment of the Bombay High Court dated September 29, 1941.\n\nHolding it to be within the accounting year the Appellate Tribunal allowecl this sum to be taken into consideration for the purpose of the accounting year. It subsequently corrected the error. It was held that under s. 33 the Tribunal was entitled to rectify the mistake and was competent to pass a consequential order dismissing the , appeal instead of allowing it.\n\nThe power under s. 35 is no doubt limited to rectification of mistakes which are apparent from the record. o A mistake contemplated by this section is not one which is to be discovered as a result of an argument but it is open to the Income-tax Officer to examine the record including the evidence and if he discovers any\n\n(1) (1951] 21 I.T.R. 333.\n\nmistake he is entitled to rectify the error provided r959 that if the result is enhancement of assessment or M , d . th f d h . h t b . t h /s. Ma,1arana re ucmg e re un t en notice as o e given o t e Mills (Private) Ltd. assessee and he should be allowed a reasonable opporv. tunity of being heard.\n\nThe Income-tax The scope and effect of -the expression \" mistake Officer, Porbandar apparent from the record \" and the extent of the powers of the Income-tax Officer under s. 35 of the Kapur 1 Act were discussed by this Court in 1ll. K. Venkatachalam v. Bombay Dyeing and Manufacturing Go.\n\nLtd. (1) where the facts were these: A sum of Rs. 50,063 being interest on tax paid in advance was given credit for under s. 18A(5) of the Act..\n\nSubsequently there was an amendment of the Act by which the interest became allowable only on the difference between the amount of tax paid and what was actually determined.\n\nAs a consequence of this the Income-tax Ocer purporting to act under s. 35 of the Act rectified the mistake and reduced the amount of interest credited to Rs. 21,157 and issued a demand for the difference. The assessee obtained a writ of prohibition against the Incometax Officer on the ground that the mistake contemplated under that provision had to be apparent on the face of the Order and it was not contemplated to cover a mistake resulting from an amendment of the law even though it was retrospective in its effect. The l{evenue appealed to this Court.\n\nThus the question for decision in that case was whether an order proper and valid when made could be said to disclose a mistake apparent from the record merely because it became erroneous as a result of a subsequent amendment of the law which was retrospective in its operation.\n\nIn delivering the judgment of the Court Gajendragadkar, J., said:-\n\n\"At the time when the Income-tax Officer applied his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the principal Act as containing the inserted proviso as from April 1, 1952. If that be the true position then the order which he made giving credit to the\n\n(r) [1959] S.C.R. 7oi. 71\n\n'959 respondent for Rs. 50,603-15-0 is plainly and obviously inconsistent with a specific and clear provision of the M/s. Makarana t d th t . 't bl b t d .\n\nMills (Private) Ltd. statu e an at mus mev1 a y e trea e as a imsv. take of law apparent from the record. If a mistake n., Income-tax of fact apparent from the record of the assessment Officer, Po1bandar order can be rectified under s. 35 we see no reason why\n\n- a mistake of law which is glaring and obvious cannot Kapur J. be similarly rectified\".\n\nThe decision of the Privy Council in Commissioner of Income-tax v. Khem Chand Ram Chand (1) was referred to.\n\nCounsel for the appellant sought to distinguish both these cases; Venlcatachalam' s case (') and Khem Chand's case (1) on the ground that the record there considered was the assessment record of that year and the Income-tax Officer did not have to go to the records of the previous year. That is a distinction without a difference. If, for instance, the Incometax Officer had found that in the assessment year 1952-53 there was an apparent arithmetical mistake in the account of the Written Down Value of the properties which resulted in a corresponding mistake in the assessment of the year in controversy could he not take the corrected figure for the purposes of the assessment and could it be said that the mistake was not apparent from the record.\n\nA fortiori if he dis- 1covered that the very basis of the different assessments was erroneous because of an initial mistake in determining the Written Down Value could it be said that this would not be a mistake apparent from the record.\n\nAnd if in order to determine the correct Written Down Value the Income-tax Officer makes correct calculations, can it be said that that is not rectifying a mistake apparent from the record but is dehors it.\n\nIn our opinion this appeal is without force and we would therefore dismiss it with costs.\n\nAppeal dismissed.\n\n(1) (1938) L.R. 65 I.A. 236.\n\n(2) [1959] s.c.R. 703,", "total_entities": 81, "entities": [{"text": "s. 7(d)", "label": "PROVISION", "start_char": 193, "end_char": 200, "source": "regex", "metadata": {"statute": null}}, {"text": "M/S. 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{"document_id": "1959_2_563_582_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPORTS 563\n\nMAHANT MOTI DAS\n\nS. P. SAHI, THE SPECIAL OFFICER IN CHARGE\n\nOF HINDU H, ELIGIOUS TRUSTS & OTHEH, S\n\n(and connected appeals)\n\n(S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR, K. N. WANCHOO and M. HIDAYATULLAH, JJ.)\n\nHindu Religious Trusts-Constitutional validity of Bihar Hindu Religious Trusts Act-Difference between Hindus, Jain and Sikh religious trusts-Legislative classification-Restrictions imposed on trustees-Validity-Whether Act interferes with practice of religion-Levy of a fe§ for the expenses of administration of Act- Legality-Bihar Hindu Religious Trusts Act, r950 (Bihar I of r95r), ss. 2, 5, 6, 7, 8, 28, 29, 32, 55(2), 60, 70-Constitution of India, Arts. r4, r9(r)(j), r9(5), 25, 26, 27.\n\nThe appellants as the Mahants of the respective maths or asthals were served with notices under s. 59 of the Bihar Hindu Religious Trusts Act, 1950, by the President, Bihar State Board of Religious Trusts, asking them to furnish statements and accounts of the properties in their possession. They challenged the constitutional validity of the Act by proceedings taken in the High Court on the grounds (r) that ss. 2, 5, 6, 7 and 8 of the Act infringe Art. 14 of the Constitution, inasmuch as there was ine:!qu:; Llity of treatment as between Hindu religious trusts on one hand and Sikh religious trusts on the other, the latter having been excluded from the purview of the Act, and that there was inequality of treatment even as between Hindu religious trusts and Jain religious trusts, though both came under the Act; (2) that the provisions of ch. V of the Act and in particular ss. 28 and 32 violate Art. i9(r)(f) of the Constitution, as under those provisions the mahant or Shebait practically loses his right of management and is reduced to the position of a mere servant of the Board; (3) that the provisions of the Act contravene Arts. 25 and 26 of the Constitution, as the power to alter or modify the budget relating to a religious trust or the power to give directions to a trustee may be exercised by the Board in such a way as to affect the clue observance of religious practices in the math or temple ; (4) that s. 70 imposes an unauthorised tax, and (5) that s. 55(2) contravenes Art. 133 of the Constitution.\n\nHeld, (r) that in view of the fact that in the matter of religious trusts in the State of Bihar, there are differences between Sikhs, Hindus and Jains and that the needs of Jains and Hindus are not the same in the matter of the administration of\n\nI959\n\nApril Ij.\n\n• I959\n\nMah ant i'v! ofi v.\n\nS. P. S11hi\n\ntheir respective religious trusts, it is open to the Bihar Legislature to exclude Sikhs who might have been in no need of pro- Das tection and to distinguish between Hindus and Jains.\n\nAccordingly, ss. 2, 5, 6, 7, and 8 of the Act do not infringe Art. r4 of the Constitution.\n\nIt is well settled that while Art. r4 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation, and in order to pass the test of permissible classification, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentia which distingvished persons or things that are grouped together from others left out of the group and (2) that that differentia must have a rational relation to the object sought to be achieved by the statute in question.\n\nShri Ram Krishna Dalmia v. Shri Justice S. R. Tendolkar, (1959] S.C.R. 279, relied on.\n\n(2) that having regard to the position of a trustee in respect of the trust property which he holds and the object or purpose of the Act, the restrictions imposed in Ch. V of the Act are really for the purpose of carrying out the objects of the trust and for the better administration, protection and preservation of the trust properties, and are reasonable restrictions in the interests of the general public within the meaning of cl. (5) of Art. 19 of the Constitution.\n\n(3) that the Act does not contravene Arts. 25 and 26 of the Constitution, as the provisions of the Act relating to the power of the Board to alter the budget and to give directions to the trustee are subject to restrictions, namely, that they must be for the proper administration of the religious trust; and, further, none of the provisions interfere with \"matters of religion\" including practices which a religious denomination regards as part of its religion.\n\n(4) that s. 70 of the Act is a valid provision as it only provides for the levy of a fee for the purpose of defraying the expenses incurred or to be incurred tn the administration of the Act and is not a tax.\n\nMahant Sri Jagannath Ramanuj Das v. The State of Orissa, (1954] S.C.R. 1046, followed.\n\n(5) thats. 55(2) of the Act does not contravene Art. 133 of the Constitution as it does not override or is not intended to override Art. 133 or any other Article of the Constitution relating to appeals to the Supreme Court.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 225, 226, 228, 229 and 248 of 1955.\n\nAppeals from the judgments and orders dated October 5, 1953, in Misc. Judicial Cases Nos. 418/52 and 124/53 and October 8, 1953, in T. S. No. 106/53,\n\nMi,; c. Judicial Cases Nos. 188/53 and 235/53 of the r959 Patna High Court.\n\nMahant Moti Das R. Patnaik, for the appellant (in C. A. No. 225/55). v.\n\nR. 0. Prasad, 'for the appellants (in C. As. Nos. 226, 5 P. Sahi 228, 229 & 248/55).\n\nMahahir Prasad, Advocate-General for the State of Bihar, Tribeni Prasad Sinha and S. P. Varma, for the respondents (in C. As. Nos. 225, 226, 228 & 229/55).\n\nMahabir Prasad, Advocate-General for the State of Bihar and S. P. Varma, for the respondent (in C. A.\n\nNo. 248z55).\n\n1959.\n\nApril 15.\n\nThe Judgment of the Court was delivered by\n\nS. K. DAS, J.-This is a batch of five appeals which s. K. Das]. have been heard together and the principal question for decision in these appeals is the constitutional validity of the Bihar Hindu Religious Trusts Act, 1950 ( Bihar I of 1951 ), hereinafter referred to as the Act. l!'our of these appeals arise out of writ proceedings taken in the High Court of Patna on petitions made under Arts. 226 and 227 of the Constitution. One of them, namely, Civil Appeal No. 228of1955, arises out of a suit which was originally instituted in the Court of the Subordinate Judge of Patna but was later transferred to the High Court by an order made by it under Art. 228 of the Constitution. The petitioners in the writ petitions and the plaintiffs in the suit challenged the constitutional validity of the Act on certain grounds to which we shall presently refer. The petitions and the suit were contested by the State of Bihar and/or the President, Bihar State Board of Religious Trusts, who are now respondents before us.\n\nThe High Court in three separate judgments, two dated October 5, 1953, and the third dated October 8, 1953, held that the Act was a valid piece of legislation and on that main finding dismissed the writ petitions and the suit. The petitioners and the plaintiffs, appellants before us, applied for and obtained certificates from the High Court under Art. 132 of the Constitution to the effect that the cases involved substantial ques-\n\n1959 tions of law as to the interpretation of the Constitution\n\n- . D and the appeals have been brought to this Court in JHahant /\\Jolt as f h 'fi v. pursuance o t ose 9ert1 cates. s. r. sahi The facts lie within a very narrow compass. In Civil Appeal No. 225 of 1955 the appellant is Mahant s. K. Das J.\n\nMoti Das, and he alleged that he was the Mahant of a math or asthal situate in village Parbatta, district Monghyr, in Bihar, that he was a follower of the religion founded by Sri Kabir Sahib, that the properties of the as th al were treated as private properties of the mahants and that the President of the Bihar State Board of Religious Trusts constituted under the Act had no authority to serve him with a notice under s. 59 of the Act, inasmuch as the Act was ultra vires and unconstitutional and, in any event, did not apply to his math or asthal. In Civil Appeal No. 226 of 1955 the appellant l\\fahant Ram Das similarly alleged that ho was the mahant of a math or asthal situate in villae\\e Bhuthari in the same district of Monghyr, that he was a \" bairagi sadh u \" and follower of Ramanandi Laskari Sri Vaishnava Sampradaya, that he was the absolute owner of the properties belonging to tbe math and that the 'President, Bibar State Board of Religious Trusts, had no authority to issue a notice to him asking him to furnish statements and accounts of the propert.ies in his possession. In Civil Appeal No. 228 of 1955 the appellants made similar allegations in their plaint and challenged the\" vires\" of the Act, mentioning as their cause of action the date on which the assent of the President of India to the Act was first puhlished in the Bihar Gazette.\n\nIn Civil Appeal No. 229 of Hl55 the appellant Mahant Mahabir Das stated that he was the Mahant of an asthal known as Bisanpur Asthal situate in the self.same district.\n\nHe also received a notice from the President, Bihar State Board of Religious Trusts, to furnish statements and accounts, and he challenged the vires of the Act on similar grounds. In Civil Appeal No. 248 of 1955 Mahrmt Ram Krishna Das alleged that the temple in question, known as Bhikam Das Thakurbari in the town of Patna, was constructed by one Benidasji with his own money and he installed certain deities therein.\n\nThe allegation was that the temple and the properties x959 thereof did not constitute a ' religious trust ' within h -\n\n. D th . f h t . . h A t d f th Ma ant Motz as e meanmg o t a express10n m t e c an ur er v. that the Act was ultra vires the Constitution inasmuch s. P. sahi as it infringed some of his fundamental rights. The\n\ndefence in all these cases was that the Act was valid, s. !(, Das J. and applied to the asthals or temple in question and the properties thereof.\n\nThe principal argument presented before us on behalf of the appellants is that the Act is bad on the ground that its several provisions infringe the appellants' fundamental rights guaranteed under (a) Art. 14; (b) Art. 19 (l)(f); and (c) Arts. 25, 26 and 27 of the Constitution. The Act has also been impugned on the ground that it imposes an unauthorised tax and also contravenes Art. 133 of the Constitution.\n\nAt this stage, it is necessary to advert to tho object or purpose of the Act and set out the relevant provisions thereof. The Act was passed by the Bihar Legislature and received the assent of the President, which assent was published in the Bihar Gazette on February 21, 1951. The long title of the Act and the preamble give the object of the Act. The long title says that it is an \"Act to provide for the better administration of Hindu Religious Trusts and for the protection and preservation of properties appertaining to such trusts.\" The preamble repeats the same object or purpose, and makes it further clear that the Act is meant to provide for the better administration of Hindu Religious Trusts in the State of Bihar. Section 1 gives the short title, and provides for extent and commencement, the Act having come into force on August 15, 1951. Section 2 is the definition section, and the word ' Hindu ' in the Act means a person professing any religion of Hindu origin and includes a Jain and a Buddhist, but does not include a Sikh.\n\nThe expressions \" religious trust \" and \" trust property \" are defined in the following way :-\n\n\" Section 2 (1). ' religious trust ' means any express or constructive trust created or existing for any purpose recognised by Hindu Law to be religious, pious or charitable, but shall not include a trust created\n\n1959 according' to the Sikh religion or purely for the benefit\n\nMahant Moti Dasof the Sikh community and a private endowment\n\nv. created for the worship of a family idol in which the s. P. sa1,; public are not interested ; ·\n\nS. K. Das}.\n\n(p) 'trust property' means the property appertaining to a religious trust\".\n\nSection 3 states :\n\n\"This Act shall apply to all religious trustR, whether created before or after the commencement of this Act, any part of the property of which is situated in the State of Bihar. \" Section 4 was amended by Bihar Act 16 of 1954, and it provides for necessary amendment or repeal, as the case may be, of certain earlier Acts dealing with public religious trusts and charitable endowments, such as, the Religious Endowments Act, 1863 (20 of 1863), the Charitable Endowments Act, 18~0 (6 of 1890) and the Charitable and Religious Trusts Act, 1920 (14 of 1920).\n\nSub-section (5) of s. 4 has an important bearing on one of the questions before us and must be quoted in full:\n\n\"Section 4 (5).\n\nThe Religious Endowments Act, 1863, and section 92 of the Code of Civil Procedure, 1908, shall not apply to any religious trust in this State, as defined in this Act.\" Chapter II of the Act deals with the constitution of the Board. Section 5 provides for the constitution of the Bibar State Board of Religious Trusts. Section 5(3) states that the Board shall be a body corporate and shall have perpetual succession and a common sea.I with power to acquire and hold property, both moveable and immovable. Section 7 makes provision for the appointment of the President and the members of the first Board and their terms of office. Section 8 contains the terms of tbe constitution of the second and every subsequent Board. Chapter IV refers to the appointment and qualification of the Superintendent of the religious trusts. The chapter further provides for the appointment of officers and servants for the Board.\n\nChapter V relates to the power and duties of the Board.\n\nSection 28 (1) provides that the general superintendence of all religious tru•ts in the State shall be vested in the\n\nBoard and the Board shall do all things reasonab~ r959 and necessary to ensure that such trusts are properly - . supervised and administered and that the income Mahant Moh Das thereof is duly appropriated and applied to the objects s. p~Sahi of such trusts and in accordance with the purposes for which such trusts were founded and for which they s. K. n,, s J. exist. Section 28 (2) enumerates in great detail the powers and duties of the Board in regard to certain matters. Section 28(2)(e),, for example, states that the duty of the Board shall be to cause inspection to be made of the property and the office of any religious trust including accounts and to authorise the Superintendent or any of its members, officers or servants for that purpose. Section 28(2)(g) empowers the Board to give directions for the proper administratio_n of a religious trust in accordance with the law governing such trust and the wishes of the founder in so far as such wishes can be ascertained. Section 32 empowers the Board to settle a scheme for the proper administration of religious trusts. Chapter VI refers to the establishment of regional trusts committees and the powers and duties imposed on such committees. Chapter VIII refers to transfer of immovable properties and borrowing of money by trustees. Section 44 of this chapter states that no transfer made . by a trustee, of any immovable property of a religious trust by way of sale, mortgage, or lease for a term exceeding three years shall be valid unless made with the previous sanction of the Board. Section 45 prohibits a trustee from borrowing money for the purpose of any religious\n\ntrust without the previous sanction of the Board.\n\nChapter X relates to trustees and their duties. Section 59 of this chapter imposes a duty on the trustee to furnish particulars of the religious trust. Section 60 relates to the budget of religious trusts and submission of such budgets to the Board and the Board may alter or modify the budget in such manner and to such extent as it thinks fit.\n\nChapter XI relates to audit of accounts and recovery of irregular expenses from the trustees in default. Chapter XIII provides for the creation of a trust fund which is to be vested in the 72\n\n'959 93oard.\n\nSection 70 states that for the purpose of\n\nMahant Moti Da> defraying the expenses incurred in the administration\n\nv of the Act the trustee of every religious trust shall pay s. P. Sahi to the Board such fee, not exceeding five per centum of its net income as the Board may from time to time 5 K. Da> J. with the previous sanction of the State Government determine. Chapter XVI provides for the dissolution or supcrsession of the Board. Section 80 states that if in the opinion of the Stat\\) Government the Board makes default in the performance of the duties imposed on it or exceeds or abuses its powers, the State Government may declare the Board to be in default and direct that the Board shall be superneded. Section 81 provides that where an order of supersession has been passed, all the members of the Board shall vacate their offices as such members and all the power~ and duties to be performed by the Board shall be performed by such person as the State' Government may direct. Section 81 empowers the State Government to make rules and s. 83 empowers the Board to make bye-laws not inconsistent with the Act and the rules made thereunder.\n\nWe proceed now to consider the contentions urged on behalf of the appellants. The first contention is that the provisions in ss. 2, 5, 6, 7 and 8 infringe Art .. 14 of the Constitution. It is pointed out that the definition of the word ' Hindu' in s. 2 does not include Sikhs; and s. 5 constitutes a Board for religious trusts other than Jain religious trusts, and also two separate Boards-one for Swetambar Jain religious trusts and the other for Digambar Jain religious trusts. It is further pointed out that under ss. 6, 7 and 8 the con- • stitution of the Board for religious trusts other than Jain religious trusts differs in material particulars from the constitution of the two Boards for Jain religious trusts. The submission is that there is ineg uality of treA.tment as between Hindu religious trusts on one hand and Sikh religions trusts on the other, the latter having been excluded from the purview of the Act; secondly, there is inequality of treatment even as between Hindu religious trusts , i, nd Jain religious trusts, though both come under the Act.\n\nWe do not\n\n(2) S.C.It~ SUPREME COURT H, EPORTS 571\n\nthink that there is any substance in this contention. r959 The provisions of Art. 14 of the Constitution had comeM h -M . D f d, . b £ h' C . b f a ant oti as up or 1scuss10n eiore t is ourt m a num er o v. earlier cases (see the cases referred to in Shri. Ram s. P. sahi Krishna Dalmia v. Shri Justice S. R. Tendolkar (1)). It is, therefore, unnecessary to enter upon any lengthy s. K. Das J. discussion as to the meaning, scope and effect of the Article. It is enough to say that it is now well settled by a series of decisions of this Court that while Art. 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation, and in order to pass the test of permissible classification, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (2) that that differentia must have a rational relation to the object sought to be achieved by the statute in question.\n\nThe classification may be founded on different bases such as, geographical, or according to objects or occupations and the like. The decisions of this Court further establish -that there is a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the cons.titutional guarantee ; that it must be presumed that the legislature understands and correctly appreciates the needs of its own people and that its faws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds; and further that the legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest. It is not disputed before us, and this has been pointed out by the High Court, that there are some differences between Hindus, Sikhs and J ains in some of the essential details of the faith which they rofess and the religious practices they observe; the Sikhs ha.ve no caste _or priests, though they have grantis who officiate at marriages and other ceremonies ; they do not believe in the Vedas, Puranas or Shastras, at least not in the same\n\n(1) [I959] S.C.R. 279.\n\nz959 way as the Hindus believe in them. The J ains also\n\nMahant Moti Das do not recognise the divine authority of the Vedas and v. do not practise sradhs or ceremonies of the dead, nor s. P. Sahi do they recognise the spiritual authority of the Brahmins (Maine's Hindu Law, 11th Edition, p. 82). It 5 I<. Das f. has been further pointed out that there are also organisational differences in the matter .of religious trusts between Hindus, Sikhs and Jains. There are not many Sikh religious trusts in Bihar, and their organi- , sation is essentially different. J ains consist of two main branches-Swetambar Jains and Digambar J ains-and each branch has a separate central organisation. Section 8 of the Act recognises these differences; for example, there is an assembly of Swetambar Jains known as Shree Sangh and under s. 8(2)(c) of the Act the Shree Sangh is entitled to elect five persons to the Board of Swetambar Jain Religious Trust.\n\nSimilarly, Digambar Jains also have an assembly known as the Digambar Samaj and under s. 8(3)(c) of the Act this assembly is entitled to elect five persons to the Board for Digambar Jain Religious Trust. In view of these differences it cannot be said that in the matter of religious trusts in the State of Bihar, Sikhs, Hindus and J ains are situated alike or that the needs of the J ains and Hin!i us are the same in the matter of the administration of their respective religious trusts; therefore, according to the well established principles laid down by this Court with regard to legislative classification, it was open to the Bihar Legislature to exclude Sikhs who might have been in no need of protection and to distinguish between Hindus and J ains.\n\nTherefore, the contention urged on behalf of the appellants that the several provisions of the Act contravene Art. 14 is devoid of any merit.\n\nThe next contention urged on behalf' of the appellants is that the provisions in Chapter V, and in particular ss. 28 and 32, violate the fundamental right guaranteed to the appellants under Art. 19(l)(f) of the Constitution, namely, their right to acquire, hold and dispose of the trust properties. This argument before us has proceeded on the footing th.at the properties which the appellants hold are trust properties within\n\n(2) S.O.R..\n\nSUPREME COURT l~EPORTS 573\n\nthe meaning of the Act; but we must state here that 1959 the appellants have also alleged that the properties M h -;; . D are their private properties, to which aspect of the a ant v. oti as case we shall advert later. Chapter V of the Act, and s. P. sahi in particular s. 28 thereof, lays down the powers and duties of the Board. To some of these powers and. s. K. Das J. duties we have already made a reference earlier. Section 32 gives power to the Board, of its own motion or on application made to it in that behalf by two or more persons interested in any trust, to settle schemes for proper administration of the religious trust. There\n\nare other sections in the chapter which give the Board power to enter into contracts and to borrow money, etc., for carrying out any of the purposes of the Act or to give effect to the provisions thereof. Under s. 58 every trustee must carry out all directions which may from time to time be issued to him by the Board under any of the provisions of the Act. The powers given under s. 28 include the power to prepare and settle the budget, to cause inspection to be made of the property and the office of any religious trust, to call for information, reports, returns, etc., to give directions for the proper administration of a religious . trust in accordance with the law governing such trusts and the wishes of the founder, to remove a trustee from his office in certain circumstances, and to control and administer the trust fund, etc.\n\nThe argument before us is that the position of a mahant or shebait of a Hindu religious trust is a combination of office and proprietary right and under the provisions of the Act the mahant or shebait practically loses his right of management and is reduced to the position of a mere servant of the Board; this, it is contended; is violative of the appellants' fundamental right under Art. 19(l)(f).\n\nIn A ngurbala Mullick v. Debabrata Mullick (1) Mukherjea, J., delivering the majority .judgment of this Court, has said that the exact legal position of a shebait may not be capable of precise definition, but its implications are fairly well established. It is now settled that the relation of a shebait in regard to\n\n(1) (195r] S.C.R, 1125, 1133.\n\n574 SUPREME COURT REPOiiTS [1959] Supp.\n\nI959 debutter property is not that of a trustee to trust property under the English law.\n\nMahant Moti Da> M I h J 'd u { erJea, ., sa1 : v.\n\nS. I). Sahi \"In English law the legal estate in the trust property vests in the trustee who holds it for the benefit of s. K Da, J. cestui que trust. In a Hindu religious endowment on the other hand the entire ownership of the dedicated property is transferred to the deity or the institution itself as a juristic person and the shebait or mahant is a mere manager.\n\nBut though a shebait is a manager and not a trustee in the technical sense, it would not be correct to describe the shebaitship as a mere office.\n\nThe shebait has not only duties to discharge in connection with the endowment, but he has a beneficial interest in the de butter property ............ In almost all such endowments the shebait has a share in the usufruct of the debutter property which depends upon the terms of the grant or upon custom or usage. Even where no emoluments are attached to the office of the shebait, he enjoys some sort of right or interest in the endowed property which partially at least has the character of a proprietary right.\n\nThus, in the conception of shebaiti both the elements of office and property, of duties and personal interest, are mixed up and blended tog_ether ; and one of the elements cannot be detached from the other. It is the presence of this personal or beneficial interest in the endowed property which invests shebaitship with the character of proprietary rights and attaches to it the legal incidents of property,\"\n\nlt is to be remembered that even before the passing of the Act here impugned, there was statutory machinery for enforcing the obligations and duties imposed upon a mahant or shebait.\n\nSectioR 92 of the Code of Civil Procedure provided that in the case of an alleged breach of any express or constructive trust created for public purposes of a charitable or religious nature or where the direction of the court was deemed necessary for the administration of any such trust, the Advocate-General, or two or more persons having an interest in the trust and having obtained the consent in writing of the Advocate-General, might institute\n\na. suit to obtain a decree-(a) to remove any trustee, 1959\n\n(b) appointing a new trustee, (c) vesting any property h - . Das . (d} d\" t' t d . .\n\nMa ant Moti m a trustee, rrec mg accoun s an enquiries, v.\n\n(e) declaring what proportion of the trust property s. P. sahi or of the interest therein shall be allocated to any particular object of the trust, (f) authorising s. K. Das J. the whole or any part of the trust property to be let, sold, mortgaged or exchanged, (g) settling scheme and/or (h) granting such further or other relief as the nature of the case might require. The section therefore provided an important machinery for enforcing the obligations and duties imposed on trusees and\n\nthe jurisdiction given to the court was of a very wide extent.\n\nNow, the right guaranteed under Art. 19(l)(f) is subject to cl. (5), thereof, which says inter alia that nothing in sub-clause (f) shall prevent the State from making any law imposing reasonable restrictions on the exercise of the right conferred by the said sub-clause in the interests of the general public.\n\nWe are of the view, in agreement withthat of the High Court, that the restrictions imposed by the Act on the power of the trustees are really intended, as the preamble of the Act states, for the better administration of Hindu religious trusts in the State of Bihar and for the protection and preservation of properties appertaining to such trusts. It is indeed true that the Act provides a better and more speedy remedy for the enforcement of the obligations and duties imposed on the trustees than the lengthy and cumbrous procedure of a suit under s. 92 of the Civil Procedure Code.\n\nThe Board is vested with summary powers in various matters, but the control is to be exercised for the better and more efficient' administration of the trust and for the protection and preservation of the trust properties. It is germane to refer in this connection to sub-s. (1) of s. 28 which states that the Board shall do all things reasonable and necessary to ensure that the religious trusts are properly supervised and administered and that the income thereof is duly appropriated and applied to the objects of such trusts and in accordance with the purposes for which such trusts were founded.\n\nSection\n\n1959 60 (2) no doubt empowers the Board to alter or modify\n\nM h -;; . D the budget of any religious trust in such manner and\n\n• ant v. 01 ' as to such extent as it thinks fit; but sub-s. (6) of s. 60 s. P. saM makes it clear that nothing contained in the section shall be deemed to authorise the Board to alter or s. IC Das J. modify any budget in a manner or to an extent inconsistent with the wishes of the founder, so far as such wishes can be ascertained, or with the provisions of the Act. Section 28 (2) (h) gives the Board power to remove a trustee from his office in certain contingencies ; but sub-s. (3) of s. 28 says that an order of removaJ passed by the B9ard under cl. (h) of sub-s. (2) shall be communicated to the trustee concerned ard such trustee may within 90 days of the communication of such order apply to the District Judge for varying, modifying or setting aside the order. Section 28 (2) (j) empowers the Board to sanction the conver- , sion of any property of a religious trust into another property if the Board is satisfied that such conversion is beneficial for the trust; there is, however, an important proviso that no such conversion shall be sanctioned unless the Board so resolves by a majority which includes at least three-fourths of its members and the resolutiol) is approved by the District Judge.\n\nEven with regard to the settling of a scheme under s. 32 there is a safeguard under . sub-s. (3) thereof, which says that the trustee or any person interested in the trust may within three months of the publication of the scheme make an application to the District Judge for varying, modifying or setting aside the scheme.\n\nThese and similar other safeguards clearly indicate the true nature of the restrictions imposed under the Act, and we are of the view that having regard to the position of a trustee as respects the trust property which he holds and the object or purpose of the Act, the restrictions imposed .are really for the purpose of carrying out the objects of the trust and for better administration, protection and preservation of the trust properties; they_are, therefore, reasonable restrictions in the interests of the general public within the meaning of cl. (5) of Art. 19 of the Constitution. In\n\n(2) S.C.R. SUPREME COURT ~EPORTS 577\n\nthis respect, the impugned provisions of the Act differ\n\nL959 from those provisions of the Madras Hindu ReligiousM ,\n\n-M . . . a1ta nt oti Das and Charitable Endowments Act, 1951, and the Or1ssa v.\n\nHindu Religious Endowments Act, 1939, as amended s. P. sahi by the Amending Act II of 1952, which came under consideration of this Court in The Commissioner, s. J<. Das J.\n\nHindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Shri Shirur Mutt (1) and Mahant Shri Jagannath Ramanuj Das v. The State of Orissa (2), and were held to be invalid on the ground that they were not reasonable :restrictions within the meaning of cl. (5) of Art. 19 of the Constitution.\n\nThe third contention of the appellants rests upon Arts. 25 and 26 of the Constitution. The appellants have invoked in aid Art. 25 (I) which says inter alia that subject to public order, morality and health, all persons have the right freely to profess, practice and propagate religion.\n\nArticle 26 is also relied on for the contention that every religious denomination or any section thereof has a right (a) to establish and maintain institutions for religious and charitable purposes and -(b) to manage its own affairs in matters of religion. It is difficult to see how any of the provisions of the Act can be said to interfere with the right guaranteed by Art. 25, viz., freedom of conscience and the right freely to profess, practice and propagate religion.\n\nLearned counsel for the appellants has not been able to point out to us any particular provision of the Act which interferes with such a right. On behalf of the appellants it has been submitted that the power to alter or modify the budget relating to a religious trust or the power to give directions to a trustee may be exercised by the Board in such a\n\nway as to affect the due observance of religious practices in a math or tern ple so as to constitute an encroachment on the right guaranteed under Art. 25, and learned counsel for the appellants had placed reliance on The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swa- . miar of Sri Shirur Mutt (1 ), for his submission tj1at\n\n(r) [1954] S.C.R. 1005.\n\n(2) [1954] S.C.R, ro.16.\n\n578 SUPREME , COUR1'. REPOR'.t'S [1959) Supp.\n\nI959 freedom of religion in our Constitution is not confined - . to religious beliefs only, but extends to religious practi- Mahant Moti Das II b' h t · h' h h C ' ces as we su Ject to t e res notions w IC t e onst1s. p~· Sahi tution itself bas laid down. The answer to this submission is two-fold: we have pointed out , earlier that s. K. Da., J. the power to alter the budget is subject to cl. (6) of s. 60 of the Act and the Board is not authorised to alter or modify the budget in a manner or to an extent inconsistent with the wishes of the founder or with the provisions of the Act. The power to give direct.ions to the trustee is also subject to a siniilar restric- tion, namely, the . directions must be for the proper administration of the religious trust in accordance with the law governing such trust and the wishes of the founder in so far as such wishes can be ascertained and are not repugnant to such law.\n\nThe keynote of all the relevant provisions of the Act is the due observance of the objects of the religious trust and not its breach or violation. Secondly, as was observed in The Commissioner, Hindu Religious Endowments, Madras\n\nv. Shri Lakshmindra Thirtha Swamiar of Shri Shirur Mutt('), at p. 1030, \"an apprehension that the powers conferred ...... may be abused in individual cases does not make the provision itself bad or invalid in law\".\n\nWith regard to Art. 26, els. (a) and (b), the position is the same. There is no provision of the Act which interferes with the right of any religious denomination or any section thereof to establish and maintain institutions for religious and charitable purposes; nor do the provisions of the Act interfere with the right of any religious denomination or any section thereof to manage its own affairs in matters of religion. Learned counsel for the appellants has drawn onr attention to Sri Venkataramana Devaru v. The State of Mysore (2), where following the earlier decision in The 001nmissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt('), it was observed that matters of religion included even practices which are regarded by the community as part of its religion. Our attention has also been drawn\n\n(1) [1954] S.C R. 1005.\n\n(2) [1958] S.C.R. 895.\n\nto Ratilal Panachand Gandhi v. The State of Bombay (1) r959 in. whch it has been eld that a religio.us sect or en?- Maha,.1-;;01; Das mmatwn has the right to manage its own affairs rn v. matters of religion and this includes the right to spend s. P. sahi the trust property or its income for religion and for religious purposes and objects indicated by the founder s. I<. Das J. of the trust or established by usage obtaining in a particular institution. It was further held therein that to divert the trust property or funds for purposes which the charity commissioner or the court considered expedient or proper, although the original objects of the founder could still be carried out, was an unwarranted encroachment on the freedom of religious institutions in regard to the management of their religious affairs. We do not think that the aforesaid decisions afford any assistance to the appellants. Granting that ' matters of religion' include practices which a religious denomination regards as part of its religion, none of the provisions of the Act interfere with such practices; nor do the provisions of the Act seek to divert the trust property or funds for purposes other than those indicated by the founder of the trust or those established by usage obtaining in a pai.ticular institution. On the contrar.Y, the provisions of the Act seek to implement the purposes for which the trust was created and prevent mismanagement and waste by the trustee. In other words, the Act by its sveral provisions seeks to fulfil rather than defeat the trust.\n\nIn our opinion, there is no substance in the argument that the provisions of the Act contravene Arts. 25 and 26 of the Constitution.\n\nLastly, the appellants have challenged the validity of s. 70 of the Act, the relevant portion of which states:\n\n\"Section 70(1).\n\nFor the purpose of defraying the expenses incurred or to be incurred in the administration of this Act, the trustee of every religious trust shall, in each financial year, pay to the Board such fee, not exceeding five per centum of its net income in the last preceding financial year, as the Board may, from time to time, with the previous sanction of the State.\n\nGovernment, determine.\"\n\n(I) [1954] S.C.R. 1055.\n\n'959 The argument is that s. 70 imposes an unauthorised\n\nM I\n\n-;-1 . D tax. The point. is, we think, concluded by our decision a 1ant Jr oti as . , . v. m M ahant Sri J agannath RamanUJ Das v .. The State s. P. sahi of Orissa (1) where the distinction between a tax and a fee for legislative purposes under our Constitution was s. J{. Das J. pointed out and with regard to an identical imposition under s. 49 of the Orissa Hindu Religious Endow-· mcnts Act, 1939, it was held that the contribution levied was a fee and not a tax. It was observed there at p. 1054:\n\n\" The collections made are not merged in the general public revenue and are not appropriated in the manner laid down for appropriation of expenses for other public purposes. They go to constitute the fund which is contemplated by section 50ofthe Act ...... '\\Ve are further of opinion that an imposition like this cannot be said to be hit by article 27 of the Constitution.\n\nWhat is forbidden by article 27 is the specific appropriation of the proceeds of any tax in payment of expenses for the promotion or maintenance of any particular religion or religious denomination. The object of the contribution under section 49 is not the fostering or paeservation of the Hindu religion or of any denomination within it; the. purpose is to see that religious trusts and institutions wherever they exist are properly administered. It is the secular administration of the religibus institutions that the legislature seeks to control and the object, as enunciated in the Act, is to ensure t.hat the endowments attached to the religious institutions are properly administered and their income is duly appropriated for purposes for which they were founded or exist. As there is no question of favouring any particular religion or religious denomination, article 27 could not possibly apply.\" These observations apply with equal force to the present case.\n\nIt has also been argued that s. 55 (2) of the Act contravenes Art. 133 of the Constitution and is accordingly invalid. Section 55 is in thee terms: 55 (I). \"Unless otherwise provided in this Act, an appeal shall lie to the High Court against every order passed by the District Judge under this Act.\n\n(1) [1954] S.C.R. 1046.\n\n(2) No appeal shall lie from any order passed in z959 appeal under this section.\" M h M\n\n D . f\n\n A 'd a ant oti as We do not thmk that s. 55 (2) o the ct overn es v. or is intended to override Art. 133 or any other Artis. P. sahi cle of the Constitution relating to appeals to the Supreme Court. Such appeals must undoubtedly lie to s. I{. Das J. the Supreme Court, provided the necessary requirements for such appeals are fulfilled. It is, we think, obvious that the Act cannot affect the jurisdiction of the Supreme Court.\n\nWe now come to that part of the case of the appellants in which they claim the properties to be their private properties or, in the alternative, the trusts to be private trusts. The High Court has pointed out that in M. J.C. 418of1952 out of which has arisen Civil Appeal No. 225 of 1955, though there was an assertion that the properties were not trust properties, there was a counter-affidavit on behalf of the State of Bihar that the asthal in question was a public asthal and the properties appertaining thereto trust properties within the meaning of the Act.\n\nIn 'M. J. C. 124 of 1953 out of which has arisen Civil Appeal No. 226 of 1955 there was a similar claim that the mahant of the asthal was the absolute owner of the properties belonging to the . 34 of 1952 . math. In Smt No. 106 of 1953 out of whrnh has arisen Civil Appeal No. 22$ of 1955 there was a prayer for adjournment in order to enable the plaintiffs (now appellants before us) to file a petition to amend the plaint, and the purpose of the amendment sought~ to be made was to claim that the institutions in question were of a private charater and the Act had no application to them. This prayer was disallowed by the High Court on the ground that the amendment sought to be made would alter the whole character of the suit. In M. J.C. 188 of 1953 out of which has arisen Civil Appeal No. 229 of 1955 the claim was that there was no trust, express or implied. In M. J.C. 235 of 1953 out of which has arisen Civil Appeal No. 248 of 1955 there was a counter-affidavit on behalf of the State of Bihar that •the temple in question was a public temple and the Act applied to it. In all these cases the High Court has\n\n'Y59 taken the view, rightly in our opinion, that the ques-\n\nMahant-;:; oti Das tions wheth_er the tru.sts are public or priv'.1te trusts or v. the properties are private or trust properties are quess. P. Sahi tions which involve investigation of complicated facts and recording of evidence and such investigation could 5 1' Das J. not be done on writ proceedings. In the one suit which was tried in the High Court the question did not arise as no amendment was allowed.\n\nTherefore, in these cases there are no materials on which the question as to the nature of the trust can be determined, though in Ci vii Appeal No. 343 of 1955 (1 ) in which also judg - • ment is being delivered today, we have held that having regard to the preamble to the Act, the provisions in s. 3 and the provisions of sub-s. (5) of s. 4 the definition clause of •religious trust ' in the Act must mean public trusts express or constructive, recognised by Hindu law to be religious, pious or charitable. That finding, however, is of no assistance to the appellants in the present cases. The fate of these cases must depend on the sole question whether the Act is constitutionally valid or not.\n\nWe have held that the Act is constitutionally valid.\n\nIn the result we hold that the appeals are without any merit. They are accordingly dismissed with costs.\n\nAppeals dismissed.\n\n(1) Jlahant Ram Saroop Das;'i v. S. P. Sahi, seep. 583 post.", "total_entities": 122, "entities": [{"text": "DAS\n\nS. P. SAHI, THE SPECIAL OFFICER IN CHARGE\n\nOF HINDU H, ELIGIOUS TRUSTS & OTHEH", "label": "RESPONDENT", "start_char": 51, "end_char": 134, "source": "metadata", "metadata": {"canonical_name": "S. P. SAHI, THE SPECIAL OFFICER IN CHARGE OF HINDU RELIGIOUS TRUSTS & OTHERS", "offset_not_found": false}}, {"text": "P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 194, "end_char": 214, "source": "metadata", "metadata": {"canonical_name": "P.B. GAJENDRAGADKAR", "offset_not_found": false}}, {"text": "K. N. WANCHOO", "label": "JUDGE", "start_char": 216, "end_char": 229, "source": "metadata", "metadata": {"canonical_name": "K.N. WANCHOO", "offset_not_found": false}}, {"text": "M. 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{"document_id": "1959_2_583_601_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 583\n\nMAHANT RAM SAROOP DASJI\n\nS. P. SARI, SPECIAL OFFICER-IN-CHARGE\n\nOF THE HINDU RELIGIOUS TRUSTS\n\nAND OTHERS\n\n(S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR, K. N. WANCiIOO and M. HIDAYATULLAH, JJ.)\n\nHindu Religious Trusts-Private Trusts-Applicability of Bihar Hindu Religious Trusts Act-Religious Endowments, public and private-Distinction between-Definition of \"religious trust \" -Scope and Effect-Bihar Hindu Religious Trnsts Act, z950 (Bihar I of z95z), SS. 2(I), 4(5), ]O(I), 32, 48\n\nThe appellant as the Mahant of the Salouna asthal made an application in the High Court under Art. 226 of the Constitution praying inter alia for the issue of a writ quashing the order of the Bihar State Board of Religious Trusts requiring the appellant to submit a return of income and expenditure under s. 59 of the Bihar Hindu Religious Trusts Act, 1950, on the grounds, inter alia, that the Salouna asthal was a private institution and not a religious trust within the meaning of the Act and that the Act did not apply to private trusts.\n\nThe High Court took the view that the language of s. 2(1) of the Act, which defined a \" religious trust\", was wide enough to cover within its -ambit both private and public trusts recognised by Hindu law and that the Salouna asthal did not come within any of the two exceptions recognised by the section.\n\nHeld, that on a true and proper construction of the provisions of the Act, considered in the background of previous legislative history with regard to religious, charitable or pious trusts in India, the definition clause in s. 2(1) of the Act does not include within its ambit private trusts and that the provisions of the Act do not apply to such trusts.\n\nThe essential distinction in Hindu law between religious endowments which are public and thos! which are private is that in a public trust the beneficial interest is vested in an uncertain and fluctuating body of persons, either the public at large or some considerable portion of it answering a particular description ; in a private trust the beneficiaries are definite and ascertained individuals or who within a time can be definitely ascertained.\n\nThe fact that the uncertain and fluctuating body' of persons is a section of the public following a particular religious faith or fa only a sect of persons of a certain religious persuasion would not make any difference in the matter and would not make the trust a private trust.\n\nI959\n\nApril r5.\n\nt959\n\nMahant Ram Saroop Dasji\n\nS. P. Sahi\n\nS. K. Das].\n\nCIVIL\n\nAPPELLATE JURISDICTION: No. 343 of 1955.\n\nCivil Appeal\n\nAppeal from the judgment and order dated September 13, 1954, of the Patna High Court in Misc. Judl.\n\nCase No. 39of1954.\n\nL. K. Jha, B. K. P. $inha and R. G. Prasad, for the appellant.\n\nMahabir Prasad, Advocate-General for the State of Bihar, Ishwari Nandan Prasad and S. P. Varma, for the respondents.\n\n1959. April 15. The Judgment of the Court was delivered by\n\nS. K. DAS, J.-This appeal on a certificate granted by the High Court of Patna is from a judgment of the said High Court dated September 13, 1954, in a writ proceeding numbered as Miscellaneous Judicial Caso No. 39 of 1954 in that court, which the appellant had instituted on an application made under Art. 226 of the Constitution in the circumstances stated below.\n\nIt was alleged that one Mahatma Mat Ramji, a Hindu saint, owned and possessed considerable properties in the district of Monghyr in the State of Bihar. About two hundred years ago, he built a small temple at Salouna in which he installed a deity called Sri Thakur Lakshmi Narainji. This temple came to he known as the Salouna asthal. Mast Ramji died near about the year 1802. He was succeeded in turn by some of his disciples, one of whom was Mahant Lakshmi Dasji. - He built anew temple in 1916 into which he removed the deity from the old temple and installed two new deities, Sri Ram and Sita. In 1919 Mahant Lakshmi Dasji died. He left three disciples, Vishnu Das, Bhagwat Das and Rameshwar Das. A dispute arose among these disciples about succession to the gaddi, which was settled sometime in February\n\n1919. By that settlement it was arranged that Vishnu Das would succeed Mahant Lakshmi Das as the shebait and would be succeeded by Bhagwat Das, and thereafter the ablest \" bairagi \" of the asthal, born of Brahmin parents, would be eligible for appointment as\n\nshebait.\n\nBhagwat Das died sometime in 1935 and again a dispute arose between one Rameshwar Das, the youngest chela of Mahant Lakshmi Das, and Ram Saroop Das who is the present Mahant and appellant before us. Rameshwar Das, it appears, filed an application under the Charitable and Religious Trusts Act (XIV of 1920) for a direction upon Mahant Ram Saroop Das to render an account of the usufruct of the asthal. This application was contested by Mahant Ram Saroop Das, who said that the properties appertaining to the Salouna asthal did not constitute a public trust within the meaning of the provisions of the Charitable and Religious Trusts Act (XIV of 1920) and therefore he was not accountable to any person. Mahant Ram Saroop Das also applied for and obtained permission under s. 5 of the aforesaid Act to institute a suit for a declaration that the Salouna asthal and the properties thereof did not constitute a public trust. Such a suit was brought in the court of the Subordinate Judge of Monghyr who, however, dismissed the suit. Then, there was an appeal to the High Court of Patna and by the judgment and decree passed in First Appeal No. IO of 1941 dated March 5, 1943, the High Court gave a declaration to the effect that the Salouna asthal and-the properties appertaining thereto did not constitute a public trust within the meaning of the provisions of the Charitable and Religious Trusts Act; (XIV of 1920). Some eight years later, the Bihar .Hindu Religious Trust Act, 1950 (Bihar I of 1951), hereinafter referred to as the Act, was passed by the Bihar Legislature and received the President's assent on February 21, 1951. It came into force on August 15, 1951. The Bihar State Board of H.eligious Trusts (one of the respondents before us) was constituted under this Act to discharge in regard to religious trusts other than Jain religious trusts the functions assigned to it under the several provisions of the Act. On November 14, 1952, this Boa.rd, in exercise of the powers conferred on it under s. 59 of the Act, asked the appellant to furnish to the Board a return of the income and expenditure of the asthal. 74\n\nx959\n\nMahant Ram Saroop Dasji v.\n\nS. P. Sahi\n\nS. K. Das].\n\nI959\n\nMahant Ram Saroop Dasji v.\n\nS,_p, Salli\n\nS. K. Das].\n\nThe appellant replied by a letter dated December 1, 1952, that the Salouna asthal wa~ a private institution to which the Act did not apply, and also drew the attention of the Board to the judgment and decree of the High Court in First Appeal No. lO of 1941.\n\nThe Board, however, gave a reply to the effect that it was not bound by the declaration made by the High Court and asked the appellant to obtain a declaration in respect of his claim under the provisions of the Act or to snbmit a return. Thereafter, on January 22, 1954, the appellant made his application under Art. 226 of the Constitution in which he averred\n\n(a) that the Salouna asthal was not a religious trust within the meaning of the Act ; (b) that the properties appertaining thereto did not constitute a religious trust and the appellant was not a trustee within the meaning of the Act; (c) that the Act did not apply to private trusts; and (d) that the demand made by the respondent Board amounted to an interference with the appellant's fundamental right to hold the asthal properties. The appellant accordingly prayed. for the issue of a writ quashing the order of the respondent Board requiring the appellant to submit a return of income and expenditure and also for an order directing the respondent Board and its officers to refrain from interfering with the appellant in his right of management of the Salouna asthal and the properties appertaining thereto.\n\nThe High Court of Patna by its judgment complained against dismissed the petition on the main ground that the language of s. 2(1) of the Act, which defined a 'religious trust ' for the purposes of the Act, was wide enough to cover within its ambit both priva:te and public trusts recognised by Hindu law to be religious, pious or charitable and that the Salouna asthal did not come within any of the two exceptions recognised by the section, namely, (1) a trust created according to Sikh religion or purely for the benefit of the Sikh community; and (2) a private endowment created for the worship of a family idol in which the public are not interested. 'fhe High Court also held that the materials on the record were not sufficieµt to decide\n\nthe question whether the Salouna asthal and the properties thereof constituted a religious trust of a public character; but proceeding on the footing that the Act applied to private trusts, it expressed the view that the restrictions imposed on the trustee by the several provisions of the Act were not violative of the fundamental right .guaranteed under Art. 19(l)(f) of the Constitution, inasmuch as there was no legal reason why the State should not exercise superintendence and control over the administration of private trusts as in the case of public trusts. In a judgment dated October 5, 1953, dealing with the same question in some earlier cases, the High Court had, however, expressed a somewhat different view. It had then referred to the principle that when a legislature with limited power makes use of a word of wide and general import, the presumption must be that it is using the word with reference to what it is competent to legislate, and adopting that principle it said that s. 2(1) of the Act should be read in a restricted sense so as to include only Hindu religious or charitable trusts of a public character and the provisions of the Act would accordingly apply to such trusts only.\n\nThe principal point urged before us on behalf of the appellant is one of construction-do the provisions of the Act apply to private religious trusts? The contention of the appellant is that they do not. It is necessary to refer at this stage to some of the relevant provisions of the Act. In connected Ci vii Appeals Nos. 225, 226, 228, 229 and 248 of 1955 (1) in which also we are delivering judgment today, we have referred to the provisions of the Act in somewhat greater detail. In this appeal we shall refer to such provisions only as have a bearing on the principal point.\n\nWe start with the definition clause in s. 2 (1). It says-\n\n\"' religious trust ' means any express or constructive trust created or existing for any purpose recognised by Hindu Law to be religious, pious or chl:!>ritable, but shall not include a trust created according to the Sikh religion or purely for the benefit of the Sikh\n\n(1) Mahant Moti Das v. S.P. Sahi, seep. 563 ante.\n\nMahant Ram Saroop Dasji v.\n\nS. P. Sahi\n\nS. K. Das].\n\nI959\n\n111 ahant Ratn Saroop Dasji\n\nS. P. Saiii\n\nS. [(. Das ].\n\ncommunity and a private endowment created for the worship of a family idol in which the public . are not interested ; \".\n\nThe expression ' trust property ' in s. 2 (p) means tho property appertaining to a religious trust and the expression ' trustee ' in s. 2 (n) is defined in the follow - ing terms-\n\n\"' trustee' means any person, by whatever designation known, appointed to administer a religious trust either verbally or by or under any deed or instrument or in accordance with the usage of such trust or by the District Judge or any other competent authority, and includes any person appointed by a trustee to perform the duties of a trustee and any member of a Committee or any other person for the time being managing or administering any trust property as such; \".\n\nThe next important section for our purpose is s. 4 as amended by Bihar Act, XVI of 1954, which gives effect to certain amendments and repeals. Sub.section (5) of s. 4 is in these terms-\n\n\" The Religious Endowments Act, 1863 (XX of 1863), and section 92 of the Code of Civil Procedure, 1908 (V of 1908), shall not apply to any religious trust in this State, as defined in this Act.\" -Chapter V of the Act contains a series of sections which delimit the powers and duties of the State Board of Religious Trusts. Section 28, the opening section of the chapter, states the general powers and duties of the Board. Section 29(1) has a bearing on the question at issue before us. It states inter alia that where the supervision of a religious trust is vested in any committee or association appointed by the founder or by a competent court or authority, such committee or association shall continue to function under the general superintendence and control of the Board unless superseded by the Board under sub-s. (2) of the section. If an order of supersession is passed, the committee er association or any other person interested in the religious trust may within 30 days of the order of the Board under sub-s. (2) make an application to the District Judge for varying, modifying or setting aside\n\nthe order of supersession. Section 30, so far as it is relevant for our purpose, states-\n\n\" When any object of a religious trust has ceased to exist or has, in the opinion of the Board, become impossible of achievement, the Board may, of its own\n\nmotion or on the application of any Hindu, after issuing notice in the prescribed manner, to the trustee of such trust and to such other person as may appear to the Board to be interested therein and after making such inquiry as it thinks fit, determine the object (which shall; be similar or as nearly similar as practicable to the object which has ceased to exist or become impossible of achievement) to which the funds, property or income of the trust or so much of such fund, property or income as was previously expended on or applied to the object which has ceased to exist or become impossible of achievement, shall be applied.\" Section 32 defines the power of the Board to settle schemes for proper administration of religious trusts.\n\nIt states:\n\n, \"32(1). The Board may, of its own motion or on application made to it in this behalf by two or more persons interested in any trust,-\n\n(a) settle a scheme for such religious trust after making such inquiry as it thinks fit and giving notice to the trustee of such trust and to such other person as may appear to the Board to be interested therein;\n\n(b) in like manner and subject to the like conditions, modify any scheme settJed under this section or under any other law or substitute another scheme in its stead: Provided that any scheme so settled, modified or substituted shall be in accordance with the law governing the trust and shall not be contrary to the wishes of the founder so far as such wishes can be ascertained.\n\n(2) A scheme settled, modified or substituted instead of another scheme under this section shall, unless otherwise ordered by the District Judge on an application, if any, made under sub-section (3) come into force on a day to be appointed by the Board in this behalf and shall be published in the official gazette.\n\nr959\n\nl\\'1ahant Rani Saroop Dasji v.\n\nS. P. Saki\n\nS. K. Das].\n\nI959\n\nJl1 ah ant llam\n\nSaoop DasJi\n\nS. P. Sahi\n\nS, J{. Das].\n\n(3) The trustee of, or any other person interested in, such trust, may within three months from the date of the publication in the official gazette of the scheme so settled, modified or substituted instead of another scheme, as the case may be, make an application to the District Judge for varying, modifying or setting aside the scheme; but, subject to the result of such application, the order of the Board under sub.sections (ll and (2) shall be final and binding upon the trustee of the religious trust and upon every other person interested in such religious trust.\n\n(4) An order passed by the District Judge on any application made under sub-section (3) shall be final.\" It may be here stated that the expression \"person interested in religious trust \" is defined in s. 2(g). The definition is in these terms-\n\n\"\" person interested in a religious trust\" means any person who is entitled to receive any pecuniary or other benefit from a religious trust and includes,-\n\n(i) any_ person who has a right to worship or to perform any rite, or to attend at the performance of any worship or rite, in any religious institution connected with such trust or to participate in any religiG>us or charitable ministration under such trust;\n\n(ii) the founder and any descendant of the founder ; and\n\n (iii) the trustee;''.\n\nThe only other section which need be quoted in full is s. 48. of the Act which is in these terms :-•\n\n\"48(1). The Board, or with the previous sanction of the Board, any person interested in a religious trust may make an application to the District Judge for an order- ( a) removing the trustee of such religious trust, if such trustee-\n\n(i) acts in a manner prejudicial to the interest of the 'said trust ; or\n\n(ii) defaults on three or more occasions in the payment of any amount payable under any law for the time being in force in respect of the property or income of the said trust or any other statutory charge on such property or income; or\n\n(iii) defaults on three or more occas10ns in the payment of any sum payable to any beneficiary under the said trust, or in discharging any other duty imposed upon him under it; or\n\n(iv) is guilty of a breach of trust.\n\n(b) appointing a new trustee;\n\n(c) vesting any property in a trustee;\n\n(d) directing accounts and inquiries; or\n\n(e) granting such further or other relief as the nature of the case may require.\n\n(2) The order of the District Judge under subsection (1) shall be final\".\n\nNow, the argument on behalf of the appellant is that on a true and proper construction of the aforesaid provisions of the Act, considered in the background of previous legislative history with regard to religious, charitable or pious trusts in India, the definition clause in s. 2 (l) of the Act is confind to religious, pious or charitable trusts of a public nature recognised as such by Hindu law. In order to appreciate this argument it is necessary to state first the distinction in Hindu law between religious endowments which are public and those which are private. To put it briefly, the essential distinction is that in a public trust the beneficial interest is vested in an uncertain and fluctuating body of persons, either the public a.t large or some considerable portion of it answering a particular description; in a private trust the beneficiaries are definite and ascertained individuals or who within a definite time can be definitely ascertained. The fact that the uncertain and fluctuatiqg body of persons is a section of the public following a particular religious faith or is only a SeJJt of persons of a certain religious persuasion would not make any difference in the matter and would not make the trust a private trust (see the observations in Nabi Shirazi v. Province of Bengal) (1).\n\nThe distinction in this respect between English law and Hindu law has been thus stated by Dr. Mukherjea in his Tagore Law Lectures on the Hip.du Law of Religious and Charitable Trusts (1952 Edition, pp. 392-396) : \"In English law charitable trusts are synonymous\n\n(1) (1942) I.L.R. I Cal. 2II 1 228.\n\nI959\n\nMahant Ram Saroop Dasji v.\n\nS. P. Salli\n\nS. K. Das].\n\n'959\n\nMaltant Ram Saroop Dasji v.\n\nS. P. Sahi\n\nS, K, Das].\n\nwith public trusts and what is called religious trust is dnly a form of charitable trust. The beneficiaries in a charitable trust being the general public or a section of the same and not a determinate body of individuals, the remedies for enforcement of charitable trust are somewhat different from those which can be availed of by beneficiaries in a private trust. In English law the Crown as parens patriae is the constitutional protector of ali property subject to charitable trusts, such trusts being essentially matters of public concern .......\n\nOne fundamental distinction _ between English and Indian law lies in the fact that there can be religious trust of a private character under Hindu law which is not possible in English law \".\n\nOn behalf of the appellant it has been pointed out that so far as public religious and charitable trusts are concerned, there are a number of legislative enactments, both general and local, which aim at controlling the management and administration of such trusts and provide for remedies in cases of mal-administration. So far as private religious trusts are concerned, there are no specific statutory enactments and such trusts are regulated by the general law of the land.\n\nThe British Government, when it was first established in India, following the tradition of the former rulers, asserted by virtue of its sovereign authority_ the right to visit public religious and charitable endowments and to prevent and redress abuses in their management. A Regulation for that purpose was passed in Bengal in 1810 (Regulation XIX of 1810) and one for Madras in 1817 (Regulation YII of 1817). In Bombay also there was a Regulation (XVII of 1827) which related to endowments of the , same chara(lter. In 1863 was passed the Religious Endowments Act (XX of 1863), which repealed the Bengal and Madras Regulations in so far as they related to purely religious institutions and their control was transferred from the Board of Revenue to non-official committees constituted under the Act of 1863. It is worthy of note, how- .ever, that the Act of 1863 also applied to public religious endowments only. In course of time it was found that the Act of 1863 did not provide adequate protec.\n\ntion to public religious trust against abuses which led to their control by the State and the remedies provided by that Act did not go far enough.\n\nThen came the Charitable Endowments Act, 1890 (VI of 1890), and the Charitable and Religious Trusts Act, 1920 (XVI of 1920), both of which related to public trusts; the former related exclusively to public trusts for charitable purposes unconnected with religious teaching or worship while the l.atter related to trusts created for public purposes of a charitable or religious nature. In the Civil Procedure Code of 1877 a specific section was introduced, viz., s. 539, under which a suit could be instituted in case of any alleged breach of any express or constructive trust created for public religious or charitable purposes. This section was later amended, and in this amended form it became s. 92 of the present Civil Procedure Code, the first condition necessary to bring a case within its purview being the existence of a trust, whether express or constructive for public purposes of a religious or charitable nature. It is clear beyond doubt that a private trust is outside the operation of s. 92, Civil Procedure Code. Of the local Acts, the earliest was that of the Bombay Presidency of the year 1863. In more recent years were passed the Orissa Hindu Religious Endowments Act, 1939, the Bombay Public Trusts Act, 1950, and the Madras Hindu Religious and Charitable Endowments Act, 1951, all of which relate to public religious institutions and endowments. No local Act has been brought to our notice which clearly or unmistakenly sought to include within its ambit private religious trusts.\n\nOn behalf. of the appellant it has been submitted that though the definition clause in s. 2 (1) of the Act is expressed in wide language, other provisions of the Act make it clear that it is confined to public trusts only. Section 2 (1) of the Act, we have pointed out, recognises two exceptions: first, a trust created according to the Sikh religion or purely for the benefit of the Sikh community; and, second, a private endowment created for the worship of a family idol, in which the public are not interestd. It is not disputed\n\nI959\n\nMahant Ram Saroop Dasji v.\n\nS. P. Saki\n\nS. K. Das].\n\nI959\n\nMahant Ram Saroop Dasji v.\n\nS. P. Sdli\n\nS. K. Das j.\n\nthat the second exception is an instance of a private trust, in which the p_ublic are not interested.\n\nThe High Court has taken the view that inasmuch as the definition clause mentions by way of an exception only one instance of a pri:vate endowment, all private endowments created otherwise than for the worship of a family idol must be included within the definition of the maxim of expressio unius exclusio alterius.\n\nWe do not think that this view is quite correct. First of all, let us examine some other provisions of the Act which specifically refer to the definition clause and see what the legislature has itself taken it to mean. Take, for example, s. 4 of the Act, as amended by Bihar Act, XVI of 1954. This section amends and repeals certain earlier Acts like the Charitable Endowments Act, 1890, and the Ch!'-ritable and Religious Trusts Act, 1920; both of which we have already pointed out related exclusively to public trusts. Sub-s. (5) of s. 4 states tb:at the Religious Endowments Act, 1863, and s. 92 of the Code of Civil Procedure, 1908, shall.not apply to any religious trust in the State, as defined in this Act: 'The Religious Endowments Act, 1863, and s. 92, Civil\n\nProcedure Code,-both apply to public trusts; they have no application to private trusts. If the definition clause was intended to include within its ambit private trusts (other than those created for the worship of a family idol), then it is difficult to understand why sub-s. (5) of s. 4 should be worded as it has been done. That sub-section in effect says that two earlier enactments which apply exclusively to public trusts shall not apply to any trust (we emphasise the word ' any ') as defined in the Act. If private trusts created otherwise than for the worship of a family idol w:ere included in the definition of religious trust, then sub-s. (5) was entirely otiose or redundant so far as those private trusts were concerned for the earlier enactments never applied to them. 1'he obvious indication is that all trusts defined in the Act are public trusts and, therefore, it became necessary to exclude the operation of earlier enactments which but for the exclusion would have applied to such trusts. If the intention ofsub-s. (5fof s. 4 was to exclude some t.rusts\n\nonly out of many included within the definition clause from the operation of the earlier enactments, as is contended for by the learned Advocate.General of Bihar, then the use of the word' any' appears to us to be particularly inapt. Sub-section (5) of s. 4 was amended by Bihar Act XV~ of 1954.\n\nBefore the amendment it read as follows;\n\n\"S. 4(5). The: Religious Endowments Act, 1863, and section 92 of the Code of Civil Procedure, 1908, shall not apply to any Hindu Religious Trust in the State of Bihar.\" Prior to the amendment, sub-s. (5) made no reference to the definition clause; it merely said that two of the earlier enactments shall not apply to an:l' Hindu Reli: gious Trust in the State of Bihar. The amended subsection, however, specifically refers to the definition clause and states that two of the earlier enactments, which apply only to public trusts, shall not apply to any trusts, as defined in the Act. In our opinion, by sub-s. (5) of s. 4 the Legislature itself has spoken and indicated the true scope and effect of the definition clause.\n\nSecondly, it may be asked why the legislature having before it the earlier enactments which applied to public trusts only, failed to use the word 'public' before the word ' purpose ' in. the definition clause ?\n\nThis is a pertinent question which must be faced. The answer, we think, is this. Charitable trusts are public trusts, both under the English and Indian law; in England a religious trust being a form of charitable trust is also public, but in India, according to Hindu law, religious trnst may be public or private. But the most usual and commonest form of a private religious trust is one created 'for the worship of a family idol in which the public are not interested. Any other private religious trust must be very: rare and difficult to think of.\n\nDealing with the distinction between public and private endowments in Hindu law, Sir Dinshah Mulla has said at p. 529 of his Principles of Hindu Law (llth edition)-\n\n\" Religious endowments are either public or private. In a public endowment the _dedication is for\n\nr959\n\nMahanl Ram Saroop Dasji\n\nS. P. Saki\n\nS. !(. Das J.\n\nI959\n\nMahant Rain Saroop Dasji\n\nS. P. Sahi\n\nS. J(. Das ].\n\nthe use or benefit of the public. When property is set apart for the worship of a family god in which the public are not interested, the endowment is a private one\".\n\nObviously enough, the definition clause merely quotes the typical example of a private endowment mentioned above. It is also significant that the exclusion of an endowment created for the worship of a family idol is based on the adjectival clause which follows it, viz., \"in which the public are not interested \". In other words, the exclusion is based on the essential distinction between a public and private trust in Hindu law.\n\nIf the test is that the public or any section thereof are not interested in the trust, such a test is characteristic of all private trusts in Hindu law. It also shows that there may be a trust created for the worship of a family idol in which the public may be interested.\n\nThose are cases of trust which began as a private trust but which eventually came to he thrown open to the public. This also indicates that the definition was intended to cover only public trusts.\n\nWe now turn to some of the other provisions of the Act, which we have earlier quoted~ Section 29(1) which talks of supervision of a religious trust being vested in any committee or association appointed by the founder or by a co)llpetent court or authority is ordinarily appropriate in the case of a public trust only.\n\nSection 30( 1) which em bodies the doctrine of cypres permits any Hindu to make an application for invoking the power of the Board to determine the object to which funds, property and income of a religious trust shall be applied where the original object of the trust has ceased to exist or has become impossible of achievement. This section is also inappropriate in the case of a private trust, the obvious reason being that any and every Hindu cannot be interested in a private trust so as to give him a locus standi to make the application. Further, it is difficult to visualise that a Hindu private debutter will fail, for a deity is immortal. Even if the idol gets broken or is lost or stolen, another image may be consecrated and it cannot be said that the original object has ceased to exist. Section 32 is an important section of the Act and confers power on the Board to settle schemes for proper administration of religious trusts. Now, the section says that the Board may exercise the power of its own motion or on application made to it in this behalf by two or more persons interested in any trust. The language of the section follpws closely the language of s. 92, Civil Procedure Code, so far as the phrase \"two or more persons iµterested in any trust\" is concerned.\n\nIt is difficult to understand why in the case of a private trust, it should be necessary that two or more persons interested in the trust must make the application to settle a scheme for such a trust. In a private or family debutter the beneficiaries are a limited and defined class of persons, as for example, the members of a family. If the trustee or shebait is guilty of mismanagement, waste, wrongful alienation of debutter property or other neglect of duties, a suit can certainly be instituted for remedying these abuses of trust.\n\nUnder the general law of the land the founder of the endowment, or any of his heirs is competent to institute a suit for proper administration of the debutter, for removal of the old trustee and for appointment of a new one. It is not necessary in such a case that two or more persons interested in the trust must join in order to institute the suit. The condition of \" two or more persons\" is appropriate only to a public trust, the reason being that a public trust is a matter of public concern. Section 48 of the Act is also analogous to s. 92 of the Code of Civil Procedure and one of the reasons for excluding the operation of s. 92 of the Code of Civil Procedure from trusts as defined by the Act is the existence of provisions in the Act which 11re analogous to s. 92 of the Code of Civil Procedure. This section is also more appropriate to public trusts than to private trusts. In fact, the Act contains provisions, as the preamble states, for the better administration of Hindu religious trusts in the State of Bihar and for the protection and preservation of properties appertaining to such .trusts and for that purpose certain earlier enactments like the Religious Endowments Act, 1863, the Charitable Endowments Act, 1890,\n\nMahant Ram Saroop Dasji v.\n\nS. P. Sahi\n\nS. R. Das ].\n\n' 1959 .\n\nM aluuiJ Ram \"Saroop Dasji v.\n\nS. P. Sahi\n\nS, K. Das ].\n\nthe Charitable and Religious Trusts Act, 1920 and the Civil Procedure Code, l908, have eitlier been amended or excluded from operation. All those earlier enactments related only to public trusts and if the intention was that the Act would apply to private trusts as well, one would expect. that that intention would be ma.de clear by the use o! unambiguous language. We find, on the contrary, that though the definition clause in s. 2(1) is expresed in somewhat wide language~ sub-s. (5) of s. 4 makes clear what the true scope and effect of the definition clause is . .For the reasons given above, we hold that the definition clause does not include within its ambit private trusts and the Act and its provisions do not apply to such trusts.\n\nLearned counsel for the 11 ppella.nt has in the alterna.ti ve argued before us that if the Act applis to private trusts, several of its provisions will be violative of the fundamental right guaranteed to citizens under Art. 19(l)(f) of the Constitution inasmuch as the restrictions imposed thereby on trustees of private trusts, in which the public are not interested, cannot be justified as reasonable restrictions in the_interests of the general public within the meaning of cl. (5) of Art. 19. The High Court negatived this argument by adopting the rule of English law that in the case of a charitable corporation where the founder is a P.rivate person, he and his heirs become visitors in law aud where such heirs are extinct or incompetent, their powers devolve on the Cr9wn or the State therefore, it is in the interests of the general pubhc that the State should exercise superintendence and control over the administration of private trusts as in the case of public trusts. This view of the High Cour.t has been seriously contested before us, and learned counsel for the appellant has submitted that there is no warrant for the adoption of'the rule of English law.in view of the fundameu tu.I distinction bet ween English and Hindu law as to private riiligious trus£s.\n\nHe has also drawn our attention to the following. observations of Dr. \"Mukherjea (Hindu Law of Religious and Charitable Trust, 1952 Edition, p. 393) on this point:\n\n(2) S.C.R.\n\nSUPREME cotrR1r REPORTS 599\n\n\"In English law there is a 'visitatorial' power attached to all eleemosynary corporations. A visitor has the right to settle disputes between members of the corporation, to irnrpect and regulate their actions and generally to correct all , abuses and irregularities in the administration of charity. The law allows to the founder of an .eleemosynary institution full powers to make regulations for its creation and such powers inclnde the right of nominating visitors. Under the law of England as it stood before 1926, if a private person was the founder of a charitable corporation, then he and his heirs became automatically the visitors. The des9ent, of the rights of a visitor to heirs has now been abolished by the Administration of Estates Act, -1925, and it is not clear as to who would be visitor in default of appointment by the founder.\n\nMost probably such rights would devolve upon the Crown as they did when the founder's heirs became extinct or could not be found or the heir was a lunatic.\"\n\nHe has further .submitted tlrat whatever be the position in English law, the guarantee of a fundamental right must depend on the terms of Art. 19 of the Constitution and such guarantee cannot be whittled down by importing artficial rules of English law.\n\nIn view of oul'>fi_nding on the question of construction of the definition clause read with s. 4 (5) and other provisions of the Act, we consider it unnecessary to pronounce finally on the c, on ten tions referred to . in the preceaing paragraph, except merely to state that a serious question of the constitutional validity of several provisions of the Act would have undoubtedly arisen if the Act were held to apply to private trusts as well.\n\nOn our findingthat the Act does not apply to private trusts, the appellant is entitled to succeed in his appeal. '.!; he High Court has said that the materials on the record of'the case are not sufficie_nt to decide the question whether the Balouna asthal and the properties of the mahant constitute a trust of a public character., This question, however, was the subject of a contested litigation and. the appellant had obtained a declaration in First Appeal No: ~O Qf 1941 that the Salouna asthal\n\nMahant Ran1 Saroop Dasji v.\n\nS. P. Sahi\n\nS. K. Das ].\n\nI •\n\n'959\n\nMaliant Ram Sa, oop Dasji\n\nS. P. Saki\n\nS. K. Das ].\n\nand the properties appertaining thereto did not constitute. a public trust. The respondents were ncit parties to that litigation and may not be bound by that judgment; but on behalf of the respondents no affidavit was filed nor were any materials placed to show thatthe .. position is different from what-was declared by the High Court. The High Court commented on the fact that the appellant did not produce before the court a.ll the documents in his possession.\n\nA petition bas been filed before us for taking in ev; idence the documents which were considered by the High Qourt in First Appeal No. 10 of 1941. We do not think that in the circumstances of this case it is ne?essary to consider that evidence afresh. As long as the declaration made by the High Court .in First Appeal No. 10of1941 stands and in the absenc~ of some evidence to the contrary, the appellant is entitled to say that the Salouna asthal and the properties appertaining thereto do not constitute a, public trust and the Act and its. provisions do not apply to it.\n\nOur attention has been drawn to s. 43 of the Act as amended by Act XVII of 1956. That section says inter alia that all disputes as to whether any immovable property is or is not a trust property shall be enquired into, either on its own motion or on an application, l;>y the authority appointed in this behalf by the State Government by notification in the official gazette. Without expressing any opinion as to the constitutional validity of s. 43 of the Act we merely point out that no decision has been given under s. 43 of the Act (as it stood prior or after the amendment) against the appellant in respect of the-Salouna asthal and the properties a ppertaining thereto. It would be open to the respondents to take such steps as may be available to them in law to get it determined by a competent authority that the trust in question is a public trust,\n\nWe wou Id accordingly allow this appeal, set aside the judgme!lt and order of the High Court dated September 13, 1954, and direct the issue of an appropriate writ quashing the order of the respondent Board calling upon the appellant to file a statement of income and expenditure with regard to the properties of the Salouna\n\nasthal and also prohibiting the respondents from interfering . with the rights of the appellant in the management of the Salouna asthal and the properties appertaining thereto, unless and until the respondents have obt.ained the necessary determination that the Salouna asthal is a public trust. The appellant will be entitled to his costs throughout.\n\nAppeal allowed.\n\nTHE STATE OF BIHAR & OTHERS. v.\n\nSM. CHARUSILA DASI\n\n(S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR K. N. WANCHOO and M. HIDAYATULLAH, JJ.)\n\nHindu Religious Trusts-Property relating to Trust situate outside State of Bihar-Applicability of Bihar Hindu Religious Trusts Act to such property-,-Legislative competency-Contitutional validity of Enactment - Applicability to private trusts-Bihar Hindu Religious Trusts Act, r950 (Bihar I of r95r), ss. r(2), 2(r), 3 -Constitution of India, Arts. 245, 246, Sch. VII, List III, Item 28.\n\nDeed-Construction-Hindu Religious Trust-Private or Publie.\n\nA deed of trust was executed by the respondent on March II, 1938, when she was residing at D in the State of Bihar, in respect of the propertitl's described in the Schedules referred to in the deed, some of which were situate outside the State of Bihar. In the trust deed she described herself as the settlor, and it was recited therein that the settlor had installed a deity named Iswar Srigopal in her house and had since been regularly worshipping.and performing the puja of the said deity; and that she had been erecting a Nat Mandir to be named in mem<fry of her deceased son. The recitals also showed that the settlor had provided for the construction of two temples (Jugal Mandir), in one of which was to be installed the deity Srigopal and other deities, and in the other the marble image of her preceptor; and that the temple committee shall consist of the Jugal Mandir shebait for the time being and six pious Hindus who must be residents of D and of whom at least four shall be Benga!is. One\n\nMahant Ram Saroop Dasji v.\n\nS. P. Sahi\n\nS. I(, Das j.\n\nI959\n\nApril r5.", "total_entities": 97, "entities": [{"text": "583\n\nMAHANT RAM SAROOP DASJI", "label": "PETITIONER", "start_char": 33, "end_char": 61, "source": "metadata", "metadata": {"canonical_name": "MAHANT RAM SAROOP DASJI", "offset_not_found": false}}, {"text": "P. SARI, SPECIAL OFFICER-IN-CHARGE\n\nOF THE HINDU RELIGIOUS TRUSTS\n\nAND OTHERS", "label": "RESPONDENT", "start_char": 66, "end_char": 143, "source": "metadata", "metadata": {"canonical_name": "S. P. SARI, SPECIAL OFFICER-IN-CHARGE OF THE HINDU RELIGIOUS TRUSTS AND OTHERS", "offset_not_found": false}}, {"text": "S. R. DAS", "label": "JUDGE", "start_char": 146, "end_char": 155, "source": "metadata", "metadata": {"canonical_name": "SUDHI RANJAN DAS*", "offset_not_found": false}}, {"text": "P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 175, "end_char": 195, "source": "metadata", "metadata": {"canonical_name": "P.B. GAJENDRAGADKAR", "offset_not_found": false}}, {"text": "M. HIDAYATULLAH, JJ.", "label": "JUDGE", "start_char": 216, "end_char": 236, "source": "metadata", "metadata": {"canonical_name": "M. HIDAYATULLAH", "offset_not_found": false}}, {"text": "Hindu Religious Trusts-Private Trusts-Applicability of Bihar Hindu Religious Trusts Act", "label": "STATUTE", "start_char": 239, "end_char": 326, "source": "regex", "metadata": {}}, {"text": "Scope and Effect-Bihar Hindu Religious Trnsts Act", "label": "STATUTE", "start_char": 422, "end_char": 471, "source": "regex", "metadata": {}}, {"text": "SS. 2(I), 4(5)", "label": "PROVISION", "start_char": 497, "end_char": 511, "source": "regex", "metadata": {"linked_statute_text": "Scope and Effect-Bihar Hindu Religious Trnsts Act", "statute": "Scope and Effect-Bihar Hindu Religious Trnsts Act"}}, {"text": "Art. 226", "label": "PROVISION", "start_char": 622, "end_char": 630, "source": "regex", "metadata": {"linked_statute_text": "Scope and Effect-Bihar Hindu Religious Trnsts Act", "statute": "Scope and Effect-Bihar Hindu Religious Trnsts Act"}}, {"text": "s. 59", "label": "PROVISION", "start_char": 833, "end_char": 838, "source": "regex", "metadata": {"linked_statute_text": "Scope and Effect-Bihar Hindu Religious Trnsts Act", "statute": "Scope and Effect-Bihar Hindu Religious Trnsts Act"}}, {"text": "Bihar Hindu Religious Trusts Act, 1950", "label": "STATUTE", "start_char": 846, "end_char": 884, "source": "regex", "metadata": {}}, {"text": "s. 2(1)", "label": "PROVISION", "start_char": 1121, "end_char": 1128, "source": "regex", "metadata": {"linked_statute_text": "the Bihar Hindu Religious Trusts Act, 1950", "statute": "the Bihar Hindu Religious Trusts Act, 1950"}}, {"text": "s. 2(1)", "label": "PROVISION", "start_char": 1601, "end_char": 1608, "source": "regex", "metadata": {"linked_statute_text": "the Bihar Hindu Religious Trusts Act, 1950", "statute": "the Bihar Hindu Religious Trusts Act, 1950"}}, {"text": "Art. 226", "label": "PROVISION", "start_char": 3267, "end_char": 3275, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "Charitable and Religious Trusts Act", "label": "STATUTE", "start_char": 4668, "end_char": 4703, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Charitable and Religious Trusts Act", "label": "STATUTE", "start_char": 5012, "end_char": 5047, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 5", "label": "PROVISION", "start_char": 5183, "end_char": 5187, "source": "regex", "metadata": {"statute": null}}, {"text": "Charitable and Religious Trusts Act", "label": "STATUTE", "start_char": 5773, "end_char": 5808, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Hindu Religious Trust Act, 1950", "label": "STATUTE", "start_char": 5860, "end_char": 5891, "source": "regex", "metadata": {}}, {"text": "s. 59", "label": "PROVISION", "start_char": 6418, "end_char": 6423, "source": "regex", "metadata": {"linked_statute_text": "Act to discharge in regard to religious trusts other than Jain religious trusts the functions assigned to it under the several provisions of the Act", "statute": "Act to discharge in regard to religious trusts other than Jain religious trusts the functions assigned to it under the several provisions of the Act"}}, {"text": "Art. 226", "label": "PROVISION", "start_char": 7228, "end_char": 7236, "source": "regex", "metadata": {"linked_statute_text": "Act to discharge in regard to religious trusts other than Jain religious trusts the functions assigned to it under the several provisions of the Act", "statute": "Act to discharge in regard to religious trusts other than Jain religious trusts the functions assigned to it under the several provisions of the Act"}}, {"text": "s. 2(1)", "label": "PROVISION", "start_char": 8214, "end_char": 8221, "source": "regex", "metadata": {"statute": null}}, {"text": "Art. 19(l)(f)", "label": "PROVISION", "start_char": 9193, "end_char": 9206, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "s. 2(1)", "label": "PROVISION", "start_char": 9833, "end_char": 9840, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 2", "label": "PROVISION", "start_char": 10665, "end_char": 10669, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 2", "label": "PROVISION", "start_char": 11281, "end_char": 11285, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 2", "label": "PROVISION", "start_char": 11377, "end_char": 11381, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4", "label": "PROVISION", "start_char": 11942, "end_char": 11946, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4", "label": "PROVISION", "start_char": 12058, "end_char": 12062, "source": "regex", "metadata": {"statute": null}}, {"text": "Religious Endowments Act, 1863", "label": "STATUTE", "start_char": 12089, "end_char": 12119, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "section 92", "label": "PROVISION", "start_char": 12138, "end_char": 12148, "source": "regex", "metadata": {"linked_statute_text": "The Religious Endowments Act, 1863", "statute": "The Religious Endowments Act, 1863"}}, {"text": "Code of Civil Procedure, 1908", "label": "STATUTE", "start_char": 12156, "end_char": 12185, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Chapter V of the Act", "label": "STATUTE", "start_char": 12279, "end_char": 12299, "source": "regex", "metadata": {}}, {"text": "Section 28", "label": "PROVISION", "start_char": 12406, "end_char": 12416, "source": "regex", "metadata": {"linked_statute_text": "Chapter V of the Act", "statute": "Chapter V of the Act"}}, {"text": "Section 29(1)", "label": "PROVISION", "start_char": 12505, "end_char": 12518, "source": "regex", "metadata": {"linked_statute_text": "Chapter V of the Act", "statute": "Chapter V of the Act"}}, {"text": "Section 30", "label": "PROVISION", "start_char": 13217, "end_char": 13227, "source": "regex", "metadata": {"linked_statute_text": "Chapter V of the Act", "statute": "Chapter V of the Act"}}, {"text": "Section 32", "label": "PROVISION", "start_char": 14073, "end_char": 14083, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 2(g)", "label": "PROVISION", "start_char": 16141, "end_char": 16148, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 48", "label": "PROVISION", "start_char": 16739, "end_char": 16744, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 2", "label": "PROVISION", "start_char": 18097, "end_char": 18101, "source": "regex", "metadata": {"statute": null}}, {"text": "Religious Endowments Act", "label": "STATUTE", "start_char": 21315, "end_char": 21339, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Then came the Charitable Endowments Act, 1890", "label": "STATUTE", "start_char": 21923, "end_char": 21968, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Charitable and Religious Trusts Act, 1920", "label": "STATUTE", "start_char": 21991, "end_char": 22032, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 539", "label": "PROVISION", "start_char": 22385, "end_char": 22391, "source": "regex", "metadata": {"linked_statute_text": "the Charitable and Religious Trusts Act, 1920", "statute": "the Charitable and Religious Trusts Act, 1920"}}, {"text": "s. 92", "label": "PROVISION", "start_char": 22619, "end_char": 22624, "source": "regex", "metadata": {"linked_statute_text": "the Charitable and Religious Trusts Act, 1920", "statute": "the Charitable and Religious Trusts Act, 1920"}}, {"text": "Civil Procedure Code", "label": "STATUTE", "start_char": 22640, "end_char": 22660, "source": "regex", "metadata": {}}, {"text": "s. 92", "label": "PROVISION", "start_char": 22922, "end_char": 22927, "source": "regex", "metadata": {"linked_statute_text": "Civil Procedure Code", "statute": "Civil Procedure Code"}}, {"text": "Civil Procedure Code", "label": "STATUTE", "start_char": 22929, "end_char": 22949, "source": "regex", "metadata": {}}, {"text": "more recent years were passed the Orissa Hindu Religious Endowments Act, 1939", "label": "STATUTE", "start_char": 23038, "end_char": 23115, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Bombay Public Trusts Act, 1950", "label": "STATUTE", "start_char": 23121, "end_char": 23151, "source": "regex", "metadata": {}}, {"text": "Madras Hindu Religious and Charitable Endowments Act, 1951", "label": "STATUTE", "start_char": 23161, "end_char": 23219, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 2", "label": "PROVISION", "start_char": 23513, "end_char": 23517, "source": "regex", "metadata": {"linked_statute_text": "the Madras Hindu Religious and Charitable Endowments Act, 1951", "statute": "the Madras Hindu Religious and Charitable Endowments Act, 1951"}}, {"text": "Section 2", "label": "PROVISION", "start_char": 23649, "end_char": 23658, "source": "regex", "metadata": {"linked_statute_text": "the Madras Hindu Religious and Charitable Endowments Act, 1951", "statute": "the Madras Hindu Religious and Charitable Endowments Act, 1951"}}, {"text": "s. 4", "label": "PROVISION", "start_char": 24738, "end_char": 24742, "source": "regex", "metadata": {"statute": null}}, {"text": "This section amends and repeals certain earlier Acts like the Charitable Endowments Act, 1890", "label": "STATUTE", "start_char": 24793, "end_char": 24886, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Religious Trusts Act, 1920", "label": "STATUTE", "start_char": 24913, "end_char": 24939, "source": "regex", "metadata": {}}, {"text": "s. 4", "label": "PROVISION", "start_char": 25035, "end_char": 25039, "source": "regex", "metadata": {"linked_statute_text": "Religious Trusts Act, 1920", "statute": "Religious Trusts Act, 1920"}}, {"text": "Religious Endowments Act, 1863", "label": "STATUTE", "start_char": 25057, "end_char": 25087, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 92", "label": "PROVISION", "start_char": 25093, "end_char": 25098, "source": "regex", "metadata": {"linked_statute_text": "the Religious Endowments Act, 1863", "statute": "the Religious Endowments Act, 1863"}}, {"text": "Code of Civil Procedure, 1908", "label": "STATUTE", "start_char": 25106, "end_char": 25135, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Religious Endowments Act, 1863", "label": "STATUTE", "start_char": 25219, "end_char": 25249, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 92", "label": "PROVISION", "start_char": 25255, "end_char": 25260, "source": "regex", "metadata": {"linked_statute_text": "The Religious Endowments Act, 1863", "statute": "The Religious Endowments Act, 1863"}}, {"text": "Procedure Code", "label": "STATUTE", "start_char": 25269, "end_char": 25283, "source": "regex", "metadata": {}}, {"text": "s. 4", "label": "PROVISION", "start_char": 25553, "end_char": 25557, "source": "regex", "metadata": {"linked_statute_text": "Civil\n\nProcedure Code", "statute": "Civil\n\nProcedure Code"}}, {"text": "s. 4", "label": "PROVISION", "start_char": 26311, "end_char": 26315, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4", "label": "PROVISION", "start_char": 26598, "end_char": 26602, "source": "regex", "metadata": {"statute": null}}, {"text": "S. 4(5)", "label": "PROVISION", "start_char": 26685, "end_char": 26692, "source": "regex", "metadata": {"statute": null}}, {"text": "Religious Endowments Act, 1863", "label": "STATUTE", "start_char": 26699, "end_char": 26729, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "section 92", "label": "PROVISION", "start_char": 26735, "end_char": 26745, "source": "regex", "metadata": {"linked_statute_text": "Religious Endowments Act, 1863", "statute": "Religious Endowments Act, 1863"}}, {"text": "Code of Civil Procedure, 1908", "label": "STATUTE", "start_char": 26753, "end_char": 26782, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 4", "label": "PROVISION", "start_char": 27301, "end_char": 27305, "source": "regex", "metadata": {"linked_statute_text": "the Code of Civil Procedure, 1908", "statute": "the Code of Civil Procedure, 1908"}}, {"text": "Section 29(1)", "label": "PROVISION", "start_char": 29710, "end_char": 29723, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 30( 1)", "label": "PROVISION", "start_char": 29944, "end_char": 29958, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 32", "label": "PROVISION", "start_char": 30744, "end_char": 30754, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 92", "label": "PROVISION", "start_char": 31116, "end_char": 31121, "source": "regex", "metadata": {"statute": null}}, {"text": "Civil Procedure Code", "label": "STATUTE", "start_char": 31123, "end_char": 31143, "source": "regex", "metadata": {}}, {"text": "Section 48", "label": "PROVISION", "start_char": 32264, "end_char": 32274, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 92", "label": "PROVISION", "start_char": 32307, "end_char": 32312, "source": "regex", "metadata": {"statute": null}}, {"text": "the Code of Civil Procedure", "label": "STATUTE", "start_char": 32316, "end_char": 32343, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 92", "label": "PROVISION", "start_char": 32398, "end_char": 32403, "source": "regex", "metadata": {"statute": null}}, {"text": "the Code of Civil Procedure", "label": "STATUTE", "start_char": 32407, "end_char": 32434, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 92", "label": "PROVISION", "start_char": 32535, "end_char": 32540, "source": "regex", "metadata": {"statute": null}}, {"text": "the Code of Civil Procedure", "label": "STATUTE", "start_char": 32544, "end_char": 32571, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Religious Endowments Act, 1863", "label": "STATUTE", "start_char": 32932, "end_char": 32962, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Charitable Endowments Act, 1890", "label": "STATUTE", "start_char": 32968, "end_char": 32999, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Charitable and Religious Trusts Act, 1920", "label": "STATUTE", "start_char": 33127, "end_char": 33168, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 2(1)", "label": "PROVISION", "start_char": 33553, "end_char": 33560, "source": "regex", "metadata": {"linked_statute_text": "the Charitable and Religious Trusts Act, 1920", "statute": "the Charitable and Religious Trusts Act, 1920"}}, {"text": "s. 4", "label": "PROVISION", "start_char": 33614, "end_char": 33618, "source": "regex", "metadata": {"linked_statute_text": "the Charitable and Religious Trusts Act, 1920", "statute": "the Charitable and Religious Trusts Act, 1920"}}, {"text": "Art. 19(l)(f)", "label": "PROVISION", "start_char": 34086, "end_char": 34099, "source": "regex", "metadata": {"linked_statute_text": "the Charitable and Religious Trusts Act, 1920", "statute": "the Charitable and Religious Trusts Act, 1920"}}, {"text": "Art. 19", "label": "PROVISION", "start_char": 34355, "end_char": 34362, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "Art. 19", "label": "PROVISION", "start_char": 36495, "end_char": 36502, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}, {"text": "s. 4", "label": "PROVISION", "start_char": 36704, "end_char": 36708, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43", "label": "PROVISION", "start_char": 38750, "end_char": 38755, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43", "label": "PROVISION", "start_char": 39161, "end_char": 39166, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 43", "label": "PROVISION", "start_char": 39236, "end_char": 39241, "source": "regex", "metadata": {"statute": null}}, {"text": "Constitution of India", "label": "STATUTE", "start_char": 40736, "end_char": 40757, "source": "regex", "metadata": {}}, {"text": "Arts. 245, 246", "label": "PROVISION", "start_char": 40759, "end_char": 40773, "source": "regex", "metadata": {"linked_statute_text": "Constitution of India", "statute": "Constitution of India"}}]}
{"document_id": "1959_2_601_624_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPORTS 601\n\nasthal and also prohibiting the respondents from interfering . with the rights of the appellant in the management of the Salouna asthal and the properties appertaining thereto, unless and until the respondents have obt.ained the necessary determination that the Salouna asthal is a public trust. The appellant will be entitled to his costs throughout.\n\nAppeal allowed.\n\nTHE STATE OF BIHAR & OTHERS. v.\n\nSM. CHARUSILA DASI\n\n(S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR K. N. WANCHOO and M. HIDAYATULLAH, JJ.)\n\nHindu Religious Trusts-Property relating to Trust situate outside State of Bihar-Applicability of Bihar Hindu Religious Trusts Act to such property-,-Legislative competency-Contitutional validity of Enactment - Applicability to private trusts-Bihar Hindu Religious Trusts Act, r950 (Bihar I of r95r), ss. r(2), 2(r), 3 -Constitution of India, Arts. 245, 246, Sch. VII, List III, Item 28.\n\nDeed-Construction-Hindu Religious Trust-Private or Publie.\n\nA deed of trust was executed by the respondent on March II, 1938, when she was residing at D in the State of Bihar, in respect of the propertitl's described in the Schedules referred to in the deed, some of which were situate outside the State of Bihar. In the trust deed she described herself as the settlor, and it was recited therein that the settlor had installed a deity named Iswar Srigopal in her house and had since been regularly worshipping.and performing the puja of the said deity; and that she had been erecting a Nat Mandir to be named in mem<fry of her deceased son. The recitals also showed that the settlor had provided for the construction of two temples (Jugal Mandir), in one of which was to be installed the deity Srigopal and other deities, and in the other the marble image of her preceptor; and that the temple committee shall consist of the Jugal Mandir shebait for the time being and six pious Hindus who must be residents of D and of whom at least four shall be Benga!is. One\n\nMahant Ram Saroop Dasji v.\n\nS. P. Sahi\n\nS. I(, Das j.\n\nI959\n\nApril r5.\n\nr959\n\nState of Bihar\n\nCharusila Dasi\n\nof the clauses of the trust deed recited :-\"The ' pronamis' and perquisites to be offered to the deities and image in the Jugal Mandir shall form part of the Srimati Charusila Trust Estate and neither the shebait nor any one else shall have interest or claim in or over same.\" The provisions of the trust deed in regard to the ceremonials relating to free distribution of food and water and the festivals to be performed for the deity and the image, which were well known festivals in which members of the Hindu Community usually take part, contemplated that they were to be done on a large scale so as to enable a large number of persons to take part in them. There was also a provision in the trust deed for the establishment of a hospital for Hindu females and a charitable dispensary for patients of any religion or creed.\n\nAfter the coming into force of the Bihar Hindu Religious Trusts Act, 1950, the President of Bihar State Board of Religious Trusts started proceedings under ss. 59 and 70 of the Act against the respondent in respect of the trust on the footing that it was a public trust to which the Act applied. The respondent made an application to the Patna High Court under Art. 226 of the Constitution in which she prayed that a writ or order be issued quashing the proceedings taken against her by the Bihar State Board of Religious Trusts on the grounds (1) that the trust deed dated March II, 1938, was a private endowment created for the worship of a.family idol in which the public were not interested,\n\n(2) that the Act did not apply to private trusts, (3) that the Act was ultra vires the Constitution by reason of the circumstance that its several provisions interfered with her rights as a citizen guaranteed under part !II of the Constitution, and (4) that, in any case, the Act was not applicable to the trust deed in question as some of the properties were situate outside the State of Bihar.\n\nHeld: (1) that on its true construction the deed of trust dated March II, 1938, created a religious and charitable trust of a public nature.\n\nDeoki Nandan v. Murlidar, [1956] S:C.R. 756, considered.\n\nIn re Charusila Dasi, I.L.R. [1946] l Cal. 473, explained.\n\nOne of the relevant considerations as to whether the trust was a public trust, will be if by the trust deed any right of worship has been given to the public or any section of the publ1c answering a particular description.\n\n(2) that the Act does not apply to private endowments.\n\nMahant Ram Saroop Dasji v. S. P. Sahi, [1959] Supp. 2 S.C.R. 583, followed.\n\n(3) that the provisions of the Act do not take away or abridge any of the rights conferred by Part III of the Constitution.\n\nMahant Moti Das v. S. P. Sahi, [1959] Supp. 2 S.C.R:. 563, followed.\n\n(4) thats. 3 of the Act makes the Act applicable to all pub- 1959 lie religious and charitable institutions within the meaning of the definition clause in s. 2(1) of the Act, which are situate in State of Bihar the State of Bihar and any part of the property of which is in v. that State.\n\nCharusila Dasi\n\n(5) that where the trust is situate in Bihar the State has legislative power over it and also over its trustees or their servants and agents who must be in Bihar to administer the trust, and as the object of the Act is to provide for the better administration of Hindu Religious Trusts in the State of Bihar and for. the protection of properties appertaining thereto, in respect of the property belonging to the trust outside the State the aim is sought to be achieved by exercising control over the trustees in personani, and there is really no question of the Act having extra-territorial operation.\n\n(6) that, in the present case, the circumstance that the temples where the deities were installed are situate in Bihar and that the hospital and charitable dispensary are to be established in Bihar for the benefit of the Hindu Public in Bihar, gives enough territorial connection to enable the legislature of Bihar to make a law with respect to such trust.\n\nTata Iron & Steel Co. Ltd. v. State of Bihar, [1958) S.C.R. 1355 and The State of Bombay v. R.M.D. Chamarbaugwala, [1957] S.C.R. 874, relied on.\n\nSardar Gurdyal Singh v. The Rajah of Faridlwte, (1894) L.R. 21 I.A. 171, distinguished.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 230 of 1955.\n\nAppeal from the judgment and order dated October 5, 1953, of the Patna High Court in M. J.C. No. 128 of 1953. , ...\\Mahabir Prasad, Advocate-General for the State of Hihar and R. C. Prasad, for the appellants.\n\nN. C. Chatterjee and P. K. Chatterjee, for the respondent.\n\n1959. April 15. The Judgment of the Court was delivered by\n\nS. K. DAS, J.-This appeal relates to a trust s. K. Das 1 known as the Srimati Charusila Trust and the properties appertaining thereto. By its judgment and order dated October 5, 1953, the High Court of Patna has held that the trust in question is a private trust created for the worship of a family idol in which the public are not interested and, therefore, the provisions\n\n1959.\n\nState of Bihar\n\nCharusila Dasi\n\nS. J(. Das].\n\nof the Bihar Hindu Religious Trusts Act, 1950 (Bihar I of 1951), hereinafter referred to as the Act, do not apply to it. Accordingly, it allowed an application made to it under Art. 226 of the Constitution and quashed the proceedings taken against the respondent herein under ss. 59 and 70 of the Act.\n\nThe State of Bihar, the President of the Bihar State Board of Religious Trusts and the Superintendent of the said Board who were respondents to the petition under Art. 226 are the appellants before us.\n\nThe trust in question was created by a trust deed executed on March 11, 1938. Srirnati Charusila Dasi is the widow of one Akshaya Kumar Ghose of No. 3, Jorabagan Street in Calcutta. She resided at the relevant time in a house known as Charu Niwas at Deoghar in the district of Santhal Parganas in the State of Bihar. In the trust deed she described herself as the settlor who was entitled to and in possession of certain properties described in schedules B, C and D.\n\nSchedule B property consisted of three bighas and odd of land situate in mohalla Karanibad of Deoghar town together with buildings and structures thereon ; schedule C property was Charu Niwas, also situate in Karanibad of Deoghar; and schedule D properties consisted of several houses and some land in Calcutta the aggregate value of which was in the neighbourhood of Rs. 8,50,000. In a subsequent letter to the Superintendent, Bihar State Board of Religious Trusts, it was stated on behalf of Srimati Charusila.\n\nDasi t; hat the total annual income from a,11 the pr6perties was about Rs. 87,839. In the trust deed it was recited that the settlor had installed a deity named Iswar Srigopal in her house and had since been regularly worshipping and performing the \" puja\" of the said deity; that she had been erecting and constructing a twin temple (jugal mandir) and a Nat Mandir (entrance hall) to be named in memory of her deceased son Dwijendra Nath on the plot of land described in schedule B and was further desirous of installing in one of the two temples the deity Srigopal\n\nand such other deity or deities as she might wish to establish during her lifetime and also of installing in\n\nthe other temple a marble image of Sri Sri Balanand Brahmachari, who was her religious preceptor and who was regarded by his disciples as a divine person.\n\nIt was fµrther recited in the trust deed that the settlor was also desirous of establishing and founding a hospital at Karanibad for Hindu females to be called Akshaya Kumar Female Hospital in memory of her deceased husband. By the trust deed the settlor transferred to the trustees the properties described in schedules B, C and D and the trustees were five in number including Srimati Charusila Dasi and her deceased husband's adopted son Debi Prasanna Ghosh; the other three trustees were Amarendra Kumar Bose, Tara Shanker Chatterjee and Surendra Nath Burman, but they were not members of the family of the settlor.\n\nAmarendra Kumar Bose resigned from the office of trusteeship and was later replaced by Dr. Shailendra Nath Dutt. The trusts imposed under the trust deed were-(1) to complete the construction of the two temples and the Nat Mandir at a cost not exceeding three lakhs to be met out of the trust estate and donations, if any ; (2) after the completion of the two temples, to instal or cause to be installed the deity Iswar Srigopal in one of the temples and the marble image of Sri Balanand Brahmachari in the other and to hold a consecration ceremony and a festival in connection therewith ; (3) after the installation ceremonies and festivals mentioned above, to provide for the payment and expenditure of the daily \"sheba puja\" and periodical festivals each year of the <leity Srigopal and such other deities as might be installed at an amount not exceeding the sum of Rs. 13,600 per annum and also to provide for the daily \"sheba\" of the marble image of Sri Balanand Brahmachari and to celebrate each year in his memory festivals on the occasion of (a) the\" Janma-tithi\" (the anniversary of the installation of the marble image); (b) \"Gurupurnima\" (full moon in the Bengali month of Ashar); and (c) \"Tirodhan\" (anniversary of the day on which Sri Balanand Brahmachari gave up his body) at a cost not exceeding Rs. 4,500 per annum; and (4) to establish or cause to be established and run and\n\nState of Bihar v.\n\nCharusila Dasi\n\nS. /{. Das j.\n\nI959\n\nStale of Hihaf\n\nCharusila Dasi\n\nS. [(, Das ].\n\nmanage in Deoghar a hospital for Hindu femo.les only to be called Akshaya Kumar Female Hospital and an attached: outdoor charitable dispensary for all out-patients of any religion or creed whatsoever and pay out of the income for the hospital and the outdoor dispensary an annual sum of Rs. 12,000 or such other sum as might be available and sufficient after meeting the charges and expenditure of the two temples and after paying the allowance of the\" she bait\" and trustees and members of the temple committee. It was further stated that the work of the establishment of the hospital and the out-door charitable dispensary should not be taken in hand until the construction of the temples and the installation of the deities mentioned above.\n\nIt may be here stated that it is the case of both parties before us that the temples and the Nat Mandir have been constructed and the deity and the marble image installed therein; but \\leither the hospital nor the charitable dispensary has yet been constructed. The powers, functions and duties of the trustees were also mentioned in the deed and, in schedule A, detailed. rules were laid down for the holding of annual general meetings, special meetings, and ordinary meetings of the trustees. To these details we shall advert later.\n\nOn October 27, 1952, the Superintendent, Bihar State Board of Religious Trusts, Patna, sent a notice to Srimati Charusila Dasi under s. 59 of the Act asking her to furnish a return in respect of the trust in question. Srimati Charusila Dasi said in reply that the trust in question was a private endowment created for the worship of aJ'amily idol in which the public were not interested and therefore the Act did not apply to it. On January 5, 1953, the Superintendent wrote again to Srimati Charusila Dasi informing her that the Board did not consider that the trust was a private trust and so the Act applied to it. There was further correspondence between the solicitor of Srimati Charusila Dasi and the President of the Bihar State Board of Religious Trusts. The correspondence did not, however, carry the matter any further and on February 5, 1953, the President of the State Board of\n\nReligious Trusts said in a notice that he had been authorised to assess a fee under s. 70 of the Act in respect of the trust. Ultimately, on April 6, 1953, Srimati Charusila Dasi made an application to the High Court under Art. 226 of the Constitution in which she prayed that a writ or order be issued quashing the proceedings taken against her by the Bihar State Board of Religious Trusts on the grounds (a) that the trust in question was a private trust to which the Act did not apply and\n\n(b) that the Act was ultra vires the Constitution by reason of the circumstance that its several provisions interfered with her rights as a citizen guaranteed under Art. 19 of the Constitution.\n\nThis application was contested by the State of Bihar and the Bihar State Board of Religious Trusts, though no affidavit was filed by either of them. On a construction of the trust deed the High Court came to the conclusion that the trust in quest\\on was wholly of a private character created for the worship of a family idol in which the public were not interested and in that view of the matter held that the Act and its provisions did not apply to it. Accordingly, the High Court\n\nallowed the application and issued a writ in the nature of a writ of certiorari quashing the proceedings under ss. 59 and 70 of the Act and a writ in the nature of a writ of prohibition restraining the Bihar State Board of Religious Trusts from taking further proceedings against Srimati Charusila Dasi in respect of the trust in question. The appellants then applied for and obtained a certificate from the High Court that the case fulfilled the requirements of Art. 133 of the Constitution. The present appeal has been filed in pursuance of that certificate.\n\nIn connected Civil Appeals numbered 225, 226, 228, 229 and 248 of 1955 (1) judgment has been pronounced to day, and we have given therein a conspectus of the provisions of the Act and have further dealt with the question of the constitutional validity of those provisions in the context of fundamental rights guaranteed by Part III of the C.onstitution. We have held therein that the provisions of the Act do not take away or\n\n(r) Mahant Moti Da$ v. S. P. Saki, seep. 563, ante.\n\nState of Bihar\n\ny, Charusila Dasi\n\nS. I<. Vas ].\n\nI959\n\nState of Bihar v.\n\nCharusila Dasi\n\nS. K. Das].\n\nabridge any of the rights conferred by that Part. In Civil Appeal No. 343of1955 (1) in which also judgment has been pronounced today, we have considered the definition clause in s. 2(1) of the Act and come to the conclusion that the Act does not apply to private endowments, and have further explained therein the essential dist.inction in Hindu law between private and public religious trusts. We do not wish to repeat what we have said in those two decisions; but in the light of the observations made therein, the two questions which fall for decision in this appeal are-(1) if on a true construction of the trust deed dated March 11, 1938, the Charusila Trust is a private endowment created for the worship of a family idol in which the pµblic are not interested, as found by the High Court and (2) if the answer to the first question is in the negative, does the Act apply by reason of s. 3 thereof to trust properties which are situate outside the State of Bihar.\n\nWe now proceed to consider and decide these two questions in the order in which we have stated them.\n\nOn behalf of the appellants it has been contended that on a true construction of the deed of trust, the Charusila Trust must be held to be a public religious trust.\n\nThe learned Judges of the High Court emphasised that part of the preamble wherein it was stated that the settlor had installed a deity called Iswar Srigopal in her house and had been regularly worshipping the said deity, which circumstance (according to them) showed that in its origin the endowment was a private endowment created for the worship of a family idol in which the public were not interested, and the learned Judges were further of the view that the installation of the said deity in one of the two temples and of the marble image of Sri Balanand Brahmachari in the other temple did not alter the nature of the endowment which continued to be a private endowment; they also expressed the opinion that the provision in the trust deed for the establishment of a hospital for Hindu females and a charitable dispensary for patients of any religion or creed was merely incidental to the other main objects of the endowment. These findings of the\n\n(r) Mahant Ram Saroop Dasji v. S, P. Sahi, seep. 583, ante.\n\nHigh Court have been seriously and strenuously chalz959r lenged before us. ' W h• • h b 'd h h State of Bihar e say t IS wit respect, ut we cons1 er t at t e learned Judges of the High Court have failed to give Charuia Dasi to several material clauses of the trust deed their due weight and these have an important bearing on the s K. Das J. question in issue. It is true that the settlor said that • she had installed the deity Iswar Srigopal in her house and she had been regularly worshipping the deity since such installation ; if the trust had. been created only for ' the purpose of continuing such family worship, the conclusion would no doubt be that the endowment was wholly of a private character in which the public had no interest. That was not, however, what was done.\n\nThe settlor created the trust for the construction of two temples, in one of which was to be installed the deity Iswar Srigopal and in the other the marble image of her preceptor; the trustees consisted of persons three of whom were strangers to the family, though the settlor reserved to herself the power to remove in her absolute discretion any one or more of the trustees for misconduct by reason of change of religion, etc. One of the relevant considerations is if by the trust deed any right'of worship has been given to the public or any section of the public answering a particular description. One of the clauses of the trust deed reads :\n\n\"The 'pronamis' and perquisites to be offered to the deities and image in the J ugal Mandir shall form part of the Srimati Charusila Trust Estate and neither the shebait nor any one else shall have interest or claim in or over same.\"\n\nThis clause to which the learned Judges of the High Court have made no reference shows that the right of worship was not confined to the family of the settlor or founder, but was given to other members of the Hindu public who could offer. \" pronamis \" and perquisites to the deities, and those 'pronamis' and perquisites were to fori:n part of the trust estate.\n\nSchedule E of the deed gives details of the festivals and ceremonials to be performed for the deity and the image of Sri Balanand Brahmachari. One of the ceremonials is a \"Jal Chhatra\" (free distribution of\n\nI959\n\nState of Bihar v.\n\nCharusila Dasi\n\nS. K. Das j.\n\nWIJ, ter); another is\" annakoot\" (distribution of food) at tho time of Diwali, the approximate .oxpenditure being fixed at Rs. 500. A third ceremony is a \"bhandara \", culminating in free distribution of food, of the Mata, ji of Sri Balanand Brahmachari. These are ceremonies which even if ancillary to \"deva-sheba, \", appea, r prima facie to confer benefit on the genernl body gf worshippers. Though not conclusive by themselves, they have to be considered in the light of the other main provisions of the trust deed. The other festivals which have to be performed as a rule for tho deity are s.nch well-known festivals a, s Hath Yatra, Jhulan, Janmastami, Rash and Do! (Ho1i) in which members of the Hindu community usually take part in large numbers, and the scale of expenses laid down shows that the festivals are to be performed on a large scale so as to enable a large number of persons to take part in them. Even with regard to the special festivals for Sri Balanand Brahmacha, ri on the occasion of the Ja, nmatithi, Gurupurnima and Tirodhan, the provisions of the trust deed contemplate that they are to be performed on a large scale so that other disciples of Sri Balananda Brahmachari may also join in them.\n\nEven the constitution of the committee of trustees is such as would show that the endowment is not a mere private endowment. The trust deed says-\n\n\" In filling up a vacancy the trustees shall see tlrnt in the Board of Trustees there shall be, if available, one who is the seniormost lineal male descendant of Akshaya Kumar Ghose, the deceased husband of the settlor, who is eligible and willing and capable of acting as a trustee, another who is a trustee of the Sree Sree Balanand Trust created at Deoghar by the said Sree Bala1rnndji Brahmachari Maharaj of sacred memory, and a third who shall be disciple ofSree Sree Balanand order, that is to say, any one of the disciples of the said Sree Sree Balanand Brahmachari Maharaj of sacred memory and his disciples and the disciples of the latter and so on if such a disciple is willing, eligible and capable of acting as a trustee of the said Trust hereby created, provided al ways that the foll number of trustees shall at all times be five in number and no one\n\nshall be eligible to be a trustee unless he be adult male, pious, Bengali Hindu and provided also that the\n\nr959\n\n State of Bihar shebait of Sree Gopal and the shebait of Sree Baleshv. wari Devi of the Ashram Deoghar shall under no Charusita Dasi circumstances be eligible to be a trustee under these presents save and except in the case of the settlor who shall so long as she lives to both a trustee and a shebait.\" We may here draw attention to the formation of the temple committee as envisaged by the trust deed. It says that the temple committee shall consist of the Jugal Mandir shebait for the time being who shall be the\"\n\nex officio member and president of the committee and the other members who will be appointed or nominated by the trustees shall consist of six pious Hindus who must be residents of Deoghar and of whom at least four shall be Bengalis. If the trust were created for the worship of a family idol, one would not expect provisions of this nature which vest the management of the temple and the \"sheba puja \" in members of the public outside the family of the settlor.\n\nBesides the aforesaid provisions, there is in express terms the imposition of a trust in favour of the public so far as the hospital and the charitable dispensary are concerned. It is necessary to quote here cl. 8 of the trust deed. That clause reads:\n\n\" To establish or cause to established and run and manage in Deoghar a hospital for Hindu females only to be called in memory of the husband of the settlor, since deceased, the \" Akshaya Kumar Female Hospital \" and an attached out-door Charitable Dispensary for all out-patients of any religion or creed whatsoever and out of the said income to pay and/or spend for the objects of the said Hospital and out-door Dispensary annually a sum of rupees twelve thousand or such sum as will be available and sufficient after meeting the aforesaid charges and expenditure and after paying the allowance of the shebait and trustees and members of the temple committee and the establishment charges of offices at Calcutta and Deoghar and of the temple estabJishment hereinafter mentioned provided however that the work of the establishment\n\nS. J(. Das ].\n\n'959\n\nStale of Bihar\n\nCharusila Dasi\n\nS. K. Das].\n\nof the Hospital and out.door Charitable Dispensary shall not be taken in hand by the trustees until the construction of the temple and installation of the deities hereinbefore mentioned.\" The trust deed further states that the female hospital and charitable dispensary shall, so long as the settlor is alive, be located in a house to be rented in Deoghar and after her death shall be shifted to and located in Charu Niwas.· Charu Niwas was, however, sold by an . order of the Calcutta High Court and the sale proceeds, it is stated, were appropriated towards the satisfaction \"of the debts and liabilities of the trust estate. One\n\nclause of the trust deed relating to the hospital and the charitable dispensary says:\n\n\"The object of the said Hospital shall be to provide Hindu females with gratuitous medical and surgical and maternity advice and aid and also to admit them as indoor patients in conformity with such rules and regulation as may be made by or with the sanction of the Board of Trustees. The outdoor Charitae Hospital shall be run as the trustees shall provide by rules. In furtherance of these objects, its funds may be expended in subscriptions or contributions to convalescent and other similar institutions and to other special hospitals and in sending patients to and maintaining them in such institution and hospitals provided that tb.e sum so expended in any one year shall not exceed rupees one thousand or such sum as may be fixed by the trustees from time to time.\" The learned Judges of the High Court have expressed the view that these provisions for the estab- _ lishment of a hospital and charitable dispensary are merely incidental or ancillary to the other main objects of the trust. With great respect, we are unable to appreciate how the establishment of a hospital and charitable dispensary of the nature indicated in the trust deed can be said to be ancillary or incidental to other objects of the rust, viz., the construction of two temples and the installation of the deities therein. In clear and unequivocal terms the trust deed imposes a\n\ndisinct and independent trust in favour of a considerable section of the public for whose benefit the hospital\n\nand the charitable dispensary are to be established.\n\nIt is true th::i, t the establishment of the hospital and the charitable dispensary is to be taken in hand after the construction of the temples and the installation of the deities; that circumstance, however, does not make the trust in relation to the hospital and the dispensary any the less important or even merely incidental or ancillary to the other trusts. It merely determines the priority of time when the different trusts created by the deed are to be given effect to. The High Court\n\nhas placed reliance on the decision in Prasaddas Pal v.\n\nJagannath Pal (1).\n\nThat was a case in which by the deed of endowment were dedicated certain houses and premises to the \"sheba ,, of a family idol established in one of the said houses and for feeding the poor and carrying out other charitable objects ; the deity was installed inside one of the residential quarters, the \" shebaitship \" was confined to the members of the family of the founder, and the feeding of the poor and of students, in case the income of the debutter property increased, was found to be part and parcel of the \"; debasheba \", and in those circumstances it was held that the feeding of the poor efo. was not an independent charity but incidental to the main purpose of the endowment, viz., the \"puja \" of the deity. We are unable to hold that the same considerations apply to the trust before us.\n\nIn Deoki N andan v .- M urlidhar (2) this Court considered the principles of law applicable to a determination of the question whether an endowment is public or private, anq observed:\n\n\"The cardina.l point to be decided is whether it was the intention of the founder that specified individuals are to have the right of worship at the shrine, or the general public. or any specified -portion thereof. In accordance with this theory i it has been held that when property is dedicated for the worship of a family idol, it is a private and not a public endowment, as the persons who are entitled to worship at the shrine of the deity can only be the members of the family, and that is an ascertained group of individuals. But\n\n(1) (1932) I.L.R. (io C\"-1. 538.\n\n(2) [1956] S.C.R. 756, 762.\n\nr959\n\nState of Bihar v.\n\nCharusila Dasi\n\nS. K. Das].\n\nr959\n\nState uf BihaY\n\nCharusila Dasi\n\nS. K. Das j.\n\n614 SUPREME COURT l'tEPORTS [1959] Supp.\n\nwhere the beneficiaries are not members of a family or a specified individual, then the endowm~IJt can only be regarded as public, intended to benefit the general body of worshipper's.\" One of the facts which was held in that case to indicate that the endowment was public was that the idol was installed not within the precincts of residential quarters but in a separate building constructed for that very purpose on a vacant site.\n\nWe do not suggest that such a fact is by itself decisive of the question. The fact that the temple is outside the dwelling house is only a circumstance in favour of it being regarded a public temple, particularly in Madras (except Malabar); there are, however, private temples in Bengal which are built outside the residential houses of donors (see the Hindu Law of Religious and Charitable Trust, Tagore Law Lectures by the late Dr. B. K. l\\lukherjea, 1952 edition, p. 188). In the case before u~, the two temples were constructed outside the residential quarters, but that is only one of the relevant circumstances.\n\nWe must construe the deed of trust wit.h reference to all its clauses and so construed, we have no doubt that the trusts imposed constitute a public endowment. There is one other point to be noticed in this connexion.\n\nThe deed of trust in the present case is in the English form aml the settlor has transferred the properties to trustees who are to hold them for certain specific purposes of religion and charity; that in our opinion is not decisive but is nevertheless a significant departure from the mode a private religious endowment is commonly made.\n\nIt is necessary now to refer to a decision of the Cli'lcutta High Court, In re Oharusila Dasi (1) relating to this very trust. The question for oonsideration in that case was the assessment of income-tax on the income of this trust estate for the accounting year 1938-\n\n39. The trustees were assessed upon the whole income of the trust. The trustees appealed against the asse'ssment and contended that the entire trust was for public, religious and charitable purposes and the whole income\n\n(1) I.LR. [1946] r Cal. 473.\n\nfell within cl. (1) of sub-s. 3 of s. 4 of the Income-tax Act. The contention of the Commissioner of Income-tax was that the trust was no more than a private religious trust and the income did not enure for the public benefit, save with respect to that part of the income which was to be devoted to the hospital and dispensary and to which the latter part of cl. (1) applied.\n\nA reference was accordingly made to the High Court and the question framed was whether on a proper construction of the deed of trust, so much of the income of the trust as was not applied for the purpose of constructing and maintaining the female hospital was exempt from tax under the provisions of s. 4(3) of the Indian Income-tax Act. It was pointed out before the High Court that no part of the income of the trust during the accounting year was devoted to the hospital and dispensary and it was .conceded that that part of the income which would be devoted to those institutions would fall within the exempting clause. It so happens that the learned counsel who argued the case on behalf of the trustees in the Cale utta High Court in the income-tax reference is the same counsel who has argued the case before us on behalf of Srimati Charusila Dasi.\n\nThe contention now is that the trust in its entirety is a private religious trust. Eleven circumstances were referred to by learned counsel in the income-tax reference in support of his contention that the entire trust as ascertained from the trust deed was of a public nature. Gentle, J., with whom Ormond, J., agreed, held that on a proper construction of the deed of trust, so much of the income of the trust as was not applied for th~ purpose of constructing and maintaining the female hospital was not exempt from tax under the provisions of s. 4(3) of the Indian Income-tax Act.\n\nThis decision, it must be stated at once, does not wholly support the present respondent. So far as the hospital and the dispensary are concerned the trust was held to be a public trust.\n\nWe are of the view that having rega.rd to the main clauses of the trust deed to which we have already made a reference, the trusts in favour of the deity Iswar Srigopal and the image of Sri Balanand Brahmachari are also of a public nature.\n\nState of Bihar v.\n\nC harusila Dasi\n\nS. J(. Das j.\n\n'959\n\nState of Bihar\n\nC harusila Dasi\n\nS. K. Das j.\n\nOne of the points which was emphasised before the Calcutta High Court was the provision with regard to \" pronamis \" and perquisites to be offered to the deity and the image.\n\nThe High Court said : \" This provision does not indicate the creation of a trust in favour.of the public, bnt, on the contrary, it denies the right of any one, which must include any member of the public, having a right to the pronamis.\n\nIn its terms, the deed negatives that benefit is con, ferred upon thepublic \".\n\nThe aforesaid observations appear to us, with respect, to be based on a misconception. When a member of the public makes an offering to a deity, he does not retain any right to what he has offered.\n\nWhat he offers belongs to the deity.\n\nWhen we talk of the right of members of the public or a considerable section thereof, we refer to the right of worship or the right to make offerings in worship of the deity and not of the right to the offerings after they have been made.\n\nWith regard to other clauses of the trust deed also we take a view different from that of the learned Judges who .decided the income-tax reference.\n\nWe have already explained our view in the preceding paragraphs and it is unnecessary to reiterate it. The conclusions at which we have arrived on a construction of the deed of trust is that it creates a religious and charitable trust of a public nature.\n\nNow, we proceed to a consideration of the second point. Section 3 of the Act says-\n\n\" This Act shall apply to all .religious trusts, whether created before or after the commencement of this Act, any part of the property of which is situated in the State of Bihar \".\n\nThe argument before us on behalf of the respondent is this. Under Art. 245 of the Constitution, Parliament may make laws for.the whole or any part of the terri,. tory of India and the legislature of a State may make laws for the whole or any part of the State. Clause (2) of the said Article further states that no I.aw made by Parliament shall be deemed to be invalid on the ground that it would have extra-territorial operation.\n\nArticle 246 gives the distribution of legislative power;\n\nParliament has exclusive power to make laws with respect to any of the matters enumerated in what has been called the Union List; Parliament as also the legislature of a State have power to make laws with respect to any of the matters enumerated in the Concurrent List; the legislature of a State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in the State List. Item 28 of the Concurrent List is-\n\n\" charities and charitable institutions, charitable and religious endowments and religious institutions\".\n\nLearned counsel for the respondent contends that by reason of the provisions in Arts. 245 and 246 of the Constitution read with item 28 of the Concurrent List, the Bihar legislature which passed the Act had no power to make a law which has operation outsidE) the State of Bihar; he further contends that under s. 3 the A.ct is made applicable to all religious trusts, whether created before or after the commencement of the Act, any part of the property of which is situated in the State of Bihar; therefore, the Act will apply to a religious institution which is outside Bihar even though a small part of its property may lie in that State. It is contended that such a provision is ultra vires the power of tho Bihar Legislature, and Parliament alone can make a law which will apply to religious institutions having properties in different States. Alternatively, it is contended that even if the Act applies toa religious institution in Bihar a small part of the property of which is in Bihar, the provisions of the Act can have no application to such property of the institution as is outside Bihar, such as the Calcutta properties in the present case.\n\nIt is necessary first to determine the extent of the application of the Act with reference to ss. 1 (2) and 3 of the Act read with the preamble. The preamble states:-\n\n\" Whereas it is expedient to provide for the better administration of Hindu religious trusts in the State of Bihar and for the protection and preservation of properties appertaining to such trusts\",\n\n78 .\n\nI959\n\nState of Bihar v.\n\nChan<sila Dasi\n\nS. K. Das ].\n\nI959\n\nState of Bihar v.\n\nCharusila Dasi\n\nS. K. Das].\n\nIt is clear from the preamble that the Act is intended to provide for the better administration of Hindu religious trusts in the State of Bihar. Section 1 (2) states that the Act extends to the whole of the State of Bihar, and s. 3 we have quoted earlier. If these two provisions are read in the context of the preamble, they can only mean that the Act applies in cases in which (a) the religious trust or institution is in Bihar and (b) any part of the property of which institution is situated in the State of Bihar. In other words, the aforesaid two conditions must be fulfilled for the application of the Act. It is now well settled that there is a general presumption that the legislature does not intend to exceed its jurisdiction, and it is a sound principle of construction that the Act of a sovereigq legislature should, if possible, retieive such an interpretation as will make it operative and not inoperative; see the cases referred to In re the Hindu Women's Right to Property Act, 1937 and The Hindu Women's Rights to Property (Amendment) Act, 1936 and In re a Special Reference under s. 213 of The Government of India Act, 1935 (1), and the decision of this Court in R. M. D. Ohamarbaugwalla v. The Union of India\\').\n\nWe accordingly hold that s. 3 makes the Act applicable to all public religious trusts, that is to say, all public religious and charitable institutions within the meaning of the definition clause in s. 2 (1) of the Act, which are situate in the State of Bihar and any part of the property of which is in that State. In other words, both conditions must be fulfilled before the Act can apply.· If this be the true meaning of s. 3 of the Act, we do not think that any of the provisions of the Act have extra-territorial application or are beyond the competence and power of the Bihar Legislature. Undoubtedly, the Bihar Legislature has power to legislate in respect of, to use the phraseology of item 28 of the Concurrent List, \" charities, charitable institutions, charitable and religious endowments and religious institutions \" situate in the State of Bihar. The question, therefore, narrows down to this : in so legislating, has it power to affect trust\n\n(1) [1941] F.C.R. 12, 27-30.\n\n(2) [1957] S.C.R. 930.\n\nproperty which may be outside Bihar but which appertains to the trust situate in Bihar ? In our opinion, the answer to the question must be in the affirmative. It is to be remembered that with regard to an interest under a trust the beneficiaries' only right is to have the trust duly administered according to its terms and this right can normally be enforced only at the place where the trust or religious institution is situate or at the trustees' place of residence: see Dicey's Conflict of Laws, 7th edition, p. 506. The Act purports to. do nothing more. Its aim, as recited in the preamble, is to provide for the better administration of Hindu religious trusts in the State of Bihar and for the protection of properties appertaining thereto. This aim is sought to be achieved by exercising control . over the trustees in personam. The trust being situate in Bihar the State has legislative power over it and also over its trustees or their servants and agents who must be in Bihar to administer the trust. Therefore, there is really no question of the Act having extraterritorial operation. In any case, the circumstance that the temples where the deities are installed are situate in Bihar, that the hospital and charitable dispensary are to be established in Bihar for the benefit of the Hindu public in Bihar gives enough territorial connection to enable the legislature of Bihar to make a law with respect to such a trust. This Court has applied the doctrine of territorial connection or nexus to income-tax legislation, sales tax legislation and also to legislation imposing a tax on gambling. In Tata Iron & Steel Co. Ltd. v. State of Bihar (1) the earlier cases were reviewed and it was pointed out that sufficiency of the territorial connection involved a consideration of two elements, namely, (a) the connection must be real and not illusory and (b) the liability sought to be imposed must be pert.inent to that connection. It cannot be disputed that if the religious endowment is itself situated in Bihar and the trustees function there, the connection between the religious institution and the property appertaining thereto is real and not illusory ; indeed, the religious institution\n\n(r) [1958] s.c.R. 1355.\n\nx959\n\nState of Bihar v.\n\nCharusila Dasi\n\nS. K. Das].\n\nI959\n\nState of Bi/lar\n\nCharusila Dasi\n\nS. H. Das].\n\nand the property appertaining thereto form one integrated whole and one cannot be dissociated from tho other. If, therefore, any liability is imposed on the trustees, such liability must affect the trust property.\n\nIt is true that in the Tata I ran & Steel Co.' s case (') this Court observed :\n\n\" It is not necessary for us on this occasion to lay down any broad proposition as to whether the theory of nexus, as a principle of legislation is applicable to all kinds of legislation. It will be enough for disposing of the point now under consideration, to say that this Court bas found no apparent reason to confine its application to income-tax legislation but bas extended it to sales tax and to tax on gambling.'' \\Ve do not see any reason why the principles which were followed in The State of Bombay v. R. jjf, D.\n\nChamarbaugwala (') should not be followed in the present case. In R. M. D. Chamarbaugwala's case(') it was found that the respondent who was the organiser of a prize competition was outside the State of Bombay ; the paper through which the prize competition was conducted was printed and published outside the State of Bombay, but it had a wide circulation in the State of Bombay and it was found that \"all the activities which the gambler is ordinarily expected to undertake\" took p]a; ce mostly, if not entirely, in the State of Bombay.\n\nThese circumstances, it was held, constituted a sufficient territorial nexus which entitled the State of Bombay to impose a tax on the gambling that took place within its boundaries and the la'Y could not be struck down on the ground of extra-territoriality. We are of the opinion that the same principles apply in the present case and the religious endowment itself being in Bibar and the trustees functioning there, the Act applies and the provisions of the Act cannot be struck down on the ground of extra-territoriality.\n\nWe proceed now to consider some of the decisions on which learned counsel for the respondent has placed reliance. These are (I) Sirdar Gurdyal Singh v. The Rajah of Faridkote ('); (2) Commissioner of Wakfs, Bengal\n\n(1) (1958] s.c.R. 1355\n\n(2) (1957] s.c.R. 874.\n\n(3) (1894) 21 I.A. 171, 185.\n\nv. Narasingh Chandra Daw and Co. (1); (3) Madangopal Bagla v. Lachmidas (\"); and (4) Maharaj Kishore Khanna v. Raja Ram Singh (3).\n\nThose decisions, in our opinion, are not in point, as they related to different problems altogether. In Sirdar Gurdyal Singh's\n\ncase (4) a Faridkote court passed an ex parte money decree against a defendant who had been a treasurer of Faridkode, but who at the time of suit had ceased to be such and was resident in Jhind Of which State he was a domiciled subject; it was held that the decree was a nullity by international law. The ratio of the decision was thus expressed by Lord Selborne:\n\n\"Territorial jurisdiction attaches (with special exceptions) upon all persons either permanently or temporarily resident within the territory while they are within it; but it does not follow them after they have withdrawn from it, and when they are living in another independent cou.ntry. . ........ In a personal action, to which none of these causes of jurisdiction apply, a decree pronounced in absentem by a foreign Court, to the jurisdiction of which the defendant has not in any way submitted himself, is by international law an absolute nullity.\" The decision in Commissioner of Wakf s, Bengal v.\n\nNarasingh Chandra Daw & Go. (1) proceeded on a construction of s. 70 of the Bengal Wakf Act which also had a section similar to s. 3 of the Act.\n\nSection 70 of the Bengal W akf Act required notice to the Commissioner of W akfs before any wakf property could be sold and the question was whether a court in Assam was under any obligation to send such a notice. It was held that the Bengal Act did not apply to Assam and s. 70 stood in a different category from the other sections of the Bengal Act. The ratio of the decision was thus explained :-\n\n\"So far as the status of the Commissioner is concerned, it is conferred by the Bengal Act to operate even outside the province. Therefore, the Commissioner may bring suits under s. 72 or s. 73 of the Bengal Act in courts outside the province. But s. 70 lies\n\n(1) I.L.R. (1939] l Cal. 462.\n\n(3) A.LR. l954 Pat. 164.\n\n(2) I.L.R. [1948] 2 Cal. 455\n\n(4) (1894) 21 I.A. 171, 185,\n\nState of Bihar v.\n\nCharusila Dasi\n\nS. K. Das ].\n\nI959\n\nState of Uihar\n\nCharusila Dasi\n\nS. J{. Das j.\n\niu a different category, because it imposes an obligation on the court to issue notice to the Commissioner in certain circumstances ....... Section 70(1) refers to a suit or proceeding in respect of any wakf property, etc., and if this wakf property is situated outside the province, so that the court having jurisdiction over it is also outside the province, then the Act cannot operate beyond its extent, that is to say outside the province of Bengal.\"\n\nThe decision in Madangopal Bagwv. Lachmidas (') and the decision in Maharaj Kishore Khanna v. Raja Ram Singh (2)-both related to the interpretation of some of the provisions of the United Provinces Encumbered Estates Act (U. P. Act 25 of 1934).\n\nIn the former case the limited question for decision was if the decreeholder under a decree of the Original side of the Calcutta High Court was precluded from executing the decree by reason of certain proceedings which had taken place before the Special Judge, .Banaras, under the United Provinces Encumbered Estates Act, 1934. The answer given was that the decreeholder was not so precluded and the decision proceeded on a construction of s. 18 of the United Provinces Encumbered Estates Act, 1934, read with ss. 7, 13 and 14(7) of that Act. It was held that the exclusive jurisdiction intended to be conferred on the Special Judge in supersession of those of civil and revenue courts extended, as indicated by s. 7, only over debts enforceable through the courts within the province and the word \"creditor\" in s. ,10 must be limited to those of them who would have to enforce their rights through such courts alone. In the Patna case the question for decision was if s. 14(7) of the U. P. Encumbered Estates Act, 1934, should be construed to mean that the decree of a Special Judge is to be deemed to be the decree of a civil court of com- petent jurisdiction even beyond the territorial jurisdiction of the State Legislature. It was held that the decree passed by the Special Judge of .Banaras had not the effect of a decree of a civil court outside the territorial limits of £he United Provinces and the Sub-\n\n(r) l.L.R. (r948) 2 Cal. 455\n\n(2) A.LR. r954 Pat. 164.\n\nordinate Judge of Purnea in Bihar had no jurisdiction to execute such a decree or to direct that the properties of a judgment-debtor in Purnea should be attached in execution of the decree. As we have said earlier, these decisions relate to an altogether different problem, namely, the proper construction of certain sections of the Bengal Wakf Act or of the United Provinces Encumbered Estates Act.\n\nThe problem before us is of a more general nature and the aforesaid decisions are no authorities for the solution of that problem.\n\nThere is a decision of this Court to which our attention has been drawn (Petition No. 234 of 1953 decided on March 18, 1953).\n\nA similar problem arose in that case where the head of a math situate in Banaras made an application under Art. 32 of the Constitution for a writ in the nature of mandamus against the State of Bombay and the Charity Commissioner of that State directing them to forbear from enforcing against the petitioner the provisions of the Bombay Public Trusts Act, 1950, on the ground inter alia that the Bombay Act could have no application to the math situate in Banaras or to any of tl!e properties or places of worship appurtenant to that math. In the course of the hearing of the petition the learned Attorney-General who appeared for the State of Bombay made it clear that there was no intention on the part of the Government of Bombay or the Charity Commissioner to apply the provisions of the Bombay Act to any math or religious institution situated out- &ide the State territory. The learned Attorney-General submitted that the Bombay Act could be made applicable, if at all, to any place of religious instruction or worship which is appurtenant to the math and is actually within the State territory. In view of these submissions no decision was given on the point urged.\n\nThe case cannot, therefore, be taken as a final decision of the question in issue before us.\n\nFor the reasons which we have already given the Act applies to the Charusila Trust which is in Bihar and its provisions cannot be struck down on the ground of extra-territoriality.\n\nr959\n\nState of nihar\n\nCharusila Dasi\n\nS. K. Das].\n\nI959\n\nState of Bihar v.\n\nCharusila Dasi\n\nS. J(. Da' ].\n\nI959\n\nApril I5.\n\nThe result is that the appeal succeeds and is allowed with costs, the judgment and order of the High Court dated October 5, 1953, are set aside and the petition of Srimati Charusila Dasi must stand dismissed with costs.\n\nAppeal allowed.\n\nTHE STATE OF BIHAR & OTHERS\n\nBHABAPRITAN ANDA OJHA (S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR, K. N. WANCHOO and M. HIDAYATULLAH, JJ.)\n\nHindu Religiou.s Trusts-Constitutional validity of Bihar Hindu Religious Trusts Act-Trust properties situate outside Bihar -Legislative competence-Scheme framed for Trust by Calcutta\n\nHigh Court-Applicability of Act to si<ch Trust-Bihar Hindn Religious Trusts Act, r950 (Bihar I of r95r), s. 3, 4(5), 28, 29- Code of Civil Procedure, r908 (Act 5 of r908), s. 92-Constitution of India, Arts. r4, r9(r)(j), 25, 26, 27. • In respect of an ancient temple situate in the State of Bihar, disputes arose in 1897 between the high priest and the \"pandas\" regarding the control of the temple which ultimately led to a suit being filed under s. 539 (now s. 92) of the Code of Civil Procedure, in the Court of the District Judge of Burd wan and a decree was passed by the Additional District Judge, under which a scheme was framed for the proper management of the temple. The decree was confirmed by the Calcutta High Court and the scheme itself was later modified from time to time by the said Higl1 Court.\n\nAfter the corning into force of the Bihar Hindu Religious Trusts Act, 1950, the President of the Bihar State Board of Religious Trusts, acting under s. 59 of the Act, served a notice on the respondent, who had been appointed Sardar Panda for the temple under the scheme, asking him to furnish a statement in respect of the temple and the properties appertaining thereto.\n\nThe respondent made an application under Art. 226 of the Constitution to the High Court of Patna challenging the validity of the action taken against him on the grounds (r) that the Bihar", "total_entities": 74, "entities": [{"text": "THE STATE OF BIHAR & OTHERS", "label": "PETITIONER", "start_char": 409, "end_char": 436, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF BIHAR & OTHERS", "offset_not_found": false}}, {"text": "SM. 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"label": "PROVISION", "start_char": 40167, "end_char": 40171, "source": "regex", "metadata": {"linked_statute_text": "The Government of India Act, 1935", "statute": "The Government of India Act, 1935"}}, {"text": "[1941] F.C.R. 12", "label": "CASE_CITATION", "start_char": 40704, "end_char": 40720, "source": "regex", "metadata": {}}, {"text": "s. 70", "label": "PROVISION", "start_char": 46562, "end_char": 46567, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 3", "label": "PROVISION", "start_char": 46627, "end_char": 46631, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 70", "label": "PROVISION", "start_char": 46645, "end_char": 46655, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 70", "label": "PROVISION", "start_char": 46918, "end_char": 46923, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 72", "label": "PROVISION", "start_char": 47224, "end_char": 47229, "source": "regex", "metadata": {"statute": null}}, 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"label": "PROVISION", "start_char": 48736, "end_char": 48755, "source": "regex", "metadata": {"linked_statute_text": "the United Provinces Encumbered Estates Act, 1934", "statute": "the United Provinces Encumbered Estates Act, 1934"}}, {"text": "s. 7", "label": "PROVISION", "start_char": 48938, "end_char": 48942, "source": "regex", "metadata": {"linked_statute_text": "the United Provinces Encumbered Estates Act, 1934", "statute": "the United Provinces Encumbered Estates Act, 1934"}}, {"text": "s. 14(7)", "label": "PROVISION", "start_char": 49195, "end_char": 49203, "source": "regex", "metadata": {"linked_statute_text": "the United Provinces Encumbered Estates Act, 1934", "statute": "the United Provinces Encumbered Estates Act, 1934"}}, {"text": "Encumbered Estates Act, 1934", "label": "STATUTE", "start_char": 49217, "end_char": 49245, "source": "regex", "metadata": {}}, {"text": "Art. 32", "label": "PROVISION", "start_char": 50463, "end_char": 50470, "source": "regex", "metadata": 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{"document_id": "1959_2_624_641_EN", "year": 1959, "text": "I959\n\nState of Bihar v.\n\nCharusila Dasi\n\nS. J(. Da' ].\n\nI959\n\nApril I5.\n\n624 SUPREME COURT REPORTS [1959] Supp.\n\nThe result is that the appeal succeeds and is allowed with costs, the judgment and order of the High Court dated October 5, 1953, are set aside and the petition of Srimati Charusila Dasi must stand dismissed with costs.\n\nAppeal allowed.\n\nTHE STATE OF BIHAR & OTHERS\n\nBHABAPRITAN ANDA OJHA (S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR, K. N. WANCHOO and M. HIDAYATULLAH, JJ.)\n\nHindu Religiou.s Trusts-Constitutional validity of Bihar Hindu Religious Trusts Act-Trust properties situate outside Bihar -Legislative competence-Scheme framed for Trust by Calcutta\n\nHigh Court-Applicability of Act to si<ch Trust-Bihar Hindn Religious Trusts Act, r950 (Bihar I of r95r), s. 3, 4(5), 28, 29- Code of Civil Procedure, r908 (Act 5 of r908), s. 92-Constitution of India, Arts. r4, r9(r)(j), 25, 26, 27. • In respect of an ancient temple situate in the State of Bihar, disputes arose in 1897 between the high priest and the \"pandas\" regarding the control of the temple which ultimately led to a suit being filed under s. 539 (now s. 92) of the Code of Civil Procedure, in the Court of the District Judge of Burd wan and a decree was passed by the Additional District Judge, under which a scheme was framed for the proper management of the temple. The decree was confirmed by the Calcutta High Court and the scheme itself was later modified from time to time by the said Higl1 Court.\n\nAfter the corning into force of the Bihar Hindu Religious Trusts Act, 1950, the President of the Bihar State Board of Religious Trusts, acting under s. 59 of the Act, served a notice on the respondent, who had been appointed Sardar Panda for the temple under the scheme, asking him to furnish a statement in respect of the temple and the properties appertaining thereto.\n\nThe respondent made an application under Art. 226 of the Constitution to the High Court of Patna challenging the validity of the action taken against him on the grounds (r) that the Bihar\n\n(2) S.C.R.\n\nSUPREME COURT REPOR'l'S 625\n\nHindu Religious Trusts Act, 1950, was ultra vires the Bihar Legislature, (2) that the Bihar Legislature did not have legislative competence to deal with the temple in question as some of the properties appertaining to the temple were situate outside Bihar, and (3) that, in any case, the Act did not apply to the temple by reason of the fact t)lat the temple and its properties were administered under a scheme made by the Court of the District Judge of Burdwan and approved by the Calcutta High Court both of which were situate outside the territorial limits of Bihar, as otherwise the Act by some of its provisions would seek to interfere with the jurisdiction of courts which are outside Bihar and thereby get extra-territorial operation.\n\nHeld: (1) that the Bihar Hindu Religious Trusts Act, 1950, is intra vires the Bihar State Legislature ;\n\nlvlahant Moti Das v. S. P. Sahi, [1959] Supp. 2 S.C.R. 503 followed.\n\n(2) that it is competent to the Bihar Legislature to legislate in respect of religious trusts situate in Bihar though some of the properties belonging to the trust may be outside Bihar; State of Bihar v. Charusila Dasi, [1959] Supp. 2 S.C.R. 6or followed.\n\n(3) that the provision of law in sub-s. (5) of s. 4 of the Act by which s. 92 of the Code of Civil Procedure shall not apply to any religious trust in the State of Bihar, is valid; and\n\n(4) that as under s. 4(5) of the Act religious trusts in Bihar are taken out of the purview of s. 92 of the Code of Civil Procedure, the jurisdiction of the District Judge of Burdwan or the Calcutta High Court to deal with the temple in question under s. 92 comes to an end; consequently the Act and its several provisions do not suffer from the vice of extra-territoriality and the Act applies to the temple in question and the properties appertaining thereto.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 236 of 1954.\n\nAppeal from the judgment and order dated October 9, 1953, of the Patna High Court in Misc. Judicial Case No. 181 of 1953.\n\nMahabir Prasad, Advocate-General for the State of Bihar, Bhagwat Prasad and S. P. Varma, for the appellants.\n\nP.R. Das, A .. 0. Roy and R.R. Biswas, for the respondent.\n\n1959. April 15. The Judgment of the Court was delivered by 79\n\n:c959\n\nThe State of Bihar & Others\n\nBhabapritananda\n\nOjha\n\nI959\n\nThe State of Biha1' &· Others\n\nBhabapritananda\n\nOjha\n\nS. K. Das j.\n\n626 SUPREME COUH, T REPORTS [1959] Supp.\n\nS. K. DAS, J.-This is an appeal from the judgment and order of the High Court of Patna dated October 9, 1953, in Miscellaneous Judicial Case No. 181 of 1953 of that Court. It relates to a temple commonly known as the Baidyanath temple situate in the town of Deoghar within the limits of Santai Parganas in the State of Bihar.\n\nFor the purposes of this appeal it will be necessary to refer to some earlier litigation about this temple.\n\nThe history of this temple, it is not disputed, goes back to remote antiquity. According to Hindu tradition referred to in the Siva Purana and Padma Purana, extracts from which, with translations, are given by Dr. Rajendra Lal Mitra in his paper on the Temples of Deoghar (see Journal of the Asiatic Society of Bengal, Part 1, 1883, quoted ju the Bihar District Gazetteer relating to Santai Parganas, 1938 edition, pp. 373-376), the origin of the temple is traced to the Treta Yuga, which was the second age of the world by Hindu mythology. Side by side with Hindu tradition, there is a Santa] tradition of the origin of the temple given by Sir William Hunter (see the Annals of Rural Bengal, p. 191 ; Satistical Account of Bengal, Vol. XIV, p. 323).\n\nBut these materials afford no evidence as to when and by whom the idol was established or the temple was built.\n\nThe temple sheltering the \"lingam \" and dedicated to Mahadeva stands in a stone-paved quadrangular courtyard. The courtyard contains eleven other temples, smaller in size and of less importance than that of Baidyanath. Pilgrims visit the temples in large numbers and make offerings of flowers and money in silver or gold ; rich people offer horses, cattle, palanquins, gold ornaments and other valuables and sometimes, rent-free land in support of the daily worship.\n\nThere is a high or chief priest (Sardar Panda) who it appears used to pay a fixed rent to the Rajas of Birbhum during the Muhammadan regime, and the administration of the temple was then left entirely in the hands of the high priest. It may be here stated that about 300 families of\" pandas\", who belong to a branch of Maithil Brahmins, were attached to the\n\ntemple and earned their livelihood by assisting pil-\n\nI959 grims in performing the various ceremonies connected The State of with the worship of the God.\n\nWhen the British rule Bihar & Others began, it was decided to take over the management of \"· the temple, and with this object an establishment of Bhabapritananda priests, collectors and watchmen was organised in Ojha 1787 at Government expense. The revenue soon fell off, as the chief priest beset the avenues to the terns. K. Das f. ples with emissaries, who induced the pilgrims to make their offerings before approaching the shrine. (See\n\nthe District Gazetteer, ibid, p. 383). In 1791 Gqvernment relinquished its claim to a share of the offerings and entrusted the management of the temple to the head priest on his executing an agreement to keep the temples in repair and to perform all the usual ceremonies.\n\nThis agreement was entered into by Ram Dutt (the ancestor of the present respondent), then high priest of the temple and Mr. Keating who was then Collector of the district.\n\nAccording to Mr. Keating the income of the temple in 1791 consisted of the offerings of the proceeds of 32 villages and 108 bighas of land which he estimated at Rs. 2,000 a year; some years later the total income was estimated at Rs. 25,000 a year. Under the system introduced by the agreement of 1791, the mismanagement of the temple was a source of constant complaint; the temple and \" ghat, s \" were frequently out of repair and the high priest was charged with alienating villages from the temple and treating his situation as a me(l>nS of enriching himself and his family.\n\nOn the death of the high priest in 1820 a dispute over the succession arose between an uncle and a .nephew. The nephew Nityanand was eventually a_ppointed, but neglected to carry out the terms of his appointment. Finally, Nityanand was charged with malversation of the funds and the uncle Sarbanand was appointed in his stead in 1823. There was a faction which was opposed to Sarbanand's retention in office and asked for Government interference in the internal management of the temple. In 1835 Government declined all interference in the matter and the parties were left to have recourse to the established courts of law. Sarbanand\n\nI959 died in 1837 and Iswaranund Ojha, son of Sarbanand Ojba, was subsequently elected Sardar Panda. Iswa- The State of d Biha, .,, Others ranund was succeeded by bis grand-son, Sailajanun\n\nOjha.\n\nBhabap, itananda There were, however, frequent disputes between the OJha high priest and the \"pandas\" regarding the control\n\nS. K. Das]. of the temple and in 1897 a snit was filed under s. 539 (now s. 92) of the Code of Civil Procedure in the Court of the District Judge of Burdwan. This was Suit No. 18 of 1897 w bicb was decided by the learned Additional D, istrict Judge of Burd wan by bis judgment dated July 4, 1901. Sailajanund Ojba was dismissed by the order of the court, as be by bis conduct and behaviour and by causing loss to the Debutter properties rendered himself unfit and disqualified to bold the post of Sardar Panda and trustee of the temple of Baidyanatb. It was further ordered by the learned Additional District Judge in the decree granted by him that some fit person be elected as Sardar Panda by the \"pandas\" of the temple and that the affairs of the temple be managed under a scheme which\n\nW(IS framed by the learned Additional District Judge and formed a part of the decree.\n\nUnder this scheme three persons were to be appointed to look after the temple and its properties and for a proper administration of the same. Orie of these three persons was to be elected from amongst the descendants of Ram Dutt Jba. After this Umesbanund Dutt Jha, second son of Iswaranund Ojba, was elected Sardar Panda. On the death of Umesbanund Dutt Jba, Bbabapritananda Ojba, who was the petitioner in the High Court and is now respondent before us,. was appointed Sardar Panda.\n\nBbabapritananda is the grand-son of Sailajanund Ojba, and we shall hereinafter refer to him as the respondent.\n\nThe scheme which was framed as a result of the decision in Civil Suit No. 18 of 1897 was confirmed by the Calcutta High Court and the decision of the High Court is reported in Shailajananda Dut Jha v. Umeshanunda Dut Jha (1).\n\nThis scheme was modified in a subsequent litigation in 1909, when one of the members of the committee applied to the District Judge\n\n(1) (1905) 2 C.L.J. 460.\n\n(2J S.C.R.\n\nSUPREME COUltT REPORTS 629\n\nfor a modification of the scheme. The application was first dismissed, but the matter was taken to the Calcutta High Court, and on September 8, 1910, that\n\nCourt on the authority of the decision of the Judicial Commit.tee in Prayag Doss v. Tirumala (1) and with the consent of counsel on both sides, directed the insertion of two clauses in the decree; by one of these clauses, liberty was reserved to any person interested to apply to the District Court of Burdwan with refer. cnce to the carrying out of the directions of the scheme and by the other clause, liberty was reserved to any person interested to apply from time to time to the Calcutta High Court for any modification of the scheme that might appear necessary or convenient.\n\nUnder these two clauses the members of the committee subsequently applied to the District Judge of Burdwan that certain directions might be given to the high priest ; the high priest opposed the application on the ground that it was in essence an application for modification of the scheme and could be entertained only by the High Court. The learned District Judge overruled this objection. The matter was again taken to the Calcutta High Court and that Court directed (1) that the committee must prepare an annual budget of the income and expenditure; (2) that provision must be rp.ade for quarterly audit and annual inspection of the accounts; (3) that provision should be made for joint control of the temple funds after they have been realised; (4) that there must be no undue interference on the part of the committee with the high priest in the internal management of the temple; and (5) that no one who has any pecuniary interest in the temple properties or is a creditor of the endowment should serve on the committee. The High Court further directed that clauses embodying the aforesaid five directions should be inserted in the scheme. This decision of the High Court is reported in U meshananda Dutta Jha v. Sir Ravaneswar Prasad Singh (2).\n\nvVe now come to more recent events which gave rise to Miscellaneous Judicial Case No. 181 of 1953 in the (I) (t906) I.L.R. 30 Mad. 138.\n\n(2) (1912) I7 C.W.N. 87t.\n\nThe State of Bihar &- Others\n\nBhabapritammda\n\nOjha\n\nS. K. Das],\n\nThe Slate of Bifiar 6- Othe1s\n\nJJh11 b\"prila11a11da\n\nOjha\n\nS. K. Das].\n\nPatna High Court. The Bihar Hindu Religious Trusts Act, 1950 (Bihar I of 1951), hereinafter referred to as the Act, received the President's assent on :Febr.uary 21, 1951, and came into force on August 15, 1951.\n\nThis Act established the Bihar State Board of Religious Trusts to discharge the functions assigned to the Board by the Act. Sometime in August 1952 the President of the Bihar State Board of Religious Trusts acting under s. 59 of the Act asked the respondent to - furnish a statement in respect of the Baidyanath temple and the properties appertaining thereto.\n\nThe respondent wrote back to say that the administration of the temple and its properties was in the hands of a committee constituted under a scheme made by the District Judge of Burd wan and approved by the Calcutta High Court, and these Courts being outside the jurisdiction of the Bihar Legislature, the Act did not apply to the temple and the respondent was not in a position to carry out the directions of the President of the Bihar State Board of Religious Trusts which might be in conflict with those of the Calcutta High Court. The Board, however, proceeded to assess and demand payment of Rs. 1,684-6-6 as fee payable by the respondent in respect of the Baidyanath temple to it under s. 70 of the Act. The respondent then made an application under Art. 226 of the Constitution to the High Court of Patna, which application gave riso to Miscellaneous Judicial Case No. 181 of 1953. On various grounds stated therein, the respondent contended that the Act was ultra vires the Bihar Legislature; he further contended that even if intra vires, the Act properly construed did not apply to the Baidyanath temple and the properties appertaining thereto by reason of the circumstance that the said temple and its properties were administered under a scheme made by the court of the District Judge of Burd wan and approved by the Calcutta High Court both of which are situate outside the territorial limits of llihar.\n\nThe State of Bihar, the Bihar State Board of l{, eligious Trusts and the President thereof, now appellants before us, contested the application. Relying on the\n\nprinciples (1) that there should be as far as possible no r959 conflict or clash of J'urisdiction between two equally The State of competent authorities and (2) that no intention to Bihar & Others exceed its own jurisdiction can be imputed to the v.\n\nBihar Legisfature and of two possible constructions of Bhabapritananda the Act, the one that would make it intra vires should Ojha be preferred, the High Court came to the conclusion s. K. Das 1. that the expression 'religious trust \" as defined in s. 2 (1) of the Act must be construed not in the plain and grammatical sense but must be cut down so as to exclude such religious trusts as are administered under a scheme made by a court situate outside the territorial limits of Bihar and, therefore, the Act did not apply to the Baidyanath temple and the President of the Bihar State Board of Religious Trusts constituted under the Act had no jurisdiction to take any proceedings against the respondent under the provisions of the Act.\n\nAccordingly, the High Court allowed the application of the respondent, quashed the proceedings taken against him by the 'Bihar State Board of Religious Trusts, and issued a writ prohibiting the said 13oard from taking any further proceedings against the respondent under any of the provisions of the Act.\n\nThe State of Bihar, the Bihar State Board of Religious Trusts and its President obtained a certificate under Art. 132 of the Constitution from the High Court and the present appeal has been filed by them in pursuance of that certificate. We shall hereinafter refer to them compendiously as the appellants.\n\nWe have had before us a number of appeals in which the validity of the Act has been challenged on several grounds and in some of these appeals, further questions were raised as to the application of the Act to private religious trusts and even to public trusts some properties of which are situate outside the State of Bihar. These appeals we put in four categories.\n\nThey have been heard one after another, and though we are delivering judgment in each category separately, it has been made clear that the reasons for the decision on points which are common to all or some of the appeals need not be repeated in each judgment.\n\nIn Civil Appeals Nos. 225, 226, 228, 229 and 248 of\n\n•959\n\nThe State of Bihar & Others v.\n\nBhabapritananda\n\nOjha\n\nS. K. Das].\n\n1955 (1), which fall in the first category, we have considered the questions if the Act is bad on the ground that its several provisions infringe the appellants' fundamental rights guaranteed under Art. 14, Art. 19\n\n(1) (f), and/or Arts. 25, 26 and 27 of the Constitution, or on the ground that it imposes an unauthorised tax.\n\nWe have given reasons for our conclusion that the Act is not bad on any of the aforesaid grounds. These reasons we do not wish to repeat here; they govern the present appeal also in so far as the Act is challenged on the self.same grounds. In Civil Appeal No. 343 of 1955 (2), which is in the second category, we have dealt at length with the definition clause of the expression \" religious trust\" in the context of other provisions of the Act, and have come to the conclusion that the Act does not apply to private trusts. In the appeal under consideration in this judgment the admitted position is that the Baidyanath temple is a public trust; so it was held in the earlier litigation to which we have already referred and the scheme was formulated on that footing in Snit No. 18 of 1897. ln Civil Appeal No. 230 of '1955 ('), which is the third category, we have considered the question if the Act suffers from the vice of extra-territoriality by reason of the provisions in s. 3, which says that the Act shall apply to all religions trusts, whether created before or after the .Qommencement of the Act, any part of thr property of which is situate in the State of Bihar. W L have held therein that two conditions must be fulfilled for the application of the Act-( a) the religions trust or institution itself must be in Bihar and (b) part of its property must be situated in the State of Bihar. Those two conditions are fulfilled in this case; the Baidyanath temple is in Rihar and it is admitted that the properties belonging to the temple lie mainly in Bihar though there are some properties in the districts of Burdwan, Murshidabad and Birbhum in the present State of \\Vest Bengal.\n\nNow, we come to the points which have been\n\n(r) Mahant Moti Das v. S. P. Saki, seep. 563, ante.\n\n(2) Mahant Ram Saroop Dasji v. S. P. Saki, seep. 583, ante.\n\n(3) State of Bihar v. Charusila Dasi, see p. 601, ante,\n\n\"' .,. ....\n\n' \\\\ . z959 specially raised in this appeal, which is in the fourth or last category. On behalf of the appellants it has been very strongly contended that the High Court was in 8;;;, S::'~,~~ .. error in relying on the doctrine of comity of jurisdicv. tions anrl cutting down the scope of the Act on such Bhabapritananda a doctrine. It has been submitted that the doctrine, Ojha of comity of jurisdictions has no application to the facts of the present case and there is no possibility of s. K. Das f. any conflict or clash of jurisdiction between two equally competent authorities. It is pointed out that item 28 of the Concurrent List in the Seventh Schedule to the Constitution of India is \"Charities and charitable institutions, charitable and religious endowments and religious institutions\".· It is argued that the -Bihar Legislature has, therefore, full legislative competence to enact the statute in question, and it has been submitted that if the Act does not suffer from the vice of extra-territoriality' then it is good and all courts must obey it. Under s. 4 (5) of the Act, s. 92 of the Code of Civil Procedure, 1908, has ceased to apply to any religious trust as defined in the Act ; therefore, no action under s. 92, Code of Civil Procedure, can be taken, after the commenC(lment of the Act, in respect' of religious trusts in Bihar which are governed by the Act and there can be no question of any conflict of jurisdiction in respect of such trusts as between the . Bihar State Board of Religious Trusts and a court in Bihar on one side and the courts outside the State of Bihar on the other. On these submissions, learned. counsel for the appellants has argued that the real question for decision is if the Act or any of its provisions suffer from the vice of extra-territoriality and if that question is answered in favour of the appellants, then the High Court was in error in cutting down the scope and ambit of the Act by invoking tho doctrine of comity of jurisdictions. • ·.\n\nAt this stage it is convenient to set out in brief the argument which Mr. P. R. Das, learned counsel for the respondent, has advanced in support of the judgment of the High Court. In one part of its judgment, the High Court has referred to the principle that every\n\n- \\\" '\\ ,.\n\n'.\\ .\n\n•959 statute should be so interpreted and applied, in so far as its language admits, as not to be inconsistent with\n\nB~\";, 5;,.\"\n\n1 ~, Zrs the comity of nations or with the established rules of\n\nv. - international law, and has referred to certain decisions Bhabap.itananda in support of that principle. Mr. P. R. Das has frankly\n\nOjha .conceded before us that no question of any inconsist-\n\nS. K. Das J.\n\nency with: the comity of nations or with the established rules of international law arises in the present case ar.d he does not contend that the Act or any of its provisions violate any established rule ofinternational law. Therefore, it is unnecessary to consider this part of the judgment of the High Court. Before us Mr. P.R.\n\nDas has developed his argument in the following way.\n\nHe has first submitted that SuitNo. 18 of 1897 which was instituted in the court of the District Judge of Burd wan in respect of the Baidyanath temple and its properties is still pending and the administratiop of .. the temple and its properties is being carried on by a committee appointed under a scheme made by the District Judge of Burdwan and later approved and 'modified by the Calcutta High Court; therefore, the District Judge of Burdwan and the Calcutta High Court are in full seizin of the trust and its properties, and the Bihar Legislature cannot take away or interfere with the jurisdiction of either the District Judge of Burdwan or the Calcutta High Court. In this connection he has referred to cl. 39 of the Letters Patent of the Patna High Court, particularly to iteni (a) of the first proviso thereto.\n\nThat clause is in these terms:-\n\n\" And 'Ve do further ordain that the jurisdiction of the High Court of Judicature at Fort 'Villiam in Bengal in any matter in which jurisdiction is by these presents given to the High Court of Judicature at Patna shall cease from the date of the publication of these presents, and that all proceedings pending in tho former Court on that date in reference to any such matter shall be transferred to tho latter Court : Provided, first, that the High Court of Judicature at Fort 'Villiam in Bengal shall continue to exercise jurisdiction- ( a) in all proceedings pending in that Court on\n\nthe date of the publication of these presents in which any decree or order, other than an order of an interlocutory nature, has been passed or made by that Court, or in which the validity of any such decree or order is directly in question; and\n\n(b) in all proceedings (not being proceedings referred to in paragraph (a) of this clause) pending in that Court on the dateof the publication of these presents under the 13th, 15th, 22nd, 23rd, 24th, 25th, 26th, 27th, 28th, 29th, 32nd, 33rd, 34th or 35th clause of the Letters Patent bearing date at Westminster the Twenty-eighth day of December, in the year of Our Lord One thousand eight hundred and sixty-five, relating to that Court; and ( c) in all proceedings instituted in that Court, on or after the date of the publication of these presents, with reference to any decree -0r order passed or made by that Court:\n\nProvided, secondly, that, if any question arises as to whether any case is covered by the first proviso to this clause, the matter shall be referred to the Chief Justice of the High Court of Judicature at Fort William in Bengal and his decision shall be final\".\n\nHis argument is that the scheme made by the District Judge of Burdwan and later approved by the Calcutta High Court can be modified only by the Ualcutta High Court and that High Court continues to exercise jurisdiction in respect of the scheme under item (a) of the first proviso to clause 39 referred to above, and cl. 41 of the Letters Patent does not empower the Bihar Legislature to amend any of the clauses of the Letters Patent. He has also submitted that on February 9, 1917, the Calcutta High Court decided that any application for enforcement of the scheme would lie to the District Judge of Burdwan and not to the Deputy Commissioner of Dumka. It may be stated here that Burd wan is in the State of West Bengal and Dumka in the State of Bihar. Mr. P. R. Das has contended that in so far as the provisions of the Act interfere with the jurisdiction of courts outside Bihar, they have extra-territorial operation and must be held to be bad\n\nI959\n\nThe State of Bihar 0- Others\n\nBhabapritananda\n\nOjha\n\nS. K. Das ].\n\nThe State of Bihar & Others\n\nBkabapritananda Ojha\n\nS. K. Das],\n\non that ground; because under Art. 245 of the Con. titution, the Bihar Legislature may make laws for the whole or any part of the State of Bihar, but it cannot make any law which will have extra-territorial operation. He has drawn our attention to the provisions of ss. 3, 4 (5) and 28 of the Act, and ha; s laid particular emphasis on the provisions of s. 29 of the Act, which provisions, according to him, have extra-territorial operation.\n\nHaving set out in some detail the arguments which have been advanced before us on behalf of the appellants and the respondent, we proceed now to consider them on merits. We agree with learned counsel for the parties that no question arises in this case of any conflict or inconsistency with the doctrine of comity of nations or with any established rule of international law. The question which really arises for decision is if any of the provisions of the Act have extra-territorial operation. This question has two aspects. First, there is s. 3 which says inter alia that the Act shall apply to all religious trusts, any part of the property of which is situated in the State of Bihar. The argument is that the Bihar Legislature has no power to legislate about trust property which is outside the territorial limits of Bihar and s. 3 of the Act in so far as it seeks to operate on trust property outside Bihar makes the Act bad on the ground of extra-territorial operation.\n\nThis part of the argument has been fully dealt with and rejected in the decision relating to the Charusila Trust, Ci vii Appeal No. 230 of 1955 (1 ).\n\nThe second facet of the argument is what Mr. P. R. Das has specially emphasised before us in this appeal. His argument in substance is that the Act by some of its provisions seeks to interfere with the jurisdiction of courts which are outside Bihar, and this in effect is the vice of extra-territorial operation from which, according to him, the Act suffers.\n\nWe are unable to agree with him in this contention.\n\nSection 3 we have already referred to. Sub-section (5) of s. 4 states inter alia thats. 92 of the Code of Civil Procedure, 1908, shall not apply to any religious trust\n\n(1) State of Bihar v. Charusila Dasi1 seep. 601, ante.\n\nin the State of Bihar as defined in the Act.\n\nWe have considered the effect of this sub-section in the decision relating to the Charusila Trust (ibid) and have held that the Act applies when the trust itself, temple or deity or math, is situate in Bihar and also some of its property is in Bihar. We have pointed out therein that the trust being situated in Bihar, that State has legislative power over it and over its trustees and their servants or agents who must be in Bihar to administer the trust ; therefore, there is really no question of the Act having extra-territorial operation. In our opinion, this reasoning is equally valid in respect of the argument of Mr. P. R. Das. If, as we have held, it is open to the Bi.har Legislature to legislate in respect of relgious trusts situate in Bihar, then that Legislature can make a law which says, as in sub-s. (5) of s. '1:0£ the Act, that s. 92 of the Code of Civil Procedure shall not apply to any religious trust in the State of Bihar. If sub-s. (5) of s. 4 of the Act is valid as we hold it is, then no question really arises of interfering with the jurisdiction of the District Judge of Burd wan or of the Calcutta High Court in respect of the Baidyanath temple, inasmuch as those courts exercised that jurisdiction under s. 92, Code of Civil Procedure, which no longer applies to the Baidyanath temple and the properties appertaining thereto, after the commencement of the Act. It is true that the Act does put an end to the jurisdiction under s. 92, Code of Civil Procedure, of all courts with regard to religious trusts situate in Bihar, but that it does by taking these trusts out of the purview of s. 92.\n\nIn other words, the Act does not take away the jurisdiction of any court outside Bihar but takes the religious trusts in Bihar out of the operation of s. 92 so that a court outside Bihar in exercise of its jurisdiction under s. 92 will decline to deal with a religious trust situate in Bihar just as it will decllne to entertain a suit under that section regarding a private trust of religious or charitable nature. Civil Procedure, in6luding all matters included in the Code of Civil Procedure at the commencement of the Constitution, is item 13 of the Concurrent List. It has not been disputed before us that it is open to the Bihar\n\nI959\n\nThe State of Bihar & Others v.\n\nBhabapritananda\n\nOjha\n\nS. K. Das].\n\nThe State of l:Jihut- &.. Oth1:,-rs\n\nv. 1Jhabap1itananda\n\nOjha\n\nS. ](. Das ].\n\nLegislature to amend the Code of Civil Procedure while legislating in respect of religious endowments and religious institutions in Bihar, and the President's assent having been received to the Act, the law made by the Bihar Legislature shall prevail in that State, under Art. 254(2) of the Constitution, fo respect of all religious trusts situate in Bihar. In this view of the matter, it is unnecessary to consider the further questions if Suit No. 18 of 1897 is still pending, the proper scope aud effect of cl. 39 of the Letters Patent of the Patna High Court, and which authority can amend the Letters Patent. Even if Suit No. 18 of 1897 is deemed to be still pending, though we do not so decide, any further action under the scheme in respect of the Baidyanath temple and its properties can be taken either by the District Judge of Burdwan or the Calcutta High Court only if the jurisdiction under s. 92, Civil Procedure Code, is still preserved in respect of it. If that juridiction has come to an end in respect of the Baidyanath temple and its properties, then no question of any conflict of jurisdiction between two equally competent authorities arises at all, apart altogether from the more debatable question as to whether the Bihar Legislature on one side and the courts in Bengal on the other can be said at all to be equally competent authorities in respect of a religious trust situate in Bihar. The question really boils down to this. Is the Act bad on the ground of extra-territorial operation, because it takes certain religious trusts situate in Bihar out of the purview of s. 92, Code of Civil Procedure ? If the answer to this question is in the negative, then all the hurdles created by the argument of Mr. P.R. Das must disappear; because if the Act is good, it must be binding on all courts and no question of any conflict of jurisdiction can arise.\n\nLearned 9ounsel for the respondent has made a pointed reference to ss. 28 and 29 of the Act. Section 28 deals with the general powers and duties of the Board. We have examined these powers and duties in our decision in connected Civil Appeals Nos. 225, 226, 228, 229 and 248 of 1955 {1)- and have held that\n\n(I) Mahant Moti Das v, S.P. Sahi, seep. 563, ante.\n\nthere is nothing in these powers and duties which can be said to have extra-territorial operation. Our attention has been drawn to cl. (j) of s. 28 (2) which empowers the Board to sanction on the application of a trustee or any other person interested in the religious trust the conversion of any property of such trust into another property, if the Board is satisfied that such conversion is beneficial for the said trust We have pointed out that these powers and duties are really for the fulfilment of the trust and they do not in any way contravene the rights of the trustees. Section 29 states:- . \"29(1). Where the supervision of a religious trust is vested in any committee or association appointed by the founder or by a competent Court or authority, such committee or association shall continue to function under the general superintendence and control of the Board, unless superseded by the Board under subsection (2).\n\n(2) The Board may supersede any committee or association referred to in sub-section (1) which in the opinion of the Board, is not discharging its functions satisfa.r; itorily and, if the Board does so, any decree or order of a Court or authority by which such committee or association was constituted shall be deemed to have been modified accordingly: Provided that before making any order under this sub-section, the Board shall communicate to the committee or association concerned the grounds on which they propose to supersede it, fix a reasonable period for the committee-or association to show cause against the proposal and consider its explanations and objections, if any. (3) Such committee or association or any other person interested in the religious trust may, within thirty days of any order of the Board under sub-section (2), make an application to the District Judge for varying, modifying or setting aside such order, but, subject to the decision of the District tTudge on any such application, the order of the Board shall be final and binding upon the applicant and every person interested in such trust.\n\nThe St•te of Bihar & Others\n\nBhabapritananda\n\nOjha\n\nS. K. Das].\n\nI959\n\nThe State of Bihar & Others\n\nBhabapritananda\n\nOjha\n\nS. R. Das ].\n\n(4) Where such committee or association has been superseded under sub-section (2), the Board may make such arrangements as may be necessary for the administration of the religious trust concerned.\" It has been argued that s. 29 in terms gives the Bihar State Board of Religious Trusts power to interfere with a committee appointed by the founder or by a competent court or authority. The argument is that the Bihar State Board of Religious Trusts can now interfere with the committee appointed under the scheme made by the District Judge of Burdwan and approved by the Calcutta High Court, and can even. supersede it. The answer to this argument is the same as that given before. Either the Act is bad on the ground of extra. territorial operation or it is not. If the Act is bad on the ground of extra-territorial operation, then there is good reason for cutting down the scope and ambit of s. 29 of the Act so that it will apply only to committees appointed by a competent court or authority in Bihar. If, however, in respect of a religious trust in Bihar, the Bihar Legislature can amend the Civil Procedure Code and take the trust out of the purview of s. 92, Civil Procedure Code, then there is no good reason why the ambit of s. 29 should be cut down in the manner suggested by the High Court.\n\nIt rs true that the legislation of a State is primarily territorial and the general rule is that extra territorium jus dicenti impune non paretur.\n\nThere is, however, no departure from that general rule when the trust itself is in Bihar and in legislating about that trust, the legislature lays down what should be done to fulfil the objects of the trust and for that purpose puts an end to an old jurisdiction in the sense explained above and creates a new one in its place. The doctrine of territorial nexus which arises in this connection has been commented on before us at great length by learned counsel for the respondent. That doctrine and the decisions bearing on it we have considered at some length in our decision relating to the Charusila Trust, Civil Appeal No. 230 of 1955.\n\nWe do not wish to repeat what we have said therein.\n\nThe conclusion at which we have arrived is that the Act and its several provisions do not suffer from the vice of extra-territoriality in the sense .suggested by learned counsel for the respondent and there is no such conflict of jurisdiction as learned counsel for the respondent has suggested. Accordingly, the Act is good and applies to the Baidyanath temple and the properties appertaining thereto.\n\nThe result, therefore, is that the appeal succeeds and is allowed with costs. The judgment and order of the High Court dated October 9, 1953, are set aside and the petition under Art. 226 of the Constitution made by the respondent must stand dismissed with costs.\n\nAppeal allowed.\n\nMESSRS. R. C. MITTER & SONS\n\nTHE COMMISSIONER OF INCOME-TAX,\n\nWEST BENGAL, CALCUTTA\n\n(B. P. SINHA, J. L. KAPUR and\n\nM. HIDAYATULL~H, JJ.)\n\nIncome-tax-Registration of firm-Procedure-\" Constituted under an instrument of partnership\", Meaning of-Indian Incometax Act, r922 (XI of r922), s. 26A, Rules 2 to 6B.\n\nThe question for determination in these two appeals was whether the appellant firms were entitled to registration under s. 26A of the Indian Income-tax Act and the common point of law involved was the interpretation of the WOjds \"constituted under an instrument of partnership \" occurring in that section.\n\nIn Appeal No. 85 the assessee firm was said to have been constituted by a verbal agreement in April, 1948, and the deed of partnership was drawn up in September, 1949. The application for registration under s. 26A of the Act for the assessment year 1949-1950 was made thereafter to the Income-tax Officer. In Appeal No. 389 the assessee firm was verbally constituted in\n\nI959\n\nThe State of Bihar &· Others\n\nBhabapritananda\n\nOjha\n\nS. K. Das].\n\nApril r5.", "total_entities": 91, "entities": [{"text": "THE STATE OF BIHAR & OTHERS", "label": "PETITIONER", "start_char": 351, "end_char": 378, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF BIHAR & OTHERS", "offset_not_found": false}}, {"text": "BHABAPRITAN ANDA OJHA (S. R. DAS", "label": "JUDGE", "start_char": 380, "end_char": 412, "source": "metadata", "metadata": {"canonical_name": "BHABAPRITAN ANDA OJHA (S. R. DAS", "offset_not_found": false}}, {"text": "P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 432, "end_char": 452, "source": "metadata", "metadata": {"canonical_name": "P.B. GAJENDRAGADKAR", "offset_not_found": false}}, {"text": "K. N. WANCHOO", "label": "JUDGE", "start_char": 454, "end_char": 467, "source": "metadata", "metadata": {"canonical_name": "K.N. 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30005, "end_char": 30010, "source": "regex", "metadata": {"linked_statute_text": "the Code of Civil Procedure, 1908", "statute": "the Code of Civil Procedure, 1908"}}, {"text": "the Code of Civil Procedure", "label": "STATUTE", "start_char": 30014, "end_char": 30041, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 4", "label": "PROVISION", "start_char": 30121, "end_char": 30125, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 92", "label": "PROVISION", "start_char": 30392, "end_char": 30397, "source": "regex", "metadata": {"statute": null}}, {"text": "Code of Civil Procedure", "label": "STATUTE", "start_char": 30399, "end_char": 30422, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 92", "label": "PROVISION", "start_char": 30615, "end_char": 30620, "source": "regex", "metadata": {"statute": null}}, {"text": "Code of Civil Procedure", "label": "STATUTE", 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{"document_id": "1959_2_63_71_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 63\n\non it.\n\nThe effect of this order will be that the appelz959 lant shall be deemed to be in possession of a valid perd f r ll Deep Chand mit and he shall have to be displace a ter 10 owing v. the usual procedure prescribed by the U. P. Road The State of uttar Transport Services (Development) Act.\" Pradesh & Others Pursuant to their order, it appears that the Regional Transport Authority renewed his permit on October 11, Subba Rao J. 1956 with effect from November 1, 1953 to October 31,\n\n1956. In the circumstances, as the petitioner was not a permit-holder when the Government made the order, no relief can be given to him in this appeal. This order will not preclude the appellant in Civil Appeal No. 429 of 1958, if he has any righl, to take appropriate proceedings against the State Government.\n\nIn the result, all the appeals are dismissed with one set of costs to the State ofUttar Pradesh.\n\nAppeals dism:ssed.\n\nTHE WESTERN INDIA THEATRES LTD. v.\n\nTHE CANTONMENT BOARD, POON A,\n\nCANTONMENT\n\n(S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR, K. N. 'vVANCHOO and M. HIDAYATULLAH, JJ.)\n\nEntertainment Tax-Imposition on cinema show--Validity- Cantonments Act, I924 (Act II of I924), s. 60-Bombay Municipal Boroughs Act, I925 (Bom. XV III of I925), s. 73-Government of India Act, I9J5, s. IOO, Sch. VII, Entry 50.\n\nThe appellant, a public limited company, was the lessee of wo cinema houses, \" West End\" and\" Capitol\" situated within the Poona cantonment area. By a notification dated June 17, 1948, the Bombay Government with the sanction of the Governor-General-in-Council imposed certain taxes in the cantonment of Poona including an entertainment tax of Rs. IO per show on the appellant's cinema houses and Rs. 5 per show on others.\n\nThe appellant, who paid the tax under protest, brought the suit, out of which the present appeal arose, for a declaration that the\n\nI959\n\nJanuary r6.\n\nimposition of the said tax by the respondent was illegal, for a . permanent injunction restraining it from levying the tax and for The W.stem lndrn the refund of Rs. 45,802, paid as tax by the appellant. The\n\nTheafru Ltd. trial Court decreed the snit but the High Court, on appeal by v. the respondent, reversed the decision of the trial Court and The Cantonment dismissed the snit. Under s. 60(1) of the Cantonments Act, 1924\n\nBoa, d, Poona, (II of 1924), read with s. 73 (xiv) of the Bombay Municipal Cantonment Boroughs Act, 1925 (Born. XVIII of 1925), the res]'Ondent had the power to impose any other tax which the Bombay Provincial Legislature could impose on the province. The question, therefore, was whether the Bombay Legislature had the power to _ impose the tax in question. It was contended on behalf of the appellant that although the Provincial Legislature had undoubtedly.the power under s. 100 of the Government of India Act, 1935, read with Entry 50 in Sch. VII thereto, to make law with respect to \"taxes dn luxuries, including taxes on entertainments, amusements, betting and gambling\", the said entry contemplated a law imposing taxes on persons who enjoyed the lnxnries, entertainments or amusements and not on persons who provided them. Such a tax, if levied on the la tier would be one on profession, trade or calling as contemplated by Entry 46 of the said Schedule and could not exceed Rs. roo per annum under s. 142A of the Government of India Act, 1935, and Rs. 250 per annum under Art. 276(2) of the Constitution.\n\nHeld, that the contention must be negatived.\n\nIt is well-settled that in construing an entry conferring legislative powers, the widest posible construction according to their ordinary meaning must be given to the words used.\n\nThere could be no reason, therefore, in construing Entry 50, to differentiate between the giver and the receiver of the luxuries, entertainments or amusements and both must be held to be amenable to the tax.\n\nNavinchandra Mafatlal v. The Commissioner of Income-tax, Bombay City, [1955] 1 S.C.R. 829, referred to.\n\nAlthough an entertainment tax was regarded as a tax on expenditure, there was no warrant for holding that Entry 50 contemplated only a tax on moneys spent on luxuries, entertainments or amusements.\n\nVVhat it had in view were these matters, and not either the giver or the receiver of them, as the real objects of legislation.\n\nThe impugned tax was distinguishable from a tax on a profession or calling.\n\nIt was a tax imposed on an actual show, and not-on a profession or calling whether there was an exercise of it or, not.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 145 of 1955.\n\nAppeal from the judgment and decree dated the February 10, 1953, of the Bombay High Court in\n\nAppeal No. 742 of 1951 from Original Decree, ansmg z959 out of the judgment and decree dated July 31, 1951, Th w 1 1 d' of the Court of the Senior Civil Judge, Poona, in Special 'nu:t::;~ 1; ia Suit No. 89 of 1950. v.\n\nH. D. Banaji, R. A. Gagrat and for the appellant.\n\nG. Gopala7crishnan, The Cantonment\n\nBoad. Poona,\n\nH. N. Sanyal, Additional Solicitor-General of India,.\n\nH. J. _Umrigar and R.H. Dhebar, for the respondent.\n\n1959. January 16.\n\nThe Judgment of the Court was delivered by\n\nDAS, C. J.-This is an appeal from tlre judgment and decree of the High Court of Bombay dated February 10, 1953, setting aside the judgment and decree of the Court of Civil Judge, Senior Division, Poona dated July 31, 1951, in Special Suit No. 89of1950 and dismissing the appellant's suit against the rc3pondent with costs throughout. This appeal has been filed under a certificate of fitness granted by the High Court of Bombay. - The facts leading up to this appeal may shortly be stated. The appellant is a public limitedeompany regiiltered under the Indian Companies Act, ll913. It is a lessee of two cinema Houses known respectively as \"West End\" and \"Capitol\" situated wi1'ohin the limits of Poona cantonment area. It exl!ibits in the said two Houses cinematograph films, both foreign and Indian.\n\nOn March 20, 1947, a notice was issued by the respondent whereby, in exercise of the powers conferred on it by s. 60 of the Cantonments Act, 1 !)24 (II of 1924), the respondent proposed to make, with the previous sanction of the Central Government, certain amendments in the notification of the Government of Bombay in the General Department No. 4ll60 dated June 17, 1918, and intimated that the draft; amendments would be considered by the respondent on or after April 21, 1947, and invited objection in writing within 30 days from the publication of that notice.\n\nOne of the items of amendments was as follows :-\n\n\"(ii) 'V-Tax on Entertainments'\n\nCantonment\n\nDas C. ].\n\nThe Western India Theatres Ltd. v.\n\nThe Cantonment Board, Poona, Cantonment\n\nDas C. J.\n\nI. Cinemas, Talkies or dramas\n\n2. Circus\n\n3. Horse Races\n\n4. Amusement park provided as follows :-\n\nRs. 5-0-0 \\ per Rs. 10-0-0 show Rs. 2-0-0 per show Rs. 100-0-0 per day of race meetings.\n\nRs. 20-0-0 per day.\n\n1. The said tax shall be levied at the rate of Rs. 10-0-0 per show in the case of the West End and Capitol Talkies and at the rate of Rs. 5-0-0 per show in other cases \" . • It appears that the Cinematograph Exhibitors A'ssociation of India submitted certain objections to the proposals. The Cantonment Executive Officer, Poona, by his letter dated July 8, 1947, informed the Secretary of the Cinematograph Exhibitors Association of India that the latter's letter had been submitted to the Government of India in original along with the respondent's proposals and that the imposition of the entertainments tax on cinemas had been approved by the Governmen17 of India, Defence Department notification No. 1463 dated May 7, 1947. On June 17, 1948, a notification was issued qy the Government of Bombay to the effect that in supersession of the notifications of Goernment noted on the margin ; i, nd of all other notifications on the same subject, the Governorin Council, with the previous sanction of the Governor General-in-Council was pleased to impose certain taxes in the Cantonment of Poona with effect from July 15,\n\n1948. One of the taxes thus imposed was as follows:-\n\n\" V Tax on entertainments.\n\n1. Cinemas, Talkies or dramas Rs. 10.0.0\n\n:in the case of the West End per show and Capitol In other cases\n\n2. Circus\n\n3. Horse Races\n\n4. Amusement park\n\nRs. 5-0-0 per show Rs. 2-0-0 per show Rs. 100-0-0 per day of race meetings.\n\nRs. 20.0-0 per\n\nday\".\n\nThe appellant paid the tax under protest and on or r959 about April 19, 1950, filed a suit (being suit No. 89 of Th w-t- 1 a\n\n1950) against the respondent in the Court of the Civil he;;,:; nLt; •a Judge, Senior Division, Poona for a declaration that v. the levy, collection Or recovery of the said tax by the The Cantonment respondent was illegal and invalid, for a permanent Board, Poona, injunction restraining the respondent from levying, Cantonm•nt collecting or recovering the said tax, for refund of the D c as . ]. sum of Rs. 45,802-0-0 being the total amount of tax collected from the appellant, for costs and interest on judgment. By its judgment dated July 31, 1951, the trial court decreed the suit in full. The respondent preferred an appeal before the High Court against the said judgment and decree of the trial court and the High Court by its judgment and decree dated February 10, 1953, allowed the appeal and dismissed the appellant's suit with costs throughout. The High Court, however, granted to the appellant a certificate of fitness for appeal to this Court and hence this fim, l appeal questioning the validity of the said tax.\n\nAt all times material to this appeal the. reE; pondent was governed by the Cantonments Act, 1921l (Act II of 1924).\n\nSection 60 of that Act runs as follows:- \" 60(1) The Board may, with the previous sanction of the local Government, impose in any Cantonment any tax; which, under any enactment for the time being in force, may be imposed in any municipality in the province wherein the Cantonment is situated.\n\n(2) Any tax imposed under this section shall take effect from the date of its notification in the official gazette\".\n\nThe enactment under which shortly after the date of passing of the Cantonments Act, 1924, tax could be imposed by the municipal boroughs in the province of Bombay was the Bombay Municipal Boroughs Act, 1925 (Born. XVIII of 1925). Therefore the powers of the respondent to levy and collect taxes under the provisions of the Cantonments Act were co-extensive with the powers of the Borough Municipalities under the Bombay Municipal Boroughs Act, 1925. Section 73 of the last mentioned Act specified the taxes which\n\n'959 might be imposed by a municipality. The relevant - . portions thereof, prior to its present adaptation, were The Western India .c Theatres Ltd. as .ioJ}OWS :- v. \" Subject to any general or special orders which The Cantonme•; t the Provincial Government may make in this behalf Board, Poona, and to the provisions of sections 75 and 76, a munici- Cantonment pality may impose for the purposes of this Act any of\n\nDas C. ]. the following taxes, namely:- . ..... ................................ ' .......................... .\n\n(xiv) any other tax (not being a toll on motor vehicles and trailers, save as provided by section 14 of the Bombay Motor Vehicles Tax Act, 1935) which under the Government of India Act, 1935, the provincial Legislature has power to impose in the province.\" The question is whether the provincial legislature of Bombay had power to impose the tax which is under consideration in this appeal.\n\nUnder s. 100 of the Government of India Act, 1935 read with entry 50 in Sch. VII thereto the provincial legislature had power to make law with respect to\n\n\"taxes on luxuries, including taxes on entertainments, amusements, betting and gambling\". Learned counsel for the appellant contends that the impugned tax is not covered by this entry at all. This entry, according to him, contemplates a law imposing taxes on persons who receive or enjoy the luxuries or the entertainments or the amusements and, therefore, no law made with respect to matters covered by this entry can impose a tax on persons who provide the luxuries, entertainments or amusements, for the last mentioned persons themselves receive or enjoy no luxury or entertainment or amusement, but simply carry on their profession, trade or calling.\n\nLearned counsel urges that the impugned law is really one with respect to matters specified in ent.ry 46, namely, taxes on professions, trades, callings and employments and, therefore, cannot exceed Rs. 100 per annum under s. 142A of the Government of India Act, 1935 and- Rs. 250 per annum under Art. 276(2) of the Constitution.\n\nVVe are unable to accept this argument as sound.\n\n(2) S.C.R.\n\nSUPREME COURT REPORT8 69\n\nAs pointed out by this Court in Navinchandra r959\n\nM.afalal v. Te Commi.ssioner. of Incm_e Ta'.I.:, Bombay The Western India City ( ), followmg certam earlier dec1s10ns referred to Theatres Ltd. therein, the entries in the legislative list should not be v. read in a narrow or restricted sense and that each The Cantonment general word should be held to extend to all ancillary Board, Poona, or subsidiary matters which can fairly and reasonably Cantonment be said to be comprehended in it. It has been accept- 1 Das C .• ed as well settled that in construing such an entry conferring legislative powers the widest possible construction according to their ordinary meaning must be put upon the words used therein. In view of this well established rule of interpretation, there can be no reason to construe the words \" taxes on h1xuries or entertainments or amusements\" in entry 50 as hav- - ing a restricted meaning so as to confine the operation of the law to be made thereunder only to taxes on persons receiving the luxuries, entertainments, or amusements. The entry contemplates luxuries, entertainments, and amusements as objects on which the tax is to be imposed. If the words are to be E:O regarded, as we think they must, there can be no reason to differentiate between the giver and the receiver of the luxuries, entertainments, or amusements and both may, with equal propriety, be made amenable to the tax. It is true that economists regard an entertain ment tax as a tax on expenditure and, indeed, when the tt; Lx is imposed on the receiver of the entertainment, it does become a tax on expenditure, but there is no warrant for holding that entry 50 contemplates only a tax on moneys spent on luxuries, entertainments or amusements. The entry, as we ha.ve said, contemplates a law with respect to these matters regarded as objects and a law which imposes tax on the act of entertaining is within the entry whether it falls on the giver or the receiver of that entertainment.\n\nNor is the impugned tax a tax imposed for t.he privilege of carrying on any trade or calling. It is a tax imposed on every show, that is to say, on every instance of the exercise of the particular trade, calling or employment. If there is no show, there is no tax. A\n\n(r) [1955] r S.C.R. 829.\n\nr959 lawyer has to pay a tax or fee to take out a license - irrespective of whether or not he actually practises.\n\nThe Western India Th · t ,. th \"] f h th ht Tl t Ltd at tax is a ax ior e pnv1 ege o avmg e ng \"a ~' · to exercise the profession if and when the person tak- The Cantonment ing out the license chooses to do so. The impugned\n\nBoard, Poona, tax is a tax on the act of entertainment resulting in a Cantonment show. In our opinion, therefore, s. 73 is a law with\n\nDas C.j. respect to matters enumerated in entry 50 and not entry 46 and the Bombay legislature had ample power .to enact this Ia w.\n\nThe only other point urged before us is that the notification is violative of the equal protection clause of our Constitution in that it has picked out the appellant's cinema houses for discriminatory treat- • ment by imposing on it a tax at the rate of Rs. 10 per show, while a tax of only Rs. 5 per show is imposed on other cinema houses. The mearning, scope, and effect of the provisions of Art. 14 of our Constitution have been fully dealt with, analysed and laid down by this Court in Budhan Choudhury v. The State of Bihar (1) and Shri Rama Krishna Dalmia v. Shri Justice S. R. Tendollcar ('). It appears, however, from the record that no issue was raised and no evidence was adduced by the appellant before the trial court showing that there were other cinema Houses similarly situate as that of the appellant's cinema Houses. It may not be unreasonable or improper if a higher tax is imposed on the shows given by a cinema h.ouse which contains large seating accommodation and is situate in fashionable or busy localities where the number of visitors is more numerous and in more affluent circumstaµces than the tax that may be imposed on shows given in a smaller cinema house containing less accommodation and situate in some localities where the visitors are less numerous or financially in less affluent circumstances, for the two cannot, in those circumstances, be said to be similarly situate. There was, however, no material on which the trial court could or we may now come to a decision as to whether there had been any real diserimination in the facts and circumstances of this case. It\n\n(1) [1951] S.C.R. 1045.\n\n(2) [1959] S.C.R. 279.\n\nmay be that the appellant may in some future procex959 eding adduce evidence to establish that there are other Th w t 1 a cinema houses similarly situate and that the .imposieThe;;,;; t;, '\" tion of a higher tax on the appellant is discriminatory v. as to which we say nothing; but all we need say is The Cantonment that in this suit the appellant bas not discharged the Board, Poona, onus that was on him and, on the material on record, Cantonment it is impossible for us to hold in this case that there 1 Das C .• has been any discrimination in fact.\n\nFor reasons stated abve this appeal must be dismissed with costs.\n\nAppeal dismissed\n\nTHE WESTERN INDIA THEATRES LTD. v.\n\nMUNICIPAL CORPORATION OF THE CITY OF\n\nPOONA {S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR.\n\nK. N. WANCHOO and M. HIDAYATULLAH, JJ.)\n\nMunicipality, Power of-Imposition of tax on cinema show- Constitutional validity of enactment-Enhancement of such tax- Validity-Bombay District Municipal Act, I90I (Bom. III of\n\nIgoI), s. 59(I) (XI)-Bombay Municipal Boroughs Act, I925 (Bom. XVIII of Ig25), s. 60.\n\nThe appellant, a public limited company, was a lessee of four cinema houses situated within the municipal limits of Poona City where it used to exhibit cinematograph films.\n\nThe respondent, the Municipal Corporation of Poona, in exercise of its power under s. 59(1) (XI) of the Bombay District Municipal Act,\n\n1901, levied with effect from October l, 1920, a tax of Rs. 2 per day as license fee on the-owners and lessees of cinema houses.\n\nThat Act governed the Municipality till 1926 and thereafter it was governed bythe Bombay Municipal Boroughs Act, 1925. The tax was enhanced to Re. l per show on June 3, 1941, and to Rs. 5 per show on June 9, 1948. By the suit, out of which the present appeal arose, the appellant sought for a declaration that the levy of the said tax, the rules framed in connection therewith and the enhancement of the tax as aforesaid were iIIegal and ultra vires.\n\nThe trial court decreed the suit in part but the High Court in appeal reversed the decision of the trial court\n\nI959\n\nJanuary z6.", "total_entities": 46, "entities": [{"text": "THE WESTERN INDIA THEATRES LTD", "label": "PETITIONER", "start_char": 957, "end_char": 987, "source": "metadata", "metadata": {"canonical_name": "THE WESTERN INDIA THEATRES LTD", "offset_not_found": false}}, {"text": "THE CANTONMENT BOARD, POON A,\n\nCANTONMENT", "label": "RESPONDENT", "start_char": 993, "end_char": 1034, "source": "metadata", "metadata": {"canonical_name": "THE CANTONMENT BOARD, POONA, CANTONMENT", "offset_not_found": false}}, {"text": "S. R. DAS", "label": "JUDGE", "start_char": 1037, "end_char": 1046, "source": "metadata", "metadata": {"canonical_name": "SUDHI RANJAN DAS*", "offset_not_found": false}}, {"text": "P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 1066, "end_char": 1086, "source": "metadata", "metadata": {"canonical_name": "P.B. GAJENDRAGADKAR", "offset_not_found": false}}, {"text": "M. HIDAYATULLAH, JJ.", "label": "JUDGE", "start_char": 1108, "end_char": 1128, "source": "metadata", "metadata": {"canonical_name": "M. HIDAYATULLAH", "offset_not_found": false}}, {"text": "Entertainment Tax-Imposition on cinema show--Validity- Cantonments Act", "label": "STATUTE", "start_char": 1131, "end_char": 1201, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 60", "label": "PROVISION", "start_char": 1226, "end_char": 1231, "source": "regex", "metadata": {"linked_statute_text": "Entertainment Tax-Imposition on cinema show--Validity- Cantonments Act", "statute": "Entertainment Tax-Imposition on cinema show--Validity- Cantonments Act"}}, {"text": "Bombay Municipal Boroughs Act", "label": "STATUTE", "start_char": 1232, "end_char": 1261, "source": "regex", "metadata": {}}, {"text": "s. 73", "label": "PROVISION", "start_char": 1291, "end_char": 1296, "source": "regex", "metadata": {"linked_statute_text": "Bombay Municipal Boroughs Act", "statute": "Bombay Municipal Boroughs Act"}}, {"text": "Government of India Act", "label": "STATUTE", "start_char": 1297, "end_char": 1320, "source": "regex", "metadata": {}}, {"text": "s. 60(1)", "label": "PROVISION", "start_char": 2320, "end_char": 2328, "source": "regex", "metadata": {"linked_statute_text": "Government of India Act", "statute": "Government of India Act"}}, {"text": "Cantonments Act, 1924", "label": "STATUTE", "start_char": 2336, "end_char": 2357, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 73", "label": "PROVISION", "start_char": 2398, "end_char": 2403, "source": "regex", "metadata": {"linked_statute_text": "the Cantonments Act, 1924", "statute": "the Cantonments Act, 1924"}}, {"text": "Bombay Municipal Cantonment Boroughs Act, 1925", "label": "STATUTE", "start_char": 2417, "end_char": 2463, "source": "regex", "metadata": {}}, {"text": "s. 100", "label": "PROVISION", "start_char": 2835, "end_char": 2841, "source": "regex", "metadata": {"linked_statute_text": "the Bombay Municipal Cantonment Boroughs Act, 1925", "statute": "the Bombay Municipal Cantonment Boroughs Act, 1925"}}, {"text": "Government of India Act, 1935", "label": "STATUTE", "start_char": 2849, "end_char": 2878, "source": "regex", "metadata": {}}, {"text": "s. 142A", "label": "PROVISION", "start_char": 3367, "end_char": 3374, "source": "regex", "metadata": {"linked_statute_text": "the Government of India Act, 1935", "statute": "the Government of India Act, 1935"}}, {"text": "Government of India Act, 1935", "label": "STATUTE", "start_char": 3382, "end_char": 3411, "source": "regex", "metadata": {}}, {"text": "Art. 276(2)", "label": "PROVISION", "start_char": 3441, "end_char": 3452, "source": "regex", "metadata": {"linked_statute_text": "the Government of India Act, 1935", "statute": "the Government of India Act, 1935"}}, {"text": "[1955] 1 S.C.R. 829", "label": "CASE_CITATION", "start_char": 3980, "end_char": 3999, "source": "regex", "metadata": {}}, {"text": "Companies Act", "label": "STATUTE", "start_char": 5746, "end_char": 5759, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 60", "label": "PROVISION", "start_char": 6100, "end_char": 6105, "source": "regex", "metadata": {"statute": null}}, {"text": "Cantonments Act", "label": "STATUTE", "start_char": 6113, "end_char": 6128, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Cantonments Act, 1921", "label": "STATUTE", "start_char": 9644, "end_char": 9665, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Section 60", "label": "PROVISION", "start_char": 9686, "end_char": 9696, "source": "regex", "metadata": {"linked_statute_text": "the Cantonments Act, 1921", "statute": "the Cantonments Act, 1921"}}, {"text": "enactment under which shortly after the date of passing of the Cantonments Act, 1924", "label": "STATUTE", "start_char": 10102, "end_char": 10186, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Bombay was the Bombay Municipal Boroughs Act, 1925", "label": "STATUTE", "start_char": 10254, "end_char": 10304, "source": "regex", "metadata": {}}, {"text": "Cantonments Act", "label": "STATUTE", "start_char": 10421, "end_char": 10436, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Section 73", "label": "PROVISION", "start_char": 10548, "end_char": 10558, "source": "regex", "metadata": {"linked_statute_text": "Bombay was the Bombay Municipal Boroughs Act, 1925", "statute": "Bombay was the Bombay Municipal Boroughs Act, 1925"}}, {"text": "sections 75 and 76", "label": "PROVISION", "start_char": 10934, "end_char": 10952, "source": "regex", "metadata": {"linked_statute_text": "Bombay was the Bombay Municipal Boroughs Act, 1925", "statute": "Bombay was the Bombay Municipal Boroughs Act, 1925"}}, {"text": "section 14", "label": "PROVISION", "start_char": 11233, "end_char": 11243, "source": "regex", "metadata": {"linked_statute_text": "Bombay was the Bombay Municipal Boroughs Act, 1925", "statute": "Bombay was the Bombay Municipal Boroughs Act, 1925"}}, {"text": "Bombay Motor Vehicles Tax Act, 1935", "label": "STATUTE", "start_char": 11251, "end_char": 11286, "source": "regex", "metadata": {}}, {"text": "Government of India Act, 1935", "label": "STATUTE", "start_char": 11304, "end_char": 11333, "source": "regex", "metadata": {}}, {"text": "s. 100", "label": "PROVISION", "start_char": 11541, "end_char": 11547, "source": "regex", "metadata": {"linked_statute_text": "the Government of India Act, 1935", "statute": "the Government of India Act, 1935"}}, {"text": "Government of India Act, 1935", "label": "STATUTE", "start_char": 11555, "end_char": 11584, "source": "regex", "metadata": {}}, {"text": "s. 142A", "label": "PROVISION", "start_char": 12569, "end_char": 12576, "source": "regex", "metadata": {"linked_statute_text": "the Government of India Act, 1935", "statute": "the Government of India Act, 1935"}}, {"text": "Government of India Act, 1935", "label": "STATUTE", "start_char": 12584, "end_char": 12613, "source": "regex", "metadata": {}}, {"text": "Art. 276(2)", "label": "PROVISION", "start_char": 12643, "end_char": 12654, "source": "regex", "metadata": {"linked_statute_text": "the Government of India Act, 1935", "statute": "the Government of India Act, 1935"}}, {"text": "s. 73", "label": "PROVISION", "start_char": 15501, "end_char": 15506, "source": "regex", "metadata": {"statute": null}}, {"text": "Art. 14", "label": "PROVISION", "start_char": 16049, "end_char": 16056, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 59(I)", "label": "PROVISION", "start_char": 18307, "end_char": 18315, "source": "regex", "metadata": {"linked_statute_text": "Power of-Imposition of tax on cinema show- Constitutional validity of enactment-Enhancement of such tax- Validity-Bombay District Municipal Act", "statute": "Power of-Imposition of tax on cinema show- Constitutional validity of enactment-Enhancement of such tax- Validity-Bombay District Municipal Act"}}, {"text": "Bombay Municipal Boroughs Act", "label": "STATUTE", "start_char": 18321, "end_char": 18350, "source": "regex", "metadata": {}}, {"text": "s. 60", "label": "PROVISION", "start_char": 18379, "end_char": 18384, "source": "regex", "metadata": {"linked_statute_text": "Bombay Municipal Boroughs Act", "statute": "Bombay Municipal Boroughs Act"}}, {"text": "s. 59(1)", "label": "PROVISION", "start_char": 18644, "end_char": 18652, "source": "regex", "metadata": {"linked_statute_text": "Bombay Municipal Boroughs Act", "statute": "Bombay Municipal Boroughs Act"}}, {"text": "Bombay District Municipal Act", "label": "STATUTE", "start_char": 18665, "end_char": 18694, "source": "regex", "metadata": {}}, {"text": "Bombay Municipal Boroughs Act, 1925", "label": "STATUTE", "start_char": 18909, "end_char": 18944, "source": "regex", "metadata": {}}]}
{"document_id": "1959_2_641_659_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPORTS 641\n\nThe conclusion at which we have arrived is that the Act and its several provisions do not suffer from the vice of extra-territoriality in the sense .suggested by learned counsel for the respondent and there is no such conflict of jurisdiction as learned counsel for the respondent has suggested. Accordingly, the Act is good and applies to the Baidyanath temple and the properties appertaining thereto.\n\nThe result, therefore, is that the appeal succeeds and is allowed with costs. The judgment and order of the High Court dated October 9, 1953, are set aside and the petition under Art. 226 of the Constitution made by the respondent must stand dismissed with costs.\n\nAppeal allowed.\n\nMESSRS. R. C. MITTER & SONS\n\nTHE COMMISSIONER OF INCOME-TAX,\n\nWEST BENGAL, CALCUTTA\n\n(B. P. SINHA, J. L. KAPUR and\n\nM. HIDAYATULL~H, JJ.)\n\nIncome-tax-Registration of firm-Procedure-\" Constituted under an instrument of partnership\", Meaning of-Indian Incometax Act, r922 (XI of r922), s. 26A, Rules 2 to 6B.\n\nThe question for determination in these two appeals was whether the appellant firms were entitled to registration under s. 26A of the Indian Income-tax Act and the common point of law involved was the interpretation of the WOjds \"constituted under an instrument of partnership \" occurring in that section.\n\nIn Appeal No. 85 the assessee firm was said to have been constituted by a verbal agreement in April, 1948, and the deed of partnership was drawn up in September, 1949. The application for registration under s. 26A of the Act for the assessment year 1949-1950 was made thereafter to the Income-tax Officer. In Appeal No. 389 the assessee firm was verbally constituted in\n\nI959\n\nThe State of Bihar &· Others\n\nBhabapritananda\n\nOjha\n\nS. K. Das].\n\nApril r5.\n\n642 SUPREME COURt REPORTS tl959] Supp.\n\n1959 June, 1944 and a memorandum of partnership was executed in June 1948. The application for registration under s. 26A for Messrs. R. C. the assessment years 1945-46 and 1946-47 was made on August Mitter &- Sons 24, 1949.\n\nv. . .\n\nThe applications were rejected by the Income-tax Officer The Commissioner and tbe appeals preferred by the assessees were also dismissed\n\n0!· Income-tax, by the Income-tax Appellate Tribunal. The High Court took West Bengal, the view thats. 26A of the Indian Income-tax Act contemplated Calcutta a firm created or brought into existence by an instrument of partnership and answered the questions against the assessees.\n\nIt was contended on their behalf that so long as the assessment was not made, they were entitled to registration irrespective of the year in which the instrument of partnership came into existence.\n\nThis was controverted on behalf of the Revenue and their case was that a firm seeking registration under s. 26A of the Act should be created by an instrument of partnership, or at any rate, such instrument should be in existence during the relevant accounting year, i. e., the year previous to the year of assessment in respect of which the application for registration was made.\n\nHeld, that the words \"Constituted under an instrument of partnership\" occurring in s. 26A of the Indian Income-tax Act included not only firms that were created by instruments of partnership but also those that were subsequent to their creation, clothed in legal form by reducing the terms and conditions of the partnerehip in writing.\n\nDwarkadas Khetan & Co. v. Commissioner of Income-tax, Bombay City, Bombay, [1956] 29 I.T.R. 903, approved.\n\nKalsi Mechanical Works, Nandpur v. Commissioner of Incometax, Simla, [1953] 24 I.T.R. 353, Padam Parshad Rattan Chand v.\n\nCommissioner of Income-tax, Delhi, (1954] 25 I.T.R. 335, Bery Engineering Co., Delhi v. Commissioner of Income-tax, Delhi, [1955] 28 I.T.R. 227, Income-tax Commissioner, Delhi v. Messrs. Birdhi Chand Girdhari Lal, [1955] 28 I.T.R. 280 and Khimji Walji & Co. v. Commissioner of Income-tax, Bihar and Orissa, [1954] 25 I.T.R. 462, dissented from.\n\nSection 26A, read with ss. 26, 28 and Rules 2 to 6B, laid down the following essential conditions that a firm must fulfil before it could claim registration under s. 26A of the Act,-\n\n(1) that i' must be constituted under an Instrument of Partnership, specifying the individual shares of the partners ;\n\n(2) that an application on behalf of and signed by, all the partners, containing all the particulars as set out in the Rules, must be made ;\n\n(3) that the application must be made before the assessment of the income of the firm was made under s. 23 of the Act for that particular year ;\n\n(4) that the profits (or loss, if any) of the business relating\n\nto the previous year, i. e., the relevant accounting year, must be 1959 divided or credited, as the case may be, in accordance with the terms of the Instrument; and lastly, Messrs. R. C.\n\n(5) that the partnership must be genuine and in actual Mitter & Sons existence in conformity with the terms and conditions of the\n\nv. . .\n\nInstrument. The. Commissioner\n\nof Income-tax, Where, therefore, as in the instant cases, the partnership West Bengal, did not admittedly function in terms of an instrument of partner- Calcutta ship which was operative during the accounting year, it could not be registered during the following assessment year.\n\nCommissioner of Income-tax, Bombay North v. Shantilal Vrajlal & Chandulal Dayalal & Co. [1957] 31 I.T.R. 903, disapproved.\n\nPer M. HrnAYATULLAH, J.-While it was clearly not possible to read \"constituted by\" for the words \"constituted under\" occurring in s. z6A of the Act, it was doubtful whether the instrument of partnership sought to be registered must be in existence in the accounting year in order to entitle it to registration.\n\nDwarkadas Khetan & Co. v. Commissioner of Income-tax, Bombay City, Bombay, [1956] 29 I.T.R. 903, referred to.\n\nCIVIL\n\nAPPELLATE JURISDICTION: Civil Appeals Nos. 85 & 389 of 1957.\n\nAppeal from the judgment and order dated August 26, 1955, of the Calcutta High Court in Income-tax\n\nReferenes Nos. 44 of 1954 and 17 of 1953.\n\nS. Mitra and P. K. Mukherjee, for the appellant (in C. A. No. 85/57.) N. C. Chatterjee and P. K. Ghosh, for the appellant (in C. A. No. 389/57). R. Ganapathy Iyer, R.H. Dhebar and D. Gupta, for the respondent. 1959.\n\nApril 15. The judgment of Sinha and Kapur, JJ., was delivered by Sinha, J. Hidayatullah, J., delivered a separatejudgment.\n\nSINHA, J.-The common question of law arising in these two appeals on certificates of fitness granted by the High Court of Calcutta under s. 66A(2) of the Indian Income-tax Act, 1922, is the effect and scope of the words \"constituted under an instrument of partnership\" in s. 26A of the Income-tax Act, which, in the course of this judgment, will be referred to as the Act.\n\nSinha ].\n\n1959 The facts of the two cases, leading upto these appeals, though not dissimilar, are not identical. They Mess1's. R. C. th \" t t t ] Miller~ Sons are, ereiore, se ou separa e y. v.\n\nIn Civil Appeal No. 85 of 1957, Messrs. R. C. Mitter The Commissioner and Sons, 54, Rani Kan to Bose Street, Calcutta, claim of Income-tax, to be a firm said to have been constituted in April\n\nWest Bengal, 1948 with four persons whose names and shares in the Calcutta ' . .\n\nSinha ].\n\n.. •\n\nnett profits of the partnership busrness, are stated to be as under :-\n\n(a) Ramesh Chandra Mitter-40 per cent. of the nett profits.\n\n(b) Sudhir Chandra Mitter-30 per cent. of the nett profits.\n\n(c) Sukumar Mitter-20 per cent. of the nett profits. .\n\n(d) Sushi! Chandra Mitter-10 per cent. of the nett profits.\n\nThe firm intimated its bank, the Bengal Central Bank, Limited, (as it then was), of the constitution of the firm as set out above, by its letter dated April 15,\n\n1948. The letter also stated that a partnership deed was going to be drawn up and executed by the partners aforesaid, and that the deed so drawn upt will be forwarded to the bank in due cours!J.\n\nThough the firm is said to have come into existence in April 1948, the deed of partnership which is set out as annexure \"A\" at p. 5 of the paper book, was drawn up only on September 27, 1949. This deed of partnership appears to have been registered under the provisions of the Indian Partnership Act, on October 12, 1949. It was also forwarded to the Bengal Central Bank, Ltd., Head Office at Calcutta, as it appears from the seal of the bank and the signature dated December 7, 1949.\n\nAn application to register the firm under s. 26A, for the assessment year 1949-50, was made to the Income-tax Authorities. The date of the said application does not appear from the record before us. The application was rejected by the Income-tax Authorities. The firm preferred an appeal to the Income-tax Appellate Tribunal, which was also dismissed by the Tribunal by its order dated September 7, 19~3. The ground of the order of the Tribunal was that as the firm admittedly\n\nwas formed by a verbal agreement in April 1948, and r959 not by or under an instrument in writing dated 9 d h ,. h Messrs. R. C.\n\nSeptember 27, 1 49, an as t e assessment was 1or t e Mitter c;. Sons year 1949-50, for which registration of the firm was v. sought, the registration could not be ordered. The The Commissioner Tribunal also referred to the letter aforesaid to the of Income-tax, Bengal Central Bank, and observed that the letter w~~ 1 ::~; az, merely contained information as to the formation of the partnership and of the personnel thereof, but it Sinha J. did not contain the terms on which the partnership had been formed. It also showed that a partnership had been created but not by deed. Hence, the Tribunal further observed, the letter might be useful for consideration on the question of the genuineness of the firm, but it could not fulfil the resiuirements of s. 26A, namely, that the firm should be constituted under an instrument of partnership. Therefore, the Tribunal held that assuming the firm to be genuine, it was not entitled to be registered under s. 26A of the Act.\n\nThereupon, the assessee nioved the Tribunal under s. 66(1) of the Act. That application was granted by the order dated February 2, 1954, and the case stated to the High Court for its decision on the following question:-\n\n\"Whether the assessee firm which is alleged to have come into existence by a verbal agreement in April, 1948, is entitled to be registered under section 26A for the purpose of assessment for 1949-50, where the Instrument of Partnership was drawn up only in September, 1949, after the expiry of the relevant previous year \". The High Court Bench, presided over by Chakravarti, C. J., by its judgment dated August 26, 1955, answered the question in the negative. The learned\n\nChief Justice considered the matter from all possible view-points, including grammatical, etymological and textual matters, and came to the conclusion that \"constituted\" meant\" created\". He also considered that the preposition \"under\" is \"obviously inappropriate'', after having convinced himself that \" constituted\" could be equated with \"created\". He also found no difficulty in observing that \" some of the\n\nr959 paragraphs of the Form appear to be ill-adjusted to the provisions of the Act and the Rules\". In the end,\n\n;,;;;;'~ R50~;, therefore, he concluded with the remarks: \"It appears v. to me to be desirable that the language of the section, The Commission\" as also that of the Rules should receive legislative of Incometax, attention\".\n\nWest BengrJl,\n\nCalcutta\n\nSinha ].\n\nIn Civil Appeal No. 389of1957, Messrs. D. C. Auddy & Brothers, Calcutta, claim to be a partnership consisting of Dula! Chand Auddy, Prem Chand Auddy, Gora Chand Auddy and Kalipada Nandy. The partnership business is said to have begun in June, 1944. An application was made on August 24, 1949, for the registration of the partnership. The Income-tax Officer and the Appellate Assistant Commissioner were of the opinion that the partnership was not a genuine one, and could not be registered.\n\nAnother reason for. not ordering registration was that the partnership deed, having been executed on June 2, 1948, could not be operative during the two years under consideration, namely, 1945-46 and 1946-47. On appeal, the Income. tax Appellate-- Tribunal rested its decision on the finding that the alleged partnership had not been constituted under an instrument of partnership within the meaning of those words in s. 26A of the Act.\n\nAt the instance of the assessee, the Tribunal framed the following question for determination by .the High Court:\n\n\" Whether the assessee firm constituted orally in June, 1944, can validly be registered in the assessment years 1945-46 and 1946-47 under Section 26A of the Indian Income Tax Act on the basis of a Memorandum of Partnership executed in June 1948.\"\n\nThe other parts of the statement of the case by the Tribunal, refer to the merits of the assessment, with which we are not concerned in this appeal. Hence, it is not necessary to set out those facts. On this part of the statement of the case, the High Court gave the same answer as in the other appeal. In this case also, the High Court granted the necessary certificate under s. 66A(2), read with art. 135 of the Constitution. As both the cases raise the same question of law, they have been heard together, and will be governed by this judgment.\n\n(2) S.C.R. SUPR:t!1ME COURT REPORTS 647\n\nIt is convenient at this stage to set out the relevant r959 provisions of the Act. Section 26A is in these terms:-\n\n\" 26A. Procedure in regisuation of firms.-(1) Ap- :/;:::; s&, R;,0<;; s plication may be made to the Income-tax Officer on v. behalf of any firm, constituted under an instrument of The Commissioner partnership specifying the individual shares of the of Income-tax, partners, for registration for the purposes of this Act West Bengal, b \" Calcutt,, and of any other enactment for the time eing in .Loree relating to income-tax or super tax.\n\nSinha J.\n\n(2) The application shall be made by such person or persons and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed.\" The section contemplates the framing of rules laying down the details of the Form in which the application has to be made and the particulars which should be stated in the application, and other cognate matters.\n\nSection 59 of the Act, authorizes the Central Board of Revenue, subject to the control of the Central Government, to make rules for carrying out the purposes of the Act, and sub-s. (5) of s. 59 provides that rules made under the section, shall be published in the Official Gazette, and \"shall thereupon have effect as if enacted in this Act\". Income-tax Rules 2 to 6B lay down the details of the procedure for making an application for the registration of a firm, as contemplated under s. 26A, quoted above. These rules have been amended extensively in 1952, but we are concerned in this case with the rules before those amendments. Rule 2 requires such an application to be signed by all the partners personally, and to be made before the income of the firm is assessed for the year, under s. 23 of the Act.\n\nRule 3 requires that the application be made in the Form annexed to the rule, and that the application \"shall be accompanied by the original Instrument of Partnership under which the firm is constituted ...... \".\n\nThe Form appearing in r. 3, requires the assessment year to be specified. Thus, the registration is for a particular year of assessment, and not for future years also, and therefore, the application for registration has\n\nto be made every year, which in fact means an application for renewal of the registration. Paragraph 3 of Messrs. R. C. h F Mitt\" & sons t e orm requires a certificate to be signed by the ap-\n\nI959\n\nv. plicants for registration, to the effect that the profits (or The Commissione. loss, if any) of the previous year were divided or credit. of Jn, ome-tax. ed as shown in Section B of the Schedule.\n\nThe ]'orm West Bengal. contains the Schedule in 7 columns which require the Calcutta\n\nSinha]. names of the partners, their addresses, the da.te of admittance to partnership, their shares in the profits or loss, etc., to be filled in. Under the Schedule, there are Section A and Section B. Section A has to contain particulars of the firm as constituted at the date of the application, and Section B has to contain the particulars of the apportionment of the income, profits or gains (or loss) of the business in the previous year between the partners who in that J}!:evious year were entitled to share therein. Rule 4 provides that if the Income-tax Officer is satisfied that there is or was a . firm in existence constituted as shown in the instrument of partnership, and that the application has been properly made, he has to enter a certificate at the foot of the Instrument of Partnership that the firm has been registered under s. 26A of the Act, and that the certificate of registration shall have effect for the assessment for the year specified therein. Rule 5 is as follows:-\n\n\" 5. The certificate of registration granted under Rule 4 shall have effect only for the assessment to be made for the year mentioned therein.\" And Rule 6 makes provision for the certificate of registration to be renewed for a subsequent year, on an application being made in that behalf in accordance with the preceding Rules.\n\nIt is mainfest that for a true and proper construction of the relevant provisions of the Act, relating to registration of firms, ss. 26, 26A and 28, and the Rules summarized above, have to be read together. So read, it is reasonably clear that the following essential conditions must be fulfilled in order that a firm may be held entitled to registration :-\n\n(I)· That the firm should be constituted under an Instrument of Partnership, specifying the individual shares of the partners.\n\n(2) That an application on behalf of, and signed\n\nI959 by, all the partners, containing all the particulars as th R 1 h b d Afessrs. R. c.- set out m e u es, as een ma e; Mitter & Sons\n\n(3) That the application has been made before v. the assessment of the income of the firm, made under The Commissioner s. 23 of the Act (omitting the words not necessary for our present purpose), for that particular year;\n\n(4) That the profits (or loss, if any) of the business relating to the previous year, that is to say, the relevant accounting year, should have been divided or credited, as the case may be, in accordance with the terms of the Instrument; and lastly,\n\n(5) That the partnership must have been genuine, and must actually have existed in confor, mity with the terms and conditions of the Instrument.\n\nIt is clear from what has been said above with reference tothe relevant provisions of the Act, that the certificate of registration has reference to a particular assessment year, and has effect for the assessment to be made for that particular year. In other words, the terms of the partnership should appear in the Instrument of Partnership in respect of the relevant accounting year. It is equally clear that the firm to be registered, should have been in existence during the accounting year, \" constituted as shown in the Instrument of Partnership\". The Rules, thus, contemplate a document operative during the accounting year. We are not here concerned with the further question whether the document should be in existence at the very inception of the accounting year, or before the Y.ear is out.\n\nThe provisions of the Act, set out above, do not present any serious difficulty except for the words \"constituted under an Instrument of Partnership\" occurring in s. 26A and the relevant Rules. On the interpretation of these words, there has been a conflict of judicial opinion, as will presently appear. On behalf of the assessee-appellants, it has been contended that so long as the assessment has not been made, the assessees are entitled to have their firms registered in accordance with the terms of the Instrument of\n\nS:<l\n\nof Income-tax,\n\nWest Bengal,\n\nCalcutta\n\nSinha ].\n\nPartnership, irrespective of the year in which the Instrument may have come into existence. Strong\n\nA1:;;;::; s~ R;,;,;, reliance was placed upon the decision of the Bombay v.\n\nHigh Court (Chagla, C. J., and Tendolkar, J.) in the\n\nI959\n\nThe Commissfon\" case of Dwarkadas Khetan & Co. v. Commissioner of of Income-tax. Income-tax, Bombay City, Bomb(ly(1), wherein, the West Bengal, following observations have been made:- Calcutta A fi k l\" d\n\n/ Sinha ].\n\n\" ny rm can ma e an app 10at10n un er section 26A for registration and the two conditions that it has got to comply with are that it must be constituted under an instrument of partnership and the second condition is that the instrument of partnership must specify the individual shares of the partners. If these two conditions are satisfied it would be entitled to registration. The section does not say that the firm must be constituted by the instrument of partnership. It does not require that the firm must come into existence by reason of the instrument of partnership, or that the firm should be the creature of the instrument of partnership, or that the firm must not exist prior to the instrument of partnership being executed. \" In the case decided by the Bombay High Court, the Instrument of Partnership had been executed on March 27, 1946, with effect from January 1, 1946. On an application made to the Department to register the firm, the matter was determined by the Income-tax Appellate Tribunal against the assessee on the ground that the partnership was in existence before the deed was executed, and that, therefore, it could not be registered.\n\nBefore the Bombay High Court, reliance had been placed on behalf of the Department on the decision of the Calcutta High Court, now before us in appeal, as also on a decision of the Punjab High Court.\n\nThe decision of the Calcutta High Court now under examination, in the case of R. C. Mitter & Sons v.\n\nCommissioner of Income-tax('), takes the view that s. 26A of the Act contemplates a firm created or brought into existence by an Instrument of Partnership, which governs the distribution of shares in the relevant accounting period. Such a deed should have\n\n(1) [1956] 29 I.T.R. 903, 907.\n\n(2) [1955] 28 I.T.R. 698, 704- 705.\n\ncome into existence on or before the commencement of z959 the relevant accounting period. The other decision relied upon in the Bombay High Court, had been ; f;:;:; s&, R~;; s given by a Division Bench of the Punjab High Court, v. reported in Padam Parshad Rattan Chand v. Commis- The Commissioner. sioner of Income-tax, Delhi (1). of Income-tax, On the other hand, it has been contended on behalf West Bengal, Calcutta of the Revenue that in order to entitle a firm to be registered, the firm should have been created by an Sinha J.\n\nInstrument of Partnership, or at any rate, such an Instrument should be in existence during the relevant accounting year, that is, the year previous to the year of assessment in respect of which the application for registration has been made. F'or the first part of the submission on behalf of the respondent, there is ample authority in the decision under appeal, which pad been relied upon before the Bombay High Court. In that case, (R. C. Mitter & Sons v. Commissioner of Income-tax (supra) (2) ), Chakravarti, C. J., who delivered the opinion of the Court under s. 66(1) of the Act, after a very elaborate discussion, came to the conclusion which may best be expressed in his own words, as follows :-\n\n\" If by the expression ' constituted under an instrument of partnership' is meant a firm which originated in a verbal agreement but with respect to which a formal deed was subsequently executed, there would be no room in the section for partnerships actually created by an instrument and such partnerships, although most obviously entitled to registration, would be excluded from the purview of the section.\n\nEven etymologically or textually, I do not think that the word 'constituted', when used in relation to a firm or such other body, can mean anything but 'created' when the reference is to some deed or instrument to which the inception of the firm or other body is to be traced. \" After having, thus, held that s. 26A contemplated firms created or brought into existence by a deed in writing, he had no difficulty in substituting \" by \" for \"under'', thus, making the crucial words \"constituted\n\n(1) [1954] 25 I.T.R. 335\n\n(2) [1955] 28 I.T.R. 698, 7% 705.\n\n1959 by \" instead of\" constituted under \". In our opinion, . the learned Chief Justice fell into the error of re-con-\n\n/:;;;;;'~ Ro~~ structing the provisions of the statute, instead of conv. struing them. The word \" by \" could be substituted The Commissioner for the word \" under \" in s. 26A only if the words, as of Income-tax, they stand in the section, were not capable of making\n\nWest Bengal, sense, and it would, thus, have been necessary to Calcutta d h d' f th t' T . j . t amen t e wor rng o e sec 10n. urnrng us at en- Sinha J. tion from the wording of the section to that of the Rules and the Form appearing under the Rules, he again came to the conclusion that \" some of the paragraphs of the Form appear to be ill-adjusted to the provisions of the Act\"'. Referring to other parts of the Rules, he was constrained to observe that they \" would lend strong support to the view that what is meant by 'any firm constituted under an instrument of partnership ' in section 26A is no more than a firm of which the constitution appears from an instrument in writing. It is obvious that if such be the meaning of the expression 'constituted under an instrument of partnership', the instrument need not be one by which the partnership was created\". But then he attempted to get over that difficulty by observing that the language of the Rules and the Form could not supersede a provision contained in the Act itself.\n\nHe further opined that the language in para. 4(1) is \"undoubtedly unsatisfactory\". In our opinion, any attempt to re-construct the provisions of the relevant section and the Rules, on the assumption that the intention of the legislature was to limit the registration of firms to only those which have been created by an Instrument of Partnership, is, with all respect, erroneous. The proper way to construe the provisions of the statute is to give full effect to all the words of the relevant provisions, to try to read them harmoniously, and then to give them a sensible meaning.\n\nHence, we have to consider, at the threshold, the\n\n~ question whether the words \"constituted under an Instrument of Partnership\" have some meaning which can be attributed to them harmoniously with the rest of the relevant provisions.\n\nA partnership may be created or set up by a contract in writing,\n\nsetting out all the terms and conditions of the partr959 nership, but there may be many cases, and perhaps, h h h l Messrs. R. C. such cases are more numerous t an t e ot er c ass, Mitt\" & sons where a partnership has been brought into existence by v. an oral agreement between the parties on certain The Commissioner terms and conditions which may subsequently be 01 Income-tax, reduced to writing which will answer the description Wtst Bengal, Calcutta of an Instrument of Partnership. Such an instrument would, naturally, record all the terms and conditions Sinha J. of the contract between the parties which, at the initial stages, had not been reduced to writing. In such n case, though the partnership had been brought into existence by an oral agreement amongst the partners, if the terms and conditions of the partnership have been reduced to the form of a document, it would be right to say that the partnership bas been constituted under that instrument. The word \"constituted \" does not necessarily mean \" created \" or \"set up '', though it may mean that also. It also includes the idea of clothing the agreement in a legal form. In the Oxford English Dictionary, Vol. II, at pp. 875 & 876, the word \" constitute \" is said to mean, inter alia, \"to set up, establish, found (an institution, etc.)\" and also \"to give legal or official form or shape to (an assembly, etc.)\". Thus, the word in its wider significance, would include both, the idea of creating or establishing, and the idea of giving a legal form to, a partnership. The Bench of the Calcutta High Court in the case of R. O. Mitter and Sons v. Commissioner of Incometax (1), under examination now, was not, therefore, right in restricting the word \" constitute \" to mean only \" to create'', when clearly it could also mean putting a thing in a legal shape. The Bombay High Court, therefore, in the case of Dwarkadas Khetan and Co. v. Commissioner of Income-tax, Bombay City, Bombay (2), was right in holding that the section could not be restricted in its application only to a firm which had been created by an instrument of partnership, and that it could reasonably and in conformity with commercial practice, be held to apply to a firm which may have come into existence earlier by an\n\n(r) [1955] 28 I.T.R. 698, 7.04. 705.\n\n(2) [1956] 29 I.T.R. 903, 907.\n\nz959 oral agreement, but the terms and conditions of the partnership have subsequently been reduced to the Aicssrs. R. C. f' f f Milter o;. Sons orm o a document. I we construe the word \"conv. stitute\" in the larger sense, as indicated above, the The Commissioner difficulty in which the learned Chief Justice of the of Income-tax, Calcutta High Court found himself, would be obviated\n\nw~' 1\n\n8~gal, inasmuch as the section would take in cases both of a cu a firms coming into existence by virtue of written docu-\n\nSinha J. ments as also those which may have initially come into existence by oral agreements, but which had subsequently been constituted under written deeds.\n\nThe purpose of the provision of the Income-tax Acts. 26A-is not to compel the firms which had been brought into existence by oral agreements, to dissolve themselves and to go through the formality of constituting themselves by Instruments of Partnership. If we construe the words \"constituted under \" in that wider sense, we give effect to the intention of the legislature of compelling a firm which had existed as a result of an oral agreement, to enter into a document defining the terms and conditions of the partnership, so as to bind the partners to those terms, before they could get the benefit of the provisions of s. 23 (5) (a).\n\nSection 23 (5) (a) confers a privilege upon partners who may find it more worth their w bile to be assessed npon their individual total income than upon the total income of the partnership.\n\nIt is, therefore, very important from the point of view of the Revenue that the Department should be apprised in time of the true constitution of the partnership, the names of the true partners and the precise share of each of them in the partnership profits (or loss, if any). The very object of this provision will be defeated if the alleged partnership is not genuine, or if the true constitution of the partnership and the respective shares of the partners, are not fully and correctly placed on record as soon as possible, for the purpose of assessment. In tliis connection, the provisions of s. 28(2) of the Act, are also worth noticing. That sub-section provides that if the Income-tax Officer or the Appellate Authorities under the Act, are satisfied that the profits of a registered firm have been distributed otherwise than\n\nin accordance with the shares of the partners, as r959 shown in the Instrument of Partnership registered under the Act, and governing such distribution, and /:;;;:; s~ Rs;; s that any partner has concealed any part of his profits, v. the penalty prescribed therein may be imposed upon The Commissioner such a partner. Unless the Instrument of Partnership 0! Income-tax, has been registered in respect of the accounting year West Bengal, Calc1tfta and before the assessment has been done, the penal provisions aforesaid cannot be enforced. It is, there- Sinha J. fore, essential, in the interest of proper administration and enforcement of the relevant provisions relating to the registration of firms, that the firms should strictly comply with the requirements of the law, and it is incumbent upon the Income-t!JoX Authorities to insist upon full compliance with the require.ments of the law.\n\nBut, in our opinion, there is no warrant in the words of the relevant provisions of the statute for restricting registration under s. 26A of the Act to those firms only which have been created or brought into existence by an Instrument of Partnership. In our opinion, it is more in consonance with the terms of the relevant provisions of the Act, referred to above, to hold that the words \"constituted under an instrument of partnership\" include not only firms which have been created by an Instrument of Partnership but also those which may have been created by word of mouth but have been subsequently clothed in legal form by reducing the terms and conditions of the partnership to writing.\n\nWe have already indicated that there has been a conflict of judicial opinion in the different High Courts in India on the question now before us.\n\nBut on a consideration of the facts in each case, it will be found that the decision arrived at in most of the cases, was correct, though the reasons given appear to have gone beyond the requirements of the case. The decision of the Bombay High Court in Dwarkadas Khetan & Co.\n\nv. Commissioner of Income-tax, Bombay City, Bombay (1), discloses that the partnership then in question had come into existence with effect from the beginning of 1946, though the Instrument of Partnership (I) [1956] 29 l.T.R. 903, 907.\n\nI959 was executed on March 27, 1946. Thus, the Instrument of Partnership came into existence during the account- Iifessrs. R. C. h \\ h h b b Mitter .,,, Sons ing year, w atever t at year may ave een, ecause v. the year 1946 was the starting year of the partner- The Commissioner ship.\n\nHence, even the earliest assessment year, pre- 0! Income-tax, sumably the year 1947-48, would be governed by the\n\nw~\\ nengol, terms and conditions of the written Instrument of Part- .• cutta nership aforesaid.\n\nThe decision of the Bombay High\n\nSinha J.\n\nCourt was followed by the same Bench of that Court in the case of Commissioner of Income-tax, Bombay North v. Shantilal V rajlal & Ghandulal Dayalal & Go. (' ). In the second case, the learned Judges ruled that the second partnership deed of September 12, 1951, which set out the names and shares of all the partnrrs who constituted the partnership, could be registered in respect of the accounting year November, 1948 to October, 1949. This conclusion was arrived at without even a mention, far less a discussion, of the relevant provisions of the Act.\n\nApparently, the matter was not critically placed before the learned Judges, when they decided the second case. The conclusion in this case is, with all respect, apparently wrong in view of our conclusion that the Instrument of Partnership should have been in existence in the accounting year.\n\nIn the High Court of Punjab, the question was fully discussed in a judgment of a Division Bench, given by one of us (Kapur, J., as he then was), in the case of Kalsi Mechanical Works, Nandpur v. Commissioner of Income-tax, Sinila (2). In that case, the firm had come into existence by a verbal agreement in June, 1944.\n\nThe deed of partnership was drawn up as late as May 9, 1949. The application for registration of the firm under s. 26A for the assessment year 1949-50, was dismissed by the Income-tax Authorities as also by the Tribunal. The High Court, after an elaborate examination of the relevant provisions of the Act, including the Rules and the Forms, upheld the orders of the Department. The conclusion of the Bench was in these terms :-\n\n\"The sections of the Income-tax Act show that\n\n(1) [1957] 31 I.T.R. 903.\n\n(2) [1953] 24 I.T.R. 353, 361,\n\nfor the purpose of registration it is necessary that the • r959 firm should be constituted by an instrument of part- Messrs. R. C. nership and in my opinion the Rules read with Sec- Mitter & sons tions 26 and 28 of the Act indicate that such a firm as is v. constituted under an instrument of partnership should The Commissioner have been in existence during the account period and of Income-tax, •\n\nh ld t . . t d . h West Bengal, s ou no come mto exrn ece urmg t e assessment Calcutt<• year, and if it was not in existence during the account period it cannot be registered so as to affect the Sinha J. liabilities of the partners for income-tax accruing during the account period.\" The conclusion reached is correct, except, with all respect, for the observation that under s. 26A, it is necessary that the firm should be constituted \"by \" an instrument of partnership. That is the leading judgment in the High Court of Punjab. It was followed by another Division Bench of that Court in the case of Padam Parshad Rattan Chand v. Commissioner of Income-tax, Delhi (1), to the effect that \"constituted under an instrument \" in s. 26A, meant \" created or formed by a formal deed\". In this case, the business of the firm had started from April,!, 1947, but' the Instrument of Partnership was executed on April 10,\n\n1950.\n\nThe application for registration was made in respect of the assessment year 1948-49. It is clear with reference to these dates that the Instrument of Partnership was not in existence either during the accounting year or even during the assessment year, and the Court, therefore, rightly held that the partnership could not be registered in respect of the assessment year; but they proceeded further to observe that there was no objection to the firm being treated as having been constituted under the Instrument as from the date of the Instrument itself. The answer of the Court to the question posed, was that the firm could be registered not in respect of the assessment year for which the application had been made, but with effect from the date of the Instrument. Apparently, the attention of the Court was not drawn to the lules aforesaid, particularly, Rules 2 and 3, which require\n\n(r) [1954] 25 I.T.R. 335\n\n' 959 that the application has to be made before the assess-\n\nMessrs. R. c. ment is completed and for a particular assessment Mitter & sons year. More or less to the same effect, are two other v.\n\nDivision Bench rulings of that High Court in Bery The Commissioner Engineering Go., Delhi v. Commissioner of lncome-\n\n0{v Incme 1•;· tax, Delhi (1) and Income-tax Commissioner, Delhi v.\n\n~lct:i;;•' Messrs. Birdhi Chand Girdhari Lal('). In all these cases in the Punjab High Court, the deeds came into exist- Sinha J. ence later than the accounting year or the assessment year, and therefore, could not have been registered.\n\nThe actual decisions in these cases were correct, though there are obiter dicta to the effect that s. 26A requires that the firm should have been created or set up by an Instrument of Partnership.\n\nIn the Patna High Court, the very same question was discussed at great length by a Division Bench of that Court, presided over by l'tamaswami, C. J., in the case of Khimji Walji & Go. v. Commissioner of Income tax, Bihar and Orissa ('). The learned Chief J 1,1stice, after an elaborate examination of the relevant provisions of the Act, came to the conclusion in these terms:-\n\n\" It is necessary for the purpose of registration under Section 26A that the partnership should be constituted by an instrument of partnership and that such a partnership as is constituted under an instrument of partnership should have been in existence during the accounting year\".\n\nIt is on the same lines as the leading judgment of the Punjab High Court, supra.\n\nWith reference to the dates given in the judgment, the decision is right, though, in this case also, the words \"constituted under\" have been construed as \"constituted by\", without discussing the necessity for so alllending the words of the statute, even as in the Punjab High\n\nCourt decisions.\n\nAs a result of the above discussion, the conclusion is reasonably clear that unless the partnership business was carried on in accordance with the terms of an Instrument of Partnership which was operative during\n\n(1) [1955] 28 I.T.R. 227.\n\n(2) [1955] 28 I.T.R. 280.\n\n(3) [1954] 25 I. T.R. 462, 470.\n\nthe accounting year, it cannot be registered in respect 1959 of the following assessment year.\n\nAs in these cases, the partnership did not admittedly function under :/;,:1:s;,,, R~0:~ such a deed of partnership, the Department and the v.\n\nHigh Court were right in refusing registration. We The Commissioner would, therefore, dismiss these appeals, but for differof Income-tax, ent reasons to those given below. The respondent is West Bengal, entitled to his costs-one set of hearing fees to be paid Calcutta half and half by the appellants.\n\nSinha J.\n\nHIDAYATULLAH, J.-I have had the advantage of Hidayatullah J. reading the judgment just delivered by my brother, Sinha, J. I agree that s. 26A of the Indian Incometax Act must be read as it is.\n\nThe words of the section, as they stand, are not meaningless, and in view of the decision in Commissioners for Special Purpose of the Income-tax v. Pemsel (1) it is not possible to read . for the expression \" constituted under\", the words\n\n\"constituted by\".\n\nI entertain, however, some doubt as to whether the instrument sought to be registered, should be in existence in the accounting year, before registration can be claimed. There is nothing in the Act which says this specifically. My brother has reasoned from the contents of the Act and the Rules that such a condition is implied. While I entertain some doubts, I am not prepared to record a dissent, more so as the Board of H, evenue has issued instructions that all firms should be registered, whether the documents under which they were constituted existed in the accounting year or not, provided the Income-tax Officer was satisfied about the genuineness of the firms.\n\nIn the result, I agree that the appeals should be dismissed with costs.\n\nAppeals dismissed.\n\n(1) [1891] A.C. 531, 542.", "total_entities": 60, "entities": [{"text": "Art. 226", "label": "PROVISION", "start_char": 622, "end_char": 630, "source": "regex", "metadata": {"statute": null}}, {"text": "R. C. MITTER & SONS", "label": "PETITIONER", "start_char": 733, "end_char": 752, "source": "metadata", "metadata": {"canonical_name": "R. C. 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{"document_id": "1959_2_660_692_EN", "year": 1959, "text": "r959\n\nAp,.il 20.\n\n660 SUPREME COURT REPORTS [1959] Supp.\n\nCOMMISSIONER OF INCOME-TAX, WEST\n\nBENGAL v.\n\nCALCUTTA NATIONAL BANK LIMITED\n\n(IN LIQUIDATION)\n\n(B. P. SINHA, J. L. KAPUR and\n\nM. HIDAYATULLAH, JJ.)\n\nExcess Profits Tax-Rental income-Banking Company letting out a part of its own premises-Liability-Excess Profits Tax Act, I940 (XV of I940), s. 2(5). Sch. I, r. 4(4).\n\nThe respondent was a banking company and the question was whether it was liable to pay excess profits tax on a sum of Rs. 86, ooo received by it as rent in respect of the major part of a six-storeyed building owned and constructed by it, which it had let out, the rest being occupied by its headquarters in Calcutta. The Department and the Income-tax Appellate Tribunal found against the respondent but the High Court, on a reference under s. 66(r) of the Income Tax Act, reversed their decision.\n\nThe Memorandum of Association of the Company provided as one of its objects as follows,-\n\n\" (e) To purchase, take on lease or in exchange or otherwise acquire any moveable or iinmoveable property, .............. . which the company may think necessary or convenient for the purpose of its business, and to construct, maintain and alter any buildings or works necessary or convenient for the purpose of the Company.\"\n\nThe question referred to the High Court for decision was \\vhether the said income was part of the business income taxable under s. 2(5) read with r. 4(4) of the Sch. I to the Excess Profits Tax Act, 1940. The High Court held that although the income was derived from the holding of property, since the functions of the assessee company did not consist wholly or mainly in the holding of investments or other rroperty as required by the first proviso to s. 2(5) of the Act, no question of the application of r. 4(4) could arise.\n\nHeld, (Per Sinha and Hidayatullah, JJ., Kapur, J., dissenting), that the question must be answered in the affirmative.\n\nPer SINHA, J.-The High Court was fundamentally in error in overlooking the main provision of s. 2(5) of the Act, for even though the first proviso might not apply, that by itself would not render the main provision of the definition, which was wider than that under the Indian Income-tax Act inapplicable.\n\nCommissioners of Inland Revenue v. Desoutter Bros. Ltd.,\n\n(r945) 29 T. C. r58, applied.\n\nThe term 'business' was of wide import and each case had to be determined with reference to the particular kind of activity or occupation of the person concerned. Though ordinarily it implied a continuous activity in carrying on a particular trade or avocation, it might also include an activity which might be called 'quiescent•.\n\nThe Commissioners of Inland Revenue v. The South Behar Railway Co., Ltd., (1923) 12 T. C. 687 and Commissioners of Inland Revenue v. The Korean Syndicate, Ltd., (1921) 12 T. C. 181, referred to.\n\nThe Memorandum of Association of a company provided the key to its business objects and the relevant clause in the instant case clearly showed that the managing of property and realisation of rents therefrom were within the objects of the company, and, therefore, such rents musf be included in calculating its profits under r. 4(4) of the Sch. I to the Act.\n\nIt was not correct to suggest that the rule, in substituting, the word \"partly\" for \"mainly\" occurring in the first proviso to s. 2(5) exceeded the provisions of the statute. Rule 4(4) did not derive its operative force from that proviso, limited to an incorporated body of a particular type, and was of wider application as evident from its own terms as also from the second proviso to s. 2(5) of the Act.\n\nPunjab Co-operative Bank Ltd. v. Commissioner of Income-tax, Punjab, (1940) A.C. 1055; [1940] 8 I.T.R. 636 and Sardar Indra Singh and Sons, Ltd. v. Commissioner of Income-tax, West Bengal, [1954] S.C.R. 167, referred to.\n\nIt was not correct to say that if rental income were to be covered by the main clause of s. 2(5), the first proviso to that section would become redundant.\n\nCommissioners of Inland Revenue v. The Tyre Investment Trust, Ltd., (1924) 12 T. C. 646, referred to.\n\nNor was it correct to say that \"business\" could not be said to include-rental income.\n\nThe United Commercial Bank Ltd., Calcutta v. The Commissioner of Income-tax, West Bengal, [1958] S.C.R. 79, held inapplicable.\n\nPer KAPUR, J.-The word 'business' could: either mean what was contained in the main provision of s. 2(5) or have the extended meaning given by the first proviso to that section. In either case it was inapplicable to the case of the respondent whose essential function was to deal in money and credit, letting out of property being neither wholly or even partly its business. The income received by the respondent, therefore, by way of rent, did not fall within the definition of the word 'profits' contained in s. 2(19) of , the Act and was not chargeable to excess profits tax under s. 4 of the Act.\n\nSalisbury House Estate Ltd. v. Fry, (1930) 15 T. C. 2661\n\nI959\n\nCommissioner of\n\nIncome-tax~ West Bengal v.\n\nCalcutta National Bank Limited (In Liquidation)\n\n1959 Mellows v. Buxton Palace Hotel Ltd., (1943) 25 T.C. 507 and Commissioners of Inland Rcvenite v. Buxton Palace Hotel Ltd. (1948) 29 Connnissioner of T.C. 329, referred to.\n\nIncome-tax, In construing the first proviso, effect must be given to every West Bengal word used. If the mere owning of immoveable property and the v.\n\nCalcutta Jl ational Bank Limited (In Liquidation)\n\nSinha].\n\nletting out of what was not needed for its own use by a company was intended to be covered by the definition, the use of the words \"wholly\" or \"mainly\" would be wholly redundant.\n\nRule 4(4) of the first Schedule to the Act did not modify the definition of 'business' so far as it related to holding of property and before it could apply, the functions of the company, which meant the activities apprnpriate to its business, must fall within the definition of 'business' as given in the Act.\n\nPer HrnAYATULLAH, J.-The rents realised by the respondent must be regarded as profits from property held as investment and included in the computation of profits under r. 4(4) of the first schedule.\n\nThere was undeniably a difference between the wording of the schedule and the Act and the tendency of the schedule was to widen the definition of business so as to include letting of property for earning rents. It could not, therefore, be said that the definition contained in the Act, wholly controlled the Schedule and r. 4(4) must be given effect to.\n\nInland Revenue Commissioners v. Gittus, (1920) r K. B. 563, applied.\n\nGittus v. Commissioners of Inland Revenue, (1921) 2 A.C. Sr, referred to.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 4 of 1956.\n\nAppeal by special leave from the judgment and order dated June 10, 1953, of the Calcutta High Court in Income-tax Reference No. 39 of 1952.\n\nK. N. Rajagopal Sastri, R. H. Dhebar and D. Gupta, for the appellant.\n\nB. Sen, P. K. Ghosh and P. ](, Bose, for the respondent. 1959.\n\nApril 20. The following Judgments were delivered\n\nSINHA, J.-The question for determination in this appeal by special leave, is whether the assessee, the Calcutta National Bank Ltd. (in liquidation), is liable to Excess Profits Tax in respect of Rs, 86,000/-, which it realised by way of rent of the building at its head-\n\n9uarters in Calcutta, during the accounting period\n\n(2) S.C.R.\n\nSUPREME COURT REPOR'l'S 663\n\nending March 31, 1946. The Department and the r959 Income-tax Appellate Tribunal answered the question in the affirmative. On a statement of the case to the Commissioner of I nconie-tax~ High Court under s. 66(1) of the Income-tax Act, a West Bengal Bench of the Calcutta High Court (Chakravartti, 0. J., v. and Lahiri, J.) answered it in the negative, reversing Calcutta National the orders of the Department and the Tribunal.\n\nAs Bank Limited the Bench refused to grant the necessary certificate (In Liquidation) of fitness, the appellant applied for, and obtained, Sinha 1. special leave to appeal, by an order of this Court dated September 27, 1954.\n\nThe facts of this case are short and simple. The assessee was a banking company in a large way of business. It owns a six-storeyed building where its offices are located on the ground floor and a part of the 6th floor, while the rest of the building is let out to tenants. The annual rental income derived from the portion let out, is about Rs. 86,000/-. The Tribunal found that the portion let out is about four to five times the floor area of the portion of the building occupied by the assessee for the purposes of its own business. By an order dated March 31, 1949, the Excess Profits Tax Officer assessed the respondent on the said rental income in respect of the accounting period ending March 31, 1946, under sub-r. (4) of r. 4 of Schedule I to the Excess Profits Tax Act, 1940 (XV of 1940) (which hereinafter will be referred to as the Act). On appeal by the respondent, the Appellate Assistant Commissioner, by his order dated January 3, 1950, upheld the assessment on the basis of sub-r. (2) of r. 4 of Schedule I to the Act.\n\nHe pointed out that the assessee carries on banking business which includes holding investments, and thus, the rental income in respect of its investments in immovable property, is included in its business income, even though it was not chargeable to income-tax under s. 10 of the Income-tax Act.\n\nIncome from securities, like shares and properties, is chargeable to income-tax under ss. 8, 9 and 12 of the Act; but that head of income is chargeable under the Act as business profits. He also pointed out that the assessee had itself included the value of these assets in the computation of its capital,\n\ni959 for claiming standard profits.\n\nThis had been done in\n\nCommisoioner of the previous years, and the assessee bank had accept- Income-tax. ed the basis and the computation of capital assets west Bengal during the previous years. On a further appeal by v. the respondent to the Appellate Tribunal, the Tribu- Calcutta National nal held that there was no doubt that the premises Bank. Limit'.d were built with a view partly to housing the head (In Liquidation) office of the company, and partly for the purpose of\n\nSinha ] . being let out to tenants, and that it was an investment by the Bank in immovable property. The Tribunal also found that this was within the terms of the Memorandum of Association of the respondent company. Hence, by its order, dated March 22, 1951, the Tribunal held that the letting out of so much of the building as was not occupied by the company itself for its own business, was a part of its business, and the rental income was, thus, liable to tax under the Act. It made a particular reference to sub-r. (4) of r. 4 of Sch. I to the Act, though the Department appears to have also relied upon sub-r. (2) of r. 4, aforesaid. Thereupon, the respondent got the Tribunal to. state the case to the High Court, and the following question was accordingly referred to the High Court under s. 66(1) of the Income-tax Act:-\n\n\"Whether in this case the rental income from immovable property is part of the business income taxable under section 2(5) read with rule 4(4) of Schedule I attached to the Excess Profits Tax Act, 1940.\" The matter was heard by the High Court with the result indicated above.\n\nHence, this appeal by special leave.\n\nThere is no doubt that excess profits are not chargeable under the Act unless the income falls within the ambit of business profits. Section 2(5) of the Act defines \" business \" as under :-\n\n\" 'business ' includes any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manufacture or any profession or vocation, but does not include a profession carried on by an individual or by individuals in partnership if the profits of the profession depend wholly or mainly on his or their personal qualifications unless such profession\n\nconsists wholly or mainly in the making of conz959 tracts on behalf of other persons or the giving to other c -. -. f d . f\n\n. I . omm1ssioner of persons o a vice o a commercia nature m connec- Income-tax tion with the making of contracts: West Bengl Provided that where the functions of a company v. or of a society incorporated by or under any enact- Calcutta Na'.ional\n\nment consist wholly or mainly in the holding of invest- (IBanLk. L•.mditd) h . . n iqui ation ments or ot er property, the holdmg of the rnvest- _ ment or property shall be deemed for the purpose of Sinha J. this definition to be a business carried on by such company or society: Provided further that all businesses to which this Act applies carried on by the same person shall be treated as one business for the purposes of this Act;\".\n\nThe definition of \" business \" under the Act, is wider than the definition of that term under the Income-tax Act (s. 2(4)).\n\nSection 2 (19) of the Act defines \"profits \" as follows :-\n\n\" ' profits ' means profits as determined in accordance with the First Schedule.\" Section 2 (20) defines \" standard profits \" as follo\"4S :-\n\n\"Standard profits means standard profits as computed in accordance with the provisions of Section 6\".\n\nAnd the charging section, s. 4 of the Act, provides that in respect of any business to which the Act applies, excess profits, that is, profits during any chargeable accounting period, exceeding the standard profits, shall be charged, levied and paid. Section 5 of the Act provides as follows:-\n\n\"This Act shall apply to every business of which any part of the profits made during the chargeable accounting period is chargeable to income-tax by virtue of the provisions of sub-clause (i) or sub.clause\n\n(ii) of clause (b) of sub-section (1) of Section 4 of the Indian Income-tax Act, 1922, or of clause (c) of that sub-section : Provided that this Act shall not apply to any business the whole of the profits of which accrue or arise without British India where such business is carried on by or on behalf of a person who is resident\n\nz959 but not ordinarily resident in British India unless the business is controlled in India ; Commissioner of Provided further that where the profits of a part Incometax, west Bengal only of a business carried on by a person who is not v. resident in British I!1dia or not ordinarily so resident Calcutta National accrue or arise in British India or are deemed under\n\n(IBonLk. Lfrdnited l the Indian Income-tax Act, 1922, so to accrue or arise,\n\nniqmatwnh th thb\" b\" hb\" f _ t en, excep w ere e usmess emg t e usmess o a\n\nSinha J. person who is resident but not ordinarily resident in British India is controlled in India, this Act shall apply only to such part of the business, and such part shall for all the purposes of this Act be deemed to be a separate business ; Provided further that this Act shall not apply to any business the whole of the profits of which accrue or arise in an Indian State; and where the profits of a part of a business accrue or arise in an Indian State, such part shall, for the purposes of this provision, be deemed to be a separate business the whole of the profits of which accrue or arise in an Indian State, and the other part of the business shall, for all the purposes of this Act, be deemed to be a separate business.\" The First Schedule, which contains the rules for computation of profits, provides, in sub-r. 4 of r. 4, as follows:-\n\n\" (4) In the case of a business which consists wholly or partly in the letting out of property on hire, the income from the property shall be included in the profits of the business whether or not it has been charged to income-tax under Section 9 of the Indian Income-tax Act, 1922, or under any other section of that Act.\"\n\nHaving set out the relevant provisions of the Act, the first question that arises for consideration, is whether the letting out of the premises in question can be said to be a business of the assessee bank. The definition of \" business \" is only an inclusive one, and includes any sort of trade, commerce or manufacture.\n\nCan it be said that realization of income from its investments which may be either in shares, securities or in immovable properties, is not a part of the business of a banking corpora ti on ? In my opinion, it will\n\nbe taking a very narrow view of the functions of a x959 bank to hold that such activities are not within the c .-. b't f h b • t' 't' f b k I th ommissioner of am I o t e usmess ac iv1 ies o a an . n e Income-tax Memorandull1 of Association of the assessee bank, the west Beng; l objects of the company are stated to be: v. \"(a) To carry on all kinds of banking business Calcutta National that are generally carried on by Joint Stock Banks ... \" Bank. Limited \" (b) T h b f b k' 11 't (In Liquidation) o carry on t e usmess o an mg m a I s branches and departments, including borrowing, rais- Sinha 1. ing or taking up money, the lending or advancing money, securities or properties ; ......... the acquiring, holding, issuing and dealing with ... investment of all kinds; ......... the managing of properties ......... \"\n\n\"(c) To purchase, take on lease or in exchange or otherwise acquire any moveable or immoveable property,. ........ which the Company may think necessary or convenient for the purpose of its business, and to construct, maintain and alter any buildings or works necessary or convenient for the purpose of thecompany.\"\n\nApparently, the bank constructed the six-storeyed building not only for its own use and occupation, but also, according to the finding of the Appellate Tribunal, for the major part, for the purpose of realising rent from tenants. Where land in a big city, like Calcutta, is taken for building purposes, it is common ' knowledge that erecting a multi-storeyed building, is by itself an investment, besides affording accommodation for the bank to carry on and advertise its business, and house its head-office and records.\n\nThe High Court answered the question referred to, in the negative on the ground that though the income was derived from the holding of property, the functions of the assessee-company did not consist wholly or mainly in the holding of in vestments or other property, as required by the proviso to s. 2(5) of the Act.\n\nSince the requirement of the first proviso to s. 2(5) of the Act, was not satisfied, no question of the application of sub-r. (4) of r. 4, could arise; and even if such a question could arise, the word \" business \" in that sub-rule, must take its colour from the main provisions of the section. This conclusion was reached by\n\n1959 the learned Chief Justice, who delivered the opinion\n\nCommission\" of of the Court, by starting with the premise that for determining the nature of the income of the company, Income-tax, west Bengal it was not necessary to consider the provisions of the v. definition of \" business '', contained in the main clause Calcutta National of s. 2(5), which was also assumed to be parallel to the Bank Limited connotation of the term \" business \" under the Indian (In Liquidation) I A H . h 1 d d . h ncome-tax ct. avmg, t us, exc u e , wit out Sinha J. giving any reasons why they had to be excluded, the provisions of the main clause of the definition of \"business\", as contained in the Act, the learned Chief Justice addressed himself to the question whether the first proviso to the definition clause, which was in the nature of an additional provision, could govern the facts of the case, and bring it within the ambit of that kind of business to which the Act applied. The learned Chief Justice rightly pointed out that the first proviso is limited to incorporated bodies and had no reference to individuals. Then, the learned Chief Justice observed : \" It is to be noticed that in the contemplation of this proviso, property is something different from investments, for it speaks of' investments or other propert.y '. It is also to be noticed that if the requirements of the proviso are satisfied, the holding of investments or other property shall be ' deemed to be a business ', which implies that it is not really a business and, but for the special provisions made by proviso, would not be . within the general definition contained in the main clause \". It is doubtful whether these observations are entirely correct, but, as will presently appear, we are not so much concerned with the proviso as with the main provisions of the definition clause (s. 2(5) ).\n\nThe conclusion of the learned Chief Justice may better be stated in his own words, as follows :-\n\n\"It appears to me that the first matter to which we must address ourselves in answering the question before us is : are the functions of the assessee company such that the holding of the building in question or buildings or other property &nd investments in general must be deemed to be its business for the pur- poses of the Excess Profits Tax Act under the first\n\nproviso to section 2(5) ? In order that that question 1959 may be answered in favour of the Revenue, it is Conzmissioner of necessary that the holding of investments or other Inconze-tax, property should be the only or the principal function West Bengal of the assessee company. As I have said, the assessee v. company is a banking company in a large way of Calcutta Natfonal business. It is hardly disputable and indeed it was Banh Limited d. d b £ h b b Jd' • f t (In Liquidation) not ispute eiore us, t at t e o rng o mvestmen s or other property was not its sole or primary occupa- Sinha 1. tion, much less the holding of the particular building in question\".\n\nIn my opinion, the aforesaid conclusion of the High Court suffers from two fundamental errors, namely,\n\n(1) that the main clause of the definition section is out of the way in determining the present controversy, and (2) that it was the proviso only which had to be considered in order to answer the question referred.\n\nIn the first instance, the learned Chief Justice is not entirely correct in observing that the definition of the term \"business\" follows the definition of the same term in the Indian Income-tax Act.\n\nAs already observed, the definition under the Act, is wider than that under the Income-tax Act, in so far as it includes certain types of profession or vocation. The scheme of the Act, as compared to that of the Income-tax Act, will have to be considered presently, but it is enough to point out that the connotation of the term \"business\" under the Act, is wider than that of the same term under the. Income-tax Act. The learned Chief Justice set aside, from his consideration, the provisions of the main clause of s. 2(5), and did not indicate his reasons for doing so.\n\nOrdinarily, the Court has first to consider whether the main clause of the definition Of the term \" business \", would govern the facts of the case. The question of the application of the first proviso, which, it is common ground, is in the nature of an additional provision which brings within its ambit certain types of income (to use a neutral term) which would not otherwise have come within the terms of the main clause of the definition, can arise only if the Court first comes to the conclusion that the main clause of the definition is out of the way. I will\n\nz959 assume that the holding of investments or other pro-\n\nCommission\" of property, is not the whole or main business of the\n\nIncome-tax.\n\nRespondent Company. That assumption will put w,,1 Bengal aside the first proviso aforesaid, but that does not by v. itself lead to the inference that the main provision of Calcutta National the definition clause, cannot be applied to the respon-\n\nBank Limited dent.\n\nAn argument on these lines was advanced; and (Tn Liquidation) J] d b L was repe e y ord Greene, M. R., in the case of Sinha J.\n\nCommissioners of Inland Revenue v. Desoutter Bros., Ltd. (1). In that case, sub-s. (4) of s. 12 of the Finance (No. 2) Act, 1939, which deals with Excess Profits Tax, was under consideration by the Court of Appeal.\n\nThe learned Master of Rolls considered the question, and made the following observations which apply with full force to the arguments which found favour in the High Court:- . \"The first argument is based on the language of Section 12(4) of the Finance (No. 2) Act, 1939, which deals with Excess Profits Tax. The first Sub-section speaks of the profits 'arising in any chargeable accounting period from any trade or business to which this section applies'. It is in respect of those profits that the tax is exigible. It will be observed that the language only extends to the profits arising from ' any trade or business'. Sub-section (4) says 'Where the functions of a company or society incorporated by or . under any enactment consist wholly or mainly in the holding of investments or other property, the holding of the investments or property shall be deemed for the purpose of this section to be a business carried on by the company or society'.\"\n\n\" I should have thought that the objects of that Sub-section were manifest. In my view it was intended, and quite clearly intended, to bring into the net a type of corporation which otherwise would or might have escaped it. The commonest type of corporation with which the Sub-section is <lea.ling is what may be called a trust investment company, whose business is the holding of investments and deriving income from them. Such a corporation would not be said to be carrying on a 'trade or business' within the meaning of\n\n(r) (1945) 29 T.C. 155, 160.\n\nSub-section (1).\n\nAnyhow, if it were not absolutely z959 clear, Sub-section (4) makes it quite certain that that .-. t f t . . t b . l d d d \"t .\n\nCommissioner of Ype o corpora ion is o e me u e , an 1 s operations 1 1 ncome~ ax# are to be regarded as the carrying on of a trade or west Bengal business. That seems to me to be the real and sole v. object of Sub-section (4).\" Calcutta National \"The argument really amounted to this: by impli- •. Bank. Limitd cation the profits from investments or property held (In Liquidation) by any other type of corporation is excluded. I cannot Sinha 1. begin to see the shadow of a foundation for any such argument. In my opinion it breaks down completely once the real significance of Sub-section (4) is appreciated.\"\n\nI respectfully adopt the reasoning and the conclusion arrived at by the Court of Appeal, extracted above.\n\nIt follows that the first proviso to s. 2(5) does not determine the controversy arising in this case. This conclusion completely displaces the ratio of the opinion of the High Court, but it does not answer the question referred to it. It has, therefore, to be considered whether the main definition clause ins. 2(5) can come into play in giving the answer to the question referred for the opinion of the High Court.\n\nThe term \"business \" is a word of very wide, though by no means determinate, scope. It has rightly been observed in judicial decisions of high authority that it is neither practicable nor desirable to make any attempt at de-limiting the ambit of its connotation. Each case has to be determined with reference to the particular kind of activity and occupation of the person concerned. Though ordinarily \"business\" implies a continuous activity in carrying on a particular trade or avocation, it may also include an activity which may be called 'quiescent'. This is illustrated by the case which went up to the House of Lords in The Commissioners of Inland Revenue v. The South Behar Railway Go., Ltd. {1). In that case, the facts were these.\n\nDown to 1906, the South Behar Railway was held by the Respondent Company and worked by another Company on behalf of the Secretary of State for India, the Respondent Company being entitled to a share in the\n\n(1) (1923) 12 T. C. 657.\n\nz959 profits in consideration of its having supplied funds and materials for the construction of the Rail way.\n\nCommissioner of In 1906, the Respondent Company relinquished posses- Income-tax, West Bmgal sion of the Railway to the Secretary of State, on the v. stipulation that until the option to purchase was Calcntta National exercised, a fixed annuity of£ 30,000 should be paid to\n\nBan~ Limit'.d :the Company in lieu of the share of profits so far paid. (In Liquidation) After that arrangement in 1906, the Company did\n\nSinha J. nothing but receive and distribute the said annuity to its share-holders. It , was held by the House of Lords that the Company was carrying on a trade or business, and was, therefore, liable to Corporation Profits Tax.\n\nThe House of Lords, while affirming the decision of the Court of Appeal, observed that the finding of the Commissioners, which was reversed by the Court of Appeal, was not a finding of pure fact, but was an inference of law, derived from the specific facts found in the case, and that, consequently, the decision was open to review.\n\nThe House of Lords, in upholding the decision of the. Court of Appeal, observed that by the agreement of 1906, the Company's income, which previoµsly was a fluctuating income derived from the share of the profits, had been converted into a fixed annuity irrespective of the earnings of the Railway ; and that the new arrangement did not materially affect the position of the Company as a business concern. The House of Lords approved of the decision in the case of the Commissioners of ln/, and Revenue\n\nv. The Korean Syndicate, Ltd.('). In that case, a Syndicate was registered in 1905 as a Company for the purposes of acquiring and working concessions and turning them to account, and of investing and dealing with any moneys not immediately required.\n\nIn 1905, the Syndicate acquired part of a right to a concession in Korea, which included a gold mine, but in 1908, it assigned its rights to another Company under an agreement of lease in consideration of certain royalties, but which were really a percentage of the profits in working the prope_rty.\n\nIn 191l, the Syndicate placed in deposit at a bank, certain sums of money received from the sale of shates which had\n\n(1) (1921) 12 T.C. 181.\n\nI959 been obtained by the Syndicate in exchange for other shares.\n\nDuring the relevant period, the Syndicate's fi d · b k . d Commissioner of activities were con ne to rece1v111g an mterest an Income-tax, royalties and distributing that income amongst its west Bengal, shareholders. Rowlatt, J. held, that the Company v. was not carrying on a business.\n\nOn appeal, it was Calcutta National held that the Syndicate was carrying on a business Bank Limited and that the profits derived therefrom, were liable t~ (In Liquidation) Excess Profits Tax. In order to ascertain the business of a Company, its Memorandum has to be looked into.\n\nThe Memorandum provides the key to what the business objects of the Company are, and it has further to be ascertained whether those objects are still being pursued. In the present case, the relevant clauses of the Memorandum of Association, have been set out, and there cannot be the least doubt that the managing of property and realisation of rents therefrom, was within the objects of the Company, if it found it necessary and convenient for carrying on its business.\n\nIt may be that this line of business activity may not be the main part of its business, but even so, if realisation of rent is one of the sources of business income to the Company, it has got to be included in the computation of its profits for the purposes of the Act.\n\nThis becomes clear on a reference to sub-r. (4) of r. 4, quoted above. But it has been contended that the words\" wholly or partly\" in the Rule, are in excess of the provisions of s. 2(5), where, in the first proviso, the words are \" wholly or mainly \". The suggestion is that the rule, in so far as it substituted \" partly \" for \"mainly \", is in excess of the provisions of the statute.\n\nIn my opinion, this argument is based on an assumption which is not well-founded.\n\nAs will presently appear from an examination and comparison of the provisions of the Act and the Income-tax Act, r. 4(4) does not n\\lcessarily derive its operative force from the first proviso to the main clause Of the definition in s. 2(5).\n\nThe proviso, as already observed, is limited to an incorporated body of a particular type, and has reference to the \" holding of investments or other property\". Rule 4(4) is of a more general application to\n\nSinha ].\n\n'959 a \"business which consists wholly or partly in the\n\nCommissioner of letting out of property on hire \". In the rule, a refer-\n\nIncome-tax, ence to s. 9 of the Indian Income-tax Act, also makes West Bengal it clear that the rule is concerned with \"property ''. v. .\n\nIt is also clear that the basis for taxation of property Calcutta National under s. 9 of the Income-tax Act, is different from the Bank Limited b • ft t' d th A t ' f (In Liquidation) as1s o axa 10n un er e c ! I? respec~ o mcome from property, and the latter 1s 1rrespecjave of whe- Sinha J. ther income from property has been the subject-matter of charge under the Income-tax Act. In this connection, a reference to the second proviso is also relevant in so far as it implies that a person may carry on businesses of differ!mt kinds, and all those different lines of business have, for the purposes of the Act, to be treated as one business.\n\nThus, the Bank may be carrying on the business of holding deposits, securities and property, as also lending money on different kinds of securities. Its income from all those activities, would have to be taken into account in order to determine its total business profits.\n\nA similar question arose in the case of Punjab Co-operative Bank, Ltd. v.\n\nCommissioner of Income-tax, Punjab('), which went up to the Judicial Committee of the Privy Council.\n\nIn that case, the question arose whether the realisation of higher values by sale and purchase of shares and securities by the Bank, could be said to be business profits, and thus, taxable, under the Indian Income-tax Act. On behalf of the Bank, it had been contended throughout, without success, that the realisation of higher values by the sale of shares and securities, was not a separate business of the Bank, but was in the way of its business as a banking corporation which had to deal with money and credit, and that the Bank had always to have in its hands, cash and easily realisable securities to meet any probable demands by its depositors. But it had been found as a fact that the Bank had been selling shares and securities not only for the purpose aforesaid, but also for augmenting its reserve funds. It was held by the Judicial Committee that it had been rightly decided by the Department and by the High Court, on a\n\n(1) (1940) AC. 1055; [1940] 8 I.T.R 635.\n\n(2) S.C.R. SUPREME COURT R.EPOI~TS 675\n\nreference, that the purchase and sale of shares and 1959 securities were a part of the banking business of the h fi h\n\n I I Commissioner of Company, and t e pro ts, t us, rea ised were iable to Income-tax, income-tax. Their Lordships of the Judicial Comwest Bengal mittee also observed that it was not necessary to estav. blish that the Bank had been carrying on a separate Calcutta National. business of buying and selling shares and investments Bank Limited in order to make profits thus made taxable. On<re it (Tn Liquidation) is found that such transactions were entered into by Sinha ]. the Bank not merely with a view to realisation or change of investments, but with a view to carrying on a business in the sense of earning profits, the Bank was really carrying on a business within the meaning of the Incometax Act. , Following this decision of the Privy Council, this Court decided in the case of Sardar Indra Singh and Sons Ltd.\n\nv. Commissioner of Income-tax, West Bengal (1) that the question whether a certain income is profit from business and not an appreciation of capital arising from a change of investment, depends upon the answer to the further question whether that income was so connected with the carrying on of the assessee's business that it could fairly be said that it is the profits and gains of the business in its normal working. It was not necessary further to _show that the income had resulted from a course of dealing which, by itself, would amount to the carrying on of a business. In that case, the assessee company had, as one of its objects to carry on the business of financiers, and to purchase and sell stock, shares, 1business concerns and other undertakings. In carrying out that objective, the company held a large number of shares in other companies, and was realising its holdings and acquiring new shares. In the background of those facts, it was held by a Bench of five Judges of this Court, that the profits made from the sale of investments and the making of fresh investments, were assessable to income-tax. In the course of his judgment, Patanjali Sastri, C. J., speaking for the Court, made the following very pertinent observations:-\n\n\"The principle applicable in all such cases is well\n\n(1) [1954] S.C.R.,167, 170, 171,\n\n'959 settled and the question always is whether the sales which produced the surplus were so connected with Co1ninissioner of the carruing on of the. assessce's business that it could Income-lax, .J west Dengal fairly be said that the surplus is the profits and gains v. of such business. It isnot necessary that the surplus Calcutta Natfonal should have resulted from such a course of dealing in\n\nBanh L•m•ud securities as by itself would amount to the carrying on (In Liquidahon) f J • f b d lJ' ' I Jd o 'll. Jusmess o uymg an se mg securities. t wou\n\nSinha ; . be enough if such sales were effected in the usual course of carrying on the business or, in the words used by the Privy Council in Punjab Go-operative Bank Ltd.\n\nv. Income Tax Commissioner, Lahore (1), if the realisation of securities is a normal step in carrying on the assessee's businef!s. Though that case arose out of the assessment of a banking business, the test is one of general application in determining whether the surplus arising out of such transactions is a capital receipt or a trading profit.\"\n\nBut the learned counsel for the Respondent Bank argued that in the present case, the earning of rental income by the Bank could not come within s. IO of the Income-tax Act, and the definition of \"business\" in the Act and in the Income-tax Act, in so far as they are relevant to the present case, must be the same. In other words, it was contended that as realisation of rents from. house property of the Bank, could not come within the purview of s. IO of the Income-tax Act, it could not also come within the purview of the Act we are now concerned with. In my opinion, there is a fallacy in this argument. The scheme of the two Acts is not the same. The Income-tax Act has brought within its taxing ambit, not only income from what is ordinarily called business, but income from several other sources. Sections 3 and 4 of the Income-tax Act render liable to tax \"all income, profits and gains from whatever source derived'', and s. 6 of the Income-tax Act, classifies the different heads of income, profits and gains into (I) salaries, and the manner of charging the same is laid down in s. 7 ; (2) interest on securities, and the manner of charging the tax is laid down in s. 8; (3) income from property, to be taxed in\n\n(r) (1940) A. C. 1055; [1940] 8 I. T. R. 635.\n\naccordanc~ with the provisions of s. 9; and (4) profits r959 and gains from business, profession or avocation, to be C01nm4ss-ioner of taxed in accordance with the provisions of s. 10. The Income-tax, fifth and the sixth heads of income may be omitted west Bengal from the present discussion. On the other hand, under v. the Act in question, only tax on excess profits, arising Calcutta N_atfonal out of certain businesses, has been imposed. The Act Bank_ Li_mitd is not concerned with all kinds of income, but only (In Liquidation)\n\nwith profits if made beyond a certain standard laid Sinha 1. down under the Act, from business described in s. 5.\n\nUnder the Act, the ambit of the term \"business\"\n\ncovers the fourth head, though not the whol~ of it, as also thll second and the third heads, set out above, again though not, perhaps, the whole of them. It is not, therefore, correct to say that what would not come within the ambit of s. IO of the Income-tax Act, would also not come within the ambit of the Act. On a proper construction of the provisions of the Act, it has got to be held that what has been covered by ss. 8, 9 and 10, at least in parts, of the Income-tax Act, comes within the purview of the Act.\n\nThis is not intended to be a complete statement of the comparative am bits of the two Acts, but it\" is enough to dispose of the argument that business, as understood under the Act, is completely covered by the provisions of s. 10 of the Income-tax Act ..\n\nIn this connection, another argument advanced by the learned counsel for the respondent, as an additional reason for not treating rental income as coming within the purview of the Act, may now be considered.\n\nIt was argued that the first proviso to s. 2(5), set out above, would become redundant if rental income were to be covered by the main clause of the definition. 'This argument again ignores some of the crucial words of the proviso. It speaks only of\" holding of investments or other property '', which is not the same thing as dealing with shares, investments or other property.\n\nThis proviso was, perhaps, inserted out of abundant caution to repel arguments, like those advanced in the case of The Commissioners of Inland Revenue v. 1'he Tyre Investment Trust Ltd. (1).\n\nIn that case, the l{espondent Company was incorporated in 1917, with the\n\n(1) [1924] 12 T.C. 646.\n\n'959 main objects of acquiring and holding shares, etc., and\n\nCommissiJ!n\" of was formed mainly with a view to acquiring shares in\n\nIncome-tax. two foreign companies and selling them to an English West Hengal Company which was likely to be interested in them. v.\n\nAfter the Respondent Company had purchased the Calcutta National shares it took an active interest in the affairs of those\n\n(/ HanLk. Lindcited two cmpanies, and in 1920, negotiations were proceedn 1qui ation) . i:- mg ior the sale of those shares. The Company was Sinha J. assessed to Excess Profits Duty. On appeal, the Special Commissioners accepted the argument on behalf of the Company that it was not carrying on a trade or _!:Jusiness within the meaning of the taxing statute, and that it was only a holding company and stood in the same position as an individual who had acquired and held investments. On appeal by the Revenue, it was held in the King's Bench Division that the principal business of the Company consisted of making investments, and was, therefore, liable to Excess Profits Duty.\n\nIn support of the second branch of his argument that rental income was not included in \"business \", the learned counsel for the respondent called our attention to the decision of tliis Court in The United Commercial Banlc Ltd., Calcutta v. '!'he Commissioner of Income-tax, West Bengal, (1) with special reference to the observations at p. 97 to the effect that various heads of income, profits and gains, under the lncometax Act, must be held to be mutually exclusive, each head having been meant to cover income from a particular source. The case before their Lordships was concerned with the question of set-off of the carried. over Joss of the previous year. That case was not in any way concerned with the provisions of the statute now before_ us. It was concerned only with the scheme of the Income-tax Act, with particular reference to the classification of income into different heads. That case does not throw any light on the interpretation of the term \" business \". In view of the considerations set forth above, it must be held that the realisation of rental income by the assessee Bank, was in the course of its business in\n\n(1) (1958] S.C.R. 79.\n\nprosecution of one of the objects in its Memorandum ; it was, therefore, liable to be included in its business profits, and thus, was assessable to Excess Profits Tax.\n\nThe appeal must, therefore, be allowed with costs here and below.\n\nKAPUR, J.-I have read the judgment prepared by my learned brother Sinha, J., but I respectfully disagree with it and my reasons are these : The sole question for decision is whether a sum of Rs. 86,000/- received by the respondent during the chargeable accounting period ending March 31, 1946, as rent of its building at Calcutta can be included in the profits of its business for the purposes of Excess Profits Tax. The respondent-the assessee-was a banking company which at one time did considerable banking business but it has gone into liquidation. It owned a six storeyed building in a commercial locality of Calcutta. During the relevant period it was occupying the ground floor arid a portion of the sixth floor and had let out the rest to tenants for which it received the sum of Rs. 86,000/- as rent, which is the amount now in controversy.\n\nThe liatbility of this sum to Excess Profits Tax depends upon the interpretation of the relevant provisions of the Excess Profits Tax Act (Act XV of 1940) (which for the sake of brevity will hereinafter be termed the Act).\n\nThe object of the Act was to impose a tax on excess profits which as the very , name implies must have reference to and be the result of a business activity. Such profits for the purposes of the Act were to be computed in the manner provided by the Act.\n\nThe scheme of the Act is as follows :- Section 2 is the definition section ; s. 4 the charging section and s. 5 deals with the application of the Act.\n\nSection 6 is a provision for determining standard profits and their computation. Excess Profits Tax was chargeable on the excess of profits during the chargeable accounting period over the standard profits, i.e., profits during the standard period. Section 5 of the Act provides :- \"This Act shall apply to every business of which\n\nI959\n\nCommissionr of\n\nlnconu-tax, IV est Bengl\n\nCalcutta National\n\nBank Limited (In Liquidation)\n\nKapur].\n\nI959\n\nComrnissioner of\n\nIncoinetax, West Bengal v.\n\nCalcutta 1'.1ational\n\nBank Limited (In Liquidation)\n\nKapur).\n\nany part of the profits made during the chargeable accounting period is chargeable to income-tax by virtue of the provisions of sub-clause (i) or sub-clause\n\n(ii) of clause (b) of sub-section (I) of section 4 of the Indian Income.tax Act 1922 .................. \" The charging section under the Act is s. 4, the relevant portion of w hie h is :\n\n\"Charge of tax: (I) Subject to the provisions of this Act, there shall, in respect of any business to which this Act applies, be charged, levied and paid on the amount by which the profits during any chargeable . accounting period exceed the standard profits .......... \" Thus the Act applies to every business, any part of the profits of which are chargeable to income-tax (s. 5) and in respect of any business to which the Act is applicable, excess profits tax shall be chargeable on the amount by which the profits during the chargeable accounting period exceed the profits during the standard period (s. 4). It is in respect of those profits that the tax is exigible. In order te> determine whether income received during a chargeable accounting period is for the purposes of the Act \"profits\" arising out of \"Business\" or not it becomes necessary to examine what these words, i.e., \"Business\" and \"•profits\" mean. Section 2( 5) of the Act defined \" Business \" as follows:-\n\n\" ' Business ' includes any trade, . commerce or manufacture or any adventure in the nature of trade, commerce or manufacture or any profession or vocation, but does not include a profession carried on by an individual or by individuals in partnership if the profits of the profession depend wholly or mainly on his or their personal qualifications unless such profession consists wholly or mainly in the making of contracts on behalf of other persons or the giving to other persons of advice of a commercial nature in connection with the making of contracts : Provided that where the functions of a company or of a society incorporated by or under any enactment consists wholly or mainly in the holding of investments .or other property, the holding of the investments or property shall be deemed for the purpose of\n\nthis definition to be a business carried on by such z959 company or society : Commissioner 1 Provided further that all business to which this Act Income-tax,\n\napplies carried on by the same person shall be treated West Bengal as one business for the purposes of this Act\". v.\n\nThe definition of \"business\" in the main section, Calcutta NaNonal 2(5) 1 h d fi •t• f \"b \" Banh Limited 1.e., ~- . is an 2 (a ogofus to 1 t e e Tm 101A1 o b tusmes~ (In Liquidation) as given m s.\n\n4) o the ncome ax ct ; u proviso\n\n(1) to s. 2(5) of the Act enlarges the scope of the word Kapur J. \"business\" in the case of companies and societies incorporated under any enactment. The words \"deemed to be\" make something\" business\" which otherwise it would not have been. In the case of an incorporated company therefore business under the Act is not merely any trade, commerce or manufacture or any ad venture in the nature of trade, commerce or manufacture but also that which is deemed to be business under proviso (1) which makes the holding of investments or other property by an incorporated Society or company business if one of the following two conditions is fulfilled, e.g.,\n\n(1) If its functions consist wholly or mainly in the holding of investments; or\n\n(2) If its functions consist wholly or mainly in the holding of other property.\n\nIt is manifest from this that in the absence of the proviso (1) to s. 2(5) of the Act the word \"business\"\n\nwould comprise no function beyond what it comprises under the Income Tax Act and such functions as the holding of investments or the holding of other property would escape the operation of the Act. The heads of income falling under s. 6 (ii), 6 (iii) and 6 (v) of the Income Tax Act, i.e., of interest on securities, and income from property and income from other sources are not business in the Income-tax Act and would not be business within the Act.\n\nThis Court in Tlnited Commercial Bank Ltd. v. Commissioner of Income-tax (1) held that the heads of income mentioned in s. 6 of the Income-tax Act are mutually exclusive, each head being specific to cover the item\n\n(1) [r95SJ S.C.R. 79. 86\n\nr959 arising from a particular source and therefore even if\n\nCommissioner of securities are held as trading assets or dealt with in the course of a business by a banker or a dealer in I11oome-tax. west Bengal securities the interest must be charged and computed v. under the head \" Interest on securities\" under s. 8 of Calcutta National the Income-tax Act and not as business profits under Bank Limited s. 10 of that Act. This wider connotation of the word (In Liqnid, tion) \" business\" in the Act was clearly intended to bring\n\nKapi1r J. within its net those incorporated societies and companies which otherwise would or might have escaped it. One such company would be a trust investment company whose business is the holding of investments and getting profit therefrom. Such a company cannot be said to be carrying on business, i.e., any trade, commerce or manufacture within the meaning of the main provision, i.e., s. 2(5) but it is the proviso which makes it clear that that type of a company is included and its operations are to be regarded as carrying on of a \" business \". See also Commissioners of I n/, and Revenue\n\nv. Desoutter Bros., Ltd. (1).\n\nAnother such company or society would be a housing society or company which owns houses for the purpose of letting on rent. Such a company or society also cannot be said to be carrying on business within the definition in. the main sub.s. (5) of s. 2. Under proviso (1) however that class of company or society would also be deemed to be carrying on \"business\". In both these cases their profits would be chargeable to excess profits tax.\n\nThe word \" profits \" in s. 2(19) of the Act means \"profits as determined in accordance with the First Sched.ule\" which provides the method of computation of\" profits\". Rule 4 of this Schedule deals with income from investments and is as follows:\n\n\"(SEE SECTION 2(19)) \"Rules for the computation of profits for purposes of Excess Profits Tax\n\n1. ............................................................. .. 2 ............................................................... . 3 ............................................................... .\n\n4. (1) \"Income received from investments shall be included in the profits in the cases and to the\n\n(1) (1945) ,29 T.C. 155, 160.\n\nextent provided in sub-rules (2), (2A) and (4) of this rule and not otherwise. 4(2). In the case of the business of a building society, or of a money-lending business, banking business, insurance business or business consisting wholly or mainly in the dealing in or holding of investments, the profits shall include all income received from investments, whether or not such income is included in the profits charged under section 10 of the Indian Income Tax Act, 1922, or is charged under any other section of that Act, or has been subjected to deduction of tax at source or is free of or exempt from income-tax \".\n\n(2A). In the case of a business part of which consists in banking, insurance or dealing in investments, not being a business to which sub. rule (2) of this rule applies, the profits shall include all income received from investments held for the purpose of that part of the business, being income to which the persons carrying on the business are beneficially entitled\".\n\nSub-rule (1) deals with business which consists wholly or mainly in the dealing in or holding of investments in the case of various kinds of companies mentioned and sub-rule (2A) deals inter alia with banking business.\n\nThe respondent being a banking co.mpany its business essentially consists in dealing with money and credit. Such a mmpany has always to keep cash or realisable securities and other realisable investments in order to meet withdrawals by depositors and the holding of such securities and other investments would be the holding of\" investments\" and that is its normal and main activity. Punjab Co-operative Bank Ltd. v. Commissioner of Income-tax, Punjab (1). See also s. 277F of the Indian Companies Act which is now a part of the Banking Companies Act. Therefore the respondent qua the holding of investments of this kind, was carrying on business under proviso (1) to s. 2(5) of the Act but it is not that kind of business which is the subject matter of controversy in this appeal. What we have to decide is was the income received as rents from the portion of the respondents'\n\n(r) [1940] 8 I.T.R. 635 (P.C.).\n\nI959\n\nCommissioner of\n\nIncmnc-tax, West Bengal v.\n\nCalcutta National Bank Limited (In Liquidation)\n\nKapur].\n\n•959 Calcutta buildiug which was not required by the res.\n\nCommissioner 1 pondent for its own purposes and let out on hire pro-\n\nIncome-tax,\n\n0 fit within s. 2(19) and chargeable under B. 4 of the\n\nWest Bengal Act. v.\n\nCalcutta National Bank Limited (In Liquidatiun)\n\nTwo arguments were addressed in favour of the contention that such income was profits of business within the Act: (1) that the laying out of money in a multi-storeyed building was itself an investment and\n\n(2) that even if the business consisted partly in letting out of property the income from that property was profit within the Act.\n\nIn support of the first submission it was argued that one of the objects in Memorandum of Association was the acquisition of immoveable property which the company may think convenient for the purpose of its business and therefore the construction of a multistoreyed building would itself be an investment.\n\nReference was made to cl. (e) of the Memorandum of Association which relates to acquisition of moveable and immoveable property. This clause is as follows:-\n\n\" (e) To purchase, take on lease or in exchange or otherwise acquire any moveable or immoveable property ..................... which the Company may think necessary or convenient for the purpose of its business, and to construct, maintain and alter any building or works necessary or convenient for the purpose of the Company\".\n\nNow this argument loses sight of the fact that the Legislature has chosen to use two words \"investments\" and \"other property\" with a disjunctive \" or \" in between. To both these words a meaning must be assigned because it cannot be said that one or the other of them is redundant or they mean the same thing. \" Investments \" has been defined thus : \"something acquired as a result of laying out money is an investment: Commissioners of Inland Revenue v.\n\nRolls Royce Ltd. (1) but this general test as a test was not accepted in a later case, Commissioners of Inland Revenue v. Desoutter Bros. Ltd.(') at p. 161 where Lord Greene said:-\n\n\"Speaking for myself, I am always disinclined to\n\n(1) (1941) 29 T. C. 14.\n\n(2) (1945) 29 T. C. 155, 160.\n\naccept any general definition or test for the purpose of\n\nI959 sol., ring this type of question. The question whether Commissioner of or not a particular piece of income is income received Income-tax, from an investment must, in my view, be decided on west Bengal the facts of the case\". v.\n\nIn every case the facts have to be ascertained and Calcutta National h h • b d d h h h Bank Limited t en t e questron can e etermme w et er t e pro-\n\n(I L' a 1. l fi . . f . l f . b . n tqut a ion ts ansrng rom a part1cu ar unct10n are usmess profits within the Act or not.\n\nAs above stated the Kapur J. essential function of a banking company consists in money and credit and to carry on such functions it has to hold investments which under the Incometax Act would fall under ss. 8 and 12.\n\nSee also s. 277F of the Companies Act of 1913 which is now incorporated in the Banking Companies Act.\n\nProperty is a word of wide connotation and includes moveable and immoveable properties, all interests therein and even investments would fall within that word but in the context it would not comprise\" investments\".\n\nIf a Banking Company as in the present case constructs a multi-storeyed building used a part of it and lets out the rest it cannot be said to carry on \" business\" unless its main function is the holding of property and we have.already seen that the main function of a Banking Company is dealing in money or credit and for that purpose it holds investments in the form of easily realisable securities. Merely because for the carrying out of its functions a Banking Company constructs a building its functions will not change from that of a Banking Company into one of a company engaged in the letting out of property on hire.\n\nAs the Excess Profits Tax is a taxing measure and the object of the Act also is to tax excess profits it is reasonable to say that the words \" inyestment \" and \"property\" as used in the case of a Banking Company are usedin the same sense as they are used in the Income-tax Act but if their holding by the company is its sole or main function then they will be deemed to be business so as to make the income derived therefrom chargeable to excess profits tax even if otherwise they\n\n1959 would not have been so chargeable. The two enactments are in pari materia and are intended to charge Co111m1ssioner of Income-tax, tax on income, profits and gains only the Act is con- West Bengal fined to \"profits \" of \"business\" as therein defined v. and income-tax is chargeable on all incomes, profits Calcutta Nai.icnal and gains. If the mere owning of immoveable pro-\n\nHank Limited perty and letting out that portion which was not (In Liquidaticn) d d .c • b d d nee e ior its own use y a company was mten e to\n\nKafl.11r J. be covered by the definition then the use of the word wholly or mainly would be wholly redundant. In construing the proviso effect has to be given to every word used.\n\nThe word \"functions \" is defined in the dictionary to mean \" activities appropriate to any business \" and if that is substituted in the proviso to s. 2(5) it would read \"where the activities appropriate to anybusiness ......... consist wholly or mainly in the holding of investments or other property\". So read, can it be said that the activities appropriate to the business of a banking company consists wholly or mainly in the holding of a multi-storeyed building or such other property for the purpose of letting out the unused portion on hire. Obvious answer to this question would be in the negative. It is manifest that rents received from the multi-storeyed property are not income received from a \"business \" within the Act. • It is not a trading receipt in the case of banking company. Under the Income-tax Act it falls under s. 9 and there is nothing to indicate in the definition of the word \" business\" as given in the main portion of s. 2(5) of the Act that it has a different complexion there. In the case of hotel proprietors it has been held that compensation paid by the Crown for requisitioning, during the war, of hotel premises is not its trading profits. Salisbury House Estate Ltd. v. Fry (1); Mellows v. Buxton Palace Hotel Ltd.('). Even under the enactment imposing Profits Tax corresponding to our Excess Profits Tax it was held not to be income receivable from \"investments or other property \". Commissioners of Inland Revenue v. Buxton Palace Hotel Ltd. (').\n\n(1) (1930) 15 T.C. 266.\n\n(2) (<9~3) 25 T.C. 507.\n\n(3) (1948) 29 T.C. 329, 333\n\nBut it was urged that sub-r. (4) of r. 4 of Schedule I x959 lays down a different method of computation and Commissioner of qualifies the qualities of a business when it relates to I nconie-tax~ holding of property. Sub-rule (4) of r. 4 is as fol- West Bengal lows:- v. \"In the case of a business which consists wholly Calcutta National or partly in the letting out of property on hire, the Bank Lhnited income from the property shall be included in the (In Liquidation) profits of the business whether or not it has been Kapur 1. charged to income-tax under section 9 of the Indian Income-tax Act, 1922, or under any other. section of that Act\".\n\nBut before this rule becomes applicable the functions of the company have to fall within the definition of \"Business\" as given in the Act. The definition Schedule I is confined to computing of profits and has relation to s. 2(19) wherein it is mentioned. It cannot be used to affect the quality of the word \"business\" as used in the Act. It only means that when the functions of a company, i.e.,\" the activities appropriate to any business\" consist wholly or mainly in the holding of \" other property \" then in the case of that portion of the business which wholly or partly consists in the letting of property for hire the income from the property shall be included in \" profits \" in spite of the fact that the income has been assessed under s. 9 of the Income Tax Act. It is a far step from saying that the definition of\" busmess\" has been modified by sub-r. (4) of r. 4. It relates to a business of letting out of property. The word\" business\" can either mean what is contained in the main provision in s. 2 (5) or the extended meaning given by the first proviso of that section. In either case it is inapplicable to the case of the respondent. It cannot be said that letting out of property is either wholly or even partly \" business\" of the respondent.\n\nIn my view the income received from rents of the portion of the building let out on hire, i.e., Rs. 86,000/- does not fall within the word \"profits \" as used in the Act and is not chargeable to Excess Profits Tax. The judgment of the High Court is therefore sound and I would dismiss this appeal .with costs.\n\n688 SUPREME COUR'r REPORTS [1959] Supp.\n\nI959 HIDAYATULLAH, J.-I have had the advantage\n\nCommission\" of of reading the judgments of my learned brothers, Income-tax.\n\nSinha and Kapur, JJ. I agree with Sinha, J., that w\"' Bengal the appeal must be allowed with costs here and below.\n\nv_ _ The question which was referred for the opinion of Calcutta Na'.'onal the Calcutta High Court was whether in this case ren-\n\nBank Limit_ed tal income from immovable property was part of the (In Liquidation) b · bl d d h ( nsmess mcome taxa e un er s. 2(5) rea wit r. 4 4)\n\nHidavatullail ;. of Sch. I attached to the Excess Profits Tax Act, 1940.\n\nIn my opinion, the question must be answered in the affirmative for the following reasons.\n\nThe Calcutta National Bank, Ltd. (in liquidation) hereinafter called the Bank, was doing business as a bank prior to going into liquidation. Its income, it appears, was also subject to excess profits tax in the past, and we are concerned in the present case with the chargeable accounting period ending March 31,\n\n1946. The Bank had constructed a six-storeyed building, of which it occupied the ground and the top floors.\n\nThe rest of it was rented out, and in the chargeable accounting period, rents totalling Rs. 86,000/- were received by the Bank. The question was, as already stated, whether this rental income was chargeable to excess profits tax under the Act.\n\nAccording to Kapur, J. the renting out of a building was not the business of the Bank within the definition of ' business' in the Act.\n\nThis income, therefore, was not properly assessable to excess profit's tax. Sinha, J. bolds the contrary view.\n\nUnder the Act, the charge of tax is laid on any business to which the Act applies. The Act does not define 'business' exhaustively, but shows what may be included in it. The definition follows to a point the definition given in the Indian Income-tax Act, but by a proviso which enlarges its scope, provides as follows:\n\n\" Provided that where the functions of a company or of a society incorporated by or under any enactment consist wholly or mainly in the holding of investments or other property, the holding of the investments or property shall be deemed for the purpose of this definition to be a business carried on by such company or society.\"\n\nThe charging section is s. 4, and it, shortly, provides x959 that the charge is laid on the amount by which the c .. • . . ommissioner of profits m a chargeable accountmg period exceed the Income-tax standard profits of a business.\n\nAccording to another west Bengl definition, \"profits\" mean profits as determined in v. accordance with the First Schedule-of the Act. In the Calcutta National schedule which is enacted as part of the Act r. 4 (4) Bank_ Li_mited h £ b ' . ' (In L1qu1dat1on) to wh1c re1erence has een made m the quest10n, _ reads as follows : Hidayatullah J. \"In the case of a business which consists wholly or partly in the letting out of property on hire, the income from the property shall be included in the profits of the business whether or not it has been charged to income-tax under section 9 of the Indian Incometax Act, 1922, or under any other section of that Act.\"\n\nThe difference between the definition of ' business ' and the rule above quoted is that while the former mentions that the business must be wholly or mainly holding of investments or other property, the rule says that if the business consists wholly or partly of letting out of property, the income of the property shall be included in the profits.\n\nKapur, J., is of the opinion that the business of the Bank being quite different, the rule cannot be made applicable, because the definition requires that the assessee's business should be wholly or mainly the holding of investments or other property. He al:so thinks that there is neither holding of an investment nor of property as investment. The definition of the term' business ' in the Act is helpful where it applies, but not being an exhaustive one, it cannot shut out something which can be appropriately described as a business.\n\nEven the opening words of the definition show that it is meant to cover most of the activities designed to produce income or profits or gain. Under the Memorandum of Association, the Bank can acquire property, just as it acquires investments for purposes of its business and even otherwise. Clause (e) enables the Bank to purchase, take on lease or in exchange or otherwise acquire any moveable or immoveable property, which the Bank\n\n'959 may consider necessary or convenient for the purpose\n\nCommission\" of of its business and to construct, maintain and alter\n\nInco'.\"e-tax. any buildings or works necessary or convenient for West Bengal the purpose of the Bank. The acquisition of a sixv. . storeyed building was, therefore, within the terms of Calcutta Natwnal the Memorandum, and the only question is whether\n\nBank L•mited th , f h b 'Id, 'f d t b (In Liquidation) e mcome rom sue m mg, I rente ou , can e taken as profits of the Bank for purposes of excess Hidayatullah J. profits tax.\n\nThe definition mentions the holding of investments or other property, and the words \" other property \" must necessarily take their colour from what precedes, that is to say,\" investments\". The holding of other property must itself be investment for earning profits; otherwise, the definition does not apply. The word ' investments' is a word of large import. In one sense, every mode of application of one's money intended to yield a return by way of interest, income or profit is investment. When the Bank builds a building more than necessary to house itself and with a desire to earning rents from it, it cannot but be stated that the building was constructed as an investment, or in other words, the Bank was holding \"other property \"within the meaning of the definition, in addition to the investments which it is the normal business of the Bank to hold. In my opinion, the income from the property would be regarded as profits from property held as • investment, and the profits will have to be calculated, .as laid down in Sch. I, r. 4( 4).\n\nThe only difficulty is in the change of language between the definition and the rule, inasmuch as the former speaks of the business which is wholly or mainly the holding of investments or other property, and the latter speaks of a part of the business being the letting out of property. Kapur, J., is of the view that the section defining the word 'business' must prevail, because the Schedule is enacted only for the purpose of computing the profits, as laid down in the definition and as the heading of the Schedule shows.\n\nThat there is a difference between the Schedule and the Act is not to be denied, and the question that naturally falls for \\lOnsideration is whether the\n\nSchedule should be given effect to independently in the r959 circumstances of the case.\n\nThe Schedule really tends c .. c h f 11 \"d h d fi . . ommissioner of ior t e purposes o co ect10n, to WI en t e e mt10n Income-tax of a business to include any letting of property for west Bengd1 • earning rents. The rule to be applied was stated by v.\n\nLord Sterndale, M. R., in Inland Revenue Oommis- Calcutta National sioners v. Gittus (1) in the following words : Bank Limited . . (In Liquidation) \" It seems to me there are two prmc1ples or rules of interpretation which ought to be applied to the Hidayatullah f. combination of Act and schedule. If the Act says that the schedule is to be used for a certain purpe5se and the heading of the part of the schedule in question shows that it is prima facie at any rate devoted to that purpose, then you must read the Act and the schedule as though the schedule. were operating for that purpose, and if you can satisfy the language of the section without extending it beyond that purpose you ought to do it.\n\nBut if in spite of that you find in the language of the schedule words and terms that go clearly outside that purpose, then you must give effect to them and you must not consider them as limited by the heading of that part of the schedule or by the purpose mentioned in the Act for which the schedule is prima facie to be used.\n\nYou cannpt refuse to give effect to clear words simply because prima facie they seem to be limited by the heading of the schedule and the definition of the purpose of the schedule contained in the Act. \" In my opinion, the second of the two propositions laid down by Lord Sterndale, M. R., applies to the exposition of the Schedule, with which we are concerned. It may be pointed out that the decision of Lord Sterndale, M. R., was accepted by the House of Lords without question in Gittus v. Commissioners of Inland Revenue (2) in an appeal from the decision of the Court of Appeal in the earlier case.\n\nThough the heading of the Schedule and the definition of the word ' profits ' show that the Schedule is designed to assist in the computation of profits, the mention of other kinds of businesses in r. 4, taken with an incomplete definition of the term in the Act, clearly\n\n(r) (1930) l K.B. 563, 576.\n\n(2) (1921) 2 A. C. Sr.\n\nr959 shows that the legislature was defining the term ' business ' as and when necessary, as it laid down the Co1nmissioncr of rules for calculation of profits of a business. It was Inconie-ta~; •West Bengal including different kinds of businesses within the Act v. and indicating how in those cases the profits had to Calcutta National be calculated. I do not think that the definition\n\n<Ba~~ Limit'.d given in the Act can be said to control everything in In quidation) the Schedule, in spite of the definition of ' profits ' and\n\nHidayatullah J. the heading given to the Schedule. As I have said\n\nI959\n\nApril 2I.\n\n' above, the second of the two alternatives is really applicable to the present case.\n\nFor these reasons and those given by my brother, Sinha, J., I hold that this appeal should be allowed with costs here and below.\n\nBY THE CoURT.-In accordance with the judgment of the majority, the decision under appeal is set aside and the appeal is allowed with costs here and below.\n\nRAM GOPAL\n\nAN ANT PRASAD AND ANOTHER\n\n(S. K. DAS, A. K. SARKAR and K. SuBBA RAO, JJ.)\n\nAppeal-Maintainability-Permit to run stage carriage-Application for renewal-New applicant's application for permit-Order by State Transport Authority renewing permit but no order passed on new applicant's application-Appeal to Appellate Tribunal against order granting renewal-Whether appeal competent-Motor Vehicles Act, r939 (4 of r939), ss. 47, 57,. 58, 64.\n\nThe appellant who was the holder of a permit to run a stage carriage, which was about to expire, rna<le an application to the State Transport Authority for its renewal for a further period.\n\nThe respondent made a representation against the renewal of the appellant's permit and also applied for the grant of the permit to himself. The State Transport Authority made an order in the terms \"Renewed for three years\" in respect of the appellant's permit but no express order was made on the respondent's application for the grant of the permit to him. On appeal by the respondent, the Appellate Tribunal cancelled the appellant's permit and granted the permit to the respondent. The appellant then moved the Judicial Commissioner, Vindhya Pradesh, for a", "total_entities": 144, "entities": [{"text": "COMMISSIONER OF INCOME-TAX, WEST\n\nBENGAL", "label": "PETITIONER", "start_char": 58, "end_char": 98, "source": "metadata", "metadata": {"canonical_name": "COMMISSIONER OF INCOME-TAX, WEST BENGAL", "offset_not_found": false}}, {"text": "CALCUTTA NATIONAL BANK LIMITED\n\n(IN LIQUIDATION", "label": "RESPONDENT", "start_char": 103, "end_char": 150, "source": "metadata", "metadata": {"canonical_name": "CALCUTTA NATIONAL BANK LIMITED (IN LIQUIDATION)", "offset_not_found": false}}, {"text": "B. P. SINHA, J.", "label": "JUDGE", "start_char": 154, "end_char": 169, "source": "metadata", "metadata": {"canonical_name": "BHUVNESHWAR PRASAD SINHA*", "offset_not_found": false}}, {"text": "L. 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"source": "regex", "metadata": {"statute": null}}, {"text": "First Schedule", "label": "PROVISION", "start_char": 66437, "end_char": 66451, "source": "regex", "metadata": {"statute": null}}, {"text": "section 9", "label": "PROVISION", "start_char": 66903, "end_char": 66912, "source": "regex", "metadata": {"statute": null}}, {"text": "Indian Incometax Act, 1922", "label": "STATUTE", "start_char": 66920, "end_char": 66946, "source": "regex", "metadata": {}}, {"text": "West Bengal including different kinds of businesses within the Act", "label": "STATUTE", "start_char": 73106, "end_char": 73172, "source": "regex", "metadata": {}}, {"text": "Motor Vehicles Act", "label": "STATUTE", "start_char": 74288, "end_char": 74306, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "ss. 47, 57", "label": "PROVISION", "start_char": 74326, "end_char": 74336, "source": "regex", "metadata": {"linked_statute_text": "Appeal to Appellate Tribunal against 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{"document_id": "1959_2_692_701_EN", "year": 1959, "text": "692 SUPREME COURT REPORTS [1959] Supp.\n\nr959 shows that the legislature was defining the term ' business ' as and when necessary, as it laid down the Co1nmissioncr of rules for calculation of profits of a business. It was Inconie-ta~; •West Bengal including different kinds of businesses within the Act v. and indicating how in those cases the profits had to Calcutta National be calculated. I do not think that the definition\n\n<Ba~~ Limit'.d given in the Act can be said to control everything in In quidation) the Schedule, in spite of the definition of ' profits ' and\n\nHidayatullah J. the heading given to the Schedule. As I have said\n\nI959\n\nApril 2I.\n\n' above, the second of the two alternatives is really applicable to the present case.\n\nFor these reasons and those given by my brother, Sinha, J., I hold that this appeal should be allowed with costs here and below.\n\nBY THE CoURT.-In accordance with the judgment of the majority, the decision under appeal is set aside and the appeal is allowed with costs here and below.\n\nRAM GOPAL\n\nAN ANT PRASAD AND ANOTHER\n\n(S. K. DAS, A. K. SARKAR and K. SuBBA RAO, JJ.)\n\nAppeal-Maintainability-Permit to run stage carriage-Application for renewal-New applicant's application for permit-Order by State Transport Authority renewing permit but no order passed on new applicant's application-Appeal to Appellate Tribunal against order granting renewal-Whether appeal competent-Motor Vehicles Act, r939 (4 of r939), ss. 47, 57,. 58, 64.\n\nThe appellant who was the holder of a permit to run a stage carriage, which was about to expire, rna<le an application to the State Transport Authority for its renewal for a further period.\n\nThe respondent made a representation against the renewal of the appellant's permit and also applied for the grant of the permit to himself. The State Transport Authority made an order in the terms \"Renewed for three years\" in respect of the appellant's permit but no express order was made on the respondent's application for the grant of the permit to him. On appeal by the respondent, the Appellate Tribunal cancelled the appellant's permit and granted the permit to the respondent. The appellant then moved the Judicial Commissioner, Vindhya Pradesh, for a\n\nwrit of certiorari quashing the order of the Appellate Tribunal r959 on the ground that it disclosed.an error on the face of it because under the Act no appeal lay from the order that was passed -by Ram Gopal the subordinate authority. The learned Judicial Commissioner v. held that the appeal was competent and dismissed the applica- Anant P•asad cation for the writ. It was contended for the appellant that the respondent's appeal to the Appellate Tribunal was not maintainable on the grounds (r) that no express order was made against the respondent by the State Transport Authority, and so s. 64(a) of the Act did not give him a right of appeal and (2) that in view of ss. 47, 57 and 58 of the Act, the State Transport Authority had no jurisdiction to consider the respondent's application or to make an order in respect of it after the appellant's permit was renewed, and therefore could not make an order rejecting it. It was also contended thats. 64 of the Act did not provide for an appeal by a person aggrieved by the renewal of a permit unless he was one of those mentioned in cl. (f) of that section which the respondent was not, and therefore even if an appeal by the respondent was competent under s. 64(a) in such an appeal, the Appellate Authority could not set aside the order of renewal.\n\nHeld: (r) that the order made by the State Transport Authority in the present case did amount, in fact, to a refusal to grant the permit to the respondent. The respondent's appeal to the Appellate Authority was therefore maintainable under s. 64(a) of the Act.\n\nS. Gopala Reddi v. Regional Transport Authority, North Arcot• [1955] 2 M.L.J. 130, approved.\n\nV. C. K. Bus Service Ltd. v. Regional Transport Authority, Coimbatore, [1957] S.C.R. 663, distinguished.\n\n(2) thats. 58(2) of the Act shows that an application for the renewal of a permit and a fresh application for the same permit have to be heard together, and that there was nothing in ss. 47 and 57, indicating a contrary course.\n\n(3) that cl. (f) of s. 64 of the Act does not in any way restrict the power of the Appellate Tribunal to grant all reliefs in an appeal under cl. (a) of the section. Consequently, the order of the Appellate Tribunal setting aside the order of renewal ' was valid.\n\nDholpur Co-operative Transport Etc. Union Ltd. v. The Appellate Authority, Rajasthan, A.LR. 1955 Rajasthan 19, in so far as it decided to the contrary, disapproved.\n\nCIVIL APPELLATE JURISDICTION : Civil Appeal No. 284 of 1958.' Appeal from the judgment and order dated April 21, 1956, of the former Judicial Commissioner's Court, Rewit, in Misc. Civil Writ No. 27 of 1956.\n\nNa.unit Lal, for .the appellant.\n\nRam Gopal v.\n\nAnant Prasad\n\nSarkar ].\n\nBhagwan Das Jain, for respondent No. 1. 1959.\n\nApril 21.\n\nThe Judgment of the Court was delivered by\n\nSARKAR, J.-This appeal arises out of an application for a writ of certiorari and involves questions of interpretation of the Motor Vehicles Act, 1939 (4 of 1939), by which grants of permits to run stage carriages and all matters connected therewith are governed.\n\nThe appellant was the holder of a permit to run a stage carriage on a stretch of the public highway called the Rewa-Singrauli route, in the State of Vindhya Pradesh which is now merged in the State of Madhya Pradesh. That permit was due to expire on December 11, 1955, and so on September 12, 1955, he made an application for its renewal for a further period. The respondent Anant Prasad who will be referred to as the respondent, made a representation against the renewal of the appellant's permit. He also applied for the grant of the permit to himself. On December 9, 1955, the State Transport Authority, Vindhya Pradesh, made an order in the following terms: \"Renewed for three years\". It is not in dispute that the order meant that the appellant's permit was renewed for three years.\n\nNo express order was made on the respondent's application for the grant of the permit to him.\n\nThe respondent preferred an appeal against this order to the Vindhya Pradesh Transport Appellate Tribunal, the appellate authority under the Act. It was contended by the appellant before the Appellate Tribunal that the appeal was not competent. The Appellate Tribunal rejected this contention and passed an order cancelling the permit granted to the a ppellant by the State Transport Authority and issuing the permit to the respondent.\n\nThe appellant then moved the Judicial Commissioner, Vindhya Pradesh, for a writ of certiorari quashing the order of the Appellate Tribunal Ol! the ground that it disclosed an error on the face of it because under the Act no appeal lay from the order that was passed by the subordinate authority~ The learned Judicial Commissioner held that the appeal\n\nwas competent and dismissed the application for the writ. Hence the present appeal.\n\nThe question is, Did an appeal lie to the Appellate Tribunal from the order made by the State Transport Authority in the present case? Section 64 of the Act contains the provisions for appeals. Whether the appeal lay or not will have to be decided by reference to these provisions. The portion of the section w-hich will have to be considered is in these terms:\n\n\"Section 64.\n\nAny person- ( a) aggrieved by the refusal of the State or a Regional Transport Authority to grant a permit, ...... or\n\n(e) aggrieved by the refusal of renewal of a permit, ......... or\n\n(f) being a local authority or police authority or an association which, or a person providing transport facilities who, having opposed the grant of a permit is aggrieved by £he grant thereof.. ........................... .\n\nmay, ......... appeal to the prescribed authority ...... \".\n\nThe prescribed authority was as we have earlier stated, the Appellate Tribunal. Clearly the respondent was not a person contemplated by cl. (e) of the section. It is also not in dispute that he was not one of those mentioned in cl. (f). The respondent does not claim that any of these clauses gave him the right of appeal.\n\nHe however claims a right of a&IJeal under cl. (a).\n\nIn our view that claim is justified~ He had applied for a permit and had not got it. He was therefore a person aggrieved by the refusal to grant a permit and clearly came within cl. (a). It is true that the order of the State Transport Authority did not expressly refuse him the permit. But that no doubt was the effect of the order that was made. He had made an application for the grant of the permit to him and the application was disposed of without granting him the permit but granting it to a competing applicant.\n\nThere was only one permit which could be granted\n\nr959\n\nRam Gopal v.\n\nAnanl Prasad\n\nsa .. har 1.\n\nI959\n\nRam Gopal v.\n\nA nant Prasad\n\nSarkar ].\n\nand the result of the order was to give it to the appellant. The permit was thereby necessarily refused to the respondent. The fact that an express order was not made cannot operate to his prejudice. In S. Gopala Reddi v. Regional Transport Authority, North Arcot (1), in circumstances identical to those in the present case an order was made by the Transport Authority in the same terms as we have here and it was said, \"The grant of a permit to one, would automatically mean the refusal of the permit to the other\". We are in entire agreement with the view expressed there.\n\nTherefore it seems to us that the respondent was a person who had been aggrieved by the refusal to grant him a permit and the appeal by him was fully competent.\n\nBut it was said on behalf of the appellant that in the present case it would be wrong to imply an order refusing the permit to the respondent for none such could be made under the Act and therefore here there was no scope for applying s. 64(a) .• The contention was put in this way : When there are a number of applications in respect of the same permit, one of which is by way of renewal to which objections have been filed and the others, fresh applications, the latter could not be taken up for consideration till the former and the objections made to it had been considered. If the objections to the renewal failed, the application for renewal had to be granted and the fresh applications for permit could not then be cousidered at all. If on the other hand, the objections to the renewal succeeded, the renwal could not be granted and the choice had then to be made from the new applicants for the permit. In the present case the objection to the renewal of the applicant's permit raised by the respondent failed and the appellant's permit was in consequence renewed. Therefore the respondent's application for_ a permit, which was an application for a new permit, never fell to be considered and that is why no order on it was made at all.\n\nWe think this contention completely lacks substance. It was said that that was t4e result of ss. 47,\n\n(1) [1955] 2 M.L.J. 130.\n\n57 and 58 of the Act but we find nothing in any of them to support it. Section 47 does not deal with the order in which applications for the renewal or grant of a new permit are to be heard and does not help at all.\n\nSection 57 (3) provides that after an application for a permit had bee!}. made others can make representations against it. These are the objections to an application for the grant or renewal of a permit earlier referred to. Sub-section (5) of s. 57 provides that the application for a permit which includes an application for the renewal of a permit and the representations against it shall be disposed of at a public hearing at which the person making the application and the persons making the representations shall be given an opportunity of being heard. But this does not show that all other applications for the same permit and all other representations in connection therewith, cannot be disposed of at the same hearing. Indeed, s. 58 (2) puts it beyond doubt that an application for renewal of a permit and the fresh applications for the same permit have to be heard together. That section so far as is relevant is in these terms :\n\n\" Section 58.-.............................................. .\n\n(2) A permit may be renewed on an application made and disposed of as if it were an application for a permit:\n\n(a) .•....•.........................................•...•.......... (b ) .............................................................. .\n\nProvided further that, other conditions being equal, an application for renewal shall be given preference over new applications for permits\".\n\nThe section therefore requires an application for the renewal of a permit to be dealt with in the same way as a new application for a permit. Such an application lias therefore to be heard along with new applications for the permit. Again, no question of giving an application for renewal preference over new applications for permits which the section requires to be given, can arise unless they are considered together. We are therefore unable to hold that in the present case the 88\n\nr959\n\nRa1n Gopal\n\nAnant Prasaa\n\nSarkar J.\n\nI959\n\nRant Gopal v.\n\nAnant Prasad\n\nSarkar ].\n\nState Transport Authority had no jurisdiction to con sider the respondent's application or to make any order in respect of it as it granted the appellant's application for renewal. It follows that the order that was made amounted in fact to a refusal to grant the permit to the respondent.\n\nIt was then said that a renewed permit was a continuation of the old permit and hence once the old permit was renewed, no question of considering the applications for new permit arose.\n\nWe find nothing to support this view. It is true that in V. 0. K. Bus Service Ltd. v. Regional Transport Authority, Coimbatore (1 ), this Court held that a renewed permit was a continuation of the old permit but it did not hold that the appropriate authority could not consider the applications for a fresh permit along with the application for renewal of the permit. This case does not assist the appellant at all.\n\nIt was then contended that s. 64 did not provide for an appeal by a person aggrieved by the renewal of a permit unless he was one of those mentioned in s. 64 (f), which the respondent was not, and therefore even if an appeal by the respondent was competent under s. 64 (a), in such an appeal the Appellate Tribunal could not set aside the order of renewal made by the State Transport Authority. It was said that if in such an appeal the order granting a renewal could be set aside, in effect an appeal against an order renewing a permit would become competent though the law did not permit this. We were referred to Dholpur Co-operative Transport Etc. Union Ltd. v. The Appellate Authority, Rajasthan ('), in support of this contention. It was there said:\n\n\"Where an appeal has been made under cl. (a) against the refusal of a permit, the Appellate Authority will generally have the right to give relief to the appellant by the grant of a permit, but will not have any jurisdiction to cancel the permit granted to another person, unless a foundation has been laid before the Regional Transport Authority for an appeal provided\n\n(r) [1957) S.C.R. 663.\n\n(2) A.I.R. 1955 Rajasthan 19, 26.\n\nby cl. (f) by an objection of somebody entitled to appeal under that clause. If such an objection has been made then it does not matter whether that particular person appeals or not. In such a case, on an appeal under s. 64 (a), the Appellate Authority may consider the objection of the nature specified in cl. (f) before the Regional Transport Authority and give its own decision in the matter.\" Itwas said that the respondent though he had filed objections was not a person who can claim a right of appeal under cl. (f) of s. 64. It was therefore contended on the authority of the observations referred to above that no foundation had been laid for an appeal provided by cl. (f) and so the Appellate Tribunal could not cancel the permit granted to the appellant by the subordinate authority.\n\nWe are unable to agree that in an appeal which is competent under cl. (a) of the section, the order renewing or granting a permit cannot be set aside unless the case was such that an appeal under cl. (f) would have also been competent. So to hold would result in making the right of appeal given by cl. (a) wholly infructuous in those cases where no relief can be given in the appeal except by setting aside the order granting or renewing a permit, for example, where there was'only one permit to grant as in the present case. Such an interpretation has to be rejected. It is based on cl. (f). But this clause cannot be construed in a manner so as to render infructuous another clause in the same section. Nor do we find anything in cl. (f) to justify such a construction.\n\nThe different clauses in the section deal with different situations. Each is independent of the others.\n\nClause (f) deals with a case where an objection had been filed against the fresh grant or the renewal of a permit but the permit has none the less been granted or renewed.\n\nThe clause gives the objector a right of appeal against the result of the rejection of his objection if he is one of the persons mentioned in it. The clause gives him that right irrespective of the fact whether he has a right of appeal under any of the other clauses or not. It does not say that a permit granted or renewed cannot be questioned except at the\n\nr959\n\nRam Gopal v.\n\nAnant Prasad\n\nSarkar j.\n\nI959\n\nRani Gopal v.\n\nAnant Prasad\n\nSarkar J.\n\ninstance of the persons mentioned in cl. (f) ; it does not affect the right of appeal under the other clauses. If an appeal lies under any of the other clauses, that of course must be an effective appeal and the appellate authority must therefore have all powers to give the relief to which the appellant is found entitled.\n\nAgain s. 64 is not concerned with defining the powers of the appellate authority and does not purport to do so.\n\nNor is there anything in the Aet to lead to the conclusion that an applicant for a permit is bound to put in objections against the applications of competing applicants for the grant or the renewal of the permit. The relief that can be granted in an appeal by any person which is competent would not depend on whether he had put in objections against the applications of the competing applicants or not.\n\nW.e do not therefore think that cl. (f) of s. 64 in any way' restricts the power of the Appellate Tribunal to grant all proper reliefs in an appeal competent under\n\ncl. (a) of the section. If cl. (f) does not so restrict the power of the Appellate Tribunal, nothing else has been pointed out to us as having that effect.\n\nIn our view, there is nothing in the Act to prevent the Appellate Tribunal from setting aside the order of the State Transport Authority renewing the appellant's permit.\n\nWe think the matter was correctly put in S. Gopala Reddi's case(') when it was said at p. 132:\n\n\"The appeal was, in our opinion, perfectly competent as an appeal against the order of the Regional Transport Authority, refusing to grant a permit. The fact that such an appeal involved an attack on the order granting a renewal of a permit to the 4th respondent would not prevent the appeal being what it was, viz., an appeal against a refusal to grant a permit, to the appellant. The Central Road Traffic Board erred in presuming that it was not open to them in the appeal to consider the merits of the order granting renewal of the 4th respondent's permit. Indeed, the first question which had to be determined in the appeal 'filed by the appellant would be the propriety of the action of the Regional Transport Authority in granting\n\n(1) [1955] 2 M.L.J. 130,\n\n(2) S.C.H. SUPREME COUHT REPOHTS 701\n\nrenewal to the 4th respondent. The filing of the appeal by the appellant set at large the order of the Regional Transport Authority granting the renewal.\"\n\nIn the Dholpur Co-operative Transport etc. Union Ltd. case (1) on which the appellant relies, no objection had been filed against any of the competing applications for the grant of a permit and it was held that the appellate authority had no power in such circumstances on appeal by a person whose application for the grant of the permit had been refused, to give relief by cancelling a permit granted by the subordinate authority to one of the applicants. It was there thought that Nadar Transport, Tiruchirapalli v. State of Madras (2) led to this conclusion. For the reasons earlier mentioned we are unable to agree with this part of the decision in the Dholpur Co-operative Transport etc. Union Ltd. case (1).\n\nWith the rest of the decision there we are not concerned and as to that we do not say anything. We also find nothing in the Nadar Transport case (2), to support the conclusion arrived at in Dholpur Co-operative Transport etc. Union Ltd. case (1 ).\n\nIn the N adar Transport case e), on the contrary, it was observed that\" sec. 64, sub-secs. (a) and (f) are intended in our opinion to apply to different situations\" and that \" the power of the appellate authority is not restricted in any manner either by the provisions of s. 64 or by any of the rules made under the powers conferred by the Act\". It was there held that in an appeal under s. 64 (a) no grounds other than those taken before the lower authority could be canvassed. That does not lead to the conclusion that on proper grounds all reliefs necessary to make the appeal effective cannot be granted. We think that the Nadar 'Pransport case (2) was misunderstood.\n\nThe result is that this appeal fails and it is dismisse\\i \"ith costs.\n\n(1) A. I. R. 1955 Rajasthan 19, 26.\n\n(2) A. I. R. 1953 Mad. I, 3\n\nAppeal dismissed.\n\nI959\n\nRani Gopal v.\n\nA nant Prasad\n\nSarkar ].", "total_entities": 34, "entities": [{"text": "West Bengal including different kinds of businesses within the Act", "label": "STATUTE", "start_char": 236, "end_char": 302, "source": "regex", "metadata": {}}, {"text": "RAM GOPAL", "label": "PETITIONER", "start_char": 1029, "end_char": 1038, "source": "metadata", "metadata": {"canonical_name": "RAM GOPAL", "offset_not_found": false}}, {"text": "AN ANT PRASAD AND ANOTHER", "label": "RESPONDENT", "start_char": 1040, "end_char": 1065, "source": "metadata", "metadata": {"canonical_name": "ANANT PRASAD AND ANOTHER", "offset_not_found": false}}, {"text": "S. K. DAS", "label": "JUDGE", "start_char": 1068, "end_char": 1077, "source": "metadata", "metadata": {"canonical_name": "S.K. DAS*", "offset_not_found": false}}, {"text": "A. K. SARKAR", "label": "JUDGE", "start_char": 1079, "end_char": 1091, "source": "metadata", "metadata": {"canonical_name": "A.K. 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{"document_id": "1959_2_702_718_EN", "year": 1959, "text": "April 2z.\n\n702 SUPREME COURT REPORTS [1959] Supp.\n\nTHE COMMISSIONER OF SALES-TAX,\n\nEASTERN DIVISION, NAGPUR\n\nHUSEN ALI ADAMJI AND CO.\n\n(S. R. DAS, C. J., N. H. BHAGWATI and M. liIDAYATULLAH, JJ.)\n\nSales Tax-Contract of sale-Construction-Unascertained goods-Levy of tax on goods sent by rail-Place where property in goods passes-Place of appropriation on delivery-Indian Sale of Goods Act, I930 (III of I930), ss. 4, I8, 23, 33, 39-Central Provinces and Berar Sales Tax Act, I947 (C. P. & Bcrar XXI of I947), s. 2(g), Explanation II.\n\nThe respondent company was a dealer in matchwood called \"sawar\" and his place of business was situate in Chanda in the erst, vhile Central Provinces. Pursuant to an agreement between the respondent and a match factory, the former loaded diverse quantities of \"sawar\" logs on railway wagons and despatched the same by rail from Chanda and other railway stations in the Central Provinces to Ambernath, a town in the erstwhile Province of Bombay. Under cl. 4 of the agreement the goods to be supplied under the contract shall be despatched by the contractor from certain railway stations within the Central Provinces, while cl. 2 reserved the right of the consignee to examine the goods on arrival at Ambernath and to reject the same if they were found, in the opiniqn of the factory manager, not to conform with the specifications. Clause 6 provided that the goods shall be measured under the supervision of the factory's representative, the decision of the factory manager at Ambernath being binding on the contractor, and by cl. 7 the prices of the goods shall be\" F. 0. R. Ambernath \". The course of dealings between the parties was that on arrival of the logs at Ambernath the logs were inspected and measured by the factory manager and the prices, calculated at the agreed rates, were paid to the respondent's agent at Bombay. The question was as to when and where the property in the logs passed from the respondent to the consignee and whether the respondent was liable to pay sales tax under the provisions of the.Central Provinces and Berar Sales Tax Act, 1947 At the date when the agreement was entered into, the logs were unascertained goods. There was also no evidence that at that date the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all.\n\nThe sales tax department levied the tax on the respondent on the grounds, inter alia, that (1) the property in the logs passed from the respondent to the factory consignee under s. 23 of the Indian Sale of Goods Act, 1930, when the logs were loaded in the wagons at railway stations within the Centra 1 Provinces and the railway\n\nreceipts taken in the name of the factory were forwarded to the x959 latter, and that (2) in any case, as the logs were in the Central Provinces at the date when the contract for sale was made, the Commissioner of transfer in them must be deemed to have taken place there Sales Tax under Explanation II to s. 2(g) of the Central Provinces and v.\n\nBerar Sales Tax Act, 1947 Husenali Held : (1) that on a proper construction of the contract as a Adamji 0- Co. whole the intention of the parties was that the respondent would send the logs by rail from the different stations in the Central Provinces to Ambernath where the factory manager would inspect, measure and accept the same if in his opinion they were of the description and quality agreed upon. Consequently, as the respondent sent the logs and left it to the factory to appropriate to the contract such of them as they accepted as of contract quality and description, the property in the logs did not pass to the buyer by the mere delivery to the railway for carriage but passed only at Ambernath when the logs were appropriated by the factory with the assent of the seller within the meaning of s. 23 of the Indian Sale of Goods Act, 1930.\n\n(2) that Explanation II to s. 2(g) of the Central Provinces & Berar Sales Tax Act, 1947, was not applicable to the case, ' because under the Explanation the goods, in respect of which the contract of sale is made, must, at the date of the contract be in existence in the Central Provinces, that is to say, that the goods must at the date of the contract be there in the form in which they are agreed to be sold and there was no evidence, in the present case, for this.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 13 of 1958.\n\nAppeal by special leave from the judgment and order dated June 29, 1954, of the former Nagpur High Court in Misc. Civil Case No. 219 of 1952.\n\nR. Ganapathy Iyer and D. Gupta, for the appellant.\n\nM. 0. Setalvad, Attorney-General for India, K. G.\n\nChondke, J.B. Dadachanji and K. K. Raizada, for the respondents.\n\nI. N. Shroff, for the Intervener (State of Madhya Pradesh). 1959.\n\nApril 21.\n\nThe Judgment of the Court was delivered by\n\nDAS, C. J.-This is an appeal by special leave Das c. J. against the order of the High Court of Judicature at Nagpur dated June 2!J, 1954, answering against the\n\nappellant certain questions rferred to it by the Board of Revenue under s. 23(1) of the Central Provinces & Cpmmissioner of Berar Sales Tax Act, 1947 (hereinafter referred to as Sales Tax\n\nr959\n\nHusenali Adaniji & Co.\n\nDas' C. ].\n\n\"the Act\"). The reference arose out of an order of assessment made on the respondent for payment of sales tax for the period June 1, 1947, to November 12, 1947, on a taxable turnover of Rs. 30,067-9·0.\n\nThe facts leading up to the present appeal may shortly be stated as follows.\n\nThe respondent deals in matchwood called \"sawn, r\" (Bombay Malabaricum).\n\nHis place of business is situate at Chanda in the erstwhile Central Provinces. In January 1948 the respondent entered into an agreement with the Western India Match Co. Ltd., which is popula.rly known and will hereinafter be referred to as \" WIMCO\" for the supply of a minimum quantity of 2,500 tons of sawar logs during the season 1947-48.\n\nThis agreement is evidenced by WIMCO's letter dated January 7, 1948, accepting and confi, rming it. Unfortunately that letter, although a part of the record, has not been printed in the Paper Book. It is common ground, however, that the agreement of sale was subject to the conditions appearing in a formal contract in writing dated March 2, 1945, which is said to have been renewed from year to year. It appears that prior to the execution of the last mentioned contract there was another contract between the respondent and WIMCO which was dated October 18, 1940. Evidently that contract was superseded by the later one of March 2, 1945, the terms and conditions whereof were renewed year after year. It is, therefore, not easily intelligible why both the contracts were filed before the Sales Tax authorities and actually mentioned in the first question that was referred to the Hight Court.\n\nBoth the contracts have been printed in the Paper Book and reference has been made to some of the terms of both of them in the course of the arguments before us.\n\nThe reason for referring to the terms of the earlier eontract is presumably to emphasise the variation in the language used in the corresponding provisions of the later contract as indicative of a definite change in .the intention of the parties. It is, therefore,\n\nas well that the relevant clauses of both the contracts should be set out here for properly following the arguments advanced on both sides.\n\nReference may first be made to the earlier contract dated October 18, 1940.\n\nClause 1 sets out the specifications, that is to say, the dimensions and quality of the logs to be delivered under the contract which need not be reproduced here.\n\nThe other material clauses, omitting the unnecessary portions thereof, may now be set out :-\n\n\" 2.\n\nThe Contractor agrees that any logs supplied by him which do not conform with the specification herein shall not be accepted or paid for by the company and he the contractor undertakes to remove all logs so rejected at his own expense from the Company's premises within fifteen days after date of notice to him or his representative from the Company so to remove such fogs.\n\nShould the Contractor fail to remove such logs from the Company's premises within the period stipulated it is hereby mutually agreed that such failure shall be construed as being the Contractor's consent to relinquish all claims whatsoever to such rejected logs, and the Contractor agrees to such logs thereupon becoming the property of the company and that the contractor shall have no claim whatsoever upon the company for payment either in respect of the supply by him of such rejected logs or arising out of the disposal by the Company of such logs.\"\n\n\"3. The said goods shall be delivered at Ambernath in the quantities and at the times hereinafter mentioned, i.e.,\n\n\" \" 4.\n\nThe goods to be supplied under this Contract shall be despatched by the Contractor from Railway Stations on the B.N.R. and G.I.P.R. Sections between the following Stations :\n\n\" \"5. Measurements :-The goods under this contract shall be measured under the supervision of the 89\n\nr959\n\nCommissioner of Sales Tax\n\nHusena.Ii Adamji & Co.\n\nDas C. ].\n\nI959 Company's Factory Manager at Ambernath on arrival\n\nCommissioner of of the goods at the Factory in accordance with the Sales Tax following stipulations :-\n\nI-lusenali Adamji &- Co.\n\nDas C. j.\n\nThe Conti:actor agrees to accept the decision of the Company's Factory Manager at Ambernath as final and binding.\" The prices of the logs to be supplied are set out in\n\ncl. 6 of the contract as \"F.O.R. Ambernath \".\n\nWe now pass on to the later contract of March 2,\n\n1945. Clause 1 sets out the specifications of the logs to be supplied under the contract in exactly the same language as in cl. I of the earlier contract. The other material clauses, again omitting the unnecessary portions, are as follows :-\n\n\" 2. The contractor agrees that any logs supplied by him. which, on arrival at Ambernath, are found in the opinion of the Company's Factory Manager not to conform with the specifications herein shall not be accepted or paid for by the Company, notwithstanding the fact that such logs may have been accepted by the Company's representatives before being railed to Ambernatb.\"\n\nIt may be mentioned here that Ambernath is a place situate in the erstwhile province of Bombay and outside the Central Provinces.\n\n\"4. The goods to be supplied under this contract shall be despatched by the Contractor from railway stations on the B. N. Railway, N. S. Railway and G. I. P. Railway sections between the following stations . . . . . . . . . . . . . . . . . . . . . . i ............................................. ·,;\n\nIt is unnecessary to set out the names of the stations which, it may, however, be stated, are all in the erstwhile Central Provinces. Clause 6 provides:\n\n\" 6.\n\nMeasurements :- The goods under this contract shall be measured under the supervision of the Company's representative in accordance with the following stipulations:-\n\nThe contractor agrees to accept the decision of the Company's Factory Manager at Ambernath• as final and binding.\" The prices of the logs to be supplied under the contract are specified as\" F.0.R. Ambernath\" in cl. 7 which concludes with the following sentence:\n\n\"The money so due and payable shall be paid by the Company to the Contractor when the measurements of the goods have been completed under the supervision of the Company's representative.\"\n\nPursuant to the agreement between the respondent and WIMCO, the former loaded diverse quantities of Sawar logs on railway wagons and despatched the same by railway from Chanda or other railway stations in the Central Provinces to Ambernath in the erstwhile province of Bombay and outside the Central Provinces. It is not disputed that on many occasions the representative of WIMCO was present at the railway station when the logs were sorted out and loaded into the wagons. The statement of the case submitted along with the r-eference under s. 23(1) of the Act is silent on the point as to whether the railway receipts were made out with WIMCO as the consignee; but it is abundantly clear from the order of the Assistant Commissioner, Sales Tax, which is.part of the record -and it has not been disputed before us-that \" the railway receipt which is a document of title according to s. 2(4) of the Indian Sale of Goods Act is taken in the name of the consignee.\" The course of dealings between the parties also appears to be that, on arrival of the logs at Ambernath, tb.e consignee buyer WIMCO, paid the railway freight and the logs were inspected and measured by WIMCO's Factory Manager and the prices, calculated at the agreed rates, were paid to the respondent's agent at Bombay. There is no doubt that the price of the logs supplied by the respondent , to WIMCO under the agreement and accepted by the latter during the period in question_ amounted to Rs. 30,067-9-0. The question for our\n\nI959\n\nCommissioner of Sales Tax\n\nHusenali Adamji & Co.\n\nDas C. J.\n\nI959 decision is Whether the respondent is liable to pay any\n\nC -. -. sales tax under the Act. oinmissioner of • . • Sales Tax It will be convement at this stage to refer to the v. rekivant provisions of law applicable to the facts of Husenali this case. Section 4 of that Act is the charging section.\n\nAdamji & Co. According to this section sales tax is payable \" on all\n\nDas C. ]. sales effected after the commencement of the Act.\" \"Sale\" is defined by s. 2(g) of the Act. At the relevant period, that section, omitting Explanation I, which is not material for our purpose, ran as follows:-\n\n\" ' Sale' with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods made in course of the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n\nExplanation II :-Notwithstanding anything to the contrary . in the Indian Sale of Goods Act, 1930, the sale of any goods which are actually in the Central Provinces and Berar at the time when the contract o/ sale as defined in that Act in respect thereof is made, shall, wherever the said contract of sale is made, be deemed for the purpose of this Act to have taken place in the Central Provinces and Berar .\"\n\nThe Act being a. piece of legislation enacted by the legislature of the erstwhile Province of Central Provinces and Berar, its operation is limited to the territories of that province. Therefore, the question arises: Does the sum of Hs. 30,067 .9.0 represent the prices of logs sold by the re&pondent within the Central Provinces ? Sale being the transfer of property in the goods agreed to be sold, we have to enquire if the property in the goods which fetched the sale proceeds on which the sales tax is sought to be levied was transferred in the Central Provinces as contemplated in the main definition or if those goods were actually in the Central Provinces at the time when the contract for sale as defined in the Sale of Goods Act in respect thereof was made as required by Explanation II set\n\nout above. This takes us to the Sale of Goods Act, 1930.\n\nSection 4 of the Sale of Goods Act is expressed in the words following:-\n\n\" 4. Sale and agreement to sell :-(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to trnsfer the property in goods to the buyer for a price.\n\nThere may be a contract of sale between one part-owner and another.\n\n(2) A contract of sale may be absolute or conditional.\n\n(3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.\n\n(4) An agreement to sell bec9m.es a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.\" There can be no doubt that the agreement pursuant to which the logs were supplied by the respondent to WIMCO was an agreement to sell within the meaning of the above section. There is also no controversy between the parties that at the date when this agreement was entered into, the logs were unascertained goods.\n\nThe question is : When did that agreement to sell unascertained goods become a sale and where did such sale take place? In other words, when and where did the property in those goods pass from the respondent to WIMBO ?\n\nThe transfer of property in the goods as between the seller and buyer is dealt with in Oh. III of the Sale of Goods Act. Section 18 of the Sale of Goods Act runs thus:\n\n\"18. Goods must be ascertained :-Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.\" Passing over ss. 19 to 22which (except as to sub-s. (3) of s. 19) apparently apply to contracts for the sale of\n\nI959\n\nCommissioner of Sales Tax\n\nHusenali Adamji & Co.\n\nDas C. ].\n\nr959\n\nConimissioncr of\n\nSales Tax\n\nHusenali Adamji & Co.\n\nDas C. J.\n\nspecific or ascertained goods, we come to s. 23 which provides :- . \"23. Sale of unascertained goods and appropriation :-( 1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.\n\n(2) Delivery to carrier :-Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the' goods to the con tract.\" Reference may next be made to s. 33 ands. 39(1). Section 33 says:-\n\n\" 33.\n\nDelivery :-Delivery of goods sold may be made by doing anything which the parties agreed shall be treated as deli very or which has the effect of putting the goods in the possession of the buyer or of any person authorised to hold them on his behalf.\" Section 39(1) runs as follows:-\n\n\" 39. Delivery to carrier or wharfinger :-\n\n(1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to wharfinger, for safe custody, is prima facie deemed to be delivery of the goods to the buyer.\" Keeping the provisions of the above quoted sections of the two Acts in view, we have to decide when and where the property in the logs passed from the respondent to WIMCO.\n\nThe Assistant Commissioner of Sales Tax assessed the respondent to a tax of Rs. 939-10-0 and imposed on the respondent a penalty of Rs. 100 under s. 25 of\n\nthe Act for not having submitted its return in contravention of r. 19 of the Central Provinces and Berar Sales Tax Rules. The Assistant Commissioner took the view that the loading of the logs into the wagons at railway stations within the Central Provinces and the taking out of the railway receipts in the name of the consignee, WIMCO, and the delivery of the same to WIMCO, had the effect of putting the latter in possession of.the goods as laid down in s. 39(1) of the Indian Sale of Goods Act and he accordingly held that the sale of the goods took place at Chanda and other railway stations in the Central Provinces and that the assessee was, consequently, liable to pa.y the sales tax under the Act.\n\nThe respondent preferred an appeal to the Sales Tax Commissioner who upheld the Assistant Commissioner's order of assessment as well as of the penalty.\n\nHe laid greater emphasis on Explanation II to s. 2(g) of the Act as over-riding the provisions of the Indian Sale of Goods Act in respect of the transfer of property in the logs and held that as the logs were in the Central Provinces at the date when the contract for sale was made, the transfer in them must be deemed to have taken place there under that Explanation. He also agreed with the Assistant Commissioner that the delivery of the logs to the railway company and the sending of the documents of title to WIMCO had, under s. 39(1) of the Sale ofGoods Act, the effect of putting WIMCO in possession of the logs.\n\nThe respondent preferred what in form appeared to be a second appeal to the Board of Revenue.\n\nAs, however, there could be no second appeal under s. 22(4) of the Act, the Board treated the memorandum of appeal as an application for revision under sub-s. 5 of s. 22 of the Act read with r. 57.\n\nBoth the members of the Board of Revenue came to the same conclusion, namely, that the sales were liable to assessment under the Act, but the reasonings adopted by them were somewhat different. Shri Shrivastava, a member of the Board of Revenue, took the view that as soon as logs answering the description agreed upon were brought to the railhead, at Chanda and sorted out and\n\nr959\n\nCommissioner of Sales Tax\n\nHusenali Adamji & Co.\n\nDas C. }.\n\nloaded in the wagons in the presence of WIMCO's re-\n\nCommissioner of presentatives, there was an implied contract of sale of\n\nsafos Tax specific and ascertained goods, as evidenced by the\n\n'959\n\nv, I-Jusenali Adamji 0- Co.\n\nDas C. ],\n\nconduct of parties and the property in each consignment passed immediately from the respondent to WIMCO at the railway station in the Central Provinces where such implied contracts were made. 'The Chairman of the Board of Revenue, however, took the view that the contract of sale was made outside the Central Provinces, namely, in Bombay and that, under thp, Sale of Goods Act, the property in the logs passed to WIMCO in Ambernath outside the province but that as the logs were in the Central Provinces, either in the form of logs or in the form immediately preceding, namely, trees standing on the laud which had been impliedly agreed to be severed from the land before actual sale, Explanation II to s. 2(g) of the Act applied and the sale must, accordingly, be deemed to have taken place within the Central Provinces and, must, therefore, be liable to sales tax under the Act.\n\nThe Board rejected the application but remitted the penahy.\n\nOn the application of the respondent under s. 23(1) of the Act, the Board of Revenue submitted to the High Court a statement of case raising the following questions :-\n\n\" (1) Did the agreements of the kind on recordthe one dated 18-10-40 and the other dated 2-3-45constitute contracts of sale-either express or implied -in respect of sawar wood supplied by the assessee to\n\nWIMCO?\n\n(2) If the answer to question No. 1 be in the affirmative, did the contracts relate to specific or ascertained goods or to unascertained or future goods?\n\n(3) Did the property in the goods pass to WIMCO by consignment simpliciter at different railway stations within this province, or did it pass at Ambernath when the goods were approved as provided in the contract? ( 4) Was reliance on the definition of 'goods' contained in s. 2(7) of the Sale of Goods Act in order in applying Explanation II to s. ?(g) of the Sales Tax\n\nr959 Act in cases, where the goods sold were in the form of trees standing on the land in this province at the time Commissioner of of the contract of sale?\" sales Tax\n\nHusenali In its judgment dated June 29, 1954, the High Court took the view that the sales in question did not take place in the Central Provinces and Berar and conse- Adamji \"\" co. quently were not \"sales\" within the meaning of the Das c. ].\n\nAct and, therefore, not liable to tax. It gave the following answers to the above questions:-\n\n\"Our answers to the questions referred for decision are:-\n\n(1) The agreement in question we.s an express agreement to sell sawar logs to WIMCO.\n\nThere was neither an express nor an implied contract each time goods were railed.\n\n(2) The contract was not for delivery of specific goods but of unascertained or future goods by description.\n\n(3) The property in the goods did not pass to the buyer by the delivery to the railway for carriage. It passed at Ambernath where the goods were appropriated by the buyer to the contract with the assent of the seller.\n\n(4) The word 'goods' in the definition of 'sale' in the Sales Tax Act must be inter.ereted according to _ its definition in s. 2(d) of the Act and not according to the definition in s. 2(7) of the Sale of Goods Act. The standing sawar trees are not goods within the meaning of the former Act.\" The effect of the answers being to nullify the assessment order, the Commissioner of Sales Tax has come up on appeal before us after obtaining special leave of this Court.\n\nThe answers to the first two questions have not been questioned before us.\n\nThe main arguments have centred round the answers to questions 3 and 4.\n\nThe answer to question 3 turned on the construction placed by the High Court on s. 23 of the Sale of Goods Act. After quoting s. 23, the High Court observed as follows:-\n\n\" After sorting the logs with the assent of the buyer's representative, the applicant appropriated the\n\nlogs to the contract by railing them to the buyer's\n\nCommissioner 1 destination at Ambernath. The statement of the case\n\n501,, Tax\n\n0 is silent on the point whether the railway receipts\n\nI959\n\nHusenali Adamji & Co.\n\nDas C. ].\n\nwere made out with the Company as the consiguee.\n\nThe assent of the representative was provisional and was not binding on the Company. Under the agreement it did not agree to nnconditionally appropriate the logs to the contract as soon as they were delivered to the railway with the assent of its representative for carriage to Ambernath. It had expressly reserved its right to reject the goods on examination at Ambernath. The agyeement therefore was that the buyer should, with the assent of the seller, appropriate the goods to the contract at Ambernath. The appropriation under s. 23 was not complete till the goods reached Ambernath and were appropriated by the Company to the contract. The appropriation of the goods by the applicant at the railheads was conditional on their acceptance by the buyer at Ambernath. There is nothing in the statement of the case to show that the logs were not so appropriated. Therefore, the property in the logs passed to the buyer at Ambernath.\" The learned counsel for the department appearing in support of this appeal contends that property in the logs passed from the respondents to WIMCO under s. 23 when sawar logs were brought to the railway station and loaded in the wagon and the railway receipts taken in the name of WIMCO were forwarded to the latter. There was an. unconditional appropriation of the goods to the contract by the respondent.\n\nThere was, according to learned counsel, assent on the part of WIMCO to this appropriation in two ways, namely, (a) expressly given by its representative who was present at the railway station, and (b) impliedly given by WIMCO by having agreed in advance that the goods should be despatched by rail from the stations mentioned in cl. 4 of the agreement, all of which were situate in the Central Provinces.\n\nThere is no doubt--and indeed it has been categorically conceded by learned counsel for the department -that the contract was for sale of unascertained goods and consequently the property in them could\n\nnot, under s. 18, pass unless and until the goods were z959 ascertained. His contention is that logs of the con- Commissioner of tract quality and description having been unconditio- Sales Tax nally appropriated by the respondent to the contract v. without reserving to itself any right of disposal and Husenali WIMCO having expressly through its representative Adamji\"\" Co. or impliedly by the very terms of the contract assentc Das . ]. ed to such appropriation, property in them passed under s. 23 from the respondent to WIMCO at the railway stations within the Central Provinces as soon as the sawar logs were loaded on the wagons and the railway receipts were taken out in the name of WIMCO. It is said that so far as the respondent is concerned it unconditionally appropriated the logs to the contract. Seeing that they were actually accepted by WIMCO on their arrival at Ambernath it is quite clear that the logs were of the contract qu.ality and description. The only question, according to learned counsel for the department, therefore, is whether there was assent of WIMCO to such appropriation. It has been found as a fact that WIMCO's representative was not present on all occasions when sawar logs used to be loaded on the railway wagons. There is no evidence that he was actually present when these particular sawar logs, with the sale proceeds of which we are concerned, were put into the wagons. Nor is there an iota of evidence that the representative of WIMCO had any authority to bind WIMCO by any assent. In view of these .difficulties, learned counsel for the department did not press the case of express assent of the representative of WIMCO and concentrated on the case of implied assent. It is quite clear from the language of s. 23 itself, that the appropriation may be by the seller with the assent of the buyer or by the buyer with the assent of_ the seller, that assent to appropriation may be express or implied and that it may be given after the appropriation or in advance before such appropriation. Learned counsel for the department lays strong emphasis on the provision of cl. 4 in the contract that the sawar logs should be despatched by rail from certain stations within the Central Provinces and contends that deiivery by the seller of sawar logs of the contract quality and\n\nI959 description to the rail ways in terms of the contract without the reservation of any right of disposat bas\n\nConi~~1::i 0 ;:: of the effect of passing the property therein to WIMCO\n\nat the railway stations in the Central Provinces under s. 23 as well as of constituting delivery of them at the railway stations under ss. 33 and 39(1). The argument is prima facie sound unless there be some other provision in the contract to negative this conclusion, e. g.,\n\nHusenali Ada1nji 6- Co.\n\nDas C. j. that the logs must be carried to Ambernath and delivered there (See The Badische Anilin und Soda Fabrik v. The Basle Chemical Works, Bindschedler (1) ).\n\nLearned counsel for the department does not urge that if the matter bad to be decided on the terms of the earlier contract dated October 18, 1940, be could properly say that there was nothing in the contract negativing the idea of the passing of property in the logs within the Central Provinces. The cumulative effect of the provisions of cl. 2 that the property in the rejected logs would pass to WIMCO upon the failure of the respondent to remove the same after rejection, of cl. 3 that the goods shall be delivered at Ambernath in the presence of WIMCO's Factory Manager and of cl. 6 providing tba t the prices will be \"F.O.R. Ambernatb\" clearly militate against the theory of passing of property immediately on the goods being loaded into the wagons.\n\nWhile not contesting this, learned counsel for the department urges that there is no such contrary intention indicated in the later contract of March 2, 1945, which really governs the case. We are unable to accept this distinction as of any substance. It is true that in this later contract cl. 2 is differently worded and there is no express provision that the goo, ds should be delivered at Ambernath. There are, nevertheless, several other provisions in the later contract indicating that property in the logs loaded in the wagon will not pass to WIMCO until after the goods arrive at Ambernath and are inspected, measured and accepted by WIMCO's Factory Manager. Clause 2 of the later contract quite clearly reserves the right of \\VIMCO to examine the goods on arrival and to reject the same if they are found, in the opinion of its Factory Manager, not to\n\n(1) [1898) A, C. 200,\n\nconform with the specifications. This reservation, z959 which is made notwithstanding the fact that the logs c .-. 01 . . om1nissioner may have been accepted by its representative before Sales Tax they were railed to Ambernath, clearly indicates that v. the so called acceptance by the representative was not Husenali final but WMI entirely tentative and sabject to Adamji & Co. approval of the logs by WIMCO's Factory Manager at Am bernath after their arrival. This circumstance certainly militates against the property in them having already passed to WIMCO at the railway stations in the Central Provinces. The provisions of cl. 6 1 that the goods shall be measured under the supervision of WIMCO's representative, the decision of its ]'actory Manager at Ambernath being binding on the respondent a:qd of cl. 7 that the prices shall be\" ]'.O.R.\n\nAmbernath \" and shall be payable after such measurement of the logs by WIMCO's repqisentative further reinforce the conclusion that the intention of the parties was that property in the goods shall not pass until the logs arrive at Ambernath and are there inspected, measured and accepted by WIMCO. In our judgment the prima facie case of what might have been the appropriation of the logs by the respondent by loading on the wagons logs of the contract quality and description with the .assent of WIMCO given in advance by the terms of cl. 4 is effectively displaced by the provisions of els. 2, 6 and 7 of the later contract which clearly indicate a contrary intention. On a proper construction of the contract as a whole the intention of the parties clearly was that the respondent would send the logs by rail from the different stations in the Central Provinces to Ambernath where WIMCO's Factory Manager would inspect, measure and accept the same if in his opinion they were of the description and quality agreed upon. In other words the respondent sent the logs and left it to WIMCO to appropriate to the contract such of them as they accepted as of contract quality and description. The respondent, therefore, gave in advance its assent to WIMCO's appropriation of the goods at Ambernath. Therefore, the decision of the High Court cannot be assailed but must be accepted as well-founded in fact and in law.\n\nLearned counsel for the department then falls back\n\nDas C. ].\n\nupon the argument founded on Explanation II to Commissioner of s. 2(g) and argues, somewhat half.heartedly, that Sales Tax notwithstanding the provisions of the Sale of Goods v.\n\nIlusenali Adamji & Co.\n\nDas C . ./.\n\nAct regarding the passing of property in the goods the sale under consideration must be deemed, in the light of that Explanation, to have taken place within the Central Provinces. The question of the constitutional validity of that Explanation was not raised in the High Court and indeed, in view of the decision of this Court in Poppatlal Shah v. State of Madras (1) and other cases, cannot now be raised and we must proceed on the footing that Explanation II did not transgress the legislative competency of the Legislature which enacted the same. It will be noticed that Explanation II can apply only if the goods \"in respect of\" which the contract of sale is entered into are, at the date of such contract, actually.in the Central Provinces. Learned counsel for the department urges that the logs delivered must have been in existence in the Central Provinces either in the shape of :Jogs or in the shape of standing timber. There. is no evidence that at the date when the agreement for sale was made, the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all. Learned counsel says that, at any rate, they must have been in existence there in the shape of standing timber. Apart from anything else, the agreement here was not \" in respect of\" any standing timber and there was no provision in the agreement as between the respondent and WIMCO for severance of the standing timber before sale under that agreement. In order to attract Explanation II the goods, in respect of which the contract of sale is. made, must, at the date of the contract be in existence in the Central Provinces, that is to say, that the goods must at the date of the contract be there in the form in which they are agreed to be sold. There is not an iota of evidence on that point. In our judgment, there. is no force in this alternative argument.\n\nThe result, therefore, is that this appeal is dismissed with costs.\n\nAppeal dismissed.\n\n(1) [1953) S.C.R. 677.", "total_entities": 85, "entities": [{"text": "THE COMMISSIONER OF SALES-TAX,\n\nEASTERN DIVISION, NAGPUR", "label": "PETITIONER", "start_char": 51, "end_char": 107, "source": "metadata", "metadata": {"canonical_name": "COMMISSIONER OF SALES-TAX, EASTERN DIVISION, NAGPUR", "offset_not_found": false}}, {"text": "HUSEN ALI ADAMJI AND CO", "label": "RESPONDENT", "start_char": 109, "end_char": 132, "source": "metadata", "metadata": {"canonical_name": "HUSEN ALI ADAMJI AND CO", "offset_not_found": false}}, {"text": "S. R. DAS", "label": "JUDGE", "start_char": 136, "end_char": 145, "source": "metadata", "metadata": {"canonical_name": "SUDHI RANJAN DAS*", "offset_not_found": false}}, {"text": "N. H. BHAGWATI", "label": "JUDGE", "start_char": 154, "end_char": 168, "source": "metadata", "metadata": {"canonical_name": "NATWARLAL HARILAL BHAGWATI", "offset_not_found": false}}, {"text": "Sale of Goods Act", "label": "STATUTE", "start_char": 370, "end_char": 387, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "ss. 4", "label": "PROVISION", "start_char": 409, "end_char": 414, "source": "regex", "metadata": {"statute": null}}, {"text": "Central Provinces and Berar Sales Tax Act", "label": "STATUTE", "start_char": 431, "end_char": 472, "source": "regex", "metadata": {}}, {"text": "s. 2(g)", "label": "PROVISION", "start_char": 508, "end_char": 515, "source": "regex", "metadata": {"linked_statute_text": "Central Provinces and Berar Sales Tax Act", "statute": "Central Provinces and Berar Sales Tax Act"}}, {"text": "cl. 4", "label": "PROVISION", "start_char": 984, "end_char": 989, "source": "regex", "metadata": {"linked_statute_text": "Central Provinces and Berar Sales Tax Act", "statute": "Central Provinces and Berar Sales Tax Act"}}, {"text": "cl. 2", "label": "PROVISION", "start_char": 1155, "end_char": 1160, "source": "regex", "metadata": {"linked_statute_text": "Central Provinces and Berar Sales Tax Act", "statute": "Central Provinces and Berar Sales Tax Act"}}, {"text": "Clause 6", "label": "PROVISION", "start_char": 1364, "end_char": 1372, "source": "regex", "metadata": {"linked_statute_text": "Central Provinces and Berar Sales Tax Act", "statute": "Central Provinces and Berar Sales Tax Act"}}, {"text": "cl. 7", "label": "PROVISION", "start_char": 1559, "end_char": 1564, "source": "regex", "metadata": {"statute": null}}, {"text": "Central Provinces and Berar Sales Tax Act, 1947", "label": "STATUTE", "start_char": 2054, "end_char": 2101, "source": "regex", "metadata": {}}, {"text": "s. 23", "label": "PROVISION", "start_char": 2510, "end_char": 2515, "source": "regex", "metadata": {"linked_statute_text": "Central Provinces and Berar Sales Tax Act, 1947", "statute": "Central Provinces and Berar Sales Tax Act, 1947"}}, {"text": "Indian Sale of Goods Act, 1930", "label": "STATUTE", "start_char": 2523, "end_char": 2553, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 2(g)", "label": "PROVISION", "start_char": 2968, "end_char": 2975, "source": "regex", "metadata": {"linked_statute_text": "the Indian Sale of Goods Act, 1930", "statute": "the Indian Sale of Goods Act, 1930"}}, {"text": "Berar Sales Tax Act, 1947", "label": "STATUTE", "start_char": 3009, "end_char": 3034, "source": "regex", "metadata": {}}, {"text": "s. 23", "label": "PROVISION", "start_char": 3816, "end_char": 3821, "source": "regex", "metadata": {"linked_statute_text": "Berar Sales Tax Act, 1947", "statute": "Berar Sales Tax Act, 1947"}}, {"text": "Indian Sale of Goods Act, 1930", "label": "STATUTE", "start_char": 3829, "end_char": 3859, "source": "regex", "metadata": {"confirmed_by_gazetteer": 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"metadata": {"statute": null}}, {"text": "Indian Sale of Goods Act, 1930", "label": "STATUTE", "start_char": 14108, "end_char": 14138, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Sale of Goods Act", "label": "STATUTE", "start_char": 15173, "end_char": 15190, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "This takes us to the Sale of Goods Act, 1930", "label": "STATUTE", "start_char": 15265, "end_char": 15309, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Section 4", "label": "PROVISION", "start_char": 15312, "end_char": 15321, "source": "regex", "metadata": {"linked_statute_text": "This takes us to the Sale of Goods Act, 1930", "statute": "This takes us to the Sale of Goods Act, 1930"}}, {"text": "Sale of Goods Act", "label": "STATUTE", "start_char": 15329, "end_char": 15346, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "III of the Sale of Goods Act", "label": "STATUTE", "start_char": 16803, "end_char": 16831, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Section 18", "label": "PROVISION", "start_char": 16833, "end_char": 16843, "source": "regex", "metadata": {"linked_statute_text": "III of the Sale of Goods Act", "statute": "III of the Sale of Goods Act"}}, {"text": "Sale of Goods Act", "label": "STATUTE", "start_char": 16851, "end_char": 16868, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "ss. 19 to 22", "label": "PROVISION", "start_char": 17088, "end_char": 17100, "source": "regex", "metadata": {"linked_statute_text": "III of the Sale of Goods Act", "statute": "III of the Sale of Goods Act"}}, {"text": "s. 19", "label": "PROVISION", "start_char": 17134, "end_char": 17139, "source": "regex", "metadata": {"linked_statute_text": "III of the Sale of Goods Act", "statute": "III of the Sale of Goods Act"}}, {"text": "s. 23", "label": "PROVISION", "start_char": 17366, "end_char": 17371, "source": "regex", "metadata": {"linked_statute_text": "III of the Sale of Goods Act", "statute": "III of the Sale of Goods Act"}}, {"text": "s. 33", "label": "PROVISION", "start_char": 18281, "end_char": 18286, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 33", "label": "PROVISION", "start_char": 18300, "end_char": 18310, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 39(1)", "label": "PROVISION", "start_char": 18578, "end_char": 18591, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 25", "label": "PROVISION", "start_char": 19330, "end_char": 19335, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 39(1)", "label": "PROVISION", "start_char": 19796, "end_char": 19804, "source": "regex", "metadata": {"statute": null}}, {"text": "Sale of Goods Act", "label": "STATUTE", "start_char": 19819, "end_char": 19836, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 2(g)", "label": "PROVISION", "start_char": 20246, "end_char": 20253, "source": "regex", "metadata": {"statute": null}}, {"text": "Sale of Goods Act", "label": "STATUTE", "start_char": 20309, "end_char": 20326, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 39(1)", "label": "PROVISION", "start_char": 20731, "end_char": 20739, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 22(4)", "label": "PROVISION", "start_char": 20967, "end_char": 20975, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 5", "label": "PROVISION", "start_char": 21072, "end_char": 21076, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 22", "label": "PROVISION", "start_char": 21080, "end_char": 21085, "source": "regex", "metadata": {"statute": null}}, {"text": "Sale of Goods Act", "label": "STATUTE", "start_char": 22155, "end_char": 22172, 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{"document_id": "1959_2_719_727_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPOR'.rS 719\n\nTHE MANAGEMENT OF RANIPUR COLLIERY\n\nBHUBAN SINGH AND OTHERS\n\n(B. P. SINHA, P. B. GAJEN.DRAGADKAR and\n\nK. N. WANCHOO, JJ.)\n\nIndustrial Dispute-Standing Orders - Interpretation of- Enquiry-Whether includes proceedings bfore Industrial Tribunal -Industrial Disputes Aet, z947 (z4 of z947)ss. 3, 33A.\n\nThe Company after regular enquiry and pending permission of the Industrial Tribunal under s. 33 of the Industrial Disputes Act, 1947, suspended some workmen without pay, whereupon the workmen filed applications under s. 33A of the Act before the Industrial Tribunal on the ground that their suspension without pay beyond ten days was against the provisions of the Standing Orders governing their conditions of service to the effect that an employee might be suspended provided the suspension without pay, whether as punishmo:nt or pending enquiry, did not exceed ten days. Th, e Tribunal dismissed the workmen's applications under s. 33A and granted permission to the Company to dismiss the workmen concerned. The workmen appealed. The Appellate Tribunal upheld the order granting permission to dismiss the workmen but came to the conclusion that the words \"pending enquiry \" in cl. 27 of the Standing Orders included proceedings before the Industrial Tribunal and that there was breach of the Standing Orders.\n\nHeld, that the employer could apply under s. 33 of the Industrial Disputes Act, 1947, for permission to dismiss an employee when after a regular enquiry he had come to the finding that the case against the employee was proved and that the punishment of dismissal was the proper punishment. The Industrial Tribunal had not to enquire into the conduct of the employee or the merits of dismissal but see whether a prima faeie case had been made out and a fair enquiry made by the employer. The time taken before the Tribunal in such proceedings was beyond the control of the employer.\n\nStanding Orders were concerned with employers and employees and not with Tribunals. In the instant case, the words \"pending enquiry\" in cl. 27 of the Standing Orders, referred only to the enquiry by the employer and not to the proceedings before the Tribunal..\n\nThe principle laid down in Lakshmi Devi Sugar Mill's case that workmen would not be entitled to payment of wages during the whole period of suspension if the Tribunal gave permission to dismiss them, would apply only to cases where there was a ban under s. 33 and the employer had to apply under that section for lifting the ban after completing the enquiry.\n\n'959\n\nApril 2I.\n\n'959 Rampalat Chamar v. The Assam, Oil Co. Ltd., (r954) L.A.C. 78, dissented from. ' The Management The A\"tomobile Products of India Ltd. v. Rukamji Bala, [r955] of Ranipur I S.C.R. r241, referred to. _ ,\n\nColliery Lakshmi Devi Sugar Mills Ltd. v. Pt. Ram Sarup, [r95(i] v.\n\nS.C.R. 916, followed and explained.\n\nBhuban Singh\n\n&- Others\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 768 of I957.\n\nAppeal by special leave from the judgme11t and order dated September 2I, 1956, of the Labour Appellate Tribunal of India at Calcutta in Appeal No. Cal.\n\nIOI of 1956.\n\nM. 0. Setalvad, Attorney-General for India, 8. N.\n\nMukherjee and B. N. Ghosh, for the appellants.\n\nDipak Dutta Choudhri, for the respondents. , I959. April 2_1.\n\nThe Judgment of the Court was delivered by , ' , ,\n\nwanchoo J. 'V ANCHOO, J.-This is an appeal by special le:J.ve\n\nagainst the decision of the Labour Appellate Tribunal of India in an industrial matter. The appellant is the Ranipur Colliery (herein:J.fter called the company) which carries on the business of coal mining in Dishergarh (\\Vest Bengal). The respondents are six workmen employed by the company. They along with, another person were working as tub-checkers. It was found that they were making false reports both as to quality and quantity of coal, which it was their duty to check, with the result that the company suffered loss. Consequently, the company served charge-sheets on them and a regular enquiry was held on April I3, I955, at which they were present and had full opportunity to give their explanation, cross-examine witnesses and generally contest the charge. The company came to the conclusion after the enquiry that the workmen were guilty of the misconduct with which they were charged and should be dismissed. As, however, an industrial dispute between the company and its workmen was, pending before the Industrial Tribunal, the company applied under s. 33 of the Industrial , Disputes' Act (hereinafter called the Act) for permission to dismiss the workmen. It appears that five out\n\nof seven workmen filed two applications under s. 33-A of the Act before the Industrial Tribunal on the ground that they had been suspended without pay from May 4, 1955, and that this was against the provision of the Standing Orders governing their conditions of service. These three applications were heard together by the Industrial Tribunal, which came to the conclusion that the permission should be granted to the company to dismiss the seven workmen and accordingly did so.\n\nHaving granted this permission, the Industrial Tribunal, in consequence, dismissed the applications under s. 33-A.\n\nSix of the workmen then went up in appeal to the Labour Appellate Tribunal against the grant of permission to dismiss and the dismissal of their a pplications under s. 33-A. Their case was (i) that no permission to dismiss should have been granted, and (ii) that five of them had been placed under suspension without wages for an indefinite period in violation of the express provision of the Standing Orders and therefore they were entitled to relief. The Appellate Tribunal dismissed the appeal with respect to the grant of permission to dismiss. It, however, came to the conclusion that there was a breach of cl. 27 of the Standing Orders, and therefore allowed the appeal of five workmen (other than Akhey Roy), who had applied under s. 33-A and ordered that they should be paid their wages from the date of suspension without pay to the date of the Industrial Tribunal's order, less ten days as provided in cl. 27 of the Standing Orders. Thereupon the company applied to this Court for special leave which was granted; and that is how the matter has come before us.\n\nIt appears that Akhey Roy has been unnecessarily joinedas a respondent, for the order of the Appellate Tribunal does not show that any relief was granted to him and his appeal to the Appellate Tribunal must therefore be taken to have been dismissed.\n\nThus the only point that falls for consideration is whether suspension without pay pending permission of the Industrial Tribunal under s. 33 of the Act is a\n\nr959\n\nThe Management of Ranipur\n\nColliery\n\nBhuban Singh\n\n6' Others\n\nWanchoo ].\n\nI959\n\nThe Managenient\n\nof Ranipur Colliery v.\n\nBhuban Singh\n\nG Others\n\nWanchoo ].\n\nbreach of cl. 27 of the Standing Orders.\n\nThe brief facts necessary in this connection are these : Seven workmen were served with charge-sheets on April 1,\n\n1955. After their replies had been received, an enquiry was held on April 13, 1955, and they were found guilty of misconduct. It was decided thereupon to apply for permission for their dismissal under s. 33 of . the Act. The application was made to the Tribunal on April 29, 1955.\n\nThereafter the workmen were suspended on May 4, 1955, without pay pending orders of the Industrial Tribunal.\n\nClause 27 of the Standing Orders, on which reliance has been placed, reads thus-\n\n\" An employee may be suspended, fined or dismissed without notice or any compensation in lieu of notice if he is found to be guilty of misconduct, provided suspension without pay, whether as a punishment or pending enquiry, shall not exceed ten days\".\n\nThe contention on behalf of the workmen is that the words \"pending enquiry\" appearing in cl. 27 include enquiry under s. 33 of the Act before the Industrial Tribunal also.\n\nTherefore, if the Industrial Tribunal takes longer than ten days to decide the application under s. 33 and the workman is suspended without pay, there would be a breach of cl. 27 of the fftanding Orders after ten days are over. On the other hand, it is contended on behalf of the company that the words \"pending enquiry\" in cl. 27 refer only to the enquiry by the employer and not to the proceedings before the Industrial Tribunal under s. 33. The Appellate Tribunal bas come to the conclusion that the words \"pending enquiry\" in cl. 27 include proceedings before the Industrial Tribunal under s. 33 and therefore if suspension without pay is for more than ten days, even though it may be pending orders of the Industrial Tribunal under s., 33, there is a breach of cl. 27 of the Standing Orders. In this connection it has relied on an earlier decision of its own in Rampalat Ghamar v. The Assam Oil Go., Ltd. (1), where the words were\" pending full enquiry\". It was of opinion that there was no difference between \"pending\n\n(1) [1954) L.A.C. 78.\n\nenquiry\" and \"pending full enquiry \" and that the proceedings before the Industrial Tribunal under s. 33 are also included in these words.\n\nWe agree that there is no real difference between \"pending enquiry\" which appears in cl. 27 of the Standing Orders and \"pending full enquiry\" which appeared in the Standing Orders in The Assam Oil Company case (1).\n\nBut we are of opinion that the view taken by the Labour Appellate Tribunal both in The Assam Oil Company case (1), and in this case is incorrect.\n\nThis Court has held in The A utomdbifo Products of India Ltd. v. Rukamji Bala (2) that s. 33 imposes a ban on the employer to dismiss a workman and it gives power to the Industrial Tribunal, on an application made to it, to grant or withhold the permission to dismiss, i.e., to lift o.r maintain the ban. So far, however, as the employer is concerned, his enquiry is (or, at any rate, should be) over when he comes to the finding that the case against the employee is proved and that the punishment of dismissal is the proper punishment.\n\nIt is only then that the employer applies under s. 33 for permission to dismiss the employee. Further, the proceedings under s. 33 are not an enquiry by the Industrial Tribunal into the rights or wrongs of the dismissal; all that it has to see is whether a primafacie case has been made out or not for lifting the ban imposed by the section and whether a fair enquiry has been made by the employer in which he came to the bona fide conclusion that the employee was guilty of misconduct. Once it found these conditions in favour of the employer, it was bound to grant the permission sought for by him. It is thus clear that proceedings under s. 33 are not in the nature of an enquiry into the conduct of the employee by the Industrial Tribunal: (see Lakshmi Devi Sugar Mills Ltd. v. Pt. Ram Sarup (3)). The proceedings therefore before the Industrial Tribunal cannot be called an enquiry into the conduct of the employee. On the other hand, the enquiry which is contemplated by cl. 27 is an enquiry into the conduct of the employee. That enquiry could\n\n(r) [r954] L.A.C. 78.\n\n(2) [r955] I S.C.R. 1241.\n\n(3) [r956] S.C.R. 916.\n\nx959\n\nThe Management of Ranipur Colliery v.\n\nBhuban Singh\n\n& Others\n\nWanchoo ].\n\nI959\n\nThe l\\[ anagement of Ranipu-r\n\nColliery\n\nBhuban Singh\n\n6- Others\n\nWant:hoo ].\n\nonly be by the employer. Therefore, when cl. 27 uses the words \" pending enquiry \", these words can only refer to the enquiry by the employer into the conduct of the emploJee. It is, in our opinion, entirely unnecessary that the words \" pending enquiry \" should have been qualified by the words \" by the employer '', before they can be interpreted as referring to the enquiry by the employer. Standing Orders are concerned with employers and employees and not with tribunals. Therefore, when an enquiry is mentioned in\n\ncl. 27 it can in the context only refer to the enquiry by the employer and not to a proceeding under s. 33 before the tribunal. We are therefore of opinion that in the context in which these words have been used in\n\ncl. 27 they mean an enquiry by the employer and are not referable to the proceedings under: s. 33 of the Act before the Tribunal.\n\nThe scheme and object of s. 33 also show that this conclusion is reasonable. Section 33 of the Act, as already stated, imposes a ban on the employer, thus preventing him from dismissing an employee till the permission of the tribunal is obtained. But for this ban the employer would have been entitled to dismiss the employee immediately after the completion of his enquiry on coming to the conclusion that the employee was guilty of misconduct. Thus ifs. 33 had not been there, the contract of service with the employee would have come to an end by the dismissal immediately after the conclusion of the enquiry and the employee would not have been entitled to any further wages.\n\nBut s. 33 steps in and stops the employer from dismissing the employee immediately on the conclusion of his enquiry and compels him to seek permission of the Tribunal, in case some industrial dispute is pending between the employer and his employees. It stands to reason therefore that so far as the employer is concerned he has done all that he could do in order to bring the contract of service to an end. To expect him to continue paying the employee after he had come to the conclusion that the employee was guilty of misconduct and should be dismissed, is, in our opinion, unfair, simply because of the accidental\n\ncircumstance that an industrial dispute being pending he has to apply to the tribunal for permission. It seems to us therefore that in such a case the employer would be justified in suspending the employee without pay after he has made up his mind on a proper enquiry to dismiss him and to apply to the tribunal for that purpose. If this were not so, he would have to go on paying the employee for not doing any work, and the period for which this will go on will depend upon an accidental circumstance, viz., how long the tribunal takes in concluding the proceedings under s. 33. In the present case th<:J' application for permission was made on April 29, 1955, and the Tribunal's award was given on March 10, 1956, more than ten months later.\n\nSo if the view taken by the Appellate Tribunal is correct, the employer has to pay the employee for this period of more than ten months, even though the employer had completed his enquiry and made up his mind to dismiss the employee long before and would have done so but for the ban imposed by s. 33. . The purpose of providing ten days as the maximum period of suspension without pay pending enquiry in cl. 27 obviously is that the employer should not abuse the provision of suspension pending enquiry and delay the enquiry inordinately, thus keeping the employee hanging about without pay for a long period. The object further seems to be to see that the employer finishes his enquiry promptly within ten days if the suspension of the employee is without pay. But it could not have been. intended that the Industrial Tribunal should also conclude the proceedings under s. 33 within ten days, and if that was not done there would be a breach of cl. 27. In any -0ase the time taken by the proceedings before the tribunal under s. 33 is beyond the control of the employer and as the provisions of\n\ncl. 27 would be inappropriate and inapplicable to the said proceedings. We are therefore of opinion that the words \" pending enquiry \" in cl. 27 both in the context and in justice and reason refer only to the enquiry by the employer and not to the proceedings before the tribunal under s. 33.\n\nThis interpretation would not cause any serious\n\nI959\n\nThe M anagenienl\n\nof Ranipur Colliery v.\n\nBhuban Singh\n\n& Others\n\nWanchoo ].\n\nr959 hardship to the employee, for if the tribunal grants\n\nTh M- , permission to tbe employer to dismiss the employee he e anagemen . . of Ran; pur will not get anythmg from the date of his suspension Colli\"Y without pay; on the other hand, if the tribunal refuses v. to grant the permission sought fo:r, he would be entitl-\n\nBh><ban Singh ed to his back wages from the date of his suspension\n\n& Others h W h wit out pay. e may int is connection refer to the\n\nwanchoo J. case of Lakshmi Devi Sugar Mills Ltd. (1) where a similar point arose for decision. In that case the Standing Orders provided suspension without pay only for four days. It was there held that suspension without pay pending enquiry as also pending permission of the tribunal could not be considered a punishment, as such suspension without pay would only be an interim measure and would last only till the application for permission to punish the workman was made and the tribunal had passed orders thereon. It was also held that if the permission was accorded the workman would not be entitled to payment during the period of s.uspension but if the permission was refused he would have to be paid for the whole period of suspension. The principle laid down in that case applies to this case also.\n\nWe would only like to add that that principle will apply only to those cases where there is a b[l, n under s. 33 and the employer has to apply under that section for lifting the ban after completing the enquiry. The matter will be different if there is no question of applying under s. 33 and under the relevant Standing Orders the employer is competent to dismiss the employee immediately after his enquiry is complete. In such a case if the Standing Orders provide that suspension without pay will not be for more than a certain number of days, the enquiry must either be completed within that period or if it goes beyond that period and suspension for any reason is considered necessary, pay cannot be withheld for more than the period prescribed under the Standing Orders. In the present case, the suspension without pay took place even after the application under s. 33 had been made and was pending permission under that section.\n\nAs the Industrial Tribunal has accorded permission to dismiss the employees 'in this case and\n\n(r) [1956] S.C.R. 916.\n\nas that part of the award has been upheld by the Appellate Tribunal, there is no question of the employees being paid during the period of suspension without pay.\n\nWe, therefore, allow the appeal, set aside the order of the Labour Appellate Tribunal and restore the order of the Industrial Tribunal dismissing the two applications under s. 33-A. In the circumstances, we pass no order as to costs.\n\nAppeal allowed. ·.\n\nRANJIT SINGH v.\n\nTHE STATE OF PUNJAB\n\n(JAFER IMAM and J. L. KAPUR, JJ.)\n\nCriminal Trial-Perjury-False statement in affidavit-Affidavit affi\"Ymed to the best of knowledge and belief-N v obligation to file affidavit-Offence, if made out-Indian Penal Code, I86o (XLV of I86o), SS. I9I and I93\n\nA habeas corpus application was made to the High Court al)eging that one S had been illegally arrested and kept in unlawful custody without any charge being made against him and without obtaining remand from a Magistrate. By way of a return the appellant, a sub-Inspector of Police, filed a false affidavit controverting the allegations made in the application.\n\nHe was prosecuted and convicted under s. 193 Indian Penal Code. The appellant challenged his conviction on the grounds that: (i) as he was not bound under the law to file an affidavit, the case did not fall under s. 191 of the Indian Penal Code and he could not be convicted under s. 193 ; and (ii) the affidavit having been affirmed as true to the best of the knowledge and belief of the appellant it could not be said which part was true to his knowledge and which to his belief.\n\nHeld that, the appellant was rightly convicted. It was not necessary for the application of s. 191 of the Indian Penal Code that the accused should be bound under the law to make an affidavit. If he chose to make one and bound himself on oath to state the truth he was liable under s. 193 of the Code if he made a false statement and it was no defence to say that he was not bound to enter the witness-box or make an affidavit.\n\nIn the present case it was necessary for the appellant to file an affidavit as he was bound to place the facts and circumstances justifying\n\nI959\n\nThe l\\fanag,•ment\n\nof Ranij>ur\n\nColliery v.\n\nBhuban Singh\n\n.J;. Others\n\nWanchoo J.\n\nr959\n\nApril 2I,", "total_entities": 71, "entities": [{"text": "719\n\nTHE MANAGEMENT OF RANIPUR COLLIERY", "label": "PETITIONER", "start_char": 36, "end_char": 75, "source": "metadata", "metadata": {"canonical_name": "THE MANAGEMENT OF RANIPUR COLLIERY", "offset_not_found": false}}, {"text": "BHUBAN SINGH AND OTHERS", "label": "RESPONDENT", "start_char": 77, "end_char": 100, "source": "metadata", "metadata": {"canonical_name": "BHUBAN SINGH AND OTHERS", "offset_not_found": false}}, {"text": "B. P. SINHA", "label": "JUDGE", "start_char": 103, "end_char": 114, "source": "metadata", "metadata": {"canonical_name": "BHUVNESHWAR PRASAD SINHA*", "offset_not_found": false}}, {"text": "K. N. WANCHOO, JJ.", "label": "JUDGE", "start_char": 143, "end_char": 161, "source": "metadata", "metadata": {"canonical_name": "K.N. 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{"document_id": "1959_2_71_78_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 71\n\nmay be that the appellant may in some future procex959 eding adduce evidence to establish that there are other Th w t 1 a cinema houses similarly situate and that the .imposieThe;;,;; t;, '\" tion of a higher tax on the appellant is discriminatory v. as to which we say nothing; but all we need say is The Cantonment that in this suit the appellant bas not discharged the Board, Poona, onus that was on him and, on the material on record, Cantonment it is impossible for us to hold in this case that there 1 Das C .• has been any discrimination in fact.\n\nFor reasons stated abve this appeal must be dismissed with costs.\n\nAppeal dismissed\n\nTHE WESTERN INDIA THEATRES LTD. v.\n\nMUNICIPAL CORPORATION OF THE CITY OF\n\nPOONA {S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR.\n\nK. N. WANCHOO and M. HIDAYATULLAH, JJ.)\n\nMunicipality, Power of-Imposition of tax on cinema show- Constitutional validity of enactment-Enhancement of such tax- Validity-Bombay District Municipal Act, I90I (Bom. III of\n\nIgoI), s. 59(I) (XI)-Bombay Municipal Boroughs Act, I925 (Bom. XVIII of Ig25), s. 60.\n\nThe appellant, a public limited company, was a lessee of four cinema houses situated within the municipal limits of Poona City where it used to exhibit cinematograph films.\n\nThe respondent, the Municipal Corporation of Poona, in exercise of its power under s. 59(1) (XI) of the Bombay District Municipal Act,\n\n1901, levied with effect from October l, 1920, a tax of Rs. 2 per day as license fee on the-owners and lessees of cinema houses.\n\nThat Act governed the Municipality till 1926 and thereafter it was governed bythe Bombay Municipal Boroughs Act, 1925. The tax was enhanced to Re. l per show on June 3, 1941, and to Rs. 5 per show on June 9, 1948. By the suit, out of which the present appeal arose, the appellant sought for a declaration that the levy of the said tax, the rules framed in connection therewith and the enhancement of the tax as aforesaid were iIIegal and ultra vires.\n\nThe trial court decreed the suit in part but the High Court in appeal reversed the decision of the trial court\n\nI959\n\nJanuary z6.\n\nI958 and dismissed the suit. It was contended on behalf of the appellant that (r) the tax was not. one covered by Entry 50 The Western India in List 11 of Seventh Schedule to the Government of India\n\nTheatres Ltd.\n\nAct, 1935, but was one on trade or calling covered by Entry 46 v. thereof, and, was as such governed by s. l42A of the said Act and Municipal that (2) s. 59(1)(XI) of the Bombay District Municipal Act, 1901, Corporation of !he was unconstitutional in that the legislature had thereby delegat- City of Poona ed essential legislative power to the Municipality to determine the nature of the tax to be imposed on the rate-payers and completely abdicated its function, leaving such power wholly unguided.\n\nHeld, that both the contentions must fail.\n\nThe first point was covered by the decision given in the appellant's other appeal, Civil Appeal No. 145 of 1955, which must also govern this case.\n\nIt was not correct to contend that the power delegated to the Municipality under s. 59(1)(XI) of the Bombay District Municipal Act, 1901, was unguided. That section authorised the imposition of such taxes alone as were necessary for the purposes of the Act.\n\nThe obligations and functions cast upon the Municipalities by ch. VII of the Act showed that taxes could be levied only for implementing those purposes and none others.\n\nNor could it be said that the provincial Legislature had abdicated its function in favour of the Municipality. The taxing power of the Municipality was made subject to the approval of the Governor-in-Council by the section itself.\n\nThe marginal note to a section could not affect the construction of the section if its language was otherwise clear and unambiguous and the word 'modify' connoted not merely reduction hut also other kinds of alteration including enlargement.\n\nThe substitution of the word 'reduce' by the word 'modify' in the body of s. bo of the Bombay Municipal Boroughs Act, 1925, notwithstanding the omission to do so in the marginal note, therefore, clearly indicated the intention of the Legislature to widen the scope of that section and, consequently, it could not be said that the enhancement of the tax was not sustainable thereunder.\n\nCommissioner of Income Tax, Bombay v. Ahmedbhai Umarbhai & Co., Bombay, [1950] S.C.R. 335 and Stevens v. The General Steam Navigation Company, Ltd., L.R. (1903) l K.B. 890, referred to.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 146 of 1955.\n\nAppeal from the judgment and decree dated February 10, 1953, of the Bombay High Court in Appeal No. 953 of 1951, arising out of the judgment and decree dated November 30, 1951, of the Court of\n\nJoint Civil Judge, Senior Division, Poona, in Specia.l x959 Suit No. 76 of 1950.\n\nTh • • e Western India H. D. BanaJi, R. A. Gagrat and G. Gopalakrishnan, Theatrs Ltd. for the appellant. v.\n\nM. 0. Setalvad, Attorney-General for India, S. N.\n\nMunicipa1 1 h.\n\nA dz d J B d h \" c h d Corporation o t e n ey an . . Da ac anJi, 1or t erespon ent.\n\nCity of Poona\n\n1959. January 16.\n\nThe Judgment of the Court was delivered by Das c. J.\n\nDAS, C. J.-The appellant is a public limited company registered under the Indian Companies Act, 1913.\n\nIt is a lessee of four cinema houses situate within the municipal limits of Poona City known respectively as \"Minerva'', \"The Globe \", \"Sri Krishna \" and \"The Nishat \". It exhibits cinematograph films, both foreign and Indian, in the said four houses. The respondent, a body corporate, was governed by the Bombay District Municipal Act, 1901 (Born. III of 1901) up to June 8, 1926, and from then by the Bombay Municipal Boroughs Act, 1925 (Born. XVIII of 1925) up to December 29, 1949, and, thereafter, by the Bombay Provincial Municipal Corporation Act, 1949 (Born.\n\nLTX of 1949). With effect from October 1, 1920, the respondent, with the sanction of the Government of Bombay levied on the owners and lessees of cinema houses within the limits of the erstwhile province of Bombay a tax of Rs. 2 per day as license fee.\n\nRules for the levy and collection of the said tax were framed by the respondent. Those rules were amended on or about June 3, 1941, enhancing the tax from Rs. 2 per day to Re. l per show. The rules were again revised on or about June 9, 1948, under which the tax was enhanced from Re. 1 per show to Rs. 5 per show. At all material times the tax wa, s being collected at the last mentioned rate.\n\nSection 59 of the Bombay District Municipal Act 1901 provided that subject to any general or special orders which the State Government might make in that behalf any municipality (a) after observing the preliminary procedure required bys. 60, and (b) with the sanction of the authority therein mentioned, might\n\n'959 impose for the purposes of that Act any of the taxes\n\nThe we:;; n India menioned in that section.. After en1;1era:ting ten\n\nTheatres Ltd. specific heads of taxes, which a mumc1pahty could v. • levy, a residuary category was set forth in cl. (xi) in .\n\nMnnicipal the words following:- Corporation of the \"Any other tax to the nature and object of which City of Poona the approval of the Governor in Council shall have\n\nDas c. J. been obtained prior to the selection contemplated in sub-clause (il of clause (a) of section 60 \".\n\nEver since the appellant became a lessee of the said cinema houses, the appellant has be!ln making payments of the said tax under protest.\n\nAfter giving the necessary statutory notice to the respondent, the appellant, on or about March 31, 1950, filed a suit in the Court of the Civil Judge, Senior Division, Poona, being Suit No. 76 of 1950, against the respondent for a declaration that the levy and imposition of the said tax with effect from October 1, 1920, were invalid and illegal; that the enhancement ,. in the rates of the tax with effect first from June 3, 1941, and then June 9, 1948, was invalid and illegal and that the resolutions passed and rules framed in connection with the levy, imposition, enhancement and collection of the said impugned tax were invalid, illegal and ultra vires, for a permanent injunction restraining the defendants from levying or recovering and or increasing and enhancing the said tax and for refund to the appellant of the amounts of the tax collected from it and for costs of the suit and interest. By its judgment dated November 30, 1951, the rial court held that the said tax was validly levied and imposed, but that the increase and enhancement thereof in 1941 and 1948 were illegal and ultra vires and that the suit was not barred under the Acts governing the respondent. The trial court decreed the suit in part by issuing an injunction restraining the respondent from levying, recovering or collecting the tax at the enhanced rate and passing a decree against the respondent for refund of a sum of Rs. 27,072 with interest and costs. The respondent preferred an appeal and the appellant filed cross objections. But the HighCourt by its judgment and decree dated February 10, 1953,\n\nreversed the judgment of the trial court and dismissed\n\nI959 the suit of the appellant with costs throughout. The Th w - . 11 , b' . l d' . d O e estern India appe ants cross o Ject10ns were a so 1smisse . n Theatres Ltd December 10, 1953, theHigh Court granted leave to the v. appellant to appeal to this Court from the said judg- Municipal ment.\n\nHence this final appeal questioning the vali- Corporation of the dity of the impugned tax.\n\nCity 0f. Poona The first point urged in this appeal is that the law imposing this tax is not covered by entry 50 in List II of the Seventh Schedule to the Government of India Act, 1935, but is really a tax on the appellant's trade or calling referred to in entry 46 and that, therefore, the amount of tax cannot under s. 142-A of the Government of India Act, 1935 exceed Rs. 100 per annum.\n\nThis point need not detain us long, for it is covered by us in the appellant's other appeal No. 145 of 1955.\n\nThe second point urged before us in support of this appeal is thats. 59(1) (xi) is unconstitutional in that the legislature had completely abdicated its functions and had delegated essential legislative power to the Municipality to determine the nature of the tax to be imposed on the rate payers. Learned counsel for the appellant urges that the power thus delegated to the municipality is unguided, uncanalised and vagrant, for there is nothing in the Act to prevent the municipality from imposing any tax it likes, even, say, income tax. Such omnibus delegation, be contends, cannot on the authorities be supported as constitutional. We find ourselves in agreement with the High Court in rejecting this contention.\n\nIn the first place, the power of the municipality cannot exceed the power of the provincial legislature itself and the municipality cannot impose any tax, e.g., income tax which the provincial legislature could not itself impose. In the next place, s. 59 authorises the municipality to impose the taxes therein mentioned \"for the purposes of this Act\". The obligations and functions cast upon the municipalities are set forth in ch. VII of the Act. Taxes, therefore, can be levied by the municipality only for implementing those purposes and for no other purpose. In other words it will be open to the municipality to levy a tax for giving any of the amenities therein mentioned.\n\nDas C. ].\n\nI959 The matter may be illustrated by reference to - . s. 54 which enumerates the duties of municipa- Th•T:estern L~; dia lities.\n\nThe first duty mentioned in that section is\n\neats that the Municipality should make provision for\n\nMunfripal lighting public streets and nobody can object if it Co, po, otion of the imposes a lighting tax, which, indeed, is item (ix) in City of Poona s. 59(1).\n\nTake another example: It is the duty of the Municipality to arrange for supply of drinking water Dos c. J. and it may legitimately charge a water rate which, again, is item (viii) in s. 59(1).\n\nWe do not for a moment suggest that the municipalities may only impose a tax directly in connection with the heads of duties cast upon it. what we say is that the tax to be imposed must have some reasonable relation to the duties cast on it by the Act. In the third place, although the rule of construction based on the principle of ejusdem generis cannot be invoked in this case, for items (i) to (x) do not, strictly speaking, belong to the same genus, but they do indicate, to our mind the kind and nature of tax which the municipalities are authorised to impose. Finally, the provincial legislature had certainly not abdicated in favour of the municipality, for the taxing power of the municipality was quite definitely made subject to the approval of the Governor-in-Council. Under the Indian Council Act, 1861 (24 & 25 Vic. c. 67) the Governor-in-Council might mean the Governor in Executive Council or the Governor in Legislative Council. If the reference in s. 59(l)(xi) is to the Governor's Legislative Council, then there was no improper delegation at all, for it was subject to the legislative control of the Governor in Legislative Council.\n\nTho Governor's Legislative Council was composed of all the members of the • Governor's Executive Council besides a few other persons.\n\nTherefore if the reference was to the Governor in his Executive Council even then, from a practical point of view, the ultimate control was left with the Governor's Legislative Council. We need not labour this point any further, for on the first three grounds the delegation of legislative authority, if any, is not excessive so as to make the exercise of it unconstitutional. In our opinion the impugned section did lay down a principle and fix a standard\n\nwhich the municipalities had to follow in imposing a r959 tax and the legislature cannot, in the circumstances, Tl w- 1 a • • ie estetn n 1a be said to have had abdicated itself and, therefore, Theatres Ltd. the delegation of power to impose any other tax canv. not be struck down as being in excess of the permis- Municipal sible limits of delegation of legislative functions.\n\nCorporation of the The last point urged by learned counsel for the City of Poona appellant is that, under cl. (xi) of s. 59(1), the enhance- Das c. J. ments of the rates of the tax in 1941 and again in 1948 were illegal in that the municipality had no power to do so under the Bombay Municipal Boroughs Act, 1925.\n\nAccording to learned counsel for the appellant the judgment under appeal upholding the validity of such enhancements cannot be supported under s. 60 of that Act. That section runs as follows :-\n\n\"Power to 60(1) Subject to the requirements suspend, reof clause (a) of the proviso to secduce or abotion 58 a municipality may, except as lish any exotherwise provided in clause (b) of the isting tax proviso to section 103 at any time for any sufficient reason, suspend, modify or abolish any existing tax by suspending, altering or rescinding any rule prescribing such tax.\n\n(2) The provisions of Chapter VII relating to the imposition of taxes shall apply so far as may be to the suspension, modification or abolition of any tax and to the suspension, alteration or rescission of any rule prescribing a tax.\"\n\nReference is made to the marginal note where the words used are \"power to suspend, reduce or abolish any existing tax\". It is suggested that the word \" modify \" in the body of the section in between the words \" suspend\" and \"abolish \" should be construed in the sense of reduction.\n\nThe marginal note, according to him, shows that the several words were used in the section to indicate a progressive diminution in the quantum of tax until it was completely gone ..\n\nReference is made to the root meaning of the word \"modify \" w hie h is to reduce or make less but does not cover the .idea of enhancement. In the first place, the marginal note cannot affect the construction of the language used in the body of the section if it is otherwise clear and unambiguous (see Commissioner of\n\nI9S9 Income Tax, Bombay v. Ahmedbhai Umarbhai & Co.,\n\nThe Western India Bombay) (1).\n\nIn the next place, it should be borne in Theatres Ltd. mind that s. 67 of the Bombay District Municipal v.\n\nAct (Born. III of 1901) which was formerly applicable Munfripal to municipalities used the word \"reduce\" in between Corporation of the the words \" suspend \" and \" abolish \" and that that City of Poo1ta \"h d b d d f h B b section a een re pro uce 1s s. 60 o t e om a y Das c. J.\n\nMunicipal Boroughs Act, 1925, but that in the process of such reproduction the word \"reduce\" was dropped and the word \" modify \" was introduced. In the marginal note, however, the word \"reduce\" was not substituted by the word \"modify\", apparently through inadvertence. If the word \"modify\" is to be read as \"reduce'', then there could be no point in the provincial legislature substituting the word \"reduce \" by the word \"modify\". This change must have been made with some purpose and the purpose could only have been to use an expression of wider connotation so as to include not only reduction but also other kinds of alteration. Section 76 of this very Act also refers to \"modification not involving an increase in the amount to be imposed\" which makes the sense in which the word \"modify\" has been used in this Act perfectly clear, namely, that there may be a modification involving an increase. Reference may also be made to the decision of the Court of Appeal in England in the case of Stevens v. The General Steam Naviga. tion Company, Ltd. (2). \" Modification \", acc, ording to Collins M. R. in his judgment at p. 893, implied an alteration and the word was equally applicable whether the effect of the alteration was to narrow or to enlarge the provisions. In our opinion the dropping of the word \".reduce\" and the introduction of the word \"modify\" in the body of s. 60 of the Act under consideration clearly indicate an intention on the part of legislature to widen the scope of this section and the High Court was right in so construing the same.\n\nNo other point was urged in this appeal and for reas'ons stated above this appeal must be dismissed with costs.\n\nAppeal dismissed.\n\n(1) [1950] S.C.R. 335 at p. 353\n\n(2) L.R. 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{"document_id": "1959_2_727_734_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPORTS 727\n\nas that part of the award has been upheld by the Appellate Tribunal, there is no question of the employees being paid during the period of suspension without pay.\n\nWe, therefore, allow the appeal, set aside the order of the Labour Appellate Tribunal and restore the order of the Industrial Tribunal dismissing the two applications under s. 33-A. In the circumstances, we pass no order as to costs.\n\nAppeal allowed. ·.\n\nRANJIT SINGH v.\n\nTHE STATE OF PUNJAB\n\n(JAFER IMAM and J. L. KAPUR, JJ.)\n\nCriminal Trial-Perjury-False statement in affidavit-Affidavit affi\"Ymed to the best of knowledge and belief-N v obligation to file affidavit-Offence, if made out-Indian Penal Code, I86o (XLV of I86o), SS. I9I and I93\n\nA habeas corpus application was made to the High Court al)eging that one S had been illegally arrested and kept in unlawful custody without any charge being made against him and without obtaining remand from a Magistrate. By way of a return the appellant, a sub-Inspector of Police, filed a false affidavit controverting the allegations made in the application.\n\nHe was prosecuted and convicted under s. 193 Indian Penal Code. The appellant challenged his conviction on the grounds that: (i) as he was not bound under the law to file an affidavit, the case did not fall under s. 191 of the Indian Penal Code and he could not be convicted under s. 193 ; and (ii) the affidavit having been affirmed as true to the best of the knowledge and belief of the appellant it could not be said which part was true to his knowledge and which to his belief.\n\nHeld that, the appellant was rightly convicted. It was not necessary for the application of s. 191 of the Indian Penal Code that the accused should be bound under the law to make an affidavit. If he chose to make one and bound himself on oath to state the truth he was liable under s. 193 of the Code if he made a false statement and it was no defence to say that he was not bound to enter the witness-box or make an affidavit.\n\nIn the present case it was necessary for the appellant to file an affidavit as he was bound to place the facts and circumstances justifying\n\nI959\n\nThe l\\fanag,•ment\n\nof Ranij>ur\n\nColliery v.\n\nBhuban Singh\n\n.J;. Others\n\nWanchoo J.\n\nr959\n\nApril 2I,\n\n<959\n\nRanjit Singh v.\n\nThe State of\n\nPun} ab\n\nthe detention which could only he done by an affidavit. Ordinarily, where the detentionis under orders of the detaining authority in exercise of his plenary powers or of a Court an affidavit may not be necessary in making the return but where it becomes necessary for the detaining authority to justify its action by disclosing facts it has to file an affidavit.\n\nHeld, further, that explanation 2 to s. 191 of the Code brings a false statement affirmed to the belief of the accused also within the mischief of s. l9I and thus makes it punish3:ble under s. 193 of the Code.\n\nEmperor v. Lachmi Narain, I. L. R. 1947 All. 155, disapproved.\n\nCRIMINAL\n\nAPPELLATE\n\nJURISDICTION: Criminal Appeal No. 19 of 1957.\n\nAppeal by special leave from the judgment and order dated March 7, 1956, of the former PEPSU High Court in Criminal Revision No. 45 of 1956, arising out of the judgment and order dated February 22, 1956, of the Additional Sessions Judge, Patiala, in Criminal Appeal No. 175/36of1955-56.\n\nPritam Singh Safeer, for the appellant.\n\nN. S. Bindra and T. M. Sen, for the respondent. 1959.\n\nApril 21. The Judgment of the Court was_ delivered by\n\nKapur J.\n\nKAPUR, J.-This is an appeal by special leave against the judgment and order of the High Court of PEPSU passed in revision. The appellant was a sub- Inspector of Police who at the relevant time was the Station House Officer in-charge Shehna police station in the erstwhile PEPSU State. He was convicted under s. 193, Indian Penal Code, by a First Class Magistrate and his appeal to the Sessions Judge, Patiala, was dismissed except as to sentence. He took a revision to the PEPSU High Court but that was also dismissed.\n\nThis appeal has arisen in the following circumstances : One Surjit Singh, s/o Risaldar W aryam Singh, was arrested on September 25, 1953, at Barnala in l'EPSU State by the Police Inspector Jaswant Singh. He was kept in the lock-up at Barnala and on the following day his custody was handed over to the appellant and he was taken to Shehna and was kept in custody-it\n\nis not clear under what section-in the police station lock-up at Shehna. Surjit Singh was there kept in custody from September 26, 1953, till October 10, 1953, when at about 10 p.m., he was surreptitiously removed to Police Station Dialpur and then to Police Post Hamirgarh and from there was taken to Police Station Baga Purana in Ferozepur District, of the then Punjab.\n\nAn application under s. 491 of the Criminal Procedure Code and under Art. 226 of the Constitution was made for a writ of Habeas Corpus and Mandamus in the High Court of PEPSU. In that petition it was alleged that Surjit Singh was being kept in unlawful custody 1 without any charge being made and without obtaining a remand by a Magistrate. In reply to this, an affidavit dated October 13, 1953, was filed by the appellant in which he stated that Surjit Singh had association with notorious dacoits; that he, the appellant, had never taken him into custody at any time ; that the said Surjit Singh was absconding and had not been arrested in spite of the best efforts of the police; that at the time of the making of the affidavit he was not in the appellant's custody and that it was incorrect that Inspector Jaswant Singh had ever entrusted l:lurjit Singh to his (appellant's) custody. He also stated that no petition had been brought to him nor had he received any telegram in connection with the custody of Surjit Singh. This affidavit was affirmed as follows:-\n\n\" I solemnly affirm that the facts stated from paras Nos. 1 to 7 are true to the best of my know ledge and belief and nothing which is relevant to this case has been kept back from this Hon'ble Court\".\n\nAs both the parties admitted before the High Court that Surjit Singh was not in the custody of the appellant the petition was dismissed. On November 9, 1953, the brother of Surjit-Singh made an application under s. 476, Criminal Procedure Code, for the prosecution of Inspector Jaswant Singh and the appellant for perjury under s. 193, Indian Penal Code, in that they had filed false affidavits. This matter was heard by another learned Judge of that Court who ordered the 92\n\nI959\n\nRanjit Singh v, The Stat; of Punjab\n\nJ(apur .f,\n\nI959\n\nRanjit Singh\n\nThe State of\n\nPunjab\n\nKapur]. ,\n\nprosecution of the appellant and directed the Registrar of the High Court to file a complaint which was filed.\n\nThe complaint was taken cognizance of by the First Class Magistrate at Patiala who convicted the appellant and sentenced him to nine months' imprisonment and a fine of Rs. 300/- and in default to undergo simple imprisonment for two months. The appellant took an appeal to the Sessions Judge, Patiala, who confirmed the order of conviction but reduced the sentence to one of three months' simple imprisonment and a fine of Rs. 50 and in default one month's simple imprisonment, a revision against this order was dismissed in limine by the Chief Justice although he gave reasons for dismissing it. The appellant .then obtained special leave from this Court.\n\nOn behalf of the appellant the first contention raised was that the appellant was not bound to file an affidavit and therefore he could not be convicted under s. 193, Indian Penal Code, because his case did not fall under s. 191, Indian Penal Code. In support of his contention he relied upon the Rules of the PEPSU High Court framed for the purpose of proceedings under Art. 226 and s. 491(2), Criminal Procedure Code, for the issuing of writs of Habeas Corpus. He also referred to the Rules made by that Court for the issuing of writs of Mandamus, Prohibition, Quo Warranto and Certiorari under Art. 226 and submitted that there was no Rule in the former, i.e., for writ of Habeas Corpus requiring a return to be made on behalf of the respondent to be supported by an affidavit whereas in the latter, i.e., issuing of writs of Mandamus etc. an affidavit was necessary and therefore it was submitted that s. 191 was inapplicable. Rule 2 of the Rules of the Court required that when a Judge was of the opinion that prima facie case had been made out for granting the application a rule nisi was to issue calling upon the person G>r persons against w horn the order was sought, to appear before the Court and to show .cause why such an order should not be made. As has been pointed out in Greene v. Home Secretary (1) which was a case under Reg. 18-B of the Defence of the\n\n(z) [1942] A.C. 284, 302.\n\nRealm Act the whole object of proceedings for a writ of Habeas Corpus is to make them expeditious, to keep them as free from technicality as possible and to keep them as simple as possible. \"The incalculable value of Habeas Corpus is that it enables the immediate determination of the right to the appellant's freedom\" (Lord Wright). When there is no question of fact to be examined or determined no affidavit is needed.\n\nAs soon as there emerges a fact into which the Court feels it should enquire the necessity for an affidavit arises. Ordinarily an affidavit may not be necessary in making the return if the detention is under orders of the detaining authority in exercise of its plenary discretion as in Liversidge v.\n\nAnderson (1) and in Greene's case (2) or a person is detained under the orders of a Court. But where the detention is, as it was in the present case, it becomes necessary for the detaining authority to justify its action by disclosing facts which would show to the si; ttisfaction of the Court that the custody is not improper. Where the prisoner says\" I do not know why I have been detained, I have done no wrong\", it is for the detaining authority to justify the custody.\n\nWhen issues of fact are raised and the actions of the police officers, as in the present case, are expressly challenged and facts are set out which if unrebutted and unexplained would be sufficient for the writ to issue, an affidavit becomes necessary. It cannot be said therefore that in the present case the appellant was not legally bound to place facts and circumstances before the Court to justify the detention of Surjit Singh and this could be done by an affidavit.\n\nSection 4 of the Oaths Act lays down the authority to administer oaths and affirmations and it prescribes the courts and persons authorised to administer by themselves or by their officers empowered in that behalf oaths and affirmations in discharge of the duties or in exercise of the powers imposed upon them and they are, all courts and persons having by law the authority to receive evidence. Section 5 prescribes the persons by whom oaths or affirmations must be\n\n(1) (1942] A.C. 206.\n\n(2) [1942] A.C. 284, 302.\n\nI959\n\nRanjit Singh\n\nThe State of Punjab\n\nKapur].\n\nI959\n\nIVuijit Singh\n\nThe State of\n\ni:iunjab\n\nHapur j.\n\nmade and they include all witnesses, i.e., all persons who may lawfully be required to give evidence by or before any court. These two sections show that the High Court or its officers were authorised to administer the oath and as the appellant was stating facts as evidence before the High Court he had to make the oath or affirmation and was bound to state the truth.\n\nSectiop 14 of that Act is in the following words:\n\nS. 14. \"Every person giving evidence on any subject before any Court or person hereby authorised to administer oaths and affirmations shall be bound to state the truth on such subject\".\n\nAs the appellant was giving evidence on his own behalf in that he was denying the allegation made in the affidavit of the brother of Surjit Singh he was bound to state the truth on the subject on which he was making the statement. The contention therefore that under s. 191 of the Indian Penal Code the relevant portion of which is:\n\nS. 191. \"Whoever being legally bound by an oath or by an express provision of law to state the truth ......... makes any statement which is false and which he either knows or believes to be false or does not believe to be true, is said to give false evidence \" the appellant was not legally bound by oath to state the truth cannot be supported. On the other hand at the stage of the proceedings in the High Court where it was being alleged that . Surjit Singh was being detained by the appellant illegally it was necessary for the appellant to make an affidavit ir\\. making a return and therefore if the statement is false, as it has been found to be, then he has committed an offence under s. 193.\n\nThe opening words of s. 191 \"whoever being legally bound by an oath or by an express provision of law to state the truth ......... \" do not support the submission that a man, who is not bound under the law to make an affidavit, can, if he does make one, deliberately refrain from stating truthfully the facts which are within his knowledge. The meaning of these words is that whenever in a court oflaw a person binds himself on oath to state the truth he is bound to state the\n\n(2) S.O.R. SUPREME COURT REPOHTS 733\n\ntruth and he cannot be heard to say that he should not have gone into the witness-box or should not have made an affidavit and therefore the submission that any false statement which he had made after taking the oath is not covered by the words of s. 191, Indian Penal Code, is not supportable. Whenever a man makes a statement in court on oath he is bound to state the truth and if he does not, he makes himself liable under the provisions of s. 193. It is no defence to say that he was not bound to enter the witness-box.\n\nA defendant or even a plaintiff is not bound to go into the witness-box but if either of them chooses to do so he cannot, after he has taken the oath to make a truthful statement, state anything which is false.\n\nIndeed the very sanctity of the oath requires that a person put on oath must state the truth. In our opinion this contention is wholly devoid of force and must be repelled. It was then contended that the officer before whom the appellant swore the affidavit, i. e., the Deputy Registrar of the High Court of PEPSU was not authorised to administer oaths. That officer as a witness for the prosecution has stated that he could administer an oath and therefore this contention of the appellant is also without any force and must be repelled.\n\nIt was also argued that the affidavit filed by the appellant was affirmed as being true to the best of know ledge and belief and therefore it could not be said as to which part was true to the appellant's knowledge and which to his belief. We have read the affidavit which consists of 7 paragraphs and each paragraph relates to affirmation of a fact which, if true, could only be so to the appellant's knowledge. But even belief would fall under Explanation 2 to s. 191 which is as under: Explanation 2 to s. 191. \"A false statement as to the belief of the person attesting is within the meaning of this section, and a person may be guilty of giving false evidence by stating that he believes a thing which ho does not believe, as well as by stating that he knows a thing which he does not know\".\n\nRanjit Singh\n\nThe State of Punjab\n\nKapur].\n\nI959\n\nRanjit Singh v.\n\nTlic State of Punjab\n\nJ; apur j.\n\nI959\n\nApril 21.\n\nThe appellant relied upon a judgment of the Allahabad High Court in Emperor v. Lachmi Narain (1). But unless there was something peculiar in the facts of that case it cannot be considered to be good law. It does not even take into consideration Explanation 2 of s. 191.\n\nLastly it was urged that the procedure adopted by the Magistrate was erroneous in that he did not hold an enquiry as requiredunder ss. 200 and 202, Criminal Procedure Code, the former of which is expressly mentioned in sub-section 2 of s. 476, Criminal Procedure Code. That contention is equally untenable because under s. 200, proviso (aa) it is not necessary for a Magistrate when a complaint is made by a court io examine the complainant and neither s. 200 nor s. 202 requires a preliminary enquiry before the Magistrate can assume jurisdiction to issue process against the person complained against.\n\nIn our opinion the appellant has been rightly convicted and we would therefore dismiss this appeal.\n\nAppeal dismissed .\n\nANDHERI MAROL KURLA BUS SERVICE\n\n& ANOTHER v.\n\nTHE STATE OF BOMBAY\n\n(JAFER IMAM and J. L. KAPUR, JJ.)\n\nIndustrial Dispute-Conciliation proceedings-Pendency of- Whether terminate on expiry of I4 days-Industrial Disputes Act, I947 (XIV of r947) SS. I2(6), 20(2), JI(I) and 33(I).\n\nConciliation proceedings were started in January r952 with respect to some disputes between appellant l and its workmen. 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{"document_id": "1959_2_734_739_EN", "year": 1959, "text": "I959\n\nRanjit Singh v.\n\nTlic State of Punjab\n\nJ; apur j.\n\nI959\n\nApril 21.\n\n734 SUPREME COURT REPORTS [1959] Supp.\n\nThe appellant relied upon a judgment of the Allahabad High Court in Emperor v. Lachmi Narain (1). But unless there was something peculiar in the facts of that case it cannot be considered to be good law. It does not even take into consideration Explanation 2 of s. 191.\n\nLastly it was urged that the procedure adopted by the Magistrate was erroneous in that he did not hold an enquiry as requiredunder ss. 200 and 202, Criminal Procedure Code, the former of which is expressly mentioned in sub-section 2 of s. 476, Criminal Procedure Code. That contention is equally untenable because under s. 200, proviso (aa) it is not necessary for a Magistrate when a complaint is made by a court io examine the complainant and neither s. 200 nor s. 202 requires a preliminary enquiry before the Magistrate can assume jurisdiction to issue process against the person complained against.\n\nIn our opinion the appellant has been rightly convicted and we would therefore dismiss this appeal.\n\nAppeal dismissed .\n\nANDHERI MAROL KURLA BUS SERVICE\n\n& ANOTHER v.\n\nTHE STATE OF BOMBAY\n\n(JAFER IMAM and J. L. KAPUR, JJ.)\n\nIndustrial Dispute-Conciliation proceedings-Pendency of- Whether terminate on expiry of I4 days-Industrial Disputes Act, I947 (XIV of r947) SS. I2(6), 20(2), JI(I) and 33(I).\n\nConciliation proceedings were started in January r952 with respect to some disputes between appellant l and its workmen. On May g, 1952, the Union and on June 2, 1952, the appellant l indicated to the Conciliation Officer that the negotiations had failed.\n\nIn the meantime on March 18, 1952, the appellant 1 dismissed\n\n(1) I.L.R. 1947 All. 155\n\none of its workmen.\n\nThe two appellants and three others were r959 prosecuted under s. 31 of the Industrial Disputes Act, 1947, for a breach of s. 33 for dismissing a workman during the pendency of Andheri Marol the conciliation proceedings.\n\nThe appellants contended that Kurla Bus Service since s. 12(6) required the report of the conciliation proceedings & Another to be submitted within r4 days of the commencement thereof, v. the proceedings had terminated on the expiry of the 14 days and The State of the dismissal was, therefore, not during the pendency of the con- Bomb2y ciliation proceedings.\n\nHeld that, in cases where no settlement was arrived at the conciliation proceedings terminated when the report of the Conciliation Officer was received by the appropriate Government and not on the expiry of 14 days from the commencement of the proceedings. The commencement and termination of conciliation proceedings were determined bys. 20 and not bys. 12(6). The dismissal of the workman was during the pendency of the conciliation proceedings and the appellants were guilty under s. 31(1) of the Act.\n\nWorkers of the Industry Colliery, Dhanbad v. Management of the Industry Colliery, [r953] S.C.R. 428; Colliery Mazdoor Congress, Asansol v. New Beerbhoorn Coal Co. Ltd., 1952 L.A.C. 219, applied.\n\nCRIMINAL\n\nAPPELLATE\n\nJURISDICTION: Criminal Appeal No. 46 of 1957.\n\nAppeal by special leave from the judgment and order dated the February 4, 1955, of the Bombay High Court in Criminal Appeal No. 1256 of 1954, arising out of the judgment and order dated June 19, 1954, of the Chief Presidency Magistrate, Bombay, in Case No. 176/S of 1953.\n\nHardayal Hardy, for the appellants.\n\nH.J. Umrigar and R.H. Dhebar, for the respondent.\n\n1959. April 21.\n\nThe Judgmen~ of the Court was delivered by KAPUR, J.-This is an appeal by special leave against the judgment and order of the High Court of Bombay reversing the judgment of the Chief Presidency Magistrate, Bombay, and thus convicting accused Nos. 1 & 5 under s. 31(1) read withs. 33(1) of the Industrial Disputes Act (XIV of 1947) (hereinafter called the Act) and sentencing accused No. 1 to a fine of Rs. 250 and accused No. 5 to a fine of Rs. 50.\n\nKapur].\n\n'959 The appellants are the Andheri Marol Kurla Bus\n\n. M 1 Service who was accused No. I (now app'ellant No. I) An \"' \"'° . d M H M l'h I d N 5 Kuda Bu' service an its anager .. . '- an w lO was accuse I o. \"°Another (now appellant No. 2).\n\nSome disputes arose between v. the appellant No. I and its workmen. On December The State of 13, 1951, the Conciliation Officer wrote to the appel- Bombay !ant No. I and enclosed the demands of the Union\n\nKapur]. which were dated August 9, 1951. On December 31, 1951, the appellant No. l was asked to appear before the Conciliation Officer on January 9, 1952, and after getting one adjournment the appellant No. I appeared before the Conciliation Officer on January 17, 1952, and filed its Written Statement and raised various objections. The next date of hearing was January 31, 1952, and the proceedings went on till June 2, 1952, when the appellant No. 1 wrote to the Conciliation Offi.cer saying that no useful purpose would be served by holding any further meetings. On May 9, 1952, the Union had also indicated to the Conciliation Officer that the negotiations had failed.\n\nOn March 18, 1952, the appellant dismissed Louis Pereira, a bus conductor 1tnd proceedings were taken on a com plaint by Assistant Commissioner of Labour under s. 33 read with s. 31 of the Act against 5 accused persons the two appellants and the partners of appellant No. I. The Chief Presidency Magistrate acquitted all the accused including the appellants and held that as the conciliation proceedings had continued for a period of more\n\nth; rn 14 days as from January 17, 1952, further proceedings for conciliation were illegal and therefore the accused persons could not be convicted under s. 31(1) of the Act. The State took an appeal to the High Court and the judgment of acquittal was reversed and of the accused persons the two appellants were convicted and the others were acquitted. The two appellants have appealed by special leave.\n\nThe question for decision is whether the conciliation proceedings could be said to be pending when Louis .Pereira was dismissed. If the answer is in the affirmative then the appellants have been properly convicted and if not the conviction must be set aside.\n\nSection 31(1) makes the contravention of the provisiun\n\nof s. 33 of the Act an offence punishable with x959 imprisonment for a period which may extend to six h\n\n. M 1 months or with fine or with both. Section 33(1) prog:,~= ; s ;;,:ice vides: & Another S. 33(1) \"During the pendency of any conciliation v. proceedings before a conciliation officer or a Board or The State of of any proceeding before a Labour Court or Tribu- Bombay nal or National Tribunal in respect of an industrial dispute, no employer shall:-\n\n(a) in regard to any matter connected with the dispute, alter to the prejudice of the workmen concerned in such dispute, the conditions of service applicable to them immediately before the commencement of such proceedings; or (b} for any misconduct connected with the dispute, discharge or punish, whether by dismissal or otherwise, any workmen concerned in such dispute, save with the express permission in writing of the authority before which the proceeding is pending\".\n\nTherefore the question reduces itself to the meaning of the words \" pendency of any conciliation proceedings before a conciliation officer\". , The argument raised on behalf of the appellant is that the object of conciliation is to get a settlement made with expedition and therefore under s. 12 the _Conciliation Officer was bound to make his report within 14 days of the commencement of the conciliation proceedings or within such shorter period fixed by the appropriate Government. From this it was submitted that as 14 days had expired before March 18, 1952, the dismissal could not be said to be one within the words \" pendency of conciliation proceedings\". The Act provides for commencement and conclusion of conciliation proceedings under s. 20 but the first sub-section of s. 20 dea}s with what are called utility services and sub-s. 2 of that section provides as to when the conciliation proceedings conclude. That sub-section is as follows :-\n\nS. 20(1) \" ..................................................... .\n\n(2) A conciliation proceeding shall be deemed to have concluded-\n\nI<apur ].\n\n'959\n\n(a) where a settlement is arrived at, when a\n\nh . 1 memorandum of the settlement is signed by the par- And eri Maro • h d\" Ku,/a Bus Smice ties to t e ISpute;\n\n& Anoth\"\n\n(b) where no settlement is arrived at, when the v. report of the conciliation officer is received by the The State of appropriate Government or when the report of the Bombay Board is published under s. 17, as the case may be; or\n\nKapu. J.\n\n(c) when a reference is made to a Court, Labour Court, Tribunal or National Tribunal under section 10 during the pendency of conciliation proceedings\".\n\nThe provisions of sub-section 2 apply to all conciliation proceedings whether in regard to utility services or otherwise. All conciliation proceedings under this sub-section shall be deemed to have concluded in the case where no settlement is reached, when the report of the Conciliation Officer is received by the appropriate Government. The conciliation proceedings therefore do not end when the report under s. 12(6) is made by the Conciliation Officer but when that report is received by the appropriate Government. It was contended that the conciliation proceedings should be held to terminate when the Conciliation Officer is required under s. 12(6) of the Act to submit his report but the provisions of the Act above quoted do not support this contention as the termination of the conciliation proceedings is deemed to take place when the report is received by the appropriate Government.\n\nThis is how s. 20(2)(b) was interpreted in Workers of the Industry Colliery,. Dhanbad v. Management of the Industry Colliery (1).\n\nIt was next contended that on this interpretation the conciliation proceedings could be prolonged much beyond what was contemplated by the Act and the termination would depend upon how soon a report is received by the appropriate Government. It is true that s. 12(6) of the Act contemplates the submission of the report by the Conciliation Officer within 14 days but that does not affect the pendency of the conciliation proceedings and if for some reason the Conciliation Officer delays the submission of his report his action\n\n(1) [1953) S.C.R. 428.\n\nmay be reprehensible but that will not affect the '959 interpretation to be put on s. 20(2)(b) of the Act.\n\nA dh\n\n. M . 1 Section 12 lays down the duties of the Conciliation Kur7a ; s ;:,:ice officer. He is required to bring about settlement & Another between the parties and must begin his investigation v. without delay and if no settlement is arrived at he is to The •State of submit his report to the appropriate Government. No Bombay doubt s. 12 contemplates that the report should be Kapur 1. made and the proceedings closed within a fortnight and if proceedings are not closed but are carried on, as they were in the present case, or if the Conciliation Officer does not make his report within 14 days he may be guilty of a breach of duty but in law the proceedings do not automatically come to an end after 14 days but only terminate as provided in s. 20(2)(b) of the Act.\n\nColliery M azdoor Congress, Asansol v. New Beerbhoom Coal Co. Ltd (1).\n\nAs the conciliation proceedings were pending at the time when Louis Pereira was dismissed the appellants were rightly convicted under s. 31(1) read with s. 33 of the Act.\n\nThe appeal is therefore dismissed.\n\nAppeal dismissed.\n\nTHE STATE OF AJMER (now RAJASTHAN) v.\n\nSHIVJI LAL\n\n(B. P. SINHA, P. B. GAJENDRAGADKAR and\n\nK. N. WANCHOO JJ.)\n\nPublic Servant-Teacher. in railway school-Whether public servant-Taking of money promising to procure a job-Whether illegal gratification-Criminal misconduct in the discharge of dutyl ndian Penal Code (Act 45 of I86o), ss. 2I, cl. 9, I6I-Prevention of Corruption Act, I947 (2 of Ig47), ss. 4(I), S(I)(d), (2).\n\nThe respondent who was a teacher in a railway school was prosecuted under s. 161 of the Indian Penal Code and s. 5(2) read withs. 5(1)(d) of the Prevention of Corruption Act, 1947. The\n\n(1) [1952] L.A.C. 219, 222.\n\nApril n.", "total_entities": 55, "entities": [{"text": "s. 191", "label": "PROVISION", "start_char": 376, "end_char": 382, "source": "regex", "metadata": {"statute": null}}, {"text": "ss. 200 and 202", "label": "PROVISION", "start_char": 516, "end_char": 531, "source": "regex", "metadata": {"statute": null}}, {"text": "Criminal Procedure Code", "label": "STATUTE", "start_char": 533, "end_char": 556, "source": "regex", "metadata": {}}, {"text": "section 2", "label": "PROVISION", "start_char": 608, "end_char": 617, "source": "regex", "metadata": {"linked_statute_text": "Criminal Procedure Code", "statute": "Criminal Procedure Code"}}, {"text": "s. 476", "label": "PROVISION", "start_char": 621, "end_char": 627, "source": "regex", "metadata": {"linked_statute_text": "Criminal Procedure Code", "statute": "Criminal Procedure Code"}}, {"text": "Criminal Procedure Code", "label": "STATUTE", "start_char": 629, "end_char": 652, "source": "regex", "metadata": {}}, {"text": "s. 200", "label": "PROVISION", "start_char": 705, "end_char": 711, "source": "regex", "metadata": {"linked_statute_text": "Criminal Procedure Code", "statute": "Criminal Procedure Code"}}, {"text": "s. 200", "label": "PROVISION", "start_char": 838, "end_char": 844, "source": "regex", "metadata": {"linked_statute_text": "Criminal Procedure Code", "statute": "Criminal Procedure Code"}}, {"text": "s. 202", "label": "PROVISION", "start_char": 849, "end_char": 855, "source": "regex", "metadata": {"linked_statute_text": "Criminal Procedure Code", "statute": "Criminal Procedure Code"}}, {"text": "ANDHERI MAROL KURLA BUS SERVICE\n\n& ANOTHER", "label": "PETITIONER", "start_char": 1111, "end_char": 1153, "source": "metadata", "metadata": {"canonical_name": "ANDHERI MAROL KURLA BUS SERVICE & ANOTHER", "offset_not_found": false}}, {"text": "THE STATE OF BOMBAY", "label": "RESPONDENT", "start_char": 1158, "end_char": 1177, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF BOMBAY", "offset_not_found": false}}, {"text": "JAFER IMAM", "label": "JUDGE", "start_char": 1180, "end_char": 1190, "source": "metadata", "metadata": {"canonical_name": "SYED JAFFER IMAM*", "offset_not_found": false}}, {"text": "L. KAPUR, JJ.", "label": "JUDGE", "start_char": 1198, "end_char": 1211, "source": "metadata", "metadata": {"canonical_name": "J.L. KAPUR", "offset_not_found": false}}, {"text": "Industrial Disputes Act", "label": "STATUTE", "start_char": 1310, "end_char": 1333, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 31", "label": "PROVISION", "start_char": 1819, "end_char": 1824, "source": "regex", "metadata": {"linked_statute_text": "Industrial Disputes Act", "statute": "Industrial Disputes Act"}}, {"text": "Industrial Disputes Act, 1947", "label": "STATUTE", "start_char": 1832, "end_char": 1861, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 33", "label": "PROVISION", "start_char": 1879, "end_char": 1884, "source": "regex", "metadata": {"linked_statute_text": "the Industrial Disputes Act, 1947", "statute": "the Industrial Disputes Act, 1947"}}, {"text": "s. 12(6)", "label": "PROVISION", "start_char": 2032, "end_char": 2040, "source": "regex", "metadata": {"linked_statute_text": "the Industrial Disputes Act, 1947", "statute": "the Industrial Disputes Act, 1947"}}, {"text": "s. 31(1)", "label": "PROVISION", "start_char": 2824, "end_char": 2832, "source": "regex", "metadata": {"linked_statute_text": "the Industrial Disputes Act, 1947", "statute": "the Industrial Disputes Act, 1947"}}, {"text": "s. 31(1)", "label": "PROVISION", "start_char": 3747, "end_char": 3755, "source": "regex", "metadata": {"statute": null}}, {"text": "Industrial Disputes Act", "label": "STATUTE", "start_char": 3781, "end_char": 3804, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 33", "label": "PROVISION", "start_char": 5228, "end_char": 5233, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 31", "label": "PROVISION", "start_char": 5244, "end_char": 5249, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 31(1)", "label": "PROVISION", "start_char": 5662, "end_char": 5670, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 31(1)", "label": "PROVISION", "start_char": 6173, "end_char": 6186, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 33", "label": "PROVISION", "start_char": 6232, "end_char": 6237, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 33(1)", "label": "PROVISION", "start_char": 6374, "end_char": 6387, "source": "regex", "metadata": {"statute": null}}, {"text": "S. 33(1)", "label": "PROVISION", "start_char": 6426, "end_char": 6434, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 12", "label": "PROVISION", "start_char": 7452, "end_char": 7457, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 20", "label": "PROVISION", "start_char": 7908, "end_char": 7913, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 20", "label": "PROVISION", "start_char": 7943, "end_char": 7948, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 2", "label": "PROVISION", "start_char": 8001, "end_char": 8005, "source": "regex", "metadata": {"statute": null}}, {"text": "S. 20(1)", "label": "PROVISION", "start_char": 8116, "end_char": 8124, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 17", "label": "PROVISION", "start_char": 8636, "end_char": 8641, "source": "regex", "metadata": {"statute": null}}, {"text": "section 10", "label": "PROVISION", "start_char": 8768, "end_char": 8778, "source": "regex", "metadata": {"statute": null}}, {"text": "section 2", "label": "PROVISION", "start_char": 8852, "end_char": 8861, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 12(6)", "label": "PROVISION", "start_char": 9241, "end_char": 9249, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 12(6)", "label": "PROVISION", "start_char": 9477, "end_char": 9485, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 20(2)(b)", "label": "PROVISION", "start_char": 9739, "end_char": 9750, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 12(6)", "label": "PROVISION", "start_char": 10116, "end_char": 10124, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 20(2)(b)", "label": "PROVISION", "start_char": 10494, "end_char": 10505, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 12", "label": "PROVISION", "start_char": 10533, "end_char": 10543, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 12", "label": "PROVISION", "start_char": 10856, "end_char": 10861, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 20(2)(b)", "label": "PROVISION", "start_char": 11268, "end_char": 11279, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 31(1)", "label": "PROVISION", "start_char": 11499, "end_char": 11507, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 33", "label": "PROVISION", "start_char": 11518, "end_char": 11523, "source": "regex", "metadata": {"statute": null}}, {"text": "Penal Code", "label": "STATUTE", "start_char": 11893, "end_char": 11903, "source": "gazetteer", "metadata": {"confirmed_by_regex": 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{"document_id": "1959_2_739_748_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COURT REPORTS 739\n\nmay be reprehensible but that will not affect the '959 interpretation to be put on s. 20(2)(b) of the Act.\n\nA dh\n\n. M . 1 Section 12 lays down the duties of the Conciliation Kur7a ; s ;:,:ice officer. He is required to bring about settlement & Another between the parties and must begin his investigation v. without delay and if no settlement is arrived at he is to The •State of submit his report to the appropriate Government. No Bombay doubt s. 12 contemplates that the report should be Kapur 1. made and the proceedings closed within a fortnight and if proceedings are not closed but are carried on, as they were in the present case, or if the Conciliation Officer does not make his report within 14 days he may be guilty of a breach of duty but in law the proceedings do not automatically come to an end after 14 days but only terminate as provided in s. 20(2)(b) of the Act.\n\nColliery M azdoor Congress, Asansol v. New Beerbhoom Coal Co. Ltd (1).\n\nAs the conciliation proceedings were pending at the time when Louis Pereira was dismissed the appellants were rightly convicted under s. 31(1) read with s. 33 of the Act.\n\nThe appeal is therefore dismissed.\n\nAppeal dismissed.\n\nTHE STATE OF AJMER (now RAJASTHAN) v.\n\nSHIVJI LAL\n\n(B. P. SINHA, P. B. GAJENDRAGADKAR and\n\nK. N. WANCHOO JJ.)\n\nPublic Servant-Teacher. in railway school-Whether public servant-Taking of money promising to procure a job-Whether illegal gratification-Criminal misconduct in the discharge of dutyl ndian Penal Code (Act 45 of I86o), ss. 2I, cl. 9, I6I-Prevention of Corruption Act, I947 (2 of Ig47), ss. 4(I), S(I)(d), (2).\n\nThe respondent who was a teacher in a railway school was prosecuted under s. 161 of the Indian Penal Code and s. 5(2) read withs. 5(1)(d) of the Prevention of Corruption Act, 1947. The\n\n(1) [1952] L.A.C. 219, 222.\n\nApril n.\n\n'959\n\nStale of Aj1nc1\n\nShivji Lal\n\nprosecution case was that the respondent offered to secure a job for the complainant in the Railway I<unning Shed at Abu Road, if the latter paid him Rs. 100, that the complainant agreed to this, and that on October 5, 1954, the complainant wrote out an application addressed to the Divisional 'Mechanical Engineer, Abu Road, and banded it to the respondent and gave him Rs. 50 promising to pay the balance of Rs. 50 after the job had been secured. The Special Judge who tried the case accepted the prosecution story and convicted the respondent on both the charges, but, on appeal, the High Court acquitted him on the ground that he was not a public servant. The State appealed to the Supreme Court. It was contended for the respondent that even if he were considered to be a public servant he could not be held guilty on either of the charges framed against him. It was found that neither in the charge framed under s. 16! of the Indian Penal Code nor in the evidence was there anything to show that the respondent intended to approach any pnblic servant in order to secure a job for the complainant.\n\nHeld: (1) that the respondent was a public servant within the meaning of the ninth clause of s. 21 of the Indian Penal Code as he was in the service of Government, was being paid by it and was entrusted with the performance of a public duty inasmuch as he was a teacher in a school maintained by Government and it was part of his public duty to teach boys.\n\nG. A. Monterio v. The State of Ajmer, [1956] S.C.R. 682, followed.\n\n(2) that in view of the words \"by otherwise abusing his position\" read along with the words \"in the discharge of his duty\" ins. 5(1)(d) of the Prevention of Corruption Act, 1947, an offence under that section requires that the public servant should misconduct himself in the discharge of his duty.\n\nIn the present case, as the respondent was only a teacher it was not part of his duty to make appointments in the Railway Running Shed at Abu Road, and consequently when he took money for procuring a job for the complainant he was not committing misconduct in the discharge of his duty. Accordingly, a conviction under s. 5(2) read withs. 5(1)(d) of the Prevention of Corruption Act, 1947, was not valid.\n\n(3) that the mere fact that a person takes money in order to get a job for another person somewhere would not by itself be an offence under s. 161 of the Indian Penal Code and that as the charge under s. 161 did not\" disclose who was the public servant whom the respondent would have approached for rendering or attempting to render service to the complainant in securing a job for him, the prosecution under that section was not maintainable; and,\n\n(4) that the presumption under s. 4(1) of the Prevention of Corruption Act, 1947, could not arise in the present case as s. 161 of the Indian Penal Code was not applicable.\n\nCRIMINAL APPELLA'rE JURISDIC'l'ION: Criminal r959 .\n\nAppeal No. 3 of 1957.\n\nState of Ajnzcr Appeal from the judgment and order dated .August v. 14, 1956, of the former Judicial Commissioner's Court, Shivji Lal Ajmer, in Criminal 1\\.ppeal No. 2 of 1956, arising out of the judgment and order dated January 11, 1956, of the Special Judge, Ajmer, in Criminal Case No. 1 of 1955.\n\nR. Ganapathy Iyer and R. H. Dhebar, for the appel. lant.\n\nB. D. Sharma, for the respondent.\n\n1959. April 22.\n\nThe Judgment of the Court was delivered by W ANCHOO, J.-This appeal is on a certificate grant- Wanchoo J. ed by the J udieial Commissioner of Ajmer. One Shivji Lal Joshi (hereinafter called the accused) was prosecuted under s. 161 of the Indian Penal C9de and s. 5 (2) of the Prevention of Corruption Act, No. II of 1947.\n\nHe was convicted by the Special Judge on both counts and sentenced to suffer rigorous imprisonment for a total period of six months. He filed an appeal before the Judicial Commissioner of Ajmer.\n\nThe appeal was allowed on the ground that the accused was not a public servant, though the Judicial Commissioner agreed with the findings of the Special Judge so far as the facts were concerned. The State applied for a certificate under Ai't, 134 (1) (c) of the Constitution to enable it to appeal to this Court. This certificate was granted; and that is how the appeal has come before us.\n\nThe facts which have been found by both the eourtH are these. The accused was a teacher in the railway school at Phulera. Prem Singh who was the complafoant was known to the accused for about a year before the incident which took place on October 6, 1954.\n\nHe was in search of a job and the accused had told him a number of times that he would procure a job for him in the Railway Running Shed at Abu Road, if Prem Singh paid him Rs. 100. On October 5, 1954, the accused had met Prem Singh at Kaiserganj\n\nr959\n\nStale of Aj11wr\n\nv. 5 liivji .ial\n\nWanchoo f.\n\nin Ajmer and told him that Dusehra holidays were approaching and if he paid Rs. 100 the accused would go to Abu Road to secure a job for him.\n\nEventually it was agreed between the two that Prem Singh would pay him Rs. 50 on the next day while the remaining Rs. 50 would be paid after the job had been secured.\n\nAfter this agreement, Prem Singh went to the Deputy Superintendent Police (Special Police Establishment), and made a complaint to the effect that the accused had told him that he could secure employment for hi!'J1 at Abu Road Loi; io Shed as he bad considerable influence there and had demanded Rs. 100 as illegal gratification for that purpose. Prem Singh also said that it had been settled that he would pay Rs. 50 in advance and Rs. 50 after his appointment.\n\nConsequently, Prem Singh wrote out an application addressed to the Divisional Mechanical Engineer, Abu Road, and also produced five ten-rupee notes before the Deputy Superintendent Police. The numbers of these notes were noted down and the Deputy Superintendent Police arranged that one Nathu Singh should accompany Prem Singh as a cousin when Prem Singh met the accused next day to pay him the money. On October 6, 1954, Prem Singh accompanied by Nathu Singh met the accused as arranged and the accused asked him for an application. Prem Singh gave him the application which he had already written out and the accused said that that would serve the purpose.\n\nThe accused then asked Prem Singh for the money and he handed over the five ten-rupee notes, adding that he would pay the remaining Rs. 50 after getting service and assuring him that he would keep to his part of the bargain. Thereafter Prem Singh gave the pre-arranged signal and the police party headed by the Deputy Superintendent of Police arrived. The Deputy Superintendent Police disclosed his identity and searched the person of the accused. In that search, the application which Prem Singh had written for the Divisional Mechanical Engineer, Abu Road, and the five ten-rupee notes were recovered.\n\nThereafter the accused was prosecuted as already mentioned above.\n\nThe accused admitted that the application as well as the five ten-rupee notes were recovered from him by the police.\n\nHis explanation was that one Jiwan Ram had given him the application which was in English and which was said to be a letter for a friend of Jiwan Ram at Abu Road. The accused did not know English and took the application to be a letter to be delivered to the friend of Jiwan Ram. Jiwan Ram also gave him five ten-rupee notes to be given to that very friend of his when the accused went to Abu Road.\n\nAs alreatly stated, both the courts below have accepted the prosecution version set out above and disbelieved the explanation given by the accused. The Special Judge convicted the accused on the basis of the prosecution story. The Judicial Commissioner, though he accepted the prosecution story to be true, held that the accused was not a public servant and therefore ordered his acquittal. The main question that has been raised on behalf of the appellant therefore in this appeal is that the Judicial Commissioner erred in holding that the accused was not a public servant within the meaning of s. 21 of the Indian Penal Code.\n\nThe question whether the accused is a public servant under s. 21 of the Indian Penal Code depends upon the interpretation of the last part of the Ninth clause of that section, which is in these terms:-\n\n\" -......... every officer in the service or pay. of the Government or remunerated by fees or commission for the performance of any public duty.\" .\n\nThe Judicial Commissioner seems to have overlooked this part of the Ninth clause, for he says that it had not been shown that it was the duty of the accused to take, receive, keep or expend any property on behalf of the Government so that he may come under the Ninth clause of s. 21.\n\nThis only refers to the earlier part of the Ninth clause and the last part which we have set out above does not seem to have l;/een considered at all. This very question came up for consideration in this Court in G. A. Monterio v. The State of Ajmer (1) and it was laid down that the true\n\n(r) [1956] S.C.R. 68~.\n\nr959\n\nStale of Ajmer\n\nShivji Lal\n\nWanchoo j.\n\nI959\n\nState of Aj1ner\n\nShiv}i Lal\n\nfVanchoo ].\n\ntest in order to determine whether a person is an officer of the Government, is: (1) whether he is in the service or pay.of the Government and (2) whether he is entrusted with the performance of any public duty.\n\nIt is not disputed in this case that the accused was in the service of Government and was being paid by Government. It cannot also, in our opinion, be doubted that he was entrusted with the performance of a public duty inasmuch as he was a teacher in a school maintained by Government and it was part of his public duty to teach boys. In these circumstances the Judicial Commissioner was in error in holding that the accused was not a public servant within the meaning of the Ninth clause of s. 21.\n\nThis, however, does not dispose of the matter.\n\nLearned counsel for the accused has urged that even if the accused is held to be a public servant, he cannot be held guilty on either of the charges framed against him. \\Ve shall first take the charge under s. 5(2) of the Prevention of Corruption Act read with s. 5(1) (d).\n\nThe charge was that the accused by corrupt or illegal means or by abusing his position as a public servant obtained pecuniary advantage for himself inasmuch as he took Rs. 50 from Prem Singh on October 6, 1954.\n\nMere receiving of money by a public servant even if it be by corrupt means is not sufficient to make out an offence under s. 5 (2) read with s. 5(l)(d). The relevant part of s. 5(l)(d) reads as follows:- \" A public servant is said to commit the offence of criminal misconduct in the discharge of his duty, if he, by corrupt or illegal means or by otherwise abusing his position as a public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage\". _ The offence under this provision consists of criminal misconduct in the discharge of his duty. In order, therefore, that this offence is committed there shonld be misconduct by the public servant in the discharge of his duty. In other words the public servant must do something in connection with his own duty and thereby obtain money for himself or for any other person by corrupt or illegal means or by otherwise abusing\n\nhis position. If a public servant takes money from a third person in order to corrupt some other public servant and there is no question of his misconducting himself in the discharge of his own duty, that action may be an offence under s. 161 of the Indian Penal Code but would not be an offence under s. 5(2) read with s. 5(l)(d) of the Prevention of Corruption Act.\n\nThe essence of an offence under s. 5(2) read with s. 5(l)(d) is that the public servant should do something in the discharge of his own duty and thereby obtain any valuable thing or pecuniary advantage for himself or for any other person by corrupt or illegal means or by otherwise abusing his position. The words \" by otherwise abusing his position \" read along with the words \"in the discharge of his duty\" appearing in s. 5(l)(d) make it quite clear that an offence under that section requires that the public servant should misc conduct himself in the discharge of his own duty. In the present case, the accused was a teacher and -it was no part of his duty to make appointments in the Running Shed at Abu Road. There would, therefore, be no question of his committing misconduct in the discharge of his duty wh\\)n he took money for procuring a job for Prem Sin\\gh in the gunning Shed. So\n\nfar therefore as the charge under s. 5(l)(d) is concerned, we are of opinion that there was no question of the accused misconducting himself in the discharge of his own duty in the circumstances of this case and it must fail.\n\nNow we turn to the charge under s. 161 of the Indian Penal Code.\n\nThe relevant part of that section (omitting the unnecessary words) for the purpose of this case is in these terms :\n\n\" Whoever, being a public servant, accepts from any person for himself any gratification whatever other than legal remuneration as a motiveor reward for rendering or attempting to render any service or disservice to any person with any public servant\".\n\nThis requires that the person accepting the gratification should be (1) a public servant, (2) he should accept gratification for himself, and (3) the gratification\n\n, 94\n\nI959\n\nState of Ajmer v.\n\nShivji Lal\n\nWanchoo ].\n\nState of Aj1ner\n\nShivji Lal\n\nWanchoo ].\n\nshould be as a motive or reward for rendering or attempting to render any service or disservice to any person with any other public servant. The charge under s. 161 of the Indian Penal Code which was framed in this case stated that the accused being a public servant accepted on October 6, 1954, a sum of Rs. 50 from Prem Singh \" as illegal gratification as a motive for securing a job for him in the Hail way Running Shed\". Now the first two ingredients set out above are clearly established in this case; but the third ingredient, (namely, that the gratification should have been taken as a motive or reward for rendering or attempting to render any service with any public servant) is not even charged against the accused. The charge merely says that he took the money as a motive for securing a job for Prem Singh in the Railway Running Shed, Abu Road. It does not disclose who was the public servant whom the accused would have approached for rendering or attempting to render service to Prem Singh in securing a job for him .. Even in the complaint made by Prem Singh to the Deputy Superintendent Police all that was said was that the accused told Prem Singh that he would secure a job for him at Abu Road because he had considerable in'fluence there. It was not disclosed as to who was the public servant on whom the accused had influence and whom he would approach in order to render service to Prem Singh. In his statement also Prem Singh did not say that the accused had told him that he had influence on any particular public servant at Abu Road who in he would influence in order to render this service to Prem. Singh, namely procuring him a job.\n\nIt is true that the application was addressed by Prem Singh to the Divisional Mechanical Engineer and was given to the accus~ who said .that it was all right; but Prem Singh did not even say that the accused had asked him to address the application to the Divisional Mechanical Engineer. It seems that the application was addressed to the Divisional Mechanical Engineer, simply because he was obviously the officer in-charge of the Railway Running Shed at Abu Road. Thus Prem Singh did not say either in his complaint or in\n\nhis statement that the accused had told him that he would render service to him by approaching a particular public servant. In the charge.sheet submitted by the police as well as in the charge framed by the court, it was not disclosed whether any public servant would be approached to render service to Prem Singh, i.e., by securing him a job. In the circumstances one of the ingredients of the offence under s. 161 was neither alleged nor charged nor proved against the accused. The mere fact that a person takes money in order to get a job for another person somewhere would not by itself necessarily be an offence under s. 161 of the Indian Penal Code unless all the ingredients of that section are made out. As in this case one of the main ingredients of that section has not been made out, the accused would be entitled to acquittal.\n\nHowever, it has been urged on behalf of the State that presumption under s. 4(1) of the Prevention of Corruption Act arises in this case as money passed hands from l'rem Singh to the accused ands. 4(1) provides that if an accused person has accepted any gratification for himself or for any other person, it shall be presumed unless the contrary is proved that he accepted that gratification as a motive or reward as is mentioned in s. 161 of the Indian Penal Code.\n\nAssuming that this presumption can be raised even when all that is proved is mere passing of money, the question still remains whether a presumption as to the motive or reward such as is mentioned in s. 161 of the Indian Penal Codecan be raised in this case at all, when we know as a fact that Prem Singh never said in the complaint that the accused had told him that he would influence any public servant and did not even say so in his statement in court and there was no mention in the charge-sheet by the police or in the charge framed by the court that the accused was going to influence any public servant in order to secure a job for Prem Singh at Ahu Road. We are of opinion that if the evidence had disclosed that the accused had indicated that he would influence any public servant in order to secure a job for Prem Singh a presumption as to the motive or reward might have\n\nI959\n\nState of Ajmer\n\nShivji Lal\n\nWanchoo ].\n\nI959\n\nStale of Ajnier\n\nShivji Lal\n\nWanchoo ].\n\nI959\n\nApril 23.\n\nbeen drawn under s. 4(1), assuming again that such a presumption can be drawn where there is simple passing of money.\n\nBut when there is no indication whatever that any public servant was to be approached or influenced by the accused there can, in our opinion, be no question of making a presumption that the pay. ment was as a motive or reward for rendering service with any public servant. In this view of the matter we are of opinion that the offence under s. 161 of the Indian Penal Code is not made out against the accused, for one of its essential ingredients is missing and no presumption can be drawn in the circumstances in that connect.ion.\n\nWe therefore dismiss the appeal though for reasons different from those which commended themselves to the learned Judicial Commissioner.\n\nAppeal dismissed.\n\nRAM DIAL v.\n\nSANT LAL AND OTHERS\n\n(B. P. SINHA, J. L. KAPUR and\n\nM. HIDAYATULLAH, JJ.)\n\nElection Petition-Allegation of corrupt practice-Mandate to voters by religious leader-Undue influence-Representation of the\n\nPeople Act, r95r (27 of r95r), s. r23(2), proviso (a)( ii).\n\nThis appeal was directed against concurrent orders of the Election Tribunal and the High Court on appeal, setting aside the appellant's election to the Punjab Legislative Assembly on an election petition filed by the respondent No. r, on the ground of corrupt practice of undue influence within the meaning of proviso (a)(ii) to s. r23(1) of the Representation of the People Act, r95r. A large number of voters of the constituency were Namdhari Sikhs and the appellant, under the auth'ority of the supreme religious leader of the Namdhari Sikhs and his son, issued the following poster and distributed it widely throughout the constituency,-", "total_entities": 74, "entities": [{"text": "s. 20(2)(b)", "label": "PROVISION", "start_char": 122, "end_char": 133, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 12", "label": "PROVISION", "start_char": 161, "end_char": 171, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 12", "label": "PROVISION", "start_char": 484, "end_char": 489, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 20(2)(b)", "label": "PROVISION", "start_char": 896, "end_char": 907, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 31(1)", "label": "PROVISION", "start_char": 1127, "end_char": 1135, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 33", "label": "PROVISION", "start_char": 1146, "end_char": 1151, "source": "regex", "metadata": {"statute": null}}, {"text": "THE STATE OF AJMER (now RAJASTHAN", "label": "PETITIONER", "start_char": 1220, "end_char": 1253, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF AJMER (now RAJASTHAN)", "offset_not_found": false}}, {"text": "SHIVJI LAL", "label": "RESPONDENT", "start_char": 1259, "end_char": 1269, "source": "metadata", "metadata": {"canonical_name": "SHIVJI LAL", "offset_not_found": false}}, {"text": "B. P. SINHA", "label": "JUDGE", "start_char": 1272, "end_char": 1283, "source": "metadata", "metadata": {"canonical_name": "BHUVNESHWAR PRASAD SINHA*", "offset_not_found": false}}, {"text": "P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 1285, "end_char": 1305, "source": "metadata", "metadata": {"canonical_name": "P.B. GAJENDRAGADKAR", "offset_not_found": false}}, {"text": "K. N. WANCHOO JJ.", "label": "JUDGE", "start_char": 1311, "end_char": 1328, "source": "metadata", "metadata": {"canonical_name": "K.N. WANCHOO", "offset_not_found": false}}, {"text": "Penal Code", "label": "STATUTE", "start_char": 1521, "end_char": 1531, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "ss. 2I", "label": "PROVISION", "start_char": 1550, "end_char": 1556, "source": "regex", "metadata": {"statute": null}}, {"text": "cl. 9", "label": "PROVISION", "start_char": 1558, "end_char": 1563, "source": "regex", "metadata": {"statute": null}}, {"text": "Prevention of Corruption Act", "label": "STATUTE", "start_char": 1569, "end_char": 1597, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "ss. 4(I)", "label": "PROVISION", "start_char": 1617, "end_char": 1625, "source": "regex", "metadata": {"linked_statute_text": "Prevention of Corruption Act", "statute": "Prevention of Corruption Act"}}, {"text": "s. 161", "label": "PROVISION", "start_char": 1716, "end_char": 1722, "source": "regex", "metadata": {"linked_statute_text": "Prevention of Corruption Act", "statute": "Prevention of Corruption Act"}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 1730, "end_char": 1747, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 5(2)", "label": "PROVISION", "start_char": 1752, "end_char": 1759, "source": "regex", "metadata": {"linked_statute_text": "Prevention of Corruption Act", "statute": "Prevention of Corruption Act"}}, {"text": "Prevention of Corruption Act, 1947", "label": "STATUTE", "start_char": 1787, "end_char": 1821, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 16", "label": "PROVISION", "start_char": 2820, "end_char": 2825, "source": "regex", "metadata": {"linked_statute_text": "the Prevention of Corruption Act, 1947", "statute": "the Prevention of Corruption Act, 1947"}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 2834, "end_char": 2851, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 21", "label": "PROVISION", "start_char": 3099, "end_char": 3104, "source": "regex", "metadata": {"statute": null}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 3112, "end_char": 3129, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Prevention of Corruption Act, 1947", "label": "STATUTE", "start_char": 3575, "end_char": 3609, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 5(2)", "label": "PROVISION", "start_char": 4050, "end_char": 4057, "source": "regex", "metadata": {"linked_statute_text": "the Prevention of Corruption Act, 1947", "statute": "the Prevention of Corruption Act, 1947"}}, {"text": "Prevention of Corruption Act, 1947", "label": "STATUTE", "start_char": 4085, "end_char": 4119, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 161", "label": "PROVISION", "start_char": 4277, "end_char": 4283, "source": "regex", "metadata": {"linked_statute_text": "the Prevention of Corruption Act, 1947", "statute": "the Prevention of Corruption Act, 1947"}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 4291, "end_char": 4308, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 161", "label": "PROVISION", "start_char": 4338, "end_char": 4344, "source": "regex", "metadata": {"linked_statute_text": "the Prevention of Corruption Act, 1947", "statute": "the Prevention of Corruption Act, 1947"}}, {"text": "s. 4(1)", "label": "PROVISION", "start_char": 4618, "end_char": 4625, "source": "regex", "metadata": {"linked_statute_text": "the Prevention of Corruption Act, 1947", "statute": "the Prevention of Corruption Act, 1947"}}, {"text": "Prevention of Corruption Act, 1947", "label": "STATUTE", "start_char": 4633, "end_char": 4667, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 161", "label": "PROVISION", "start_char": 4708, "end_char": 4714, "source": "regex", "metadata": {"linked_statute_text": "the Prevention of Corruption Act, 1947", "statute": "the Prevention of Corruption Act, 1947"}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 4722, "end_char": 4739, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 161", "label": "PROVISION", "start_char": 5472, "end_char": 5478, "source": "regex", "metadata": {"linked_statute_text": "the Prevention of Corruption Act, 1947", "statute": "the Prevention of Corruption Act, 1947"}}, {"text": "s. 5", "label": "PROVISION", "start_char": 5508, "end_char": 5512, "source": "regex", "metadata": {"linked_statute_text": "the Prevention of Corruption Act, 1947", "statute": "the Prevention of Corruption Act, 1947"}}, {"text": "Prevention of Corruption Act", "label": "STATUTE", "start_char": 5524, "end_char": 5552, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 21", "label": "PROVISION", "start_char": 9937, "end_char": 9942, "source": "regex", "metadata": {"statute": null}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 9950, "end_char": 9967, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 21", "label": "PROVISION", "start_char": 10029, "end_char": 10034, "source": "regex", "metadata": {"statute": null}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 10042, "end_char": 10059, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 21", "label": "PROVISION", "start_char": 10599, "end_char": 10604, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 21", "label": "PROVISION", "start_char": 11720, "end_char": 11725, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 5(2)", "label": "PROVISION", "start_char": 11983, "end_char": 11990, 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{"document_id": "1959_2_748_760_EN", "year": 1959, "text": "I959\n\nStale of Ajnier\n\nShivji Lal\n\nWanchoo ].\n\nI959\n\nApril 23.\n\n748 SUPREME COURT REPORTS [1959] Supp.\n\nbeen drawn under s. 4(1), assuming again that such a presumption can be drawn where there is simple passing of money.\n\nBut when there is no indication whatever that any public servant was to be approached or influenced by the accused there can, in our opinion, be no question of making a presumption that the pay. ment was as a motive or reward for rendering service with any public servant. In this view of the matter we are of opinion that the offence under s. 161 of the Indian Penal Code is not made out against the accused, for one of its essential ingredients is missing and no presumption can be drawn in the circumstances in that connect.ion.\n\nWe therefore dismiss the appeal though for reasons different from those which commended themselves to the learned Judicial Commissioner.\n\nAppeal dismissed.\n\nRAM DIAL v.\n\nSANT LAL AND OTHERS\n\n(B. P. SINHA, J. L. KAPUR and\n\nM. HIDAYATULLAH, JJ.)\n\nElection Petition-Allegation of corrupt practice-Mandate to voters by religious leader-Undue influence-Representation of the\n\nPeople Act, r95r (27 of r95r), s. r23(2), proviso (a)( ii).\n\nThis appeal was directed against concurrent orders of the Election Tribunal and the High Court on appeal, setting aside the appellant's election to the Punjab Legislative Assembly on an election petition filed by the respondent No. r, on the ground of corrupt practice of undue influence within the meaning of proviso (a)(ii) to s. r23(1) of the Representation of the People Act, r95r. A large number of voters of the constituency were Namdhari Sikhs and the appellant, under the auth'ority of the supreme religious leader of the Namdhari Sikhs and his son, issued the following poster and distributed it widely throughout the constituency,-\n\n\"A command from Shri Sat Guru Sacha Padshah to the Namdharies of Halqa-Sirsa\".\n\n\"Every Namdhari of this Halqa is commanded by Shri Sat Guru that he should make every effort for the success of Shri Ram Dayal Vaid, a candidate for the Punjab Vidhan Sabha, by giving his own vote and those of his friends and acquaintances, it being our primary_ duty to make him successful in the election. The election symbol of Shri Vaid is a riding horseman.\n\nSd. Maharaj Bir Singh S/o. Sat Guru Maharaj Pratap Singh, Jiwan Nagar (Hissar).\" Both the Tribunal and the High Court found that the religious leader not only issued the said hukam or command, but also delivered speeches to the effect that every Namdhari must vote for the appellant implying that disobedrence of his mandate would carry divine displeasure or spiritual censure and practically left no free choice to the Namdhari electors.\n\nHeld, that the case clearly fell within fhe purview of proviso (a)(ii) to s. 123(2) of the Representation of the People Act and the appeal must be dismissed.\n\nThe law in England relating to undue influence at elections, was not the same as the law in India. While the law in England laid emphasis upon the individual aspect of the exercise of undue influence, under the Indian law what was material was not the actual effect produced but the doing of such acts as were calculated to interfere with the free exercise of an electoral right. .\n\nNorth Durham's case, (1874) 2 O'M. & H. 152, referred to.\n\nDecisions of the English Courts in this regard, therefore, could not be used as precedents in India.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 108 of 1959.\n\nAppeal from the judgment and order dated November 25, 1958, of the Punjab High Court in F.A.O. No. 173 of l!J58.\n\nA. V. Viswanatha Sastri and Naunit Lal, for the appellant.\n\nM. 0. Setalvad, Attorney-General for India, V. A.\n\nSyed M oharmnud and M. K. Ramamurthi, for respondent No. 1.\n\nR.H. Dhebar, for respondent No. 3. • 1959.\n\nApril 23.\n\nThe Judgment of the Court was delivered by\n\nI959\n\nRam Dial v.\n\nSant Lal\n\ncS- Others\n\nI959\n\nJla1n Djal v.\n\nSanl La.l & Others\n\nSinha ].\n\nSINHA, J.-When the hearing of the appeal had been concluded on March 18, 1959, we had informed the parties, as also the counsel for the Election Commission of India, that the appeal is dismissed with costs, and that the reasons would follow.\n\nWe now proceed to give our reasons.\n\nThis is an appeal on a certificate of fitness granted by the High Court of Judicature for the State of Punjab at Chandigarh, against the judgment and order dated November 25, 1958, of that Court, dismissing an appeal against the /order of the Election Tribunal, Hissar, dated September 14, 1958, setting aside the appellant's election to the Punjab Legislative Assembly. The appellant was the successful candidate from the general seat which was a doubl, e-member constituency of Sirsa, the.other successful candidate being a Harijan candidate-respondent No. 2 in this Court.\n\nThe first respondent contested the general seat. The Election Commission of India was added as the third respondent by an order of this Court, dated February 27, 1959, when this Court was moved in the stay matter. This Court directed the case itself to . be heard before the date fixed for the fresh election as a result of the order of the. Election Tribunal.\n\nIt appears that for the double-member constituency of Sirsa, there were a large number' of candidates. One of the two seats was reserved for members of the scheduled castes. After the usual withdrawals, sixteen candidates were left in the field to contest the two seats, eight candidates being for the general seat, and the other eight, for the reserved seat.\n\nWe are not here concerned with the seat reserved for members of the scheduled castes. In respect of the general constituency, the appellant secured 27,272 votes, whereas the first. respondent secured 23,329, as a result of the election which took place on March 12 and 14,\n\n1957. The result of the election was declared on March 17, 1957.\n\nThe first respondent filed an election petition on April 28, 1957, challenging the election of the appellant. The election was challenged on a large number uf grounds-practically exhausting all available\n\ngrounds under the election law-but as a result of the findings of the Election Tribunal and of the High Court, we are only concerned with the allegations relating to \"corrupt practices'', contained in subparas. 1 to 3 of para. 13B of the election petition, which formed the basis for issue No. 4.\n\nThe relevant allegations may be stated in extenso in the words of the election petition, as under :-\n\n\" (B) : That respondent No. 1 himself, his agents and other persons with the consent of the respondent No. 1 and his agents have committed the corrupt practice of undue influence by interfering directly or indirectly with the free exercise of the electoral right of the electors of this constituency. 'rhe known details of these corrupt practices are given in the various clauses under the sub-para.:-\n\n(i) Sat Guru Maharaj Pratap Singh of Jiwan N agar, the religious head of N amdharis sect of the Sikhs had some personal grievances against Shri Devi Lal of Chautala a prominent Congress Leader of tho constituency, and the chief supporter of the petitioner at this election.\n\nRespondent No. 1 folly knowing of this grievance of the Sat Guru approached him and through him also approached Maharaj Charan Singh of Sikanderpur the religious head of the Radha Swami Samaj and got issued Farmans (orders) by both these religious heads to their followers in this constituency to the effect that their Dharma required them to wholeheartedly support respondent No. 1 and to oppose the candidature of the petitioner and that if any of the followers dared to act against their ]'armans, the wrath of the aforementioned Gurus would fall upon him and he would be the object of Divine displeasure.\n\nThese Farmans of the two Gurus were orally conveyed, through the' Su bas' of Namdharis, Shri Bir Singh the son of Sat Guru Partap Singh and N aginder Singh and Shri Purshotam Singh followers of Guru Charan Singh, throughout the Constituency wherever the followers of these two sects resided from the day of withdrawal till the polling began, during their canvassing tours for respondent No. l,_Shri Bir Singh, Purshotam Singh and Naginder Singh aforesaid and Sant Teja\n\nr959\n\nRam Dial v.\n\nSant Lal & Others\n\nSinha J.\n\nI959\n\nRa1n Dial v.\n\nSant Lal & Others\n\nSinha ].\n\nSingh JVI.L.C. in Diwans held in the various villages and towns of the Constituen-0y during their canvassing tour, besides repeating these 'Farmans' of the two Gurus also threatened the followers with expulsion from the sect and Samaj if they went against the wish of the Gurus in this matter.\n\n(ii) That Sat Guru Pratap Singh himself in the presence of respondent No. 1 in the Big-Diwan of his followers held on the 25th of February, 1957, at Sirsa in Radha Swami Sat-Sangh Hall, preached and commended all those present that it was the primary Dharma of all his followers to help the candidature of respondent No. 1 and to oppose the petitioner with all their might by giving their own votes and by canvassing among their area of influence in the constituency.\n\nThe Sat Guru himself held Diwans at villages Tharaj on the 6th of March, 1957, at village Dhiwan on the 5th March, 1957, at village Rori on the 6th March, 1957, and\" at Phaggu on the 6th March, 1957. In these Di wans he besides repeating his Farmans aforesaid also relied upon the strong appeal of his relationship, he being the son of the daughter of village Tharaj. A very big diwan of his followers also held at Khairpur on the 26th February, 1957, for the same purpose where the Sat Guru himself commended his followers in the like tune.\n\n(iii) That respondent No. 1 got issued posters in thousands printed on both the sides in Hindi and Gurumukhi scripts on the 26th of February, 1957, containing_ the orders 'Farmans' of Satguru Partap Singh under he signa, ture of Shri Maharaj Bir Singh son of Satguru Partap Singh. These posters were got published at the instance of respondent No. 1 at Bansal Press Hissaria Bazar, Sirsa. These posters contained in verbatim the orders 'Farmans' of the Satguru to the effect that it was the primary Dharma of every Namdhari of this constituency to give his own vote as well as to canvass votes of their all acquaintances for Shri Ram Dayal candidate respondent No. 1. A copy of the poster in original together with its English translation is attached with the petition and may be read as to form its part. These posters were distributed\n\nthroughout the constituency after the same were got printed till the polling day in all the villages where N amdhari reside.\"\n\nIn support of all his alilegations quoted above, the first respondent adduced a large volume of oral evidence, besides some documentary evidence as well.\n\nThe Tribunal came to the conclusion that Maharaj Pratap Singh had issued farmans to his satsanghis that he, who will not vote for the appellant, would suffer not only in this world but in the next also, but it found it not proved that the f armans or orders of the two religious heads of the Namdharis and Radhaswamis, were orally conveyed through Maharaj Bir Singh, son of Maharaj Partap Singh, Naginder Singh and Shri Parshotam Singh, to the followers of the two Gurus in the constituency, or that they, while conveying the farmans of the Gurus, threatened the followers with expulsion from the sect, if they went against the wishes of the Gurus, except what Naginder Singh had said in the Diwan at Sirsa and at other places.\n\nIt also recorded the finding that the Diwans were held for the purpose of canvassing in favour of the appellant at the time and place mentioned in the petition, .and that those Diwans were addressed by Maharaj\n\nPa.rtap Singh and others. It was also found that' Maharaj Partap Singh actively supported the candidature of the appellant, and addressed his followers on the basis of religion and asked them to vote for the appellant, and that all this was done at the instance and in the presence of the appellant. It was further found that posters, like exh. P. 1, were issued by the appellant under the authority of Maharaj~~Bir Singh\n\nand his father, Maharaj Partap Singh, and widely distributed throughout the constituency. The Tribunal also discussed the question as to whether, on those findings, the provisions of s. 123(2) of the Representation of the People' Act, 1951 (which will hereinafter be referred to as 'the Act J, relating to \"undue influence\", could be said to have been satisfied; and alternatively, whether those findings would bring the case within the provisions of cl. (3) of s. 123 of the A0t,\n\nI959\n\nRam Dial\n\nSant Lal b Others\n\nSinha ].\n\nI959\n\nRani Diut\n\nSant Lril & Other.~\n\nrelating to systematic appeal on grounds of caste, race, community or religion, etc.\n\nThe Tribunal appeared to be inclined to the view that a command in terms of exh. P. 1, emanating from a religious head, like the Sat Guru, to his followers-mostly illiterate and ignorant persons..,.-may well be construed as\" undue influence\" ..\n\nBut alternatively, it also held that even if the provisions of cl. (2) of s. 123 of the Act, had uot been satisfied, the case had been brought well within the purview of cl. (3) of s. 123. Other issues were either not pressed or were decided against the petitioner in t.hat court. The Tribunal, therefore, declared the appellant's election void under s. lOO(l)(b) of the Act..\n\nIn view of the fact that the petitioner had failed to substantiate many of his allegations, the Tribunal directed the parties to bear their own costs.\n\nThe appellant preferred an appeal which was heard by a Division Bench (Falshaw and Dua, JJ.) of the High Court of Judicature for the State of Punjab at Chandigarh.\n\nThe High Court substantially affirmed the findings of the Election Tribunal on issue No. 4 aforesaid.\n\nThe High Court also accepted the oral evidence adduced on behalf of the respondent, with particular reference to the publication and wide distribution of the poster, exh. P. I. In the course of its judgment, the High Court observed:\n\n\"The language of the mandate and the general background and circumstances of this case including the obvious consciousness of Maharaj Pratap Singh and Ram Dial of the probable and likely effect of such commands on the illiterate, ignorant and credulous followers of the Maharaj can lead but to one conclusion that it was intended to convey to them the threat of divine displeasure and spiritual censure if they dared to disobey the f arman of their supreme spiritual and religious head.\" In answer to the contention that the f arman had been motivated not by religious considerations bnt by a personal grievance, the High Court did not attach any importance to the alleged differenc'!l in the motive, and observed: . \" If the influence exercised by the religious and\n\nspiritual head has the effect of creating in the minds of the voters a feeling of divine displeasure or spiritual censure then whatever the motive, the influence \\vould amount to undue influence.\n\nThe contents of the poster reproduced earlier unequivocally establiRh the mandatory nature of the command. Religious sanction is, in my opinion, implict in it and I think, on a reasonable construction of its contents, it must be held that Maharaj Pratap Singh intended to convey to his followers who are mostly illiterate, igtiorant, credulous and unsophisticated villagers, ha viug blind and implicit faith in their religious head that if they did , not vote for Ram Dial, they would incur. divine displeasure and spiritual censure.\n\nWith this class of villagers the displeasure of the religious head is usually associated with divine displeasure.\" Dealing with the scope of s. 123(2), it held that the language of the poster, exh. P. 1, construed in the light of the oral evidence, left the Court in no doubt that Maharaj Partap Singh's Jarman did necessarily imply divine displeasure and spiritual censure for those who chose to disobey the Jarman.\n\nIn its view, therefore, the facts, as found, attracted the provisions of s. 123(2) of the Act. It also held that the evidence led in the case, established that the meetings addressed by Maharaj Partap Singh and others, in support of the election of the appellant, induced the belief that the voters would incur divine diRplcasurc or spiritual censure if they did not vote ip accordance with the mitndate issued by the Maharaj; thus, clearly establishing the commission of corrupt practice of \"undue influence \". The High Court also examined the question whether the corrupt practice falling under cl. (3) of s. 123 of the Act, had been established, and decided the question in the negative, though not without some hesitation. It further held that the publication of the poster, exh. P. 2, did not bring the case within the purview of s. 123(4) of the Act. In the result, the High Court agreed with the conclusion of the Tribunal, declaring the election void, and dismissed the appeal with costs.\n\nThe appellant applied to the High Court, praying for the necessary certificate that the\n\nI959\n\nRa, m lJial v.\n\nSant Lal & Others\n\nSinh~ } .\n\nr959\n\nRam Dial v.\n\nSant Lal & Others\n\nSinha J.\n\ncase was a fit one for appeal to this Court, and that Court granted the certificate. Hence, this appeal.\n\nAfter the decision of the Tribunal and of the High Court, the only question for determination in this appeal, is whether, on the findings of fact recorded, as stated above, the corrupt practice of\" undue influence\", as defined ins. 123(2), has been made out. It has been argued on behalf of the appellant that the main cl. (2) of s. 123, is out of the way of the parties in this case, because it applies only to threats of injury to person or property and not to what may be termed \"spiritual undue influence\",· which is specifically covered by sub-cl. (ii) of proviso (a) to cl. (2) of s. 123.\n\nIt was further argued that the word \" deemed \" would show that the proviso is by way of an addition to the main provision of cl. (2) of s. 123; that is to say, what was not actually covered by the main cl. (2), has been added to the ambit of the definition by the proviso. It has further been argued that cl. (2) is directed against unduly influencing individual voters, and reliance was placed upon the cases of Cheltenham (1 ), Nottingham(') and North Durham('). Reference was also made to the observations in \".Rogers on Elections\"('), and it was argued that an electoral right, as defined in s. 79(d) of the Act, is a personal individual right, including the right to vote or to refrain from voting at an election.\n\nHence, there should have been pleading by the petitioner and finding by the Court on evidence that certain named individuals had been subjected to the corrupt practice of undue influence. Secondly, in the absence of any such pleading or finding, a general allegation of the corrupt practice of undue influence, without :reference to individuals, is not enough in law to vitiate an election.\n\nThe corrupt practice of undue influence has been defined in cl. (2) of s. 123 of the Act, in these terms:-\n\n\" (2) Undue influence, that is to say, any direct or indirect interference or attempt to interfere on the part of the candidate or his agent, or of any other\n\n(1) (1869) l O'M. & H. 62, 64.\n\n(2) (1869) 1 O'M, & H. 245, 246.\n\n(3) (1874) 2 O'M, & J-l, 152, 156.\n\n(4) Vol,, II 20th Ed, p. 329.\n\nperson, with the consent of a candidate or his election agent, with the free exercise of any electoral right : Provided that-\n\n(a) without prejudice to the generality of the provisions of this clause any such person as is referred to therein who-\n\n(i) threatens any candidate, or any elector, or any person in whom a candidate or an elector is interested, with injury of any kind including social ostracism and excommunication or expulsion from any caste or community; or\n\n(ii) induces or attempts to induce a candidate or an elector to believe that he, or any person in whom he is interested, will become or will be rendered an object of divine displeasure or spiritual censure, shall be deemed to interfere with the free exercise of the electoral right of such candidate or elector within the meaning of this clause;\n\n(b) a declaration of public policy, or a promise of public action, or the mere exercise of a legal right without intent to interfere with an electoral right, shall not be deemed to be interference within the meaning of this clause\".\n\nIt should be observed, at the outset, that the law in England, relating to undue influence at elections, is not the same as the law in India, as will appear from the following definition of\" undue influence \" contained in s. 2 of 46 & 4 7 Viet. c. 51, which substantially re-enacted the former s. 5 of 17 & 18 Viet. c. 102 :-\n\n\"Every person who shall directly or indirectly, by himself or by any other person on his behalf, make use of or threaten to make use of any force, violence, or restraint, or inflict or threaten to inflict, by himself or by any other person, any temporal or spiritual injury, damage, harm, or loss upon or against any person in order to induce or compel such person to vote or refrain from voting, or on account of such per. son having voted or refrained from voting at any election, or who shall by abduction, duress, or any fraudulent device or contrivance, impede or prevent the free exercise of the franchise of any elector, or shall thereby compel, induce, or prevail upon any\n\nRam Dial v.\n\nSant Lal & Others\n\nSinha ].\n\nRam Dial\n\nSant Lal 6' Others\n\nSinha j,\n\n758 SUPltEME COURT REPORTS [1959) Supp.\n\nelector either to give or to refrain from giving his vote at any election, shall be guilty of undue influence\".\n\nThe words of the English sta.tute, quoted above, Jay emphasis upon the individual aspect of the exercise of undue influence. It was with reference to the words of that statute, that Bramwell, B., made the following observations in North Durham('):-\n\n\"When the language of the Act is examined it will be found that intimidation to be within the statute must be intimidation practised upon an individual ''.\n\nThe Indian law, on the other hand, does not empha- • sise the individual aspect of the exercise of such influence, but pays regard to the use of such influence as has the tendency to bring about the result contemplated in the clause.\n\nWhat is material under the lndian law, is not the actual effect produced, but the doing of such acts as are calculated to interfere with the free exercise of any electoral right.\n\nDecisions of the English Courts, based on the words of the English statute, which are not strictly in pari materia with the words of the Indian statute, cannot, therefore, be used as precedents in this country.\n\nIn the present case, we are not concerned with the threat of temporal injury, damage or harm. On the pleadings and on the findings of the Tribunal and of the High Court, we are concerned with the undue exercise of spiritual influence which has been found by. the High Court to have been such a potent influence as to induce in the electors the belief that they will be rendered objects of divine displeasure or spiritual censure if they did not carry out the command of their spiritual head. It was argued that exh. P. l, on which so much stress was laid by the Tribunal and by the High Court, did not contain any such direct threat as would bring the case within the second p; uagraph of proviso (a) to s. 123(2). Exhibit P. 1, as officially translated, is in these terms:-\n\n\"A command from Shri Sat Guru Sacha Padshah to the Namdharies of Halqa-Sirsa \".\n\n\"Every Namdhari of this Halqa is commanded by Shri Sat Gnru that he should make every effort for\n\n(t) (1874) 2 O'M. & H. 15z, 156.\n\nthe success of Shri Ram Dayal Vaid, a candidate for the Punjab Vidhan Sabha, by giving his own vote and those of his friends and acquaintances, it being our primary duty to make him successful in the election.\n\nThe election symbol of Shri Vaid is a riding horseman.\n\nSd. Maharaj Bir Singh S/o Sat Guru Maharaj Partap Singh,\n\nJivan Nagar (Hissar) \".\n\nWe have looked into the original document also, and we agree with the High Court that the crucial words, like hukam of Shri Sat Guru Sacha Padshah, etc., have been printed in very bold letters, conveying the distinct impression to the large number of Namdharis, who are voters in the constituency, that it was a matidate from their spiritual guru who wielded great local influence amongst them, that it was their bounden duty, under the strict orders of their religious leader, not only to cast their own votes in favour of the particular candidate, but also to exert their influence amongst their friends and acquaintances in favour of that candidate; and that any infringement of that mandate had implicit in it divine displeasure or spiritual censure. It was contended on behalf of the appeUant that a religious leader has as much the right to freedom of speech as any other citizen, and that, therefore, his exhortation in favour of a particular candidate should not have the result of vitiating the election. There cannot be the least doubt that a religious leader has the right freely to express his opinion on the comparative merits of the contesting candidate and to canvass for such of them as he considers worthy of the confidence of the electors. In other words, the religious leader has a right to exercise his influence in favour of any particular candidate by voting for him and by canvassing votes of others for him. He has a right to express his opinion on the individual merits of the candidates. Such a course of conduct on his part, will only be a use of his great influence amongst a particular section of the voters in the constituency ; but it will amount to an abuse of his great influence if\n\nRam fJial v.\n\nSant Lal\n\nQ>. 01hers\n\nSiHha ].\n\nI959\n\nRani Dial v.\n\nSant Lal & Others\n\nSinha ].\n\nthe words he uses in a document, or utters in his speeches, leave no choice to the persons addressed by him, in the exercise of their electoral rights. If the religious head had said that he preferred the appellant to the other candidate, because, in his opinion, he was more worthy of the confidence of the electors for cert:lin reasons good, bad or indifferent, and addressed words to that effect to persons who 1_Vere amenable to his influence, he would be within his rights, and his influence, however great, could not be said to have been misused.\n\nBut in the instant case, as it appears, according to the findings of the High Court, in agreement with the Tribunal; that the religious leader practically left no free choice to the Namdhari electors, n.ot only by issuing the hukam or f arman, as contained in exh. P. I, quoted above, but also by his speeches, to the effect that they must vote for the appe!Iant, implying that disobedience of his mandate would carry di vine displeasure or spiritual censure, the case is clearly brought within the purview of the second paragraph of the proviso to s. 123(2) of the Act. This :1spect of the case has been dealt with at length by the High Court in a well-considered judgment, and we do not think it necessary to repeat all those observations, beyond saying that we agree with them. •In that view of the matter, it is not necessary for us to consider the further question whether cl. 2 of s. 123 of the Act, apart from the proviso-para. (ii), discussed above-covers a case, like the present, where the. undue influence is of a spiritual character as distinguished from threats of irijury to person or property.\n\nAs t.he main ground urged in support of the appeal against the judgment of the High Court, fails, the appeal must be dismissed with costs to the respondent No. I.\n\nAppeal dismissed.", "total_entities": 30, "entities": [{"text": "s. 4(1)", "label": "PROVISION", "start_char": 121, "end_char": 128, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 161", "label": "PROVISION", "start_char": 564, "end_char": 570, "source": "regex", "metadata": {"statute": null}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 578, "end_char": 595, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "RAM DIAL", "label": "PETITIONER", "start_char": 913, "end_char": 921, "source": "metadata", "metadata": {"canonical_name": "RAM DIAL", "offset_not_found": false}}, {"text": "SANT LAL AND OTHERS", "label": "RESPONDENT", "start_char": 926, "end_char": 945, "source": "metadata", "metadata": {"canonical_name": "SANT LAL AND OTHERS", "offset_not_found": false}}, {"text": "B. 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{"document_id": "1959_2_761_776_EN", "year": 1959, "text": "(2) S.C.R.\n\nSUPREME COUR'l' REPORTS 761\n\nTHE PATNA ELECTRIC SUPPLY CO., LTD.,\n\nPATNA\n\nTHE PATNA ELECTRIC SUPPLY vVORKERS'\n\nUNION (B. P. SINHA, P. B. GAJENDRAGADKAR and\n\nK. N. WANCHOO, JJ.)\n\nIndustrial Dispute-Housing Jacilities for industrial labour-- Award based on Bihar Government Scheme~Validity.\n\nOne of the i terns in dispute referred to the Industrial Tribunal for adjudication, which was the subject matter of this appeal, related to the demand of the Workers' Union that the appellant company must provide quarters to its employees in terms of the Bihar Government Scheme and undertake immediate construction for that purpose. The case of the Company was that the State and not the employer was primarily responsible for providing quarters to the employees and, in any event, it was not financially possible for the appellant to undertake the task. The Tribunal upheld the Union's claim and directed the company to start construction of at least 15 quarters, as specified by the Government scheme, within a year. The Labour Appellate Tribunal, on appeal, held that the Government scheme was binding on the company and upheld the award.\n\nThe scheme, on which the award was based, was one prepared by the Industrial Housing sub-Committee appointed by the Government of Bihar and sanctioned by the Government as recommended by the Bihar Central (Standing) Labour Advisory Board. It imposed on the employers the responsibility for housing industrial labour and provided for financial assistance to the employers by the State Government to the extent of 50% of the capital required, by way of loan repayable in 25 annual instalments, recoverable, on default, from the properties mortgaged for the loan or the assets of the debtor. The scheme prescribed the terms on which the quarters were to be let out to the employees and specified their size.\n\nIt was contended on behalf of the appellant that, the scheme was not obligatory and could not impose a term of employment for the workmen. For the Union it was argued that the scheme had materially altered the rule, followed by industrial adjudication in such cases, so far as the State of Bihar was concerned and had imposed a moral obligation on the appellant.\n\nNeither the Industrial Tribunal nor the Labour Appellate Tribunal in appeal, took the financial position of the company into consideration where they held that the Scheme did impose a\n\nI959\n\nApril 23.\n\nI959\n\nThe Patna Electric Suj-1ply Co , Ltd., Patna\n\nThe Patna Electric Supply\n\nJVorkers' Union\n\nmoral obligation on the appellant to provide quarters for its employees, which \\Vas enforceable in industrial adjudication.\n\nHeld, that the scheme sanctioned by the Bihar Government was merely of a recommendatory nature and since it had no statutory force it could not provide a basis for the direction made by the a\\vard.\n\nIts language sho\\ved that it was vague and not intended io be acted upon anJ so it could not have the effect of intro. ducing a term of employment as between the employer and the ¥.'Or.k1nen.\n\nAlthough there could be no doubt that, Industrial Tribunals' had generally the power and jurisdiction, apart from any scheme or agreen1ent bet\\veen the parties, in appropriate cases, to impose new obligations on the employers in the interest of social justice and for securing peace and co-operation between the employer and the \\VOrkmen, the award in appeal could not be justified on the merits under the prevailing condition of the industrial evolution in the country.\n\nH 1 estern India Autu!J'iohile Association v. The Industrial Tribunal, Bombay, A.LR. r949 F.C. rrr, The Bharat Bank Ltd., Delhi v.\n\nThe Employees of the Bharat Bank Ltd., Delhi, [1950] S.C.R. 459 and Rohtas Jndu.stries Ltd. v. Brijnandan Pandey, [1956] S.C.R. 800, referred to.\n\nIt was the duty of Industrial Tribunals to take into consideration the interests of national economy and progress and they were entirely right in taking the view, which they had consistently done, that it would be inexpedient in the present financial condition of the industries in the country to impose the additional burden of providing housing facilities on them which should be the primary responsibility of the State.\n\nEastern Plywood Manufacturing Co., Ltd. v. Their Workers, [1949] L.L.J. 29r, Mohamad Rai Akbarali Khan v. The Associated Cement Companies Ltd., [1953] L.A.C. 677, Samastip\"r Central Sugar Co., Ltd. v. Their Workmen, [1955] 2 L.L.J. 727 and M/s.\n\nNational Carbon Co. (India) Ltd. v. National Carbon Co. Mazdoor Union, Calcu.tta, [r956] L.A.C. 660, approved.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 227 of 1958.\n\nAppeal by special leave from the judgment and order dated January 31, 1956, of the Labour Appellate Tribunal of India, Calcutta, in Appeals Nos. Cal. 36 and 38 of 1953.\n\nM. C. Setalvad, Attorney-General for India and Na unit Lal, for the appellant.\n\nP. K. Chatterjee, for the respondents.\n\n1959. April 23. The Judgment of the Court was delivered by\n\nGAJENDRAGADKAR, J.-This appeal by special leave r959 arises out of an industrial dispute between the Patna The Patna Electric Supply Co., Ltd., (hereafter called the appel- Electric supply ]ant) and its workmen represented by the Patna Elecc Ltd p o, ., at11a _ tric Supply Workers' Union (hereafter called the v. respondent). The appellant is a public company incor- The Patna porated under the Indian Companies Act and has its Electric Supply d 1 Workers' Union registered office at Patna. It is an in ustria establish- _ ment' engaged solely in public utility service, namely, Gajendragadkar J. the supply of electricity for the requirements of the public and is a licensee under the provisions of the Electric Supply Act, 1948 (54 of 1948). On March 29, 1952, the Government of Bihar, by a notification issued under s. 7 read with s. 10(1) of the Industrial Disputes Act, ffi47 (14 of 1947) (hereafter called the AcL) referred twelve items of dispute for adjudication to the Industrial Tribunal consisting of Mr. H. K.\n\nChaudhuri as the sole member. Out of the said items the present appeal is concerned with only one; and it relates to \"the housing facilities to the workmen and principle of allotment of quarters to them \". The respondent had put forward a demand that the appellant should provide houses to its employees and should undertake the construction of quarters immediately in that behalf. The respondent's case was that the appellant was bound to provide quarters to its em ployces and let out the same to them according to the Bihar Government scheme. The appellant denied its liability to make any housing provision for its employees and that gave rise to the industrial dispute.\n\nThe appellant urged before the tribunal that the housing facilities and allotment of quarters to workmen was the primary responsibility of the State and not of the employer; and it alleged that in any event it was financially not possible for the appellant to undertake the task.\n\nThe appellant had also contended that it had to function within the limits prescribed by the Electricity Supply Act, 1948, and that the relevant provisions of the said Act would not permit the appellant to undertake any expenditure to meet the respondent's demand.\n\nOn March 9, 1953, the tribunal upheld the respondent's claim and by its award it directed the appellant\n\n'959 to start construction of at least 15 quarters according Th P to the specifications laid down in the Government Elect;;, ;~\":rzy schme within one year from the date of the publica- Co.,.Ltd., Patna catIOn of the award. v.\n\nThis part of-the award was challenged by the appel- • The Patna !ant before the Labour Appellate Tribunal; but the Electric Supply appellate tribunal was not imp ressed by the appel- Workers' Union !ant's pleas and so it dismissed the.appeal on January Gajendrngadkar J. 31, 1956. It agreed with the tribunal in holding that the scheme sanctioned by the Bihar Government was binding on the appellant and it saw no substance in the appellant's contention that expenditure involved in the construction of the quarters would be inadmissible under the Electricity Act.\n\nThe appellant then applied for, and-obtained, special leave from this Court on September 17, 1956. That is bow this appeal has come to this Court, and the only question which it raises for our decision is whether the direction issued by the award calling upon. the appellant to start the construction of at least 15 quarters is justified or not. It is true that the appellant bas provided housing facilities for some members of its staff. It appears that 17 employees out of 183 in the Power Station, 146 out of 329 in the Mains Department, and I out of 58 in the General Department have been provided by th!l appellant with free quarters, whereas one employee in the Mains Department is granted honse allowance at\n\n12~% in lieu of a house.\n\nBut this arrangement is a matter of the appellant's choice and volition; and it cannot be made an obligation and thus virtually a term of employment; that is the appellant's case.\n\nOn the other band, the respondent's contention is that the Bihar Government scheme of industrial housing has now been finalised and it imposes upon the appellant an obligation to provide housing facilities for all its employees. It is not seriously disputed by the respondent that the industrial adjudication has so far consistently held that providing housing facilities for industrial labour is the primary responsibility of the State; but the argument is that the scheme formulated by the Industrial Housing Sub, Committee in\n\n(2) S.C.l~. 8Ul'l{, EME UOUH, T HEl'OH.TS 765 •\n\nBihar bas materially altered the position so far as the 1 959 State of Bihar is concerned. It is this argument which The Patna has been accepted by the tribunals below. They have Electric supply held that the scheme sanctioned by the Bihar Governco, Ltd., Patna ment on the recommendation of the Industrial Housing v.\n\nSub-Committee, though recommendatory in character, The Patna imposes a moral obligation on the employer to provide Electric Supply\n\nWorkers' Union housing for his employees, and in industrial adjudica- __ lion this moral obligation can be enforced against it. Gajendragadkar J.\n\nIt is this conclusion which must first be examined.\n\nIt appears that in March 1938 the Government of Bihar had set up a Committee known as the Bihar Labour Enquiry Committee under the Chairmanship of Dr. Rajendra Prasad for the purpose of enquiring into the conditions of industrial labour in the State and for making such recommendations as might appear practicable with the object of improving the level of wages and conditions of work of industrial workers.\n\nThis Committee submitted its report to Government in April 1940. It had suggested that housing on an adequate scale should be made a statutory obligation of the employer but the extent to which the industry could be required to fulfil such an obligation should be determined by the State Government after careful investigation into its financial condition. No action was, however, taken on this recommendation by the State Government.\n\nSubsequently the Bihar Government appointed the Industrial Housing Sub-Committee cm the recommendation of the Bibar Central (Standing) Labour Advisory Board and this Sub-Committee submitted its report on December 16, 1948, recommending the setting up of an industrial housing board for formulating certain schemes for housing industrial workers.\n\nThe matter was then considered by the Bihar Central (Standing) Labour Advisory Board on :February II, 1950, and the Board asked the Industrial Housing Sub-Committee to re-examine the question further and make specific recommendations. Accordingly the Sub.\n\nCommittee reconsidered the matter and made its final recommendations on August 17, 1950.\n\nThese recommendations were considered by the Bihar Central\n\nr959\n\nThe l'alna Electric Supply Co, Ltd., l)atna\n\n766 SUPREME COURT REPOitTS [1959] Supp.\n\n(Standing) Labour Advisory Board in September 1950 and they were adopted by it with slight modifications.\n\nThis scheme was finally sanctioned by the State Government.\n\nUnder this scheme the responsibility for housing in- The Patna dustrial labour is placed on the shoulders of the em- Elecl•ic supply 1ilo,-ers.\n\nTo begin with the scheme was intended to Workers' Union .J\n\nbe applicable only to factories registered under Facto- Gajendragadkar J. ries Act, 1948. lt provides for financial assistance by State Government to the employer on terms and conditions specified in it. It appears that under para. 4 of the scheme the State Government may give loan to the employer to the extent of 50% of the capital required for industrial housing and that the loan would carry interest at 3% per annum. The remaining 50% of the capital is to be provided for by the employer. The amount granted as a loan together with interest thereon bas to be repaid by the employer in 25 annual instalments of equal amount on the dates fixed for such repayment. There is also a default clause which enables the State Government to recover the amount due from the properties mortgaged to the State Government for the loan or from other assets of the borrower. The scheme prescribes the terms on which the quarters when built should be let out to the employees. and it lays down the standard size and other specifications of the quarters. The respondent's contention is that since this scheme has been sanctioned by the State Government it imposes on the employers in the State of Bihar a moral obligation to implement it and industrial adjudication can give effect to the scheme by issuing appropriate directions by their awards; this contention has been accepted by the tribunals below.\n\n\\Ve do not think that the scheme in question can justify the direction issued by the award under appeal.\n\nIt is clear that though the original Bihar Labour Enquiry Committee had recommended to the State Government that housing on an adequate scale should be made a statutory obligation of the employer, the State Government has so far taken no action on this recommendation. It is common ground that the State\n\nLegislature has passed no legislation imposing statur959 , tory obligation on the employer to provide for housing The ratna _on an adequate scale to his employees. The scheme Electric supply in question on which the respondent relies has no co., Ltd., Patna statutory force. It merely approves of the recomv. mendations made by the Bibar Central (Standing) The. Patna Labour Advisory Board and the only liability which Etectnc , supply Workers Union the State Government has purported to undertake by _ . sanctioning the scheme is to agree to afford partial Gajendragadkar J. financial assistance to the employers on the terms and conditions specified in it. In other words, if any industrial employer wants to provide housing facilities for his employees he may be able to ask for financial assistance from the State Government and the State Government may afford such assistance under the scheme; but that is a very .different matter. It may be conceded that in a large majority of cases industrial labour is very badly in need of housing accommodation, and it would, therefore, be desirable that such facilities should be afforded to labour either by the State or if possible by the employer or by both of them acting together in co-operation; but we do not see how the present scheme which no doubt is laudable in its object can afford any valid basis for issuing directions against the appellant calling upon it to construct quarters for its workmen as the award purports to do.\n\nIt appears that both the tribunals assumed that the scheme in question had been adopted with the consent of the appellant and as such the appellant was bo.und by it.\n\nThis assumption is clearly unjustified.\n\nNo partner of the appellant was a member of the Committee and Mr. Chandra, the appellant's Labour Adviser was not its member in 1950 but became one in 1952.\n\nMr. Chandra is a Labour Adviser of other companies as well and so it would be difficult to accept the argument that even after be became a member in 1952 he could represent the appellant in the legal sense so as to bind it by his consent; but apart from this aspect of the matter, even Mr. Chandra was not a member in 1950 when the scheme was adopted. It is true that some representatives of industrial employers were nominated by the State Government as members\n\n7 959 of the Committee; but that would not jnstify the assumption that the scheme adopted by the Com- The Patna Electric supply mittee and sanctioned by the Government is binding co., Ltd, Patna on the appellant. It is significant that even the scheme v. lays down tha, t providing housing accommodation to The Patna the lowest paid workers is mainly the responsibilit.y of Elec\"ic Supply the employers and that the State Government could Workers' Union _ only help the employers by giving them aid in the Gajendragadl<ar J. form of loan and in the matter of acquisition of land.\n\nThe scheme is thus merely recommendatory and the use of the word \"mainly\" shows that it is vague and cannot be, and was not expected to be, enforced as it stands. It is clear that tribunals cannot call upon the Governm'ent to advance a loan to the employers whenever they pass awards calling upon the employers to start the construction of quarters for their employees; so that if Government takes time to sanction the required loan, or, owing to its own difficulties, it is unable to sanction it, the employer would be exposed to the risk oft.he penalties arising out of his failure to comply with the award; and that only serves to emphasise that the problem must be tackled by the employers and the State in co-operation with each other and cannot at present at least be treated as a subject-matter of an award .. We are, therefore, satisfied that the scheme in question which is the sole basis for the award cannot have the effect of introducing a term of employment between the appellant and its workmen in regard to housing facilities.\n\nWe may incidentally point out that if the present award is upheld it would give rise to similar demands from employees in other allied or similar industries in Bihar; and if such demands are upheld it would inevitably impose a very large burden on the employers and that may materially affect the industrial progress of the State of Bihar. It is necessary to emphasise that, in considering the claims of workmen sympathetically on the ground of social and economic justice, industrial adjudication has to bear in mind the interests of national economy and progress which are relevant and material. We must, therefore, hold that the award under appeal cannot be sustained on the\n\nbasis of the scheme sanctioned by the Bihar Governz959 ment.\n\nIt lias, however, been urged before us on behalf of ElTht •. P5atna 1 d h h . d ec ric . upp y the respon ent that, apart from t e scheme, t em usco .. Ltd, Patna trial tribunal has jurisdiction to make an award \"· calling upon the appellant to provide housing accom- The Patna modation for its employees. The argument is that, Electric Supply unlike commercial arbitration, industrial arbitration Workers' Union may, and often does, involve the making of a new con- G . nd agadilar 1 tract or the imposition of new obligations on the aJe r • employer in the interests of social justice; and having regard to the fact that the employees are very badly in need of housing accommodation it was open to the tribunal in the present case to have directed the appellant to make a beginning in that direction by providing housing .accommodation to some of its employees. In support of this argument the respondent has relied upon the oft-quoted observation of Ludwig Teller that \"Industrial arbitration may involve the extension qf\n\nan existing agreement or the making of a new one, or, in general, the creation of new obligations or modification of old ones while commercial arbitration generally concerns itself with interpretation of existing obligations and disputes relating to existing agreements \"(1).\n\nThere is no doubt that in appropriate cases industrial adjudication may impose new obligations on the employer in the interest of social justice and with the object of securing peace and harmony between the employer and his workmen and full co-operation between them. This view about the jurisdiction and power of the industrial tribunals has been consistently recognised in this country since the decision of the Federal Court in Western India Automobile Association\n\nv. The Industrial Tribunal, Bombay (2).\n\nIn that case the employer had chall.<:Jnged the jurisdiction of the industrial tribunal to direct the reinstatement of his employees ; and it was urged that such a direction was contrary to the known principles which govern the\n\n(r) Ludwig Teller's\" Labour Disputes & Collective Bargaining\", Vol. J, p. 536. {z) A.LR. 1949 F.C. III, 120.\n\nI959 relationship between master and servant and was out.\n\nTh' Patna side the jurisdiction of the tribunal. This contention\n\nEl<ctdc supply was negatived by the :Federal Court, and it was co., Ud., Patna observed that industrial adjudication does not mean v.\n\nThe Patna Electric Supply Workers' Union\n\nadjudication according to the strict law of master and servant. \"The award of the tribunal\", observed Mahajan, J., in delivering the judgment of the Court, \" may contain provisions for the settlement of a dis- Gaj, ndragadkar ;. pute which no Court could order if it was bound by ordinary law, but the tribunal is not fettered in any way by these limitations\". The same view has been more emphatically expressed by Mukherjea, J., in The Bharat Bank Ltd., Delhi v. The Employees of the Bharat Bank Ltd., Delhi (1 ). \"In settling the disputes between the employers and the workmen\", observed the learned Judge, \"the function of the tribunal is not confined to administration of justice in accordance' with law. It can confer rights and privileges on either party which it considers reasonable and proper, though they may not be within the terms of any existing agreement. It has not merely to interpret or to give effect to the contractual rights and obligations of the parties. It can create new rights and obligations between them which it considers essential for keeping industrial peace\". In Rohtas Industries Ltd. v. Brijnandan Pandey('), Mr. Justice S. K. Das has expressed the same conclusion en he observed that \"a court of law proceeds on the footing that no power exists in the courts to make contracts for people; and the parties must make their own contracts. The courts reach their limit of power when they enforce contracts which the parties have made.\n\nAn Industrial Tribunal is not so fettered and may create new obligations or modify contracts in the interests of industrial peace, to protect legitimate trade union activities and to prevent unfair practice or victimisation\". Thus there can be no doubt that an industrial tribunal has jurisdiction to make a proper and a reasonable order in any industrial dispute; and in that sense the respondent may be right when it contends that it was within the competence of the tribunals below to entertain its\n\n(I) [1956] S C.R. 459, 513.\n\n(z) [1956] s.c.R. 800, 810.\n\ngrievance about housing accommodation and to give it appropriate relief in that behalf.\n\nThe Patna Eiectric Supply Co., Ltd., Patna v.\n\nBut assuming that the tribunal had jurisdiction to entertain the dispute, the question still remains whether, apart from the agreement on which the tribunals have based their decision, the award under appeal The Patna can be 1ustified on general grounds. In our opinion, Electric supply Workers' Union under the present conditions the answer to this question has to be in favour of the appellant and against Gajendragadkar ]. the respondent. Industrial tribunals have consistently taken the view that housing accommodation of industrial labour is the primary responsibility of the State ; and there has also been no difference of opinion on the point that in the present economic condition of our industries it would be inexpedient to impose on the employers the obligation to provide housing accommodation for their employees. Besides a scheme of wages properly fixed necessarily takes into account house rent amongst other relevant facts; and under a proper scheme of dearness allowance adjustments can be made when necessary from time to time so as to take into account an appreciable rise in the rents which industrial labour my have to pay. That is why usually tribunals do not entertain employees' claim for housing and do not even allow a separate demand for house allowance as such. This position is not disputed before us by the respondent.\n\nWe may, liowever, refer to a few typical decisions of the Industrial Tribunals on this point. In Eastern Plywood Manufacturing Co., Ltd., And Their Workers (1) the Industrial Tribunal rejected the workmen's claim for housing accommodation or in the alternative for house rent allowance of Rs. 10 per month on the ground that the obligation for housing labour in an urban area is not really on the employer, and that the tribunal had already considered in the issues on basic pay and dearness allowance as to how much the company should be directed to pay in emolument~ to its workmen. The tribunal thought that it woulrl not be reasonable to saddle the company with any further financial commitments in the shape of house rent allowance.\n\n(1) [1949] L.L.J. 291,\n\n. x9s9 In Mahomad Rai Akbarali Khan v . . The Associated\n\nThe Patna Cement Companies Ltd. (1), the Labohr Appellate Tri- , Elect.ic supply bmial has considered this problem. It was urged by Co., Lid., Patna the employees before the appellate tribunal that the v. employers should either provide quarters or pay house\n\nEI Th•. P5atnpopl rent allowance, whereas the company contended that \"t\"' u Y t th r f h d Workers' Union rt was no e unct10n o t e management to prov1 e accommodation for its employees. The appellate tri- Gajmdragodkar J. bunal, however, took the view that the emplqyers'\n\ncontention should be accepted subject to considerable qualifications in certain cases; and it proceeded to consider the special features of the problem presented by the employers' factory at .Sevalia. Sevalia was a village until the employer went there to start its factory which needed the services of' a large contingent of workers. \"When an industrial concern like this\"; observed the appellate tribunal, \"bursts upon a rural area there is a very considerable impact on its economy. The inhabitants nearby join the factory as well as those living further away; there is also an influx of persons from outside; in short it means that accommodation becomes scarce and expensive; and if a workman has to go further afield for his accommodation he is put to considerable physical fatigue and inconvenience. In such circumstances it has not been the policy of the tribunals to ignore a claim for house rent allowance\". After making these observations, the appellate tribunal proceeded to readjust the dearness allowance payable to the employees after taking into account the increased house rent which they had to pay for their housing accommodation in Sevalia ; and having thus readjusted the dearness allowance the appellate tribunal held that no separate order as to house rent .allowance was necessary. It appears that in that, case the industrial tribunal had taken the view that the problem was not likely to be solved by granting house rent allowance to the employees and that the only practical course, therefore, was that the company should either help the workers in building their houses or that the company itself should construct quarters. That is why it bad rejected the\n\n(1) [1953] L.A.C. 677.\n\nemployees' demand for house rent allowance but had r959 recommended to the concern to undertake building The Patna operations. The Labour Appellate Tribunal reversed ElectriC supply this conclusion and took a more practical and a wiser co., Ltd., Patna course by readjusting the dearness allowance so as to v. grant adequate relief to the employees in that behalf.\n\nThe Patna It would thus be seen that even where the employer wElecktric , 5uuply h d d f 11 11 l.k S i or ers nion a starte its actory at a sma v1 age i e eva 1a _ the appellate tribunal did not accept the employees' Gajendragadkar ]. demand for housing accommodation and did not also think it proper to ask the employer to pay to its employees any separate special house rent allowance.\n\nIn Samastipur Central Sugar Go., Ltd., And Their Workmen (1) the Labour Appellate Tribunal had occasion to consider this question once again. In dealing with the merits of the problem, it accepted the decision of the Appellate Tribunal in Mahomad Rai Akbarali Khan v. The Associated Cement Go. Ltd. {2), •• and observed that \"where the basic wage and dearness allowance are consolidated, house rent at the normal time and the subsequent rise must be presumed to have been taken into account when the total consolidated amount was fixed\".\n\nThe same view was taken by the Labour Appellate Tribunal in 11Iessrs. National Carbon Go. (India) Ltd. v.\n\nNational Carbon Go., M azdoor Union, Calcutta (3).\n\nIn that case the tribunal had directed the employer to pay his workmen house rent allowance because it had taken the view that in making the said order it was granting a relief lesser than granting free quarters which the employees had claimed and that the lesser was involved in the greater relief and could be granted by it. On the evidence adduced in the said proceedings the Labour Appellate Tribunal did not agree with this view. It held that \"provision for free quarters by constructing houses cannot permit of comparison with payment of house rent allowance in money month after month to determine which is greater and which is smaller than the relief of providing free quarters\".\n\nOn this view the Labour\n\n(1) [1955] II L.L.J. 727, 730.\n\n(2) [1953] L.A C. 677.\n\n(8) [1956] L.A.C. 660.\n\n'959 Appellate Tribunal came to the conclusion that the tribunal had no J\n\n0 Urisdiction to award house rent The Patna Ekctdc supply allowance when the dispute referred to it for adjudica- Co., Ltd .. Patna tion was about free quarters.\n\nIt is thus clear that industrial tribunals have conn, Patna sistently refused to entertain a claim for housing Elect>ic supply accommotlation or for the grant of a special and sepa- Workers' Union __ rate housing allowance against their employers. That\n\nGajendrngadka, J. is why in making the award under appeal the tribu,\n\nnals below were at pains to emphasise the fact that the scheme sanctioned by the Bihar Government made the position substantially different so far as Bihar was concerned.\n\nThe problem of housing industrial labour has been the subject-matter of some legislative enactments.\n\nAs regards the workers employed in Plantations, the Plantations Labour Act, 1951 (69 of 1951), provides that it shall be the duty of every employer to construct and maintain for every worker and his family residing in the plantation necessary housing accommodation subject to the other provisions of the Act.\n\nHousing Boards have also been established in different States to tackle the larger problem of housing in general.\n\nThe Bombay Housing Board Act, 1948 (Born. 69 of 1948), the Mysore Labour Housing Act, 1949 (Mys. 28 of 1949), the Madhya Pradesh Housing Board Act, 1950 (Madhya Pradesh 43 of 1950), the Hyderabad Labour Housing Act, 1952 (Hyd. 36 of 1952), the Saurashtra Housing Act, 1954 (Saurashtra 32 of 1954) and the U. P. Industrial Housing Act, 1 1955 (U. P. 32 of 1955), are attempts made by the respective States to nieet their responsibility in the matter of providing housing accommodation to its citizens in general and to industrial labour in particular.\n\nThis problem appears to have been considered by the Planning Commission in its report on the Second Five Year Plan. Chapter 26 of the re.port deals with the general problem of housing and ch. 27 deals with labour policy and programmes. The discussion of the problem in these two chapters shows that housing shortage can be conquered only by sustained ;:ind well\n\nplanned efforts made by the States and the industry together. It is a very big problem and involves the expenditure of a huge amount. Efforts are being made by the Central Government to invite the co-ope-\n\nI959\n\nThe Patna Electric Supply Co, Ltd., Patna ration of industrial employers to tackle this problem v. with the progressively increasing financial and other El~~; icP;~; ly assistance offered by the State Governments. But it Wotkers' Union is obvious that this problem cannot at present be tackled in isolation by industrial tribunals in dealing Gajend1agadkar J. with housing demands made by employees in individual cases. In the present economic condition of our industries it would be inexpedient to impose this additional burden on the employers. Such an imposition may retard the progress of our industrial development and production and thereby prejudicially affect the national economy.\n\nBesides such an imposition on the employers would ultimately be passed by them to the consumers and that may result in an increase in prices which is not desirable from a national point of view. It is true that the concept of social justice is not static and may expand with the growth and prosperity of our industries and a rise in our production and national income; but so far as the present state of our national economy, and the general financial condition of our industry are concerned it would be undesirable to think of introducing such an obligation on the employers today. That is why we think the industrial tribunals have very wisely refused to entertain pleas for housing accommodation made by workmen from time to time against their employers.\n\nIn the present case it is clear that the question about the financial ability of the appellant to meet the additional burden imposed by the award has not been considered at all. In fact the Tribunals below seem to have taken the view that since the appellant is bound by the scheme it is immaterial, if not irrele-\n\n- vant, to enquire whether the appellant would be able to meet the expenses involved in the construction of quarters as directed by the award. It is obvious that such a view proceeds on purely theoretical considerations wh~ have no relation to existing facts in regard to the financial position of the industry or the state of\n\nI959\n\nThe T'atna Electric Supfly Co., Ltd., Patna v.\n\nThe Patna\n\nnational economy. In fairness to the Tribunals we ought to add that if the tribunals had not taken an erroneous view about the effect of the scheme sanctioned by the Bihar Government they would not have granted the demand made by the respondent for housing accommodation. Since we hold that on the Elecfric supply merits the award cannot be sustained we do not think Workers' Union it is necessary to consider whether the expenditure\n\nGajcndragadkar J. involved in the construction of quarters would be admissible under the relevant provisions of the Electricity Act.\n\nApril 23.\n\nThe result is the appeal succeeds and the award under appeal is set aside. , In the circumstances of this case we think it would be fair that the parties should bear their own costs.\n\nAppeal allowed.\n\nDIN DAYAL SHARMA\n\nTHE STATE OF UTTAR PRADESH\n\n(JAFER !MAM and J. L. KAPUR, JJ.)\n\nCriminal Trial-Bribery and criminal miscond14ct-Accused committed to Court of Session-Law amended making such cases triable by Special Judge-Sessions Judge, if has jurisdiction to continue trial-Investigation by officer below Deputy Superintendent of Police-Whether trial vi(iated-Prevention of Corruption Act, I947 (II of Ig47), s. 5-A-Criminal Law (Amendment) Act, I952 (46 of\n\nI952), S. IO. .\n\nThe appellant was committed to the Court of Session for trial of offences under s. 5(2) Prevention of Corruption Act, 1947 and s. r6r Indian Penal Code. Shortly thereafter, the Criminal Law (Amendment) Act, 1952 came into force.\n\nAn Assistant Sessions Judge tried the appellant aud convicted him of the offences charged. The appellant contended that the trial was vitiated as the investigation had been mad~ by a police officer below the rank of Deputy Superintendent of Police and that the Assistant Sessions Judge had no jurisdiction to try the case as it was triable by a Special Judge. \"f< Held that, the Assistant Sessions Judge had jurisdiction to", "total_entities": 23, "entities": [{"text": "761\n\nTHE PATNA ELECTRIC SUPPLY CO., LTD.,\n\nPATNA", "label": "PETITIONER", "start_char": 36, "end_char": 84, "source": "metadata", "metadata": {"canonical_name": "THE PATNA ELECTRIC SUPPLY CO., LTD., PATNA", "offset_not_found": false}}, {"text": "THE PATNA ELECTRIC SUPPLY vVORKERS'\n\nUNION", "label": "RESPONDENT", "start_char": 86, "end_char": 128, "source": "metadata", "metadata": {"canonical_name": "THE PATNA ELECTRIC SUPPLY WORKERS UNION", "offset_not_found": false}}, {"text": "P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 143, "end_char": 163, "source": "metadata", "metadata": {"canonical_name": "P.B. GAJENDRAGADKAR", "offset_not_found": false}}, {"text": "K. N. WANCHOO, JJ.", "label": "JUDGE", "start_char": 169, "end_char": 187, "source": "metadata", "metadata": {"canonical_name": "K.N. WANCHOO", "offset_not_found": false}}, {"text": "Companies Act", "label": "STATUTE", "start_char": 5378, "end_char": 5391, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Electric Supply Act, 1948", "label": "STATUTE", "start_char": 5680, "end_char": 5705, "source": "regex", "metadata": {}}, {"text": "s. 7", "label": "PROVISION", "start_char": 5795, "end_char": 5799, "source": "regex", "metadata": {"linked_statute_text": "the Electric Supply Act, 1948", "statute": "the Electric Supply Act, 1948"}}, {"text": "s. 10(1)", "label": "PROVISION", "start_char": 5810, "end_char": 5818, "source": "regex", "metadata": {"linked_statute_text": "the Electric Supply Act, 1948", "statute": "the Electric Supply Act, 1948"}}, {"text": "Industrial Disputes Act", "label": "STATUTE", "start_char": 5826, "end_char": 5849, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Electricity Act", "label": "STATUTE", "start_char": 8102, "end_char": 8117, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Plantations Labour Act, 1951", "label": "STATUTE", "start_char": 30988, "end_char": 31016, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Bombay Housing Board Act, 1948", "label": "STATUTE", "start_char": 31365, "end_char": 31395, "source": "regex", "metadata": {}}, {"text": "Mysore Labour Housing Act, 1949", "label": "STATUTE", "start_char": 31420, "end_char": 31451, "source": "regex", "metadata": {}}, {"text": "Madhya Pradesh Housing Board Act, 1950", "label": "STATUTE", "start_char": 31475, "end_char": 31513, "source": "regex", "metadata": {}}, {"text": "Hyderabad Labour Housing Act, 1952", "label": "STATUTE", "start_char": 31547, "end_char": 31581, "source": "regex", "metadata": {}}, {"text": "Saurashtra Housing Act, 1954", "label": "STATUTE", "start_char": 31605, "end_char": 31633, "source": "regex", "metadata": {}}, {"text": "Industrial Housing Act", "label": "STATUTE", "start_char": 31672, "end_char": 31694, "source": "regex", "metadata": {}}, {"text": "Electricity Act", "label": "STATUTE", "start_char": 35198, "end_char": 35213, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Prevention of Corruption Act", "label": "STATUTE", "start_char": 35790, "end_char": 35818, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 5", "label": "PROVISION", "start_char": 35839, "end_char": 35843, "source": "regex", "metadata": {"linked_statute_text": "Prevention of Corruption Act", "statute": "Prevention of Corruption Act"}}, {"text": "s. 5(2)", "label": "PROVISION", "start_char": 35986, "end_char": 35993, "source": "regex", "metadata": {"linked_statute_text": "Prevention of Corruption Act", "statute": "Prevention of Corruption Act"}}, {"text": "Prevention of Corruption Act, 1947", "label": "STATUTE", "start_char": 35994, "end_char": 36028, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 36040, "end_char": 36057, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}]}
{"document_id": "1959_2_776_780_EN", "year": 1959, "text": "I959\n\nThe T'atna Electric Supfly Co., Ltd., Patna v.\n\nThe Patna\n\n776 SUPREME COURT REPORTS [1959) Supp.\n\nnational economy. In fairness to the Tribunals we ought to add that if the tribunals had not taken an erroneous view about the effect of the scheme sanctioned by the Bihar Government they would not have granted the demand made by the respondent for housing accommodation. Since we hold that on the Elecfric supply merits the award cannot be sustained we do not think Workers' Union it is necessary to consider whether the expenditure\n\nGajcndragadkar J. involved in the construction of quarters would be admissible under the relevant provisions of the Electricity Act.\n\nApril 23.\n\nThe result is the appeal succeeds and the award under appeal is set aside. , In the circumstances of this case we think it would be fair that the parties should bear their own costs.\n\nAppeal allowed.\n\nDIN DAYAL SHARMA\n\nTHE STATE OF UTTAR PRADESH\n\n(JAFER !MAM and J. L. KAPUR, JJ.)\n\nCriminal Trial-Bribery and criminal miscond14ct-Accused committed to Court of Session-Law amended making such cases triable by Special Judge-Sessions Judge, if has jurisdiction to continue trial-Investigation by officer below Deputy Superintendent of Police-Whether trial vi(iated-Prevention of Corruption Act, I947 (II of Ig47), s. 5-A-Criminal Law (Amendment) Act, I952 (46 of\n\nI952), S. IO. .\n\nThe appellant was committed to the Court of Session for trial of offences under s. 5(2) Prevention of Corruption Act, 1947 and s. r6r Indian Penal Code. Shortly thereafter, the Criminal Law (Amendment) Act, 1952 came into force.\n\nAn Assistant Sessions Judge tried the appellant aud convicted him of the offences charged. The appellant contended that the trial was vitiated as the investigation had been mad~ by a police officer below the rank of Deputy Superintendent of Police and that the Assistant Sessions Judge had no jurisdiction to try the case as it was triable by a Special Judge. \"f< Held that, the Assistant Sessions Judge had jurisdiction to\n\ntry the case. Section IO of the Criminal Law (Amendment) Act, r959 1952 transferred only cases pending before Magistrates to Special Judges but did not transfer cases which had been committed to Din Dayal Sha.ma Court of Session before the Act came into force. v.\n\nAsgarali Nazarali Singaporewalla v. The State, [1957] S.C.R.\n\nThe State of 678, relied on.\n\nUttar Pradesh Held further that, the conviction was not vitiated by the investigation having been made by an officer below the rank of a Deputy Superintendent of Police. If the matter had been urged before the Courts at an early stage it would have had to take steps to get the illegality cured by ordering fresh investigations.\n\nBut the appellant could not be permitted to raise the questions whether the objection regarding investigation had been taken at the earliest stage as the question had not been raised in the Courts below.\n\nH. N. Rishbud v. The State of Delhi, [1955] r S.C.R. n50, relied on.\n\nCRIMINAL\n\nAPPELLATE\n\nJURISDICTION: Criminal Appeal No. 95 of 1957.\n\nAppeal by special leave from the judgment and order dated December 16, 1955, of the Allahabad High Court in Criminal Revision No. 1403 of 1953, arising out of the Judgment and order dated August 6, 1953, of the Court of the Additional Sessions Judge at Meerut in Criminal Appeal No. 225 of 1953.\n\nH.J. Umrigar and K. L. Mehta, for the appellant.\n\nG. 0. Mathur, 0. P. Lal and G. N. Dikshit, for the respondent.\n\n1959. April 23.\n\nThe Judgment of the Court was delivered by IMAM, J.-The appellant was convicted under s. 5(2) Imam J. of the Prevention of Corruption Act and under s. 161 of the Indian Penal Code and sentenced to one year's rigorous imprisonment on each count. The sentences were made to run concurrently.\n\nOn the facts found by the courts below the appellant accepted Rs. 20/- as illegal gratification from one Malekchand who had applied for allotment of a house.\n\nThe appellant was employed at that time as a clerk in the office of the District Relief and Rehabilitation Office, Meerut. The aforesaid sum of money was accepted by the appellant as bribe with a view to getting a house allotted to Malekchand. There can be 98\n\n. '\n\n'959 no question that., on the facts found, the appellant\n\nDin Dayal Sharma was guilty both uuder s. 5(2) of the Prevention of Cor-\n\n. v. ruption Act and under s. 161 of the Indian Penal\n\nThe State of Code.\n\nUttar Prndesh The first point taken was that the investigation had\n\nImam]. taken place by a police officer below the rank of Deputy Superintendent of Police.\n\nConsequently, the investigation had taken place in contravention of the provisions of the Prevention of Corruption Act.\n\nThe conviction of the appellant was therefore vitiated.\n\nThis point was taken before the Additional Sessions Judge who had heard the appeal of the appellant against his conviction. The Additional Sessions Judge referred to a decision of the Calcutta High Court\n\nwhich supported the submission made on behalf of the appellant. He also referred to a decision of the Allahabad High Court to the contrary effect.\n\nHe followed, as he was bound to follow, the decision of the Allahabad High Court. The decision of this Court in the case of H. N. Rishbud and Inder Singh v. 'Phe State of Delhi(') does not support the submission made by Mr. Umrigar on behalf of the appellant.\n\nHe, however, referred to a passage in the aforesaid cited decision at page 1164 to the effect that where a breach of a mandatory provision is brought to the knowledge of the court at a sufficiently early stage, the court, while not declining cognizance, would have to take the necessary steps to get the illegality cured and the defect rectified by ordering such investigation as the circumstances of the case may i; all for. It ha.s not been shown to our satisfaction that the attention of the trial court was drawn at an early stage to any breach of the provisions of.the Prevention of Corruption Act.\n\nThere had been an enquiry before commitment to the Sessions.\n\nIt is clear that during these proceedings before commitment no objection was raised that the investigation had taken place by a police officer below the rank of Deputy Superintendent of Police in contravention of the provisions of the Prevention of Corruption Act. The decision of this Court was given on December 14, 1954, and the High Court j).1dgment in the present case was delivered on\n\n{I) [1955] I S.C.R. u50, u64.\n\n',,.\n\n\"December 16, 1955. No point was taken before the 1959 High Court to the effect that the investigation had n D - 15, .b db ffi 1 h kfD u1aya11a7ffl.4 een ma e y an o cer be ow t e ran o eputy v.\n\nSuperintendent of Police in contravention of the pro- The stat• of visions of the Prevention of Corruption Act. Such an Uttar Pradesh objection should have been taken if the appellant was prepared to establish before the High Court that the. 1\"'\"m J. objection had been taken at a sufficiently early stage and that in view of the decision of this Court in the case cited the trial court ought not have proceeded with the trial unless the defect had been removed.\n\nThe decision of this Court in the case cited is clear, however, that generally a conviction is not vitiated because there had not been strict compliance with the provisions of the Prevention ofCurruption Act in the matter of investigation by a police officer.\n\nAs to whether the objection was taken at a siifficiently early stage is a question of fact and ought to have been raised in the High Court as the decision of this Court in the case cited had been delivered something like a year before. As this point in this form was not raised before the High Court we cannot allow it to be raised at this stage.\n\nIt was next contended that the Assistant Sessions Judge who tried the case had no jurisdiction to try the case as it was triable by a Special Judge only. It is clear, however, that the case had been committed to the Court of Session before the Criminal Law (Amendment) Act,' 1952, came. into force. Under s. IO of this Act all cases pending before the Court of a Magistrate were transferred to the Court of a Special Judge .. Section 10 did not purport to transfer c11oses, pending in the Court of Session at the commencement of the Act, to the Court of the Special Judge. In the case of Asgarali Nazarali Singaporewalla v. The State('}, this Court observed \" The cases which were pending before the courts of sessions did not require to be so transferred because they would be tried by the procedure obtaining in the courts of sessions ancl\n\nnothing further required to be done.\" It seems clear to us, therefore, that the Assistant Sessions Judge had jurisdiction to try the case as the same had been\n\n{I) [1957] S.C.R. 678, 686.\n\n. r959 pending in the court of Session when the Act came . ·. - into force. Din Dayal Sha, ma . . • v.\n\nThe third content10n raised was that the courts The state of below had not correctly appreciated the nature, extent u11a .. P; adesh and the quantum of proof required for raising the presumption under s. 4 of the Prevention of Corrup- Im, am J. tion Act. The High Court's judgment does not show that that Court in any way raised any presumption under s. 4 against the appellant. The following passage from the High Court's judgment would make this clear:\n\n\"It was next contended that the evidence on the\n\necord does not satisfactorily prove that the sum of Rs. 20 was received by the applicant as illegal gratification. The finding on this point is a finding of fact. I have gone through the judgment of. both the courts below and . I see no satisfactory reason to disagree with the concurrent finding of both the courts on this -~ point. There is ample evidence on behalf of the prosecution to the conclusion that the sum of Rs. 20 was\n\n~ paid by Malekchand to the applicant on his demand in order to secure the allotment of a house. There does not appear any satisfactory reason why Malekchand should have paid Rs. 20 to the applicant to procure wheat.for him.\" There is, therefore, no question of. any presumption being raised against the appellant. On the contrary, his defence that he had taken the sµm of Rs. 20 from l\\Ialekchand to purchase wheat for him was disbelieved and l\\falekchand's evidence that he had taken this money in order to secure an allotment of a house for l\\Ialekchand was accepted. There appears to be no substance in the point raised.\n\nIt was next urged that the matter of sentence may be considered. The incident took place in 1951 and the appellant has been on bail and it would not bo desirable to send him back to jail. The sentence of one year's imprisonment for corruption by a public servant cannot, however, be considered as unduly severe.\n\nThe appeal is accordingly dismissed.\n\nAppeal dismissed •", "total_entities": 23, "entities": [{"text": "Electricity Act", "label": "STATUTE", "start_char": 656, "end_char": 671, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "DIN DAYAL SHARMA", "label": "PETITIONER", "start_char": 886, "end_char": 902, "source": "metadata", "metadata": {"canonical_name": "DIN DAYAL SHARMA", "offset_not_found": false}}, {"text": "THE STATE OF UTTAR PRADESH", "label": "RESPONDENT", "start_char": 904, "end_char": 930, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF UTTAR PRADESH", "offset_not_found": false}}, {"text": "L. KAPUR, JJ.", "label": "JUDGE", "start_char": 951, "end_char": 964, "source": "metadata", "metadata": {"canonical_name": "J.L. KAPUR", "offset_not_found": false}}, {"text": "Prevention of Corruption Act", "label": "STATUTE", "start_char": 1248, "end_char": 1276, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 5", "label": "PROVISION", "start_char": 1297, "end_char": 1301, "source": "regex", "metadata": {"linked_statute_text": "Prevention of Corruption Act", "statute": "Prevention of Corruption Act"}}, {"text": "s. 5(2)", "label": "PROVISION", "start_char": 1444, "end_char": 1451, "source": "regex", "metadata": {"linked_statute_text": "Prevention of Corruption Act", "statute": "Prevention of Corruption Act"}}, {"text": "Prevention of Corruption Act, 1947", "label": "STATUTE", "start_char": 1452, "end_char": 1486, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 1498, "end_char": 1515, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Court of Session before the Act", "label": "STATUTE", "start_char": 2231, "end_char": 2262, "source": "regex", "metadata": {}}, {"text": "s. 5(2)", "label": "PROVISION", "start_char": 3563, "end_char": 3570, "source": "regex", "metadata": {"statute": null}}, {"text": "Prevention of Corruption Act", "label": "STATUTE", "start_char": 3586, "end_char": 3614, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 161", "label": "PROVISION", "start_char": 3625, "end_char": 3631, "source": "regex", "metadata": {"statute": null}}, {"text": "Indian Penal Code", "label": "STATUTE", "start_char": 3639, "end_char": 3656, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 5(2)", "label": "PROVISION", "start_char": 4291, "end_char": 4298, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 161", "label": "PROVISION", "start_char": 4353, "end_char": 4359, "source": "regex", "metadata": {"statute": null}}, {"text": "Prevention of Corruption Act", "label": "STATUTE", "start_char": 4650, "end_char": 4678, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Prevention of Corruption Act", "label": "STATUTE", "start_char": 5926, "end_char": 5954, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Prevention of Corruption Act", "label": "STATUTE", "start_char": 6254, "end_char": 6282, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Prevention of Corruption Act", "label": "STATUTE", "start_char": 6726, "end_char": 6754, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Section 10", "label": "PROVISION", "start_char": 8143, "end_char": 8153, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4", "label": "PROVISION", "start_char": 9054, "end_char": 9058, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4", "label": "PROVISION", "start_char": 9204, "end_char": 9208, "source": "regex", "metadata": {"statute": null}}]}
{"document_id": "1959_2_781_797_EN", "year": 1959, "text": "-------.-- ~---·\n\n(2) S.O.R. SUPH.EME COURT HEPOHTS > ~781 ·\n\nUJAGAR SINGH,\n\nv. l\\IST. JEO (JAFER b1A~1, A. K. SARKAR and SunnA RAO, JJ.)\n\nCustomary Law-Proof of custom-TVhm can be taken judicial notice of-]at agriculturists of the Punjab-Sister inheriting brother's property in preference to collaterals-Indian Evidence Act, r872 (rof r872), s. 57(r). The question involved in this appeal was whether under the customary law of the Punjab a sister was a preferential heir in respect of her brother's self-acquired property, to a collateral.\n\nThe respondent, the sister, relied on a custom, which she termed a special custom; and on that basis claimed her brother's pro- . perty, and the appellant, a collateral of the 8th degree of her brother, resisted her claim relying solely, on a general custom stated in paragraph 24 of the Rattigan's Digest of the Customary Laws of the Punjab to the effect that sisters were excluded by collaterals in the matter of inheritance to non-ancestral property.\n\nThe Subordinate Judge, and the District Judge on appeal, held in favour of the appellant but the High Court revei:sed their decisions holding that, there was no such general custom as recorded by Rattigan and that it was in any event for the appellants to prove that custom and this he had failed to do. The High Court also held that the respondent had succeeded in proving the custom set up by her •. It was contended on behalf of the appellant that the High Court was in error in placing the onus of proving the custom on him since the custom was a general custom as stated by Rattigan.\n\nIIe/d, that no distinction could be made bet.ween a general custom or other customs so far as the need of proof \\Vas concerned and the ordinary rule was that all customs, general or otherwise, had to be proved unless. by repeated recognition by the courts a custom had become entitled to judicial notice under s. 57(1) of the Evidence Act.\n\nRaja Rama Rao v. Raja of Pittapt<r, (1918) LR. 45 LA. 148, relied on.\n\nAlthough there could be no doubt that Rattigans Digest was of the highest authority on questions of custom of the Punjab, it was not possible, regard being had to the formidable array of conflicting decis; ons of the courts as to its existence, to take judicial notice of the custom mentioned in paragraph 24 of the Digest, without further proof.\n\nCase-law reviewed.\n\nAlthough the respondent had in the plaint relied on a custom and termed it a special custom, that could not amount to an\n\nApril a3.\n\n' \\ '\" .. - \\\n\n. r959 admission which would obviate the , necessity of proof of the general customs or its. terms by the appellant.\n\nUjaga, Singh Even supposing that the High Court was not correct in its v. finding that the respondent had proved. the custom entitling her\n\nMst feo to succeed, as the custom set up by the appellant had not also been established, s. S of the Punjab Laws Act, 1872, applied and the case had to be decided by the personal law of the parties.\n\nThe respondent was entitled to base her claim on the personal _ law although in her plaint she had relied on a custom. The per- ---- -· sonal law of the parties was the Hindu law and the respondent was entitled to succeed under that law also.\n\nDaya Ram v. Sahel Singh, no P.R. 1906, Abdul Hussein Khan v. Bibi Sona Dero, (1917) L.R. 45 I.A. 10 and Mst. Fatima Bibi v. Shah Nrrwaz, (1920) I.L.R. 2 Lah. 98, relied on.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No . 296 of 1955. Appeal by special leave from tho judgment and decree dated September 8, 1952, of the Punjab High Court in Civil Regular Second Appeal No. 327of1948, arising out of the judgment and decree dated November 21, 1947,.of the Court of District Judge, Amritsar, in Appeal No. 212 of 1946 from the judgment and decree dated August 20, 1946, of the Subordinate Judge, 1st Class, Amritsar, in Suit No. 297 of 1945.\n\nAchhru Ram and R. S. Narula, for the appellant.\n\nGurbachan Singh and Madan Lal Kapur, for the respondent.\n\n1959. April 23. The Judgment of the Court was delivered by Sa•••• f.\n\nSaBKAR, J.-The suit out, of which this appeal\n\narises concerns the right to certain plots of land in\n\n- village Sultanwind, Tehsil and District Amritsar in the Punjab. It raises a question of the Punjab customs.\n\nSahib Singh, the last male owner of the lands in dispute, died in December 1918 leaving a widow Nihal Kaur. The widow succeeded to the lands but on her remarriage soon thereafter, she was divested .of them and they passed to Sahib Singh's mother, Kishen Kaur who died on November 12, 1942.\n\nOn Kishen Kaur's death disputes arose between Sahib Singh's sister, Jeo, the respondent in this appeal\n\nand his agnatic relation, the appellant Ujagar Singh, as to the ownership of the lands. The Tehsildar entered the respondent's name as the owner of the lands in the revenue records but on appeal by the appellant, the Collector of Amritsar directed the name of the respondent to be. removed and the appellant's name to be entered in its place.\n\nOn June 11, 1945, the respondent filed a suit against, ' the appellant asking for a declaration that she was the owner of the lands. In paragraph 3 of the plaint it was stated that the respondent \"came into possession of the properties left by Kishen Kaur, as the heir of her father and brother, according to the Zamindara Custom prevalent in .Mauza Sultanwind among the people of the Got (Sub-caste) Bheniwal and the custom of the family of her father \". In paragraph 5 it was stated, \" According to the afore-mentioned special custom, the right of inheritance of the daughter and her descendants and in their absence that of the sister and her descendants to the property left by her father and brother is preferential to that of the collaterals beyond the fifth degree; no matter whether the property is ancestral or self-acquired.\" The defence taken in the written statement of the appellant was that \" According to the General Custom and the Custom of the District of A:qnitsar, the plaintiff as his sister is in no way the heir of the property left by (her) brother in presence of the reversionary heirs, no matter whether the land is ancestral qua reversionary heirs or it is self acquired. There is no particular family, Got or village custom of the District of Amritsar.\" In substance, the position taken by the appellant was that he as the agnatic relation or collateral of Sahib Singh was entitled to the properties under the general custom of the Punjab in preference to the respondent.\n\nThe question that the suit involved was, who was the preferential heir of Sahib Singh.\n\nThe suit was heard by the Subordinate Judge, Amritsar, who found that the appellant was a collateral of Sahib Singh of the eighth degree and that the properties in dispute were not ancestral. He held that the respondent had based her claim on a special\n\nr959\n\nU jagar Singh\n\nMst. j eo\n\nSarkar ].\n\nI959\n\nUjagar Singh v.\n\nMst. ]eo\n\nSatkar ].\n\ncustom but bad not been able to establish it by necessary evidence and therefore the appellant was to be considered as the preferential heir under the general custom.\n\nThe respondent then appealed to the District Judge, Amritsar. That learned Judge confirmed the findings of the Court below that the land was not ancestral and that the appellant was a collateral of Sahib Singh of the eighth degree. He then held that the general custom of the Punjab among the agriculturists which the parties were, was, as stated in para. 24 of Rattigan's Digest of the Customary Law of the Punjab, that \"sisters are usually excluded as well as their issues \" and therefore put the onus of proving any special custom entitling the sister to succeed on the respondent. On the evidence led by the respondent he came to the conclusion that she had failed to discharge the onus and thereupon dismissed the appeal.\n\nThe respondent took the matter up in further appeal to the High Court of Punjab. Kapur J. who delivered the main judgment of the High Court, observed that para. 24 of Rattigan's Digest did not lay down the custom correctly and that the statement there was too broad. He held that the onus of proving the custom whereby a sister was exoluded from the inheritance lay on the appellant and that he had failed to discharge that onus.\n\nHe also held that even if the onus lay on the respondent of proving a custom giving her the right to succeed, she had succeeded in discharging that onus. Soni J., another member of the bench which heard the appeal, delivered a short judgment in effect agreeing with the view of Kapur J.\n\nIn the result the High Court allowed the appeal and upheld the respondent's claim.\n\nThe present appeal is from this judgment of the High Court. .\n\nIt is not in dispute that the parties belong to an agriculturist J at tribe and are members of the Bheniwal sub-caste of village Sultanwind in Tehsil and District Amritsar. The genealogical table on the record would show that the appellant was a ninth degree collateral of Sahib Singh and this is what the High Court found. It was not in dispute in the High Court\n\nnor before us that the properties were not the ancestral x959 properties of Sahib Singh. h 1\n\nUjagar Singh Mr. Achhru Ram appearing fort e appe lant conv. tended that the learned Judges of the High Court . Mst. Jeo were wrong in placing the onus on his client.\n\nHis /r - contention was that the general custom in the Punjab .\n\nSarkar J. among the agriculturist tribes was that sisters were excluded by collaterals in the matter of succession to both ancestral and non-ancestral properties and that custom had been correctly set out in Rattigan's Digest.\n\nThat being so, according to him, the respondent was not entitled to the properties unless she established a special custom of the tribe or family, entitling her to succeed in preference to the collaterals and the onus of doing this must, therefore, be on her. He contended that she had failed to discharge the onus.\n\nEniinent Judges have from time to time pointed out that the use of the expression \" the general custom of the Punjab\" fa inaccurate. Plowden, J. in Ralla v.\n\nBuddha (1) at page 223 said, \"It seems expedient to point out that there is strictly speaking no such thing as a custom or a general custom of the Punjab, in the same sense as there is a common law of England,- a general custom applicable to all persons throughout the province, subject (like the English common law) to modification in its application, by a special custom of a class, or by a local custom.\" Young C. J. said in Mussammat Semon v. Shahu (2), \"There is no such thing as general customary law known to the Legislature.\" In Kesar Singh v. Achhar Singh (3) Addison A. 0. J. said that the expression \"general custom of the Punjab \" was clearly a misnomer.\n\nThe reason given for saying that there is no such thing as general custom in the Punjab is that custom there is tribal and even with the same tribe there are different customs for different localities. So Sir Charles\n\nRoe had said in his Tribal Law in the Punjab, \" Under such circumstances, seeing that the origin of all the tribes is not the same, and that even with\n\n(I) 50 P.R. 1893.\n\n(2) (1934) l.L.R. I7 Lah, IO, rr.\n\n(3) (I935) I.L.R. i7 Lah. Ior, 106.\n\nI959\n\nUjagar Singh v.\n\nMd. ]eo\n\nSarkar ].\n\ntribes of the same origin local and social conditions have greatly differed, it would be impossible that there could be a single body of Customary or Tribal law, common to the whole of the Punjab\": see Rattigan's Digest (13th Ed.) p. 157. Each tribe has its own customs 0 and in the Punjab there are many tribes.\n\nNone the less however the expression \" general custom of the Punjab \" has been frequently used. It has been used for a purpose which appears clearly from the observations of Addison J. in Kartar Singh v.\n\nMst. Preeto (1), set out below:\n\n\" In fact it had become customary even in the Courts to look upon custom as a thing generally followed and to place the burden of proof upon any person who asserted that his custom was not the same as the so called general custom of the Province. If this person succeeded in proving the custom he alleged, the name, ' special custom ' was given to it.\" The reported decisions very often proceeded on the basis that if there was a general custom, it did not have to be proved; that anybody wishing to rely on a custom at variance with the general custom, must prove it or fail in his claim.\n\nIt seems to us wrong to say that a general custom need never be proved. It is stated in Halsbury's Laws of England (3rd Ed.) Vol. 11, Art. 319 at p. 171, \"All customs of which the Courts do not take the judicial notice must be clearly proved to 'exist-the onus of est:i.blishing them being upon the parties relying upon their existence\". No distinction is here made between a general custom and other customs. Section 48 of the Evidence Act also contemplates the proof of a general custom. In Daya Ram v. Sohel Singh (2), Robertson J., said at p. 410:\n\n\" ......... It lies upon the person asserting that he is ruled in regard to a particular matter by custom, to prove that he is so governed, and not by personal law, imd further to prove what the particular custom is.'' These observations were approved by the Judicial\n\n(1) (1935) I.L.R. 17 Lah. 296, 299.\n\n(2) uo P.R. 1906,\n\n(2) S.C.R. SUPREME COURT REPOHTS 787\n\nCommittee in Abdul Hussein Khan v. Bibi Sona Dero (1).\n\nIt therefore appears to us that the ordinary rule is that all customs, general or otherwise, have to be proved.\n\nUnder s. 57 of the Evidence Act however nothing need b~ proved of which courts can take judicial notice. Therefore it is said that if there is a custom of which the courts can take judicial notice, it need not be proved. Now the circumstances in which the courts can take judicial notice of a custom were stated by Lord Dunedin in Raja Rama Rao v. Raja of Pittapur (2), in the following words, \" When a custom or usage, whether in regard to a tenure or a contract or a family right, is repeatedly brought to the notice of the Courts of a country, the Courts may hold that custom or usage to be introduced into the law without necessity of proof in each individual case.\" When a custom has been so recognised by the courts, it passes into the law of the land and the proof of it then becomes unnecessary under s. 57(1) of the Evidence Act. It appears to us that in the courts in the Punjab the expression \"general custom\" has really been used in this sense, namely, that a custom has by repeated recognition by courts, become entitled to judicial notice as was said in Bawa Singh v. Mt. Taro (3) and Sukhwant Kaur v. Balwant Singh (4).\n\nIs there then a custom that sisters are excluded by collaterals in the matter of inheritance to non-ancestral properties of_ which the coufts ought to take judicial notice? Mr. Achhru Ram contends that such is the position and it is recognised as such in Rattigan's Digest paragraph 24.\n\nThere is no doubt that Rattigan's Digest is of the highest authority on questions of the customs of the Punjab. But we can take judicial notice of a statement of custom therein contained only if it has been well recognised by decisions of courts of law. We have been taken through a large number of reported decisions on the question and it seems to us that the custom as stated by Rattigan\n\n(1) (1917) L.R. 45 I.A. 10, 13. (3)\n\n0 A.I.R. 1951 Simla 239.\n\n(2) (1918) L.R. 45 I.A. 148, 154, 155\n\n(4) A.LR. 1951 Simla 242.\n\nr959\n\nUjagar Sinzh\n\nMst. ]eo\n\nSarkar ].\n\nI959\n\nUjagar Singh\n\nMst. ] eo.\n\nSarkar ].\n\ncannot be said to have been so well recognised as to have become entitled to judicial notice from courts without further proof.\n\nWe find in the law reports a very large number of cases 011 the subject of a sister's right to inherit, one group of which takes the view that there is no custom excluding sisters from inheritance when there are collateral relations of the last male holder and another group taking , the contrary view. It would neither be possible nor profitable to refer to all these cases here but some may be mentioned.\n\nWe shall first mention the cases which do not recognise that a custom excluding sisters from the inheritance exists. In Makhan v. Musammat Nur Bhari (1) certain seventh degree collaterals of the last male holder sued the latter's sister for possession of his properties.\n\nNo claim appears there to have been made by the collaterals that there was any general custom entitling them to succeed in preference to the sister. The case having been returned to the Chief Court after the enquiry directed by it, Elsmie, J. held:\n\n\"The result of the further enquiry is to show that the plaintiffs have been unable to prove that they are by custom entitled to exclude the sister of the last owner. On the other hand, there is some evidence, though not much, to show that sisters have inherited.\n\nIt is indeed quite clear that no well defined custom is made out one way• or the other.\" The result was that the sister was held entitled to a share of the properties that came to her under the Mohammedan law, the parties being Mohammedans and no custom having been proved one way or the _ other. This was a case decided in 1884.\n\nIn Sheran v. Mussammat Sharman(') in which the collaterals were the plaintiffs and the sister the defendant, it was observed :\n\n\"On the question of inheritance, for the plaintiffs it has been contended that under the general Customary Law of the Punjab governing agricultural communities, the collaterals in the male line, fifth in\n\n(2) 117 P.R. 19or.\n\ndescent from the common ancestor, exclude sisters, but we are not prepared to assent to the wide proposition that such a general custom exists.\" It was also there held that there was no general custom in the Mooltan District whereby collaterals were preferred to a sister. In the end, no custom having been found to exist favouring either side and the parties being Mahomedans, the Mohammedan Ia w was applied and the sister got a share.\n\nIn Bholi v. Kahna (1), it was remarked that paragraph 24 of Rattigan's Digest was rather broadly stated and hardly warranted by the authorities quoted for and against.\n\nIn .i.'11ussammat Bhari v. Khanun (2), where the contest was between the ninth degree collaterals and a sister, the onus of proving that the collaterals were entitled to succeed in preference to the sister was placed on the collaterals who were the plaintiffs in the suit, and as the collaterals were unable to discharge the onus placed on .them, they lost.\n\nIn Mst. Fatima Bibi v. Shah Nawaz (3), it was said that the general rule laid down in paragraph 24 of Rattigan's Digest was open to the criticism that it was based mainly on authorities regarding ancestral property and on the generally accepted principles of agnatic succession which do not apply in the case of self acquired property. It was also held that the reported decisions were not such that a general rule could be said to exist on the question of a sister's right to succeed which was so widely accepted that it would justify a court in coming to any definite conclusion based on custom.\n\nIn Samo v. Sahu (4) it was said that the court below was wrong in placing the onus on the sister in a contest between her and the collaterals of the fourth degree, for, there was no such thing as general customary law known to the legislature and that Rattigan's Digest on Customary La.w merely showed that according to judicial decisions a large number of tribes were governed by certain customs in certain matters.\n\n(1) 3.'.i P.R. 1909,\n\n(2) 20 P. R. 1919.\n\n(3) (1920) I.L.R. 2 Lah. 98.\n\n(4) (1934) I. L. R. 17 Lah. 10, II.\n\nr959\n\nUjagar Singh v.\n\nMst. jeo\n\nSarkar j.\n\nUjagar Singh v. lvlst. /eo\n\nSarkar j.\n\nIn Jagat Singh v. Puran Singh (1), a case decided in 1944, it was oberved at p. 369:\n\n\"As I have indicated above there is no rule of special custom when a contest arises between a sister or a sister's son against a near collateral. Then one has to fall back on general custom. There is no rule of general custom on that point. It is no doubt true that in paragraph 24 of Rattigan's Digest it has been stated that sisters and their sons are in general not heirs but that has been said in very wide terms. It may be applicable to cases of ancestral property, but it i~ difficult to say there is any special rule of general custom when a contest arises between a sister and collaterals of the third or fifth degree and the property is self acquired.\"\n\nIn this case neither a general nor a special custom having been proved to exist, the Court based its decision on the personal law of the parties, namely, the Hindu law.\n\nThe cases decided since 1950 all take the view that there is no general custom giving collaterals preference to sisters in matters of inheritance. They are Sukhwant Kaur v. Balwant Singh (supra), Maulu v.\n\nMst. Ishro ('), Harnam Singh v. Mst. Gurdev Kaur(') and Shrimati Bui v. Ganga Singh (').\n\nWe now come to the other group of cases which seem to recognise the general custom excluding sisters from inheritance when there are collaterals of the last male holder.\n\nIn Hamira v. Ram Singh('), the Court approved of the decision in Shidan v. Fazal Shah('), the judgment in which is set out as an appendix to the report. In the latter case the contest was between a sister and collaterals of the seventh degree and it was held that the onus of proving a custom entitling the sisters to succeed rested on them and this was based on paragraph 24 of Rattigan's Digest, an entry in the Ri wajii-am which applied to the parties and certain reported decisions.\n\nObviously, Rattigan was relied upon.\n\n(x) (x944) 49 P.L.R 366.\n\n(3) (1957) 59 P.L.R. 6o9.\n\n(5) 134 P.R. 1907.\n\n(2) (1950) 52 P.L.R. 261.\n\n(4) (1959) 61 P.L.R. 145.\n\n(6) (1907) P.R. at p. 646,\n\n(2) S.C.R.\n\nSUPREME COURT RgJ:>ORTS 791\n\nIn Harnamon v. Santa Singh (1) it was said that the burden of proving that the sister was entitled to succeed in preference to a collateral lay on her.\n\nThe same view was taken in 1lfussammat Nurbhari v.\n\nAbdul Ghani Khan (2), Mussammat Hussein Bibi v.\n\nNigahia (3), Jagu v. Bhago (4), Began v. Ali Gohar( 5),\n\nKirpa v. Bakshi Singh (6) (case decided in 1944), Santi\n\nv. Ujagar Singh, Ex. D. 6 in the present case (decided in 1944) and Mussammat Ratni v. Harwant Singh (7).\n\nIn some of these cases paragraph 24 of Rattigan's Digest was expressly approved of as applying to nonancestral properties.\n\nIt will thus appear that there is a formidable array of authorities in support of either view. In this state of conflict of judicial decisions we are not prepared to say that a custom giving preference to collaterals over sisters in the matter of inheritance to non.ancestral properties has been so widely or uniformly recognised by courts as would justify us in taking judicial notice of it. It is important also to note that it is recognised that a Punjab custom is fluid and capable of adapting itself to varying conditions, as stated in Hassan v. Jahana (8) and that the decisions for the last ten years are uniformly against the view expressed in paragraph 24 of Rattigan's Digest. We there- • fore come to the conclusion that the High Court was right in its view that it could not be held on the authority of paragraph 24 in Rattigan's Digest that a general custom excluding' sisters from inheritance as against collaterals, existed.\n\nIt was then said that in the plaint it had been .admitted by the respondent that there was a general custom as alleged by the appellant and so no proof of that general custom was required in this case.\n\nWe do not think this contention is justified. No doubt in her plaint the respondent referred to a custom entitling her to succeed and termed it a special custom. We are anable to read the reference to a special custom as\n\n(1) (1912) 13 I.e. 7u.\n\n(3) (1919) l Lah. I.\n\n(5) A.I.R. 1934 Lah, 554.\n\n(7) (1948) 50 P.L.R. 249.\n\n(2) mo P.R. 1916.\n\n(4) (1926) 96 I.e. 907.\n\n(6) (1948) 50 P.L.R. 220.\n\n(8) 71 P.R. 1904.\n\nU jagar Singh\n\nMst. jeo\n\nSarkar }.\n\nI959 amounting to an admission of a general custom or its\n\nUjagar Singh terms.\n\nThat being the position we have to see if either side led any evidence in support of its claim. So far as the appellant is concerned he has relied on the alleged general custom and sought to support it by reference to paragraph 24 of Rattigan's Digest. It view of what we have said earlier we do not think that R.attigan's Digest can be taken as correctly laying down the custom on the point. Neither do we think that the reported decisions show the existence of any such general custom.\n\nThere is nothing else on wbich the appellant has sought to rely. \\Ve therefore think that the appellant has failed to establish the custom\n\n~1st. jeo\n\nSarkar ].\n\nalleged by him. ' We have next to see whether the respondent has proved the custom which she set up.\n\nWe think that she has. The High Court has discussed the evidence led by the respondent, and found it acceptable. We have no reason to take a contrary view. Some reference to the evidence may now be made. Ex. P. 4, Settlement Record of 1852, proves that in the village Sultanwind Sajja Si11gh and l\\fajja Si11gh succeeded to the properties of Nodh Singh as his sister's sons in the presence of collaterals. Mr. Achhru Ram contended that the statement in Ex. P. 4, that Sajja Singh and - ' Majja Singh were the sister's sons of Nodh Singh was wrong for, in Ex. P. 5, the Settlement Rcords of 1891 and 1892, they were described as the daughter's sons of Nodh Singh and Baghel Singh, his brother. He contended that on the authorities it is clear that on a conflict between two settlement records the later one in date has to be accepted. That appears to have been held in a number of cases of which Alo v.\n\nSher (1) may be mentioned. But it seems to us that this is a point which should have been raised in the trial Court which does not appear to have been done, for, then the respondent could have led evidence to show which of the two settlement records put the matter correctly. Ex. P. 9 which is a settlement record of 1852 of the same village, shows that on Gandhi's\n\n(1) A.I.R. 1927 Lab. 607.\n\ndeath his sister's son succeeded to his properties though there were collaterals. Mr. Achhru Ram's comment was that in 1852 things were so unsettled in the Punjab that no one cared for lands and that was the reason why the collaterals allowed Gandhi's sister's son to succeed to his 'properties. This is an explanation which we are unable to accept. Exhibit P. 7 is a settlement document of the Bheniwal tribe in the village Sultanwind prepared in 1891-92. It shows that Mst. Chandi, the sister of Buta Singh, succeeded to his properties. It was said that the pedigree did not show that any collateral was alive. But this is not right because it shows that Buta Singh's great grand uncle, Tara Singh, was alive. Mr. Achhru Ram says that that must be a mistake and Tara Singh who was Buta Singh's great grand uncle could not have been alive when the latter died. This again is a matter which should have been cleared up in the • trial Court and we do not think it right to speculate about it.\n\nIt remains to consider two entries in the Riwaji-iam.\n\nWe have first the Riwaji-i-am of 1913-14. The entry there is in this form :\n\n\"Q. 70.-Does property ever devolve on sisters and/or upon their sons?\n\nAll tribes.-The property never devolves upon sisters and their issues.\" At the foot the case of Bholi v. Kahna (1) is cited.\n\nNow it is well established that Ri waji-i-am entries are to be taken as referring to customs relating to succession to ancestral properties unless it is stated to be otherwise. So it was stated in the Full Bench decision of the Lahore High Court in Mst. Hurmate v.\n\nHoshiaru (2) at p. 235:\n\n\"It is reasonable, therefore, to assume that when manuals of Customary law were originally prepared and subsequently revised, the persons questioned, unless specifically told to the contrary, could normally reply in the light of their own interest alone and that, as stated above, was 9onfined to the ancestral property\n\n(r) 35 P.R. 1909.\n\n(2) (r943) I.L.R. 25 Lah. 228, 235.\n\nIOO\n\nI959 .\n\nU jagar Singh\n\nMst. jeo\n\nSarkar ].\n\nI959\n\nUjagar Singh\n\nv, Mst. jeo\n\nSarkar ].\n\n794 SUPREME COURT REPOH, TS [1959] Supp.\n\nonly. The fact that on some occasions the questioner had particularly drawn some distinction between ancestral and non-ancestral property would not have put them on their guard in every case, considering their lack of education and lack of intelligence in general. Similarly the use of the term \" in no case \" or \" under no circumstances\" would refer to ancestral . property only and not be extended so as to cover selfacquired property unless the context favoured that construction \".\n\nThe Full Bench was really authoritatively laying down a rule which had been the prevailing opinion in the courts in the Punjab. In the Riwaji-i-am of . 1913-14 we find nothing in the context to show that the answer there recorded was intended to apply to self acquired property. That being so, it does not prove any custom against the right of a sister to inherit the self acquired property of her brother.\n\nThe other Riwaji-i-am was that of the year 1940. ' It was in these terms:\n\n\"Q. 68.-Does property ever devolve upon sisters or sister's son ?\n\nAll tribe.-\n\n(1) In the case of an unmarried sister or sisters the property is entered in her or their name till marriage. (2) Married sister 'or sisters or their descendants did not get the property in any case.\"\n\nHere again there is nothing in the context to indicate that the answers were given in regard to nonancestral property. So this does not help the appellant either.\n\nIn this Riwaji-i-am eight instances are given. Some of them deal with the self acquired property. That does not in our opinion indicate that the answer recorded in the Riwaji-iam was intended to cover succession to self acquired property also. It is not disputed that the instances mentioned under the entries in the Riwaji-i-am are often collected by the officer in charge of the preparation of the record. It is impossible to say whether any, and if so, which, instance recorded in the Riwaji-i-am had been suppli((d\n\nby the tribesmen in answer to questions put to them by the Settlement Officer. It is not possible therefore to say that then~ is any indication-in the instances in this H, iwaji-i-am entry that the anS\\}'Cl'S were intended to cover self acquired property also.\n\nNow of the eight instances given rn the Riwaji-i-am two are concerned with self acquired property where there were no collaterals and the sisters were allowed to succeed. The remaining six are concerned with ancestral property.\n\nIn four of these, the last ma!e owner died without leaving any reversioner and in each such case the married sisters succeeded to the property. In the fifth one, the sisters were unmarried at the time of the brother's death and they were allowed to take possession of the properties.\n\nBut this instance shows that on their marriages taking place they were dispossessed of the properties which apparently thereupon went to the collaterals. These seven instances therefore do not help either side. They show that sisters were allowed to succeed in respect of both kinds of properties in the absence of any collaterals and that sisters were on their marriages divested of the ancestral properties to which they had succeeded on their brothers' deaths, they being at that time unmarried. The last instance deals with the Rajput Mohammedan tribe of Tehsil Ajnala which is in the District Amritsar, the district to which the parties to the present litigation belong. This instance shows that a sister was allowed to succeed to the ancestral property left by the brother in preference to his collaterals of the sixth degree.\n\nThis therefore is an instance of a custom in a neighbouring Tehsil under which sisters were allowed to succeed in the presence of collaterals nearer in degree than the collateral in the present case.\n\nIn these circumstances we agree with the learned Judges of the High Court that the respondent was able to prove acustom whereby a sister was entitled to succeed in preference to the collateral relations of her brother.\n\nWe think it also right to say that even if it had been held that the respondent was not able to establish a custom entitling her to succeed she would get the\n\nr959\n\nUjagar Singh v.\n\nMst. jeo\n\nSarkar J.\n\nI959\n\nUjagar Singh v.\n\nMst. ]eo.\n\nSarka\" ].\n\nproperties under the Hindu law. The parties are Sikhs to whorn the Hindu law applies. Since the Hindu Law of Inheritance (Amendment) Act, 1929, a sister is an heir under the Hinj:lu law in preference to collaterals and that Act would be applicable to the devolution in this case. It is however said that as the respondent had not made any claim in the plaint on the basis of Hindu law but on the contrary relied on custom, it was not open to her to fall back on the Hindu law on failing to establish the custom.\n\nWe do not think that this is the correct position.\n\nSection 5 of the Punjab Laws Act, 1872, provides that in questions regarding succession, the rule of decision shall be (a) any custom applicable to the parties;\n\n(b) the personal law of the parties except in so far as modified by custom or legislation. In the Full Bench case of Daya Ram v. Sohil Singh (1) Robertson, J., said at p. 410:\n\n\"It therefore appears to me clear that when either party to a suit sets up \"custom\" as a rule of decision, it lies upon him to prove the custom which he seeks to apply. If he fails to do so clause(b) of section 5 of the Punja.b Laws Act applies and the rule of decision must be the personal law of the parties subject to other provisions of the clause.\" As we have earlier said this observation was approved by the Judicial Committee in Abdul Hussain Khan v.\n\nBibi Sona Dero (').\n\nIn Fatima Bibi v. Shah Nawaz ('), a case to which we have earlier referred, the Court allowed the plaintiff's sisters, who had based their claim on custom and not on the personal law, to fall back on Mohammedan law, the personal law of the parties, on their failure to establish the custom, no custom against them having been proved by the collaterals.\n\nThere are a number of other authorities, to which it is not necessary to refer, in .which personal law was resorted to when no custom on either side was established. We agree that that is the correct view to take.\n\nWe therefore think that even if the respondent had been unable to prove the custom in\n\n(1) IIO P.R. 19o6. (2)\n\n(1917) L.R. 45 I.A. IO, 13. (3)\n\n(1920) I.L.R. 2 Lah. 98.\n\nher favour she is entitled to succeed in the suit on the basis of the personal law of the parties, namely, -the Hindu law.\n\nFurther, we see no prejudice to the appellant if such a course is adopted. It is not disputed that if the Hindu law applied, the respondent would be entitled to the properties in preference to the appellant.\n\nThe only defence to the claim under the Hindu law that the appellant could take would be a custom. The custom on which the appellant relied for his case was a general custom entitling the collaterals to succeed in preference to sisters. We have earlier held that no such general custom has been proved in this case.\n\nTherefore it seems to us in the interest of justice and for the reason that litigation should come to an end that it is right that the respondent should succeed in the suit as her brother's heir under the Hindu law.\n\nThere remains one other matter to be mentioned.\n\nThe respondent had filed an application for an order that by reason of certain agreements and certain proceedings arising out of the decree in her favour passed in this case by the High Court, the appellant should not have been given leave by this Court to institute the present appeal and the leave granted under Art. 136 of the Constitution should be revoked.\n\nAs, in our view, the respondent succeeds on the merits of the case we think it unnecessary to express any opinion on this question.\n\nIn the result we dismiss the appeal with costs.\n\nAppeal dismissed.\n\nI959\n\nU jagar Singh\n\nMst. }co\n\nSarkar .f.", "total_entities": 19, "entities": [{"text": "UJAGAR SINGH", "label": "PETITIONER", "start_char": 62, "end_char": 74, "source": "metadata", "metadata": {"canonical_name": "UJAGAR SINGH", "offset_not_found": false}}, {"text": "IST. JEO", "label": "RESPONDENT", "start_char": 82, "end_char": 90, "source": "metadata", "metadata": {"canonical_name": "MST. JEO", "offset_not_found": false}}, {"text": "A. K. SARKAR", "label": "JUDGE", "start_char": 105, "end_char": 117, "source": "metadata", "metadata": {"canonical_name": "A.K. SARKAR", "offset_not_found": false}}, {"text": "SunnA RAO, JJ.", "label": "JUDGE", "start_char": 122, "end_char": 136, "source": "metadata", "metadata": {"canonical_name": "K. 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{"document_id": "1959_2_798_814_EN", "year": 1959, "text": "Apri! 24\n\n798 SUPitEME COUHT ItEPOHTS [1959] Supp.\n\nBHINKA AND OTHEitS\n\nCHAHAN SINGH\n\n(S. K. DAS, A. K. SARKAR and K. SuBBA HAo, JJ.)\n\nAgricultural Tenancy-Jurisdiction of Revenue Court-Suit for eject1ncnt of person in occupation without title-Provisional order of Magistrate regarding possession, if a proper defence-U. P.\n\nTenancy Act, I939 (U. P. 17 of Ig39), s. I8o-Code of Criminal Procedure (V of I898), s. I45\n\nThese appeals arose out of suits for ejectment instituted in the I<.evenue Court by the respondent Zamindar against the appellants under s. 180 cif the U. P. Tenancy Act, 1939 (U. P. 17 of 1939).\n\nHis case was that the lands in suit were his sir lands and the appellants trespassed on the same on the basis of a wrong order of the Criminal Court. The case of the appellants was that they were admitted as hereditary tenants by the respondents. There was a previous proceeding under s. 145 of the Code of Criminal Procedure between the parties and the Magistrate found. possession with the appellants and directed that they should remain in possession till evicted by due process of law.\n\nThe Revenue Court which tried the suits found that the lands were sir lands of the respondent and the appellants were not hereditary tenants and did not take possession with the consent of the respondent. The Additional Commissioner on appeal and the Boa.rd of Revenue on second appeal, agreed with these findings of the Revenue Court and dismissed the appeals. The Board negatived the plea of the appellants that the suits were not triable by the Revenue Court. Section r8o of the U. P.\n\nTenancy Act, 1939, provides that a person taking or retaining possession of land without the consent of the person entitled to admit him into occupation and otherwise than in accordance with the provisions of law for the time being in force will be liable to ejectment thereunder. In view of the finding of the courts below that the appellants had not taken possession with the consent of the respondent, the question was whether they did so by virtue ol s. r45 of the Code of Criminal Procedure.\n\nHeld, that the provisions of s. r45 of the Code of Criminal Procedure authorised the Magistrate only to declare the actual possession of a party on a specified date and not to give possession or permit any party to take possession. He had no power under that section to decide questions of title or right to posses- - sion \\vhich a civil court a, Ione could decide.\n\nThe words \" taking \" and \" retaining \" were used by s. 180 of the Act in an independent and exclusive sense. 'fhe former referred to taking of possession illegally and the latter to taking of possession legally but subsequent retaining of it illegally.\n\nConsequently, the appellants whose possession had been found\n\nto be illegal from the very inception, could not be said to retain possession legally so as to be outside the scope of the section.\n\nIt was also clear that possession in accordance with law, such as was contemplated by s. 180 of the Act, meant possession with lawful title. The provisional Order of the Magistrate with regard to possession, irrespective of lawful rights of the parties, could not, therefore, enable the appellants to resist the suit nuder s. 180 of the Act.\n\nDinomoni Chowdhrani v. Barojo Mohini Chowdhrani, (1901) L.R. 29 I.A. 24, referred to.\n\nCIVIL\n\nAPPELLATE JURISDICTION: Civil Appeals Nos. 78 to 83 of 1959.\n\nAppeals by special leave from the judgment and orders dated July 28, 1954, of the U. P. Board of Revenue in Second Appeals Nos. 430-435 of 1953-54, arising out of the judgment and orders dated April 28, 1954, of the Court of the Additional Commissioner, Meerut Division, Meerut, in Appeals Nos. 455-460 of 1954 against the judgment and orders dated March 16, 1954, of the Addl. District Ma.gistrate, Meerut., in Cases Nos. 389-394 of 1950.\n\nB. 0. Misra, for the appellants.\n\nS. N. Andley, J. B. Dadachanji and Rameshwar Nath, for the respondent. 1959.\n\nApril 24.\n\nThe Judgment of the Court was delivered by\n\nIfJ59\n\nBhinka & Others\n\nCharan S-ingh\n\nSuBBA RAO, J.-These six appeals by special leave S11bba Rao J. were filed against the judgment of the Board of Revenue dated July 28, 1954.\n\nThe respondent was a Zamindar of Gadhi, Baghu and Santokpore Villages in Uttar Pradesh.\n\nHe claimed that the plaint-schedule lands were his Sir.\n\nThe appellants set up a dispute claiming that they were admitted by the respondent as hereditary tenants and that they were in possession of the said lands.\n\nAs the dispute was likely to cause breach of the peace, the Sub-Divisional Magistrate, Baghpat, took proceedings under s. 145, Code of Criminal Procedure, and attached the disputed lands on October 8, 1948, lJ>l1d directed them to be placed in possession of a superdgidar pending disposal of those proceedings.\n\nAfter\n\nBhinka & Others\n\nCharan Singh\n\nSubba Rao ].\n\nmaking the necessary enquiry, by an order dated March 20, 1950, he found that the appellants were in possession of the said lands and declared that they were entitled to be in possession thereof until evicted therefrom in due course of law.\n\nOn June 30, 1950, the respondent filed six suits in the Revt>nue Court (Additional Collector, Meerut) against the appellants under s. 180 of the U. P.\n\nTenancy Act (U. P. 17 of 1939), hereinafter called the Act, for evicting them from the said lands and for damages. He alleged therein that the disputed lands were his Sir lands and that the appellants trespassed on the same on the basis of a wrong order of the Criminal Court. The appellants pleaded, inter alia, that they had been admitted as hereditary tenants by the respondent after receiving from them 'a sum of Rs. 40,000 towards premium. The suits were consolidated, but were stayed on August 14, 1951, under r. 4 of the 1-tules made under the U. P. Ordinance No. III of 1951. On September 22, 1952, on an application made by the respondent, the Revenue Court ordered under r. 5 for restarting the trial of the suits.\n\nAfter the said order, the Revenue Court trltnsferred the suits to the Civil Court for retrial, but the first Additional Munsif, G hazia bad, to w horn the suits were transferred, held that the said suits were triable only by the Revenue Court and retransferred the same to that Court.\n\nThe Additional Collector, Meerut, held, on evidence, that the said lands were Sir and Khud lcasht of the respondent and that the appellants were not admitted thereto as hereditary tenants.\n\nThe appellants preferred six appeals against the decrees of the Additional Collector in the six suits to the Court of the Commissiouer at Meerut. The Additional Commissioner, who heard the appeals, held that one of the appeals filed by the legal representatives of Jahana, the plaintiff in the suit which gave rise to that appeal, had not been properly presented on the ground that Shri Brahmanand Sharma, Vakil, did not file in the suit any vakalat given to him by the legal representatives of the deceased and therefore the appeal had abated, and that as all the suits were consolidated with the\n\nconsent of the parties, the decision in the Ruit became final and operated as res judicata in the other appeals.\n\nOn the merits, he agreed with the trial Court in holding that the lands in dispute were Sir and that the appellants were not hereditary tenants. Thereafter, the appellants preferred six second appeals against the said order of the Additional Commissioner to the Board of Revenue at Allahabad. The Board of Revenue accepted the findings of the two Courts, and also it negatived the plea raised by the appellants for the first time to the effect that the suits were not maintainable in the Revenue Court. In the result, the appeals were dismissed. The present appeals were filed against the order of the Board of Revenue.\n\nThe learned Counsel for the appellants raised before us the following contentions: (1) The appeal by the legal representatives of J ahana against the order of the Additional Collector, Meerut, was properly presented to the Court of the Commissioner ; (2) assuming that the said appeal had abated, the decision of the Additional Collector in the suit giving rise to the said appeal would not operate as res judicata in the connected appeals; (3) the Revenue Court had no jurisdiction to try the suits; (4) as the suits had been stayed under r. 4 of the Rules made under the U. P.\n\nZamindari Abolition and Land Reforms Act, 1950,\n\nhereinafter called the Rules, they had abated under r. 5 of the said Rules; (5) the finding on issue one, namely, that the appellants were not hereditary tenants, was vitiated by errors of law; and (6) the finding on issue two', namely, \"to what damages, if any, was the plaintiff entitled\", was contrary to law inasmuch as the Additional Collector gave damages though neither the witnesses deposed to it nor the Advocate advanced any argument thereon.\n\nThe first two contentions need not detain us. As we are rejecting the contentions of the learned Counsel for the appellants on all the other points, the correctness of the decision of the Revenue Board on the said two points would not affect the result of the appeals. vVe do not, therefore, propose to express our opinion • thereon.\n\nIOI\n\n. I959\n\nBhinha &. Others\n\nCharan Singh\n\nSiebba Rao j.\n\n802 St.J:PREME COURT REPORTS [1959] Supp.\n\n'959 w e shall take the fifth contention next. That con-\n\nBh' k--;;;:- 0 h tention raises the question whether the appellants\n\nin av.\n\n1 ers were hereditary tenants of the disputed lands. The Cha•an Singh three Courts have concurrently held on a consideration of oral and documentary evidence that they were Subba Rao J. not hereditary tenants. The learned Counsel for the appellants made an attempt to reopen the said finding by contending that it was vitiated by the following errors of law: (i) Though the appellants filed a certified copy of the.khatauni of 1355 fasli, the- Courts did not draw the presumption, which they were bound to do, to the effect that the said certified copy was a genuine document and that the person who purported to have signed it had held the official character which he claimed to hold in the said document ; (ii) as the Magistrate made an order in favour of the appellants under s. 145 of the 'Code of Criminal Procedure, the Courts should have thrown the burden of proof on the respondent; (iii) the material evidence adduced on the side of the appellants was ignored; (iv) the Courts applied different standards of proof to the appellants and the respondent in regard to the certified copies of khatauni and khasra prepared by the same patwari, Ahmed Ali; and (v) the Courts also ignored the rights accrued to the appellants and ss. 10, 16 and 20 of the U. P. Tenancy Act. For convenience of reference and to distinguish the alleged errors of law from the main contentions, we shall refer to the former as points.\n\nThe first point, in the manner presented before us, does not appear to have been raised in any of the three Courts. Section 79 of the Evidence Act reads :\n\n\" The Court shall presume to be genuine every document purporting to be a certificate, ......... which is by law declared to be admissible as evidence of any particular fact, and which purports to be duly certified by any officer of the Central Government or of a State Government,. ............................................. .\n\nProvided that such document is substantially in the form and purports to be executed in the manner directed by law in that behalf.\n\nThe Court sha11 also presume that any officer by whom any such document purports to be signed or•\n\ncertified, held, when he signed it, the official character z959 which he c. laims in such paper\".\n\nEh. k \"' Oth U d h• • C • b d d h In a '-\"\" efS n er t IS section a ourt IS oun to raw t e v. presumption that a certified copy of a document is Charan Singh genuine and also that the officer signed it in the official character which he claimed in the said document.\n\nSubba Rao J.\n\nBut such a presumption is permissible only if the certified copy is substantially in the form and purported to be executed in the manner provided by law in that behalf. Section 4 of the Evidence Act indicates the limits of such a presumption. The relevant part of that section reads :\n\n\" Whenever it is directed by this Act that the Court shall presume a fact, it shall regard such fact as proved, unless and until it is disproved\".\n\nTo put it differently, if a certified copy was executed substantially in the form and in the manner provided by law, the Court raises a rebuttable presumption in regard to its genuineness. The khatauni of 1355 fasli with which we are concerned, gives the relevant details and purports to have been signed by Ahmed Ali, the patwari of the village. It cannot be disputed that the patwari was an officer appointed by the State Government and that he was authorized to issue certified copies of the record of rights.\n\nThe U. P. Land Records Manual gives the rules prescribing the form and the manner in which a certified copy of the record of rights should be issued. Paragraph 26 of the Manual confers upon him the power to give to the applicants certified copies from his record; and under\n\ncl. (d) of the said paragraph he should enter in his diary a note of such extracts. He should also note the amount of fee realised by him in the diary as well as on the extract. In this case neither the diary was produced to prove that the procedure prescribed was followed nor the extract to disclose that the officer made any note of payment. It cannot, therefore, be said that the certified copy was issued by the patwari in substantial compliance with the provisions of law governing such issue. If so, it follows that the Court is not bound to draw the presumption in regard to its genuineness.\n\nI959\n\nBhinka c;.. Others\n\nCharan Singh\n\nSubba llao j.\n\nThat apart, a Court is bound to draw only a rebuttable presumption in regard to its genuineness.\n\nIn this case the three Courts rejected the document on the ground that it was not genuine on the basis of not only the internal evidence furnished by the document but also on other evidence. They have given convincing reasons for doing so, and even if there was any rebuttable presumption, it was rebutted in the present case.\n\nNor is there any merit in the second point either.\n\nThe order of the Magistrate under s. 145 of the Code of Criminal Procedure may, at best, throw the burden of proof on the plaintiff; but in the present case the question of burden of proof is not material, for the findings of the three Courts were arrived at on a consideration of the entire evidence. Though the learned Counsel says that material evidence has been ignored by the Courts, he has not been able to point out what evidence has been excluded. The Courts\n\nhave considered the entire evidence placed before them and the findings were based on an appreciation of the said evidence. We are also unable to appreciate the contention that different standards of proof have been applied by the Courts in respect of the different parties. This argument is based upon the fact that the Additional Commissioner, while rejecting the certified copy of the . khatauni of 1355 fasli filed by the appellant, relied upon the certified copy of khasra dated June 28, 1948, filed by the respondent, though both of them were issued by the same patwari, Ahmed Ali.\n\nWe do not see any incongruity in the action of the Additional Commissioner.\n\nHe rejected the former as, for other reasons, he held that it was not genuine, and he relied upon the latter as he accepted its genuineness. The last of the points has not been made in any of the Courts below and indeed it does not arise on the finding that the appellants are not tenants. Sections 10, 16 and 20 of the U. P. Tenancy Act presuppose that the person claiming rights thereunder is a tenant, and, on the finding that the appellants are not tenants, there is no scope for invoking the said provisions. Presumably for that very reason,\n\nno question on the basis of those sections was raised\n\nI959 in the Courts below. The concurrent finding of the m. k--:- 011 three Courts to the effect that the appellants are not \"\" av. iers hereditary tenants is essentially one of fact and is not Charan Singh vitiated by any error of law.\n\nFollowing the usual practice of this Court, we must accept the finding.\n\nSubba Rao J.\n\nThe sixth contention, in our view, is not open to the appellants at this stage. The Additional Collector gave damages though he noticed the fact that no witness deposed in regard to damages and though the respondent's Counsel did not argue on that point. Notwithstanding the said fact, he gave damages on the basis of the annual rent of the holdings. The correctness of this finding was not canvasse.d either in the first appellate Court or in the second appellate Court; nor does the statement of case filed in this Court disclose any grievance on that score. In the circumstances, we do not feel justified to allow the appellants to raise that plea in this Court.\n\nWe may now advert to the main and substantial contention of the appellants, namely, that the suits are not maintainable in a Revenue Court. This question turns upon the interpretation of s. 180 of the Act.\n\nBefore reading the section, it would be convenient and useful to notice briefly the scheme of the Act relevant to the question raised. The Act, as the preamble shows, was passed to consolidate and amend the laws relating to agricultural tenancies (proprietary cultiva- . tion). It regulates the relationship between the landlords and the tenants in respect of the agricultural holdings. It confers exclusive jurisdiction on Revenue Courts in respect of rights inter se between the landlord and the tenant. It also reconciles the conflicting jurisdictions of Revenue and Civil Courts.\n\nBriefly stated, all disputes between a landlord and his tenant in respect of tenancy are exclusively made triable by Revenue Courts and all disputes in respect of proprietary rights are left to the decision of Civil Courts. Incidentally, if a question exclusively falling within the jurisdiction of a Revenue Court arises in a suit in a Civil Court, that suit is stayed and the relevant issue is submitted for decision of the Revenue\n\nB!tinka & Others\n\nCourt. So too, if a question of proprietary right arises in a proceeding before a Revenue Court, that issue is submitted for the decision of a Civil Court. J urisdiction is expressly conferred on Revenue Courts to entertain, among others, suits for ejectmeut under certain circumstances on specified grounds. Section 180 of the Act is one of the fasciculus of sections dealing with ejectment. Sections 155 to 179 provide for suits for ejectment against tenants on specified grounds.\n\nThen comes s. 180, the material part of which reads:\n\nCharan Singh\n\nSubba Rao ].\n\n\"(1). A person taking or retaining possession of a plot of land without the consent of the person entitled to admit him to occupy such plot and otherwise than in accordance witq the provisions of the law for the time being in force, shall be liable to ejectment uuder this section on the suit of the person so entitled, and also to pay damages which may extend to four times the annual rental value calculated in accordance with the sanctioned rates applicable to hereditary tenants.\n\nExplanation 11.-A tenant entitled to sublet a plot of land in accordance with the provisions of the la, w for the time being in force may ma.intain a suit under this section aga.inst the person taking or retaining possession of uch plot otherwise than in the circumstances for which provision is made in section 183.\n\n(2) If no suit is brought under this section, or if a decree obtained under this section is not executed, the person in possession shall become a hereditary tenant of such plot, or if such person is a co-sharer, he shall become a khudlcasht-holder, on the expiry of the period of limitation prescribed for such snit or for the execution of such decree, as the case may be.'' Section 242 says that suits of the nature specified in the fourth schedule shall be heard and determined by Revenue Courts. Schedule 4, Group B, gives succintly the description of the suits and the periods of limitation and the court-fee payable thereon. Serial No. 8 relates to a snit under s: 180 of the Act. Against that\n\n(2) s.c.R.\n\nSUPR~ME1 COURT RE1l?ORTg 807\n\nserial number, the nature of the suit is described in the following terms :\n\n\" For the ejectment of a person occupying land without title and for damages.\" The period of limitation for instituting such a suit is also prescribed thereunder. ' Under s. 180 of the Act, a person entitled to admit another to a plot of land can file a suit in a Revenue Court to eject him. The latter can defend the suit only on two grounds, namely, (1) that he has taken possession or retained possession of the said plot with the consent of the former; and (2) that he took possession or retained possession in accordance with the provisions of law for the time being in force. If no suit was brought against the occupier or if the decree obtained against him was not executed, he would become a hereditary tenant after the period of limitation prescribed in the fourth Schedule to the Act. On the findings of the Courts below, the appellants did not take possession of the lands with the consent_ of the respondent; but it is said that they had taken possession of the lands in accordance with the provisions of the law for the time being in force.\n\nTo substantiate this contention, reliance is placed firstly on the recitals in the plaints, and, secondly, on the provisions of s. 145 of the Code of Criminal Procedure. In the plaints it was stated that the Criminal Court had declared on March 20, 1950, the appellants' possession for some reason, and after the order of the said Court, they had forcibly reaped the crops raised by the respondent.\n\nThe cause of action was alleged to have accrued after March 20, 1950, or near about the date of their taking possession of the said lands. The allegations in the plaints do riot support the appellants. The respondent did not admit that possession was taken in execution of the order made by the Magistrate; but he averred that taking advantage of a wrong order declaring the appellants' possession, they trespassed upon his lands. If the allegations were assumed to be correct, the appellants did not take possession in accordance with the provisions of the law for the time being in force.\n\nI959\n\nBhinka 0- Others\n\nCharan Singh\n\nS\"bba Rao ].\n\nI959\n\nBhinka 6- Others\n\nCharan Singh\n\nSubba Rao ].\n\nCan it be said that the appellants had taken possession in accordauce with the provisions of s. 145 of the Code of Criminal Procedure? The short answer is that s. 145 of the said Code does not confer on a Magistrate any power to make an order directing the delivel'y of possession to a person who is not in possession on the date of the preliminary order made by him under s. 145(1) of the Code.\n\nUnder s. 145(1) of the Code, his jurisdiction is confined only to decide whether any and which of the parties was on the date of the preliminary order in possession of the land in dispute. The order only declares the actual possession of a party on a specified date and does not purport to give possession or authorise any party to take possession. Even in the case of :any party who has been forcibly and wrongfully dispossessed within two months next before the date of the preliminary order, the Magistrate is only authorised to treat that party who is dispossessed as if he had been in possession on such date. If that be the legal position, the appellants could not have taken possession of the disputed lands by virtue of an order made under the provisions of s. 145 of the Code of Crimil\\al Procedure. They were either in possession or not in possession of the said lands on the specified date, and, if they were not in possession on that date, their subsequent .taking possession thereof could not have been under the provisions of the Code of Criminal Procedure.\n\nIf the appellants did not take possession of the dis puted lands, did they retain possession of the same in accordance with the provisions of the law for the time being in force ? The dichotomy between taking and retaining indicates that they are mutually exclusive and apply to two different situations. The word \" taking \" applies to a person taking possession of a land qtherwise than in accordance with the provisions of the law, while. the word\" retaining\" to a person taking possession in accordance with the provisions of the law but subsequently retaining the same illegally.\n\nSo construed, the appellants' possession of the lands being illegal from the inception, they could not be described as. persons . retaining possession of the said\n\nlands in accordance with the provisions of any law for the time being in force, so as to be outside the scope of s. 180 of the Act.\n\nBut the contention may be negatived on a broader basis.\n\nCan it be said that the possession by virtue of an order of a Magistrate under the provisions of s. 145 of the Code of Criminal Procedure is one in accordance with the provisions of the law for the time being in force? It appears to us that the words\" possession in accordance with the law for the time being in force\" in the context can only mean possession with title.\n\nThe suit contemplated by the section is one by a landlord against a person who has no right to possession.\n\nThe preceding sections, as we have already indicated, provided for evicting different categories of tenants on specified grounds. Section 180 provides for the eviction of a person who but for the eviction would become a hereditary tenant by efflux of the prescribed time.\n\nIf there is any ambiguity-we find none-it is dispelled by the heading given to the section and also the description of the nature of the suit given in the Schedule.\n\nThe heading reads thus:\n\n\" Ejectment of person occupying land without Title\". \"Maxwell On Interpretation of Statutes\", 10th Edn., gives the scope of the user of such a heading in the interpretation of a section thus, at p. 50 :\n\n\"The headings prefixed to sections or sets of sections in some modern statutes are regarded as preambles to those sections. They cannot control the plain words of the statute but they may explain ambiguous words.\" If there is any doubt in the interpretation of the words in the section, the heading certainly helps us to resolve that doubt.\n\nUnless the person sought to be evicted has title or right to possession, it cannot be said that his possession is in accordance with the provisions of the law for the time being in force. If so, the appellants must establish that the order of the Magistrate issued under the provisions of s. 145 of the Code of\n\nI959\n\nBhinka & Others v.\n\nCharan Singh\n\nSubba Rao ].\n\nI959\n\nBhinka & Others v.\n\nCharan Singh\n\nSubba Rao ].\n\n810 SUPREME COUR'r REPORTS [1959] Supp.\n\nCriminal Prooedure conferred a title or a right to possession on them.\n\nThis leads us to the consideration of the legal effect of the order made by the Magistrate under s. 145 of t.he Code of Criminal Procedure. Under s. 145(6) of the Code, a Magistrate is authorized to issue an order declaring a party to .be entitled to possession of a land until evicted therefrom in due course of law. The Magistrate does not purport to decide a party's title or right to possession of the land but expressly reserves that question to be decided in due course of law. The foundation of his jurisdiction is on apprehension of the breach of the peace, and, with that object, he makes a temporary order irrespective of the rights of the parties, which will have to be agitated and disposed of in the manner provided by law. The life of the said order is co-terminous with the passing of a decree by a Civil Court and the moment a Civil Court makes an order of eviction, it displaces the order of the Criminal Court.\n\nThe Privy Council in Dinomoni Ghowdhrani v. Brojo\n\nJfohini Ghowdhrani (1) tersely states the effect of orders under s. 145 of the Code of Criminal Procedure thus:\n\n\"These orders are merely police orders made to prevent breaches of the peace. They decide no question of title .... ; ....... \".\n\nWe, therefore, hold that a provisional order of a Magistrate in regard to possession irrespective of the rights of the parties cannot enable a person to resist the suit under s. 180 of the Act.\n\nThis leaves us with the fourth contention based upon the U. P. Zamindari Abolition and Land Reforms Rules.\n\nTo appreciate this contention some relevant facts may be recapitulated. On August 14, 1951, the six suits were stayed in view of the U. P.\n\nGovernment Notification dated August 9, 1951, issued under Ordinance No. III of 1951. Thereafter the suits continued to remain stayed under r. 4 of the said Rules. The appellants filed an application under sub. rule (3) of r. 5 for restarting the trial of the suits, and an order directing; the restarting of the suits was made by the Additional Collector, Meerut, on September 22,\n\n(1) (1901) L.R. 29 I.A. 24, 33.\n\n1952. The appellants preferred a revision against that order to the Board of Revenue. It was contended before the Board of Revenue that the suits had abated under cl. (v) of r. 4 of the Rules, but the Board of Revenue rejected their contention on the ground that the suits fell within the exception to r. 5. It may also be mentioned that the rules were amended on October 8, 1952, i. e., after the order directing the restarting of the proceedings. On the said facts, the first question is whether r. 5 of the amended Rules would apply to a case which was restarted under the provisions of tho original Rules. The following are the relevant rules from the two sets of Rules, i. e., the original Rules and the amended Rules:\n\nOriginal Rules as published in Gazette dated 30-6-1952. 4.\n\nStay of certain suits and proceedings.- All suits and proceedings whether of the first instance, appeal or revision of the nature as hereinafter specified in respect of tlrn area for which a notification under section 4 has been issued pending in any court on the date of vesting, ... shall be stayed: 4(v). Suits, applications and proceedings including appeals, references and revisions under section 180 of the U. P. Tenancy Act, 1939.\n\nAs amended on 8-10-1952.\n\nAll suits and proceedings whether of tho first instance, appeal or revision of the nature as hereinafter specified in respect of the area for which a notification under section 4 has been issued pending in any court for _ hearing on the date of vesting, ....................... . shall be stayed: 4(v). Suits, applications and proceedings including appeals, references and revisions under section 180 of the U. P. Tenancy Act, 1939, or of similar nature pending in a civil court, except where the plaintiff is a tenant or where the land was the Sir, khudkhast or grove of an intermediary and in which rights\n\nI959\n\nBhinka & Others\n\nCharan Singh\n\nSubba Rao ].\n\nI959\n\nBhinka & Others\n\nCharan Singh\n\nSubba Rao J.\n\n5(1 ).\n\nDisposal of suits and proceedings stayed under rule 4( a)( 1 ).-Every suit or proceeding whether of the first instance, appeal or revision stayed under clauses (i) to (iv) of rule 4 shall be abated by the court or the authority before which it may be pending after notice to the parties and giving them an opportunity to be heard.\n\n5(2).\n\nThe abatement of any suit or proceeding under sub-rule\n\n(1) shall not debar any person from establishing his right in a court of competent jurisdiction in accordance with the law for the time being in force in respect of any matter in issue in such suit or proceeding. 5(3). Where a suit has been stayed under clause\n\n(v) of rule 4 any party to the suit may within six months from the date of vesting apply to the court concerned to restart the issue.\n\nhave not accrued to the defendant under section 16 or any other section of the U.P. Zamindari Abolition and Land Reforms Act, 1950.\n\n5(1).\n\nDisposal of suits and proceedings stayed under rule 4 (a)(l): Every suit or proceeding, whether pending in the court of first instance, or• in appeal or revision stayed under clauses (i) to (v) of rule 4, shall together with the appeals or revision, if any, be abated by the court or the authority before which it may be pending after notice to the parties and giving them an opportunity to be heard. 5(2).\n\nThe abatement of any suit or proceeding under sub-rule (1) shall not debar any person from establishing his right in a court of competent jurisdiction in accordance with the law for the time being in force in respect of any matter in issue in such suit or proceeding.\n\nFrom a comparative study of the aforesaid rules, it\n\nI959 will be seen that there are two fundamental differences Eh. k--;;;:-- Oth relevant to the present enquiry, namely, (i) while in av. ers under the original Rules, all suits under s. 180 of the Charan Singh Act are stayed, under the corresponding rules of the amended Rules an exception is made in the case of Subba Rao f. lands which are Sir, Khudkast or grove of an intermediary in which rights have not accrued to the defendant under s. 16 or any other section of the U. P.\n\nZamindari Abolition and Land Reforms Act, 1950; and (ii) while under the original Rules, there is a procedur~ for restarting a suit stayed under r. 4, there is no such procedure under the amended Rules. In the present case, the suits were restarted under the old Rules and thereafter no stay order was made under the amended Rules. The position, therefore, is that there was neither a subsisting stay under the old Rules nor any stay order made under the new Rules. If so, r. 5 of the amended Rules cannot be invoked, for under that rule only a suit stayed under r. 4 (a)(i) shall be abated thereunder. We, therefore, hold that r. 5 of the amended Rules cannot be invoked in the present case.\n\nThat apart, cl. (v) of sub-rule (2) of r. 4 of the amended Rules does not in terms apply to a land which is Sir unless rights have accrued to a person in possession thereof under s. 16 or any other section of the U. P. Zamindari Abolition and Land Reforms Act,\n\n1950. On the findings arrived at by the Courts, namely, that the appellants were trespassers on the Sir land, it cannot be disputed that they have not acquired any rights under the aforesaid provisions.\n\nAs the operation of r. 5 is conditioned by cl. (v) of sub-rule (2) of r. 4, there is no scope for invoking the former provisions unless cl. (v) of sub-rule (2) of r. 4 applies to a given case and also an order of stay has been made thereunder. In this case, as the suit lands are found to be Sir lands and as the appellants have not acquired any of the rights mentioned in cl. (v) of sub-rule (2) of r. 4, the said sub-rule cannot apply, and, therefore, r. 5 cannot also be invoked.\n\nFurther, this contention was raised in the revision\n\nI959\n\nBhin, ka & Others\n\npetitions filed by the appellants to the Revenue Board, and the latter by its order dated September 6, 1953, held against them and that order has become final.\n\nFor the said reasons, we must hold that the suits could not be abated under r. 5 of the amended Rules.\n\nCharan Singh\n\nSubba Rao ],\n\nApril a7.\n\nIn the result, the appeals fail and are dismissed with costs.\n\nAppeals dismissed .\n\nDOLGOBINDA PARICHA\n\nNIMAI CHARAN MISRA & OTHEH, S\n\n(S. K. DAS; A. K. SARKAR and K. SUBBA RAo, JJ.)\n\nEvidence-Admissibility-Joint statement of thr.e persons- Admissibility under s. 32(5) of the Evidence Act, when only one is dead-Opinion as to relationship-Conduct as evidence of opinion- Proof of conduct-Direct evidence-\" Opinion\", meaning of-Indian Evidence Act, I872 (I of r872), ss. 32(5), 50, 60.\n\nOn the death of H, who as the mother of the last male owner had succeeded to the estate, the respondents claimed the estate and brought a suit for its recovery on the strength of the pedigree which they set up that they were the sons of the halfsisters of the last male owner and therefore came before the agnates. The suit was contested by some of the agnates, of whom the appellant was one, who challenged the correctness of the pedigree, and maintained that the respondents' mothers \\Vere not the half-sisters of the last male owner. The trial court agreed with the respondents' case and decreed the suit and this was confirmed by the High Court.\n\nThe High Court relied on Ex. I, a petition dated November 2, 1917, which S, one of the brothers of the third plaintiff, on his own behalf and on behalf of his brothers had filed in Suit No. 31 of I917 which was a suit instituted by some of the agnates of H•s husband questioning the alienation~ made by H. In the petition, S alleged that the applicants were the legal claimants to the properties in the suit and prayed' to be added as co-defendants to the suit. The petition contained a pedigree which supported the pedigree set up", "total_entities": 75, "entities": [{"text": "Supp.\n\nBHINKA AND OTHEitS", "label": "PETITIONER", "start_char": 45, "end_char": 70, "source": "metadata", "metadata": {"canonical_name": "BHINKA AND OTHERS", "offset_not_found": false}}, {"text": "CHAHAN SINGH", "label": "RESPONDENT", "start_char": 72, "end_char": 84, "source": "metadata", "metadata": {"canonical_name": "CHARAN SINGH", "offset_not_found": false}}, {"text": "S. K. DAS", "label": "JUDGE", "start_char": 87, "end_char": 96, "source": "metadata", "metadata": {"canonical_name": "S.K. DAS*", "offset_not_found": false}}, {"text": "A. K. SARKAR", "label": "JUDGE", "start_char": 98, "end_char": 110, "source": "metadata", "metadata": {"canonical_name": "A.K. 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{"document_id": "1959_2_79_86_EN", "year": 1959, "text": "(2) S.C.R, SUPREME COURE.r REPORTS 79\n\nJUTE & GUNNY BROKERS LTD. v.\n\nM/S. NEW CENTRAL JUTE MILLS CO., LTD.\n\n(S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR, K. N. W ANCHOO and M. HIDAYATULLAH JJ.) .\n\nContract-Validity-Ordinance making provision of regulation of trade-Act replacing Ordinance-Deeming provisions-Legal fiction-Effect-Raw Jute (Central Jute Board and Miscellaneous Provisions) Ordinance, r950 (W. Ben. r7 of r950), ss. 5, 6 and 7- Raw Jute (Central Jute Board and Miscellaneous Provision.s) Act, r95r (W. Ben. 6 of r95r), ss. 5, 6, 7, r6.\n\nIn respect of a dispute between the appellant company and the respondent company which ; was referred to the arbitration of the Bengal Chamber of Commerce in terms of the arbitration clause contained in the contract entered into on April 6, 1951, an award was made on February 29, 1952, allowing the claim of the appellant. The respondent made an application in the High Court for having the award set aside on the ground, inter alia, that the contract was void under the provisions of the Raw Jute (Central Jute Board and Miscellaneous Provisions) Act, 1951, inasmuch as it had not been entered into in the manner specified in ss. 5, 6 and 7 of the Act as required therein. On December 14, 1950, the Government of West Bengal had promulgated an Ordinance called the Raw Jute (Central Jute Board and Miscellaneous Provisions) Ordinance, 1950, for the better regulation of the trade, and on December 29, 1950, a notification was issued specifying December 30, 1950, as \" the appointed day for the purposes of ss. 5, 6 and 7 of the said Ordinance.\" Subsequently the Ordinance was replaced by the Act which bys. 16, provided: \" ............ any notification issued ......... under the Raw Jute (Central Jute Board and Miscellaneons Provisions) Ordinance, 1950, shall, on the said Ordinance ceasing to operate, be deemed to have been .. .issued ... under this Act as if this Act had commenced on the 14th day of December 1950.\" It was contended for the appellant that the notification dated December 29, 1950, could not be read as having brought ss. 5, 6 and 7 of the Act into force, because, on a plain reading of it, the notification did not purport to bring any of the sections of the Act into force, but expressly brought ss. 5, 6 and 7 of the Ordinance into force and that the said sections of the Act not having been brought into force, the contract in question was valid and, consequently, the award was binding and enforceable.\n\nHeld, that in order to give full effect to the two legal fictions created in s. 16 of the Act that the Act shall be deemed to have commenced on December 14, 1950, and that the notification issued under the Ordinance shall be deemed to have\n\nI959\n\nJanuary 20.\n\nI959 been issued under the Act, the principle of mutatis midandis has to be adopted and the word \"Act\" substituted for the word jute G Gunny \"Ordinance\" used in the notification dated December 29, 1950.\n\nB•okcrs Ltd.\n\nConsequently, the provisions of ss. 5, 6 and 7 of the Act were v. applicable to the contract in question.\n\nM/s. New Central jute Mills Co., Ltd.\n\nCIVIL\n\nAPPELLATE JURISDICTION : Civil Appeal Ko. 92 of 1954.\n\nDas C. ).\n\nAppeal from the judgment and order _dated January 28, 1953, of the Calcutta High Court in Award Case No. 105 of 1952.\n\nill. Q. Setalvad, Attorney-General for India, B. Sen, P. D. Himatsinghka and B. P. Maheshwari, for the appellant.\n\nN. C. Chatterjee, M. G. Porf, dar and Ganpat Rai, for the respondent.\n\n1959. January 20.\n\nThe Judgment of the Court was delivered by\n\nDAS, C. J.-This is an appeal filed upon a certificate of fitness granted by the High Court of Calcutta impugning the judgment pronounced by the said High Court on January 23, 1953, declaring null and void an award (No. 209 of 1952) made by the Bengal Chamber of Commerce in case No. 855 of 1951, whereby they ordered the respondent company to pay to the appellant company a sum of Rs. 1,95,000 besides interest and costs.\n\nThe facts giving rise to the present appeal are simple and may briefly be summarised as follows: On\n\nAprl 6, 1951, the appellant company entered into a contract with the respondent company for the supply of 5,000 maunds of Nikhli and/or Ashuganj Jute on certain prices according to quality, \"shipment during July and/or August, 1951, guaranteed\". That contract, which was entered into by bought and sold notes exchanged between the parties through brokers, contained a very wide arbitration clause. When shipping documents were presented to the respondent company by the bankers of the appellant company, they were not honoured on the plea that the same were not in order and the respondent company failed to take delivery of the goods.\n\nThe last date on which the\n\ndocuments were so presented was September 17, 1951. z959 On September 26, 1951, the appellant company, Jute & Gunny through their solicitors, wrote to the respondent com- Brokers Ltd. pany intimating that they had exercised their option v. of cancelling the contract and demanding the payment M/s. New Central of the sum of Rs. 1,95,000 as damages on the basis Jute MillsCo., Ltd. of the difference between the contract price and the - market price of the goods as on September 17, 1951.\n\nDas c. f.\n\nThe respondent company having by their letter dated October 25, 1951, denied their liability to pay any amount, the appellant company on November 2, 1951, referred the dispute to the arbitration of the Bengal Chamber of Commerce in terms of the arbitration clause contained in that contract. The respondent company submitted to the jurisdiction of the Tribunal of arbitration by appearing and adducing evidence before it. On February 29, 1952, the arbitrators made their award by which they allowed the claim of the appellant company in full with interest and costs. ; The award having been filed in the Calcutta High Court on April 23, 1952, the respondent company on June 9, 1952, filed an application in that Court praying, inter alia, that the award be declared null and void and be set aside. The main ground urged in that application was that the award was a nullity in that the contract containing the arbitration clause was void under the provisions of the Raw Jute (Central Jute Board and Miscellaneous Provisions) Act, 1951, (W.\n\nBen. VI of 1951) which was then in force. In order to appreciate the points raised before the High Court and before us it is necessary at this stage to refer to some of the statutory provisions bearing on the question.\n\nTo regulate the prices of jute and to empower the Government to fix its maximum prices, the West Bengal Legislature passed an Act called the West Bengal Jute (Control of Prices) Act, 1950, (W. Ben.\n\nVI of 1950) which came into force on March 15, 1950.\n\nOn December 14, 1950, the Government of West Bengal promulgated an Ordinance called the Raw Jute (Central Jute Board and Miscellaneous Provisions) II\n\n'959 Ordinance, 1950 (XVII of 1950) for the better regulation of the jute trade. The preamble to that Ordinance jute &Gunny\n\nBrokers Ltd. recited that, as the owners of jute mills were not being v. able to secure adequate supplies of jute on the M/s. N•w Central maximum prices fixed under the West Bengal Jute Jut• Mills Co., Ltd. (Control of Prices) Act, 1950, it had become expedient\n\nDa~ to set up a Central Jute Board in West Bengal for\n\n J. ensuring an equitable supply of raw jute to the owners of the jute mills. That Ordinance consisted of only 15 sections. Section 4 of that Ordinance provided for the constitution of the Central Jute Board. Section 5 was expressed in the following terms :-\n\n\" 5.\n\n(1) No person shall sell or agree to sell raw jute to the owner of a jute-mill and no owner of a jute mill shall buy or agree to buy raw jute save and except in pursuance of a contract for the sale or the supply of raw jute entered into in the manner provided in section 6.\n\n(2) Any contract entered into for the sale or the supply of raw jute with the owner of a jute-mill save and except in the manner provided in section 6 shall be void and of no effect.\n\n(3) Any person contravening the provisions of sub-section (1) shall be guilty of an offence under this Ordinance and shall be punishable with imprisonment which may extend to six months or with fine or with both.\" Section 6 laid down the manner in which all contracts for the sale or supply of raw jute with the owners of jute mills were to be entered into. Section 7 ran as follows:-\n\n\" 7.\n\n(1) N'o .person shall deliver or cause to be delivered to the owner of a jute-mill and no owner of a jute-mill shall accept or cause to be accepted any raw jute save and except in pursuance of a contract for the sale or the supply of raw .jute entered into in the manner provided in section 6.\n\n(2) Any person contravening the provisions gf sub-section (1) shall be guilty of an offence under this Ordinance and shall be punishable with imprisonment which may extend to six months or with fine or with both.\n\n(3) The provisions of section 5, section 6, and this r959 , section shall have effect on and from the appointed day.\" jute & Gunny\n\nBrokers Ltd.\n\nThe expression \"appointed day\" occurring in s. 7 (3) v. quoted above was thus defined in s. 2 (1) of that M/s. New Central Ordinance:- . jute Mills Co., Ltd. \"2 (1) 'appointed day' means the date specified by the State Government by notification in the Official Das c. j.\n\nGazette as the appointed day for the purpose of this Ordinance ; \" .\n\nBy a notification dated December 29, 1950, published in an extraordinary issue of the Calcutta Gazette of the same date, December 30, 1950, was specified as \"the appointed day for the purposes of ss. 5, 6 and 7 of the said Ordinance.\"\n\nThe said Ordihance was subsequently replaced by an Act called the Raw Jute (Central Jute Board and Miscellaneous Provisions) Act (W. Ben. Act VI of 1951), hereinafter referred to as \"the Act\", which came into force on March 21, 1951. The first fifteen sections of the Act were almost verbatim reproductions of the fifteen sections of the Ordinance and only one new section was added as the sixteenth section reading as follows :-\n\n\" 16. The Central Jute Board constituted, any rule made, any notification or licence issued, any direction given, any contract entered into, any minimum price fixed, anything done or any action whatsoever taken under the Raw Jute (Central Jute Board and Miscellaneous Provisions) Ordinance, 1950, shall, on the said Ordinance ceasing to operate, be deemed to have been constituted, made, issued, given, entered into, fixed, done or taken under this Act as if this Act had commenced on the 14th day of December, 1950.\" The Act was in force at all times material to these proceedings though the same was subsequently repealed on August 5, 1952.\n\nIt may be mentioned here that both when the Ordinance was in force and after the Act had come into operation, the Central Jute Board issued a series of circulars by which it authorised the owners of jute mills to purchase raw jute up to the extent of quotas\n\n'959 respectively allotted to them through \" normal trade Jute c;. Gunny channels\" subject to their furnishing particulars of Brokers Ltd. the contracts and of deliveries under them to the v.\n\nBoard. The contract in question was entered into M/s. New Central through \"normal trade channels\" and not in the Jute Mills Co., Ltd. manner specified in the said Act or the rules framed thereunder. Indeed, it is conceded that no applica- Das C. j.\n\ntion had been made by the appellant company to the Board under s. 6(1) of the Act, that the Board did not, under s. 6(2) of the Act select any jute mills as buyers of these goods,' that the respondent company had not signified in writing to the Board its intention to buy the raw jute in question, that the Board did not specify a date within which the contract was to be entered into and that, finally, the delivery period fixed in the contract was in contravention of the provisions of the Act and the rules and, therefore, the contract was void under s. 5(2) of the Act, if ss. 5, 6 and 7 were in force at the date of the contract.\n\nThe respondent company's aforesaid application for setting aside the award having come on for hearing, the learned Single Judge sitting on the Original Side reported the matter, under r. 2 of c.h. V of the Original Side Rules, to the Chief Justice for forming a larger Bench for hearing of the said application.\n\nA Special Bench was accordingly constituted by the Chief Justice and the application came up for hearing before that Bench. Three points were urged before the High Court, namely, (1) that the Act was ultra vires the Bengal Legislature; (2) that even if the Act were intra vires ss. 5, 6 and 7 of the Act were never brought into force and (3) that there was a subsequent independent agreement to refer the disputes to the arbitration of the Bengal Chamber of Commerce. The High Court negatived all the contentions raised by the appellant company and by its judgment dated January 23, 1953, allowed the application and declared the award to be null and void, but directed the parties to bear their own costs.\n\nThis appeal, as already stated, has been filed against the judgment of the High Court upon a certificate of fitness granted by the High Court.\n\n(2) S.C.R.\n\nSUPREME COURT REPORTS 85 • The learned Attorney-General appearing in support r959 of this appeal has urged before us only the second\n\nC 1 h jute & Gunny point urged before the High ourt, name y, t at even Brokers Ltd. if the Act were intra vires ss. 5, 6 and 7 had never v. been brought into force and, therefore, the contract in M /s. New Central question containing the arbitration clause was valid jute Mills Co., Ltd. and consequently the award was binding and enforce- - able.\n\nHe does not dispute that, by virtue of s. 16 of Das c. f. the Act, the notification issued on December 19, 1950, under s. 2(1) of the Ordinance has to be deemed to have been issued under the Act, but he contends that even so the notification dated December 29, 1950, cannot be read as having brought ss. 5, 6 and 7 of the Act into force, for it, in terms, specified December 30, 1950, as the appointed day\" for the purposes of ss. 5, 6 and 7 of the Ordinance\". He urges that this Court has to take the notification made under the Ordinance as it finds it and then, under s. 16 of the Act, to deem it to have been made under the Act. According to him the fiction created by s. 16 ends as soon as the notification is deemed to have been made under the Act and goes no further. He concludes, on the authority of the decisions in Hamilton and Co. v. M aclcie and Sons (1) and T. W. Thomas & Co. Limited v. Portsea Steamship Company Limited (2), that, on a plain reading of it, the notification, when it is deemed to have been made under the Act, makes no sense, for it does not purport to bring any of the sections of the Act into force but expressly briµgs ss. 5, 6 and 7 of the Ordinance into force. He submits that it is not for the court to alter the terms of the notification so as to make it possible to read it as a notification made under the Act.\n\nWe are unable to accept this line of argument. The decisions relied on by the learned Attorney General can have no application to the present case. In those cases there was no statutory provision for deeming the provision of the charter party referring all disputes under the charter party to arbitration as an integral part of the provisions of the bill of lading and, therefore, the only thing to be done in those cases was to lift bodily the relevant provision\n\n(1) [1889] 5 T.L.R. 677.\n\n(2) L.R. [1912] A.C. I.\n\nz959 of the charter party and to insert it in a_nd to read it as a part of the bill of lading. It was held that so 1;~:k;; sG~;; Y read it became insensible, for an arbitration clause v. referring all disputes arising out of the charter party M/s. New Central was wholly out of place and meaningless as a term of J\"te Mills Co., Lid. the bill of lading. A cursory perusal of s. 16 will, however, show that there are two fictions created by Dos c. 1 that section: One is that the Act shall be deemed to have commenced on December 14, 1950, and the other is that the notification issued under the Ordinance shall be deemed to have been issued under the Act. If the Act fictionally commenced on December 14, 1950, then the Ordinance would have to be treated as not promulgated at all, for the two could not have coexisted and when the Act provided that the notification, which, for identification, is described as having been issued under the Ordinance, should be deemed to have been made under the Act, then, unless we read the word \" Ordinance \" as \" Act \", we do not give full effect to the twin fictions created by the Act. In other words the creation of tlie statutory fictions compels us to adopt the principle of mutatis mutandis and to substitute the word \"Act\" for the word \" Ordinance\" used in the notification, so as to give full effect to the fictions created by the statute. We see no reason in support of the contentions of the Attorney General that the fiction raised by s. 16 stops short at mere issuing of the notification. The ambit of the fiction appears to us to cover not only the issuance of the notification but to extend to our reading it as having been one issued under the Act.\n\nWe cannot read it as having been issued under the Act unless we read the word \"Ordinance\" used in the notification as \"Act\".\n\nNo other point has been urged before us and for reasons stated above this appeal must be dismissed.\n\nIn view of the circumstances referred to in the judgment of the High Court and appearing in the record we make no order for costs of this appeal.\n\nAppeal dismissed.", "total_entities": 43, "entities": [{"text": "79\n\nJUTE & GUNNY BROKERS LTD", "label": "PETITIONER", "start_char": 35, "end_char": 63, "source": "metadata", "metadata": {"canonical_name": "JUTE & GUNNY BROKERS LTD", "offset_not_found": false}}, {"text": "S. NEW CENTRAL JUTE MILLS CO., LTD", "label": "RESPONDENT", "start_char": 71, "end_char": 105, "source": "metadata", "metadata": {"canonical_name": "M/S. 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"end_char": 7889, "source": "regex", "metadata": {"statute": null}}, {"text": "section 6", "label": "PROVISION", "start_char": 8033, "end_char": 8042, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 6", "label": "PROVISION", "start_char": 8290, "end_char": 8299, "source": "regex", "metadata": {"statute": null}}, {"text": "Section 7", "label": "PROVISION", "start_char": 8434, "end_char": 8443, "source": "regex", "metadata": {"statute": null}}, {"text": "section 6", "label": "PROVISION", "start_char": 8751, "end_char": 8760, "source": "regex", "metadata": {"statute": null}}, {"text": "section 5", "label": "PROVISION", "start_char": 8999, "end_char": 9008, "source": "regex", "metadata": {"statute": null}}, {"text": "section 6", "label": "PROVISION", "start_char": 9010, "end_char": 9019, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 7", "label": "PROVISION", "start_char": 9167, "end_char": 9171, "source": "regex", "metadata": {"statute": null}}, 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{"document_id": "1959_2_814_835_EN", "year": 1959, "text": "SUPREME COURT REPORTS [1959] Supp.\n\nI959\n\nBhin, ka & Others\n\npetitions filed by the appellants to the Revenue Board, and the latter by its order dated September 6, 1953, held against them and that order has become final.\n\nFor the said reasons, we must hold that the suits could not be abated under r. 5 of the amended Rules.\n\nCharan Singh\n\nSubba Rao ],\n\nApril a7.\n\nIn the result, the appeals fail and are dismissed with costs.\n\nAppeals dismissed .\n\nDOLGOBINDA PARICHA\n\nNIMAI CHARAN MISRA & OTHEH, S\n\n(S. K. DAS; A. K. SARKAR and K. SUBBA RAo, JJ.)\n\nEvidence-Admissibility-Joint statement of thr.e persons- Admissibility under s. 32(5) of the Evidence Act, when only one is dead-Opinion as to relationship-Conduct as evidence of opinion- Proof of conduct-Direct evidence-\" Opinion\", meaning of-Indian Evidence Act, I872 (I of r872), ss. 32(5), 50, 60.\n\nOn the death of H, who as the mother of the last male owner had succeeded to the estate, the respondents claimed the estate and brought a suit for its recovery on the strength of the pedigree which they set up that they were the sons of the halfsisters of the last male owner and therefore came before the agnates. The suit was contested by some of the agnates, of whom the appellant was one, who challenged the correctness of the pedigree, and maintained that the respondents' mothers \\Vere not the half-sisters of the last male owner. The trial court agreed with the respondents' case and decreed the suit and this was confirmed by the High Court.\n\nThe High Court relied on Ex. I, a petition dated November 2, 1917, which S, one of the brothers of the third plaintiff, on his own behalf and on behalf of his brothers had filed in Suit No. 31 of I917 which was a suit instituted by some of the agnates of H•s husband questioning the alienation~ made by H. In the petition, S alleged that the applicants were the legal claimants to the properties in the suit and prayed' to be added as co-defendants to the suit. The petition contained a pedigree which supported the pedigree set up\n\nby the respondents, and the High Court held that Ex. I was admissible under s. 32(5) of the Indian Evidence Act.\n\nThe oral evidence of P.W. 2 and P.W. 4 supported _the respondents' case as to the pedigree set up by them and the High Court held that their evidence was admissible under s. 50 of the Indian Evidence Act. On appeal to the Supreme Court, it was contended for the appellant (1) that Ex. I was not admissible under s. 32(5) of the Indian Evidence Act because (a) the statement therein was a joint statement of three persons of whom one alone was dead, and (b) it was not made before disputes had arisen; and (2) that the testimony of P.W. 2 and P.W. 4 did not fall within the purview of s. 50 of the Indian Evidence Act and that the High Court erred in admitting and accepting such evidence.\n\nHeld: (1) that s. 32(5) of the Indian Evidence Act was applicable to the statements as to pedigree in Ex. I because: (a) they were really made by S for self and on behalf of his brothers, and that, in any case, they were as much statements of S as of the other two brothers who are alive.\n\nChandra Nath Roy v. Nilamadhab Bhattacharjee, (1898) I.L.R. 26 Cal. 236, approved.\n\n(b) they were made before the precise question in dispute in the present litigation had arisen, as the respondents were not preferential heirs at the time of the previous suit and no question arose or could have arisen then as to the relationship between them and the last male owner.\n\n(2) that the evidence of P.W. 2 and P.W. 4 that they were present at the marriage of the mother of plaintiffs l and 2 as also at the Upanayanam ceremonies of plaintiffs l and 2, showed the opinion of those witnesses as to the relationship as expressed by their conduct, and was admissible under s. 50 of the Indian Evidence Act.\n\nThe word \" opinion \" in s. 50 of the Indian Evidence Act means something more than mere retailing of gossip or hearsay ; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question. Such belief or conviction may manifest itself in conduct or behaviour which indicates the existence of the belief or opinion.\n\nUnder s. 50 such conduct or outward behaviour as evidence of the opinion held is relevent and may be proved.\n\nChander Lal Agarwala v. Khalilar Rahman, I.LR (1942] 2 Cal. 299, approved.\n\nConduct, as an external perceptible fact, may be proved either by the testimony of the person himself whose opinion is evidence under s. 50 or by some other person acquainted with the facts which express'such opinion, and as the testimony must relate to external facts which constitute conduct and is given by persons personally acquainted with such facts, the testimony is in each case direct within the meaning of s. 60 of the Indian Evidence Act.\n\nr959\n\nDolgobinda\n\nParicha\n\nNimai Charan Misra <!> Others\n\nI959\n\nDolgobinda\n\nParicha\n\nNitnai Charan A1isra G Othtrs\n\nThe observations of Hutchins, J., in Queen Empress v.\n\nSitbbarayan, (1885) I.L.R. 9 Mad. 9, that s. 50 of the Indian Evidence Act seems to imply that a person whose opinion is a relevant fact cannot be called to state his own opinion as expresed by his conduct and that his conduct may be proved by others only when he is dead or cannot be called, disapproved.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 206 of 1954.\n\nAppeal from the judgment and decree dated March 9, 1951, of the Orissa High Court in Appeal from Original decree No. 14 of_l946, arising out of the judgment and decree dated January 31, 1946, of the Court of Subordinate Judge at Sambalpur in Title Suit No. 16 of 1944.\n\nL. K. Jha, Rameshwar Nath, S. N. Andley and J.B.\n\nDadachanji, for the appellant.\n\nS. C. Issacs and R. Patnaik, for the respondents. 1959.\n\nApril 27.\n\nThe Judgment of the Court was delivered by s. K. Das J.\n\nS. K. DAs, J.-This appeal on a certificate granted by the High Court of Orissa is from the judgment and decree of the said High Court dated March 9, 1951, by which it substantially affirmed the decision of the learned Subordinate Judge of Sambalpur in Title Suit\n\nNo. 16 of 1944 except for a modification of the decree for damages awarded by the latter.\n\nTwo questions of law arise in this appeal, one relating to the interpretation of s. 32, sub-s. (5) and the other to s. 50 of the Indian Evidence Act (I of 1872), hereinafter referred to as the Evidence Act.\n\nThe material facts rel a ting to the appeal are susceptible of a simple and concise statement. Three persons Nirnai Charan Misra, Lakshminarayan Misra and Baikuntha Pati brought a suit for a declaration of their title to and recovery of possession of certain properties details whereof are not necessary for our purpose. This suit was numbered Title S_uit 16 of 1944 in the court of the Subordinate Judge of Sambalpur.\n\nThe claim of the plaintiffs, now respondents before us, was founded on the following pedigree :-\n\nM ell\n\nSankarsan\n\nI lla!aram 1-----------1- Baidyanath Raghunath I I\n\n-1 _ Anirudha Deft. 7\n\nI .\n\nPurushottam\n\nI Sri pa ti Deft. 2 1------1 Natabar Deft. l Janardan ., I .\n\nDevendra Deft. 3 I\n\nI . --r----1 Radha Krushna Deft. 4\n\nI Satyabadi\n\n(dead)·\n\nDolgovind Ramhari Deft. 5 Deft. 6 I Must. Ahal ya\n\n(dead) married.\n\nLakhan Pati.\n\nI I Dasarath (Deft. 8) (given in adoption in another family).\n\nI Baikuntha (Plaintiff 3)\n\nSa tyabhama = (rst wife) married 1861 (died 1886)\n\nI Bhubana\n\nI Lokanath =\n\nI Mst. Malabati Mst. Brindabati\n\n(dead) married.\n\nRaghumani. ' {dead) married,\n\n-~Iandhata Misra.\n\nHaripriya alias Srihari (died 1942) (2nd wife)\n\nI Satyananda (died 1902)\n\nN _I • 1ma1 Plaintiff l\n\nI Lakshminarayan Plaintiff 2\n\n~I ~\n\n';--o\n\n~::: ~· ... ti ~ \"rj .... O<:i I ~ .,.\n\nO 10 C{iC). ~-~ v. o> ;:..;· \\0 -Q Qt:4 ~ Q.\n\n~ ~\n\n~ ~\n\n~ ~\n\n0) B !; i:l t<1 ,._. t:a 8 c::\n\n~ 1-3_\n\n!; i:l\n\n~'. 1-tj . 0 ~- 1-3.\n\nCIJ .. ~- ,,.\n\n, t . . •l\n\nro ' ~- I\n\nI959\n\nDolgobinda\n\nParicha\n\nNitnai Charan Misra & Others\n\nS. /{, Das ].\n\nThe last male owner was Satyananda who died unmarried sometime in 1902-1903, and his mother Haripriya succeeded to the estate. She lived till 1942; but in 1916 she had sold a portion of t, he property to one Indumati, daughter of Dharanidhar Misra (plaintiffs' witness no. 4) and some of the reversioners, namely, Natabar and Janardan, who were agnates of Haripriya's husband Lokenath Parichha,. brought a suit challenging the alienation. This suit was Suit No. 31of1917 in the court of the Subordinate Judge, Sambalpur. The suit was decreed on August 31, 1918, and the alienation was declared to be without legal necessity and not binding on the reversion after the death of Haripriya. In 1929 was passed the Hindu Law of Inheritance (Amendment) Act (II of 1929) which inter alia gave to a i, ister's son a place in the order of Mitakshara succession higher than the agnates ; before-the amending Act a sister's son ranked as a bandhu, but under it he succeeded next after the sister. The question whether a half-sister was entitled to get the benefit of the amending Act gave rise to a difference of opinion, but the Privy Council held in 1942, settling the difference then existing between the various High Courts, that the term 'sister' included a ' half-sister ' ; but a full sister and a half-sister did not take together and the latter took only in default of the full sister. (See Mst. Sahodra v. Ram Babu (1) ).\n\nThe plaintiffs-respondents claimed on the strength of the pedigree which they set up that they were sons of the half-sister of Satyanand and therefore came before the agnates.\n\nThe suit was contested by some of the defendants who were agnates of Lokenath Paricha and of whom the present appellant was one. The contesting defendants challenged the correctness of the pedigree alleged by the plaintiffs-respondents and their main case was that Ahalya and Malabati were not the daughters of Lokenath Parichha but were daughters of Baidyanath Misra, father of Haripriya. The relevant pedigree which the appellant set up was-\n\n(1) (1942) L, R. 69 LA. 145.\n\nI Haripriya (died on 6-4-1942)\n\nI Satyanand (died in 1903)\n\nBaidyanath Misra\n\nI -i-- I I Bisseswar Ahal ya= Malabati = Misra Lakshan Pa ti Mandha ta\n\nDayaLgar= I IJ Sushila P. W. 3\n\nI-~--· I Dasarathi Baikuntha I\n\nPllf. 3 I ,-.-·-·· Nimai\n\nPHI. I\n\nI Lakshminarayan.\n\nPlff. 2.\n\nAs the High Court has put it, the essential controversy between the parties centred round the question if the plaintiffs-respondents were the sons of the daughters of Lokenath Parrohha by his first wife Satyabhama. On this question the parties gave both oral and documentary evidence. On a consideration of that evidence the learned Subordinate Judge held that they were the sons of the daughters of Lokenath Parichha and on that finding the suit was decreed.\n\nThere was an appeal to the High Court, and it affirmed the finding of the learned Subordinate Judge. The High Court relied on Ex. 1, a petition dated November 2, 1917, which Satyabadi on bis own behalf and on behalf of his brothers Baikunth Pa ti and Dasarath Pati had filed in Suit No. 31of1917; this petition contained a pedigree which showed that Abalya, Brindabati, and Malabati were daughters of Lokenath Parichha by his first wife and Satyabadi, Baikunth and Dasarath were the sons of Ahalya. The admissibility of this document was challenged on behalf of the appellant, but , the learned Judges of the High Court held that the document was admissible under s. 32(5) of the Evidence Act.\n\nThe contention before us is that the document was not so admissible, and this is one of the questions for decision before us.\n\nAs to the oral evidence, N arasimham, J., held that the testimony given by three of the witnesses of the plaintiffs-respondents, namely, Janardan Misra (plaintiffs' witness no. 2), Sushila Misrain (plaintiffs' witness no. 3) and Dharanidhar Misra (plaintiffs' witness no.\n\n4) was admissible under s. 50 of the Evidence Act, and\n\nI959\n\nDolgobinda\n\nParicha\n\nNimai Charan Misra & Others\n\nS. [(. Das].\n\nI959\n\nDolgobinda\n\nParicha\n\nNimai Charan Misra G Others\n\nS. !{. Das].\n\nhe relied on that testimony in support of the pedigree set 11 p by the plaintiffs-respondents. The learned Chief Justice relied on the evidence of Dharanidhar Misra which he held to be admissible but with regard to the other two witnesses, he said-\n\n\" With regard to the other two witnesses relied on by the plaintiffs namely that of P. Ws. 2 (Janardan Misra, aged 62) and 3 (Susi]a Misrani, aged 43) knowledge of relevant facts as to relationships can seldom be attributed to them.\n\nTheir evidence, though true, and otherwise acceptable, must be based upon their having heard the declarations of such members of the family as were their contemporaries or upon the tradition or reputation as to family descent handed down from generation to geaeration and recognised and adopted by the family generally. This may partly, if not wholly, be based upon conduct within the meaning of section 50, such as treating and recognising the mothers of the plaintiffs as Lokenath's daughters, and the plaintiffs as his daughter's sons.\n\nThey, judged from their respective ages, could not be considered to have direct knowledge of the matters in issue.\n\nScanning their evidence closely, I find that they have in no way deposed about such conduct of the me.mbers of the familv of Lokenat.h as could be attributed to the knowledge or belief or consciousness of those who had special means of knowledge of the relationships or that the relationship was recognised and adopted by the family generally. In the , circumstances, I entertain some doubt as to the acceptability of their statements in evidence.\" On behalf of the appellant, it has been contended that the testimonv of none of the aforesaid three witnesses fell within the purview of s. 50 of the Evidence Act and the High Court was in error in admitting and accepting that evidence or any part thereof, and according to learned counsel for the appellant, the whole of it was hearsay pure and simple-some of it being even second or third-hand hearsay. Thus the second question for our consideration is if the testimony of the witnesses mentioned above or of any of them, is \"admissible evidence within the meaning of s. 50 of the Evidence Act.\n\nWe proceed to consider the second question first.\n\nThe Evidence Act states that the expression \" facts in issue \" means and includes any fact from which either by itself or in connection with other facts the existence, non-existence, nature or extent of any right, liability or disability asserted or denied in any suit or proceeding necessarily follow ; \" evidence \" means and includes (1) all statements which the Court permits or requires to be made before it by witnesses in relation to matters of fact under enquiry; and (2) all documents produced for the inspection of the Court. It further states that one fact is said to be relevant to another when the one is connected with the other in any one of the ways referred to in the provisions of the Evidence Act relating to the relevancy of facts. Section 5 of the Evidence Act lays down that evidence may be given in any suit or proceeding of the existence or non-existence of every fact in issue and 'of such other facts as are declared to be relevant and of no others. It is in the context of these provisions of the Evidence Act that we have to considers. 50 which occurs in Chapter II, headed \"Of the Relevancy of Facts\". Section 50, in so far as it is relevant for our purpose, is in these terms :-\n\n\" S. 50. When the Court has to form an opinion as to the relationship of one person to another, the opinion, expressed by conduct, as to the existence of such relationship, of any person who, as a member of . the family or otherwise, has special means of knowledge on the subject, is a relevant fact\". l On a plain reading of the section it is quite clear that it deals with relevancy of a particular fact. It states in effect that when the Court has to form an opinion as to the relationship of one person to another the opinion expressed by conduct as to the existence of such relationship of any person who has special means of knowledge on the subject of that relationship is a relevant fact.\n\nThe two illustrations appended to the section clearly bring out the true scope and effect of the section. It appears to us that the essential requirements of the section are-(1) there must be a case where the court has to form an opinion as to the\n\nDolgobinda\n\nParicha\n\nv, Nimai Charan Misra & Others\n\nS. [{. Das ].\n\nI959\n\nDolgobinda\n\nParicha\n\nN 11nai Charan Misra & Others\n\nS. I<. Das j.\n\nrelationship of one person to another ; (2) in such a case, the opinion expressed by conduct as to the existence of such relationship is a relevant fact; (3) but the person whose opinion expressed by conduct is relevant must be a person who as a member of the family or otherwise has special means of knowledge on the particular subject of relationship; in other words, the person must fulfil the condition laid down in the latter part of the section. If the person fulfils that condition, then what is relevant is his opinion expressed by conduct. Opinion means something more than mere retailing of gossip or of hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question.\n\nNow, the \"belief\" or conviction may manifest itself in conduct or behaviour wh\\ch indicates the existence of the belief or opinion. What the section says is that such conduct or outward behaviour as evidence of the opinion held is relevant and may, therefore, be proved.\n\nWe are of the view that the true scope and effect of section 50 of the Evidence Act has been correctly and succinctly put in the following observ:ations made in Chandu Lal Agarwala v. Khalilar Rahman('):-\n\n\" It is only ' opinion as expressed by condltct ' which is made relevant. This is how the conduct comes in. The offered item of evidence is ' the conduct', but what is made admissible in evidence is' the opinion ', the opinion as expressed by such conduct.\n\nThe offered item of evidence thus only moves the Court to an intermediate decision: its immediate effect is only to move the Court to see if this conduct establishes any 'opinion' of the person, whose conduct is in evidence, as to the relationship in question. In order to enable the Court to infer 'the opinion', the conduct must be of a tenor which cannot well be supposed to have been willed without the inner existence of the ' opinion '.\n\nWhen the conduct is of such a tenor, the Court only gets to a relevant piece of evidence, namely, the opinion of a person. It still remains for the Court to weigh such evidence and come to its own opinion as\n\n(r) I.L.R. [1942] 2 Cal. 299, 309.\n\nto the factum probandum-as to the relationship in\n\nquestion.\" We also accept as correct the view that s. 50 does not make evidence of mere general reputation (without conduct) admissible as proof of relationship: Lakshmi Reddi v. V enkata Reddi (1 ).\n\nIt is necessary to state here that how the conduct or external behaviour which expresses the opinion of a person coming within the meaning of s. 50 is to be proved is not stated in the section. The section merely says that such opinion is a relevant fact on the subject of relationship of one person to another in a case where the court has to form an opinion as to that relationship. Part II of the Evidence Act is headed \"On Proof\". Chapter III thereof contains a fascicule of sections relating to facts which need, not .be proved. Then there is Chapter IV dealing with oral evidence and in it occurs s. 60 which says inter alia :-\n\n\" S. 60. Oral evidence must, in all cases whatever, be direct; that is to sayif it refers to a fact which could be seen, it must be the evidence of a witness who says he saw it; if it refers to a fact which could be heard, it must be the evidence of a witness who says he heard it; if it refers to a fact which• could be perceived by any other sense or in any other manner, it must be the evidence of a witness who says he perceived it by that sense in that manner ; if it refers to an opinion or to the grounds on which that opinion is held, it must be the evidence of the person who holds that opinion on those grounds. \" If we remember that the offered item of evidence under s. 50 .is conduct in the sense explained above, then there is no difficulty in holding that such conduct or outward behaviour must be proved in the manner laid down in s. 60; if the conduct relates to something which can be seen, it must be proved by the person who saw it; if it is something which can be heard, then it must be proved by the person who heard it; and so on. The conduct must be of the\n\n(1) A.I.R. 1937 P.C. 201.\n\nI959\n\nDo/gobinda\n\nParicha\n\nNimai Charan Misra & Others\n\nS. K. Das].\n\n'959\n\nDolgobinda Paricha v.\n\nNiniai Charan Misra 6' Others\n\nS. K. Das].\n\nperson who fulfils the essential conditions of s. 50, and it must be proved in the manner laid down in the provisions relating to proof. It appears to us that that portion of s. 60 which provides that the person who holds an opinion must be called to prove his opinion does not necessarily delimit the scope of s. 50 in the sense that opinion expressed by conduct must be proved only by the person whose conduct expresses the opinion. Conduct, as an external perceptible fact, may be proved either by the testimony of the person himself whose opinion is evidence under s. 50 or by some other person acquainted with the facts which express such opinion, and as the testimony must relate to external facts which constitute conduct and is given by persons personally acquainted with such facts, the testimony, is in each case direct within the meaning of s. 60.\n\nThis, in our opinion, is the true. inter-relation between s. 50 and s. 60 of the Evidence Act. In Queen Empress v. Subbarayan (1) Hutchins, J., said:-\n\n\"That proof of the opinion, as expressed by conduct, may be given, seems to imply that the person himself is not to be called to state his own opinion, but that, when he is dead or cannot be called, his conduct may be proved by others. The section appears to us to afford an exceptional way of proving a relationship, but by no means to prevent any person from stating a fact of which he or she has special means of knowledge. \" While we agree that s. 50 affords an exceptional way of proving a relationship and by no means prevents any person from stating a fact of which he or she has special means of knowledge, we do not agree with Hutchins, J., when he says that the section seems to imply that the person whose opinion is a relevant fact cannot be called to state his own opinion as expressed by his c\"nduct and that his conduct may be proved by others only when he is dead or cannot be called.\n\nWe do not think that s. 50 puts any such limitation.\n\nLet us now apply the tests indicated above to the testimony of the two witnesses, J anardan Misra and\n\n(1) (1885) l.L.R. 9 Mad. g, II.\n\nDharanidhar Misra.\n\nAs to Sushila Misrain, she was aged about 43 when she gave evidence in 1946. It is unnecessary to consider in detail her evidence, because .if the evidence of the other two older witnesses be admissible, that would be sufficient to support the finding arrived at by the, courts below and her evidence would also be admissible on the same criteria as the evidence of the other two witnesses.\n\nThe first question which we must consider is if Janardan Misra and Dharanidhar Misra had special means of knowing the disputed relationship. Janardan Misra was aged about 62 in H!46, and he was related to the family of Baidyanath Misra.\n\nKashi Nath Misra was his grand-father and was a brother of Baidyanath Misra.\n\nObviously, therefore, J anardan Misra had special means of knowing the disputed relationship, being related to Baidyanath and therefore to Haripriya, who was the second wife of Lokenath. He said in his evidence that he knew Lokenath Parichha, had seen his first wife Satyabhama and remembered the marriage of Haripriya with Lokenath Parichha. Obviously, therefore, he fulfilled the condition of special knowledge. He further said that he attended the marriage of Malabati, daughter of Lokenath, when Lokenath was living. That marriage took place in the house of Lokenath. He also said that he was present when the first two daughters of Malabati were married and also at the time of the Upanayan ceremonies of plaintiffs 1 and 2.\n\nAccording to the witness, Shyam Sundar Pujari, a son of a sister of Lokenath, acted as a maternal uncle at. the time of the marriage of the eldest daughter of Malabati and Dayasagar Misra carried Radhika, second daughter of Malabati, at the time of her marriage.\n\nThe question is whether. these statements of Janardan Misra as to his conduct are admissible under s. 50, Evidence Act. Learned counsel for the respondent has contended before us that even apart from s. 50, the evidence of Janardan Misra is direct evidence of facts which he saw and which should be treated as directly proving the relationship between Lokenath\n\n1?4\n\nr959\n\nDolgobinda\n\nParicha\n\nNimai Charnn Misra & Others\n\nS. !(. Das].\n\nI959\n\nDolgobinda Paricha v.\n\nNimai Chaf'an Misra £. Others\n\nS. ](. Das ].\n\nand his daughters. We do not think that learned counsel for the respondent is right in his submission that Janardan's evidence directly proves the relation between Lokenath and his alleged daughters, Ahalya, Brindabati and Malabati. J anardan does not say that he was present at the birth of any of these daughters. What he says is that he was present at the marriage of Malabati which took place when Lokenath was living and in Lokenath's house; he was also present at the marriages of the first two daughters of Malabati and also at the time of the Upanayan\n\nceremonies of plaintiffs 1 and 2. This evidence, in our opinion, properly comes within s. 50, Evidence Act ; it shows the opinion of Janardan Misra as expressed by his conduct, namely, his attending the marriage of l\\falabati as daughter of Lokenath and his attending the marriages and Upanayan ceremonies of the grandchildren of Lokenath. We do not think that it can be suggested for one moment that Janardan Misra attended the marriage and other ceremonies in the family as a mere casual invitee. He must have been invited as a relation of the family and unless he believed that Malabati was a daughter of Lokenath and the others were grand-children of Lokenath to whom the witness was related, he would not have said that he attended those ceremonies as those of the children and grand-children of Lokenath. This, in our opinion, is a reasonable inference from the evidence and if that is so, then the evidence of J anardan Misra was clearly evidence which showed his belief as expressed by his conduct on the subject of the relationship between Lokenath and his daughters and Lokenath and his grand-children.\n\nJanardan also said that one Shyamsundar Pujari acted as maternal uncle at the time of the marriage of the eldest daughter of Malabati. There is some evidence in the record that Shyamsundar Pujari was son of Lokenath's sister. This was, however, disputed by the appellant. The High Court has not recorded any finding on the relation of Shyamsundar Pujari to Lokenath. If it werl) proved that Shyamsundar was a son of Lokenath's sister, he would have special\n\nmeans of knowledge as a relation of the family and his conduct at the time of the marriage of Malabati's daughter would also be admissible under s. 50.\n\nBut in the absence of any finding as to any special means of knowledge on the part of Shyamsundar, the latter's conduct will not be admissible under s. 50.\n\nWe need not say anything more about Shyamsundar, as the High Court has not based its finding on the conduct of Shyamsundar.\n\nThe same criteria apply to the evidence of Dharanidhar Misra, who was aged 96 at the time when he gave evidence.\n\nHe was the maternal uncle of Janardan Misra. Dharanidhar's evidence showed that he knew Lokenath Parichha and his two wives, Satyabhama and Haripriya. He also had special means of knowing the disputed relationship, though he was not directly related to Lokenath. He said that Lokenath was two years older than him and the witness attended the marriages of Radhika and Sarjoo and the \" thread \" ceremonies of Lakshminarayan and Nimai.\n\nThe witness further added that though he did not remember if he was invited to the marriage of Mandhata's daughters, he was invited to the feasts which followed the marriage. He said that the feasts took place in the house of Mandhata and he attended the \"gansana \" and marriage feasts of Mandhata's daughters.\n\nThe same criteria which make the evidence of J anardan Misra admissible under s. 50 also make the evidence of Dharanidhar Misra admissible under the same section.\n\nWe may in this connection refer to one of our own decisions, Sitaji v. Bijendra Narain Choudhary (1), wherein the following observations were made:-\n\n\" A member of the family can speak in the witness-box of what he has been told and what he has learned about his own ancestors, provided what he says is an expression of his own independent opinion (even though it is based on hearsay derived from deceased, not living, persons) and is not merely repetition of the hearsay opinion of others, and provided the opinion is expressed by conduct. His sources of\n\n(r) A.LR 1954 S, C, 6or.\n\nI959\n\nDolgobinda Paricha • v.\n\nNimai Charan Misra & Others\n\nS. [(, Das }.\n\n828 SUPREME COURT REPOliTs [1959] Supp.\n\ninformation and the time at which he acquired the knowledge (for example, whether before the dispute or\n\n. D~:~::::• not) would affect its weight but not its admissibility.\n\nThis is therefore legally admissible evidence which, if\n\nI959\n\nNimai Cha.an believed, is legally sufficient to support the finding\".\n\nMisra & 01hm It is true that Dharanidhar Misra was not directly related to the family of Lokenath. He was, however, s. K. Das f. distantly related to Haripriya. He was a friend of Lokenath Paricbha and lived in the same neighbourhood.\n\nHis evidence showed that he knew him and the members of his family quite well. That being the position, his evidence that he at; tern; led the marriage ceremonies and the Upanayan ceremonies of several members of the family undoubtedly showed his opinion as expressed by his conduct.\n\n'We are accordingly of the view that the evidence of both Janardan Misra and Dharanidhar Misra was admissible under s. 50 and the learned Judges of the High Court committed no error of law in admitting and considering that evidence. We are concerned here with the question of admissibility only.\n\nAs to what weight should be given to their evidence was really a matter for the courts below and both the learned Chief Justice and Narasimham, J., accepted the testimony of Dharanidhar Misra and Narasimham, J., further relied on the testimony of J anardan Misra also.\n\nWe now proceed to a consideration of the first question, namely, the admissibility of the document Ext. 1.\n\nThe High Court has held the document to be admissible under sub-section (5) of s. 32 of the Evidence Act.\n\nWe must first read s. 32 (5):\n\n\"S. 32. Statements, written or verbal, of rele- • vant facts made by a person who is dead, or who cannot be found, or who has become inc.apable of giving evidence, or whose attendance cannot be procured without an amount of delay or expense which, under the circumstances of the case, appears to the Court unreasonable, are themselves relevant facts in the following cases :- (1)\n\n(2) .•.............•..................•.......•.................\n\n(3) ........................................................... .\n\n(4) ........................................................... . (5) \\Vhen the statement relates to the existence of any relationship by blood, marriage or adoption between persons as to whose relationship by blood, marriage or adoption the person making the statement had special means of knowledge, and when the statement was made before the question in dispute was raised.\n\n(6) ........................................................... .\n\n(7) ........................................................... .\n\n(8) ........................................................... \" Now, four conditions must be fulfilled for the-application of sub-s. (5) of s. 35: firstly, the statements, written or verbal, of relevant facts must have been made by a person who is dea.d or cannot be found, etc., as mentioned in the initial part of the section; secondly, the statements must relate to the existence of any relationship by blood, marriage or adoption; thirdly, the person making the statement must have special means of knowledge as to the relationship in question; and lastly, the statements must have been made before the question in dispute was raised. There is no serious difficulty in the present case as to the first two conditions.\n\nExhibit 1 contained a pedigree which showed that Lokenath had three daughters by his first wife, the daughters being Ahalya, Brindabati and Malabati; it also showed that Ahalya. had three sons Satyabadi, Baikuntha and Dasarath, of whom Baikuntha was one of the plaintiffs in the present suit and the other two plaintiffs Nimai and Lakshminarayan were shown as sons of Malabati. Exhibit 1 was signed by Satyabadi on his own behalf and on behalf of his brothers Baikuntha and Dasarath. Satyabadi is now dead.\n\nSo far as Satyabadi is concerned, there can be no doubt that the first two conditions for the application of sub-s. (5) of s. 32 are fulfilled. It has been contended that as Dasarath and Baikuntha are alive (Baikuntha being one of the plaintiffs) and as the statement was the joint statement of three persons of whom one alone is dead, the first and preliminary condition necessary for the application of s. 32 is not\n\nDolgobinda Paricha v.\n\nNimai Charan Misra & Others\n\n5. K. Das].\n\n'959\n\nDolgobinda\n\nJ::>at'iiha\n\nNiinai Charan .llfisra Others\n\nS. [(, Das ].\n\nfulfilled.\n\nWe do not think that this contention is correct, and we are of the view that the position is correctly stated in Chandra Nath Roy v. Nilamadhab Bhattacharjee ('); that was a case in which the statements were recitals as to a pedigree and were contained in a patta executed by three sisters, two of whom were dead and it was pointed out that the statement in the patta was as much the statement of the sisters who were dead as of the sister who was alive.\n\nIn the case before us the statements as to pedigree in Ex. 1 were really the statements of Satyabadi, who signed for self and on behalf of his brothers. Assuming, however, that the statements were of all the three brothers, they were as much statements of Satyabadi as of the other two brothers who are alive.\n\nWe, therefore, see no difficulty in treating the statements as to pedigree in Ex. 1 as statements of a dead person as to the existence of a relationship by blood between Lokenath and his daughters Ahalya, Brindabati and Malabati-the relationship which is in dispute now.\n\nThe more important point for consideration is if the statements as to pedigree in Ex. 1 were made, to use the words of sub.s. (5), before the question in dispute was raised.\n\nThe High Court held that the statements were made ante litem motam.\n\nLearned counsel for the appellant has very strongly contended before us that the High Court took an erroneous view in this matter.\n\nLet us first see the circumstances in which Ex. 1 was filed and dealt with in Suit No. 31 of 1917.\n\nW'e have said earlier what that suit was about. It was a suit brought by some of the reversioners for a declaration that the alienation made by Haripriya in favour of Indumati was without legal necessity and, therefore, not binding on the reversion after the death of Haripriya. The suit was filed on August 27, 1917.\n\nOn November 2, 1917, certain other persons made an application to be added as parties to the suit on the footing that they had the same interest in the suit as the plaintiffs. That application was disposed of by the learned Subordinate Judge by the following order-\n\n\" In a suit like the present, it is not necessary\n\n(1) (1898) I.L.R. 26 Cal. 236.\n\nthat all the reversioners should be made parties. So I reject the petition.\" Exhibit 1 was filed on November 5, 1917. In that petition Satyabadi alleged: \"The applicants are the legal claimants to inherit the properties left by Lokenath ...... the applicants therefore beg that they may kindly be made co-defendants\". It was further alleged that the plaintiffs of that suit had no legal right over the share in dispute, and this was followed by a pedigree given in para. IV of the petition. This petition (Ex. 1) was put up on November 27, 1917, and the learned Subordinate Judge disposed of the petition by the following order :-\n\n\"The petition of Satyabadi Pati and others was put up in the presence of the plaintiff's pleader.\n\nHe objects to the same. The petition is, therefore, rejected.\" Ultimately, the suit was decreed on August 31, 1918, on the finding that the alienation by Haripriya was without legal necessity and did not bind the reversion after her death.\n\nThe learned Judges of the High Court took the view that in Suit No. 31 of 1917 no dispute arose as to the alleged relation between Lokenath on one side and Ahalya, Brindabati and Malabati on the other. The dispute in that suit was about the validity of the alienation made by Haripriya and the suit having been filed by some of the reversioners on behalf of the reversion, no issue was raised or could be raised as to whether Lokenath had any daughters by his first wife.\n\nSuch an issue was not relevant to the suit and furthermore nobody could anticipate in 1917 that the sons of a sister or half-sister would be preferential heirs in the order of Mitakshara succession. They, therefore, held that the statements in Ex. 1 were ante litem motam and admissible under sub-s. (5) of s. 32, Evidence Act.\n\nOn behalf of the appellant it has been argued that for a declaratory decree in respect of an alienation made by a Hindu widow or other limited heir, the right to sue rests in the first instance with the next reversioner and the reversioner next after him is not entitled to sue except in some special circumstances\n\nI959\n\nDolgobinda I'aricha v.\n\nNimai Charan Misra & Others\n\nS. K. Das],\n\nI959\n\nDolgobinda\n\nPaticha\n\nv. Nimai Charan A1isra & Others\n\nS. l(. Das].\n\nand therefore the question as to who the next reversioner was arose in the suit of 1917; and Ex. I did raise a dispute as to who the last male owner was- Lokenath or Satyanand-and also showed that there was a dispute if the plaintiffs of that suit were entitled to the property in dispute there. The existencs..of such a dispute, it has been argued, affected the statements in Ex. 1 and what Satyabadi said therein were not \" the natural effusions of a party who must know the truth and who speaks upon an occasion when his mind stands in an even position without any tern ptation to exceed or fall short of the truth\" (as per Lord Chancellor Eldon in Whitelocke v. Baker) (1). Learned counsel has also relied on the decision in Naraini Kuar v . .i.\n\nChandi Din (2) where it was held that s. 32(5) did not apply to statements made by interested parties in denial, in the course of litigation, of pedigrees set up by their opponents.\n\nWe do not think that in Suit No. 31 of 1917 any que.stion as to the relationship of Lokenath with Ahalya, Brindabati and Malabati arose at all. It is to be remembered that even according to the pedigree set up by the appellant one of the plaintiffs is a son of Ahalya and two others are sons of Malabati.\n\nWhat is now in dispute is whether Ahalya and Malabati were daughters of Lokenath Parichha. That is a question which did not at all arise for consideration in Suit No. 31of1917; nor did it arise in the proceedings which the application of Satyabadi (Ex. 1) gave rise to.\n\nPrima facie, there is nothing to show that a dispute as to the relationship of Lokenath with Ahalya and Malabati arose at any stage prior to or in the course of the proceedings which arose out of Ex. 1 ; that would be sufficient to discharge the onus of proving that the statements in Ex. 1 were ante litem motam.\n\nNa ta bar, one of the plaintiffs in the suit of 1917, who might have given evidence of any such dispute if it existed, said nothing about it. We have referred to the circumstances in which Ex. 1 was filed and dis posed of. It is true that the order of the learned Subordinate Judge rejecting the petition Ex. 1 is somewhat cryptic and it does not show what objection the\n\n(7) (1807) 13 Ves. 510, 514.\n\n(8) (1886) I.L.R. 9 All. 467 •\n\nplaintiff of that suit took and on what ground the learned Subordinate Judge rejected the petition. If, however, the various orders made by the learned Subordinate Judge, particularly the orders dated N ovember 2, 1917, and November 27, 1917, to which we have earlier made reference are examined, it seems clear to us that the learned Subordinate Judge was proceeding on the footing that in a suit of that nature it was not necessary to make all the reversioners parties, because the revetsioners who brought the suit represented the entire body of reversioners. From the judgment passed in the suit (Ex. Cl) it does not appear that the question as to who the next reversioners were was at all gone into. That may be due to the circumstance, pointed out by the High Court, that Purushottam, uncle of J anardan and N atwar, was then alive. He was admittedly then the nearest reversioner, but as he did not join as a plaintiff he was made a proforma defendant. The nearest reversioner having been added as a party defendant in the sui~ of 1917, no question of title arose in that suit as between the reversioners inter se.\n\nSuch a question of title was wholly foreign to the nature of that suit. Nor, do we find anything in the judgment, Ex. Cl, to show that it was ever suggested in that suit that the last male owner was not Satyanand. The sons of the half-sister of Satyanand were not preferential heirs at the time and we agree with the learned Judges of the High Court that no question arose or could have arisen in that suit as to the relation between Lokenath on one side and Ahalya and Malabati on the other. That being the position, the statements as to pedigree contained in Ex. 1 were made before the precise question in dispute in the present litigation had arisen.\n\nIt has next been argued by learned counsel for the appellant that in admitting Ex. 1 under s. 32(5) the courts below assumed that Satyabadi had special means of knowledge as to the relation between Lokenath and his alleged daughters Ahalya and Malabati.\n\nThe argument has been that unless it ii!! assumed that Satyabadi is the grand-son of Lokenath, he can have\n\nDolgobinda Paricha v.\n\nNimai Charan Mis.a G Others\n\nS. K. Das].\n\nI959\n\nDolgobinda\n\nParicha\n\nNi1nai Charan Misra 6- Others\n\nS. K. Das].\n\nno special means of know ledge as to the disputed relationship.\n\nLearned counsel for the appellant ha.s referred us to the decision in Subbiah Mudaliar v.\n\nGopala Mudaliar (1 ) where it was held that for a statement in a former suit to be admissible under s. 32(5) the fact that the person who made the statement had special means of knowledge must be shown by some independent evidence , otherwise it would be arguing in a circle to hold that the document itself proves the relation and therefore shows special means of knowledge. In Hitchins v. Eardley (2) the question of the legitimacy of the declarant was in issue and the same question was necessary to be proved in order to admit his declarations. That was a jury case and the question relating to the admissibility of evidence being a question oflaw had to be determined by the Judge; but the same question being the principal question for decision in the case had to be determined by the jury at the conclusion of the trial. In the difficulty thus presented, prima facie evidence only was required at the time of admission.\n\nWe do not think that any such difficulty presents itself in the case under our consideration.\n\nAs to Satyabadi's special means of know ledge, we have in this case the evidence of Janardan Misra and Dharanidhar Misra, which evidence independently shows that Satyabadi was the grand-son of Lokenath, being the son of his daughter, Ahalya. It may be stated here also that it was admitted that Ahalya was Satyabadi's mother, and that would show that Satyabadi had special means of knowledge as to who his mother's father was.\n\nTherefore, we agree with the High Court that Ex. 1 fulfilled all the conditions of s. 32( 5 ), Evidence Act and was admissible in evidence.\n\nWe have already said that it is not for us to consider what weight should be given to the oral evidence of Janardan and Dharanidhar or to the statements in Ex. 1.\n\nThe courts below have considered that evidence and have assessed it. \\Ve do not think that we shall be justified in going behind that assessment.\n\nLearned counsel for the appellant wished also to\n\n(1) A.LR. 1936 Mad. 808 .\n\n(2) (1871) L.R. 2 P. &.D. 248.\n\nargue the point that the Privy Council decision in r959 Mst. Sahodra's case (1) was wrong and that a half- Dolgobinda sister was not entitled to get the benefit of the amend- Paricha ing Act of 1929. The Privy Council decision was given v. at a time when it was binding on the courts in India Nimai Charan and it settled differences of opinion which then existed Misra &- Others in the different High Courts. That decision was taken • 5 - as settling the law on the subject and on the faith of K. Das J. that decision a half-sister has been held in subsequent cases to be entitled to the benefit of the Amending Act.\n\nThe High Court dealt with the case in 1951 after the Constitution had come into force and the Privy Council jurisdiction in Indian appeals had ceased. No point was taken on behalf of the appellant in the High Court that the Privy Council decision should be reopened and the question of the right of a half-sister re-examined. In these circumstances, we did not allow learned counsel for the appellant to argue the correctness or otherwise of the Privy Council decision.\n\nThe contentions as to the admissibility of Ex. 1 and the oral evidence of Janardan Misra and Dharanidhar Misra being devoid of merit, the appeal fails.\n\nWe accordingly dismiss the appeal with costs in favour of the contesting respondents.\n\nAppeal dismissed.\n\n(I) (1942) L.R. 69 I.A. 145.", "total_entities": 75, "entities": [{"text": "Subba Rao", "label": "JUDGE", "start_char": 340, "end_char": 349, "source": "metadata", "metadata": {"canonical_name": "K. SUBBA RAO", "offset_not_found": false}}, {"text": "PARICHA\n\nNIMAI CHARAN MISRA & OTHEH", "label": "RESPONDENT", "start_char": 460, "end_char": 495, "source": "metadata", "metadata": {"canonical_name": "NIMAI CHARAN MISRA & OTHEH,S", "offset_not_found": false}}, {"text": "S. K. 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{"document_id": "1959_2_836_845_EN", "year": 1959, "text": "April zg.\n\n836 SUPREME COURT REPORTS [1959) Supp.\n\nM/S. SASA MUSA SUGAR WORKS (P) LTD. v.\n\nSHOBRATI KHAN AND OTHERS (B. P. SINHA, P. B.. GAJE, NDRAGADKAR and\n\nJC N. vVANcHoo, JJ.)\n\n Industrial Dispi<te-Go-slow-Employer's application for perm.ission to dismiss worhmen-Tribunal's poie; er-Perverse finding- Grant of permission-Indi<strial Disputes Act, r947 (r4 of r947), s. 33\n\nPending an adjudication proceeding between the workmen and the Mills, the management of the appellant Mills served notices on thirty-three of its workmen and thereafter suspended them for taking a leading part in a protracted go-slow in contravention of the Industrial Disputes Act.\n\nFor similar reasom,. a few days later, it again served similar notices on fifteen others and suspended them.\n\nThereafter the management made two applications under s. 33 of the Industrial Disputes Act for permission to dismiss the said workmen. The forty-eight workmen in their turn applied under s. 33A of the Act alleging breach of s. 33 by the management in suspending them by way of punishment. The Industrial Tribunal found that the suspension was not by way of punishment and that there was a deliberate resort to go-slow by the workmen which was unjustified; it refused the permission with respect to sixteen of the workmen on the ground of want of evidence but granted leave to the management to suspend the rest for seven days, thus disallowing the prayer for dismissal. It also rejected the workmen's application under s. 33A of the Act.\n\nAppeals were filed by both the parties and when they came up for hearing, the Appellate Tribunal allowed the workmen to withdraw their appeal so far as it related to their application under s. 33A of the Act, with the result that the finding of the Tribunal that the suspension was not a punishment but only pending enquiry by the management and proceedings before the Tribunal, stood confirmed.\n\nWhile agreeing with all other findings of the Tribunal, the Appellate Tribunal took the view that the suspension ordered by the management was substantive.punishrnent since the notices did not state that it was pending enquiry, and the subsequent application for permission to dismiss the workmen was, therefore, mala fide and dismissed the appeal of the management. ' Held, that the material findings arrived at by the Industrial Tribunal not having been upset by the Appellate Tribunal, the only possible order on the applications of the management under s. 33 of the Act was to permit it to dismiss the workmen provided there was evidence against them all. It was not open to the Industrial Tribunal to substitute some other form of punishment and give permission therefor.\n\n(2) S.C.R. SUPREME COURT REPOH.TS 837\n\nThe Appellate Tribunal was clearly in error in holding that suspension, in the instant ca.se, was not an interim order pending enquiry and proceedings before the Tribunal under s. 33, b_ut substantive punishment, contrary to the finding of the Industrial Tribunal which stood confirmed by its own order permitting the withdrawal of the appeal against it by the workmen.\n\nThe finding of the Industrial Tribunal that there was no evidence against sixteen workmen was, on the face of it, perverse, since the evidence against them was the same as against the thirty-two others.\n\nAs go-slow was serious misconduct, insidious in nature and could not be countenanced,· and since the workmen were found guilty of snch misconduct, the management must be granted the permission to dismiss them.\n\nCIVIL\n\nAPPELLATE\n\nJURISDICTION: Civil Appeals Nos. 746 and 747 of 1957.\n\nAppeals by special leave from the judgments and orders dated June 3, 1955, and May 21, 1956, of the Labour Appellate Tribunal of India, Calcutta, in Appeal No. Cal. 366/52 and Misc. Case No. 145 of 1955 respectively, arising out of an A ward dated September 22, 1952, of the Industrial Tribunal, Bihar, and published in the Bihar State Government Gazette on October 21, 1952.\n\nM. 0. Setalvad, Attorney-General for India and R. 0. Prasad, for the appellant.\n\nThe respondent did not appear. 1959.\n\nApril 29.\n\nThe Judgment of the Court was delivered by\n\nM /s. Sasa Jiusa\n\nSugar Works\n\n(P) Ltd. v.\n\nShobrati Khan\n\n& Others\n\nWANCHOO, J.-These are two appeals by the Wanchoo J. management by special leave in an industrial matter arising out of two applications under s. 33 of the Industrial Disputes Act (hereinafter called the Act).\n\nThe facts of the case are briefly these : The appellant, Messrs. Sasa Musa Sugar Works (Private) Ltd. is a sugar factory in District Saran (Bihar). The factory was established in 1932. In June 1942, a trade union was formed in this factory. In July 1943, trouble arose between the workmen and the management resulting in the discharge of three office-bearers of the union, including one Shams-ud-din, who was then the\n\nMfs. Sasa i11usa\n\nSugar Worls\n\n(PJ Ltd. v.\n\nShobrati Khan\n\n& Others\n\nlVanchoo ].\n\njoint secretary. That matter was referred to adjudication and the discharged workmen were ordered to be reinstated in the beginning of 1944. In December 1944, there was trouble again and a large number of workmen were dismissed, including Shams-ud-din, who had by now become the president of the union.\n\nThis dispute was again referred to an Industrial Tribunal, which again ordered reinstatement of the dismissed workmen in August 1947.\n\nThere was peace for some time after this. But in June 1951, the management again discharged seventeen workmen, including Shams-ud-din, who was at that time secretary of the union.\n\nThe trouble continued up to December 1951, when .an agreement was arrived at .between the union and the management, as a result of which twelve of the workmen were reinstated hut five, including Shams-ud-din, were not and their cases were to be referred to adjudication. It appears, however, that another reference between the management and its workmen was already pending since September 8, 1951, before an Industrial Tribunal, when this agreement was arrived at. Thereafter the work in the factory proceeded smoothly for some time. But on January 1, 1952, a notice was issed by the union to the management enlisting as many as 40 demands and it was threatened that if the demands were not met within seven days, the union would have to advise the workmen to adopt go-slow and call upon them to offer passive resistance with effect from January 9, 1952, and take all legitimate means to see that the decision of go-slow was carried out till the demands of the union were fulfilled.\n\nThis notice was received by the management on January 4, which immediately contacted the officers of the Labour Department as well as the Sub-Divisional Magistrate at Gopalganj.\n\nOn January 8, the Deputy Labour Commissioner wrote to the union that as the conciliation officer was busy in the general elections, the status quo should be maintained till the elections were over, so that the matter migji.t be looked into by the concilia- tion officer. The union, however, gave no heed to this advice and go-slow began from January 9 and\n\n(2) S.C.R. SUPREME COURT REPOHTS 839\n\nwas continued till January 12, 1952.\n\nThen the Labour Commissioner himself came to the factory on January 12 and advised Shams-ud-din who was the moving spirit behind all this to call off the go-slow, as it was proposed to start conciliation proceedings at Patna on January 17, 1952.\n\nConciliation proceedings then began on January 17 and an agreement was arrived at as to some of the demands on January 23, and it was decided that. further conciliation proceedings would be held in February. But in spite of this agreement go-slow was again resorted to from January 24 to January 31. In the meantime, the Labour Officer had arrived at the factory on January 28, 1952, and further talks took place. The workmen, however, did not pay heed to the advice of the Labour Officer. He, therefore, reported on January 31 to the Labour Commissioner that go-slow was still continuing.\n\nThe Labour Commissioner then ordered the Labour Officer to tell the workmen that no further conciliation proceedings would take place until the goslow was called of.\n\nThe Labour Officer then informed the management that it could take disciplinary action against the workmen concerned with the permission of the Industrial Tribunal. Consequently, the management suspended thirty-three workmen by a notice given on the night of January 31 as from February 1.\n\nIt was said in the notice that these thirty-three workmen had been found taking a leading part in the unjustified go-slow which was in contravention of the Act and they were therefore suspended from service until further orders. This notice had some good effect and work improved for four days; but from :February 5 goslow was started again. Consequently, the management suspended seven more workmen from February 6 and eight more from February 7 by giving notice to them in the same terms in which the notice had been given to the thirty-three workmen, on' January 31.\n\nAs adjudication proceedings were pending since September 1951 between the management and its workmen, the former applied on February 6, 1952, under s. 33 of the Act for permission to dismiss the thirty-three workmen and on February 11, 1952, for permission to\n\nr959\n\nM /s. Sa.sa Musa Sugar Works\n\n(P) Ltd. v.\n\nShobrati Khan\n\n& Others\n\nWanchoo ].\n\nl\\f /s. Sasa :\\1usa Sugar Works\n\n(P) Ltd. v.\n\nShobrati Khan\n\nQ;. Others\n\nWanchoo j.\n\ndismiss the remaining fifteen workmen who had been suspended later. The forty-eight workmen in their turn applied on March 29, 1952, under s. 33-A of the Act to the Industrial Tribuhal and their case was that they had been suspended as a measure of punishment and that as this was done without the sanction of the Indnstrial.Tribunal, the management had committee] a breach of s. 33.\n\nThe three applications were tric<l together by the Industrial Tribunal and the contentions raised before it were these:\n\n(1) The management's applications under s. 33 had not been preceded by any enquiry into the miscon- <luct of the workmen and were, therefore, liable to be rejected;\n\n(2) The order of suspension in this case amounted to punishment and therefore s. 33 had been contra vened; and\n\n(3) There was an unjustified go-slow by the workmen in January and February 1952.\n\nOn the first point, the Industrial Tribunal found that no enquiry had been held by the management before the two applications under s. 33 were made; but it hel<l that all the evidence which could have been taken in the enquiry by the management had been led before it and it was in foll possession of the facts, and no question of any prejudice to the workmen arose, as it would be open to it on a review of the entire evidence before it to decide whether the applications for permission to dismiss should be granted or not.\n\nOn the second point, it held that the order of suspension was not as a measure of punisment in the circumstances of this case and that it was an order pen<ling enquiry by the management and proceedings under s. 33 before the tribunal and tha£, as there were no Standing Orders as to suspension in this factory, the management's liability to pay the workmen their wages during the period of suspension remained. On the third point., the Indnstrial Tribunal, after an elaborate discussion of the evidence, came to the conclusion that there-was a deliberate go-slow resorted to by the workmen in January and February 1952 and\n\nthat it was unjustified as it took place while conciliation proceedings were pending.\n\nHaving given these findings; the Industrial Tribunal had then to decide what orders it should pass on the applications under s. 33 and s. 33-A. It held that there was no evidence to show that of the forty-eight workmen concerned, sixteen workmen named by it had taken part in the go-slow or instigated it. It therefore refused the application under s. 33 with respect to these sixteen workmen.\n\nAs to the remaining thirtytwo workmen it held that as some Standing Orders which were under contemplation at the time provided either dismissal or suspension for seven days in case of misconduct, it was proper to grant leave to the management to suspend the workmen for seven days, in view of some opinion expressed by a Go-Slow Committee appointed some time before by the Bihar Central (Standing) Labour Advisory Board. In effect, therefore, it rejected the prayer of the management for dismissal with respect to these thirty-two workmen also.\n\nFinally, it rejected the application under s. 33-A.\n\nThis award led to two appeals before the Labour Appellate Tribunal; one was by the management against the entire award so far as it related to its applications under s. 33, and the other by the workmen against the dismissal of their application under s. 33-A and against the award relating to the applications of the management under s. 33.\n\nWhen the matter came up for hearing before the Appellate Tribunal, the workmen withdrew their appeal with respect to their application under s. 33-A and it wa.s consequently dismissed. The result of the dismissal of the appeal of the workmen was that the finding of the Industrial Tribunal that the suspension was not a punishment and was only pending enquiry by the management and the proceedings before the tribunal, stood confirmed.\n\nAs to the appeal by the management with respect to the applications under s. 33, it was contended on its behalf before the Appellate Tribunal that the Industrial Tribunal had gone wrong on two substantial questions of law, namely-\n\n(1) the Industrial Tribunal could either grant or\n\nro6\n\nI959\n\nM/s. Sasa Musa\n\nSugar Works\n\n(P) Ltd. v.\n\nS hobrati Khan\n\nQ>. Others\n\nWanchoo ].\n\nI959\n\nM /s. Sasa Musa\n\nSugar Works\n\n(P) Ltd.\n\nrefuse permission to dismiss on an application for such permission under s. 33 and it could not substitute its owu judgment about the quantum of punishment; and\n\n(2) it was wrong in rejecting the applications v. against sixteen workmen on the ground that there was Shobrati Khan no evidence.\n\n& Others The Appellate Tribunal was of the opinion that the wanchoo J .. contention of the management on both these points was correct and that the appeal involved substantial questions of law. It also found that the Industrial Tribunal's finding that the workmen had resorted to go-slow was not perverse and could be the only finding on the evidence. It then went on to say that go-slow was insidious in nature and could not be countenanced, and that it was serious misconduct normal punishment for which was dismissal. It also held that the Industrial Tribunal was not right in relying upon the recommendations of the Go-Slow Committee and the contemplated Standing Orders which were not till then in force. Having said all this, we should have expected that the Appellate Tribunal would set aside the order of the Industrial Tribunal and grant permission • to the management to dismiss the workmen for what was serious misconduct of an insidious nature which could not be countenanced. But it went on to say that it was well settled that where an employer could not punish a workman without obtaining permission from the tribunal under s. 33, an application for permission would be mala fide if it was made after any punishment had already been meted out to the workman. It held that in the present case, the suspension of the workmen by the management was substantive punishment, because the notice did not in so many words state that it was pending enquiry and therefore the applications for permission having been made after punishment had been meted out were mala fide. In coming to this conclusion, the Appellate Tribunal seems to have forgotten that it had already dismissed the appeal of the workmen from the order of the Industrial Tribunal on their application under s. '33-A, which in effect amounted to confirming the order of the Industrial Tribunal that the suspension was not a punishment but was rightly made pending enquiry by\n\nthe management and proceedings before the tribunal.\n\nThe Appellate Tribunal supported its decision on this question of punishment by stating that the mala .fides of the management were clear from the fact that though the suspensions had been made between January 31 and February 7, 1952, the application was filed by the management on March 29, 1952, after the application by the workmen under s. 33-A had been filed.\n\nThis observation was clearly wrong, for the applications under s. 33 were filed on February 6 and 11 by the mana.gement, and it was the application of the workmen under s. 33-A which was filed on March 29.\n\nHaving thus inverted the order in which the applications were made to the Industrial Tribunal, the Appellate Tribunal held that the applications of the management under s. 33 were not bona fide. It then dismissed the appea.l of the management, thus upholding the order of the Industrial Tribunal so far as the suspen - sion of thirty-two workmen for seven days was concerned on 1; he ground that the workmen had withdrawn their appeal, though in the earlier part of the judgment all that w2s said was that the workmen had withdrawn their appeal against the order under s. 33-A.\n\nAs the Appellate Tribunal had obviously made a mistake and inverted the order in which the applications under ss. 33 and 33-A had been made, a review application was filed by the management. It, however, held that though the dates had been wrongly mentioned by accident, it saw no reason to review its order. That is how the management filed two special leave petitions in this Court.\n\nWe are of opinion that on the findings of the Industrial Tribunal on the three points formulated by it which have not been upset by the Appellate Tribunal, the only order possible on the applications of the management under s. 33 was to permit it to dismiss the forty-eight workmen, provided there was evidence against them all. It was not open to the Industrial Tribunal when it was asked to give permission to dismiss to substitute some other kind of punishment and give permission for that. The Industrial Tribunal was satisfied that there was misconduct and that finding has been upheld by the Appellate Tribunal. As such\n\nM /s. Sasa Musa Sugar Works\n\n(P) Ltd. v.\n\nShobrati Khan\n\n& Others\n\nWanchoo ].\n\nM /s. Sasa Musa\n\nSugar 111 orhs\n\n(P) Ltd. v.\n\nShobrati J{ han\n\nc;. Others\n\nTVanchoo ] .\n\nif there was evidence that these forty-eight workmen were guilty of misconduct, the Industrial Tribunal was bound to accord permission asked for.\n\nWe cannot agree with the Appellate Tribunal that the suspension in this case was substantive punishment. and was not an interim order pending enquiry and proceedings before the Industrial Tribunal under s. 33.\n\nWe have already pointed out that the Labour Officer told the management on January 31, 1952, that it was free to take disciplinary action with the permission of the Industrial Tribunal. It was thereafter that thirty. three workmen were suspended on January 31 and the notice clearly said that the suspension was pending further orders, thus intimating to the workmen that the order of suspension was an interim measure. This notice of January 31 was followed by an application on February 6 to the Industrial Tribunal for permission to dismiss the thirty-three workmen involved in it, and this also clearly shows that the suspension was pending enquiry (if any) by the management and proceedings before the Industrial Tribunal. Similarly, the suspension notices of February 5 and 6 relating to fifteen workmen said that they were suspended till further orders and were followed on February 11 by an application under s. 33 to the Industrial Tribunal for permission to dismiss them. In the circumstances it is quite clear that suspension in this case was not a punishment but was an interim measure pending enquiry and proceedings before the tribunal. We have already pointed out that this was the finding of the Industrial Tribunal on the basis of which the application under s. 33-A was dismissed and this finding stood confirmed when the workmen withdr.ew their appeal with respect to their application under s. 33-A. The Appellate Tribunal therefore was clearly in error in holding. that the suspension was punishment.\n\nThe only question that remains is about the sixteen workmen about whom the Industrial Tribunal held that there was no evidence to connect them with the go-slow. The Appel.late Tribunal's view in this matter was that the contention of the management that the Industrial Tribunal was wrong in holding that there was no evidence against these sixteen workmen was ·\n\ncorrect. It has been shown to us that evidence against these sixteen workmen is of exactly the same witnesses and of the same kind as the evidence against the remaining thirty-two. The finding, therefore, of the Industrial Tribunal that there was no evidence against the sixteen workmen is patently perverse, for there was the same evidence against them as against the remaining thirty-two. It follows, therefore, that all the forty-eight workmen (two of whom are since said to have died) are exactly in the same position. As held by the .Appellate Tribunal, go-slow is serious misconduct which is insidious in its nature and cannot be countenanced. In these circumstances as these forty. eight workmen were taking part in the go-slow and were thus guilty of serious misconduct, the management was entitled to get permission to dismiss them. But as the management held no enquiry after suspending the workmen and proceedings under s. 33 were practically converted into the enquiry which normally the management should have held before applying to the Industrial Tribunal, the management is bound to pay the wages of the workmen till a case for dismissal was made out in the proceedings under s. 33 ; (see the decision of this Court in the Management of Ranipur Colliery v. Bhuhan Singh (1) ).\n\nAs already pointed out, this is the view taken by the Industrial Tribunal while dealing with the application under s. 33-A which stood confirmed by the dismissal of the appeal by the workmen in that behalf.\n\nThe management will therefore have to pay the wages during the period of suspension till the award of the Industrial Tribunal.\n\nWe thereforeallow the appeals and set aside the orders of the two Tribunals so far as the applications under s. 3;3 are concerned and grant the appellant the permission sought for by it in these applications subject to the workmen being paid all their wages during the period of suspension up to the date of the award of the Industrial Tribunal, i.e., 22-9-1952. As the workmen did not appear to contest these appeals, we pass no order as to costs.\n\nAppeals allowed.\n\n(1) [1959] Suppl. 2 S.C.R. 719.\n\nI959\n\nM /s. 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{"document_id": "1959_2_846_868_EN", "year": 1959, "text": "r959\n\nMay 4.\n\n846 SUPREME COURT REPORTS [1959] Supp.\n\nSAROJ KUMAR MAZUMDAR\n\nTHE COMMISSIONER OF INCOME-TAX, WEST\n\nBENGAL, CALCUTTA. (N. H. BHAGWATI, B. P. SINHA and J. L. KAPUR, JJ.)\n\nIncome-tax-Assessment-Single transaction of purchase and sale of land-If a venture in the nature of trade or capital investment -Test-Dominant intention-Onus-Indian Income-tax Act, z922 (XI of I922), ss. 2(4), IO.\n\nThe question for decision in this appeal was whether a single transaction of sale of land measuring about three quarters of an acre was an adventure in the nature of trade so as to make it liable to income-tax. The assessee appellant, an Engineer by profession, was engaged in various business activities including that of an engineering firm but, admittedly, had no dealing, except the one in question, in respect of land. In 1946 he entered into an agreement with the Hindusthan Co-operative Insurance Society Ltd. for the purchase of the land in question and paid a sum of Rs. 32,748 in two instalments, being 25% of the estimated total price of the land. As his construction activities declined and the Government, who had requisitioned the land, were not immediately releasing it, the appellant sold his rights under the agreement to a third party in 1947 and thereby received a sum of Rs. 74,000 odd in excess of the amount paid by him to the Society. The land, however, was not released by the Government until i949. The Income-tax Officer held that the transaction v:.1as an adventure in the nature of trade and the said sum was a profit therefrom, taxable under s. IO of the Incometax Act, and included it in the assessable income. The Appellate Assistant Commissioner, in appeal, held that the assessee, a man of means, had intended to purchase the land for his own use, and that the motive of profit was entirely absent when the purchase was made and that as it was a case of appreciation of capital, he was liable to pay Capital Gains ta, x.\n\nThe Appellate Tribunal on appeal by the Department, reversed the findings and the decision of the Appellate Assistant Commissioner and affirmed that of the Income-tax Officer. After the assessee had obtained from this Court special leave to appeal, he made an application to the High Court under s. 66(2) of the Income-tax Act, which that Court dismissed as being barred by limitation.\n\nHeld, (per Bhagwati and Sinha, JJ., Kapur, J., dissenting) that admittedly the transaction in question being a single instance of its kind, and not in the line of the business of the assessee, it was for the Department to prove that the dominant intention of the appellant, when he entered into the agreement with the Society, was to embark on a venture in the nature of\n\nr959 trade as distinguished from a capital investment, and they having failed to do so, the appeal must succeed.\n\nCommissioners of Inland Revenue v. Reinhold, 34 T. C. 389, Saroj Kumar applied.\n\nMazumdar\n\n1:here could. e o doubt,. as held by the . Court, that the Th• ca:;,.issioner question for dec1s1on mvolved m such cases was one of law or a mixed question of fact and Jaw.\n\nG. Venkataswami Naidu and Co. v. The Commissioner of Income-tax, A.LR. 1959 S.C. 359, referred to and distinguished.\n\nThe line of demarcation, however, between an isolated transaction and a venture in the nature of trade was very thin and each case had to be decided on the total impression all its facts and circumstances made on the mind of the Judge.\n\nCase-law reviewed.\n\nKAPUR, J.-Even though the powers of this Court under Art. 136 of the Constitution were very wide, they had to be exercised within the limits imposed by its own decisions and one such limitation was tqat this Court would not ordinarily interfere on questions of fact. Since the question involved in the instant case was a mixed question of law and fact, the facts should properly be found by the body whose exclusive function under the Income-tax Act was to do so.\n\nG. Venkataswami Naidu & Co. v. The Commissioner of Incometax, A.LR. 1959 S.C. 359 and Dhakeswari Cotton Mills v. The Coihmissioner of Income-tax, [1955] l S.C.R. 941, referred to.\n\nNor could an assessee be allowed to by-pass the procedure prescribed by ss. 66(1), 66(2) of the Income-tax Act to-have question of Jaw determined.\n\nSince, however, the Appellate Tribunal had, in the instant case, failed to consider certain essential facts, the case should be remitted to it for a proper decision in the light of the observations made by this Court.\n\nCIVIL\n\nAPPELLATE\n\nJURISDICTION: Civil Appeal No. 347 of 1955.\n\nAppeal by special leave from the judgment and. order dated March 26, 1954, of the Income-tax Appellate Tribunal, Calcutta, in Income-tax Appeal No. 5263 of 1953-54.\n\nA. V. Viswanatha Sastri and Sukumar Ghosh, for the appellant.\n\n0. K. Daphtary, Solicitor-General of India, R. Ganapathy, R.H. Dhebar and D. Gupta, for the respondent.\n\n1959. May 4.\n\nThe Judgment of Bhagwati and Sinha, JJ., was delivered by Sinha, J. Kapur, J. delivered a separate Judgment.\n\nof Income-tax,\n\nWest Bengal, Calcutta\n\n'959 SINHA, J.-The only question for determination in this appeal by special leave, is whether the solitary Saroj J(umar\n\nMazumdor transaction in respect of about three quarters of an v. acre of land in the suburbs of Calcutta, was an ad ven- The Commission\" ture in the nature of trade and, therefore, liable to of Income-tax, West Bengal,\n\nCalcutta\n\nSinha J.\n\nincome-tax. The assessee is the appellant.\n\nHe challenges the correctness of the order of the Income-tax Appellate Tribunal, Calcutta Bench, Calcutta, dated March 26, 1954, passed in LT.A. 5263 of 1953-54, in respect of the Assessment year 1948-49, reversing that of the Appellate Assistant Commissioner of Incometax, Range \"C \", Calcutta, dated September 5, 1953.\n\nThe facts of this case leading upto this appeal are as follows : The appellant is engaged in various types of business activities, being a share-holder and Director or Managing Director of several limited liability concerns, and is also a partner in the firm known as \"Pioneer Engineering Works\". In respect of his income during the previous two assessment years, the appellant was assessed to income-tax on the sums of Rs. 53,000/-(1946-47) and Rs. 59,000/- (1947-48).\n\nThe appellant holds investments in shares of the value of Rs. 2,45,000/-, out of which, according to the assessee, shares of-the value of Rs. 1,95,000/-, though standing in his name, belong to other members of his family, including his father and his wife.\n\nThe Hindusthan Co-operative Insurance Society Limited, of Calcutta, (hereinafter referred to as \"the Society \"), acquired a block of about 578 bighas of land lying between Diamond Harbour Road a'nd Tolly's N ullah, within the Municipal limits of the Corporation of Calcutta, between the years 1940 and 1942. The Society decided to level the land thus acquired and to open out roads and after developing the same, it subdivided it into small plots and sites in different blocks suitable for residential purposes under its scheme called \"The New Alipore Land Development Scheme No. XV \". The Society offered such plots for sale. One such plot, being plot No. 77 in block \" E \" of the said Scheme, was agreed, by an agreement dated January 10, 1946, to be sold to the assessee at the rate of Rs. 2,550 /- per katha. In pursuance of the said agreement, the assessee paid to the Society, a sum of\n\nRs. 13,099/- being 10% of the estimated price of the x959 plot with an approximate area of 51 kathas, which Saro} Kumar subsequently, on exact measurement, was found to Mazunidar be 45·56 kathas.\n\nSubsequently, on the acceptance v, of his offer, the appellant paid another sum ofThe Commissioner Rs. 19,649 (omitting annas), being 15% of the estimatof Income-tax, ed price. Thus, in all, a sum of Rs. 32,748/- being West Bengal, 25% of the estimated total price of the land, was Calcutta paid by the assessee to. th'tl Society.\n\nAll this area Sinha 1. which the Society had undertaken to develop and sell to different purchasers in small plots, was in occupation of the Government, which had requisitioned it for purposes connected with the prosecution of the Second World War. Hence, one of the terms of the transaction between the assessee and the Society, was that the transaction of purchase would be completed within six months of the lands being released from Government occupation. It was further stipulated that the assessee would be entitled to apply, within three months of the receipt of the notice of de-requisition, for extension of time not exceeding one year, for the completion of the transaction on the condition that he paid interest at the rate of 7% per annum on the outstanding amount, during the extended period. If the assessee, as purchaser, paid to the Society another sum which, together with Rs. 32,748/-, already paid, would amount to 50% of the total price of the plot in question (within six months of the notice of de-requisition), he could get a conveyance of the property on his executing an English Mortgage for the remaining 50% of the price carrying interest at the rate of 7%, on the expiry of these aforesaid six months.\n\nAs there was an apprehension that the Government might acquire the whole property for its own purpose, it was further stipulated that in the event of such an acquisition by Government, the agreement for sale would stand rescinded, and the assessee, in that event, would be entitled to re-payment of the amounts paid by him to the Society by way of advance for the completion of the transaction. The assessee's case is that as the terms of the payment of purchase-price in several instalments, as aforesaid, were convenient to him,\n\nL07\n\nz959 he agreed to take the plot on the conditions aforesaid, with a view to building a residential house for himself Saroj Kuniar d • k h · h h' Mazumdar an constructmg a wor s op m connection wit 1s v. business activity.\n\nAt the end of the Second World The Commissioner War, the assessee's construction activities began to of Incomet•>. decline, and there was no immediate prospect of the\n\nWest Bengal, land in question being de-requisitioned by Government.\n\nCalcutta I th h d c h n ose mrcumstances, t e assessee negotiate 1or t e Sinha J. assignment of his rights under the agreement with the Society, to Rani Yuddha Rajya Devi of Nepal. The Itani appeared to have taken a fancy to the plot and to have made an attractive offer to the appellant.\n\nHence, after exchange of letters between the parties, it was agreed between them that a sum of Rs. 1,07;000 odd would be deposited by the Rani with the assessee on suspense account until the transaction of sale between the Society as the vendor and the Rani or her nominee, as the vendee, would be executed and the transaction of purchase finalised upon her undertaking\n\n- to pay the sum of Rs. 98,000 odd to the Society, which was the outstanding amount of the sale-price in respect of the plot agreed by the assessee to be purchased by him from the Society. After a good deal of correspondence, on December 27, ,1950, the Society executed a deed of conveyance in respect of the said plot, to the daughter of the said Rani as the vendee. The aforesaid vendee executed a deed of mortgage in favour of the Society for the outstanding amount of Rs. 50,900/-, after payment of Rs. 32,700 odd to the Society. In the result, the assessee received, on April 3, 194 7, a sum of Rs. 1,07,000 odd from the Rani, in pursuance of the agreement between her and the assessee.\n\nUntil the execution of the sale-deed between the Society and the Rani's nominee, as aforesaid, the assessee continued to be liable to the Society in respect of the agreement of January 10, 1946. The assessee, thus, received from the Rani a sum of Rs. 74,000 odd in excess of the amount paid by him to the Society. The property, including the plot in question, was not de-requisitioned until some time in 1949.\n\nIn respect of the assessment year 1948-49, the assessee filed a return of his income to the Income-tax\n\nDepartment, showing a loss of Rs. 2,000 odd for the . x959 financial year 194 7-48. In pursuance of the notice Saroj Kumar under s. 23(2) of the Income-tax Act, the assessee ap- Mazumdar peared before the Income-tax Officer, Calcutta, and v. produced all his books of account, including his bank The Commissioner accounts. The Income-tax Officer, on an examination of Income-tax, of the accounts and after questioning the assessee West Bengal, h ' l . h h ' Calcutta came to t e cone usion t at t e assessee had made a profit of Rs. 74,000 odd from the transaction in ques- Sinha J. tion, which, according to him, was an adventure in the nature of trade. Hence, on an examination of the assessee's accounts, the Income-tax Officer included the sum of Rs. 74,485/- as profit from an \"adventure in the nature of trade \"-taxable under s. 10 of the Income-tax Act-as one of the items of income accrued to the assessee during the assessment year 1948-49.\n\nThe assessee went up in appeal to the Appellate Assistant Commissioner of Income-tax, and challenged the conelusioh of the Income-tax Officer that the sum of Rs. 74,000 odd was profit from an adventure in the nature of trade. It was also taken as one of the grounds of appeal by him that in any event, the receipt accrued to the assessee only in 1950, after the transaction of sale had been completed as between the Rani's nominee and the Society. The Appellate Assistant Commissioner did not agree with the Income-tax Officer that the assessee was not in a position either to complete the transaction of purchase by paying the full amount of consideration, or to erect a building thereon, or to use the land in any ot, her way. He pointed out that under the Scheme, the Society had offered terms of purchase on instalments and on execution of a mortgage in respect of the vended property to the extent of 50% of the consideration money. He also pointed out that the assessee had considerable investments to the extent of Rs. 2,45,000/- in shares of different limited concerns. He, therefore, came to the conclusion that the assessee was a man of means, and that it could not be said that he had not intended to purchase the plot for his own use.\n\nHe further held that the motive of making a profit at the time of the purchase, had not been established by the Department,\n\n'959 and that it was a \" solitary transaction \".\n\nOn these findings, he found himself unable to confirm the Saroj [( uniar\n\nMazumdar finding of the Income-tax Officer that the profit was v. from an adventure in the nature of trade.\n\nHe took The Commission\" the view that the appellant had made an investment of Inoome tax, which had appreciated considerably in value, and that West , s-•gal, it was undoubtedly a case of appreciation of capital. ca cutta Treating it as a \"Capital Gain\", he came to the con-\n\nSinha 1. clusion that as the payment had been made in 1947, the gain accrued in that year and not in the year 1950, as contended on behalf of the assessee. In the result, he made him liable to pay Capital Gains tax.\n\nThe Department went up in appeal to the Incometax Appellate Tribunal, which, by its judgment dated March 26, 1954, allowed the appeal. The Tribunal pointed out that the assessee was not a man of such large means as to think of acquiring the plot for his own residential or business purposes. The admitted shares worth Rs. 2,45,000/- standing in his name, the Tribunal pointed out, were held by the assessee, in respect of the major portion, on behalf of other members of his family.\n\nThe Tribunal also observed that Rs. 32,748/- paid hy the assessee to the Society had been paid out of borrowed money. This conclusion does not appear to have been well-founded in fact. The accounts do show credits in favour of the assessee of a larger amount. The Tribunal also pointed out that undoubtedly the \"assessee is a keen businessman and has a number of varied business interests. Admittedly, he is a director of about a dozen concerns and managing director of two or three.\n\nHe is -/8/- annas partner in an Engineering concern which is carrying out a number of construction and other contract works. He is an Engineer by profession and a resident of Calcutta.\" The Tribunal based its conclusion that the sale was an adventure in the nature of trade, and that the profits, thus made, were assessable to income-tax, on the following grounds:-\n\n1. That the payment by the assessee to the Cooperative Society, of Rs. 32,748/-, came out of a loan taken for the purpose from a company (which conclusion, as already pointed out, is not borne out by the entries in the books of account of that company);\n\n2. That the assessee could not have paid the c959 balance of Rs. 98,000 odd, the outstanding amount of Saroj I< umar the purchase.money, to the Insurance Company; Mazumdar\n\n3. That the assessee had no means to construct a v. house on the land, and lastly, The Co1nmissioncr\n\n4. That the site itself fetched no income, thus, of Income-tax, showing that it could not be an investment but only West Bengal, Calcutta an excursion into the realm of trade.\n\nAgainst this decision of the Appellate Tribunal, the Sinha 1. assessee moved this Court and obtained special leave to appeal.\n\nBefore we deal with the main question in controversy in this appeal, we would like to make some general remarks on the nature of the questions involved in this case. It is not disputed on behalf of the respondent that the question now before us, is a question of law, or a mixed question of fact and law, as has been recently laid down by this Court in the case of G. Venkataswami Naidu and Go. v. The Commissioner of Income-tax (1).\n\nSpeaking for the Court, Gajendragadkar, J., after a detailed discussion of the decisions of this Court M eenakshi Mills, Madurai v. Commissioner of Income-tax, Madras (2) and The Oriental lnvestmi;, nt Go., Ltd. v. Commissioner of Income-tax, Bombay (3), and of the House of Lords, in Edwards v.\n\nBairstow (4), came to the conclusion that the question arising in the case, is a mixed question of law and fact, and, therefore, open to examination by this Court. In G. V enkataswami N aid11, and Go. v. The Commissioner of Income-tax (supra), the question raised, was exactly similar to the question now before us, though in a different setting of facts. His conclusion may be stated in his own words as follows :-\n\n\"In other words, in reaching the conclusion that the transaction is an adventure in the nature of trade, the tribunal has to find primary evidentiary facts and then apply the legal principles involved in the expression \"adventure in the nature of trade\" used by s. 2, sub-s. (4). It is patent that the clause 'in the nature of trade' postulates the existence of certain elements in\n\n(1) A.I.R. 1959 S.C. 359.\n\n(2) [1956] S.C.R. 691;\n\n(3) [1958] S.C.R. 49'.\n\n(4) 36 T.C. 207 •\n\n'959 the adventure which in Jaw would invest it with the character of a trade or business; and that would make Saroj J(u1nar\n\nMazumda, the question and its decision one of mixed law and v. fact.\"\n\nThe Commission\" In that view of the matter, this Court further pointo/ Ineometax, ed out that the more proper form of the question is\n\n~Vest Bengal,\n\nCaleutta \"whether, on the facts and circumstances proved in the case, the inference that the transaction in question Sinha J. is an adventure in the nature of trade is in Jaw justified.\" The recent decision of this Court has examined almost all the relevant cases decided in Indian as also English and Scotch Courts, and thus, our task in the present case, has been very much simplified. It has further been observed in that case, more than once, that judicial opinion was unanimous that no general principles or universal tests could be laid down, which could govern the decision of all cases in which the question for determination is similar to the one now before us.\n\nEach case must be determined on the total impression created on the mind of the Court by all the facts and circumstances disclosed in that particular case. Hence, no decided case can, strictly speaking, be a precedent which could govern the decision of a later case, involving a similar question. Those decisions can be used only by way of illustrations of the different view-points which have a bearing on the decision of the case in hand. It has also not been disputed that in a case .where a transaction under examination, is not in the line of the business of the assessee, and is an isolated or a single instance of a transaction like that, the burden lies on the Revenue to bring the case within the words of the statute, namely, that it was an adventure in the nature of trade. That the onus is on the Department, has been clearly laid down by Lord Garmount in the case of Commissioners of Inland Revenue v. Reinhold('). That was a case in which the respondent, the assessee, was a director of a company carrying on the business of Warehousemen, and had bought four houses in January, 1945, and sold them at a profit in December, 1947.\n\nHe admitted that he had bought the property with a\n\n(I) 34 T. C. 389, 393\n\nview to resale, and had instructed his agents to sell x959 the same whenever a suitable purchaser was forth- Saroj Humar coming. The assessee was made liable for tax in Mazumdar respect of the profit made by him on the resale.\n\nOn v. an appeal by the assessee before the General Commis- The Commissioner sioners, it was contended on his behalf that \"the profit of Income-ta:i, on the resale was not taxable. On behalf of the Crown, West Bengal, . d d h h t . f h d Calcutta 1t was conten e t at t e ransact10n o pure ase an sale in question, constituted an adventure in the nature Sinha J. of trade, and that, therefore, the profits arising out of the transaction, were chargeable to income-tax. The General Commissioners, being eqally divided, allowed the appeal. It was held by the Court of Session (First Division) that the fact that the property was purchased with a view to resale, did not, of itself, establish that the transaction was an adventure in the nature of trade, and that, therefore, the determination by the Commissioners was justifiable in law. The Court, in• coming to that conclusion, took into account the considerations that the respondent was'not a property agent, and that his business was not, in any way, associated with the purchase and sale of estates. It was an isolated transaction, even though the assessee had purchased a hotel and sold it again ten years previously. The Court made a reference to the following observations of Lord Buckmaster in the case of Leeming v. Jones (1):-\n\n\" ............ an accretion to capital does not become income merely because the original capital was invested in the hope and expectation that it would rise in value ; if it does so rise, its realization does not make it income.\"\n\nPlacing that decision along-side of the present case, let us see what its salient features are. Though the appellant is engaged in various types of business as a share-holder or a director in limited liability concerns, as also in building contracts, dealing in landed estates is not in the line of his business. If such a transaction were in the line of his business, it would not matter much whether, in the assessment year, he had several such transactions or only one. Even a single\n\n(I) (1930) .A. C. 415, 420,\n\nr959 transaction of dealing in landed estates, being a part of his business, would be liable to income-tax, if a Saroj J(umar fi . d h Mazumdar pro t lS ma e in t at transaction.\n\nBut, admittedly, v. the transaction in question is the only one of its kind, The Commissioner out of which the appellant has made a considerable of Income-tax, profit wliich appears to have been in the nature of a\n\nWest Bengal, windfall. 'Vhen he entered into the agreement with Calcutta the Society for the purchase of the plot, in January,\n\nSinha 1. 1946, he had expected that at the end of the W or Id War, the Government would release the property from its requisition, and that the Society witl develop the land by laying the necessary roads and providing other amenities to the plot-holders. But as the Government did not release the property, and as the appellant was a businessman, who was interested in return from his capital, and as he had already paid Rs. 32,000 odd by way of advance towards the pur- • chase price, and as in 1947, at the end of the Second World War, his business in contracts for building constructions, beg'an to decline, he, naturally, thought of making the bet of the bargain. If he did not get out of the transaction, his financial difficulties in meeting his further liabilities under the agreement, as a result of slump in his main line of business, might lead to the forfeiture of the advance of Rs. 32,000 odd, he would naturally be on the lookout for a good purchaser. He was lucky to find a lady with a lot of money to spare, who had, as he alleged, taken a fancy to the plot in question.\n\nThus, he could assign to her the benefit of his agreement with the Society on terms which were highly profitable to him.\n\nThere is no clear evidence in support of the inference of the Appellate Tribunal that the land was purchased with the sole intention of selling it later at a profit. The Tribunal considered two alternatives in relation to this transaction-one, that the land was purchased in order to build a residential house, and the second, that it was purchased in hope of selling it later for a profit. The first alternative, the Tribunal rejected on the ground that\" he does not seem to have very much of means at his disposal.\" That itself is a statement which does not bear close scrutiny. During the two years previous to the year under assessment, the appellant had\n\nbeen assessed to income-tax on Rs. 53,000/- and z959 Rs. 59,000/-, as already indicated. That does not lend Saroj Kumar countenance to the surmise that the appellant was not Mazumdar a man of means. Admittedly, he held marketable v. shares of the value of about 2§- lacs of rupees, though The Commissioner\n\nall those shares standing in his name, were not claimed of Income-tax, by him as his own.\n\nApparently, he was carrying on West Bengal, l t • b , d . h . d' l d' Calcutta a ucra ive usmess urmg t e imme 1ate y prece mg years. It is true that in the year of assessment, on his Sinha J. own showing in his income-tax return, he had suffered a loss, but that may have been a turning point in his fortunes, and that would not necessarily lead to the inference that he was not in a sound financial position on the date of the agreement with the Society. It may be that his hopes of flourishing in his business in the years to come, were not realized after the conclusion of the Second World War. But even assuming that the Tribunal was right in its conclusion as to the second alternative, namely, that the purchase was made in the hope of making a profit after re-sale, the matter is not concluded. In this connection, a reference may be made again to the decision in Commissioners of Inland Revenue v. Reinhold (supra), at p. 392, where it was argued on behalf of the Revenue that a profit made in a transaction which was in the nature of an investment in the hope and expectation of a rise in price, may be an accretion of capital, but that if at the time of the purchase, the purchaser had resolved to sell the property in the event of a profit being made, and instructions had been issued to his agents accordingly, the transaction could not have been treated as an investment, but was truly an adventure in the nature of trade, and the profit thus made, must be treated as income. This argument was not accepted as valid. In that connection, reference was made to the following observations of Lord Dunedin, in the case of Jones v. Leeming (1) :-\n\n\" ............ The fact that a man does not mean to hold an investment may be an item of evidence tending to show whether he is carrying on a trade or\n\n(r) (1930) A.C. 415, p. 423. roS\n\n'959 concern in the nature of trade in respect of his invest-\n\nSaroj Rumar ments, but per se it leads to no conclusion whatever.\" Mazumdar The decision of the House of Lords in the case aforev. said, which is also reported in 15 T. C. 333, is rather ins- The Commfasioner tructive. In that case, the appellant was a member of Income-tax, of a syndicate of four persons, formed to acquire an West Bengal t' bb t t 'th 11' Calcutt• • op 10n over a ru . er es a e, w1 a view to se mg at a profit. The opt10n was secured, but the estate was Sinha J. considered to be too small for re-sale. An option over another joint estate was accordingly secured, and it was decided to resell the two estates to a public company to be formed for the purpose. Another member of the syndicate undertook to arrange for promotion of the company. The syndicate's rights were transferred to a company. This company floated another company to which the properties were sold.\n\nThe syndicate's profits were divided between the members, and the appellant, as one of the members of the syndicate, was assessed to income-tax in respect of his shares of the profits. The General Commissioners, on appeal, were of the opinion that the interest in the property in question had been acquired with the sole object of making a profit, and that there was no intention of holding it as an investment. Hence, the assessment to income-tax was affirmed.\n\nThe King's Bench Division, at the first hearing, remitted the case to the General Commissioners for a finding as to whether there was a concern in the nature of trade, and the Commissioners found that the transaction was not such a concern. It was held by the House of Lords that the profits were not liable to tax on the basis that they were income from an adventure in the nature of trade. Viscount Dunedin, in the course of his opinion, referred, with apparent approval, to the dictum in Ryall v. N oare (' ), to the following effect :\n\n\" A casual profit made on an isolated purchase and sale, unless merged with similar transactions in the carrying on of a trade or business is not liable to tax.\" He also approved of the following dictum of Lawrence, L. J., in the case of Leeming v. Jones (2) :-\n\n(1) (1923) 2 K. B. 447, 454.\n\n(2) (1930) 1 K.B. 279, 302.\n\n\"It seems to me in the case of an isolated transaction of purchase and re-sale of property there is really\n\nI959\n\nSaroj K uma• no middle course open. It is either an adventure in Mazttmdar the nature of trade, or else it is simply a case of sale v. and re-sale of property.\" The Commissione• Lord Warrington of Clyffe, in the course of his of Income-tax, . . f J L . l) d h West Bengal, opmwn in the case o ones v. eeming ( , ma et e Calcutta following observations, which apply with full force to the facts and circumstances of the present case:-\n\n\"Here we have a case of the acquisition of an item of property and a profit made by the transfer thereof to .another. In this I can find nothing but a profit arising from an accretion in value of the item of property in question and the realization of such enhanced value. There is in this nothing in the nature of revenue or income. The fact that the parties intended from the first to make a profit if they could does not in my opinion affect the question we have to determine.\"\n\nAs already indicated, the line of demarcation between cases of isolated transactions of purchase and sale being ventures in the nature of trade, and those which are not such ventures, if any, is very thin.\n\nThe cases in which single transactions have been held not to belong to the class of ventures in the nature of trade, have been noticed above, and the considerations which lecf those courts to hold that such ventures were not liable to income-tax, apply to the case in hand. On the other side of the line, there is a series of cases in which single transactions have been held to have been ventures in the nature of trade, for reasons which do not apply to the present case.\n\nWe may notice some of the typical cases which illustrate the reasons for which a single transaction was brought within the ambit of a venture in the nature of trade.\n\nThe case of Californian Copper Syndicate (Limited and Reduced) v. Harris (Surveyor of Taxes) (2), related to the purchase and sale of a mining property. In that case, a company had been formed for the purpose, inter alia, of acquiring and re-selling a mining property. That company acquired some mining property\n\n(r) (1930) A.G. 415, 425.\n\n(2) 5 T.C. 159\n\nSinha J,\n\n'959 and sold the same to a second company, consideration for the sale being paid-up shares of the latter company.\n\nSaroj Kumar f Mazitmdar It was held by the Court o Exchequer (Scotland) v.\n\nSecond Division, that the difference between the pur- The Commissioner chase price and the value of shares for which the proof Iucome-tax, perty was exchanged was a profit assessable to incomew\"' Bengal, tax. It was pointed out by the Court that the case in- Calcutta volved a deal which was a \"proper trading transaction,\n\nSinha J. one within the Company's power under their Articles, and contemplated as well as authorised by their Articles\". The ratio of the decision in that case appears to have been that though it was a single transaction in which profit was made, it was an adventure in the nature of trade, being in the line of the business adopted by the company. The next case of Martin\n\nv. Lowry (1) is another instance of a single transaction of purchase of property being treated as a venture in the nature of trade, on account of the very nature and magnitude of the commodity dealt in by a person whose usual line of business was wholly outside the scope of the new venture. That was a case in which a wholesale agricultural machinery merchant, who never had any dealings in linen trade, purchased from the Government its surplus stock of aeroplane linen (some 44 million yards). In order to dispose of this huge stock of linen purchased by him, the assessee embarked upon an extensive advertising campaign, rented offices and engaged expert staff to organize the sales.\n\nThe number of transactions of sale of that huge stock of linen, ran into thousands. The House of Lords affirmed the determination of the courts below, holding that the transaction amounted to the carrying on of a trade of which the profits were chargeable to income-tax and Excess Profits Duty. Another case in the same volume, is The Commissioners of Inland Revenue v. Livingston and others (2). In that case, the persons sought to be taxed were, a ship repairer, a blacksmith and a fish salesman's employee, who joined in the venture of purchasing a cargo vessel with a view to converting it into a steam-drifter, and selling it. That was a new line of .business for them.\n\n(1) II T.C. 297.\n\n(2) II T.C. 538.\n\nExtensive repairs and alterations to the ship were r959 carried out, and the result was a sale of the converted 1 fi I h ld b h .\n\nSaroj Kumar vesse at a pro t. twas e t at t e transact10n, Mazumdar though an isolated one, was a venture in the nature v. of trade, and thus, liable to income-tax. The ratio of The Commissioner the decision was stated in the following words of•the of Income-tax, Lord President :- West Bengal, f • 1 • Calcutta \" I the venture was one consIStmg s1mp y m an isolated purchase of some article against an expected Sinha 1. rise in price and a subsequent sale it might be impossible to say that the venture was 'in the nature of trade '; because the only trade in the nature of which it could participate would be the trade of a dealer in such articles, and a single transaction falls as far short of constituting a dealer's trade, as the appearance of a single swallow does of making a summer.\n\nThe trade of a dealer necessarily consists of a course of dealing, either actually engaged in or at any rate contemplated and intended to continue.\" The case of Rutledge v. The Commissioners of Inland Revenue (1), is another illustration of a case in which a single transaction of purchase and sale, was held to be an adventure in the nature of trade for the reason that the commodity purchased was of such a nature and of such a vast magnitude that it could not have possibly been intended for the consumption of the purchaser himself or his family. In that case, the assessee was a money-lender who was also interested in a cinema company. In the interest of his cinema business, he happened to be in Berlin, and there took the opportunity of purchasing, for a very cheap price, a very large quantity (one million rolls) of toilet paperfor £1,000-and realised £12,000 by sale of that com modity. He was taxed on the nett profit of £10,895.\n\nIt was held by the Court of Session, Scotland (First Division), that it was certainly an adventure, because the assessee made himself liable for the purchase of that vast quantity of toilet paper, obviously for no other conceivable purpose than that of re-selling it for a large profit.\n\nAs regards the question whether the adventure was in the nature of trade, it was contended\n\n(r) 14 T.C. 490.\n\nr959 on behalf of the assessee that it was essential to the idea of trade that there should be a continuous series Saroj J{umar f d .\n\nMazumda. o tra ing operat10ns.\n\nThe Court rightly pointed out v. that the question was not whether it was a trade but The Cammi.'5iouer whether it was a venture in the nature of trade. of Income-tax, Hece, though the single transaction of purchase and West Bengal, sale, may not have amounted to what is ordinarily Calcutta d d b d th f f un erstoo y tra e m e sense o a series o transac- Sinha 1. tions, it was certainly a venture in the nature of trade, because from the very beginning, the intention was manifest that the purchase was made not with a view to utilizing the commodity for the personal use of the purchaser, but with a view to making profit by a resale, which was apparent from the very nature and magnitude of the commodity purchased. Another illustration of the same rule is to be found in the case of The Balgouniie Land Trust, Ltd. v. The Commissioners of Inland Revenue (1). That was the case of a landed estate which was left by the owner to trustees with a direction to sell it. The trustees, being unsuccessful in their efforts to sell the estate, formed a company with general powers to deal in real property, and transferred the estate to this company. The company made certain other purchases of property by way of accretions to the original estate. The property was sold in parts during the years 1921, 1924, 1926 and 1927. The company was assessed to income-tax for the profits from the sales of those lands. The Court, confirming the assessment of the company to income-tax on the profits made on those sales, held that the company was doing precisely what it meant to do, namely, carrying on business of a company. dealing in a real estate. The case of Commissioners of Inland Revenue v. Fraser (2), is another illustration of the rule that if a person enters into a single transaction outside his ordinary avocation of life, with the sole object of making a profit by re-sale, it may amount to an adventure in the' nature of trade. In that case, a wood-cutter bought, for re-sale, whisky in large quantities, and without taking delivery of the whisky, sold it at a profit. It was the assessee's sole\n\n(r) 14 T.C. 684.\n\n(2) 24 T.C. 498.\n\ndealing in 'Yhisky, but a.11 the same, it was held to be r959 liable to income-tax on the ground that the nature of h h c Saroj Kumar t e transaction, wit re1erence to the commodity Mazumdar dealt in in large quantities, which would not ordinarily v. be meant for personal or family consumption, may The Commissioner indicate that it was an adventure in the nature of of Income-tax,\n\ntrade.\n\nWest Bengal.\n\nWe have set out the illustrative cases on the two Calcutta sides of the thin line of demarcation that may possibly Sinha 1. be said to distinguish one class of case from the other. ' The question still remains, on which side of the line, the present case should be placed ? The learned Solicitor-General placed strong reliance on the recent decision of this Court in G. Venkataswami Naidu & Co. v.\n\nThe Commissioner of Income-tax (supra). The question, therefore, is whether the present case falls on the same side of the line as the recent decision of this Court, which had to deal with a similar question, as already indicated. In that case, the assessee had purchased four plots under four different deeds. During the time that the assessee was in possession of those plots, he made no efforts to put up any structures, or to utilize them in other ways. The assessee was in a fiduciary position with the Mills contiguous to which the plots purchased, were; and it was also found that the assessee was in a position to influence the Mills to purchase those plots at a price favourable to him. It was ih that setting of the facts, that this Court made the following observations:-\n\n\"Whens. 2, sub-s. (4) refers to an adventure in the nature of trade it clearly suggests that the transaction cannot properly be regarded as trade or business.\n\nIt is allied to transactions that constitute trade or business but may not be trade or business itself. It is characterized by some of the essential features thatmake up trade or business but not by all of them; and so, even an isolated transaction can satisfy the description of an adventure in the nature of trade.\"\n\nCan it be said, in the setting of the facts and circumstances of the present case, set out above, that the transaction in question has such characteristics as\n\nI959 to point to the conclusion that it was a venture in the nature of trade ? It was suggested that the area of the Saroj J(umar d 1 h f Mazumdar Ian in question, name y, t ree quarters o an acre. in v. the suburbs of Calcutta, was large enough to indicate The Commissioner that the assessee would not have intended to take it of Income-tax, for his own use and occupation. In the first place,\n\nw\"' Bengal, the area is not so large as to lead necessarily to the . Calcutta inference that it could not have been meant to be used Sinha J. by him in the way of his business or for his own residence.\n\nCertainly, the Society, having acquired more than 5QO bighas of land in a lot, could not claim that the land was meant for its own use. On the other side, it was meant to be developed into small building sites, as they actually did. But the Society had, without developing the area, sub-divided it into building sites, one of which was sought to be acquired by the appellant. He was carrying on an engineering concern, and it is not, therefore, unlikely that he may have intended,. as he alleged, to put up a small workshop on a portion of the land to be acquired, and to build his own residential house on the other portion. It was not suggested that the appellant had his own house in Calcutta, and was, therefore, not in need of a building site. At the time he entered into the agreement of purchase with the Society, he was doing good business, as is shown by the large amounts on which he was assessed to income-tax. It was not unnatural for him to look forward to continue his business in as prosperous a way as he had been doing in the recent past, and thus, to raise sufficient funds to build his own residential house, or to construct a workshop for his own engineering business.\n\nHence, the possibility or the probability that the site may appreciate in value, would not necessarily lend itself to the inference that the transaction was a venture in the nature of trade, as distinguished from a capital investment. In all the circumstances of this case, the total impression created on our mind, is that it has not been made out by the Department that the dominant intention of the appellant was to embark on a venture in the nature of trade, when he entered into the agreement which resulted in the profits sought to be taxed.\n\nFor the aforesaid reasons, we would allow this z959 appeal, and s1it aside the orders of the Tribunal below with costs.\n\nSaroj Kumar Mazumdar KAPUR, J.-I regret I am unable to agree that v ... the appeal in the present case should be allowed The Commissioner\n\nd h 0 h £ h. h of Income-tax an my reasons are t ese: n t e acts w IC were West Bengal.' proved the Income-tax Appellate Tribunal came Calcutta to the conclusion that the purchase of land by the appellant was an adventure in the nature of trade and Kapur f. profit arising therefrom was assessable to income-tax.\n\nIn coming to this conclusion the Appellate Tr-ibunal took into consideration certain facts; (1) that the only payment the appellant made for the purchase of the land was of a sum of Rs. 32,748 which he borrowed from his company and he was not in a position to pay the balance of Rs. 98,246; (2) the appellant had no money available at all to pay the part of the purchase price of Rs. 1,30,994 and he had no means to construct the house; (3) that his financial resources were such as not to justify the purchase of the plot of land for the construction of a house; (4) the site itself fetched no income but it was a kind of investment with the hope of making a profit out of it and the land was purchased only for the purpose of sale; (5) that the appellant being a keen businessman had intimate know ledge of the trend of the rise in prices of land and therefore the purpose for which he made the purchase was in order to make profit and not merely an investment.\n\nAs against these circumstances various facts were brought to our notice which it has argued militate against the findings of the Tribunal: (1) that the appellant.was carrying on an engineering concern and therefore it was not unlikely that he intended, as he alleged, to put up a small workshop on that portion of land; (2) that the appellant did not have his own house in Calcutta and therefore he could have been in need of a piece of land on which he could build a house and (3) that at the time he entered into an agreement of purchase he had a prosperous business which is shown by the amount of income-tax which he paid for\n\nI959 two years and he could legitimately expect that his business would continue to remain prospous; (4) that Sa1'oj J{umar f l l d h Mazumdar these acts cou d not ea to t e necessary conv. sequence that the transaction was a venture in the The Commission\" nature of trade and that it was not the dominant of Income-tax. intention of the appellant at the time when he entered West Bengal, into the transact.ion to embark upon a venture in the Calcutla nature of trade.\n\nKapur.].\n\nUnder the Income-tax law it is the exclusive func-, tion of the Appellate Tribunal to find facts.\n\nEven though the powers of this Court under Art. 136 are very wide yet they have to be exercised within the limits imposed by the decisions of this Court and one such limitation is that this Court will not ordinarily interfere with findings of fact. It has been held by this Court that the question whether an adventure is in the nature of a trade or not is a mixed question of law and fact.\n\nThe facts have to be found by the fact-finding authority and to those facts the law has to be applied and whenever it is necessary to get a correct finding on a question of fact it is the factfinding authority which is called upon to consider the evidence and give its finding. (See G. Venkataswami Naidu & Co. v. The Commissioner of Income-tax (1)).\n\nTherefore if there arose a question of law out of the order of the Appellate Tribunal then the appellant could have had the case stated to the High Court under s. 66(1) and if the Appellate Tribunal refused to state the case it was open to the appellant to have the case stated under s. 66(2) of the Indian Income. tax Act. No doubt he did make an application to the Appellate Tribunal to state the case under s. 66(1) but he did not make any application to the High Court till 1957, after he had obtained speciaUeave in this Court and the High Court dismissed the petition on the ground that it was barred by time.\n\nThe position comes to this that the tribunal refused to state the case under s. 66(1) of the Income-tax Act and the appellant did not apply to the High Court under s. 66(2) till long after the period of limitation had expired. In the circumstances the courses open to this\n\n(1) A.l.R. f1959) S.C. 359.\n\nCourt would be (1) to set aside the order of the Appel-\n\nI959 late Tribunal and remit the case to the Tribunal for Saroj J<umar decision in accordance with the observations made by Mazumdar this Court as was done in the case of Omar Saly v.\n\nMohammed Sait v. The Commissioner of Income-tax (1) The Commissioner or it may be open to this Court to direct a reference as 01 Income-tax, was done in Jagta Coal Company v. The Commissioner West JJengal, of Income-tax (2).\n\nThen in Dhakeswari Cotton .Mills v.\n\nCalcu:ta The Commissioner of Income-tax (3) this Court only Kapur J. remitted the case to the Appellate Tribunal to proceed in accordance with law on the ground that certain principles of natural justice bad been violated and the assessee was not given an opportunity to rebut the evidence against him.\n\nThe Income-tax law bas prescribed a procedure to have questions of law determined and an assessee cannot byepass .the various steps prescribed under that law. The position therefore comei; to this that if there is no evidence to support the finding the question is one of law which would fall under ss. 66(1) and 66(2) of the Income-tax Act; (2) ifin giving its finding the Appellate Tribunal disregards certain pieces of evidence or proceeds in a manner which is violative of natural justice the finding will be vitiated but if there is evidence to support the finding of fact and these findings are properly arrived at then it will be a pure question of fact which this Court will not ordinarily interfere with; (3) if there is an error of law arising as above or because of misinterpretation of the Income-tax law then the case has to be stated to the High Court in the manner provided in the Income-tax Act and if the assessee does not choose to follow the procedure prescribed then he cannot come to this Court disregarding the remedy provided by the Income-tax law and (4) the legal effect of facts found where the point for determination is a mixed question of law and fact would fall under s. 66(1) & (2) of the Income-tax Act. (See G. Venkataswami Naidu & Co. v. The Commis sioner of Income-tax (4) ).\n\nThis is a case in which certain essential facts have\n\n(1) C.A. No. 15 of 1958.\n\n(3) [1955] l S.C.R. 94r.\n\n(2) C. A. No. 337 of 1956.\n\n(4) A.I.R. (1959) S.C. 359.\n\nx959 not been considered by the Appellate Tribunal and . therefore it is a case which should be remitted to the Saroj I<uniaY\n\nMazumdar Income-tax Appellate Tribunal to determine the facts\n\nv. in accorda.nce with the observations made by this The Commission\" Court and in the light of those findings to determine\n\n0! Income-tax, whether the transaction was an adventure in the\n\nWest Bengal, nature of a trade or not. ~~~ .\n\nKapur],\n\nI959 •\n\nMay 5.\n\nI would order accordmgly.\n\nORDER OF THE COURT In view of the opinion of the majority, the appeal is allowed with costs.\n\nCOMMISSIONER OF INCOME-TAX; BIHAR &\n\nORISSA\n\nM/S. PATNEY & CO.\n\n(B. P. SINHA, J. L. KAPUR and M. liIDAYATULLAH, JJ.)\n\nIncome-tax - Assessment on non-resident-Agree1nent with resident debtor for payment outside British India-Remittance by cheques posted in British India--Place of payment-Non-resident's liability to tax.\n\nThe respondents, Vl'ho were non-residents carrying on business at Secunderabad within the territories of the Nizam of Hyderabad, were acting as agents of two firms in Bombay and Madurai, in British India, for the supply of certain goods to the Nizam's Government.\n\nIn respect of the Commission due to the respondents by the firms the agreement between the parties was that the amounts were to be paid to the respondents in cash or by cheques at Secunderabad. For these amounts cheques drawn.by the firms on the Bombay and Madras branches, respectively, of the Imperial Bank of India, were sent by post at Bombay and Madurai to the respondents at Secunderabad, and when received, they were credited in their books of account, the cheques being sent to their banker there for collecting and crediting to their account.\n\nFor the assessment year 1945-1946 the Income-tax Officer, Berhampnr (in British India), assessed these sums as taxable income holding that the amount was received in British", "total_entities": 32, "entities": [{"text": "SAROJ KUMAR MAZUMDAR", "label": "PETITIONER", "start_char": 54, "end_char": 74, "source": "metadata", "metadata": {"canonical_name": "SAROJ KUMAR MAZUMDAR", "offset_not_found": false}}, {"text": "THE COMMISSIONER OF INCOME-TAX, WEST\n\nBENGAL, CALCUTTA", "label": "RESPONDENT", "start_char": 76, "end_char": 130, "source": "metadata", "metadata": {"canonical_name": "THE COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA", "offset_not_found": false}}, {"text": "B. 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{"document_id": "1959_2_868_874_EN", "year": 1959, "text": "868 SUPREME COURT REPORTS [1959] Supp.\n\nx959 not been considered by the Appellate Tribunal and . therefore it is a case which should be remitted to the Saroj I<uniaY\n\nMazumdar Income-tax Appellate Tribunal to determine the facts\n\nv. in accorda.nce with the observations made by this The Commission\" Court and in the light of those findings to determine\n\n0! Income-tax, whether the transaction was an adventure in the\n\nWest Bengal, nature of a trade or not. ~~~ .\n\nKapur],\n\nI959 •\n\nMay 5.\n\nI would order accordmgly.\n\nORDER OF THE COURT In view of the opinion of the majority, the appeal is allowed with costs.\n\nCOMMISSIONER OF INCOME-TAX; BIHAR &\n\nORISSA\n\nM/S. PATNEY & CO.\n\n(B. P. SINHA, J. L. KAPUR and M. liIDAYATULLAH, JJ.)\n\nIncome-tax - Assessment on non-resident-Agree1nent with resident debtor for payment outside British India-Remittance by cheques posted in British India--Place of payment-Non-resident's liability to tax.\n\nThe respondents, Vl'ho were non-residents carrying on business at Secunderabad within the territories of the Nizam of Hyderabad, were acting as agents of two firms in Bombay and Madurai, in British India, for the supply of certain goods to the Nizam's Government.\n\nIn respect of the Commission due to the respondents by the firms the agreement between the parties was that the amounts were to be paid to the respondents in cash or by cheques at Secunderabad. For these amounts cheques drawn.by the firms on the Bombay and Madras branches, respectively, of the Imperial Bank of India, were sent by post at Bombay and Madurai to the respondents at Secunderabad, and when received, they were credited in their books of account, the cheques being sent to their banker there for collecting and crediting to their account.\n\nFor the assessment year 1945-1946 the Income-tax Officer, Berhampnr (in British India), assessed these sums as taxable income holding that the amount was received in British\n\n. .\n\n(2) S.C.R.\n\nSUPREME COURT REPOltTS 869\n\nIndia and not at Secunderabad. The Appellate Tribunal found '959 that all the cheques received at Secunderabad by the respondents \\Vere treated by them as payment. The respondents claimed Com1nissioner of that in. view of the agreement between the parties that the Income-tax: amount of commission should be paid at Secunderabad, \\Vhen Biho.r &- Orissa the cheques were sent by post, the post office was the agent v. of the debtor and not of the respondents, that the amount M/s. Putney & Co. must be treated as having been received when the post office delivered the cheques to the respondents, and that, consequently, the amount cannot be treated as having been received in British India. The Income-tax authorities relied on the decision in Commissioner of Income-tax v. Ogale Glass IVorks Ltd., [1955] r\n\nS.C.R. 185 •.\n\nHeld, that in the case of payment by cheques sent by post the determination of the place of payment would depend upon the agreement between the parties or the course of conduct of the parties. If it is shown that the creilitor authorised the debtor either expressly or impliedly to send a cheque by post the property in the cheque passes to the creditor as soon as if is posted.\n\nBut \\Vhere, as in the present case, the agreement was that the amount was to be paid at Secunderabad, outside British India, when the cheques were received by the respondents there the amount must be deemed to have been received at that place, and, therefore, the amount was not liable to be taxed in British India.\n\nCommissioner of Income-tax v. Ogale Glass IVorks Ltd., [1955] r S.C.R. 185, distinguished. ·\n\nCIVIL APPELLATE JumsDICTION: Civil Appeal No. 326 of 1957.\n\nAppe.al by special leave from the judgment and order dated February 16, 1955, of the Orissa High Court in S. J.C. No. 117 of 1951. G. K. Daphtary, Solicitor-General of India, K. N.\n\nRajagopal Sastri, R. II. Dhebar and D. Gupta, for the appellant~ ·\n\nRameshwar Nath, S. N. Andley and J.B. Dadachanji, for the respondent.\n\n1959. JIIay 5. The Judgment of tho Court was delivered by\n\n KAPUR, J.-This appeal pursuant to special leave is brought by the Commissioner of Income-tax against the judgment of th_e High Court of Orissa holding that the amounts received by the assessees-respondcnts were not received in what was British India. and\n\nKapzi, ].\n\n--------=~~~--~-~-----·-··.\n\ntherefore not liable to income-tax. The respondents at all material times were non-residents carrying on Commissioner of\n\nIncome-tax business at Secunderabad which was then in the terri-\n\nI959\n\nBiha, & o,;;, a tories of the Nizam of Hyderabad. They acted as v. agents for the supply of gas plants manufactured by M/s. Patncy & Co. Messrs. T. V. S. Iyengar & Sons, Madura, to the\n\nKapu1 ].\n\nNizam's Government, and also as agents of the Lucas Indian Services, Ilombay branch, for the supply of certain goods to that Government. The year of assessment is 1945-46. There does not appear to have been any written agreement between the two manufacturers and the respondents but the goods were to be supplied on a commission basis. In pursuance of this agreement the respondents received from M/s. T.V.S. Iyengar & Sons, Madura, cheques drawn on the Imperial Bank of India, Madras, amounting to Rs. 35,202 in respect of all goods supplied from Madura and also from Lucas Indian Services, Bombay, by cheques drawn on Imperial Ilank of India, Bombay branch, amounting to Rs. 5,302 in respect of goods supplied by them, thus making a total of Rs. 40,504.\n\nThese cheques were sent by post and when received by the respondents at Secunderabad were credited in the account books of the respondents and sent to their banker G. Raghunathmal for collecting and crediting to the account of the respondents.\n\nAs against these sums so deposited the respondents at once drew cheques and thus operated on these amounts deposited.\n\nIn regard to the commission received from the Ilombay firm it was paid into the account on December 22, 1944, but was given credit for only on January 2,\n\n1945. The Income-tax Officer assessed these sums as taxable income holding that the entire amount of Rs. 40,504 was received in British India and not at Secunderabad. An appeal was taken by the respondents to the. Appellate Assistant Commissioner who upheld the order holding that income must be held to . have accrued, arisen or received in Ilritish India.\n\nAgainst this order the respondents took an appeal to the Income-tax Appellate Tribunal and it was held that the amounts were received by the respondents from Madura and Bombay firms as commission but\n\n(2) S.C.R.\n\nSUPREME COURT REPORTS 871\n\nz959 they were received at Secunderabad. The appeal was therefore allowed. The finding of the Appellate Tri- Commissioner of bunal in their own words was:- I ncome-ta:r~ \" The contention of the Appellants is that the Bihar & Orissa cheques being negotiable instruments and the creditor v. having accepted them and passed through their books, Mfs. Patney & Co. the receipt must be taken to be receipts in Hyderabad.\n\nWe agree with the view submitted by the appellants.\n\nIn Bhashyam's Negotiable Instruments Act, 8th Edition, Revised, page 556, it is stated that it will be open to a creditor to accept a cheque in absolute payment of money due to him, in which case it will be equivalent to cash payment. That being the position it cannot be said that the income was received in British India \".\n\nAt the instance of the Commissioner a reference under s. 66(1) of the Act was made to the High Court of Orissa for their opinion on the following question :-\n\n\" Whether in the circumstances of the case, the sums of Rs. 35,202 and Rs. 5,302 received as commission from T. V. S. Iyengar & Sons Ltd., and Lucas Indian Services Ltd., respectively were income that accrued, arose or were received in British India \".\n\nThe High Court found that the statement of case was imperfect and that the real question was different. It said:-\n\n\" The real question in all such cases is not merely whether the cheques were drawn on a bank in British India, and sent for collection to that bank. The question is whether when the. cheques were received by the assessee having bis place of business outside British India, those cheques were in fact received as absolute and final payments by way of unconditional discharge or whether they were received as mere conditional payments on realisation. The fact that cheques were drawn on a ball'k in British India or that they were sent for collection through a Secunderabad banker of the assessee though relevant, are not conclusive\".\n\nIt therefore remitted the case to the Appellate Tribunal for submission of supplementary statement of case.\n\nIt appears that at that stage the controversy was\n\nKapur }.\n\n'959 confined to the question whether the cheques having\n\nCommissioner of been sent to Secunderabad and having been realised\n\nIncome-tax, in British India would amount to a final discharge or Bihar & Orissa an unconditional one.\n\nThe Tribunal in its supple-\n\nM v. c mentary statement found that the course of conduct 1' Patncy'\"'\n\n0 • followed by the parties showed that the cheques were\n\nKapur 1. received from the Bombay and Madura firms in full satisfaction of the commission ascertained from time to time and due on such date. It said:\n\n\" Tb e facts that such entries were made in the assessee's books, that the cheques were put into the bank immediately, that the bank at once gave credit to the assessee for these sums after charging discount thereon and immediately allowed the assessee to operate on those sums are significant \". Therefore t, he finding of fact by the Tribunal although not specific was that the receipt of the cheque by the respondents operated as full discharge of the debt due on account of commission from these two firms.\n\nThe matter was decided by the High Court against the appellant and in the meanwhile this Court had given a judgment in Commissioner of Income-tax v.\n\nOgale Glass Works Ltd (1). Even after considering the decision of that case the High Court was of the opinion that the income of the respondents was not received in British India and answered the question against the Revenue. The High Court refused to give leave to appeal to this Court and it was this Court which gave special leave to appeal.\n\nThe question is whethoc the amounts of commission paid by cheques, drawn respectively on banks at Madras and Bombay and respectively posted from Madura and Bombay, can in the circumstances of this case be held to have been received in what was British India or at Secunderabad ? The Appellate Tribunal found that all the cheques whether from Madura or from Bombay were sent by the two respective firms from Madura or Bombay and were received by the respondents at Secunderabad and were treated as payment. The question still remains as to the effect of the sending of the cheques from Madura or Bombay by post. If there is an express request by the\n\n(1) [1955] I S.C.R. 185.\n\n(2) S.C.R.\n\nSUPREME COUI~T REPORTS 873\n\ncreditor that the amount be paid by cheques to be sent '959 by post and they are so sent there is no doubt that Commissioner of the payment will be taken to be at the place where Income-tax, the cheque or cheques are posted.\n\nThe respondents Bihar &- Orissa argued that there was an agreement between the v.\n\nMadura and Bombay firms and the respondents that M/s. Patney\"\" Co. the money would be paid whether in cash or by Kapur J. cheque 'at Secunderabad' and therefore when the cheques were sent by post the post office was the agent of the debtor and not of the respondents. There is in support of the respondents an affidavit which was filed in the assessment proceedings and which was relied upon in the High Court. According to this affidavit it was verbally agreed that the commission would be paid at Secunderabad in cash or by cheque (as the case may be), the language used in the affidavit was:\n\n\"The above commission was verbally decided to be paid to Messrs. Patney & Co. Ltd., Secunderabad the Agent Company in Hyderabad State at Secunderabad in cash or by cheque as the case might be \".\n\nIn the case of payment by cheques sent by post the determination of the place of payment would depend upon the agreement between the parties or the course of conduct of the parties. If it is shown that the creditor authorised the debtor either expressly or impliedly to send a cheque by post the property in the cheque passes to the creditor as soon as it is posted.\n\nTherefore the post office is an agent of the person to whom the cheque is posted if there be an express or implied authority to send it by post (Commissioner of Income-tax v. Ogale Glass Works Ltd. (1)). In that case there was an express request of the assessee to remit the amount of thebills outstanding against the debtor, that is, Government of India by means of cheques. But it was observed by this Court that according to the course of business usage in general which has to be considered as a part of the surrounding circumstances the parties must have intended that the cheques should be sent by post which is the usual and normal mode of transmission and therefore the posting of cheques in Delhi amounted to payment in\n\n(1) (1955] I S.C.R. 185.\n\nI959 Delhi to the post office which was constituted the Commissioner of agent of the assessee. But it was argued for the\n\nIncomet•~· respondents that in the absence of such a request the Bihar & Orissa post office could not be constituted as the agent of the\n\nM/s. Pat:~Y & co. creditor and relied on a passage in Ogale's case (1) at p. 204 where it was observed:- J(apur ] . \" Of course if there be no such request, express or implied, then the delivery of the letter or t, he cheque to the post office is delivery to the agent of the sender himself \".\n\nIt was further contended that in this case there was an express agreement that the payment was to be made at Secunderabad and therefore the matter does not fall within the rule in Ogale Glass W arks case (1) and the following principle laid down in judgment by Das, J. (as he then was), is inapplicable:-\n\n\"Applying the above principles to the facts found by the Tribunal the position appears to be this. The engagement of the Government was to make payment by cheques. The cheques were drawn in Delhi and received by the assessee in Aundh by post. According to the course of business usage to which, as part of the surrounding circumstances, attention has to be paid under the authorities cited above, the parties must have intended that the cheques should be sent by post which is the usual and normal agency for transmission of such articles and according to the Tribunal's finding they were in fact received by the assessee by post.\" In our opinion this contention is well-founded.\n\nWhatever may be the position when there is an express or implied request for the cheque for the amount being sent by post or when it can be inferred from the course of conduct of the parties, the appellant in this case expressly required the amount of the commission to be paid at Secunderabad and the rule of Ogale Work's case (1) would be inapplicable.\n\nThe High Court judgment in our view was correct and we would therefore dismiss this appeal with costs ..\n\nAppeal dismissed.\n\n(1) (1955] I S.C, R. 185.", "total_entities": 6, "entities": [{"text": "Kapur", "label": "JUDGE", "start_char": 464, "end_char": 469, "source": "metadata", "metadata": {"canonical_name": "J.L. KAPUR", "offset_not_found": false}}, {"text": "COMMISSIONER OF INCOME-TAX; BIHAR &\n\nORISSA", "label": "PETITIONER", "start_char": 610, "end_char": 653, "source": "metadata", "metadata": {"canonical_name": "COMMISSIONER OF INCOME-TAX, BIHAR & ORISSA", "offset_not_found": false}}, {"text": "M/S. PATNEY & CO", "label": "RESPONDENT", "start_char": 655, "end_char": 671, "source": "metadata", "metadata": {"canonical_name": "M/S. PATNEY & CO", "offset_not_found": false}}, {"text": "B. P. SINHA, J.", "label": "JUDGE", "start_char": 675, "end_char": 690, "source": "metadata", "metadata": {"canonical_name": "BHUVNESHWAR PRASAD SINHA*", "offset_not_found": false}}, {"text": "Negotiable Instruments Act", "label": "STATUTE", "start_char": 7070, "end_char": 7096, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 66(1)", "label": "PROVISION", "start_char": 7437, "end_char": 7445, "source": "regex", "metadata": {"linked_statute_text": "Negotiable Instruments Act", "statute": "Negotiable Instruments Act"}}]}
{"document_id": "1959_2_875_923_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 875\n\nTAHSILDAR SINGH AND ANOTHER\n\nTHE STATE O:F UTTAR PHADESH\n\n(B. P. SINHA, JAFER IMAM, J. L. KAPUR,\n\nA. K. SARKAR, K. SuBBA RAo and M. HrnAYATULLAH, JJ.)\n\nCriminal Trial-Police Statements-Use of--Omission, when amounts to contradiction-Code of Criminal Procedure, I898 (V of I898), s. I62-Indian Evidence Act, I872 (I of I872), s. I45\n\nA music performance attended by a large number of persons including two police informers Bankey and Asa Ram. was going on on a platform in front of the house of one Ram Saroop.\n\nAt that time there was a full moon and the light of a gas lamp and several lanterns. The informers had placed their guns on a cot close to the platform and one Bharat Singh was sitting on that cot. The accused along with 15 or 20 persons suddenly arrived armed with fire arms to kill the informers and stood behind a well on the southern side, from where they shouted that no one should run away and advanced firing shots. Two persons were killed on the spot. Bharat Singh was hit and he ran northwards pursued by the culprits and was also shot dead. The culprits turned over the dead bodies and on seeing Bharat Singh's face they exclaimed that Asa Ram informer had been killed. They then passed in front of Ram Saroop's house and disappeared.\n\nWhile going they carried away Bankey's gun from the cot. The appellants and seven others were sent up for trial for this occurrence. At the trial the defence alleged that prosecution had developed its case. The police statements of the eye witness did not mention the facts regarding the scrutiny of the dead bodies and the presence of the gas lantern, and the defence counsel put the following two questions with respect to these omissions to the first eye witness produced:-\n\n1. \"Did you state to the Investigating Officer that the gang rolled the dead bodies of Nathi, Saktu and Bharat Singh and scrutinised them and did you tell him that the face of Asa Ram resembled with that of the deceased Bharat Singh?\"\n\n2. \"Did you state to the Investigating Officer about the presence of the gas lantern ?\" The Sessions Judge disallowed the questions and on account of this order similar questions were not put to the other eye witnesses.\n\nThe Sessions Judge convicted the appellants under s. 302 Indian Penal Code and sentenced them to death. The appellants appealed to the High Court and made an application alleging that the Sessions Judge had not allowed the defence counsel to put omissions amounting to material contradictions to\n\nI959\n\nMay 5.\n\nI959\n\nTahsildar Singh\n\n& Another\n\nthe eye witnesses and prayed that the eye witnesses be summoned so that the questions disallowed may be put to them.\n\nThough the High Court held that the omissions amounted to contradictions and that the Sessions Judge had wrongly disallowed crossexamination \\Vith respect thereto, it found that even after ignoring these t\\VO circumstances there \\Vere other facts which showed that the culprits had come close to the eye witnesses and that they had unmistaken opportunity of identifying the appellants in the light of the full moon and the lanterns.\n\nThe High Court accordingly dismissed the application for summoning the eye witnesses holding that no prejudice had been caused to the appellants by the disallowance of the cross-examination in respect of omissions ;, ind also dismissed the appeals and confirmed the convictions and sentences of the appellants.\n\nThe State of Vilar Pradesh\n\nHeld, (Per SINHA, KAPUR, SARKAR and SuBBA RAO, JJ.) that the omissions did not amount to contradictions and that the Sessions Judge was right in disallowing cross-examination in respect thereof. A statement to the police could be used under s. 162 of the Code only for the purpose of contradicting a statement in the witness box under the second part of s. 1, Evidence Act, but it could not be used for the purpose of cross-examining the witness under the first part of s. 145 A statement made to the police but not reduced to writing, could not be used for any purpose, not even for contradiction.\n\nIt \\Vas incorrect to say that all omissions in regard to important features of the incident which were expected to be included in the statement made bef6re the police, should be treated as contradictions.\n\nAn omission in the police statement could amount to a statement and be used as a contradiction only when (i) it was necessarily implied from the recital or recitals found in the statement, (ii) it was negative aspect of a positive recited in the statement or (iii) when the. statement before the police and that before the Court could not • stand together.\n\nIt was for the the trial Judge to decide in each case, after comparing the part or parts of the statement recorded by the police with that made in the witness-box, whether the recital intended to be used for contradiction was one of the nature indicated above.\n\nIn re Ponnusami Chetty, (1933) I.LR. 56 Mad. 475; In re Guruva Vannan, I.LR. (1944) Mad. 897; Ram Bali v. State, A.LR. 1952 All 289; Badri Chaudhry v. State, A.LR. 1926 Pat. 20, Sakhawat v. Crown, I.LR. (1937) Nag. 277, referred to.\n\nRudder v. The State, A.LR. 1957 All. 239; Mohinder Singh t\n\nv. Emperor, A.LR. 1932 Lah. ro3; Yusuf Mia v. Emperor, A.LR. 1938 Pat. 579; State of M. P. v. Banshilal Behari, A.LR. 1958 M.P. 13, disapproved.\n\nHeld, (Per IMAM and HIDAYATULLAH, JJ.) that the questions that were put by the defence counsel were properly ruled out by the Sessions Judge as they did not set up contradictions, !Jut attempted to obtain from the witnesses versions of what they\n\n' / ,;\n\nhad stated to the police which were then to be contradicted. r959 The reference to s. 145 Evidence Act ins. 162 of the Code of Criminal Procedure brings in the whole of the manner and machinery Talisildar Singh of s. 145 and not merely the second part. An accused is entitled &o Another to cross-examine the witness under the first part of s. 145 with v. respect to the police statement. Relevant and material omissions The State of amount to vital contradictions which can be established by cross- Uttar Pradesh examination and confronting the witness with his previous statement to the police. In the circumstances of the present case even if the defence had been allowed to put questions concerning the omissions, it would not have affected the credibility of the witnesses and no prejudice was caused to appellants by the disallowance of the questions.\n\nCRIMIN.AL\n\nAPPELLATE\n\nJURISDICTION: Criminal Appeal No. 67of1958.\n\nAppeal by special leave from the judgment and order dated September 11, 1957, of the-Allahabad High Court in Criminal Appeal No. 1388 of 1956 and Referred Trial No. 133 of 1956, arising out of the judgment and order dated September 8, 1956, of the Court of the Additional Sessions Judge at Etawah in Sessions Trial Nos. 83 and 109 of 1955.\n\nJai Gopal Sethi and R. L. Kohli, for the appellants.\n\nS. P. Sinha, G. G .. Mathur and G. N. Dikshit, forthe respondent.\n\n195\\:.l.\n\nMay 5.\n\nThe judgment of B. P. Sinha, J. L. Kapur, A. K. Sarkar and K. Subba Rao, JJ. was delivered by K. Subba Rao, J. and the judgment of Jafer Imam and M. Hidayatullah, JJ., was delivered by M. Hidayatullah, J.\n\nSuBB.A RAO, J.-This appeal by special leave raises Subba Rao J. the question of construction of s. 162, Code of Criminal Procedure. On June 16, 1954, one Ram Sanehi Mallah of Nayapura gave a dinner at his home and a large number of his friends attended it. After the dinner, at about 9 p. m., a music performance was given in front of the house of Ram Sanehi's neighbour, Ram Sarup. About 35 or 40 guests assembled in front of Ram Sarup's platform to hear the music. The prosecution case is that a large number of persons armed with fire-arms suddenly appeared near a well situated on the southern side of the house of Ram Sarup and\n\nr939\n\nTahsildar S'ingh\n\n& Another\n\nv. 1'he State of Uttar Pradesh\n\nSubbr' Rao f.\n\nopened fire which resulted in the death of Natthi, Bharat Singh and Saktu, and injuries to six persons, namely, Hazari, Bankey, Khem Singh, Bal Kishan, Mizaji Lal and Nathu.\n\nThe topography of the locality where the incident took place is given in the two site-plans, Ex. P-57 and Ex. P-128. It appears from the plans that the house of Ram Sarnp faces west, and directly in front of the main door of his house is a platform ; to the southwest of the platform, about 25 paces away, is a well with a platform of 3 feet in height and about 13 feet in width around it; and to the west of the platform in front of Ram Sarnp's house the audience were seated.\n\nThe prosecution version of the sequence of events that took place on that fatal night is as follows: After the dinner, there was a music performance in front of the platform of Ram Sarup's house and a number of persons assembled there to hear the music. Saktu phyed on the Majeera while Nathu was singing. It was a full-moon night and there were also a gas lamp n, nd several lanterns. Bankey and Asa Ram placed their guns on n, cot close to the platform and Bharat Singh was sitting on that cot. \"While Bankey was among the audience, Asa, Ram was still taking his dinner inside the house. At about 9 p. m., the accused n, long with 15 or 20 persons arrived from an eastern lane, stood behind the well, shouted that no one should run away and advanced northward from the well firing shots. Natthi and Saktu were hit and both of them died on the spot. Bharat Singh, who was also hit, ran northward and was pursued by some of the culprits and was shot dead in front of Bankey's house shown in the plan. Bankey, who was also shot at n, nd injured, took up Asa Ram's gun and went up to the roof of Ram Sarup's house wherefrom he fired shots at the dacoits, who were retreating. Asa Ram, who was luckily inside the house taking his dinner, ran np to the roof of Ram Sarup's house and saw the occurrence from over the parapet. The culprits turned over the dead-bodies of Saktu, N atthi and Bharat Singh and, on seeing Bharat Singh's face, they exclaimed that Asa Ram was killed.\n\nThereafter, they\n\nproceeded northward, passed through the corner of\n\nI959 Ram Sarup's house and disappeared in the direction of Tahsil-;;;; Singh\n\nthe Chambal. They also carried away Bankey's gun & Another which was on the cot. v.\n\nThe motive for the offence is stated thus : The cul- The State of prits were mem hers of a notorious gang called the Utta. Pradesh Man Singh's gang, who, it is alleged, were responsible Subba Rao J. for many murders and dacoities in and about the aforesaid locality. That gang was in league with another gang known as Charna's gang operating in the same region.\n\nAsa Ram and Bankey had acted as informers against Charna's gang, and this information led to the killing of Charna. Man Singh's gang wanted to take vengeance on the said two persons; and, having got the information that the said two persons would be at the music party on that fateful night, they organized the raid with a view to do away with Asa Ram and Bankey.\n\nOut of the nine accused committed to the Sessions, the learned Sessions Judge acquitted seven, convicted Tahsildar Singh and Shyama Mallah under 14 charges and awarded them various sentences, including the sentence of death. Before the learned Sessions Judge, Tahsildar Singh took a palpably false plea that he was not Tahsildar Singh but was Bhanwar Singli, and much of the time of the learned Sessions Judge was taken to examine the case of the prosecution that the accused was really Tahsildar Singh, son of Man Singh. The other accused, Shyama Mallah, though made a statement before the Sub-Divisional Magistrate admitting some facts, which were only exculpatory in nature, denied the commission of the offence before the committing Magistrate and before the learned Sessions Judge. As many as eight eyewitnesses described the events in detail and clearly stated that both the accused took part in the incident.\n\nWhen one of the witnesses, Bankey (P. W. 30), was in the witness-box, the learned Counsel for. the accused put to him the following two questions in cross-examination: ·\n\n1. \"Did you state to the investigating officer that the gang rolled the dead bodies of Natthi, Saktu and\n\n880 SUPREME t:OURT REPORTS [1959] Supp.\n\n'959 Bharat Singh, and scrutinized them and did you tell\n\nTahsilda, Singh him that the face of Asa Ram resembled that of the\n\n& Another deceased Bharat Singh ?\" v.\n\n2. \"Did you state to the investigating officer The Stafo of about the presence of the gas lantern?\" Uttar I'radesh In regard to the first question, the learned Sessions\n\nSubba Rao J. Judge made the following note:\n\n\" The cross-examining Counsel was asked to show the'law which entitles him to put this qustion.\n\nHe is unable to show any Jaw.\n\nI, therefore, do not permit the question to be put unless I am satisfied.\" In respect of the second question, the following note is niade:\n\n\"He is also unable to show any law entitling him to put this question. I will permit him to put it if he satisfies me about it.\" It appears from the deposition that no other question on the basis of the statement made before the police was put to this witness. After his evidence was closed, the learned Judge delivered a considered order giving his reasons for disallowing the said two questions.\n\nThe relevant part of the order reads:\n\n\"Therefore if there is no contradiction between his evidence in Court and his recorded statement in the diary, the latter cannot be used at all. If a witness deposes in Court that a certain fact existed but had stated under section 161 Cr. P. C. t\\, ither that that fact had not existed or that the reverse and irreconcilable fact had existed, it is a case of conflict between the deposition in the Court and the statement under section 161 Cr. P. 0. and the latter can be used to contradict the former. But if he had not stated under section 16I anything about the fact, there is no conflict and the statement cannot be used to contradict him.\n\nIn some cases an omission in the statement under section 161 may amount to contradiction of the deposition in Court; they are the cases where what is actually stated is irreconcilable with what is omitted and impliedly negatives its existence.\"\n\nIt is enough to notice at this stage that the learned Sessions Judge did not by the said order rule that no (\n\nomission in the statement made under s. 161 of the Code of Criminal Procedure can be put to a witness, but stated that only an omission which is irreconcilable with what is stated in evidence can be put to a wit; ness.\n\nThe said two omissions were not put to any of the other witnesses except to one to whom only one of the said omissions was put. No other omissions were put in the cross-examination either to P. W. 30 or to any other witness.\n\nThe learned Sessions Judge on a consideration of the voluminous evidence in the case held that the guilt was brought home to the said two accused and convicted them as aforesaid. Tahsildar Singh and Shyama Mallah preferred two separate appeals to the High Court against their convictions and sentences. The two appeals were heard along with the reference made by the learned Sessions Judge under s. 374 of the Code of Crimina.I Procedure for the confirmation of the sentence of death awarded to the appellants. The learned Judges of the High Court, after reviewing the entire evidence over again, accepted the findings of the learned Sessions Judge and confirmed the convictions and se •. \"Jences passed on the appellants. Before the High Court a petition was filed by the appellants alleging that the learned Sessions Judge did not allow the Counsel for defence to put omissions amounting to material contradictions to the eye-witnesses and therefore the said eye-witnesses should be summoned so that the said questions might be put to them. That petition was filed on May 1, 1957, and on July 30, 1957, after the argument in the appeals was closed, the petition was dismissed.\n\nPresumably, no attempt was made to press this application either before the appeals were taken up for argument or during the course of the argument; but the question raised in the petition was considered by the learned Judges of the High Court in their judgment. The judgment discloses that the learned Counsel appearing for the appellants argued before the High Court that the learned Sessions Judge wrongly disallowed the aforesaid two questions, and the learned Judges, conceding that those two questions should have been allowed, held that the accused\n\nIII\n\nz959\n\nTahsildar Singh\n\nO> Another v.\n\nThe State of Uttar Pradesh\n\nSubba Rao ].\n\n'959\n\nTahsildar Singh\n\n0- Another\n\nThe Slde of Uttar PradBsh\n\nSu!Jba Rao ]:\n\n882 SUPHEME COURT REPORTS (1959] Supp.\n\nwere not prejudiced by the said fact.\n\nThey justified their conclusion by the following reasons:\n\n\" We did so because among other reasons we decided to ignore these two circumstances and to base our findings on matters of greater certainty, namely, the fact of the miscreants firing while advancing, passing in front of Rn, m Swarup's platform and taking away Bankey's gun from the cot, movements which brought them close to the eye-witnesses and thereby gave the witnesses an unmistakable opportunity of seeing their faces in the light of the lanterns and tho full moon. These factors made recognition by witnesses indepenent of any gas lantern or any scrutiny of the dead bodies, so that these matters ceased to be of any ren, l consequence and therefore made the summoning of the eye-witnesses before us quite unnecessary\".\n\nIn the result, they dismissed the appeals. The present n, ppeal is by special leave filed against the judgment of the High Court.\n\nLearned Counsel for the appellants raised before us the following points : (1) (a). Section 162 of the Code of Criminal Procedure by its own operation attracts the provisions of s. 145 of the Evidence Act and under the latter section the whole vista of cross-examination on the basis of the previous statement in writing made by the witnesses before the police is open to the :wcused; to illustrate the contention: a witness can be asked whether he made a particular statement before the police officers; if he says \"yes\", the said assertion\n\nan be contradicated by putting to him an earlier statement which does not contain such a statement.\n\n(1) (b). The word \"contradiction\" is of such wide connotation that it takes in all material omissions and a Court can decide whether there is one such omission as to amount to contradiction only after the question is putJ answered and the relevant statement or part of it is marked, and, therefore, no attempt should be made to evolve a workable principle, but the question must be left at large to be decided by the Judge concerned on the facts of each case.\n\n(2) The High Court erred in holding that only two questions were intended to be put in cross-examination to the prosecution\n\n(2) S.C.R. SUPREME COUHT HEPORTS 883\n\nwitnesses whereas the Advocate for the accused intended to put to the witnesses many other omissions to establish that tll.ere was development in the prosecution case from time to time but refrained from doing so in obedience to the considered order made by the learned Sessions Judge. (3) Even if only two questions were illegally disalloweJ, as it was not possible to predicate the possible effect of t.he cross-examination of the witnesses on the basis of their answers to the said questions on their reliability, 'it should be held that the accused had no opportunity to have an effective cross-examination of the witnesses and therefore they had no fair trial. (4) The learned Judges committed an illegality in testing the credibility of the witnesses other than the witness who gave the first information report by the contents of the said report.\n\nThe arguments of the learned Counsel for the rt>Rpondent in respect of each of the said contentions will be considered in their appropriate places.\n\nwe shall proceed to consider the contentions of the learned Counsel fOl' the appellants in the order in which they were addressed: Re. (1) (a): Diverse and conflicting views werfl expressed by Courts on the interpretation of s. 162 of the Code of Criminal Procedure. A hi::; toric retrospect of the sectfon will be useful to al:Jpreciate its content.\n\nThe earliest Code is that of 1872 and tho latest amendment is that of 1955.\n\nFormerly Criminal Procedure Code for Courts in the Presidency towns and those in\n\nthe mofussil were not the same.\n\nCriminal Procedure Co<le, 1882 (10 of 1882), consolidated the earlier Acts and prescribed a uniform law to all Courts in India.\n\nIt was superseded by Act 5 of 1898 and substantittl changps were made by Act 18 of 1923. Since then the Code stands amended from time to t, ime by many other Acts. The latest amendments were made by Act 26 of 1955 which received the a,;; sent of the President on August 10, 1955, and by notification issued by tbe Central Government its provisions came into force on and from January 1, 1956.\n\nWe are not concerned in this case with the Amending Act of 1955, but only with the Act as it stood before the amendment of 1955.\n\nI959\n\nTahsilJar Singh\n\n& Auotlier\n\nThe State of Ultar Pradesh\n\nSubba Rao ].\n\nr959 In Act 10 of 1872 the section corresponding to the Tahsit;;; Singh presents. 162 wa; s s. 119, which read:\n\nc;. Anoth\" \"An officer m charge of a Pol1ce-station, or other v.\n\nPolice officer making an investigation, may examine The State of orally any person supposed to be acquainted with the Uttar Pradesh facts and circumstances of the case, and may reduce into writing any statement made by the person so Subba Rao J. examined.\n\nSuch person shall be bound to answer all questions relating to such case, put him by such officer, other than questions criminating himself.\n\nNo statement so reduced into writing shall be signed by the person making it, nor shall it be treat.ed as part of the record or used as evidence.\" This section enables a police officer to elicit information from persons supposed to be acquainted with facts, and permits him to reduce into writing the answers given by such persons, but excludes the said statement from being treated as part of the record or used as evidence.\n\nAct 10 of 1882 divided the aforesaid s. 119 into two sections and numbered them as ss. 161 and 162, which read:\n\nS. 161 : \"Any Police-officer making an investigation under this chapter may examine orally any person supposed to be acquainted with the facts and circumstances of the case, and may reduce into writing any statement made by the person so examined.\n\nSuch person shall be bound to answer truly all questions relating to such case put to him by such officer, other than questions the answers to which would have a tendency to expose him to a criminal charge or to a penalty or forfeiture.\"\n\nS. 162: \"No statement, other than a dying declaration, made by any person to a Police-officer in the course of an investigation under this chapter shall, if reduced to writing, be signed by the person making it, or be used as evidence against the accused.\n\nNothing in this section shall be deemed to affect the provisions of section 27 of the Indian Evidence Act, 1872.\" The first two paragraphs of s. 119 of Act 10 of 1872 with slight modifications not relevant for the present\n\npurpose constituted the corresponding paragraphs of 1959 s. 161 of Act 10 of 1882; and the third paragraph of . - .. 9 f h c • A . h h Tahsildar 'ingh s. 11 o t e iormer ct, wit some c anges, was &> Another made s. 162 of the latter Act.\n\nThere was not much v. difference between the third paragraph of s. 119 of The State of the Act of 1872 and s. 162 of the Act of 1882, except Uttar Pradesh that in the latter Act, it was made clear that the prohibition did not apply to a dying declaration or affect Subba Rao f. the provisions of s. 27 of the Indian Evidence Act,\n\n1872. The Code of 1898 did not make any change in s. 161, nor did it introduce any substantial change in the body of s. 162 except taking away the exception in rE>gard to the dying declaration from it and putting it in the second clause of that section. Buts. 162 was amended by Act 5 of 1898 and the amended section read:\n\n\"(l) No statement made by any person to a police-officer in the course of an investigation under this Chapter shall, if taken down in writing, be signed by the person making it, nor shall such writing be used as evidence: Provided that, when any witness is called for the prosecution whose statement has been taken down in writing as aforesaid, the Court shall, on the request of the accused, refer to such writing, and may then, if the Court thinks it expedient in the interests of justice, direct that the accused be furnished with a copy thereof; and such statement may be used to impeach the credit of such witness in manner provided by the Indian Evidence Act, 1872.\n\n(2) Nothing in this section shall be deemed to apply to any statement falling within the provisions of section 32, clause (1), of the Indian Evidence Act, 1872.\"\n\nFor the first time the proviso to s. 162 introduced new elements, namely: (i) The right of the accused to request the Court to refer to the statement of a witness reduced to writing; (ii) a duty cast on the Court to refer to such writing; (iii) discretion conferred on the Court in the interests of justice to direct that the accused be furniahed with a copy of the statement; and (iv) demarcating the field within which such\n\nr959\n\nTah$ildar Singh\n\n& Another\n\nThe Stale of Utfar Pradesh\n\nSubba Rao J.\n\nstatements can be used, namely, to impeach the credit of the witness in the manner provided by the Indian Evidence Act, 1872. From the standpoint of the accused, this was an improvement on the corresponding sections of the earlier Codes, for whereas the earlier Codes enacted a complete bar against the use of Ruch statements in evidence, this Code enabled the accused, subject to the limitations mentioned therein, to make use of then to impeach the credit of a witness in the manner provided by the Indian Evidence Act.\n\nOn the basis of the terms of s. 162 of Act 5 of 1896, two rival contentions were ra.ised before the Courts.\n\nIt was argued for the prosecution that on the strength of s. 157 of the Evidence Act, the right of.the prosecution to prove any oral statement to contradict the testimony of any wit.ness under that section was not taken away by s. 162 of tho Code of Criminal Procedure which only provided that the writing shall not be used as evidence. On the other hand, it was contended on behalf of the accused that when the statement of a witness was admittedly reduced into writing, it would be unreasonable to allow any oral evidence of the statement to be given when the writing containing the statement could not be proved.\n\nThe judgment of Hosain, J., in the case of Rustam v.\n\nKing-Emperor (1) and the decisions in Fanindra Nath Baneijee v. Emperor('), King-Emperor v. Nilakanta (3) and ilfuthukumaraswami Pillai v. King-Emperor(') represent one side of the question, and the judgment of Knox, J., in Rustam v. King-Emperor (1) and the observations of Beaman, J., in Emperor v. Narayan(') represent the other side.\n\nA division Bench of the Bombay High Court in Emperor v. Hanmaraddi Bin Ramaraddi ('), after notieing the aforesaid decisions on the question, ruled that the police officer could be allowed to depose to what the witness had stated to him in the investigation for the purpose of corroborat,. ing what the witness had said at the trial. In that context, Shah, J., observed at p. 66:\n\n(I) (<gm) 7 A L.J. 468.\n\n(3) (1912) 35 Mad. 247.\n\n(5) (1907) 32 Bont. 111\n\n(2) (1908) 36 Cal. 281\n\n(4) (r9r2) 35 Mad. 397.\n\n(6) (1915) 39 Born. 58.\n\n\" The point is not free from difficulty which is sufficiently reflected in the diversity of judicial opinions, bearing on the question.\"\n\nPresumably, in view of the aforesaid conflict, to make the legislative intention clear the section was amended by Act 18 of 1923. Section 162 as amended by the aforesaid Act reads :\n\n\"(1) No statement made by any person to a police-officer in the course of an investigation under this Chapter shall, if reduced into writing, be signed by the person making it; nor shall any such statement or any record thereof, whether in a police-diary or otherwise, or any part of such statement or record, be used fo.r any purpose (save as hereinafter provided) at any inquiry or trial in respect of any offence under investigation at the time when such statement was made:\n\nProvided that, when any witness is called for the prosecution in such inquiry or trial whose statement has been reduced into writing as aforesaid, the Court shall, on the request of the accused, refer to such writing and direct that the accused be furnished with a copy thereof, in order that any part of such statement, if duly proved, may be used to contradict such witness in the manner provided by section 145 of the Indian Evidence Act, 1872.\n\nWhen any part of such statement is so used, any part thereof may also be used in the re-examination of such witness, but for the purpose only of explaining any matter referred to in his cross-examination :\n\nProvided, further that, if the Court is of opinion that any part of any such statement is not relevant to the subject-matter of the inquiry or trial or that its disclosure to the accused is not essential in the interests of justice and is inexpedient in the public interests, it shall record such opinion (but not the reasons therefor) and shall exclude such part from the copy of the statement furnished to the accused.\" Sub-section (1) of the substituted section attempted to steer clear of the aforesaid conflicts and avoid other difficulties by the following ways: (a) Prohibited the use of the statei:nent, both oral and that reduced into\n\nTahsildar Singh\n\n& Another v.\n\nThe State of Uttar Pradesh\n\nSubba Rao].\n\nI959\n\nTahsildar Singh\n\n& Another v.\n\nThe State of Uttar Pradesh\n\nSubba Rao J.\n\nwriting, from being used for any purpose at any inquiry or trial in respect of any offence under investigation; (b) while the earlier section enabled the accused to make use of it to impeach the credit of a witness in the manner provided by the Indian Evidence Act, 1872, the new section enabled him onlv to use it to contradict the witness in the manner provided by s. 145 of the said Act; (c) the said statement could also be used for the purpose of only explaining any matter referred to in his cross-examination; and (d) while under the old section a discretion was vested in the Court in the matter of furnishing the accused with a copy oflan earlier statement of a prosecution witness, under the amended section, subject to the second proviso, a duty was cast upon the Court, if a request was made to it by the acG_Used, to direct that the accused be furnised with a copy thereof. The effect of the amendment was that the loopholes which enabled the use of the statement made before the police in a trial were plugged and the only exception made was to enable the accused to use the statement of a witness reduced into writing for a limited purpose, namely, in the manner provided by s. 145 of the Indian Evidence Act, 1872, and the prosecution only for explaining the matter referred to in his cross examination.\n\nThe scope of the limited use also was clarified. Under the old section the statement was permitted to be used to impeach the credit of a witness in the manner provided by the Indian Evidence Act; under the said Act, the credit of a witness could be impeached either under s. 145 or under s. 155(3).\n\nWhile the former section enables a witness to be cross-examined as to a previous statement made by him in writing without such writing being shown to him, the latter section permits the discrediting of the witness by proof of his previous statement by independent evidence. If a statement in writing could be used to discredit a witness in the manner provided by those two sections, the purpose of the Legislature would be defeated. Presumably in realisation of this unexpected consequence, the Legislature in the amendment made it clear that the said statement can only be used to contradict a\n\nwitness in the manner provided by s. 145 of the Evidence Act.\n\nBy Act 2 of 1945, the following sub-section (3) was added to s. 161:\n\n\"The police-officer may reduce into writing any statement made to him in the course of an examination under this section, and if he does so, he shall make a separate record of the statement of each such person whose statement he records.\" This sub-section restored the practice obtaining before the year 1923 with a view to discourage the practice adopted by some of the police officers of taking a condensed version. of the statements of all the witnesses or a precis of what each witness said. It is not necessary to notice in detail the changes made in s. 162 by Act 26 of 1955, except to point out that under the amendment the prosecution is also allowed to use the statement to contradict a witness with the permission of the Court and that in view of the shortened committal procedure prescribed, copies of the statements of the prosecution witnesses made before the police during investigation are made available by the police to the accused before the commencement of the inquiry or trial. The consideration of the provisions of the latest amending Act need not detain us, for the present case falls to be decided under the Act as it stood before that amendment.\n\nIt is, therefore, seen that the object of the legislature throughout has been to exclude the statement of a witness made before the police during the investigation from being made use of at the trial for any purpose, and the amendments made from time to time were only intended to make clear the said object and to dispel the cloud cast on such intention. The Act of 1898 for the first time introduced an exception enabling the said statement reduced to writing to be used for impeaching the credit of the witness in the manner provided by the Evidence Act. As the phraseology of the exception lent scope to defeat the purpose of the legislature, by the Amendment Act of 1923, the section was redrafted defining the limits of the exception with precision so as to confine it only\n\nI959\n\nTahsildar Singh\n\n& Another\n\nThe State of Uttar Pradesh\n\nSubba Rao].\n\nI959\n\nTahsildar Singh\n\n0- Another v.\n\nThe State of Uttar Pradesh\n\nSubba Jlao J,\n\nto contradict the witness in the manner provided under s. 145 of the Evidence Act. If one could guess the intention of the legislature in framing the section in the manner it did in 1923, it .would be apparent that it was to protect the accused against the user of the statements of witnesses. made before the police during investigation at the trial presumably on the assumption that the said statements were not made under circumstances inspiring confidence.\n\nBoth tht> section and the proviso intended to serve primarily the same purpose, i.e., the interest of the accused.\n\nBraund, J., in Emperor v. Ajtab Mohd. Khan(') gave the purpose of s. 162 thus at p. 299:\n\n\" As it seems to us it is to protect accused persons from being prejudiced by statements made to police officers who by reason of the fact that an investigation is known to be on foot at the time the statement is made, may be in a position to influence the maker of it and, on the other hand, to protect accused persons from the prejudice at the hands of persons who in the knowledge that an investigation has already started, are prepared to tell untruths. \"\n\nA division Bench of the Nagpur High Court in Baliram Tikaram Marathe v. Emperor (2) expressed a similar idea in rega.rd to the object underlying the section, at p. 5, thus :\n\n\" The object of the section is to protect the accused both against over.zealous police officers and untruthful witnesses. \" The Judicial Committee in Pakala Narayana Swami v.\n\nThe King-Emperor(') found another object underlying the section when they said at p. 78 :\n\n\"If one had to guess at the intention of the Legislature in framing a section in the words used, one would suppose that they had in mind to encourage the free disclosure of information or to protect the person making the statement from a supposed unreliability of police testimony as to alleged statements or both.\" Section 162 with its proviso, if construed in the\n\n(1) A.LR. 1940 All. 291.\n\n(2) A.LR. 1945 Nag. I.\n\n(3) (1939) L.R. 66 !. A. 66.\n\n(2) S.C.R.\n\nSUPREME COURT ltEPOH, TS 891\n\nmanner which we will indicate at the later stage of the judgment, clearly achieves the said objects.\n\nThe learned Counsel's first argument is based upon the words \"in the manner provided by s. 145 of the Indian Evidence Act, 1872\" found in s. 162 of the Code of Criminal Procedure. Section 145 of the Evidence Act, it is said, empowers the accused to put all relevant questions to a witness before his attention is . called to those parts of the writing with a view to contradict him. In support of this contention reliance is placed upon the judgment of this Court in Bhagwan Singh v. The State of Punjab (1).\n\nBose, J., describes the procedure to be followed to contradict a witness under s. 145 of the Evidence Act thus at p. 819:\n\n\" H, esort to section 145 would only be necessary if the witness denies that he made the former statement. In that event, it would be necessary to prove that he did, and if the former statement was reduced to writing, then section ~45 requires that his attention must be drawn to those parts which are to be used for contradiction. But that position does not arise when the witness admits the former statement. In such a case all that is necessary is to look to the former statement of which no further proof is neces;; ary because of the admission that it was made.\" It is unnecessary to refer to other cases wherein a similar procedure is suggested for putting questions under s. 145 of the Indian Evidence Act, for the said decision of this Court and similar decisions were not considering the procedure in a case where the statement in writing was intended to be used for contradiction under s. 162 of the Code of Criminal Procedure. Section 145 of the Evidence Act is in two parts: the first part enables the accused to cross-examine a witness as to previous statement made by him in writing or reduced to writing to without such writing being shown to him; the second part deals with a situation where the cross.examination assumes the shape of contradiction : in other words, both parts deal with cross-examination; the first part with cross.examination other than by way of contradiction, and the\n\n(1) [1952] S.C.R. 812.\n\nr959\n\nTahsildar Singh\n\n& Another\n\nThe Stale of Ullar Pradesh\n\nSubba Rao ].\n\nr959\n\nTah5ildar Singlt\n\n&. AnotheT\n\nThe State of UttaT Pradesh\n\nSubba Rao ].\n\nsecond with cross-examination by way of contradiction only. The procedure prescribed is that, if it is intended to contradict a witness by the writing, his attention must, before the writing can be proved, be called to those parts of it which are to be used for the purpose of contradicting him. The proviso to s. 162 of the Code of Criminal Procedure only enables the accused to make use of such statement to contradict a witness in the manner provided by s. 145 of the Evidence Act. It would be doing violence to the language of the proviso if the said statement be allowed to be used for the purpose of cross-examining a witness within the meaning of the first part of s. 145 of the Evidence Act.\n\nNor are we impressed by the argument that it would not be possible to invoke the second part of s. 145 of the Evidence Act without putting relevant questions under the first part thereof.\n\nThe difficulty is more imaginary than real. The second part of s. 145 of the Evidence Act clearly indicates the simple procedure to be followed.\n\nTo illustrate: A says in the witness-box that B stabbed C ; before the police he had. stated that D stabbed C.\n\nHis attention can be drawn to that part of the statement made before the police which contradicts his statement in the witness-box. If he admits his previ- ·\n\nous statement, no further proof is necessary; if he does not admit, the practice generally followed is to admit it subject to proof by the police officer.\n\nOn the other hand, the procedure suggested by the learned Counsel may be illustrated thus: If the witness is asked \"did you say before the police-officer that you saw a gas light?\" and he answers \"yes\", then the statement which does not contain such recital is put to him as contradiction. This procedure involves two fallacies: one is it enables the accused to elicit by a process of cross-examination what the witness stated before the police-officer. If a police-officer did not make a record of a witness's statement, his entire statement could not be used for any purpose, whereas if a police-officer recorded a few sentences, by this process of cross-examination, the witness's oral statement could be brought on record.\n\nThis procedure,\n\ntherefore, contravenes the express provision of s. 162 of the Code.\n\nThe second fallacy is that by the illustration given by the learned Counsel for the appellants there is no self-contradiction of the primary statement made in the witness-box, for the witness -has yet not made on the stand any assertion at all which can serve as the basis. The contradiction, under the section, should be between what a witness asserted in the witness-box and what he stated before the police-officer, and not between what he said he had stated before the police-officer and what he actually made before him. In such a case the question could not be put at all: only questions to contradict can be put and the question here posed does not contradict; it leads to an answer which is contradicted by the police statement.\n\nThis argument of the learned Counsel based upon s. 145 of the Evidence Act is, therefore, not of any relevance in considering the express provisions of s. 162 of the Code of Criminal Procedure.\n\nThis leads us to the main question in the case, i.e., the interpretation of s. 162 of the Code of Criminal\n\nProcedure. The cardinal rule of construction of the provisions of a section with a proviso is succinctly stated in Maxwell's Interpretation of Statutes, 10th Edn., at p. 162 thus :\n\n- \"The proper course is to apply the broad general rule of construction, which is that a section or enactment must be construed as a whole, each portion throwing light if need be on the rest.\n\nThe true principle undoubtedly is, that the sound interpretation and meaning of the statute, on a view of the enacting clause, saving clause, and proviso, taken and construed together is to prevail.\" Unless the words are clear, the Court should not so construe the proviso as to attribute an intention to the legislature to give with one hand and take away with another. To put it in other words, a sincere attempt should be made to reconcile the enacting clause and the proviso and to avoid repugnancy between the two.\n\nAs the words in the section declare the intention of the legislature, we shall now proceed to construe the\n\nr959\n\nTrihsildur Singh\n\nb Another\n\nV, The Stale of Ultar Pradesh\n\nSubba Rao ].\n\n1 ahsildur Singh\n\n& Another\n\nv. [he State of Uttar Pradesh\n\nSubba Rao ].\n\nsection giving the words used therein their natural and ordinary sense.\n\nThe object. of the main section as the history of its legislation shows and the decided cases indicate is to impose a general bar against the use of statement made before the police and the enacting clause in clear terms says that no statement made by any person to a police officer or any record thereof, or any part of such statement or record, be used for any purpose. The words are clear and unambiguous. The proviso engrafts an exception on the general prohibition and that is, the said statement in writing may be used to contradict a witness in the manner provided by s. 145 of the Evidence Act.\n\nWe have already noticed from the history of the sectiori that the enacting clause was mainly intended to protect the interests of accused.\n\nAt the stage of investigation, statements of witnesses are taken in a haphazard manner. The police-officer in the course of his investigation finds himself more often in the midst of an excited crowd and babel of voices raised all round.\n\nIn such an atmosphere, unlike that in a Court of Law, he is expected to hear the statements of witnesses and record separately the statement of each one of them.\n\nGenerally he records only a summa.ry of the statements which appear to him to be relevant. These statements are, therefore, only a summary of what a witness says and very often perfunctory. Indeed, in view of the aforesaid facts, there is a statutory prohibition against police officers taking the signature of the person making the statement, indicating thereby that the statement is not intended to be binding on the witness or an assurance by him that it is a correct statement.\n\nAt the same time, it being the earliest record of the statement of a witness soon after the incident, any contradiction found therein would be of immense help to an accused to discredit the testimony of a witness making the statement. The section was, therefore, conceived in an attempt to find a happy via media, namely, while it enacts an absolute bar against the statement made before a police-officer being used for any purpose what.soever, it enables the accused. to rely .\n\nupon it for a limited purpose of contradicting a witness in the manner provided by s. 145 of the Evidence Act by drawing his attention to parts of the statement intended for contradiction. It cannot be used for corroboration of a prosecution or a defence witness or even a Court witness. Nor can it be used for contradicting a defence or a Court witness. Shortly stated, there is a general bar against its use subject to a limited exception in the interest of the accused, and the exception cannot obviously be used to cross the bar.\n\nIf the provisions of the section are construed in the aforesaid background, much of the difficulty raised disappears. Looking at the express words used in the section, two sets of words stand out prominently. which afford the key to the intention of the legislature. They are: \"statement in writing\", and \" to contradict\". \" Statement \" in its dictionary meaning is the act of stating or reciting. Prima facie a statement cannot take in an omission.\n\nA statement cannot include that which is not stated. But very often to make a state- . ment sensible or self-consistent, it becomes necessary to imply words which are not actually in the statement.\n\nThough something is not expressly stated, it is necessarily implied from what is directly or expressly stated. To illustrate:' A ' made a statement previously that he saw ' B ' stabbing 'C ' to death; but before the Court he deposed that he saw 'B' and' D' stabbing ' C' to death: the Court can imply the word \"only\" after 'B ' in the statement before the police.\n\nSometimes a positive statement may have a negative aspect and a negative one a positive aspect. Take an extreme example: if a witness states that a man is dark, it also means that he is not fair.\n\nThough the statement made describes positively the colour of a skin, it is implicit in that statement itselfthat it is not of any other colour. Further, there are occasions when we come across two statements made by the same person at different times and both of them cannot stand or co-exist. There is an inherent repugnancy between the two and, therefore, if one is true, the other must be false.\n\nOn one occasion a person says\n\nI959\n\nTahsildar Singh\n\n& Another v.\n\nThe State of Uttar Pradesh\n\nSubba Rao].\n\nI959\n\nTahsildar Singh\n\n& Another v.\n\nThe State of Utlar Ptadesh\n\nSubba Rao J.\n\nthat when he entered the room, he saw' A' shooting 'B ' dead with a g1rn ; on another occasion the same person says that when he entered the room he saw 'C' stabbing ' B ' dead ; both the statements obviously cannot stand together, for, if the first statement is true, the second is false and vice versa.\n\nThe doctrine of recital by necessary implication, the concept of the negative or the positive aspect of the same recital, and the principle of inherent' repugnancy, may in one sense rest on omissions, but, by construction, the said omissions must be deemed to be partof the statement in writing. Sueh omissions are not really omissions strictly so called and the statement must be deemed to contain them by implication. A statement, therefore, in our view, not only includes what is expressly stated therein, but also what is necessarily implied therefrom.\n\n\"Contradict\" according to the Oxford Dictionary means to affirm to the contrary. Section 145 of the Evidence Act indicates the manner in which contradiction is brought out. The cross-examining Counsel shall put the part or parts of the statement which affirms the contrary to what is stated in evidence. This indicates that there is something in writing which can be set against another statement made in evidence.\n\nIf the statement before the police-officer-in the sense we have indicated-and the statement in the evidence before the Court are so inconsistent or irreconcilable with each other that both of them cannot co-exist, it may be said that one contradicts the other.\n\nIt is broadly contended that a statement includes all omissions which are material and are such as a witness is expected to say in the normal course.\n\nThis contention ignores the intention of the legislature expressed in s. 162 of the Code and the nature of the non-evidenti.ary value of such a statement, except for the limited purpose of contradiction. Unrecorded statement is completely excluded. But recorded one is used for a specified purpose. The record of a statement, however perfunctory, is assumed to give a sufficient guarantee to the. correctness of the statement made, but if words not recorded are brought in by some fiction, the object of the section would be\n\n(2) S.C.R. SUPREME COURT REPOHTS 897\n\ndefeated.\n\nBy that process, if a part of a statement is recorded, what was not stated could go in on the sly in the name of contradiction, whereas if the entire statement was not recorded, it would be excluded. By doing so, we would be circumventing the section by ignoring the only safeguard imposed by the legislature, viz., that the statement should have been recorded.\n\nWe have already pointed out that under the amending Act of 1955, the prosecution is also allowed to use the statement to contradict a witness with the permission of the Court. If construction of the section as suggested by the learned Counsel for the appellants be accepted, the prosecution would be able to bring out in the cross-examination facts stated by a witness before a police-officer but not recorded and facts omitted to be stated by him before the said officer.\n\nThis result is not decisive on the question of construction, but indicates the unexpected repercussions of the argument advanced to the prejudice of the accused.\n\nAs s. 162 of the Code of Criminal Procedure enables the prosecution in the re-examination to rely upon any part of the statement used by the defence to contradict a witness, it is contended that the construction of the section accepted by us would lead to an anomaly, namely, that the accused cannot ask the witness a single question, which does not amount to contradiction whereas the prosecution, taking advantage of a single contradiction relied upon by the accused, can re-examine the witness in regard to any matter refer-· red to in his cross-examination, whether it amounts to a contradiction or not.\n\nI do bot think there is any anomaly in the situation. Section 145 of the Evidence Act deals with cross-examination in respect of a previous statement made by the witness. One of the modes of cross-examination is by contradicting the witness by referring him to those parts of the writing which are inconsistent with his present evidence. Section 162, while confining the right to the accused to cross-examine the witness in the said manner, enables the prosecution to re-examine the witness to explain\n\nII3\n\nI959\n\nTahsildar Singh\n\n<5 Another\n\nThe State of Uttar Pradesh\n\nSubba Rao ].\n\nI959\n\nTahsildar Singh\n\n& Another v.\n\nThe State of Uttar Pradesh\n\nSubba Rao ],\n\nthe matters referred to in the cross-examination. This enables the prosecution to explain the alleged contradiction by pointing out that if a part of the statement used to contradict be read in the context of any other part, it would give a different meaning; and if so read, it would explain away the alleged contradiction.\n\nWe think that the word \" cross-examination \" in the last line of the first proviso to s. 162 of the Code of Criminal Procedure cannot be understood to mean the entire gamut of cross-examination without reference to the limited scope of the proviso, but should be confined only to the cross-examination by contradiction allowed by the said proviso.\n\nThe conflict of judicial opinion on this question is reflected in the decisions of different High Courts in th.is country. One of the views is tersely put by Burn J. in In re Ponnusami Ohetty (1) at p. 476:\n\n\"Whether it is considered as a question of logic or language, \" omission \" and \"contradiction\" can never be identical. If a proposition is stated, any contradictory proposition must be a statement of some kind, whether positive or negative. To\" contradict\" means to \" speak against \" or in one word to \" gainsay\". It is absurd to say that you can contradict by keeping silence. Silence may be full of significance, but it is not \"diction\", and therefore it cannot be\n\n\" contradiction\".\n\nConsidering the provisions of s. 145 of the Evidence Act, the learned Judge observed thus at p. 4 77 :\n\n\" It would be in my opinion sheer misuse of words to say that you are contradicting a witness by the writing, when what you really want to do is to contradict him by pointing out omissions from the writing. I find myself in complete agreement with the learned Sessions Judge of Ferozepore who observed that \"a witness cannot be confronted with the unwritten record of an un-made statement\".\" The learned Judge gives an illustration of a case of apparent omission which really is a contradiction, i. e., a case where a witness stated under s. 162 of the Code that he saw three persons beating a man and later {t) {1933) I.L, R. 56 Mad. 475.\n\nstated in Court that four persons were beating the z959 same man. This illustration indicates the trend of - the Judge's mind that he was prepared to treat an Taitar thsingh omission of that kind as part of the statement by :. 0\n\ner necessary implication.\n\nA Division Bench of the The State of Madras High Court followed this judgment in In re Uttar Pradesh Guruva Vannan (1).\n\nIn that judgment, Mockett, J., made the following observation at p. 901 : Subba Rao f. \" I respectfully agree with the judgment of Burn, J., in Ponnuswamy Ohetty v. Emperor (2) in which the learned Judge held that a statement under section 162 of the Code of Criminal Procedure cannot be filed in order to show that a witness is making statements in the witness box which he did not make to the police and that bare omission cannot be a contradiction.\n\nThe iearned judge points out that, whilst a bare omission can never be a contradiction, a so-called omission in a statement may sometimes amount to a contradiction, for example, when to the police three persons are stated to have been the criminals and later at the trial four are mentioned.\" The Allahabad High Court in Ram Bali v. State (3) expressed the principle with its underlying reasons thus at p. 294:\n\n\"Witness after witness was cross-examined about certain statements made by him in the deposition but not to be found in his statement under s. 162, Criminal\n\nP. C.\n\nA statement recorded by the police under s. 162 can be used for one purpose and one purpose only and that of contradicting the witness.\n\nTherefore if there is no contradiction between his evidence in Court and his recorded statement in the diary, the latter cannot be used at all. If a witness deposes in Court that a certain fact existed but had stated under s. 162 either that that fact had not existed or that the reverse and irreconcilable fact had existed it is a case of conflict between the depos'ition in the Court and the statement under s. 162 and the latter can be used to contradict the former.\n\nBut if he had not stated under s. 162 anything about the fact there is no conflict and the\n\n(r) I.L.R. (1944) Mad. 897.\n\n(2) (1933) I L.R. 56 Mad. 475.\n\n(3) A.LR. 1952 All. 280.\n\ni959\n\nTahsildar Singh\n\n& Another v.\n\nThe Stale of Uttar Pradesh\n\nSubba Rao ].\n\nstatement cannot be used to contradict him.\n\nIn some cases an omission in the statement under s. 162 may amount to contradiction of the deposition in Court; they are the cases where what is actually stated is irreconcilable with what is omitted and impliedly negatives its existence.\" At a later stage of the judgment, the learned Judges laid down the following two tests to ascertain whether a particular omission amounts to contradiction: (i} an omission is not a contradiction unless what is actually stated contradicts what is omitted to be said; and\n\n(ii) the test to find out whether an omission is contradiction or not is to see whether one can point to any sentence or assertion which is irreconcilable with the deposition in the Court. The said observations are in accord with that of the Madras High Court in In re Guruva Vannan (').\n\nThe Patna High Court in Badri Chaudhry v. King-Emperor (2) expressed a similar view.\n\nAt p. 22, Macpherson, J., analysing s. 162 of the Code of Criminal Procedure, after its amendment in 1923, observed :\n\n\" The first proviso to section 162 ( 1) makes an exception in favour of the accused but it is an exception most jealously circumscribed under the proviso itself . . \"Any part of such statement\" which has been reduced to writing may in certain limited circumstances be used to contradict the witness who made it. The limitations are strict: (1) Only the statement of a prosecution witness can be .used; and (2) only if it has been reduced to writing ; (3) only a part of the statement recorded can be used ; ( 4) such part must be duly proved; (5) it must be a contradiction of the evidence of the witness in Court; (6) it must be used as provided in s. 145, Evidence Act, that is, it can only be used after the attention of the witness has been drawn to it or to those parts of it which it is intended to use for the purpose of contradiction, and there are others.\n\nSuch a statement which does not contradict the testimony of the witness cannot be proved in any circumstances and it is not permissible to use the recorded statement as a whole to show that the witness did not say something to the investigating officei;.\"\n\n(1) I.L.i:. (1944) Mad. 897.\n\n(2) A.I.R. 1926 Pat. 20.\n\nIn Sakhawat v. Crown (1) much to the same effect was stated at p. 284:\n\n\" The section (s. 162) provides that such statements can be used only for the purpose of contradiction. Contradiction means the setting up of one statement against another and not the setting up of a statement against nothing ;'.Lt all.\n\nAn illustration would make the point clear. If a witness in Court says 'I saw A running away ' he may be contradicted under section 162 by his statement to the police 'I did not see A running away'. But by proving an omission what the learned Counsel contradicts is not the statement 'I saw A running away' but the statement 'I stated to the police that I saw A running away '.\n\nAs section 162 does not allow the witness to depose 'I stated to the police that I saw A running away' it follows that there can be no basis for eliciting the omission.\n\nOur argument is further fortified by the use of the words \"any part of such statement ............... may be used to contradict.\" It is not said that whole statement may be used. But in order to prove an omission the whole statement has to be so used, as has been done in the present case.\" The contrary view is expressed in the following proposition:\n\n\" An omission may amount to contradiction if the matter omitted was one which the witness would have been expected to mention and the Sub-Inspector to make note of in the ordina, ry course. Every detail is expected to be noted.\" This proposition, if we may say so, couched in wide phraseology enables the trial Judge to put into the mouth of a witness things which he did not state at an earlier stage and did not intend to say, on purely hypothetical considerations.\n\nThe same idea in a slightly different language was expressed by Bhargava and Sahai, JJ., in Rudder v. The State (2) at p. 240:\n\n\"There are, however, certain omissions which amount to contradictions and have been treated as such by this Court as well as other Courts in thi:; country. Those are omissions relatil)g to facts which\n\n(r) I.L.R. (1937) Nag. 277.\n\n(2) A.LR. r957 All. 239.\n\nTahsildar Si11gh\n\nb Another v.\n\nThe State of Uttar Pradesh\n\nSubba Rao ].\n\nTahsildar Singh\n\n& Another v.\n\nThe State of Uttar Pradesh\n\nSubba Rao j.\n\nare expected to be included in the statement before the police by a person who is giving a narrative of what he saw, on the ground that they relate to important features of the incident about which the deposition is made.\" A similar view was expressed in Mohinder Singh v.\n\nEmperor (1), Yusuf Mia v. Emperor('), and State of M. P. v. Banshilal Behari (').\n\nReliance is placed by the learned Counsel for the appellants on a statement of law found in \"Wigmore on Evidence\", Vol. III, 3rd Edn., at p. 725. In discussing under the head \"what amounts to a Self-contradiction '', the learned author tersely describes a self-contradiction in the following terms:\n\n\" ............ it is not a mere difference of statement that suffices ; nor yet is an absolute oppositeness essential; it is an inconsistency that is required.\" The learned author further states, at p. 733 :\n\n\"A failure to assert a fact, when it would have been natural to assert it, amounts in effect to an assertion of the non-existence of the fact.\" The said statement is no doubt instructive, but it cannot be pressed into service to interpret the provisions of s. 162 of the Code of Criminal Procedure. In America, there is no provision similar to s. 162 of the Code. It is not, therefore, permissible, or e\\'en possible, to interpret the provisions of a particular Act, having regard to stray observations in a text-book made in a different context.\n\nIt is not necessary to multiply cases.\n\nThe two conflicting views may be briefly stated thus: (i) omissions, unless by necessary implication be deemed to be part of the statement, cannot be used to contradict the statement made in the witness-box; and (ii) they must be in regard to important features of the incident which are expected to be included in the statement made before the police. The first proposition not only carries out the intention of the legislature but is also in accord with the plain meaning of the words used in the section. The second proposition not only stretches\n\n(1) A.J.R. 1932 I.ah. 103.\n\n(2) A.J.R. 1938 Pat. 579.\n\n(3) A.J.R. i956 M.P. 13.\n\nthe meaning of the word \"statement\" to a breaking point, but also introduces an uncertain element, namely, ascertainment of what a particular witness would have stated in the circumstances Qf a particular case and what the police officer should have recorded. When the section sa.ys that the statement is to be used to contradict the subsequent version in the witness-box, the proposition brings in, by construction, what he would have stated to the police within the meaning of the word \"statement\". Such a construction is not permissible.\n\nFrom the foregoing discussion the following propositions emerge: (1) A statement in writing made by a witness before a police officer in the course of investigation can be used only td contradict his statement in the witness-box and for no other purpose; (2) statements not reduced to writing by the police officer cannot be used for contradiction; (3) though a particular statement is not expressly recorded, a statement that can be deemed to be part of that expressly recorded can be used for contradiction, not because it is an omission strictly so-called but because it is deemed to form part of the recorded statement; (4) such a fiction is permissible by construction only in the following three cases: (i) when a recital is necessarily implied from the recital or recitals found in the statement; illustration: in the recorded statement before the police the witness states that he saw A stabbing B at a particular point of time, but in the witness-box he says that he saw A and C stabbing Bat the same point of time; in the statement before the police the word \"only \"\n\ncan be implied, i.e., the witne::; s saw A only stabbing B; (ii) a negative aspect of a positive recital in a statement ; illustration : in the recorded statement before the police the witness says that a dark man stabbed B, but in the witness-box he says that a fair man stabbed B; the earlier sta, tement must be deemed to contain the recital not only that the culprit was a dark complexioned man but also that be was not of fair complexion; and (iii) when the statement before the police and that before the Court cannot stand together; illustration: the witness says in the recorded\n\nI959\n\nTahsildar Singh\n\n& Another\n\nThe State of Uttar Pradesh\n\nSubba Rao ].\n\nI959\n\nTahsildar Singh\n\n& Another v.\n\nThe State of Uttar Pradesh\n\nSubba Rao].\n\nstatement before the police that A after stabbing B ran away by a northern lane, but in the Court he says that immediatly after stabbing he ran away towards the southern lane; as he could not have run away immediately after the stabbing, i.e., at the same point of time, towards the northern lane as well as towards the southern lane, if one statement is true, the other must necessarily be false.\n\nThe aforesaid examples are not intended to be exhaustive but only illustrative.\n\nThe same instance may fall under one or more heads. It is for the trial Judge to decide in each case, after comparing the part 'or parts of the statement recorded by the police with that made in the witness-box, to give a ruling, having regard to the aforesaid principles, whether the recital intended to be used for contradiction satisfies the requirements of law.\n\nThe next point is what are the omissions in the statement before the police which the learned Sessions Judge did not allow the accused to put to the witnesses for contradicting their present version.\n\nThe learned Counsel for the appellants contends that the accused intended to put to the witnesses the following omissions, but they did not do so as the learned Sessions Judge disallowed the two questions put to P. W. 30 and made a considered order giving his reasons for doing so, and that the learned Counsel thought it proper not to put the same questions or other questions in regard to omissions to P. W. 30 or to the other witnesses that followed him. The said omissions are:\n\n(1) The warning by the members of the gang on their arrival to the audience at the music party not to stir from their places; (2) the presence of a gas lantern;\n\n(3) the chase of Bharat Singh by the assailants;\n\n(4) the scrutiny of the dead bodies by the gang; and (5) the return of the gang in front of the house of Bankey. The learned Counsel for the respondent contests this fact and argues that only two omissions, namely, the presence of a gas-lantern and the scrutiny of the dead bodies by the gang, were put in the cross-examination of P. W. 30 and no other omissions were put to him or any other witness, and that indeed the order\n\nr959 of the learned Sessions Judge did not preclude him from putting all the omissions to the witnesses and taking the decision of the Judge on the question of Tahsildar Singh & Another their admissibility.\n\nHe further contends that even v. before the learned Judges of the High Court the The State of Advocate for the appellants only made a grievance of Uttar Pradesh his not having been allowed to put the aforesaid two omissions and did not argue that he intended to rely Subba Rao J. upon other omissions but did not do so as he thought that the learned Sessions Judge would disallow them pursuant to his previous order. Before the High Court ah application was filed for summoning eight eyewitnesses on the ground that the learned Sessions Judge did not allow the Counsel for defence to put the omissions amounting to material contradiction to them, but no mention was made in that application of the number of omissions which the accused intended to put to the eye-witnesses if they were summoned.\n\nThat application was filed on May 1, 1957, but no attempt was made to get a decision on that application before the arguments were heard. Presumably, the Court as well as the parties thought that the application could more conveniently be disposed of after hearing the arguments. On July 30, 1957, i. c., after the appellants were fully heard, that application was dismissed and the detailed reasons for dismissing it were given in the judgment, which was delivered on September 11, 1957. The judgment of the learned Judges of the High Court clearly indicates that what was argued before them was that two omissions sought , to be put to P. W. 30 were disallowed and therefore the accused did not put the said omissions to the other witnesses. It was not contended on behalf of the accused that other omissions were intended to be used for contradiction, but were not put to the witnesses as the Advocate thought that in view of the order of the learned Sessions Judge they would not be allowed automatically. The learned Judges held that the said two omissions amounted to material contradiction and that the learned Sessions Judge was wrong in disallowing them, bnt they ignored those\n\nr959\n\nTahsildar Singh\n\n& Another\n\nThe State of Uttar Pradesh\n\nSitbba Rao J.\n\ntwo circumstances and based their findings on matters of greater certainty. If really the Judges had made a mistake in appreciating the arguments of the learned Counsel for the appellants in the context of omissions,' one would expect the accused to mention the said fact prominently in their application for special leave. Even if they omitted to mention that fact in the application for special leave, they could have filed an affidavit sworn to by the Advocate, who appeared for them before the learned Judges of the High Court, mentioning the fact that in spite of the argument specifically directed to the other omissions the learned Judges by mistake or over-sight failed to notice that argument.\n\nThe learned Counsel who argued before us did not argue before the High Court, and, therefore, obviously be is not in a position to assert that the Judges committed a mistake in omitting to consider the argument ad l'anced before them.\n\nBut be made strenuous attempts before us to persuade us to hold that there must have been a mistake. He would say that the learned Counsel had in fact relied upon all the aforesaid omissions in support of his contention that there was development of the case of the prosecution from time to time and therefore he must have also relied upon the said omissions in the context of the statements made under s. 162 of the Code of Criminal Procedure; on the other hand, the fact tlrnt the learned Judges considered all the alleged omissions in connection with the said contention and only considered two omissions in regard to the contention based on s. 162 of the Code is indicative of the fact that. the Je11rned Counsel, for reasons best known to him, did n6t tbink fit to rely upon all the alleged omissions. The deposition of P.W. 30 11lso shows that only two omissions in the statement before the police, viz., the existence of a gas-lantern and the scrutiny of the dead bodies by the gang, were put to him in cross-examination and the learned Sessions Judge disallowed those questions on the ground that the le11rned Counsel was not able to show any law entitling him to put the snid questi ous. Though the witness was examined at some Ieng th, no other alleged omissions in\n\n(2) s.c.n.\n\nSUPREME COUHT B.EPOH, TS 007\n\nthe statement before the police were sought to be put, z959 to him. It would be seen from the short ord6r made T , .1d-s h b l S .\n\nJ. d h . h f a, ist ar tng y the earned ess10ns u ge at t c time eac one o e,, Anutl.er the two questions were put, that the learned Sessions v.\n\nJudge did not give a general ruling that no omissions The State of in a statement before the police could be put to a witvu,,. Pradesh ness.\n\nThe rulings were given, having regard to the Subba Rao ]. nature of the omissions relied upon.\n\nBut after the entire evidence of P. W. 30 was closed, the learned Sessions Judge gave a considered order. Even in that order, he did not rule out all omissions as inadmissible, but clearly expressed the view that if what was stated in the witness-box was irreconcilable with what was omitted to be stated in the statement, it could go in as material contradiction. Even after this order, it was open to the appellants to bring out all such omissions, but no attempt was made by them to do so.\n\nThese circumstances also support the impression of the learned Judges of the High Court that what was argued before them was only in respect of the two specified omissions put to P. W. 30 in his cross-examination.\n\nWe, therefore, hold that only two omissions relating to the existence of the gas-lantern and the scrutiny of the faces of the deceased by the appellants\n\nwere put to P. W. 30 and were intended to be put to the other witnesses, but were not so done on the basis of the ruling given by the Court.\n\nWould those two omissions satisfy the test laid down by us? The witness stated in the Court that there was a gas-lamp and that some of the miscreants scrutinised the faces of the dead bodies. In their statements before the police they did not mention the said two facts and some of the witneBses stated that there were lanterns. Taking the gas-lamp first: the scene of occurrence was not a small room but one spreadover from the well to Bankey's house.\n\nFrom that omission in the statement it cannot necessarily be implied that there was no gas-lamp in any part of the locality wherein the incident took place ; nor can it be said that, as the witnesses stated that there were lanterns, they must be deemed to have stated that there was no gas-lamp, for the word \"lantern \" is\n\n1'959\n\n1'ahsildar Singh\n\n& Another\n\nThe State of Utear Pradesh\n\nSubba Rao ].\n\n908 SUPREME COUHT REPORTS [1959] Supp.\n\ncomprehensive enough to take in a gas-lantern. It is also not possible to state that the statements made before the police and those made before the Court cannot co-exist, for there is no repugnancy between the two, as even on the assumption that lantern excludes a gas-lantern, both can exist in the scene of occurrence. The same can be said also about the scrutiny of the faces of the dead bodies. In the statements before the police, the movements of the appellants were given. It was stated that they shot at the people and decamped with the gun of Bharat Singh.\n\nThe present evidence that in the course of their pursuit, they looked at the faces of two of the dead bodies does not in any way contradict the previous versions, for the said incident would fit in with the facts contained in the earlier statements. The appellants could have shot at the audience, pursued them, taken the gun of Bharat Singh and on their way scrutinised the dead bodies.\n\nThe alleged omission does not satisfy any of the principles stated by us.\n\nIn this view, it is unnecessary to express our opinion on the question whether, if the said two omissions amounted to contradiction within the meaning of s. 162 of the Code of Criminal Procedure, the appellants were in any way prejudiced in the matter of their trial.\n\nThe last contention of the learned Counsel for the appellants is that the learned Judges of the High Court acted illegally in testing the veracity of the witnesses with reference to the contents of the first information report.\n\nA perusal of the judgment of the High Court shows that the Advocate for the appellants contended before them, inter alia, that the witnesses should not be believed as their present version was inconsistent with the first information report. The learned Judges assumed that the said process was permissible and even on that assumption they rejected the plea of the learned Counsel for the appellants that there was improvement in the prosecution case. The learned Judges were really meeting the argument of the learned Counsel for the appellants. It is idle to suggest that they erred in law in relying upon the first information report to discredit the witnesses for the simple reason that they accepted the !'lvidence in spite of some omissions in the first information report.\n\nIn the result, we confirm the judgment of the High Court and dismiss the appeal.\n\nHrnAYATULLAH, J.-The judgment which I am delivering has been prepared by my learned brother, Imam, J. and myself.\n\nWe agree that the appeal be dismissed but would express in our own words the grounds upon which it should be dismissed.\n\nThe main contention advanced on behalf of the appellants was as follows: There was no fair trial of the appellants as they had been deprived of the right of cross-examination of the prosecution witnesses with reference to their statements made to the police during the police investigation. The trial Judge had disallowed two questions in this respect, and the lawyer for the appellants regarded the decision of the learned Judge as one which prevented him from putting further questions with respect to other matters concerning the police statements of the witnesses. The order of the learned Judge had to be respected. The order of the learned Judge was illegal, as on a proper inte1'- pretation of the provisions of s. 162 of the Code of Criminal Procedure, the appellants were entitled not only to put the two questions which were ruled out, but also questions with respect to other matters arising out of the police statements of the witnesses. The purpose of cross-examination is to test the reliability of the witnesses both as to what they had to say about the occurrence itself and concerning their identification of those who had participated in it.\n\nThere were several matters with respect to which, if questions had been allowed to be put, an effective cross-examination might have resulted and ena, bled the appellants to persuade the trial Judge to hold that the witnesses were entirely unreliable. In a case of this kind in which the appellants were involved, there were only two principal questions which were of vital importance: (1) how far the witnes,;; es had improved their\n\nTahsi/dar Singh\n\nb Another\n\nThe State of Uttar Pradesh\n\nHidayatullah ].\n\nTahsildat' Sin/; h\n\n& Another\n\nThe State of Uttar Pt'adesh\n\nHidayatullah ].\n\nstory in their evidence in Court from what they harl sa.id to the police concerning the occurrence, and\n\n(2) the existence of opportunity and sufficient light to enable proper identification.\n\nIt may be assumed, although it has been a matter of controversy, that the order of the trial Judge disallowing the two quest.ions which were put was understood by the lawyer for the defence to mean that all similar questions in the nature of omissions in the police statements with respect to matters stated in Court would be disallowed and therefore no attempt was made to put further questions to the witnesses in this respect.\n\nUnfortunately, the lawyer for the defence had not in this particular case laid any adequate foundation upon which the two questions, which were ruled out, could have been properly put.\n\nFrom that point of view, the order of the trial Judge in disallowing those questions was not improper. It could not, therefore, be sairl that tho trial Judge had done anything which could be rightly characterised as infringement of the provisions of s. 162 of the Code of Criminal Procedure or of the Indian Evidence Act, or even of the rules of natural justice.\n\nJ ohari Chowkidar had reported the occurrence to the police station, which was a brief statement.\n\nCertain matters were, however, definitely mentionedthe names of the persons recognised in the occurrence, the number of persons killed and injured, the taking away of a gun which was with Bharat Singh, Bankey Kumhar firing his gun at the culprits in such a m:i, nner tbat some of them must have been injured, and the existence of light from the moon and lantern.\n\nThe principal comment had been that in this report there was no mention of the culprits having advanced from the well towards the open place where villagers had gathered to hear the music. On the contrary, the first information report indicated that the firing was done from the parapet of the well. It is clear, however, from Johari's statement that the culprits had taken away the gun which was with Bharat Singh.\n\nThis could only have been done if the culprits had\n\nadvanced from the well to the place where the villagers bad assembled.\n\nIt was then commented that in the first information report the culprits were said to have come from the southern lane, while in Court the evidence was that they had come to the w-ell from the eastern lane. The discrepancy is a minor one. Johari must have been concerned with reporting the first firing from the well, and he might have mistaken the actual direction from which the culprits bad approached the well.\n\nJohari's statement made no mention of the culprits uttering any warning that no one was to run away as they advanced from the well, whereas in Court the witnesses spoke to that effect. This was a detail which Johari might not have considered to be of sufficient importance, as he was anxious to make a bare statement in order to get the police to proceed to the place of occurrence as quickly as possible. J ohari's statement also makes no mention of the culprits examining the bodies of the dead and examining their faces and exclaiming that Asa Ram, one of the men whom they wished to kill, had been killed.\n\nHere again, this was a matter of detail which Johari might not have considered necessary to mention. The first information report made no mention of the existence of gas light.\n\nIt did, however, mention the existence of light of lantern and existence of moonlight. The existence of light from lantern and the full moon obviously was sufficient to recognise known persons. It is in evidence that the appellants were known for several -years to the witnesses who had identified them as participants in the occurrence. It could not be said with absolute certainty that the mention of the existence of light of lantern excluded the existence of gas light. The statement of J ohari gives clear indication that the culprits did not remain all the time at the well, because they must have advanced to take away the gun which was with Bharat Singh. The culprits must have stayed at the place of occurrence for some time to enable Bankey Kumhar to fire his gun at them and to convey to , Joh1iri's mind the certainty that some of the culprits must have been injured.\n\nReference is made only to\n\nTahsildar Singh\n\n&- Another v.\n\nThe State of Uttar Pradesh\n\nHidayatullah } .\n\nI959\n\nTahsildar Singh\n\n&- Another\n\nThe State of Uttar P1adeh\n\nllidayatulluh J,\n\nSUPR~~ME COURT REPORTS [1959] Supp.\n\nsome of the details and not to all the discrepancies pointed out in order to determine whether the alleged improvement in the story of the witnesses in Court from what they are alleged to have stated to the police was with reference to vital matters, which went to the root of the prosecution case.\n\nIt is apparent from what has been stated above that even if the defence had been allowed to put questions concerning these alleged omissions in the statements of the witnesses to the police, it could not have made their evidence in Court unreliable with respect to any material particular concerning the occurrence or the identification of the accused.\n\nFrom the above, it seems to us that there is no merit in the appeal. As, however, considerable argument has been made concerning the right of cross. examination and as to how the provisions of s. 162 of the Code of Criminal Procedure should be construed, it becomes necessary to consider the submissions of the learned counsel for the appellants.\n\nThe provisions of the Code of Criminal Procedure of 1861 and 1872 have been referred to by our learned brother, Subba Rao, J. Section 162 of the Code of 1872 made it clear that except for a dying declaration and matters coming within the provisions of s. 27 of the Indian Evidence Act of 1872, no statement of any person made to a police officer in the course of investigation, if reduced into writing, could be used as evidence against the accused. There was no restriction as to the extent of the right of an accused to cross-examine a prosecution witness concerning his statement to the police.\n\nSection 162 of the Code of 1898 prohibited the use of a statement reduced into writing, as evidence except any statement. falling within the provisions of s. 32 of the Indian Evidence Act, 1872. The proviso to this section, however, expressly stated that in spite of the prohibition in the main provision, the accused conld use such a statement to impeach the credit of the witnesses in the manner provided in the Indian Evidence Act of 1872.\n\nIt will be seen therefore that until 1898 there was no restriction imposed upon the accused as to the extent\n\nof his right of cross-examination. As s. 162 of the Code of 1898 entirely prohibited the use of the statement reduced into writing as evidence, the proviso to it safeguarded the right of the accused to impeach the credit of such witness in the manner provided in the Indian Evidence Act, 1872.\n\nUnder the Indian Evidence Act, a witness's credit can be impeached under ss. 145 and 155 of that Act. The manner in which the provisions of these sections could be utilised to impeach the credit of a witness covers a wide field. If, however, it was intended to contradict a witness concerning his previous statement reduced into writing, then the provisions of s. 145 require that those parts of the writing by which it was sought to contradict the witness must be shown to him. There can be no doubt that the provisions of the Code from 1861 to 1898 in no way curbed the right of cross-examination on behalf of the accused. The provisions were intended to protect the accused in that no statement of a witness to the police reduced into writing could be used as evidence against him, but the right to cross-examine the witness to the fullest extent in accordance with the provisions of the Indian Evidence Act in order to show that he was unreliable, remained unaffected.\n\nThe real question for consideration is whether the amendment of the Code in 1923 brought about such a radical change in the provisions of s. 162 of the Code as to suggest that the Legislature had taken a retrogade step, and had intended to deprive the accused of the right of cross-examination of prosecution witnesses concerning their police statements except in one restricted particular, namely, to make use of the statements reduced into writing to contradict the witnesses in the manner provided by s. 145 of the Indian Evidence Act.\n\nThe provisions of s. 162 of the Code of 1898 were amended in 1923 in the hope that the amendment would resolve the various doubts which had sprung up as the result of divergent judicial opinions as to the meaning of these provisions. The provisions of s. 162 of the Code of 1898 harJ. been variously construed,\n\nr959\n\nTahsildar Singh\n\n6\" Another v.\n\nThe State of Uttar Pradesh\n\nIlidayatullah ].\n\nr959 and the amendment in 1923 has not improved matters.\n\nThe amended section still remains difficult to con- Tahsildar Singh\n\no;. Another strue. We shall endeavour now to construe it. v.\n\nUnder s. 161 of the Code, the police officer may The State of examine orally any person supposed to be acquainted Utta• P•adesh with the facts and circumstances of the case. He may also reduce into writing any statement made to him Hidayatultah ]. in the course of such examination, and if he does so, he must make a separate record of the statement of each such person.\n\nThe legislature has, however, put restrictions upon the use of such statements at the inquiry or trial of the offence. The first restriction is that no statement made by any person to a police officer, if reduced into writing, be signed by the person making it. The intention behind the provision is easy to understand.\n\nThe legislature probably thought that the making of statements by witnesses might be thwarted, if the witnesses were led to believe that because they had signed the statements they were bound by them, and that whether the statements were true or not, they must continue to stand by them. The legislature next provides that a statement, however recorded, or any part of it shall not be used for any purpose (save as provided in the section) at the inquiry or trial in respect of any offence under investigation at the time such statement is made. The object here is not easily discernible, but perhaps is to discourage over-zealous police officers who might otherwise exert themselves to improve the statements made before them. The Privy Council considered the intention to be:\n\n\" If one had to guess at the intention of the legislature in framing a section in the words used, one would suppose that they had in mind to encourage the free disclosure of the information or to protect the person making the statement from a supposed unreliability of police testimony as to alleged statements or both.\" It is possible that the legislature had also in mind that the use of statements made under the influence of the investigating agency might, unless restricted to a use for the benefit of the accused, result in considerable\n\n(2) S.C.R. SUPREME COURT H, EPOH, TS 915\n\nprejudice to him.\n\nBut whatever the intention which led to the imposition of the restrictions, it is manifest that the statements, however recorded, cannot be used except to the extent allowed by the section.\n\nThe prohibition contained in the words \"any purpose\" is otherwise absolute.\n\nThen follow two provisos. The first gives the right to the accused to make use of the statements for contradicting a witness for the prosecution in the manner provided by s. 145 of the Indian Evidence Act. It also gives a right to the prosecution to use the statement for purposes of re-examination of the same witness but only to explain any matter referred to in the cross-examination of the witness.\n\nThe first proviso, when analysed, gives the following ingredients :\n\n(i) A prosecution witness is called for the prosecution;\n\n(ii) whose statement has previously been reduced to writing;\n\n(iii) The accused makes a request ;\n\n(iv) The accused is furnished with a copy of the previous statement ;\n\n(v) In order that any part of such statement, if duly proved, may be used to contradict such witness in the manner provided by s. 145 of the Indian Evidence Act. . lf the accused exercises the right in (v) above in any instance, then the prosecution has the right to use the statement in the re-examination of the witness but only to explain any matters referred to by him in cross-examination.\n\nSection 145 of the Indian Evidence Act reads:\n\n\" Cross-examination as to previous statements in writing : A witness may be cross-examined as to previous statements made by him in writing or reduced into writing, and relevant to matters in question, without such writing being shown to him, or being proved ; but, if it is intended to contradict him by the writing, his attention must, before the writing can be proved, be called to those parts of it which are to be used for the purpose of contradicting him.\"\n\nr959\n\nTahsildar Singh\n\n& Another\n\nThe State of Uttar Pradesh\n\nIIidayatullah ].\n\n'959\n\nTal1sildar Singh\n\n& Another v.\n\nThe State of Uttar Pradesh\n\nHidayatullah j.\n\nThe section analysed, gives the following result:\n\n(1) vVitnesses can be cross-examined as to previous statements in writing or reduced into writing;\n\n(2) These writings need not be shown to tho witnesses or proved beforehand ;\n\n(3) But if the intention is to contradict them by the writings,\n\n(a) their attention must be drawn to those parts which are to be used for contradiction ;\n\n(b) This should be done before proving the writings.\n\nOur learned brother, Subba Rao, J., restricts the use by the accused of the previous statements to the mechanism of contradiction as detailed in (3) above, but says that the accused has no right to proceed under (ll and (2).\n\nHe deduces this from the words of s. 162 of the Code of Criminal Procedure, where it is provided:\n\n\"in order that any part of such statement, if duly proved, may be used to contradict such witness in the manner provided by section 145 of the Indian Evidence Act, 1872.\" The fact that the accused can use the previous statement for the purpose of contradicting, shows that the previous statement cannot be used for corroborating the witness.\n\nAlso there must be some basis for contradicting. This may arise, because of there being a contrary statement, irreconcilable statement or even material omissions. The accused can establish a contradiction by cross-examining the witness but only so as to bring out a contradiction and no more.\n\nWe regret we cannot agree (and we say this with profound respect) that the accused is not entitled to crosscxamine but only to contradict. In our opinion, the reference to s. 145 of the Indian Evidence Act brings in the whole of the manner and machin, ery of s. 145 and not merely the second part. In this process, of course, the accused cannot go beyond s. 162 or ignore what the section prohibits but cross-examination to establish a contradiction between one statement and another is certainly permissible.\n\nThis question loses much of its importance when\n\nthere are patent contradictions and they can be put to the witness without any cross-examination as in the two statements:\n\n(a) I saw A hit B.\n\n(b) I did not see A hit 13.\n\nBut there are complex situations where the contradiction is most vital and relevant but is not so patent.\n\nThere are cases of omissions on a relevant and material point. Let us illustrate our meaning by giving two imaginary statements:\n\n(a) When I arrived at the scene I saw that X was running away, chased by A and B who caught him.\n\n(b) 'Vhen I arrived at the scene I saw X take out a dagger from his pocket, stab D in his chest and then take to his heels.\n\nHe was chased by A and B who caught him.\n\nThere is an omission of two facts in the first statement, viz., (a) X took out a dagger from his pocket, and (b) he stabbed Din the chest. These two statements or their omission involve a contradiction as to the stage of the occurrence, when the observation of the witness began.\n\nWhat s. 145 of the Indian Evidence Act provides is that a witness may be contradicted by a statement reduced into writing and that is also the use to which the earlier statement can be put under s. 162 of the Code of Criminal Procedure. vVhen some omissions occur, there is contradiction in one sense but not necessarily on a relevant matter. The statements of witnesses may and do comprise numerous facts and circumstances, and it happens that when they are asked to narrate their version over again, they omit some and add others. What use can be made of such omissions or additions is for the accused to decide, but it cannot be doubted that some of the omissions or additions may have a vital bearing upon the truth of the story given. We do not think that by enacting s. 162 in the words used, the legislature intended a prohibition of cross-examination to establish which of the two versions is an authentic one of the events as seen by the witness.\n\nThe use of the words \" reexamination \" and \"cross-examination \" in the same\n\nI959\n\nTahsildar Singh\n\n& Another v.\n\nThe State of Uitar Pradesh\n\nHidayatul/ah ].\n\nI959\n\nTahsildar Si11gli\n\n& Another v.\n\nThe State of UttaY Pradesh\n\nllidayatullah ].\n\nproviso shows that cross-examination is contemplated or in other words, that the manner of contradiction under s. 145 of the Indian Evidence Act comprises both cross-examination and contradiction.\n\nIndeed, the second part is only the final stage of the contradiction, which includes the earlier stages. Re-examination is only permissible where there is cross-examination.\n\nIt must not be overlooked that the cross-examination must be directed to bringing out a contradiction between the statements and must not subserve n, ny other purpose. If the cross-examination does anything else, it will be barred under s. 162, which permits the use of the earlier statement for contradicting a witness and nothing else.\n\nTaking the example given above, we do not see why cross-examination may not be like this:\n\nI put it to you that when you arrived on the scene X was already running away and you did not actually see him stab D as you have deposed to-day ?\n\nNo.\n\nI saw both the events.\n\nQ. If that is so, why is your statement to the police silent as to stabbing ?\n\nI stated both the facts to the police.\n\nThe witness can then be contradicted with his previous statement. We need hardly point out that in the illustration given by us, the evidence of the witness in Court is direct evidence as opposed to testimony to a fact suggesting guilt. The statement before the police can only be called circumstantial evidence of complicity and not direct evidence in the strict sense.\n\nOf course, if the questions framed were : Q. What did you state to the police ? or (:; J_ Did you state to the police that D stabbed X?\n\nThey may be ruled out as infringing s. 162 of the Code of Criminal Procedure, because they do not set up a contradiction but attempt to get a fresh version from the witnesses with a view to contradicting him.\n\nHow the cross-examinn, tion can be made must obviously vary from case to case, counsel to counsel and statement to statement.\n\nNo single rule can be laid down and the propriety of the question in the light of\n\nthe two sections can be found only when the facts and questions are before the Court. But we are of opinion that relevant and matflrial omissions amount to vital contradictions, which can be established by crossexamination and confronting the witness with his previous statement.\n\nThe word \" contradict \" has various meanings, and in the Oxford English Dictionary it is stated as \" To be contrary to in effect, character, etc. ; to be directly opposed to ; to go counter to, go against \" as also \" to affirm the contrary of; to declare untrue or erroneous; to deny categorically \" and the word \"contradiction \" to mean \" A state or condition of opposition in things compared; variance; inconsistency, contrariety \". In Shorter Oxford English Dictionary, \"contradict \" is said to mean \" To speak against ; to oppose in speech ; to forbid ; to oppose; to affirm the contrary of; to declare untrue or erroneous; to deny; to be contrary to; to go counter to and go against\" and \" contradiction \" to mean \" A state of opposition in things compared; variance; inconsistency\". The meaning given to the words \"contradict\" and \" contradiction\" in these Dictionaries must at least include the case of an omission in a previous statement which by implication amounts to contradiction and therefore such an omission is a matter which is covered by the first proviso to s. 162 and questions in crossexamination can be put with respect to it in order to contradict the witness. It is difficult to say as an inflexible rule that any other kind of omission cannot be put to a witness in order to contradict him, when the proper foundation had been laid for putting such questions. The words \"to contradict him\" appearing in s. 145 of the Evidence Act must carry the same meaning as the words \"to contradict such witness\" in s. 162 of the Code. In a civil suit, where the provisions of s. 162 of the Code of Criminal Procedure have no application, would it be correct to say that only questions concerning omissions of the kind suggested by our learned brother could be put and none other ?\n\nWe cannot see why a question of the nature of crossexamination regarding an omission with respect to a\n\nI959\n\nTahsildar Singh\n\n& Another v.\n\nThe State of Uttar Pradesh\n\nllidayatu/lah ].\n\nI959\n\nTahsildar Singh\n\n& Another v.\n\nThe State of Uttar Pradesh\n\nH idayatullah j.\n\nmatter which the witness omitted to make in his previous statement and which, if made, would have been recorded, cannot be put. The facts and circumstances of each case will determine whether any other kind of omission than that referred to by our learned brother could be put to a witness in order to contradict him.\n\nIt would be for the Judge to decide in each case whether in the circumstances before him the question could be put. The purpose of cross-examination is to test the veracity of the statement made by a witness in his examination-in-chief as also to impeach his credit. Not only is it the right of the accused to shake the credit of a witness, but it is also the duty of the Court trying an accused to satisfy itself that the witnesses are reliable. It would be dangerous to lay down any hard and fast rule.\n\nWe pause to look at the matter from another angle.\n\nWe shall assume that the interpretation which the State claims should be put upon s. 162(1) is correct and compare the respective rights of the accused and the prosecution.\n\nAccording to this interpretation, the accused has no right of cross-examination in respect of the contradiction. This means that no question can be put about the previous statement but only the part in which there is a contradiction can be brought to the witness's notice and his explanation, if any, obtained. In other words, there is only \"contradiction\" and no more.\n\nBut when the accused has used the statement to contradict the witness-it may be only on one point-what are the rights of the prosecution? The prosecution can use any part of the statement in the re-examination not only to explain the ' contradiction ' but also to explain any matter referred to in the cross-examination of the witness.\n\nIf 'contradiction' does not include the right of cross-examination, the right of the prosecution must necessarily extend to re-examination in respect of any other matter needing explanation in the cross-examination at large. Thus, the accused cannot ask a single question of the nature of cross-examination but because he sets up a 'contradiction' in the narrow sense, the prosecution can range all over the previous\n\nstatement and afford the witness a chance of explaining any matter in his cross-examination by re-examining him which right includes the possibility of asking leading questions with the permission of the Court.\n\nThus, the accused makes a ' contradiction' at his own peril. By making a single 'contradiction', the accused places the entire statement in the hands of the prosecution to explain away everything with its assistance. One wonders if the legislature intended such a result, for it is too great a price for the accused to pay for too small a right. Fortunately, that is not the meaning of s. 162 of the Code of Criminal Procedure, and it is not necessary to read the word \" crossexamination \" in the proviso in a sense other than what it has.\n\nThe right of both the accused and the prosecution is limited to contradictions.\n\nIt involves crossexamination by the accused as to that contradiction within s. 145 of the Indian Evidence Act and reexamination in relation to the matters 'referred to in the cross-examination of the witness'. The prosecution cannot range at will to explain away every discrepancy but only such as the accused under his right has brought to light. In our opinion, reading the section in this way gives effect to every part and does not lead to the startling and, if we may say so, the absurd results which we have endeavoured to set out above.\n\nThe question may be asked, how is there to he a cross-examination about a previous statement? It is difficult to illustrate one's meaning by entering into such an exposition.\n\nAny one interested to see the technique is invited to read Mrs. May brick's trial in the Notable English Trials (1912) at pages 77-79, the trial of William Palmer, pages 35,36, 50-51. EXiamples will be found in every leading trial. The question is, did the legislature intend giving this right ? In our opinion, the legislature did and for the very obvious reason that it gave the prosecution also a chance to re-examine the witness, to explain ' any matter referred to in the cross-examination of the witness.'\n\nII6\n\nI959\n\nTahsilda• Singh\n\n& Another v.\n\nThe State of Uttar Pradesh\n\nHidayat,.llah ].\n\nI959\n\nTaJ, siTdar Singh\n\n& Another\n\nThe Stale nf Uttar J), adi:sh\n\nliidr1y11/ullali ].\n\n\\V c respectfully do not agree that the section should Im construed in the way our learned brother has con- Ht!'ll('d it. Though we agree as to the result., our opinion cannot be left unexpressed. If the section is\n\ncorrntrued too narrowly, the right it confers will cease to be of any real protection to the accused, and the danger of its becoming an impediment to effective\n\ncross-examination on behalf of the accused is apparent.\n\nThis brings us to the consideration of the questions, which were asked and disallowed.\n\nThese were pnt during the cross-examination of Bankey, P. W. 30.\n\nThey are: Q Did you state to the investigating officer that the gang rolled the dead bodies of Nathi, Sakt, u aml Bhar:it Singh and scrutinized them, and did you tell him that the face of Asa Ram resembled that of the deceast'd Bharat Singh?\n\nDid you state to the investigating officer about the presence of the gas lantern?\n\nThese questions 1Yere defective, to start with. They did not set up a contradiction but attempted to obtain from the witness a version of what he stated to the police, which is then contradicted. What is needed is to take the strttement of the police a.s it is, and oetablish a contradiction between that statement and the evidence in Court. To do otherwise is to transgress tho bounds set by s. 162 which, by its absolute prohibition, limits even cross-examination to contradictions and no more.\n\nThe cross.examinatiou cannot oven indirectly subserve any other purpose.\n\nIn the questions with which we illustrated our meaning, the witness was not asked what he stated to the police, but was told what he had stated to the police and asked to explain the omission. It is to be borne in minrl that the statement made to _the police is 'duly proved' either earlier or even later to establish wha.t the witness had then stated.\n\nIn our opinion, the two questions were defective for the reasons given here, and were properly ruled out, even though all the reasons given by the Court may . not sta.nd scrutiny. The matter was not followed up\n\n(2) S.C.R. SUPHEME COURT RE.POH, TS 923\n\nwith proper questions, and it seems th<tt similar questions on these aud other points were not put to the witness out of deference (as it is now suggested) to the ruling of the Court.\n\nThe accused c<rn only blame themselves, if they did not.\n\nThe learned Judges of the High Court r1 !led out from their consideration that these two cirnumstances made it possible for the witnesses to recognise the accused, but held that there was ample opportunity even otherwise for the witnesses to do so.\n\nThe High Court was justified in so doing, and there being ample evidence on which they could come to the conclusion that the witnesses had, in fact, recognised the accused, it must inevitably be regarded as one of fact in regard to which this Court does not interfere.\n\nSince 110 other point was argued, the appeal must fail, and we agree that it be dismissed.\n\nAppeal dismis8ed.\n\nTHE TH, U~TEES OJ!' THE CIIARlTY HUND,\n\nESPLANADE l~OAD, .FORT, BOMBAY\n\nTHE COMMU3SIONEL~ OF INCO:'vlE-TAX,\n\nBOMBAY\n\n(S. g, DAS, C. J., N. H. BHAGWA'l'l aml\n\nM. HrnAYA'I'ULLAH, JJ.)\n\nIncumc-tax--Public charitable trust--Exemption- -Test-Indian Income-tax Act, r922 (XI of r922), s. 4(3)(i).\n\nThe appellants were the trnstees of a charity fund known as \"The Charity Fund founded by Sir Sassoon David, Baronet of Bombay\". Clause 13 of the deed of trust, after declaring that the trnstees should apply the net income for all or any of the following purposes, namely, (a) the relief antl benefit of the poor ;111d indigent members of Jewish or any other community of Bombay or other parts of lndia or of the world either by making payments to them in cash or providing them with food and\n\nTahsild'\" Singh\n\n0 .d not her\n\nHe Stal~ of Utt:lr J>1 adesh\n\nHid , y, tullah ] .\n\nI959\n\nMay 5.", "total_entities": 201, "entities": [{"text": "875\n\nTAHSILDAR SINGH AND ANOTHER", "label": "PETITIONER", "start_char": 33, "end_char": 65, "source": "metadata", "metadata": {"canonical_name": "TAHSILDAR SINGH AND ANOTHER", "offset_not_found": false}}, {"text": "THE STATE O:F UTTAR PHADESH", "label": "RESPONDENT", "start_char": 67, "end_char": 94, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF UTTAR PRADESH", "offset_not_found": false}}, {"text": "B. P. 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{"document_id": "1959_2_87_107_EN", "year": 1959, "text": "(2) S.C.R. SUPREME COURT REPORTS 87\n\nGOPI CHAND\n\nTHE DELHI ADMINISTRATION (S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR, K. N. WANCHOO and HrnAYATULLAH, JJ.) ·\n\nCriminal Trial-Temporary enactment-Provision for trial of specified offences under summons procedure in notified areas-Constitutional validity-Applicability to proceedings pending on expiry of enactment-Absence of saving provision-East Punjab Public Safety Act, r949 (Punj. 5 of r949), ss. 36(I), 2o-Constitution of India, Art. r4-General Clauses Act, r879 (Io of r879), s. 6.\n\nSection 36(1) of the East Punjab Public Safety Act, r949, (Punj. 5 of r949), which was passed in the wake of the partition disturbances in India with a view to ensure public safety and the maintenance of public order, provided that offences mentioned therein and committed in the area declared to be dangerously disturbed under s. 20 of the Act, should be tried under the summons procedure prescribed by Ch. XX of the Code of Criminal Procedure. By the first notification issued under s. 20 of the Act, the whole of the Province of Delhi was declared to be a dangerously disturbed area; subsequently the second notification purported to cancel the first. The third notification then sought to modify the second by inserting into it the words \"except as respect things done or omitted to be done before this notification\". The fourth and last notification issued under s. 36(r) of the Act sought to save proceedings thereunder pending after the cancellation of the first notification. The appellant who was put up for trial in three cases for offences ordinarily triable under the warrant procedure, was tried under the summons procedure according to s. 36(r) of the Act and the first notification and the trials were continued even after the expiry of the Act in respect of substantial parts of them under the same procedure and ended in his conviction which was affirmed by the High Court in appeal. The Act was a temporary Act and contained no provision saving pending proceedings. It was contended on behalf of the appellant that the first part of s. 36(1) of the Act in treating the disturbed areas as a class by themselves and providing a uniform procedure for the trial of specified offences violated Art. r4 of the Constitution and that the continuance of the trials under the summons procedure even after.the expiry of the Act was invalid. ·\n\nHeld, that the two tests of the validity of the classification made by the Legislature were, (r) that te classification must be based on an intelligible differentia and (2) that this differentia must be reasonably connected with the object of the legislation.\n\nThus tested, there could be no doubt, in the present case, that the classification on a geographical basis made by the impugned\n\nI959\n\nJanuary 20.\n\nI959\n\nGopi Chand\n\nThe Delhi Administration\n\nAct between areas that were dangerously disturbed and other areas, in the interest of speedy trial of offences, was perfectly justified.\n\nRam Krishna Dalmia v. Justice Tendolkar, [r959] S.C.R. 279, relied on.\n\nLachmandas Kewalram Ahuja v. The State of Bombay, [r952] S.C.R. 7ro, held inapplicable.\n\nBut since the impugned Act was a temporary Act and contained no appropriate provision saving the summons procedure prescribed by it, that procedure could not, on the expiry of the Act, apply to the cases pending against the appellant.\n\nKrishnan v. The State of Madras, [r95r] S.C.R. 62I, relied on.\n\nWicks v. Director of Public Prosecutions, (1947] A.C. 362, referred to.\n\nThe third and the fourth notifications, obviously intended to cure the absence of a saving provision in the Act, were wholly outside the authority conferred on the delegate by s. 20 or s. :;6(1) of the Act and must be held to be invalid. With the issue of the second notification, therefore, the entire province of Delhi ceased to be a dangerously disturbed area.\n\nIt was erroneons to apply by analogy the provisions of s. 6 of the General Clauses Act to cases governed by a te1nporary Act, such as the one in question, which did not contain the appropriate saving provision and contend that since the trials had commenced validly, their continuance under the same procedure even after the declaration had ceased to operate and subsequent orders of conviction and sentence passed therein were valid as well.\n\nSrinivasachari v. The Queen, (r883) I.L.R. 6 Mad. 336, Muk,; nd v. Laib<, (19or) 3 Born. L.R. 584 and Gardner v. Lucas,\n\n(r878) 3 A.C. 582, held inapplicable.\n\nRam Singh v. The Crown, A.I.R. r950 East Punjab 25, disapproved.\n\nSyed Qasim Razvi v. The State of Hyderabad, [1953] S.C.R. 589, referred to and distinguished.\n\nCRIMINAL\n\nAPPELLATE JURISDICTION: Criminal Appeals Nos. 25-27 of 1955.\n\nAppeals from the judgments and order dated February 1, 1955, of the Punjab High Court (Circuit Bench), Delhi in Cr. Appeals Nos. 5-D, 6-D and 13-D of 1952, arising out, of the judgments and orders dated December 22, 1951, of the 1st Class Magistrate, New Delhi in Criminal Cases Nos. 220/2, 221/2 and 223/2 of 1949.\n\nRam Lal Anand and S. N. Anand, for the appellant.\n\nGopi Chand H.J. Umriga.r and T. M. Sen, for the respondent. v.\n\n1959. January 20.\n\nThe Judgment of the Court The Delhi was delivered by Administration\n\nGAJENDRAGADKAR J.-These three appeals havecajendragadkar J. been filed with certificates granted by the High Court of Punjab under Art. 134(1) (c) of the Constitution and they arise from three criminal cases filed against the appellant. 'rhe appellant Gopi Chand was the chief cashier, and Hukam Chand was an assistant cashier, in the United Commercial Bank Ltd., New Delhi. They were charged with the commission of offences under s. 409 in three separate cases. In the first case No. 223/2 of 1949, the prosecution case was that on or about April 8, 19<!8, bot, h had agreed to commit, or cause to be committed, criminal breach of trust in respect of the funds of the Bank where they were employed; and in pursuance of the said agreement they had committed criminal breach of trust in respect of the total amount of Rs. 1,65,000. They were thus charged under ss. 408, 409 and 120B of the Indian Penal Code.\n\nThe appellant was convicted of the offence under s. 409 read with s. 120 and sentenced to rigorous imprisonment for seven years. Against this order of conviction and sentence he preferred an appeal to the High Court of Punjab (No. 5-D of 1952). The High Court confirmed his conviction but altered the sentence imposed on him by directing that he should suffer four year's :rigorous imprisonment and pay a fine of Rs. 10,000 or in default suffer rigorous imprisonment for fifteen months. The order of conviction and sentence thus passed gives rise to Criminal Appeal No. 25 of 1955 in this Court.\n\nIn the second case (No. 221/2 of 1949) the appellant was charged with having committed an offence under ss. 408 and 409 of the Indian Penal Code in that he had committed criminal breach of trust in respect of an amount of Rs. 23,772-8-6. The trial magistrate convicted the appellant of the said offence and sentenced him to suffer rigorous imprisonment for five years.\n\n'959 On appeal (No. 6-D of 1952) the order of conviction was confirmed but the sentence imposed on him was Gopi Chand reduced to three years' rigorous imprisonment. This v.\n\nThe Delhi order has given rise to Criminal Appeal No. 26 of 1955 Administration in this Court.\n\nIn the third case (No. 220/2 of 1949) the appellant, Gajendragadkar ]. Hukam Chand and Ganga Dayal were charged with having committed an offen.ce under s. 409/408 read with s. 120B of the Indian Penal Code in that all of them had agreed to commit criminal breach of trust in respect of the sum of Rs. 10,000 belonging to the Bank and that in pursuance of the said agreement they had committed the \"riminal breach of trust in respect of the said amount. The trial magistrate convicted the appellant of the offence charged and sentenced him to four year's rigorous imprisonment.\n\nOn appeal (No. 13-D of 1952) the High Court confirmed the conviction but reduced the sentence to two years' rigorous imprisonment. From this order arises Criminal Appeal No. 27 of 1955 in this Court.\n\nThe appellant has obtained a certificate from the High Court under Art. 134(1) (c) of the Constitution because he seeks to cha)lenge the validity of the order of conviction and sentence passed against him in the three cases on the ground that the proceedings in all the said cases are void.. He contends that, whereas the charges framed against him had to be tried according to the procedure prescribed for the trial of warrant cases, the learned trial magistrate tried all the cases according to the procedure prescribed for the trial of summons cases and that makes void all the proceedings including the final orders of conviction and the sentences.\n\nThe point arises in this way. The East Punjab Public Safety Act, 1949 (Punj. 5 of 1949), hereinafter called the Act, which came into force on March 29, 1949, was passed to provide for special measures to ensure public safety and maintenance of public order.\n\nIt is common ground that the offences with which the appellant was charged would normally have to be tried under the procedure prescribed by ch. XXI of the Code of Criminal Procedure for the trial of warrant\n\ncases but in fact they have been. tried under the z959 procedure prescribed by ch. XX for the trial of sumd d cc Gopi Chand mons cases. The summons proce ure iuers from the v. warrant procedure in some material points.\n\nUnder The Delhi the former procedure a charge is not to be framed Administration while under the latter a charge has to be framed under . - s. 254 of the Coclv.\n\nSimilarly an accused person gets Ga; endragadkar J. only one chance of cross-examining the prosecution witnesses under the summons procedure whereas under the warrant procedure he is entitled to cross-examine the said witnesses twice, once before the framing of the charge and again after the charge is framed. The appellant concedes that the cases against him were tried according to the summons procedure by reason of s. 36 of the Act and the notification issued under it; but he contends that the relevant provisions of the Act are ultra vires and he alternatively argues that the proceedings in respect of a substantial part were continued under the summons procedure even after the Act had expired and the relevant notifications had ceased to be operative. That is how the validity of the trial and of the orders of conviction and sentence is challenged by the appellant.\n\nIt would be relevant at this stage to refer to the material provisions of the Act and the relevant notifi- . cations issued under it. The Act came into force on March 29, 1949. It was passed to provide jfor special measures to ensure public safety and maintenance of public order.\n\nSection 36 of the Act prescribes the procedure for the trial of specified offences ; under sub-s. (1) all offences under this Act or under any other law for the time being in force in a dangerously disturbed area, and in any other area all offences under this Act and any other offence under any other law which the Provincial Government may certify to be triable under this Act, shall be tried by the courts according to the procedure prescribed by the Code, provided that in all cases the procedure prescribed for the trial of summons cases by ch. XX of the Code shall be adopted, subject, in the case of summary trials, to the provisions of ss. 263 to 265 of the Code.\n\nFor the avoidance of doubt sub-s. (2) provided that\n\nx959 the provisions of sub-s. (1) shall apply to the trial of offences mentioned therein committed before the com-· Gopi; hand mencement of this Act, and in a dangerously disturbed\n\nThe Delhi area committed before the date of the notification Administretion under s. 20, in respect of it. Under s. 20 the Prov in-\n\n- cial Government is authorised by notification to dec- Gajena>agadka, J. ]are that the whole or any part of the Province as may be specified in the notification to be a dangerously disturbed area.\n\nFour notifications were issued under s. 20.\n\nBy the first notification issued on July 8, 1949, the whole of the Province of Delhi was declared to be a dangerously disturbed area by the competent authority. It appears that on September 28, 1950, the said authority issued the second notification cancelling the first not.ification with effect from October l, 1950.\n\nThis notification was followed by the third notification on October 6, 1950, which purported to modify it by inserting the words \" except as respect things done or omitted to be done before the date of this notification \" after the words\" with effect from October 1, 1950\"; in other words, this notification purported to introduce an exception to the cancellation of the first notification caused by the second, and in effect it purported to treat the Province of Delhi as a dangerously disturbed area in respect of things done or omitted to be done before the date of the said notification. The last notification was issued on April 7, 1951.\n\nThis notification was issued by the Chief Commissioner of Delhi in exercise of the powers conferred by sub-s. (I) of s. 36 of the Act, and by it he certified as being triable under the said Act in any area within the State of Delhi not being a dangerously disturbed area the following offences, viz., any offence under any law other than the aforesaid Act of which cognisance had been taken by any magistrate in Delhi before October 1, 1950, and the trial of it according to the procedure prescribed in ch. 4 of the said Act was pending in any court immediately before the said date and had not concluded before the date of the certificate issued by the notification.\n\nLet us now mention the facts about the trial of the\n\nthree cases against the appellant about which there is\n\nI 959 no dispute. The First Information Report was filed Gopi Chand against the appellant on June 30, 1948. The trial v. commenced on July 18, 1949, and it was conducted The Delhi according to the procedure prescribed by ch. XX of Administration the Code.\n\nSome prosecution witnesses were examined - and cross-examined before January 26, 1950, and the Gajendragadkar f. whole of the prosecution evidence was recorded before August 14, 1951. The evidence for the defence was recorded up to November 14, 1951, and the learned magistrate pronounced his judgments in all the cases on December 22, 1951.\n\nFor the appellant, Mr. Ram Lal Anand contends that s. 36(1) of the Act is ultra vires because it violates the fundamental right of equality before law guaranteed by Art. 14 of the Constitution.\n\nHis argument is that since offences charged against the appellant were triable under the warrant procedure under the Code,\n\nthe adoption of summons procedure which s. 36(1) authorised amounts to discrimination and thereby violates Art. 14. It is the first part of sub-s. (1) of s. 36 which is impugned by the appellant. The effect of the impugned provisions is that, after an area is declared to be dangerously disturbocl, offences specified in it would be tried according to the summons procedure even though they have ordinarily to be tried according to warrant procedure. The question is whether in treating the dangerously disturbed areas as a class by themselves and in providing for one uniform procedure for the trial of all the specified offences in such areas the impugned provision has violated Art. 14.\n\nThe point about the construction of Art. 14 has come before this Court on numerous occasions, and it has been consistently held that Art. 14 does not forbid reasonable classifications for the purpose of legislation.\n\nIn order that any classification made by the Legislature can be held to be permissible or legitimate two tests have to be satisfied.\n\nThe classification must be based on an intelligible differentia which distinguishes persons or things grouped together in one class from others left out of it, and the differentia must have a\n\n94 SUPREME COURT.REPORTS [1959] Supp.\n\n1959 reasonable or rational nexus with the object sought to be achieved by the said impugned provision. It is Gopi Chand h h 1. . f h v. true t at, in t e app 10at10n o t ese tests uniform The Dethi approach might not always have been adopted, or, in Administration dealing with the relevant considern, tions emphasis -- might have shifted; but the validity of the two tests Gajendragadkar J. that have to be applied in determining the vires of the impugned statute under Art. 14 cannot be doubted.\n\nIn the present case the classification has obviously been made on a territorial or geographical basis. The Legislature t bought it expedient to provide for the speedy trial of the specified offences in areas which were notified to be dangerously disturbed areas ; and for this purpose the areas in the State have been put in two categories, those that are dangerously disturbed and others.\n\nCan it be said that this classification is not founded on an intelligible differentia ? In dealing with this question it would be relevant to recall the tragedy of the holocaust and the savage butchery and destruction of property which afflicted several parts of the border State of Punjab in the wake of the partition of India. :Faced with the unprecedented problem presented by this tragedy, the Legislature thought that the dangerously d4sturbed areas had to be dealt with on a special footing; and on this basis it provided inter alia for the trial of the specified offences in a particular manner. That obviously is the genesis of the impugned statl!te. That being the position, it is impossible to hold that the classification between dangerously disturbed areas of the State on the one hand and the non-disturbed areas on the other was not rational or that it was not based on an intelligible differentia.\n\nThen again, the object of the Act was obviously to ensure public safety and maintenance of public order; and there can be no doubt that the speedy trial of the specified offences had an intimate rational relation or nexus with the achievement of the said object. There is no doubt that the procedure prescribed for the trial of summons cases is simpler, shorter and speedier ; and so, when the dangerously disturbed areas were facing the problem of unusual civil commotion and strife, the Legislature was justified\n\nin enacting the first part of s. 36 so that the cases z959 against persons charged with the commission of the specified offences could be speedily tried and disposed Gopi Chand v. of.\n\nWe are, therefore, satisfied that the challenge to The Delhi the vires of the first part of sub-s. (1) of s. 36 cannot be Administration sustained. In this connection we may refer to the recent decision of this Court in Ram Krishna DalmiaGajendragadkar J.\n\nv. Justice Tendolkar (1).\n\nThe judgment in that case has considered the previous decisions of this Court on Art. 14, has classified and explained them, and has enumerated the principles deducible from them. The application of the principles there deduced clearly supports the validity of the impugned provisions.\n\nIt is, however, urged by Mr. Ram Lal Anand that the decision of this Court in Lachmandas Kewalram Ahuja v. The State of Bombay (2) supports his contention thats. 36(1) is invalid. We are not impressed by this argument. In Ahuja's case (~)the objects of the impugned Act were the expediency of consolidating and amending the law relating to the security of the State, maintenance of public order and maintenance of supplies and services essential to the community in the State of Bombay. These considerations applied equally to both categories of cases, those referred to the Special Judge and those l).Ot so referred; and so, on the date when the Constitution came into force, the classification on which s. 12 was based became fanciful and without any rational basis at all. That is why, according to the majority decision s. 12 contravened Art. 14 of the Constitution and as such was ultra vires.\n\nIt is difficult to see how this decision can help the appellant's case. The impugned provision in the present case makes no distinction between one class of cases and another, much less between cases directed to be tried according to the summons procedure before January 26, 1950, and those not so directed. The summons procedure is made applicable to all offences under the Act or under any other law for the time being in force; in other words, all criminal offences are ordered to be tried according to the summons procedure in the dangerously disturbed areas. That being\n\n(1) A.l.R. 1958 S.C. 538.\n\n(2) [1952] S.C.R. 710, 73x.\n\n'959 so, we do not think that the decision in Ahuja's case(') has any application at all.\n\nThus we feel no difficulty Gopi Chand in holding that the impugned provision contained in\n\nTh; Delhi the first part ofs. 36(1) is constitutional and valid.\n\nAdministration Then it is urged that the Act which came into force on March 29, 1949, was due to expire and did expire Gajendragadka1 J. on August 14, 1951, andso the proceedings taken against the appellant under the summons procedure after the expiration of the tern porary Act were invaid.\n\nIt is argued that, in dealing with this point, it would not be permissible to invoke the provisions of s. 6 of the General Clauses Act because the said section deals with the effect of repeal of permanent statutes.\n\nThis argument no doubt is well-founded.\n\nAs Craies has observed, \"as a general rule, unless it contains some special provisions to the contrary, after a temporary Act has expired no proceedings can be taken upon it and it ceases to have any further effect\" (').\n\nThis principle has been accepted by this Court in Krishnan\n\nv. The State of Madras (3). \"The general rule in regard to a temporary statute is'', observed Patanjali Sastri J., \" that, in the absence of special provision to the contrary, proceedings which are being taken against a person under it will ipso facto terminate as soon as the statute expires\". It is true that the Legislature can and often enough does avoid such an anomalous consequence by enacting in the temporary statute a saving provision, and the effect of such a saving provision is in some respects similar to the effect of the provisions of s. 6 of the General Clauses Act.\n\nAs an illustration, we may refer to the decision in Wicks v. Director of Public Prosecutions('). In that case an offence against Defence (General) Regulations made under the Emergency Powers (Defence) Act, 1939, was committed during the currency of the Act and the offender was prosecuted and convicted after the expiry of the Act. The contention raised by the offender that his prosecution and conviction were invalid because, at the relevant time, the temporary\n\n(I) (1952] S.C.R. 710, 73r.\n\n(2) Craies on\" Statute Law\", 5th Ed., p. 377.\n\n(3) [1951] S.):.R. 621, 628.\n\n(4) [1947] A.C. 362.\n\n. Act had expired was rejected in view ofthe provisions r959 of s. 11, sub-s. 3, of the Act.\n\nThis sub-section had Gopi Chand provided that the expiry of the 1\\ct shall not affect v. the operation thereof as respects things previously The Delhi done or omitted to be done.\n\nThe House of Lords Administration agreed with the view expressed by the Court of Crimi- . - nal Appeal and held that it was clear that PariiamentGa; endragadkar J. did not inten<l sub-s. 3 to expire with the rest of the Act and that its presence in the statute is a provision which preserved the right to prosecute after the date of its expiry. Since the impugned Act does not contain an appropriate saving section the appellant would be entitled to contend that, after the expiration of the Act, the procedure laid down in it could no longer be invoked in the cases then pending against the appellant.\n\nWe would like to add that, in the present case, we are not called upon to consider whether offences created by a temporary statute cease to be punishable on its expiration.\n\nFor the respondent, Mr. Umrigar, however, contends that the appellant is wrong in assuming that the Act in fact expired on August 14, 1951.\n\nHe has invited our attention to the provisions of Act No. I of 1951 by which the President extended some of the provisions of the earlier temporary Act in exercise of the powers conferred by s. 3 of the Punjab State Legislature (Delegation of Powers) Act, 1951 (46 of 1951), The provisions of that Act extended to the whole of the State of Punjab and came into force on September 13, 1951. Mr. Umrigar relied on s. 16 of Act 46 of 1951 which repealed the East P, unjab Public Safety Act, 1949 (Punj. 5 of 1949) and the East Punjab Safety (Amendment) Ordinance, 1951 (5 of 1951) but provided that notwithstanding such repeal any order made, notification or direction issued, appointment made or action taken under the said Act and in force immediately before the commencement of this Act shall, in so far as it is not inconsistent therewith, continue in force and be deemed to have been made, issued or taken under the corresponding provisions of this Act. It m_ust, however, be pointed out that this\n\nz959 Act does not continue the material provisions of the impugned Act such as s. 20 and s. 36; and so s. 16 Gopi Chand cannot be invoked for the purpose of validating the\n\nThe vDelhi continuation of the subsequent proceedings against the AdminislYation appellant in the cases then pending against him.\n\nBesides, it is necessary to recall that s. 36(1) of the Gajendrngadka. J. Act prescribed the application of the summons procedure in. the trial of specified offences only in dangerously disturbed areas ; and so, unless it is shown that the relevant area could be treated as a dangerously disturbed area at the material time, s. 36(1) would be inapplicable. In other words, the adoption of the summons procedure would be justified only so long as the area in question could be validly treated as a dangerously disturbed area and it is therefore pertinent to enquire whether at the relevant time the area in question was duly and validly notified to be a dangerously disturbed area.\n\nWe have already referred to the four notifications issued-by the competent authority. The second notification purported to cancel with effect from October 1, 1950, the first notification which had declared the whole of the Province of Delhi as a dangerously disturbed area. A week thereafter, the third notification sought to introduce an exception to the cancellation as notified by the second notification. Apart from the question as to whether, after the lapse of a week, it was competent to the authority to modify the second notification, it is difficult to understand how it was within the jurisdiction of the notifying authority to say that the whole of the Province of Delhi had ceased to be a dangerously disturbed area \" except as respects things done or omitted to be done before the date of this notification\". Section 20 of the Act under which this notification has been issued authorised the Provincial Government to declare that the whole or any part of the Province was a dangerously disturbed area. The notification could declare either the whole or a part of the Province as a dangerously disturbed area; but s. 20 does not empower the notifying authority to treat any area as being dangerously disturbed in respect of certain things and not dangerously disturbed\n\nin regard to others. Authority to declare areas as\n\nI959 dangerously disturbe~ has no doubt been validly d 1 b Gopi Chand e egated to the Provincial Government ; ut no v. authority has been conferred on the delegate to treat The Delhi any area as disturbed for certain things and not dis- Administration turbed for others. We have, therefore, no doubt that . - in introducing the exception to the cancellation effect- Ga; endragadkar f. ed by the second notification the third notification has gone outside the authority conferred by s. 20 and is clearly invalid. If that be so, it must be held that the whole of the Province of Delhi ceased to be a dangerously disturbed area as from October, 1, 1950.\n\nIt was probably realised that the third notification would be invalid and hence the fourth notification was issued on April 7, 1951.\n\nThis purports to be a certificate issued by the competent authority under the second part of s. 36, sub-s. (1).\n\nThis certificate seeks to achieve the same result by declaring that though the State of Delhi was not a dangerously disturbed area, the offences specified in the notification would nevertheless continue to be tried according to the summons procedure.\n\nThis notification is clearly not authorised by the powers conferred by the second part of s. 36, sub-s. (1).\n\nWhat the Provincial Government is authorised to do . by the second part of s. 36(1) is to direct that in areas other than those which are dangerously disturbed all offences under the Act and any other offence under any other law should be tried according to the summons procedure. It is clear that the notification which the Provincial Government is authorised to issue in this behalf must relate to all offences under the Act and any other offence under any other law.\n\nIn other words, it is the offences indicated which can be ordered to be tried. under the summons procedure by the notification issued by the Provincial Government.\n\nThe Provincial Government is not • authorised to issue a notification in regard to the trial of any specified case or cases; and since it is clear t, hat the notification in question covers only pending cases and has no reference to offences or class of offences under the Indian Penal Code, it is outside the\n\nI959 authority conferred by the secoi; id part of s. 36(1). It is obvious that the third and the fourth notifications Gopi Chand d J J h' h ' v. attempte to cure t le anoma y w IC rt was appre-\n\nThe Ddhi hended would follow in regard to pending cases in the Administ.ation absence of a saving section in the Act. If through inadvertence or otherwise the Act did not contain an Gajendragadkar J. appropriate saving section, the defect could not be cured by the notifications issued either under s. 20 or under s. 36( l) of the. Act. In issuing the said notifications the competent authority was taking upon itself the functions of the Legislature and that clearly was outside its authority as a delegate either under s. 20 or under s. 36( l) of the Act.\n\nMr. Umrigar, then, argues that the competent authority was entitled to modify the notification issued by it because the power to issue a notification must also , involve the power either to cancel, vary or modify the same; and in support of this argument Mr. U mrigar relies on the provisions of s. 19 of the Punjab General Clauses Act, 1898 (Punj. 1 of 1898) which in substance corresponds to cl. 21 of the General Clauses Act, 1897 (10 of 1897). In our o.pinion, this argument is not well-founded. Section 19 of the Punjab General Clauses Act, like s. 21 of the General Clauses Act, embodies a rule of construction, the nature and extent of the application of which must inevitably be governed by the relevant provisions of the statute which confers the power to issue the notification, The power to cancel the notification can be easily conceded to the competent authority and so also the power to modify or vary it be likewise conceded ; but the said power must inevitably be exercised within the limits prescribed by the provision conferring the said power. Now s. 20 empowers the Provincial Government to declare the whole or any part of the Province to be a dangerously disturbed area; and if a notification is i8sued • in respect of the whole or any part of the Provi nee it may be either cancelled wholly or may be modified restricting the declaration to a specified part of the Province. The power to cancel or modify must be exercised in reference to the areas of the Province which it is competent for the Provincial\n\nGovernment to specify as dangerously disturbed. -The 1 959 power to modify cannot obviously include the power Gopi Chand to treat the same area as dangerously disturbed for \"· persons accused of crimes committed in the past and The Delhi not disturbed for others accused of the same or similar Administration offences committed later. That clearly is a legislative function which is wholly outside the authority confer- Gajendragadkar f. red on the delegate by s. 20 or s. 36(1).\n\nWe must, therefore, hold that the third and the fourth notifications are invalid and as a result of the second notification the whole of the Province of Delhi ceased to be a dangerously disturbed area from October 1, 1950.\n\nThis position immediately raises the question about the validity of the proceedings continued against the appellant in the three cases pending against him under the summons procedure.\n\nSo. long as the State of Delhi was validly notified to be a dangerously disturbed area the adoption of the summons procedure was no doubt justified and its validity could not be impeached; but, with the cancellation of the relevant notification s. 36(1) of the Act ceased to apply and it was necessary that as from the stage at which the cases against the appellant then stood the warrant procedure should have been adopted; and since it has not been adopted the trial of the three cases is invalid and so the orders of conviction and sentence imposed against him are void. That in brief is the alternative contention raised before us by Mr. B, am Lal Anand.\n\nMr. Umrigar, urges that since the trial had validly commenced under the summons procedure, it was unnecessary to change the procedure after October I, 1950, and his case is that the trial is not defective in any manner and the challenge to the validity of the impugned orders of conviction and sentence should not be upheld. In support of his argument Mr. Umrigar has invit ed our attention to some decisions which may now be considered. In Srinivasachari v.1'he Queen (1) the accused was tried by a Court of Sessions in December 1882 on charges some of which were triable by assessors and others by jury. Before the trial was concluded the Code of Criminal Procedure, 1882, came into force\n\n(1) [1883] I.L.R. 6 Mad. 336.\n\n'959 and under s. 269 of the Code all the said charges became triable by jury. Section 558 of the Code had Gopi 2and pr6vided that the provision$ of the new Code had to\n\nThe Delhi be applied, as far as may be, to all cases pending in Administrntion any criminal court on January 1, 1883. The case - against the accused which was pending on the 'date Gajendrngadkar f. when the new Act came into force was submitted to the High Court for orders ; and the High Court directed that by virtue of s. 6 of the General Clauses Act the trial must be conducted under the rules of procedure in force at the commencement of the trial.\n\nIt is clear that the decision of the High Court was based both on the specific provisions of s. 558 which provided for the application of the new Code to pending cases only as far as may be and on the principles laid down in s. 6 of the General Clauses Act. That is why that decision cannot assist the respondent since s. 6 of the General Clauses Act is inapplicable in the present case.\n\nThe decision on Mulcund v. Ladu (1) is also inapplicable for the same reasons. It was a case where one act was repealed by another and so the question as to the applicability of the provisions of the latter act had to be considered in the light of the provisions of s. 6 of the General Clauses Act. The judgment in terms does not refer to s. 6 but the decision is obviously based on the principles of the said section.\n\nThen Mr. Umrigar relied on Gardner v. Lucas (2). In that case s. 39 of the Conveyancing (Scotland) Act, 1874, with which the court was dealing affected not only the procedure but also substantive rights; and so it was held that the said section was not retrospective in operation. This decision is wholly inapplicable and cannot give us any assistance in the present case.\n\nMr. U mrigar also placed strong reliance on a decision of the Full Bench of the Punjab High Court in Ram Singh v. The Crown('). That decision does lend support to Mr. Umrigar's contention that the continuation of the trial under the summons procedure did not introduce any infirmity and was in fact appropriate\n\n(1) [1901] 3 Born. L.R. 584.\n\n(2) [1878] 3 A.C. 582.\n\n(3) A.LR. 1950 East Punjab 25.\n\nand regular.\n\nThe case against Ram Singh had x959 been sent to the Court of Session under the provif h P b P Gopi Chand sions of s. 37 (1) o t e unja ublic Safety Act, v. 1948 (Punj. 2 of 1948) at a time when Ludhiana The Delhi District was declared to be a dangerously disturbed Administration area; before, however, the trial in the Court of Session - actually commenced the District ceased to be a Gajendragadkar J. dangerously disturbed area.\n\nEvenso, it was held that the Sessions Judge should continue with the trial under the provisions of s. 37 (1) of the Act and not under the ordinary provisions of the Code regarding sessions trial, and should follow the procedure prescribed for the trial of summons cases. It appears that the judgment in the case proceeded on the assumption tha.t the principles enacted by s. 6 of the General Clauses Act were applicable, and so, since at the commencement of the proceedings the adoption of the summons procedure was justified under s. 37 (1) of the Act, the trial could continue under the same procedure even after the area had ceased to be a dangerously disturbed area. In our opinion, it is erroneous to apply by analogy the provisions of s. 6 of the General Clauses Act to cases governed by the provisions of a temporary Act when the said Act does not contain the appropriate saving section. ]'ailure to recognise the difference between cases to which s. 6 of the General Clauses Act applies and those which are governed by the provisions of a temporary Act which does not contain the appropriate saving section has introduced an infirmity in the reasoning adopted in the judgment.\n\nBesides, the learned judges, with respect, were in error in holding that the application of the ordinary criminal procedure was inadmissible or impossible after the area ceased to be dangerously disturbed. No doubt the learned judges recognised the fact that ordinarily the procedural law is retrospective in operation, but they thought that there were some good reasons against applying the ordinary procedural law to the case, and that is what influenced them in coming to the conclusion that the summons procedure had to be continued even after the area ceased to be dangerously disturbed. In this connection the learned\n\nI959\n\njudges referred to the observation in Maxwell that \"the general principle, however, seems to be that alter.\n\nGopi Chand ations in procedure are retrospective, unless there be some good reason against it (1) ; and they also relied The Delhi Administrntion on the decision of the Privy Council in Delhi Cloth and\n\nGeneral Mills Go., Ltd. v. Income-tax Commissioner, Gajendragadkar ;. Delhi(') in which their Lordships have referred with approval to their earlier statement of the law in the Colonial Sugar Refining Go. v. Irving(') that\" while provisions of a statute dealing merely with matters of procedure may properly, unless that construction be textually inadmissible, have retrospective effect attributed to them\". The learned judges took the view that these principles justified their conclusion that \"where the provisions of a statute dealing with matters of procedure are inapplicable to a certain pro ceeding pending at the time the statute came into force, they must be regarded as textually inadmissible so far as those proceedings are concerned \". We are disposed to think that this view is not sound.\n\nWe do not think that the adoption of the ordinary warrant procedure was either inadmissibl~ or inapplicable at the stage where the trial stood in the case against Ram Singh (')- It was wrong to assume that the sessions procedure would be inapplicable for the reason that the provisions of the Code in regard to the commitment of the case to the Court of Session had not been complied with.\n\nWith respect, the learned judges failed to consider the fact that the procedure adopted in sending the case to the Court of Session under s. 37(1) of the relevant Act was valid and the only question which they had to decide was what procedure should be adopted after Ludhiana ceased to be a dangerously disturbed area. Besides, it was really not a case of retrospective operation of the procedural law; it was in fact a case where the ordinary procedure which had become inapplicable by the provisions of the temporary statute became applicable as soon as the area in question ceased to be dangerously disturbed.·\n\n(1) Maxwell on\" Interpretation of Statutes\", gth Ed., p. 226.\n\n(2) [1927] 9 Lah. 284.\n\n(3) [1905] A.C. 369.\n\n(4) A.I.R. (1950) East Punjab 25.\n\nIn this connection it is relevant to refer to the r959 decision of this Court in Syed Qasim Razvi v. The State of Hyderabad (1).\n\nIn that case this Court was Gopi hand dealing with the regulation called the Special Tribu- The Delhi nal Regulation (V of 1358 Fasli) which had been pro- Administration mulgated by the Military Governor of the Hyderabad - State. The said regulation had provided that the Gajendrfgadkar J.\n\nMilitary Governor may, by general or special order, direct that any offence or class of offences should be tried by such tribunal, and the procedure for trial laid down by it differed from the provisions of the Hyderabad Criminal Procedure Code in several material particulars. The cases against the accused were directed to ' be tried by the Special Tribunal on October 6, 1949.\n\nThe accused were convicted in September 1950 and their conviction on some of the charges was upheld by the High Court in appeal in April, 1951. The accused then appealed to this Court and also applied under Art. 32 of the Constitution for quashing the orders of conviction and sentence on the ground that the Special Tribunal Regulation became void on January 26, 1950, as its provisions contravened Arts. 14 an<l 21 of the Constitution which came into force on that date, and the continuation of the trial and conviction of the accused after that date was illegal. It is true that the final decision in the case, according to the majority view, proceeded on the footing that -the accused had substantially the benefit of a normal trial though there were deviations in certain particulars and so his conviction could not be $>Ct aside merely because the Constitution of India came into force before the termination of the trial. As we will presently point out, the relevant facts in this case in regard to the deviation from the normal procedure are different from those in Syed Qasim Razvi's case (1), but that is another matter. What is important for our purpose is the view expressed by this Court that the regulation issued by the Military Governor of Hyderabad State could not be impeached and so the Special Tribunal must be deemed to have taken cognisance of\n\n(1) [1953] S.C.R. 589.\n\nSUPREME COURT REPORTS [1959] S!1PP , '959 the case quite properly and its proceedings up to the date of the coming in of the Constitution would also Gopi :;_hond have to be regarded as valid. Dealing with this point,\n\nThe Delhi Mukherjea, J., who delivered the judgment of the Administration Court, quoted with approval the observations made in Lachmandas Kewalram Ahuja v. The State of Bom- • Gajendragqdkar ]. bay(') that \"as the Act was valid in its entirety before the date of the Constitution, that part of the proceedings before the Special Judge, which, up to that date had been regulated by the special procedure cannot be questioned \". Unfortunately this aspect of the matter was not properly placed before the Full Bench of the Punjab High Court in the case of Ram Singh ('). If the learned judges had proceeded to deal with the question referred to them on the basis that the initial submission of the case to the Court of Session under s. 37(1) of the Act was valid they would not have come to the conclusion that the sessions procedure was inadmissible or inapplicable to the continuation of the case after Ludhiana had ceased to be a dangerously disturbed area. That is why we think that the view taken by the Full Bench is erroneous.\n\nThe position then is that as from October 1, 1950, the three cases against the appellant should have been tried according to the warrant procedure. It is clear that, at the stage where the trial stood on the material date, the whole of the prosecution evidence had not been led and so there was no difficulty in framing charges against the appellant in the respective cases and thereafter continuing the trial according to the warrant procedure. Having regard to the nature of the charges framed and the character and volume of evidence led, it is difficult to resist the appellant's argument that the failure to frame charg, es has led to prejudice; and it is not at all easy to accept the respondent's contention that the double opportqnity to cross-examine the prosecution witnesses which is available to an accused person under the warrant procedure is not a matter of substantive and valuable benefit to him. The denial of this opportunity must,\n\n(1) [1952] S.C.R. 710, 731.\n\n(2) A.I.R. 1950 East Punjab 25. '\n\nin the circumstances of the present cases, be held to\n\nI959 have caused prejudice to him. We must accordingly hold that the continuation of the trial of the three Gopi Chand v. cases against the appellant according to the summons The Delhi procedure subsequent to October I, 1950, has vitiated Administration the trial and has rendered the final orders of convic- , tion and sentence invalid. We must accordingly setGajendragadkar J. aside the orders of conviction and sentence passed against the appllant in all the three cases.\n\nThat takes us to the question as to the final order which should be passed in the present appeals. The offences with which the appellant stands charged are of a very serious nature; and though it is true that he has had to undergo the ordeal of a trial and has suffered rigorous imprisonment for some time that would not justify his prayer: that we should not order his retrial. In our opinion, having regard to the gravity of the offences charged against the appellant, the ends of justice require that we should direct that he should be tried for the said offences de novo according to law.\n\nWe also direct that the proceedings to be taken against the appellant hereafter should be commenced without delay and should be disposed of as expeditiously as possible.\n\nAppeal allowed.\n\nRetrial ordered.\n\nTIRUVENIBAI & ANOTHER\n\n1).\n\nSMT. LILABAI (P. B. GAJENDRAGADKAR and M. HIDAYA'.1.'ULLAH, JJ.) Registration-Contract to lease-Agreement not creating a present and immediate demise-Whether requires registration-\" Agreement to lease \", Meaning of-Indian Registration Act, I90/i (I6 of\n\nI908), S. 2(7).\n\nA document purporting to be a receipt and bearing a four anna revenue stamp was executed by Min favour of the respondent and recited, inter alia, as follows: \" I have this day given\n\nI959\n\nJanuary :JI.", "total_entities": 128, "entities": [{"text": "87\n\nGOPI CHAND", "label": "PETITIONER", "start_char": 33, "end_char": 47, "source": "metadata", "metadata": {"canonical_name": "GOPI CHAND", "offset_not_found": false}}, {"text": "THE DELHI ADMINISTRATION (S. R. DAS", "label": "JUDGE", "start_char": 49, "end_char": 84, "source": "metadata", "metadata": {"canonical_name": "THE DELHI ADMINISTRATION (S. R. DAS", "offset_not_found": false}}, {"text": "P. B. 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{"document_id": "1959_2_8_63_EN", "year": 1959, "text": "I959\n\nJanuary z5.\n\n8 SUPREME COURT REPORTS [1959) Supp.\n\nDEEP CHAND\n\nTHE STATE OF UTTAR PRADESH\n\nAND OTHERS (and connected appeal)\n\n(S. R. DAS, c. J., N. H. BHAGWATI, B. P. SINHA, K. 8-uBBA RAO and K. N. WANCHOO, JJ.)\n\nTransport Service-Scheme of nationalisation formulated under State enactment of Amendment of Central Act-Ejfect-Repugnancy -Constitutional validity of State enactment-Uttar Pradesh Transport Service (Development) Act (IX of r955), s. rr(5)-Motor Vehicles (Amendment) Act, r956 (roo of r956), Ch. IV A-General Clauses Act, r897 (roof r897), s. 6-Constitution of India-Articles\n\nI], JI, 245, 246, 254.\n\nThese appeals impugned the constitutionality of the Uttar Pradesh Transport Service (Development) Act, 1955 (U. P. IX of 1955), passed by the State Legislature after obtaining the assent of the President, and the validity of the scheme of na tionalisation framed and the notifications issued by the State Government under it. The appellants as permit-holders under the Motor Vehicles Act, 1939, were plying buses on different 'routes in Uttar Pradesh along with buses owned by the State Government. The State Government issued a notification under s. 3 of the impugned Act directing that the said routes along with others should be exclusively served by the State buses, and followed up that notification by others under ss. 4 and 8 of the Act. The appellants moved the High Court under Art. 226 of the Constitution challenging the validity of the said Act and the notifications therennder. The High Court rejected their petitions and thereafter came into force the Motor Vehicles (Amendment) Act (100 of 1956), inserting Ch. IV A into the Act, which provided for nationalisation of transport services.\n\nThe contentions raised on behalf of the appellants were,-(1) that the passing of the Amending Act made the impugned Act wholly void under Art. 254(1) of the Constitution, (2) that the scheme framed under the impugned Act fell within the purview of s. 68B of the Amending Act and ceased to be operative and (3) that even 'assuming that the impugned Act was valid in so far as the scheme \\Vas concerned, it violated Art. 31 as it stood before the Constitution (Fourth Amendment) Act, 1955 A further contention on the basis of the proviso to Art. 254(2) was that the impugued Act stood \"· wholly repealed by the Amending Act, s. 68B of the latter excluding the operation of the General Clauses Act. It was contended, inter alia, on behalf of .the State that the amendment of Art. 31 by the Constitution (Fourth Amendment) Act, 1955. having removed, before the scheme under the impugned Act had\n\n(2) S.O.R.\n\nSUPREME OOUR'l' REPORTS\n\nyet been framed, the constitutional limitation which that Article z959 had imposed on the Legislature when it passed the impugned Act, had the effect of validating that Act passed by it at a time Dup Chand when it was subject to the limitation. v. ' Held, (per curiam), that the Uttar Pradesh Transport The State 0! Uttar Service (Development) Act, 1955, did not, on the passing of the Pradesh & Othtrs Motor Vehicles (Amendment) Act, 1956 (mo of 1956), become wholly void under Art. 254(1) of the Constitution but continued to be a valid and subsisting law supporting the scheme already framed under the U.P. Act.\n\nEven assuming that the Amending Act had the effect, under Art. 254(2), of repealing the State Act, such repeal could not nullify the scheme already framed under that Act, for the provisions of s. 6 of the General Clauses Act would operate to save it.\n\nNor could it be said, having regard to the provisions of the impugned Act and particularly s. u(5) thereof, that it offended Art. 31 of the Constitution as it stood before the Constitution (Fourth Amendment) Act, 1955, by failing to provide for the payment of adequate compensation.\n\nPer Das, C.J., and Sinha, ].-There was no reason why the doctrine of eclipse as explained in Bhikaji Narain Dhakras v. The State of Madhya Pradesh, [1955] 2 S.C.R. 589, could not also apply to a post-Constitution .law that infringed a fundamental right conferred on citizens alone. Such a law, though shadowed and rendered ineffective by the fundamental right so far as the citizens were concerned, would remain effective so far as noncitizens were concerned. The moment the shadow was removed by a constitutional amendment, the law would apply to citizens without re-enactment.\n\n\nHeld, (per Bhagwati, Subba Rao and Wanchoo, JJ,), that it was apparent from the provisions of Arts. 254, 246 and 13 of the Constitution, read together, that the power of Parliament and the State Legislature to make laws with regard to any of the matters enumerated in the relevant list in the Seventh Schedule '\\Vas subject to the provisions of the Constitution including Art. 13. There was a clear distinction between the two clauses of Art. 13.\n\nUnder cl. (1), pre-Constitution law subsisted except to the extent of its inconsistency with the provisions of Part III whereas under cl. (2) any post-Constitution law contravening those provisions was a nullity from its inception to the extent of such contravention. The words \"any law\" in the second line of\n\n;;:\n\nI959\n\ncl. (2) meant an Act factually passed in spite of the prohibition contained therein, and did not pre-suppose that the law made Deep Chand was not a nullity. That prohibition went to the root and limited v. the State's power of legislation and law made in spite of it was a The State of Uttar still-born one. • Pradesh G -Others In construing the constitutional provisions relating to the powers of the legislature embodied in Arts. 245 and 13(2) of the Constitution, no distinction should be 1nade as bet\\veen an affirn1ative and a negative provision, for both are limitations on that power.\n\n]{. C. Gajapati N rirayan Deo v. The Staie of Orissa, [1954] S.C.R. 1, referred to.\n\nA distinction, well-recognised in judicial decisions, had, however, to be made in judging the effect of law made in transgression of the limits fixed by Arts. 245 and 13(2), between an Act that was void from its inception and one that, though valid \\Vhen made, was rendered unconstitutional later on.\n\nOn that distinction was based the principle that an after-acquired power could not validate a statute and a law validly made could take effect when the obstruction was removed.\n\nA review of the relevant authorities and judicial decisions clearly established, (1) that affirmative conferment of power to make laws subject-wise and the negative prohibition from infringing any fundamental rights were but two _aspects of want of legislative power, (2) that by expressly making the power to legislate on the entries in the Seventh pchedule subject to other provisions of the Constitution, that power was subjected to the limitations laid down in Part III of the Constitution, (3) that, therefore, a Jaw in derogation or in excess of such power would be void ab initio either wholly or to the extent of the contravention and that (4) the doctrine of eclipse could be invoked only in the case of a law that was valid when made but was rendered invalid by a supervening constitutional inconsistency.\n\nNewberry v. United State, (1912) 265 U.S. 232; 65 L. Ed. 913; John M. Wilkerson v. Charles A. Rohrer, (1891) 140 U.S. 545; 35 L. Ed. 572; Carter v. Egg and Egg Pulp Marketing Board, (1942) 66 C.L.R. 557; Kesha.van Madhava Menon v. The Staie of Bombay, [195r] S.C.R. 228; Behram Khurshed Pesikaka v. The State of Bombay, [1955] l S.C.R. 589; Saghir Ahmed v. The State of U. P. [1955] l S.C.R. 707; Ram Chandra Balai v. State of Orissa, [1956] S.C.R. 28 and Pannalal Binjraj v. Union of India, [1957] S.C.R. 233, referred to and discussed.\n\nThe tests of repugnancy between two statutes, one passed by tte Parliament and the other by the State Legislature, were, (r) whether there was a direct conflict between them, (2) whether Parliament intended to lay down an exhaustive code in respect of the subject-matter replacing the Act of the State Legislature, and (3) whether both the laws occupied the same field.\n\nA comparison of the provisions of the two Acts indicated\n\nJ •\n\nthat both were intended to operate in respect of the same subject z959 matter and the same field but only in respect of the schemes initiated after the Amending Act had come into force, the latter Deep Chand.\n\nAct having no retrospective effect. The State Act must, therev. fore, yield place to the Central Act to that extent and become The State of Uttar void only in respect of schemes framed under the Central Act.\n\nPradesh & Others Keshavan Madhava Menon v. The State of Bombay, [1951] S.C.R. 228, applied.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 380 to 389, 391 to 399, 401, 429 and 431 to 434 of 1958.\n\nAppeals from the judgment and decree dated December 19, 1956, of the Allahabad High Court in Civil Misc.\n\nWrits Nos. 1574, 1575, 1576, 1577, 1578, 1579, 1444, 1584, 1586, 1589, 1631, 1632, 1634, 1635, 1636, 1694, 1695, 1697, 1704, 1707, 3726, 1647, 1948 and 1949 and 1956.\n\nM. K. Nambiyar, Shyam Nath Kacker, J.B. Dadachanji, S. N. Andley and Rameshwar Nath, for the appellants (in C. As. Nos. 380-385, 387-389, 391-399 and 401 of 1958).\n\nS. N. Kacker and J. B. Dadachanji, for the appellant (in C. A. No. 386/58).\n\nNaunit Lal, for the appellants (in C. As. Nos. 429 & 431-434/58).\n\nK. B. Asthana & G. N. Dikshit, for the respondents.\n\n1959. January 15. The judgment of D11s, C. J., and Sinha, J., was delivered by Das, C. J. The judgment of Bhagwati, Subba Rao and Wanchoo, JJ., was delivered by Subba Rao, J.\n\nDAS, C. J.-We have had the advantage of perus- Das c. J. - ing the judgment prepared by our learned Brother Subba Rao and we agree with the order proposed by him, namely, that all the above appeals should be dismissed with costs, although we do not subscribe to all the reasons advanced by him.\n\nThe relevant facts and the several points raised by learned counsel for the appellants and the petitioners in support of the appeals have been fully set out in the judgment which our learned Brother will presently. deliver and it is not necessary for us to set out the\n\nI959 same here. 'Vithout committing ourselves to all the reasons adopted by our learned Brother, we agree with Deep Chand his following conclusions, namely, (1) that the Uttar n, Stat:· of uttar Pradesh Transport Service {Development) Act, 1955 Pradesh & Others(Act IX of 1955), hereinafter referred to as the U. P.\n\nDas C. J.\n\nAct, did not, on the passing of the Motor Vehicles (Amendment) Act, 1956 (100 of 1956), hereinafLer referred to as the Central Act, become wholly void under Art. 254(1) of the Constitution but continued to be a valid and subsisting law supporting the scheme already framed under the U. P. Act; (2) that, even if the Central Act be construed as amounting, under Art. 254(2), to a repeal of the U. P. Act, such repeal did not destroy or efface the scheme already framed under the U. P. Act, for the provisions of s. 6 of the General Clauses Act saved the same; (3) that the U. P.\n\nAct did not offend the provisions of Art. 31 of the Constitution, as it stood before the Constitution (4th Amendment) Act, 1955, for the U. P. Act and in particular s. 11(5) thereof provided for the payment of adequate compensation. These findings are quite sufficient to dispose of the points urged by Mr. Nambiyar and Mr. Naunit Lal in support of the claims and contentions of their respective clients.\n\nIn view of the aforesaid finding that the U. P. Act did not infringe the fundamental rights guaranteed by Art. 31, it is wholly unnecessary to discuss the following questions, namely, (a) whether te provisions of Part III of the Constitution enshrining the fundamental rights are mere checks or limitations on the legislative competency conferred on Parliament and the State Legislatures by Arts. 245 and 246 read with the relevant entries in the Lists in the Seventh Schedule to the Constitution or are an integral part of the provisions defining, prescribing and conferring the legislative competency itself and (b) whether the doctrine of eclipse is applicable only to pre-Constitution laws or can apply also to any post-Constitution law which falls under Art. 13(2) of the Constitution. As, however, our learned Brother has thought fit to embark upon a discussion of these questions, we desire to guard ourselves 1tgainst being understood as\n\naecepting or acquiescing in the conclusion that the 1959 doctrine of eclipse cannot apply to any post-Constitution law. A post-Constitution law may infringe either n .. p Chand a fundamental right conferred on citizens only or a Th• Stat:· of Uttar fundamental right conferred on any person, citizen or Pradesh & others non-citizen. In the first case the law will not stand in the way of the exercise by the citizens of that funda- Das c. J. mental right and, therefore, will not have any operation on the rights of the citizens, but it will be quite effective as regards non-citizens. In such a case the fundamental right will, qua the citizens, throw a shadow on tlw law which will nevertheless be on the\n\nStatute Book as a valid law binding on non-citizens and if the shadow is removed by a constitutional amendment, the law will immediately be applicable even to the citizens without being re-enacted. The decision in John M. Wilkerson v. Charles A. Rahrer (1) cited by our learned Brother is squarely in point. In other words the doctrie of eclipse as explained by this Court in Bhilcaji Narain Dhakras v. The State of Madhya Pradesh (2) also applies to a post-Constitution law of this kind.\n\nWhether a post-Constitution law of the other kind, namely, which infringes a fundamental right guaranteed to all persons, irrespective of whether they are citizens or not, and which, therefore, can have no operation at all when it is enacted, is to be regarded as a still born law as if it had not been enacted at all and, therefore, not subject to the. doctrine of eclipse is a matter which may be open to discussion. On the findings arrived at in this case, however, a discussion of these aspects of the matter do not call for a considered opinion and we reserve our right to deal with the same if and when it becomes actually necessary to do so.\n\nSuBBA RAO, J.-Tbese twenty-five appeals are by Suoba.Rao J. certificate under Arts. 132 and 133 of the Constitution granted by the High Court of Judicature at Allahabad and raise the question of the validity of the scheme of nationalization of State Transport Service formulated by the State Government and the consequential orders made by it.\n\n(1) (1891) 140 U.S. 545; 35 L. Ed. 572.\n\n\nr959 The said appeals arise out Writ Petitions filed by\n\nD P Ch d the appellants in the Allahabad High Court challeng--\n\nv. \"\" ing the validity of the U. P. Transport Services Th, State of uua' (Development) Act of 1955, being U. P. Act No. IX\n\nPrnd\"h & Othm of 1955 (hereinafter referred to as the U. P. Act), and the notifications issued thereunder. All the appeals Subba Rao J. were consolidated by order of the High Court.\n\nThe appellants have been carrying on business as stage carriage operators for a considerable number of years on different routes in Uttar Pradesh under valid permits issued under the Motor Vehicles Act, 1939, along with buses owned by Government, The U. P.\n\nLegislature, after obtaining the assent of the President on April 23, 1955, passed the U. P. Act and duly published it on April 24, 1955.\n\nUnder s. 3 of the U. P. Act, the Government issued a notification dated May 17, 1955, whereunder it was directed that the aforesaid routes along with others should be exclusively served by the stage carriages of the Government and the private stage carriages should be excluded from those routes. On November 12, 1955, the State Government published the notification under s. 4 of the U. P. Act formulating the scheme for the aforesaid routes among others. The appellants received notices under s. 5 of the U. P. Act requiring them to file objections, if any, to the said scheme; and after the objections were received, they were informed that they would be heard by a Board on January 2, 1956.\n\nOn that date, the objections filed by the operators other than those of the Agra region were heard and the inquiry in regard to the Agra region was adjourned to January 7, 1956. It appears that the operators of the Agra region did not appear on the 7th. The notification issued under s. 8 of the U. P. Act was published in the U. P. Gazette on June 23, 1956, and on June 25, 1956, the Secretary to the Regional Transport Authority, Agra, sent an order purported to have been issued by the Transport Commissioner to the operators of the Agra region prohibiting them from plying their stage carriages on the routes and also informing them that their permits would be transferred to other routes.\n\nOn July 7, 1956, a notice was sent to\n\n(2) S.O.R. SUPREME COURT l~EPORTS 15\n\nthe other operators in similar terms.\n\nThe appellants '959 filed Writ Petitions in the Allahabad High Court Deep Chand challenging the validity of the U. P. Act and the v. notifications issued thereunder.\n\nThe State of uttar The facts in Civil Appeal No. 429 of 1958 are slightly Pradesh & Others different from those in other appeals and they may be stated : The appellant's application for renewal of his Subba Rao J. permanent permit was rejected in 1953; but, on appeal, the State Transport Authority Tribunal allowed his appeal OJl 1September 6, 1956, and directed his permit to be renewed for three years beginning from November 1, 1953. Pursuant to the order of the Tribunal, the appellant's permit was renewed with effect from November 1, 1953, and it was made valid up to October 31, 1956.\n\nThe scheme of nationalisation was initiated and finally approved between the date of the rejection of the appellant's application for renewal and the date when his appeal was allowed. The appellant applied on October 11, 1956, for the renewal of his permit and he was informed by the Road Transport Authority, Allahabad, that no action on his application, under reference was possible. The appellant's contention, among others, was that the entire proceedings were taken behind his back and therefore the scheme was not binding on him.\n\nThe appellants in thirteen appeals, namely, Civil Appeals Nos. 387 to .389, 391 to 394, 396 to 399 and 401 and 429 were offered alternative routes. Though they tentatively accepted the offer, presumably on the ground that it was the lesser of the two evils, in fact they obtained stay as an interim arrangement and continued to operate on the old routes.\n\nThe appellants filed applications for permission to urge new grounds in the appeals, which were not taken before the High Court. The said grounds read :-·\n\n(i) That by reason of the coming into operation of the Motor Vehicles (Amendment) Act, No. 100of1956, passed by Parliament and published in the Gazette of India Extraordinary dated 31st December, 1956, the impugned U. P. Act No. IX. of 1955 has become void.\n\n(ii) That by reason of Article 254 of the Constitution of India, tlie said impugned Act No. IX. of 1955,\n\nr959 beiug repugnant and inconsistent with the Central Act\n\nDeep Chand No. 100 of 1956, has become void since the coming v. into operation of the aforesaid Act No. 100 of 1956 \".\n\nThe State of uua, The judgment of the Allahabad High Court, which is Pradesh &. Others the subject-matter of these appeals, was delivered on\n\n- December 19, 1956. The Amending Act of 1956 was Suiba Rao }. published on December 31, 1956. It is therefore manifest that the appellants could not hfLve raised the aforesaid grounds before the High Comt. ]'urther, the grounds raise only a pure question of law not dependent upon the elucidation of any further facts.\n\nIn the circumstances, we thought it to be a fit case for allowing the appellants to raise the new grounds and we accordingly gave them the permission.\n\nMr. M. K. Nambiar, appearing for some of the appellants, raised before us the following points: (i) The Motor Vehicles (Amendment) Act (100 of 1956) passed by the Parliament is wholly repugnant to the provisions of the U. P. Act and therefore the latter became void under the provisions of Article 254( l) of the Constitution; with the result that, at the present time, there is no valid law whereunder the Government can prohibit the appellants from exercising their fundamental right under the Constitution, namely, to carry on their business of motor transport; (ii) the scheme framed under the Act, being one made to operate in future and from day to sJay, is an instrument within the meaning of s. 68B of the Amending Act., and therefore the provisions of the Amending Act would prevail over those of the scheme, and after the Amending Act came into force, it would have no operative force; and (iii) even if the U. P. Act was valid and continued to be in force in regard to the scheme framed thereunder, it would offend the provisions of Art. 31 of the Constitution, as it was befor{I the Constitution (Fourth Amendment) Act, 1955, as, though the State had acquired the appellant's interest in a commercial undertaking, no compensation for the said interest was given, as it should be under the said Article.\n\nThe other learned Counsel, who followed Mr. Nambiar, except Mr. Naunit Lal, adopted bis argument. Mr. Na unit Lal, in addition to the argument\n\nadvanced by Mr. Nambiar in regard to the first z959 point, based his contention on the proviso to Art. 254(2) of the Constitution rather than on Art. 254(1).\n\nDeep Chand He contended that by reason of the Amending Act, The Stat:· of uua the U. P. Act was repealed in toto and, because of Pradesh & Other: s. 68B of the Amending Act, the operation of the provisions of the General Clauses Act , was excluded.\n\nIn Subba Rao J. addition, he contended that in Appeal No. 429 of 1958, the scheme, in so far as it affected the appellant's route was bad inasmuch as no notice was given to him before the scheme was approved.\n\nWe shall proceed to consider the argument advanced by Mr. Nambiar in the order adopted by him; but before doing so, it would be convenient to dispose of the point raised by the learned Advocate General, for it goes to the root of the matter, and if it is decided in his favour, other questions do not fall for consideration. The question raised by the learned Advocate General may be posed thus: whether the amendment of the Constitution removing a constitutional limitation on a legislature to make a particular law has the effect of validating the Act made by it when its power was subject to that limitation. The present case illustrates the problem presented by the said question.\n\nThe U. P. Legislature passed the U. P. Act on April 24, 1955, whereunder the State Government was authorized to frame a scheme of nationalization of motor transport. After following the procedure prescribed therein, the State Government finally published the scheme on June 23, 1956. The Constitution (Fourth Amendment) Act, 1955, received the assent of the President on April 27, 1955. The State Government framed the scheme under the U. P. Act after the passing of the Constitution (Fourth Amendment) Act,\n\n1955. Under the said Amendment Act, cl. (2) of Art. 31 has been amended and cl. (2A) has been inserted.\n\nThe effect of the amendment is that unless the. law provides for the transfer of ownership or right to possession of any property to the State or to a Corporation owned or controlled by the State, it shall not be deemed to provide for the compulsory acquisition or\n\n'959 requisition of property within the meaning of cl. (2) of\n\nh d that Article and therefore where there is no such trans- Deep vc an fer, the condition imposed by cl. (2), viz., that the law\n\nThe State of Uttar should fix the amout of compensation or specify the Pradesh & Othm principles on which and the manner in which the compensation is to be determined and given, is not Subba Rao J. attracted. If the amendment applies to the U. P. Act, as there is no transfer of property to the State, no question of compensation arises. On the other hand, if the unamended Article governs the U. P. Act, the question of compensation ;.vill be an important factor in deciding its validity. The answer to the problem so presented depends upon the legal effect of a constitutional limitation of the legislative power on the law made in derogation of that limitation.\n\nA distinction is sought to he made by the learned Advocate General between the law made in excess of the power conferred on a legislature under the relevant List in the Seventh Schedule and that made in violation of the provisions of Part III of the Constitution.\n\nThe former, it is suggested, goes to the root of the legislative power, whereas the latter, it is said, operates as a check on that power, with the result that the law so made is unenforceable, and as soon as the check is removed, the law . is resuscitated and becomes operative from the date the check is removed by the constitutional amendment.\n\nMr. Nambiar puts before us the following two propositions in support of his contention that the law so made in either cpntingency is void ab initio : (i) the paramountcy of fundamental rights over all legislative powers in respect of all the Lists in the Seventh Schedule to the Constitution is secured by the double process of the prohibition laid by Art. 13(2) and the restl'ictions imposed by Art. 245, unlike the mere implied prohibition implicit in the division of power under Art. 246; and (ii) where the provisions of an enactment passed by a legislature after January 26, 1950, in whole or in part-subject to the doctrine of severability-are in conflict with the provisions of Part III, the statute, in whole or in part, is void ab initio. This question was subjectd to judicial scrutiny by this\n\n. '\n\n,.>\n\nCourt, but before we consider the relevant authorities, it would be convenient to tel?t its validity on first principles.\n\nDeep Chand v.\n\nThe relevant Articles of the Constitution read follows: as The State of U ttar Pradesh & Others Article 245: \"(1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part oft.he territory of India, and the Legislature of a State may make laws for the whole or any part of the State.\"\n\nArticle 246: \"(1) Notwithstanding anything in clauses (2) and (3) Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution 'referred to as the \"Union List\").\n\n(2) Notwithstanding anything in clause (3), Parliament and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the \"Concurrent List\").\n\n(3) Subject to clauses (1) and (2), the Legislature of any State h.as exclusive power to make la\\:vs for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh\n\nSchedule (in this Constitution referred to as the \" State List\").\n\n(4) Parliament has power to mali.e laws with respect to any matter for any part of the territory of . India not included in a State notwithstanding that such matter is a matter enumerated in the State List.\"\n\nArticle 13: \"(1) All laws in force in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to th.e extent of such inconsistency, be void.\n\n(2) The State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void.\"\n\nSubba Rao].\n\n' 959 Article 31 (Before the Constitution (Fourth Deep Chand Amendment) Act, 1955): v. \" (I) No person shall be deprived of his property The Stale of Utta' save by authority Of law. p, adesh \"\" Othm\n\n(2) No property, movable or immovable, includ-\n\nSitbba Rao ] • ing any interest in, or in any company owning, any commercial or industrial undertaking, shall be taken possession of or acquired for public purposes under any law authorisiug the taking of such possession or such acquisition, unless the law provides for compensation for the property taken possession of or acquired and either fixes the amouut of the compensation, or specifies the principles on which, and the manner in which, the compensation is to be determined and given\". < The combined effect of the said provisions may be stated thus : Parliament and the Legislatures of States have power to make laws in respect of any of the matters enumerated in the relevant lists in the Seventh Schedule and that power to make laws is subject to the provisions of the Constitution including Art. 13, i.e., the power is made subject to the limitations imposed by Part III of the Constitution. The general power to that extent is limited.\n\nA Legislature, therefore, has no power to make any law in derogation of the injunction contained in Art. 13. Article 13(1) deals with laws in f9rce in the territory of India before the commencement of the Constitution and such laws in so far as they are inconsistent with the provisions of Part III shall, to the extent of such inconsistency be void. The clause, therefore, recognizes the validity of the pre-Constitution laws and only declares that the said laws would be void thereafter to the extent of their inconsistency with Part III ; whereas cl. (2) of that article imposes a prohibition on the State making laws taking away or abridging the rights conferred by I\n\nPart III and declares that laws made in contravention of this clause shall, to the extent of the contravention, • be void.\n\nThere is a clear distinction between the two clauses.\n\nUnder cl. (I), a pre.Constitution law subsists except to the extent of its inconsistency with the provisions of Part III; whereas, no post-Constitution law\n\nI959 I\n\ncan be made contravening the provisions of Part III, I and therefore the law, to that extent, though made, is\n\n) a nullity from its inception. If this clear distinction Deep vchana is borne in mind, much of the cloud raised is dispelled. The State. of uttar When cl. (2) of Art. 13 says in clear and unambiguous P.yadesh & Others terms that no State shall make any law which takes away or abridges the rights conferred by Part III, it Subba Rao f. will not avail the State to contend either that the clause does not embody a curtailment of the power to legislate or that it imposes only a check but not a prohibition. A constitutional prohibition against a State making certain laws cannot be whittled down by analogy or by drawing inspiration from decisions on the provisions of other Constitutions ; nor can we appreciate the argument that the words \"any law\"\n\nin the second line of Art. 13(2) posits the survival of the law made in the teeth of such prohibition. It is said that a law can come into existence only when it is made and therefore any law made in contravention of . that clause presupposes that the law made is not a nullity. This argument may be subtle but is not sound. The words\" any law\" in that clause can only mean an Act passed or made factually, notwithstanding the prohibition. The result of such contravention is stated in that clause.\n\nA plain reading of the clause indicates, without any reasonable doubt, that the prohibition goes to the root of the matter and limits the State's power to make law; the law made in spite of the prohibition is a still-born law.\n\nCooley in his book \" Constitutional Limitations\" (Eighth Edition, Volume I}, states at page 379:\n\n\"From what examination has been given to this subject, it appears that whether a statute is constitutional or not is always a question of power; that is, a question whether the legislature in the particulir case, in respect to the subject-matter of the act, the manner in which its object is to be accomplished, and the mode of enacting it, has kept within the constitutional limits and observed the constitutional conditions.\" The Judicial Committee in The Queen v. Burak (1) observed at page 193 as under :\n\n(r) (1878) L.R. 5 I. A. 178.\n\nr959 \"The established courts of Justice, when a question arises whether the prescribed limits have been exceed.\n\nDeep Chand v. ed, must of necessity determine that question ; and The State of uuar the only way in which they can properly do so, is by Pradesh & Oth'Js looking to the terms of the instrument by which, affirmatively, the legislative powers were created, and by Subba Rao f. which, negatively, they are restricted.\"\n\nThe Judicial Committee again in Attorney-General for Ontario v. Attorney-General for Canada(') crisply stated the legal position at page 583 as follows:-\n\n\" .............. .if the text is explicit the text. is conclusive, alike in what it directs and what\" it forbids.\" • The same idea is lucidly expressed by Mukherjea, J., as he then was, in K. G. Gajapati Narayan Deo v.\n\nThe State of Orissa ('). It is stated at page 11 as follows:- \"If the Constitution of a State distributes the legislative powers amongst different bodies, which have to act within their respective spheres marked out by specific legislative entries, or if there are limitations on the legislative authority in the shape of fundamental rights, questions do arise as to whether the legislature in a particular case has or has not, in respect to the subject-matter of the statute or in the method of enacting it, transgressed the limits of its constitutional powers.\" The learned Judge in the aforesaid passage clearly accepts the doctrine that both the transgression of the ambit of the entry or of the limitation provided by the fundamental rights are equally transgressions of the limits of the State's constitutional powers.\n\nIt is, therefore, manifest that in the construction of the constitutional provisions dealing with the powers of the legislature, a distinction cannot be made between• an affirmative provision and a negative provision; for, both are limitations on the power.\n\nThe Constitution affirmatively confers a power on the legislature to make laws within the ambit of the relevant entries in the lists and negatively prohibits it from making laws infringing the fundamental rights. It\n\n(1) (1912) A.C. 571.\n\n(2) [1954] S.C.R. r.\n\n(2) S.C.R.\n\nSUPREME COURT REPORTS - 23 • goes further and makes the legislative power subject '959 to the prohibition under Art. 13(2).\n\nApparent wide d h f h Deep Chand power is, therefore, reduce to t e extent o t e prov, hibition.\n\nThe State of Uttar If Arts. 245 and 13(2) define the ambit of the power Pradesh & Others to legislate, what is the effect of a law made in excess of that power? The American Law gives a direct and Subba Rao J. definite answer to this question. Cooley in his \" Constitutional Limitations\" (Eighth Edition, Volume I) at page 382 under the heading \" Consequences if a statute is void\" says:-\n\n\" When a statute is adjudged to be unconstitutional, it is as if it had never been. . .............. And what is true of an act void in toto iR true also as to any part of an act which is found to be unconstitutional, and which, consequently, is to be regarded as having never, at any time, been possessed of any legal force.\" In llottschaefer on Constitutional Law, much to the same effect is stated at page 34:\n\n\"The legal status of a legislative provision in so far as its application involves violation of constitutional provisions, must however be determined in the light of the theory on which Courts ignore it as law in the decision of cases in which its application produces. unconstitutional results. That theory implies that the legislative provisions never had legal force as applied to cases within that clause.\" In \"Willis on Constitutional Law\", at page 89:\n\n\"A judicial declaration of the unconstitutionality of a statute neither annuls nor repeals the statute but has the effect of ignoring or disregarding it so far as the deterination of the rights of private parties is concerned. The Courts generally say that the effect of an unconstitutional statute is nothing. It is as though it had never been passed ...................... \" \"Willoughby on Constitution of the United States'', Second Edition, Volume I, page 10:\n\n\"The Court does not annul or repeal the statute if it finds it in conflict with the Constitution. It simply refuses to recognize it, and determines the rights of\n\n• r959 the parties just as if such statute had no application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .\n\nDeep Chand The validity of a statute is to be tested by the\n\nThe Stat;· of Uitar constitutional power of a legislature at the time of its Pradesh c;. Others enactment by that legislature, and, if thus tested, it is beyond the legislative power, it is not rendered valid, Subba Rao J. without re-enactment, iflater, by constitutional amendment, the necessary legislative power is granted. ' An after-acquired power cannot, ex proprio vigore, validate a statute void when enacted '.\n\n\"However, it has been held that where an act is within the general legislative power of the enacting body, but is rendered unconstitutional by reason of some adventitious circumstance, as, for example, when a State legislature is prevented from regulating a matter by reason of the fact that the Federal Congress has already legislated upon that matter, or by reason of its silence is to be construed as indicating that there should be no regulation, the act does not need to be re-enacted in order to be.enforced, if this cause of its unconstitutionality is removed. \" For the former propositi01i, the decision in Newberry\n\nv. United States (1) and for the latter proposition the decision in John M. Wilkerson v. Charles A. Rahrer (') are cited. In N ewberry's Gase the validity of the Federal Corrupt Practices Act of 1910, as amended by the Act of 1911, fixing the maximum sum which a candidate might spend to procure his nomination at a primary election or convention was challenged. At the time of the enactment, the Congress had no power to make that law, but subsequent.ly, by adoption of the 17th Amendment, it acquired the said power. The question was whether an after-acquired power could validate a statute which was void when enacted. Mr.\n\nJustice McReynolds delivering the opinion of the court states the principle at page 920 :\n\n\"Moreover, the criminal statute now relied upon ante-dates the 17th Amendment, and must be tested by powers possessed at time of its enactment. An\n\n(1) (1921) 256 U.S. 232; 65 L. Ed. 913.\n\n(2) (1891) 140 U.S. 545; 35 L. Ed. 572.\n\nafter-acquired power cannot, ex proprio vigore,:valiz959 date a statute void when enacted.\" Deep Chand In Wilkerson's Gase (1) the facts were thatin June 1890, v. the petitioner, a citizen of the United States and an The State of Utta• agent of Maynard, Hopkins & Co., received from his Pradesh & Others Principal intoxicating liquor in packages. The pack- - Subba Rao]. ages were shipped from the State of Missouri to various points in the State of Kansas and other States. On\n\nAugust 9, 1890, the petitioner offered for sale and sold two packages in the State of Kansas. The packages sold were a portion of the liquor shipped by Maynard, Hopkins & Co. It was sold in the same packages in which it was received. The petitioner was prosecuted for violating the Prohibitory Liquor Law of the State of Kansas; for, under the said law, \"any person or persons who shall manufacture, sell or barter any intoxicating liquors, shall be guilty of a misdemeanor\".\n\nOn August 8, 1890, an Act of Congress was passed to the effect that intoxicating liquors transported into any State should upon arrival in such State be subject to the operation and effect of the laws of such State.\n\nIt will be seen from the aforesaid facts that at the time the State Laws were made, they were valid, but they did not operate upon packages of liquors imported into the Kansas State in the course of inter-State commerce, for the regulation of inter-State commerce was within the powers of the Congress; and that before the two sales in the Kansas State, the Congres~\n\nmade an Act making intoxicating liquors transported into a State subject to the laws of that State, with the result that from that date the State Laws operated on the liquors so transported. Under those circumstances, the Supreme Court of the United States held:\n\n\"It was not necessary, after the passage of the Act of Congress of August 8, 1890, to re-enact the Law of Kansas of 1899, forbidding the sale of intoxicating liquors in that State, in order to make such State Law operative on the sale of imported liquors.\" The reason for the decision is found at page 578:\n\n(1) (1891) 140 U.S. 545; 35 L. Ed. 572.\n\nr959 \" This is not the case of a law enacted, in the unauthorized exercise of a power exclusively confided to Deep Chand Congress, but of a law which it was competent for the n, stat;·.1 uuar State to pass, l; mt which could not operate upon arti- Prad\"h & othm cles occupying a certain situation until the passage of the Act of Congress. That Act in terms removed the Subba Rao f. obstacle, and we perceive no adequate ground for adjudging that a re-enactment of the State Law was required before it could have the effect upon imported which it had always had upon domestic property. \" A reference to these decisions brings out in bold relief the distinction between the two classes of cases referred to therein. It will be seen from the two decisions that in the former the Act was void from its inception and in the latter it was valid when made but it could not operate on certain articles imported in the course of inter-State trade. On that distinction is based the principle that an after-acquired power cannot, ex proprio vigore, validate a statute in one case, and in the other, a law validly made would take effect when the obstruction is removed.\n\nThe same principle is enunciated in Garter v. Egg and Egg Pulp Marketing Board('). Under s. 109 of the Australian Constitution \" when a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid. \" Commenting on that section, Latham, C. J., observed at page 573:\n\n\"This section applies only in cases where, apart from the operation of the section, both the Commonwealth and the State Laws which are in question would be valid. If either is invalid ab initio by reason of lack of power, no question can arise under the section. The word \" invalid\" in this section cannot be interpreted as meaning that a State law which is affected by the section becomes ultra vires in whole or in part. If the Commonwealth law were repealed the State law would again become operative. \"\n\nWe shall now proceed to consider the decisions of this Court to ascertain whether the said principles are\n\n(1) (1942) 66 C.L.R. 557\n\naccepted or departed from. The earliest case is Keshaz959 van Madhava Menon v. The State of Bombay (1). There Deep Chand the question was whether a prosecution launched \"· under the Indian Press (Emergency Powers) Act, 1931, The State of Uttar before the Constitution could be continued after the Pradesh & Others Constitution was passed. The objection taken was that the said law was inconsistent with fundamental Subba Rao J. rights and therefore was void. In the context of the question raised, it became necessary for the Court to consider the impact of Art. 13(1) on the laws made before the Constitution. The-Court, by a majority, held that Art. 13(1) of the Indian Constitution did not make existing laws which were inconsistent with fundamental rights void ab initio, but only rendered such laws ineffectual and void with respect to the exercise of the fundamental rights on and after the date of the commencement of the Constitution and that it had no retrospective effect. Das, J., as he then was, observed at page 233:\n\n\"It will be noticed that all that this clause declares is that all existing laws, in so far as they are inconsistent with the provisions of Part III shall, to the extent of such inconsistency, be void.\n\nEvery statute is prima facie prospective unless it is expressly or by necessary implications made to have retrospective operation. \" At page 234, the learned Judge proceeded to state:\n\n\"They are not void for all purposes but they are void only to the extent they come into conflict with the fundamental rights. In other words, on and after the commencement of the Constitution no existing law will be permitted to stand in the way of the exercise of any of the fundamental rights. Therefore, the voidness of the existing law is limited to the future exercise of the fundamental rights .................. Such laws exist for all past transactions and for enforcing all rights and liabilities accrued before the date of the Constitution. \" At page 235, the same idea is put in different words thus:-\n\n\" ............ Article 13(1) only has the effect of\n\n(1) [1951] S.C.R. 228.\n\n'959 nullifying or rendering all inconsistent existing laws ineffectual or nugatory and devoid of any legal Deep Chand force or binding effect only with respect to the exercise\n\nThe stat:· of UttarOf fundamental rights on and after the date of the Pradesh & Others commencement of the Constitution.\"\n\nSubba Rao ].\n\nAt page 236, the learned Judge concludes:\n\n\" So far as the past acts are concerned the law exists, notwithstanding that it does not exist with respect to the future exercise of fundamental rights.\" Mahajan, J., as he then was, who delivered a separate judgment, put the same view in different phraseology at page 251:\n\n\"The effect of Article 13(1) is only prospective and it operates in respect to the freedoms \\I hich are infringed by the State subsequent to the coming into force of the Constitution but the past acts of a person which came within the mischief of the law then in force are not affected by Part III of the Constitution.\" The learned Judge, when American law was pressed on him in support of the contention that even the pre- Constitution law was void, observed thus, at page 256:\n\n\"It is obvious that if a statute has been enacted and is repugnant to the Constitution, the statute is void since its very birth and anything done under it is also void and illegal. ·The courts in America have followed the logical result of this rule and even convictions made under such an unconstitutional statute have been set aside by issuing appropriate writs. If a statute is void from its very birth then anything done under it, whether closed, completed, or inchoate, will be wholly illegal and relief in one shape or another has to be given to the person affected by such an unconstitutional law. This rule, however, is not applicable in regard to laws which were existing and were constitutional according to the Government of India Act, 1935. Of course, if any law is made after the 25th January, 1950, which is repugnant to the Constitution, then the same rule will have to be followed by courts in India as is followed in America and even convictions made under such an unconstitutional law\n\n(2) S.C.Hi.\n\nSUPHEME COUH, T H, EPOH, TS 29\n\nwill have to be set aside by resort to exercise of powers i959 given to this court by the Constitution.\" Deep Chand Mukherjea, J., as he then was, in Behram Khurshed v.\n\nPesikaka v. The State of Bombay (1) says at page 652 The State of Uttar much to the same effect: Pradesh & Others \" We think that it is not a correct proposition Subbu Rao J. that constitutional provisions in Part III of our Constitution merely operate.as a check on the exercise of legislative power. It is axiomatic that when the lawmaking power of a State is restricted by a written fundamental law, then any law enacted and opposed to the fundamental law is in excess of the legislative authority and is thus a nullity. Both these declarations of unconstitutionality go to the root of the power itself and there is no real distinction between them.\n\nThey represent but two aspects of want of legislative power. The legislative power of Parliament and the State Legislatures as conferred by articles 245 and 246 of the Constitution stands curtailed by the fundamental rights chapter of Constitution. A mere reference to the provisions of article 13(2) and articles 245 and 246 is sufficient to indicate that there is no competency in Parliament or a State Legislature to make a law which comes into clash with Part III of the Constitution after the coming into force of the Constitution.\" The effect of the decision may be stated thus: The learned judges did not finally decide the effect of Art. 13(2) of the Constitution on post-Constitution laws for the simple reason that the impugned law was a pre- Constitution one.\n\nArt. 13(1) was held to be prospective in operation and therefore did not affect the preexisting laws in respect of things done prior to-the Constitution. As regards the post-Constitution period, Art. 13(1) nullified or rendered all inconsistent existing laws ineffectual, nugatory or devoid of any legal force or binding effect with respect to the exercise of the fundamental rights. So far as the past acts were concerned, the law existed, notwithstanding that it did not exist with respect to the future exercise of the said rights. As regards the pre-Constitution laws,\n\n\n'959 this decision contains the seed of the doctrine of\n\nD P Cl d eclipse developed by my Lord the Chief Justice in \"\n\nv. •an Bhikaji Narain Dhakras v. The State of Madhya Pra- The State of u11ardesh (')where it was held that as the pre-Constitution Pradesh e> Othm law was validly made, it existed for certain purposes even during the post-Constitution period. This prinoi- Subba Rao f. pie has no application to post-Constitution laws infringing the fundamental rights as they would be ab initio void in toto or to the extent of their contravention of the fundamental rights.\n\nThe observations of the learned judges made in the decision cited above bring out the distinction between pre and post-Constitution laws which are repugnant to the Constitution and the impac't of Art. 13 on the s11id laws.\n\nIn Behram Khurshed Pesikaka's Gase (2), this Court considered the legal effect of the declaration made in the case of The State of Bombay v. F. N. Balsara (') that clause (b) of s. 13 of the Bombay Prohibition Act (Born. XXV of 1949) is void under Art. 13(1) of the Constitution in so far as it affects the consumption or use of liquid medicinal or toilet preparations containing alcohol and held that it was to render part of s. 13(b) of the Bombay Prohibition Act inoperative, ineffective and ineffectual and thus unenforceable. Bhagwati, J., at page 620, cited all the relevant passages from textbooks on Constitutional Law and, presumably, accepted the view laid down therein to the effect that an unconstitutional Act in legal contemplation is as though it h~.d never been passed. Jagannadhadas, J., at page 629, noticed the distinction between the scope of els. (l) and (2) of Art. 13 of the Constitution. After citing a passage from \"Willoughby on Constitution of the United States\", the learned Judge observed :\n\n\" This and other similar passages from other treatises relate, however, to cases where the entire legislation is uncq_nstitutional from the very commencement of the Act, a situation which falls within the scope of article 13(2) of our Constitution. They do not directly cover a situation which falls within\n\n\n(3). [1951] S.C.R. 682.\n\narticle 13(1). . ........... The question is what is the r959 effect of article 13(1) on a pre-existing valid statut'e, h. h , t f bl' t h f , l t Deep Chand w 10 m respec o a severa e par t ereo v10 a es v fundamental rights. Under article 13(1) such part is The stat; of Uttar \"void \" from the date of the commencement of the Pradesh &- Others Constitution, while the other part continues to be valid. Two views of the result brought about by this Subba Rao J. voidness are possible, viz., (1) the said severable part becomes unenforceable, while it remains part of the Act, or (2) the said part goes out of the Act and the Act stands appropriately amended pro tanto: The first is the view which appears to have been adopted by my learned brother, Justice Venkatarama Aiyar, on the basis of certain American decisions. I feel.inclined to agree with it. This aspect, however, was not fully presented by either side and was only suggested from the Bench in the course of arguments.\n\nWe have not had the benefit of all the relevant material being placed before us by the learned advocates on either side. The second view was the basis of the arguments before us. It is, therefore, necessary and desirable to deal with this case on that assumption.\" This passage shows that his opinion-though a tentative one-was that the severable part became unenforceable while it remained part of the Act.\n\nBut the learned Judge made an incidental observation that the American view applied to cases that fall I./ within the scope of Art. 13(2) of the Constitution, i.e., the entire legislation would be unconstitutional from the very commencement of the Act. Venkatarama Aiya.r, J., founded his decision on a broader basis. At page 639, the learned Judge observed : .\n\n\" Another point of distinction noticed by American jurists between unconstitutionality arising by reason of lack of legislative competence and that arising by reason of a check imposed on a competent Legislature may also be mentioned.\n\nWhile a statute passed by a Legislature which had no competence cannot acquire validity when the Legislature subsequently acquires competence, a statute which was within the competence of the Legislature at the time of its enactment but which infringes a constitutional\n\nr959 prohibition could be enforced proprio vigore when once the prohibition is removed.\" Deep Chand v.\n\nOn the basis of this distinction, the learned Judge held The State of uua, that Art. 13(1) of the Constitution only placed a check Prad\"h & Othm on a competent legislature and therefore the word\n\n\" void \" in that article meant \"relatively void\", i.e., Subba Rao J. h l l d d h A t e aw on y con emne t e ct as wrong to individuals and refused to enforce it against them. In support of the said conclusion the learned Judge cited a pas-· sage from \" Willoughby on the Constitution of the United States\". A comparison of the passage cited with that in the text book discloses that one important sentence which makes all the difference to the legal posit.ion is omitted by mistake and that sentence is J J \" An after-acquired power cannot ex proprio vigore validate a statute void when enacted \". The second paragraph in the extract on which the learned Judge placed reliance and also the decision relied upon by him did not support his conclusion. As already stated, the decision and the passage dealt not with a case where the State had no power to make the law, but with a case where the law lay dormant till a law of the Federal Congress removed the conflict between the State Law and the Federal Law. That case may by analogy be applied to Art. 13(1) in respect of laws validly made before the Constitution but cannot be invoked in the ca2e of a statute which was void when enacted. By a subsequent order, this Court granted the review and reopened the case to enable the 'Bench to obtain the opinion of a larger Bench on the Constitutional points raised in the judgment delivered by the learned Judges. That matter came up before a Constitutional Bench, and Mahajan, C. J., who was a party to the decision in K eshavan M adhava Menon' s Case (1) explained the majority view therein on the meaning of the word \"void\" in Art. 13(1) thus, at page 651 :-\n\n\"The majority however held that the word \"void\" in article 13(1), so far as existing laws were concerned, could not be held to obliterate them from the statute book, and could not make such laws void altogether, because in its opinion, article 13 had not been given any\n\n(1) (1951] S.C. R. 228.\n\nretrospective effect. The majority however held that z959 after the coming into force of the Constitution the Deep Chand effect of article 13(1) on such repugnant laws was that v. it nullified them, and made them ineffectual and nuga- The State of uttar tory and devoid of any legal force or binding effect. It Pradesh & Others was further pointed out in one of the judgments representing the majority view, that the American rule Subba Rao f. that if a statute is repugnant to the Constitution the statute is void from its birth, has no application to cases concerning obligations incurred or rights accrued in accordance with an existing law that was constitutional in its inception, but that if any law was made after the 26th January, 1950, which was repugnant to the Constitution, then the same rule shall have to be followed in India as followed in America. The result therefore of this pronouncement is that the part of the section of an existing law which is unconstitutional is not law, and is null and void. Fcir determining the rights and obligations of citizens the part declared void should be notionally taken to be obliterated from the section for all intents and purposes, though it may remain written on the statute book and be a good law when a question arises for determination of rights and obligations incurred prior to 26th January, 1950, and also for the determination of rights of persons who have not been given fundamental rights by the Constitution. Thus, in this situation, there is no scope for introducing terms like \"relatively void \" coined by American Judges in construing a Constitution which is not drawn up in similar language and the implications of which are not quite familiar in this country.\" The learned Judge, as we have already pointed out, rejected the distinction made by Venkatarama Aiyar, J., between lack of legislative power and the abridgment of the fundamental rights. Though tha~\n\nquestion did not directly arise, the learned Judge expressed his view on the scope of Art. 13(2) at page 653 thus:\n\n\"The authority thus conferred by Articles 245 and 246 to make laws subjectwise in the different Legislatures is qualified by the declaration made in\n\n'959 article 13(2). That power can only be exercised\n\nDeep Chand subject to the prohibition contained in article 13(2). On • v. the construction of article 13(2) there was no divergen- The State of Uttar ce of opinion between the majority and the minority Pradesh & Othmin Keshava Madhava Menon v. The State of Bombay (supra). It was only on the construction of article 13(1) Subba Rao J. that the difference arose because it was felt that that article could not retrospectively invalidate laws which when made were constitutional according to the Constitution then in force.\" Das, J., as he then was, in his dissenting judgment differed from the majority on other points but does not appear to have differed from the aforesaid views expressed by Mahajan, C. J., as regards the scope of K eshava M adhava Menon' s Gase on the meaning of the word \"void \" in Art. 13(1).\n\nThis judgment is therefore an authority on two points and contains a weighty observation on the third : (i) when the law-making power of a State is restricted by written fundamental law, then any law opposed to the fundamental law is in excess of the legislative authority and is thus a nullity; (ii) even in the case of a statute to which Art. l?(l) applies, though the law is on the statute book and be a good law, when a question arises for determination of rights and obligations incurred prior to January 26, l!l50, the part declared void should be notionally taken to be obliterated from the section for all intents and purposes ; and (iii) on the construction of Art. 13(2), the law made in contravention of that clause is a nullity from its incep.tion.\n\nThe next case is a direct one on the point and that is Saghir Ahmad v. The State of U. P. (').\n\nThere, the U. P. Road Transport Act (II of 1951) was passed enabling the State to run stage carriage service on a .route or routes to the exclusion of others.\n\nUnder that Act, the State Government made a declaration extending the Act to a particular area and issued a notification setting out what purported to be a scheme for the opetation of the stage carriage service on certain routes.\n\nAt the time the said Act was passed, the State had no such power to deprive a citizen of his\n\n(r) [1955] I S.C.R. 7\"\"1\n\nright to carry on his transport service.\n\nBut after the 1959 Act, Art. 19(1) was amended by the Constitution (First Amendment) Act, 1951, enabling the tate to carry on Deep vhand • any trade or business either by itself or through cor- 1 he state of Uttar porations owned or controlled by the State to the Pradesh & Others exclusion of private citizens wholly or in par1;.\n\nOne of the questions raised was whether the amendment of the Subba Rao J.\n\nCons1; itution could be invoked to validate the earlier legislation. The Court held that the Act when passed was unconstitutional and therefore it was still-born and could not be vitalised by the subsequent amendment of the Constitution removing the constitutional objections but must be re-enacted.\n\nAt page 728, Mukherjea, J., as he then was, who delivered the judgment of the Court, has given the reasons for the said view :-\n\n\"As Professor Cooley has stated in his work on , Constitutional Limitations (Vol. I, page 304 note.) \"a j statute void for unconstitutionality is dead and cannot be vitalised by a subsequent amendment of the Constitution removing the constitutional objection but must be re-enacted\".\n\nWe think that this is sound law and our conclusion is that the legislation in question which violates the fundamental right of the appellants under article 19(1) (g) of the Constitution and is not shown to be protected by clause (6) of the article, as it stood at the time of the enactment, must be held to be void under article 13(2) of the Constitution.\" This is a direct authority on the point, without a dissenting voice, and we are bound by it. 'l'he decision given in Bhikaji Narain's Case (1) is strongly relied upon by the learned Advocate General in support of his contention. Shortly stated, the facts in that case were: Before the Constitution, the C. P. & Berar Motor Vehicles (Amendment) Act, 19!7 (C. P.\n\nIII of 1948) amended the Motor Vehicles Act, 1939 (Central Act IV of 1939) and conferred extensive powers on the Provincial Government including the power to create a monopoly of the motor transport business in its favour to the exclusion of all motor transport operators. It was contended by the affected parties that by reason of Art. 13(1) of the Constitution,\n\n(r) [19j5] 2 S.C.R. 589.\n\n'959 the Act became void.\n\nOn behalf of the State, it was argued that the Constitution (First Amendment) Act, Deep Chand v. 1951, and the Constitution (Fourth Amendment) Act, Th, state of uua, 1955, had the effect of removing the inconsistency and P.adesh & Others the Amendment Act III of 1948 became operative again.\n\nThis Court unanimously accepted the conten- Subba Rao J. tion of the State. This decision is one given on a construction of Art. 13(1) of the Constitution and it is no authority on the construction and scope of Art. 13(2) of the Constitution. The reason for the decision is found in the following passages in the judgment, at page 598:\n\n\" ........................ on and after the commencement. of the Constitution the existing law, as a result of its becoming inconsistent with the provisions of article 19(1)(g) read with clause (6) as it then stood, could not be permitted to stand in the way of the exercise of that fundamental right. Article 13(1) by reason of its language cannot be read as having obliterated the entire operation of the inconsistent law or having wiped it out altogether from the statute book ............... In short, article 13(1) had the effect of nullifying or rendering the existing law which had become inconsistent with a.rt.icle 19(1) (g) read with clause (6) as it then stood ineffectual, nugatory and devoid of any legal force or binding effect only with respect to the exercise of the fundamental right on and after the date of the commencement of the Constitution. Therefore, between the 26th January, 1950, and 18th June, 1951, the impugned Act could not stand in the way of the exercise of the fundamental right of a citizen under Article 19(l)(g). The true position is that the impugn-· ed law became, as it were, eclipsed, for the time being, by the fundamental right. . ............................... .\n\nThe American authorities refer only to post-Constitution laws which were inconsistent with the provisions of the Constitution. Such laws never came to life but were still-born as it were. . .................................. .\n\nSuch laws were not dead for all purposes.\n\nThey existed for the purposes of pre-Constitution rights and liabilities and they remained operative, even after the Constitution, as against non-citizens. It is only as\n\nagainst the citizens that they remained in a dormant r959 or moribund condition.\" Deep Chand The aforesaid. passages are only the restatement of the v. law as enunciated in Keshavan Madhava Menon's The State of Uttar Case (1) reaffirmed in Pesikaka' s Case (2) and an exten- Pradesh & Others sion of the same to meet a different situation. A pre- 1 h d f D J h Subba Rao].\n\nConstitution aw, stating int e wor s o aos, ., as c then was, exists notwithstanding that it does not exist with respect to the future exercise of the fundamental rights. That principle has been extended in this decision, by invoking the doctrine of eclipse. As the law existed on the statute book to support pre-Constitution acts, the Court held that the said law was eclipsed for the time being by one or other of the fundamental rights and when the shadow was removed by the amendment of the Constitution, the impugned Act became free from all blemish or infirmity. The Legislature was competent to make the law with which Pesikaka's CaBe (2) was concerned at the time it was made. It was not a case of want of legislative power at the time the Act was passed, but one where in the case of a valid law supervening circumstances cast a cloud. To the other class of cases to which Art. 13 (2) will apply, the views expressed by the American authorities, by Mahajan, J., as he then was, in Pesikaka's Case, and by Mukherjea, J., as he then was, in Saghir Ahmad's Case (3) directly apply. To the facts in Bhikaji Narain's Case, (4) the principle laid down in Keshavan Madhava Menon's Case is attracted. But it is said that the observations of the learned , Judges are wide enough to cover the case falling under Art. 13 (2) of the Constitution and further that a logical extension of the principle laid down would take in also a case falling under Art. 13(2).\n\nThe first contention is based upon the following passage :- But apart from this distinction between pre- Constitution and post-Constitution laws, on which how ever we need not.rest our decision, it must be held that these American authorities could have no application to our Constitution. All laws existing or future\n\n(1) [1951] S.C.R. 228.\n\n(3) [1955] l S.C.R. 707.\n\n(2) [1955] l S.C.R. 613\n\n(4) [1955] 2'S.C.R. 589.\n\n...\n\n- -- ·, ' . \\\n\n1959 _ which are inconsistent with the provisions of Part III\n\nC! d of our Constitution, are by express provisions of article Deep v. ••• 13 rendered void to the extent of such inconsistency.\n\nThe state of UttarSuchlaws were not dead for all purposes.\n\nThey PradeSh & Others existed for the purposes of pre-Constitution rights and - - liabilities and they remained operative, even after the Subba Raa J. __ Constitution, as against non-citizens. It is only as -- against the citizens that they remained in a dormant or moribund condition.\"\n\nThe first part of the said observation states nothing more than the plain import of the provisions of Art. 13(1) and (2), namely, that they render laws void only 'to the extent' of snch inconsistency. The second part of the observation directly applies only to a case covered by Art. 13(1), for the learned Judges say that the laws exist for the purposes of pre-Constitution rights and liabilities and they remain operative even after the Constitution as against non-citizens. The said observation could not obviously apply to post.\n\nConstitution laws. Even so, it is said that by a parity of reasoning the post-Constitution laws are also voidto the extent of their repugnancy and therefore the law in respect of non-citizens will be on the statute book and by the application of the doctrine of eclipse, the same result should flow in its case also. There is some - plausibility in this argument, but it ignores one vital principle, viz., the existence or the non-existence of legislative power or competency, at the time the law is made governs the situation. There is no scope for applying the doctrine of eclipse to a case where the law is void ab initio in whole or in part. That apart, in the present case-we do not base our decision on that-Art. 31(1) infringed by tho Act, applies to all persons irrespective of whether they are citizens or non-citizens, and therefore. the entire law was void ab initio. . That judgment, therefore, does not support the respondent as it has bearing only on the construe tion of Art. 13(1) of the Constitution. .\n\nIn Ram Chandra Palai. v. State of Orissa ('), this Court followed the decision in Bhikaji Narain's Case(') in the case of a pre-Constitution Act. In Pannalal\n\n(1) [1956] S.C.R. 28 •\n\n\n(2} S.C.R. ·SUI'REJ\\IE COURT REPORTS 39\n\nBinjraj v. Union of India('), Bhagwatl, J.; quoted r959 with approval the extract from Keshavan JJ!adhava D Ch d Menon's Case('), wherein it was held that .. Art. 13(1) eep v. an has ouly the effect of nullifying or rendering all incon- The State of uuar sistent existing laws ineffectual or nugatory or devoid Pradesh & Others of any legal force or binding effect only with respect to the fundamental rights on or after the commence- Subba Rao J. ment of the Con.stittition. - The learned Advocate General relied upon certain decisions in support of his contention that the word \" void\" in Arts. 13(1) and 13 (2) means only \" unenforceable\" against persons claiming fundamerital rights, and the law continues to .be inthe statute book irrespective of the fact that it was made - in infringement of the fundamental rights. The obser-\n\n- vations of J\\Iukherjea, J., as he then was, in Chiranjit\n\nLal Chowdhuri v. The Union of India(') are relied on and they are :\n\n\"Article 32; as its provisions show, is not directly concerned with the determination of constitutional validity of -particular legislative enactments. What\n\nit aims at is the enforcing of fundamental rights guaranteed by the Constitution, no matter whether the necessity for such enforcement arises out of an action of the executive or of the legislature. . ................ ; .. .\n\nThe rights that could be enforced under article 32 must ordinarily be the rights of the petitioner himself who complains of infraction of such rights and approaches the court for relief.\" He also relies upon the decision of Das, J ., as he then was, in The State of JJ!adras v. Srimathi Champakam Dorairajan ('), wherein the learned Judge states thus, at page 531 :\n\n\"The directive principles of the State Policy, which by article 37 are expressly made unenforceable by a Court; cannot override the provisions found in Part III which, notwithstanding other provisions, are expressly made enforceable by appropriate \\Vrits, Orders or directions under article 32.\" Basing his argument on the aforesaid two observatios,\n\n(1) [1957] S.C.R. 233.\n\n(3) [1950] S.C.R. 869, 899.\n\n(2) [1951] S C.R. 228. ·\n\n(4) [1951] S.C.R. 525,\n\nz959 it is contended that in the case of both the directive principles and the fundamental rights, it must be held Deep Chand that the infringement of either does not invalidate the\n\nThe Stat;· of Uttar law, but only makes the law unenforceable. This argu- Prndesh & Others ment, if we may say so, mixes up the Constitutional -- invalidi~ of a . statute with the procedure to be Subba Rao J. followed to enforce the fundamental rights of an individual.\n\nThe Constitutional validity of a statute depends upon the existence of legislative power in the State and the right of a person to approach the Supreme Court depends upon his possessing the fundamental right, i.e., he cannot apply for the enforcement of his right unless it is infringed by any law.\n\nThe cases already considered supra clearly establish that a law, whether pre-Constitution or post.Constitution, would be void and nugatory in so far as it infringed the fundamental rights.\n\nWe do not see any relevancy in the reference to the directive principles; for, the legislative power of a State is only guided by the directive principles of State Policy.\n\nThe directions, even if disobeyed by the State, cannot affect the legislative power of the State, as they are only directory in scope and operation. The result of the aforesaid discussion may be summarized in the following propositions : (i) whether the Constitution affirmatively confers power on the legislature to make laws subject-wise or negatively prohibits it from infringing any fundamental right, they represent only two aspects of want of legislative power; (ii) the Constitution in express terms mkes the power of a legislature to make laws in regard to the entries in the Lists of the Seventh Schedule subject to the other provisions of the Constitu Hon and thereby circumcribes or reduces the said power by the limitations laid down in Part III of the Constitution; (iii) it follows from the premises that a law made in derogation or in excess of that power would be ab initio void wholly or to the extent of the contravention as the case may be; and (iv) the doctrine of eclipse can be invoked only in the case of a law valid when made, but a shadow is cast , on it by supervening constitutional ipconsistency or supervening existing statutory\n\ninconsistency ; when the shadow is removed, the im z959 pugned Act is freed from all blemish or infirmity.\n\nApplying the aforesaid principles to the present case, Deep hand we hold that the validity of the Act could not be test- The Stat; '01 Uttar ed on the basis of the Constitution (Fourth Amend- Pradesh c;. Others ment) Act, 1955, but only on the terms of the relevant Articles as they existed prior to the Amendment.\n\nSubba Rao J.\n\nWe shall now proceed to consider the first contention of Mr. Nambiar. He contends that the Motor Vehicles (Amendment) Ac.t (100 of 1956) passed by Parliament was wholly repugnant to the provisi9ns of the U. P. Act and therefore the law became void under the provisions of Art. 254(1) of the Constitution, with the result that at the present time there is no valid law whereunder the State can prohibit the appellants exercising their fundamental right under the Constitution, namely, carrying on the business of motor transport.\n\nMr. Naunit Lal bases his case on the proviso to Art. 254(2) of the Constitution rather than on cl. (1) thereof. He contends that by reason of the Amending Act, the U. P. Act was repealed in toto; and because of Section 68B, the operation of the provisions of the General Clauses Act saving things done under the repealed Act was excluded. The learned Advocate General attempted to meet the double attack by pressing on us to hold that there was no repugnancy at all between the provisions of the Central Act and the U. P. Act and therefore the U. P. Act had neither become void nor was repealed by necessary implication by the Central Act. We shall now examine the provisions of Art. 254(1) and 254(2).\n\nArticle 254:\n\n\"(1) If any provisions of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, or to any provision of an existing law with respect to one of the matters enumerated in the Concurrent List, then, subject to the provisions of clause (2), the law made by Parliament, whether passed before or after the law made by the Legislitture of 6\n\n'959 such State, or, as the case may be, the existing law, shall prevail and the law made by the Legislature of Deep vhand th~ State shall, to the extent of the repugnancy, be\n\nThe State of Uttar VOid.\n\nPradesh &- Others\n\n(2) Where a law made by the Legislature of a State with respect to one of the matters enumerated Subba Rao J. in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the' Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State.\n\nProvided that nothing in this clause shall prevent Parliament from enacting at any time any law with respect to the same matter including a law adding to, amending, varying or repealing the law so made by the Legislature of the State.\" Article 254(1) lays down a general rule. Clause (2) is an exception to that Article and the proviso qualifies the exception. If there is repugnancy between the law made by the State and that made by Parliament with respect to one of the matters enumerated in the Concurrent List, the law made by Parliament shall prevail to the extent of the repugnancy and the law made by the State shall, to the extent of such repug- nancy, be void. Under cl. (2), if the Legislature of a State makes a provision repugnant to the provisions of the law made by Parliament, it would prevail if the legislation of the State received the assent of the President. Even in such a case, Parliament may subsequently either amend,. vary or repeal the law made by the Legislature of a State. In the present case, the Uttar Pradesh Legislative Assembly, after obta, ining the assent of the President on April 23, 1955, pf,\\, Sse~. the U. P. Act. Parliament subsequently passed the foor Vehicles (Amendment) Act (100 of 1956).\n\nTherefore, both the clauses of Art. 254 would apply to the situation. The first question i~ whether the provisions of the Union law, i.e., the Motor Vehicles (Amendment) Act (100 of 1956), are repugnant to the provisions of the U. P. Act and if so to\n\nwhat extent. Before we proceed to examine the pro-\n\nI959 visions of the two Acts, it may be convenient to notice Deep Chand the law pertaining to the rule of repugnancy. v.\n\nNicholas in his Australian Constitution, 2nd Edition, The State of Uttar page 303, refers to three tests of inconsistency or Pradesh & Others repugnancy :- Subba Rao ]. \"(1) There may be inconsistency in the actual terms of the competing statutes ;\n\n(2) Though there may be no direct conflict, a State law may be inoperative because the Commonwealth law, or the award of the Commonwealth Court, is intended to be a complete exhaustive code; and\n\n(3) Even in the absence of intention, a conflict . may arise when both State and Commonwealth seek to exercise their powers over the same subject matter.\" This Court in Oh. 'l.'ika Ramji v. The State of Uttar\n\nPradesh (1) accepted the said three rules, among others, as useful guides to test the question of repugnancy.\n\nIn Zaverbhai Amaidas v.\n\nThe State of Bombay (2), this Court laid down a similar test. At page 807, it is stated:\n\n\" The principle embodied in section 107(2) and Article 254(2) is that when there is legislation covering the same ground both by the centre and by the . Province, both of them being competent to enact the same, the law of the Centre should prevail over that of the State.\" Repugnancy between two statutes may thus be ascertained on the basis of the following three principles:\n\n(1) Whether there is direct conflict between the two provisions ;\n\n(2) Whether Parliament intended to lay down an exhaustive code in respect of the subject matter replacing the Act of the State Legislature; and\n\n(3) Whether the law made by Parliament and the law made by the State Legislature occupy the same field.\n\nWe shall now examine the provisions of both the Acts in some detail in order to ascertain the extent of the repugnancy between them. The Scheme of\n\n(1) [1956] S.C.R. 393.\n\n(2) [1955) l S.C.R. 799.\n\n44 SUPREME COUR'r REPORTS [1959] Supp.\n\nr959 the U. P. Act may be summarized thus: Under the U. P. Act \"State Road Transport Service\" is defined Deep vchand to mean transport service by a public service vehicle\n\nTh' stat' of uttar owned by the State Government. Under s. 3 : Prnd\"h & Othm \"Where the State Government is of the opinion that it is necessary in the interests of the general pub- Subba Rao J. lie and for subserving the common good, or for maintaining and developing efficient road transport system so to direct, it may, by notification in the official Gazette declare that the road transport services in general, or any particular class of such service on any route or portion thereof as may be specified, shall be run and operated exclusively by the State Government, or by the State Government in conjunction with railways or be run and operated partly. by the State Government and partly by others under and in accordance with the provisions of the Act\".\n\nAfter the publication of the notification under s. 3, the State Government or, if the State Government so directs, the Transport Co.mmissioner publishes in such manner as may be specified a scheme as to the State Road Transport Service providing for all or any of the matters enumerated in cl. (2) of s. 4.\n\nClause (2) of s. 4 directs that, among others, the scheme should provide the particulars of the routes or portions thereof over which and the date on which the State Transport Service will commence to operate, the roads in regard to whi.ch private persons may be allowed to operate upon, the routes that will be served by the State Government in conjunction with railways, the curtailment of the routes covered by the existing permits or transfer of the permits to other route or routes. Section 5 enjoins the Transport Commissioner to give notice to the permit-holder requiring him to lodge a statement in writing whether he agrees to the transfer of the permit and in cl. (2) thereof, it is prescribed that in case he accepts the transfer, he is not entitled to any compensation, but if he does not agree to the transfer, .his permit will be cancelled subject to his right to get compensation under the Act. Under s. 6 any person whose interests are affected may within 30 days from the publication of the scheme, file objections\n\non it before the Transport Commissioner who shall r959 forward them to the Board constituted u1t1der s. 7, Deep Chand consist.ing of the Commissioner of a Division, Secretary v. to GoverQment in the Transport Department; and the The State of Utta• Transport Commissioner. The Board shall consider Pradesh & Others the objections, if any, forwarded under s. 6 and may either confirm, modify or alter the scheme.\n\nThe Subba Rao J.\n\nScheme so confirmed or modified or altered under s. 7 shall be published in the Official Gazette. Any scheme published under s. 8 may at any time be cancelled or modified or altered by the State Government. Section 10 gives the consequences of the publicat:lon under s. 8.\n\nSection 11 provides compensation for premature cancellation of permits or curtailment of route or routes, as may be determined in accorda.nce with the principles specified in Schedule I. In Schedule I, compensation is payable as fol4iws:\n\n\"(1) For every complete month or Rupees one part of a month exceeding fifteen days of hundred. the unexpired period of the permit.\n\n(2) For part of a month not exceed- Rupees ing fifteen days of the unexpired period fifty. of a permit.\n\nProvided always that the amount of compensation shall in no case be less than rupees two hundred.\" Section 12 authorises the State Government, in a cae where the permit has been cancelled, to purchase the motor vehicle covered by it if the holder of the permit offers to sell, upon terms and conditions laid down in Schedule II provided the vehicle is of the type of manufacture and model notified by the State Government and provided secondly that the vehicle is mechanically in a sound condition or otherwise declared fit by the Transport Commissioner or his nominee. Sections 13 to 18 provide for a State Machinery for tho development of motor transport industry. Sections 19 to 22 are provisions which are consequential in nature. Shortly stated, under the U. P. Act the State Government initiate a scheme providing for the nationalization of the road transport in whole or in part; the objections filed by the persons affected by the scheme are heard by a\n\n'959 Board of three officers appointed by the State Govern.\n\nDeep Chand ment ; the Board after hearing the objections may v. confirm, modify or alter the scheme ; the scheme so The Sta\" of uuar confirmed may be cancelled, modified or altered by Pmdesh & Othmthe State Government by following the same procedure adopted for framing the original scheme; and Subba Rao f. the holders of permits cancelled may be given new permits if they choose to accept and if not they will be paid such compensation as prescribed under the Act.\n\nUnder the Amendment Act 100 of 1956, whereby a new chapter was inserted in the Motor Vehicles Act of 1939, the procedure prescribed is -different.\n\nUnder s. 68-A of that Act, 'State Transport Undertaking' is defined to mean any undertaking providing road transport service, where such undertaking is carried on by,-(i) the Central Government or a State Government ; (ii) an~ Road Transport Corporation established under s. 3 of the Road Transport Corporation Act, 1950; (iii) the Delhi Transport Authority established under s. 3 of the Delhi Road Transport Authority Act, 1950; and (iv) any municipality or any corporation or company owned or controlled by the State Government. Under s. 68C, the State Transport Undertaking initiates a scheme if it is of opinion that for the purpose of providing an efficient, adequate, economical and properly co-ordinated road transport stirvice, it is necessary in the public interest that road transport service in general, or any particular class of such service in relation to any area or route or portion thereof should be run and operated by the State Transport Undertaking, whether to the exclusion complete or partial, of other persons or otherwise. Section 68D says that any person affected by the Scheme may fl.le objections to the said Scheme before the State Government; the State Government may, after considering the objections and after giving an opportunity to the objectors or their representatives and the representatives of the State Transport Undertaking to be heard in the matter, approve or modify the Scheme.\n\nAny Sche.me published may at any time be cancelled or modified by the State Transport Undertaking following the same procedure; for the purpose of giving effect\n\n(2) S.C.R. SUPREME COURT RllJPORTS 47\n\nto the Scheme, the Regional Transport Authority, r959 inter alia, may cancel the existing permits or modify Deep Chand the terms of the existing permits. Section 138G lays v. down. the principles and method of determination of The state of Uttar\n\ncompensation. Under that section compem; ation isPradesh & Others payable for every completed month or part ofa month exceeding fifteen days of the unexpired period of the Subba Rao f. permits at Rs. 200 and for part of a month not exceed- . ing fifteen days of the unexpired period of the permit at Rs. 100. Under the Amending Act, the gist of the provisions is that the Scheme is initiated by the State Transport Undertaking carried on by any of the four institutions mentioned in s. 68A, including the State Government ; objections are filed by the affected parties to the Scheme, the affected parties and the Undertaking are heard by the State Government, which, after hearing the objections, approves or modifies the Scheme.\n\nThere is no provision for transfer of permits to some other routes, or for the purchase of the buses by the State Government. Compensation payable is twice that fixed under the U. P. Act. One important thing to be noticed is that the U. P. Act is prospective, i.e., comes into force only from the date of the passing of the Amending Act and the procedure prescribed applies only to schemes that are initiated under the provisions of the U. P. Act.\n\nA comparison of the aforesaid provisions of the U. P. Act and the Amending Act indicates tha.t both the Acts are intended to operate in respect of the same subject matter in the same field.\n\nThe unamended Motor Vehicles Act of 1939 did not make any provision for the nationalization of transport services, but the States introduced amendments to implement the scheme of nationalization of road transport. P:resumably, Parliament with a view to introduce a uniform law throughout the country avoiding defects founa in practice passed the Amending Act inserting Chapter IV-A in the Motor Vehicles Act, 1939. This object would be frustrated if the argument that bo1h the U. P. Act and the Amending Act should co-exist in respect of schemes to be framed after the Amending Act, is accepted. Further the authority to initiate\n\n1959 the scheme, the manner of doing it, the authority to hear the objections, the principles regarding payment Deep Chand d h d £C v. of compensation un er t e two Acts iuer in import- Th' Stat' of uua. ant details from one another.\n\nWhile in the U. P. Act Prad\"k & Othm the scheme is initiated by the State Government, in the Amendment Act, it is proposed by the State Trans- Subba Rao f. port Undertaking. The fact that a particular undertaking may be carried on by the State Government also cannot be a reason to equate the undertaking with the State Government; for under s. 68A the undertaking may be carried on not only by the State Government but by five other different institutions.\n\nThe undertaking is made a statutory authority under the Amending Act with a right to initiate the scheme and to be heard by the State Government in regard to objections filed by the persons affected by the scheme.\n\nWhile in the U. P. Act a Board hears the objections, under the Amending Act the .State Government decides the disputes. The provisions of the scheme, the principles of compensation and the manner of its payment also differ in the two Acts.\n\nIt is therefore manifest that the Amending Act occupies the same field in respect of the schemes initiated after the Amending Act and therefore to that extent the State Act must yield its place to the Central Act. But the same cannot be said of the schemes framed under the U. P. Act before the Amending Act came into force.\n\nUnder Art. 254(1) \"the law made by Parliament, whether passed before or after the law made by the Legislature of such State ............ shall prevail and the law made by the legislature of the State shall, to the extent of the repugnancy, be void.\" • Mr. Nambiar contends that, as the U. P. Act and the Amending Act operate in the same field in respect of the same subject-matter, i.e., the nationalization of bus.transport, the U. P. Act becomes void under Art. 254(1) of the Constitutfon.\n\nThis argument ignores the crucial words \"to the extent of the repugnancy \" in the said clause. What is void is not the entire Act but only to the extent of its repugnancy with the law made by Parliament. The identity of the field may relate to the pith and substance of the subject-matter\n\nand also the period of its operation. when both r959 coincide, the repugnancy is complete and the whole of n . Ch the State Act becomes void.\n\nThe operation of the eep v. and Union Law may be entirely prospective leaving the the State of Uttar State Law to be effective in regard to thing already Pradesh & Others done. Sections 68C, 68D and 68E, inserted by the Amending Act, clearly show that those sections are e:oncern- Subba Rao f. ed only with a scheme initiated after the Amending Act came into force.\n\nNone of the sections, either expressly or by necessary implication, indicates that the schemes already finalised should be reopened and fresh schemes be framed pursuant to the procedure prescribed thereunder. Therefore, under Art. 254(1), the law under the U. P. Act subsists to support the schemes framed thereunder and it becomes void only in respect of schemes framed under the Central Act. A similar question arose in the context of the application of Art. 13(1) to a pre-Constitution law yhich infringed the fundamental rights given under the Constitution.\n\nIn Keshavan Madhava Menon's Gase (1), which we have referred to in a different context the question was whether Indian Press (Emergency Powers) Act, 1931, was void as infringing the provisions of Art. 13(1) of the Constitution; and the Court held that the said Act was valid and would continue to be in force to sustain a prosecution launched for an act done be fore the Constitution. In the words of Das, J . ., as he then was:\n\n\"Such laws exist for all past transactions and for enforcing all rights and liabilities accrued before the date of the Constitution.\" (p. 234).\n\n\"So far as the past acts are concerned the law exists, notwithstanding that it does not exist with\n\nr~, spect to the future exe:ccise of fundamental rights.\" (pp. 235-236).\n\nArticle 13(1), so far as it is relevarit to the present inquiry, is pari materia with the provisions of Art. 254(1) of the Constitution. While under Art. 13(1) all the pre-Constitution laws, to the extent of their inconsistency with the provisions of Part III, are void, under\n\n(1) [1951] S.C.R. 228. 7\n\n'959 Art. 254(1) the State Law to the extent of its repugnancy to the law made by Parliament is void. If the Deep Chand v. pre-Constitution law exists for the post-Constitution Th• stati of utta' period for all the past transactions, by the same Pradesh & Others parity of reasoning, the State law subsists after the making of the law by Parliament, for past transac- Subba Rao J. tions. In this view, both the laws can co-exist to operate during different periods.\n\nThe same decision also affords a solution to the question mooted, namely, whether if the law was void all the completed transactions fall with it. Mahajan, J., as he then was, draws a distinction between a void Act and a repealed Act vis-a-vis their impact on.past transactions. At page 251, the learned Judge says:\n\n\" The expression \" void \" has no larger effect on the statute so declared than the word \"repeal\". The expression \" repeal \" according to common law rule obliterates a statute completely as if ithad never been passed and thus operates retrospectively on past transactions in the absence of a saving clause or in the absence of provisions such as are contained in the Interpretation Act, 1889, or in the General Clauses Act, 1897, while a provision in a statute that with effect from a particular date an existing law would be void to the extent of the repugnancy has no such retrospective operation and cannot affect pending prosecutions or actions taken under such laws.\n\nThere is in such a situation no necessity of introducing a saving clause and it does not need the aid of a legislative provision of the nature contained in the Interpretation Act or the General Clauses Act. To hold that a.prospective declaration that a statute is void affects pending cases is to give it indirectly retrospective operation and that result. is repugnant to the clear phraseology employed in the various articles in Part III of the Constitution.\" The said observation directly applies to a situation created by Art. 254(1).\n\nAs the U. P. Act was void from the date of the Amending Act, actions taken before that date cannot be affected. In whichever way it is looked at, we are satisfied that in the present case, the scheme already framed subsists and the\n\nState law exists to sustain it even after the Parliax959 ment made the law. In this view we reJect the con- Deep Chand tention of Mr. Nambiar based on Art. 254(1) of the v.\n\nConstitution.\n\nThe State of Uttar The alternative argument advanced by Mr. Naunit Pradesh & Others Lal may now be considered. It is not disputed that under the proviso to Art. 254(2), the. Parliament can Subba Rao f. repeal the law made by the Legislature of a St11te and that Parliament can repeal the repugnant St2, te law.\n\nwhether directly or by necessary implication. Assuming that Parliament in the present case by enacting the Amending Act repugnant to the State law with respect to the same subject-matter i. e., nationalization of road transport, impliedly repealed the State law, would it have the effect of effacing the scheme already made ? If there was a repeal, the provisions of s. 6 of the General Clauses Act of 1897 are directly attracted. The relevant part of s. 6 of the General Clauses Act reads :\n\n\" Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not-\n\n(a) revive anything not in force or existing at the time at which the repeal takes effect; or\n\n(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder.\" The express words used in clause (b) certainly take in the scheme framed under the repealed Act. It was a thing duly done under the repealed Act.\n\nBut it is said that a comparison of the provisions of s. 6 with those of s. 24 would indicate that anything duly done excludes the scheme. Section 24 deals with the continuation of orders, schemes, rules, forms or bye-laws, made or issued under the repealed Act.\n\nBut that section applies only to the repeal of a Central Act but not a State Act. But the exclusion of the scheme is sought to be supported on the basis of the argument that in the case of a repeal of a Central Act, both the sections apply and, in that context, a reawnable\n\n'959 interpretation would be to exclude what is specifically D\"P Chand provided for from the general words used in s. 6. v.\n\nWhatever justification there may be in that context, The State of Uttar there is none when we are concerned with the repeal Pradesh & Others of a State Act to which s. 24 does not apply. In that situation, we have to look to the plain words of s. 6 Subba Rao ]. d h h h\n\nan ascertain w et er t ose words are comprehensive enough to take in a scheme already framed. We have . no doubt that a scheme framed is a thing done under the repealed Act.\n\nA further contention is raised on the basis of the provisions of s. 68B to achieve the same result, namely, that the said section indicates a different intention within the meaning of s. 6 of the General Clauses Act.\n\nSection 68B reads :\n\n\" The provisions of this Chapter and rules and orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in Chapter IV of this Act or in any other law for the time bei11g in force or in any instrument having effect by virtue of any such law.\" This section embodies nothing more than the b:ue statement that the provisions of this Act should prevail notwithstanding the fact that they are inconsistent with any other law. We have expressed our view that the provisions of this Act are prospective in operatipn and, therefore, nothing in those sections, which we have already analysed, is inconsistent with the provisions of the State law in regard to its operation with respect to transactions completed thereunder.\n\nAssuming without deciding that the word 'instrument' in s. 68B includes a scheme, we do not see any provisions in the Act which are inconsistent with the scheme framed under the State Act.\n\nThe provisions starting from s. 68C only contemplate a scheme initiated after the Amending Act came into force and therefore they cannot obviously be inconsistent with a scheme already framed under the State Act before the Amending Act came into force.\n\nWe, therefore, hold that s. 6 of the General Clauses Act saves the scheme framed under the U. P. Act.\n\nThe next contention of the learned Counsel Mr.\n\nN ambiar, namely, that the scheme being a prescrip- '959 tion for the future, it has a continuous operation even Deep Chand after the Amending Act became law, with the result v. that after the Amending Act, there was no va, lid law to The State of Uttar sustain it, need not detain us ; for, we have held that Pradesh & Others the State law subsists even after the Amending Act to sustain the things done under the former Act.\n\nSubba Rao f.\n\nThis leads us to the contention of the learci!ed Advocate General that even if the Constitution (Fourth Amendment) Act, 1955, could not be relied on to sustain the validity of the U. P. Act, there was no deprivation of property of the appellants within the meaning of the decisions of this Court in The State of West Bengal v. Subodh Gopal Bose (1); Dwarkadas Shrinivas of Bombay v. The Sholapur Spinning & Weaving Go. Ltd. (2) and Saghir Ahmad's Gase (3).\n\nThose cases have held that els. (1) and (2) of Art. 31 relate to the same subject matter and that, though there is no actual transfer of property to the State, if by the Act of the State, an individual has been substantially dispossessed or where his right to use and enjoy his property has been seriously impaired or the value of the property has been materially reduced, it would be acquisition or taking possession within the meaning of cl. (2) of the said Article.\n\nAfter a\n\n1 faint attempt to raise this question, the learned Advocate General conoe_ded that in view of the decision in Saghir Ahmad's Gase he could not support his argument to the effect that the State did not deprive the petitioners of their interest in a commercial undertaking. In the said case, this Court held in express terms tha.t U. P.\n\nTransport Act, 1951, which in effect prohibited .the petitioners therein from doing their motor transport business deprived them of their property or i.l:tterest in a commercial undertaking within the meaning of Art. 31(2) of the Constitution.\n\nMukherjea J., as he th.en was, observed at page 728 :\n\n\" It is not seriously disputed on behalfof the respondents that the appellants' right to ply motor vehicles for gain is, in any event, an interest in a\n\n(1) [1954] S.C.R. 587.\n\n(2) [r954] S.C.R. 674.\n\n(3) [1955] I S.C.R. 707.\n\nI959\n\ncommercial undertaking. There is no doubt also that the appellants have been deprived of this interest.\" Deep Chand\n\nThe learned Judge proceeded to state at page 729 : The State of Utta' \"In view of that majority decision it must be hadesh & Othm taken to be settled now that clauses (1) arid (2) of article 31 are not mutually exclusive in scope but should Subba Rao J. be read together as dealing with the same subject, namely, the protection of the right to property by means of limitations on the State's powers, the deprivation contemplated in clause (1) being no other than acquisition or taking possession of the property refer- •\n\nred to in clause (2).\n\nThe learned Advocate General conceded this to be the true legal position after the pronouncements of this Court referred to above.\n\nThe fact that the buses belonging to the appellants have not been acquired by the Government is also not material. The property of a business may be both tangible and intangible. Under the statute the Government may not deprive the appellants of their buses or any other tangible property but they are depriving them of the business of running buses on hire on public roads.\n\nWe think therefore that in these circmnstances the legislation does conflict with the provisions of article 31(2) of the Constitution and as the requirements of that clause have not been complied with, it should be held to be invalid on that ground.\" The above observations are clear and unambiguous and they do not give scope for further argument on the subject. It follows that if the Act does not provide for compensation, the Act would be invalid being in conflict with the provisions of Art. 31(2) of the Coustitution.\n\nThe next question is whether in fact the provisions of Art. 31(2) of the Constitution, before the Constitution (Fourth Amendment) Act, 1955, were complied with. Under Art. 31(2) no property shall be taken possession of or acquired save for a public purpose and save by authority of law which provides for compensation for the property so acquired or requisitioned and either fixes the amount of the compensation or specifies the principles on which, and the manner in which, the compensation is to be determined and\n\ngiven. In The State of West Bengal v. JYJrs. Bela z959 Baner<iee (1), Patanjali Sastri, C. J., has defined the J Deep Chand meaning of the word 'compensation ' at page 563, as v. under : The State of Uttar \"While it is true that the legislature is given the Pradesh & Others discretionary power oflaying down the princip1es which should govern the determination of the amount . to be Subba Rao f. given to the owner for the property appropriated, such principles must ensure that what is determined as payable must be compensation, that is, a just equivalent of what the owner has been deprived of. Within the limits of this basic requirement of full indemnification of the expropriated owner, the Constitution allows free play to the legislative judgment a:> to what principles should guide the determination of the amount payable. Whether such principles take into account all the elements which make up the true value of the property appropriated and exclude matters which are to be neglected, is a justiciable issue to be adjudicated by the Court. This, indeed, was not disputed. \" On the basis of the aforesaid principle, Mr. Nambiar contends that the U. P. Act does not provide for compensation in the sense of giving the operator deprived of his interest a just equivalent of what he has been deprived of, or fix any principles to guide the determination of the amount payable. The U.P. Act, the argument proceeds, does not provide at l!-11 for compensation payable in respect of the interest of the opera.tor in a commercial undertaking, but only gives compensation for the unexpired period of the permit. On the other hand, the learned Advocate General contends that the appellants would be entitled only to just equivalent of the interest that they are deprived of, namely, the interest in a commercial undertaking and that the cumulative effect of the provisions of the U. P. Act is that just equivalent of the said interest is given.\n\nAs it is common case that what the Act should give is just compensation for the interest of the operator in a commercial undertaking, we shall now exa.mine the provisions of the U. P. Act to ascertain whether it\n\n(I) [1954] S.C.R. 558.\n\nr959 provides a quid pro quo for the interest the operator is deprived of. Deep Chand\n\nThe provisions of the U. P. Act relating to compen- The state of Utta, sation may usefully be read at this stage: Prndesh & Othm Section 5 : \" ( l) Where the scheme published under section 4 provides for cancellation of any existing persubba 1100 .f. mit granted under Chapter IV of the Motor Vehicles Act, 1939, or for the transfer of such permit to any other route or routes the Transport Commissioner shall cause notice thereof to be served on the permitholder concerned and on any other persons to whom in his opinion special notice should be given. The notice shall also require the permit-holder to lodge a statement in writing within the period to be specified therein whether he agrees to the transfer of the permit.\n\n(2) If the permit-holder agrees to the transfer of his permit, he shall, provided the permit is actually so transferred ultimately, be not entitled to claim compensation under section 11 but the transference of the permit shall be deemed to be in lieu of compensation and complete discharge therefor of the State Government.\n\nWhere, however, the permit-holder does uot agree to the transfer, the permit shall, without prejudice to the right of the permit-holder to get compensation under the said section be liable to be cancelled.\"\n\nSection 11: \"(1) Where in pursuance of-the Scheme published under section 8 any existing permit granted under Chapter IV of the Motor Vehicles Act, 1939, is or is deemed to have been cancelled or the route or routes covered by it are curtailed or are deemed to have been curtailed, the permit-holder shall, except in cases where transfer of the permit has been agreed to under sub-section (2) of section 5, be entitled to receive and be paid such compensation by the State Government for and in respect of the premature cancellation of the permit or, as the case may be, for curtailment of the route or routes covered by the permit as may be determined in accordance with the principles specified in Schedule I.\n\n(2) The compensation payable under this section shall be due as from the date of order of cancellation\n\nof the permit or curtailment of the route covered by z959 the permit.\n\nDeep Chand\n\n(3) There shall be paid by the State Government v. on the amount of compensation determined under sub- The State of Uttar section (1) interest at the rate of two and one-half Pradesh & Others\n\nper cent. from the date of order of cancellation or curtailment of route to the date of determination of Subba Rao f. compensation as aforesaid.\n\n(4) The compensation payable under this Bection shall be given in cash.\n\n(5) The amount of compensation to be given in accordance with the provisions of sub-section (1) shall be determined by the Transport Commissioner and shall be offered to the permit-holder in full satisfaction of the compensation payable under this Act and if the amount so offered is not acceptable to the permit-holder, the Transport Commissioner may within such time and in such manner as may be prewribed refer the matter to the District Judge whose decision in the matter shall be final and shall not be called in question in any Court. \"\n\nSection 12 : \" Where a permit granted under Chapter IV of the Motor Vehicles Act, 1939, haB been cancelled or the route to which the permit relates has been curtailed in pursuance of the scheme published under section 8, the State Government may if the holder of the permit offers to sell, choose to purchase the motor vehicles covered by the permit upon terms and conditions laid down in Schedule II : - Provided, firstly, that the vehicle is of a type, manufacture and model notified by the State Government; and Provided, secondly, that the vehicle is in a mechanically sound condition and is otherwise declared fit by the Transport Commissioner or his nominee. \"\n\nSCHEDULE I. \" Paragraph 1 : The compensation payable under section 11 of the Act for cancellation of a contract carriage or stage carriage or public carrier's permit under clause (e) of sub-section (1) of section 10 of the\n\n'9:i9 Act shall be computed for every vehicle covered by\n\nDeep Chand the permit as follows, namely : v.\n\n(1) For every complete month or part The State of Uttar of a month exceeding fifteen days of Pradesh o;. Others the unexpired period of the permit.\n\nSubba Rao J.\n\n(2) For part of a month not exceeding fifteen days of the unexpired period of a permit.\n\nRupees one hundred Rupees fifty\n\nProvided always that the amount of compensation shall in no case be less than rupees two hundred.\n\nParagraph 2: The compensation payable under section 11 for curtailment of the route or routes covered by a stage carriage or public carrier permit under clause (d) of sub-section (1) of section 10 of the Act shall be an amount computed in accordance with the following formula : YxA\n\nR In this formulay means the length in mile by which the route is curtailed.\n\nA means the amount computed in accordance with paragraph 1 above.\n\nR means the total length in miles of the route covered by the permit.\" The aforesaid provisions constitute an integrated scheme for paying compensation to the person whose permit is cancelled. The gist of the provisions may be stated thus: The scheme made by the State Government may provide for the cancellation of a permit, for curtailment of the route or routes or for transfer of the permit to other routes. Where a transfer of the permit is accepted by the operator, he will not be entitled to any compensation ; if he does not accept, compensation will be paid to him with interest in respect of the premature cancellation of the permit, or as the case may be for the curtailment of the route or routes covered by the permit. The amount of compensation to be given shall be determined by the Transport Commissioner in accordance with the provisions of the Act, and if the amount so\n\noffered is not acceptable to the permit-holder, the z959 Transport Commissioner may, within such time and Deep Chand in such manner as may be prescribed, refer the matter '\" to the District Judge whose decision in the matter Th• State of Uttar shall he final.\n\nThere is also a provision enabling the Pradesh &- Others Government to purchase the motor vehiclee. covered by the permit, if the holder of the permit offers to sell Subba Rao f. and if the vehicles satisfy the specifications laid down in the Act. The question is whether these provisions offer a quid pro quo for the interest of the petitioners in the commercial undertaking i.e., business in motor transport. Let us examine the question from the standpoint of a business deal. If the trans, port business is sold, the seller gets his value for the assets minus the liabilities and for his good-will. In the case of a scheme framed under the Act, the assets are left with the holder of the permit and under ce:rtain conditions the State purchases them. As the scheme is a phased one, it cannot be said, though there will be difficulties, that the assets cannot be sold to other operators. If a permit is not cancelled but o:nly transferred to another route, it may be assumed that if the transfer is voluntarily accepted by the permit-holder, he is satisfied that the route given to him ii> as good as that on which he was doing his business. On the other hand, if he chooses to reject the transfer of his permit to another route and takes compensation, the question is whether the compensation provided by s. 11 is anything like an equivalent or quid pro quo for the interest in the commercial undertaking acquired by the State. If cl. (5) of s. 11 had not been there, we would have had no hesitation to hold that a fl.at rate of Rs. 100 or less irrespective of the real loss to the holder would not be compensation within the meaning of Art. 31(2).\n\nBut, in our view, s. 11(5) gives a different complexion to the entire question of compensation. Under that clause, a permit-holder aggrieved by the amount of compensation given by the Transport Commissioner may ask for referring the matter to the District Judge for his decision in regard to the adequacy of the compensation.\n\nThis clause is susceptible of both a strict a8 well as a\n\nr959 liberal interpretation. If it is strictly construed, it may be held that what the District Judge can give as Deep Chand. compensation is only that which the Transport Com-\n\nTh 5,.,:· 01 uu., missioner can, under the provisionsofs. 11(1) i.e., at p,:aesh o;, Othm the rates mentioned in the Schedule. But a liberal interpretation, as contended by the learned Advocate Subba Roo J.\n\nGeneral, can be given to that clause without doing violence to the language used therein and that interpretation will carry out the intention of the legislature.\n\nIf the jurisdiction of the District Judge relates only to the calculation of figures, the said clause becomes meaningless in the present context. Section II read with the Schedule gives the rate of compensation, the rate of interest, the dates from which and up to which the said compensation is to be paid with interest. The duty of calculating the said amount is entrusted to the Transport Commissioner who will be a fairly senior officer of the Government. If he made any mistake in mere calculations, he would certainly correct it if the permit-holder pointed out the mistake to him. In the circumstances, is it reasonable to assume that 'the legislature gave a remedy for the permit-holder to approach the District Judge for the mere correction of the calculated figures ? It is more reasonable to assume that the intention of the legislature was to provide prima f acie for compensation at fiat rate and realising the inadequacy of the rule of thumb to meet varying situations, it entrusted the duty of the final determination of compensation to a judicial officer of the rank of a District Judge. The provisions of s.11(5), in our view, are certainly susceptible of such an interpretation as to carry out the intention of the legislature indicated by the general scheme of the provisions.\n\nThe crucial words are \"if the amount so offered is not acceptable to the permit-holder\". The amount offered is no doubt the amount calculated in accordance with s. 11(1). But a duty is cast on the Transport Commissioner to refer the matter to the District Judge if the amount offered is not acceptable to the permit-holder.\n\nThe word \" acceptable\" is of very wide connotation and it does not limit the objection only to the wrong calculation under s. 11(1).\n\nThe permit-holder may\n\nnot accept the amount on the ground that compensa- 1 959 tion offered is inadequate and is not a qui:d pro quo Deep Chand for the interest of which he is deprived. It is therefore v. for the District Judge, on the evidence adduced by The state of uuar both the parties, to decide the proper compensation to Pradesh & Others be paid to him in respect of the right of which he is deprived by the cancellation of the permit. The lang- Subba Rao J. uage of s. 11(5) not only bears the aforesaid construction but also carries out the intention of the legislature, for it cannot be imputed to the legislature that it intended to deprive a valuable interest by giving a nominal amount to the permit-holder.\n\nSection 11(5) speaks of the time limit within which such reference may be made to the District J\"udge, but no such rule has been brought to our notice. We hope and trust that, without standing on any such technicality, the Transport Commissioner, if so required, will refer the matter of compensation to the District Judge. Having regard to the entire scheme of compensation provided by the Act, we hold tha1; the Act provided for adequate compensation for the interest acquired within the meaning of Art. 31(1) of the Constitution.\n\nIt is said that out of the twenty five appeals appellants in thirteen appeals had accepted to take a transfer of the permits to different routes; but on behalf of the appellants it is denied that the acceptance was unequivocal and final.\n\nThey say that it was conditional and that, as a matter of fact, they have not been plying the buses on the transferred routes and indeed have been operating them only on the old routes. In these circumstances, we cannot hold that the said appellants accepted the alternative routes. If they or some of them choose to accept any alternative routes, they are at liberty to do so, in which event they will not be entitled to any compensation.\n\nLastly, the learned Counsel for the appellants contends that cl. (2) of s. 3 of the U. P. Act infringes their fundamental rights under Art. 31(2) inasmuch as it prevents them from questioning the validity of the scheme on the ground that it is not for public purpose.\n\nSection 3 reads :\n\nr959 \"(1) Where the State Government is of the opi- D\"p Chand nion that it is necessary in the interest of the general v. public and for subserving the common good, or for The stat• of Uttar maintaining and developing efficient road transport Pradesh & Others system so to direct, it may, by notification in the official Gazette declare that the road transport services Subba Rao f. in general, or any particular class of such service on\n\nany route or portion thereof as may be specified, shall be run and operated exclusively by the State Government, or by the State Government in conjunction with railways or be run and operated partly by the State Government and partly by others under and in accordance with the provisions of this Act. (2) The notification under sub-section (1) shall be conclusive evidence of the facts stated therein. \" The argument of the learned Counsel on the interpretation of this section appears to be an after-thought; for the records do not disclose that the appellants attempted to question the said fact before the Government and they were precluded from doing so on the basis of\n\ncl. (2) of s. (3).\n\nWe are not, therefore, prepared to allow the appellants to raise the contention for the first time before us.\n\nThe last contention, which is special to Civil Appeal No. 429 of 1958, is that during the crucial period when the scheme of nationalization was put through, the appellant had no permit, it having been cancelled by the order of the appropriate tribunal; but subsequently, after the scheme was finalised, the said order was set aside by the Appellate Tribunal retrospectively and therefore the order of the State Government made behind the back of the appellant does not bind him.\n\nThe appellant's permit was not renewed by the Regional Transport Authority. Against the said order, he preferred an appeal to the State Transport Tribunal, which by an order dated September 6, 1956, allowed the appeal and directed that the appellant's permit be renewed for three years beginning from November 1,\n\n1953. In disposing of the appeal the State Transport Tribunal observed :\n\n\"We are told that in the meantime this route has been notified and the Government buses are plying\n\non it.\n\nThe effect of this order will be that the appelz959 lant shall be deemed to be in possession of a valid perd f r ll Deep Chand mit and he shall have to be displace a ter 10 owing v. the usual procedure prescribed by the U. P. Road The State of uttar Transport Services (Development) Act.\" Pradesh & Others Pursuant to their order, it appears that the Regional Transport Authority renewed his permit on October 11, Subba Rao J. 1956 with effect from November 1, 1953 to October 31,\n\n1956. In the circumstances, as the petitioner was not a permit-holder when the Government made the order, no relief can be given to him in this appeal. This order will not preclude the appellant in Civil Appeal No. 429 of 1958, if he has any righl, to take appropriate proceedings against the State Government.\n\nIn the result, all the appeals are dismissed with one set of costs to the State ofUttar Pradesh.\n\nAppeals dism:ssed.\n\nTHE WESTERN INDIA THEATRES LTD. v.\n\nTHE CANTONMENT BOARD, POON A,\n\nCANTONMENT\n\n(S. R. DAS, c. J., s. K. DAS, P. B. GAJENDRAGADKAR, K. N. 'vVANCHOO and M. HIDAYATULLAH, JJ.)\n\nEntertainment Tax-Imposition on cinema show--Validity- Cantonments Act, I924 (Act II of I924), s. 60-Bombay Municipal Boroughs Act, I925 (Bom. XV III of I925), s. 73-Government of India Act, I9J5, s. IOO, Sch. VII, Entry 50.\n\nThe appellant, a public limited company, was the lessee of wo cinema houses, \" West End\" and\" Capitol\" situated within the Poona cantonment area. By a notification dated June 17, 1948, the Bombay Government with the sanction of the Governor-General-in-Council imposed certain taxes in the cantonment of Poona including an entertainment tax of Rs. IO per show on the appellant's cinema houses and Rs. 5 per show on others.\n\nThe appellant, who paid the tax under protest, brought the suit, out of which the present appeal arose, for a declaration that the\n\nI959\n\nJanuary r6.", "total_entities": 288, "entities": [{"text": "DEEP CHAND", "label": "PETITIONER", "start_char": 57, "end_char": 67, "source": "metadata", "metadata": {"canonical_name": "DEEP CHAND", "offset_not_found": false}}, {"text": "THE STATE OF UTTAR PRADESH\n\nAND OTHERS", "label": "RESPONDENT", "start_char": 69, "end_char": 107, "source": "metadata", "metadata": {"canonical_name": "THE STATE OF UTTAR PRADESH AND OTHERS", "offset_not_found": false}}, {"text": "S. R. 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show--Validity- Cantonments Act", "label": "STATUTE", "start_char": 122955, "end_char": 123025, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 60", "label": "PROVISION", "start_char": 123050, "end_char": 123055, "source": "regex", "metadata": {"linked_statute_text": "Entertainment Tax-Imposition on cinema show--Validity- Cantonments Act", "statute": "Entertainment Tax-Imposition on cinema show--Validity- Cantonments Act"}}, {"text": "Bombay Municipal Boroughs Act", "label": "STATUTE", "start_char": 123056, "end_char": 123085, "source": "regex", "metadata": {}}, {"text": "s. 73", "label": "PROVISION", "start_char": 123115, "end_char": 123120, "source": "regex", "metadata": {"linked_statute_text": "Bombay Municipal Boroughs Act", "statute": "Bombay Municipal Boroughs Act"}}, {"text": "Government of India Act", "label": "STATUTE", "start_char": 123121, "end_char": 123144, "source": "regex", "metadata": {}}]}
{"document_id": "1959_2_923_935_EN", "year": 1959, "text": "(2) S.C.R. SUPHEME COURT RE.POH, TS 923\n\nwith proper questions, and it seems th<tt similar questions on these aud other points were not put to the witness out of deference (as it is now suggested) to the ruling of the Court.\n\nThe accused c<rn only blame themselves, if they did not.\n\nThe learned Judges of the High Court r1 !led out from their consideration that these two cirnumstances made it possible for the witnesses to recognise the accused, but held that there was ample opportunity even otherwise for the witnesses to do so.\n\nThe High Court was justified in so doing, and there being ample evidence on which they could come to the conclusion that the witnesses had, in fact, recognised the accused, it must inevitably be regarded as one of fact in regard to which this Court does not interfere.\n\nSince 110 other point was argued, the appeal must fail, and we agree that it be dismissed.\n\nAppeal dismis8ed.\n\nTHE TH, U~TEES OJ!' THE CIIARlTY HUND,\n\nESPLANADE l~OAD, .FORT, BOMBAY\n\nTHE COMMU3SIONEL~ OF INCO:'vlE-TAX,\n\nBOMBAY\n\n(S. g, DAS, C. J., N. H. BHAGWA'l'l aml\n\nM. HrnAYA'I'ULLAH, JJ.)\n\nIncumc-tax--Public charitable trust--Exemption- -Test-Indian Income-tax Act, r922 (XI of r922), s. 4(3)(i).\n\nThe appellants were the trnstees of a charity fund known as \"The Charity Fund founded by Sir Sassoon David, Baronet of Bombay\". Clause 13 of the deed of trust, after declaring that the trnstees should apply the net income for all or any of the following purposes, namely, (a) the relief antl benefit of the poor ;111d indigent members of Jewish or any other community of Bombay or other parts of lndia or of the world either by making payments to them in cash or providing them with food and\n\nTahsild'\" Singh\n\n0 .d not her\n\nHe Stal~ of Utt:lr J>1 adesh\n\nHid , y, tullah ] .\n\nI959\n\nMay 5.\n\nI95Y\n\n924 SUPREME COURT REJ'ORTS [1959] Supp.\n\nclothes and/or lodging or residential quarters or in giving education including scholarships to or setting them up in life or in such The J'rustecs of the other manner as to the said Trustees may seem proper or ........ .\n\nChudty Fund,\n\n(b) the institution maintenance and support of hospitals Esplanade lload, and schools1 colleges or other educational institutions or ........... .\n\nForl Bombay · f '\n\n(c) the relief of any distress caused by the elements o\n\nC v. . . nature such as famine, pestilence, fire, tempest, flood, earthquake The ommissioner . or any other such calamity or .............. . of Income-tux,\n\nBombay\n\n(d) the care and protection of animals useful to mankind or ................. .\n\n(e) the advancement of religion or .............. .\n\n(f) other purposes beneficial to the community not falling under any of the foregoing purposes .............. ., added by way of provisos (1) that in applying the net income for the purposes mentioned in sub-cl. (a) the trustees must give preference to the poor and indigent relations or members of the family of Sir Sassoon David, including distant and collateral relatives, (2) that for the said purpose the trustees must apply not less than half of the income for the benefit of the members of the Jewish community of Bombay only, including the said relatives of Sir Sassoon David and Jewish objects. The question for determination was whether the income from the trust fund was exempt from taxation under s. 4(3)(i) of the Indian Income-tax Act. The High Court came to the conclusion that the trust fund could not be said to be held, wholly or partly, for religious or charitable purposes involving an element of public utility and answered the question in the negative.\n\nHeld, that there could be no doubt that each one of the primary purposes mentioned in the deed of trust, including the one mentioned in sub-cl. (a), properly construed, involved an element of public utility and thus they constituted a valid charitable trust.\n\nAlthough it was open to the trustees to spend the entire income for the purpose mentioned in sub-cl. (a), that could not detract from the validity of the trust since the relations or family members of the founder did not come in directly under any of the other purposes and could do so only under sub-cl. (a) as preferential beneficiaries to be selected from out of the class of primiary beneficiaries prescribed by it, in terms of the provisos. The test of the validity of such a public charitable deed of trust should be whether or not at the primary stage of eligibility it could be said to possess that character.\n\nIn re Koettgan's Will Trusts, [1954] Ch. 252, applied.\n\nTrustees of Gordhandas Govindram Family Charitable Trust v.\n\nCommissioner of Income-tax (Central), Bombay, [1952] 21 I.T.R- 231, distinguished and held inapplicable.\n\nThe circums\\ance that in selecting the actual beneficiaries\n\nfrom the primary class of beneficiaries under sub-cl. (a), the z959 trustees had to give preferece undr the provisos,_ to the rela- - 1 th tions or members of the family of Sir Sassoon David, could not The Trustee~ 0 8 therefore affect the public charitable trust constituted under Charity lund, sub-cl. (a) and the income from the trust properties was entitled Esplanade Road, to exemption under s. 4(3)(i) of the Indian Income-tax Act.\n\nPott, Bombay v.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. The Commissioner 396 of 1957. of Income-tax,\n\nBombay Appeal from the Judgment and Order dated the 21st February, 1956, of the Bombay High Court in Income-tax Reference No. 32 of 1954.\n\nR. J. Kolah, J. B. Dadachanji and S. N. Andley, for the appellants.\n\nK. N. Rajagopal Sastri and D. Gupta, for the respondent.\n\n1959. May 5. delivered by The Judgment of the Court was\n\nD.as, C. J.-This is an appeal brought on a certificate Das c. J. granted on September 19, 1956, by the High Court of Bombay under s. 66(A)(2) of the Indian Income Tax Act (hereinafter referred to as \" the said Act \") against its order dated February 21, 1956, in Incometax Reference No. 32 of 1954 answering in the negative two questions of law referred to it under s. 66(1) of the said Act at the instance of the appellants.\n\nThe appellants are the trustees of a charity fund known as \"The Charity Fund Founded by Sir Sassoon David, Baronet of Bombay\". The said Sir Sassoon David, Bart. and four other persons, who were holding certain securities of the value of Rs. 24,25,000 for the purpose of charity and had been applying the same for and towards charitable purposes, executed, on June 8, 1922, a Deed of Declaration of Trust declaring that the said trust fund would be held by them on trusts more specifically therein mentioned. Clause 13 of the said deed, on the true construction of which depends the answer to the referred questions, runs as follows:-\n\n\" 13.\n\nThe Trust Fund shall be held by the Trustees upon the Trusts to apply the net income thereof\n\n926 SUPHEME COURT ltEPURTS [1959] Supp.\n\n' 959 after providing for all necessary expenses in relation\n\nThe Trustees of\"\" to the management of the Trust :Funds for all or any\n\nCharity Fund, of the following purposes, that is to say, Esplanade Road,\n\n(a) the relief and benefit of the poor and indigent lort, IJombay members of Jewish or any other community of Bom-\n\n2., c v. . . bay or other parts of India or of the world either by 11e 01nmissioner . . . . of Income-tax. makmg payments to them m cash or prov1d111g them Bombay with food and clothes and/or lodging or residential quarters or in giving education including scholarships Das c. /. to or setting them up in life or in such other manner as to the said Trustees may seem proper or ............. ..\n\n(b) the institution maintenance and support of hospitals and schools, colleges or other educational institutions or .............. . (c} the relief of any distress caused by the elements of nature such as famine, pestilence, fire, tempest, flood, earthquake or any other such calamity or .......... ..\n\n(d) the care and protection of animals useful to mankind or .......... ..\n\n(e) the advancement of religion or .......... ..\n\n(f) other purposes beneficial to the community not falling under any of the foregoing purposes .........\n\nProvided always that in applying the income as aforesaid the Trustees shall give preference to the poor and indigent relations or members of the family of the said Sir Sassoon David, Bart., including therein distant and collateral relations; provided further that in tho application of the income of the said Charitable Trust l<'und the said Trustees for the time being shall observe the following proportions, viz.: that not less than half the income of the said funds shall at all times be applied for the benefit of the members of the Jewish Community of Bombay only (including the relations of Sir Sassoon David, Bart. as aforesaid) and Jewish objects and particularly in giving donations to the members of the Jewish Community of Bombay on the anniversary of the death of the said Sir Sassoon David, Bart. and his wife Lady Hannah David which falls on the Twenty.second day of\" June and the remaining income for the benefit of all persons and objects including Jewish persons an~ objects and in\n\nsuch proportions as the said Trustees may think proper. r959 Provided further that if the income of t?e Trus.t Funds The Tt-;:;;; es of the for any year shall not be wholly applied durrng that charitv Fund, year on the Trusts aforesaid such surplus income may Esplan; de Road, be carried forward to the subsequent year or years Fort, Bombay and be applied as the income arising during that year v ... or vears.\n\nProvided also that during the life-time ofT!ze 1c0\"\"ms 1s•oner\n\nS . .J S D 'd B . h l' t' f l of ncomeax, 1r assoon av1 , art., m t e app ica 10n o tie Bombay said income the Trustees shall have regard to the wishes of the said Sir Sassoon David, Bart., who shall Das c. J. also be entitled to direct if he so desires that the income of the time being of the Trust-Funds or any part thereof may be applied to such charitable object or objects as the said Sir Sassoon David, Bart., shall direct and in such case the Trustees shall so apply the income\".\n\nThis Deed of Declaration of Trmit was, on June 4, 1953, registered under the Bombay Public Trusts Act., 1950.\n\nThe Trust fund had been invested by the trustees in inter alia 3~% Government Securities. In the year 1930 a certificate was issued by the Income-tax Officer, A Ward, Bombay, whereby the Reserve Bank of India was authorised not to deduct at source the tax on the interest on the said securities so held by the trustees. It was mentioned in the said certificate that it was to enure till its cancellation. In 1946 the 3~% Government Securities were redeemed by the Government of India and were converted into 3% Conversion Loan, 1946.\n\nAccordingly in February, 1948, the said certificate of exemption was cancelled, as\n\nthe securities covered thereby had been redeemed by the Government. The trustees thereupon asked for a fresh certificate of exemption from the Income-tax Officer, Bombay Refund Circle in respect of the 3%\n\nConversion Loan, 1946.\n\nBut the said Income-tax Officer refused to issue such certificate on the ground that the income from the trust fund in question was not exempt from taxation under s. 4(3)(i) of the said Act which, at the material time, was as follows:-\n\n\" 4(l) 0 0 0 • e 0 o o 0 • t 0 o 0 0 0 t t t 0 o 0 0 0 0 t t 0 t o 0 0 0 0 0 0 o 0 t t t 0 o I I 0 o t 0 0 0 0 t o 0 0 t\n\nti ftl II I It fl It I I It I I It I tit Ill tttttt t It t ttt I flt 11 It tit I ti\n\nr959 (2)\n\nThe T.-ustees of the · ' ': '' '''' · •' ··'''''' · ' ·.''' '' ·· ··· ' •''':' ''' Cha.ity Fund, (3) Any mcome, profits or gams falling w1th- Esp!anade Road, in the following classes shall not be included in total\n\nFo.t, Bombay income of the person receiving them :-\n\nv. . .\n\n(i) Any income, derived from property held under The Commissio\"''trust or other legal obligation wholly for religious or of Income-tax, I . bl d h f h Id Bombay c iar1ta e purposes, an mt e case o property so e\n\nDas C. ]. in part only for such purposes, the income applied, or finally set apart for application, thereto:\n\n\" Upon the fact of the withholding of the certificate by the Income-tax Officer, Refund Circle, being intimated to the Income-tax Officer, A-V Ward, Bombay, the latter Officer started proceedings against the appellants under s. 34 of the .said Act in respect of the assessment years 1944-45 to 1947-48. He also started regular proceedings for the assessment year 1948-49 and the succeeding years up to 1952-53.\n\nIn the assessment proceedings for those nine years the Income-tax Officer took the view that the income from the trust fund was not exempt from taxation under s. 4(3)(i) and accordingly he assessed the appellants for the first four assessment years (1944-45 to 194 7-48) on the ground that the income for those years had escaped assessment. He also assessed the appellants to tax for the subsequent five years (1948- 49 to 1952-53). On appeal the Appellate Assistant Commissioner confirmed the said assessments.\n\nOn further appeal by the appellants, the Income-tax Appellate Tribunal set aside the assessments for the first four years (1944-45to 1947-48) holding thats. 34 had been wrongly invoked, for it was only a case of difference of opinion of one Income-tax Officer from his predecessor on the same set of facts. The department did not take any further steps in the matter and accepted that view of the Tribunal as regards the assessjlleBts of those years and we are not in this appeal concerned with them. As regards the assessments for the five years (1948-49 to 1952-53) the Tribunal upheld the decision of the Appellate Assistant\n\nCommissioner who had confirmed the assessments r959 made by the Income-tax Officer.\n\nTh T h 0 1. . b . d b th ll d e rustees of t e n app icat10n emg ma e y e appe ants, un er .Charity Fund s. 66( l) of the said Act, the Tribunal drew up a state- Esplanade Road, ment of case and referred two questions of law arising Fort, Bombay out of its order to the High Court for its opinion.\n\nv. . .\n\nThe said questions are as follows :- The Commissioner\n\n1) Wh h h T . h Id h ll of Income-tax ( et er t e rust property is e w o y Bombay ' for religious or charitable purposes within the meaning of section 4(3)(i) of the Indian Income-tax Act ?\n\nDas c. J.\n\n(2) If the answer to question (1) is in the negative, whether the trust property is held in part only for religious or charitable purposes ?\n\nThe said reference came up for hearing before the said High Court and both the referred questions were answered in the negative. The High Court, however, gave the appellants a certificate of fitness for appeal to this Court and the present appeal has been filed on the strength of such certificate.\n\nA perusal of cl. 13 of the deed shows that the trust fund is declared to be held by the trustees upon trusts to apply the net income thereof for all or any of the six purposes enumerated therein. It was conceded before the High Court-and it has not been disputed before us-that if there was nothing else in this clause, then each of these six purposes would have to be upheld as a charitable purpose involving an element of public utility and consequently within the protection of s. 4(3)(i). The fact that the trustees could expend the net income on any of the six purposes to the exclusion of the other five purposes would not, it is also conceded, have made the slightest difference in the matter of such exemption from income-tax. For instance, if the trustees spent the net income solely and wholly for the purposes mentioned under sub-cl. (a) to the exclusion of those mentioned in sub-els. (b) to (f) such income would still be exempt from taxation under s. 4(3)(i). The High Court, however, took,, the view that cl. 13 should be read as a whole along with the provisos and that so read the trust is primarily for the benefit of the relations or members of the family\n\nz959 of Sir Sassoon David, Bart. It is pointed out that in\n\nTh T - fth applying the net income for the purposes mentioned ' rnstees o ' . b 1 h b h Charity Fund m su -c . (a), t e trustees are ound, under t e first Esplanade Roa~. proviso, to give preference to the poor and indigent\n\nFo•t. Bombay relations or members of the family of the said Sir\n\nv. . .\n\nSassoon David, Bart. including therein distant and The Comm.ssion\" collateral relations. The second proviso, it is urged, of ;;;;;; ax. makes it further clear that in the application of the income for the said purpose, the trustees are enjoined Das c. J. to apply not less than half the income for the benefit of the members of the Jewish community of Bombay only \"including the relations of Sir Sassoon David, Bart., as aforesaid\" and the Jewish objects. Emphasis is laid on the words \" not less than half\" as indicating that it is permissible for the trustees to spend more than half and indeed the whole of the not income for the benefit of the said relations or members of the family of the said Sassoon David, Bart.\n\nIt is also pointed out that, although the remaining income, if any, has to be spent for the benefit of all persons and objects including Jewish persons and objects, the trustees could, if they so wished, spend the same also for the relations or members of the family of Sir Sassoon David, Bart. as Jewish persons.\n\nThe argument, which found favour with the High Court, is that the provisos impose a mandatory obligation on the trustees (i) to give preference to the poor and indigent relations or members of the family of Sir Sassoon David, Bart. and (ii) to spend not less than half the income, which may extend to the entire income, for the benefit of the relations or members of the family of Sir Sassoon David, Bart. The High Court points out that in view of the language of cl. 13 of the deed read as a whole, it is open to the trustees, without being guilty of any breach of trust, to spend the entire net income of the trust fund for the purpose of giving relief to the poor and indigent relations or members of the family of the said Sir Sassoon David, Bart., incfuding therein the distant and collateral relations and such being the position, the High Court came to the conclusion that it could not be said that the property was held wholly or partly for religious or\n\ncharitable purposes involving an clement of public z959 utility. The High Court accordingly held that the Th r - 1\n\nh • e rustees o t e income from the trust fund was not exempt from taxa- Charity Fund, tion under s. 4(3)(i) and answered both the questions Esplanade Road, in the negative. The problem before us is whether Furt, Bombay the High Court was right in so answering the ques-.\n\nv. . . tions.\n\nThe Commissioner In coming to the decision that it did, the High Court\n\n01 n:~::; tax, relied on its own earlier decision in the case of Trustees of Gordhandas Govindram Family Charitable Trust Das c. J.\n\nv. Commissioner of Income-tax (Central), Bombay (1 ).\n\nThe facts in that case, however, were somewhat different from the facts now before us. In that case the trust was significantly enough described as \" Gordhandas Govindram Family Charitable Trust\". Clause 2 of that trust deed provided for the application of the net income in giving help or relief to such poor V aishyas and other Hindoos as the trustees might consider deserving of help in the manner and to the extent specified in the said trust deed and subject to the conditions and directions stated in the next following clauses. Sub-clause (a) of cl. 3 provided that Vaishya Hindoos who were members of Seksaria family should be preferred to poor Vaishyas not belonging to the said family. Maintenance had to be provided under sub-cl. (b) for the poor male descendants of the settlor and under sub-cl. ( c) for the poor female descendants of the settlor. Marriage expenses were provided under sub-cl. (d) for the poor male descendants and under sub-cl. (e) for the poor female descendants of the sett.lor.\n\nThere were other subclauses providing for payment of money to the poor male or female descendants of the other members of the Seksaria family. In the present judgment now under appeal, the High Court recognises that the particular trust they were dealing with in the earlier case \"was a fairly blatant illustration of a settlor trying to benefit his own family and his own relations\" and states that in the earlier case it had pointed out \"that the benefit to the public was too remote and too illusory and accordingly held that that was\n\n(1) [1952] 21 I.T.R. 231.\n\n'959 not a trust which had for its object a general public The T;;;;;;,5 of the utility\". Such, however, cannot be said of the provi-\n\nCha•ity Fimd, sions of the present Deed of Declaration of Trust.\n\nEsplanade lload, Under cl. 13 the trustees are at liberty to hold the\n\nFo•t, Bombay trust fund and to apply the net income thereof for all\n\nv. . . or any of the six purposes mentioned therein. The The Commissioner . b f . . . of Ineome-tax, relations or mem ers 0 the family of the said Sir Sas- Bombay soon David, Bart., including therein distant and collateral relations do not figure as direct recipients of any Das c. J. benefit under sub-els. (b) to (f) and, therefore, in so far as those purposes are concerned the trust certainly involves an element of public utility. We are not unmindful of the fact that it is open to the trustees to spend the net income entirely for the purpose referred to in sub-cl. (a) to the exclusion of the other clauses. But the very fact that the relations or members of the family do not come in directly under any of those latter sub-clauses cannot be ignored, for they certainly have some bearing on the question as to who or what were the primary objects of the trust as a whole. In the next place, the purpose of sub-cl. (a) is the \"relief and benefit of the poor and indigent members of Jewish or any other community of Bombay or other parts of India or of the world\". It is conceded by learned counsel that this sub-clause clearly expresses a general charitable intention involving an element of public utility. It follows, therefore, that sub-cl. (a) constitutes a valid public charitable trust having as its beneficiaries the several classes of persons referred to therein. This is the first position.\n\nWe then pass on to the provisos. The first proviso opens with the words \"in applying the income as aforesaid\". This takes us back to sub-cl. (a).\n\nThe meaning of the proviso obviously is that in applying the income for the purpose of sub-cl. (a), the trustees shall give preference to the poor and indigent relations or members of the family of Sir Sassoon David, Bart. The proviso does not operate independently but comes into play only \"in applying the income as aforesaid\".\n\nThe provision for giving preference involves the idea of selection of some persons out of a bigger class envisaged in subcl. (a). The poor and indigent relations or members of\n\n(2) S.C.R. SUPREME COUHT REPOHTS 933\n\nthe family can claim to participate in the benefits 1959 under the trust only if they come within one of the ., r - ,, h d . b l ) T l 1 \"° rustces o, t e several classes enumerate m su -c . (a . o tarn an chaiity Fund extreme example : If a poor and indigent relation of Esplanade Road, Sir Sassoon David, Bart. abjures the faith held by the Fort, Bombay Jewish community and does not adopt any other faith v ... and thus ceases to be a member of the Jewish commu- The Comnmswner b d b b f h of Income-ta>< rnty ut oes not ecome a mem er o any ot er com- 130111bay ' munity, he will certainly not be entitled to the benefits of sub-cl. (a) although he is a poor and indigent relation Das c. J. or member of the family of Sir Sassoon David, Bart. within the meaning of the first proviso. In other words, sub-cl. (a) prescribes the primary class of beneficiaries out of which the actual beneficiaries are to be selected by the application of the provisions of the provisos, that is to say, by giving preference to the relations or members of the family of the said Sir Sassoon David, Bart. The case of In re Koettgan's Will Trusts (1) appears to us, on the facts, to be more in point than the case of Gordhandas Govindram Family Charity Trust case (2) relied on by the High Court. In the last mentioned English case the testatrix bequeathed her residuary estate upon trust for the promotion and furtherance of commercial educa- - tion. The persons eligible as beneficiaries under the fond were stated to be \"persons of either sex who are British born subjects and who are desirous of educating themselves or obtaining tuition for a higher com: mercial career but whose means are insufficient or will not allow of their obtaining such education or tuition at their own expense ... \" The testatrix further. directed that in selecting the beneficiaries \"it is my wish that the ... trustees shall give preference to any employees of John Batt & Co. (London) Ltd. or any members of the families of such employees; failing a sufficient number of beneficiaries under such description then the persons eligible shall be any persons of British birth as the trustees may select provided that the total income to be available for benefiting the preferred beneficiaries shall not in' any one year be more than 75% of the total available income for that\n\n(1) [1954] Ch. 252, 257.\n\n(2) [1952] 21 I.T.R. 23r.\n\n1959 year\". It was held, on a construction of the will,\n\nT -,- ., 11 that the gift to the primary class from which the e rtts ecs o1 re • , Cha, ity Fund, trustees could select the beneficiaries contained the E<plauod' lload. necessary element of benefit to the public and that it\n\nFo.t, Bombay was when that class was ascertained that the validity v. of the trust had to be determined, so that the subsen~ 1C0>nmissiou\" quent direction to prefer, as to the 75% of the income,\n\n;;:~:ox, a limited class did not affect the validity of the trust which was accordingly a valid and effective charitable\n\nDos c. J. trust. Referring to the first part of the will U pjobn, J., at p. 257 said:-\n\n\" If the will concluded there, the trust would clearly be a valid charitable trust, having regard to the admission that a gift for commercial education is for the advancement of education.\" Tlien after stating that the next task was to make a selection from that primary class of eligible persons, the learned Judge continued:-\n\n\" It is only when one comes to make a selection from that primary class that the employees of John Datt & Co. and the members of their families come into consideration, and the question is, does that direction as to selection invalidate the primary trust ? In -my judgment it does not do so.\"\n\nFurther down be said:-\n\n\"In my judgment it is at the stage wlien the primary class of eligible persons is ascertained that the question of the public nature of the trust arises and falls to be decided, and it seems to me that the will satisfies that requirement and that the trust is of a sufficiently public nature.\" The learned Judge then concluded:-\n\n\" If, when selecting from that primary class the trustees are directed to give a preference to the employees of the company and members of their families, that cannot affect the validity of the primary trust, it being quite uncertain whether such persons will exhaust in any year 75%. On the true construction of this will, that is not (as to 75%) primarily a trust for persons connected with Joh.n Batt & Co., and the class of persons to benefit is not \" confined \" t; o them, and in my judgment the trust contained in clauses 7\n\nand 8 of the will of the testatrix is a valid charitable r959 trust\" • The Trustees of the It is true that this is a judgment of a Single Judge but Charity Fund, it does not appear to have been departed from or over- F!splanade Road, ruled in any subsequent case and appears to us to be Fort, Bon.bay based on sound principle. Applying this test, there Th c v ... • • • e mnmissioner can be no quest10n-mdeed it has been concededof Income-tax, that the earlier part of cl. 13, omitting the provisos, Bombay constitutes a valid public charitable trust. The circumstance that in selecting the beneficiaries under sub- Das c. J.\n\ncl. (a) preference has to be given, under the provisos, to the relations or members of the family of Sir Sasoon David, Bart., cannot affect that public charitable trust.\n\nIn our judgment, the facts of this case come nearer to the facts of the English case referred to above than to the facts of the earlier decision of the Bombay High Court in Gordhandas Govindram Family Charity Trust case (1).\n\nAs we have already stated the relations or members of the family are clearly not the primary object contemplated by sub.els. (b) to (f).\n\nThe first part of sub-cl. (a), omitting the provisos, is not said to be too wide or vague and unenforceable. The provision for giving preference to the poor and indigent relations or the members of the family of Sir Sassoon David, Bart., cannot affect the public charitable trust constituted under sub-cl. (a).\n\nIn our opinion the income from the trust properties comes within the scope of s. 4(3)(i) and is, therefore, entitled to exemption. Therefore the negative answer given by the High Court to question No. I cannot be supported and that question should be answered in the affirmative.\n\nIn this view of the matter, question No. 2 does not arise and needs no answer. The result is that this appeal must be allowed and the question No. I must be answered in the affirmative. The appellants will have the costs of the reference in the High Court and of this appeal in this Court.\n\nAppeal allowed,\n\n(1) [1952] 21 I.T.R. 23r.", "total_entities": 28, "entities": [{"text": "DAS", "label": "JUDGE", "start_char": 1039, "end_char": 1042, "source": "metadata", "metadata": {"canonical_name": "SUDHI RANJAN DAS*", "offset_not_found": false}}, {"text": "Incumc-tax--Public charitable trust--Exemption- -Test-Indian Income-tax Act", "label": "STATUTE", "start_char": 1098, "end_char": 1173, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 4(3)(i)", "label": "PROVISION", "start_char": 1194, "end_char": 1204, "source": "regex", "metadata": {"linked_statute_text": "Incumc-tax--Public charitable trust--Exemption- -Test-Indian Income-tax Act", "statute": "Incumc-tax--Public charitable trust--Exemption- -Test-Indian Income-tax Act"}}, {"text": "Clause 13", "label": "PROVISION", "start_char": 1335, "end_char": 1344, "source": "regex", "metadata": {"linked_statute_text": "Incumc-tax--Public charitable trust--Exemption- -Test-Indian Income-tax Act", "statute": "Incumc-tax--Public charitable trust--Exemption- -Test-Indian Income-tax Act"}}, {"text": "s. 4(3)(i)", "label": "PROVISION", "start_char": 3313, "end_char": 3323, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 3338, "end_char": 3352, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 4(3)(i)", "label": "PROVISION", "start_char": 5140, "end_char": 5150, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 5165, "end_char": 5179, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 66(A)(2)", "label": "PROVISION", "start_char": 5745, "end_char": 5756, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 66(1)", "label": "PROVISION", "start_char": 5981, "end_char": 5989, "source": "regex", "metadata": {"statute": null}}, {"text": "Clause 13", "label": "PROVISION", "start_char": 6550, "end_char": 6559, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4(3)(i)", "label": "PROVISION", "start_char": 11161, "end_char": 11171, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 34", "label": "PROVISION", "start_char": 12275, "end_char": 12280, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4(3)(i)", "label": "PROVISION", "start_char": 12621, "end_char": 12631, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 66( l)", "label": "PROVISION", "start_char": 13794, "end_char": 13803, "source": "regex", "metadata": {"statute": null}}, {"text": "section 4(3)(i)", "label": "PROVISION", "start_char": 14194, "end_char": 14209, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 14224, "end_char": 14238, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "cl. 13", "label": "PROVISION", "start_char": 14708, "end_char": 14714, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4(3)(i)", "label": "PROVISION", "start_char": 15176, "end_char": 15186, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4(3)(i)", "label": "PROVISION", "start_char": 15657, "end_char": 15667, "source": "regex", "metadata": {"statute": null}}, {"text": "cl. 13", "label": "PROVISION", "start_char": 15715, "end_char": 15721, "source": "regex", "metadata": {"statute": null}}, {"text": "cl. 13", "label": "PROVISION", "start_char": 17730, "end_char": 17736, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4(3)(i)", "label": "PROVISION", "start_char": 18443, "end_char": 18453, "source": "regex", "metadata": {"statute": null}}, {"text": "Clause 2", "label": "PROVISION", "start_char": 19090, "end_char": 19098, "source": "regex", "metadata": {"statute": null}}, {"text": "cl. 3", "label": "PROVISION", "start_char": 19446, "end_char": 19451, "source": "regex", "metadata": {"statute": null}}, {"text": "cl. 13", "label": "PROVISION", "start_char": 20696, "end_char": 20702, "source": "regex", "metadata": {"statute": null}}, {"text": "cl. 13", "label": "PROVISION", "start_char": 27973, "end_char": 27979, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 4(3)(i)", "label": "PROVISION", "start_char": 29056, "end_char": 29066, "source": "regex", "metadata": {"statute": null}}]}
{"document_id": "1959_2_936_948_EN", "year": 1959, "text": "r959\n\nMay 6.\n\n936 SUPREME COURT REPORTS [1959] Supp.\n\nCROMPTON PARKINSON (WORKS) PRIVATE\n\nLTD., BOMBAY\n\nITS WORKMEN AND OTHERS\n\n(S. R. DAS, c. J., N. H. BHAGWATI, s. K. DAS, P. B. GAJENDRAGADKAR and K. N. WANOHOO, .T.J.)\n\nI nditstrial Dispute-Bonus-Gross Profits-E xpenditt<rc, when may be disallowed-Service Fee-TFhether allowable expcnditure-\n\nAvailable Surpl1's-Bon1ts, deducted as prior charge-Propriety of.\n\nInitially the appellant was a roo% subsidiary of the British company, Crompton Parkinson Ltd.\n\nIn 1947 an agreement called \" Technical Aid Agreement\" was concluded between the two companies under which the appellant agreed to pay to the parent company 5% of the net value of its sales every year as service fee for the use of their patterns, valuable designs, technical aid, benefit of research and ancillary services and facilities.\n\nAs the appellant obtained the benefit of the parent company's technical kno\\v1edge and research it did not maintain a separate research establishment on which it \\vould otherwise have had to spend far more than the service fee it paid.\n\nThe agreement had received the approval of the Govern1nent; the incon1e-tax authorities had, every year, allowed the service fee as legitimate expenditure; and the remittances to the parent company had been sanctioned by the Reserve Bank of India.\n\nIn the claim for bonus by the workmen, the Tribunal, in calculating the gross profits, pruned down the allowable expenditure on account of the service fee to one fourth on the grounds that the amount of service fee paid was excessive and beyond the requirements of commercial necessity and that a large part of the pay1nent was in the nature of capital expenditure. In calculating the available surplus the Tribunal deducted as a first charge 4! months basic wages as bonus before deducting depreciation and incometax contrary to the terms of the l'ull Bench formula.\n\nHeld, that the entire amount of service fee paid ought to have been allowed as proper expenditure. Unless• it was definitely found that a purported expenditure was sham or had been made with the express object of minimising the profits with a vie\\v to deprive the workmen of their bonus, the Tribunal could not substitute its own judgment as to what was or was not commercially justified in place of that of the appellant and its directors. 1'he service fee was a genuine expenditure and represented a binding contractual obligation which could legally be enforced against the appellant and a breach thereof may have had serious consequences affecting its business.\n\nHeld further, that the Tribunal acted wrongly in deducting\n\nbonus as a prior charge even before the recognised items of prior 1959 charges. Such departures from the Full Bench Formula by Tribunals were to be deprecated.\n\nCrompton d C C k C Parkinson (Works) Associate ement ompanies Ltd. v. Its Wor men, .A. Nos.\n\nP . 1 d 459 4nd 460 of 1957, decided on 5-5-59, followed. rBivaleb_t ' . om ay\n\nCIVIL\n\nAPPEI, LATE JURISDICTION: Civil Appeals v.\n\nNos. 756 & 757 of 1957.\n\nIts Workmm\n\nAppeal by special leave from the Award dated January 8, 1957, of the Industrial Tribunal, Bombay, in I. T. Ref. Nos. 109 and 147 of 1956.\n\n0. K. Daphtary, Solicitor-General of India, N. A.\n\nPalkhivala and S. N. Andley, for the appellant.\n\nRajani Patel and Janardan Sharma, for the respondents.\n\n1959. May 6.\n\nThe Judgment of the Court was delivered by\n\n&· Others\n\nDAS, C. J.-These are appeals by special leave filed Das c. J. by Crompton Parkinson (Works) Private Ltd. (hereinafter referred to as the company) against that part of the award made in References (IT) Nos. 109 and 147 of 1956 by the Industrial Tribunal, Bombay, on January 8, 1957, which concerns the demand of its workmen for bonus for the company's financial year 1954-55. That award was published in the Bombay Government Gazette of January 17, 1957, in Part IL at pages 351-364.\n\nThe material facts and circumstances leading upto the said award, as they appear from the evidence placed on record before the Tribunal, may shortly be stated as follows:- The company was incorporated in India in the year 1937. The registered office of the company is at Bombay. The authorised capital of the company is Rs. 75 lacs divided into 75,000 ordinary shares of the value of Rs. 100 each. Out of the authorised capital, shares of the value of Rs. 60 lacs have been issued, subscribed and fully paid. At its inception the company was 100% subsidiary of the well known British company named Crompton Parkinson Ltd. (hereinafter called the arent company). In 1937\n\n1 959 the company commenced its business which was and is to manufacture electrical equipment such as trans- Crompton .c • h Parkinrnn (Wo•ks) 1ormers, motors, fans, starters and sw1tc gears and to\n\nPdvate Ud, sell the same in the market. All the goods, which the\n\n11ombay company manufactures, are manufactured wholly in v. accordance with patterns, designs, specifications and\n\nnn;;,;,:~·· technical processes developed by and belonging to the Parent company which the latter makes available to\n\nDas c. J. the company. The company's products are sold under the trade names and marks belonging to the Parent company, namely, \"Crompton Parkinson\", \"Crompton\",\" Parkinson\" and\" C. P. \". Between 1937 and 1947 the company's business is said to have been in a stage of development and progress and it is admitted that the Parent company made no charge for the several services and facilities given by it to the company. fo the year 1947, after the company's business had been. established on a firm footing, an agreement wa.s concluded between the two companies in order to provide, on a long term basis, for the continuance of the technical assistance and service and other facilities afforded by the Parent company on which the company was wholly dependent. That agreement, which is said to be of a type commonly executed between the manufacturing and industrial concerns in India and their respective associates, parents or affiliates abroad and generally known as \" Technical Aid Agreements\" is said to have received the approval of the Government of India to promote the industrial development of the country. That agreement was actually executed on August 12, 1947, and provided that for a period of 20 years the Parent company would. render to the company various facilities and services, including, amongst others, the following :-\n\n( l) the use of the latest designs, manufacturing information and production methods discovered and developed by Crompton Parkinson Ltd . ;\n\n(ii) the fullest information and ad vice as to the most suitable machine tools and production machinery and equipment and as to the correct operation and use thereof;\n\n(iii) the supply at cost of machinery, equipment,\n\nraw materials and manufacturing parts. Under this r959 facility the appellants obtain the benefit of bulk purc h d h• h C p k' Ltd rompton c ase terms un er w IC rompton at' mson Parl<insoii (Works) purchase their raw materials; Private Ltd.,\n\n(iv) the benefit of the knowledge an<.1 experience Bombay of Crompton Parkinson Ltd.'s executive in all matters v.\n\nIts IV or Ii men relating to technical, mechanical and financial manage- & others ment;\n\n(v) the service of the Crompton Parkinson Ltd.'s Das c. J. experts and technical personnel ;\n\n(vi) facilities for training of selected employees of the petitioners in Crompton Parkinson Ltd.'s Works, and\n\n(vii) licence to use on the appellants' products the world-famous trademarks, \"Crompton Parkinson\", •· Crompton\", \"Parkinson\" and \"C. P.\" belonging to Crompton Parkinson Limited.'' In lieu of all royalties, licence fees and other considerations usually allowed for services and facilities of this kind, the company agreed to pay to the Parent company service fee calculated at the rate of 5% of the net value of the sales made by the company from year to year. ]'or the year 1954-55 the company had actually paid the amount of service fee and the same, after deducting the Indian income-tax, had been remitt_s1d to the Parent company. Shortly after the execution of the aforesaid agreement, 26% of shares of the company were acquired by Messrs .. Greaves Cotton Co. Ltd., which is an Indian Company and the company ceased to be a 100% subsidiary of the Parent company. It is said that when negotiations for the aforesaid agreement were going on negotiations were also in progress for the transfer of shares to the Indian company and that the latter was apprised of the terms of the proposed agreement and approved of the terms of payment of 5% of the net value of sales.\n\nOn August 25, 1955, the General Engineering Employees Union representing the workmen who are respondents Nos. 1 and 2 submitted certain demands to the company. No agreement having been arrived at, the matter was referred to the Conciliation Officer. As\n\n1959 no settlement was arrived at as a result of the conciliation proceedings, the Conciliation Otticer submitted c,-on1pto11 h' G f B b Pa•ki,, son (Wo•ks) IS report to the overnment o om ay under sub-s. 4 l\"ivat• Ud, of s. 12 of the Industrial Disputes Act, 1947. The Bombay Government of Bombay, after considering the said\n\nv. report and in exercise of the powers conferred on it by Its Wo•kmen sub-s. 5 of s. 12 of the Industrial Disputes Act, 1947, & Othets made an order on August 6, 1956, referring the dis-\n\nDas c. J. putes between the company and its workmen (other than those of the Watch and Ward staff) over their demands mentioned in the schedule to that order for adjudication to the Tribunal from whose award the present appeals have been filed.\n\nThis reference was marked as (IT) No. 109 of 1956.\n\nBy another order made on October 10, 1956, the Government of Bombay referred the disputes between the company and its workmen belonging to the Watch and Ward staff over the latter's demands mentioned in the schedule to that order for adjudication to the same Tribunal.\n\nThat reference was marked as (IT) No. 147 of 1956.\n\nOn September 10, 1956, a statement of claim was filed by the General Secretary, General Engineering Employees Union, on behalf of the workmen (other than those of the Watch and Ward staff) in Reference (IT) No. 109 of 1956 claiming, inter alia, tbat all workmen should be given bonus either (i) equivalent to 33?3% of their earnings during 1954-55 or (ii) a pro-rata bonus equivalent to their six months' basic wages, basic wage being calculated at the daily rate of pay which the workmen drew on June 30, 1955, and bonus being given without atta.ching any conditions. In the statement of claim the Union contended: (i) that during the year 1954-55 the company had made huge profits,\n\n(ii) that the company's business had expanded by leaps and bounds and production had mounted up very much and the company had made huge profits and (iii) that the wages paid to its employees fell terribly short of the living wage standard and extremely out of any reasonable proportion to the tremeudously high salaries paid to the company's officers. The Union requested the Tribunal to take into consideration the company's practice, inter alia, of writing off\n\n(2) S.C.R.\n\nSUPREME COURT REPOI~TS 941\n\nof very substantial amounts' as service fees to the Par- 1959 ent company. c The company filed its written statement in reply to Patki1~:0: r; otk•) the statement of claim filed by the Union in Reference Private Ltd,, No. (IT) 109 of 1956. While agreeing that .it had made Bombay reasonable progress, the company did not admit that v. the progress had been as rapid or phenomenal as the Its Workmen\n\n&- Others Union had suggested. The company stated that it had been able to accumulate only small reserves, that, Das c. J. in spite of its increased turnover, its profit for the year in question was quite low on account of stiff competition, that the wages paid to the workmen compared favourably with those paid by similar concerns, that they paid to the Parent company a service fee as consideration for the use of their patterns, valuable designs, technical aid, benefit of research and ancillary services and facilities.\n\nF'•r Lhe purposes of the reference, the company filed a copy of its audited balance-sheet and profit and loss account for the year 1954-55 as a confidential exhibit. In the said profit and loss account, service fee of 5% so paid for the year was shown as an item of expenditure.\n\nThe Union on behalf of the workmen belonging to the Watch and Ward staff filed a statement of claim in Reference (IT) No. 147 of 1956 regarding certain special claims of those workmen to which the company replied by its written statement. It is not necessary to refer to that statement of claim by the Union or the company's written statement, for they are not relevant to the question of bonus.\n\nIn the course of hearing of the References, which were taken up together, the workmen, through their counsel, submitted to the Tribunal, amongst other things, that the payment of the said service foe by the company was not justified and that the same should be disallowed as an item of expenditure for the purpose of calculating bonus payable to the workmen for the year 1954-55. The Tribunal thereupon called upon the company to bring on record by an affidavit all relevant facts and circumstances relating to the payment of service fee.\n\nThe company submitted that it was not open to the workmen to question an item of\n\n942 SUPREME COURT HEPORTS [1959) Supp.\n\n• 95J expenditure actually incurred and paid in the course of business or to request that such an item already\n\nPa.k~;;~:''<~o, ks) debited to the accounts, which had duly been audited\n\nT>iva\" Ltd, and passed, should be disallowed. The company sub-\n\nJJombay mitted that in any event the said payment was fully\n\nv. justified and reasonable.\n\nHowever, in compliance Its WMkmen with the Tribunal's directions, the company on Decem-\n\n& 01\"\"' ber 18, 1956, filed an affidavit affirmed on Decem her Das c. 1. 14, 1956, by Shri V. V. Dhume, the Secretary to the Company setting forth the relevant facts and circumstances relating to the payment of the said service fee.\n\nAt the further direction of the Tribunal, a copy of the agreement dated August 12, 1947, was also filed by tho company. Shri V. V. Dhume was examined before the Tribunal and his oral testimony was also recorded.\n\nThe material provisions of the said agreement ha Ye already been summarised above. Efom the affidavit and the oral evidence of Shri V. V. Dhumo referred to above, it is clear that all the goods which the company manufactures are manufactured wholly in accordance with the patterns, designs, specifications and technical processes developed by and belonging to the Parent company which it makes available to the company and that the company's products are sold exclusively under the trade names and marks belonging to the Parent company. There can be and is no dispute that the company has thus at its disposal the benefit of the Parent company's accumulated knowledge and experience, technical data and good will and the reputation attaching to its products. It is clear upon the evidence on record that the manufacture of specialised electrical goods and equipment of the types produced by the company is a highly specialised business of a very competitive nature requiring the use of the most up to date technique. In order to keep abreast with the latest development in the field of manufacture of this kind of equipment, the company will ordinarily have to maintain its own research laboratories and specialised staff to develop new methods and innovations and processes. The company, however, - does not maintain a separate research establishment of its own but obtains the benefit of the Parent\n\n(2) s.c.tt. SUPREME COtJRT REl>OttTS !}43\n\ncompany's invaluable services under the said agreer959 ment. According to Shri V. V. Dhume the service fee c , • rompton paid by the company to the Parent company const1- Parkinson (Works) tutes, in a substantial measure, a mere reimbursement Private Ltd., of expenses incurred by the latter in the maintenance Bombay and operation of its research department and rendering v. of facilities to the company. Shri V. V. Dhume fur-\n\n11~\n\n~~;:C~\"' ther stated that, had the company to maintain its own research department to provide such service and Das c. J. facilities, the annual expense of the company would have far exceeded the service fee actually paid by it to the Parent company. It also appears from the affidavit of Shri V. V. Dhume that the independent shareholders of the company who had acquired 26% shares of the company about the time when the \"Technical Aid Agreement\" was executed had willingly accepted that agreement. Apart from the fact that the agreement had received the approval of the Government of India in the Ministry of Finance as well as in the Ministry of Commerce and Industry, the income-tax authorities have from year to year allowed the full amount of the service fee paid by the company to the Parent company as an expenditure incurred wholly and exclusively for the purposes of the company's business. Likewise every payment and remittance made by the company representing the service fee to the Parent company has been sanctioned by the Reserve Bank of India ever since 1947. The payment of the service fee no doubt represents a binding con- , tractual obligation on the company which can be legally enforced against it and a breach thereof on the part of the company may well lead to the cancellation thereof by the Parent company as a result whereof the company will be deprived of the services and facilities obtained by it under the agreement and may even be prevented from carrying on its business.\n\nThere was no serious cross-examination of Shri V. V. Dhume regarding these matters by counsel appearing for the workmen and no substantive evidence on these questions was led by the workmen.\n\nThe Tribunal made its award in both the References on January 8, 1957. As regards the service fee,\n\nr959 the Tribunal held (i) that the amount of service fee\n\nC Pt paid by the company to the Parent company was rom on . .\n\nParkinson (Works) excessive and beyond the reqmrements of commercial\n\nPduate Ltd., necessity and was allowable as an expense only as to Bombay one quarter thereof and (ii) that in any event even if\n\nv. the commercial necessity of the payment could not bo\n\n11~ ri.;:;,:~•n challenged, a large part of the payment was in the nature of capital expenditure and that only the Das c. J. balance, being in fact a quarter thereof, was allowable as revenue expense for the purpose of determining the surplus available for the payment of bonus to the workmen. Thus, as regards the service fee, the Tribunal in its award proceeded to \"prune it down\". In the actual calculations made by the Tribunal for determining the available surplus according to the bonus formula appearing in what has been marked as confidential exhibit T-1, the Tribunal ha.s allowed only Rs. 2 lacs out of the total of Rs. 7•67 lacs actually paid as service fee and added back Rs. 5·67 lacs to the profits. It will also be noticed from that confidential exhibit T-1 that the Tribunal has deducted as a first charge 4~ months' basic wages as bonus before depreciation as well as tax, on no better ground than that, in the view taken by it, income-tax should not be deducted as a prior charge on the gross profits in preference to bonus. In so doing the Tribunal has not, quite clearly, followed but has made variations in that formula.\n\nThe bonus formula enjoins the Tribunals to arrive at the available surplus after providing for certain prior charges mentioned therein and then to determine, after taking into consideration all material circumstances, how that available surplus should be distributed between the three interests, namely, the industry, the shareholders and the workmen. To deduct bouus as a prior charge even before the recognised itums of prior charges appears to us to put the cart before the horse. Such a process is certainly not giving effect to the bonus formula but amounts to ad hoc determination which may vary according to the length of the proverbial foot of the Lord Chancellor and is bound to had to chaos and industrial unrest. The boi; rns formula was evolved by\n\nthe Labour Appellate Tribunal as far back as 1950 r959 and it has been generally approved by this Court in c more decisions than one and what is more it has Parki; s\n\n0 ;;; P~orks) worked fairly satisfactorily. In our judgment in the Private Ltd., appeals of Associated Cement Companies Ltd. v. Its Hombay Workmen (1) we have deprecated such departure from v. the bonus formula by individual Tribunals, for clearly Its Workmen\n\n0- Others such departure is not conducive to the harmonious and peaceful relations between the workmen and Das c. 1. their employers.\n\nThe only other question which calls for our decision is the correctness of the Tribunal's award as to the service fees.\n\nThe conclusion of the Tribunal on that point is founded on the ground that the test of \"commercial necessity\" applied by the income-tax authorities for determining whether the expenditure was allowable under s. 10(2)(xv) of the Indian Income-tax Act should also be applied by the Tribunal. The Tribunal evidently overlooked the fact that the incometax authorities are entitled to apply the test of commercial necessity by reason of the express provisions of s. 10(2)(xv) which authorise them to arrive at the taxable income, profits and gains after making allowance for expenditures laid out and expended wholly and exclusively for the purpose of the business. There is no such provision in the Industrial Disputes Act. In the absenc~ of cogent and compelling evidence leading to the definite conclusion and finding that a purported expenditure was sham or had been made 'Yith the express object of minimising the profits with a view to deprive the workmen of their bonus, it is no part of the duty of an Industrial Tribunal to substitute its own judgment as to what was or was not commercially justified in the place of the judgment exercised by the company and its Directors in whom in law the management of the company is confided. The Tribunal has completely overlooked the fact that the company's accounts had been duly audited by its auditors who were duly appointed by the company and that the said auditors had duly certified\n\n(r) [1959] S.C.R 925.\n\n' 959 in the manner provided for by the Indian Com- Crompton panies Act, that the said accounts had been drawn rarkinson (Works) up in conformity with the law and exhibited a true\n\nI'rfoate Ltd., and correct view of the state of the company's Bombay affairs. The Tribunal has paid no attention to the v. fact, appearing in the evidence on record before him, Its Workmen\n\n& Others that the income-tax department had allowed such service fee as legitimate revenue expense and the Das c. J. entire amount of the service fee was allowed as a deduction by income-tax authorities every year as a revenue expenditure wholly and exclusively incurred as a matter of commercial necessity of the company's business. Nor does the Tribunal appear to have adverted to the fact that the remittances to the Parent company were allowed by the Reserve Bank which always exercises close scrutiny on - every payment made to non-residents with a view to prohibit payments which are not justified. Nor has the Tribunal taken note of the fact that the Ministry of Finance and the Ministry of Commerce and Industry have approved of the payment of the service fee as provided in the agreement.\n\nA conclusion drawn by the Tribunal without adverting to the evidence before it amounts to an error of law and cannot possibly be sustained. Further, the Tribunal appears to have been led away by three facts, namely, (i) that the company did not pay any service fee during the period 1937-47,\n\n(ii) that the agreement was executed on August 12, 1947, that is to say, three days before the attainment of our independence and (iii) that at the date of the agreement the company was a 100% subsidiary of the Parent company. As regards the first reason, the explanation may well be that during the period 1937 to 1947 the company was still in a stage of development and growth. In any case the fa_ct that no fees had been charged during a particular period when the company was 100% subsidiary of the Parent company cannot reasonably be taken as a reason for not allowing them in future. It will be recalled that negotiations were going on for the acquisition of a considerable block of shares by an Indian company simultaneously with the negotiations for the execution of t]J.e\n\nagreement and that in fact 26% of the shares were r959 itcquirnd by Messrs. Greaves Cotton Co. Ltd. Further, such service fee has been paid year after year from P krompt(olVn k l _ . . . a1 inson or s 1947 right up to the bonus year rn question. The Private Ltd., second reason is equally unsustainable. The fact that Bombay a great constitutional change was envisaged may well v. and properly have been the reason for placing the Its Workmen legal relationship between the company and the & Others Parent company on a firmer and permanent legal Das c. J. footing.\n\nThe Tribunal seems to have overlooked the fact stated by Shri V. V. Dhume, that \"the payment of the service fee for the services of this nature is quite a common feature in India\". The reasonableness and legality of the payment of such fee is also supported by the fact that the income-tax authorities and the Reserve Bank of India have not taken any exception to such payment. The last reason adopted by the Tribunal clearly overloos the fact that shortly after the execution of the agreement about 26% of shares in the company were acquired by an Indian company and year after year ever since then these independent shareholders of the Indian company had willingly accepted the service agreement. Finally the award does not disclose any basis on which the Tribunal has purported to \" prune it down\" to one quarter of the amount actually paid by the company.\n\nAfter a careful consideration of the evidence on record we have come to the conclusion that this part of the award concerning disallowance of the major portion of the service fees cannot be supported or upheld. The Tribunal in the award itself has pointed out, as alreadv stated, that in case the whole of this service fee is to be allowed, as we think it should be, then on that basis the available surplus would permit the payment of bonus of one month's basic wag~ to the workmen. The company has no objection to payment of bonus to the workmen amounting to one month's basic wages, subject to the conditions laid down in the award in this behalf and indeed it has done so since the date of the award. The result, therefore, is that we allow these appeals to the extent that the award of the Tribunal be varied and modified by\n\n'959 n.llowing only one month's basic wages to its workmen\n\nC who are respondents to these appeals instead of 2i rompton th ' b . \"d d . h d b • Parkiuson (Wo>ks) mon s as10 wages as prov1 e m t e awar , su Ject, Private Ltd., of course, to the conditions laid down in the awn.rd. Be Bombay it noted here that the company has paid this bonus to\n\nv. the respondents and nothing remains due and payable Its Workmen for bonus for 1954-55. Considering all circumstances & Others of these appeals, we r.lirect each party to bear its own Das c. J.. costs of these appeals.\n\n'959\n\nMay 5.\n\nAppeal allowed in part.\n\nTHE INDIAN HUME PIPE CO., LTD., v.\n\nTHEIR WORKMEN\n\n(S. R. DAS, c. J., N. H. BHAGWATI, s. K. DAS, P. B. GAJENDRAGADKAR and K. N. WANCHOO, JJ.)\n\nInditslrial Dispute-Boniis -Available Surplus - Previous losses written off-Expenditure on patents written off-Debenture redemption reserve-If proper prior charges-Preference shares. return on-Calcitlations 011 All-India basis, whether proper.\n\nThe appeliant manufactured hume pipes and had factories in different parts of India, Pakistan and Ceylon. For determining the available surplus for the payment of bonus for the year 1954-55 the appellant claimed deductions as prior charges on account of (i) losses suffered on the Lahore factory written off,\n\n(ii) expenditure on patents written off, and (iii) debenture redemption reserve.\n\nIt also claimed 6% retnrn on the preference shares as return on paid up capital. The losses on the Lahore factory had been incurred in the previous years which had been carried forward from year to year and had been written off s irrecoverable in the bonus year.\n\nThe amounts spent on the purchase of the patents which had been worked off in the previous years had also been written off in the bonus year.\n\nThe appellant had issued debentures in 1942-43 redeemable in 1962-63 and claimed Rs. 3,50,000 as the annual contribution towards the redemption reserve. The appellant had issued preference shares on which the share-holders, under the terms of the issue, were not entitled to more than 5%, but the appellant claimed a return of 6% on these shares also as return on paid up", "total_entities": 17, "entities": [{"text": "CROMPTON PARKINSON (WORKS) PRIVATE\n\nLTD., BOMBAY", "label": "PETITIONER", "start_char": 54, "end_char": 102, "source": "metadata", "metadata": {"canonical_name": "CROMPTON PARKINSON (WORKS) PRIVATE LTD., BOMBAY", "offset_not_found": false}}, {"text": "ITS WORKMEN AND OTHERS", "label": "RESPONDENT", "start_char": 104, "end_char": 126, "source": "metadata", "metadata": {"canonical_name": "ITS WORKMEN AND OTHERS", "offset_not_found": false}}, {"text": "S. R. DAS", "label": "JUDGE", "start_char": 129, "end_char": 138, "source": "metadata", "metadata": {"canonical_name": "SUDHI RANJAN DAS*", "offset_not_found": false}}, {"text": "N. H. 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{"document_id": "1959_2_948_963_EN", "year": 1959, "text": "948 SUPREME COURT REPORTS [1959] Supp.\n\n'959 n.llowing only one month's basic wages to its workmen\n\nC who are respondents to these appeals instead of 2i rompton th ' b . \"d d . h d b • Parkiuson (Wo>ks) mon s as10 wages as prov1 e m t e awar , su Ject, Private Ltd., of course, to the conditions laid down in the awn.rd. Be Bombay it noted here that the company has paid this bonus to\n\nv. the respondents and nothing remains due and payable Its Workmen for bonus for 1954-55. Considering all circumstances & Others of these appeals, we r.lirect each party to bear its own Das c. J.. costs of these appeals.\n\n'959\n\nMay 5.\n\nAppeal allowed in part.\n\nTHE INDIAN HUME PIPE CO., LTD., v.\n\nTHEIR WORKMEN\n\n(S. R. DAS, c. J., N. H. BHAGWATI, s. K. DAS, P. B. GAJENDRAGADKAR and K. N. WANCHOO, JJ.)\n\nInditslrial Dispute-Boniis -Available Surplus - Previous losses written off-Expenditure on patents written off-Debenture redemption reserve-If proper prior charges-Preference shares. return on-Calcitlations 011 All-India basis, whether proper.\n\nThe appeliant manufactured hume pipes and had factories in different parts of India, Pakistan and Ceylon. For determining the available surplus for the payment of bonus for the year 1954-55 the appellant claimed deductions as prior charges on account of (i) losses suffered on the Lahore factory written off,\n\n(ii) expenditure on patents written off, and (iii) debenture redemption reserve.\n\nIt also claimed 6% retnrn on the preference shares as return on paid up capital. The losses on the Lahore factory had been incurred in the previous years which had been carried forward from year to year and had been written off s irrecoverable in the bonus year.\n\nThe amounts spent on the purchase of the patents which had been worked off in the previous years had also been written off in the bonus year.\n\nThe appellant had issued debentures in 1942-43 redeemable in 1962-63 and claimed Rs. 3,50,000 as the annual contribution towards the redemption reserve. The appellant had issued preference shares on which the share-holders, under the terms of the issue, were not entitled to more than 5%, but the appellant claimed a return of 6% on these shares also as return on paid up\n\ncapital as provided in the Full Bench formula. The dispute 1959 regarding bonus had been raised by the workmen of the \\Vadala factory alone, the workmen of other factories having settled The btdian Hume the matter had been paid the agreed bonus. The respondents Pipe Co., Ltd., claimed that the bonus calculations should not be made on the v. basis of All-India figures but on the basis of the actual amounts Their Workmen paid or payable by the appellant under the settlements.\n\nHeld, that the losses on the Lahore factory and the patents written off could not be allowed as prior charges as they were merely debits in connection with the working of previous years.\n\nNor could the amount on account of the debenture redemption reserve be allowed as a prior charge as no such charge was envisaged by the Full Bench formula of the Labour Appellate Tribunal ; but this amount could be taken into consideration when distributing the available surplus among the various interests entitled thereto. In determining the available surplus the Full Bench formuta must be adhered to in its essential particulars as otherwise there would be no stability or uniformity of practice.\n\nA deduction of more than 5% return on the preference shares could not be allowed as that was the maximum return which the share-holders could get on these shares. Even though the Full Bench formula mentioned 6% return on paid up capital it was not to be literally construed and the Tribunal could, if the circumstances warranted, increase or decrease the i; ate.\n\nIn calculating the actual amount of bonus to be paid calculations had to be made on the basis of All-India figures otherwise the respondents would have an advantage over those workmen with whom settlements had been made and would get larger amounts of bonus merely by reason of the fact that the appellant had managed to settle the claims of those workmen at lesser figures.\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 54 of 1958.\n\nAppeal by special leave from the Award dated January 14, 1957, of the Industrial Tribunal at Bombay in Reference (I. T.) No. 75 of 1956.\n\nM. 0. Setalvad, Attorney-General for India and J. N.\n\nShroff, for the appellants.\n\nN. V. Phadke, T. S. Venkataraman, K. R. Sharma and K. R. Ohaudhury, for respondent No. 1 and the Intervener.\n\n1959. May 5.\n\nThe Judgment of the Court was delivered by\n\n19~ BHAGWATI, J.-This appeal with special leave chalne 1,, dian llum.lenges the award made by the Industrial Tribunal,\n\nPipe co. Ltd .• Bombay, in lteference (IT) No. 75 of 1956 between the v. appellant and the respondents whereby the Industrial Their Workmen Tribunal awarded to the respondents 4~ months' basic wages as bonus for the year 1954-55 (year ending lJhagwati J • June 30, 1955).\n\nThe appellant is a subsidiary of the Premier Construction Co., Ltd., and manufactures Hume Pipes. l t has factories in different parts of India, Pakistan and Ceylon. The respondents are the workers employed in the appellant's factory at Antop Hill, Wadala, Bombay.\n\nIn October 1955, respondent 1 who arc workmen represented by the Engineering Mazdoor Sabha made a <lemand for the payment of six-months' wages as bonus for the year 1954.55. The matter was also referred to the Conciliation Officer requesting him to initiate Conciliation Proceedings. The Conciliation Proceedings went on before the Conciliation Officer upto March 23, 1956, on which date both the parties arrived at and executed an Agreement to refer the matter to an Industrial Tribunal for adjudication.\n\nAccordingly, on April 30, 1956, both the parties drew up and signed a joint-application for referring the dispute for adjudication to a Tribunal and the Government of Bombay thereupon in exercise of the powers conferred by sub-s. (2) of s. 10 of the Industrial Disputes Act, 1947, by its order dated June 11, 1956, referred the following dispute to the Tribunal :-\n\n\"DEMAND: Every Workman (daily rated) Hhould be paid bonus for the year 1954-55 (year ending 30th June, 1955) equivalent to six-months' wages without attaching any condition thereto\".\n\nltespondent No. 1 filed their statement of claim before the Tribunal on June 29, 1956. They alleged that the profits of the appellant during the year 1954- 55 were higher than those during the year 1953-54 for which year the appellant had paid four months' basic wages as bonus.\n\nThey also alleged that the wages paid to them by the appellant fell short of the living wage and therefore the appellant should pay them six months' basic wages as bonus for the relative year,\n\nThe appellant filed its written statement in answer r959 on August 14, 1956. The appellant submitted that, Tl\n\nI -;;:- II after providing. for \" the prior charges\" according t.o ; ipen ~;',' u~'~\" the formula laid down by the Labour Appellate Triv. bunal the profits made during the year under con- Their Wmtanen sideration did not leave any surplus and the respondents were not entitled'to any bonus. It denied that Rhagwlfi J. it had made huge profits during the year in question and submitted that the profits made were not evqn sufficient to provide for \"the prior charges\", etc.\n\nThe Tribunal after hearing the parties came to the conclusion that even if payment of a bonus equal to 4! months' basic wages were made a fair surplus would be left in the hands of the appellant to the tune of Rs. 3·30 lacs and therefore awarded the same subject to the following conditions :- (a) Any employee who has been dismissed for misconduct resulting in financial loss to the company shall not be entitled to bonus to the extent of the loss caused. (b) Persons who are eligible for bonus but who are no longer in the service of the company on the date of the payment shall be paid the same provided that they make a written application for the same within three months of publication of this award. ' Such bonus shall be paid within one month of receipt of application provided that no claim can be enforced before six weeks from the date this award becomes enforceable.\n\nBeing aggrieved by the said award of the Tribunal, the appellant applied for and obtained from this Court special leave to appeal against the same under Art. 136 of the Constitution and hence this appeal.\n\nThe formula evolved by the Full Bench of the Labour Appellate Tribunal in Millowners' Association, Bombay v. Rashtreeya Mill Mazdoor Sangh, Bombay (1) is based on this idea that \"as both labour and capital contribute to the earnings of the industrial concern, it is fair that labour should derive some benefit, if there is\n\na surplus after meeting\" prior or necessary charges\".\n\nThe following were prescribed as the first charges on\n\n(1) (1950) L.L.J. 1247.\n\nr959 gross profits, viz., (1) Provision for depreciation ; -.-\n\n(2) reserves for rehabilitation; (3) a return at 6% on The Indian Hume h 'd 1 ( k' Pipe co., Ltd., t e pat up capita ; 4) a return on the wor mg v. capital at a lesser rate than the return on paid up Th•lr Wo•hmm capital and (5) an estimated. amount in respect of the\n\npayment of income-tax. The surplus that remained Bhagwati J. after making the aforesaid deductfons would be available for distribution among the three sharers, viz., the shareholders, the industry and the workmen [See Muif Mills Co., Ltd. v. Suti Mills Mazdoor Union, Kanpur (1) and Sree Meenakshi Mills Ltd. v. Their Workmen(')].\n\nThis Full Bench Formula has been working all throughout the country since its enunciation as aforesaid and has been found to be, in the main, fairly satisfactory. It is conducive to the benefit of both labour and capital and even though certain variatiOns have been attempted to be made therein from time to time the main features thereof have not been substantially departed from. We feel that a formula which has been thus adopted all throughout the country and has so far worked fairly satisfactorily should be adhered; to, though there is scope for certain flexibility in the working thereof in accordance with the exigencies of the situation.\n\nIn the working of the said formula, however, regard must be had both to the interests of capital and labour. In any given industry there are three interests involved, viz., the shareholders, the Company and the workmen and all these interests have got to get their proper share in the surplus profits ascertained after due provision is made for these \"prior charges\".\n\nThe shareholders may look to largr dividends commensurate with the prosperity of the industrial concern, the company would, apart from rehabilitaticm and replacement of buildings, plant and machinery, look forward to expansion and satisfaction of other needs of the industry and the workmen would certainly be entitled to ask for a share in the surplus profits with a view to bridge the gap between the wages earned by them and the living wages. _All those interests\n\n(1) [1955] I S.C.R. 991, 998.\n\nhave, therefore, got to be duly and properly provided r959 fordhaving regar 1 d to thefi princpl lebsl off soc 1 al .Jbusice The Indian Hum~ an once surp us pro ts ava1 a e or c istri ut10n Pife co., Ltd., amongst these respective interests are determined v. after making due provision for the \"prior charges\" as Their Workmen aforesaid the Industrial Tribunal adjudicating upon the dispute would have a free hand in the distribution Bha.gwati J. of the same having regard, of course, to the considerations mentioned hereinabove. But so far as the determination of the surplus profits is concerned the formula must be adhered to in its essential particulars as otherwise there would be no stability nor uniformity of practice in regard to the same.\n\nIt may be noted, however, that in regard to the depreciation which is a prior charge on the gross profits earned by a concern there is always a difference in the method of approach which is adopted by the income-tax authorities and by the industrial tribunals.\n\nIt was pointed out by us in Sree Meenakshi Mills Ltd.\n\nv. Their Workmen (1) that the whole of the depreciation admissible under the Income-tax Act was not allowable in determining the available surplus. The initial depreciation and the additional depreciation were abnormal additions to the income-tax depreciation and it would not be fai1 to the workmen if these depreciations were rated as prior charges before the available surplus was ascertained.· Considerations on which the grant of initial and additional depreciations might be justified under the Income-tax Act were different from considerations of social justice and fair apportionment on which the Full Bench Formula in regard to the payment of bonus to workmen was based. This was the reason why we held in that case that only normal depreciation including multiple shift depreciation, but not initial or additional depreciation should rank as prior charge. We approved of the decision of the Labour Appellate Tribunal in U. P. Electric Supply Go., Ltd. v. Their Workmen (2 ) in arriving at the above conclusion and disallowed the claim of the company there to deduct the initial or additional depreciation as prior charge in bonus calculations.\n\n(r) [r958] S.C.R. 878,\n\n(2) (1955) L, A, C. 65g. 120\n\n1959 When this decision was reached we had not before\n\nTh I -a H us the decision of the -Labour Appellate Tribunal in e n '\"\" ume S El · C\n\n' S ,/!I' U . h S Pipe co., Ltd., urat ectricity ompany s taJJ nion v. T e urat v.\n\nElectricity Co., Ltd.(') where a Bench of the Labour Their Workmen Appellate Tribunal had negatived the contention that if only the \"normal \" depreciation allowed by the In- Bhagwati J. come-tax law were allowed a company would be able to recoup the original cost of the assets and observed that:\n\n\"For the purpose of bonus formula the initial and additional depreciation, which are disallowed by that formula, must be ignored in fixing the written down value and in determining the period over which the normal depreciation will be allowed. The result will be a notional amount of normal depreciation ; but, as we have said repeatedly the bonus formula is a notional formula.\"\n\nWe have already expressed in the judgment delivered by us in Associated Cement Co., Ltd. v. Its Workmen (2) that for the purpose of the bonus formula the notional normal depreciation should be deducted from the gross profits calculated on the basis adopted in Surat Electric Supply Co. Staff Union v. Surat Electricity Co., Ltd.(') and not merely the normal depreciation including multiple shift depreciation allowed by the income-tax authorities as stated in U. P. Electric Supply Co., Ltd. v. Their Workmen (3).\n\nIt is well settled that the actual income-tax payable by the company on the basis of the full statutory depreciation allowed by the income-tax authorities for the relevant accounting year should be taken into account as a prior charge irrespective of any set off allowed by the Income-tax authorities for prior charges or any other considerations such as building up of income-tax reserves for payment of enhanced liabilities of income-tax accruing in future. It is also well settled that the calculations of the surplus available for distribution should be made having regard to the working of the industrial concern in the releyant\n\n(1) (1956) L.A.C. 443.\n\n(2) [1959] S.C.R. 925.\n\n(3) (1955) L.A.C. 659.\n\naccounting year without taking into consideration the\n\nI959 credits or debits which arereferable to the working of 1.h 1 -d. H . f f e n ian ume the previous years, e.g., the re undo excess profits tax Pipe co .. Ltd., paid in the past or loss of previous years carried forv. ward but written off in the accounting year as also Their Workmen any provision that may have to be made to meet future liabilities, e.g., redemption of debenture stock, Bhagwati f. or provision for Provident Fund and Gratuity and other benefits, etc., which, laowever, necessary they may be, cannot be included in the category of prior charges.\n\nIf regard be had to the principles enunciated above it is clear that the items of Rs. 1·14 lacs representing the Lahore factory balance written off, Rs. 0·34 lacs being patents written off, and Rs. 0·09 lacs shown as loss on sale of Tardeo property cannot be allowed as proper deductions from the gross profits for the purposes of bonus calculations. The first two items represented debits in connection with the working of previous years.\n\nLoss of the Lahore factory had been incurred during the three previous accounting years and had been carried forward from year to year and the only thing which was done during the year under consideration was that it was then written off as irrecoverable. The patents also had been worked off in previous years and the amounts spent in the purchase thereof were therefore to be written off bnt had reference to the working of the company during the previous years. The last item of Rs. 0·09 lacs was trivial and was therefore not pressed with the result that all these three items were rightly added back in the calculations of the gross profits of the appellant and the figure of gross profits taken at Rs. 36·21 lacs was correctly arrived at by the Tribunal.\n\nThe depreciation allowed by the Tribunal was\n\ns. 9.82 lacs which was the full statutory depreciation allowed by the Income-tax authorities. That should not have been done and the only depreciation allowed should have been the notional normal depreciation which was agreed between the parties before us at Rs. 6·23 lacs.\n\nWorking the figure of income-tax deducted by the\n\nx959 appellant on the basis adopted in Shree M eenakshi\n\n7 h I -d. H Mills Ltd. v. 'l'heir Workmen (1) the income-tax on the e n, ian unze l'ipe co .. Ltd., gross profits of Rs. 36·21 la.cs less the statutory deprev. ciation allowed by the income-tax authorities, viz.,\n\nThefr Workmen Rs. 9·82 lacs would be equivalent to 7 annas in the rupee on Rs. 26'39 lacs, i.e., Rs. 11·55 lacs thus leav- J'Jhagwati 1 ing a balance of Rs. 16·82 lacs from which the other prior charges would have to be deducted in order to ascertain the distributable surplus. 6% return on the ordinary share capital and 5% return on the preference share capital would come to Bs. 4·30 lacs. The appellant, however, claimed that even on the preference shares 6% return should be allowed and not 5% even though preference shareholders were not entitled to anything beyond 5% under the terms of issue.\n\nThe appellant obviously relied upon the wording of the formula: \"return at 6% on the paid up capital\" and contended that the preference shares also being paid up capital it would be entitled to a return of 6% on the preference shares for the purposes of the bonUli formula even though in fact it would have to pay only 5% return on the same. \"Ve cannot accept this contention. Even though the bonus formula is .a notional one we cannot ignore the fact that in no event would the appellant be bound to pay to the preference shareholders anythipg beyond 5% by way of return. The Full Bench Formula cannot be so literally construed. There is bound to be some flexibility therein, the 6% which is prescribed there as th'e return on paid up capital is not inexorable, and the Tribunals could if the circumstances warrant vary the rate of interest either by increasing or decreasing the same. On the facts of this case however there is no warrant for allowing anything beyond 5% return on preference share capital and the amount of Rs. 4•30 lacs should therefore be deducted ail another prior charge from the grsos profits of the appellant. 4% return on reserves used as working capital was calculated merely at a figure of Rs. 0·29 lacs worked out on a total figure of Rs, 7,42,139.\n\nThe Tribunal\n\n(1) [195i) S.C.R. 878,\n\n(2) S.C.R. SUPREME COURT REPOHTS 957\n\ndid not take into consideration another sum of z959 Rs. 41,81,196 which represented the depreciation fund The Indi;;. llume\n\nwhich according to the appellant had been used as Pipe co., Ltd., working capital during the year. If that had been v. allowed a further sum of Rs. 1.67 lacs should have Their Workmen been added to Rs. 0·29 lacs and the total amount of d k. • l ld Bhagwati ]. 4% return on reserves use as wor mg capita wou have amounted to Rs. 1·96 lacs.\n\nTwo arguments were advanced against this contention of the appellant. One was that there was nothing like a depreciation fund, that it merely represented a credit item introduced in the balance-sheet as against the value of the fixed capital at its original cost and would have disappeared as such if the proper accounting basis had been adopted, viz., the fixed block had been showed at its depreciated value after deducting the amount of depreciation from the original cost.\n\nSuch book entries, it was contended, did not convert that credit item into a depreciation fund available to the company and there was therefore no basis for the contention that such a depreciation fund ever existed and could be used as working capital in the business. The other waR that there was nothing on the record to show that such a depreciation fund, if any, had been, in fact, used as working capital in the business during' that year.\n\nThe answer furnished by the appellant in regard to both these contentions was that on a true reading of the balance-sheet Rs. 41,81,196 were reserves used as working capital, vide calculations in Exhibit C-12.\n\nProvision for depreciation was Rs. 1,10,29,954 and the paid up capital was Rs. 80,00,000 thus totalling to Rs. 1,90,29,954. The total capital block as shown in page 5 of the balance-sheet for the year ending June 30, 1955, was Rs. 1,48,48,758 and the working capital therefore was Rs. 41,81,196. This was apart from Rs. 7,42,139 which was the total of the three items at page 4 of the balance-sheet: Rs. 98,405 capital reserves, Rs. 4, 73, 734 other reserves and Rs. 1, 70,000 provision for doubtful debts as also the investments, cash and bank balance. This being the true position it follows on the facts of the present case that this\n\n1959 amount was available for use as working capital and\n\nThe Indfon linme the balance-shee~ sh_owed that it w~.s in _fact so used.\n\nPipe co., Ltd., Moreover, no obiect10n was urged m this behalf nor v. was any finding to the contrary recorded by the Tri- 1.,1ei'r JVorkmen bunal.\n\nWe are, therefore, of the opinion that the reasoning Hhagwati J. adopted by the Tribunal was not correct and the appellant was entitled to 4% return on the reserves nsed as working capital including the sum of Rs. 41,81,196.\n\nThe appellant was thus entitled to Rs. l 96 lacs as the 4% return on reserves used as working capital and not merely Rs. 0·29 lacs as allowed by the Tribunal.\n\nThe provision for rehabilitation had been claimed by the appellant at Rs. 1·10 lacs on the basis of 10% of the net profits relying upon para. 20 of the Report of the Committee on Profit Sharing in which the Committee had proposed that 10% of the net profits should compulsorily be set aside for reserves to meet emergencies as well as for rehabilitation, modernization and reasonable expansion.\n\nNo evidence was at all led by the appellant before the Tribunal showing the cost of the machinery as purchased, the age of the machinery, the estimate for replacement etc., in order to srlbstantiate this claim for rehabilitation and the appellant was content merely to rely upon this recommendation of the Committee on Profit-sharing. This was rightly considered by the Tribunal as insufficient to support the appellant's claim, though it allowed for rehabilitation, in addition to the statutory depreciation, the amount for which the appellant had actually made provision, viz., the sum by which the depreciation written off for the year exceeded the statutory depreciation (i. e., Rs. 10,00,000 minus Rs. 9,82,799- Rs. 17,201). The amount was really small and did not affect the bonus to be awarded. The Tribunal, in fact, allowed the same, though it appears that in the absence of evidence of the nature above referred to even that sum of ls. Ol 7 lacs ought not to have been allowed. In this state of affairs it is really impossible for us to allow the appellant's claim for rehabilitation in anything beyond the sum of Rs. 0 17 lacs actually\n\nallowed by the Tribunal and the claim of the appellant x959 for any further provision for rehabilitation must be Th 1 -a H . • e n ian ume disallowed for the purpose of the bonus calculat10ns Pipe co., Ltd., for the year under consideration. It will however be v. open to the appellant to claim higher rehabilitation for Their Workmen subsequent years if it can substantiate its claim by adducing proper evidence.\n\nBhagwati J.\n\nIn addition to these various sums allowed to the appellant by way of prior charges against the gross profits earned during the accounting year the Tribunal also allowed to the appellant Rs. 2·50 lacs by way of provision for debenture redemption fund.\n\nThe claim of the appellant was for a sum of Rs. 3·50 lacs for the same and it arose under the following circumstances.\n\nThe. appellant had issued debentures of the value of Rs. 30 lacs in the year 1942-43 and they were redeemable in the year 1962-63. No annual provision had been made from profits for redemption of the same inasmuch as until the year 1949 the appellant was not working at a profit. Such provision was made only thereafter. For the year 1950-51, the appellant made a provision for Rs. 75,000 for debenture redemption fund, for 1951-52, Rs. 1,50,000, for 1952-53 Rs. 1,50,000, for 1953-54 Rs. 75,000 and further provision had to be made for redemption of debenturesin a sum of Rs. 24,50,000. In so far as 7 more years were left before the due date for redemption the appellant claimed Rs. 3,50,000 as the annual sum to be set apart, though as a matter of fact in the balance-sheet only a provision of Rs. 2,50,000 had been made by it for debenture redemption reserve. The Tribunal pointed out that when the appellant had in its accounts appropriated Rs. 2,50,000 for the debenture redellj.ption fund the claim to have Rs. 3,50,000 for the purposPs of bonus formula was clearly untenable. It however was of the opinion that a reasonable provision for redemption fund should be allowed as a prior charge and actually allowed the sum of Rs. 2,50,000 which had been actually provided for the purpose in the balance-sheet1 negativing the contention of the respondents that no provision should be allowed for debenture redemption fund in the bonus formula;\n\n'959 We are of the opinion that the Tribunal was not\n\nI -d. H justified in allowing the sum of Rs. 2,50,000/- for T\" Jn •an unie d b d f d h h Pipe co .. Ltd., e enture re empt10n un as a pr10r c arge m t e v. bonus calculations. The Full Bench Formula does Thefr Wo'1nnen not envisage any such prior charge. It is no doubt, true that capital is shy and it would not be practicable Bhagwati f. for the industrial concern to raise large amounts by way of fresh debentures when they become due. It is also true that the debentures do not stand on a par with other debts of a concern because the debentureholders would in a conceivable situation be able to enforce their security by bringing the industry to a stand-still by taking over charge of the whole concern.\n\nIt would therefore appear that the redemption of these debentures would be one of the primary obligations of the industrial concern and due provision has of necessity to be made for redemption thereof on due date.\n\nThis however does not mean that in the calculations of the distributable surplus the provision for such redemption should be given the status of a prior charge, though of course that would be a relevant consideration while distributing the available surplus between the various interests entitled thereto. We are therefore of opinion that the Tribunal was wrong in allowing Rs. 2,50,000/- as a prior charge in the bonus calculations.\n\nThis disposes of all the contentions which have been urged on behalf of both the parties and calculating the figure on that basis we arrive at the following:-\n\nGross Profit as per Tribunal's calculations Less : Notional Normal Depreciation\n\nLess: Tax @ 7 as. in a rupee\n\nRs.\n\nLess: 6% return on ordinary share capital\n\nin lacs.\n\n36·21\n\n6•23\n\n29·98. 11·55\n\n18·43\n\nand 5% on preference share capital 4·30\n\n14•13\n\nLess: 4% Return on reserves used as working capital: 7,42,139 29 + 41,81,196 1•67\n\nThe Indian Hum6\n\nPipe Co., Lid.,\n\nv. 49,23,335 l •96 Their Workmen\n\nLess : Provision for Rehabilitation\n\n12•17\n\n0·17\n\nAvailable Surplus 12·00 This would bring the available surplus for distribution to a sum of Rs. 12 lacs and this would be distributable amongst the shareholders, the company and the workmen concerned.\n\nIt is not feasible to lay down any rigid formula as to what the proportion of such distribution amongst these various interests should be. The shareholders as well as the company would both be naturally interested inter alia in providing the debenture redemption reserves as also meeting the needs of the industry for further expansion. The workmen would no doubt be interested in trying to bridge the gap between their actual wage and the living wage to the extent feasible.\n\nThis surplus of Rs. 12 lacs would have to be distributed amongst them having regard to the facts and circumstances of the case, of course bearing in mind the various considerations indicated above.\n\nBefore we arrive at the figure of the actual bonus which it will be appropriate in the circumstances of this case to allow to the workmen, we may advert to one argument which was pressed before us on their behalf and that was that the bonus calculations should not be made on the basis of the All-India figures which were adopted by the Tribunal but on the basis of the actual amounts which the appellant had paid and would have to pay to the workmen concerned. It was pointed out that the respondents here were only the workmen in the Wadala Factory of the appellant. The appellant had, however, paid to the various workmen elsewhere as and by way of bonus sums varying between 4 % and 29% of the basic wages for the year in question. The sum of Rs. 1,23,138/- only had been\n\nBhagwali J.\n\nz959 paid in full and final settlement to t.he workmen in\n\nT ' 1 d--:-- II some of the factories and the bonus calculations on an '\" \" zan\n\n\"'\"' AJ d\" b Id h Pipe co., Ltd., I-In ia as1s wou t us work to the advantage of v. the a ppellaut in so far as they would result in saving Their Workmen to the appellant of the difference between the amounts to which those workmen would be entitled on the basis Bhagwati f. of the All-India figures adopted by the Tribunal and the amounts actually paid to them as a result of agreements, conciliation or adjudication. It was therefore contended that the calculations should be made after taking into account the savings thus effected by the appellant and only a sum of Rs. 1,23,138/- which was the actual sum paid to those workmen should be taken into account and no more. We are afraid, we cannot accept this contention. If this contention was accepted the respondents before us would have an advantage over those workmen with whom settlements have been made and wonld get larger amounts by way of bonus merely by reason of the fact that the appellant had managed to settle the claims of those workmen at lesser figures. If this contention of the respondents was pushed to its logical extent it would also mean that in the event of the non-fulfilment of the conditions imposed by the Tribunal in the award of bonus herein bringing in savings in the hands of the appellant, the respondents would be entitled to take ad vantage of those savings also and should be awarded larger amounts by way of bonus, which would really be the result of the claimants entitled to the same not receiving it under certain circumstances-an event which would be purely an cxtraneo~ one and unconnected with the contribution of the respondents towards the gross profits earned by the appellant. Tho Tribunal was, therefore, right in calculating the bonus on an All-India basis.\n\nBy our order dated April 12, 1957, the appellant was ordered to pay to the respondents within a fortnight from the date thereof bonus for the year 1954-55 equivalent to two months' basic wages; that amount has already been paid and works out at Rs. 3·39 lacs on an All-India basis. 'The only.question which therefore survives is what further bonus, if any, would the respondents be entitled\n\nto from the distributable surplus of Rs. 12 lacs. The r959 sum of Rs. 3·50 lacs required for building up the - d b d . . ll • d The Indian Hume e enture re empt10n reserve is an a -engrossmg nee rp c Ltd of the appellant and that is a factor which must of ' e :.·· ·• necessity be taken into consideration while arriving at Their Worhinen the ultimate figure, particularly because such redemption of the debentures would enure not only for the Bhagwati J. benefit of the Company and its shareholders but also of the workmen employed therein.\n\nHaving regard to all the circumstances of the case, we feel that an award of four months' basic wages as aggregate bonus for the year 1954-55 (which by the way was the bonus awarded for the previous year 1953-54 also) would give a fair share to the labour in the distributable surplus, leaving to the shareholders and the company a balance of Rs. 5·22 lacs to be utilised by them not only towards building up of the debenture redemption reserve but also for building up other reserves, which would be utilised for various other purposes indicated above.\n\nThe appellant would no doubt get also the refund of the income-tax on the bonus payments made by it.\n\nThis rebate would also go towards the fulfilment of the very same objectives, which would ultimately enure both for the benefit of the capital as well as labour.\n\nwe have, therefore, come to the conclusion that the appellant should pay to the respondents, in addition to the two months' basic wages already paid to them in pursuance of this Court's order dated April 12, 1957, an additional sum equivalent to two months' basic wages by way of bonus for the year 1954-55 subject to the same conditions as were laid down in the award of the Tribunal above referred to, all the dates mentioned therein being calculated from the date of this judgment.\n\nWe accordingly allow the appeal, modify the award of the Industrial Tribunal to the extent mentioned above, but in the circumstances of the case we make no order as to costs, each party bearing and paying its own costs thereof. - Appeal allowed.", "total_entities": 12, "entities": [{"text": "we r.lirect each party to bear its own Das", "label": "JUDGE", "start_char": 533, "end_char": 575, "source": "metadata", "metadata": {"canonical_name": "SUDHI RANJAN DAS*", "offset_not_found": false}}, {"text": "THE INDIAN HUME PIPE CO., LTD", "label": "PETITIONER", "start_char": 647, "end_char": 676, "source": "metadata", "metadata": {"canonical_name": "THE INDIAN HUME PIPE CO., LTD.,", "offset_not_found": false}}, {"text": "THEIR WORKMEN", "label": "RESPONDENT", "start_char": 683, "end_char": 696, "source": "metadata", "metadata": {"canonical_name": "THEIR WORKMEN", "offset_not_found": false}}, {"text": "N. H. BHAGWATI", "label": "JUDGE", "start_char": 717, "end_char": 731, "source": "metadata", "metadata": {"canonical_name": "NATWARLAL HARILAL BHAGWATI", "offset_not_found": false}}, {"text": "P. B. GAJENDRAGADKAR", "label": "JUDGE", "start_char": 744, "end_char": 764, "source": "metadata", "metadata": {"canonical_name": "P.B. GAJENDRAGADKAR", "offset_not_found": false}}, {"text": "K. N. WANCHOO, JJ.", "label": "JUDGE", "start_char": 769, "end_char": 787, "source": "metadata", "metadata": {"canonical_name": "K.N. WANCHOO", "offset_not_found": false}}, {"text": "s. 10", "label": "PROVISION", "start_char": 5970, "end_char": 5975, "source": "regex", "metadata": {"statute": null}}, {"text": "Industrial Disputes Act, 1947", "label": "STATUTE", "start_char": 5983, "end_char": 6012, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Art. 136", "label": "PROVISION", "start_char": 8375, "end_char": 8383, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 12213, "end_char": 12227, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 12637, "end_char": 12651, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "s. 9", "label": "PROVISION", "start_char": 17342, "end_char": 17346, "source": "regex", "metadata": {"statute": null}}]}
{"document_id": "1959_2_964_986_EN", "year": 1959, "text": "'959\n\nMay 5.\n\nSUPREME COURT REPORTS [1959] Supp.\n\nTHE INDIAN MOLASSES CO. (PRIVATE) LTD. v.\n\nTHE COMMISSIONER OF INCOME-TAX, WEST\n\nBENGAL. (B. P. SINHA, J. L. KAPUR and\n\nM. HIDAYATULLAH, JJ.)\n\nIncome-tax-Deduction - Business expendit11re-Payment of sums for getting annuities to provide pension-Liability depending on contingency-Expenditure, meaning of-Indian Income-tax Act, z922 (XI of z922), s. Io(2)(xv).\n\nWith a view to provide a pension to H who was the managing director of the appellant company, after his retirement at the age of 55 years on September 20, 1955, the company executed a trust deed on September 16, 1948, in favour of three trustees to w horn the company paid a sum of Rs. l,09,643 and further undertook to pay annually Rs. 4,364 for six consecutive years.\n\nThe trustees undertook to hold the said sums upon trust to spend the same in taking out a Deferred Annuity Policy with an Insurance Society in the name of the trustees but on the life of H under which a certain sum of money was payable annually to H for life from the date of his superannuation. It was also provided in the deed that notwithstanding the main clause the trustees would, if so desired by the company, take out instead a different kind of policy for the benefit of both H and his wife, with a further provision for H's wife should H die before he attained the age of 55. On January 12, f949, the trustees took out a policy, wherein the amount of Deferred Annuity to be paid per annum was fixed according as whether both H and his wife were living on September 20, 1955, or one of them died earlier.\n\nThe policy also contained, inter alia, two clauses: \"(1) Provided the contract is in force and unreduced, the Grantees (i. e., the trustees) shall be entitled to surrender the Annuity on the Option Anniversary (i.e., Sept. 20, 1955) for the Capital sum of£ 10,169 subject to written notice of the intention to surrender being received by the Directors of the Society within the thirty days preceding the Option Anniversary. (2) If both the Nominees shall die whilst the Contract remains in force and unreduced and before the Option Anniversary the said funds and Property of the Society shall be liable to make repayment to the Gran tees of a sum equal to a returu of all the premiums which shall have been paid under this Contract without interest after proof 'thereof and subject as hereinbefore provided.\"\n\nThe appellant company paid the initial sum and the yearly premia for some years before H died.\n\nFor the assessment years 1949-50, 1950-51, 1951-52 and 1952-53, the appellant claimed a deduction of these sums from its profits _or gains under s. l0(2)(xv)\n\nof the Indian Income-tax Act, 1922, but the Income-tax authoriz959 ties disallowed the claim on the ground that the sums claimed did not amount to expenditure within the meaning of the section.\n\nThe Indian The appellant's contention was that payment of pension was an Moasses Co. expenditure of a revenue character and so also the payment of a (Prwate) Ltd. lump sum to get rid of a recurring liability to pay such pension v. and that expenditure on insurance was not contingent, because The Commissioner though the contingency related to life and depended on it, the of Incorpe-tax, probabilities were estimated on actuarial calculations and, that West Bengal the expenditure was, therefore, real.\n\nHeld, that expenditure which is deductible for the purposes of income-tax under s. ro(2)(xv) of the Indian Income-tax Act, 1922, is one which must be towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not expenditure.\n\nIn the present case, on the terms of the deed of trust, money was placed in the hands of trustees for the purchase of annuities of different kinds, if required, but to be returned if the annuities were not bought, and the clauses in the policy taken out by the trustees showed that till September 20, 1955, the appellant had dominion through the trustees over the premia paid. The payment to the trustees was therefore towards a liability depending on a contingency. Consequently, the amount claimed was not liable to be deducted as an expenditure under s. ro(2)(xv) of the Act.\n\nCases on English Income-tax law reviewed.\n\nCIVIL\n\nAPPELLATE\n\nJURISDICTION: Civil Appeal No. 395 of 1957.\n\nAppeal by special leave from the judgment and order dated December 21, 1955, of the Calcutta High Court in Income-tax Reference No. 15 of 1954.\n\nA. C. Sampath Iyengar, Dipak Dutta Choudhury and B. N. Ghosh, for the appellant.\n\nM. C. Setalvad, Attorney-General for India, R. Ganapathy Iyer, R.H. Dhebar and D. Gupta, for the respondent.\n\n1959. May 5. The Judgment of the Court was delivered by\n\nHIDAYATULLAH, J.-The Indian Molasses Co. (Pri- Hidayat\"llah J. vate) Ltd., Calcutta (hereinafter called the assessee Company), have brought this appeal, with the special leave of this Court granted on November 9, 1956, against the judgment of the High Court of Calcutta dated December 21, 1955, in Income-tax Reference\n\n1959 No. 15 of 1954.\n\nThe question of law referred to the\n\nThe Indian High Court was : Molasses Co. \" 'Whether on the facts and in the circumstances (Pdvate) Ltd. of the case, and on a true construction of the Trust ' v.\n\nDeed, dated 16th September, 1948, and the Policy The Commissioner dated the 13th January, 1949, the payments made by\n\n01 Income-tax, the assessee Company and referred to in paragraph 4\n\nWest Bengal b t't t ' d't ' 'th' th . f' a ove cons I u e expen I ure w1 m e meanmg o Hidayatnllah J. that word in section 10(2)(xv) of the Indian Income. tax Act, 1922, in respect of which a claim for deduction can be made, subject to the other conditions mentioned in that clause being satisfied\".\n\nThe question was answered in the negative.\n\nThe facts of the case are as follows : One John Bruce Richard Harvey was the Managing Director of the assessee Company in 1948. He had by then served the Company for 13 years, and was due to retire at the age of 55 years on September 20, 1955.\n\nThere was, it appears, an agreement by which the Company was under an obligation to provide a pension to Harvey after his retirement. On September 16, 1948, the Company executed a Trust Deed in favour of three trustees to whom the Company paid a sum of£ 8,208-19-0 (Rs. 1,09,643) and further undertook to pay annually Rs. 4,364 (£ 326-14 sh.) for six consecutive years, and the trustees agreed to execute a declar.ation of trust. The trustees undertook to hold the said sums upon trust to spend the same in taking out a deferred Annuity Policy with the Norwich Union Life Insurance Society in the name of the trustees but on the life of Harvey under which £ 720 per annum were payable to Harvey for life from the date of his superannuation. It was also provided in the deed that notwithstanding the main clause the trustees would, if so desired by the assessee Company, take ont instead a deferred longest life policy, with the said Insurance Company, in their names, but in favour of Harvey and Mrs. Harvey for an annuity of £ 558-1-0 per annum payable during their joint lives from the date of Harvey's superannuation and during the lifetime of the survivor, provided further that if Harvey died before he attained the age of 55 years the\n\nI959 annuity payable to Mrs. Harvey would be £ 611-12-0 during her life. It was further provided that should f The Indian Harvey die before attaining the age o 55 years, the Molasses co. trustees would stand possessed of the capital value of (Private) Ltd. the Deferred Annuity Policy, upon trust to purchase v • . therewith an annuity for Mrs. Harvey with the above The Commissioner\n\nInsurance Company or another Insurance Company 0! Income-tax, of repute. The other conditions of the deed of trust West Bengal need not be considered, because they do not bear upon Hidayatullah J. the controversy.\n\nIn furtherance of these presents, the trustees took out a policy on .January 12, 1949. In addition to conditions usual in such policies, it provided for the following benefits : Amount per annum of deferred Annuity. £ 563-5-8 p. a. if both Mr. and Mrs. Harvey be living on September 20, 1955. £ 720-0-0 p. a. if Mrs.\n\nHarvey should die before September 20, 1955, leaving Harvey surviving her. £ 645-0-0 p. a. if Harvey should die before September 20, 1955, leaving Mrs. Harvey surviving him.\n\nThere was a special provision which must be reproduced:\n\n\"Provided the contract is in force and unreduced, the Grantees (i.e., the trustees) shall be entitled to surrender the Annuity on the Option Anniversary (i.e., Sept. 20, 1955) for the Capital sum of £ 10,169 subject to written notice of the intention \"to surrender being received by the Directors of the Society within the thirty days preceding the Option Anniversary.\" Two other clauses of the second schedule of the Policy may also be quoted: (III) \"If both the Nominees shall die whilst the Contract remains in force and unreduced and before the Option Anniversary the said funds and Property of the Society shall be liable to make repayment to\n\n1959 the Grantees of a sum equal to a return of all the premiums which shall have been paid under this Contract The Indian Molasses co. without interest after proof thereof and subject as (Private) Ltd. herein before provided. v. (IV) The Grantees shall before the Option Annin, Commissioner versary and after it has acquired a Surrender Value\n\n01 Income-tax, be entitled to surrender the Contract for a Cash Pay- West Bengal ment equal to a return of all the premiums (at the\n\nHidayatullah f. yearly rate) which have been paid less the first year's premium or five per cent. of the Capital Sum specified in the Special Provision of the First Schedule whichever shall be the lesser sum, provided that if the Deferred Annuity has been reduced an equivalent reduction in the guaranteed Surrender Value as calcu- • lated above will be made. \"\n\nThe assessee Company paid the initial sum and the yearly premia for some years before Harvey died. In the assessment years 1949-50, 1950-51, 1951-52 and 1952-53, it claimed a deduction of.these sums from its profits or gains under s. 10(2)(xv) of the Indian Income-tax Act (hereinafter called the Act), which provides: . \"Such profits or gains shall be computed after making the following allowances, namely,\n\nany expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) paid out or expended wholly and exclusively for the purposes of such business, profession or vocation. \" This claim was disallowed by the Department and the Appellate Tribunal. The Tribunal held that it was not necessary to decide if the expenditure was wholly or exclusively for the purposes of the Company's business, and if so, whether it was of a capital nature, because in the Tribunal's opinion there was no expenditure at all. The reason why the Tribunal held this way may be stated in its own words :\n\n\"Clauses (I) and (II) do not contain any provision having a material bearing upon Clause (III).\n\nTherefore if it happens that both Mr. and Mrs. Harve:y die before 20th September, 1955, all the payments till made through the Trustees to the Insurance Society will come back to the Trustees and as there is not the\n\nslightest trace of any indication anywhere that the 1959 Trustees should have any beneficient interest in these moneys, there would be a resultant trust in favour of The Indian Molasses Co. the Company in respect of the m_oneys thus far paid (Private Ltd.) out. In other words, what has been done amounts to v. a provision for a contingency which may never arise. The Commissioner Such a provision can hardly be treated as payment to of Income-tax, an employee whether of remuneration or pension or West Bengal gratuity, and cannot be a proper deduction against Hidayatullah J. the incomings of the business of the Company for the purpose of computing its taxable profits. In short, there has been no expenditure by the Company yet; there has been only an allocation of a part of its funds for an expenditure which may (or may not) have to be incurred in future. \"\n\nThe Tribunal, however, referred the above-stated question for the opinion of the High Court. The High Court noticed the limited scope of the question, and pointed out that the Tribunal had stated at the end of the Statement of the Case:\n\n\" In the event of the High Court holding that there was an expenditure in this case, it would still be necessary for the Tribunal whether the money was laid out or expended wholly and exclusively for the purposes of the assessee's business and, if so, whether the expenditure was in the nature of capital or revenue expenditure. \" The learned Chief Justice of the Calcutta High Court (Sarkar, J., concurring) felt the difficulty of the question.\n\nHe analysed the ingredients of cl. (xv), and pointed out that the question referred to but one such ingredient. The Divisional Bench, however, did not call for an additional statement of fact, or ask that the rest of the matter be referred, so that the whole of the question involved might get disposed of.\n\nIt observed:\n\n\"This Court has always construed questions referred to it with a certain degree of strictness and has not allowed any point to be canvassed before it which had not been raised before the Appellate Tribunal and which was not covered by the Tribunal's\n\nr959 appellate order. I am, therefore, of opinion that the\n\nThe Ind; an question should be taken as covering only the ground Molasses co. upon which the Tribunal held the payments to be not (Private) Lid. allowable as deductions as not embracing any other v. ground. \" The Commissioner We must express our regret that the case took the of Income-tax, course it did. The order of assessment was passed as\n\nrVest Bengal .c b k 9 d lar ac as 1 52, an seven years have now passed\n\nHidayatullah J. during which only one question out of three is before the Courts for decision. Section 10(2)(xv) was analysed by the learned Chief Justice in these words :\n\n\" It w'ill be noticed that three ingredients of the clause lie on the surface of its language. In order that a deduction may be claimed under its provisions, it must be proved first that there was an expenditure, secondly, that the expenditure was not in the nature of a capital expenditure-I am leaving aside the personal expenses-and, thirdly, that it was laid out or expended wholly and exclusively for the purposes of the assessee's business-I am leaving out profession or vocation. \"\n\nWe must not be understood as finding fault with the Divisional Bench. It decided the question as framed. It is the Tribunal which referred the question in this form, keeping to itself the right to decide about the other ingredients of the clause later. \\Vhether the question can be answered in the bland form it is posed, is a matter to which we will have to address ourselves presently. But it appears to us that this is a very unsatisfactory way to go about the business.\n\nPerhaps, the Tribunal decided this case in this way and referred the question it did, because it felt that if this Court in Allahabad Bank Ltd. v. Commissioner of Income-tax, West Bengal (1 ) was able to decide whether a particular outlay was ' expenditure ' without reference to the other ingredients of cl. (xv), the same could be done in this case also. That case, however, was very different in its facts. Thero, certain contributions on trust for payment of pensions to employees were held not to be ' expenditure ', because on the original trust failing, the money was\n\n(t) (1954] S.C.R. 195.\n\ndeemed to be held by the trustees on a resulting trust r959 for the benefit of the maker. If the same can be said The Indian in this case, namely, that the money coninued to Molasses co. belong to the assessee Company 'in the account years, (Private) Ltd. its payment to the trustees or the Insurance Company v. notwithstanding, there may be a possibility of answer- The Commissioner ing the question as was done in the decision of this of Income-tax, C t td 'l' B t 'f h l t .\n\nWest Bengal our 01 e ear ier. u I sue a c ear-cu proposition cannot be laid down, then, obviously, there is Hidayatullah J. considerable difficulty in deciding what is 'expenditure ' within the clause, without reference to the rest of its provisions. Of course, to find the meaning of the word 'expenditure ', a dictionary is all that is needed, but to go further and to decide whether the outlay in this case was ' expenditure ', the context in which the word is used in the clause cannot successfully be left out.\n\nMr. Sampath Iyengar for the assessee Company complained before us of the narrowness of the question, though before the High Court he was opposed to any extension of the ambit of the question. The following passage from the judgment of the Chief Justice shows the respective attituds of the Department and the assessee Company before the Bench:\n\n\"Mr. Meyer contended that that language entitled him to argue not only that there had been no expenditure in fact at all, but also that even assuming that there had been an expenditure in the sense of a physical spending, still the expenditure was not such as could be claimed as an allowance under the clause against the profits of the relevant accounting year in view of the fact that it was, in any event, an expenditure made to meet a contingent liability.\n\nMr. S. Iyengar, who appeared on be'half of the assessee, objected to the scope of the question being so enlarged and he referred to the appellate order of the Tribunal which had proceeded on a single ground. \"\n\nThe learned Attorney-General who appeared for the Department at once conceded the difficulty of answering the question, but contended that the question in its present form could be answered, though he agreed that if it could not, the Court would be free to say so.\n\nr959 We cannot help saying that though the Tribunal may Th, Indian be at liberty to decide a case as appears best to it, Molasses Co. there is considerable hardship to the tax-payers, if (Private) Ltd. questions of law are decided piecemeal and repeated\n\nThe C v. . . references to the High Court are necessary. The juris- 0'\"'\"\"·\"0\"\" d' t' f th H' h C t . d . d 1 . of Inconie-tax.\n\nIC 10n o e Ig our IS a visory an consu tative, west Brngol and questions of interpretation of the law in this attenuated form can well be avoided.\n\nThis will tend Hidayatullah J. to cut down the duration of litigation.\n\nIn deciding that the payment of the lump sum and premia was not 'expenditure ', different views were expressed as the case progressed. The Income-tax Officer held that in the absence of a written agreement covering the conditions of service, remuneration, etc., the arrangement could only be taken as a provision for a gratuity, more so as there was a provision in the deed of trust for payment of an annuity to Mrs. Harvey in the event of Harvey's demise.\n\nAccording to him, there were so many alternative arrangements for the disbursement of the money laid out, that it was impossible to say what shape the annuity would ultimately take and till certain events happened, the ' expenditure ' w!ts not effective. Following, therefore, the case in Atherton v. British Insulated and H elsby Cables, Ltd. (1 ) and distinguishing Hancock v. General Reversionary and Investment Co. Ltd. ('), the claim for deduction was rejected by the Income-tax Officer.\n\nThe Appellate Assistant Commissioner considered that in the absence of an agreement the payment must be regarded as an ex gratia payment of a capital nature, so long as the trust intervened. The Appellate Assistant Commissioner also commented upon the existence of a provision for Mrs. Harvey's pension which could not be a part of the agreement. He was thus of the opinion that the case fell within the rule laid down in Atherton's case (1).\n\nThis opinion of the Tribunal which has already been reproduced earlier, was shortly that there was no 'expenditure' yet and this was only an allocation of funds for an 'expenditure', which might or might not be incurred in the future.\n\nThe High Court analysed the terms of the deed of\n\n(1) (1925) 10 Tax Cas. 155.\n\n(2) (1918) 7 Tax Cas. 358.\n\ntrust, and pointed out that there were two contingenr959 cies in which money was likely to revert to the asses- The Indian see Company. The first contingency was if both Har- Molasses co. vey and Mrs. Harvey died before September 20, 1955. (P, ivate) Ltd.\n\nThe second contingency was due to an omission in v.\n\ncl. (III) to provide for a pension to Harvey, if Mrs. The Commissioner Harvey died before the above date. In that event, 01 Income-tax, the trust would have failed, unless a policy was taken West Bengal out under cl. (II). The High Court held that if any Hidayatullah J.\n\n- of these two circumstances happened, then there would have been a resulting trust in favour of the assessee Company, and it would have been entitled to get back all the money laid out by it. We must say here that the High Court was in error as to the second of the two contingencies because the policy which was taken out provided for all the three alternatives, and pension was payable to both or either survivor, though in different sums. Even in the trust deed, the three alternative pensions were provided as follows : £ 720, if the annuity was payable to Harvey alone; or £ 558-1-0, during the joint lives of both or survivor; or £ 611-12-0,. to Mrs. Harvey if Harvey died before September 20, 1955. The special provision in the policy, however, covered the first contingency of both the prospective annuitants dying before September 20, 1955, and if that happened, the assessee Company would have, if it chose to surrender the policy, got back the sum of£ 10,169 subject to a written notice of the intention to surrender being received by the Insurance Company within thirty days preceding September 20, 1955.\n\nThe High Court then observed in addition that there was no ' instant necessity ' for the expenditure, nor was the money ' laid out for a business purpose of an instant character', nor did it bring in a 'present asset which would always remain an asset in that form, the money having gone for ever'. The High Court pointed out that there was always a -possibility of a resulting trust in favour of the Company and the money could not, therefore, be held to have been expended. The conclusion of the High Court, therefore, was that the assessee Company must be held to have\n\n'959 set apart ' tentatively' a sum of money in order that it might be available for the payment of a' gratuity' The Indian Molosoes co. to Harvey and Mrs: Harvey, but there being' no pro- (P•ivatc) Ltd. vision for the application of tbe money in the event of\n\nv. those contingencies not occurring and no annuity being n, Commfasiouer payable to any one', there was no 'expenditure ' in of Income-tax. any real and practical sense of the term '.\n\nWe; I Bengal Th h' 1 d e arguments mt 1s appea have range , as they\n\nHidayatullah ;. did before the High Court, over a very wide field. No useful purpose will be served in following them through all their convolutions. The main points urged on behalf of the assessee Company are that payment of pension is an expenditure of a revenue character and so also the payment of a lump sum to get rid of a recurring liability to pay such pension. This is illustrated from some English cases, and reference is made also to Ch. IX-B of the Act. It is also submitted that in so far as payment by the assessee Company was concerned, it was, i_n point of fact, made, and this was ' expenditure ' within the dictionary meaning of the word. The argument of the Department is that by 'expenditure 'is meant a laying out of money for an accrued liability and not for a contingent liability, which contingency may or may not take place; that the present 1trrangement was only a setting apart of money for a contingent liability and till the liability became real, there was no expenditure. The assessee Company, however, contends that expenditure on insurance is not contingent, because though the contingency relates to life and depends on it, the probabilities are great being estimated on actuarial calculations and the expenditure is real.\n\nBoth sides rely on a large number of English decisions.\n\nWe shall now consider the arguments in detail and refer to those authorities, which are relevant.\n\nIn dealing with cases expounding the English In. come-tax law, it must always be borne in mind that the scheme of legislation there is not the same as in our country. No doubt, a certain amount of assistance can, with caution, be taken from them, but the problems under our Income-tax laws must be resolved, in the ultimate analysis, with reference to our laws.\n\nIt has been ruled under the English statute that\n\nI959 sums paid to an employee as pension or gratuity are The Indian deductible as money laid out and expended for the Molasses co. purpose of trade, profession or vocation. See Smith v. (Private) Ltd.\n\nIncorporated Council of Law Reporting for England v. and Wales (1). It has also been ruled that a single The Commissioner payment to avoid the recurring liability of an emploof Income-tax, 1 d d Th l d\n\nWest Bengal yee's pension is a so a proper e notion. e ea ing case on the subject is Hancock v. General Reversionary Hidayatullah J. and Investment Go. Ltd. (2). In that case, the taxpayer was under a liability to pay a pension to a retired actuary, and pension had, in fact, been paid for some years. Subsequently, the tax-payer purchased an annuity for the employee, which he accepted in place of his pension. The sum paid in purchasing the annuity was allowed as a deduction in computing the tax-payer's profits, it being held that it was money wholly and exclusively laid out or expended for the purposes of the trade, profession or vocation.\n\nOn the other hand, a sum which a company put into a fund for the relief of invalidity, etc., was held not to be an admissible deduction, and the case last cited was distinguished. See Rowntree & Go. Ltd. v.\n\nCurtis (3).\n\nPollock, M. R., drew pointed attention to the words of Lush, J., in the earlier case, where' he observed at p. 698 :-\n\n\"It seems to me as impossible to hold that the fact that a lump sum was paid instead of a recurring series of annual payments alters the character of the expenditure, as it would be to hold that, if an employer made a voluntary arrangement with his servant to pay the servant a year's salary in advance instead of paying each year's salary as it fell due, he would be making a capital outlay.'', and added that Lush, J., had described the actuarial payment made in Hancock's case- (2) as a pension in another form, which could not be said of the invalidity, claims for which were wholly uncertain. warrington, L. J., pointed out that the test to apply was fir:; t\n\n(r) [r9r4] 3 K. B. 574; 6 Tax Cas. 477.\n\n(2) (r9r8) 7 Tax Cas. 358.\n\n(3) [1925] r K. B. 328; 8 Tax Cas. 678.\n\n'959 whether there was an expenditure which he held there was, and next whether it could be said to be wholly The Indian Molasses co. and exclusively for the purposes of the trade which, in (Private) Ltd. his opinion, could not be said of the expenditure in v. that case. The words of the learned Lord Justice on The Commissioner the first proposition have a bearing upon tho present\n\n01 Income-tax. case, and may be reproduced here (at p. 703) : West Bengal\n\n\" I • 1 d • h M L tt h am me me to agree wit r. a er m 1s Hidayatullah J. contention that the money has actually been expended.\n\nThere is nothing like a resulting trust in favour of the company although there is that provision which I have already called attention to in the trust deed, that one of the things which might be done would be to abrogate altogether the trust or the provisions of the deed and to substitute other rules and prov1s10ns.\n\nBut it seems to me that that cannot be said to be a resulting trust in favour of the company having regard to the other objects which are pointed out as those to which the scheme was directed.\" Similarly, a sum of money paid to the trustees to form a nucleus of a pension fund for the benefit of some of its employees by a company was also not held to be an admissible deduction in Atherton's case (1).\n\nViscount Cave, L. C., recalled the test laid d_own in a rough way by Lord Dunedin in Vallambrosa Rubber Co. v.\n\nFarmer (2) (at p. 192) that,\n\n\"capital expenditure is a thing that is going to be spent once and for all and income expenditure is a thing which is going to recur every year\", but added that it was not and wa.s not meant to be a decisive test. The Lord Chancellor observed, however, that,\n\n\"when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital.\"\n\n(r) (1925) 10 Tax Cas, 155.\n\n(2) (1910) 5 Tax Cas. 529.\n\nAgain, in Morgan Crucible Co. Ltd. v. The Commis- '959 sioners of Inland Revenue (1), the payment to an insur- The Indian ance company to take out a policy was held not to be Molasses co. an admissible deduction. There, the company operat- (Private) Ltrl. ed a scheme for payment of pensions to retired or v. incapacitated employees, reserving to itself the uncon- The Commissioner\n\ntrolled discretion to vary or cease payment of penofw 1\"1cBomc-ta1x, .\n\nWh . 'd h d d d es enga s10ns. en pens10ns were pa1 , t ey were e ucte but when the company took out a policy, without Hidayatullah J. informing their employees, for payment to itself of annuities equal to the pensions, it was held that by this the company had acquired an asset .and this was in the nature of a capital asset.\n\nRowlatt, J., in distinguishing Hancock's case (2), observed that unlike that case the liability to pay pensions was not got rid of and that the company had acquired an asset.\n\nThe learned Judge continued (at p. 317):\n\n\" It is true they have got an asset which would give them, in all probability, nothing on balance, because they use it to pay these pensions ; but they have got an asset; they had not any pension fund to pay these pensions with, and now they have got an insurance company which will in the future not extinguish the liability but countervail it and they\n\nhave got the command of this policy to the extent that they are entitled to get their capital money-I say ' capital money ' without prejudice-back from the insurance company on surrendering the policies.\"\n\nFrom these cases, there are deducible certain principles of a fundamental character. The first is that capital expenditure cannot be attributed to revenue and vice versa. Secondly, it is equally clear that a payment in a lump sum does not necessarily make the payment a capital one. It may still possess revenue character in the same way as a series of payments.\n\nThirdly, if there is a lump sum payment but there is no possibility of a recurrence, it is probably of a capital nature, though this is by no means a decisive test.\n\nFourthly, if the payment of a lump sum closes the\n\n(r) [1932] 2 K. B. 185; r7 Tax Cas. 311, 317.\n\n(2) (1918) 7 Tax Cas. 358.\n\nz959 liability to make repeated and periodic payments in the future, it may generally be regarded as a payment The Indian Molasses co. of a revenue character (Anglo-Persian Oil Go. Ltd. v. (Private) Ltd.\n\nDale) (1), and lastly, if the ownership of the money v. whether fn point of fact or by a resulting trust be still The Commissioner in the tax-payer, then there is acquisition of a capital of Income-tax, asset and not an expenditure of a revenue character.\n\nWest Bengal S'd b 'd ' h h ' ' 1 th th 1 e y SI e wit t ese prmmp es, ere are o ers\n\nHidayatullah J. which are also fundamental. The Income-tax law.does not allow as expenses all the deductions a prudent trader would make in computing his profits. The .money may be expended on grounds of commercial expediency but not of necessity. The test of necessity is whether the intention was to earn trading receipts or to avoid future recurring payments of a revenue character.\n\nExpenditure in this sense is equal to disbursement which, to use a homely phrase, means something which comes out of the trader's pocket.\n\nThus, in finding out what profits there be, the normal accountancy practice may be to a.How as expense any sum in respect of liabilities which have accrued over the accounting period and to deduct such sums from profits. But the Income-tax laws do not take every such allowance as legitimate for purposes of tax.\n\nA distinction is made between an actual liability in praesenti and a liability de futuro which, for the time being, is only contingent. The former is deductible but not the latter. The case which illustrates this distinction is Peter Merchant Ltd. v. Stedeford (').\n\nNo doubt, that case was decided under the system of Income-tax laws prevalent in England, but the distinction is real. What a prudent trader sets apart to meet a liability, not actually present but only contingent, cannot bear the character of expense till the liability becomes real.\n\nWe may here refer to two other cases. In Alexander Howard & Go. Ltd v. Bentley ('), a business of blouse and gown manufacture was carried on by one A. C.\n\nHoward. His three brothers were employed by him.as salaried managers. In 1933 A. C. Howard remarried\n\n(1) [1932] I J(. B. 124; 16 Tax Cas. 253.\n\n(2) (1948) 30 Tax Cas, 496.\n\n(3) (1948) 30 Tax Cas 334.\n\nand under pressure from his brothers a company was r959 formed and the directors were authorised to enter into The Indian an agreement to purchase the business. A. C. Howard h\n\n.\"''vlolass11s Co. was the governing director oft e company and his (Private) Ltd. three brothers, permanent directors. The company also v. entered into a service agreement with them, and Art. The Commissioner\n\n107 thereof provided: 01 Incoine-tax, \" After the death of the said Alexander Charles West Bengal Howard and during such time as his legal personal Hidayatullah J. representatives shall hold at least Ten Thousand Shares in the Company, any widow surviving him shall receive out of the profits of the Company an annuity of One Thousand Pounds per annum during her life.\" This service agreement was executed on January 3,\n\n1934. In 1943 by a deed of release A. C. Hmvard released to the company all right to a claim in respect of the annuity in consideration of the payment to him of a sum of£ 4,500.\n\nThis amount was based upon the findings of an actuary. The taxpayer submitted that the sum pa.id in redemption of the annuity was a proper charge against revenue, and was deductible.\n\nThe Commissioners held against the company on two main grounds. They held that in order to decide whether the sum paid to obtain release of the annuity was properly allowable as a deduction, they had to decide first whether the annuity itself would have been properly chargeable to revenue, (Anglo-Persian Oil Co. Ltd. v. Dale (1) and Bean v. Doncaster Amalgamated Collieries Ltd. (2) per Lord Simon at pp. 311-312); and they helu next that the redemption of the annuity freed the company from a contingent liability and the company had thus secured only an enduring advantage.\n\nSingleton, J., before whom the case came in appeal, affirmed the decision.\n\nHe pointed out that this was not a case of a company providing an annuity or pension for an employee, \"for\" (to quote him) \" the wife of Mr. Alexander Charles Howard had notliing whatever to do with the Company\".\n\nIf, therefore,\n\n(r) [1932/ r K. B: Il{; r6 Tax Cas. 253.\n\n(2) (r9i6) '27 Tax Cas, 296.\n\n1959 the original annuity was not chargeable to revenue,\n\nThe Indian the sum of£ 4,500 paid to avoid it, could not also be.\n\nMolasses co.\n\nThe other case is Southern Railway of Peru Ltd. v. (P, ivate) Ltd.\n\nOwen('). In that case, the English compa.ny was v. bound to provide compensation to all its employees on The Commission\" the termination of their services. Legislation to this of Income-tax, effect was deemed to be a part of the contract of West Bengal • S h . h d. . ] . serv10e. uc ng t arose on rnmrnsa or on termma-\n\nHidayatullah J. tion of the employment by the employer after proper notice.\n\nThe compensation was an amount egufLl to one month's salary for every year of service. There were, however, certain exceptions under which the compensation was not payable. The company sought to deduct an amonnt equal to the burden cast on it each yefLr but the claim was refused. It WfLS held by majority that though 'the company was entitled to chfLrge against one year's receipts the cost of making provision for the retirement payments which would ultimately be payable as it had the benefit of the employees' services during that year, provided the present value of the future payments could be fairly estimated', since the factor of discount was ignored in making the deduction, the claim could not be entertained.\n\nThese two cases illustrate the propositions that the recurring liability of a pension which is compressed into a lump payment should itself be a legal obligation, and that, if contingent, the present value of the future payments should be fairly estimable. IC the pension itself be not payable as an obligation, and if t.here be a possibility that no such payment may be necessary in the future, the whole of the amount cannot be deducted but only the present value of the future liability, if it can be estimated. It is significant that the case in Sun Insurance Office v. Clark(') was applied to the last corollary.\n\nSo far, we have dealt with the principles which underlie leading cases decided in England, some of w hicb were in the forefront of the arguments. 'Ve have already stated that the English decisions should be read with considerable caution. Under the English Income-tax Act, the law is stated in a negative\n\n(I) [1957] A.G. 334-\n\n(2) [1912] A.G. 443.\n\nfom. Section 137 of 15 & 16, Geo. 6 & 1 Eliz. 2, c. 10, r959 which prescribes the general rules rrgarding deduc- The Indian tions is expressed in the negative, and r. (a) which was Molasses co. applicable to the cited cases reads as follows: (Private) Ltd. \"Subject to the provisions of this Act, in computv. ing the profits or gains to be charged under Case I or The Commissioner Case II of schedule D, no sum shall be deducted in ofwlnco3me-ta1x, est enga respect of-\n\n. (a) any disbursements or expenses, not being Hidayatullah J. money wholly and exclusively laid out or expended for the purposes of the trade, profession or vocation.\" In these several cases, emphasis was sometimes laid on the words \"wholly and exclusively\", sometimes on \" laid out or expended \" and som.etimes on \" for the purposes of the trade ... \". It was the nature of the liability or the time of payment or the value of the payment or all of them which determined whether the amount should be deducted or not.\n\nClause (xv) of s. 10(2) of the Act, with which we are concerned, reads as follows :\n\n10. \"Business-(1) The tax shall be p>tyable by an assessec under the head 'Profits and gains of business, profession or vocation' in respect of the profits or gains of any business, profession or vocation carried on by him.\n\n(2) Such profits or gains shall be computed after making the following allowances, namely-\n\n(xv) any expenditure not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly an<l exclusively for the purpuse of such business, profession or vocation.\"\n\nThis section, though it enacts affirmatively what is stated in the negative form in the English statute, is substantially in pari materia with the English enactment and would have justified our considering the English authorities as aids to the interpretation thereof.\n\nBut there is no case directly on what is 'expenditure ', and if the authorities under the English statute\n\nr959 were to be of real assistance, the whole of -tho matter should have been before us.\n\nThe question, however, The Indian I\" h Molams Co. 1mits t e approach to whether the payments made (P, foalc) Ltd. towards the policy were 'expenditure ' within cl. (xv). v. ' Expenditure' is equal to 'expense' and 'expense' is The Commission\" money laid out by calculation and intention though in\n\n01 Income-tax, many uses of the word this element may not be pre-\n\nWest Bengal t I I f k h ' sen , as w 1en we spear o a JO eat anot er s expense.\n\nllidayatullah J. But the idea of 'spending' in the sense of 'paying out or away' money is the primary meaning and it is with that meaning that we are concerned. 'Expenditure' is thus what is 'paid out or away' and is something which is gone irretrievably.\n\nTo be an allowance within cl. (xv), the money paid out or away must be (a) paid out wholly and exclusively for the purpose of th.e business and further\n\n(b) must not be (i) capital expenditure, (ii) personal expense or (iii) an allowance of the character described in els. (i) to (xiv). But whatever the character of the expenditure, it must be a paying out or away, and\n\n\"\\l'C are uot concerned with the other qualifying aspects of R1rnh expenditure stated in the clause either affirmatively or negatively.\n\nSo, the question is whether in a business sense the amount was spent, that is to say, paid out or away.\n\nTo discuss this, we must go to the terms of the policy.\n\nNo doubt, under the general terms of the policyan annuity was to be provided for the Harveys.\n\nWe are not concerned with Mrs. Harvey, because she had no claim to the annuity or pension any more than Mrs.\n\nHoward had in Alexander Howard & Go. Ltd. v. Bentley (1) already discussed by us elsewhere. That consideration involves a finding on whether an annuity to Mrs. Harvey was an expense made wholly and exclusively for the purpose of the business, and that is not a matter open to us by the limited question posed. In any event, the provision for a pension or annuit.y to Mrs. Harvey cannot rank higher than an ftnnuit,, to Harvey, and the matter can be considered on the \"limited aspect that a pension or annuity to Harvey was also contemplated.\n\n(r) (1948) 30 Tax Cas. 334\n\nIn the years of account the assessee Company did z959 hand out to the trustees, the sums of money for which The Indian deduction is claimed.\n\nBut was the money spent in so Molasses co. far as the assessee Company was concerned ? Harvey (Private) Ltd. was then alive and it was not known if any pension to v. him would be payable at all. Harvey might not have The Commissioner d b H h b of Income-tax hve to e 55 years. e might even ave a andoned West Bengal' his service or might have been dismissed. Till September 20, 1955, the assessee Company had dominion Hidayatullah J. through the grantees over the premia paid, at least in two circumstances. They are to be found in the special provision, and the third clause of the second schedule of the policy. These provisions have been quoted already, but may again be reproduced:\n\n\"Special provision: Provided the contract is in force and unreduced, the Grantees shall be entitled to surrender the Annuity on the Option Anniversary for the Capital sum of . £ 10,169 subject to written notice of the intention to surrender being received by the Directors of the Society within the thirty days preceding the Option Anniversary.\" CL (III): \"If both the Nominees shall die whilst the Contract remains in force and unreduced and before the Option Anniversary the said funds and Property of the Society shall be liable to make repayment to the Grantees of a sum equal to a return of all the premiums which shall have been paid under this Contract without interest after proof thereof and subject as hereinbefore provided.\"\n\nTo be a payment which is made irrevocably there should be no possibility of the money forming, once again, a part of the funds of the assessee Company.\n\nIf this condition be not fulfilled and there is a possibility of there being a resulting trust in favour of the\n\nCompany, then the money has not been spent, i.e., pa'id out or away, but the amount must be treated as set apart to meet a contingency. There is a distinction between a contingent liability and a payment depending upon a contingency. The question is whether in the years of account, one can describe the assessee Company's liability as contingent or merely depending\n\nz959 upon a contingency. In our opinion, the liability was contingent and not merely depending upon a contin- The Indian Molasses Co. gency (P1iva\") Ltd. hat such a distinction is real was laid down in the\n\nv. . . speech of Lord Oaksey in Southern Railway of Peru The Commimoner Ltd. v. Owen (1), and was recognised generally in the of Income-tax h f th h L L d N h r West Bengal' speehc es. oh ot erf haw or s. r, O\\fv, t e 9us 1oh11 is w at 1s t e e11ect o t e 'payment o premia m t e\n\nHidayatnllah J. present case ?\n\nLearned counsel for the assessee Company referred us to the provisions of Chapter IX-B of the Act, particularly ss. 58R, 588 and 58V thereof.\n\nWe regret we are not able to see how these provisions help in the matter. We are not concerned with the provisions of this Chapter,. because the allowance does not fall within any of the provisions, 31nd . we have only to decide the question whether the amounts paid to purchase the policy involved an expenditure in the accounting years.\n\nNext learned counsel relied upou Joseph v. Law Integrity Insurance Company, Limited('), Prudential Insurance Company v. Inland Revenue Commissioners (3) and In re National Standard Life Assurance Corporation(') to show that there was no contingent liability but a liability depending on a contingency, namely, the duration of life, the probabilities of which were estimated on actuarial calculations.\n\nNo doubt, these cases deal with insurance of human life but the observations therein are not material here. In the first of these cases, it was held that the kind of policies which were issued were policies of insurance on human lives, and that the company was carrying on the business of life insurance contrary to its memorandum of association and the policies were ultra vires the company.\n\nThe policies were also illegal within s. 1 of the Assurance Companies Act, 1909. In this context, the definition that ' a policy of life insurance ' means ' any instrument by which the payment of monies, by or out of the funds of an assurance company, on the\n\n(1) [1957] A.C. 334.\n\n(3) [1904] 2 K.B. 658.\n\n(2) [1912] 2 Ch. 58r.\n\n(4) [1918] l Ch. 427, 430.\n\nhappening of any contingency depending on the durar959 tion of human life, is assured or secured ' was referred The Indian to. The policies issued by the company, £hough osten- Molasses co. sibly called 'investment policies ' were held to be (Private) Ltd. really life insurance policies. The next case arose v. under s. 98 of the Stamp Act, 1891. It was held that The Commissioner a contract by which in consideration of the payment of Income-tax. b f kl .\n\nWest Bengal y a person o a wee y premium, a sum certain was payable to him on his attaining the age of 65 or, in Hidayatullah J. the event of his dying earlier, a smaller sum was to be paid to his executors, was a policy of insurance upon a contingency depending upon a life within the meaning of the section. In the last case, the question arose under s. 30 of the Assurance Companies Act, 1909, and it was decided that a certificate-holder held a policy on human life because money was payable not only at the expiration of a certain number of years but all premiums were repayable in the event of death to the legal representative.\n\nThese cases may help to determine the nature of the contract with the insurance company but cannot help in the solving of the question whether the payments to the insurance company were expenditure. That insurance of human lives involves a contingency relating to the duration of human life is a very' different proposition from the question whether the payment in the present case to the trustees was towards a contingent liability or towards a liability depending on a contingency.\n\nIn our opinion, the payment was not merely contingent but the liability itself was also contingent. Expenditure which is deductible for income-tax purposes is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is not expenditure. In the present case, nothing more was . done in the account years. The money was placed in the hands of trustees and/or the insurance company to purchase annuities of different kinds, if required, but to be returned if the annuities were not bought and\n\nIZf\n\n<959 the setting apart of the money was not a paying out or away of these sums irretrievably.\n\nThe Indian Molasses co.\n\nIn our opinion, the question was correctly answered (Private) Ltd. by the Calcutta High Court.\n\nWe, therefore, dismiss v. the appeal with costs.\n\nThe Commissioner of Income-tax,\n\nWest Bengal\n\nH idayatullah J.\n\nI959\n\nMay 5.\n\nAppeal dismissed.\n\nM/S. SARUPCHAND HUKAMCHAND & CO.\n\nUNION OF INDIA AND OTHERS\n\n(S. R. DAS, C. J., N. H. BHAGWATI and\n\nM. HIDAYATULLAH, JJ.)\n\nIncome-tax--Assessment of unregistered firni treated as registered by Income-tax Officer-Appeal against orders of assessment- Finding of profit reversed and fresh assessment dirccted-Effect- Duty of Income-tax Officer-Indian Income-tax Act, I922 (XI of I922), SS. 23(5)(b), 24(2)(d) and JI(4).\n\nThe Income-tax Officer found that the assessee, an unregistered firm, had made a profit in the assessment year I940-4r. He treated it as registered under s. 23(5)(b) of the Act, assessed the partners and carried the profit to their individual returns, making no demand on the firm.\n\nFor the next t\\vo assess1nent years, hoVvever, the firm \\\\'as assessed as unregistered firm.\n\nFor all the three assessment years, the Income-tax Officer treated the firm as\" resident and ordinarily resident\". The firm appealed against all these assessments.\n\nThe appeals were all consolidated and heard together by the Appellate Assistant Commissioner.\n\nHe found that the firm was non-resident, the computation of income n1ade by the Income-tax Officer was erroneous, that in the assessment year 1940-41 there was a loss and during the subsequent years the firm had made profits.\n\nHe, therefore, directed the Income-tax Officer to modify the assessments accordingly.\n\nThereupon the Income-tax Officer gave relief to the partners for the year 1940-41 and directed certain refunds to be made to them. The firm was not satisfied and moved both the Income-tax Officer and the Appellate Assistant Commissioner", "total_entities": 27, "entities": [{"text": "THE INDIAN MOLASSES CO. (PRIVATE) LTD", "label": "PETITIONER", "start_char": 50, "end_char": 87, "source": "metadata", "metadata": {"canonical_name": "INDIAN MOLASSES CO. (PRIVATE) LTD", "offset_not_found": false}}, {"text": "THE COMMISSIONER OF INCOME-TAX, WEST\n\nBENGAL", "label": "RESPONDENT", "start_char": 93, "end_char": 137, "source": "metadata", "metadata": {"canonical_name": "THE COMMISSIONER OF INCOME-TAX, WEST BENGAL", "offset_not_found": false}}, {"text": "L. KAPUR", "label": "JUDGE", "start_char": 156, "end_char": 164, "source": "metadata", "metadata": {"canonical_name": "J.L. KAPUR", "offset_not_found": false}}, {"text": "M. HIDAYATULLAH, JJ.", "label": "JUDGE", "start_char": 170, "end_char": 190, "source": "metadata", "metadata": {"canonical_name": "M. HIDAYATULLAH", "offset_not_found": false}}, {"text": "Indian Income-tax Act", "label": "STATUTE", "start_char": 354, "end_char": 375, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Indian Income-tax Act, 1922", "label": "STATUTE", "start_char": 2668, "end_char": 2695, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Indian Income-tax Act, 1922", "label": "STATUTE", "start_char": 3461, "end_char": 3488, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "section 10(2)(xv)", "label": "PROVISION", "start_char": 5595, "end_char": 5612, "source": "regex", "metadata": {"statute": null}}, {"text": "First Schedule", "label": "PROVISION", "start_char": 9748, "end_char": 9762, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10(2)(xv)", "label": "PROVISION", "start_char": 10183, "end_char": 10195, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 10210, "end_char": 10224, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Section 10(2)(xv)", "label": "PROVISION", "start_char": 13984, "end_char": 14001, "source": "regex", "metadata": {"statute": null}}, {"text": "s10", "label": "PROVISION", "start_char": 29654, "end_char": 29657, "source": "regex", "metadata": {"statute": null}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 38022, "end_char": 38036, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "Section 137", "label": "PROVISION", "start_char": 38120, "end_char": 38131, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 10(2)", "label": "PROVISION", "start_char": 39121, "end_char": 39129, "source": "regex", "metadata": {"statute": null}}, {"text": "Learned counsel for the assessee Company referred us to the provisions of Chapter IX-B of the Act", "label": "STATUTE", "start_char": 45152, "end_char": 45249, "source": "regex", "metadata": {}}, {"text": "ss. 58R, 588 and 58V", "label": "PROVISION", "start_char": 45264, "end_char": 45284, "source": "regex", "metadata": {"linked_statute_text": "Learned counsel for the assessee Company referred us to the provisions of Chapter IX-B of the Act", "statute": "Learned counsel for the assessee Company referred us to the provisions of Chapter IX-B of the Act"}}, {"text": "s. 1", "label": "PROVISION", "start_char": 46469, "end_char": 46473, "source": "regex", "metadata": {"statute": null}}, {"text": "Assurance Companies Act, 1909", "label": "STATUTE", "start_char": 46481, "end_char": 46510, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "s. 98", "label": "PROVISION", "start_char": 47106, "end_char": 47111, "source": "regex", "metadata": {"linked_statute_text": "the Assurance Companies Act, 1909", "statute": "the Assurance Companies Act, 1909"}}, {"text": "Stamp Act, 1891", "label": "STATUTE", "start_char": 47119, "end_char": 47134, "source": "regex", "metadata": {}}, {"text": "s. 30", "label": "PROVISION", "start_char": 47600, "end_char": 47605, "source": "regex", "metadata": {"linked_statute_text": "the Stamp Act, 1891", "statute": "the Stamp Act, 1891"}}, {"text": "Assurance Companies Act, 1909", "label": "STATUTE", "start_char": 47613, "end_char": 47642, "source": "regex", "metadata": {"confirmed_by_gazetteer": true}}, {"text": "Income-tax Act", "label": "STATUTE", "start_char": 49670, "end_char": 49684, "source": "gazetteer", "metadata": {"confirmed_by_regex": false, "gazetteer_score": 1.0}}, {"text": "SS. 23(5)(b), 24(2)(d)", "label": "PROVISION", "start_char": 49705, "end_char": 49727, "source": "regex", "metadata": {"statute": null}}, {"text": "s. 23(5)(b)", "label": "PROVISION", "start_char": 49894, "end_char": 49905, "source": "regex", "metadata": {"statute": null}}]}
{"document_id": "1959_2_986_1002_EN", "year": 1959, "text": "986 SUPREME COURT REPORTS [1959] Supp.\n\n<959 the setting apart of the money was not a paying out or away of these sums irretrievably.\n\nThe Indian Molasses co.\n\nIn our opinion, the question was correctly answered (Private) Ltd. by the Calcutta High Court.\n\nWe, therefore, dismiss v. the appeal with costs.\n\nThe Commissioner of Income-tax,\n\nWest Bengal\n\nH idayatullah J.\n\nI959\n\nMay 5.\n\nAppeal dismissed.\n\nM/S. SARUPCHAND HUKAMCHAND & CO.\n\nUNION OF INDIA AND OTHERS\n\n(S. R. DAS, C. J., N. H. BHAGWATI and\n\nM. HIDAYATULLAH, JJ.)\n\nIncome-tax--Assessment of unregistered firni treated as registered by Income-tax Officer-Appeal against orders of assessment- Finding of profit reversed and fresh assessment dirccted-Effect- Duty of Income-tax Officer-Indian Income-tax Act, I922 (XI of I922), SS. 23(5)(b), 24(2)(d) and JI(4).\n\nThe Income-tax Officer found that the assessee, an unregistered firm, had made a profit in the assessment year I940-4r. He treated it as registered under s. 23(5)(b) of the Act, assessed the partners and carried the profit to their individual returns, making no demand on the firm.\n\nFor the next t\\vo assess1nent years, hoVvever, the firm \\\\'as assessed as unregistered firm.\n\nFor all the three assessment years, the Income-tax Officer treated the firm as\" resident and ordinarily resident\". The firm appealed against all these assessments.\n\nThe appeals were all consolidated and heard together by the Appellate Assistant Commissioner.\n\nHe found that the firm was non-resident, the computation of income n1ade by the Income-tax Officer was erroneous, that in the assessment year 1940-41 there was a loss and during the subsequent years the firm had made profits.\n\nHe, therefore, directed the Income-tax Officer to modify the assessments accordingly.\n\nThereupon the Income-tax Officer gave relief to the partners for the year 1940-41 and directed certain refunds to be made to them. The firm was not satisfied and moved both the Income-tax Officer and the Appellate Assistant Commissioner\n\nunder s. 35 of the Act, claiming that inasmuch as it had been c959 found to have incurred a Joss in the first of the three assessment years, it could not for that year be treated as a registered firm M /s. Sarupchand and was entitled to carry forward the Joss to the subsequent Hukamchand & Co. years.\n\nThey declined to interfere on the ground that the direcv tion of the Income-tax Officer under s. 23(5)(b), not being appeal- Union of India able, had become final and the time within which the original & Others order of the Income-tax Officer could be rectified had also run out. The firm went up to the Commissioner and the Central Board of Revenue, but to no effect. Thereafter it moved the High Court under Art. 226 of the Constitution. The single Judge who heard the matter declined to interfere. The Division Bench on appeal agreed with the single Judge. The firm appealed to this Court. The question for decision was whether after the finding of profit made by the Income-tax Officer had been turned to one of Joss by the Appellate Assistant Commissioner on appeal, the original decision of the Income-tax Officer to treat the firm as a registered one under s. 23(5)(b) could remain intact.\n\nHeld, that since the Income-tax Officer could treat an unregistered firm as a registered one under s. 23(5)(b) of the Indian Income-tax Act only if there was a profit, the reversal of the finding of profit made by him by the Appellate Assistant Commissioner must automatically take away the jurisdiction of the Income-tax Officer to act under that section and his order made thereunder must fall through.\n\nIt made no difference in the instant case, whether the Appellate Assistant Commissioner's order was one under cl. (a) of s. 31(3} or under cl. (b) of that section, for the effect of the order in law in either case would be the same, namely, the annulment of the assessment resulting in the restoration of the case back to its original position.\n\nIt was not correct to suggest that under proviso ( d) to s. 24(2) of the Act the losses of an unregistered firm could be carried to the partners' account as if the firm was registered.\n\nThat proviso was not intended to enable the Income-tax Officer to forego the obligation laid on him by cl. (b} of s. 23(5), i.e., to find out the interest of the Revenue, and thus to render the words 'during any year ' in proviso rednndant. The effect of the proyisions of s. 23(5)(b) and the proviso (d) to s. 24(2), which must be read together, was that the proviso was to be invoked subject to the conditions under s. 23(5}(b) to obtain more revenue for the State by applying s. 23(5)(a).\n\nAlthough the Appellate Assistant Commissioner ould not have interfered with the order made by the Income-tax Officer under s. 23(5}(b) of the Act in an appeal against that order, the position must be different when the assessment itself was subject to appeal under s. 31 of the Act, and the Appellate Assistant Commissioner under s. 3r(4) authorised the Income-tax Officer to modify the assessment in the light of his direction. It would, therefore, be the duty of the Income-tax Officer to consider de\n\nI959 nova \\Vhether in the altered circun1stances the provisions of s. 23(5)(b) of the Act could at all be applied. 1\\-1/s. Sarupchoind.\n\nCo11unissioner of lnco11ie-tax v. Tribune 1'rust, Lahore, [1948] Hukamchand 6' C0 16 I.T.l{. 214, Comntissioncr of Inco1ne-tax v. McMillan & Co., . v. . [1958] 33 I.T.R. 182 and Commissioner of Income-tax v. Amritlal Union of India Bhogilal & Co., [1958] 34 I.T.R. 130, considered.\n\n& Others\n\nCIVIL APPELLATE JURISDICTION: Civil Appeal No. 172 of 1955.\n\nAppeal by special leave from the judgment and order dated February 26, 1953, of the Bombay High Court in Appeal No. 108 of 1952, arising ont of the Judgment and order dated July 8, 1952, of the said High Court in its Ordinary Original and Civil Jurisdiction in Misc. No. 48 of 1952.\n\nR. J. Kolah, J. B. Dadachanji, S. N. Andley and Rarneshwar Nath, for the appellant.\n\nIi. N. Sanyal, Additional Solicitor-General of India, K. N. Rajagopal Sastri and D. Gupta, for the respondents.\n\n1959. May 5.\n\nThe Judgment of the Court was delivered by\n\nHidayatu/lah J.\n\nHIDAYATULLAH, J.-This appeal, by special leave of this Court, is directed against the judgment and order of the High Court of Judicature at Bombay dated February 26, 1953, in Appeal N\"o. 108 of 1952.\n\nBy that judgment, the Divisional Bench (Chagla, C. J. and Shah, J.) declined to interfere, in Letters Patent Appeal, with the judgment of Tendolkar, J., dated July 8, 1952, in Miscellaneous Application No. 48 of 1952. In the petition which was originally filed in the High Court under Art. 226 of the Constitution, a writ of mandamus was asked against the Union of Inditt ttnd two Income-tax Officers to compel them to give effect to the appellate order of the Appellate Assistant Commissioner of I. T. F. Range, Bombay, dated pril 29, 1949.\n\nThe High Court in both the judgments declined the writ.\n\nThe facts of the case are as follows: The appellant, Messrs. Sarupchand and Hukamchand and Co., (hereinafter referred to as the assessee firm) was carrying on business, inter alia, as shroffs, merchants and\n\ncomm1ss10n agents at Bombay, Indore, Ujjain and r!J59 Calcutta. It had, in the relevant account years, two , 5 ,\n\nS. S h d H k h d d S • H' .ih/s. arupcnand partners, ir arupc. an u amc an an fl Ira- Hukamchand c;,, co lal Kalyanmal. The two partners were also separately v. liable to income-tax, the former as a Hindu undivided Union of India family and the latter as an individual. We are con- & Others cerned here with the assessment years 1940-41, 1941- 42 and 1942-43. These correspond to the account Hidayatullah f. years, 1995-1996 (Samvat) to 1997-1998 (Samvat).\n\nW'hen the assessment of the assessee firm was made, the Income-tax Officer, Section VIII (Central), Bombay, treated the firm as \"resident and ordinarily resident\". For the assessment year 1940-41 the Incometax Officer found a profit of Rs. 80,358, and applying s. 23(5)(b) of the Indian Income-tax Act (hereafter called the Act), he proceeded to treat the firm which was unregistered as registered for the purpose of assessment. On March 15, 1945, he therefore assessed the two partners carrying the profit into their indivi- • dual returns and made no demand upon the firm. It appears that an application for registration had already been filed under s. 26A of the A.ct before the Income-tax Officer, but it was rejected-and quite correctly-because no instrument of partnership was disclosed. That order was also passed on the same date.\n\nFor the assessment years 1941.42 and 1942-43, the Income-tax Officer by his orders dated July 31, 1945, and October 31, 1945, respectively, treated the firm as \"resident and ordinarily resident\" and as an unregistered firm.\n\nFor the first of the two assessment years, h(i) assessed the firm on a total income of Rs. 2,30,798 to income-tax and super-tax, and for the second year, its British Indian income was taken at Rs. 2,62,827 and the total income at Rs. 7,00,116 and was also treated accordingly.\n\nThe assessee firm appealed agaimit these assessments.\n\nThe Appellate Assistant Commissioner by his order passed in the consolidated appeals on April 29, 1949, held that the assessee firm was non-resident and excluded the income of the firm outside British India, though it was included in the total word income for the purpose of computing the rate of tax.\n\nr959 He also found error in the computation of income\n\nMl h made by the Income-tax Officer, and held that in s. Sarupc and h 9 h Ihtkamchand & Ca. t e assessment year 1 40-41 t ere was a loss of\n\nRs. 1,61,084 in the total world income of the assessee Union af India firm.\n\nFor the subsequent years also there were slight\n\n& Othm variations in the amounts determined by the Incometax Officer, but it was held that the assessee firm had Hidayatullah f. made profits in those years. The following is the summary of the findings of the Appellate Assistant Commissioner, as given by him in his order:\n\nAssess- Income in Income Total outside meat British British world year India India income.\n\nRs.\n\nRs.\n\nRs. 1940-41 Loss 2,26;028 74,944 Loss 1,61,084 • 1941-42 1,27,062 1,08,236 ... 2,35,298 1942-43 2,62,827 4,41,789 ... 7,04,616\n\nIn addition to these findings, the Appellate Assistant Commissioner added a direction to the following effect:\n\n\"The Income-tax Officer is directed to mod ifv the assessments accordingly.\" \" When the matter reached the Income-tax Officer, he gave effect to the order of the Appellate Assistant Commissioner under s. 31 of the Act and carried the loss to the partners in their assessments for the year 1940-41, and granted a refund of Rs.16,9.77-11-0 to Sir Sarupchand Hukamchand and Rs. 68,339 to Sri Hiralal Kalyanmal. The assessee firm, however, was not satisfied, and embarked upon voluminous correspondence beginning with a letter dated September 10, 1949, by which it claimed that inasmuch as it had been shown to have incurred a loss in the first of the three assessment years, it could not for that year .be treated as a registered firm, and that as an unregistered firm it was entitled therefore to carry forward the loss to the subsequent years. In addition to the correspondence, the assessee firm moved in turn the Income-tax Officer\n\nas well as .the Appellate Assistant Commissioner res- 1 959 pectively under s. 35 of the Act for rectification of the M/ 5 h d ff f. h s. arupc an assessment to the same e ect.\n\nThe officers o t e Hukamchand & co.\n\nDepartment at both levels declined to interfere, and v. stated that the direction of the Income-tax Officer Union of India under s. 23(5)(b) was not appealable, and had become & Others final.\n\nThey also pointed out that the period during H idayatullah J. which the original order of the Income-tax Officer could be rectified (viz., 4 years) had already run out, and that the petitions were accordingly out of time.\n\nThe assessee firm moved the Commissioner as well as the Central Board of Revenue, but failed to get the desired order.\n\nFinally, after the receipt of the order of the Central Board of Revenue, the assessee firm applied on July 16, 1951, to the Additional Income-tax Officer, Section VIII (Central), to give effect to an order which , the assessee firm had secured from the Appellate Assistant Commissioner earlier. By that order, the Appellate Assistant Commissioner had, at the request of the assessee firm, directed the Income-tax Officer to take the losses of the first assessment year into the accounts of the partners, which direction, in the opinion of the Appellate Assistant Commissioner, his predecessor had omitted to make in the first instance. It was after this that fresh assessment forms were drawn up, and the refund was determined. It may be pointed out here that the partners withdrew the amount of refund, though in making the request to the Additional Income-tax Officer the assessee firm had reserved its right \" to move further in the matter as may be advised\", and had pointed out that the action was without prejudice to such rights.\n\nHaving failed to obtain relief from the Department, the appellate authorities and the Central Board of Revenue, tqe assessee firm filed the petition under Art. 226 of the Constitution in the High Court of Judicature at Bombay. That petition was heard by Tendolkar, J., and he declined to interfere mainly on the ground that it was possible to take two views of the matter whether after a profit assessment was turned into a loss assessment by the Appellate Assistant\n\nz959 Commissioner, the original order of the Income-\n\nM/ 5\n\nP , d tax Officer under s. 23(5)(b) remained outstanding or s. aru c11an .\n\nHukamchand & co. not.\n\nHe thought that this was not a fit case for the\n\nv. issuance of a writ of mandamus by the High Court. In Union of India appeal which was taken from this decision, Chagla,\n\n& Others C. J., looked at proviso (d} to s. 24(2), and also came to the view that there was a possibility of two views Hidayatullah ] . being taken in the matter, and that the learned single Judge was right in not interfering. Shah, J., in a _concurring judgment, explained what he considered was the meaning of s. 23(5)(b) read with s. 24(2), proviso (d}, but he also felt that this was not a case in which a writ could be claimed against the Union of India or the Income-tax Officers.\n\nChagla, C. J., however, expressed the hope that the taxing authorities would not deny the assessee firm its rights under the Act on any technical ground, such as limitation, or failure to pursue a particular procedure. In the result, the Divisional Bench sustained the order of Tendolkar, J., who had dismtssed the petition earlier.\n\nThis Court on May 3, 1954, granted special leave to appeal against the judgment of the Divisional Bench: Before arguing on merits of the appeal, the leamed Additional Solicitor-General and subsequen_tly Mr. Rajagopala Sastri who took over the argument, raised three objectiol)s to the present appeal. According to them, the petition in the High Court was directed against the Union of India and the two Income-tax Officers who had dealt. with this matter, and the relief which was claimed could be granted by none of them. They further argued that mandamus was an inappropriate writ to issue in this matter, when the order passed by the Income-tax Officer under s. 23(5)(b) was not appealable and the Appellate Assistant Commissioner could do nothing about it in the appeal against the quantum of assessjllent. They also stated that the relief asked for in the petition could not be granted by the High Court, and that the powers of this Court were accordingly limited.\n\nWe shall deal with these objections, when we have determined the essence of the matter. Under s. 23(5)(b), a power is conferred on the Income-tax Officer to treat an unregistered firm as a registered\n\n(2) S.C.R. stti>REME COURT REPORTS 993\n\nfirm, if by adopting that method more tax and superz~59 tax would be realisable from te individual partners M/s. Sarupchand in their own assessments than In assessing the firm. Hztkanichand &- co.\n\nThe clause may be quoted in extenso for ready referv. ence here : Union of India 23(5). \"Notwithstanding anything contained in s- Others the foregoing sub-sections, when the assessee is a firm Hidayati<llah J. and the total income of the firm has been assessed under sub-section (1), sub-section (3) or sub-section (4), as the case may be,-\n\n(b) in the case of an unregistered firm, the Income-tax Officer may instead of determining the sum payable by the firm itself proceed in the manner laid down in clause (a) as applicable to a registered firm, if, in his opinion, the aggregate amount of the\n\ntax including super-tax, if any, payable by the partners under such procedure would be greater than the aggregate amount which would be payable by the firm and the partners individually if the firm were assessed as an unregistered firm. \".\n\nThe contention of the assessee firm is that the action of the Income-tax Officer in treating an unregistered firm as a registered firm is mainly in the interests of the Revenue and he can act if more revenue would be available and not otherwise.\n\nWhen an unregistered firm makes a loss, it is entitled to carry forward the loss for a certain number of years till it is absorbed in the profits, if any, of subsequent years. By carrying the loss to the account of the individual partners, relief is afforded to them in their own income-tax payment, and there is presently a loss of revenue to the State. This, according to the assessee firm, is outside the jurisdiction of the Income-tax Officer, because his action is conditioned upon realisation of more revenue and not creating loss for the State.\n\nLearned counsel for the Department agree that there would be, in the ass.essment year in which there is a loss by an unregistered firm, a loss to the Revenue if it is carried into the accounts of the partners; but they contend that there is no inhibition against the\n\nI959: action and refer to proviso (d) to s. 24(2) as indicating\n\nMl S-P h d that such a course is perfectly valid. The assessee s. aru c an H\"kamchand & co. firm also contends that the moment loss was deterv. mined by the Appellate Assistant Commissioner, the Union of India previous order made by the Income-tax Officer under\n\n& Othm s. 23(5)(b) of the Act automatically fell to the ground and the loss could only be carried forward in the Hidayatullah ]. f h uture assessments of t e unregistered assessee firm and not in the account of the partners. The assessee firm contends that the direction by the Appellate Assistant Commissioner to modify the assessments of the three years accordingly implied the re-opening of the entire question whether this unregistered firm could be treated as a registered firm for purposes of assessment in the first yea, r. The Department, on the other hand, refers to the provisions of s. 30 of the Act to show that an appeal lies to the Appellate Assistant Commissioner on the grounds expressly mentioned there and none other. It further points out that this • is not one of the grounds on which the appeal could have been taken, and the Act cannot by implication be deemed to have conferred on the Appellate Assistant Commissioner a power which he ordinarily did not possess under the Act.\n\nThe order of the Incometax Officer to treat the unregistered firm as registered must, therefore, be held to be outstanding, and all that has happened in the ease is to take that order to its logical conclusion in the light of the assessed loss of the firm, in the three years under assessment.\n\nThis question was argued before us in great detail, as apparently it had also been in the Court below.\n\nThere is no doubt that the matter is one of some complexity, which is not unusual in a statute of the type we are considering, but, in our opinion, only one correct view of the matter was possible, and with all due respect, the High Court made but . little attempt to determine it.\n\nWe shall now attempt to lay down the interpretation of the various sections bearing upon the matter. Section 23(5)(b) has already been quoted. It will appear from it that the Income-tax Officer is given the option to apply the procedure laid down in cl. (a) to an unregistered firm, if, in his\n\nopinion, the aggregate amount of tax including super~ x959 tax, if any, payable by the partners under such pro- M/s.Sarupchand cedure would be greater than the aggregate amount of Hukamchand.,;. co. tax which would be payable by the firm and the v. partners individually, if the firm was assesseil as an Union of India unregistered firm.\n\nClause (a) provides that the sum & Others payable by the firm shall not be determined but the Hidayatullah J. total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed and the sum payable by him on the basis of such assessment shall be determined. To put it simply, in the case of a registered firm its' assessable income is first determined, but is not processed further to determine the tax.\n\nInstead, the shares of the partners in the assessable income are determined in accordance with the particulars furnished by them, and the resultant amounts are respectively carried to each partner's return and included in his income, and the tax on the total is determined. In the case of an unregistered firm, the assessable income is found out, and then the tax payable by the unregistered firm is determined and a demand issued. If there is a loss, then the loss is carried forward to the succeeding years till it is absorbed or for six (now, eight) years but no further.\n\nPreviously, the number of years ranged from one to six, but there is no need to refer to the provision in detail.\n\nWhat happened in this case was that for the assessment year 1940-41, the Income-tax Officer determined the assessable income at Rs. 80,358.\n\nHe felt that more tax was likely to be realised if the partners were assessed instead of the firm, nd he accordingly decided to apply the procedure laid down ins. 23(5)(b) to the firm. In passing his order, the Income-tax Officer observed as follows:\n\n\" The firm is an unregistered one but the aggregate amount of tax payable by the partners would be greater by applying the procedure laid down in Sec. 23(5)(a) of the Act than the aggregate amount which would be payable by the firm and the partners individually if the firm were assessed as an unregistered one.\n\nI therefore order under Sec. 23(5)(b) of the\n\n'959 Act that the procedure laid down in Sec. 23(5}{a) M/\" Sarupchand should be applied and the firm declared N. D. for the Hukamchand & Co. assessment year 1940-41 \".\n\nIt is no doubt true that ifthe Income.tax Officer had Union of Indio determined a Joss, he could not and probably would & Others not have passed this order, which would have had Hidayatullah J. the immediate effect of loss to the Revenue of the sums which have now been ordered to be refunded to the partners of this unregistered firm.\n\nThe Depart. ment, however, says that the assessment for 1940-41 except in so far as profit was converted into loss has become final and cannot be set aside now. l1; relies on Commissioner of Income-tax, Bombay and Aden v.\n\nKhemchand Ramdas(') and Commissioner of Income. tax v. Tribune Trust, Lahore (2).\n\nThere is no doubt that an assessment which has once been made does become final, subject only to the powers exercisable under ss. 34 and 35 of the Act. The position, however, is different when the assessment itself is subject to appeal, and the Appellate Assistant Commissioner passes an order converting the profit into a loss, and gives a direction to the Income-tax Officer to modify the assessment accordingly.\n\nThe position then was that the Income.tax Officer had exercised his powers under s. 23(5)(b) as there was a profit. When the Appellate Assistant Commissioner found a . loss it became clear that the Income-tax Officer had, by 1'.n erroneous finding of profit assnmed jurisdiction to act under s. 23(5)(b).\n\nThe reversal of the finding of profit destroyed the jlubstratum of the jurisdiction of the Income-tax Officer to act under that clause and his order automatically fell through.\n\nThe Department's contention that such an order is referable to cl. (a) of s. 31(3) and does not involve the setting aside of the order under s. 23(5)(b) passed earlier by the Income-tax Officer is not correct.\n\nNo doubt, the right of appeal given to the assessee under s. 30 is limited to the matters therein coutained, but the relief which the appellate authority can give is to be found in s. 31(3). The .assessment order having\n\ncome before the Appellate Assistant Commissioner, he\n\n(1) [1938] 6 I.T.R. 414.\n\n(2) [1948] 16 l.T.R. 214.\n\nCan: under Cl. (a), Confirm, reduce, enhance Or annul\n\nI959 the assessment. Under cl. (b) he can set aside the M, s-p , d s. aru c11an assessment and direct the Income-tax Officer to make Hukamchand & ca. a fresh assessment, after making such further enquiries v. as the Income-tax Officer thinks fit or the Appellate Union of India Assistant Commissioner directs, and the Income-tax & Others Officer must thereupon proceed to make fresh assess- Hidayatu/lah 1 • ment and determine the amount of tax payable on the basis of such fresh assessment. It is contended by the Department that the order of the Appellate Assistant Commissioner was passed under cl. (a) and not\n\ncl. (b), and there being no fresh assessment ordered, the only thing that the Income-tax Officer could do was to re-determine the tax within the limits of his own order under s. 23(5)(b) of the Act, which applied\n\ncl. (a) of that sub-section to this case.\n\nIn our opinion,. this is not a correct approach.\n\nEven if the order be referred to cl. (a) of s. 31(3), the effect, in law, was the annulment of the assessment which had been made in the case, and the necessary consequence of the determinati6n of the loos in the assessable income remained to be worked out. The Income-tax Officer worked it out by carrying the losses to the return of the partners.\n\nUnder what section could he do so except under s. 23(5)(b)? There was no authorisation under s. 31(4) of the Act and the second proviso to s. 24 was clear.\n\nIn such a case, the Income.tax Officer was required once again to apply his mind to determine whether it would be in the interests of Revenue to proceed, as he had done before. It is manifest that if he had done this duty in the interests of the Revenue, as the law indeed contemplates, he would never have passed the order that the loss of the firm should be carried to the accounts of the partners immediately in that year of assessment. Learned counsel for the Department admits that no Income-tax Officer would have, with a loss by the fitm, given relief on the basis of that loss to the partners, but he contends that this is not illegal in view of the special provisions of proviso (d) to s. 24(2) of the Act.\n\nWe accordingly proceed to consider the effect of that proviso, which reads as follows:\n\nr959 \" Provided that-\n\nM s. sarnpchand\n\n(d) where an unregistered firm is assessed as a Hnkamchand ,, co. registered firm under clause (b) of sub-section (5) of\n\nSection 23, during any year, its losses shall also be Union °! India carried forward and set off under this section as if it\n\n& Othm were a registered firm''.\n\nHidayatullah J.\n\nFrom this, it is argued, as it was argued in the High Court, that even the losses of an unregistered firm can be carried to the partners' account, as if the firm were registered. .No doubt, if the proviso is read in an extended manner, the result asked for would follow ; but a careful reading of it would show that it was not designed to enable the Income. tax Officer to forego the obligation laid on him by cl. (b) of s. 23(5), to find out the interests of the Revenue. To read this proviso as enabling the Income-tax Officer to overlook the said clause is to give no meaning to the words \" during any year \".\n\nThose words form a material part of the proviso, because the proviso with or without those words makes an entirely different sense.\n\nWithout those words, it gives a general power to carry the losses to the partner's account. With those wlilrds, it OJ; ily provides for a contingency in which an unregistered firm treated as such in the previous years, is sought in any particular year to be treated as a registered firm, and by reason of its carrying some business losses in the past, arrangement for the carrying forward and absorption of those losses has to be made for the ye:i, r in which it is to be treated as a registered firm. In that event., the proviso provides that its losses shall be carried to the partners' account, as if it were a registered firm. It is inconceivable that if the firm was carrying heavy business losses, it would suddenly be treated in a year of assessment as a registered firm, so that its losses might give relief to the partners and not give revenue to the State. This proviso would only be resorted to, when in spite of taking the losses to the accounts of the partners, more revenue would be available to the State. The proviso is an enabling one.\n\nAn unregistered firm, treated as such in previous years, may, during any year, be treated as a registered firm provided the Revenue would\n\nbenefit. It may be that the firm may have made a x959 loss in that year or was carrying a loss from the pre- M/ 5\n\nP 1 d vious years but, if by treating the firm as registered, Huk:;,, c~::ac ;~0• the Revenue would be benefited, the proviso can be v. used. But there is no general power to act this way Union of India to the detriment of the Revenue. To give any other &- Others interpretation to this proviso will mean that the words Ilidayatullah J. \"during any year\" have not received any meaning and that the proviso is interpreted to make it not incumbent on the Income-tax Officer to consider the interests of the Revenue, as required by cl. (b) of s. 23(5).\n\nThe two provisions must be read in harmony, and when so read, yield the only result that proviso (d) is to be invoked, subject to the conditions under s. 23(5)(b) to obtain more .revenue for the State by applying s. 23(5)(a).\n\nIt would appear, therefore, that the Income-tax Officer in the light of the losses determined by the Appellate Assistant Commissioner, was under a duty to apply his mind de novo to the problem which he had undertaken, when he resorted to s. 23(5) tb). It is admitted that if the matter had been so plain to him, he would not have, if he did his duty correctly under that provifiion, carried the losses to the partners' account.\n\nThe only question, therefore, which survives for determination is whether the order of the Appellate Assistant Commissioner left the Income-tax Officer free of his earlier order, and whether he was under a duty to reconsider the position under s. 23(5) (b).\n\nWhen the basis for assessing a profit was gone, it is manifest that there was nothing but.loss to carry forward to the partners' account.\n\nWith the fall of t~ assessment in this manner, fell the need for applying the special provisions of cl. (b) of s. 23( 5) to the case.\n\nIndeed, the duty of the Income-tax Officer indicated a contrary course, if he was to act under s. 23(5) (b) at all. The order of the Appellate Assistant Commissioner was passed in respect of three years' assessment, and was a consolidated order. He set out in parallel columns the income and losses of the firm and not of the partners and directed the Income-tax Officer to\n\n\" 1000 SUPREME COUR'r REPORTS [1959j Supp.\n\n'959 modify the assessments accordingly. The intention M/ 5-P h d obviously underlying that order was to put the matter\n\nHuk~,,,,~;;:,,; ;'.~0 • at the stage at which the assessable income of the v. assessee firm was determined before computing the Union of India tax thereupon. To compute the tax, the Income-tax\n\n& Others Officer had to determine whether the loss occasioned in the first year should be carried forward to the Hidayatullah ]. assessee firm in the subsequent year, and he could not give effect to the order of the Appellate Assistant Commissioner fully, unless he determined once again the question under s. 23(5) (b). In other words, the implication of the appellate order was to take the matter prior to the order regarding the treatment of the unregistered firm as a registered firm, and of necessity, that order.fell to the ground as being passed beyond that stage.\n\nIt is contended on the strength of thB ruling of the Privy Council in Commissioner of Income-tax v. The Tribune Trust, Lahore (1) that once the assessment is final and valid, it remains so until it is set aside, but once it has become final, it cannot be altered except under ss. 34 and 35.\n\nNo exception can be taken to the statement of the law by the Privy Council, which, with all due respect, is absolutely correct, but it is impossible to hold, on analogy, that the order determining that this unregistered firm should be treated as registered, had equally become final and not open to further consideration. Learned counsel for the Department also urged on the strength of Commissioner of Income-tax v .. McMillan & Go. (2) and Commissioner of Income-tax v. Amritlal Bhogilal & Go. ('), that if the powers of the Appellate Assistant Commissioner '1id not involve a review of the determination .by the Income-tax Officer under s. 23(5) (b), this result could not indirectly follow. No dou ht, the Appellate Assistant Commissioner could not, if the matter had gone before him in appeal against the order under' that section, have interfered. But the Appellate Assistant Commissioner was exercising his powers under s. 31 of the Act and annulling the assessment\n\n(1) [1948] 16 LT.R. 214.\n\n(2) [1958] 33 LT.R. 182.\n\n(3) [1958] 34 LT.R. 130.\n\nof the first year and converting a profit in that\n\nI959 year into a loss.\n\nNone can deny that he had that - h h 1 h' h b .c h' S t' Mjs. Sarupc and power m t e appea w IC was e1ore im. ec 10n Httkamchand &o co. 31(4) of the Act enjoins that where as the result of an v. appeal any change is made in the assessment of a Union of India firm, the Appellate Assistant Commissioner may &o Others authorise the Income-tax Officer to amend accordingly any assessment made on any partner of the firm. This Hidayatullah f. power was implicit in the order which the Appellate Assistant Commissioner passed, namely, that there was a loss in the assessment year in question and the assessments for the three years had to be modified.\n\nThe Income-tax Officer therefore was under a duty to modify the assessments of the partners accordingly, and to take the matter up again from the point at which the order of the Appellate Assistant Commissioner had placed it. He had once again to determine whether he would, in the altered circumstances, apply s. 23(5)(b) to this case or not.\n\nIn our opinion, the Income-tax Officers in question did not do their duty as required by law, and we should, therefore, by a writ compel them to do so.\n\nAs regards the argument that the petition is directed against wrong persons and for a wrong relief, we do not think that it is so. The petition sought relief against the Union of India, which, in any event, was not concerned with this matter, and was wrongly joined. But the two Income-tax Officers who dealt with this matter, were required under the statute to do their duty once again in the matter of the application of s. 23(5) (b) of the Act. That they failed to apply their mind to this matter under a wrong apprehension of the law is manifest, and they did not give effect to the orders of the Appellate Assistant Commissioner. The assessee firm having failed to secure this relief from all the authorities superior to the Incometax Offics, it was open to the High Court by a writ '; to order the Income-tax Officer concerned to hear and determine this matter in accordance'with law.\n\nThis is precisely the relief which was claimed in the High Court and is now claimed in the present appeal.\n\nI959 think, with due respect, that the High Court should M/s. sarupchand have, on a correct appraisal of the legal situation, Hukamchand & Co. ordered this relief, and we accordingly, after explain- . v. . ing the law applicable .to the case, order the approunion ;~India priate Income-tax Officer to hear and determine this\n\n& ' \"' matter i.n the light of our observations.\n\nHidayatullah J.\n\nWe may set down here that the two partners of the firm to whom relief has been given by way of refund after the Appellate Assistant Commissioner's order undertook unconditionally to refund the amounts, before the matter is considered by the Income-tax Officer.\n\nWe order that the two partners shall return the amounts in the manner to be ordered by the Income-tax Officer, before action is taken to determine the matter.\n\nI959\n\nMay 5.\n\nIn the result, the appeal is allowed with costs throughout to be paid by respondents 2 and 3. The Union of India shall, however, bear its own costs. It may be noted that no separate costs were incurred by it either in this Court or in the Court below. It joined respondents 2 and 3 in the statement of the case filed in this Court and also appeared through the same counsel in both the Courts.\n\nAppeal allowed.\n\nTHE INDIAN OXYGEN & ACETYLENE CO.,\n\nPRIVATE LTD., BOMBAY v.\n\nITS WORKMEN & ANOTHER\n\n(S. R. DAS, c. J., N. H. BRAGWATI, s. K. DAS, P. B. GAJENDRAGADKAR and K. N. V\\TANOHOO, JJ.)\n\nIndustrial Dispute-Bonus-Full Bench formullt, if can be disregarded-Rehabilitation, claim for-Average life, calculation of -Method of Weighted Average-Exhmtsted Assets-Whether can be taken into account.\n\nThe workmen claimed bonus for the years r952-53 and r953-54. The employers contended that on a proper working\n\n./ (", "total_entities": 74, "entities": [{"text": "M/S. 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