IH fd.' B1rt4bori Union c£. E#changd of

Encloues

z960

Mllrch .15.

SUPREME COURT REPORTS [1960)

as indicated above ; in that case Parliament may have to pass a law on those lines under Art. 368 and then follow it up with a law relatable to the amendeJ Art. 3 to implement the agreement.

Q. 3.

Same as answers (a), (b) and (c) to Question 2.

Reference answered accordingly.

CHARANDAS HARIDAS AND ANOTHER

THE COMMISSIONER OF INCOME-TAX,

BOMBAY NORTH, KUTCH, SAURASHTRA

AND AHMEDABAD & ANOTHER (S. K. DAB, J. L. KAPUR and M. HIDAYATULLAH, JJ.)

Income-tax-Income from managing agency-Karla of Hindu undivided family becoming partner of managing agency firm-Income therefrom assessed as family income-Subsequent partition of managing agency comtnission-Claim for assessnzen-t as 1"11dividual income of divided members.

C, who was the Karta of the Hindu undivided family consisting of his \\'ifC, three sons and himself, was a partner in six managing agency firms in six Mills, and the income received by him as partner was being assessed as that of the Hindu undivided family for the purposes of income-tax. On December 31, 1945, C, acting for his three minor sons and himself, and his wif~ entered into an oral agreement for a partial partition, \Vi'.th effect fron1 January 1, 1946, by which C gave a certain share to his daughter in the managing agency commission from two of the six managing agencies held by the family and the balance together with the shares in the other managing agencies was divided into five equal shares between C, his wife and sons.

The agreement was subsequently recorded in a document <lated September II, 1946, which recited, inter alia: "By this partition we decided that \Vhatever commission fell due till 31-12-45 and which is received after 31-12-45 should be kept joint and in r:espect of the commission which accrues from 1-1-46 and received after that date each of us become absolute owner of his one-fifth share and therefore from the date, i.e., from 1-1-46 these commissions cease to be the joint property of our family." For the assessment years 1947-48 and 1948-49, C claimed that the incoine from the managing agency firms should no longer be treated as the income of the Hindu undivided family but as the separate income of the divided members, )Jut the Income-tax authorities rejected the claim on the grounds that by the document in question the division was of th• inrome and not of the assets from which the income wa

IO..·-·

...

' -

derived and since income-tax was payable at the moment of time I96o when income accrued, this income must be taken to have accrued to the indu undivided family: Charandas Haridas Held, that inasmuch as there was no other effective mode v. of partitioning this asset and further in view of tlie finding that Commissioner 01 Incom•-tax the partition was not a pretence, the asset must be treated as divided for purposes of income-tax law and the income was not assessable as the income of the Hindu undivided family.

CIVIL APPELI, ATE JURISDICTION: Civil Appeal No. 108of1957.

Appeal by special leave from the judgment and order dated February 16, 1955, of the Bombay High Court in Income-tax Reference No. 35/x of 1954.

A. V. Viswanatha Sastri, B. K. B. Naidu and I. N.

Shroff, for the appellants.

0. K. Daphtary, Solicitor-General of I_ndia K. N.

Rajagopal Sastri and D. Gupta, for the respondents.

1960. March 15. The Judgment of the Court was delivered by

HIDAYATULLAH, J.-This is an appeal with the Hidayalullah J. special leave of this Court against the judgment and order dated February 16, 1955, of the High Court of Bombay in an I!J.come-tax Reference under s. 66(2) of the Indian, Income-tax Act.

The appellants are two assessees, Charandas Haridas and Chinubhai Haridas, whose cases are identical, and, in fact, there was a consolidated reference by the Income-tax Appellate Tribunal, which was answered by the High Court by its judgment. The respondents are respectively the Commissioner of Income-tax, Bombay North, Kutch and Saurashtra and the Commissioner of Income-tax, Delhi, Ajmer, Rajasthan and Madhya Bharat. The two appellants represented two units of Hindu undivided families.

Charandas Haridas represented his wife, three sons and himself, and Chinubhai Haridas represented his wife, son nd himself. In stating the facts relative to the two families, it will not be necessary to give them separately, because the question which was answered by the High Court in the judgment under appeal arose in identical circumstances in the two families.

The only difference 's in the shares held respectively by the ; two Hindu undivided families in the managing

x96o agencies to be hereafter mentioned. We will, therefore,

Ch d-H .d confine ourselves to a statement of the facts relating "'"" :~ "" as to Charandas Haridas only. Commissioner of Charandas Haridas was the Karta of the Hindu un- Incom•-••• divided family consisting of his wife, three sons and himself.

He was a partner in six managing agei, cy Hiday•tullah f. firms in six Mills.

In previous years, the income received by him as partner in these managing agencies was being assessed as the income of the Hindu undivided family. On December 31, 1945, Charandas Haridas acting for his three minor sons and himself and Shantaben, his wife, entered into au oral agreement for a partial partition. By that agreement Charandas Haridas gave an one pie share to his daughter, Pratima, in the managing agency commission from two of the six managing agencies held by the family.

The balance together with the shares in the other managing agencies was divided into five equal shares between Charandas Haridas, his wife and sons.

This agreement was to come into effect from January 1, l946, which was the beginning of a fresh accounting year. On September 11, 1946, Charandas Haridas acting .for himself and his minor sons, and Shantaben executed a memorandum of partial partitfon in which the above facts were recited, the document purporting to be a record of what had taken place orally earlier.

In the assessment years 194 7-48 and 1948-49, Charandas Haridas claimed that the income should no longer be treated as the income of the Hindu undivided family but as the separate income of the divided members. The Income-tax Officer declined to treat the income as any but of the Hindu undivided family, and assessed the income as before.

An appeal to the Appellate Assistant Commissioner was unsuccessful, and the matter was taken to the Incometax Appellate Tribunal. The Appellate Tribunal held that by the document in question, the division, if any, was of the income and not of the assets from which the income was derived, inasmuch as "the agreements of the managing agency with the managed Companies did not undergo any change whatever as a result of the alleged partition".

The Appellate Tribunal,

---·~.

therefore,· held that the arrangement to share the r96o receipts from this source of income was not binding c• d-H a 'f h l . . ,.aran as an as on the Department, i the assets t emse ves contmued v. to remain joint. It further held that the _document Commissioner of was " a farce ", and did not save the family from Income-tax assessment as Hindu undivided family. The Tribunal having declined to state a case under s. 66(1) of the Hidayatullah J.

Indian Income-tax Act, Charandas Haridas moved the Bombay High Court, and obtained an order under s. 66(2) of the Act. The question on which the case was stated was :

" Whether there were materials to justify the finding of the Tribunal that the income in the share of the commission agency of the Mills was the income of the Hindu undivided family ? " 'The High Court stated that though the reference was very elaborately argued, it raised a very simple question .of fa.ct and all that it was required to find out was whether there were materials before the Appellate Tribunal upon which the, finding of fact could be rested. The High Court held that though the finding given by the Appellate Tribunal could not be construed as a finding that the document was not genuine, the method adopted by the family to p, artition the assets was insufficient to bring about the result intended by it.

According to the High Court, the Appellate Tribunal was right in holding that the document was ineffective, and though the income _ might have been purported to be divided and might, in fact, have been so divided, the source of income still remained united as belonging to the Hindu undivided family. It accordingly answered the question in the affirmative, holding that there were materials before the Tribunal on which it could reach the conclusion that in so far as these income-bearing assets were concerned, they still belonged to the Hindu undivided family. Leave to appeal to this Court was refused by the High Court, but Charandas Haridas applied to this Court and obtained special leave, and the present appeal was filed.

Mr. Viswanatha Sastri appearing for Charandas l{aridas, pointed out that a Hindu undivided family cannot be a partner of a firm.

Charandasr Haridas,

8UPRE.\1E COURT REPORTS [1960]

r960 . fherefore, though he represented the Hindu undivided - . family, in his capacity as a partner could not insist Cha.ondas 11"''das that the other members of the family be received as

Commi;; ion" of partners, or admitted to the benefits of partnership.

Income-tax The only mode in which the partition could be made was to divide the income, and this had the necessary Hidayatullah J. effect, in law, of dividing the assets, if not for the purposes of the Partnership Act, at least for the purposes of assessing income-tax. He, therefore, contended that the Hindu undivided family which had ce:tsed to exist in so far as these assets were concerned, could not be assessed as such after January 1,

1946, the date from which the partition was effective.

The learned Solicitor-General for the Department contended that the argument itself involved the assumption that the assets were not, in fact, divided, and since income-tax was payable at the moment of time when income accrued, this income must be taken to have accrued to the Hindu undivided family and its subsequent partition into five or six shares did not affect the position.

Before we deal with these arguments, it is necessary to quote the operative portion of the document, which is as follows :

"Re :-Partial partition of the Hindu Undivided Family of Charandas Haridas of Ahmedabad.

We the undersigned Sheth Charandas Haridas by himself and as the guardian of minors Rameshchandra Charandas, Anilkumar Charandas and Gautamkumar Charandas and Shantaben Charandas all residing in Shahibaug, Ahmedabad make this memorandum (Nondh) that, we have a Hindu undivided family and Sheth Charandas Haridas manages our family's joint property as Karta or Manager and all of us as members of the joint undivided family are entitled to our joint undivided family as Malik. Our family received a commission of Re. 0-1-11. 5/12 from the Vijaya Mills Co., Ltd. and out of this commission Sheth Charandas Haridas as Karta or Manager of the 1family has given already a commission of one pie to Pratima, the daughter of the family.

So also out of the commission of Re. 0-2-l received by the family from the Gopal

...

... -

Mills Co., Ltd. Sheth Charandas Haridas as Karta. r96o and Manager has given already to Pratima one piec, nd-H ·~ · Af d d ·

0h R 0 l 10 5/12 , iara as arii.as comm1ss10n. ter e uctmg t ese e. - - . v. and Ite. 0-1-11! commission remained. These com- Commissioner of missions and other commission received from various Income-tax other mills have been partitioned orally by us on Sam vat Year 2002 Magsar Vadi 12, dated 31st Hiaayatullah ].

December, 1945. By this partition we decided that whatever commission fell due till 31-12-45 and which is received after 31-12-45 should be kept joint and in respect of the commission which accrues from 1-1-46 a.nd received after that date each of us become absolute owner of his one-fifth share and therefore from the date, i.e., from 1-1-46 these commissions cease to be the joint property of our family.

But it is our desire that we should keep a memorandum for our memory of the oral partial partition effected on Sam vat Year 2002 Magsar Vadi 12, dated 31-12-45 pursuant to which we have partitioned the commissions to be received by our family. Because . of this we keep this note."

The document no doubt mentions "a commission" in respect of each of the six managing agencies, which commission was divided by the document. The word "commission'', however, has been used in two different senses; sometimes it refers to the amount of the managing agency COffemission to be received by Charandas Haridas and sometimes to the right to that commission which Charandas Haridas had as a partner.

The sole question is whether the source was effectively divided for purposes of the Income-tax law, so that the assessment could not be made upon a Hindu undivided family.

The law was stated by Mayne, and approved by the Privy Council in Pichappa v. Ohokalingam (1 ), in the following words :

"Where a managing member of a joint family enters into a partnership with a stranger the other members of the family do not ipso facto become partners in the business so as to clothe them with all the rights and obligations of a partner as defined by the Indian Contract Act. In such a case the

(t) A.I.R. 1934 P.C. 192, 39 I

Charandas [iarida~

Co1n1nissioner of I nco111etax

Hitl....:yatuJJah J.

SUPREMT<J COURT REPOR1'S [1960]

family as a unit. does not qccome a partner, but only such of its members as in fact enter into a contractual relation with the stranger: the partnership will be governed by the Act." Further, t.he Privy Council in Appovier v. Rarna Subba A iyan (1) observed :

"Nothing can express more definitely a conversion of the tenancy, and with that conv<:'rsion a change of the status of the family quoad this property. The produce is no longer to ho brought to the common chest, as representing the income of an undivided property, but the proceeds are to be enjoyed in six distinct equal shares by .the members of the family, who are thenceforth to become entitled to those definite shares." The .Bombay High Court quoted this passage, and stated that there must be a division of the right as well as a division of the property; and unless the division effected a separation of the property into shares, it would remain only as a separation of the income after its accrual and would not affect the asset as such.

In this view of the matter, the Bombay High Court held that the asset continued to be joint in spite of the division of the income after its accrual.

In our opinion, here there are three different branches of law to notice. There is the law of Partnership, which takes no account of a Hindu undivided family_ There is also the Hindu law, which permits a partition of the family and also a partial partition binding upon the family. There is then the Income-tax law, under which a particular income may be treated as the income of the Hindn undivided family or as the income of the separated members enjoying separate shares by partition. The fact of a partition in the Hindu law may have no effect upon the position of the partner, in so far as the law of Partnership is concerned, but it has foll effect upon the family in so far as the Hindu law is concerned. J nst as the fact of a Karta becoming a partner does not introduce the members of the undivided family into the partnership, the division of the family does not change the position of the partner vis-a-vis the other partner or partners. The lncome-

(1) (I%6) II M.l.A. 75•

• ,

/ -

tax law before the partition takes note, factually, of 19fo the position of the Karta, and assesses not him qua - b . l H' d d' 'd d Charandas Haridas partner ut as representmg t 1e m u un 1v1 e family. In doing so, the Income-tax law looks not to Commi:Sfoner of the provisions of the Partnership Act., but to the Income-tax provisions of Hindu law.

When once the family has disrupt(ld, the position under the partnership continues Hidayatitllah f. as before, but the position under the Hindu law changes.

There is then no Hindu undivided family as a unit of assessment in point. of fact, and the income which accrues, cannot be said .to be of a Hindu undivided family There is nothing in the Indian Incometax Jaw or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset. Such division must, of course, be effective so as to bind the members; but Hindu law does not further require that the property must in every case be partitioned by metes and bounds, if separate enjoyment can otherwise be secured according to the shares of the members. For an aso:et of this kind, there was no other mode of partition open to the parties if they wished to retain the property and yet hold it not jointly but in severalty, and the law does not con- - template that a person should <Jo the impossible. Indeed, the result would have been the same, even if the dividing members had said in so many words tha.t they had partitioned the assets, because in so far as the firms were concerned, the step would have been wholly inconsequential.

The respondent suggested that the family could have partitioned the managing agencies among the members of the family by alloting them severally; but that would not have been possible without a dissolution of the managing agency firms and their reconstitution, which was not altogether in the hands of Charandas Haridas. It was also suggested that the managing agencies could have been aUotted to Charandas Haridas while the others took some other property, or a receiver could have been appointed. No doubt, there were many modes of partition which might have been adopted; but the question remains that if the family desired to partition these assets only and no more, could they have acted in some other manner

1;60 to achieve the same result? No answer to this question was attempted.

Charanda0 Harida, It is, therefore, manifest that the family took the

v. fullest measure possible for dividing the joint interest Commissioner of Income-tax into separate interests. There is no suggestion here that this division was a mere pretence; nor has the Wdayatullah J. Appellate Tribunal given such a finding.

Tile document was fully .effective between the members of the family, and there was factually no Hindu undivided family in respect of these particular assets. The assets at all times stood in the name of Charandas Haridas, and looked at from the point of view of the law of Partnership, the family had no standing. The assets still are in the name of Charandas Haridas, and looked again from the same viewpoint, the division has no different signification.

What has altered is the status of the family.

While it was joint, the Department could treat the income as that of the family; but after partition, the Department could not say that it was still the income of the Hindu undivided family, when there was none. In the face of the finding that this was a genuine document and not a sham, and that it effectually divided the income and in the circumstances, the assets, the question answers itself in the negative, that is to say, that there were no materials to justify the finding that the income in the share of the commission agency of the Mills was the income of the Hindu undivided family.

The appeal will be allowed. The respondents will pay the costs of the two assessees here and below.

There will be only one set of costs here.

Appeal allowed.

Art. 368

Art. 3

CHARANDAS HARIDAS AND ANOTHER

L. KAPUR

M. HIDAYATULLAH, JJ.

December 31, 1945

January 1, 1946

September II, 1946

Charandas Haridas Held

CIVIL APPELI

Bombay High Court

A. V. Viswanatha Sastri

B. K. B. Naidu

I. N.

Shroff

K. Daphtary

Rajagopal Sastri

D. Gupta

HIDAYATULLAH

Hidayalullah

s. 66(2)

Income-tax Act

Charandas Haridas

Chinubhai Haridas

Kutch

Saurashtra

Delhi

Ajmer

Rajasthan

Madhya Bharat

Charandas Haridas

Shantaben

Pratima

January 1, l946

September 11, 1946

Incometax Appellate Tribunal

s. 66(1)

Indian Income-tax Act

s. 66(2)

Viswanatha Sastri

Charandas l{aridas

Charandasr Haridas

January 1,

1946

Ahmedabad

Sheth Charandas Haridas

Rameshchandra Charandas

Anilkumar Charandas

Gautamkumar Charandas

Shantaben Charandas

Vijaya Mills Co., Ltd.

Sheth Charandas Haridas

Mayne

Indian Contract Act

:yatuJJah

.Bombay High Court

Wdayatullah J. Appellate Tribunal


.. -

3 S.C.R.

SUPREME COURT REPORTS

THE GODAV ARI SUGAR MILLS LTD. v.

SHRI D._K. WORLIKAR

(P. B. GAJENDRAGADKAR and K. N. W ANCHOO, JJ.) Industrial Dispute-N otificai:ion-C onstruction -Head office of Sugar Industry, if within its purview-Bombay Industrial Relations Act, r946 (Bom. II of r947), s. 2(4)-Notification No. IIJI-46 of r952. The respondent, a stenographer employed by the appellant at its head office in Bombay, challenged the legality and propriety of the dismissal order passed against him by an application under the provisions of the Bombay Industrial Relations Act, 1946, and contended that the Notification No. n31-46 issued by the Government of Bombay in 1952 under s. 2(4) of the said Act brought within its purview the head office of the appellant which was dealing in Sugar Industry. The appellant challenged the competency of the application on the ground that the Act did not apply to the respondent's:case and the Labour Court had no jurisdiction as the Notification did not apply to the head office of the appellant: Held, that on a proper construction of the Notification, it ca.:nnot be said that the Government of Bombay intended to extend the scope of the Notification to the head office of a Sugar Industry. The Notification did not bring within its purview the sugar industry as such but the manufacture of sugar and its by-products, the object being to confine its benefits to service or employment which was connected with the manufacture of sugar and its by-products including the growing of sugar canes and all agricultural and industrial operations connected with the growing of sugarcane. .

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 425 of 1958.

Appeal by special leave from the :pecision dated October 9, 1956, of the Labour Appellate Tribunal of India, Bombay, in Appeal (Bom.) No. 111 of 1956.

M. C. Setalva<l, Attorney--General of India, S. N.

Andley, J. B. Da<lachanji, Rameshwar Nath and P. L. Vohra, for the appellants.

M. S. K. Sastri, for the respondent.

1960. March 15. The Judgment of the Court was delivered by

Godavari Sugar

Mills Ltd. v.

D.£(. Worlikar

GAJENDRAGADKAR, J.-This appeal by special leave Gajeniragadkar ]. raises a short question about the construction of the notification No. 1131-46 issued by the Government of Bombay on October 4, 1952, under s. 2(4) of the Bombay Industrial Relations Act, 1946 (Born. 11 of

1947) (hereinafter called the Act). The respondent,

who was a stenographer em ployed by the appellant, the Godavari Sugar Mills Ltd., at its head office in Godavari Sugar Bombay was dismissed by the appellant on April 22, Mills Ltd. 1955.

He had been working as .a stenographer for v.

D.K. Wvrtii<ar some years past on a salary of Rs. 135 pins Rs. 27 as dearness allowance.

He ""1s charged with having Gajrndrngadkor ]. committed acts of disobedience and in"ubordination, and after a proper enquiry where he was given an opportunity to defend himself, he was found guilty of the alleged misconduct; that is why his services were terminated ; that is the appellant's case.

The respondent challenged the legality and propriety of his dismissal by an ttpplication before the Labour Court at Bombay; he purported to make this application under s. 42(4) read withs. 78 (1) (a) (i) and

(iii) of the Act.

The appellant in reply challenged the competence of the application on the ground that the Act did not apply to the respondent.'s case, and so the Labour Court had no jurisdiction to entertain it ..

Both the parties 11greed that the question of jurisdiction thus raised by the appellant should be tried as a preliminary issue; and so the Labour Court considered the said objection and upheld it. It held that the notification in question on which the respondent relied did not apply to the head office of the appellant at Bombay ; accordingly the Labour Conrt dismissed the respondent's application. The respondent cha.]- lenged the correctness of this decision by preferring an appeal before the Industrial Court..

His appeal, however, failed since the Ind us trial Co IJl't agreed with the Labour Comt in holding th11t t.he notification did not apply to the head office of the appellant. The matter was then taken by the respondent before the Labour Appellate 'I'tibuual and this time the respondent succeeded, the Labour Appellate Tribunal having held that the notification applied to the head office and that the respondent was entitled to claim the benefit of the provisions of the Act.

On this finding the Labour Appellate Tribunal set aside the order passed by the courts below and remanded the case to the Labour Court for disposal on the merits in accordance with law. It is this order which has given rise to the present appeal; and the only question which it

- '

. ., .

raises for our decision is whether the notification in Ig6o question arJplies to the head office of the appellant at Godavari Sugai Bombav.

Milis Ltd.

The Act has been passed by the Bombay Legislav. ture. in order to regulate relations of employers and D.K. Worlikar employees, to make provis_ion for settlement of ind us- Ga endrar; adkar J. trial disputes and to provide for certain other 1

 purposes. It has made elaborate provisions in order to carry out its object, and has conferred some benefits on the employees in addition to those which have been conferred on them by the Central Industrial Disputes Act, XIV of 1947. Under s. 42(4) of the Act, for instance, an employee desiring a change in respect "Of any order pa.ssed by the employer under standing orders can make an application to the Labour Court in that behalf subject to the proviso which it is un necessary t; o set out. Section 78(l)(a)(iii) requires the Labour Court to decide whether any change made by an employer or desired by an employee should be made. An ordef of dismissal passed by an employer can, therefore, be challenged by the employee directly by an application before the Labour Court under the Act, whereas under the Central Act a complaint against wrongful dismissal can become an industrial dispute only if it is sponsored by the relevant union or taken up by a group of employees and is referred to the industrial tribunal for adjudication under s. 10 of the Act. Since the respondent claims a special benefit under the Act he contends that his case falls . under the notification. It is common ground that if the notification applies to the case of the respondent the application made by him to the Labour Court would be competent and would have to be considered on the merits; on the other hand, if the said notification does not apply then the application' is incompetent and must be dismissed in limine on that ground. ..· Let us now read the notification. It has been issued by the Government of Bombay in exercise of the powers conferred on it by s. 2, sub-s. (4), of the Act, and in supersession of an earlier notification, and it provides that "the Government of Bombay is pleased to direct that all the provisions of the sitid Act shall

SUPREME COURT REPOH, TS [1960)

1960 apply to the following industry, viz., the manufacture

Godavari Sugar of sugar and its by-products including (1) the growing Mills Lid. of sugarcane on farms belonging to or attached to v. concerns engaged in the said manufacture, and (2) all D.K. Worlikar agricultural and industrial operations connected with . . -- the growing of sugarcane or the said manufacture, Ga; endragadkar f. engaged in such concerns. 'Note: For the purposes of this notification all service or employment connected with the conduct of the above industry shall be deemed to be part of the industry when engaged in or by an employer engaged in that industry".

It is significant that the notification applies not to sugar industry as such but to the manufacture of sugar and its by-products. If the expression" sugar industry" had been used it would have been possible • to construe that expression in a broader sense having regard to the wide definition of the word ".industry " prescribed in s. 2(19) of the Aot; but. the notification has deliberately adopted a different phraseology and has brought within its purview not the suga.r industry as such but the manufacture of sugar and its by-products. Unfortunately the Labour Appellate Tribunal has read the notification as though it referred to the sugar industry as such. That is a serious infirmity in the (j.ecision of the Labour Appellate Tribunal.

Besides, the inclusion of the two items specified in els. (1) and (2) is also significant. Section 2(19)(b)(i) shows that " industry" includes agr'iculture and agricultural operations. Now, if the manufacture of sugar and its by-products had the same meaning as the expression sugar industry, then the two items added by els. (1) and (2) would have been included in the said expression by virtue of the definition of "industry" itself and the addition of the two clauses would have been superfluous. The fact that the two items have been included specifically clearly indicates that the first part of the notification would not have applied to them, and it is with a view to extend the scope of the said clause that the inclusive words introducing the two items have been used. This fact also shows the limited interpretation which must be put on the words "the m'tnufacture of sugar and its byproducts ".

• -

It is true that the note added to the notification . .r960 purports to include within the scope of the notifi- Godavari Sugar cation some cases of service and employment by the Mills.Ltd. deeming process. Unfortunately the last clause in v. the note is unhappily worded and it is difficult to D. K. Worlikar understand what exactly it was intended to mean. . - .

Even so, though by the first part of the note some Gajendragadkar J. kinds of service or employment are deemed to be part of the industry in question by virtue of the fact that they are connected with the conduct of the said industry, the latter part of lbhe note requires that the said service or employment must be engaged in th.at industry. It is possible that the workers engaged in manuring or a clerk in the manure depot which is required to .issue manure to the agricultural farm which grows sugarcane may for instance be included within the scope of the notification by virtue of the note; but it is difficult to see how the respondent, who is an employee in the head office at Bombay, can claim the benefit of this note. The addition made by the deeming clause on the strength of the connection of certain services and employments with the conduct of the industry is also controlled by the requirement that the said services or employments must be engaged in that industry so that connection with the industry has nevertheless to be established before the note can be applied to the respondent.

It has been urged before us by Mr. Sastri, for the respondent, that at the head office there is accounts department, the establishment section, stores purch, ase' section and legal department;, and he pointed out that the machinery which is purchased for the industry is landed at Bombay, received by the head office and is , then sent to the factories. In fact the factories and the offices attached to them are situated at Lakshmiwadi and Sakharwadi respectively and are separated by hundreds of miles from the head office at Bombay.

The fact that the machinery required at the factories is received at the head office .and has to be forwarded . to the respective factories cannot, in our opinion, assist the respondent in contending that the head office itself and all the employees engaged in it fall wjthin the note to the notification. The object of the

'10

Godavari Sugar

Mills Ltd. v.

D. K. Worlikar

Gajendragadkat' ].

notification appears to be to confine its benefit to service or employment which is connected with the manufacture of sugar and its by-products including the two items specified in cl. (1) and cl. (2).

Subsidiary services such as those we have indicated are also included by virtue of the note; but in our opinion it is difficult to extend the scope of the notification to the head office of the appellant. We must accordingly hold that the Labour Appellate Tribunal erred in law in holding that the case of the respondent was governed by the notification.

Incidentally we would like to add that the registrar appointed under s. 11 of the Act has consistently refused to recognise the staff of the head office as coming under the notification, and it is common ground that the C()nsistent practice in the matter so far is against the plea raised by the respondent. It is perfectly true that in construing the notification the prevailing practice can have no relevance; but if after construing the notification we come to the conclusion that the head office is outside the purview of the notification it would not be irrelevant to refer to the prevailing practice which happens to be consistent with the construction we have placed on the notification. It appears that in the courts below reference was made to a similar notification issued in respect of textile industry under s. 2, su b-s. (3), of the Act and the relevant decisions construing the said notification were cited. We do not think any useful purpose will be served by considering the said notification and the decisions thereunder.

In the result the appeal is allowed, the order passed by the Labour Appellate Tribunal is set aside and the respondent's application is dismissed. There will be no order as to costs.

Appeal allowed.

THE GODAV ARI SUGAR MILLS LTD

D._K. WORLIKAR

P. B. GAJENDRAGADKAR

Bombay Industrial Relations Act

s. 2(4)

Bombay Industrial Relations Act, 1946

Government of Bombay

s. 2(4)

M. C. Setalva

S. N.

Andley

J. B. Da<lachanji

Rameshwar Nath

P. L. Vohra

M. S. K. Sastri

GAJENDRAGADKAR

Gajeniragadkar

s. 2(4)

Bombay Industrial Relations Act, 1946

Godavari Sugar Mills Ltd.

Godavari Sugar Bombay

April 22, Mills Ltd. 1955

Labour Court at Bombay

s. 42(4)

Bombay

Industrial Disputes Act

s. 42(4)

Section 78(l)(a)(iii)

s. 10

s. 2

Godavari Sugar

D.K. Worlikar

endragadkar

s. 2(19)

Section 2(19)(b)(i)

D. K. Worlikar

Gajendragadkar

Sastri

Lakshmiwadi

Sakharwadi

s. 11

s. 2


3 S.C.R. SUPREME COURT REPORTS

SARW ARLAL AND OTHERS

THE STATE OJB' HYDERABAD

(B. P. SINHA, c. J., JAF'ER IMAM, A. K. SARKAR,

K. C. DAS GUPTA and J.C. SHAH, JJ.)

Jagir, Abolition of-Regulations pr_omulgated by Military Governor and Prime Minister-Constitutional validity-Delegation of authority by Nizam-Nature and extent-Hyderabad (Abolition of Jagirs) Regulation, IJS8 Fasli, s. 6(4)-Hyderabad Jagir, (Commutation) Regulation (XXV of IJ59 Fasli) s. 4(I)(c), 4(2)-Constitution of India, Art. 32(8).

After the Police action in the State of Hyderabad in August, 1948, the Nizam, by a Farman dated September 19, 1948, invested the Military Governor "with all authority for the administration of the State " and by a later Farman declared that " the said authority includes and has always included authority to make Regulations." By virtue of the said powers, the Military Governor promulgated the Hyderabad (Abolition of Jagirs) Regulations of 1358 Fasli. Thereafter on the termination of the appointment of the Military Governor, the Nizam by another Farman appointed Mr. Vellodi as his Chief Minister and directed that "all the powers of administration, vested in the Military Governor before the said date are exercisable by the Chief Minister." Thus empowered, the Chief Minister promulgated the Hyderabad Jagirs (Commutation) Regulation XXV of 1358 Fasli. Thereafter with the commencement of the Constitution of India, the territory of the State of Hyde.pbad became part of the Union of India and the President certified the two Regulations under Art. 31(6) of the Constitution. By the Constitution (First Amendment) Act of 1951, Arts. 3r(A) and 31(B) and Sch. IX were inserted into the Constitution and the two Regulations were included in the said schedule. The appellant, whose properties had been taken over by the Jagir Administrator under the Abolition Regulation, and who had, in the meantime, filed a writ petition in the High Court, by his amended petition after the amendment of the Constitution, claimed that ss. 4(r)(c) and 4(2) of the Commutation Regulation and s. 6(4) of the Abolition Regulation were confiscatory in nature and amounted to colourable and fraudulent exercise of legislative power. The High Court found against him and rejected his petition: Held, that the decision of the High Court must be affirmed.

There can be no question that the Nizam, at the time when he executed the Farmans and prior to it, was an absolute ruler vested with all authority executive, legislative and judicial and had unquestionable powers to modify or extinguish any of the rights of his subjects and the language of the Farmans leaves no manner of doubt tha.t he thereby delegated the entirety-

I960

z960 of his authority aud powers to the Military Governor and thereafter to the Prime Minister.

Sarwar/al The doctrine of invalidity of legislation enacted in colourable v. exercise of legislative authority can apply only where the legis- Slal• of Hyderabad lature is subject to constitutional restrictions. But where the powers of the legislature suffers from no limitations, constitutional or otherwise, that doctrine can have no application.

No question of infringement of fundamental rights could arise as (i) the impngned Regulations were pre-Constitution legislations and the appellant's rights had already been determined befor.e the Constitution, (ii) Art. 32(B) of the Constitution exempts the Regulations from such a challenge.

Keshavan Madhava Menon v. State of Bombay [1951] S.C.R. 228, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 392 of 1956 & 686 of 1957.

Appeals from the judgment and order dated March 31, 1954, of the former Hyderabad High Court in Civil Writ Nos. 43 and 44of1951 respectively.

S. P. Varma, S. Mohammed and S. R. Borgaouker, for the appellants in both the appeals.

A. V. Viswanatha Sastri, T. V. R. Tatachari and T. M. Sen, for the respondents in both the appeals.

Civil Appe.al No. 392 of 1956.

1960. March 16. The Judgment of the Court was delivered by

Shah J.

SHAH, J.-This is an appeal filed with a certificate granted under Art. 133(l)(c) of the Constitution by . the High Court of Judicature of the State of Hyderabad.

The appellant was a Jagirdar holding jagirs Ramwarm Chandam Palli and Gulla Palli, Taluq Sirsalla, in the District of Karimnagar in the State of Hyderabad. After the Police Action in August, 1948, Major General Chaudary was appointed the Military Governor for the State of Hyderabad.

His Exalted Highness the Nizam of Hyderabad invested the l\riilitary Governor with authority to administer the State by a Farman dated September 19, 1948. The Farman was in the following terms :

" Whereas the General Officer Commanding in Chief Southern Army has appointed Major General J. N. Chaudary, O.B.E., to be the Military Governor for the Hyderabad State and whereas all authority

• -

r .......

- ..

for the administration of the State now vests in z96o him, I hereby enjoin all the subjects of the State to s 1 1 fi . arwar a carry out such orders as he may deem t to issue v. from time to time.

I appeal to all officers of the state of Hyderabad State administration a.nd subjects of the State to render faithful and unflinching obedience to the Shah J.

Military Governor and conduct themselves in a manner calculated to bring about the speedy restoration of law and order in the State".

On August 7, 1949, HiB Exalted Highness the Nizam issued an explanatory Farman in the following terms :

"With reference to my Farman dated 19-9-1948, in which I referred to' i; he fact that all authority for the administration of the State now vests in the Military Governor, I hereby declare that the said authority includes and has always included authority to make Regulations". _ On August 10, 1949, the Military Governor promulgated The Hyderabad (.Abolition of Jagirs) Regulation of 1358 Fasli, which will hereinafter be referred to as the Abolition Regulation.

This Regulation was brought into force on August 15, 1949, the date of its publication in the Officfal Gazette.

Section 5 of the Regulation directed that from a date to be notified for the transfer of the administrations of the jagirs in the State to the Government, the jagirdars shall make over the management of the jagirs to the J agir Administrator and in default of compliance therewith the Officer appointed under the Regulation may take forcible possession. By s. 6, it was provided that the jagirs shall be included in the " Diwani " and unless and until included in a district, shall be administered by the Jagir Administrator, and that the powers, rights and liabilities in relation to such jagirs shall cease to be exercisable by the jagirdars and shall be exercisable by the Jagir Administrators, and that no jagirdar shall recover or receive any customary or other dues from any tenant or resident of the jagir.

By s. 14, it was declared that the jagirdars were to receive certain interim maintenance allowances until such time as the terms of the commutation of the jagirs were determined.

Pursuant to the authority reserved by s. 6 of the Abolition Regulation, possession

'96° of the jagirs was taken over sometime in September 1949 by the Jagir Administrator acting on behalf of Sarwarlal

v. the State of Hyderabad. state of Hyderabad On December 1, 1949, another Farman was issued - by His Exalted Highness the Nizam which provided Shah J. as follows :

" Whereas the General Officer Commanding in Chief Southern Army has as from the 1st December, 1949, terminated the appointment of Major General Chaudary, O.B.E., to be the Military Governor for the Hyderabad State ; And whereas it is necessary to make other arrangements for the administration of the State as from the said date; Now, therefore, I hereby appoint as from the said date Mr. M. K. Vellodi, C.I.E., I.C.S., to be my Chief Minister and ... I further direct that all the powers of administration, vested in the Military Governor before the said date are exercisable by the Chief Minister ".

In exercise of the powers vested in him, the Chief Minister promulgated the Hyderabad Jagirs (Commutation) Regulation No. XXV of 1359 Fasli-which will hereinafter be referred to as the Commutation Regulation. This Regulation was brought into operation on January 25, 1950.

By s. 3 of the Regulation, the method of computing the commutation sum for every jagir was prescribed.

After the inauguration of the Constitution of InJia on January 26, 1950, on which date the territory of the State of Hyderabad became part of the Union of India, the President on April 25, 1950, certified the two Regulations under Art. 31(6) of the Constitution by a notification published in the gazette of the Union of India. The Constitution was amended on June 18, 1951 by the Constitution (First Amendment) Act of 1951 whereby, inter alia, Arts. 3l(A) and 3l{B) and Sch. IX were incorporated in the Constitution. The Abolition Regulation and the Commutation Regulation were included in Schedule IX and by virtue of Art. 3l(B), neither the Regulations nor any of the provisions thereof were to be deemed to be void or ever to have become void on the ground that the

• -

Regulations were inconsistent with or took away or abridged any of the rights conferred by any of the provisions of Part III of the Constitution. In the Sarwar/al meantime, the appellant had, on January 29, 1951, State of ~yderabad filed a petition in the High Court of Hyderabad for _ a writ in the nature of mandamus directing the State Shah J. of Hyderabad and the , J agir Administrator to hand over possession of the a.ppellant's properties and for an order declaring the Abolition Regulation and the Commutation Regulation ultra vires and unconstitutional and for certain interim orders. After the amendment of the Constitution, the petition was amended on August 14, 1952. By this petition, the appellant claimed that ss. 4(l)(c) and 4(2) of the Commutation R(lgulation a, nd s. 6(4) of the Abolition Regulation were invalid because by these provisions, there was " naked confiscation of the property " of the appellant and that they amounted to" colourable and fraudulent exercise of legislative power". The High Court of Hyderabad rejected the petition filed by the appellant, but certified the case under Art. 133(l)(c) as a fit one for appeal to this court.

In this appeal, two principal contentions fall to be determined, viz., (1) whether legislative authority was conferred upon. the Military Governor by the Farman dated September 19, 1948 and (2) If, by the Farman, :legislative authority was delegated to the Military Governor, whether it was circumscribed by any limitations or reservations.

Was the Military Governor, by the Farman dated September 19, 1948, inveated with all the sovereign authority legislative, executive and judicial'of H.E.H. the Nizam or was he merely invested with the executive authority ? By the plain words used in the Farman, " all authority for the administration of the State was conferred upon the Military Governor" and there is nothing in the text of the Far.man which warrants the view that only executive authority was intended to be delegated thereby. Within the expression, "all administrative authority" is encompassed the entirety of the authority of the sovereign, and by the delegation from His Exalted Highness the Niza:m, the Military Governor was invested with that authorit; y

'96• in all its amplitude. The injunction to the subjects of

Sarw., lal tGhe State to cardry oufit all s?ch ordedrs has the 1 Militahry overnor may eem t to rnsue an t e appea to t e State of ;; yderabad officers of the State and the subjects to render faithful and unflinching obedience and to conduct themselves Shah J. in a manner calculated to bring about the speedy restoration oflaw and order, do not detract from the amplitude of the powers delegated to the Military Governor. The expression, "orders " would include every order made in exercise of authority for the administration of the State; and the object intended to be achieved, viz., the speedy restoration of law and order in the State by His Exalted Highness the Nizam as expressed in the appeal was not restrictive of that authority. That His Exalted Highness the Nizam in and before the month of September, 1948, was an absolute ruler invested with all authority, executive, legislative and judicial is indisputable. He had supreme powers vested in him to modify, restrict take away or extinguish the rights of any of his subjects and the validity of his actions or orders was not liable to be questioned before any tribunal or authority.

The Farman promulgated on September 19, 1948, by His Exalted Highness the Nizam delegated his sovereign authority to the Military Governor and to remove all doubts as to the effect of that delegation, an explanatory Farman dated August 7, 1949, was issued. It was declared in express terms by that Farman that the authority of the Military Governor "included and has always included the authority to make Regulations ''. In the clearest terms, the author of the Farman proclaimed the content of the authority 'delegated by him to the Military Governor.

The plea rather faintly urged by Mr. Varma that the Farman merely recited that the Military Governor had been invested with authority for administration and did not by its own force purport to invest the Military Governor with authority to administer the State is plainly inconsistent with the argument which was advanced in the High Court and the statement of the case filed in this court and was therefore rightly abandoned by him. ·,. .. ' ..... ' .. '• .. .

• -

Though by the delegation of authority, the Military x96o Governor was invested with all authority of His s 1 1 Exalted Highness the Nizam in the matter of adminisar~~· a tration of the State in all its departments, the/soverei- State of Hyderabad gnty of His Exalted Highness the Nizam was, by this act of delegation, undoubtedly not extinguished. It was open to him, notwithstanding the delegation, to issue orders or Regulatiom; contrary to those which were issued by the Milit2ry Governor, and also to withdraw the authority of the Military Governor.

There is, however, no evidence on the record to show that after September 19, 19~!8, and before the Abolition Regulation was promulgated; the authority of the Military Governor was withdrawn or that His Exalted Highness the Nizam had_issued any order or Regulation inconsistent with the Abolition Regulation. The authority of the Military Governor was withdrawn in December, 1949, and the Chief Minister was invested with the same authority of administration including expressly the power of legislation, and it was in exer- • cise of that authority that the Chief Minister issued , the Commutation Regulation.

The authority of His Exa.lted Highness the Nizam as the sovereign ruler to resume the jagirs and to extinguish the interests of the jagirdars being by delegation vested in the Military Governor, tlie legality of the action of the latter was not open to challenge on any test of legislative competence. Assuming that no opportunity had arisen for exercise of the sovereign authority in the matter of resumption of jagirs or extinction of the jagirdars' interests before the promulgation of the Abolition Regulation, an inference cannot therefrom arise that His Exalted Highness the Nizam had irrevocably placed a restriction on his sovereignty, or that the delegation to the Military Governor of the sovereign authority was subject to an implied restriction that the interests of the jagirdars in the jagirs could not in exercise of the authority be + extinguished.

The authority of the Military Governor, being unrestricted, so long as it enured, his action in issuing the Abolition Regulation could not be challenged on the plea that it was a colourable exercise of legislative

Shah] •

r960 authority. The doctrine of invalidity of legislative provisions enacted in colourable exercise of authority Sarwar/al J" 1 1 t h b t t v app ies to eg1s a ures w ose powers are su J€C o stat• of H; derabad constitutional restrictions. When such a legislative body seeks, under t, he guise or pretence of complying .Shah f. with the restrictions, in enacLing a statute, to evitde or elude them, it is but a fraud on the Constitution, and the statute is liable to be declared invalirl on the ground that the enactment is in colourable exercise of authority, the statute being in truth beyond the competence of the body. But a statute enacted by a legislative authority whose powers are not fettered by any constitutional or other limitations, cannot be declared invalid as enacted in colourable exercise of its powers.

The authority of the Chief Minister under the Farman dated December 1, 1949, in its amplitude, was as extensive as that of His Exalted Highness the Nizam . and the Commutation Regulation was not liable to be challenged on the ground of want of legislative competence or colourable exercise of legislative authority, the power exercised by him being the legislative power as the delegate of the Sovereign.

The plea that the fundamental rights of the appellant under the Constitution were infringed by the two Regulations does not require any detailed examination. By' virtue of the Abolition Regulation, the rights of the appellant as a jagirdar in his jagir were extinguished and by the Commutation Regulation, the quantum of compensation payable to him was determined by a pre-Constitution legislation. The Regulations were competently promulgated in exercise of legislative authority in that behalf; and the Constitution does not operate retrospectively to revive the rights which had been, before it was enacted, extinguished. The Constitution has, except as otherwise expressly provided, no retrospective operation: Keshavan Mailha.va Menon v. State of Bombay('); and rights which were by legislation extinguished, before it was enacted, are not revived thereby. At the commencement of the Constitution, the appellant had, therefore, no rights in the jagirs and he, obviously, could not claim a writ of mandamus directing (r\ [195t) S.C.R. 228.

3 S.C.R. SUPRE.l.VIE COURT REPORTS 319

delivery of possession of the jagir, or a writ directing z96° commutation otherwise than under the provisions of Sarwarlal , the Commutation Regulation. It may also be observed v. that the Parliament has, by the Constitution (1st State of Hyderabad

Amendment) Act, included the Abolition and the _ -· -· - Commutation Regulations in the ninth schedule, and Shah]. by virtue of Art. 3l(B), the two Regulations are exempt from challenge on the ground that they are inconsistent with or take away or abridge any of the fundamental rights conferred by Part III of the Constitution.

The appeal therefore fails and is dismissed with costs.

Civil Appeal No. 686 of 1957.

This appeal raises the same question which has been decided in the companion Appeal No. 392of1956 and for reasons set out therein, this appeal must fail and is dismissed with costs.

Appeals dismissed.

JAIKRISHNADAS MANOHARDAS

DESAI AND ANOTHER

THE STATE OF BOMBAY

(JAFER IMAM, K. N. WANCHOO and J. 0. SHAH, JJ.)

Criminal Breach of Trust-Ingredients of-(:ommon intetion Meaning of-Indian Penal Code (XLV ojI86o), ss. 409, 34.

The first appellant was the Managing Director and the second appellant a Director and technical expert of a cloth dyeing concern known as Parikh Dyeing and Printing Mills Ltd. The company entered into a contract with the Textile Commissioner undertaking to dye a large quantity of cloth which was supplied to the company for'i:hat purpose. In pursuance of the contract certain quantity of cloth was dyed and delivered to the Textile Commissioner by the company but it failed to dye and deliver the balance of cloth which remained in its possession and was not returned to the Textile Commissioner in spite of repeated demands. Ultimately the two appellants were prosecuted for criminal breach of trust under s. 409 read with s. 34 of the Indian Penal Code and were convicted for the same in a trial by jury.

z960

March z6.

SARW ARLAL AND OTHERS

B. P. SINHA

JAF'ER IMAM

A. K. SARKAR

K. C. DAS GUPTA

C. SHAH, JJ.

s. 6(4)

s. 4(I)(c), 4(2)

Constitution of India

Art. 32(8)

in the State of Hyderabad

Vellodi

Constitution of India

Art. 31(6)

Arts. 3

ss. 4(r)(c) and 4(2)

s. 6(4)

Nizam

Art. 32(B)

S. P. Varma

S. Mohammed

S. R. Borgaouker

A. V. Viswanatha Sastri

T. V. R. Tatachari

T. M. Sen

Shah

SHAH

Art. 133(l)(c)

Hyderabad

After the Police Act

Chaudary

September 19, 1948

J. N. Chaudary

The Farman was in the following terms :

" Whereas the General Officer Commanding in Chief Southern Army has appointed Major General J. N. Chaudary, O.B.E., to be the Military Governor for the Hyderabad State and whereas all authority

• -

r .......
..

for the administration of the State now vests in z96o him, I hereby enjoin all the subjects of the State to s 1 1 fi .

s 1

August 7, 1949

HiB Exalted Highness the Nizam

August 10, 1949

August 15, 1949

Section 5

s. 6

s. 14

s. 6

December 1, 1949

1st December, 1949

Chaudary

M. K. Vellodi

January 25, 1950

s. 3

January 26, 1950

Union of India

April 25, 1950

Art. 31(6)

June 18, 1951

Arts. 3

Schedule IX

Art. 3

January 29, 1951

State of ~yderabad

High Court of Hyderabad

State Shah J. of Hyderabad

August 14, 1952

ss. 4(l)(c) and 4(2)

s. 6(4)

Art. 133(l)(c)

H.E.H. the Nizam

19, 1948

Varma

s 1

September 19, 19~!8

S.C.R. SUPRE.l.VIE COURT REPORTS 319

Parliament

Art. 3

JAIKRISHNADAS MANOHARDAS

STATE OF BOMBAY

JAFER IMAM

K. N. WANCHOO

0. SHAH

Meaning of-Indian Penal Code

ss. 409, 34

Parikh Dyeing and Printing Mills Ltd.

s. 409

s. 34

Indian Penal Code


3 S.C.R. SUPRE.l.VIE COURT REPORTS 319

delivery of possession of the jagir, or a writ directing z96° commutation otherwise than under the provisions of Sarwarlal , the Commutation Regulation. It may also be observed v. that the Parliament has, by the Constitution (1st State of Hyderabad

Amendment) Act, included the Abolition and the _ -· -· - Commutation Regulations in the ninth schedule, and Shah]. by virtue of Art. 3l(B), the two Regulations are exempt from challenge on the ground that they are inconsistent with or take away or abridge any of the fundamental rights conferred by Part III of the Constitution.

The appeal therefore fails and is dismissed with costs.

Civil Appeal No. 686 of 1957.

This appeal raises the same question which has been decided in the companion Appeal No. 392of1956 and for reasons set out therein, this appeal must fail and is dismissed with costs.

Appeals dismissed.

JAIKRISHNADAS MANOHARDAS

DESAI AND ANOTHER

THE STATE OF BOMBAY

(JAFER IMAM, K. N. WANCHOO and J. 0. SHAH, JJ.)

Criminal Breach of Trust-Ingredients of-(:ommon intetion Meaning of-Indian Penal Code (XLV ojI86o), ss. 409, 34.

The first appellant was the Managing Director and the second appellant a Director and technical expert of a cloth dyeing concern known as Parikh Dyeing and Printing Mills Ltd. The company entered into a contract with the Textile Commissioner undertaking to dye a large quantity of cloth which was supplied to the company for'i:hat purpose. In pursuance of the contract certain quantity of cloth was dyed and delivered to the Textile Commissioner by the company but it failed to dye and deliver the balance of cloth which remained in its possession and was not returned to the Textile Commissioner in spite of repeated demands. Ultimately the two appellants were prosecuted for criminal breach of trust under s. 409 read with s. 34 of the Indian Penal Code and were convicted for the same in a trial by jury.

z960

March z6.

I960 In appeal the High Court reviewed the evidence on the gronnd of misdirection to the jury but found that the two appellants were Jaikrishnadas liable to account for the cloth over which they had dominion, and M anohardas Desai having failed to do so each of them was guilty of the offence of v. criminal breach of trust. The High Court refused to accept the State of Bombay appellants' plea that the cloth was old and was eaten up by white ants and moths. On appeal by the appellants by special leave:

Shah f

Held, that to establish a charge of criminal breach of trust, the prosecution was not bound to prove the precise mode of conversion, misappropriation or misapplication by the accused of the property entrusted to him or over which he had dominion. The principal ingredient of the offence of criminal breach of trust being dishonest misappropriation the mere failure of the accused to account for the property entrusted to him might not be the foundation of his conviction in all cases but where he was unable to account and rendered an explanation for his failure which was untrue, an inference of misappropriation with dishonest intent might readily be made.

The essence of liability under s. 34 of the Indian Penal Code is the existence of a common intention animating the offenders and the participation in a criminal act in furtherance of the common intention. The physical presence at the scene of offence of the offender sought to be rendered liable under s. 34 is not, on the words of the statute, one of the conditions of its applicability in every case.

Barendra Kumar Chose v. The King Emperor, (r929) L.R. 52 I.A. 40, followed.

Shreekantiah Ramayya Munipalli v. The State of Bombay, [r955] I S.C.R. n77, explained and distinguished.

CRIMINAL

APPELLATE

JURISDICTION: Criminal Appeal No. 159 of 1!!57.

Appeal by special leave from the judgment and order dated February 14, 1956, of the Bombay High Court in Criminal Appeal No. 1232 of 1955, arising out _ of the judgment and order dated October 3, 1955, of the Additional Sessions Judge for Greater Bombay in Case No. 38 V. Sessions 1955.

Purshottam Tricumdas, B. K. B. Naidu and I. N.

Shroff, for appellant No. 1.

Appellant No. 2 did not appear.

H. J. Umrigar, R. H. Dhebar and T. M. Sen, for the respondent.

1960. March 16.

The Judgment of the Court was delivered by SHAH, J.-At a trial held with the aid of a common jury in Case No. 38 of the Vth Session 1955 before the

Additional Sessions Judge, City Court, Greater Bornr960 bay, the two appellant!> were convicted of offences .. under s. 409 read with s .. 34 of the Indian Penal Code.· Jaikmhnadas . . • • Manohardas Desai The Add1t10nal Sess.ions Judge sentenced the first v. appellant to suffer rigorous imprisonment for five years state of Bombay and the second appellant to suffer rigorous imprisonment for four years. In appeal, the High Court of Shah .f.

Bombay reviewed the evidence, because in the view of the Court, the verdict of the jury was vitiated on account of a misdirection on a matter of substantial importance, but held tha, t the conviction of the two appellants for the offence under s. 409 read withs. 34 of the Indian Penal Code was, on the evidence, not liable to be set aside. The High Court accordingly confirmed the conviction of the two appellants but reduced the sentence pa.ssed upon the first appellant to rigorous imprisonm€mt for three years and the sentence against the second appellant to rigorous imprisonment for one year. Against the order of conviction and sentence, the appellants have appealed to this court with special leave.

The facts which gave rise to the charge against the two appellants are briefly these:

On June 15, 1948, the Textile Commissioner invited tenders for dyeing Pugree Cloth. The Parikh Dyeing and Printing Mills Ltd., Bombay-hereinafter to be referred to as the company-of which the first appellant was the Managing Director and the second appellant was a Director and technical expert, submitted a tender which was accepted on July 27, 1948, subject to certain general and special conditions. Pursuant to the contract, 2,51,059! yards of cloth were supplied to the company for dyeing. The company failed to dye the cloth within the stipulated period and there was correspondence in that behalf between the company and the Textile CommisHioner. Approximately 1,11,000 yards out of the cloth were dyed and delivered to the Textile Commissioner. On March 25, 1950, the company requested the Textile Commissioner to cancel the contract and by his Itter dated April 3, 1950, the Textile Commissioner corop.iied with the request, and cancelled the contract in respect of 96,128 yards. On November 20, 1950, the contract was cancelled by the

i96o Textile Commissioner in respect of the balance of cloth

J .k . h d and the company was called upon to give an account ainsnaas . f h di d.

Manohardas Desai without any urt er e ay of the balance un ehvered v. and it was informed that it would be held responsible State of Bombay for "material spoiled or not accounted for". On

December 4, 1950, the company sent a statement of Shah f. account setting out the quantity of cloth actually delivered for dyeing, the quantity of cloth returned duly dyed and the balance of cloth, viz., 1,32,160 yards remaining to be delivered. Against the cloth admitted by the company remaining to be delivered, it claimed a wastage allowance of 2,412 yards and admitted liability to deliver 1,29,748 yards lying with it on Government account.

It appears that about this time, the company was in financial difficulties. In December 1950, the first appellant left Bombay to take up the management of a factory in Ahmedabad and the affairs of the company were managed by one R. K. Patel. In June 1952, an application for adjudicating the two appellants insolvents was filed in the Insolvency Court at Ahmedabad. An insolvency notice was also taken out against the two appellants at the instance of another creditor in the High Court at Bombay. Proceedings for winding up the company were commenced in the High Court at Bombay. In the meantime, the mortgagee of the machinery and factory of the company had entered into possession under a covenant reserved in that behalf, of the premises of the factory of the company.

The. Textile Commissioner made attempts to recover the cloth remaining undelivered by the company. A letter was posted by the Textile Commissioner on April 16, 1952, calling upon the company to deliver 51,756 yards of cloth lying with it in bleached condition to the Chief Ordnance Officer, Ordnance Depot, Sewri, but the letter was returned undelivered. It was ultimately served with the help of the police on the second appellant in October 1952. Thereafter on November 7, 1952, another letter was addressed to the company and the same was served on the second appellant on November 25, 1952. By this letter, the company was reminded that 1,35,726! yards of cloth

!< •

were lying with it on account of the government ai1d z960 the same had to be accounted for, and that the 1

.k . h d instructions to deliver 51,756 yards to the Chief Manh;; a~"n~:ai Ordnance Officer, Ordnance Depot, Sewri, had not been v. attended to. The Textile Commissioner called upon State of Bombay the company to send its representatives to "clarify the position" and to account for the material.

After Shah 1 receiving this letter, the second appellant attended at the office of the Textile Commissioner and on November 27, 1952, wrote a letter stating that "the main factors involved in not delivering the goods in finished state was that the material was very old ", was " dhobihleached in different lots", was "bleached under different conditions and therefore unsuitable for vat colour dyeing in heavy shades'', that it varied in length, weight, and finiBh and had " lost affinity for .vat colour dyeing". It was also stated that the company had in dyeing the basic material, suffered "huge losses" estimated at Rs .. 40,000. It was then stated: "We are, therefore, however prepared to.co-operate with the Government and are willing to make good the government's bare cost. Please let us know the detail and the actual amount to be deposited so that we may do so at an early date. We shall thank you if we are given an appointment to discuss the rnatter as regards the final amount with respect to the balance qm1.ntity of the basic material."

On December 29, 1952,, the premises of the company and the place of residence of the appellants were raided, but no trace of the cloth was found. A complaint was then filed with the police charging the two appellants with criminal breach of trust in respect of 1,32,404! yards of cloth belonging to the Government.

There is no dispute that approximately 1,30,000 yards out of the cloth entrusted to the company by the Textile Commissioner for dyeing has not been returned. Bv its letter dated December 4, 1950, the company admitted liability to deliver 1,29,748 yards of cloth, but this cloth has not been returned to the .Textile Commissioner in spite of repeated demands.

That the appellants, as directors of the company ha.d dominion over that cloth was not questioned :in the . trial.court. The plea that there wer(f.Qthe, r: Dif.eqtqrs

x96o of the company besides the appellants who had

1 .k . h d dominion over the cloth has been negatived by the Ma":•h;;:i,,';'v::.i High Court and in our judgment rightly. Direct v. evidence to establish misappropriation of the cloth State of Bombay over which the appellants had dominion is undoubtedly lacking, but to establish a charge of criminal Shah J. breach of trust, the prosecution is not obliged to prove the precise mode of conversion, misappropriation or misapplication by the accused of the property entrusted to him or over which he has dominion.

The principal ingredient of the offence being dishonest misappropriation or conversion which may not ordinarily be a matter of direct proof, entrustment of property and failure in breach of an obligation to account for the property entrusted, if proved, may in the light of other circumstances, justifiably lead to an inference of dishonest misappropriation or conversion.

Conviction of a person for the offence of criminal breach of trust may not, in all cases, be founded merely on his failure to account for the property entrusted to him, or over which he has dominion, even when a duty to account is imposed upon him, but where he is unable to account or renders an explanation for his failure to account which is untrue, an inference of misappropriation with dishonest intent may readily be made.

In this case, on a search of the factory on December 29, 1952, the cloth remaining to be delivered by the company was not found. At the trial, the appellants sought to explain the disappearance of the cloth from the factory premises where it was stored, on the plea that it was old and was eaten up by white-ants and moths, and had been thrown away as rubbish.

This plea of the appellants was not accepted by the High Court and we think rightly. No information was given at any time to the Textile Commissioner after December 4, 1950, that the cloth had been eaten up by white-ants and moths, and was therefore thrown away or otherwise destroyed. Nor was any evidence led in support of the plea by the appellants.

In this court, counsel for the first appellant con~ tended that failure to return the cloth may give rise to a civil liability to make good the loss occasioned

3 S.C.R. SUPREME COUR'f REPORTS 325

thereby, but in the circumstances of the case, the first r960 appellant cannot be found guilty of the offence of 1 .k •

11 d criminal breach of trust. Counsel submitted that the Man:a~a:aD:m first appellant had left Bombay in 1950 and had v. settled down in Ahmedabad and was attending to a State of Bombay factory in that town, that thereafter the first appellant was involved in insolvency p:r_oceedings and was unable to attend to the affairs of the company in Bombay, and if, on account of the pre"occupation of the first appellant at Ahmedabad, he was unable to visit Bombay and the goods were lost, no criminal misappropriation can be attributed to him. But the case pleaded by the appellant negatives this submission. The first appellant in his statement before the trial court admitted that he often went to Bombay even after he had migrated to Ahmedabad and that he visited the mill premises and got the same opened by the Gurkha watchman itnd he found that the heap of cloth lying in the mill was getting smaller every time he visited the mill and on inquiry, he was told by the watchman that e'ery day one basketful of sweepings was thrown away. He also stated that he was shown several placeB in the compound of the factory where pits had been filled up with these sweepings, and that he found a Bmall heap lying by the side of the "Tulsipipe gutter" and also in the warehouses in the mill premises. It is clear from this statement and other evidence on the record that even after he migrated to Ahmedabad, the first appellant was frequently visiting the factory at Bombay. The evidence also discloses that meetings of Directors were held from time to time, but the minutes of the Directors' meetings have not been produced. The books of account of the company evidencing disbursements to the Directors of remuneration for attending the meetings and the expensea for the alleged collection and throwing away of the sweepings have not been pr9duced. It is admitted by the first appellant that the letter dated November 27, 1952, was written by the second appellant under his instructions. In his statement at the trial, the first appellant stated that he was informed of the letter dated November 26, 1952, .from the Textile Commissioner and that he

Shah].

'960 could not attend the office of that officer because he

Jaikrishnadas was busy attending to the insolvency proceedings and Manohardas Desai that he deputed the second appellant to attend the v. office and to explain and discuss the position. He State of Bombay then stated, "We had informed the Commissioner

Shah ]. that the company was prepared to pay for the cloth remaining after deducting the amount claimed as damages". The letter dated November 27, 1952, was evidently written under the direction of the first appellant and by that letter, liability to pay for the cloth after certain adjustments for losses alleged to be suffered by the company in carrying out the contract was admitted. By the letter dated December 4, 1950, liability to deliver the cloth was admitted and by the letter dated November 27, 1952, liability to pay compensation for the loss occasioned to the Government was affirmed.

The appellants who were liable to account for the cloth over which they had dominion have failed to do so, and they have rendered a false explanation for their failure to account.

The High Court was of the opinion that this false defence viewed in the light of failure to produce the books of account, the stock register and the complete absence of reference in the correspondence with the Textile Commissioner about the cause of disappearance established misappropriation with criminal intent.

Counsel for the first appellant contended that probably the goods passed into the possession of the mortgagees of the assets of the company, but on this part of the submission, no evidence was led in the trial court. Counsel for the first appellant, relying upon the observations in Shreekantiah RamayyaMunipalli v. The State of Bombay (1), also contended that, in any event, a charge under s. 409 read with s. 34 of the Indian Penal Code cannot be established against the first appellant unless it is shown that at the time of misappropriation of the goods, the first appellant was physicalty present.

But the essence of liability under s. 34 is to be found in the existence of a common intention animating the offenders leading to the doing of a criminal act in furtherance of the

(l) [1955] 1 s.c R. 1177.

common intention and presence of the offender sought z96o to be rendered liable under s. 34 is not, on the words 1 .k . h d of the statute, one of the conditions of its applic- Manh;; an:'D:ai ability. As explained by Lord Sumner in Barendra v.

Kumar Ghose v .The King Emperor(1) the leading feature State of Bombay of s. 34 of the Indian Penal Code is ' participation ' in action. To establish joint responsibility for an offence, it must of course be established that a criminal act was done by several persons; the participation must be in doing the act, not merely in its planning. A common intention-a meeting of minds-to commit an offence and participation in the commission of the offence in _furtherance of that , common intention invite the application of s. 34. But this participation need not in all cases be by physical presence. In offences involving physical violence, normally presence at the scene of offence of the offenders sought to be rendered liable on the principle of joint liability may be necessary, but such is not the case in respect of other offences where the offence consists of diverse acts which may be done at different times and places.

In Shree Kantiah's case (supra), misappropriation was committed by removing goods from a Government depot and on the occasion of t, he removal of the goods, the first accused was not present. It was therefore doubtful whether he had participated in the commission of the offence, and this court in those circumstances held that participation by the :first accused was not established.

The observations in Shree Kantiah's case

(supra) in so far as they deal with s. 34 of the Indian Penal Code must, in our judgment, be read in the ligh~ of the facts established and are not intended to lay down a principle of universal application.

The High Court has found that the two appellants were liable to account for the cloth over which they had dominion and they failed to account for the same and therefore each had committed the offence of criminal breach of trust. The High Court observed: "Iri such a case, if accused Nos. 1 and 2 (Appellants 1 & 2) alone were concerned with the receipt of the goods, if they were dealing with the goods all the time, if they were receiving communications from the Textile Commissioner's office and sending replies to

(1) [1924) L.R. 52 I.A, 40, 52,

Shah].

z960 them, and if the part played by each of them is appal .k . h d rent from the manner in which they are shown to have ai "' na as d It h h" t t h "t ft Manohardas Desai ea wit t lB con rac , t en I IS a case o wo persons v. entrusted with the goods and a breach of trust Slate of Bombay obviously being committed by both of them".

It was submitted that the High Court erred in Shah f. finding the appellants guilty of offences 'under s. 409 of the Indian Penal Code when the charge framed against them was one under s. 409 read with s. 34 of the Indian Penal Code. A charge framed against the accused person, referring to s. 34 is but a convenient form of giving notice to him that the principle of joint liability is sought to be invoked.. Section 34 does not create an offence ; it merely enunciates a principle of joint liability for criminal acts done in furtherance of the common intention of the offenders. Conviction of an accused - person recorded, relying upon the principle of joint liability, is therefore for the offence committed in furtherance of the -common intention and if the reasons for conviction establish that the accused was convicted for an offence committed in furtherance of the common _intention of himself and others, a reference in the order recording conviction to s. 34 of the Indian Penal Code may appear to be a surplusage. The order of the High Court recording the conviction of the appellants for the offence under s. 409 of the Indian Penal Code is therefore not illegal.

It was submitted for the first appellant that the sentence passed against him was unduly severe, and that, in any event, no distinction should have been made between him and the second appellant in the ' matter of sentence. It is evident on the findinge

accepted by us that property of considerable value has been misappropriated by the first appellant. He -was the Managing Director of the company and primarily, he had dominicm over the property entrusted to the company. The second appellant was, though a Director, essentially a technician. Having regard to these circumstances, if the High Court has made a distinction between the two appellants, we ought not to interfere with the sentence, which by itself cannot be said to be excessive. .

The appeal fails and is dismissed.

Appeal dismissed.

.. -

Parliament

Shah

Art. 3

THE STATE OF BOMBAY

JAFER IMAM

K. N. WANCHOO

Meaning of-Indian Penal Code

ss. 409, 34

Parikh Dyeing and Printing Mills Ltd.

s. 409

s. 34

Indian Penal Code

M anohardas Desai

State of Bombay

s. 34

Indian Penal Code

s. 34

L.R. 52 I.A. 40

Purshottam Tricumdas

B. K. B. Naidu

I. N.

Shroff

H. J. Umrigar

R. H. Dhebar

T. M. Sen

SHAH

s. 409

Indian Penal Code

Manohardas Desai

High Court of Shah .f.

Bombay

s. 409

Indian Penal Code

June 15, 1948

July 27, 1948

March 25, 1950

April 3, 1950

November 20, 1950

Manohardas Desai

December 4, 1950

Shah

Bombay

Ahmedabad

R. K. Patel

Insolvency Court at Ahmedabad

High Court at Bombay

April 16, 1952

November 7, 1952

November 25, 1952

November 27, 1952

December 29, 1952

Shah

November 26, 1952

Jaikrishnadas

s. 409

s. 34

Indian Penal Code

s. 34

s. 34

Sumner

s. 34

Indian Penal Code

s. 34

Shree Kantiah

s. 34

Indian Penal Code

s. 409

Indian Penal Code

s. 409

s. 34

Indian Penal Code

s. 34

Section 34

s. 34

Indian Penal Code

s. 409

Indian Penal Code